8-K

United States
SECURITIES AND EXCHANGE COMMISSION

Washington, D.C. 20549

FORM 8-K

CURRENT REPORT

Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934

Date of Report (Date of earliest event reported): February 14, 2005

IMS HEALTH INCORPORATED

(Exact name of registrant as specified in its charter)

Delaware	001-14049	06-1506026
(State or other jurisdiction of incorporation)	(Commission File Number)	(IRS Employer Identification No.)
1499 Post Road, Fairfield, Connecticut 06824
(Address of principal executive offices) (Zip Code)
Registrant’s telephone number, including area code: (203) 319-4700
Not Applicable
(Former name or former address, if changed since last report)

Check the appropriate box below if the Form 8-K is intended to simultaneously satisfy the filing obligation of the registrant under any of the following provisions:

oWritten communications pursuant to Rule 425 under the Securities Act (17 CFR 230.425)

oSoliciting material pursuant to Rule 14a-12 under the Exchange Act (17 CFR 240.14a-12)

oPre-commencement communications pursuant to Rule 14d-2(b) under the Exchange Act (17 CFR 240.14d-2(b))

oPre-commencement communications pursuant to Rule 13e-4(c) under the Exchange Act (17 CFR 240.13e-4(c))

Item 1.01Entry into a Material Definitive Agreement

Employment Agreements

On February 15, 2005, in connection with the previously announced transition plan,  IMS Health Incorporated (the “Company”) entered into an amended and restated employment agreement (the “Thomas Employment Agreement”), effective January 1, 2005 and which has a term until March 1, 2006, with David M. Thomas, pursuant to which Mr. Thomas will serve as the Company’s Executive Chairman of the Board of Directors.  The Thomas Employment Agreement restates the prior employment agreement in effect between Mr. Thomas and the Company, which is described in the Company’s proxy statement filed with the Commission on March 23, 2004 (the “Proxy Statement”) and filed as Exhibit 10.43 to the Company’s Annual Report on Form 10-K (the “10-K”).

In addition, on February 15, 2005, the Company entered into an amended and restated employment agreement (the “Carlucci Employment Agreement” and together with the Thomas Employment Agreement, the “Employment Agreements”), effective January 1, 2005 and which has a term until December 31, 2007, with David R. Carlucci, pursuant to which Mr. Carlucci will serve as the Company’s Chief Executive Officer and President.  The Carlucci Employment Agreement restates the prior employment agreement in effect between Mr. Carlucci and the Company, which is described in the Proxy Statement and filed as Exhibit 10.50 to the 10-K.

The descriptions of the material terms of the prior employment agreements with Messrs. Thomas and Carlucci in the Proxy Statement are incorporated by reference herein in response to this Item 1.01, and the material amendments thereto contained in the Employment Agreements are as described below.  These amendments were also described in the Company’s Current Report on Form 8-K filed on November 9, 2004 (the “November 8-K”) in connection with the announcement of the succession plan, however the Employment Agreements were not entered into until February 15, 2004.

Pursuant to the Thomas Employment Agreement, Mr. Thomas will receive a base salary of $880,000 per year, with target annual incentive equal to such salary; he will cease participating in the Company’s performance restricted stock (units) program in 2005; the vesting of 283,334 options and 38,417 restricted stock units now scheduled to vest after March 31, 2006 were accelerated to March 31, 2006; and he was granted 45,833 restricted stock units that will vest as to 33,333 units on January 1, 2006 and 12,500 units on March 31, 2006; and upon his retirement the Company will transfer to him title to his Company-provided automobile.  The Thomas Employment Agreement also requires Mr. Thomas to provide consulting services to the Company after his retirement for a period of up to 9 months for which he will receive a consulting fee of $70,000 per month.

Pursuant to the Carlucci Employment Agreement, Mr. Carlucci will receive a base salary of $730,000 per year, with target annual incentive equal to such salary and an annual opportunity to earn performance restricted stock (units) equal to the annual incentive; and

2

he was granted 38,000 restricted stock units vesting in equal installments over 3 years and stock options to purchase 115,000 shares of Company stock vesting in equal installments over 3 years.  Upon a change of control, all outstanding stock options, restricted stock, restricted stock units and other equity-based awards then held by Messrs. Thomas and Carlucci will become vested and exercisable.

The foregoing summaries of the Employment Agreements do not purport to be complete and are subject to and qualified in their entirety by reference the text of the agreements, which are attached hereto as Exhibits 10.1 and 10.2 and incorporated by reference into this Item 1.01.

Plan Amendments

On February 14, 2005, the Compensation and Benefits Committee of the Board of Directors (the “Committee”) established the 2005 award opportunities for all executive officers under the Executive Annual Incentive Plan (the “AIP”), related opportunities for 4 senior executive officers to earn performance restricted stock units (“PERS”) based on 2005 performance, and award opportunities for the 2005-2006 performance period under the Long-Term Incentive Plan (the “LTIP”) for certain executive officers and other senior employees not participating in the PERS program.

Awards under the AIP depend on the level of achievement during the plan year relative to financial targets set by the Committee at the beginning of the year.  The 2005 financial targets will be based on two performance measures: revenue and operating income growth of the Company on a consolidated basis.  Individual personal objectives will also be considered if at least 80% of the financial goals are achieved.  The AIP for 2004 also incorporated performance goals based on revenue and operating income.  The AIP provides for cash awards which, for target level performance, equal a pre-set percentage of the executive’s salary.  For 2005, the payout percentage targets range from 49% to 100%.  Performance at a level higher than target level can result in payouts of up to 200% of the executive’s target payout.  Performance below target level can result in a payout at a level less than the target payout, but no payout will be made if a specified threshold level of performance is not achieved.

The Committee also authorized PERS awards which match the amounts earned under the AIP for 2005 performance.  The number of restricted stock units to be granted as PERS will equal the dollar amount of the executive’s AIP award earned in 2005 divided by the average fair market value of IMS stock for the last twenty trading days of 2005.  After grant, PERS remain subject to forfeiture during an additional two-year period in the event of termination of the executive’s employment, with exceptions for death, certain other non-fault terminations, or a change in control.  At vesting or after a further deferral period if elected by the executive, PERS are settled by delivery of one share for each restricted stock unit.  PERS earn dividend equivalents while they are outstanding.

Awards under the LTIP depend on the level of achievement during a two-year performance period relative to financial targets.  For the 2005-06 performance period, the

3

financial targets will be based on performance measured by revenues and operating income growth of the Company on a consolidated basis.  Previously, LTIP awards have been based primarily on earnings per share performance, including the performance period that began in 2004 and continues through 2005.  Each award that may be earned under the LTIP consists of a cash amount and a number of restricted stock units having a value at the commencement of the performance period equal to the cash amount.  Awards may range from 0% to 200% of the participant’s target award level, depending on the level of performance.  The cash portion of the award is vested at the end of the performance period, but restricted stock units require two years of further service in order to vest, except in cases of death, disability and certain retirements.

Item 5.02Departure of Directors or Principal Officers; Election of Directors; Appointment of Principal Officers

As described in Item 1.01, on February 15, 2005 and effective as of January 1, 2005, David M. Thomas was appointed to the position of Executive Chairman of the Board of Directors and has stepped down from his position as Chairman and Chief Executive Officer, and David R. Carlucci was appointed to the position of Chief Executive Officer and President and has stepped down from his position as President and Chief Operating Officer.

In addition, the Board of Directors approved the previously announced increase to the size of the Board from nine to ten and elected Mr. Carlucci to fill the newly created vacancy.  Mr. Carlucci has not been appointed to any committee of the Board.

These appointments were described in the November 8-K but not final until the approval by the Board of Directors in connection with approving the Employment Agreements.

Mr. Thomas, age 55, has served as a Director and as Chairman and Chief Executive Officer of IMS since November 2000. From November 2000 until October 2002, Mr. Thomas also served as President of IMS. Prior to joining IMS, Mr. Thomas was Senior Vice President/Group Executive, Personal Systems Group of IBM from January 1998 until September 2000. He held the position of General Manager of Global Industries of IBM from January 1996 until January 1998 and General Manager of IBM North America from October 1995 until January 1996. Mr. Thomas is also a director of the following public companies: Fortune Brands, Inc., The TriZetto Group, Inc. and Interpublic Group of Companies, Inc.

Mr. Carlucci, age 50, was appointed President and Chief Operating Officer in October 2002. Before joining IMS, Mr. Carlucci was General Manager, IBM Americas, which comprises all of IBM’s sales and distribution operations in the U.S., Canada and Latin America, from January 2000 until January 2002. Prior to that, Mr. Carlucci held roles of increasing responsibility at IBM, including General Manager, IBM’s S/390 Division from January 1998 to January 2000; Chief Information Officer from February 1997 to January 1998; General Manager, IBM Printing Systems Company from July 1995 to January 1997; Vice President, systems, industries and services, Asia Pacific from January 1993 to

4

July 1995; and Vice President, marketing and channel management, IBM Personal Computer Company — North America from February 1990 to December 1992. He joined IBM in 1976 as a Sales Representative.

The information about the material terms of the Employment Agreements included in response to Item 1.01 is hereby incorporated by reference into this Item 5.02.

Item 5.03Amendments to Articles of Incorporation or By-laws; Change in Fiscal Year

On February 15, 2005, the Board of Directors of the Company approved an amendment to the Company’s by-laws, effective on such date, to provide for the appointment of alternate and substitute members of committees of the board.  A copy of the amended and restated by-laws of the Company is attached hereto as Exhibit 4.1 and hereby incorporated by reference into this Item 5.03.

Item 9.01Financial Statements and Exhibits

(c)	Exhibits
Exhibit 4.1	Amended and Restated By-laws of IMS Health Incorporated.
Exhibit 10.1	Amended and Restated Employment Agreement by and between David M. Thomas and IMS Health Incorporated effective as of January 1, 2005.
Exhibit 10.2	Amended and Restated Employment Agreement by and between David R. Carlucci and IMS Health Incorporated effective as of January 1, 2005.

5

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 hereunto duly authorized.

	IMS HEALTH INCORPORATED
Date: February 18, 2005	By:	/s/ Robert H. Steinfeld
		Robert H. Steinfeld Senior Vice President, General Counsel and Corporate Secretary

6

EXHIBIT INDEX

Exhibit 4.1	Amended and Restated By-laws of IMS Health Incorporated.
Exhibit 10.1	Amended and Restated Employment Agreement by and between David M. Thomas and IMS Health Incorporated effective as of January 1, 2005.
Exhibit 10.2	Amended and Restated Employment Agreement by and between David R. Carlucci and IMS Health Incorporated effective as of January 1, 2005.

7

EX-4.1

Exhibit 4.1

AMENDED AND RESTATED

BY-LAWS

OF

IMS HEALTH INCORPORATED

(as amended through February 14, 2005)

ARTICLE I.

STOCKHOLDERS

Section 1.  The annual meeting of the stockholders of the corporation for the purpose of electing directors and for the transaction of such other business as may properly be brought before the meeting shall be held on such date, and at such time and place within or without the State of Delaware as may be designated from time to time by the Board of Directors.

Section 2.  Special meetings of the stockholders shall be called at any time by the Secretary or any other officer, whenever directed by the Board of Directors or by the Chief Executive Officer.  The purpose or purposes of the proposed meeting shall be included in the notice setting forth such call.

Section 3.  Except as otherwise provided by law, notice of the time, place and, in the case of a special meeting, the purpose or purposes of the meeting of stockholders shall be delivered personally or mailed not earlier than sixty, nor less than ten days previous thereto, to each stockholder of record entitled to vote at the meeting at such address as appears on the records of the corporation.

Section 4.  The holders of a majority in voting power of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute a quorum at all meetings of the stockholders for the transaction of business, except as otherwise provided by statute or by the Restated Certificate of Incorporation; but if at any regularly called meeting of stockholders there be less than a quorum present, the stockholders

present may adjourn the meeting from time to time without further notice other than announcement at the meeting until a quorum shall be present or represented.  At such adjourned meeting at which a quorum shall be present or represented any business may be transacted which might have been transacted at the original meeting.  If the adjournment is for more than 30 days, or if, after the adjournment, a new record date is fixed for the adjourned meeting, a notice of the adjourned meeting shall be given to each stockholder of record entitled to vote at the meeting.

Section 5.  The Chairman of the Board, or in the Chairman’s absence or at the Chairman’s direction, the President, or in the President’s absence or at the President’s direction, any officer of the corporation shall call all meetings of the stockholders to order and shall act as Chairman of such meeting.  The Secretary of the corporation or, in such officer’s absence, an Assistant Secretary shall act as secretary of the meeting.  If neither the Secretary nor an Assistant Secretary is present, the Chairman of the meeting shall appoint a secretary of the meeting.  Unless otherwise determined by the Board of Directors prior to the meeting, the Chairman of the meeting shall determine the order of business and shall have the authority in his or her discretion to regulate the conduct of any such meeting, including, without limitation, by imposing restrictions on the persons (other than stockholders of the corporation or their duly appointed proxies) who may attend any such meeting, whether any stockholder or stockholders’ proxy may be excluded from any meeting of stockholders based upon any determination by the Chairman, in his or her sole discretion, that any such person has unduly disrupted or is likely to disrupt the proceedings thereat, and the circumstances in which any person may make a statement or ask questions at any meeting of stockholders.  The Chairman of the meeting shall have authority to adjourn any meeting of stockholders.

Section 6.  At all meetings of stockholders, any stockholder entitled to vote thereat shall be entitled to vote in person or by proxy, but no proxy shall be voted after three years from its date, unless such proxy provides for a longer period.  Without limiting the manner in which a stockholder may authorize another person or persons to act for the stockholder as proxy pursuant to the General Corporation Law of the State of Delaware, the following shall constitute a valid means by which a stockholder may grant such authority: (1) a stockholder may execute a writing authorizing another person or persons to act for the stockholder as proxy, and execution of the writing may be accomplished by the stockholder or the stockholder’s authorized officer, director, employee or agent signing such writing or causing his or her signature to be affixed to such writing by any reasonable means including, but not limited to, by facsimile signature; or (2) a stockholder may authorize another person or persons to act for the stockholder as proxy by transmitting or authorizing the transmission of a telegram, cablegram, or other means of electronic transmission to the person who will be the holder of the proxy or to a proxy solicitation firm, proxy support service organization or like agent duly authorized by the person who will be the holder of the proxy to receive such transmission, provided that any such telegram, cablegram or other means of electronic transmission must either set forth or be submitted with

information from which it can be determined that the telegram, cablegram or other electronic transmission was authorized by the stockholder.  If it is determined that such telegrams, cablegrams or other electronic transmissions are valid, the judge or judges of stockholder votes or, if there are no such judges, such other persons making that determination shall specify the information upon which they relied.

Any copy, facsimile telecommunication or other reliable reproduction of the writing or transmission created pursuant to the preceding paragraph of this Section 6 may be substituted or used in lieu of the original writing or transmission for any and all purposes for which the original writing or transmission could be used, provided that such copy, facsimile telecommunication or other reproduction shall be a complete reproduction of the entire original writing or transmission.

Proxies shall be filed with the Secretary of the meeting prior to or at the commencement of the meeting to which they relate.

Section 7.  When a quorum is present at any meeting, the vote of the holders of a majority in voting power of the stock present in person or represented by proxy and entitled to vote on the matter shall decide any question brought before such meeting, unless the question is one upon which by express provision of statute or of the Restated Certificate of Incorporation or these By-Laws, a different vote is required, in which case such express provision shall govern and control the decision of such question.

Section 8.  In order that the corporation may determine the stockholders (a) entitled to notice of or to vote at any meeting of stockholders or any adjournment thereof, or (b) entitled to consent to corporate action in writing without a meeting, or (c) entitled to receive payment of any dividend or other distribution or allotment of any rights, or entitled to exercise any rights in respect of any change, conversion or exchange of stock or for the purpose of any other lawful action, the Board of Directors may fix a record date, which record date shall not precede the date upon which the resolution fixing the record date is adopted, and which record date (i) in the case of clause (a) above, shall not be more than sixty nor less than ten days before the date of such meeting, (ii) in the case of clause (b) above, shall not be more than ten days after the date upon which the resolution fixing the record date is adopted by the board of directors, and (iii) in the case of clause (c) above, shall not be more than sixty days prior to such action.  If for any reason the Board of Directors shall not have fixed a record date for any such purpose, the record date for such purpose shall be determined as provided by law.  Only those stockholders of record on the date so fixed or determined shall be entitled to any of the foregoing rights, notwithstanding the transfer of any such stock on the books of the corporation after any such record date so fixed or determined.

Section 9.  The officer who has charge of the stock ledger of the corporation shall prepare and make at least ten days before every meeting of stockholders, a complete list of the stockholders entitled to vote at the meeting, arranged in alphabetical order, and showing the address of each stockholder and the number of shares registered in the name of each stockholder.  Such list shall be open to the examination of any stockholder, for any purpose germane to the meeting, during ordinary business hours, for a period of at least ten days prior to the meeting, either at a place within the city where the meeting is to be held, which place shall be specified in the notice of meeting, or, if not so specified, at the place where the meeting is to be held.  The list shall also be produced at the time and kept at the place of the meeting during the whole time thereof, and may be inspected by any stockholder who is present.

Section 10.  The Board of Directors, in advance of all meetings of the stockholders, shall appoint one or more judges of stockholder votes, who may be stockholders or their proxies, but not directors of the corporation or candidates for office.  In the event that the Board of Directors fails to so appoint judges of stockholder votes or, in the event that one or more judges of stockholder votes previously designated by the Board of Directors fails to appear or act at the meeting of stockholders, the Chairman of the meeting may appoint one or more judges of stockholder votes to fill such vacancy or vacancies.  Judges of stockholder votes appointed to act at any meeting of the stockholders, before entering upon the discharge of their duties, shall be sworn faithfully to execute the duties of judge of stockholder votes with strict impartiality and according to the best of their ability and the oath so taken shall be subscribed by them.  Judges of stockholder votes shall, subject to the power of the Chairman of the meeting to open and close the polls, take charge of the polls, and, after the voting, shall make a certificate of the result of the vote taken.

Section 11.  (A)  Annual Meetings of Stockholders.  (1) Nominations of persons for election to the Board of Directors of the corporation and the proposal of business to be considered by the stockholders may be made at an annual meeting of stockholders (a) pursuant to the corporation’s notice of meeting delivered pursuant to Article 1, Section 3 of these By-Laws, (b) by or at the direction of the Chairman of the Board or (c) by any stockholder of the corporation who is entitled to vote at the meeting, who complied with the notice procedures set forth in subparagraphs (2) and (3) of this paragraph (A) of this By-Law and who was a stockholder of record at the time such notice is delivered to the Secretary of the corporation.

(2)  For nominations or other business to be properly brought before an annual meeting by a stockholder pursuant to clause (c) of paragraph (A)(1) of this By-Law, the stockholder must have given timely notice thereof in writing to the Secretary of the corporation, and, in the case of business other than nominations, such other business must be a proper matter for stockholder action.  To be timely, a stockholder’s notice shall be delivered to the Secretary at the principal executive offices of the corporation not less than seventy days nor more than ninety days prior to the first anniversary of the preceding year’s annual meeting;

provided, however, that in the event that the date of the annual meeting is advanced by more than twenty days, or delayed by more than seventy days, from such anniversary date, notice by the stockholder to be timely must be so delivered not earlier than the ninetieth day prior to such annual meeting and not later than the close of business on the later of the seventieth day prior to such annual meeting or the tenth day following the day on which public announcement of the date of such meeting is first made.  Such stockholder’s notice shall set forth (a) as to each person whom the stockholder proposes to nominate for election or re-election as a director all information relating to such person that is required to be disclosed in solicitations of proxies for election of directors, or is otherwise required, in each case pursuant to Regulation 14A under the Securities Exchange Act of 1934, as amended (the “Exchange Act”), including such person’s written consent to being named in the proxy statement as a nominee and to serving as a director if elected; (b) as to any other business that the stockholder proposes to bring before the meeting, a brief description of the business desired to be brought before the meeting, the reasons for conducting such business at the meeting and any material interest in such business of such stockholder and the beneficial owner, if any, on whose behalf the proposal is made; and (c) as to the stockholder giving the notice and the beneficial owner, if any, on whose behalf the nomination or proposal is made (i) the name and address of such stockholder, as they appear on the corporation’s books, and of such beneficial owner and (ii) the class and number of shares of the corporation which are owned beneficially and of record by such stockholder and such beneficial owner.

(3)  Notwithstanding anything in the second sentence of paragraph (A)(2) of this By-Law to the contrary, in the event that the number of directors to be elected to the Board of Directors of the corporation is increased and there is no public announcement naming all of the nominees for director or specifying the size of the increased Board of Directors made by the corporation at least eighty days prior to the first anniversary of the preceding year’s annual meeting, a stockholder’s notice required by this By-Law shall also be considered timely, but only with respect to nominees for any new positions created by such increase, if it shall be delivered to the Secretary at the principal executive offices of the corporation not later than the close of business on the tenth day following the day on which such public announcement is first made by the corporation.

(B)  Special Meetings of Stockholders.  Only such business shall be conducted at a special meeting of stockholders as shall have been brought before the meeting pursuant to the corporation’s notice of meeting pursuant to Article I, Section 2 of these By-Laws.  Nominations of persons for election to the Board of Directors may be made at a special meeting of stockholders at which directors are to be elected pursuant to the corporation’s notice of meeting (a) by or at the direction of the Board of Directors or (b) by any stockholder of the corporation who is entitled to vote at the meeting, who complies with the notice procedures set forth in this By-Law and who is a stockholder of record at the time such notice is delivered to the Secretary of the corporation.  Nominations by stockholders of persons for election to the Board

of Directors may be made at such a special meeting of stockholders if the stockholder’s notice as required by paragraph (A)(2) of this By-Law shall be delivered to the Secretary at the principal executive offices of the corporation not earlier than the ninetieth day prior to such special meeting and not later than the close of business on the later of the seventieth day prior to such special meeting or the tenth day following the day on which public announcement is first made of the date of the special meeting and of the nominees proposed by the Board of Directors to be elected at such meeting.

(C)  General.  (1)  Only persons who are nominated in accordance with the procedures set forth in this By-Law shall be eligible to serve as directors and only such business shall be conducted at a meeting of stockholders as shall have been brought before the meeting in accordance with the procedures set forth in this By-Law.  Except as otherwise provided by law, the Restated Certificate of Incorporation or these By-Laws, the Chairman of the meeting shall have the power and duty to determine whether a nomination or any business proposed to be brought before the meeting was made in accordance with the procedures set forth in this By-Law and, if any proposed nomination or business is not in compliance with this By-Law, to declare that such defective nomination shall be disregarded or that such proposed business shall not be transacted.

(2)  For purposes of this By-Law, “public announcement” shall mean disclosure in a press release reported by the Dow Jones News Service, Associated Press or comparable national news service or in a document publicly filed by the corporation with the Securities and Exchange Commission pursuant to Section 13, 14 or 15(d) of the Exchange Act.

(3)  For purposes of this By-Law, no adjournment nor notice of adjournment of any meeting shall be deemed to constitute a new notice of such meeting for purposes of this Section 11, and in order for any notification required to be delivered by a stockholder pursuant to this Section 11 to be timely, such notification must be delivered within the periods set forth above with respect to the originally scheduled meeting.

(4)  Notwithstanding the foregoing provisions of this By-Law, a stockholder shall also comply with all applicable requirements of the Exchange Act and the rules and regulations thereunder with respect to the matters set forth in this By-Law.  Nothing in this By-Law shall be deemed to affect any rights of stockholders to request inclusion of proposals in the corporation’s proxy statement pursuant to Rule 14a-8 under the Exchange Act.

ARTICLE II.

BOARD OF DIRECTORS

Section 1.  The Board of Directors of the corporation shall consist of such number of directors, not less than three, as shall from time to time be fixed exclusively by resolution of the Board of Directors.  The directors shall be divided into three classes in the manner set forth in the Restated Certificate of Incorporation of the corporation, each class to be elected for the term set forth therein.  Directors shall (except as hereinafter provided for the filling of vacancies and newly created directorships) be elected by the holders of a plurality of the voting power present in person or represented by proxy and entitled to vote.  A majority of the total number of directors then in office (but not less than one-third of the number of directors constituting the entire Board of Directors) shall constitute a quorum for the transaction of business and, except as otherwise provided by law or by the corporation’s Restated Certificate of Incorporation, the act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors.  Directors need not be stockholders.

Section 2.  Newly created directorships in the Board of Directors that result from an increase in the number of directors and any vacancy occurring in the Board of Directors shall be filled only by a majority of the directors then in office, although less than a quorum, or by a sole remaining director; and the directors so chosen shall hold office for a term as set forth in the Restated Certificate of Incorporation of the corporation.  If any applicable provision of the General Corporation Law of the State of Delaware expressly confers power on stockholders to fill such a directorship at a special meeting of stockholders, such a directorship may be filled at such meeting only by the affirmative vote of at least 80 percent in voting power of all shares of the corporation entitled to vote generally in the election of directors, voting as a single class.

Section 3.  Meetings of the Board of Directors shall be held at such place within or without the State of Delaware as may from time to time be fixed by resolution of the Board or as may be specified in the notice of any meeting.  Regular meetings of the Board of Directors shall be held at such times as may from time to time be fixed by resolution of the Board and special meetings may be held at any time upon the call of the Chairman of the Board or the President, by oral, or written notice including, telegraph, telex or transmission of a telecopy, e-mail or other means of transmission, duly served on or sent or mailed to each director to such director’s address or telecopy number as shown on the books of the corporation not less than one day before the meeting.  The notice of any meeting need not specify the purposes thereof.  A meeting of the Board may be held without notice immediately after the annual meeting of stockholders at the same place at which such meeting is held.  Notice need not be given of regular meetings of the Board held at times fixed by resolution of the Board.  Notice of any meeting need not be given to any director who shall attend such meeting in person (except when the director attends a meeting for the express purpose of objecting at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened), or who shall waive notice thereof, before or after such meeting, in writing.

Section 4.  Notwithstanding the foregoing, whenever the holders of any one or more series of Preferred Stock or Series Common Stock issued by the corporation shall have the right, voting separately by series, to elect directors at an annual or special meeting of stockholders, the election, term of office, removal, filling of vacancies and other features of such directorships shall be governed by the terms of the Restated Certificate of Incorporation applicable thereto, and such directors so elected shall not be divided into classes pursuant to Article SEVENTH of the Restated Certificate of Incorporation unless expressly provided by such terms.  The number of directors that may be elected by the holders of any such series of Preferred Stock or Series Common Stock shall be in addition to the number fixed by or pursuant to the By-Laws.  Except as otherwise expressly provided in the terms of such series, the number of directors that may be so elected by the holders of any such series of stock shall be elected for terms expiring at the next annual meeting of stockholders and without regard to the classification of the members of the Board of Directors as set forth in Section 1 hereof, and vacancies among directors so elected by the separate vote of the holders of any such series of Preferred Stock or Series Common Stock shall be filled by the affirmative vote of a majority of the remaining directors elected by such series, or, if there are no such remaining directors, by the holders of such series in the same manner in which such series initially elected a director.

Section 5.  If at any meeting for the election of directors, the corporation has outstanding more than one class of stock, and one or more such classes or series thereof are entitled to vote separately as a class, and there shall be a quorum of only one such class or series of stock, that class or series of stock shall be entitled to elect its quota of directors notwithstanding absence of a quorum of the other class or series of stock.

Section 6.  The Board of Directors may designate three or more directors to constitute an executive committee, one of whom shall be designated Chairman of such committee.  The members of such committee shall hold such office until the next election of the Board of Directors and until their successors are elected and qualify.  Any vacancy occurring in the committee shall be filled by the Board of Directors.  Regular meetings of the committee shall be held at such times and on such notice and at such places as it may from time to time determine.  The committee shall act, advise with and aid the officers of the corporation in all matters concerning its interest and the management of its business, and shall generally perform such duties and exercise such powers as may from time to time be delegated to it by the Board of Directors, and shall have authority to exercise all the powers of the Board of Directors, so far as may be permitted by law, in the management of the business and the affairs of the corporation whenever the Board of Directors is not in session or whenever a quorum of the Board of Directors fails to attend any regular or special meeting of such Board.  The committee shall have power to authorize the seal of the corporation to be affixed to all papers which are required by the Delaware General Corporation Law to have the seal affixed thereto.  The fact that the executive committee has acted shall be conclusive evidence that the Board of Directors

was not in session at such time or that a quorum of the Board had failed to attend the regular or special meeting thereof.

The executive committee shall keep regular minutes of its transactions and shall cause them to be recorded in a book kept in the office of the corporation designated for that purpose, and shall report the same to the Board of Directors at their regular meeting.  The committee shall make and adopt its own rules for the government thereof and shall elect its own officers.

Section 7.  The Board of Directors may from time to time establish such other committees to serve at the pleasure of the Board which shall be comprised of such members of the Board and have such duties as the Board shall from time to time establish.  Any director may belong to any number of committees of the Board.  The Board may designate one or more Directors as alternate members of any committee, who may replace any absent or disqualified member at any meeting of the committee.  In the absence or disqualification of a member of a committee, the member or members thereof present at any meeting and not disqualified from voting, whether or not he, she or they constitute a quorum, may unanimously appoint another member of the Board of Directors to act at the meeting in the place of any such absent or disqualified member.  The Board may also establish such other committees with such members (whether or not directors) and such duties as the Board may from time to time determine.

Section 8.  Unless otherwise restricted by the Restated Certificate of Incorporation or these By-Laws, any action required or permitted to be taken at any meeting of the Board of Directors or of any committee thereof may be taken without a meeting if all members of the Board or committee, as the case may be, consent thereto in writing, and the writing or writings are filed with the minutes of proceedings of the Board of Directors.

Section 9.  The members of the Board of Directors or any committee thereof may participate in a meeting of such Board or committee, as the case may be, by means of conference telephone or similar communications equipment by means of which all persons participating in the meeting can hear each other, and participation in a meeting pursuant to this subsection shall constitute presence in person at such a meeting.

Section 10.  The Board of Directors may establish policies for the compensation of directors and for the reimbursement of the expenses of directors, in each case, in connection with services provided by directors to the corporation.

ARTICLE III.

OFFICERS

Section 1.  The Board of Directors, as soon as may be after each annual meeting of the stockholders, shall elect officers of the corporation, including a Chairman of the Board or President and a Secretary.  The Board of Directors may also from time to time elect such other officers (including one or more Vice Presidents, a Treasurer, one or more Assistant Vice Presidents, one or more Assistant Secretaries and one or more Assistant Treasurers) as it may deem proper or may delegate to any elected officer of the corporation the power to appoint and remove any such other officers and to prescribe their respective terms of office, authorities and duties.  Any Vice President may be designated Executive, Senior or Corporate, or may be given such other designation or combination of designations as the Board of Directors may determine.  Any two or more offices may be held by the same person.

Section 2.  All officers of the corporation elected by the Board of Directors shall hold office for such term as may be determined by the Board of Directors or until their respective successors are chosen and qualified.  Any officer may be removed from office at any time either with or without cause by the affirmative vote of a majority of the members of the Board then in office, or, in the case of appointed officers, by any elected officer upon whom such power of removal shall have been conferred by the Board of Directors.

Section 3.  Each of the officers of the corporation elected by the Board of Directors or appointed by an officer in accordance with these By-laws shall have the powers and duties prescribed by law, by the By-Laws or by the Board of Directors and, in the case of appointed officers, the powers and duties prescribed by the appointing officer, and, unless otherwise prescribed by the By-Laws or by the Board of Directors or such appointing officer, shall have such further powers and duties as ordinarily pertain to that office.  The Chairman of the Board or the President, as determined by the Board of Directors, shall be the Chief Executive Officer and shall have the general direction of the affairs of the corporation.

Section 4.  Unless otherwise provided in these By-Laws, in the absence or disability of any officer of the corporation, the Board of Directors may, during such period, delegate such officer’s powers and duties to any other officer or to any director and the person to whom such powers and duties are delegated shall, for the time being, hold such office.

ARTICLE IV.

CERTIFICATES OF STOCK

Section 1.  The shares of stock of the corporation shall be represented by certificates, provided that the Board of Directors may provide by resolution or resolutions that some or all of any or all classes or series of the corporation’s stock shall be uncertificated shares.  Any such resolution shall not apply to shares represented by a certificate until such certificate is surrendered to the corporation.  Notwithstanding the adoption of such a resolution

by the Board of Directors, every holder of stock represented by certificates and upon request every holder of uncertificated shares shall be entitled to have a certificate signed by, or in the name of the corporation by the Chairman of the Board of Directors, or the President or a Vice President, and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation, or as otherwise permitted by law, representing the number of shares registered in certificate form.  Any or all the signatures on the certificate may be a facsimile.

Section 2.  Transfers of stock shall be made on the books of the corporation by the holder of the shares in person or by such holder’s attorney upon surrender and cancellation of certificates for a like number of shares, or as otherwise provided by law with respect to uncertificated shares.

Section 3.  No certificate for shares of stock in the corporation shall be issued in place of any certificate alleged to have been lost, stolen or destroyed, except upon production of such evidence of such loss, theft or destruction and upon delivery to the corporation of a bond of indemnity in such amount, upon such terms and secured by such surety, as the Board of Directors in its discretion may require.

ARTICLE V.

CORPORATE BOOKS

The books of the corporation may be kept outside of the State of Delaware at such place or places as the Board of Directors may from time to time determine.

ARTICLE VI.

CHECKS, NOTES, PROXIES, ETC.

All checks and drafts on the corporation’s bank accounts and all bills of exchange and promissory notes, and all acceptances, obligations and other instruments for the payment of money, shall be signed by such officer or officers or agent or agents as shall be hereunto authorized from time to time by the Board of Directors.  Proxies to vote and consents with respect to securities of other corporations owned by or standing in the name of the corporation may be executed and delivered from time to time on behalf of the corporation by the Chairman of the Board, the President, or by such officers as the Board of Directors may from time to time determine.

ARTICLE VII.

FISCAL YEAR

The fiscal year of the corporation shall begin on the first day of January in each year and shall end on the thirty-first day of December following.

ARTICLE VIII.

CORPORATE SEAL

The corporate seal shall have inscribed thereon the name of the corporation.  In lieu of the corporate seal, when so authorized by the Board of Directors or a duly empowered committee thereof, a facsimile thereof may be impressed or affixed or reproduced.

ARTICLE IX.

AMENDMENTS

These By-Laws may be amended, added to, rescinded or repealed at any meeting of the Board of Directors or of the stockholders, provided notice of the proposed change was given in the notice of the meeting of the stockholders or, in the case of a meeting of the Board of Directors, in a notice given not less than two days prior to the meeting; provided, however,  that, notwithstanding any other provisions of these By-Laws or any provision of law which might otherwise permit a lesser vote of the stockholders, the affirmative vote of the holders of at least 80 percent in voting power of all shares of the corporation entitled to vote generally in the election of directors, voting together as a single class, shall be required in order for the stockholders to alter, amend or repeal Section 2 and Section 11 of Article I, Sections 1 and 2 of Article II or this proviso to this Article IX of these By-Laws or to adopt any provision inconsistent with any of such Sections or with this proviso.

EX-10.1

Exhibit 10.1

Employment Agreement for David M. Thomas

As Amended and Restated at January 1, 2005

IMS HEALTH INCORPORATED

Employment Agreement for David M. Thomas

As Amended and Restated at January 1, 2005

i

(f) Termination by Executive for Good Reason After a Change in Control

(g) Other Terms Relating to Certain Terminations of Employment

8. Definitions Relating to Termination Events

(a) “Cause”

(b) “Change in Control”

(c) “Compensation Accrued at Termination”

(d) “Disability”

(e) “Good Reason”

(f) “Potential Change in Control”

(g) “Special SERP Benefit”.

9. Rabbi Trust Obligation Upon Potential Change in Control; Excise Tax-Related Provisions

(a) Rabbi Trust Funded Upon Potential Change in Control

(b) Gross-up If Excise Tax Would Apply

10. Non-Competition and Non-Disclosure; Executive Cooperation; Non-Disparagement

(a) Non-Competition

(b) Non-Disclosure; Ownership of Work

(c) Cooperation With Regard to Litigation

(d) Non-Disparagement

(e) Release of Employment Claims

(f) Forfeiture of Outstanding Options

(g) Survival

11. Governing Law; Disputes; Arbitration

(a) Governing Law

(b) Reimbursement of Expenses in Enforcing Rights

(c) Arbitration

(d) Interest on Unpaid Amounts

ii

12. Miscellaneous

(a) Integration

(b) Successors; Transferability

(c) Beneficiaries

(d) Notices

(e) Reformation

(f) Headings

(g) No General Waivers

(h) No Obligation To Mitigate

(i) Offsets; Withholding

(j) Successors and Assigns

(k) Counterparts

(l) Due Authority and Execution

(m) Representations of Executive

13. Indemnification

iii

IMS HEALTH INCORPORATED

Employment Agreement for David M. Thomas

As Amended and Restated at January 1, 2005

THIS EMPLOYMENT AGREEMENT by and between IMS HEALTH INCORPORATED, a Delaware corporation (the “Company”), and David M. Thomas (“Executive”) became effective as of November 14, 2000 (the “Effective Date”).  The first amendment and restatement of this Employment Agreement became effective as of December 3, 2002, and the second amendment and restatement of this Employment Agreement (the “Agreement”) shall become effective as of January 1, 2005.

W I T N E S S E T H

WHEREAS, the Company desires to employ Executive as Executive Chairman of the Board of the Company, and Executive desires to accept such employment on the terms and conditions herein set forth.

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein, and other good and valuable consideration the receipt and adequacy of which the Company and Executive each hereby acknowledge, the Company and Executive hereby agree as follows:

1.Employment.

The Company hereby agrees to employ Executive, to serve from and after January 1, 2005 as its Executive Chairman of the Board (“Executive Chairman”), and Executive hereby agrees to accept such employment, during the Term as defined in Section 2 (subject to Section 7(c) and 7(e)), and to serve in such capacity from and after January 1, 2005, upon the terms and conditions set forth in this Agreement.  Prior to October 7, 2002, Executive served as President of the Company, which office and title he relinquished with his consent, and prior to January 1, 2005, Executive served as Chief Executive Officer of the Company, which office and title he relinquished with his consent.

2.Term.

The term of employment of Executive under this Agreement (the “Term”) shall be the period commencing on January 1, 2005 and ending on March 31, 2006, except that the Term will end at a date, prior to the end of such period, specified in Section 6 or 7 in the event of termination of Executive’s employment.  In the event there occurs a Potential Change in Control during the period of 180 days prior to March 31, 2006, the Term shall be extended automatically at March 31, 2006 by an additional

period such that the Term will extend until the 180th day following such Potential Change in Control.

3.Offices and Duties

The provisions of this Section 3 will apply during the Term, except as otherwise provided in Section 7(c) and 7(e):

(a)Generally.  Executive shall serve, from and after January 1, 2005, as the Executive Chairman of the Board and shall be nominated and, if elected, shall serve as a member of the Board of Directors of the Company (the “Board”) and, for so long as he is serving on the Board, Executive agrees to serve as a member of any Board committee if the Board shall elect Executive to such committee.  In any and all such capacities, Executive shall report only to the Board of Directors of the Company.  Executive shall have and perform such duties, responsibilities, and authorities as are customary for the executive chairman of a publicly held corporation of the size, type, and nature of the Company which has a separate Chief Executive Officer, as they may exist from time to time and consistent with such position and status, but in no event shall such duties, responsibilities, and authorities be reduced from those of Executive as Chairman of the Board at January 1, 2005.  Executive shall devote a substantial portion of his business time and attention, and his best efforts, abilities, experience, and talent, to the position of Executive Chairman of the Board and for the businesses of the Company without commitment to other business endeavors, except that Executive (i) may make personal investments which are not in conflict with his duties to the Company and manage personal and family financial and legal affairs, (ii) may serve as a member of the board of directors of such companies as he is serving on as of January 1, 2005, (iii) undertake public speaking engagements, and (iv) serve as a director of (or similar position with) any other business or an educational, charitable, community, civic, religious, or similar type of organization with the approval of the Board of Directors of the Company, so long as such activities (i.e., those listed in clauses (i) through (iv)) do not preclude or render unlawful Executive’s employment or service to the Company or otherwise materially inhibit the performance of Executive’s duties under this Agreement or impair the business of the Company or its subsidiaries.

(b)Place of Employment.  Executive’s principal place of employment shall be at the Company’s principal executive offices in Fairfield, Connecticut.

(c)Rank of Executive Within Company.  As Executive Chairman of the Board, Executive shall be the highest-ranking executive of the Company.

2

4.Salary and Annual Incentive Compensation.

As partial compensation for the services to be rendered hereunder by Executive, the Company agrees to pay to Executive during the Term the compensation set forth in this Section 4.

(a)Base Salary.  The Company will pay to Executive during the Term a base salary at the annual rate of $880,000, payable commencing at the beginning of the Term in accordance with the Company’s usual payroll practices with respect to senior executives (except to the extent deferred under Section 5(d)).  Executive’s annual base salary may be increased above, but may not be reduced below, the then-current rate of such base salary.  For purposes of this Agreement, “Base Salary” means Executive’s then-current base salary.

(b)Annual Incentive Compensation.  The Company will pay to Executive during the Term annual incentive compensation which shall offer to Executive an opportunity to earn additional compensation based upon performance in amounts determined by the Compensation and Benefits Committee of the Board (the “Committee”) in accordance with the applicable plan and consistent with past practices of the Company; provided, however, that the annual target incentive opportunity shall be 100% of Base Salary for achievement of target level performance, with the nature of the performance and the levels of performance triggering payments of such annual target incentive compensation for each year to be established after consultation with Executive and communicated to Executive during the first quarter of such year by the Committee; and provided further that the annual incentive (if any) payable for the portion of the Term in 2006 shall be prorated based on the number of days in the full year worked by Executive.  In addition, the Committee (or the Board) may determine, in its discretion, to increase Executive’s annual target incentive opportunity or provide an additional annual incentive opportunity, in excess of the annual target incentive opportunity, payable for performance in excess of or in addition to the performance required for payment of the annual target incentive amount.  Any annual incentive compensation payable to Executive shall be paid in accordance with the Company’s usual practices with respect to payment of incentive compensation to senior executives (except to the extent deferred under Section 5(d)).

5.Long-Term Compensation, Including Restricted Stock, Stock Options, and Benefits, Deferred Compensation, and Expense Reimbursement.

(a)Executive Compensation Plans.  Executive shall participate during the Term in long-term incentive executive compensation plans and programs only to the extent specified in this Section 5.  In connection with any such participation, for purposes of eligibility and benefit participation levels under these programs that are not tax-qualified or otherwise subject to nondiscrimination requirements under the Internal Revenue Code of 1986, as amended (the “Code”), Executive shall be given full

3

service credit for service with IBM Corporation (“Past Service Credit”) and, with respect to any other plans and/or programs, Past Service Credit so long as the tax qualified and/or non-discriminatory status is not jeopardized. Executive’s participation in long-term incentive executive compensation programs during the Term shall consist of the following:

(i)The Company shall grant Executive as of January 1, 2005 45,833 Restricted Stock Units (“RSUs”) pursuant to and subject to the terms of the Company’s Amended and Restated 1998 Stock Incentive Plan, effective July 20, 1999, as amended from time to time (“1998 Plan”) (the “Retention Grant”).  The Retention Grant, if not previously forfeited, shall vest as to 33,333 RSUs on the first anniversary of the date of grant (or the earlier termination of Executive without Cause or for Good Reason) and shall vest as to 12,500 RSUs on March 31, 2006 (or the earlier termination of Executive without Cause or for Good Reason).  Other provisions of this Agreement notwithstanding, the RSUs subject to the Retention Grant shall be forfeited if Executive voluntarily terminates his employment hereunder prior to the vesting date of such RSUs, other than a termination by Executive for Good Reason.

(ii)Executive will not be eligible to receive an award of Restricted Stock Units (“PERS”) under the Performance-Based Restricted Stock Program for years after 2004, but will be entitled to receive PERS for the 2004 performance year in accordance with the terms of such Program.

(iii)For purposes of the vesting of any RSUs, PERS, stock options and any other equity award outstanding and held by Executive at January 1, 2005, service as Executive Chairman hereunder shall be treated as continuing employment.  All previously unvested PERS granted under the Performance-Based Restricted Stock Program and all previously unvested stock options shall vest at March 31, 2006 if Executive’s employment hereunder continues through such date.  If Executive’s employment terminates prior to that date, vesting of such awards will be governed by the applicable provisions of this Agreement, the 1998 Plan and any other program or award documents governing the award.  All of Executive’s stock options which remain unvested and unexercised as of March 31, 2006 will automatically vest and remain outstanding and exercisable after such date for the shorter of five years from that date or the expiration date of the option that would have applied if Executive had continued his employment with the Company.

4

(b)Employee and Executive Benefit Plans.  Executive shall be entitled during the Term to participate, without discrimination or duplication, in all employee and executive benefit plans and programs of the Company, as presently in effect or as they may be modified or added to by the Company from time to time, to the extent such plans are available to other senior executives or employees of the Company, subject to the eligibility and other requirements of such plans and programs, including without limitation plans providing pensions, supplemental pensions, supplemental and other retirement benefits, medical insurance, life insurance, disability insurance, and accidental death or dismemberment insurance, as well as savings, profit-sharing, and stock ownership plans, provided that such benefit plans and programs, in the aggregate, shall provide Executive with benefits and compensation substantially no less favorable than those provided by the Company to Executive under such plans and programs as in effect on the Effective Date.  Additionally, Executive shall be eligible to participate in and receive benefits under the Company’s Employee Protection Plan (“EPP”).

In furtherance of the foregoing, during the Term:

(i)Executive will participate as Executive Chairman in all executive and employee vacation and time-off programs; provided that Executive shall be entitled to a minimum of 25 vacation days annually;

(ii)Executive will be entitled to retirement benefits substantially no less favorable than those under the defined benefit pension plans and programs of the Company, including the IMS Health Incorporated Supplemental Executive Retirement Plan (the “SERP”), as in effect on the Effective Date (subject to such enhancement to benefits as are provided hereunder, including Sections 7(e) and (f)); provided, however, that, the provisions of the SERP notwithstanding, (A) for vesting purposes under the SERP, Executive shall be credited with 28 years of “Service,” based on his prior employment with IBM Corporation and (B) Executive shall be entitled to the greater of (x) the “Retirement Benefit” as determined under the SERP without modification by this Agreement (other than clause (A) above) and (y) the “Special SERP Benefit” as defined in Section 8(g); 

(iii)Executive shall be entitled during the Term to receive or participate in perquisites under policies implemented by the Board and the Committee, and in any event shall be entitled to financial accounting and planning services (up to a maximum of $15,000 per year for each of 2005 and 2006) and office and administrative support; and

5

(iv)Upon Executive’s termination of service at or after March 31, 2006, or upon an earlier termination due to death or Disability, the Company will, without charge to Executive, transfer to Executive title (free of any liens or encumbrances) to the automobile then being provided by the Company for Executive’s use; provided, however, that such transfer may be delayed until the end of any lease period then in effect, during which period the Company will provide the automobile for Executive’s exclusive use.

Any provision to the contrary contained in this Agreement notwithstanding, unless Executive is terminated by the Company for “Cause” (as defined in Section 8(a)) or Executive terminates voluntarily and not for “Good Reason” (as defined in Section 8(e)), Executive may elect continued participation after termination of employment in the Company’s health and medical coverage for himself and his spouse and dependent children after such coverage would otherwise end for his lifetime (under rules in effect at the Effective Date hereof); provided, however, that in the event of such election, Executive shall pay the Company each year an amount equal to (i), during the first 18 months after termination (or other applicable period under COBRA), the then-current annual COBRA premium being paid (or payable) by any other former employee of the Company, and (ii), thereafter, the annual amount payable in accordance with standard payment rates applicable to employees who have retired at the date of Executive’s termination of employment, except in each case as may be otherwise provided under Section 6 or 7.  If Executive’s age and years of service do not qualify him for full benefits under the Company’s retiree health benefits plan, Executive and his spouse and qualifying dependents shall be entitled to the same benefits as would have been provided if Executive’s age and years of service had qualified for full benefits under such plan.

(c)Acceleration of Awards Upon a Change in Control.   In the event of a Change in Control (as defined in Section 8(b)), or as otherwise provided hereunder, all outstanding stock options, restricted stock, RSUs and other equity-based awards then held by Executive, including the Retention Grant, shall become vested and exercisable.

(d)Deferral of Compensation.  If the Company has in effect or adopts any deferral program or arrangement permitting executives to elect to defer any compensation, Executive will be eligible to participate in such program on terms no less favorable than the terms of participation of any other senior executive officer of the Company.  Any plan or program of the Company which provides benefits based on the level of salary, annual incentive, or other compensation of Executive shall, in determining Executive’s benefits, take into account the amount of salary, annual incentive, or other compensation prior to any reduction for voluntary contributions made by Executive under any deferral or similar contributory plan or program of the Company, but shall not treat any payout or settlement under such a deferral or similar contributory plan or program to be additional salary, annual incentive, or other compensation for

6

purposes of determining such benefits, unless otherwise expressly provided under such plan or program.

(e)Reimbursement of Expenses.  The Company will promptly reimburse Executive for all reasonable business expenses and disbursements incurred by Executive in the performance of Executive’s duties during the Term in accordance with the Company’s reimbursement policies as in effect from time to time.

(f)Corporate Aircraft.  Executive and his immediate family shall be entitled to use Company aircraft for all business and reasonable personal travel, except that (i) Executive shall reimburse the Company for all personal travel in amounts determined in accordance with Company policy; and (ii) Executive shall use commercial aircraft (first class for international flights and domestic flights in excess of 2 hours; business class for all other flights) where use of Company aircraft is not practical.  If any use of Company aircraft by Executive or his family members results in imputed income to Executive, Executive shall be responsible for the payment of taxes on such imputed income.

(g)Company Registration Obligations.  The Company will use its best efforts to file with the Securities and Exchange Commission and thereafter maintain the effectiveness of one or more registration statements registering under the Securities Act of 1933, as amended (the “1933 Act”), the offer and sale of shares by the Company to Executive pursuant to stock options or other equity-based awards granted to Executive under Company plans or otherwise or, if shares are acquired by Executive in a transaction not involving an offer or sale to Executive but resulting in the acquired shares being “restricted securities” for purposes of the 1933 Act, registering the reoffer and resale of such shares by Executive.

(h)Limitations Under Code Section 409A.  In the event that it is reasonably determined by the Company that, as a result of Section 409A of the Code (and any related regulations or other pronouncements thereunder), any of the payments that Executive is entitled to under the terms of this Agreement, the SERP, or any other plan involving deferred compensation (as defined under Code Section 409A) may not be made at the time contemplated by the terms thereof without causing the Executive to be subject to an income tax penalty and interest, the Company will make such payment on the first day permissible under Code Section 409A without the Executive incurring a penalty.   In addition, other provisions of this Agreement, the SERP, or any other such plan notwithstanding, the Company shall have no right to accelerate any such payment or to make any such payment as the result of an event except to the extent permitted under Section 409A. 

6.Termination Due to Retirement, Death, or Disability.

(a)Retirement.  Executive may elect to terminate employment hereunder by retirement at or after age 60 or at such earlier age as may be approved by the Board (in either case, “Retirement”).  In this regard, termination of Executive’s

7

employment at March 31, 2006 or a later date will be deemed a Retirement.  At the time Executive’s employment terminates due to Retirement, the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease except for obligations which expressly continue after termination of employment due to Retirement, and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination (as defined in Section 8(c));

(ii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to the annual incentive compensation that would have become payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for that year if his employment had not terminated, based on performance actually achieved in that year (determined by the Committee following completion of the performance year), multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

(iii)The vesting and exercisability of stock options held by Executive at termination and all other terms of such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted (subject to Section 10(f) hereof); and

(iv)All restricted stock and deferred stock awards, including outstanding PERS awards, all other long-term incentive awards, and all deferral arrangements under Section 5(d), shall be governed by the plans and programs under which the awards were granted or governing the deferral, and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement.

(b)Death.  In the event of Executive’s death which results in the termination of Executive’s employment, the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease except for obligations which expressly continue after death, and the Company will pay Executive’s beneficiary or estate, and Executive’s beneficiary or estate will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

8

(ii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s death occurred, an amount equal to the annual incentive compensation that would have become payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for that year if his employment had not terminated, based on performance actually achieved in that year (determined by the Committee following completion of the performance year), multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of his death and the denominator of which is the total number of days in the year of death;

(iii)The vesting and exercisability of stock options held by Executive at death and all other terms of such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted; and

(iv)All restricted stock and deferred stock awards, including outstanding PERS awards, all other long-term incentive awards, and all deferral arrangements under Section 5(d), shall be governed by the plans and programs under which the awards were granted or governing the deferral, and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement.

(c)Disability.  The Company may terminate the employment of Executive hereunder due to the Disability (as defined in Section 8(d)) of Executive.  Such employment shall terminate at the expiration of the 30-day period referred to in the definition of Disability set forth in Section 8(d), unless Executive has returned to service and presented to the Company a certificate of good health prior to such termination as specified in Section 8(d).  Upon termination of employment, the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease except for obligations which expressly continue after termination of employment due to Disability, and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to the annual incentive compensation that would have become payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for that year if his employment had not terminated, based on performance actually achieved in that year (determined by the Committee following

9

completion of the performance year), multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

(iii)The vesting and exercisability of stock options held by Executive at termination and all other terms of such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted, as modified by this Agreement;

(iv)Any performance objectives upon which the earning of performance-based restricted stock and deferred stock awards and other long-term incentive awards is conditioned shall be deemed to have been met at target level at the date of termination, and restricted stock and deferred stock awards, including outstanding PERS awards, and other long-term incentive awards (to the extent then or previously earned, in the case of performance-based awards) shall become fully vested and non-forfeitable at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;

(v)Disability benefits shall be payable in accordance with the Company’s plans, programs and policies (including the SERP) as modified by this Agreement, and all deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral, provided that, if the Company’s payment obligation (determined on a monthly basis) pursuant to Section 7(c)(ii) hereof (the “Section 7(c)(ii) Payments”) would have been greater than the monthly payments if Executive’s termination of employment had been treated as a termination by the Company without Cause, Executive shall be entitled to an additional monthly payment equal to the difference between the Section 7(c)(ii) Payments and the monthly payments due Executive pursuant to this Section 6(c)(v), to the extent of such excess; and

(vi)For the period extending from the date of termination due to Disability until the date Executive reaches age 65, Executive shall continue to participate in those employee and executive benefit plans and programs under Section 5(b) to the extent such plans and programs provide medical insurance, disability insurance and life insurance benefits (but not other benefits, such as pension and retirement benefits, provided under Section 5(b)) in which Executive was participating immediately prior to termination, the

10

terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period or, if the terms of such plans or programs do not allow Executive’s continued participation, Executive shall be paid a cash payment equivalent on an after-tax basis to the value of the additional benefits (of the type described in this Section 6(c)(vi)) Executive would have received under such plans or programs had Executive continued to be employed during such period following Executive’s termination until age 65, with such benefits provided by the Company at the same times and in the same manner as such benefits would have been provided to Executive under such plans and programs (it being understood that the value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating); provided, however, that Executive must continue to satisfy the conditions set forth in Section 10 in order to continue receiving the benefits provided under this Section 6(c)(vi).

(d)Other Terms of Payment Following Retirement, Death, or Disability.  Nothing in this Section 6 shall limit the benefits payable or provided in the event Executive’s employment terminates due to Retirement, death, or Disability under the terms of plans or programs of the Company more favorable to Executive (or his beneficiaries) than the benefits payable or provided under this Section 6 (except in the case of annual incentives in lieu of which amounts are paid hereunder), including plans and programs adopted after the date of this Agreement.  Amounts payable under this Section 6 following Executive’s termination of employment, other than those expressly payable following determination of performance for the year of termination for purposes of annual incentive compensation or otherwise expressly payable on a deferred basis, will be paid as promptly as practicable after such termination of employment.

(e)Consulting Obligation Following Retirement.  Upon Executive’s Retirement at or after March 31, 2006, beginning at the date of such Retirement and continuing through December 31, 2006, Executive shall provide consulting services to the Company on a regular basis up to a maximum amount of six (6) days per month.  The Company shall pay Executive a consulting fee of $70,000 per month, plus reimbursement of reasonable expenses.  The Company will provide to Executive office and administrative support during the period in which he provides consulting services to the Company.  In the event of Executive’s death or Disability during the Term or after the Term but prior to the end of the period during which the consulting services are to be provided under this Section 6(e), the Company will pay to Executive (or his beneficiaries in the case of death) a lump sum equal to the then present value amount of consulting fees that would have thereafter been paid hereunder if Executive had provided consulting services through the end of the specified consulting period.

11

7.Termination of Employment For Reasons Other Than Retirement, Death, or Disability.

(a)Termination by the Company for Cause.  The Company may terminate the employment of Executive hereunder for Cause (as defined in Section 8(a)) at any time.  At the time Executive’s employment is terminated for Cause, the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease, and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination (as defined in Section 8(c));

(ii)All stock options, restricted stock and deferred stock awards, including outstanding PERS awards, and all other long-term incentive awards will be governed by the terms of the plans and programs under which the awards were granted, as modified by this Agreement; and

(iii)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral, and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement.

(b)Termination by Executive Other Than For Good Reason.  Executive may terminate his employment hereunder voluntarily for reasons other than Good Reason (as defined in Section 8(e)) at any time.   At the time Executive’s employment is terminated by Executive other than for Good Reason the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease, and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)All stock options, restricted stock and deferred stock awards, including outstanding PERS awards, and all other long-term incentive awards will be governed by the terms of the plans and programs under which the awards were granted; and

(iii)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral, and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement.

12

(c)Termination by the Company Without Cause Prior to a Change in Control.  The Company may terminate the employment of Executive hereunder without Cause, if at the date of termination no Change in Control or a Potential Change in Control has occurred, upon at least 90 days’ written notice to Executive.  The foregoing notwithstanding, the Company may elect, by written notice to Executive, to terminate Executive’s positions specified in Sections 1 and 3 and all other obligations of Executive and the Company under Section 3 at a date earlier than the expiration of such 90-day period, if so specified by the Company in the written notice, provided that Executive shall be treated as an employee of the Company (without any assigned duties) for all other purposes of this Agreement, including for purposes of Sections 4 and 5, from such specified date until the expiration of such 90-day period.  At the time Executive’s employment is terminated by the Company (i.e., at the expiration of such notice period), the Term will terminate, all remaining obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease (except as expressly provided below), and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)Cash in an aggregate amount equal to  two times the sum of (A) Executive’s Base Salary under Section 4(a) immediately prior to termination plus (B) an amount equal to the greater of  (x) the portion of Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination or (y) the portion of Executive’s annual incentive compensation that became payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the latest year preceding the year of termination based on performance actually achieved in that latest year (the sum of (A) and (B) being herein referred to as the “Cash Compensation”) and The amount determined to be payable under this Section 7(c)(ii) shall be payable in monthly installments over the 24 months following termination, without interest, except that (subject to Section 5(h)) the Company may elect to accelerate payment of  the remaining balance of such amount and to pay it as a lump sum, without discount;

(iii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to the portion of Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination, multiplied by a fraction the numerator of which is the number of days Executive was employed

13

in the year of termination and the denominator of which is the total number of days in the year of termination;

(iv)Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, and, in other respects (including the period following termination during which such options may be exercised), such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted;

(v)Any performance objectives upon which the earning of performance-based restricted stock and deferred stock awards and other long-term incentive awards is conditioned shall be deemed to have been met at target level at the date of termination, and restricted stock and deferred stock awards, including outstanding PERS awards, and other long-term incentive awards (to the extent then or previously earned, in the case of performance-based awards) shall become fully vested and non-forfeitable at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;

(vi)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement; and

(vii)For a period of two years after such termination (but not after Executive attains age 65), Executive shall continue to participate in those employee and executive benefit plans and programs under Section 5(b) to the extent such plans and programs provide medical insurance, disability insurance and life insurance benefits (but not other benefits, such as pension and retirement benefits, provided under Section 5(b)) in which Executive was participating immediately prior to termination, the terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period; provided, however, that such participation shall terminate, or the benefits under such plans and programs shall be reduced, if and to the extent Executive becomes covered (or is eligible to become covered) by plans of a subsequent employer or other entity to which Executive provides services during such period providing comparable benefits.  If the terms of the Company plans and programs referred to in this Section 7(c)(vii) do not allow

14

Executive’s continued participation, Executive shall be paid a cash payment equivalent on an after-tax basis to the value of the additional benefits described in this Section 7(c)(vii) Executive would have received under such plans or programs had Executive continued to be employed during such period, with such benefits provided by the Company at the same times and in the same manner as such benefits would have been provided to Executive under such plans and programs (it being understood that the value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating); provided, however, that Executive must continue to satisfy the conditions set forth in Section 10 in order to continue receiving the benefits provided under this Section 7(c)(vii).  Executive agrees to promptly notify the Company of any employment or other arrangement by which Executive provides services during the benefits-continuation period and of the nature and extent of benefits for which Executive becomes eligible during such period which would reduce or terminate benefits under this Section 7(c)(vii); and the Company be entitled to recover from Executive any payments and the fair market value of benefits previously made or provided to Executive hereunder which would not have been paid under this Section 7(c)(vii) if the Company had received adequate prior notice as required by this sentence.

(d)Termination by Executive for Good Reason Prior to a Change in Control.  Executive may terminate his employment hereunder for Good Reason, prior to a Change in Control, upon 90 days’ written notice to the Company; provided, however, that, if the Company has corrected the basis for such Good Reason within 30 days after receipt of such notice, Executive may not terminate his employment for Good Reason with respect to the matters addressed in the written notice, and therefore Executive’s notice of termination will automatically become null and void.  At the time Executive’s employment is terminated by Executive for Good Reason (i.e., at the expiration of such notice period), the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease (except as expressly provided below), and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)Cash in an aggregate amount equal to two times the sum of (A) Executive’s Base Salary under Section 4(a) immediately prior to termination plus (B) an amount equal to the greater of  (x) the portion of Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion

15

payable in PERS or in other non-cash awards) for the year of termination or (y) the portion of Executive’s annual incentive compensation that became payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the latest year preceding the year of termination based on performance actually achieved in that latest year (the sum of (A) and (B) being herein referred to as the “Cash Compensation”) and .  The amount determined to be payable under this Section 7(d)(ii) shall be payable in monthly installments over the 24 months following termination, without interest, except that (subject to Section 5(h)) the Company may elect to accelerate payment of  the remaining balance of such amount and to pay it as a lump sum, without discount;

(iii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to the portion of Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination, multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

(iv)Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, and, in other respects (including the period following termination during which such options may be exercised), such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted;

(v)Any performance objectives upon which the earning of performance-based restricted stock and deferred stock awards and other long-term incentive awards is conditioned shall be deemed to have been met at target level at the date of termination, and restricted stock and deferred stock awards, including outstanding PERS awards, and other long-term incentive awards (to the extent then or previously earned, in the case of performance-based awards) shall become fully vested and non-forfeitable at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;

16

(vi)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement; and

(vii)For a period of two years after such termination (but not after Executive attains age 65), Executive shall continue to participate in those employee and executive benefit plans and programs under Section 5(b) to the extent such plans and programs provide medical insurance, disability insurance and life insurance benefits (but not other benefits, such as pension and retirement benefits, provided under Section 5(b)) in which Executive was participating immediately prior to termination, the terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period; provided, however, that such participation shall terminate, or the benefits under such plans and programs shall be reduced, if and to the extent Executive becomes covered (or is eligible to become covered) by plans of a subsequent employer or other entity to which Executive provides services during such period providing comparable benefits.  If the terms of the Company plans and programs referred to in this Section 7(d)(vii) do not allow Executive’s continued participation, Executive shall be paid a cash payment equivalent on an after-tax basis to the value of the additional benefits described in this Section 7(d)(vii) Executive would have received under such plans or programs had Executive continued to be employed during such period, with such benefits provided by the Company at the same times and in the same manner as such benefits would have been provided to Executive under such plans and programs (it being understood that the value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating); provided, however, that Executive must continue to satisfy the conditions set forth in Section 10 in order to continue receiving the benefits provided under this Section 7(d)(vii).  Executive agrees to promptly notify the Company of any employment or other arrangement by which Executive provides services during the benefits-continuation period and of the nature and extent of benefits for which Executive becomes eligible during such period which would reduce or terminate benefits under this Section 7(d)(vii); and the Company shall be entitled to recover from Executive any payments and the fair market value of benefits previously made or provided to Executive hereunder which would not have been paid

17

under this Section 7(d)(vii) if the Company had received adequate prior notice as required by this sentence.

If any payment or benefit under this Section 7(d) is based on Base Salary or other level of compensation or benefits at the time of Executive’s termination and if a reduction in such Base Salary or other level of compensation or benefit was the basis for Executive’s termination for Good Reason, then the Base Salary or other level of compensation in effect before such reduction shall be used to calculate payments or benefits under this Section 7(d).

(e)Termination by the Company Without Cause After a Change in Control.  The Company may terminate the employment of Executive hereunder without Cause, simultaneously with or within 24 months following a Change in Control, upon at least 90 days’ written notice to Executive.  The foregoing notwithstanding, the Company may elect, by written notice to Executive, to terminate Executive’s positions specified in Sections 1 and 3 and all other obligations of Executive and the Company under Section 3 at a date earlier than the expiration of such 90-day notice period, if so specified by the Company in the written notice, provided that Executive shall be treated as an employee of the Company (without any assigned duties) for all other purposes of this Agreement, including for purposes of Sections 4 and 5, from such specified date until the expiration of such 90-day period.  At the time Executive’s employment is terminated by the Company (i.e., at the expiration of such notice period), the Term will terminate, all remaining obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease (except as expressly provided below), and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)Cash in an aggregate amount equal to three times the sum of (A) Executive’s Base Salary under Section 4(a) immediately prior to termination plus (B) an amount equal to the greater of (x) the portion of Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination or (y) the portion of Executive’s annual incentive compensation that became payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the latest year preceding the year of termination based on performance actually achieved in that latest year.  The amount determined to be payable under this Section 7(e)(ii) shall be paid by the Company not later than 15 days after Executive’s termination;

(iii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount

18

equal to the portion of Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination, multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

(iv)Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, and any such options granted on or after the date hereof shall remain outstanding and exercisable until the stated expiration date of the Option as though Executive’s employment did not terminate, and, in other respects, such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted;

(v)Any performance objectives upon which the earning of performance-based restricted stock and deferred stock awards and other long-term incentive awards is conditioned shall be deemed to have been met at target level at the date of termination, and restricted stock and deferred stock awards, including outstanding PERS awards, and other long-term incentive awards (to the extent then or previously earned, in the case of performance-based awards) shall become fully vested and non-forfeitable at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;

(vi)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement;

(vii)For purposes of the SERP, Executive will be credited with additional years of age and/or years of Service (as defined in the SERP) if and to the extent required so that Executive’s termination will qualify as a “Retirement” within the meaning of the SERP and so that Executive will be entitled the maximum “Retirement Benefit” in accordance with Section 3.1 of the SERP.  In addition, the provisions of the SERP notwithstanding, the term “Average Final Compensation” as used in the SERP shall mean the greatest of (A) Average Final Compensation as defined in the SERP, (B) the sum of (x) Executive’s Base Salary plus (y) Executive’s annual target incentive opportunity for the year in which the Change in Control

19

occurred (if not yet determined, then such opportunity shall be deemed to equal the greater of the minimum annual target incentive opportunity that would be required by this Agreement or the actual annual incentive earned for the year immediately preceding the year in which the Change in Control occurred), or (C) $2,000,000; and

(viii)For a period of three years after such termination (but not after Executive attains age 65), Executive shall continue to participate in those employee and executive benefit plans and programs under Section 5(b) to the extent such plans and programs provide medical insurance, disability insurance and life insurance benefits (but not other benefits, such as pension and retirement benefits, provided under Section 5(b)) in which Executive was participating immediately prior to termination, the terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period, and on terms no less favorable than the terms applicable to Executive before the Change in Control; provided, however, that such participation shall terminate, or the benefits under such plans and programs shall be reduced, if and to the extent Executive becomes covered (or is eligible to become covered) by plans of a subsequent employer or other entity to which Executive provides services during such period providing comparable benefits.  If the terms of the Company plans and programs referred to in this Section 7(e)(viii) do not allow Executive’s continued participation, Executive shall be paid a cash payment equivalent on an after-tax basis to the value of the additional benefits described in this Section 7(e)(viii) Executive would have received under such plans or programs had Executive continued to be employed during such period, with such benefits provided by the Company at the same times and in the same manner as such benefits would have been provided to Executive under such plans and programs (it being understood that the value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating); provided, however, that Executive must continue to satisfy the conditions set forth in Section 10 in order to continue receiving the benefits provided under this Section 7(e)(viii).  Executive agrees to promptly notify the Company of any employment or other arrangement by which Executive provides services during the benefits-continuation period and of the nature and extent of benefits for which Executive becomes eligible during such period which would reduce or terminate benefits under this Section 7(e)(viii); and the Company shall be entitled to recover from Executive any

20

payments and the fair market value of benefits previously made or provided to Executive hereunder which would not have been paid under this Section 7(e)(viii) if the Company had received adequate prior notice as required by this sentence.

If any payment or benefit under this Section 7(e) is based on Base Salary or other level of compensation or benefits at the time of Executive’s termination and if the Company has purported to reduce Base Salary or other level of compensation or benefits prior to such termination in a manner that would constitute Good Reason, then the Base Salary or other level of compensation in effect before such reduction shall be used to calculate payments or benefits under this Section 7(e).

(f)Termination by Executive for Good Reason After a Change in Control.  Executive may terminate his employment hereunder for Good Reason, simultaneously with or within 24 months following a Change in Control, upon 90 days’ written notice to the Company; provided, however, that, if the Company has corrected the basis for such Good Reason within 30 days after receipt of such notice, Executive may not terminate his employment for Good Reason, and therefore Executive’s notice of termination will automatically become null and void.  At the time Executive’s employment is terminated by Executive for Good Reason (i.e., at the expiration of such notice period), the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease (except as expressly provided below), and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)Cash in an aggregate amount equal to three times the sum of (A) Executive’s Base Salary under Section 4(a) immediately prior to termination plus (B) an amount equal to the greater of (x) the portion of Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination or (y) the portion of Executive’s annual incentive compensation that became payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the latest year preceding the year of termination based on performance actually achieved in that latest year.  The amount determined to be payable under this Section 7(f)(ii) shall be paid by the Company not later than 15 days after Executive’s termination;

(iii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to the portion of Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e.,

21

excluding the portion payable in PERS or in other non-cash awards) for the year of termination, multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

(iv)Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, and any such options granted on or after the date hereof shall remain outstanding and exercisable until the stated expiration date of the Option as though Executive’s employment did not terminate, and, in other respects, such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted;

(v)Any performance objectives upon which the earning of performance-based restricted stock and deferred stock awards and other long-term incentive awards is conditioned shall be deemed to have been met at target level at the date of termination, and restricted stock and deferred stock awards, including outstanding PERS awards, and other long-term incentive awards (to the extent then or previously earned, in the case of performance-based awards) shall become fully vested and non-forfeitable at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;

(vi)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement;

(vii)For purposes of the SERP, Executive will be credited with additional years of age and/or years of Service (as defined in the SERP) if and to the extent required so that Executive’s termination will qualify as a “Retirement” within the meaning of the SERP and so that Executive will be entitled the maximum “Retirement Benefit” in accordance with Section 3.1 of the SERP.  In addition, the provisions of the SERP notwithstanding, the term “Average Final Compensation” as used in the SERP shall mean the greatest of (A) Average Final Compensation as defined in the SERP, (B) the sum of (x) Executive’s Base Salary plus (y) Executive’s annual target incentive opportunity for the year in which the Change in Control occurred (if not yet determined, then such opportunity shall be deemed to equal the greater of the minimum annual target

22

incentive opportunity that would be required by this Agreement or the actual annual incentive earned for the year immediately preceding the year in which the Change in Control occurred), or (C) $2,000,000; and

(viii)For a period of three years after such termination (but not after Executive attains age 65), Executive shall continue to participate in those employee and executive benefit plans and programs under Section 5(b) to the extent such plans and programs provide medical insurance, disability insurance and life insurance benefits (but not other benefits, such as pension and retirement benefits, provided under Section 5(b)) in which Executive was participating immediately prior to termination, the terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period, and on terms no less favorable than the terms applicable to Executive before the Change in Control; provided, however, that such participation shall terminate, or the benefits under such plans and programs shall be reduced, if and to the extent Executive becomes covered (or is eligible to become covered) by plans of a subsequent employer or other entity to which Executive provides services during such period providing comparable benefits.  If the terms of the Company plans and programs referred to in this Section 7(f)(viii) do not allow Executive’s continued participation, Executive shall be paid a cash payment equivalent on an after-tax basis to the value of the additional benefits described in this Section 7(f)(viii) Executive would have received under such plans or programs had Executive continued to be employed during such period, with such benefits provided by the Company at the same times and in the same manner as such benefits would have been provided to Executive under such plans and programs (it being understood that the value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating); provided, however, that Executive must continue to satisfy the conditions set forth in Section 10 in order to continue receiving the benefits provided under this Section 7(f)(viii).  Executive agrees to promptly notify the Company of any employment or other arrangement by which Executive provides services during the benefits-continuation period and of the nature and extent of benefits for which Executive becomes eligible during such period which would reduce or terminate benefits under this Section 7(f)(viii); and the Company shall be entitled to recover from Executive any payments and the fair market value of benefits previously made or provided to Executive hereunder which would not have been paid

23

under this Section 7(f)(viii) if the Company had received adequate prior notice as required by this sentence.

If any payment or benefit under this Section 7(f) is based on Base Salary or other level of compensation or benefits at the time of Executive’s termination and if a reduction in such Base Salary or other level of compensation or benefits was the basis for Executive’s termination for Good Reason or would otherwise constitute Good Reason, then the Base Salary or other level of compensation in effect before such reduction shall be used to calculate payments or benefits under this Section 7(f).

(g)Other Terms Relating to Certain Terminations of Employment.  Whether a termination is deemed to be at or following a Change in Control or Potential Change in Control for purposes of Sections 7(c), (d), (e), or (f) is determined at the date of termination, regardless of whether the Change in Control had occurred at the time a notice of termination was given.  In the event Executive’s employment terminates for any reason set forth in Section 7(b) through (f), Executive will be entitled to the benefit of any terms of plans or agreements applicable to Executive which are more favorable than those specified in this Section 7 (except in the case of annual incentives in lieu of which amounts are paid hereunder).  Amounts payable under this Section 7 following Executive’s termination of employment, other than those expressly payable on a deferred basis, will be paid as promptly as practicable after such a termination of employment, and such amounts payable under Section 7(e) or 7(f) will be paid in no event later than 15 days after Executive’s termination of employment unless not determinable within such period.

8.Definitions Relating to Termination Events

(a)“Cause”.  For purposes of this Agreement, “Cause” shall mean Executive’s

(i)willful and continued failure to substantially perform his duties hereunder (other than any such failure resulting from incapacity due to physical or mental illness or disability or any failure after the issuance of a notice of termination by Executive for Good Reason) which failure is demonstrably and materially damaging to the financial condition or reputation of the Company and/or its subsidiaries, and which failure continues more than 48 hours after a written demand for substantial performance is delivered to Executive by the Board, which demand specifically identifies the manner in which the Board believes that Executive has not substantially performed his duties hereunder and the demonstrable and material damage caused thereby; or

(ii)the willful engaging by Executive in misconduct which is demonstrably and materially injurious to the Company, monetarily or otherwise.

24

No act, or failure to act, on the part of Executive shall be deemed “willful” unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company.  Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Executive a copy of the resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board (after reasonable notice to Executive and an opportunity for Executive, together with Executive’s counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, Executive was guilty of conduct set forth above in this definition and specifying the particulars thereof in detail.

(b)“Change in Control”.   For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if, during the term of this Agreement:

(i)any “Person,” as such term is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the “Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then-outstanding securities;

(ii)during any period of twenty-four months (not including any period prior to the effectiveness of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than (A) a director nominated by a Person who has entered into an agreement with the Company to effect a transaction described in Sections (8)(b)(i), (iii) or (iv) hereof, (B) a director nominated by any Person (including the Company) who publicly announces an intention to take or to consider taking actions (including, but not limited to, an actual or threatened proxy contest) which if consummated would constitute a Change in Control or (C) a director nominated by any Person who is the Beneficial Owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company’s securities) whose election by the Board or nomination for election by the Company’s stockholders was approved in advance by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or

25

nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

(iii)the stockholders of the Company approve any transaction or series of transactions under which the Company is merged or consolidated with any other company, other than a merger or consolidation (A) which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66 2/3% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and (B) after which no Person holds 20% or more of the combined voting power of the then-outstanding securities of the Company or such surviving entity;

(iv)the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(v)the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control has occurred.

(c)“Compensation Accrued at Termination”.  For purposes of this Agreement, “Compensation Accrued at Termination” means the following:

(i)The unpaid portion of annual base salary at the rate payable, in accordance with Section 4(a) hereof, at the date of Executive’s termination of employment, pro rated through such date of termination, payable in accordance with the Company’s regular pay schedule;

(ii)All earned and unpaid and/or vested, nonforfeitable amounts owing or accrued at the date of Executive’s termination of employment under any compensation and benefit plans, programs, and arrangements set forth or referred to in Sections 4(b) and 5(a) and 5(b) hereof (including the guaranteed 2001 bonus and any earned and vested annual incentive compensation and long-term incentive award) in which Executive theretofore participated, payable in accordance with the terms and conditions of the plans, programs, and arrangements (and agreements and documents thereunder) pursuant to which such compensation and benefits were granted or accrued; and

26

(iii)Reasonable business expenses and disbursements incurred by Executive prior to Executive’s termination of employment, to be reimbursed to Executive, as authorized under Section 5(e), in accordance the Company’s reimbursement policies as in effect at the date of such termination.

(d)“Disability”.  For purposes of this Agreement, “Disability” means Executive’s absence from the full-time performance of Executive’s duties hereunder for six consecutive months as a result of his incapacity due to physical or mental illness or disability, and, within 30 days after written notice of termination is thereafter given by the Company, Executive shall have not returned to the full-time performance of such duties.

(e)“Good Reason”.  For purposes of this Agreement, “Good Reason” shall mean, without Executive’s express written consent, the occurrence of any of the following circumstances unless, in the case of subsections (i), (iv), (vi) or (viii) hereof, such circumstances are fully corrected prior to the date of termination specified in the notice of termination given in respect thereof:

(i)the assignment to Executive of duties inconsistent with Executive’s position and status hereunder, or an alteration, adverse to Executive, in the nature of Executive’s duties, responsibilities, and authorities, Executive’s positions or the conditions of Executive’s employment from those specified in Section 3 or otherwise hereunder (including the appointment of a Chief Executive Officer and President without Executive’s consent) (other than inadvertent actions which are promptly remedied); for this purpose, it shall constitute “Good Reason” under this subsection (e)(i) if (A) Executive shall be required to report to and take direction from any person or body other than the Board of Directors of the Company; and (B) if Executive shall be removed from the Board, from the office of Executive Chairman of the Board, or from any Board committee on which Executive has served during the Term, or there occurs any failure of Executive to be nominated, elected, reappointed or reelected as a member of the Board, as Executive Chairman of the Board, or as a member of any Board committee on which he has served during the Term, including a failure of the Board or stockholders to take such actions (notwithstanding their legal right to do so), except the foregoing shall not constitute Good Reason if occurring in connection with the termination of Executive’s employment for Cause, Disability, Retirement, as a result of Executive’s death, or as a result of action by or with the consent of Executive; for purposes of this Section 8(e)(i), references to the Company (and the Board and stockholders of the Company) refer to the ultimate parent company (and its board and

27

stockholders) succeeding the Company following an acquisition in which the corporate existence of the Company continues, in accordance with Section 12(b);

(ii)(A) a reduction by the Company in Executive’s Base Salary, (B) the setting of Executive’s annual target incentive opportunity or payment of earned annual incentive in amounts less than specified under or otherwise not in conformity with Section 4 hereof, (C) a change in compensation or benefits not in conformity with Section 5, or (D) a reduction, after a Change in Control, in perquisites from the level of such perquisites as in effect immediately prior to the Change in Control or as the same may have been increased from time to time after the Change in Control except for across-the-board perquisite reductions similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company;

(iii)the relocation of the principal place of Executive’s employment not in conformity with Section 3(b) hereof; for this purpose, required travel on the Company’s business will not constitute a relocation so long as the extent of such travel is substantially consistent with Executive’s customary business travel obligations in periods prior to the Effective Date;

(iv)the failure by the Company to pay to Executive any portion of Executive’s compensation or to pay to Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven days of the date such compensation is due;

(v)the failure by the Company to continue in effect any material compensation or benefit plan in which Executive participated immediately prior to a Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amounts of compensation or benefits provided and the level of Executive’s participation relative to other participants, as existed at the time of the Change in Control;

(vi)the failure of the Company to obtain a satisfactory agreement from any successor to the Company to fully assume the Company’s obligations and to perform under this Agreement, as contemplated

28

in Section 12(b) hereof, in a form reasonably acceptable to Executive; or

(vii)any other failure by the Company to perform any material obligation under, or breach by the Company of any material provision of, this Agreement.

(f)“Potential Change in Control”.  For purposes of this Agreement, a “Potential Change in Control” shall be deemed to have occurred if, during the term of this Agreement:

(i)the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

(ii)any Person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; or

(iii)the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

(g)“Special SERP Benefit”.  For purposes of this Agreement, “Special SERP Benefit” means:

(i)if Executive’s employment terminates after the fifth (5th) anniversary of the Effective Date, a “Retirement Benefit” as determined under the SERP but determined by counting as “Service” for purposes of the SERP Executive’s service with IBM Corporation (aggregating 28 years of service) and by offsetting the Retirement Benefit so determined under the SERP by Executive’s vested retirement benefits paid or payable to Executive under any qualified or non-qualified defined benefit pension plan maintained by IBM Corporation as though such benefits were a “Basic Plan Benefit” for purposes of the SERP (and calculated in the form of an annual life annuity as provided for in Section (3) of the SERP); or

(ii)if Executive’s employment terminates prior to the fifth (5th) anniversary of this Agreement pursuant to any of Sections 7(c), (d), (e) or (f) or Section 6(b) or (c), a “Retirement Benefit” as determined pursuant to paragraph (i) above calculated with the following additional modifications:  first, Executive’s “Average Final Compensation” as determined under the SERP shall be determined using Executive’s “Compensation” (as defined in the SERP) with IBM Corporation; second, the resulting Retirement Benefit shall be multiplied by a fraction, the numerator of which is the number of completed calendar months of Executive’s employment with the

29

Company from the Effective Date to the date of termination and the denominator of which is sixty (60).

9.Rabbi Trust Obligation Upon Potential Change in Control; Excise Tax-Related Provisions

(a)Rabbi Trust Funded Upon Potential Change in Control.   In the event of a Potential Change in Control or Change in Control, the Company shall, not later than 15 days thereafter, have established one or more rabbi trusts and shall deposit therein cash in an amount sufficient to provide for full payment of all potential obligations of the Company that would arise assuming consummation of a Change in Control, or has arisen in the case of an actual Change in Control, and a subsequent termination of Executive’s employment under Section 7(e) or 7(f).  Such rabbi trust(s) shall be irrevocable and shall provide that the Company may not, directly or indirectly, use or recover any assets of the trust(s) until such time as all obligations which potentially could arise hereunder have been settled and paid in full, subject only to the claims of creditors of the Company in the event of insolvency or bankruptcy of the Company; provided, however, that if no Change in Control has occurred within two years after such Potential Change in Control, such rabbi trust(s) shall at the end of such two-year period become revocable and may thereafter be revoked by the Company.

(b)Gross-up If Excise Tax Would Apply.   In the event Executive becomes entitled to any amounts or benefits payable in connection with a Change in Control or other change in control (whether or not such amounts are payable pursuant to this Agreement) (the “Severance Payments”), if any of such Severance Payments are subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (or any similar federal, state or local tax that may hereafter be imposed), the Company shall pay to Executive at the time specified in Section 9(b)(iii) hereof an additional amount (the “Gross-Up Payment”) such that the net amount retained by Executive, after deduction of any Excise Tax on the Total Payments (as hereinafter defined) and any federal, state and local income tax and Excise Tax upon the payment provided for by Section 9(b)(i), shall be equal to the Total Payments.

(i)For purposes of determining whether any of the Severance Payments will be subject to the Excise Tax and the amount of such Excise Tax:

(A)any other payments or benefits received or to be received by Executive in connection with a Change in Control or Executive’s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (which, together with the

30

Severance Payments, constitute the “Total Payments”) shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of nationally-recognized tax counsel selected by Executive such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;

(B)the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (x) the total amount of the Total Payments and (y) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying Section 9(b)(i)(A) hereof); and

(C)the value of any non-cash benefits or any deferred payments or benefit shall be determined by a nationally-recognized accounting firm selected by Executive in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

(ii)For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive’s residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes.  In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of Executive’s employment, Executive shall repay to the Company within ten days after the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local income tax imposed on the Gross-Up Payment being repaid by Executive if such repayment results in a reduction in Excise Tax and/or federal and state and local income tax

31

deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code.  In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of Executive’s employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess within ten days after the time that the amount of such excess is finally determined.

(iii)The payments provided for in this Section 9(b) shall be made not later than the fifteenth day following the date of Executive’s termination of employment; provided, however, that if the amount of such payments cannot be finally determined on or before such day, the Company shall pay to Executive on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the date of Executive’s termination of employment.  In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Executive, payable on the fifteenth day after the demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).

(iv)All determinations under this Section 9(b) shall be made at the expense of the Company by a nationally recognized public accounting firm selected by Executive, and such determination shall be binding upon Executive and the Company.

10.Non-Competition and Non-Disclosure; Executive Cooperation; Non-Disparagement

(a)Non-Competition.  Without the consent in writing of the Board, Executive will not, at any time during the Term and for a period of two years following termination of Executive’s employment for any reason, acting alone or in conjunction with others, directly or indirectly (i) engage (either as owner, investor, partner, stockholder, employer, employee, consultant, advisor, or director) in any business in which he has been directly engaged on behalf of the Company or any affiliate, or has supervised as an executive thereof, during the last two years prior to such termination, or which was engaged in or planned by the Company or an affiliate at the time of such termination, in any geographic area in which such business was conducted or planned to be conducted; (ii) induce any customers of the Company or

32

any of its affiliates with whom Executive has had contacts or relationships, directly or indirectly, during and within the scope of his employment with the Company or any of its affiliates, to curtail or cancel their business with the Company or any such affiliate; (iii) induce, or attempt to influence, any employee of the Company or any of its affiliates to terminate employment; or (iv) solicit, hire or retain as an employee or independent contractor, or assist any third party in the solicitation, hire, or retention as an employee or independent contractor, any person who during the previous 12 months was an employee of the Company or any affiliate; provided, however, that the limitation contained in clause (i) above shall not apply if Executive’s employment is terminated as a result of a termination by the Company without Cause following a Change in Control or is terminated by Executive for Good Reason following a Change in Control; and provided further, that activities engaged in by or on behalf of the Company are not restricted by this covenant. The provisions of subparagraphs (i), (ii), (iii), and (iv) above are separate and distinct commitments independent of each of the other subparagraphs.  It is agreed that the ownership of not more than one percent of the equity securities of any company having securities listed on an exchange or regularly traded in the over-the-counter market shall not, of itself, be deemed inconsistent with clause (i) of this Section 10(a).

(b)Non-Disclosure; Ownership of Work.  Executive shall not, at any time during the Term and thereafter (including following Executive’s termination of employment for any reason), disclose, use, transfer, or sell, except in the course of employment with or other service to the Company, any proprietary information, secrets, organizational or employee information, or other confidential information belonging or relating to the Company and its affiliates and customers so long as such information has not otherwise been disclosed or is not otherwise in the public domain, except as required by law or pursuant to legal process.  In addition, upon termination of employment for any reason, Executive will return to the Company or its affiliates all documents and other media containing information belonging or relating to the Company or its affiliates.  Executive will promptly disclose in writing to the Company all inventions, discoveries, developments, improvements and innovations (collectively referred to as “Inventions”) that Executive has conceived or made during the Term; provided, however, that in this context “Inventions” are limited to those which (i) relate in any manner to the existing or contemplated business or research activities of the Company and its affiliates; (ii) are suggested by or result from Executive’s work at the Company; or (iii) result from the use of the time, materials or facilities of the Company and its affiliates.  All Inventions will be the Company’s property rather than Executive’s.  Should the Company request it, Executive agrees to sign any document that the Company may reasonably require to establish ownership in any Invention.

(c)Cooperation With Regard to Litigation.  Executive agrees to cooperate with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), by making himself available to testify on behalf of the Company or any subsidiary or affiliate of the Company, in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to

33

assist the Company, or any subsidiary or affiliate of the Company, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to the Company, or any subsidiary or affiliate of the Company, as may be reasonably requested and after taking into account Executive’s post-termination responsibilities and obligations.  The Company agrees to reimburse Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or assistance.

(d)Non-Disparagement.  Executive shall not, at any time during the Term and thereafter make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to the Company, its subsidiaries or affiliates or their respective officers, directors, employees, advisors, businesses or reputations, nor shall Executive’s successor in office make any such statements or representations regarding Executive.  Notwithstanding the foregoing, nothing in this Agreement shall preclude Executive or his successor from making truthful statements that are required by applicable law, regulation or legal process.

(e)Release of Employment Claims.  Executive agrees, as a condition to receipt of any termination payments and benefits provided for in Sections 6 and 7 herein (other than Compensation Accrued at Termination) (the “Termination Benefits”), that he will execute a general release in the standard form employed by the Company, releasing any and all claims arising out of Executive’s employment (other than enforcement of this Agreement and other than with respect to vested rights or rights provided for under any benefit plan or arrangement of the Company).

(f)Forfeiture of Outstanding Options.  The provisions of Sections 6 and 7 notwithstanding, if Executive willfully and materially fails to substantially comply with any restrictive covenant under this Section 10, all options to purchase Common Stock granted by the Company and then held by Executive or a transferee of Executive shall be immediately forfeited and thereupon such options shall be cancelled.  Notwithstanding the foregoing, Executive shall not forfeit any option unless and until there shall have been delivered to him, within six months after the Board (i) had knowledge of conduct or an event allegedly constituting grounds for such forfeiture and (ii) had reason to believe that such conduct or event could be grounds for such forfeiture, a copy of a resolution duly adopted by a majority affirmative vote of the membership of the Board (excluding Executive) at a meeting of the Board called and held for such purpose (after giving Executive reasonable notice specifying the nature of the grounds for such forfeiture and not less than 30 days to correct the acts or omissions complained of, if correctable, and affording Executive the opportunity, together with his counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, Executive has engaged and continues to engage in conduct set forth in this Section 10(f) which constitutes grounds for forfeiture of Executive’s options; provided, however, that if any option is exercised after delivery of such notice and the Board subsequently makes the determination described in this sentence, Executive

34

shall be required to pay to the Company an amount equal to the difference between the aggregate value of the shares acquired upon such exercise at the date of the Board determination and the aggregate exercise price paid by Executive.  Any such forfeiture shall apply to such options notwithstanding any term or provision of any option agreement.  In addition, options granted to Executive on or after the Effective Date, and gains resulting from the exercise of such options, shall be subject to forfeiture in accordance with the Company’s standard policies relating to such forfeitures and clawbacks, as such policies are in effect at the time of grant of such options.

(g)Survival.  The provisions of this Section 10 shall survive the termination of the Term and any termination or expiration of this Agreement.

11.Governing Law; Disputes; Arbitration

(a)Governing Law.  This Agreement is governed by and is to be construed, administered, and enforced in accordance with the laws of the State of Delaware, without regard to conflicts of law principles.  If under the governing law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation, ordinance, or other principle of law, such portion shall be deemed to be modified or altered to the extent necessary to conform thereto or, if that is not possible, to be omitted from this Agreement.  The invalidity of any such portion shall not affect the force, effect, and validity of the remaining portion hereof.  If any court determines that any provision of Section 10 is unenforceable because of the duration or geographic scope of such provision, it is the parties’ intent that such court shall have the power to modify the duration or geographic scope of such provision, as the case may be, to the extent necessary to render the provision enforceable and, in its modified form, such provision shall be enforced.

(b)Reimbursement of Expenses in Enforcing Rights.  All reasonable costs and expenses (including fees and disbursements of counsel) incurred by Executive in negotiating this Agreement (up to a maximum of $15,000) and thereafter seeking to interpret this Agreement or enforce rights pursuant to this Agreement shall be paid on behalf of or reimbursed to Executive promptly by the Company, whether or not Executive is successful in asserting such rights; provided, however, that no reimbursement shall be made of such expenses relating to any unsuccessful assertion of rights if and to the extent that Executive’s assertion of such rights was in bad faith or frivolous, as determined by arbitrators in accordance with Section 11(c) or a court having jurisdiction over the matter.

(c)Arbitration.  Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Fairfield CT by three arbitrators in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect at the time of submission to arbitration.  Judgment may be entered on the arbitrators’ award in any court having jurisdiction.  For purposes of entering any judgment upon an award

35

rendered by the arbitrators, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the District of Connecticut, (ii) any of the courts of the State of Connecticut, or (iii) any other court having jurisdiction.  The Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied.  The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum.  The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law.  Subject to Section 11(b), the Company shall bear all costs and expenses arising in connection with any arbitration proceeding pursuant to this Section 11.  Notwithstanding any provision in this Section 11, Executive shall be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement.

(d)Interest on Unpaid Amounts.  Any amount which has become payable pursuant to the terms of this Agreement or any decision by arbitrators or judgment by a court of law pursuant to this Section 11 but which has not been timely paid shall bear interest at the prime rate in effect at the time such amount first becomes payable, as quoted by the Company’s principal bank.

12.Miscellaneous

(a)Integration.  This Agreement cancels and supersedes any and all prior agreements and understandings between the parties hereto with respect to the employment of Executive by the Company, any parent or predecessor company, and the Company’s subsidiaries during the Term, except for contracts relating to compensation under executive compensation and employee benefit plans of the Company and its subsidiaries.  The foregoing notwithstanding, Executive shall not participate in the Company’s Employee Protection Plan unless the aggregate benefits provided under such plan would exceed the aggregate benefits provided to Executive under this Agreement upon termination of employment.  Executive shall remain entitled to any right or benefit under a Change-in-Control Agreement executed by the Company, for so long as such Change-in-Control Agreement remains in effect, if and to the extent that such right or benefit is more favorable than a corresponding provision of this Agreement, but no payment or benefit under the Change-in-Control Agreement shall be made or extended which duplicates any payment or benefit hereunder.  If and to the extent that this Agreement may provide enhanced benefits to Executive under the SERP which benefits are not explicitly provided for under the SERP, the SERP shall be deemed amended by this Agreement (but only insofar as it pertains to Executive). This Agreement constitutes the entire agreement among the parties with respect to the matters herein provided, and no modification or waiver of any provision hereof shall be effective unless in writing and signed by the parties hereto.  Executive shall not be entitled to any payment or benefit under this Agreement which duplicates a payment or

36

benefit received or receivable by Executive under such prior agreements and understandings or under any benefit or compensation plan of the Company.

(b)Successors; Transferability.  The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise, and whether or not the corporate existence of the Company continues) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place.  As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise and, in the case of an acquisition of the Company in which the corporate existence of the Company continues, the ultimate parent company following such acquisition.  Subject to the foregoing, the Company may transfer and assign this Agreement and the Company’s rights and obligations hereunder.  Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution or as specified in Section 12(c).

(c)Beneficiaries.  Executive shall be entitled to designate (and change, to the extent permitted under applicable law) a beneficiary or beneficiaries to receive any compensation or benefits provided hereunder following Executive’s death.

(d)Notices.  Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by Federal Express or other similar overnight service or by certified or registered mail, return receipt requested, postage prepaid and addressed to such party at the address set forth below or at such other address as may be designated by such party by like notice:

If to the Company:

IMS HEALTH INCORPORATED
1499 Post Road
Fairfield, CT  06824
Attention:  General Counsel

If to Executive:

David M. Thomas
1499 Post Road
Fairfield, CT  06824

If the parties by mutual agreement supply each other with telecopier numbers for the purposes of providing notice by facsimile, such notice shall also be

37

proper notice under this Agreement.  In the case of Federal Express or other similar overnight service, such notice or advice shall be effective when sent, and, in the cases of certified or registered mail, shall be effective two days after deposit into the mails by delivery to the U.S. Post Office.

(e)Reformation.  The invalidity of any portion of this Agreement shall not deemed to render the remainder of this Agreement invalid.

(f)Headings.  The headings of this Agreement are for convenience of reference only and do not constitute a part hereof.

(g)No General Waivers.  The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions.  No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced.

(h)No Obligation To Mitigate.  Executive shall not be required to seek other employment or otherwise to mitigate Executive’s damages upon any termination of employment; provided, however, that, to the extent Executive receives from a subsequent employer health or other insurance benefits that are substantially similar to the benefits referred to in Section 5(b) hereof, any such benefits to be provided by the Company to Executive following the Term shall be correspondingly reduced.

(i)Offsets; Withholding.  The amounts required to be paid by the Company to Executive pursuant to this Agreement shall not be subject to offset other than with respect to any amounts that are owed to the Company by Executive due to his receipt of funds as a result of his fraudulent activity. The foregoing and other provisions of this Agreement notwithstanding, all payments to be made to Executive under this Agreement, including under Sections 6 and 7, or otherwise by the Company, will be subject to withholding to satisfy required withholding taxes and other required deductions.

(j)Successors and Assigns.  This Agreement shall be binding upon and shall inure to the benefit of Executive, his heirs, executors, administrators and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its successors and assigns.

(k)Counterparts.  This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

38

(l)Due Authority and Execution.  The execution, delivery and performance of this Agreement has been duly authorized by the Company and this Agreement represents the valid, legal and binding obligation of the Company, enforceable against the Company according to its terms.

(m)Representations of Executive.  Executive represents and warrants to the Company that he has the legal right to enter into this Agreement and to perform all of the obligations on his part to be performed hereunder in accordance with its terms and that he is not a party to any agreement or understanding, written or oral, which prevents him from entering into this Agreement or performing all of his obligations hereunder.  In the event of a breach of such representation or warranty on Executive’s part or if there is any other legal impediment which prevents him from entering into this Agreement or performing all of his obligations hereunder, the Company shall have the right to terminate this Agreement forthwith in accordance with the same notice and hearing procedures specified above in respect of a termination by the Company for Cause pursuant to Section 7(a) and shall have no further obligations to Executive hereunder.  Notwithstanding a termination by the Company under this Section 12(m), Executive’s obligations under Section 10 of this Agreement shall survive such termination.

13.Indemnification

All rights to indemnification by the Company now existing in favor of Executive as provided in the Company’s Certificate of Incorporation or By-laws or pursuant to other agreements in effect on or immediately prior to the Effective Date shall continue in full force and effect from the Effective Date (including all periods after the expiration of the Term), and the Company shall also advance expenses for which indemnification may be ultimately claimed as such expenses are incurred to the fullest extent permitted under applicable law, subject to any requirement that Executive provide an undertaking to repay such advances if it is ultimately determined that Executive is not entitled to indemnification; provided, however, that any determination required to be made with respect to whether Executive’s conduct complies with the standards required to be met as a condition of indemnification or advancement of expenses under applicable law and the Company’s Certificate of Incorporation, By-laws, or other agreement shall be made by independent counsel mutually acceptable to Executive and the Company (except to the extent otherwise required by law).  After the date hereof, the Company shall not amend its Certificate of Incorporation or By-laws or any agreement in any manner which adversely affects the rights of Executive to indemnification thereunder.  Any provision contained herein notwithstanding, this Agreement shall not limit or reduce any rights of Executive to indemnification pursuant to applicable law.  In addition, the Company will maintain directors’ and officers’ liability insurance in effect and covering acts and omissions of Executive during the Term and for a period of six years thereafter on terms substantially no less favorable than those in effect on the Effective Date.

39

IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has caused this amended and restated Employment Agreement to be duly executed as of the effective date hereof specified in the first paragraph hereof.

IMS HEALTH INCORPORATED
By:	/s/ David R. Carlucci
	Name: David R. Carlucci
	Title: Chief Executive Officer
EXECUTIVE
/s/ David M. Thomas
David M. Thomas

40

EX-10.2

Exhibit 10.2

Employment Agreement for David R. Carlucci

As Amended and Restated at January 1, 2005

IMS HEALTH INCORPORATED

Employment Agreement for David R. Carlucci

As Amended and Restated at January 1, 2005

i

(f) Termination by Executive for Good Reason After a Change in Control

(g) Other Terms Relating to Certain Terminations of Employment

8. Definitions Relating to Termination Events

(a) “Cause”

(b) “Change in Control”

(c) “Compensation Accrued at Termination”

(d) “Disability”

(e) “Good Reason”

(f) “Potential Change in Control”

9. Rabbi Trust Obligation Upon Potential Change in Control; Excise Tax-Related Provisions

(a) Rabbi Trust Funded Upon Potential Change in Control

(b) Gross-up If Excise Tax Would Apply

10. Non-Competition and Non-Disclosure; Executive Cooperation; Non-Disparagement

(a) Non-Competition

(b) Non-Disclosure; Ownership of Work

(c) Cooperation With Regard to Litigation

(d) Non-Disparagement

(e) Release of Employment Claims

(f) Forfeiture of Outstanding Options

(g) Survival

11. Governing Law; Disputes; Arbitration

(a) Governing Law

(b) Reimbursement of Expenses in Enforcing Rights

(c) Arbitration

(d) Interest on Unpaid Amounts

12. Miscellaneous

(a) Integration

(b) Successors; Transferability

(c) Beneficiaries

(d) Notices

(e) Reformation

(f) Headings

(g) No General Waivers

(h) No Obligation To Mitigate

(i) Offsets; Withholding

(j) Successors and Assigns

(k) Counterparts

ii

(l) Due Authority and Execution

(m) Representations of Executive

13. Indemnification

iii

IMS HEALTH INCORPORATED

Employment Agreement for David R. Carlucci

As Amended and Restated at January 1, 2005

THIS EMPLOYMENT AGREEMENT by and between IMS HEALTH INCORPORATED, a Delaware corporation (the “Company”), and David R. Carlucci (“Executive”) became effective as of October 7, 2002 (the “Effective Date”).  The first amendment and restatement of this Employment Agreement became effective as of December 3, 2002, and the second amendment and restatement of this Employment Agreement shall become effective as of January 1, 2005.

W I T N E S S E T H

WHEREAS, the Company desires to employ Executive as Chief Executive Officer and President of the Company, and Executive desires to accept such employment on the terms and conditions herein set forth.

NOW, THEREFORE, in consideration of the foregoing, the mutual covenants contained herein, and other good and valuable consideration the receipt and adequacy of which the Company and Executive each hereby acknowledge, the Company and Executive hereby agree as follows:

1.Employment.

The Company hereby agrees to employ Executive as its Chief Executive Officer and President, and Executive hereby agrees to accept such employment during the Term as defined in Section 2 (subject to Section 7(c) and 7(e)) and to serve in such capacities from and after January 1, 2005, upon the terms and conditions set forth in this Employment Agreement (the “Agreement”).  Prior to January 1, 2005, Executive served as Chief Operating Officer of the Company, which office and title he relinquished with his consent

2.Term.

The term of employment of Executive under this Agreement (the “Term”) shall be the period commencing on January 1, 2005 and ending on December 31, 2007 and any period of extension thereof in accordance with this Section 2, except that the Term will end at a date, prior to the end of such period or extension thereof, specified in Section 6 or 7 in the event of termination of Executive’s employment. The Term, if not previously ended, shall be extended automatically without further action by either party by one additional year (added to the end of the Term) first on December 31, 2007 (extending the Term to December 31, 2008) and on each succeeding December 31 thereafter, unless either party shall have served written notice in accordance with Section 12(d) upon the other party on or within 90 days before the December 31 extension

date, electing not to extend the Term further as of that December 31 extension date, in which case employment shall terminate on that December 31 and the Term shall end at that date, subject to earlier termination of employment and earlier termination of the Term in accordance with Section 6 or 7. The foregoing notwithstanding, in the event there occurs a Potential Change in Control during the period of 180 days prior to the December 31 on which the Term will terminate as a result of notice given by Executive hereunder, the Term shall be extended automatically at that December 31 by an additional period such that the Term will extend until the 180th day following such Potential Change in Control.

3.Offices and Duties.

The provisions of this Section 3 will apply during the Term, except as otherwise provided in Section 7(c) and 7(e):

(a)  Generally.    Executive shall serve as the Chief Executive Officer and President of the Company and shall be nominated and, if elected, shall serve as a member of the Board of Directors of the Company (the “Board”) and, for so long as he is serving on the Board, Executive agrees to serve as a member of any Board committee if the Board shall elect Executive to such committee.  In any and all such capacities, Executive shall report only to the Board of Directors and the Executive Chairman of the Board of the Company.  Executive shall have and perform such duties, responsibilities, and authorities as are customary for the chief executive officer and president of a publicly held corporation of the size, type, and nature of the Company as they may exist from time to time and consistent with such position and status. Executive shall devote his full business time and attention, and his best efforts, abilities, experience, and talent, to the positions of Chief Executive Officer and President and for the businesses of the Company without commitment to other business endeavors, except that Executive (i) may make personal investments which are not in conflict with his duties to the Company and manage personal and family financial and legal affairs, (ii) may serve as a member of the board of directors of such companies as he is serving on as of January 1, 2005, (iii) undertake public speaking engagements, and (iv) serve as a director of (or similar position with) any other business or an educational, charitable, community, civic, religious, or similar type of organization, with the approval of the Board, so long as such activities (i.e., those listed in clauses (i) through (iv)) do not preclude or render unlawful Executive’s employment or service to the Company or otherwise materially inhibit the performance of Executive’s duties under this Agreement or impair the business of the Company or its subsidiaries.

(b)  Place of Employment.    Executive’s principal place of employment shall be at the Company’s principal executive offices in Fairfield, Connecticut.

4.Salary and Annual Incentive Compensation.

As partial compensation for the services to be rendered hereunder by Executive, the Company agrees to pay to Executive during the Term the compensation set forth in this Section 4.

(a)  Base Salary.    The Company will pay to Executive during the Term a base salary at the annual rate of $730,000, payable commencing at the beginning of the Term in accordance with the Company’s usual payroll practices with respect to senior executives (except to the extent deferred under Section 5(d)).  Executive’s annual base salary shall be reviewed by the Compensation and Benefits Committee of the Board (the “Committee”) as of January 1 of each

2

year of the Term, beginning in 2006, and may be increased above, but may not be reduced below, the then-current rate of such base salary. For purposes of this Agreement, “Base Salary” means Executive’s then-current base salary.

(b)  Annual Incentive Compensation.    The Company will pay to Executive during the Term annual incentive compensation which shall offer to Executive an opportunity to earn additional compensation based upon performance in amounts determined by the Committee in accordance with the applicable plan and consistent with past practices of the Company; provided, however, that the annual target incentive opportunity shall be not less than 100% of Base Salary for achievement of target level performance, with the nature of the performance and the levels of performance triggering payments of such annual target incentive compensation for each year to be established after consultation with Executive and communicated to Executive during the first quarter of such year by the Committee.  In addition, the Committee (or the Board) may determine, in its discretion, to increase Executive’s annual target incentive opportunity or provide an additional annual incentive opportunity, in excess of the annual target incentive opportunity, payable for performance in excess of or in addition to the performance required for payment of the annual target incentive amount. Any annual incentive compensation payable to Executive shall be paid in accordance with the Company’s usual practices with respect to payment of incentive compensation to senior executives (except to the extent deferred under Section 5(d)).

5.Long-Term Compensation, Including Restricted Stock, Stock Options, Benefits, Deferred Compensation, and Expense Reimbursement.

(a)  Executive Compensation Plans.    Executive shall be entitled during the Term to participate, without discrimination or duplication, in all executive compensation plans and programs intended for general participation by senior executives of the Company, as presently in effect or as they may be modified or added to by the Company from time to time, subject to the eligibility and other requirements of such plans and programs and subject to the limitation specified in Section 5(a)(v) below; provided that for purposes of eligibility and benefit participation levels under any such programs hereafter adopted that are not tax-qualified or otherwise subject to nondiscrimination requirements under the Internal Revenue Code of 1986, as amended, Executive shall be given full service credit for service with IBM Corporation (“Past Service Credit”) and, with respect to existing programs, Executive will be entitled to Past Service Credit as provided in Section 5(b).

In furtherance of the foregoing:

(i)Executive will continue to be eligible for awards of Restricted Stock Units (“PERS”) under the Performance-Based Restricted Stock Program (the “PBRSP”) which match the amount of annual incentive compensation earned under Section 4(b); provided, however, that the Company may replace the PBRSP with a different long-term incentive program providing an incentive opportunity determined by the Committee to be reasonably comparable to that under the PBRSP.

(ii)The Company shall grant Executive, as of January 1, 2005, 38,000 Restricted Stock Units (“RSUs”) pursuant to and subject to the terms of the Company’s Amended and Restated 1998 Stock Incentive Plan (“1998 Plan”) (the “Promotion

3

RSU Grant”). The Promotion RSU Grant shall vest as to one-third of the RSUs on each of the first three anniversaries of the date of grant (subject to accelerated vesting in accordance with other provisions of this Agreement).  Other terms of the RSUs shall be governed by the 1998 Plan and the agreement under the 1998 Plan setting forth the terms of the RSUs.

(iii)The Company shall grant to Executive as of January 1, 2005 stock options (the “Promotion Options”) to acquire 115,000 common shares of the Company, par value $.01 per share (the “Company Common Stock”). The Promotion Options shall be granted under the 1998 Plan, shall have an exercise price per share equal to the Fair Market Value (as defined in the 1998 Plan) of the Company Common Stock on the date of grant, shall vest and become fully exercisable as to one-third of the underlying shares on each of the first three anniversaries of the date of grant (subject to accelerated vesting in accordance with other provisions of this Agreement) and shall provide for an exercise period equal to (x) the remaining option term of ten years from date of grant for so long as Executive remains employed, (y) upon Executive’s termination of employment by the Company without Cause or by Executive for Good Reason, the shorter of the remaining option term or three years from date of termination, and (z), upon other terminations of Executive’s employment, in accordance with the terms of this Agreement and otherwise in accordance with the customary terms of options under the 1998 Plan.

(iv)All unvested PERS granted under the PBRSP prior to January 1, 2005 and all unvested stock options granted by the Company prior to January 1, 2005 will continue to vest during the Term and shall be governed by the terms applicable to the original award (including terms applicable under Executive’s employment agreement as in effect prior to January 1, 2005).

(v)Other provisions of this Section 5 notwithstanding, Executive agrees that no stock options (or any long-term equity award that replaces options) will be granted to Executive for the 2005 award cycle.

(b)  Employee and Executive Benefit Plans.    Executive shall be entitled during the Term to participate, without discrimination or duplication, in all employee and executive benefit plans and programs of the Company, as presently in effect or as they may be modified or added to by the Company from time to time, to the extent such plans are available to other senior executives or employees of the Company, subject to the eligibility and other requirements of such plans and programs, including without limitation plans providing pensions, supplemental pensions, supplemental and other retirement benefits, medical insurance, life insurance, disability insurance, and accidental death or dismemberment insurance, as well as savings, profit-sharing, and stock ownership plans, provided that such benefit plans and programs, in the aggregate, shall provide Executive with benefits and compensation substantially no less favorable than those provided by the Company to Executive under such plans and programs as in effect on the Effective Date. Additionally, Executive shall be eligible to participate in and receive benefits under the Company’s Employee Protection Plan, and Executive shall be eligible to receive or participate in perquisites under policies implemented by the Board and the Committee.

4

In furtherance of and not in limitation of the foregoing, during the Term:

(i)Executive will participate as Chief Executive Officer and President in all executive and employee vacation and time-off programs; provided that Executive shall be entitled to a minimum of 25 vacation days annually; and

(ii)Executive will be entitled to retirement benefits substantially in accordance with the IMS Health Incorporated Supplemental Executive Retirement Plan (the “SERP”), as in effect on the Effective Date; provided, however, that, the provisions of the SERP notwithstanding, (A) for vesting purposes under the SERP, Executive shall be credited with 26 years of “Service,” based on his prior employment with IBM Corporation; (B) in place of the annual benefit formula in Section 3.1(b)(i) and 3.2(b)(i) of the SERP, Executive’s Retirement Benefit or Deferred Vested Benefit shall be calculated as “8% of his Average Final Compensation multiplied by the number of his years of Service not in excess of five years, plus 1.6% of such Average Final Compensation multiplied by the number of his years of Service over five but not in excess of 17, with an additional 0.8% for a partial year of Service completed at his 65^th birthday”; and (C), in addition to the offsets specified in subsections (ii), (iii) and (iv) of Section 3.1(b) and 3.2(b) of the SERP, the Retirement Benefit or Deferred Vested Benefit payable under the SERP shall be reduced by the amount of Executive’s vested retirement benefits paid or payable to Executive under any qualified or non-qualified defined benefit pension plan maintained by IBM Corporation as though such benefits were a “Basic Plan Benefit” for purposes of the SERP (and calculated in the form of an annual life annuity as provided for in Section (3) of the SERP).

Any provision to the contrary contained in this Agreement notwithstanding, unless Executive is terminated by the Company for “Cause” (as defined in Section 8(a)) or Executive terminates voluntarily and not for “Good Reason” (as defined in Section 8(e)), Executive may elect continued participation after termination of employment in the Company’s health and medical coverage for himself and his spouse and dependent children after such coverage would otherwise end for his lifetime (under rules in effect at the Effective Date hereof); provided, however, that in the event of such election, Executive shall pay the Company each year an amount equal to (i), during the first 18 months after termination (or other applicable period under COBRA), the then-current annual COBRA premium being paid (or payable) by any other former employee of the Company, and (ii), thereafter, the annual amount payable in accordance with standard payment rates applicable to employees as of the Effective date of this agreement except in each case as may be otherwise provided under Section 6 or 7. If Executive’s age and years of service do not qualify him for full benefits under the Company’s retiree health benefits plan, Executive and his spouse and qualifying dependents shall be entitled to the same benefits as would have been provided if Executive’s age and years of service had qualified for full benefits under such plan.

(c)  Acceleration of Awards Upon a Change in Control.    In the event of a Change in Control (as defined in Section 8(b)), or as otherwise provided for hereunder, all outstanding stock options, restricted stock, RSUs and other equity-based awards granted to and held by Executive shall become vested and exercisable.

5

(d)  Deferral of Compensation.    If the Company has in effect or adopts any deferral program or arrangement permitting executives to elect to defer any compensation, Executive will be eligible to participate in such program on terms no less favorable than the terms of participation of any other senior executive officer of the Company. Any plan or program of the Company which provides benefits based on the level of salary, annual incentive, or other compensation of Executive shall, in determining Executive’s benefits, take into account the amount of salary, annual incentive, or other compensation prior to any reduction for voluntary contributions made by Executive under any deferral or similar contributory plan or program of the Company, but shall not treat any payout or settlement under such a deferral or similar contributory plan or program to be additional salary, annual incentive, or other compensation for purposes of determining such benefits, unless otherwise expressly provided under such plan or program.

(e)  Reimbursement of Expenses.    The Company will promptly reimburse Executive for all reasonable business expenses and disbursements incurred by Executive in the performance of Executive’s duties during the Term in accordance with the Company’s reimbursement policies as in effect from time to time.

(f)  Company Registration Obligations.    The Company will use its best efforts to file with the Securities and Exchange Commission and thereafter maintain the effectiveness of one or more registration statements registering under the Securities Act of 1933, as amended (the “1933 Act”), the offer and sale of shares by the Company to Executive pursuant to stock options or other equity-based awards granted to Executive under Company plans or otherwise or, if shares are acquired by Executive in a transaction not involving an offer or sale to Executive but resulting in the acquired shares being “restricted securities” for purposes of the 1933 Act, registering the reoffer and resale of such shares by Executive.

(g)  Limitations Under Code Section 409A.  In the event that it is reasonably determined by the Company that, as a result of Section 409A of the Code (and any related regulations or other pronouncements thereunder), any of the payments that Executive is entitled to under the terms of this Agreement, the SERP, or any other plan involving deferred compensation (as defined under Code Section 409A) may not be made at the time contemplated by the terms thereof without causing the Executive to be subject to an income tax penalty and interest, the Company will make such payment on the first day permissible under Code Section 409A without the Executive incurring a penalty.  In particular, with respect to the lump sum SERP payments provided for hereunder (as described above), in the event of any delay in the payment date as a result of Code Section 409A(a)(2)(A)(i) and (B)(i), the Company will adjust the payments to reflect the deferred payment date using the interest rate prescribed under the SERP.  In addition, other provisions of this Agreement, the SERP, or any other such plan notwithstanding, the Company shall have no right to accelerate any such payment or to make any such payment as the result of an event except to the extent permitted under Section 409A. 

6.Termination Due to Retirement, Death, or Disability.

(a)  Retirement.    Executive may elect to terminate employment hereunder by retirement at or after age 60 or at such earlier age as may be approved by the Board (in either case, “Retirement”). At the time Executive’s employment terminates due to Retirement, the Term will

6

terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease except for obligations which expressly continue after termination of employment due to Retirement, and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination (as defined in Section 8(c));

(ii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to annual incentive compensation that would have become payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for that year if his employment had not terminated, based on performance actually achieved in that year (determined by the Committee following completion of the performance year), multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

(iii)The vesting and exercisability of stock options held by Executive at termination and all other terms of such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted (subject to Section 10(f) hereof); and

(iv)All restricted stock and deferred stock awards, including outstanding PERS awards, all other long-term incentive awards, and all deferral arrangements under Section 5(d), shall be governed by the plans and programs under which the awards were granted or governing the deferral, and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement.

(b)  Death.    In the event of Executive’s death which results in the termination of Executive’s employment, the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease except for obligations which expressly continue after death, and the Company will pay Executive’s beneficiary or estate, and Executive’s beneficiary or estate will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s death occurred, an amount equal to the annual incentive compensation that would have become payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for that year if his employment had not terminated, based on performance actually achieved in that year (determined by the Committee following completion of the performance year), multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of his death and the denominator of which is the total number of days in the year of death;

(iii)The vesting and exercisability of stock options held by Executive at death and all other terms of such options shall be governed by the plans and programs and the

7

agreements and other documents pursuant to which such options were granted; and

(iv)All restricted stock and deferred stock awards, including outstanding PERS awards, all other long-term incentive awards, and all deferral arrangements under Section 5(d), shall be governed by the plans and programs under which the awards were granted or governing the deferral, and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement.

(c)  Disability.    The Company may terminate the employment of Executive hereunder due to the Disability (as defined in Section 8(d)) of Executive. Such employment shall terminate at the expiration of the 30-day period referred to in the definition of Disability set forth in Section 8(d), unless Executive has returned to service and presented to the Company a certificate of good health prior to such termination as specified in Section 8(d). Upon termination of employment, the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease except for obligations which expressly continue after termination of employment due to Disability, and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to the annual incentive compensation that would have become payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for that year if his employment had not terminated, based on performance actually achieved in that year (determined by the Committee following completion of the performance year), multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

(iii)The vesting and exercisability of stock options held by Executive at termination and all other terms of such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted, as modified by this Agreement;

(iv)Any performance objectives upon which the earning of performance-based restricted stock and deferred stock awards and other long-term incentive awards is conditioned shall be deemed to have been met at target level at the date of termination, and restricted stock and deferred stock awards, including outstanding PERS awards, and other long-term incentive awards (to the extent then or previously earned, in the case of performance-based awards) shall become fully vested and non-forfeitable at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;

8

(v)Disability benefits shall be payable in accordance with the Company’s plans, programs and policies (including the SERP) as modified by this Agreement, and all deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral, provided that, if the Company’s payment obligation (determined on a monthly basis) pursuant to Section 7(c)(ii) hereof (the “Section 7(c)(ii) Payments”) would have been greater than the monthly payments if Executive’s termination of employment had been treated as a termination by the Company without Cause, Executive shall be entitled to an additional monthly payment equal to the difference between the Section 7(c)(ii) Payments and the monthly payments due Executive pursuant to this Section 6(c)(v), to the extent of such excess; and

(vi)For the period extending from the date of termination due to Disability until the date Executive reaches age 65, Executive shall continue to participate in those employee and executive benefit plans and programs under Section 5(b) to the extent such plans and programs provide medical insurance, disability insurance and life insurance benefits (but not other benefits, such as pension and retirement benefits, provided under Section 5(b)) in which Executive was participating immediately prior to termination, the terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period or, if the terms of such plans or programs do not allow Executive’s continued participation, Executive shall be paid a cash payment equivalent on an after-tax basis to the value of the additional benefits (of the type described in this Section 6(c)(vi)) Executive would have received under such plans or programs had Executive continued to be employed during such period following Executive’s termination until age 65, with such benefits provided by the Company at the same times and in the same manner as such benefits would have been provided to Executive under such plans and programs (it being understood that the value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating); provided, however, that Executive must continue to satisfy the conditions set forth in Section 10 in order to continue receiving the benefits provided under this Section 6(c)(vi).

(d)  Other Terms of Payment Following Retirement, Death, or Disability.    Nothing in this Section 6 shall limit the benefits payable or provided in the event Executive’s employment terminates due to Retirement, death, or Disability under the terms of plans or programs of the Company more favorable to Executive (or his beneficiaries) than the benefits payable or provided under this Section 6 (except in the case of annual incentives in lieu of which amounts are paid hereunder), including plans and programs adopted after the date of this Agreement. Amounts payable under this Section 6 following Executive’s termination of employment, other than those expressly payable following determination of performance for the year of termination for purposes of annual incentive compensation or otherwise expressly payable on a deferred basis, will be paid as promptly as practicable after such termination of employment.

9

7.Termination of Employment For Reasons Other Than Retirement, Death, or Disability.

(a)  Termination by the Company for Cause.    The Company may terminate the employment of Executive hereunder for Cause (as defined in Section 8(a)) at any time. At the time Executive’s employment is terminated for Cause, the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease, and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination (as defined in Section 8(c));

(ii)All stock options, restricted stock and deferred stock awards, including outstanding PERS awards, and all other long-term incentive awards will be governed by the terms of the plans and programs under which the awards were granted, as modified by this Agreement; and

(iii)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral, and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement.

(b)  Termination by Executive Other Than For Good Reason.    Executive may terminate his employment hereunder voluntarily for reasons other than Good Reason (as defined in Section 8(e)) at any time. An election by Executive not to extend the Term pursuant to Section 2 hereof shall be deemed to be a termination of employment by Executive for reasons other than Good Reason at the date of expiration of the Term, unless a Change in Control (as defined in Section 8(b)) occurs prior to, and there exists Good Reason at, such date of expiration. At the time Executive’s employment is terminated by Executive other than for Good Reason the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease, and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)All stock options, restricted stock and deferred stock awards, including outstanding PERS awards, and all other long-term incentive awards will be governed by the terms of the plans and programs under which the awards were granted; and

(iii)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral, and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement.

(c)  Termination by the Company Without Cause Prior to a Change in Control.    The Company may terminate the employment of Executive hereunder without Cause, if at the date of termination no Change in Control or a Potential Change in Control has occurred, upon at least 90 days’ written notice to Executive. The foregoing notwithstanding, the Company may

10

elect, by written notice to Executive, to terminate Executive’s positions specified in Sections 1 and 3 and all other obligations of Executive and the Company under Section 3 at a date earlier than the expiration of such 90-day period, if so specified by the Company in the written notice, provided that Executive shall be treated as an employee of the Company (without any assigned duties) for all other purposes of this Agreement, including for purposes of Sections 4 and 5, from such specified date until the expiration of such 90-day period. An election by the Company not to extend the Term pursuant to Section 2 hereof shall be deemed to be a termination of Executive’s employment by the Company without Cause at the date of expiration of the Term and shall be subject to this Section 7(c) if at the date of such termination no Change in Control or a Potential Change in Control has occurred; provided, however, that, if Executive has attained age 65 at such date of termination, such termination shall be deemed a Retirement of Executive. At the time Executive’s employment is terminated by the Company (i.e., at the expiration of such notice period), the Term will terminate, all remaining obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease (except as expressly provided below), and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)Cash in an aggregate amount equal to two times the sum of (A) Executive’s Base Salary under Section 4(a) immediately prior to termination plus (B) an amount equal to the greater of (x) the Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination or (y) the Executive’s annual incentive compensation that became payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the latest year preceding the year of termination based on performance actually achieved in that latest year (the sum of (A) and (B) being herein referred to as the “Cash Compensation”) . The amount determined to be payable under this Section 7(c)(ii) shall be payable in monthly installments over the 24 months following termination, without interest, except that (subject to Section 5(g)) the Company may elect to accelerate payment of the remaining balance of such amount and to pay it as a lump sum, without discount;

(iii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to the annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination, multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

(iv)Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, and, in other respects (including the period following termination during which such options may be exercised), such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted;

11

(v)Any performance objectives upon which the earning of performance-based restricted stock and deferred stock awards and other long-term incentive awards is conditioned shall be deemed to have been met at target level at the date of termination, and restricted stock and deferred stock awards, including outstanding PERS awards, and other long-term incentive awards (to the extent then or previously earned, in the case of performance-based awards) shall become fully vested and non-forfeitable at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;

(vi)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement; and

(vii)For a period of two years after such termination (but not after Executive attains age 65), Executive shall continue to participate in those employee and executive benefit plans and programs under Section 5(b) to the extent such plans and programs provide medical insurance, disability insurance and life insurance benefits (but not other benefits, such as pension and retirement benefits, provided under Section 5(b)) in which Executive was participating immediately prior to termination, the terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period; provided, however, that such participation shall terminate, or the benefits under such plans and programs shall be reduced, if and to the extent Executive becomes covered (or is eligible to become covered) by plans of a subsequent employer or other entity to which Executive provides services during such period providing comparable benefits. If the terms of the Company plans and programs referred to in this Section 7(c)(vii) do not allow Executive’s continued participation, Executive shall be paid a cash payment equivalent on an after-tax basis to the value of the additional benefits described in this Section 7(c)(vii) Executive would have received under such plans or programs had Executive continued to be employed during such period, with such benefits provided by the Company at the same times and in the same manner as such benefits would have been provided to Executive under such plans and programs (it being understood that the value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating); provided, however, that Executive must continue to satisfy the conditions set forth in Section 10 in order to continue receiving the benefits provided under this Section 7(c)(vii). Executive agrees to promptly notify the Company of any employment or other arrangement by which Executive provides services during the benefits-continuation period and of the nature and extent of benefits for which Executive becomes eligible during such period which would reduce or terminate benefits under this Section 7(c)(vii); and the Company be entitled to recover from Executive any payments and the fair market value of benefits previously made or provided to Executive hereunder which would not have been paid under this

12

Section 7(c)(vii) if the Company had received adequate prior notice as required by this sentence.

(d)    Termination by Executive for Good Reason Prior to a Change in Control.    Executive may terminate his employment hereunder for Good Reason, prior to a Change in Control, upon 90 days’ written notice to the Company; provided, however, that, if the Company has corrected the basis for such Good Reason within 30 days after receipt of such notice, Executive may not terminate his employment for Good Reason with respect to the matters addressed in the written notice, and therefore Executive’s notice of termination will automatically become null and void. At the time Executive’s employment is terminated by Executive for Good Reason (i.e., at the expiration of such notice period), the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease (except as expressly provided below), and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)Cash in an aggregate amount equal to two times the sum of (A) Executive’s Base Salary under Section 4(a) immediately prior to termination plus (B) an amount equal to the greater of (x) Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination or (y) Executive’s annual incentive compensation that became payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the latest year preceding the year of termination based on performance actually achieved in that latest year (the sum of (A) and (B) being herein referred to as the “Cash Compensation”). The amount determined to be payable under this Section 7(d)(ii) shall be payable in monthly installments over the 24 months following termination, without interest, except that (subject to Section 5(g)) the Company may elect to accelerate payment of the remaining balance of such amount and to pay it as a lump sum, without discount;

(iii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination, multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

(iv)Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, and, in other respects (including the period following termination during which such options may be exercised), such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted;

(v)Any performance objectives upon which the earning of performance-based restricted stock and deferred stock awards and other long-term incentive awards

13

is conditioned shall be deemed to have been met at target level at the date of termination, and restricted stock and deferred stock awards, including outstanding PERS awards, and other long-term incentive awards (to the extent then or previously earned, in the case of performance-based awards) shall become fully vested and non-forfeitable at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;

(vi)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement; and

(vii)For a period of two years after such termination (but not after Executive attains age 65), Executive shall continue to participate in those employee and executive benefit plans and programs under Section 5(b) to the extent such plans and programs provide medical insurance, disability insurance and life insurance benefits (but not other benefits, such as pension and retirement benefits, provided under Section 5(b)) in which Executive was participating immediately prior to termination, the terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period; provided, however, that such participation shall terminate, or the benefits under such plans and programs shall be reduced, if and to the extent Executive becomes covered (or is eligible to become covered) by plans of a subsequent employer or other entity to which Executive provides services during such period providing comparable benefits. If the terms of the Company plans and programs referred to in this Section 7(d)(vii) do not allow Executive’s continued participation, Executive shall be paid a cash payment equivalent on an after-tax basis to the value of the additional benefits described in this Section 7(d)(vii) Executive would have received under such plans or programs had Executive continued to be employed during such period, with such benefits provided by the Company at the same times and in the same manner as such benefits would have been provided to Executive under such plans and programs (it being understood that the value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating); provided, however, that Executive must continue to satisfy the conditions set forth in Section 10 in order to continue receiving the benefits provided under this Section 7(d)(vii). Executive agrees to promptly notify the Company of any employment or other arrangement by which Executive provides services during the benefits-continuation period and of the nature and extent of benefits for which Executive becomes eligible during such period which would reduce or terminate benefits under this Section 7(d)(vii); and the Company shall be entitled to recover from Executive any payments and the fair market value of benefits previously made or provided to Executive hereunder which would not have been paid under this Section 7(d)(vii) if the Company had received adequate prior notice as required by this sentence.

14

If any payment or benefit under this Section 7(d) is based on Base Salary or other level of compensation or benefits at the time of Executive’s termination and if a reduction in such Base Salary or other level of compensation or benefit was the basis for Executive’s termination for Good Reason, then the Base Salary or other level of compensation in effect before such reduction shall be used to calculate payments or benefits under this Section 7(d).

(e)    Termination by the Company Without Cause After a Change in Control.    The Company may terminate the employment of Executive hereunder without Cause, simultaneously with or within 24 months following a Change in Control, upon at least 90 days’ written notice to Executive. The foregoing notwithstanding, the Company may elect, by written notice to Executive, to terminate Executive’s positions specified in Sections 1 and 3 and all other obligations of Executive and the Company under Section 3 at a date earlier than the expiration of such 90-day notice period, if so specified by the Company in the written notice, provided that Executive shall be treated as an employee of the Company (without any assigned duties) for all other purposes of this Agreement, including for purposes of Sections 4 and 5, from such specified date until the expiration of such 90-day period. An election by the Company not to extend the Term pursuant to Section 2 hereof shall be deemed to be a termination of Executive’s employment by the Company without Cause at the date of expiration of the Term and shall be subject to this Section 7(e) if the date of such termination coincides with or is after a Change in Control or Potential Change in Control; provided, however, that, if Executive has attained age 65 at such date of termination, such termination shall be deemed a Retirement of Executive. At the time Executive’s employment is terminated by the Company (i.e., at the expiration of such notice period), the Term will terminate, all remaining obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease (except as expressly provided below), and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)Cash in an aggregate amount equal to three times the sum of (A) Executive’s Base Salary under Section 4(a) immediately prior to termination plus (B) an amount equal to the greater of (x) Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination or (y) Executive’s annual incentive compensation that became payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the latest year preceding the year of termination based on performance actually achieved in that latest year. The amount determined to be payable under this Section 7(e)(ii) shall be paid by the Company not later than 15 days after Executive’s termination;

(iii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination, multiplied by a fraction the numerator of which is the number of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

15

(iv)Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, and any such options granted on or after the date hereof shall remain outstanding and exercisable until the stated expiration date of the Option as though Executive’s employment did not terminate, and, in other respects, such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted;

(v)Any performance objectives upon which the earning of performance-based restricted stock and deferred stock awards and other long-term incentive awards is conditioned shall be deemed to have been met at target level at the date of termination, and restricted stock and deferred stock awards, including outstanding PERS awards, and other long-term incentive awards (to the extent then or previously earned, in the case of performance-based awards) shall become fully vested and non-forfeitable at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;

(vi)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement; and

(vii)For a period of three years after such termination (but not after Executive attains age 65), Executive shall continue to participate in those employee and executive benefit plans and programs under Section 5(b) to the extent such plans and programs provide medical insurance, disability insurance and life insurance benefits (but not other benefits, such as pension and retirement benefits, provided under Section 5(b)) in which Executive was participating immediately prior to termination, the terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period, and on terms no less favorable than the terms applicable to Executive before the Change in Control; provided, however, that such participation shall terminate, or the benefits under such plans and programs shall be reduced, if and to the extent Executive becomes covered (or is eligible to become covered) by plans of a subsequent employer or other entity to which Executive provides services during such period providing comparable benefits. If the terms of the Company plans and programs referred to in this Section 7(e)(viii) do not allow Executive’s continued participation, Executive shall be paid a cash payment equivalent on an after-tax basis to the value of the additional benefits described in this Section 7(e)(viii) Executive would have received under such plans or programs had Executive continued to be employed during such period, with such benefits provided by the Company at the same times and in the same manner as such benefits would have been provided to Executive under such plans and programs (it being understood that the value of any insurance-provided benefits will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating); provided, however, that Executive must continue to satisfy the

16

conditions set forth in Section 10 in order to continue receiving the benefits provided under this Section 7(e)(viii). Executive agrees to promptly notify the Company of any employment or other arrangement by which Executive provides services during the benefits-continuation period and of the nature and extent of benefits for which Executive becomes eligible during such period which would reduce or terminate benefits under this Section 7(e)(viii); and the Company shall be entitled to recover from Executive any payments and the fair market value of benefits previously made or provided to Executive hereunder which would not have been paid under this Section 7(e)(viii) if the Company had received adequate prior notice as required by this sentence.

If any payment or benefit under this Section 7(e) is based on Base Salary or other level of compensation or benefits at the time of Executive’s termination and if the Company has purported to reduce Base Salary or other level of compensation or benefits prior to such termination in a manner that would constitute Good Reason, then the Base Salary or other level of compensation in effect before such reduction shall be used to calculate payments or benefits under this Section 7(e).

(f)    Termination by Executive for Good Reason After a Change in Control.    Executive may terminate his employment hereunder for Good Reason, simultaneously with or within 24 months following a Change in Control, upon 90 days’ written notice to the Company; provided, however, that, if the Company has corrected the basis for such Good Reason within 30 days after receipt of such notice, Executive may not terminate his employment for Good Reason, and therefore Executive’s notice of termination will automatically become null and void. At the time Executive’s employment is terminated by Executive for Good Reason (i.e., at the expiration of such notice period), the Term will terminate, all obligations of the Company and Executive under Sections 1 through 5 of this Agreement will immediately cease (except as expressly provided below), and the Company will pay Executive, and Executive will be entitled to receive, the following:

(i)Executive’s Compensation Accrued at Termination;

(ii)Cash in an aggregate amount equal to three times the sum of (A) Executive’s Base Salary under Section 4(a) immediately prior to termination plus (B) an amount equal to the greater of (x) Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination or (y) Executive’s annual incentive compensation that became payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the latest year preceding the year of termination based on performance actually achieved in that latest year. The amount determined to be payable under this Section 7(f)(ii) shall be paid by the Company not later than 15 days after Executive’s termination;

(iii)In lieu of any annual incentive compensation under Section 4(b) for the year in which Executive’s employment terminated, an amount equal to Executive’s annual target incentive compensation potentially payable in cash to Executive (i.e., excluding the portion payable in PERS or in other non-cash awards) for the year of termination, multiplied by a fraction the numerator of which is the number

17

of days Executive was employed in the year of termination and the denominator of which is the total number of days in the year of termination;

(iv)Stock options held by Executive at termination, if not then vested and exercisable, will become fully vested and exercisable at the date of such termination, and any such options granted on or after the date hereof shall remain outstanding and exercisable until the stated expiration date of the Option as though Executive’s employment did not terminate, and, in other respects, such options shall be governed by the plans and programs and the agreements and other documents pursuant to which such options were granted;

(v)Any performance objectives upon which the earning of performance-based restricted stock and deferred stock awards and other long-term incentive awards is conditioned shall be deemed to have been met at target level at the date of termination, and restricted stock and deferred stock awards, including outstanding PERS awards, and other long-term incentive awards (to the extent then or previously earned, in the case of performance-based awards) shall become fully vested and non-forfeitable at the date of such termination, and, in other respects, such awards shall be governed by the plans and programs and the agreements and other documents pursuant to which such awards were granted;

(vi)All deferral arrangements under Section 5(d) will be settled in accordance with the plans and programs governing the deferral and all rights under the SERP and any other benefit plan shall be governed by such plan, as modified by this Agreement; and

(vii)For a period of three years after such termination (but not after Executive attains age 65), Executive shall continue to participate in those employee and executive benefit plans and programs under Section 5(b) to the extent such plans and programs provide medical insurance, disability insurance and life insurance benefits (but not other benefits, such as pension and retirement benefits, provided under Section 5(b)) in which Executive was participating immediately prior to termination, the terms of which allow Executive’s continued participation, as if Executive had continued in employment with the Company during such period, and on terms no less favorable than the terms applicable to Executive before the Change in Control; provided, however, that such participation shall terminate, or the benefits under such plans and programs shall be reduced, if and to the extent Executive becomes covered (or is eligible to become covered) by plans of a subsequent employer or other entity to which Executive provides services during such period providing comparable benefits. If the terms of the Company plans and programs referred to in this Section 7(f)(viii) do not allow Executive’s continued participation, Executive shall be paid a cash payment equivalent on an after-tax basis to the value of the additional benefits described in this Section 7(f)(viii) Executive would have received under such plans or programs had Executive continued to be employed during such period, with such benefits provided by the Company at the same times and in the same manner as such benefits would have been provided to Executive under such plans and programs (it being understood that the value of any insurance-provided benefits

18

will be based on the premium cost to Executive, which shall not exceed the highest risk premium charged by a carrier having an investment grade or better credit rating); provided, however, that Executive must continue to satisfy the conditions set forth in Section 10 in order to continue receiving the benefits provided under this Section 7(f)(viii). Executive agrees to promptly notify the Company of any employment or other arrangement by which Executive provides services during the benefits-continuation period and of the nature and extent of benefits for which Executive becomes eligible during such period which would reduce or terminate benefits under this Section 7(f)(viii); and the Company shall be entitled to recover from Executive any payments and the fair market value of benefits previously made or provided to Executive hereunder which would not have been paid under this Section 7(f)(viii) if the Company had received adequate prior notice as required by this sentence.

If any payment or benefit under this Section 7(f) is based on Base Salary or other level of compensation or benefits at the time of Executive’s termination and if a reduction in such Base Salary or other level of compensation or benefits was the basis for Executive’s termination for Good Reason or would otherwise constitute Good Reason, then the Base Salary or other level of compensation in effect before such reduction shall be used to calculate payments or benefits under this Section 7(f).

(g)    Other Terms Relating to Certain Terminations of Employment.    Whether a termination is deemed to be at or following a Change in Control or Potential Change in Control for purposes of Sections 7(c), (d), (e), or (f) is determined at the date of termination, regardless of whether the Change in Control had occurred at the time a notice of termination was given. In the event Executive’s employment terminates for any reason set forth in Section 7(b) through (f), Executive will be entitled to the benefit of any terms of plans or agreements applicable to Executive which are more favorable than those specified in this Section 7 (except in the case of annual incentives in lieu of which amounts are paid hereunder). Amounts payable under this Section 7 following Executive’s termination of employment, other than those expressly payable on a deferred basis, will be paid as promptly as practicable after such a termination of employment, and such amounts payable under Section 7(e) or 7(f) will be paid in no event later than 15 days after Executive’s termination of employment unless not determinable within such period.

8.Definitions Relating to Termination Events.

(a)    ”Cause”.    For purposes of this Agreement, “Cause” shall mean Executive’s

(i)willful and continued failure to substantially perform his duties hereunder (other than any such failure resulting from incapacity due to physical or mental illness or disability or any failure after the issuance of a notice of termination by Executive for Good Reason) which failure is demonstrably and materially damaging to the financial condition or reputation of the Company and/or its subsidiaries, and which failure continues more than 48 hours after a written demand for substantial performance is delivered to Executive by the Board, which demand specifically identifies the manner in which the Board believes that Executive has not substantially performed his duties hereunder and the demonstrable and material damage caused thereby; or

19

(ii)the willful engaging by Executive in misconduct which is demonstrably and materially injurious to the Company, monetarily or otherwise.

No act, or failure to act, on the part of Executive shall be deemed “willful” unless done, or omitted to be done, by Executive not in good faith and without reasonable belief that his action or omission was in the best interest of the Company. Notwithstanding the foregoing, Executive shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to Executive a copy of the resolution duly adopted by the affirmative vote of not less than three-quarters (3/4) of the entire membership of the Board at a meeting of the Board (after reasonable notice to Executive and an opportunity for Executive, together with Executive’s counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, Executive was guilty of conduct set forth above in this definition and specifying the particulars thereof in detail.

(b)    ”Change in Control”.    For purposes of this Agreement, a “Change in Control” shall be deemed to have occurred if, during the term of this Agreement:

(i)any “Person,” as such term is used for purposes of Section 13(d) or 14(d) of the Securities Exchange Act of 1934, as amended (the “Exchange Act”) (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the stockholders of the Company in substantially the same proportions as their ownership of stock of the Company), becomes the “Beneficial Owner” (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company’s then-outstanding securities;

(ii)during any period of twenty-four months (not including any period prior to the effectiveness of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than (A) a director nominated by a Person who has entered into an agreement with the Company to effect a transaction described in Sections (8)(b)(i), (iii) or (iv) hereof, (B) a director nominated by any Person (including the Company) who publicly announces an intention to take or to consider taking actions (including, but not limited to, an actual or threatened proxy contest) which if consummated would constitute a Change in Control or (C) a director nominated by any Person who is the Beneficial Owner, directly or indirectly, of securities of the Company representing 10% or more of the combined voting power of the Company’s securities) whose election by the Board or nomination for election by the Company’s stockholders was approved in advance by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved, cease for any reason to constitute at least a majority thereof;

(iii)the stockholders of the Company approve any transaction or series of transactions under which the Company is merged or consolidated with any other company, other than a merger or consolidation (A) which would result in the voting securities of the Company outstanding immediately prior thereto

20

continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 66 2/3% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and (B) after which no Person holds 20% or more of the combined voting power of the then-outstanding securities of the Company or such surviving entity;

(iv)the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company’s assets; or

(v)the Board adopts a resolution to the effect that, for purposes of this Agreement, a Change in Control has occurred.

(c)    “Compensation Accrued at Termination”.    For purposes of this Agreement, “Compensation Accrued at Termination” means the following:

(i)The unpaid portion of annual base salary at the rate payable, in accordance with Section 4(a) hereof, at the date of Executive’s termination of employment, pro rated through such date of termination, payable in accordance with the Company’s regular pay schedule;

(ii)All earned and unpaid and/or vested, nonforfeitable amounts owing or accrued at the date of Executive’s termination of employment under any compensation and benefit plans, programs, and arrangements set forth or referred to in Sections 4(b) and 5(a) and 5(b) hereof (including the guaranteed bonus and any earned and vested annual incentive compensation and long-term incentive award) in which Executive theretofore participated, payable in accordance with the terms and conditions of the plans, programs, and arrangements (and agreements and documents thereunder) pursuant to which such compensation and benefits were granted or accrued; and

(iii)Reasonable business expenses and disbursements incurred by Executive prior to Executive’s termination of employment, to be reimbursed to Executive, as authorized under Section 5(e), in accordance the Company’s reimbursement policies as in effect at the date of such termination.

(d)    “Disability”.    For purposes of this Agreement, “Disability” means Executive’s absence from the full-time performance of Executive’s duties hereunder for six consecutive months as a result of his incapacity due to physical or mental illness or disability, and, within 30 days after written notice of termination is thereafter given by the Company, Executive shall have not returned to the full-time performance of such duties.

(e)    “Good Reason”.    For purposes of this Agreement, “Good Reason” shall mean, without Executive’s express written consent, the occurrence of any of the following circumstances unless, in the case of subsections (i), (iv), (vi) or (viii) hereof, such circumstances are fully corrected prior to the date of termination specified in the notice of termination given in respect thereof:

21

(i)the assignment to Executive of duties inconsistent with Executive’s position and status hereunder, or an alteration, adverse to Executive, in the nature of Executive’s duties, responsibilities, and authorities, Executive’s positions or the conditions of Executive’s employment from those specified in Section 3 or otherwise hereunder (other than inadvertent actions which are promptly remedied); for this purpose, it shall constitute “Good Reason” under this subsection (e)(i) if Executive shall be required to report to and take direction from any person or body other than the Board of Directors and the Executive Chairman of the Board; except the foregoing shall not constitute Good Reason if occurring in connection with the termination of Executive’s employment for Cause, Disability, Retirement, as a result of Executive’s death, or as a result of action by or with the consent of Executive; for purposes of this Section 8(e)(i), references to the Company (and the Board and stockholders of the Company) refer to the ultimate parent company (and its board and stockholders) succeeding the Company following an acquisition in which the corporate existence of the Company continues, in accordance with Section 12(b);

(ii)(A) a reduction by the Company in Executive’s Base Salary, (B) the setting of Executive’s annual target incentive opportunity or payment of earned annual incentive in amounts less than specified under or otherwise not in conformity with Section 4 hereof, (C) a change in compensation or benefits not in conformity with Section 5, or (D) a reduction, after a Change in Control, in perquisites from the level of such perquisites as in effect immediately prior to the Change in Control or as the same may have been increased from time to time after the Change in Control except for across-the-board perquisite reductions similarly affecting all senior executives of the Company and all senior executives of any Person in control of the Company;

(iii)the relocation of the principal place of Executive’s employment not in conformity with Section 3(b) hereof; for this purpose, required travel on the Company’s business will not constitute a relocation so long as the extent of such travel is substantially consistent with Executive’s customary business travel obligations in periods prior to the Effective Date;

(iv)the failure by the Company to pay to Executive any portion of Executive’s compensation or to pay to Executive any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven days of the date such compensation is due;

(v)the failure by the Company to continue in effect any material compensation or benefit plan in which Executive participated immediately prior to a Change in Control, unless an equitable arrangement (embodied in an ongoing substitute or alternative plan) has been made with respect to such plan, or the failure by the Company to continue Executive’s participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amounts of compensation or benefits provided and the level of Executive’s participation relative to other participants, as existed at the time of the Change in Control;

22

(vi)the failure of the Company to obtain a satisfactory agreement from any successor to the Company to fully assume the Company’s obligations and to perform under this Agreement, as contemplated in Section 12(b) hereof, in a form reasonably acceptable to Executive;

(vii)any election by the Company not to extend the Term of this Agreement at the next possible extension date under Section 2 hereof, unless Executive will have attained age 65 at or before such extension date; or

(viii)any other failure by the Company to perform any material obligation under, or breach by the Company of any material provision of, this Agreement.

(f)    “Potential Change in Control”.    For purposes of this Agreement, a “Potential Change in Control” shall be deemed to have occurred if, during the term of this Agreement:

(i)the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control;

(ii)any Person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; or

(iii)the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred.

9.Rabbi Trust Obligation Upon Potential Change in Control; Excise Tax-Related Provisions.

(a)    Rabbi Trust Funded Upon Potential Change in Control.    In the event of a Potential Change in Control or Change in Control, the Company shall, not later than 15 days thereafter, have established one or more rabbi trusts and shall deposit therein cash in an amount sufficient to provide for full payment of all potential obligations of the Company that would arise assuming consummation of a Change in Control, or has arisen in the case of an actual Change in Control, and a subsequent termination of Executive’s employment under Section 7(e) or 7(f). Such rabbi trust(s) shall be irrevocable and shall provide that the Company may not, directly or indirectly, use or recover any assets of the trust(s) until such time as all obligations which potentially could arise hereunder have been settled and paid in full, subject only to the claims of creditors of the Company in the event of insolvency or bankruptcy of the Company; provided, however, that if no Change in Control has occurred within two years after such Potential Change in Control, such rabbi trust(s) shall at the end of such two-year period become revocable and may thereafter be revoked by the Company.

(b)    Gross-up If Excise Tax Would Apply.    In the event Executive becomes entitled to any amounts or benefits payable in connection with a Change in Control or other change in control (whether or not such amounts are payable pursuant to this Agreement) (the “Severance Payments”), if any of such Severance Payments are subject to the tax (the “Excise Tax”) imposed by Section 4999 of the Code (or any similar federal, state or local tax that may hereafter be imposed), the Company shall pay to Executive at the time specified in Section 9(b)(iii) hereof an additional amount (the “Gross-Up Payment”) such that the net amount

23

retained by Executive, after deduction of any Excise Tax on the Total Payments (as hereinafter defined) and any federal, state and local income tax and Excise Tax upon the payment provided for by Section 9(b)(i), shall be equal to the Total Payments.

(i)For purposes of determining whether any of the Severance Payments will be subject to the Excise Tax and the amount of such Excise Tax:

(A)any other payments or benefits received or to be received by Executive in connection with a Change in Control or Executive’s termination of employment (whether pursuant to the terms of this Agreement or any other plan, arrangement or agreement with the Company, any Person whose actions result in a Change in Control or any Person affiliated with the Company or such Person) (which, together with the Severance Payments, constitute the “Total Payments”) shall be treated as “parachute payments” within the meaning of Section 280G(b)(2) of the Code, and all “excess parachute payments” within the meaning of Section 280G(b)(1) of the Code shall be treated as subject to the Excise Tax, unless in the opinion of nationally-recognized tax counsel selected by Executive such other payments or benefits (in whole or in part) do not constitute parachute payments, or such excess parachute payments (in whole or in part) represent reasonable compensation for services actually rendered within the meaning of Section 280G(b)(4) of the Code in excess of the base amount within the meaning of Section 280G(b)(3) of the Code, or are otherwise not subject to the Excise Tax;

(B)the amount of the Total Payments which shall be treated as subject to the Excise Tax shall be equal to the lesser of (x) the total amount of the Total Payments and (y) the amount of excess parachute payments within the meaning of Section 280G(b)(1) of the Code (after applying Section 9(b)(i)(A) hereof); and

(C)the value of any non-cash benefits or any deferred payments or benefit shall be determined by a nationally-recognized accounting firm selected by Executive in accordance with the principles of Sections 280G(d)(3) and (4) of the Code.

(ii)For purposes of determining the amount of the Gross-Up Payment, Executive shall be deemed to pay federal income taxes at the highest marginal rate of federal income taxation in the calendar year in which the Gross-Up Payment is to be made and state and local income taxes at the highest marginal rate of taxation in the state and locality of Executive’s residence on the Date of Termination, net of the maximum reduction in federal income taxes which could be obtained from deduction of such state and local taxes. In the event that the Excise Tax is subsequently determined to be less than the amount taken into account hereunder at the time of termination of Executive’s employment, Executive shall repay to the Company within ten days after the time that the amount of such reduction in Excise Tax is finally determined the portion of the Gross-Up Payment attributable to such reduction (plus the portion of the Gross-Up Payment attributable to the Excise Tax and federal and state and local

24

income tax imposed on the Gross-Up Payment being repaid by Executive if such repayment results in a reduction in Excise Tax and/or federal and state and local income tax deduction) plus interest on the amount of such repayment at the rate provided in Section 1274(b)(2)(B) of the Code. In the event that the Excise Tax is determined to exceed the amount taken into account hereunder at the time of the termination of Executive’s employment (including by reason of any payment the existence or amount of which cannot be determined at the time of the Gross-Up Payment), the Company shall make an additional gross-up payment in respect of such excess within ten days after the time that the amount of such excess is finally determined.

(iii)The payments provided for in this Section 9(b) shall be made not later than the fifteenth day following the date of Executive’s termination of employment; provided, however, that if the amount of such payments cannot be finally determined on or before such day, the Company shall pay to Executive on such day an estimate, as determined in good faith by the Company, of the minimum amount of such payments and shall pay the remainder of such payments (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code) as soon as the amount thereof can be determined but in no event later than the thirtieth day after the date of Executive’s termination of employment. In the event that the amount of the estimated payments exceeds the amount subsequently determined to have been due, such excess shall constitute a loan by the Company to Executive, payable on the fifteenth day after the demand by the Company (together with interest at the rate provided in Section 1274(b)(2)(B) of the Code).

(iv)All determinations under this Section 9(b) shall be made at the expense of the Company by a nationally recognized public accounting firm selected by Executive, and such determination shall be binding upon Executive and the Company.

10.Non-Competition and Non-Disclosure; Executive Cooperation; Non-Disparagement.

(a)    Non-Competition.    Without the consent in writing of the Board, Executive will not, at any time during the Term and for a period of two years following termination of Executive’s employment for any reason, acting alone or in conjunction with others, directly or indirectly (i) engage (either as owner, investor, partner, stockholder, employer, employee, consultant, advisor, or director) in any business in which he has been directly engaged on behalf of the Company or any affiliate, or has supervised as an executive thereof, during the last two years prior to such termination, or which was engaged in or planned by the Company or an affiliate at the time of such termination, in any geographic area in which such business was conducted or planned to be conducted; (ii) induce any customers of the Company or any of its affiliates with whom Executive has had contacts or relationships, directly or indirectly, during and within the scope of his employment with the Company or any of its affiliates, to curtail or cancel their business with the Company or any such affiliate; (iii) induce, or attempt to influence, any employee of the Company or any of its affiliates to terminate employment; or (iv) solicit, hire or retain as an employee or independent contractor, or assist any third party in the solicitation, hire, or retention as an employee or independent contractor, any person who during the

25

previous 12 months was an employee of the Company or any affiliate; provided, however, that the limitation contained in clause (i) above shall not apply if Executive’s employment is terminated as a result of a termination by the Company without Cause following a Change in Control or is terminated by Executive for Good Reason following a Change in Control; and provided further, that activities engaged in by or on behalf of the Company are not restricted by this covenant. The provisions of subparagraphs (i), (ii), (iii), and (iv) above are separate and distinct commitments independent of each of the other subparagraphs. It is agreed that the ownership of not more than one percent of the equity securities of any company having securities listed on an exchange or regularly traded in the over-the-counter market shall not, of itself, be deemed inconsistent with clause (i) of this Section 10(a).

(b)    Non-Disclosure; Ownership of Work.    Executive shall not, at any time during the Term and thereafter (including following Executive’s termination of employment for any reason), disclose, use, transfer, or sell, except in the course of employment with or other service to the Company, any proprietary information, secrets, organizational or employee information, or other confidential information belonging or relating to the Company and its affiliates and customers so long as such information has not otherwise been disclosed or is not otherwise in the public domain, except as required by law or pursuant to legal process. In addition, upon termination of employment for any reason, Executive will return to the Company or its affiliates all documents and other media containing information belonging or relating to the Company or its affiliates. Executive will promptly disclose in writing to the Company all inventions, discoveries, developments, improvements and innovations (collectively referred to as “Inventions”) that Executive has conceived or made during the Term; provided, however, that in this context “Inventions” are limited to those which (i) relate in any manner to the existing or contemplated business or research activities of the Company and its affiliates; (ii) are suggested by or result from Executive’s work at the Company; or (iii) result from the use of the time, materials or facilities of the Company and its affiliates. All Inventions will be the Company’s property rather than Executive’s. Should the Company request it, Executive agrees to sign any document that the Company may reasonably require to establish ownership in any Invention.

(c)    Cooperation With Regard to Litigation.    Executive agrees to cooperate with the Company, during the Term and thereafter (including following Executive’s termination of employment for any reason), by making himself available to testify on behalf of the Company or any subsidiary or affiliate of the Company, in any action, suit, or proceeding, whether civil, criminal, administrative, or investigative, and to assist the Company, or any subsidiary or affiliate of the Company, in any such action, suit, or proceeding, by providing information and meeting and consulting with the Board or its representatives or counsel, or representatives or counsel to the Company, or any subsidiary or affiliate of the Company, as may be reasonably requested and after taking into account Executive’s post-termination responsibilities and obligations. The Company agrees to reimburse Executive, on an after-tax basis, for all expenses actually incurred in connection with his provision of testimony or assistance.

(d)    Non-Disparagement.    Executive shall not, at any time during the Term and thereafter make statements or representations, or otherwise communicate, directly or indirectly, in writing, orally, or otherwise, or take any action which may, directly or indirectly, disparage or be damaging to the Company, its subsidiaries or affiliates or their respective officers, directors, employees, advisors, businesses or reputations, nor shall Executive’s successor in office make any such statements or representations regarding Executive. Notwithstanding the foregoing,

26

nothing in this Agreement shall preclude Executive or his successor from making truthful statements that are required by applicable law, regulation or legal process.

(e)    Release of Employment Claims.    Executive agrees, as a condition to receipt of any termination payments and benefits provided for in Sections 6 and 7 herein (other than Compensation Accrued at Termination) (the “Termination Benefits”), that he will execute a general release in the standard form employed by the Company, releasing any and all claims arising out of Executive’s employment (other than enforcement of this Agreement and other than with respect to vested rights or rights provided for under any benefit plan or arrangement of the Company).

(f)    Forfeiture of Outstanding Options.    The provisions of Sections 6 and 7 notwithstanding, if Executive willfully and materially fails to substantially comply with any restrictive covenant under this Section 10, all options to purchase Common Stock granted by the Company and then held by Executive or a transferee of Executive shall be immediately forfeited and thereupon such options shall be cancelled. Notwithstanding the foregoing, Executive shall not forfeit any option unless and until there shall have been delivered to him, within six months after the Board (i) had knowledge of conduct or an event allegedly constituting grounds for such forfeiture and (ii) had reason to believe that such conduct or event could be grounds for such forfeiture, a copy of a resolution duly adopted by a majority affirmative vote of the membership of the Board (excluding Executive) at a meeting of the Board called and held for such purpose (after giving Executive reasonable notice specifying the nature of the grounds for such forfeiture and not less than 30 days to correct the acts or omissions complained of, if correctable, and affording Executive the opportunity, together with his counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, Executive has engaged and continues to engage in conduct set forth in this Section 10(f) which constitutes grounds for forfeiture of Executive’s options; provided, however, that if any option is exercised after delivery of such notice and the Board subsequently makes the determination described in this sentence, Executive shall be required to pay to the Company an amount equal to the difference between the aggregate value of the shares acquired upon such exercise at the date of the Board determination and the aggregate exercise price paid by Executive. Any such forfeiture shall apply to such options notwithstanding any term or provision of any option agreement. In addition, options granted to Executive on or after the Effective Date, and gains resulting from the exercise of such options, shall be subject to forfeiture in accordance with the Company’s standard policies relating to such forfeitures and clawbacks, as such policies are in effect at the time of grant of such options.

(g)    Survival.    The provisions of this Section 10 shall survive the termination of the Term and any termination or expiration of this Agreement.

11.Governing Law; Disputes; Arbitration.

(a)    Governing Law.    This Agreement is governed by and is to be construed, administered, and enforced in accordance with the laws of the State of Delaware, without regard to conflicts of law principles. If under the governing law, any portion of this Agreement is at any time deemed to be in conflict with any applicable statute, rule, regulation, ordinance, or other principle of law, such portion shall be deemed to be modified or altered to the extent necessary to conform thereto or, if that is not possible, to be omitted from this Agreement. The invalidity of any such portion shall not affect the force, effect, and validity of the remaining portion hereof. If

27

any court determines that any provision of Section 10 is unenforceable because of the duration or geographic scope of such provision, it is the parties’ intent that such court shall have the power to modify the duration or geographic scope of such provision, as the case may be, to the extent necessary to render the provision enforceable and, in its modified form, such provision shall be enforced.

(b)    Reimbursement of Expenses in Enforcing Rights.    All reasonable costs and expenses (including fees and disbursements of counsel) incurred by Executive in negotiating this Agreement (up to a maximum of $15,000) and thereafter seeking to interpret this Agreement or enforce rights pursuant to this Agreement shall be paid on behalf of or reimbursed to Executive promptly by the Company, whether or not Executive is successful in asserting such rights; provided, however, that no reimbursement shall be made of such expenses relating to any unsuccessful assertion of rights if and to the extent that Executive’s assertion of such rights was in bad faith or frivolous, as determined by arbitrators in accordance with Section 11(c) or a court having jurisdiction over the matter.

(c)    Arbitration.    Any dispute or controversy arising under or in connection with this Agreement shall be settled exclusively by arbitration in Fairfield, CT by three arbitrators in accordance with the National Rules for the Resolution of Employment Disputes of the American Arbitration Association in effect at the time of submission to arbitration. Judgment may be entered on the arbitrators’ award in any court having jurisdiction. For purposes of entering any judgment upon an award rendered by the arbitrators, the Company and Executive hereby consent to the jurisdiction of any or all of the following courts: (i) the United States District Court for the District of Connecticut, (ii) any of the courts of the State of Connecticut, or (iii) any other court having jurisdiction. The Company and Executive further agree that any service of process or notice requirements in any such proceeding shall be satisfied if the rules of such court relating thereto have been substantially satisfied. The Company and Executive hereby waive, to the fullest extent permitted by applicable law, any objection which it may now or hereafter have to such jurisdiction and any defense of inconvenient forum. The Company and Executive hereby agree that a judgment upon an award rendered by the arbitrators may be enforced in other jurisdictions by suit on the judgment or in any other manner provided by law. Subject to Section 11(b), the Company shall bear all costs and expenses arising in connection with any arbitration proceeding pursuant to this Section 11. Notwithstanding any provision in this Section 11, Executive shall be paid during the pendency of any dispute or controversy arising under or in connection with this Agreement.

(d)    Interest on Unpaid Amounts.    Any amount which has become payable pursuant to the terms of this Agreement or any decision by arbitrators or judgment by a court of law pursuant to this Section 11 but which has not been timely paid shall bear interest at the prime rate in effect at the time such amount first becomes payable, as quoted by the Company’s principal bank.

12.  Miscellaneous.

(a)    Integration.    This Agreement cancels and supersedes any and all prior agreements and understandings between the parties hereto with respect to the employment of Executive by the Company, any parent or predecessor company, and the Company’s subsidiaries during the Term, except for contracts relating to compensation under executive compensation and employee benefit plans of the Company and its subsidiaries. The foregoing

28

notwithstanding, Executive shall not participate in the Company’s Employee Protection Plan unless the aggregate benefits provided under such plan would exceed the aggregate benefits provided to Executive under this Agreement upon termination of employment. Executive shall remain entitled to any right or benefit under a Change-in-Control Agreement executed by the Company, for so long as such Change-in-Control Agreement remains in effect, if and to the extent that such right or benefit is more favorable than a corresponding provision of this Agreement, but no payment or benefit under the Change-in-Control Agreement shall be made or extended which duplicates any payment or benefit hereunder. If and to the extent that this Agreement may provide enhanced benefits to Executive under the SERP which benefits are not explicitly provided for under the SERP, the SERP shall be deemed amended by this Agreement (but only insofar as it pertains to Executive). This Agreement constitutes the entire agreement among the parties with respect to the matters herein provided, and no modification or waiver of any provision hereof shall be effective unless in writing and signed by the parties hereto. Executive shall not be entitled to any payment or benefit under this Agreement which duplicates a payment or benefit received or receivable by Executive under such prior agreements and understandings or under any benefit or compensation plan of the Company.

(b)    Successors; Transferability.    The Company shall require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise, and whether or not the corporate existence of the Company continues) to all or substantially all of the business and/or assets of the Company to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no such succession had taken place. As used in this Agreement, “Company” shall mean the Company as hereinbefore defined and any successor to its business and/or assets as aforesaid which assumes and agrees to perform this Agreement by operation of law, or otherwise and, in the case of an acquisition of the Company in which the corporate existence of the Company continues, the ultimate parent company following such acquisition. Subject to the foregoing, the Company may transfer and assign this Agreement and the Company’s rights and obligations hereunder. Neither this Agreement nor the rights or obligations hereunder of the parties hereto shall be transferable or assignable by Executive, except in accordance with the laws of descent and distribution or as specified in Section 12(c).

(c)    Beneficiaries.    Executive shall be entitled to designate (and change, to the extent permitted under applicable law) a beneficiary or beneficiaries to receive any compensation or benefits provided hereunder following Executive’s death.

(d)    Notices.    Whenever under this Agreement it becomes necessary to give notice, such notice shall be in writing, signed by the party or parties giving or making the same, and shall be served on the person or persons for whom it is intended or who should be advised or notified, by Federal Express or other similar overnight service or by certified or registered mail, return receipt requested, postage prepaid and addressed to such party at the address set forth below or at such other address as may be designated by such party by like notice:

If to the Company:

IMS HEALTH INCORPORATED

1499 Post Road

Fairfield, CT  06824

Attention: General Counsel

29

If to Executive:

David R. Carlucci

1499 Post Road

Fairfield, CT 06824

Arthur Woodard, Esq.

Kaye Scholer LLP

425 Park Avenue

New York, NY 10022-3598

(212) 836-8005

If the parties by mutual agreement supply each other with telecopier numbers for the purposes of providing notice by facsimile, such notice shall also be proper notice under this Agreement. In the case of Federal Express or other similar overnight service, such notice or advice shall be effective when sent, and, in the cases of certified or registered mail, shall be effective two days after deposit into the mails by delivery to the U.S. Post Office.

(e)    Reformation.    The invalidity of any portion of this Agreement shall not deemed to render the remainder of this Agreement invalid.

(f)    Headings.    The headings of this Agreement are for convenience of reference only and do not constitute a part hereof.

(g)    No General Waivers.    The failure of any party at any time to require performance by any other party of any provision hereof or to resort to any remedy provided herein or at law or in equity shall in no way affect the right of such party to require such performance or to resort to such remedy at any time thereafter, nor shall the waiver by any party of a breach of any of the provisions hereof be deemed to be a waiver of any subsequent breach of such provisions. No such waiver shall be effective unless in writing and signed by the party against whom such waiver is sought to be enforced.

(h)    No Obligation To Mitigate.    Executive shall not be required to seek other employment or otherwise to mitigate Executive’s damages upon any termination of employment; provided, however, that, to the extent Executive receives from a subsequent employer health or other insurance benefits that are substantially similar to the benefits referred to in Section 5(b) hereof, any such benefits to be provided by the Company to Executive following the Term shall be correspondingly reduced.

(i)    Offsets; Withholding.    The amounts required to be paid by the Company to Executive pursuant to this Agreement shall not be subject to offset other than with respect to any amounts that are owed to the Company by Executive due to his receipt of funds as a result of his fraudulent activity. The foregoing and other provisions of this Agreement notwithstanding, all payments to be made to Executive under this Agreement, including under Sections 6 and 7, or otherwise by the Company, will be subject to withholding to satisfy required withholding taxes and other required deductions.

30

(j)    Successors and Assigns.    This Agreement shall be binding upon and shall inure to the benefit of Executive, his heirs, executors, administrators and beneficiaries, and shall be binding upon and inure to the benefit of the Company and its successors and assigns.

(k)    Counterparts.    This Agreement may be executed in counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument.

(l)    Due Authority and Execution.    The execution, delivery and performance of this Agreement has been duly authorized by the Company and this Agreement represents the valid, legal and binding obligation of the Company, enforceable against the Company according to its terms.

(m)    Representations of Executive.    Executive represents and warrants to the Company that he has the legal right to enter into this Agreement and to perform all of the obligations on his part to be performed hereunder in accordance with its terms and that he is not a party to any agreement or understanding, written or oral, which prevents him from entering into this Agreement or performing all of his obligations hereunder. In the event of a breach of such representation or warranty on Executive’s part or if there is any other legal impediment which prevents him from entering into this Agreement or performing all of his obligations hereunder, the Company shall have the right to terminate this Agreement forthwith in accordance with the same notice and hearing procedures specified above in respect of a termination by the Company for Cause pursuant to Section 7(a) and shall have no further obligations to Executive hereunder. Notwithstanding a termination by the Company under this Section 12(m), Executive’s obligations under Section 10 of this Agreement shall survive such termination.

13.  Indemnification.

All rights to indemnification by the Company now existing in favor of Executive as provided in the Company’s Certificate of Incorporation or By-laws or pursuant to other agreements in effect on or immediately prior to the Effective Date shall continue in full force and effect from the Effective Date (including all periods after the expiration of the Term), and the Company shall also advance expenses for which indemnification may be ultimately claimed as such expenses are incurred to the fullest extent permitted under applicable law, subject to any requirement that Executive provide an undertaking to repay such advances if it is ultimately determined that Executive is not entitled to indemnification; provided, however, that any determination required to be made with respect to whether Executive’s conduct complies with the standards required to be met as a condition of indemnification or advancement of expenses under applicable law and the Company’s Certificate of Incorporation, By-laws, or other agreement shall be made by independent counsel mutually acceptable to Executive and the Company (except to the extent otherwise required by law). After the date hereof, the Company shall not amend its Certificate of Incorporation or By-laws or any agreement in any manner which adversely affects the rights of Executive to indemnification thereunder. Any provision contained herein notwithstanding, this Agreement shall not limit or reduce any rights of Executive to indemnification pursuant to applicable law. In addition, the Company will maintain directors’ and officers’ liability insurance in effect and covering acts and omissions of Executive during the Term and for a period of six years thereafter on terms substantially no less favorable than those in effect on the Effective Date.

31

IN WITNESS WHEREOF, Executive has hereunto set his hand and the Company has caused this instrument to be duly executed as of the date first above written.

IMS HEALTH INCORPORATED
By:	/s/ David M. Thomas
	Name:	David M. Thomas
	Title:	Executive Chairman of the Board
EXECUTIVE
/s/ David R. Carlucci
David R. Carlucci

32