-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, LCuTTnaBoapjW7NN9IuLyLEexbuYcAWV+0Cbg0VR7RIyqH6ydLuBCg1PKf0bGALX 1st2MjXJefdVMbf2kR3jkg== 0000950123-98-002743.txt : 19980402 0000950123-98-002743.hdr.sgml : 19980402 ACCESSION NUMBER: 0000950123-98-002743 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 21 CONFORMED PERIOD OF REPORT: 19971231 FILED AS OF DATE: 19980320 SROS: NONE FILER: COMPANY DATA: COMPANY CONFORMED NAME: DUN & BRADSTREET CORP CENTRAL INDEX KEY: 0000030419 STANDARD INDUSTRIAL CLASSIFICATION: 8700 IRS NUMBER: 132740040 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-K SEC ACT: SEC FILE NUMBER: 001-07155 FILM NUMBER: 98569765 BUSINESS ADDRESS: STREET 1: ONE DIAMOND HILL ROAD CITY: MURRAY HILL STATE: NJ ZIP: 07974 BUSINESS PHONE: 2032224200 MAIL ADDRESS: STREET 1: 1 DIAMOND HILL RD CITY: MURRAY HILL STATE: NJ ZIP: 07974 FORMER COMPANY: FORMER CONFORMED NAME: DUN & BRADSTREET COMPANIES INC DATE OF NAME CHANGE: 19790429 10-K 1 DUN & BRADSTREET CORPORATION 1 ================================================================================ SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------------------------ FORM 10-K (MARK ONE) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE FISCAL YEAR ENDED DECEMBER 31, 1997 OR [ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE ACT OF 1934 FOR THE TRANSITION PERIOD FROM TO . COMMISSION FILE NUMBER 1-7155. THE DUN & BRADSTREET CORPORATION (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) DELAWARE 13-2740040 (STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.) ONE DIAMOND HILL ROAD, MURRAY HILL, NJ 07974 (ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (908) 665-5000. SECURITIES REGISTERED PURSUANT TO SECTION 12(b) OF THE ACT:
TITLE OF EACH CLASS NAME OF EACH EXCHANGE ON WHICH REGISTERED ------------------- ----------------------------------------- COMMON STOCK, PAR VALUE $1 PER SHARE NEW YORK STOCK EXCHANGE PREFERRED STOCK PURCHASE RIGHTS NEW YORK STOCK EXCHANGE
SECURITIES REGISTERED PURSUANT TO SECTION 12(g) OF THE ACT: NONE Indicate by check mark whether the registrant: (1) has filed all reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months and (2) has been subject to such filing requirements for the past 90 days. Yes [X] No [ ] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K. [ ] As of February 20, 1998, 171,354,339 shares of Common Stock of The Dun & Bradstreet Corporation were outstanding and the aggregate market value of such Common Stock held by nonaffiliates* (based upon its closing transaction price on the Composite Tape on such date) was approximately $5,634.8 million. * Calculated by excluding all shares held by executive officers and directors of the registrant without conceding that all such persons are "affiliates" of the registrant for purposes of federal securities laws. (Continued) ================================================================================ 2 DOCUMENTS INCORPORATED BY REFERENCE PART I - - ------- Item 1 -- Business............................... Note 16 (Segment Information) on pages 53 and 54 of the 1997 Annual Report. PART II - - ------- Item 5 -- Market for the Registrant's Common Equity and Related Stockholder Matters.............................. Page 34, Management's Discussion and Analysis of Financial Condition and Results of Operations, of the 1997 Annual Report. Item 6 -- Selected Financial Data................ Page 56, Five-Year Selected Financial Data, of the 1997 Annual Report. Item 7 -- Management's Discussion and Analysis of Financial Condition and Results of Operations........................... Pages 29 to 34, Management's Discussion and Analysis of Financial Condition and Results of Operations, of the 1997 Annual Report. Item 7A -- Quantitative and Qualitative Disclosures about Market Risk........ Pages 29 to 34, Management's Discussion and Analysis of Financial Condition and Results of Operations, of the 1997 Annual Report, and Note 5 (Financial Instruments with Off-Balance Sheet Risks) on Page 44 of the 1997 Annual Report. Item 8 -- Financial Statements and Supplementary Data................................. Pages 35 to 56 of the 1997 Annual Report. PART III - - ------- Item 10 -- Directors and Executive Officers of the Registrant........................... Pages 2 to 3 of the Company's Proxy Statement dated March 6, 1998 (as supplemented by the Company's additional proxy materials dated March 17, 1998). Item 11 -- Executive Compensation................. Pages 9 to 20 of the Company's Proxy Statement dated March 6, 1998 (as supplemented by the Company's additional proxy materials dated March 17, 1998). Item 12 -- Security Ownership of Certain Beneficial Owners and Management..... Pages 4 to 7 of the Company's Proxy Statement dated March 6, 1998 (as supplemented by the Company's additional proxy materials dated March 17, 1998). Item 13 -- Certain Relationships and Related Transactions......................... Pages 4 to 7 of the Company's Proxy Statement dated March 6, 1998 (as supplemented by the Company's additional proxy materials dated March 17, 1998).
------------------------ The Index to Exhibits is located on Pages 17 to 19. 1 3 PART I As used in this report, except where the context indicates otherwise, the term "Company" means The Dun & Bradstreet Corporation and all subsidiaries consolidated in the financial statements contained herein. ITEM 1. BUSINESS (a)(1) The Dun & Bradstreet Corporation was incorporated under the laws of the State of Delaware on February 6, 1973 and became the parent holding company of Dun & Bradstreet, Inc. and its subsidiaries on June 1, 1973. Dun & Bradstreet, Inc. was incorporated under the laws of the State of Delaware in 1930 and is the successor to a business commenced in 1841. On November 1, 1996, The Dun & Bradstreet Corporation reorganized into three publicly traded independent companies by spinning off, through a tax-free distribution to shareholders (the "1996 Distribution"), two of its businesses. The two companies spun off in the 1996 Distribution were ACNielsen Corporation ("ACNielsen") and Cognizant Corporation ("Cognizant"). On December 17, 1997, the Company announced a plan to reorganize into two publicly traded independent companies by spinning off, through a tax-free distribution to shareholders (the "1998 Distribution"), a subsidiary corporation comprising the Company's Risk Management Services segment. After the 1998 Distribution, the business of the Company will consist entirely of the Directory Information Services business conducted by Reuben H. Donnelley, and the Risk Management Services segment will comprise the business of a new publicly traded company that will succeed to the name "The Dun & Bradstreet Corporation." The 1998 Distribution is subject to final approval by the Company's board of directors and obtaining a ruling from the Internal Revenue Service with respect to the tax-free treatment of the distribution. The Company expects to complete the reorganization in the summer of 1998. (2) Not applicable. (b) The response to this item is incorporated herein by reference to Note 16 (Segment Information) on Pages 53 and 54 of the 1997 Annual Report. (c) The Dun & Bradstreet Corporation is a non-operating holding company whose revenue is derived primarily from dividends received from its subsidiaries. A descriptive narrative of the Company's business segments follows item (d). The number of full-time equivalent employees at December 31, 1997 was approximately 15,100. (d) The response to this item is incorporated herein by reference to Note 16 (Segment Information) on Pages 53 and 54 of the 1997 Annual Report. The Company is the world's leading marketer of information and services for business decision-making. Its operations can be divided into two business segments: Risk Management Services and Directory Information Services. The businesses formerly comprising the Marketing Information Services, Software Services and Other Business Services segments were spun-off pursuant to the 1996 Distribution and are treated as discontinued operations in the Company's historical financial statements. A narrative description of the Company's operations by business segment follows. RISK MANAGEMENT SERVICES DUN & BRADSTREET Dun & Bradstreet ("D&B") is the world's largest provider of business-to-business credit, marketing and purchasing information and receivables management services. D&B operates offices in 36 countries, conducts operations in two other countries via minority interests in joint venture companies, and operates through independent correspondents in over 150 additional countries. D&B gathers data through telephone and personal interviews with business managers and through third party sources. At the core of D&B's products and services are its worldwide database containing information on more than 48 million businesses, the 2 4 D-U-N-S numbering system (a numerical identification system used to identify corporate affiliations), and its ability to integrate business information from multiple sources and create decision support tools. Companies throughout the world use D&B's products and services to evaluate and make decisions about their working relationships with customers and suppliers; to improve efficiency and productivity; to identify growth opportunities and market their products more successfully; and to take actions that increase revenue, cash flow and profits. D&B conducts business in three general regions: United States; Europe, Africa and Middle East; and Asia-Pacific, Canada and Latin America. DUN & BRADSTREET, U.S. In the United States, D&B provides Value-Added Products, Credit Information Services, Marketing Information Services and Receivable Management Services, as described below. Value-Added Products Value-Added Products, which include Database Marketing Services, Predictive Scoring Services, Decision Support Services, Supplier Evaluation and Management Services, Software Partner Marketing and Internet Access, provide easy, open access to D&B's databases and allow D&B to embed its information in its customers' business processes and technology. These products and services are scalable for use on individual desktops, in networks and on computer hosts, and are designed to improve customers' decision making, speed-of-action and productivity and to help customers realize the full value of their information and technology investments. The D-U-N-S Numbering System is a critical component in D&B's Valued-Added Products. As a unique, universal identifier of more than 48 million businesses around the world, the D-U-N-S Number can help customers tap revenue and customer service opportunities by uncovering prospects and linking related customers' accounts, identifying cross-selling opportunities within the same corporate family, eliminating duplicate file entries in customer and supplier databases, and reducing operating costs and increasing purchasing power by linking interrelated suppliers. Database Marketing Services help give D&B's customers a better understanding of the profitability and performance of their customers by enhancing internal customer data with external information and analysis that can help target the most profitable customers and prospects, analyze market penetration, territory alignment and market segmentation and perform demand estimation. Predictive Scoring Services, such as the Commercial Credit Score, Industry-specific Credit Scores and OneScore, use statistical models to help D&B's customers predict the likelihood of delinquent payment or failure to pay within terms, while the Financial Stress Score is a statistical model that helps D&B's customers predict the likelihood that a customer or prospect will discontinue operations or file for bankruptcy. Decision Support Services include desktop decision support systems such as Risk Assessment Manager and Supplier Assessment Manager. These systems use the customers' rules to automate credit and purchasing decisions, respectively, using internal and external information, including D&B's predictive scores. Supplier Evaluation and Management Services provide information and analyses that help customers identify suppliers and assess the risk of doing business with them. Through alliances being developed with major business application software providers, Software Partner Marketing can cleanse, consolidate and migrate legacy customer and vendor data to a business's new enterprise application system, as well as provide real-time, online access to D&B information. Internet Access allows customers to access D&B information directly from D&B's Web site using secure transaction services and from the Web sites of certain third parties. D&B is also developing custom access to its databases via customers' Intranets. Value-Added Products, while a market leader in its industry, faces competition from various information services and software providers. Credit Information Services D&B provides business credit information on more than 11 million U.S. businesses. Its core credit information is available through a variety of company-specific reports, including the Business Information 3 5 Report, Payment Analysis Report, Alert Services and business reference directories. Customers can access this information via D&B's Web site, personal computer, mail, telephone, fax and customized connections between D&B and a customer's computer systems. Credit Information Services also distributes its products via a number of other firms, including leading vendors of online information services and the Web sites of certain third parties. The Business Information Report contains commercial credit information that may include the D&B Rating, PAYDEX Score, financials, summary information, public record data and payment history. The Payment Analysis Report provides information on a company's payment record and includes the PAYDEX Score, historical trends and industry comparisons. Alert Services provide businesses with the ability to monitor accounts or their portfolio for significant changes that could impact a customer, supplier or partner. The Dun & Bradstreet Reference Book of American Business contains approximately 3.4 million business listings in the United States and Puerto Rico. Customers use D&B's Credit Information Services to extend commercial credit, approve loans and leases, underwrite insurance, evaluate vendors, and make other financial and risk assessment decisions. D&B's largest customers for this information are major manufacturers and wholesalers, insurance companies, banks, and other credit and financial institutions. Traditionally, Credit Information Services were offered pursuant to an annual contract requiring a minimum volume commitment. In January 1998, D&B began to offer customers a choice of how to pay for these services. Customers can now continue to commit to a standard, annual discounted contract or opt for a flexible, monthly, pay-as-you-go discount plan, with no minimum usage requirement. Credit Information Services is the leading commercial credit-reporting agency in the United States. However, it faces competition from in-house operations of the businesses it seeks as customers and from other general and specialized credit reporting agencies and other information services providers. It believes the principal attributes in judging the competition are information quality, availability, service and price. Marketing Information Services Marketing Information Services provides business-to-business marketing information and analysis. This information is derived from D&B's database of information on more than 48 million businesses in 200 countries. The information is delivered in print, on diskette, magnetic tape and CD-ROM, through online information services and other third parties, and via D&B's Web site and the Web sites of certain third parties. These products and services help businesses conduct market segmentation, customer profiling, prospect selection and marketing list development. Market Data Retrieval ("MDR") offers marketing information that helps businesses sell to the education market. MDR's database includes information on course offerings, facilities and more than 4 million educators in 250,000 pre-school, elementary, secondary and higher educational institutions and libraries in the United States and Canada. Marketing Information Services, while a market leader in its industry, faces competition from data providers who have competitive distribution channels, delivery formats and data quality. Receivable Management Services Receivable Management Services ("RMS") provides its customers with a full range of accounts receivable management services, including third-party collection of accounts, letter demand services and receivables management outsourcing programs. These services substitute and/or enhance its customers' own internal management of accounts receivable. RMS services and collects delinquent receivables on behalf of 30,000 customers primarily in the business-to-business market. Principal markets include insurance, telecommunications, and transportation services. Customers select the applicable RMS service that best meets their receivable portfolio needs. RMS uses the Dun & Bradstreet name to communicate with debtors about delinquent accounts for collection services. Revenues are generally earned on a contingent fee basis. Receivables outsourcing programs 4 6 are selected when customers seek to outsource their accounts receivable function to a third party vendor. Services include debt verification and collection, customer service functions and analytical reporting. RMS has sold franchises to third parties, which are given permission to sell debt collection services under the RMS name. These franchises cover portions of 27 states. RMS uses franchises to complement its field sales and telesales forces. These franchises are located in less concentrated markets where local presence is preferred. RMS continues to be responsible for all product fulfillment. Customer ownership remains with RMS with franchisees retaining exclusive access in their markets. Certain states require licensing for consumer and commercial debt collection. RMS, and in some instances the individual collectors, must be licensed in order to conduct business in these states. The laws under which such licenses are granted generally require annual license renewal and provide for denial, suspension or revocation for improper actions or other reasons. Internationally, RMS provides cross-border receivable services in which the RMS worldwide offices service cross-border claims for one another. This service has grown significantly, but comprises only 2 percent of RMS' total revenue. RMS is considered to be a leader in the commercial receivables management industry in the U.S. There are several consumer collection agencies that have larger receivables portfolios, particularly health care and credit card collection providers. The third-party commercial collection market is highly fragmented with over 5,000 collection agencies. The outsourcing market has significantly fewer competitors due to the need for larger scale operations by the receivables providers. Both markets are very price competitive with status and statistical reporting and speed of service as key qualitative attributes. DUN & BRADSTREET EUROPE, AFRICA AND MIDDLE EAST AND DUN & BRADSTREET ASIA-PACIFIC, CANADA AND LATIN AMERICA Dun & Bradstreet Europe, Africa and Middle East and Dun & Bradstreet Asia-Pacific, Canada and Latin America ("D&B Europe" and "D&B Asia-Pacific, Canada and Latin America," respectively) opened their first overseas office in 1857 and today conduct operations in offices and branches located throughout Europe, Latin America, Africa, the Middle East, Asia, Japan, the Pacific Rim and Canada. D&B Europe and D&B Asia-Pacific, Canada and Latin America provide substantially the same business-to-business credit, marketing and purchasing information and receivable management services outside the United States as those provided domestically by D&B U.S. D&B Europe and D&B Asia-Pacific, Canada and Latin America's major products and services include company-specific reports, analytical tools to help the customer make better business decisions, local and international credit-reference publications, marketing publications, marketing information systems, consumer-credit information, as well as receivables management services. Customers can access information via D&B's Web site and the Web sites of certain third parties, personal computer, mail, fax, CD-ROM, online information services and other third parties. In 1996, D&B Asia-Pacific, Canada and Latin America reorganized its operations in Brazil, Mexico, Chile and Venezuela. It continues to provide cross-border services originating in Latin America through local affiliates, small local operations centers and an operations center in Florida, and in the Asia-Pacific region is exploring possible joint venture and distribution arrangements to leverage its staff and data sourcing and distribution capabilities. D&B Europe continues to invest in data systems and is continuing its rollout to the European market of a new range of cross-border products. D&B Europe has also continued investing heavily in a new technology platform, which is expected to result in enhanced product/service flexibility as well as opportunities to streamline operations. D&B Europe and D&B Asia-Pacific, Canada and Latin America's operations are subject to the usual risks inherent in carrying on business in certain countries outside of the U.S., including currency fluctuations and possible nationalization, expropriation, price controls, changes in the availability of data from public sector sources, limits on providing information across borders or other restrictive governmental actions. Management believes that the risks of nationalization or expropriation are reduced because its basic service is the delivery of 5 7 information, rather than the production of products that require manufacturing facilities or the use of natural resources. D&B Europe and D&B Asia-Pacific, Canada and Latin America face competition from banks, consumer information companies, application software developers, online content providers and in-house operations of businesses as well as direct competition from businesses providing similar services. D&B Europe is believed to be the largest single supplier of credit information services in Europe. The competition is primarily local and there are no competitors offering a comparable range of global services or capabilities. MOODY'S INVESTORS SERVICE, INC. Moody's Investors Service, Inc. ("Moody's") publishes credit opinions on investment securities, assigning ratings to fixed-income securities and other credit obligations. It also provides a broad range of business and financial information. Moody's was founded in 1900. It now employs approximately 600 analysts and has a total of more than 1,500 associates located around the world. Moody's provides ratings and information on governmental and commercial entities in over 95 countries. Moody's customers include investors (both institutional and individual), banks and other financial intermediaries, and a wide range of corporate and governmental issuers of securities. Moody's publishes rating opinions on a broad range of credit obligations. These include various United States corporate and governmental obligations, Eurosecurities, structured finance securities and commercial paper issues. In recent years, Moody's has moved beyond its traditional bond ratings activity, assigning ratings to insurance companies' obligations, bank loans, derivative product companies, debt, mutual funds and derivatives. At the end of 1997, Moody's had outstanding ratings on approximately 85,000 corporate and 62,000 public finance obligations. Ratings are disseminated to the public through a variety of electronic and print media. Detailed descriptions of both the rated issue and issuer, along with a summary of the rationale for the assignment of the specific rating, also appear in various Moody's credit research products. The ratings fees charged to most issuers account for a majority of Moody's revenues. Therefore, a substantial portion of Moody's revenues is dependent upon the volume of debt securities issued in the global capital markets. In addition to revenues from its ratings activities, Moody's derives revenues from its publication of investor-oriented credit research services to over 30,000 subscribers globally. Moody's publishes more than 100 research products, including in-depth research on major issuers, industry studies, special comments and summary credit opinion handbooks. Product selection includes insurance, utilities, speculative grade instruments, bank and global credit research. Moody's also offers current and historical business and financial information for investment research and reference uses. Such information is published in more than 30 different products and services, including in manuals, handbooks and guides, as well as on CD-ROM and in other electronic formats. These products and services cover over 20,000 major U.S. and non-U.S. companies, as well as over 22,000 municipalities and governmental entities and their securities. Moody's international operations have continued to grow as a result of the expansion and development of international debt markets in recent years. Moody's maintains offices in 12 countries. Moody's non-U.S. operations are subject to the usual risks inherent in carrying on business in certain countries outside the U.S., including currency fluctuations and possible nationalization, expropriation, price controls and/or other restrictive governmental actions. Management believes that the risks of nationalization or expropriation are negligible. Moody's international business is not solely dependent on non-U.S. office staff, as these offices are supported by travel from Moody's internationally-focused personnel. Moody's is one of the two largest ratings agencies in the world. Both in the United States and internationally, competition is increasing as the volume of ratable credit-sensitive instruments increases and additional ratings agencies are created or existing agencies enter new markets. Moody's is registered as an investment advisor under the Investment Advisers Act of 1940. 6 8 DIRECTORY INFORMATION SERVICES THE REUBEN H. DONNELLEY CORPORATION The Reuben H. Donnelley Corporation ("RHD") provides sales, marketing and publishing services for yellow pages and other directory products for more than 275 directories, operates in 14 states, and is the largest independent marketer of yellow pages advertising in the United States. RHD serves the yellow pages marketing needs of over a half million small and medium size businesses and service organizations that purchase yellow pages advertising. RHD's telephone company clients include Ameritech advertising services ("Aas"), Bell Atlantic Yellow Pages Company ("Bell Atlantic"), formerly NYNEX Information Resources Company, Sprint Publishing & Advertising and Centel Directory Company, both subsidiaries of Sprint Corporation ("Sprint"), in addition to other smaller telephone companies. RHD's client agreements include both partnership and agency relationships. DonTech, a partnership between RHD and Aas, was restructured in August 1997. Under the new structure, DonTech acts as the exclusive advertising sales agent for Ameritech's printed and Internet directories in Illinois and northwest Indiana. The restructured partnership continues to be a perpetual partnership. Under a separate agreement, RHD provides publishing services for Ameritech's Illinois and northwestern Indiana directories through 2003. RHD, as sales agent for Bell Atlantic, provides advertising sales services for directories published in substantially all of New York State. The agreement continues until 2005. RHD's relationship with Sprint includes the CenDon partnership agreement with Centel Directory Company, and related directory contracts with several of Sprint's operating subsidiaries, to publish, manufacture and distribute telephone directories in Florida, Nevada, North Carolina and Virginia. RHD, as sales agent, provides advertising sales and publishing services for Sprint's directories in the greater Orlando marketplace. Both the CenDon Partnership and the Sprint sales agency agreements continue until 2004. RHD's agency relationship with Cincinnati Bell Directory expired in August 1997. RHD launched a proprietary directory operation in Cincinnati, northern Kentucky and southwest Indiana in September 1997. In December 1997, RHD sold its proprietary yellow pages directories located in Delaware, Maryland, New Jersey, Pennsylvania, Virginia and the District of Columbia to Yellow Book USA L.P. ("Yellow Book"). As part of the asset sale, RHD assigned to Yellow Book its rights and responsibilities under the C-Don partnership agreement with Commonwealth Communications, Inc., as well as the joint venture agreements with North Pittsburgh Telephone Company, Conestoga Telephone and Telegraph, and Denver and Ephrata Telephone Company in Pennsylvania. Under a separate five-year agreement, RHD provides publishing services for the directories purchased by Yellow Book. RHD also has an agency agreement to provide sales and publishing services for CFW Telephone Company in Virginia. RHD's publishing and marketing operations provide a variety of leading-edge pre-press processes and information management services to produce or support print and electronic directory products. Core publishing services include graphics and ad composition, customer order processing, listing database management, and pagination. RHD provides for both clients and its own proprietary business some of the most comprehensive capabilities in the directory information industry, including tools and information to effectively conduct sales and marketing planning, sales management, sales compensation, and customer service activities. Publishing operations are based at its facilities in Raleigh, North Carolina and Dunmore, Pennsylvania. The advanced database management and publishing systems in Raleigh's state-of-the art facility became fully operational in 1997. Competition in the directory industry takes many forms and there is competition to varying degrees from other yellow pages publishers in some of the markets that RHD serves, although in most of its markets RHD represents the leading product in the market. There is also competition for advertising dollars by newspapers, 7 9 radio, direct mail, online information services and television, and advances in technology have brought in new industry participants, new products and new channels. In response, RHD has developed non-traditional relationships with businesses not formerly associated with the yellow pages industry to develop revenues from other sources, including the sale of advertising for internet yellow pages as well as cable television advertising. The deregulation of the telecommunications industry as a result of the Telecommunications Act of 1996 is resulting in increased competition for local telephone service and expanded geographic markets for local telephone service providers, thereby opening up potential opportunities for directory publishers. INTELLECTUAL PROPERTY The Company owns and controls a number of trade secrets, confidential information, trademarks, trade names, copyrights, patents and other intellectual property rights which, in the aggregate, are of material importance to the Company's business. Management of the Company believes that each of the "Dun & Bradstreet", "Moody's" and "Reuben H. Donnelley" names and related names, marks and logos are of material importance to the Company. The Company is licensed to use certain technology and other intellectual property rights owned and controlled by others, and, similarly, other companies are licensed to use certain technology and other intellectual property rights owned and controlled by the Company. The Company considers its trademarks, service marks, databases, software and other intellectual property to be proprietary and the Company relies on a combination of copyright, trademark, trade secret, patent, non-disclosure and contract safeguards for protection. The names of the Company's products and services referred to herein are trademarks, service marks or registered trademarks or service marks owned by or licensed to the Company or one or more of its subsidiaries. ITEM 2. PROPERTIES The executive offices of the Company are located at One Diamond Hill Road, Murray Hill, New Jersey in a property owned by D&B. The other properties of the Company are geographically distributed to meet sales and operating requirements worldwide. They are generally considered to be both suitable and adequate to meet current operating requirements and virtually all space is being utilized. The principal properties of the Company, by business segment, are set forth below. RISK MANAGEMENT SERVICES Owned properties located within the U.S. total five, consisting of two buildings in Berkeley Heights, New Jersey, one each in Murray Hill and Parsippany, New Jersey, and one in New York, New York. Owned properties located outside the U.S. are located in Melbourne, Australia; Curitiba, Brazil; Santiago, Chile; Mexico City, Mexico; Caracas, Venezuela; High Wycombe, England; Lyon, France; Marseille, France; and Milan, Italy. The operations of this segment are also conducted from 84 leased offices located throughout the U.S. and 93 leased non-U.S. office locations. DIRECTORY INFORMATION SERVICES Operations are conducted from 38 leased locations throughout the U.S. ITEM 3. LEGAL PROCEEDINGS The Company and its subsidiaries are involved in legal proceedings, claims and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such current legal proceedings, claims and litigation could have a material effect on quarterly or annual operating results or cash flows when resolved in a future period. However, in the opinion of management, these matters will not materially affect the Company's consolidated financial position. 8 10 Information Resources In addition to the matters referred to above, on July 29, 1996, Information Resources, Inc. ("IRI") filed a complaint in the United States District Court for the Southern District of New York, naming as defendants the Company, A.C. Nielsen Company (a subsidiary of ACNielsen) and IMS International, Inc. (a subsidiary of Cognizant). The complaint alleges various violations of United States antitrust laws, including alleged violations of Section 1 and 2 of the Sherman Act. The complaint also alleges a claim of tortious interference with a contract and a claim of tortious interference with a prospective business relationship. These claims relate to the acquisition by defendants of Survey Research Group Limited ("SRG"). IRI alleges SRG violated an alleged agreement with IRI when it agreed to be acquired by the defendants and that the defendants induced SRG to breach that agreement. On October 15, 1996, defendants moved for an order dismissing all claims in the complaint. On May 6, 1997, the United States District Court for the Southern District of New York issued a decision dismissing IRI's claim of attempted monopolization in the United States, with leave to replead within sixty days. The Court denied defendants' motion with respect to the remaining claims in the complaint. On June 3, 1997, defendants filed an answer denying the material allegations in IRI's complaint, and A.C. Neilsen Company filed a counterclaim alleging that IRI has made false and misleading statements about its services and commercial activities. On July 7, 1997, IRI filed an Amended and Restated Complaint repleading its alleged claim of monopolization in the United States and realleging its other claims. By notice of motion dated August 18, 1997, defendants moved for an order dismissing the amended claim. On December 1, 1997, the Court denied the motion and, on December 16, 1997, defendants filed a supplemental answer denying the remaining material allegations of the amended complaint. IRI's complaint alleges damages in excess of $350 million, which amount IRI asked to be trebled under antitrust laws. IRI also seeks punitive damages in an unspecified amount. In connection with the IRI action, Cognizant, ACNielsen and the Company entered into an Indemnity and Joint Defense Agreement (the "Indemnity and Joint Defense Agreement") pursuant to which they have agreed (i) to certain arrangements allocating potential liabilities ("IRI Liabilities") that may arise out of or in connection with the IRI action and (ii) to conduct a joint defense of such action. In particular, the Indemnity and Joint Defense Agreement provides that ACNielsen will assume exclusive liability for IRI Liabilities up to a maximum amount to be calculated at such time such liabilities, if any, become payable (the "ACN Maximum Amount"), and that the Company and Cognizant will share liability equally for any amounts in excess of the ACN Maximum Amount. The ACN Maximum Amount will be determined by an investment banking firm as the maximum amount which ACNielsen is able to pay after giving effect to (i) any plan submitted by such investment bank which is designed to maximize the claims-paying ability of ACNielsen without impairing the investment banking firm's ability to deliver a viability opinion (but which will not require any action requiring stockholder approval) and (ii) payment of related fees and expenses. For these purposes, financial viability means the ability of ACNielsen, after giving effect to such plan, the payment of related fees and expenses and the payment of the ACN Maximum Amount, to pay its debts as they become due and to finance the current and anticipated operating and capital requirements of its business, as reconstituted by such plan, for two years from the date any such plan is expected to be implemented. Management is unable to predict at this time the final outcome of the IRI action or whether the resolution of this matter could materially affect the Company's results of operations, cash flows or financial position. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS Not applicable. 9 11 EXECUTIVE OFFICERS OF THE REGISTRANT* Officers are elected by the Board of Directors to hold office until their respective successors are chosen and qualified. Listed below are the executive officers of the registrant at March 20, 1998 and brief summaries of their business experience during the past five years.
NAME TITLE AGE ---- ----- --- Volney Taylor**............. Chairman of the Board and Chief Executive Officer 58 William F. Doescher......... Senior Vice President and Chief Communications Officer 60 Nancy L. Henry.............. Senior Vice President and Chief Legal Counsel 52 Elahe Hessamfar............. Senior Vice President and Chief Information Officer 44 Frank R. Noonan............. Senior Vice President and President -- The Reuben H. 55 Donnelley Corporation Peter J. Ross............... Senior Vice President and Chief Human Resources Officer 52 Frank S. Sowinski........... Senior Vice President and Chief Financial Officer 41 Chester J. Geveda, Jr. ..... Vice President and Controller 51
- - --------------- * Set forth as a separate item pursuant to Items 401(b) and (e) of Regulation S-K. ** Member of the Board of Directors since December 19, 1984. Mr. Taylor was elected Chairman of the Board and Chief Executive Officer, The Dun & Bradstreet Corporation, effective November 1, 1996. He served as Executive Vice President, The Dun & Bradstreet Corporation, from February 1, 1982 to October 31, 1996. Since January 1, 1991, he has also served as Chairman, Dun & Bradstreet. Mr. Doescher was elected Senior Vice President and Chief Communications Officer, The Dun & Bradstreet Corporation, effective November 1, 1996. Since April 1992, he has also served as Senior Vice President -- Global Communications, Dun & Bradstreet. He served as Vice President -- Public Relations and Advertising, The Dun & Bradstreet Corporation, from April 1983 until October 1996. Ms. Henry was elected Senior Vice President and Chief Legal Counsel, The Dun & Bradstreet Corporation, effective March 27, 1997. Prior thereto, she was with the law firm of Skadden, Arps, Slate, Meagher & Flom from 1980. Ms. Hessamfar was elected Senior Vice President and Chief Information Officer, The Dun & Bradstreet Corporation, effective August 18, 1997. Prior thereto, she served as Chief Information Officer of Turner Broadcasting System from July 1993 to August 1997. She previously served as Vice President Information Systems for PAC Bell Directories from May 1987 to July 1993. Mr. Noonan was elected Senior Vice President, The Dun & Bradstreet Corporation, and President, The Reuben H. Donnelley Corporation, effective November 1, 1996. He previously served, until October 1996, as Senior Vice President, The Dun & Bradstreet Corporation, since February 20, 1995, and as Chairman, President and Chief Executive Officer, The Reuben H. Donnelley Corporation, since August 7, 1991 (President), January 1, 1994 (Chief Executive Officer) and February 20, 1995 (Chairman). Mr. Ross was elected Senior Vice President and Chief Human Resources Officer, The Dun & Bradstreet Corporation, effective November 1, 1996. Since June 1988, he has also served as Senior Vice President -- Human Resources, Dun & Bradstreet. Mr. Sowinski was elected Senior Vice President and Chief Financial Officer, The Dun & Bradstreet Corporation, effective November 1, 1996. He served as Executive Vice President -- Applications & Alliances, Dun & Bradstreet, U.S. from November 1996 to December 1997, and as Executive Vice President -- Applications, Mass Marketing & Alliances, Dun & Bradstreet, U.S. from October 1993 to October 1996. Prior 10 12 thereto, he served as Senior Vice President -- Finance & Planning, Dun & Bradstreet, U.S. from August 1989 to September 1993. Mr. Geveda was elected Vice President and Controller, The Dun & Bradstreet Corporation, effective November 1, 1996. Since November 1996, he has also served as Senior Vice President -- Finance, Dun & Bradstreet. From April 1993 until October 1996, he served as Senior Vice President -- Finance and Planning, Dun & Bradstreet, U.S. He had previously served as Senior Vice President -- Finance and Administration, Dun & Bradstreet Europe, Africa and Middle East, from September 1990 until March 1993. PART II ITEM 5. MARKET FOR THE REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER MATTERS Information in response to this Item is set forth under Dividends and Common Stock Information in "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Page 34 of the 1997 Annual Report, which information is incorporated herein by reference. ITEM 6. SELECTED FINANCIAL DATA Selected financial data required by this Item is incorporated herein by reference to the information relating to the years 1993 through 1997 set forth in the "Five-Year Selected Financial Data" on Page 56 of the 1997 Annual Report. ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS Information in response to this Item is set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 29 to 34 of the 1997 Annual Report, which information is incorporated herein by reference. ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK Information in response to this Item is set forth in "Management's Discussion and Analysis of Financial Condition and Results of Operations" on Pages 29 to 34 of the 1997 Annual Report and in Note 5 (Financial Instruments with Off-Balance Sheet Risks) on Page 44 of the 1997 Annual Report, which information is incorporated herein by reference. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA See Index to Financial Statements and Schedules on Page 14. ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND FINANCIAL DISCLOSURE Not applicable. PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT Information in response to this Item is incorporated herein by reference to the section entitled "Election of Directors" in the Company's Proxy Statement dated March 6, 1998 (as supplemented by the Company's additional proxy materials dated March 17, 1998) filed with the Securities and Exchange Commission, except that "Executive Officers of the Registrant" on Pages 10 and 11 of this report responds to Item 401(b) and (e) of Regulation S-K. 11 13 ITEM 11. EXECUTIVE COMPENSATION Information in response to this Item is incorporated herein by reference to the section entitled "Compensation of Executive Officers and Directors" in the Company's Proxy Statement dated March 6, 1998 (as supplemented by the Company's additional proxy materials dated March 17, 1998) filed with the Securities and Exchange Commission. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT Information in response to this Item is incorporated herein by reference to the section entitled "Security Ownership of Management and Others" in the Company's Proxy Statement dated March 6, 1998 (as supplemented by the Company's additional proxy materials dated March 17, 1998) filed with the Securities and Exchange Commission. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS Information in response to this Item is incorporated herein by reference to the section entitled "Security Ownership of Management and Others" in the Company's Proxy Statement dated March 6, 1998 (as supplemented by the Company's additional proxy materials dated March 17, 1998) filed with the Securities and Exchange Commission. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) List of documents filed as part of this report. (1) Financial Statements. See Index to Financial Statements and Schedules on Page 14. (2) Financial Statement Schedules. See Index to Financial Statements and Schedules on Page 14. (3) Exhibits. See Index to Exhibits on Pages 17 to 19. (b) Reports on Form 8-K. Filed December 19, 1997, Item 5. Other Events reported. (c) Exhibits. See Index to Exhibits on Pages 17 to 19. (d) Financial Statement Schedules. See Index to Financial Statements and Schedules on Page 14. 12 14 SIGNATURES Pursuant to the requirements of Section 13 or 15(d) of the Securities Exchange Act of 1934, the registrant has duly caused this report to be signed on its behalf by the undersigned, thereunto duly authorized. THE DUN & BRADSTREET CORPORATION (Registrant) By: /s/ VOLNEY TAYLOR -------------------------------------- (Volney Taylor, Chairman and Chief Executive Officer) Date: March 20, 1998 Pursuant to the requirements of the Securities Exchange Act of 1934, this report has been signed below by the following persons on behalf of the registrant and in the capacities and on the date indicated. /s/ VOLNEY TAYLOR /s/ ROBERT J. LANIGAN - - --------------------------------------------------- --------------------------------------------------- (Volney Taylor, (Robert J. Lanigan, Director) Chairman, Chief Executive Officer and Director) /s/ FRANK S. SOWINSKI /s/ VERNON R. LOUCKS JR. - - --------------------------------------------------- --------------------------------------------------- (Frank S. Sowinski, (Vernon R. Loucks Jr., Director) Senior Vice President and Chief Financial Officer) /s/ CHESTER J. GEVEDA, JR. /s/ HENRY A. MCKINNELL - - --------------------------------------------------- --------------------------------------------------- Chester J. Geveda, Jr. (Henry A. McKinnell, Director) Vice President -- Controller) /s/ HALL ADAMS, JR. /s/ JOHN R. MEYER - - --------------------------------------------------- --------------------------------------------------- (Hall Adams, Jr., Director) (John R. Meyer, Director) /s/ CLIFFORD L. ALEXANDER, JR. /s/ JAMES R. PETERSON - - --------------------------------------------------- --------------------------------------------------- (Clifford L. Alexander, Jr., Director) (James R. Peterson, Director) /s/ MARY JOHNSTON EVANS /s/ MICHAEL R. QUINLAN - - --------------------------------------------------- --------------------------------------------------- (Mary Johnston Evans, Director) (Michael R. Quinlan, Director) /s/ RONALD L. KUEHN, JR. - - --------------------------------------------------- (Ronald L. Kuehn, Jr., Director)
Date: March 20, 1998 13 15 INDEX TO FINANCIAL STATEMENTS AND SCHEDULES FINANCIAL STATEMENTS: The Company's consolidated financial statements, the notes thereto and the related report thereon of Coopers & Lybrand L.L.P., independent accountants, for the years ended December 31, 1997, 1996 and 1995, appearing on Pages 35 to 56 of the accompanying 1997 Annual Report, are incorporated by reference into this Annual Report on Form 10-K (see below). The additional financial data indicated below should be read in conjunction with such consolidated financial statements.
PAGE --------------------------- 1997 ANNUAL 10-K REPORT ------------ ----------- CONSOLIDATED FINANCIAL STATEMENTS Report of Independent Accountants........................... F-7 35 Statement of Management Responsibility for Financial Statements................................................ F-7 35 At December 31, 1997 and 1996: Consolidated Balance Sheets............................... F-9 37 For the years ended December 31, 1997, 1996 and 1995: Consolidated Statements of Operations..................... F-8 36 Consolidated Statements of Cash Flows..................... F-10 38 Consolidated Statements of Shareholders' Equity........... F-11 39 Notes to Consolidated Financial Statements................ F-12 to F-27 40 to 55 Management's Discussion and Analysis of Financial Condition and Results of Operations................................. F-1 to F-6 29 to 34 Other Financial Information: Five-Year Selected Financial Data......................... F-28 56 SCHEDULES: Report of Independent Accountants......................... 15 -- II -- Valuation and Qualifying Accounts for the years ended December 31, 1997, 1996 and 1995................. 16 --
Schedules other than the one listed above are omitted as not required or inapplicable or because the required information is provided in the consolidated financial statements, including the notes thereto. 14 16 REPORT OF INDEPENDENT ACCOUNTANTS To the Shareholders and the Board of Directors of The Dun & Bradstreet Corporation: Our report on the consolidated financial statements of The Dun & Bradstreet Corporation at December 31, 1997 and 1996, and for the years ended December 31, 1997, 1996 and 1995, which report includes an explanatory paragraph regarding the Company's change in certain revenue recognition accounting policies, has been incorporated by reference in this Form 10-K from page 35 of the 1997 Annual Report of The Dun & Bradstreet Corporation. In connection with our audits of such financial statements, we have also audited the related financial statement schedule listed in the index on page 14 of this Form 10-K. In our opinion, the financial statement schedule referred to above, when considered in relation to the basic financial statements taken as a whole, presents fairly, in all material respects, the information required to be included therein. /s/ COOPERS & LYBRAND L.L.P. New York, New York February 13, 1998 15 17 SCHEDULE II THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS FOR THE YEARS ENDED DECEMBER 31, 1997, 1996 AND 1995
- - -------------------------------------------------------------------------------------------------------- COL. A COL. B COL. C COL. D COL. E - - -------------------------------------------------------------------------------------------------------- ADDITIONS BALANCE CHARGED TO BALANCE BEGINNING COSTS AND AT END DESCRIPTION OF PERIOD EXPENSES DEDUCTIONS(A) OF PERIOD ----------- --------- ---------- ------------- ----------- (IN MILLIONS) ALLOWANCE FOR DOUBTFUL ACCOUNTS: For the Year Ended December 31, 1997......... $38.1 $27.5 $(22.2) $43.4 ===== ===== ====== ===== For the Year Ended December 31, 1996......... $35.7 $25.8 $(23.4) $38.1 ===== ===== ====== ===== For the Year Ended December 31, 1995......... $47.8 $35.2 $(47.3) $35.7 ===== ===== ====== =====
- - --------------- NOTE: (a) Represents primarily the write-off of uncollectible accounts for which a reserve was provided. 16 18 INDEX TO EXHIBITS
REGULATION S-K EXHIBIT NUMBER - - -------------- (3) Articles of Incorporation and By-laws. (a) Restated Certificate of Incorporation of The Dun & Bradstreet Corporation dated June 15, 1988 (incorporated herein by reference to Exhibit 4(a) to Registrant's Registration No. 33-25774 on Form S-8 filed November 25, 1988). (b) By-laws of Registrant dated December 15, 1993 (incorporated herein by reference to Exhibit E to Registrant's Annual Report on Form 10-K for the year ended December 31, 1993, file number 1-7155, filed March 25, 1994). (4) Instruments Defining the Rights of Security Holders, Including Indentures. (a) Credit Agreement, dated as of August 30, 1996, among The Dun & Bradstreet Corporation, The Borrowing Subsidiaries Party Hereto, The Lenders Party Hereto, The Chase Manhattan Bank, Citibank, N.A. and Morgan Guaranty Trust Company of New York, $1,000,000,000 Revolving Credit and Competitive Advance Facility (incorporated herein by reference to Exhibit 4(a) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, file number 1-7155, filed March 27, 1997). Another Instrument with respect to an issue of long term debt has not been filed as an exhibit to this Annual Report on Form 10-K, as the authorized principal amount of such issue does not exceed 10% of total assets of registrant and subsidiaries on a consolidated basis. The Dun & Bradstreet Corporation agrees to furnish a copy of such instrument to the Commission upon request. *(b) Notice dated April 10, 1997 of election by The Dun & Bradstreet Corporation to reduce commitments under $1,000,000,000 Revolving Credit and Competitive Advance Facility to $750,000,000. (10) Material Contracts. *+(a) Nonfunded Deferred Compensation Plan for Non-Employee Directors of Registrant, as amended July 16, 1997. *+(b) Pension Benefit Equalization Plan, as amended July 16, 1997. *+(c) Profit Participation Benefit Equalization Plan, as amended and restated effective July 16, 1997. *+(d) 1982 Key Employees Stock Option Plan for Registrant and Subsidiaries, as amended July 16, 1997. *+(e) 1991 Key Employees Stock Option Plan for Registrant and Subsidiaries, as amended July 16, 1997. +(f) Form of Limited Stock Appreciation Rights Agreement Relating to Incentive Stock Options (incorporated herein by reference to Exhibit 28(f) to Registrant's Registration No. 33-44551 on Form S-8, filed December 18, 1991). +(g) Form of Limited Stock Appreciation Rights Agreement Relating to Non-Qualified Stock Options (incorporated herein by reference to Exhibit 28(g) to Registrant's Registration No. 33-44551 on Form S-8, filed December 18, 1991). *+(h) Form of Limited Stock Appreciation Rights Agreement Relating to Stock Options, effective for grants made on and after November 15, 1996. *+(i) Key Employees Performance Unit Plan for Registrant and Subsidiaries, as amended December 17, 1997. +(j) Corporate Management Incentive Plan, as amended February 19, 1997 (incorporated herein by reference to Exhibit A to Registrant's Proxy Statement dated March 27, 1997, file number 1-7155).
17 19
REGULATION S-K EXHIBIT NUMBER - - -------------- *+(k) 1989 Key Employees Restricted Stock Plan for Registrant and Subsidiaries, as amended July 16, 1997. *+(l) Forms of Change-in-Control Severance Agreement, as amended July 16, 1997. *+(m) Supplemental Executive Benefit Plan, as amended July 16, 1997. *+(n) Restricted Stock Plan for Non-Employee Directors, as amended July 16, 1997. +(o) Executive Transition Plan, as amended February 19, 1997 (incorporated by reference to Exhibit 10(s) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, file number 1-7155, filed March 27, 1997). *+(p) 1996 The Dun & Bradstreet Corporation Non Employee Directors' Stock Incentive Plan, as amended December 17, 1997. *+(q) Special Corporate Management Incentive Plan, adopted December 17, 1997. (r) Amended and Restated Agreement of Limited Partnership of D&B Investors L.P., dated April 1, 1997 (incorporated by reference to Exhibit 10(u) to Registrant's Quarterly Report on Form 10-Q for the quarter ended June 30, 1997, file number 1-7155, filed August 14, 1997). *(s) Amendment No. 1, dated July 14, 1997, to the Amended and Restated Agreement of Limited Partnership of D&B Investors, L.P., dated April 1, 1997. (t) Agreement to Retire General Partner Interest dated October 21, 1996 by and between D&B Investors L.P. and IMS America, Ltd. (incorporated by reference to Exhibit 10(w) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, file number 1-7155, filed March 27, 1997). (u) Distribution Agreement dated as of October 28, 1996, among the Company, Cognizant Corporation and ACNielsen Corporation (incorporated by reference to Exhibit 10(x) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, file number 1-7155, filed March 27, 1997). (v) Tax Allocation Agreement dated as of October 28, 1996, among the Company, Cognizant Corporation and ACNielsen Corporation (incorporated by reference to Exhibit 10(y) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, file number 1-7155, filed March 27, 1997). (w) Employee Benefits Agreement dated as of October 28, 1996, among the Company, Cognizant Corporation and ACNielsen Corporation (incorporated by reference to Exhibit 10(z) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, file number 1-7155, filed March 27, 1997). (x) Indemnity and Joint Defense Agreement dated as of October 28, 1996, among the Company, Cognizant Corporation and ACNielsen Corporation (incorporated by reference to Exhibit 10(aa) to Registrant's Annual Report on Form 10-K for the year ended December 31, 1996, file number 1-7155, filed March 27, 1997).
18 20
REGULATION S-K EXHIBIT NUMBER - - -------------- *(13) Annual Report to Security Holders. 1997 Annual Report *(18) Letter Re Change in Accounting Principles. *(21) Subsidiaries of the Registrant. List of Active Subsidiaries as of January 31, 1998 *(23) Consents of Experts and Counsel. Consent of Coopers & Lybrand L.L.P. *(27) Financial Data Schedule.
- - --------------- * Filed herewith. + Represents a management contract or compensatory plan. 19 EX-4.B 2 NOTICE DATED APRIL 10, 1997 1 EXHIBIT 4(b) [DUN & BRADSTREET LOGO] Philip C. Danford 1 Diamond Hill Road, Murray Hill, NJ 07974 Vice President & Treasurer 908-665-5033 Fax 908-665-5032 by fax: 212-552-5700 April 10, 1997 Ms. Rana Khan Chase Manhattan Bank Agent Bank Services 1 Chase Manhattan Plaza. 8th Floor New York, New York 10081 Dear Rana, Please use this letter as notification of The Dun & Bradstreet Corporation election to reduce the outstanding commitments under Section 2.08 (c) of our $1,000,000,000 Credit Agreement dated August 30, 1996 and Section 2.08 (c) of our $200,000,000 Credit Agreement dated August 30, 1996. Specifically, we wish to reduce the commitments as follows:
Commitments Amount Commitments Before Reduction of Reduction After Reduction -------------- ------------ ------------ $1,000,000,000 $250,000,000 $750,000,000 200,000,000 50,000,000 150,000,000 -------------- ------------ ------------ Total $1,200,000,000 $300,000,000 $900,000,000
Under Section 2.08 (c) of the Credit Agreements, we are required to give at least three days notice. We request that the reduction be effective April 16, 1997. Please confirm your acceptance by return facsimile. Sincerely, /s/ Philip C. Danford cc: M. Benveniste H. Buckland L. Brown F. Colarusso EX-10.A 3 NONFUNDED DEFERRED COMPENSATION PLAN 1 EXHIBIT 10(a) THE DUN & BRADSTREET CORPORATION NONFUNDED DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS (AS AMENDED EFFECTIVE JULY 16, 1997) ------------------------------------------------------------------ 1. Directors who are not employees of The Dun & Bradstreet Corporation (the "Company") or any of its subsidiaries may elect on or before December 31 of any year to have payment of all or a specified part of all fees payable to them for their services as Directors (including fees payable to them for services as members of a committee of the Board) during the calendar year following such election and succeeding calendar years deferred until they cease to be Directors of the Company. Any person, not an employee, who shall become a Director during any calendar year, and who was not a Director of the Company on the preceding December 31, may elect, before the term as a Director begins, to have payment of all or a specified part of such fees for the remainder of such calendar year and for succeeding calendar years so deferred. Any such election shall be made by written notice delivered to the Secretary of the Company. 2. All deferred fees shall be held in the general funds of the Company, shall be credited to the Director's account and shall be deemed to have been invested in one or more of the funds (as set forth on the Deferred Compensation Election Form attached hereto as Exhibit A) in the Addendum to the Company's Profit Participation Plan as such Director shall have most recently elected. Such election shall be made on a Deferred Compensation Election Form filed with the Secretary of the Company. The Director's account shall be credited on a monthly basis with the investment 2 -2- performance of the respective funds in which the account is invested. Directors may elect to have deferred amounts held and invested in one or more of the funds in multiples of 10%, except that no Director may elect to have more than 50% of his or her account invested in the Dun & Bradstreet Common Stock Fund. Subject to the foregoing investment limitation in the Dun & Bradstreet Common Stock Fund and to the limitation on multiples of 10%, each Director may, at any time, make a revised investment election applicable to amounts deferred, or elect to have the amount credited to his or her account reallocated among the investment funds, such revised election or reallocation to be effective from and after the first day of the month following receipt of a Deferred Compensation Election Form by the Secretary of the Company. In the event a Director fails to make an investment election, his or her entire account shall be credited to the Special Fixed Income Fund. 3. The aggregate balance in the Director's account, giving effect to the investment performance of the fund(s) to which deferred fees were credited, shall be paid to the Director in five or ten annual installments or in a lump sum, as the Director shall elect in the notice referred to in Paragraph 1 above. The first installment (or lump sum payment if the Director so elects) shall be paid on the tenth day of the calendar year immediately following the calendar year in which the Director ceases to be a Director of the Company, and subsequent installments shall be made on the tenth day of each succeeding calendar year until the entire amount credited to the Director's account shall have been paid. The amount of each installment shall be determined by multiplying the 3 -3- balance credited to the Director's account as of the December 31 immediately preceding the installment payment date by a fraction, the numerator of which shall be one and the denominator of which shall be the number of installment payments over which payment of such amount is to be made, less the number of installments theretofore made. Thus, if payment is to be made in ten installments, the fraction for the first installment shall be 1/10th, for the second installment 1/9th, and so on. 4. If a Director should die before full payment of all amounts credited to the Director's account, the full amount credited to the account as of December 31 of the year of the Director's death shall be paid on the tenth day of the calendar year following the year of death to the Director's estate or to such beneficiary or beneficiaries as previously designated by the Director in a written notice delivered to the Secretary of the Company. 5. A Director's election to defer compensation shall continue until a Director ceases to be a Director or until the Director changes or terminates such election by written notice delivered to the Secretary of the Company. Any such notice of change or termination shall become effective as of the end of the calendar year in which such notice is given. Amounts credited to the account of a Director prior to the effective date of such change or termination shall not be affected thereby and shall be paid to the Director only in accordance with paragraph 3 (or Paragraph 4 in the event of death) above. 4 -4- 6. The right of a Director to any deferred fees and/or the interest thereon shall not be subject to assignment by the Director. If a Director does make an assignment of any deferred fees and/or the interest thereon, the Company may disregard such assignment and discharge its obligation hereunder by making payment as though no such assignment has been made. 7. If there is a "Change in Control" of the Company, as defined in Paragraph 8: a) The total amount to the credit of each Director's account under the Plan shall be paid to the Director in a lump sum within 30 days from the date of such Change in Control; provided, however, if such payment is not made within such 30-day period, the amount to the credit of the Director's account shall be credited with interest from the date of such Change in Control until the actual payment date at an annual rate equal to the yield on 90-day U.S. Treasury Bills plus one percentage point. For this purpose the yield on U.S. Treasury Bills shall be the rate published in The Wall Street Journal on the first business day of the calendar month in which the Change in Control occurred. b) The total amount credited to each Director's account under the Plan from the date of the Change in Control until the date the Director ceases to be a Director shall be paid to the Director in a lump sum within 30 days from the date the Director ceases to be a Director. c) If a Director elects to change or terminate an election with respect to the deferral of fees by written notice delivered to the Secretary of the Company, and such notice is given during the calendar year in which a Change in Control occurs and on or before the date of the Change in Control, the change or termination of election shall become effective as of the date of the Change in Control. If such notice is given subsequent to the date of the Change in Control, it shall become effective as of the end of the calendar year in which the notice is given. 8. A "Change in Control" of the Company shall mean the occurrence of any of the following events: a) any "Person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than the Company, any trustee or other fiduciary holding securities under an employee 5 -5- benefit plan of the Company, or any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "Beneficial Owner" (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; b) during any period of twenty-four months (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new Director (other than (1) a Director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section, (2) a Director designated 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 (3) a Director designated 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 shareholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; c) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and (2) after which no Person holds 20% or more of the combined voting power of the then outstanding securities of the Company or such surviving entity; or d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 9. Notwithstanding any provision herein to the contrary, amounts payable under this Plan shall not be funded and shall be made out of the general funds of the Company; provided, however, that the Company reserves the right to establish one or more trusts 6 -6- to provide alternate sources of benefit payments under this Plan; provided, further, however, that upon the occurrence of a "Potential Change in Control" of the Company, as defined below, the appropriate officers of the Company are authorized to make transfers to such a trust fund, established as an alternate source of benefits payable under the Plan, as are necessary to fund the lump sum payments to Directors required pursuant to Paragraph 7 of this Plan in the event of a Change in Control of the Company; provided, further, however, that if payments are made from such trust fund, such payments will satisfy the Company's obligations under this Plan to the extent made from such trust fund. For the purposes of this Plan, "Potential Change in Control" means: a) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Company; b) any person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Company; c) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Company (or a company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), who is or becomes the beneficial owner, directly or indirectly, of securities of the Company representing 9.5% or more of the combined voting power of the Company's then outstanding securities, increases such person's beneficial ownership of such securities by 5% or more over the percentage so owned by such person; or d) the Board of Directors of the Company adopts a resolution to the effect that, for purposes of this Plan, a Potential Change in Control of the Company has occurred. 10. The Executive Compensation and Stock Option Committee of the Board (the "Committee") shall be responsible for the administration of the Plan and may delegate 7 -7- to any management committee, employee, Director or agent its responsibility to perform any act hereunder, including without limitation those matters involving the exercise of discretion, provided that such delegation shall be subject to revocation at any time at its discretion. The Committee shall have full authority to interpret the provisions of the Plan and construe all of its terms, to adopt, amend and rescind rules and regulations for the administration of the Plan, and generally to conduct and administer the Plan and to make all determinations in connection with the Plan as may be necessary or advisable, other than those determinations delegated to management employees or independent third parties by the Board. All of its rules, interpretations and decisions shall be applied in a uniform manner to all Directors similarly situated and decisions of the Committee shall be conclusive and binding on all persons. 11. The Plan may be modified, amended or revoked at any time by the Board of Directors of the Company. Adopted by Executive Committee: December 23, 1975 Amended by Board of Directors effective: January 1, 1977 January 1, 1982 September 20, 1989 December 19, 1990 April 21, 1993 November 20, 1996 July 16, 1997 8 EXHIBIT A THE DUN & BRADSTREET CORPORATION NONFUNDED DEFERRED COMPENSATION PLAN FOR NON-EMPLOYEE DIRECTORS DEFERRED COMPENSATION ELECTION FORM The completed form should be forwarded to: The Office of the Corporate Secretary, attention William H. Buchanan, Jr., One Diamond Hill Road, Murray Hill, NJ 07974. INVESTMENT ELECTION I wish to have the investment experience for the following Funds used as the basis for the interest rate to be credited on my deferred account balance. Investments must be made in 10% increments: % S&P 500 Index Fund ---------- % Mid- and Small-Capitalization Equity Index Fund ---------- % International Equity Index Fund ---------- % Dun & Bradstreet Common Stock Fund (% in fund cannot ---------- exceed 50%) % Special Fixed Income Fund ---------- % Balanced Index Fund ---------- 100 % ==========
Signature: Date: ------------------------------------- ------------------ EX-10.B 4 PENSION BENEFIT EQUALIZATION PLAN 1 EXHIBIT 10(b) PENSION BENEFIT EQUALIZATION PLAN OF THE DUN & BRADSTREET CORPORATION (As Amended Effective July 16, 1997) I. Purpose of the Plan The purpose of the Pension Benefit Equalization Plan of The Dun & Bradstreet Corporation (the "Plan") is to provide a means of equalizing the benefits of those employees participating in the Master Retirement Plan of The Dun & Bradstreet Corporation (the "Retirement Plan") whose funded benefits under the Retirement Plan are or will be limited by the application of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as amended (the "Code") or any applicable law or regulation. The Plan is intended to be an "excess benefit plan" as that term is defined in Section 3(36) of ERISA with respect to those participants whose benefits under the Retirement Plan have been limited by Section 415 of the Code, and a "top hat" plan meeting the requirements of Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA with respect to those participants whose benefits under the Retirement Plan have been limited by Section 401(a)(17) of the Code. II. Administration of the Plan The Executive Compensation and Stock Option Committee (the "Committee") of the Board of Directors (the "Board") of The Dun & Bradstreet Corporation (the "Corporation") shall administer the Plan and may delegate to any management committee, employee, director or agent its responsibility to perform any act hereunder, including without limitation those matters involving the exercise of discretion, provided that such delegation shall be subject to revocation at any time at its discretion. The Committee shall have full authority to determine all questions arising in connection with the Plan, other than those determinations delegated to management employees or independent third parties by the Board of Directors, including interpreting its provisions and construing all of its terms; may adopt procedural rules; and may employ and rely on such legal counsel, such actuaries, such accountants and such agents as it may deem advisable to assist in the administration of the Plan. All of its rules, interpretations and decisions shall be applied in a uniform manner to all participants similarly situated and decisions of the Committee shall be conclusive and binding on all persons. III. Participation in the Plan All members of the Retirement Plan shall be eligible to participate in this Plan whenever their benefits under the Retirement Plan as from time to time in effect would exceed the limitations on benefits and contributions imposed by Sections 401, 415 or any other applicable Section of the Code, calculated from and after September 2, 1974. For purposes of this Plan, benefits of a participant in this Plan shall be determined as though no provision were 2 contained in the Retirement Plan incorporating limitations imposed by Sections 401, 415 or any other Section of the Code. IV. Benefit Limitations For purposes of this Plan and the Retirement Plan, the limitations imposed by Section 415 of the Code shall be deemed to be met when the sum of the participant's defined benefit plan fraction and his defined contribution plan fraction equals 1.0, as such fractions are computed for purposes of Section 415 of the Code and Section 19.4 of the Retirement Plan. V. Equalized Benefits The Corporation shall pay to each eligible member of the Retirement Plan and his beneficiaries a supplemental pension benefit equal to the benefit which would have been payable to them under the Retirement Plan, as if no provision were set forth therein incorporating limitations imposed by Sections 401, 415 or any other applicable Section of the Code, to the extent that such benefit otherwise payable under the Retirement Plan exceeds the benefit limitations related to the Retirement Plan as described in Section III of this Plan. Subject to Section XII of this Plan, such supplemental pension benefits shall be payable in accordance with all of the terms and conditions applicable to the participant's benefits under the Retirement Plan including whatever optional benefits he may have elected; provided, however, if an Election (as defined in Section IX of this Plan) or a Special Election (as defined in Section X of this Plan) has been made and becomes effective prior to the date when benefits under this Plan would otherwise be payable, the form of payment of benefits under this Plan shall be in the form so elected pursuant to such Election or Special Election; provided further that notwithstanding any Election or Special Election, if the lump sum value, determined in the same manner as provided under Section IX below, of the benefits payable under this Plan is $10,000 or less at the time such benefits are payable under this Plan, such benefits shall be payable as a lump sum. Any portion of the benefits payable under this Plan as a lump sum, including any amounts payable as a lump sum under Section VI, shall be paid 60 days after the date when payments of the same benefits under this Plan, if payable in the form of an annuity, would otherwise commence, or as soon as practicable thereafter, provided the Committee has approved such payment. Any such lump sum distribution of a participant's or beneficiary's benefits under this Plan shall fully satisfy all present and future Plan liability with respect to such participant or beneficiary for such portion or all of such benefits so distributed. Any portion of the benefits payable under this Plan as an annuity shall commence on the date when annuity benefits under this Plan would otherwise commence, without regard to any Election or Special Election. 3 VI. Payments of Benefits in the Event of Death In case of the death of the participant, the amount in his account shall, where applicable and subject to Section XII of this Plan, be distributed to the surviving beneficiary who has been designated to receive benefits under the Retirement Plan and in the manner which has been elected under the Retirement Plan; provided, however, if an Election (as defined in Section IX of this Plan) or a Special Election (as defined in Section X of this Plan) has been made and becomes effective prior to the date when benefits under this Plan would otherwise be payable, the form of payment of benefits payable to such surviving beneficiary under this Plan shall be in the form so elected pursuant to such Election or Special Election; provided further that notwithstanding any Election or Special Election, if the lump sum value, determined in the same manner as provided under Section IX below, of the benefits payable under this Plan is $10,000 or less at the time such benefits are payable to such surviving beneficiary under this Plan, such benefits shall be payable as a lump sum. If the participant has not designated a beneficiary under the Retirement Plan, or if no such beneficiary is living at the time of the participant's death, the amount, if any, in the participant's account that is distributable upon his death shall be distributed to the person or persons who would otherwise be entitled to receive a distribution of the participant's Retirement Plan benefits. Payment to such person or persons shall completely discharge the Plan with respect to the amount so paid. VII. Change in Control Upon the occurrence of a "Change in Control" of the Corporation, as such term is defined below, (i) each participant and beneficiary already receiving benefits and/or survivor's benefits under the Plan shall receive a lump sum distribution of their unpaid benefits and/or survivor's benefits under the Plan in an amount equal to the present value of such benefits and/or survivor's benefits in full satisfaction of all present and future Plan liability with respect to such participant or beneficiary, and (ii) each vested participant who is not already receiving benefits under the Plan shall receive (A) a lump sum distribution of the present value of his accrued benefit under the Plan as of the date of such Change in Control, within 30 days of the date of such Change in Control and (B) a lump sum distribution of the present value of his additional benefit, if any, accrued under the Plan from the date of the Change in Control until the date he retires or terminates employment with the Corporation, within 30 days from the date of the participant's retirement or termination of employment with the Corporation. In determining the amount of the lump sum distributions to be paid under this Section VII, the following actuarial assumptions shall be used: (i) the interest rate used shall be the interest rate used by the Pension Benefit Guaranty Corporation for determining the value of immediate annuities as of January 1st of either the year of the occurrence of the Change in Control or the participant's retirement or termination of employment, whichever is applicable, (ii) the 1983 Group Annuity Mortality Table shall be used; and (iii) it shall be assumed that all participants retired or terminated employment with the Corporation on the date of the occurrence of the Change in Control for purposes of determining the amount of the lump sum distribution to be paid upon the occurrence of the Change in Control. For purposes of this Plan, a "Change in Control" shall be deemed to have occurred if 4 (a) any "Person," as such term is used in Section 13 (d) and 14 (d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any corporation owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; (b) during any period of twenty-four months (not including any period prior to the effective date of this provision), individuals who at the beginning of such period constitute the Board, and any new director (other than (1) a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clause (a), (c) or (d) of this Section) (2) a director designated by any Person (including the Corporation) 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 (3) a director designated by any Person who is the Beneficial Owner, directly or indirectly, of securities of the Corporation representing 10% or more of the combined voting power of the Corporation's securities) whose election by the Board or nomination for election by the Corporation's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (c) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation and (2) after which no Person holds 20% or more of the combined voting power of the then outstanding securities of the Corporation or such surviving entity; or (d) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets. 5 VIII. Funding Benefits payable under this Plan shall not be funded and shall be made out of the general funds of the Corporation; provided, however, that the Corporation reserves the right to establish one or more trusts to provide alternate sources of benefit payments under this Plan, provided, further, however, that upon the occurrence of a "Potential Change in Control" of the Corporation, as defined below, the appropriate officers of the Corporation are authorized to make contributions to such a trust fund, established as an alternate source of benefits payable under the Plan, as are necessary to fund the lump sum payments to Plan participants required pursuant to Section VII of this Plan in the event of a Change in Control of the Corporation; provided, further, however, that if payments are made from such trust fund, such payments will satisfy the Corporation's obligations under this Plan to the extent made from such trust fund. In determining the amount of the necessary contribution to the trust fund in the event of a Potential Change in Control, the following actuarial assumptions shall be used: (i) the interest rate used shall be the interest rate used by the Pension Benefit Guaranty Corporation for determining the value of immediate annuities as of January 1st of the year of the occurrence of the Potential Change in Control, (ii) the 1983 Group Annuity Mortality Table shall be used; and (iii) it shall be assumed that all participants will retire or terminate employment with the Corporation as soon as practicable after the occurrence of the Potential Change in Control. For the purposes of this Plan, "Potential Change in Control" means: (a) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Corporation; (b) any person (including the Corporation) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Corporation; (c) any person, other than a trustee or other fiduciary holding securities under an employee benefit plan of the Corporation (or a Corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), who is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 9.5% or more of the combined voting power of the Corporation's then outstanding securities, increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person; or (d) The Board of Directors of the Corporation adopts a resolution to the effect that, for purposes of this Plan, a Potential Change in Control of the Corporation has occurred. 6 IX. Election of Form of Payment A participant under this Plan may make an election, on a form supplied by the Committee, to receive all, none, or a specified portion of his benefits under this Plan in a lump sum and to receive any balance of such benefits in the form of an annuity (an "Election"); provided that any such Election shall be effective for purposes of this Plan only if (i) such participant remains in the employment of the Corporation or an Affiliate (as defined under Section XII below), as the case may be, for the full twelve calendar months immediately following the Election Date of such Election, except in the case of such participant's death or disability as provided below and (ii) such participant complies with the administrative procedures set forth by the Committee with respect to the making of the Election. A participant making such Election shall be subject to the provisions of Section XII of this Plan. A participant may elect a payment form different than the payment form previously elected by him under this Section IX by filing a revised election form; provided that any such new Election shall be effective only if the conditions in clauses (i) and (ii) of the immediately preceding paragraph are satisfied with respect to such new Election. Any prior Election made by a participant that has satisfied such conditions remains effective for purposes of this Plan until such participant has made a new Election that satisfies such conditions. A participant making an election under this Section IX may specify the portion of his benefits under this Plan to be received in a lump sum as follows: 0 percent, 25 percent, 50 percent, 75 percent or 100 percent. In the event a participant who has made an Election dies or becomes "totally disabled" as defined in The Dun & Bradstreet Corporation Long Term Disability Plan while employed by the Corporation or an Affiliate and such death or total disability occurs during the twelve-calendar-month period immediately following the Election Date of such Election, the condition that such participant remain employed with the Corporation or an Affiliate (as defined in Section XII) for such twelve-month-period shall be deemed to be satisfied and such Election shall be effective with respect to benefits payable to such participant or participant's beneficiaries under this Plan. The amount of any portion of the benefits payable as a lump sum under this Section IX will equal the present value of such portion of such benefits, and the present value shall be determined (i) based on a discount rate equal to the average of 85% of the 15-year non-callable U.S. Treasury bond yields as of the close of business on the last business day of each of the three months immediately preceding the date the annuity value is determined and (ii) using the 1983 Group Annuity Mortality Table. "Election Date" for purposes of this Plan means the date that a properly completed election form with respect to an Election or Special Election (as defined in Section X below) is received by the Corporate Assistant Treasurer of the Corporation. X. Special Election of Form of Payment Any participant under this Plan (except for the Chairman of the Board of Directors of the Corporation on December 21, 1994) who as of December 31, 1994 (i) is age 54 7 or older and (ii) has at least 4 years of Credited Service (as defined in the Corporation's Supplemental Executive Benefit Plan) may make an election, on a form supplied by the Committee, to receive all, none, or a specified portion, in the same percentages as described in Section IX above, of his benefits under this Plan in a lump sum and to receive any balance of such benefits in the form of an annuity (a "Special Election"); provided that any such Special Election shall be effective for purposes of this Plan only if such participant remains in employment with the Corporation or an Affiliate (as defined in Section XII below), as the case may be, for the one calendar month immediately following the Election Date, except in the case of death or disability as provided below and complies with the administrative procedures set forth by the Committee with respect to the making of the Special Election; and provided further that the Election Date with respect to any such Special Election may not be later than January 31, 1995. A participant making such Special Election shall be subject to the provisions of Section XII of this Plan. In the event a participant who has made a Special Election dies or becomes "totally disabled" as defined in The Dun & Bradstreet Corporation Long Term Disability Plan while employed by the Corporation or an Affiliate (as defined in Section XII below) and such death or total disability occurs during the one-calendar-month-period immediately following the Election Date of such Special Election, the participant shall for purposes of this Section X be deemed to have been employed with the Corporation or an Affiliate (as defined in Section XII below), as the case may be, for such one calendar-month period, and such Special Election shall be effective with respect to benefits payable to such participant or participant's beneficiaries under this Plan. The amount of any portion of the benefits payable as a lump sum under this Section X will equal the present value of such portion of such benefits, and the present value shall be determined (i) based on a discount rate equal to the average of 85% of the 15-year non-callable U.S. Treasury bond yields as of the close of business on the last business day of each of the three months immediately preceding the date the annuity value is determined and (ii) using the 1983 Group Annuity Mortality Table. XI. Indemnification Subject to certain conditions as provided below, the Corporation shall indemnify each participant or beneficiary who receives any benefits under this Plan in the form of an annuity for any interest and penalties that may be assessed by the U.S. Internal Revenue Service (the "Service") with respect to U.S. Federal income tax on such benefits (payable under the Plan in the form of an annuity) upon final settlement or judgment with respect to any such assessment in favor of the Service, provided the basis for the assessment is that the amendment of this Plan to provide for the Election or the Special Election causes the participant or the beneficiary, as the case may be, to be treated as being in constructive receipt of such benefits prior to the time when such benefits are actually payable under the Plan. In case any such assessment shall be made against a participant or beneficiary, such participant or beneficiary, as the case may be (the "indemnified party"), shall promptly notify the Corporation's Treasurer in writing and the Corporation, upon request of such indemnified party, shall select and retain an accountant or legal counsel reasonably satisfactory to the indemnified party to represent the indemnified party in connection with such assessment 8 and shall pay the fees and expenses of such accountant or legal counsel related to such representation, and the Corporation shall have the right to determine how and when such assessment by the Service should be settled, litigated or appealed. In connection with any such assessment, any indemnified party shall have the right to retain his own accountant or legal counsel, but the fees and expenses of such accountant or legal counsel shall be at the expense of such indemnified party unless the Corporation and the indemnified party shall have mutually agreed to the retention of such accountant or legal counsel. The Corporation shall not be liable to a participant or beneficiary for any payments under this Section XI with respect to any assessment described in the second preceding paragraph if such participant or beneficiary against whom such assessment is made has not notified or allowed the Corporation to participate with respect to such assessment in the manner described above or, following demand by the Corporation, has not made the deposit to avoid additional interest or penalties as described below, or has agreed to, or otherwise settled with the Service with respect to, such assessment without the Corporation's written consent, provided, however, (i) if such assessment is settled with such consent or if there is a final judgment for the Service, (ii) the Corporation has been notified and allowed to participate in the manner as provided above and (iii) such participant or beneficiary has made any required deposit to avoid additional interest or penalties as described below, the Corporation agrees to indemnify the indemnified party to the extent set forth in this Section XI. In the event a final settlement or judgment with respect to an assessment as described under this Section XI has been made against a participant or beneficiary, such participant or beneficiary may elect to receive a portion or all of his benefits that is otherwise payable as an annuity under the Plan in the form of a lump sum in accordance with procedures as the Committee may set forth, and such lump sum distribution will be made as soon as practicable after any such election. At the time such assessment is made against such participant or beneficiary (the "assessed party") and prior to any final settlement or judgement with respect to such assessment, if so directed by the Corporation, such assessed party shall, as a condition to receiving an indemnity under this Section XI, as soon as practicable after notification of such assessment make a deposit with the Service to avoid any additional interest or penalties with respect to such assessment and, upon the request of such assessed party, the Corporation shall lend, or arrange for the lending to, such assessed party a portion of his remaining benefit under the Plan, not to exceed the lump sum value of such benefit under the Plan, determined using the actuarial assumptions set forth in Section IX, solely for purposes of providing the assessed party with funds to make a deposit with the Service to avoid any additional interest or penalties with respect to such assessment. XII. Limitations on Payment of Benefits If a participant under this Plan has at any time made an Election or a Special Election to have all or a portion of the benefits under this Plan distributed in a lump sum, such participant shall be subject to this Section XII. 9 Notwithstanding any other provision of this Plan to the contrary, no benefits or no further benefits, as the case may be, shall be paid to a participant who is subject to this Section XII if the Committee reasonably determines that such participant has: (i) To the detriment of the Corporation or any Affiliate, directly or indirectly acquired, without the prior written consent of the Committee, an interest in any other company, firm, association, or organization (other than an investment interest of less than 1% in a publicly-owned company or organization), the business of which is in direct competition with the business (present or future) of the Corporation or any of its Affiliates; (ii) To the detriment of the Corporation or any Affiliate, directly or indirectly competed with the Corporation or any Affiliate as an owner, employee, partner, director or contractor of a business, in a field of business activity in which the participant has been primarily engaged on behalf of the Corporation or any Affiliate or in which he has considerable knowledge as a result of his employment by the Corporation or any Affiliate, either for his own benefit or with any person other than the Corporation or any Affiliate, without the prior written consent of the Committee; or (iii) Been discharged from employment with the Corporation or any Affiliate for "Cause." An "Affiliate" for purposes of this Plan means any corporation, partnership, division or other organization controlling, controlled by or under common control with the Corporation or any joint venture entered into by the Corporation. "Cause" for purposes of this Section XII shall include the occurrence of any of the following events or such other dishonest or disloyal act or omission as the Committee determines to be "cause": (b) The participant has misappropriated any funds or property of the Corporation or any Affiliate; (c) The participant has, without the prior knowledge or written consent of the Committee, obtained personal profit as a result of any transaction by a third party with the Corporation or any Affiliate; or (d) The participant has sold or otherwise imparted to any person, firm, or corporation the names of the customers of the Corporation or any Affiliate or any confidential records, data, formulae, specifications and other trade secrets or other information of value to the Corporation or any Affiliate derived by his or her association with the Corporation or any Affiliate. In any case described in this Section XII, the participant shall be given prior written notice that no benefits or no further benefits, as the case may be, will be paid to such participant. Such written notice shall specify the particular act(s), or failures to act, on the basis of which the decision to terminate his benefits has been made. 10 Notwithstanding any other provision of this Plan to the contrary, a participant who receives in a lump sum any portion of his benefits under this Plan pursuant to an Election or Special Election shall receive such lump sum portion of his benefits subject to the condition that if such participant engages in any of the acts described in clause (i) or (ii) of this Section XII, then such participant shall within 60 days after written notice by the Corporation repay to the Corporation the amount described in the immediately following sentence. The amount to be repaid shall equal the amount, as determined by the Committee, of the participant's lump sum benefit paid under this Plan to which such participant would not have been entitled, if such lump sum benefit had instead been payable in the form of an annuity under this Plan and such annuity payments were subject to the provisions of this Section XII. XIII. Miscellaneous This Plan may be terminated at any time by the Board of Directors of the Corporation, in which event the rights of participants to their accrued benefits shall become nonforfeitable. This Plan may also be amended at any time by the Board of Directors of the Corporation, except that no such amendment shall deprive any participant of his benefits accrued at the time of such amendment. No right to payment or any other interest under this Plan may be alienated, sold, transferred, pledged, assigned, or made subject to attachment, execution, or levy of any kind. Nothing in this Plan shall be construed as giving any employee the right to be retained in the employ of the Corporation. The Corporation expressly reserves the right to dismiss any employee at any time without regard to the effect which such dismissal might have upon him under the Plan. This Plan shall be construed, administered and enforced according to the laws of the State of New York. XIV. Effective Date This Plan shall be effective as of October 17, 1990, upon its adoption by the Board of Directors of The Dun & Bradstreet Corporation. EX-10.C 5 PROFIT PARTICIPATION BENEFIT EQUALIZATION PLAN 1 EXHIBIT 10(c) PROFIT PARTICIPATION BENEFIT EQUALIZATION PLAN OF THE DUN & BRADSTREET CORPORATION As Amended and Restated Effective July 16, 1997 I. Purpose of the Plan The purpose of the Profit Participation Benefit Equalization Plan of The Dun & Bradstreet Corporation (the "Plan") is to provide a means of equalizing the benefits of those employees participating in the Profit Participation Plan for Employees of the Dun & Bradstreet Corporation (the "Profit Participation Plan") whose funded benefits under the Profit Participation Plan are or will be limited by the application of the Employee Retirement Income Security Act of 1974, as amended ("ERISA"), the Internal Revenue Code of 1986, as amended (the "Code") or any applicable law or regulation. The Plan is intended to be an "excess benefit plan" as that term is defined in Section 3(36) of ERISA with respect to those participants whose benefits under the Profit Participation Plan have been limited by Section 415 of the Code, and a "top hat" plan meeting the requirements of Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA with respect to those participants whose benefits under the Profit Participation Plan have been limited by Section 401(a)(17) of the Code. II. Administration of the Plan The Executive Compensation and Stock Option Committee of the Board of Directors (the "Committee") of The Dun & Bradstreet Corporation (the "Corporation") shall administer the Plan and may delegate to any management committee, employee, director or agent its responsibility to perform any act hereunder, including without limitation those matters involving the exercise of discretion, provided that such delegation shall be subject to revocation at any time at its discretion. The Committee shall have full authority to determine all questions arising in connection with the Plan, other than those determinations delegated to management employees or independent third parties by the Board of Directors, including interpreting its provisions and construing all of its terms; may adopt procedural rules; and may employ and rely on such legal counsel, such actuaries, such accountants and such agents as it may deem advisable to assist in the administration of the Plan. All of its rules, interpretations and decisions shall be applied in a uniform manner to all participants similarly situated and decisions of the Committee shall be conclusive and binding on all persons. 2 2 III. Participation in the Plan All members of the Profit Participation Plan shall be eligible to participate in this Plan whenever their benefits under the Profit Participation Plan as from time to time in effect would exceed the limitations on benefits and contributions imposed by Sections 401, 415 or any other applicable Section of the Code, calculated from and after September 2, 1974. For purposes of this Plan, benefits of a participant in this Plan shall be determined as though no provision were contained in the Profit Participation Plan incorporating limitations imposed by Sections 401, 415 or any other Section of the Code. IV. Benefit Limitations For purposes of this Plan and the Profit Participation Plan, the limitations imposed by Section 415 of the Code shall be deemed to be met when the sum of the participant's defined benefit plan fraction and his defined contribution plan fraction equals 1.0, as such fractions are computed for purposes of Section 415 of the Code and Section 14.4 of the Profit Participation Plan. V. Equalized Benefits If member participating contributions or Company contributions to the Profit Participation Plan are suspended during any calendar year because any such contributions would cause the participant's account under such plan to exceed the benefit limitations related to such plan as described in Section III of this Plan, the Corporation shall pay the participant, on or about March 1st of the following year, an amount equal to: (1) the Company contributions that otherwise would have been credited to such participant's account under the Profit Participation Plan for the balance of the year in which such suspension occurs, as if no provision were set forth therein incorporating limitations imposed by Section 401, 415 or any other applicable Section of the Code, and the participant had continued his participating contributions to the Profit Participation Plan at the rate in effect at the time such contributions were suspended for the balance of the year in which such suspension occurs, plus (2) an interest factor equal to one-half of the annual return which would have been received by the participant had such payment been invested eighty percent (80%) in the Special Fixed Income Fund (Fund C) of the Profit Participation Plan and twenty percent (20%) in the Wells Fargo Equity Index Fund (Fund A) of the Profit Participation Plan during the year in which such suspension occurs, less (3) any applicable withholding taxes. 3 3 VI. Change in Control Upon the occurrence of a "Change in Control", each participant under the Plan shall receive a lump sum distribution equal to: (1) the total amount which such participant had accrued under the Plan which has not yet been distributed to such participant pursuant to Section V(1) hereof as of the date of such Change in Control, plus (2) an interest factor equal to one-half of the return which would have been received by the participant had such amount been invested eighty percent (80%) in the Special Fixed Income Fund (Fund C) of the Profit Participation Plan and twenty (20%) in the Wells Fargo Equity Index Fund (Fund A) of the Profit Participation Plan during the portion of the calendar year subsequent to the date contributions to such participant's account were suspended under the Profit Participation Plan and prior to such Change in Control, less (3) any applicable withholding taxes. Any such lump sum distribution shall be paid to the participant within sixty days of the Change in Control provided, however, that any such payment will not prevent the further accrual of benefits under the Plan after the date of such Change in Control For purposes of this Plan, a "Change in Control" shall be deemed to have occurred if (a) any "Person," as such term is used in Section 13 (d) and 14 (d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any corporation owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; (b) during any period of twenty-four months (not including any period prior to the effective date of this provision), individuals who at the beginning of such period constitute the Board, and any new director (other than (1) a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clause (a), (c) or (d) of this Section, (2) a director designated by any Person (including the Corporation) 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 4 4 would constitute a Change in Control or (3) a director designated by any Person who is the Beneficial Owner, directly or indirectly, of securities of the Corporation representing 10% or more of the combined voting power of the Corporation's securities) whose election by the Board or nomination for election by the Corporation's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (c) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation and (2) after which no Person holds 20% or more of the combined voting power of the then outstanding securities of the Corporation or such surviving entity; or (d) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets. VII. Miscellaneous This Plan may be terminated at any time by the Board of Directors of the Corporation, in which event the rights of participants to their accrued benefits shall become nonforfeitable. This Plan may also be amended at any time by the Board of Directors of the Corporation, except that no such amendment shall deprive any participant of his benefits accrued at the time of such amendment. Benefits payable under this Plan shall not be funded and shall be made out of the general funds of the Corporation; provided, however, that the Corporation reserves the right to establish a trust fund as an alternate source of benefits payable under the Plan and to the extent payments are made from such trust, such payments will satisfy the Corporation's obligations under this Plan. No right to payment or any other interest under this Plan may be alienated, sold, transferred, pledged, assigned, or made subject to attachment, execution, or levy of any kind. Nothing in this Plan shall be construed as giving any employee the right to be retained in the employ of the 5 5 Corporation. The Corporation expressly reserves the right to dismiss any employee at any time without regard to the effect which such dismissal might have upon him under the Plan. This Plan shall be construed, administered and enforced according to the laws of the State of New York. VIII. Effective Date This Plan shall be effective as of October 17, 1990, upon its adoption by the Board of Directors of the Dun & Bradstreet Corporation. EX-10.D 6 1982 KEY EMPLOYEES STOCK OPTION PLAN 1 EXHIBIT 10(d) 1982 KEY EMPLOYEES STOCK OPTION PLAN FOR THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES 1. PURPOSE OF THE PLAN The purpose of the Plan is to aid The Dun & Bradstreet Corporation (herein called the "Company") and its subsidiaries in securing and retaining key employees of outstanding ability and to motivate such employees to exert their best efforts on behalf of the Company and its subsidiaries by providing incentive through the award of stock options and stock appreciation rights. The Company expects that it will benefit from the added interest which such key employees will have in the welfare of the Company as a result of their proprietary interest in the Company's success. 2. STOCK SUBJECT TO THE PLAN The total number of shares of Common Stock of the Company which may be issued under the Plan is 7,600,000. The shares may consist, in whole or in part, of unissued shares or treasury shares. Issuance of shares of Common Stock upon exercise of an option or reduction of the number of shares of Common Stock subject to an option upon exercise of a stock appreciation right shall reduce the total number of shares of Common Stock available under the Plan. Shares which are subject to unexercised stock options which terminate or lapse may be optioned again under the Plan. 2 3. ADMINISTRATION The Board of Directors of the Company shall appoint an Executive Compensation and Stock Option Committee (herein called the "Committee") consisting of at least three members of the Board of Directors who shall administer the Plan and serve at the pleasure of the Board. Each member of the Committee shall not be eligible to participate in the Plan and shall not at any time within one year prior to appointment have been eligible for selection as a person to whom stock may have been allocated or to whom stock options or stock appreciation rights of the Company or any of its affiliates may have been granted pursuant to the Plan or any other plan of the Company or its affiliates. The Committee shall have the authority, consistent with the Plan, to determine the provisions of the stock options and stock appreciation rights to be granted, to interpret the Plan and the stock options and the stock appreciation rights granted under the Plan, to adopt, amend and rescind rules and regulations for the administration of the Plan, the stock options and the stock appreciation rights and generally to conduct and administer the Plan and to make all determinations in connection therewith which may be necessary or advisable, and all such actions of the Committee shall be binding upon all participants. The Committee shall require payment of any amount the Company may determine to be necessary to withhold for federal, state or local taxes as a result of the exercise of a stock option or a stock appreciation right. Fair market value of the Common Stock as of a given date shall be determined in accordance with procedures established by the Committee. 4. ELIGIBILITY Key employees (but not members of the Committee and any person who serves only as a Director) of the Company and its subsidiaries (within the meaning of Section 425(f) of the Internal Revenue Code of 1954, as amended (the "Code")), who are from time to time responsible for the 2 3 management, growth and protection of the business of the Company and its subsidiaries, are eligible to be granted stock options or stock appreciation rights under the Plan. The participants under the Plan shall be selected from time to time by the Committee, in its sole discretion, from among those eligible, and the Committee shall determine, in its sole discretion, the number of shares to be covered by the stock options or stock appreciation rights or both granted to each participant. An employee may not be granted a stock option, however, if at the time such option is to be granted, such employee owns stock of the Company or any of its subsidiaries possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any such subsidiary. For purposes of the preceding sentence, the attribution rules of stock ownership set forth in Section 425(d) of the Code shall apply. The granting of a stock option or stock appreciation right under the Plan shall impose no obligation on the Company or any subsidiary to continue the employment of an optionee and shall not lessen or affect the right to terminate the employment of an optionee. 5. LIMITATIONS No stock option may be granted under the Plan after January 19, 1992, but stock options theretofore granted may extend beyond that date. 6. TERMS AND CONDITIONS OF STOCK OPTIONS Stock options granted under the Plan shall be, as determined by the Committee, non-qualified, incentive or other stock options for federal income tax purposes, as evidenced by option grants, and shall be subject to the foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine: 3 4 (a) Option Price. The option price per share shall be determined by the Committee, but shall not be less than 100% of the fair market value of the Common Stock on the date an option is granted. (b) Exercisability. Stock options granted under the Plan shall be exercisable at such time and upon such terms and conditions as may be determined by the Committee, but in no event shall an option be exercisable more than ten years after the date it is granted. (c) First Year Non-Exercisability. Except as provided in Paragraph 9 of the Plan, no stock option shall be exercisable during the year ending on the first anniversary date of the granting of the option. (d) Limitation on Incentive Stock Options. The aggregate fair market value (determined as of the time the options are granted) of the stock with respect to which incentive stock options may be exercised for the first time by any optionee in any calendar year shall not exceed $100,000. This limitation shall apply to incentive stock options granted after December 31, 1986 under all stock option plans of the optionee's employer corporation and its parent and subsidiary corporations, if any. (e) Exercise of Stock Options. Except as otherwise provided in the Plan or the option, a stock option may be exercised for all, or from time to time any part, of the shares for which it is then exercisable. The purchase price for the shares as to which an option is exercised shall be paid to the Company in full at the time of exercise at the election of the optionee (i) in cash, (ii) in shares of Common Stock of the Company having a fair market value equal to the option price for the shares being purchased and satisfying such other requirements as may be imposed by the Committee or (iii) partly in cash and partly in such shares of Common Stock of the Company. The Committee may permit the optionee to elect, subject to such terms and conditions as the 4 5 Committee shall determine, to have the number of shares deliverable to the optionee as a result of the exercise reduced by a number sufficient to pay the amount the Company determines to be necessary to withhold for federal, state or local taxes as a result of the exercise of the option, up to the amount calculated by applying the optionee's maximum marginal tax rate. No optionee shall have any rights to dividends or other rights of a shareholder with respect to shares subject to an option until the optionee has given written notice of exercise of the option, paid in full for such shares and, if requested, given the representation described in Paragraph 6(i) of the Plan. (f) Exercisability Upon Termination of Employment by Death. If an optionee's employment by the Company or a subsidiary terminates by reason of death one year or more after the date of grant of a stock option, the option thereafter may be exercised, during the three years after the date of death or the remaining stated period of the option, whichever period is shorter, to the extent to which such option was exercisable at the time of death or thereafter would become exercisable during the three-year period after the date of death in accordance with its terms. (g) Exercisability Upon Termination of Employment by Disability or Retirement. If an optionee's employment by the Company or a subsidiary terminates by reason of disability or retirement one year or more after the date of grant of an option, the option thereafter may be exercised, during the five years after the date of such termination of employment or the remaining stated period of the option, whichever period is shorter, to the extent to which such option was exercisable at the time of such termination of employment or thereafter would become exercisable during such period in accordance with its terms; provided, however, that if the optionee dies within a period of five years after such termination of employment, any unexercised stock option may be exercised thereafter, during either (1) the period ending on the later of (i) five years after such termination of employment and (ii) one year after the date of 5 6 death or (2) the period remaining in the stated term of the option, whichever period is shorter, to the extent to which such option was exercisable at the time of his death or thereafter would become exercisable during the remainder of the five-year period after such termination of employment in accordance with its terms. For purposes of this Paragraph 6, "retirement" shall mean termination of employment with the Company or a subsidiary after the optionee has attained age 55 and completed ten or more years of employment; or after the optionee has attained age 65, regardless of the length of such optionee's employment. An optionee shall not be considered disabled for purposes of this Paragraph 6, unless he or she furnishes such medical or other evidence of the existence of the disability as the Committee, in its sole discretion, may require. (h) Effect of Other Termination of Employment. If a participant's employment terminates for any reason, other than disability, death or retirement one year or more after the date of grant of a stock option or stock appreciation right, each stock option and stock appreciation right held by such participant shall thereupon terminate. (i) Additional Agreements of Optionee and Restrictions on Transfer. The Committee may require each person purchasing shares pursuant to exercise of a stock option to represent to and agree with the Company in writing that the shares are being acquired without a view to distribution thereof. The certificates for shares so purchased may include any legend which the Committee deems appropriate to reflect any restrictions on transfers. The Committee also may impose, in its discretion, as a condition of any option, any restrictions on the transferability of shares acquired through the exercise of such option as it may deem fit. Without limiting the generality of the foregoing, the Committee may impose conditions restricting absolutely the transferability of shares acquired through the exercise of options for such periods as the 6 7 Committee may determine and, further, in the event the optionee's employment by the Company or a subsidiary terminates during the period in which such shares are nontransferable, the optionee may be required, if required by the related option agreement, to sell such shares back to the Company at such price and on such other terms as the Committee may have specified in the option agreement. (j) Nontransferability of Stock Options. Except as otherwise provided in this Paragraph 6(j), a stock option shall not be transferable by the optionee otherwise than by will or by the laws of descent and distribution and during the lifetime of an optionee an option shall be exercisable only by the optionee. An option exercisable after the death of an optionee or a transferee pursuant to the following sentence may be exercised by the legatees, personal representatives or distributees of the optionee or such transferee. The Committee may, in its discretion, authorize all or a portion of the options previously granted or to be granted to an optionee to be on terms which permit irrevocable transfer for no consideration by such optionee to (i) any or all of the spouse, children or grandchildren of the optionee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of the optionee and/or any or all of such Immediate Family Members, or (iii) a partnership in which the optionee and/or any or all of such Immediate Family Members are the only partners, provided that subsequent transfers of transferred options shall be prohibited except those in accordance with the first sentence of this Paragraph 6(j). Following transfer, any such options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The events of termination of employment of Paragraphs 6(f), 6(g) and 6(h) hereof shall continue to be applied with respect to the original optionee, following which the options shall be exercisable by the transferee only to the extent, and for the periods specified, in Paragraphs 6(f), 6(g) and 6(h). The Committee may delegate to the 7 8 Administrative Committee the authority to authorize transfers, establish terms and conditions upon which transfers may be made and establish classes of optionees eligible to transfer options, as well as to make other determinations with respect to option transfers. 7. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS (a) Grants. The Committee also may grant stock appreciation rights in connection with stock options granted under the Plan, either at the time of grant of options or subsequently. Stock appreciation rights shall cover the same shares covered by an option (or such lesser number of shares of Common Stock as the Committee may determine) and shall be subject to the same terms and conditions as the option except for such additional limitations as are contemplated by this Paragraph 7 (or as may be included in a stock appreciation right granted hereunder). (b) Terms. Each stock appreciation right shall entitle an optionee to surrender to the Company an unexercised option, or any portion thereof, and to receive from the Company in exchange therefor an amount equal to the excess of the fair market value on the exercise date of one share of Common Stock over the option price per share times the number of shares covered by the option, or portion thereof, which is surrendered. The date a notice of exercise is received by the Company shall be the exercise date. Payment shall be made in shares of Common Stock or in cash, or partly in shares and partly in cash, valued at such fair market value, all as shall be determined by the Committee. Stock appreciation rights may be exercised from time to time upon actual receipt by the Company of written notice of exercise stating the number of shares of Common Stock subject to an exercisable option with respect to which the stock appreciation right is being exercised. No fractional shares of Common Stock will be issued in payment for 8 9 stock appreciation rights, but instead cash will be paid for a fraction or, if the Committee should so determine, the number of shares will be rounded downward to the next whole share. (c) Limitations on Exercisability. The Committee shall impose such conditions upon the exercisability of stock appreciation rights as will result, except upon the occurrence of an event contemplated by limited stock appreciation rights granted pursuant to Paragraph 7(d) or contemplated by the provisions of Paragraph 9, in the amount to be charged against the Company's consolidated income by reason of stock appreciation rights not to exceed, in any one calendar year, two percent of the Company's prior calendar year's consolidated income before income taxes. The Committee also may impose, in its discretion, such other conditions upon the exercisability of stock appreciation rights as it may deem fit. (d) Limited Stock Appreciation Rights. The Committee may grant limited stock appreciation rights which are exercisable upon the occurrence of specified contingent events. Such stock appreciation rights may provide for a different method of determining appreciation, may specify that payment will be made only in cash and may provide that related stock options or stock appreciation rights or both are not exercisable while such limited stock appreciation rights are exercisable. Unless the context otherwise requires, whenever the term "stock appreciation right" is used in the Plan, such term shall include limited stock appreciation rights. 8. TRANSFERS AND LEAVES OF ABSENCE For purposes of the Plan: (a) a transfer of an employee from the Company to a 50% or more owned subsidiary, partnership, venture or other affiliate (whether or not incorporated) or vice versa, or from one such subsidiary, partnership, venture or other affiliate to another, (b) a leave of absence, duly authorized by the Company, for military service or sickness or for any other purpose approved by the 9 10 Company if the period of such leave does not exceed 90 days, or (c) a leave of absence in excess of 90 days, duly authorized in writing by the Company, provided the employee's right to re-employment is guaranteed either by statute or by contract, shall not be deemed a termination of employment under the Plan. 9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR OTHER EVENTS Upon changes in the Common Stock of the Company by reason of a stock dividend, stock split, reverse split, recapitalization, merger, consolidation, combination or exchange of shares, separation, reorganization or liquidation, the number and class of shares available under the Plan as to which stock options or stock appreciation rights may be granted, the number and class of shares under each option and the option price per share, and the terms of stock appreciation rights shall be correspondingly adjusted by the Committee, such adjustments to be made in the case of outstanding options without change in the total price applicable to such options. In the event of a merger, consolidation, combination, reorganization or other transaction in which the Company will not be the surviving corporation, an optionee shall be entitled to options on that number of shares of stock in the new corporation which the optionee would have received had the optionee exercised all of the unexercised options available to the optionee under the Plan, whether or not then exercisable, at the instant immediately prior to the effective date of such transaction, and if such unexercised options had related stock appreciation rights the optionee also will receive new stock appreciation rights related to the new options. Thereafter, adjustments as provided above shall relate to the options or stock appreciation rights of the new corporation. Except as otherwise specifically provided in the stock option or stock appreciation right, in the event of a Change in Control, merger, consolidation, combination, reorganization or other transaction in which the shareholders of the Company will receive cash or 10 11 securities (other than common stock) or in the event that an offer is made to the holders of Common Stock of the Company to sell or exchange such Common Stock for cash, securities or stock of another corporation and such offer, if accepted, would result in the offeror becoming the owner of (a) at least 50% of the outstanding Common Stock of the Company or (b) such lesser percentage of the outstanding Common Stock which the Committee in its sole discretion determines will materially adversely affect the market value of the Common Stock after the tender or exchange offer, the Committee shall, prior to the shareholders' vote on such transaction or prior to the expiration date (without extensions) of the tender or exchange offer, (i) accelerate the time of exercise so that all stock options and stock appreciation rights which are outstanding shall become immediately exercisable in full without regard to any limitations of time or amount otherwise contained in the Plan or the options or stock appreciation rights and/or (ii) determine that the options and stock appreciation rights shall be adjusted and make such adjustments by substituting for Common Stock of the Company subject to options and stock appreciation rights, common stock of the surviving corporation or offeror if such stock of such corporation is publicly traded or, if such stock is not publicly traded, by substituting common stock of a parent of the surviving corporation or offeror if the stock of such parent is publicly traded, in which event the aggregate option price shall remain the same and the number of shares subject to option shall be the number of shares which could have been purchased on the closing day of such transaction or the expiration date of the offer with the proceeds which would have been received by the optionee if the option had been exercised in full prior to such transaction or expiration date and the optionee had exchanged all of such shares in the transaction or sold or exchanged all of such shares pursuant to the tender or exchange offer, and if any such option has related stock appreciation rights, the stock appreciation rights shall likewise be adjusted. No optionee shall have any right to prevent the consummation of any of the foregoing acts affecting the number of shares available to the optionee, but 11 12 the optionee's remedy shall be limited to a determination by an appropriate court of the number of shares or cash to which the optionee shall thereafter be entitled and appropriate orders for the issuance of such shares or payment of such cash. For purposes of this Paragraph 9, "Change in Control" means: (i) any "person", as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the shareowners of the Company in substantially the same proportion as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii), or (iv) of this sentence) whose election by the Board or nomination for election by the Company's shareowners was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (iii) the shareowners of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which 12 13 no "person" (as hereinabove defined) acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iv) the shareowners 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. 10. USE OF PROCEEDS Proceeds from the sale of shares of Common Stock pursuant to exercise of stock options granted under the Plan shall constitute general funds of the Company. 11. AMENDMENTS The Board of Directors may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would impair the rights of any optionee under any option theretofore granted, without the optionee's consent, or which, without the approval of the shareholders of the Company, would: (a) Except as is provided in Paragraph 9 of the Plan, increase the total number of shares reserved for the purposes of the Plan. (b) Decrease the option price to less than 100% of fair market value on the date of grant of an option. (c) Change the employees (or class of employees) eligible to receive stock options under the Plan. (d) Materially increase the benefits accruing to employees participating under the Plan. 13 14 12. EFFECTIVENESS OF THE PLAN AND AMENDMENTS The Plan became effective upon approval by the shareholders at the 1982 Annual Meeting. Paragraph 6(j) as amended became effective upon approval by the Board of Directors at its July 16, 1997 meeting. 14 EX-10.E 7 1991 KEY EMPLOYEES STOCK OPTION PLAN 1 EXHIBIT 10(e) 1991 KEY EMPLOYEES STOCK OPTION PLAN FOR THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES 1. PURPOSE OF THE PLAN The purpose of the Plan is to aid The Dun & Bradstreet Corporation (herein called the "Company") and its subsidiaries in securing and retaining key employees of outstanding ability and to motivate such employees to exert their best efforts on behalf of the Company and its subsidiaries by providing incentive through the award of stock options and stock appreciation rights. The Company expects that it will benefit from the added interest which such key employees will have in the welfare of the Company as a result of their proprietary interest in the Company's success. 2. STOCK SUBJECT TO THE PLAN The total number of shares of Common Stock of the Company which may be issued under the Plan is 17,000,000. The maximum number of shares for which options may be granted from the 1995 Annual Meeting during the remaining term of the Plan to any individual optionee shall be 1,000,000. The shares may consist, in whole or in part, of unissued shares or treasury shares. Issuance of shares of Common Stock upon exercise of an option or reduction of the number of shares of Common Stock subject to an option upon exercise of a stock appreciation right shall reduce the total number of shares of Common Stock available under the Plan. Shares which are 2 subject to unexercised stock options which terminate or lapse may be optioned again under the Plan. 3. ADMINISTRATION The Board of Directors of the Company shall appoint an Executive Compensation and Stock Option Committee (herein called the "Committee") consisting of at least three members of the Board of Directors who shall administer the Plan and serve at the pleasure of the Board. Each member of the Committee shall not be eligible to participate in the Plan and shall not at any time within one year prior to appointment have been eligible for selection as a person to whom stock may have been allocated or to whom stock options or stock appreciation rights of the Company or any of its affiliates may have been granted pursuant to the Plan or any other plan of the Company or its affiliates, except as permitted under regulations adopted under Section 16 of the Securities Exchange Act of 1934. The Committee shall have the authority, consistent with the Plan, to determine the provisions of the stock options and stock appreciation rights to be granted, to interpret the Plan and the stock options and the stock appreciation rights granted under the Plan, to adopt, amend and rescind rules and regulations for the administration of the Plan, the stock options and the stock appreciation rights and generally to conduct and administer the Plan and to make all determinations in connection therewith which may be necessary or advisable, and all such actions of the Committee shall be binding upon all participants. The Committee shall require payment of any amount the Company may determine to be necessary to withhold for federal, state or local taxes as a result of the exercise of a stock option or a stock appreciation right. Fair market value of the Common Stock as of a given date shall be determined in accordance with procedures established by the Committee. 2 3 4. ELIGIBILITY Key employees (but not members of the Committee and any person who serves only as a Director) of the Company and its subsidiaries (within the meaning of Section 425(f) of the Internal Revenue Code of 1954, as amended (the "Code")), who are from time to time responsible for the management, growth and protection of the business of the Company and its subsidiaries, are eligible to be granted stock options or stock appreciation rights under the Plan. The participants under the Plan shall be selected from time to time by the Committee, in its sole discretion, from among those eligible, and the Committee shall determine, in its sole discretion, the number of shares to be covered by the stock options or stock appreciation rights or both granted to each participant. An employee may not be granted a stock option, however, if at the time such option is to be granted, such employee owns stock of the Company or any of its subsidiaries possessing more than 10% of the total combined voting power of all classes of stock of the Company or of any such subsidiary. For purposes of the preceding sentence, the attribution rules of stock ownership set forth in Section 425(d) of the Code shall apply. The granting of a stock option or stock appreciation right under the Plan shall impose no obligation on the Company or any subsidiary to continue the employment of an optionee and shall not lessen or affect the right to terminate the employment of an optionee. 3 4 5. LIMITATIONS No stock option may be granted under the Plan after February 19, 2001, but stock options theretofore granted may extend beyond that date. 6. TERMS AND CONDITIONS OF STOCK OPTIONS Stock options granted under the Plan shall be, as determined by the Committee, non-qualified, incentive or other stock options for federal income tax purposes, as evidenced by option grants, and shall be subject to the foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine: (a) Option Price. The option price per share shall be determined by the Committee, but shall not be less than 100% of the fair market value of the Common Stock on the date an option is granted. (b) Exercisability. Stock options granted under the Plan shall be exercisable at such time and upon such terms and conditions as may be determined by the Committee, but in no event shall an option be exercisable more than ten years after the date it is granted. (c) First Year Non-Exercisability. Except as provided in Paragraph 9 of the Plan, no stock option shall be exercisable during the year ending on the first anniversary date of the granting of the option. (d) Exercise of Stock Options. Except as otherwise provided in the Plan or the option, a stock option may be exercised for all, or from time to time any part, of the shares for which it is then exercisable. The purchase price for the shares as to which an option is exercised shall be paid to the Company in full at the time of exercise at the election of the 4 5 optionee (i) in cash, (ii) in shares of Common Stock of the Company having a fair market value equal to the option price for the shares being purchased and satisfying such other requirements as may be imposed by the Committee or (iii) partly in cash and partly in such shares of Common Stock of the Company. The Committee may permit the optionee to elect, subject to such terms and conditions as the Committee shall determine, to have the number of shares deliverable to the optionee as a result of the exercise reduced by a number sufficient to pay the amount the Company determines to be necessary to withhold for federal, state or local taxes as a result of the exercise of the option. No optionee shall have any rights to dividends or other rights of a shareholder with respect to shares subject to an option until the optionee has given written notice of exercise of the option, paid in full for such shares and, if requested, given the representation described in Paragraph 6(h) of the Plan. (e) Exercisability Upon Termination of Employment by Death. If an optionee's employment by the Company or a subsidiary terminates by reason of death one year or more after the date of grant of a stock option, the option thereafter may be exercised, during the three years after the date of death or the remaining stated period of the option, whichever period is shorter, to the extent to which such option was exercisable at the time of death or thereafter would become exercisable during the three-year period after the date of death in accordance with its terms. (f) Exercisability Upon Termination of Employment by Disability or Retirement. If an optionee's employment by the Company or a subsidiary terminates by reason of disability or retirement one year or more after the date of grant of an option, the option thereafter may be exercised, during the five years after the date of such termination of employment or 5 6 the remaining stated period of the option, whichever period is shorter, to the extent to which such option was exercisable at the time of such termination of employment or thereafter would become exercisable during such period in accordance with its terms; provided, however, that if the optionee dies within a period of five years after such termination of employment, any unexercised stock option may be exercised thereafter, during either (1) the period ending on the later of (i) five years after such termination of employment and (ii) one year after the date of death or (2) the period remaining in the stated term of the option, whichever period is shorter, to the extent to which such option was exercisable at the time of death or thereafter would become exercisable during the remainder of the five-year period after such termination of employment in accordance with its terms. For purposes of this Paragraph 6, "retirement" shall mean termination of employment with the Company or a subsidiary after the optionee has attained age 55 and completed ten or more years of employment; or after the optionee has attained age 65, regardless of the length of such optionee's employment. An optionee shall not be considered disabled for purposes of this Paragraph 6, unless he or she furnishes such medical or other evidence of the existence of the disability as the Committee, in its sole discretion, may require. (g) Effect of Other Termination of Employment. If a participant's employment terminates for any reason, other than disability, death or retirement one year or more after the date of grant of a stock option or stock appreciation right as described above, each stock option and stock appreciation right held by such participant shall thereupon terminate. 6 7 (h) Additional Agreements of Optionee and Restrictions on Transfer. The Committee may require each person purchasing shares pursuant to exercise of a stock option to represent to and agree with the Company in writing that the shares are being acquired without a view to distribution thereof. The certificates for shares so purchased may include any legend which the Committee deems appropriate to reflect any restrictions on transfers. The Committee also may impose, in its discretion, as a condition of any option, any restrictions on the transferability of shares acquired through the exercise of such option as it may deem fit. Without limiting the generality of the foregoing, the Committee may impose conditions restricting absolutely the transferability of shares acquired through the exercise of options for such periods as the Committee may determine and, further, in the event the optionee's employment by the Company or a subsidiary terminates during the period in which such shares are nontransferable, the optionee may be required, if required by the related option agreement, to sell such shares back to the Company at such price and on such other terms as the Committee may have specified in the option agreement. (i) Nontransferability of Stock Options. Except as otherwise provided in this Paragraph 6(i), a stock option shall not be transferable by the optionee otherwise than by will or by the laws of descent and distribution and during the lifetime of an optionee an option shall be exercisable only by the optionee. An option exercisable after the death of an optionee or a transferee pursuant to the following sentence may be exercised by the legatees, personal representatives or distributees of the optionee or such transferee. The Committee may, in its discretion, authorize all or a portion of the options previously granted or to be granted to an optionee to be on terms which permit irrevocable transfer for no consideration by such optionee to (i) any or all of the spouse, children or grandchildren of the optionee 7 8 ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of the optionee and/or any or all of such Immediate Family Members, or (iii) a partnership in which the optionee and/or any or all of such Immediate Family Members are the only partners, provided that subsequent transfers of transferred options shall be prohibited except those in accordance with the first sentence of this Paragraph 6(i). Following transfer, any such options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The events of termination of employment of Paragraphs 6(e), 6(f) and 6(g) hereof shall continue to be applied with respect to the original optionee, following which the options shall be exercisable by the transferee only to the extent, and for the periods specified, in Paragraphs 6(e), 6(f) and 6(g). The Committee may delegate to the Administrative Committee the authority to authorize transfers, establish terms and conditions upon which transfers may be made and establish classes of optionees eligible to transfer options, as well as to make other determinations with respect to option transfers. 7. TERMS AND CONDITIONS OF STOCK APPRECIATION RIGHTS (a) Grants. The Committee also may grant stock appreciation rights in connection with stock options granted under the Plan, either at the time of grant of options or subsequently. Stock appreciation rights shall cover the same shares covered by an option (or such lesser number of shares of Common Stock as the Committee may determine) and shall be subject to the same terms and conditions as the option except for such additional limitations as are contemplated by this Paragraph 7 (or as may be included in a stock appreciation right granted hereunder). 8 9 (b) Terms. Each stock appreciation right shall entitle an optionee to surrender to the Company an unexercised option, or any portion thereof, and to receive from the Company in exchange therefor an amount equal to the excess of the fair market value on the exercise date of one share of Common Stock over the option price per share times the number of shares covered by the option, or portion thereof, which is surrendered. The date a notice of exercise is received by the Company shall be the exercise date. Payment shall be made in shares of Common Stock or in cash, or partly in shares and partly in cash, valued at such fair market value, all as shall be determined by the Committee. Stock appreciation rights may be exercised from time to time upon actual receipt by the Company of written notice of exercise stating the number of shares of Common Stock subject to an exercisable option with respect to which the stock appreciation right is being exercised. No fractional shares of Common Stock will be issued in payment for stock appreciation rights, but instead cash will be paid for a fraction or, if the Committee should so determine, the number of shares will be rounded downward to the next whole share. (c) Limitations on Exercisability. The Committee shall impose such conditions upon the exercisability of stock appreciation rights as will result, except upon the occurrence of an event contemplated by limited stock appreciation rights granted pursuant to Paragraph 7(d) or contemplated by the provisions of Paragraph 9, in the amount to be charged against the Company's consolidated income by reason of stock appreciation rights not to exceed, in any one calendar year, two percent of the Company's prior calendar year's consolidated income before income taxes. The Committee also may impose, in its discretion, such other conditions upon the exercisability of stock appreciation rights as it may deem fit. 9 10 (d) Limited Stock Appreciation Rights. The Committee may grant limited stock appreciation rights which are exercisable upon the occurrence of specified contingent events. Such stock appreciation rights may provide for a different method of determining appreciation, may specify that payment will be made only in cash and may provide that related stock options or stock appreciation rights or both are not exercisable while such limited stock appreciation rights are exercisable. Unless the context otherwise requires, whenever the term "stock appreciation right" is used in the Plan, such term shall include limited stock appreciation rights. 8. TRANSFERS AND LEAVES OF ABSENCE For purposes of the Plan: (a) a transfer of an employee from the Company to a 50% or more owned subsidiary, partnership, venture or other affiliate (whether or not incorporated) or vice versa, or from one such subsidiary, partnership, venture or other affiliate to another, (b) a leave of absence, duly authorized in writing by the Company, for military service or sickness or for any other purpose approved by the Company if the period of such leave does not exceed 90 days, or (c) a leave of absence in excess of 90 days, duly authorized in writing by the Company, provided the employee's right to re-employment is guaranteed either by statute or by contract, shall not be deemed a termination of employment under the Plan. 10 11 9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR OTHER EVENTS Upon changes in the Common Stock of the Company by reason of a stock dividend, stock split, reverse split, recapitalization, merger, consolidation, combination or exchange of shares, separation, reorganization or liquidation, the number and class of shares available under the Plan as to which stock options or stock appreciation rights may be granted (both in the aggregate and to any one optionee), the number and class of shares under each option and the option price per share, and the terms of stock appreciation rights shall be correspondingly adjusted by the Committee, such adjustments to be made in the case of outstanding options without change in the total price applicable to such options. In the event of a merger, consolidation, combination, reorganization or other transaction in which the Company will not be the surviving corporation, an optionee shall be entitled to options on that number of shares of stock in the new corporation which the optionee would have received had the optionee exercised all of the unexercised options available to the optionee under the Plan, whether or not then exercisable, at the instant immediately prior to the effective date of such transaction, and if such unexercised options had related stock appreciation rights the optionee also will receive new stock appreciation rights related to the new options. Thereafter, adjustments as provided above shall relate to the options or stock appreciation rights of the new corporation. Except as otherwise specifically provided in the stock option or stock appreciation right, in the event of a Change in Control, merger, consolidation, combination, reorganization or other transaction in which the shareholders of the Company will receive cash or securities (other than common stock) or in the event that an offer is made to the holders of Common Stock of the Company to sell or exchange such Common Stock for cash, securities or stock of another corporation and such offer, if accepted, would result in the offeror becoming the owner of (a) at least 50% of the outstanding Common Stock of the Company or (b) such lesser 11 12 percentage of the outstanding Common Stock which the Committee in its sole discretion determines will materially adversely affect the market value of the Common Stock after the tender or exchange offer, the Committee shall, prior to the shareholders' vote on such transaction or prior to the expiration date (without extensions) of the tender or exchange offer, (i) accelerate the time of exercise so that all stock options and stock appreciation rights which are outstanding shall become immediately exercisable in full without regard to any limitations of time or amount otherwise contained in the Plan or the options or stock appreciation rights and/or (ii) determine that the options and stock appreciation rights shall be adjusted and make such adjustments by substituting for Common Stock of the Company subject to options and stock appreciation rights, common stock of the surviving corporation or offeror if such stock of such corporation is publicly traded or, if such stock is not publicly traded, by substituting common stock of a parent of the surviving corporation or offeror if the stock of such parent is publicly traded, in which event the aggregate option price shall remain the same and the number of shares subject to option shall be the number of shares which could have been purchased on the closing day of such transaction or the expiration date of the offer with the proceeds which would have been received by the optionee if the option had been exercised in full prior to such transaction or expiration date and the optionee had exchanged all of such shares in the transaction or sold or exchanged all of such shares pursuant to the tender or exchange offer, and if any such option has related stock appreciation rights, the stock appreciation rights shall likewise be adjusted. For purposes of this Paragraph 9, "Change in Control" means: (i) any "person", as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any 12 13 corporation owned, directly or indirectly, by the shareowners of the Company in substantially the same proportion as their ownership of stock of the Company), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new director (other than a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii), or (iv) of this sentence) whose election by the Board or nomination for election by the Company's shareowners was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (iii) the shareowners of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "person" (as hereinabove defined) acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iv) the shareowners 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. 13 14 10. USE OF PROCEEDS Proceeds from the sale of shares of Common Stock pursuant to exercise of stock options granted under the Plan shall constitute general funds of the Company. 11. AMENDMENTS The Board of Directors may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would impair the rights of any optionee under any option theretofore granted, without the optionee's consent, or which, without the approval of the shareholders of the Company, would: 14 15 (a) Except as is provided in Paragraph 9 of the Plan, increase the total number of shares reserved for the purposes of the Plan or change the maximum number of shares for which options may be granted to any optionee. (b) Decrease the option price to less than 100% of fair market value on the date of grant of an option. (c) Change the employees (or class of employees) eligible to receive stock options under the Plan. (d) Materially increase the benefits accruing to employees participating under the Plan. 12. EFFECTIVENESS OF THE PLAN AND AMENDMENTS The Plan became effective upon approval by the shareholders at the 1991 Annual Meeting. The Amendments proposed in 1995 became effective upon approval by the shareholders at the 1995 Annual Meeting. Paragraph 6(f) as amended shall apply to all options outstanding at the date of the 1995 Annual Meeting or thereafter. Paragraph 6(i) as amended became effective upon approval by the Board of Directors at its July 16, 1997 meeting. 15 EX-10.H 8 FORM OF LIMITED STOCK APPRECIATION RIGHTS AGRMT 1 EXHIBIT 10(h) LIMITED STOCK APPRECIATION RIGHTS AGREEMENT RELATING TO STOCK OPTIONS UNDER THE 1991 KEY EMPLOYEES STOCK OPTION PLAN This Agreement confirms the grant on [ grant date ] by THE DUN & BRADSTREET CORPORATION (the "Company") to: [Associate Name] (the "Associate") of Limited Stock Appreciation Rights ("LSAR's") with respect to the following ten-year stock options to purchase shares of the Company's Common Stock, par value $1 per share ("Common Stock"), presently held by the Associate or granted to the Associate contemporaneously herewith under the 1991 Key Employees Stock Option Plan for The Dun & Bradstreet Corporation and Subsidiaries, as amended from time to time (the "1991 Plan"): Date of Option Grant Number of Shares Option Exercise Price - - -------------------- ---------------- --------------------- [ ] [ ] [$ ] Each LSAR represents the right to receive, in cash, upon exercise, the excess of the Tender Offer Price (as defined below) over the option exercise price of the above option to which the LSAR relates, such excess constituting the "Appreciation." These LSAR's are issued in accordance with and are subject to the terms of the 1991 Plan, which plan is incorporated herein by reference, and the following additional terms and conditions: 1. Each LSAR is related to an option (the "Related Option") to purchase the number of shares of Common Stock at the option exercise price per share indicated above. 2. These LSAR's may be exercised, in whole or in part, only on and after six months after the date of grant and only during the 30-day period beginning on the first day following the acquisition of at least 20% of all outstanding shares of Common Stock pursuant to any tender or exchange offer for shares of Common Stock (other than one made by the Company), whether the Company does or does not support the offer. A tender or exchange offer filed with the Securities and Exchange Commission on Form 14D-1 (or successor form) shall be treated conclusively as a tender or exchange offer for purposes of this provision. Each LSAR is exercisable only if and to the extent the Related Option is exercisable. During the 30-day period when these LSAR's are exercisable, other stock appreciation rights relating to the Related Option shall not be exercisable. 3. To the extent exercisable, these LSAR's may be exercised from time to time by notice to the Company. The date a notice of exercise is received by the Company shall be the exercise date. At the time of payment of the Appreciation to the Associate, the Company shall require payment of any amount the Company may determine to be necessary to withhold for federal, state or local taxes as a result of the exercise of an LSAR. 4. Exercise of an LSAR shall reduce the number of shares of Common Stock covered by the Related Option and any other related stock appreciation right on a share for share basis. The exercise of a Related Option or of any other related stock appreciation right shall reduce the number of related LSAR's on the same basis. 2 5. The term "Tender Offer Price" when used herein shall mean the highest price paid for shares of Common Stock in any tender or exchange offer of the kind contemplated in Paragraph 2 above which is in effect at any time during the 60-day period preceding the date of exercise of an LSAR, provided that any securities or property which are part or all of the consideration paid for shares of Common Stock in any such tender or exchange offer shall be valued at the higher of (i) the valuation placed on such securities or property by the person making such offer or (ii) the valuation (for purposes hereof) placed on such securities or property by the Executive Compensation and Stock Option Committee of the Board of Directors of the Company (the "Committee"). 6. These LSAR's shall terminate when the Associate is no longer subject to the provisions of Section 16(b) of the Securities Exchange Act of 1934, as amended. 7. These LSAR's are not transferable by the Associate, provided that the Committee may, in its discretion, authorize the irrevocable transfer for no consideration by the Associate to certain of the Associate's immediate family members or to certain trusts and partnerships in which the Associate and/or such family members have an interest. IN WITNESS WHEREOF, The Dun & Bradstreet Corporation has caused this Agreement to be executed in duplicate by its officer thereunto duly authorized. THE DUN & BRADSTREET CORPORATION By______________________________ Chief Executive Officer The undersigned hereby accepts and agrees to all the terms and provisions of the foregoing Limited Stock Appreciation Rights Agreement and acknowledges receipt of (i) a copy of the Prospectus dated May 31, 1995 relating to the 1991 Key Employees Stock Option Plan for The Dun & Bradstreet Corporation and Subsidiaries and (ii) a copy of the [ year ] Annual Report of The Dun & Bradstreet Corporation. ___________________ __________________________________ Date Associate EX-10.I 9 KEY EMPLOYEES PERFORMANCE UNIT PLAN 1 EXHIBIT 10(i) KEY EMPLOYEES PERFORMANCE UNIT PLAN FOR THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES 1. PURPOSE OF THE PLAN The purpose of the Plan is to aid The Dun & Bradstreet Corporation ("Dun & Bradstreet") and its subsidiaries (collectively, the "Company") in securing and retaining key employees of outstanding ability and to motivate such employees to exert their best efforts on behalf of the Company and its subsidiaries by providing incentive through the award of performance units. The Company expects that it will benefit from the added interest which such key employees will have in the welfare of the Company as a result of their interest in the long-term performance of the Company. 2. ADMINISTRATION The Board of Directors of Dun & Bradstreet shall appoint an Executive Compensation and Stock Option Committee (herein called the "Committee") consisting of at least three members of the Board of Directors who shall administer the Plan and serve at the pleasure of the Board. Each member of the Committee (a) shall not be eligible to participate in the Plan, (b) shall not at any time within one year prior to his or her appointment have been eligible for selection as a person to whom stock may have been allocated or to whom stock options or stock appreciation rights of Dun & Bradstreet or any of its affiliates may have been granted, except as permitted under regulations adopted under Section 16 of the Securities Exchange Act of 1934, and (c) from and after April 16, 1996, shall be an "outside director" as defined in the regulations under Section 162(m) of the Internal Revenue Code (the "Code"). The Committee shall have the authority, consistent with the 2 Plan, to determine the provisions of the performance units to be granted, to interpret the Plan and the performance units granted under the Plan, to adopt, amend and rescind rules and regulations for the administration of the Plan and the performance units, and generally to conduct and administer the Plan and to make all determinations in connection therewith which may be necessary or advisable, and all such actions of the Committee shall be binding upon all participants. 3. ELIGIBILITY Key employees (but not members of the Committee and any person who serves only as a Director) of the Company, who are from time to time responsible for the management, growth and protection of the business of the Company, are eligible to be granted performance units under the Plan. The participants under the Plan shall be selected from time to time by the Committee, in its discretion, from among those eligible, and the Committee shall determine, in its discretion, consistent with the terms of the Plan, the terms and conditions of the performance units granted to each participant. The granting of a performance unit under the Plan shall impose no obligation on Dun & Bradstreet or any subsidiary to continue the employment of a participant and shall not lessen or affect the right to terminate the employment of a participant. 4. PERFORMANCE UNITS Performance units ("Units") granted under this Plan shall be subject to the following terms and conditions: (a) Award Period. The Award Period for a Unit shall be established by the Committee at the time of grant and shall be not more than four (4) calendar years in length. The Committee may provide that the Award Period for such Units shall begin with the calendar year during which such Units are granted. Notwithstanding any other provision of the Plan, if the Committee anticipates that the Company will be distributing to the Company's shareholders the voting securities of any 2 3 entity then wholly owned by the Company ("Newco"), then the Committee may establish a separate Award Period for those employees who continue employment with the Company following the date on which the voting securities of Newco are distributed to the Company's shareholders (the "Spin-off Date"), which Award Period may commence on the first day of the next calendar year and terminate on the earlier of the last day of such year or the Spin-off Date. (b) Valuation of Units. (i) Payment values for each Unit, which may be in cash, in restricted stock issued pursuant to the Key Employees Restricted Stock Plan or other restricted stock plan of Dun & Bradstreet as in effect from time to time, in performance shares of common stock in the Company or in any combination of the foregoing, shall be established by the Committee, together with targets to be achieved during the Award Period for one or more performance measures, no later than March 31 of the first year of the Award Period; such performance measures, targets and Unit payment schedules shall govern the valuation of Units for award payment determination purposes. (ii) The Committee shall select performance measures for each Award Period from the following: (1) earnings per share, net income, operating income, revenue, working capital, return on equity, return on assets, total return to shareholders, and average sales growth, each of which may be on a corporate-wide basis or with respect to one or more operating units, divisions, acquired businesses, minority investments, partnerships or joint ventures; and (2) with respect to participants other than executive officers of Dun & Bradstreet (as such are determined by the Committee), priority objectives or other qualitative measures. Executive officers shall include "covered employees" as defined in the regulations under Section 162(m) of the Code. (iii) The Committee may increase or decrease targets and/or Unit payment schedules if in its sole judgment there have been extraordinary occurrences, not anticipated when Unit grants 3 4 were approved, which significantly have affected or may affect the Company's earnings or other performance measures, except that no increase may be made with respect to awards earned by executive officers, and no change in the targets applicable to executive officers may be made during the Award Period. Notwithstanding the above, any expenses incurred either before or after a Change in Control (as defined below) occurs, as a result of a Change in Control, as determined by the Company's outside accountants as of the date the Change in Control occurs, shall not be taken into account in determining whether performance criteria and targets have been achieved, and in no event shall a Change in Control constitute an extraordinary occurrence which could justify a change in performance criteria, targets and/or Unit payment schedules. (iv) In calculating whether the performance targets for executive officers have been met, the Committee (A) will make appropriate conforming adjustments in the performance measures or the targets to exclude the effects of any corporate transactions such as acquisitions, divestitures and reorganizations, and (B) will not take into account extraordinary accounting changes or items (as defined under generally accepted accounting principles), restructuring charges, nonrecurring events, or any unusual events affecting earnings by more than 10%, which in any such case affect the results that otherwise would have been attained under the applicable performance measures. (c) Payment of Units. As promptly as practicable after the completion of an Award Period, the Committee shall determine what, if any, award payments have been earned with respect to related Units. Payment shall be made to participants in cash, in restricted stock shares, in performance shares of common stock in the Company or in any combination of the foregoing, as established by the Committee, promptly after the date the Committee makes such determination. For purposes of such payment, restricted stock shares and performance shares shall be valued at the fair market price (i.e., the average of high and low trading prices) on the business day before the date of such determination. The Company shall require payment by participants of any 4 5 amounts the Company may determine to be necessary to withhold for federal, state or local taxes, except that the Committee may permit a participant to elect to have a portion of any restricted stock deliverable in payment of an award withheld to provide for payment of any such taxes. (d) Termination of Employment. Units held by a participant whose employment with the Company or any of its subsidiaries terminates for any reason less than one year after the date of grant of such Units shall be canceled. If employment terminates more than one year after the date of grant by reason of disability, death or retirement, the participant shall receive full payment of the final value of the Units the participant has been granted. If employment terminates more than one year after the date of grant by reason of termination by the Company (other than for cause), the Committee may, at its discretion and subject to such limitations and at such time or times as it may deem advisable, provide for a pro rata payment of the final value of the Units the participant has been granted. If employment terminates more than one year after the date of grant for any reason not specified above in this Section 4(d), Units held by a participant shall be canceled. Participants shall receive no payment with respect to canceled Units. Pro rata payment shall be based upon the number of completed months of the Award Period during which the participant was an employee relative to the total number of months in the full Award Period. Such payment shall be made as promptly as practicable after the completion of the applicable Award Period unless the Committee shall determine, in the event of the participant's termination by the Company (other than for cause), to make an earlier payment. The full amount of any award payment to terminated participants hereunder shall be paid in cash. (e) Non-Assignability. Each Unit granted under this Plan shall by its terms be nontransferable by the participant except by will or the laws of descent and distribution. Each Unit shall be payable during a participant's lifetime only to the participant. 5 6 (f) Limitation on Value of Units. The total of all payments to any participant under this Plan, including cash, restricted stock and/or performance shares, in any calendar year shall not exceed $6,000,000. (g) Other Terms and Conditions. The Committee may impose such other terms, provisions and conditions, not inconsistent with the Plan, as it shall determine in its sole judgment. Notwithstanding the restrictions contained herein with respect to executive officers, the Committee may decide to make awards or allow payment of awards to executive officers without regard to said restrictions (i) if the Committee decides that special or unforeseen circumstances make such action advisable or (ii) if such executive officers do not thereby become "covered employees." 5. TRANSFERS AND LEAVES OF ABSENCE For purposes of the Plan: (a) a transfer of an employee from the Company to a subsidiary or vice versa, or from one subsidiary to another, (b) a leave of absence, duly authorized in writing by the Company, for military service or sickness or for any other purpose approved by the Company if the period of such leave does not exceed 90 days, and (c) a leave of absence in excess of 90 days, duly authorized in writing by the Company, provided the employee's right to re-employment is guaranteed either by statute or by contract, shall not be deemed a termination of employment. 6. CHANGE IN CONTROL (a)(i) With respect to Units granted on or prior to October 15, 1997, upon the occurrence or potential occurrence of certain events defined by the Committee, including without limitation, a merger, consolidation, combination, reorganization or other transaction in which the Company is not 6 7 the surviving corporation or in which the determination of whether performance criteria and targets of outstanding Units will be satisfied at the end of the Award Period otherwise is impaired (any such event, a "Triggering Event"), or a "Change in Control" of the Company, Units held by a participant, including Units held less than one year after the date of grant of such Units, shall immediately become payable in full, with the final value of such Units determined as though performance criteria and targets for the full Award Period had been achieved. (ii) With respect to Units granted after October 15, 1997, (1) upon the occurrence or potential occurrence of any Triggering Event that does not constitute a "Change in Control" of the Company, Units held by a participant, including Units held less than one year after the date of grant of such Units, shall immediately become payable in an amount equal to the product of (A) the final value of such Units determined as though performance criteria and targets for the full Award Period had been achieved at 100%, multiplied by (B) a fraction, the numerator of which is the number of days in the Award Period prior to the occurrence of the Triggering Event and the denominator of which is the number of days in the Award Period; and (2) upon the occurrence of a "Change in Control," Units held by a participant, including Units held less than one year after the date of grant of such Units, shall immediately become payable in full, with the final value of such Units determined as though performance criteria and targets for the full Award Period had been achieved at 100%. (b) For all purposes of this Plan, "Change in Control" means (i) any "Person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act), 7 8 directly or indirectly, of securities of the Company representing 30% or more of the combined voting power of the Company's then outstanding securities; (ii) during any period of two consecutive years, individuals who at the beginning of such period constitute the Board, and any new Director (other than a Director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (i), (iii) or (iv) of this Section) whose election by the Board or nomination for election by the Company's shareholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (iii) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation or (2) a merger or consolidation effected to implement a recapitalization of the Company (or similar transaction) in which no "Person" (as hereinabove defined) acquires more than 50% of the combined voting power of the Company's then outstanding securities; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 8 9 (c) If the Company has not fulfilled a commitment to make a restricted stock award under a Company restricted stock plan to the participant at the time of the payment of the participant's Units, the Committee shall authorize an immediate payment in cash under this Plan to the participant equal in amount to the value of such restricted stock award without restrictions. 7. AMENDMENTS The Committee may amend or discontinue the Plan in its sole discretion, but no amendment or discontinuation shall be made which would impair the rights of the participant under any Unit granted on or prior to October 15, 1997 without the participant's consent, or which, without the approval of the shareholders of the Company, would change (a) the performance measures in Section 4(b) with respect to "covered employees," (b) the individuals or class of individuals eligible to participate in the Plan, or (c) the maximum amount payable to an individual participant under the Plan; provided, however, that upon the occurrence of a Change in Control of the Company, no amendment or discontinuation shall be made which would impair the rights of the participant under any Unit theretofore granted without the participant's consent. 8. EFFECTIVENESS The amendments proposed in 1996 became effective upon approval by the shareholders at the 1997 Annual Meeting. Sections 6(a) and 7 as amended became effective upon approval by the Board of Directors at its October 15, 1997 meeting. Section 4(a) as amended became effective upon approval by the Board of Directors at its December 17, 1997 meeting. 9 EX-10.K 10 1989 KEY EMPLOYEES RESTRICTED STOCK PLAN 1 EXHIBIT 10(k) 1989 KEY EMPLOYEES RESTRICTED STOCK PLAN FOR THE DUN & BRADSTREET CORPORATION AND SUBSIDIARIES 1. PURPOSE OF THE PLAN The purpose of the Plan is to aid The Dun & Bradstreet Corporation (herein called the "Company") and its subsidiaries in securing and retaining key employees of outstanding ability and to motivate such employees to exert their best efforts on behalf of the Company and its subsidiaries by providing incentive through the grant of restricted stock awards ("Awards"). The Company expects that it will benefit from the added interest which such key employees will have in the welfare of the Company as a result of their proprietary interest in the Company's success. 2. STOCK SUBJECT TO THE PLAN The total number of shares of Common Stock of the Company that may be issued under the Plan is 2,400,000. The shares may consist, in whole or in part, of unissued shares or treasury shares. If any shares awarded under the Plan are reacquired by the Company pursuant to the Plan, such shares may thereafter be reissued under the Plan. 3. ADMINISTRATION The Board of Directors of the Company shall appoint an Executive Compensation and Stock Option Committee (herein called the "Committee") consisting of at least three members of 2 the Board of Directors who shall administer the Plan and serve at the pleasure of the Board. Each member of the Committee shall not be eligible to participate in the Plan and shall not at any time within one year prior to appointment have been eligible for selection as a person to whom stock may have been allocated or awarded or to whom stock options or stock appreciation rights of the Company or any of its affiliates may have been granted under this Plan or any other plan of the Company or its affiliates, except as permitted under regulations adopted under Section 16 of the Securities Exchange Act of 1934. The Committee shall have the authority, consistent with the Plan, to determine the provisions of the Awards to be granted, to interpret the Plan and any agreements with participants under the Plan governing the terms of Awards ("Award Agreements"), to adopt, amend and rescind rules and regulations for the administration of the Plan and the Awards, and generally to conduct and administer the Plan and to make all determinations in connection therewith which may be necessary or advisable, and all such actions of the Committee shall be binding upon all participants. 4. ELIGIBILITY Key management and other employees (but not members of the Committee and any person who serves only as a Director) of the Company and its subsidiaries, who are from time to time responsible for the management, growth or protection of the business of the Company and its subsidiaries, are eligible to be granted Awards under the Plan. The participants under the Plan shall be selected from time to time by the Committee, in its discretion, from among those eligible, and the Committee shall determine, in its discretion, consistent with the terms of the Plan, the terms and conditions of the Awards granted to each participant. The granting of an Award under the Plan shall impose no obligation on the Company or any subsidiary to continue 2 3 the employment of a participant and shall not lessen or affect the Company's or subsidiary's right to terminate the employment of a participant. 5. DURATION OF THE PLAN No Award may be granted under the Plan after December 31, 1998. 6. RESTRICTED STOCK AWARDS Awards granted under this Plan shall be subject to the following terms and conditions: (a) The prospective recipient of an Award shall not, with respect to such Award, be deemed to have become a participant or to have any rights with respect to such Award until and unless such recipient shall have executed an Agreement or other instrument evidencing the Award and its terms and conditions and delivered a fully executed copy thereof to the Company and otherwise complied with the then applicable terms and conditions under the Plan. (b) Each participant shall be issued a certificate in respect of shares of restricted stock awarded under the Plan. Such certificate shall be registered in the name of the participant, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Award substantially in the following form: "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of the 1989 Key 3 4 Employees Restricted Stock Plan for The Dun & Bradstreet Corporation and Subsidiaries and an Agreement entered into between the registered owner and The Dun & Bradstreet Corporation. Copies of such Plan and Agreement are on file in the offices of the Secretary's Department of The Dun & Bradstreet Corporation." (c) All certificates for restricted stock delivered under this Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Company's Common Stock is then listed and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (d) The Committee may adopt rules which provide that the stock certificates evidencing such shares may be held in custody by a bank or other institution, or that the Company may itself hold such shares in custody until the restrictions thereon shall have lapsed, and may require as a condition of any Award that the participant shall have delivered a stock power endorsed in blank relating to the stock covered by such Award. (e) Recipients of Awards under the Plan are not required to make any payment or provide consideration other than the rendering of services. 4 5 7. RESTRICTIONS AND FORFEITURES The shares of Common Stock awarded pursuant to the Plan shall be subject to the following restrictions and conditions: (a) During a period set by the Committee of no less than one year nor more than ten years commencing with the date of an Award (the "Restriction Period"), the participant will not be permitted to sell, transfer, pledge, assign or otherwise dispose of restricted stock awarded pursuant to said Award. Within these limits the Committee may provide for the lapse of such restrictions in installments where deemed appropriate. (b) Except as provided in Section 7(a), the participant shall have with respect to the restricted stock all of the rights of a shareholder of the Company, including the right to vote the shares and receive dividends and other distributions. (c) Subject to the provisions of Section 7(d), upon termination of employment for any reason during the Restriction Period, all shares still subject to restriction shall be forfeited by the participant and will be reacquired by the Company. (d) In the event of a participant's retirement, disability or death, all restrictions with respect to such participant's restricted stock shall lapse (subject to Section 7(e)) and such participant or such participant's beneficiary shall be entitled to receive (if held in custody by the Company, a bank or other institution) and retain all of the stock subject to the Award; provided, however, that, in the case of retirement, the Committee in its sole 5 6 discretion may determine that such restrictions shall not lapse as to all or a portion of an Award or that all or any of the shares subject to restriction shall be forfeited. (e) The Committee may impose any conditions on an Award it deems advisable to ensure the participant's payment to the Company of any federal, state or local taxes required to be withheld with respect to such Award. 8. TRANSFERS AND LEAVES OF ABSENCE For purposes of the Plan: (a) a transfer of an employee from the Company to a subsidiary or vice versa, or from one subsidiary to another, (b) a leave of absence, duly authorized in writing by the Company, for military service or sickness or for any other purpose approved by the Company if the period of such leave does not exceed 90 days, or (c) a leave of absence in excess of 90 days, duly authorized in writing by the Company, provided the employee's right to re-employment is guaranteed either by statute or by contract, shall not be deemed a termination of employment under the Plan. 9. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR OTHER EVENTS Upon changes in the Common Stock of the Company by reason of a stock dividend, stock split, reverse split, recapitalization, merger, consolidation, combination or exchange of shares, separation, reorganization or liquidation, the number and class of shares available under the Plan as to which Awards may be granted and the number and class of shares under each Award shall be correspondingly adjusted by the Committee. Except as otherwise specifically provided in the Agreement relating to any Award, in the event of a Change in Control, merger, consolidation, 6 7 combination, reorganization or other transaction in which the shareholders of the Company will receive cash or securities (other than common stock) or in the event that an offer is made to the holders of Common Stock of the Company to sell or exchange such Common Stock for cash, securities or stock of another corporation and such offer, if accepted, would result in the offeror becoming the owner of (a) at least 50% of the outstanding Common Stock of the Company or (b) such lesser percentage of the outstanding Common Stock which the Committee in its sole discretion determines will materially adversely affect the market value of the Common Stock after the tender or exchange offer, the Committee shall, prior to the shareholders' vote on such transaction or prior to the expiration date (without extensions) of the tender or exchange offer (i) accelerate the termination of the Restriction Period so that all restrictions with respect to a participant's restricted stock shall immediately lapse without regard to any limitations of time or amount otherwise contained in the Plan or the Agreement and/or (ii) determine that the Awards shall be adjusted and make such adjustments by substituting for Common Stock of the Company subject to Awards, common stock of the surviving corporation or offeror if such stock of such corporation is publicly traded or, if such stock is not publicly traded, by substituting common stock of a parent of the surviving corporation or offeror if the stock of such parent is publicly traded, in which event the number of shares subject to an Award shall be the number of shares which could have been purchased on the closing day of such transaction or the expiration date of the offer with the proceeds which would have been received by the participant if the participant had exchanged all of such shares in the transaction or sold or exchanged all of such shares pursuant to the tender or exchange offer. For purposes of this Section 9, "Change in Control" means: 7 8 (a) any "Person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (b) during any period of twenty-four months (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new Director (other than (1) a Director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section, (2) a Director designated 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 (3) a Director designated 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 shareholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; 8 9 (c) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and (2) after which no Person holds 20% or more of the combined voting power of the then outstanding securities of the Company or such surviving entity; or (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 10. AMENDMENTS The Board of Directors may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would impair the rights of any participant under any Award theretofore granted, without the participant's consent, or which, without the approval of the shareholders of the Company, would: (a) Except as is provided in Section 9 of the Plan, increase the total number of shares reserved for the purposes of the Plan. 9 10 (b) Change the employees (or class of employees) eligible to receive Awards under the Plan. (c) Materially increase the benefits accruing to employees participating under the Plan. 11. EFFECTIVENESS OF THE PLAN The Plan became effective upon approval by the shareholders at the 1989 Annual Meeting. 10 EX-10.L 11 FORMS OF CHANGE IN CONTROL SEVERANCE AGRMT 1 EXHIBIT 10(l)-a [NEW HIRE MASTER 3X] [DATE OF HIRE] PERSONAL AND CONFIDENTIAL [NAME] [ADDRESS] [ADDRESS] Dear [FIRST_NAME]: The Dun & Bradstreet Corporation (the "Company") considers it essential to the best interests of its shareholders to foster the continued employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a "Change in Control" (as such term is defined in Section 2) may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company and its shareholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control. In order to induce you to remain in the employ of the Company, the Company agrees that you shall receive the severance benefits set forth in this letter agreement (the "Agreement") in the event your employment with the Company is terminated under the circumstances described below subsequent to a Change in Control. No provision of this letter agreement shall be effective for any purpose whatsoever except upon the occurrence of either a "Potential Change in Control" (as such term is defined in Section 2) or a Change in Control. 2 [DATE OF HIRE] Page 2 1. Term of Agreement. This Agreement shall commence as of the date hereof, and shall continue in effect through the third December 31st occurring after the date hereof; provided, however, that commencing on the January 1st following such third December 31st, and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30th of the preceding year, the Company or you shall have given notice to the other that it or you, respectively, does not wish to extend this Agreement, provided, however, that no such notice shall be effective if a Change in Control or Potential Change in Control shall have occurred prior to the date of such notice; and provided, further, that if a Change in Control shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of not less than twenty-four (24) months beyond the month in which such Change in Control occurred. 2. Change in Control; Potential Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a Change in Control, as set forth below. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred if (a) any "Person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "Beneficial Owner" (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; (b) during any period of twenty-four months (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than (1) a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section, (2) a director designated 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 (3) a director designated 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 shareholders was approved by a vote of at least two-thirds (2/3) of the directors then 3 [DATE OF HIRE] Page 3 still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (c) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and (2) after which no Person holds 20% or more of the combined voting power of the then outstanding securities of the Company or such surviving entity; or (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (ii) For purposes of this Agreement, a "Potential Change in Control" shall be deemed to have occurred if: (a) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (b) any Person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; (c) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (iii) You agree that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control, you will remain in the employ of the Company until the earliest of (a) a date which is 180 days from the occurrence of such Potential Change in Control, (b) the termination by you of your employment by reason of Disability as defined in Subsection 3(ii), or (c) the date on which you first become entitled under this Agreement to receive the benefits provided in Section 4(iii) below. 3. Termination Following Change in Control. (i) General. If any of the events described in Section 2 constituting a Change in Control shall have occurred, you shall be entitled to the benefits provided in Section 4(iii) upon the subsequent termination of your employment during the term of this 4 [DATE OF HIRE] Page 4 Agreement unless such termination is (a) because of your death or Disability, (b) by the Company for Cause, or (c) by you other than for Good Reason. If your employment with the Company is terminated prior to a Change in Control at the request of a Person engaging in a transaction or series of transactions that would result in a Change in Control, the twenty-four month period set forth in Section 1 of this Agreement will commence upon the subsequent occurrence of a Change in Control, your actual termination shall be deemed a termination occurring during such twenty-four month period and covered by Section 3 of this Agreement, your Date of Termination shall be deemed to have occurred immediately following the Change in Control, and Notice of Termination shall have been deemed to have been given by the Company immediately prior to your actual termination. (ii) Disability. If, as a result of your incapacity due to physical or mental illness or disability, you shall have been absent from the full-time performance of your duties with the Company for six (6) consecutive months, and within thirty (30) days after written notice of termination is thereafter given you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability". (iii) Cause. Termination by the Company of your employment for "Cause" shall mean termination: (a) upon the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination (as defined in Subsection 3(v)) by you for Good Reason (as defined in Subsection 3(iv)), after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties; (b) upon the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; or (c) upon your conviction of a felony. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a 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 you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in this Subsection and specifying the particulars thereof in detail. (iv) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, 5 [DATE OF HIRE] Page 5 "Good Reason" shall mean without your express written consent, the occurrence after a Change in Control of any of the following circumstances unless, in the case of paragraphs (a), (e), (f), (g) or (h), such circumstances are fully corrected prior to the Date of Termination (as defined in Section 3(vi)) specified in the Notice of Termination (as defined in Section 3(v)) given in respect thereof: (a) the assignment to you of any duties inconsistent with the position in the Company that you held immediately prior to the Change in Control, or an adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately prior to such Change in Control; (b) a reduction by the Company in your annual base salary and/or guideline bonus and/or perquisites as in effect on the date hereof or as the same may be increased from time to time except for across-the-board perquisites reductions similarly affecting all management personnel of the Company and all management personnel of any Person in control of the Company; (c) the relocation of the Company's offices at which you are principally employed immediately prior to the date of the Change in Control to a location more than thirty-five (35) miles from such location, except for required travel on the Company's business to an extent substantially consistent with your business travel obligations prior to the Change in Control[; PROVIDED, HOWEVER, THAT A RELOCATION OF THE COMPANY'S OFFICES AT WHICH YOU ARE PRINCIPALLY EMPLOYED IMMEDIATELY PRIOR TO THE DATE OF THE CHANGE IN CONTROL TO NEW YORK CITY SHALL NOT CONSTITUTE "GOOD REASON" FOR PURPOSES OF THIS AGREEMENT] (1); (d) the failure by the Company to pay to you any portion of your compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due; (e) the failure by the Company to continue in effect any material compensation or benefit plan in which you participated immediately prior to the 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 your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as (1) Headquarters agreements only. 6 [DATE OF HIRE] Page 6 existed at the time of the Change in Control; (f) the failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Company's life insurance, medical, dental, accident, or disability plans or perquisites in which you were participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the Change in Control; (g) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; or (h) any purported termination of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (v) hereof (and, if applicable, the requirements of Subsection (iii) hereof), which purported termination shall not be effective for purposes of this Agreement. Your right to terminate your employment pursuant to this Subsection shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. (v) Notice of Termination. Any purported termination of your employment by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6. "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (vi) Date of Termination, Etc. "Date of Termination" shall mean (a) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), or (b) if your employment is terminated pursuant to Subsection (iii) or (iv) hereof or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination for Cause shall not be less than thirty (30) days from the date such Notice of Termination is given, and in the case of a termination for Good Reason shall not be less than fifteen (15) nor more than sixty (60) days from the date such 7 [DATE OF HIRE] Page 7 Notice of Termination is given; provided, however, that if within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, then the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); and provided, further, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement, and shall not be offset against or reduce any other amounts due under this Agreement and shall not be reduced by any compensation earned by you as the result of employment by another employer. 4. Compensation Upon Termination or During Disability. Following a Change in Control, you shall be entitled to the following benefits during a period of disability, or upon termination of your employment, as the case may be, provided that such period or termination occurs during the term of this Agreement: (i) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness or disability, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all compensation payable to you under the Company's disability plan or program or other similar plan during such period, until this Agreement is terminated pursuant to Section 3(ii) hereof. Thereafter, or in the event your employment shall be terminated by reason of your death, your benefits shall be determined under the Company's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (ii) If your employment shall be terminated by the Company for Cause or by you other than for Good Reason, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you 8 [DATE OF HIRE] Page 8 are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. (iii) If your employment by the Company should be terminated by the Company other than for Cause or Disability or if you should terminate your employment for Good Reason, you shall be entitled to the benefits provided below: (a) the Company shall pay to you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, no later than the fifth day following the Date of Termination, plus all other amounts to which you are entitled under any compensation plan of the Company, at the time such payments are due; (b) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you, at the time specified in Subsection (v), a lump sum severance payment (in addition to the payments provided in paragraphs (c), (d), (e), (f), (g), (h) and (i) below, the "Severance Payments") equal to (1) 300% of the greater of (A) your annual base salary in effect on the Date of Termination or (B) your annual base salary in effect immediately prior to the Change in Control, and (2) 300% of your guideline bonus with respect to the year in which the Change in Control occurs; your annual base salary and guideline bonus (as taken into account under the first half of this Subsection (iii)(b)) shall count for three years additional credited service and be included in final average earnings calculations for participants in the Company's Retirement Account Plan, Supplemental Executive Retirement Plan, Pension Benefit Equalization Plan and any successor or substitute plans thereto, a sample calculation of which appears in Exhibit A to this Agreement; (c) in lieu of shares of common stock of the Company ("Common Shares") issuable upon exercise of outstanding options (other than options qualifying as incentive stock options ("ISOs") under Section 422A of the Internal Revenue Code of 1986 (the "Code") which ISOs were granted on or before the date hereof) ("Options"), and stock appreciation rights ("SARs"), if any, granted to you under the Company's 1982 Stock Option Plan, 1991 Stock Option Plan or any successor or substitute plans thereto (except those SARs applicable to ISOs granted on or before the date hereof) (which Options shall be cancelled upon the making of the payment referred to below), the Company shall pay to you, at the time specified in Subsection (v), an amount in cash equal to the product of (1) the excess of, in 9 [DATE OF HIRE] Page 9 the case of an ISO granted after the date hereof, the closing price of Common Shares as reported on the New York Stock Exchange on or nearest the Date of Termination (or, if not listed on such exchange, on a nationally recognized exchange or quotation system on which trading volume in the Common Shares is highest) and, in the case of all other Options, the higher of such closing price or the highest per share price for Common Shares actually paid in connection with any Change in Control, over the per share option price of each Option held by you (whether or not then fully exercisable), and (2) the number of Common Shares covered by each such Option; (d) in lieu of Common Shares issuable upon the lapse of restrictions, if any, granted to you under the Company's 1989 Key Employees Restricted Stock Plan or any successor or substitute plan(s) thereto, the Company shall pay to you, at the time specified in Subsection (v), an amount in cash equal to the product of (1) the closing price of Common Shares as reported on the New York Stock Exchange on or nearest the Date of Termination (or, if not listed on such exchange, on a nationally recognized exchange or quotation system on which trading volume in the Common Shares is highest) or the highest per share price for Common Shares actually paid in connection with any Change in Control, whichever is greater (such price, the "Price"), and (2) the number of Common Shares granted to you subject to such restrictions; (e) (1) all outstanding performance units awarded to you under the Company's Key Employees Performance Unit Plan (the "PUP"), whether or not vested, shall be cancelled, and you shall receive a cash payment equal to the amount you would have earned at a 100% target award valuation; (2) all outstanding restricted stock awarded to you under the PUP, whether or not vested (and whether or not any restrictions thereupon have lapsed), shall be cancelled, and you shall receive a cash payment equal to the product of (A) the number of cancelled restricted shares and (B) the Price; and (3) all outstanding unrestricted stock awarded to you under the PUP, whether or not vested, shall be cancelled, and you shall receive a cash payment equal to the product of (A) the number of cancelled unrestricted shares and (B) the Price; (f) the Company shall provide you with a cash allowance, at the time specified in Subsection (v), for outplacement counseling and job search activities in the amount of 20% of your annual salary and guideline bonus as in effect on the Date of Termination but not to exceed a maximum allowance of $100,000; and the 10 [DATE OF HIRE] Page 10 Company shall pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder); (g) for a thirty-six (36) month period after such termination, the Company shall arrange to provide you with life and health insurance benefits and perquisites substantially similar to those which you were receiving immediately prior to the Notice of Termination. Notwithstanding the foregoing, the Company shall not provide any benefit otherwise receivable by you pursuant to this paragraph (g) if an equivalent benefit is actually received by you during the thirty-six (36) month period following your termination, and any such benefit actually received by you shall be reported to the Company; (h) at the time specified in Subsection (v), the Company shall pay to you, in lieu of amounts which may otherwise be payable to you under any bonus plan (a "Bonus Plan"), an amount in cash equal to (1) your annual target bonus for the year in which the Change in Control occurs, multiplied by a fraction, (A) the numerator of which equals the number of full or partial days in such annual performance period during which you were employed by the Company and (B) the denominator of which is 365, and (2) the entire target bonus opportunity with respect to each performance period in progress under all other Bonus Plans in effect at the time of termination; and (i) starting at age 55, you shall receive retiree medical and life benefits from the Company. Such benefits shall be no less favorable than the benefits that you would have received had you, at the time Notice of Termination is given, both (1) attained age 55 and (2) retired from the Company. Notwithstanding the foregoing, any benefit described in the preceding sentence shall constitute secondary coverage with respect to retiree medical and life benefits actually received by you in connection with any subsequent employment (or self-employment) following your termination. (iv) In the event that you become entitled to the Severance Payments, if any of the Severance Payments will be subject to the tax (the "Excise Tax") imposed by section 4999 of the Code, (or any similar federal, state or local 11 [DATE OF HIRE] Page 11 tax that may hereafter be imposed), the Company shall pay to you at the time specified in Subsection (v) below, an additional amount (the "Gross-Up Payment") such that the net amount retained by you, 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 this subsection, shall be equal to the Total Payments. 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 you in connection with a Change in Control or your 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) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors and acceptable to you 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 (1) the total amount of the Total Payments and (2) the amount of excess parachute payments within the meaning of section 280G(b)(1) (after applying clause (a), above), and (c) the value of any non-cash benefits or any deferred payments or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d) (3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you 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 your 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 your employment, you shall repay to the Company within ten (10) 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 12 [DATE OF HIRE] Page 12 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 you if such repayment results in a reduction in Excise Tax and/or a 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 your 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 (plus any interest payable with respect to such excess) within ten (10) days after the time that the amount of such excess is finally determined. (v) The payments provided for in Subsections (iii)(b), (c), (d), (e), (f) and (h) shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you 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 Termination. 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 you, payable on the fifth day after demand by the Company (together with interest at the rate provided in section 1274(b)(2)(B) of the Code). (vi) Except as provided in Subsections (iii)(g) and (iii)(i) hereof, you shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise. 5. Successors; Binding Agreement. (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) 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. Failure of the Company to obtain such express assumption and agreement at or prior to the effectiveness of any such succession shall be a 13 [DATE OF HIRE] Page 13 breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms to which you would be entitled hereunder if you terminate your employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 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. (ii) This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflicts of law principles. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of 14 [DATE OF HIRE] Page 14 the Company under Section 4 shall survive the expiration of the term of this Agreement. 8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and during the term of this Agreement supersedes the provisions of all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto with respect to the subject matter contained herein. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter, which will then constitute our agreement on this subject. Sincerely, THE DUN & BRADSTREET CORPORATION BY Nancy L. Henry Senior Vice President and Chief Legal Counsel Agreed to this [DAY] day of [MONTH], [YEAR]. - - --------------------------- [NAME] 15 [DATE OF HIRE] Page 15 EXHIBIT A [TO BE PROVIDED] 16 EXHIBIT 10(l)-b [NEW HIRE MASTER 2X] [DATE OF HIRE] PERSONAL AND CONFIDENTIAL [NAME] [ADDRESS] [ADDRESS] Dear [FIRST_NAME]: The Dun & Bradstreet Corporation (the "Company") considers it essential to the best interests of its shareholders to foster the continued employment of key management personnel. In this connection, the Board of Directors of the Company (the "Board") recognizes that, as is the case with many publicly held corporations, the possibility of a "Change in Control" (as such term is defined in Section 2) may exist and that such possibility, and the uncertainty and questions which it may raise among management, may result in the departure or distraction of key management personnel to the detriment of the Company and its shareholders. The Board has determined that appropriate steps should be taken to reinforce and encourage the continued attention and dedication of key members of the Company's management, including yourself, to their assigned duties without distraction in the face of potentially disturbing circumstances arising from the possibility of a Change in Control. In order to induce you to remain in the employ of the Company, the Company agrees that you shall receive the severance benefits set forth in this letter agreement (the "Agreement") in the event your employment with the Company is terminated under the circumstances described below subsequent to a Change in Control. No provision of this letter agreement shall be effective for any purpose whatsoever except upon the occurrence of either a "Potential Change in Control" (as such term is defined in Section 2) or a Change in Control. 17 [DATE OF HIRE] Page 2 1. Term of Agreement. This Agreement shall commence as of the date hereof, and shall continue in effect through the third December 31st occurring after the date hereof; provided, however, that commencing on the January 1st following such third December 31st, and each January 1 thereafter, the term of this Agreement shall automatically be extended for one additional year unless, not later than September 30th of the preceding year, the Company or you shall have given notice to the other that it or you, respectively, does not wish to extend this Agreement, provided, however, that no such notice shall be effective if a Change in Control or Potential Change in Control shall have occurred prior to the date of such notice; and provided, further, that if a Change in Control shall have occurred during the original or extended term of this Agreement, this Agreement shall continue in effect for a period of not less than twenty-four (24) months beyond the month in which such Change in Control occurred. 2. Change in Control; Potential Change in Control. (i) No benefits shall be payable hereunder unless there shall have been a Change in Control, as set forth below. For purposes of this Agreement, a "Change in Control" shall be deemed to have occurred if (a) any "Person", as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any company owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "Beneficial Owner" (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; (b) during any period of twenty-four months (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new director (other than (1) a director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section, (2) a director designated 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 (3) a director designated 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 shareholders was approved by a vote of at least two-thirds (2/3) of the directors then 18 [DATE OF HIRE] Page 3 still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (c) the shareholders of the Company approve a merger or consolidation of the Company with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and (2) after which no Person holds 20% or more of the combined voting power of the then outstanding securities of the Company or such surviving entity; or (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (ii) For purposes of this Agreement, a "Potential Change in Control" shall be deemed to have occurred if: (a) the Company enters into an agreement, the consummation of which would result in the occurrence of a Change in Control; (b) any Person (including the Company) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control; (c) the Board adopts a resolution to the effect that, for purposes of this Agreement, a Potential Change in Control has occurred. (iii) You agree that, subject to the terms and conditions of this Agreement, in the event of a Potential Change in Control, you will remain in the employ of the Company until the earliest of (a) a date which is 180 days from the occurrence of such Potential Change in Control, (b) the termination by you of your employment by reason of Disability as defined in Subsection 3(ii), or (c) the date on which you first become entitled under this Agreement to receive the benefits provided in Section 4(iii) below. 3. Termination Following Change in Control. (i) General. If any of the events described in Section 2 constituting a Change in Control shall have occurred, you shall be entitled to the benefits provided in Section 4(iii) upon the subsequent termination of your employment during the term of this 19 [DATE OF HIRE] Page 4 Agreement unless such termination is (a) because of your death or Disability, (b) by the Company for Cause, or (c) by you other than for Good Reason. If your employment with the Company is terminated prior to a Change in Control at the request of a Person engaging in a transaction or series of transactions that would result in a Change in Control, the twenty-four month period set forth in Section 1 of this Agreement will commence upon the subsequent occurrence of a Change in Control, your actual termination shall be deemed a termination occurring during such twenty-four month period and covered by Section 3 of this Agreement, your Date of Termination shall be deemed to have occurred immediately following the Change in Control, and Notice of Termination shall have been deemed to have been given by the Company immediately prior to your actual termination. (ii) Disability. If, as a result of your incapacity due to physical or mental illness or disability, you shall have been absent from the full-time performance of your duties with the Company for six (6) consecutive months, and within thirty (30) days after written notice of termination is thereafter given you shall not have returned to the full-time performance of your duties, your employment may be terminated for "Disability". (iii) Cause. Termination by the Company of your employment for "Cause" shall mean termination: (a) upon the willful and continued failure by you to substantially perform your duties with the Company (other than any such failure resulting from your incapacity due to physical or mental illness or any such actual or anticipated failure after the issuance of a Notice of Termination (as defined in Subsection 3(v)) by you for Good Reason (as defined in Subsection 3(iv)), after a written demand for substantial performance is delivered to you by the Board, which demand specifically identifies the manner in which the Board believes that you have not substantially performed your duties; (b) upon the willful engaging by you in conduct which is demonstrably and materially injurious to the Company, monetarily or otherwise; or (c) upon your conviction of a felony. For purposes of this Subsection, no act, or failure to act, on your part shall be deemed "willful" unless done, or omitted to be done, by you not in good faith and without reasonable belief that your action or omission was in the best interest of the Company. Notwithstanding the foregoing, you shall not be deemed to have been terminated for Cause unless and until there shall have been delivered to you a copy of a 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 you and an opportunity for you, together with your counsel, to be heard before the Board), finding that in the good faith opinion of the Board you were guilty of conduct set forth above in this Subsection and specifying the particulars thereof in detail. (iv) Good Reason. You shall be entitled to terminate your employment for Good Reason. For purposes of this Agreement, 20 [DATE OF HIRE] Page 5 "Good Reason" shall mean without your express written consent, the occurrence after a Change in Control of any of the following circumstances unless, in the case of paragraphs (a), (e), (f), (g) or (h), such circumstances are fully corrected prior to the Date of Termination (as defined in Section 3(vi)) specified in the Notice of Termination (as defined in Section 3(v)) given in respect thereof: (a) the assignment to you of any duties inconsistent with the position in the Company that you held immediately prior to the Change in Control, or an adverse alteration in the nature or status of your responsibilities or the conditions of your employment from those in effect immediately prior to such Change in Control; (b) a reduction by the Company in your annual base salary and/or guideline bonus and/or perquisites as in effect on the date hereof or as the same may be increased from time to time except for across-the-board perquisites reductions similarly affecting all management personnel of the Company and all management personnel of any Person in control of the Company; (c) the relocation of the Company's offices at which you are principally employed immediately prior to the date of the Change in Control to a location more than thirty-five (35) miles from such location, except for required travel on the Company's business to an extent substantially consistent with your business travel obligations prior to the Change in Control[; PROVIDED, HOWEVER, THAT A RELOCATION OF THE COMPANY'S OFFICES AT WHICH YOU ARE PRINCIPALLY EMPLOYED IMMEDIATELY PRIOR TO THE DATE OF THE CHANGE IN CONTROL TO NEW YORK CITY SHALL NOT CONSTITUTE "GOOD REASON" FOR PURPOSES OF THIS AGREEMENT] (1); (d) the failure by the Company to pay to you any portion of your compensation or to pay to you any portion of an installment of deferred compensation under any deferred compensation program of the Company within seven (7) days of the date such compensation is due; (e) the failure by the Company to continue in effect any material compensation or benefit plan in which you participated immediately prior to the 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 your participation therein (or in such substitute or alternative plan) on a basis not materially less favorable, both in terms of the amount of benefits provided and the level of your participation relative to other participants, as (1) Headquarters agreements only. 21 [DATE OF HIRE] Page 6 existed at the time of the Change in Control; (f) the failure by the Company to continue to provide you with benefits substantially similar to those enjoyed by you under any of the Company's life insurance, medical, dental, accident, or disability plans or perquisites in which you were participating at the time of the Change in Control, the taking of any action by the Company which would directly or indirectly materially reduce any of such benefits, or the failure by the Company to provide you with the number of paid vacation days to which you are entitled on the basis of years of service with the Company in accordance with the Company's normal vacation policy in effect at the time of the Change in Control; (g) the failure of the Company to obtain a satisfactory agreement from any successor to assume and agree to perform this Agreement, as contemplated in Section 5 hereof; or (h) any purported termination of your employment that is not effected pursuant to a Notice of Termination satisfying the requirements of Subsection (v) hereof (and, if applicable, the requirements of Subsection (iii) hereof), which purported termination shall not be effective for purposes of this Agreement. Your right to terminate your employment pursuant to this Subsection shall not be affected by your incapacity due to physical or mental illness. Your continued employment shall not constitute consent to, or a waiver of rights with respect to, any circumstance constituting Good Reason hereunder. (v) Notice of Termination. Any purported termination of your employment by the Company or by you shall be communicated by written Notice of Termination to the other party hereto in accordance with Section 6. "Notice of Termination" shall mean a notice that shall indicate the specific termination provision in this Agreement relied upon and shall set forth in reasonable detail the facts and circumstances claimed to provide a basis for termination of your employment under the provision so indicated. (vi) Date of Termination, Etc. "Date of Termination" shall mean (a) if your employment is terminated for Disability, thirty (30) days after Notice of Termination is given (provided that you shall not have returned to the full-time performance of your duties during such thirty (30) day period), or (b) if your employment is terminated pursuant to Subsection (iii) or (iv) hereof or for any other reason (other than Disability), the date specified in the Notice of Termination (which, in the case of a termination for Cause shall not be less than thirty (30) days from the date such Notice of Termination is given, and in the case of a termination for Good Reason shall not be less than fifteen (15) nor more than sixty (60) days from the date such 22 [DATE OF HIRE] Page 7 Notice of Termination is given; provided, however, that if within fifteen (15) days after any Notice of Termination is given, or, if later, prior to the Date of Termination (as determined without regard to this proviso), the party receiving such Notice of Termination notifies the other party that a dispute exists concerning the termination, then the Date of Termination shall be the date on which the dispute is finally determined, either by mutual written agreement of the parties, by a binding arbitration award, or by a final judgment, order or decree of a court of competent jurisdiction (which is not appealable or with respect to which the time for appeal therefrom has expired and no appeal has been perfected); and provided, further, that the Date of Termination shall be extended by a notice of dispute only if such notice is given in good faith and the party giving such notice pursues the resolution of such dispute with reasonable diligence. Notwithstanding the pendency of any such dispute, the Company will continue to pay you your full compensation in effect when the notice giving rise to the dispute was given (including, but not limited to, base salary) and continue you as a participant in all compensation, benefit and insurance plans in which you were participating when the notice giving rise to the dispute was given, until the dispute is finally resolved in accordance with this Subsection. Amounts paid under this Subsection are in addition to all other amounts due under this Agreement, and shall not be offset against or reduce any other amounts due under this Agreement and shall not be reduced by any compensation earned by you as the result of employment by another employer. 4. Compensation Upon Termination or During Disability. Following a Change in Control, you shall be entitled to the following benefits during a period of disability, or upon termination of your employment, as the case may be, provided that such period or termination occurs during the term of this Agreement: (i) During any period that you fail to perform your full-time duties with the Company as a result of incapacity due to physical or mental illness or disability, you shall continue to receive your base salary at the rate in effect at the commencement of any such period, together with all compensation payable to you under the Company's disability plan or program or other similar plan during such period, until this Agreement is terminated pursuant to Section 3(ii) hereof. Thereafter, or in the event your employment shall be terminated by reason of your death, your benefits shall be determined under the Company's retirement, insurance and other compensation programs then in effect in accordance with the terms of such programs. (ii) If your employment shall be terminated by the Company for Cause or by you other than for Good Reason, the Company shall pay you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, plus all other amounts to which you 23 [DATE OF HIRE] Page 8 are entitled under any compensation plan of the Company at the time such payments are due, and the Company shall have no further obligations to you under this Agreement. (iii) If your employment by the Company should be terminated by the Company other than for Cause or Disability or if you should terminate your employment for Good Reason, you shall be entitled to the benefits provided below: (a) the Company shall pay to you your full base salary through the Date of Termination at the rate in effect at the time Notice of Termination is given, no later than the fifth day following the Date of Termination, plus all other amounts to which you are entitled under any compensation plan of the Company, at the time such payments are due; (b) in lieu of any further salary payments to you for periods subsequent to the Date of Termination, the Company shall pay as severance pay to you, at the time specified in Subsection (v), a lump sum severance payment (in addition to the payments provided in paragraphs (c), (d), (e), (f), (g), (h) and (i) below, the "Severance Payments") equal to (1) 200% of the greater of (A) your annual base salary in effect on the Date of Termination or (B) your annual base salary in effect immediately prior to the Change in Control, and (2) 200% of your guideline bonus with respect to the year in which the Change in Control occurs; your annual base salary and guideline bonus (as taken into account under the first half of this Subsection (iii)(b)) shall count for two years additional credited service and be included in final average earnings calculations for participants in the Company's Retirement Account Plan, Supplemental Executive Retirement Plan, Pension Benefit Equalization Plan and any successor or substitute plans thereto, a sample calculation of which appears in Exhibit A to this Agreement; (c) in lieu of shares of common stock of the Company ("Common Shares") issuable upon exercise of outstanding options (other than options qualifying as incentive stock options ("ISOs") under Section 422A of the Internal Revenue Code of 1986 (the "Code") which ISOs were granted on or before the date hereof) ("Options"), and stock appreciation rights ("SARs"), if any, granted to you under the Company's 1982 Stock Option Plan, 1991 Stock Option Plan or any successor or substitute plans thereto (except those SARs applicable to ISOs granted on or before the date hereof) (which Options shall be cancelled upon the making of the payment referred to below), the Company shall pay to you, at the time specified in Subsection (v), an amount in cash equal to the product of (1) the excess of, in 24 [DATE OF HIRE] Page 9 the case of an ISO granted after the date hereof, the closing price of Common Shares as reported on the New York Stock Exchange on or nearest the Date of Termination (or, if not listed on such exchange, on a nationally recognized exchange or quotation system on which trading volume in the Common Shares is highest) and, in the case of all other Options, the higher of such closing price or the highest per share price for Common Shares actually paid in connection with any Change in Control, over the per share option price of each Option held by you (whether or not then fully exercisable), and (2) the number of Common Shares covered by each such Option; (d) in lieu of Common Shares issuable upon the lapse of restrictions, if any, granted to you under the Company's 1989 Key Employees Restricted Stock Plan or any successor or substitute plan(s) thereto, the Company shall pay to you, at the time specified in Subsection (v), an amount in cash equal to the product of (1) the closing price of Common Shares as reported on the New York Stock Exchange on or nearest the Date of Termination (or, if not listed on such exchange, on a nationally recognized exchange or quotation system on which trading volume in the Common Shares is highest) or the highest per share price for Common Shares actually paid in connection with any Change in Control, whichever is greater (such price, the "Price"), and (2) the number of Common Shares granted to you subject to such restrictions; (e) (1) all outstanding performance units awarded to you under the Company's Key Employees Performance Unit Plan (the "PUP"), whether or not vested, shall be cancelled, and you shall receive a cash payment equal to the amount you would have earned at a 100% target award valuation; (2) all outstanding restricted stock awarded to you under the PUP, whether or not vested (and whether or not any restrictions thereupon have lapsed), shall be cancelled, and you shall receive a cash payment equal to the product of (A) the number of cancelled restricted shares and (B) the Price; and (3) all outstanding unrestricted stock awarded to you under the PUP, whether or not vested, shall be cancelled, and you shall receive a cash payment equal to the product of (A) the number of cancelled unrestricted shares and (B) the Price; (f) the Company shall provide you with a cash allowance, at the time specified in Subsection (v), for outplacement counseling and job search activities in the amount of 15% of your annual salary and guideline bonus as in effect on the Date of Termination but not to exceed a maximum allowance of $50,000; and the 25 [DATE OF HIRE] Page 10 Company shall pay to you all legal fees and expenses incurred by you as a result of such termination (including all such fees and expenses, if any, incurred in contesting or disputing any such termination or in seeking to obtain or enforce any right or benefit provided by this Agreement or in connection with any tax audit or proceeding to the extent attributable to the application of section 4999 of the Code to any payment or benefit provided hereunder); (g) for a twenty-four (24) month period after such termination, the Company shall arrange to provide you with life and health insurance benefits and perquisites substantially similar to those which you were receiving immediately prior to the Notice of Termination. Notwithstanding the foregoing, the Company shall not provide any benefit otherwise receivable by you pursuant to this paragraph (g) if an equivalent benefit is actually received by you during the twenty-four (24) month period following your termination, and any such benefit actually received by you shall be reported to the Company; (h) at the time specified in Subsection (v), the Company shall pay to you, in lieu of amounts which may otherwise be payable to you under any bonus plan (a "Bonus Plan"), an amount in cash equal to (1) your annual target bonus for the year in which the Change in Control occurs, multiplied by a fraction, (A) the numerator of which equals the number of full or partial days in such annual performance period during which you were employed by the Company and (B) the denominator of which is 365, and (2) the entire target bonus opportunity with respect to each performance period in progress under all other Bonus Plans in effect at the time of termination; and (i) starting at age 55, you shall receive retiree medical and life benefits from the Company. Such benefits shall be no less favorable than the benefits that you would have received had you, at the time Notice of Termination is given, both (1) attained age 55 and (2) retired from the Company. Notwithstanding the foregoing, any benefit described in the preceding sentence shall constitute secondary coverage with respect to retiree medical and life benefits actually received by you in connection with any subsequent employment (or self-employment) following your termination. (iv) In the event that you become entitled to the Severance Payments, if any of the Severance Payments will be subject to the tax (the "Excise Tax") imposed by section 4999 of the Code, (or any similar federal, state or local 26 [DATE OF HIRE] Page 11 tax that may hereafter be imposed), the Company shall pay to you at the time specified in Subsection (v) below, an additional amount (the "Gross-Up Payment") such that the net amount retained by you, 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 this subsection, shall be equal to the Total Payments. 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 you in connection with a Change in Control or your 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) shall be treated as subject to the Excise Tax, unless in the opinion of tax counsel selected by the Company's independent auditors and acceptable to you 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 (1) the total amount of the Total Payments and (2) the amount of excess parachute payments within the meaning of section 280G(b)(1) (after applying clause (a), above), and (c) the value of any non-cash benefits or any deferred payments or benefit shall be determined by the Company's independent auditors in accordance with the principles of sections 280G(d) (3) and (4) of the Code. For purposes of determining the amount of the Gross-Up Payment, you 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 your 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 your employment, you shall repay to the Company within ten (10) 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 27 [DATE OF HIRE] Page 12 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 you if such repayment results in a reduction in Excise Tax and/or a 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 your 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 (plus any interest payable with respect to such excess) within ten (10) days after the time that the amount of such excess is finally determined. (v) The payments provided for in Subsections (iii)(b), (c), (d), (e), (f) and (h) shall be made not later than the fifth day following the Date of Termination; provided, however, that if the amounts of such payments cannot be finally determined on or before such day, the Company shall pay to you 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 Termination. 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 you, payable on the fifth day after demand by the Company (together with interest at the rate provided in section 1274(b)(2)(B) of the Code). (vi) Except as provided in Subsections (iii)(g) and (iii)(i) hereof, you shall not be required to mitigate the amount of any payment provided for in this Section 4 by seeking other employment or otherwise, nor shall the amount of any payment or benefit provided for in this Section 4 be reduced by any compensation earned by you as the result of employment by another employer, by retirement benefits, by offset against any amount claimed to be owed by you to the Company, or otherwise. 5. Successors; Binding Agreement. (i) The Company will require any successor (whether direct or indirect, by purchase, merger, consolidation or otherwise) 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. Failure of the Company to obtain such express assumption and agreement at or prior to the effectiveness of any such succession shall be a 28 [DATE OF HIRE] Page 13 breach of this Agreement and shall entitle you to compensation from the Company in the same amount and on the same terms to which you would be entitled hereunder if you terminate your employment for Good Reason following a Change in Control, except that for purposes of implementing the foregoing, the date on which any such succession becomes effective shall be deemed the Date of Termination. 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. (ii) This Agreement shall inure to the benefit of and be enforceable by you and your personal or legal representatives, executors, administrators, successors, heirs, distributees, devisees and legatees. If you should die while any amount would still be payable to you hereunder had you continued to live, all such amounts, unless otherwise provided herein, shall be paid in accordance with the terms of this Agreement to your devisee, legatee or other designee or, if there is no such designee, to your estate. 6. Notice. For the purpose of this Agreement, notices and all other communications provided for in this Agreement shall be in writing and shall be deemed to have been duly given when delivered or mailed by United States certified or registered mail, return receipt requested, postage prepaid, addressed to the respective addresses set forth on the first page of this Agreement, provided that all notice to the Company shall be directed to the attention of the Board with a copy to the Secretary of the Company, or to such other address as either party may have furnished to the other in writing in accordance herewith, except that notice of change of address shall be effective only upon receipt. 7. Miscellaneous. No provision of this Agreement may be modified, waived or discharged unless such waiver, modification or discharge is agreed to in writing and signed by you and such officer as may be specifically designated by the Board. No waiver by either party hereto at any time of any breach by the other party hereto of, or compliance with, any condition or provision of this Agreement to be performed by such other party shall be deemed a waiver of similar or dissimilar provisions or conditions at the time or at any prior or subsequent time. No agreements or representations, oral or otherwise, express or implied, with respect to the subject matter hereof have been made by either party which are not expressly set forth in this Agreement. The validity, interpretation, construction and performance of this Agreement shall be governed by the laws of the State of New York without regard to its conflicts of law principles. All references to sections of the Exchange Act or the Code shall be deemed also to refer to any successor provisions to such sections. Any payments provided for hereunder shall be paid net of any applicable withholding required under federal, state or local law. The obligations of 29 [DATE OF HIRE] Page 14 the Company under Section 4 shall survive the expiration of the term of this Agreement. 8. Validity. The invalidity or unenforceability of any provision of this Agreement shall not affect the validity or enforceability of any other provision of this Agreement, which shall remain in full force and effect. 9. Counterparts. This Agreement may be executed in several counterparts, each of which shall be deemed to be an original but all of which together will constitute one and the same instrument. 10. Entire Agreement. This Agreement sets forth the entire agreement of the parties hereto in respect of the subject matter contained herein and during the term of this Agreement supersedes the provisions of all prior agreements, promises, covenants, arrangements, communications, representations or warranties, whether oral or written, by any officer, employee or representative of any party hereto with respect to the subject matter contained herein. If this letter sets forth our agreement on the subject matter hereof, kindly sign and return to the Company the enclosed copy of this letter, which will then constitute our agreement on this subject. Sincerely, THE DUN & BRADSTREET CORPORATION BY Nancy L. Henry Senior Vice President and Chief Legal Counsel Agreed to this [DAY] day of [MONTH], [YEAR]. - - --------------------------- [NAME] 30 [DATE OF HIRE] Page 15 EXHIBIT A [TO BE PROVIDED] EX-10.M 12 SUPPLEMENTAL EXECUTIVE BENEFIT PLAN 1 EXHIBIT 10(m) SUPPLEMENTAL EXECUTIVE BENEFIT PLAN OF THE DUN & BRADSTREET CORPORATION (as amended effective July 16, 1997) PREAMBLE The principal purpose of this Supplemental Executive Benefit Plan is to ensure the payment of a competitive level of retirement income and disability benefits in order to attract, retain and motivate selected executives of the Corporation and its affiliated companies. SECTION 1 Definitions 1.1 "Affiliate" means any corporation, partnership, division or other organization controlling, controlled by or under common control with the Corporation or any joint venture entered into by the Corporation. 1.2 "Average Final Compensation" means the greater of (i) a Participant's or Vested Former Participant's average final compensation as defined in The Dun & Bradstreet Corporation Retirement Account as if no provision were set forth therein incorporating limitations imposed by Sections 401, 415 or any other applicable Section of the Internal Revenue Code, or, (ii) if the Participant is disabled at the time of his Retirement, the Participant's Basic Earnings. For purposes of (i), Average Final Compensation will not include an employee's compensation while the employee is a Vested Former Participant or a Former Participant and will include compensation from the date of the Participant's employment with the Corporation or an Affiliate. 1.3 "Basic Disability Plan" means as to any Participant either (i) the long-term disability plan of the Corporation or an Affiliate pursuant to which long-term disability benefits are payable to such Participant or, (ii) if the Affiliate which employs such Participant has not adopted a long-term disability plan, the long-term disability plan of the Corporation. 2 1.4 "Basic Disability Plan Benefit" means the amount of benefits actually payable to a Participant from the Basic Disability Plan or which would be payable if the Participant were a member of such Plan. For purposes of determining a Participant's Basic Disability Plan Benefit, a disability benefit shall not be treated as actually payable to a Participant unless the Participant is actually covered by a long-term disability plan of the Corporation or an Affiliate. 1.5 "Basic Earnings" means a Participant's total earnings received as an employee as salary or wages in the twelve months immediately preceding the onset of the Participant's disability, including any amounts deferred under a plan qualified under Section 401(k) of the Internal Revenue Code, amounts contributed on a Participant's behalf on a salary reduction basis to a cafeteria plan described in Section 125 of the Internal Revenue Code, cash bonuses and commissions, but excluding any pension, retainers, severance pay, income derived from stock options, stock appreciation rights and restricted stock awards and dispositions of stock acquired thereunder, payments dependent upon any contingency after the period of Credited Service and other special remuneration (including performance units). 1.6 "Basic Plan" means as to any Participant or Vested Former Participant, the defined benefit pension plan of the Corporation or an Affiliate, which is intended to meet the requirements of Code Section 401(a) and pursuant to which retirement benefits are payable to such Participant or Vested Former Participant or to the Surviving Spouse or designated beneficiary of a deceased Participant or Vested Former Participant. 1.7 "Basic Plan Benefit" means the amount of benefits payable from the Basic Plan to a Participant or Vested Former Participant. 1.8 "Board" means the Board of Directors of The Dun & Bradstreet Corporation. 1.9 "Change in Control" means: (a) Any "person," as such term is used in Section 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act") (other than the Corporation, any trustee or other fiduciary holding securities under an employee benefit plan of the Corporation, or any 3 Corporation owned, directly or indirectly, by the shareholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), is or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Corporation representing 20% or more of the combined voting power of the Corporation's then outstanding securities; (b) during any period of twenty-four months (not including any period prior to the effective date of this provision), individuals who at the beginning of such period constitute the Board, and any new director (other than (1) a director designated by a person who has entered into an agreement with the Corporation to effect a transaction described in clause (a), (c) or (d) of this Section) (2) a director designated by any Person (including the Corporation) 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 (3) a director designated by any Person who is the Beneficial Owner, directly or indirectly, of securities of the Corporation representing 10% or more of the combined voting power of the Corporation's securities) whose election by the Board or nomination for election by the Corporation's shareholders was approved by a vote of at least two-thirds (2/3) of the directors then still in office who either were directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (c) the shareholders of the Corporation approve a merger or consolidation of the Corporation with any other company, other than (1) a merger or consolidation which would result in the voting securities of the Corporation outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting 4 securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Corporation or such surviving entity outstanding immediately after such merger or consolidation and (2) after which no Person holds 20% or more of the combined voting power of the then outstanding securities of the Corporation or such surviving entity; or (d) the shareholders of the Corporation approve a plan of complete liquidation of the Corporation or an agreement for the sale or disposition by the Corporation of all or substantially all of the Corporation's assets. 1.10 "Committee" means the Executive Compensation and Stock Option Committee of the Board. 1.11 "Corporation" means The Dun & Bradstreet Corporation, a Delaware corporation, and any successor or assigns thereto. 1.12 "Credited Service" means a Participant's, Former Participant's or Vested Former Participant's Credited Service as defined in The Dun & Bradstreet Corporation Retirement Account, except that Credited Service will include service while the Participant is receiving Disability Benefits and service from the date the Participant, Former Participant or Vested Former Participant was employed by the Corporation or an Affiliate, but will not include service while an employee is a Former Participant or Vested Former Participant. However, in the case of an acquired company, the Participant's, Former Participant's or Vested Former Participant's service with that company prior to the date of acquisition will not be counted unless such service is recognized for benefit accrual purposes under the relevant Basic Plan. 1.13 "Disability Benefit" means the benefits provided to Participants and Vested Former Participants pursuant to Section 5 of the Plan. 1.14 "Effective Date" means July 1, 1989. 1.15 "Election" means an election as to the form of benefit payment made pursuant to Section 4.5 of the Plan. 1.16 "Election Date" means the date that a properly completed election form with respect to an Election or a Special Election is received by the Corporation's Treasurer. 5 1.17 "Former Participant" means an employee who has not completed five or more years of Credited Service at the time his employment with the Corporation or an Affiliate terminates or at the time he was removed, upon written notice by the Chief Executive Officer of the Corporation and with the approval of the Committee, from further participation in the Plan. 1.18 "Other Disability Income" means (A) the disability insurance benefit that the Participant is entitled to receive under the Federal Social Security Act while he is receiving the Basic Disability Plan Benefit and (B) the disability income payable to a Participant from the following sources: (a) any supplemental executive disability plan of any Affiliate; and (b) any other contract, agreement or other arrangement with the Corporation or an Affiliate (excluding any Basic Disability Plan) to the extent it provides disability benefits. 1.19 "Other Retirement Income" means (A)(i) the Social Security retirement benefit that the Participant or Vested Former Participant is entitled to receive under the Federal Social Security Act as of the date of his Retirement or, (ii) if the Participant or Vested Former Participant is not eligible to receive a Social Security retirement benefit commencing on such date, the Social Security retirement benefit he is entitled to receive at the earliest age he is eligible to receive such a benefit, discounted to the date his Benefit under the Plan actually commences, using the actuarial assumptions then in use under the relevant Basic Plan, assuming for purposes of (i) and (ii) above that for years prior to the Participant's employment with the Corporation and for years following the Participant's termination of employment with the Corporation up until the Participant attains age 62, the Participant earned compensation so as to accrue the maximum Social Security benefits, and (B) the retirement income payable to a Participant or Vested Former Participant from the following sources: (a) any retirement benefits equalization plan of the Corporation or an Affiliate or any former Affiliate, the purpose of which is to provide the Participant or Vested Former Participant with the benefits he is precluded from receiving under any relevant Basic Plan as a result of limitations under the Internal Revenue Code; and 6 (b) any supplemental executive retirement plan of any Affiliate; and (c) any other contract, agreement or other arrangement with the Corporation or an Affiliate (excluding any Basic Plan and any defined contribution plan intended to meet the requirements of Section 401(a) of the Code) to the extent it provides retirement or pension benefits. 1.20 "Participant" means an employee of the Corporation or an Affiliate who becomes a participant in the Plan pursuant to Section 2 and has not been removed pursuant to Section 2.2. 1.21 "Plan" means this Supplemental Executive Benefit Plan of The Dun & Bradstreet Corporation, as amended from time to time. 1.22 "Potential Change in Control" means: (a) the Corporation enters into an agreement, the consummation of which would result in the occurrence of a Change in Control of the Corporation; (b) any person (including the Corporation) publicly announces an intention to take or to consider taking actions which if consummated would constitute a Change in Control of the Corporation; (c) any person, other than a trustee or their fiduciary holding securities under an employee benefit plan of the Corporation (or a Corporation owned, directly or indirectly, by the stockholders of the Corporation in substantially the same proportions as their ownership of stock of the Corporation), who is or becomes the beneficial owner, directly or indirectly, of securities of the Corporation representing 9.5% or more of the combined voting power of the Corporation's then outstanding securities, increases his beneficial ownership of such securities by 5% or more over the percentage so owned by such person; or 7 (d) the Board adopts a resolution to the effect that, for purposes of this Plan, a Potential Change in Control of the Corporation has occurred. 1.23 "Retirement" means the termination, other than at death, of a Participant's or Vested Former Participant's employment with the Corporation or an Affiliate (i) after reaching age 55 and completing ten years of Vesting Service, or (ii) immediately following the cessation of the payment of Disability Benefits under the Plan to such Participant or Vested Former Participant while he is still disabled, as such term is defined under the Basic Disability Plan. 1.24 "Retirement Benefit" means the benefits provided to Participants and Vested Former Participants pursuant to Section 4 of the Plan. 1.25 "Special Election" means an election as to the form of benefit payment made pursuant to Section 4.6 of the Plan. 1.26 "Surviving Spouse" means the spouse of a deceased Participant or Vested Former Participant to whom such Participant or Vested Former Participant is legally married immediately preceding such Participant or Vested Former Participant's death. 1.27 "Surviving Spouse's Benefits" mean the benefits provided to a Participant's or Vested Former Participant's Surviving Spouse pursuant to Section 6 of the Plan. 1.28 "Vested Former Participant" means an employee who completed five or more years of Credited Service at the time his employment with the Corporation or an Affiliate terminated or at the time he was removed, upon written notice by the Chief Executive Officer of the Corporation and with the approval of the Committee, from further participation in the Plan. 1.29 The masculine gender, where appearing in the Plan, will be deemed to include the feminine gender, and the singular may include the plural, unless the context clearly indicates to the contrary. 8 SECTION 2 Eligibility and Participation SECTION 2.1 All key management employees of the Corporation and its Affiliates who are responsible for the management, growth or protection of the business of the Corporation and its Affiliates, who are designated by the Chief Executive Officer of the Corporation in writing, are eligible, upon approval by the Committee, for participation in the Plan as of the effective date of such designation. SECTION 2.2 A Participant's participation in the Plan shall terminate upon termination of his or her employment. Prior to termination of employment, a participant may be removed, upon written notice by the Chief Executive Officer of the Corporation and with the approval of the Committee, from further participation in the Plan. As of the date of termination or removal, no further benefits shall accrue to such individual. SECTION 3 Eligibility For Benefits SECTION 3.1 Each Participant or Vested Former Participant is eligible for an annual Retirement Benefit under this Plan upon Retirement, or upon termination of employment with the Corporation before Retirement after completing five or more years of Credited Service. SECTION 3.2 Each Participant is eligible to commence receiving a Disability Benefit under this Plan upon the actual or deemed commencement of benefits under the relevant Basic Disability Plan. Notwithstanding the above, a Participant may not receive a Disability Benefit if he has not previously enrolled for the maximum disability insurance coverage available under the relevant Basic Disability Plan. SECTION 3.3 Notwithstanding any other provision of the Plan to the contrary, no benefits or no further benefits, as the case may be, shall be paid to a Participant, Vested Former Participant or Surviving Spouse if the Committee reasonably determines that such Participant or Vested Former Participant has: (a) To the detriment of the Corporation or any Affiliate, directly or indirectly acquired, without the prior written consent of the Committee, an interest in any other company, 9 firm, association, or organization (other than an investment interest of less than 1% in a publicly-owned company or organization), the business of which is in direct competition with any business of the Corporation or an Affiliate; (b) To the detriment of the Corporation or any Affiliate, directly or indirectly competed with the Corporation or any Affiliate as an owner, employee, partner, director or contractor of a business, in a field of business activity in which the Participant or Vested Former Participant has been primarily engaged on behalf of the Corporation or any Affiliate or in which he has considerable knowledge as a result of his employment by the Corporation or any Affiliate, either for his own benefit or with any person other than the Corporation or any Affiliate, without the prior written consent of the Committee; or (c) Been discharged from employment with the Corporation or any Affiliate for "Cause". "Cause" shall include the occurrence of any of the following events or such other dishonest or disloyal act or omission as the Committee reasonably determines to be "cause": (i) The Participant or Vested Former Participant has misappropriated any funds or property of the Corporation or any Affiliate or committed any other act of willful malfeasance or willful misconduct in connection with his or her employment; (ii) The Participant or Vested Former Participant has, without the prior knowledge or written consent of the Committee, obtained personal profit as a result of any transaction by a third party with the Corporation or any Affiliate; or (iii) The Participant or Vested Former Participant has sold or otherwise imparted to any person, firm, or corporation the names of the customers of the Corporation or any Affiliate or any confidential records, data, formulae, specifications and other trade secrets or other information of value to the Corporation or any Affiliate derived by his or her association with the Corporation or any Affiliate. (iv) The Participant or Vested Former Participant fails, on a continuing basis, to perform such duties as are requested by any employee to whom the Participant or Vested Former Participant reports or the Board; or 10 (v) The Participant or Vested Former Participant commits any felony or any misdemeanor involving moral turpitude. In any case described in this Section 3.3, the Participant, Vested Former Participant or Surviving Spouse shall be given prior written notice that no benefits or no further benefits, as the case may be, will be paid to such Participant, Vested Former Participant or Surviving Spouse. Such written notice shall specify the particular act(s), or failures to act, on the basis of which the decision to terminate benefits has been made. SECTION 3.4 (a) Notwithstanding any other provision of the Plan to the contrary, a Participant or Vested Former Participant who receives in a lump sum any portion of his Retirement Benefit pursuant to an Election or Special Election shall receive such lump sum portion of his Retirement Benefit subject to the condition that if such Participant or Vested Former Participant engages in any of the acts described in clause (i) or (ii) of Section 3.3, then such Participant or Vested Former Participant shall within 60 days after written notice by the Corporation repay to the Corporation the amount described in Section 3.4(b). (b) The amount described under this Section 3.4(b) shall equal the amount, as determined by the Committee, of the Participant's or Vested Former Participant's lump sum benefit paid under this Plan to which such Participant or Vested Former Participant would not have been entitled, if such lump sum benefit had instead been payable in the form of an annuity under this Plan and such annuity payments were subject to the provisions of Section 3.3. SECTION 4 Amount and Form of Retirement Benefits SECTION 4.1 The Retirement Benefit provided by the Plan is designed to provide each Participant and Vested Former Participant with an annual pension from the Plan and certain other sources equal to his Retirement Benefit as hereinafter specified. Thus, the Retirement Benefits described hereunder as payable to Participants and Vested Former Participants will be offset by retirement benefits payable from sources outside the Plan as specified herein. SECTION 4.2 (a) The Retirement Benefit of a Participant or Vested Former Participant upon Retirement shall be an annual benefit equal to (i) for a Participant or Vested 11 Former Participant who had attained age fifty and had been credited with at least ten years of Vesting Service as of January 15, 1997 or a Participant or Vested Former Participant whose age plus years of Vesting Service is equal to or greater than 70 as of January 15, 1997, or other individuals designated by the Chief Executive Officer; 50% of his Average Final Compensation with respect to his first ten years of Credited Service, plus 2% of such Average Final Compensation for each year of Credited Service in excess of ten years of Credited Service, but not to exceed fifteen years of Credited Service, offset by his Other Retirement Income and his Basic Plan Benefit. A full month is credited for each completed and partial month of age and Credited Service; (ii) for all other Participants or Vested Former Participants; 40% of his Average Final Compensation with respect to his first ten years of credited service, plus 2% of Average Final Compensation for each year of Credited Service in excess of ten years of Credited Service, but not to exceed twenty years of Credited Service, offset by his Other Retirement Income and his Basic Plan Benefit. A full month is credited for each completed and partial month of Credited Service. If such a Participant or Vested Former Participant retires before age 60 without the Corporation's consent, his Retirement Benefit shall be reduced by 3% for each year or fraction thereof that Retirement commenced prior to reaching age 60. (b) Any portion of the Retirement Benefit provided under this Section 4.2 payable in the form of an annuity pursuant to Section 4.4 shall be payable in monthly installments and will commence on the first day of the calendar month coinciding with or next following the day the Participant or Vested Former Participant retires, and any portion of such Retirement Benefit payable in a lump sum pursuant to Section 4.4 shall be paid on the date that is sixty days after the date when annuity payments under this Section 4.2 commence, or would commence if any portion of the Retirement Benefit were payable in the form of an annuity, or as soon as practicable thereafter, provided the Committee has approved any such lump sum payments. SECTION 4.3 (a) Subject to Section 4.3(c), the Retirement Benefit of a Participant or Vested Former Participant who terminates employment with the Corporation with five or more years of Credited Service before he is eligible to retire under the relevant Basic Plan shall be an annual benefit equal to (i) for a Participant or Vested Former Participant who had 12 attained age fifty and had been credited with at least ten years of Vesting Service as of January 15, 1997 or a Participant or Vested Former Participant whose age plus years of Vesting Service is equal to or greater than 70 as of January 15, 1997, or other individuals designated by the Chief Executive Officer; 25% of his Average Final Compensation for his first five years of Credited Service, plus 5% of Average Final Compensation for each additional year of Credited Service between six and ten years of Credited Service, plus 2% of Average Final Compensation for each additional year of Credited Service from 11 to 15 years, offset by his Other Retirement Income and his Basic Plan Benefit. A full month is credited for each completed and partial month of Credited Service, and (ii) for all other Participants or Vested Former Participants; 20% of his Average Final Compensation with respect to his first five years of Credited Service, plus 4% of Average Final Compensation for each additional year of Credited Service between six and ten years of Credited Service, plus 2% of Average Final Compensation for each additional year of Credited Service from 11 to 20 years, offset by his Other Retirement Income and his Basic Plan Benefit. A full month is credited for each completed and partial month of Credited Service. (b) Any portion of the Retirement Benefit provided under this Section 4.3 payable in the form of an annuity pursuant to Section 4.4 shall be payable in monthly installments and will commence on the first day of the calendar month coinciding with or next following the day the Participant or Vested Former Participant reaches age 55 or the date of his termination, if later, and any portion of such Retirement Benefit payable in a lump sum pursuant to Section 4.4 shall be paid on the date that is 60 days after the date when annuity payments under this Section 4.3 commence, or would commence if any portion of the Retirement Benefit were payable in the form of an annuity, or as soon as practicable thereafter, provided the Committee has approved any such lump sum payments. (c) If a Participant or Vested Former Participant terminates employment with the Corporation without the Corporation's consent, and the payment of his Retirement Benefit commences, or would commence if it were payable in the form of an annuity, before he reaches age 60, his Retirement Benefit shall be reduced by 10% for each year or fraction thereof that the payment of his Retirement Benefit commences, or would commence if it were payable in the form of an annuity, prior to his reaching age 60. 13 SECTION 4.4 (a) Except as provided under Section 4.4(b) or Section 4.4(c), a Retirement Benefit under this Plan shall be payable to a Participant or Vested Former Participant in the form of a straight life annuity and without regard to any optional form of benefits elected under the Basic Plan. (b) If a Participant or a Vested Former Participant makes an Election while he is a Participant pursuant to Section 4.5 or a Special Election pursuant to Section 4.6 and such Election or Special Election becomes effective (i) prior to the date such Participant or such Vested Former Participant retires or terminates employment with the Corporation or an Affiliate and (ii) while he was still a Participant, a Retirement Benefit under this Plan shall be payable to such Participant or such Vested Former Participant in the form or combination of forms of payment elected pursuant to such Election or Special Election under Section 4.5 or Section 4.6, as the case may be, and without regard to any optional form of benefit elected under the Basic Plan. Any lump sum distribution of a Participant's or Vested Former Participant's Retirement Benefit under the Plan shall fully satisfy all present and future Plan liability with respect to such Participant or Vested Former Participant for such portion or all of such Retirement Benefit so distributed. (c) Notwithstanding any Election or Special Election made under Section 4.5 or 4.6, if the lump sum value, determined in the same manner as provided under Section 4.5(a), of a Participant's or Vested Former Participant's Retirement Benefit is $10,000 or less at the time such Retirement Benefit is payable under this Plan, such benefit shall be payable as a lump sum. (d) If the Retirement Benefit under this Plan is payable to a Participant or Vested Former Participant in a different form and/or at a different time than his Other Retirement Income or his Basic Plan Benefits, the offset provided in this Plan for such Participant's or Vested Former Participant's Other Retirement Income and Basic Plan Benefit shall be converted, using actuarial assumptions that are reasonable and appropriate and in accordance with applicable law at the time the benefit under this Plan is determined, to the extent required as follows, but solely for purposes of calculating the amount of such offset: (i) a percentage of the benefits to be offset equal to the percentage of such Participant's or Vested Former Participant's benefits payable in the form of an 14 annuity under this Plan shall be actuarially converted to the extent required into the form of a straight life annuity, commencing at the time such benefits payable under this Plan commence or on the date such Participant or Vested Former Participant would first become eligible for the payment of such benefits under this Plan, if earlier; and (ii) the balance, if any, of the benefits to be offset shall be actuarially converted to a lump sum payment payable on the date which is 60 days after the date described in Section 4.4(d)(i). SECTION 4.5 (a) A Participant may elect, on a form supplied by the Committee, to receive all, none, or a specified portion, as provided in Section 4.5(c), of his Retirement Benefit under the Plan in a lump sum and to receive any balance of such Retirement Benefit in the form of an annuity; provided that any such Election shall be effective for purposes of this Plan only if the conditions of Section 4.5(b) are satisfied. A Participant may elect a payment form different than the payment form previously elected by him under this Section 4.5(a) by filing a revised election form; provided that any such new Election shall be effective only if the conditions of Section 4.5(b) are satisfied with respect to such new Election. Any prior Election made by a Participant that has satisfied the conditions of Section 4.5(b) remains effective for purposes of the Plan until such Participant has made a new Election satisfying the conditions of Section 4.5(b). The amount of any portion of a Participant's or a Vested Former Participant's Retirement Benefit payable as a lump sum under this Section 4.5 will equal the present value of such portion of the Retirement Benefit, and such present value shall be determined (i) based on a discount rate equal to 85% of the average of the 15-year non-callable U.S. Treasury bond yields as of the close of business on the last business day of each of the three months immediately preceding the date the annuity value is determined and (ii) using the 1983 Group Annuity Mortality Table. (b) A Participant's Election under Section 4.5(a) becomes effective only if the following conditions are satisfied: (i) such Participant remains in the employment of the Corporation or an Affiliate, as the case may be, for the full twelve calendar months immediately following the Election Date of such Election, except in case of death or disability of such 15 Participant as provided in Section 4.5(d) and (ii) such Participant complies with the administrative procedures set forth by the Committee with respect to the making of the Election. (c) A Participant making an election under Section 4.5(a) may specify the portion of his Retirement Benefit under the Plan to be received in a lump sum as follows: 0 percent, 25 percent, 50 percent, 75 percent or 100 percent. (d) In the event a Participant who has made an Election pursuant to Section 4.5(a) dies or becomes totally and permanently disabled for purposes of the relevant Basic Disability Plan while employed by the Corporation or an Affiliate and such death or total and permanent disability occurs during the twelve-calendar-month period, as described under Section 4.5(b)(i), immediately following the Election Date of such Election, the condition under Section 4.5(b)(i) shall be deemed satisfied with respect to such Participant. SECTION 4.6 (a) Any Participant (except the Chairman of the Board of Directors of the Corporation on December 21, 1994) who as of December 31, 1994 (i) is age 54 or older and (ii) has at least 4 years of Credited Service may elect, on a form supplied by the Committee, to receive all, none, or a specified portion, in the same percentages as described in Section 4.5(c), of his Retirement Benefit under the Plan in a lump sum and to receive any balance of such Retirement Benefit in the form of an annuity; provided that any such Special Election shall be effective for purposes of this Plan only if such Participant remains in employment with the Corporation or an Affiliate, as the case may be, for the one calendar month immediately following the Election Date, except in the case of death or total and permanent disability as provided in Section 4.6(b), and complies with the administrative procedures set forth by the Committee for making such Special Election; and provided further that the Election Date with respect to any such Special Election is not later than January 31, 1995. The amount of any portion of a Participant's or a Vested Former Participant's Retirement Benefit payable as a lump sum under this Section 4.6 will equal the present value of such portion of the Retirement Benefit, and such present value shall be determined (i) based on a discount rate equal to the average of 85% of the 15-year non-callable U.S. Treasury bond yields as of the close of business on the last business day of each of the three months immediately preceding the date the annuity value is determined and (ii) using the 1993 Group Annuity Mortality Table. 16 (b) In the event a Participant who has made a Special Election pursuant to Section 4.6(a) dies or becomes totally and permanently disabled for purposes of the relevant Basic Disability Plan while employed by the Corporation or an Affiliate and such death or total and permanent disability occurs during the one-calendar-month period, as described under Section 4.6(a) immediately following the Election Date of such Special Election, the condition under Section 4.6(a) requiring that such Participant remain employed with the Corporation or an Affiliate, as the case may be, for the one-calendar-month period immediately following the Election Date of such Election shall be deemed satisfied. SECTION 4.7 Subject to Section 3.1, Section 3.3, Section 3.4 and the foregoing limitations of this Section 4, the Retirement Benefit of each Participant and Vested Former Participant under the Plan shall at all times be 100% vested and nonforfeitable. SECTION 4.8 (a) Subject to Section 4.8(c), the Corporation shall indemnify each Participant, Vested Former Participant and Surviving Spouse who receives any portion of a Retirement Benefit or Surviving Spouse's Benefit under this Plan in the form of an annuity for any interest and penalties that may be assessed by the U.S. Internal Revenue Service (the "Service") with respect to U.S. Federal income tax on such benefits (payable under the Plan in the form of an annuity) upon final settlement or judgment with respect to any such assessment in favor of the Service, provided the basis for the assessment is that the amendment of the Plan to provide for the Election or the Special Election causes the Participant, Vested Former Participant or Surviving Spouse, as the case may be, to be treated as being in constructive receipt of such benefits prior to the time when such benefits are actually payable under the Plan. (b) In case any assessment shall be made against a Participant, Vested Former Participant or Surviving Spouse as described in Section 4.8(a), such Participant, Vested Former Participant or Surviving Spouse, as the case may be (the "indemnified party"), shall promptly notify the Corporation's Treasurer in writing and the Corporation, upon request of such indemnified party, shall select and retain an accountant or legal counsel reasonably satisfactory to the indemnified party to represent the indemnified party in connection with such assessment and shall pay the fees and expenses of such an accountant or legal counsel related to such representation, and the Corporation shall have the right to determine how and when such 17 assessment by the Service should be settled, litigated or appealed. In connection with any such assessment, any indemnified party shall have the right to retain his own accountant or legal counsel, but the fees and expenses of such accountant or legal counsel shall be at the expense of such indemnified party unless the Corporation and the indemnified party shall have mutually agreed to the retention of such accountant or legal counsel. (c) The Corporation shall not be liable for any payments under this Section 4.8 with respect to any assessment described in Section 4.8(a) if a Participant, Vested Former Participant or Surviving Spouse against whom such assessment is made has not promptly notified or allowed the Corporation to participate with respect to such assessment in the manner described in Section 4.8(b) or, following demand by the Corporation, has not made the deposit to avoid additional interest or penalties as described in Section 4.8(d) or has agreed to, or otherwise settled with the Service with respect to, such assessment without the Corporation's written consent, provided, however, (i) if such assessment is settled with such consent or if there is a final judgment for the Service, (ii) the Corporation has been notified and allowed to participate in the manner as provided in Section 4.8(b) and (iii) such Participant, Vested Former Participant or Surviving Spouse has made any required deposit to avoid additional interest or penalty as described in Section 4.8(d), the Corporation agrees to indemnify the indemnified party to the extent set forth in this Section 4.8. (d) In the event a final settlement or judgment with respect to an assessment as described under Section 4.8 has been made against a Participant, Vested Former Participant or Surviving Spouse, such Participant, Vested Former Participant or Surviving Spouse may elect to receive a portion or all of his Retirement Benefit or Surviving Spouse's Benefit that is otherwise payable as an annuity under the Plan in the form of a lump sum in accordance with procedures as the Committee may set forth, and such lump sum distribution will be made as soon as practicable after any such election. At the time such assessment is made against such Participant, Vested Former Participant or Surviving Spouse (the "assessed party") and prior to any final settlement or judgment with respect to such assessment, if so directed by the Corporation, such assessed party shall, as a condition to receiving any indemnity under this Section 4.8, as soon as practicable after notification of such assessment make a deposit with the Service to avoid any additional 18 interest or penalties with respect to such assessment and, upon the request of such assessed party, the Corporation shall lend, or arrange for the lending to, such assessed party a portion of his remaining Retirement Benefit or Surviving Spouse's Benefit under the Plan, not to exceed the lump sum value of such benefit under the Plan, determined using the actuarial assumptions set forth in Section 4.5(a), solely for purposes of providing the assessed party with funds to make a deposit with the Service to avoid any additional interest or penalties with respect to such assessment. SECTION 5 Disability Benefits SECTION 5.1 The Disability Benefit provided by the Plan is designed to provide each Participant with a disability benefit from the Plan and certain other sources equal to his Disability Benefit as hereinafter specified. Thus, Disability Benefits described hereunder as payable to Participants will be offset by disability benefits payable from sources outside the Plan (other than benefits payable under the relevant Basic Disability Plan) as specified herein. SECTION 5.2 In the event that a Participant has become totally and permanently disabled for the purposes of the relevant Basic Disability Plan, an annual Disability Benefit shall be payable in monthly installments under this Plan during the same period as disability benefits are actually or deemed paid by the relevant Basic Disability Plan, in an amount equal to 60% of the Participant's Basic Earnings. Such Disability Benefit shall be offset by the Participant's Other Disability Income, if any. A Participant's Disability Benefits shall also be offset by the Participant's Basic Plan Benefit, if the Participant's Basic Disability Plan Benefit does not already include such an offset. SECTION 6 Surviving Spouse's Benefits SECTION 6.1 Upon the death of a Participant or Vested Former Participant, while employed by the Corporation or an Affiliate, who has completed at least ten years of Credited Service with the Corporation or an Affiliate and has attained age 55, his Surviving Spouse will be entitled to a Surviving Spouse's Benefit under this Plan equal to 50% of the Retirement Benefit that would have been provided from the Plan had the Participant or Vested 19 Former Participant retired from the Corporation or an Affiliate with the Corporation's consent, on the date of his death. SECTION 6.2 Upon the death of a Participant or Vested Former Participant, while employed by the Corporation or an Affiliate, who has completed at least five years of Credited Service with the Corporation or an Affiliate and has not attained age 55, his Surviving Spouse will be entitled to a Surviving Spouse's Benefit under this Plan equal to 50% of the Retirement Benefit that would have been provided from the Plan had the Participant or Vested Former Participant terminated employment with the Corporation or an Affiliate on the date of his death with the Corporation's consent, and elected to have the payment of his Basic Plan Benefit commence at age 55 in the form of a straight life annuity. SECTION 6.3 Upon the death of a Vested Former Participant while no longer employed by the Corporation or an Affiliate, who has not attained age 55, his Surviving Spouse will be entitled to a Surviving Spouse's Benefit under this Plan equal to 50% of the Retirement Benefit that would have been provided from the Plan to the Vested Former Participant at age 55, taking into account whether the Corporation consented to the termination. SECTION 6.4 Upon the death of a Participant or Vested Former Participant, while employed by the Corporation or an Affiliate, who has completed at least five, but less than ten years of Credited Service with the Corporation or an Affiliate and has attained age 55, his Surviving Spouse will be entitled to a Surviving Spouse's Benefit under this Plan equal to 50% of the Retirement Benefit that would have been provided from the Plan had the Participant or Vested Former Participant terminated employment with the Corporation or an Affiliate on the date of his death with the Corporation's consent and his Basic Plan Benefit commenced immediately in the form of a straight life annuity. SECTION 6.5 Upon the death of a Vested Former Participant while he is receiving Retirement Benefits, his Surviving Spouse shall receive a Surviving Spouse's Benefit equal to 50% of the Retirement Benefit he was receiving at the time of his death. SECTION 6.6 Except as provided in Section 6.8, the Surviving Spouse's Benefit provided under Section 6.1, 6.4 and 6.5 will be payable monthly, will commence as of the first day of the month coincident with or next following the month in which the Participant or Vested 20 Former Participant dies, and will continue until the first day of the month in which the Surviving Spouse dies. SECTION 6.7 Except as provided in Section 6.8, the Surviving Spouse's Benefit provided under Section 6.2 and 6.3 will be payable monthly, will commence as of the first day of the month coincident with or next following the month in which the Participant or Vested Former Participant would have attained age 55, and will continue until the first day of the month in which the Surviving Spouse dies. SECTION 6.8 (a) If a Participant or a Vested Former Participant while he was a Participant has made an Election under Section 4.5 or a Special Election under Section 4.6 and such Election or Special Election is effective on the date of such Participant's or Vested Former Participant's death, the Surviving Spouse's Benefit payable to a Surviving Spouse of such Participant or Vested Former Participant will be payable in the form or combination of forms of payment so elected by such Participant or Vested Former Participant pursuant to such Election or Special Election. The amount of any lump sum payment under this Section 6.8 shall be the present value of the applicable portion of the Surviving Spouse's Benefit payable under the Plan, and such present value shall be determined using the actuarial assumptions set forth in Section 4.5(a). Any lump sum distribution of a Surviving Spouse's Surviving Spouse's Benefit under the Plan shall fully satisfy all present and future Plan liability with respect to such Surviving Spouse for such portion or all of such Surviving Spouse's Benefit so distributed. (b) Notwithstanding any Election or Special Election made under Section 4.5 or 4.6, if the lump sum value, determined in the same manner as provided under Section 4.5(a), of a Surviving Spouse's Benefit is $10,000 or less at the time such Surviving Spouse's Benefit is payable under this Plan, such benefit shall be payable as a lump sum. (c) Any portion of a Surviving Spouse's Benefit provided under Section 6.1, 6.4 and 6.5 which is payable as an annuity shall be paid in the manner and at such time as set forth in Section 6.6, and any such benefit which is payable as a lump sum shall be paid 60 days after the date when annuity payments commence, or would commence if any portion of such Surviving Spouse's Benefit were payable as an annuity as set forth in Section 6.6. 21 (d) Any portion of a Surviving Spouse's Benefit provided under Section 6.2 and 6.3 which is payable as an annuity shall be paid in the manner and at such time as set forth in Section 6.7, and any such benefit which is payable as a lump sum shall be paid 60 days after the date when annuity payments commence, or would commence if any portion of such Surviving Spouse's Benefit were payable as an annuity, as set forth in Section 6.7. SECTION 6.9 Notwithstanding the foregoing provisions of Section 6, the amount of a Surviving Spouse's Benefit shall be reduced by one percentage point for each year (including a half year or more as a full year) in excess of ten that the age of the Participant or Vested Former Participant exceeds the age of the Surviving Spouse. SECTION 7 Committee SECTION 7.1 The Committee shall be responsible for the administration of the Plan and may delegate to any management committee, employee, director or agent its responsibility to perform any act hereunder, including without limitation those matters involving the exercise of discretion, provided that such delegation shall be subject to revocation at any time at its discretion. The Committee shall have the authority to interpret the provisions of the Plan and construe all of its terms, to adopt, amend, and rescind rules and regulations for the administration of the Plan, and generally to conduct and administer the Plan and to make all determinations in connection with the Plan as may be necessary or advisable. All such actions of the Committee shall be conclusive and binding upon all Participants, Former Participants, Vested Former Participants and Surviving Spouses. SECTION 8 Miscellaneous SECTION 8.1 The Board may, in its sole discretion, terminate, suspend or amend this Plan at any time or from time to time, in whole or in part. However, no termination, suspension or amendment of the Plan may adversely affect a Participant's or Vested Former Participant's vested benefit under the Plan, or a retired Participant's or Vested Former Participant's right or the right of a Surviving Spouse to receive or to continue to receive a benefit 22 in accordance with the Plan as in effect on the date immediately preceding the date of such termination, suspension or amendment. SECTION 8.2 Nothing contained herein will confer upon any Participant, Former Participant or Vested Former Participant the right to be retained in the service of the Corporation or any Affiliate, nor will it interfere with the right of the Corporation or any Affiliate to discharge or otherwise deal with Participants, Former Participants or Vested Former Participants with respect to matters of employment without regard to the existence of the Plan. SECTION 8.3 Notwithstanding anything herein to the contrary, at any time following the termination of service of a Participant or Vested Former Participant, the Committee may authorize, under uniform rules applicable to all Participants, Vested Former Participants and Surviving Spouses under the Plan, a lump sum distribution of a Participant's, Vested Former Participant's and/or Surviving Spouse's Retirement Benefit or Surviving Spouse's Benefit under the Plan in an amount equal to the present value of such Retirement Benefit or Surviving Spouse's Benefit, using the actuarial assumptions then in use for funding purposes under The Dun & Bradstreet Corporation Retirement Account, in full satisfaction of all present and future Plan liability with respect to such Participant, Vested Former Participant and/or Surviving Spouse, if the amount of such present value is less than $250,000. Such lump sum distribution may be made without the consent of the Participant, Vested Former Participant or Surviving Spouse. SECTION 8.4 (a) Notwithstanding anything in this Plan to the contrary, if a Participant has less than five years of Credited Service at the time of a Change in Control, and as a result of the Change in Control, and before he completes five years of Credited Service, (i) the Plan is terminated, (ii) the Participant is removed from further participation in the Plan, or (iii) the Participant is terminated as a result of action initiated directly or indirectly by the Corporation or any Affiliate, such Participant shall be entitled to a Benefit of 20% of his Average Final Compensation and the Corporation will remain obligated to pay all benefits under the Plan. (b) Notwithstanding anything in this Plan to the contrary, upon the occurrence of a Change in Control, (i) no reduction shall be made in a Participant's or Vested Former Participant's Retirement Benefit, notwithstanding his termination of employment or 23 Retirement prior to age 60 without the Corporation's consent, (ii) the provisions of Section 3.3(i) and (ii) shall not apply to any Participant, Vested Former Participant or Surviving Spouse, (iii) each Participant and Vested Former Participant already receiving a Retirement Benefit under the Plan shall receive a lump sum distribution of his unpaid Retirement Benefit and, if he is married, his Surviving Spouse's Benefit under the Plan within 30 days of the Change of Control in an amount equal to the present value of such Retirement Benefit and Surviving Spouse's Benefit in full satisfaction of all present and future Plan liability with respect to such Participant, Vested Former Participant and Surviving Spouse, if any, and each Surviving Spouse already receiving a Surviving Spouse's Benefit under the Plan shall receive a lump sum distribution of his unpaid Surviving Spouse's Benefit at the same time in an amount equal to the present value of such Surviving Spouse's Benefit in full satisfaction of Plan liability to such Surviving Spouse, (iv) each Vested Former Participant who is not already receiving a Retirement Benefit under the Plan shall receive a lump sum distribution of his unpaid Retirement Benefit and, if he is married, his Surviving Spouse's Benefit within 30 days of the Change in Control in an amount equal to the present value of such Retirement Benefit and Surviving Spouse's Benefit, and each Surviving Spouse of either a Vested Former Participant or a Participant with five or more years of Credited Service who is not already receiving a Surviving Spouse's Benefit under the Plan shall receive a lump sum distribution of his unpaid Surviving Spouse's Benefit at the same time in amount equal to the present value of such Surviving Spouse's Benefit, (v) each Participant with less than five years of Credited Service who is entitled to a benefit under Section 8.4(a) shall receive a lump sum distribution of the present value of such Retirement Benefit within 30 days from the earlier of the date the Plan is terminated, the date he is removed from further participation in the Plan, or the date his employment with the Corporation is terminated, and of his Surviving Spouse's Benefit based upon the amount of such Retirement Benefit if he is married on the applicable date, and (vi) each Participant who is not included in (v) above and who is not already receiving a Retirement Benefit under the Plan shall receive (a) within 30 days of the later to occur of the date of such Change in Control or the date he completes five years of Credited Service a lump sum distribution of the present value of his accrued Retirement Benefit under the Plan as of the applicable date and, if he is married on such date, the present value of his Surviving Spouse's 24 Benefit, and (b) within 30 days from the earliest of the date of his Retirement or termination of employment with the Corporation, the date the Plan is terminated or the date he is removed from further participation in the Plan, a lump sum distribution of the present value of his additional Retirement Benefit accrued after the applicable event in (a) computed as of the applicable date herein set forth in (b) and, if he is married on such applicable date, the present value of his surviving Spouse's Benefit. In determining the amount of the lump sum distributions to be paid under this Section 8.4, the following actuarial assumptions shall be used: (i) the interest rate used shall be the interest rate used by the Pension Benefit Guaranty Corporation for determining the value of immediate annuities as of January 1st of either the year of the occurrence of the Change in Control or the Participant's retirement or termination of employment, whichever is applicable, (ii) the 1983 Group Annuity Mortality Table shall be used; and (iii) it shall be assumed that all Participants retired or terminated employment with the Corporation on the date of the occurrence of the Change in Control and with the Corporation's consent for purposes of determining the amount of the lump sum distribution to be paid upon the occurrence of the Change in Control. SECTION 8.5 (a) The Plan is unfunded, and the Corporation will make Plan benefit payments solely on a current disbursement basis, provided, however, that the Corporation reserves the right to purchase insurance contracts, which may or may not be in the name of a Participant or Vested Former Participant, or establish one or more trusts to provide alternative sources of benefit payments under this Plan, provided, further, however, that upon the occurrence of a "Potential Change in Control" the appropriate officers of the Corporation are authorized to make such contributions to such trust or trusts as are necessary to fund the lump sum distributions to Plan Participants required pursuant to Section 8.4 of this Plan in the event of a Change in Control. In determining the amount of the necessary contribution to the trust or trusts in the event of a Potential Change in Control, the following actuarial assumptions shall be used: (i) the interest rate used shall be the interest rate used by the Pension Benefit Guaranty Corporation for determining the value of immediate annuities as of January 1st of the year of the occurrence of the Potential Change in Control, (ii) the 1983 Group Annuity Mortality Table shall be used; and (iii) it shall be assumed that all Participants will retire or terminate employment 25 with the Corporation as soon as practicable after the occurrence of the Potential Change in Control and with the Corporation's consent. The existence of any such insurance contracts, trust or trusts shall not relieve the Corporation of any liability to make benefit payments under this Plan, but to the extent any benefit payments are made from any such insurance contract in the name of the Corporation or any Affiliate or from any such trust, such payment shall be in satisfaction of and shall reduce the Corporation's liabilities under this Plan. Further, in the event of the Corporation's bankruptcy or insolvency, all benefits accrued under this Plan shall immediately become due and payable in a lump sum and all Participants, Vested Former Participants and Surviving Spouses shall be entitled to share in the Corporation's assets in the same manner and to the same extent as general unsecured creditors of the Corporation. (b) Members and Vested Former Members shall have the status of general unsecured creditors of the Corporation and this Plan constitutes a mere promise by the Corporation to make benefit payments at the time or times required hereunder. It is the intention of the Corporation that this Plan be unfunded for tax purposes and for purposes of Title I of the Employee Retirement Income Security Act of 1974, as amended and any trust created by the Corporation in meeting its obligations under the Plan shall meet the requirements necessary to retain such unfunded status. SECTION 8.6 If any dispute arises under the Plan between the Corporation and a Participant, Former Participant, Vested Former Participant or Surviving Spouse (collectively or individually referred to as "Participant" in this Section 8.6) as to the amount or timing of any benefit payable under the Plan or as to the persons entitled thereto, such dispute shall be resolved by binding arbitration proceedings initiated by either party to the dispute in accordance with the rules of the American Arbitration Association and the results of such proceedings shall be conclusive on both parties and shall not be subject to judicial review. If the disputed benefits involve the benefits of a Participant who is no longer employed by the Corporation or any Affiliate, the Corporation shall pay or continue to pay the benefits claimed by the Participant until the results of the arbitration proceedings are determined unless such claim is patently without merit; provided, however, that if the results of the arbitration proceedings are adverse to the Participant, then in such event the recipient of the benefits shall be obligated to repay the 26 excess benefits to the Corporation. The Corporation expressly acknowledges that the amounts payable under the Plan are necessary to the livelihood of Participants and their family members and that any refusal or neglect to pay benefits under the preceding sentence prior to the resolution of any dispute shall be prima facie evidence of bad faith on its part and will be conclusive grounds for an arbitration award resulting in an immediate lump sum payment to the Participant, of the Participant's benefits under the Plan then due and payable to him, unless the arbitrator determines that the claim for the disputed benefits was without merit. The amount of such lump sum payment shall be equal to the then actuarial value of such benefits calculated by utilizing the actuarial assumptions then in use for funding purposes under The Dun & Bradstreet Corporation Retirement Account. In addition, in the event of any dispute covered by this Section 8.6 the Corporation agrees to pay the entire costs of any arbitration proceeding or legal proceeding brought hereunder, including the fees and expenses of counsel and pension experts engaged by a Participant and that such expenses shall be reimbursed promptly upon evidence that such expenses have been incurred without awaiting the outcome of the arbitration proceedings; provided, however, that such costs and expenses shall be repaid to the Corporation by the recipient of same if it is finally determined by the arbitrators that the position taken by such person was without merit. SECTION 8.7 To the maximum extent permitted by law, no benefit under the Plan shall be assignable or subject in any manner to alienation, sale, transfer, claims of creditors, pledge, attachment or encumbrances of any kind. SECTION 8.8 The Corporation may withhold from any benefit under the Plan an amount sufficient to satisfy its tax withholding obligations. SECTION 8.9 The Plan is established under and will be construed according to the laws of the State of New York. EX-10.N 13 RESTRICTED STOCK PLAN 1 EXHIBIT 10(n) THE DUN & BRADSTREET CORPORATION RESTRICTED STOCK PLAN FOR NON-EMPLOYEE DIRECTORS (AS AMENDED EFFECTIVE JULY 16, 1997) ---------------------------------------------------------------- (FROZEN 11/1/96) 1. PURPOSES OF THE PLAN The purposes of the Plan are to encourage the Directors of The Dun & Bradstreet Corporation (the "Company") who are not employees or officers of the Company to own shares of the Company's Common Stock, thereby aligning their interests more closely with the interests of other shareholders, to aid the Company in securing and retaining Directors of outstanding ability, and to encourage the highest level of Director performance by providing incentive through the grant of restricted stock awards ("Awards"). 2. STOCK SUBJECT TO THE PLAN The total number of shares of Common Stock of the Company that may be issued under the Plan is 50,000. The shares may consist, in whole or in part, of unissued shares or treasury shares. If any shares awarded under the Plan are reacquired by the Company pursuant to the Plan, such shares may thereafter be reissued under the Plan. 3. ADMINISTRATION The Plan shall be administered by the Executive Compensation and Stock Option Committee (the "Committee") of the Board of Directors. The Committee shall have the authority, consistent with the Plan, to interpret the Plan and any agreements 2 -2- with participants under the Plan governing the terms of Awards ("Award Agreements"), to adopt, amend and rescind rules and regulations for the administration of the Plan and the Awards, and generally to conduct and administer the Plan and to make all determinations in connection therewith which may be necessary or advisable, and all such actions of the Committee shall be binding upon all participants. 4. PARTICIPATION Each member of the Board of Directors from time to time who is neither an officer nor an employee of the Company shall be a participant in the Plan. 5. RESTRICTED STOCK AWARDS Each participant shall be granted an Award of 300 shares of Common Stock on the fourth full New York Stock Exchange trading day following the Company's release of its earnings results for the second quarter of each year, beginning with the year 1994. Awards granted under this Plan shall be subject to the following terms and conditions: (a) The prospective recipient of an Award shall not, with respect to such Award, be deemed to have become a participant or to have any rights with respect to such Award until and unless such recipient shall have executed an Award Agreement or other instrument evidencing the Award and its terms and conditions and delivered a fully executed copy thereof to the Company and otherwise complied with the then applicable terms and conditions under the Plan. (b) Each participant shall be issued a certificate in respect of shares of restricted stock awarded under the Plan. Such certificate shall be registered in the name of the participant, and shall bear an appropriate legend referring to the terms, conditions and restrictions applicable to such Award substantially in the following form: 3 -3- "The transferability of this certificate and the shares of stock represented hereby are subject to the terms and conditions (including forfeiture) of The Dun & Bradstreet Corporation Restricted Stock Plan for Non-Employee Directors and an Agreement entered into between the registered owner and The Dun & Bradstreet Corporation. Copies of such Plan and Agreement are on file in the offices of the Secretary's Department of The Dun & Bradstreet Corporation." (c) All certificates for restricted stock delivered under this Plan shall be subject to such stock transfer orders and other restrictions as the Committee may deem advisable under the rules, regulations and other requirements of the Securities and Exchange Commission, any stock exchange upon which the Company's Common Stock is then listed and any applicable federal or state securities law, and the Committee may cause a legend or legends to be put on any such certificates to make appropriate reference to such restrictions. (d) The Committee may adopt rules which provide that the stock certificates evidencing such shares may be held in custody by a bank or other institution, or that the Company may itself hold such shares in custody until the restrictions thereon shall have lapsed, and may require as a condition of any Award that the participant shall have delivered a stock power endorsed in blank relating to the stock covered by such Award. (e) Recipients of Awards under the Plan are not required to make any payment or provide consideration other than the rendering of services as Directors. 6. RESTRICTIONS AND FORFEITURES The shares of Common Stock awarded pursuant to the Plan shall be subject to the following restrictions and conditions: (a) During a period of five years commencing with the date of an Award (the "Restriction Period"), the participant will not be permitted to sell, transfer, pledge, assign or otherwise dispose of restricted stock awarded pursuant to said Award (except by will or the laws of descent and distribution). (b) Except as provided in Section 6(a), the participant shall have with respect to the restricted stock all of the rights of a shareholder of the Company, including the right to vote the shares and receive dividends and other distributions. 4 -4- (c) Upon a participant's involuntary termination of Board service for cause by Board or shareholder action during the Restriction Period, all shares still subject to restriction shall be forfeited by the participant and will be reacquired by the Company. (d) Upon a participant's retirement, disability, death, or involuntary termination of Board service, except for cause, following a "Change in Control" as defined in Section 7, all restrictions with respect to such participant's restricted stock shall lapse and such participant or such participant's beneficiary shall be entitled to receive (if held in custody by the Company, a bank or other institution) and retain all of the stock subject to the Awards. (e) Upon a participant's resignation or other termination of Board service during the Restriction Period for reasons other than those set forth in Sections 6(c) and (d), a portion of the shares still subject to restriction shall be forfeited by the participant and will be reacquired by the Company. The number of restricted shares of Common Stock forfeited shall be determined by multiplying the number of shares by a fraction, the denominator of which is 60 months and the numerator of which is the number of whole months remaining in the Restriction Period. 7. ADJUSTMENTS UPON CHANGES IN CAPITALIZATION OR OTHER EVENTS Upon changes in the Common Stock of the Company by reason of a stock dividend, stock split, reverse split, recapitalization, merger, consolidation, combination or exchange of shares, separation, reorganization or liquidation, the number and class of shares available under the Plan as to which Awards may be granted and the number and class of shares under each Award shall be correspondingly adjusted by the Committee. Except as otherwise specifically provided in the Award Agreement relating to any Award, in the event of a Change in Control, merger, consolidation, combination, reorganization or other transaction in which the shareholders of the Company will receive cash or securities (other than common stock) or in the event that an offer is made to the holders of Common Stock of the Company to sell or exchange such 5 -5- Common Stock for cash, securities or stock of another corporation and such offer, if accepted, would result in the offeror becoming the owner of (a) at least 50% of the outstanding Common Stock of the Company or (b) such lesser percentage of the outstanding Common Stock which the Committee in its sole discretion determines will materially adversely affect the market value of the Common Stock after the tender or exchange offer, the Committee shall, prior to the shareholders' vote on such transaction or prior to the expiration date of the tender or exchange offer (i) accelerate the termination of the Restriction Period so that all restrictions with respect to a participant's restricted stock shall immediately lapse without regard to any limitations of time or amount otherwise contained in the Plan or the Award Agreement and/or (ii) determine that the Awards shall be adjusted and make such adjustments by substituting for Common Stock of the Company subject to Awards, common stock of the surviving corporation or offeror if such stock of such corporation is publicly traded or, if such stock is not publicly traded, by substituting common stock of a parent of the surviving corporation or offeror if the stock of such parent is publicly traded, in which event the number of shares subject to an Award shall be the number of shares which could have been purchased on the closing day of such transaction or the expiration date of the offer with the proceeds which would have been received by the participant if the participant had exchanged all of such shares in the transaction or sold or exchanged all of such shares pursuant to the tender or exchange offer. For purposes of this Section 7, "Change in Control" means: (a) any "Person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than 6 -6- the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or becomes the "Beneficial Owner" (as defined in Rule 13d-3 under the Exchange Act), directly or indirectly, of securities of the Company representing 20% or more of the combined voting power of the Company's then outstanding securities; (b) during any period of twenty-four months (not including any period prior to the execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new Director (other than (1) a Director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section, (2) a Director designated 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 (3) a Director designated 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 shareholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (c) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and (2) after which no Person holds 20% or more of the combined voting power of the then outstanding securities of the Company or such surviving entity; or (d) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. 7 -7- 8. AMENDMENTS The Board of Directors may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would impair the rights of any participant under any Award theretofore granted, without the participant's consent, or which, without the approval of the shareholders of the Company, would: (a) except as is provided in Section 7 of the Plan, increase the total number of shares reserved for the purposes of the Plan; (b) change the participants (or class of participants) eligible to receive Awards under the Plan; (c) materially increase the benefits accruing to participants under the Plan; or (d) effect any other amendment to the Plan for which approval by the shareholders of the Company is required pursuant to any applicable law or rule. In addition, no amendment or alteration shall be made more than once every six months, other than to comport with changes in the Internal Revenue Code, the Employee Retirement Income Security Act or the rules promulgated therewith. 9. EFFECTIVENESS AND TERM OF THE PLAN The Plan became effective upon its approval by the Board of Directors as of July 20, 1994. The Plan shall be submitted within one year of such date to the shareholders of the Company for their approval, and if not so approved within that period, the Plan and all Awards granted hereunder shall be void and of no force or effect. If so 8 -8- approved by the shareholders, the Plan shall remain in effect until amended or terminated by action of the Board. Adopted by Board of Directors: July 20, 1994 Approved by Shareholders: April 18, 1995 Amended by Board of Directors effective: July 16, 1997 EX-10.P 14 1996 THE DUN & BRADSTREET CORP. 1 EXHIBIT 10(p) 1996 THE DUN & BRADSTREET CORPORATION NON-EMPLOYEE DIRECTORS' STOCK INCENTIVE PLAN (AS AMENDED EFFECTIVE DECEMBER 17, 1997) ------------------------------------------------------------------- 1. PURPOSE OF THE PLAN The purpose of the Plan is to aid the Company in attracting, retaining and compensating non-employee Directors and to enable them to increase their ownership of Shares. The Plan will be beneficial to the Company and its shareholders since it will allow non-employee Directors to have a greater personal financial stake in the Company through the ownership of Shares, in addition to underscoring their common interest with shareholders in increasing the value of the Shares on a long-term basis. 2. DEFINITIONS The following capitalized terms used in the Plan have the respective meanings set forth in this Section: (a) Act: The Securities Exchange Act of 1934, as amended, or any successor thereto. (b) Awards: Options, Shares of Restricted Stock, Phantom Stock Units or Performance Shares granted pursuant to the Plan. (c) Beneficial Owner: As defined in Rule 13d-3 under the Act (or any successor rule thereto). (d) Board: The Board of Directors of the Company. (e) Change in Control: The occurrence of any of the following events: (i) any "Person," as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Exchange Act"), (other than the Company, any trustee or other fiduciary holding securities under an employee benefit plan of the Company, or any corporation owned, directly or indirectly, by the shareholders of the Company in substantially the same proportions as their ownership of stock of the Company), is or 2 -2- 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 execution of this Agreement), individuals who at the beginning of such period constitute the Board, and any new Director (other than (1) a Director designated by a person who has entered into an agreement with the Company to effect a transaction described in clause (a), (c) or (d) of this Section, (2) a Director designated 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 (3) a Director designated 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 shareholders was approved by a vote of at least two-thirds (2/3) of the Directors then still in office who either were Directors at the beginning of the period or whose election or nomination for election was previously so approved cease for any reason to constitute at least a majority thereof; (iii) the shareholders of the Company approve a merger or consolidation of the Company with any other corporation, other than (1) a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by remaining outstanding or by being converted into voting securities of the surviving entity) more than 50% of the combined voting power of the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation and (2) after which no Person holds 20% or more of the combined voting power of the then outstanding securities of the Company or such surviving entity; or (iv) the shareholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (f) Code: The Internal Revenue Code of 1986, as amended, or any successor thereto. (g) Committee: The Executive Compensation and Stock Option Committee of the Board. 3 -3- (h) Company: The Dun & Bradstreet Corporation, a Delaware corporation. (i) Disability: Inability to continue to serve as a non-employee Director of the Board due to a medically determinable physical or mental impairment which constitutes a permanent and total disability, as determined by the Committee (excluding any member thereof whose own Disability is at issue in a given case) based upon such evidence as it deems necessary and appropriate. A Participant shall not be considered disabled unless he or she furnishes such medical or other evidence of the existence of the Disability as the Committee, in its sole discretion, may require. (j) Determination Date: As such term is defined in Section 8(b) of the Plan. (k) Effective Date: The date on which the Plan takes effect, as defined pursuant to Section 15 of the Plan. (l) Fair Market Value: On a given date, the average of the high and low prices of the Shares as reported on such date on the Composite Tape of the principal national securities exchange on which such Shares are listed or admitted to trading, or, if no Composite Tape exists for such national securities exchange on such date, then on the principal national securities exchange on which such Shares are listed or admitted to trading, or, if the Shares are not listed or admitted on a national securities exchange, the average of the per Share closing bid price and per Share closing asked price on such date as quoted on the National Association of Securities Dealers Automated Quotation System (or such market in which such prices are regularly quoted), or, if there is no market on which the Shares are regularly quoted, the Fair Market Value shall be the value established by the Committee in good faith. If no sale of Shares shall have been reported on such Composite Tape or such national securities exchange on such date or quoted on the National Association of Securities Dealers Automated Quotation System on such date, then the immediately preceding date on which sales of the Shares have been so reported or quoted shall be used. (m) Option: A stock option granted pursuant to Section 6 of the Plan. (n) Option Price: The purchase price per Share of an Option, as determined pursuant to Section 6(b) of the Plan. (o) Participant: Any director of the Company who is not an employee of the Company or any Subsidiary of the Company as of the date that an Award is granted. (p) Performance Period: The calendar year. 4 -4- (q) Performance Share: An annual bonus award, payable in unrestricted Shares, granted pursuant to Section 9(a) of the Plan. (r) Person: As such term is used in Section 13(d) or 14(d) of the Act (or any successor section thereto). (s) Phantom Stock Unit: A bookkeeping entry, equivalent in value to one Share, credited in accordance with Section 8(a) of the Plan. (t) Plan: The 1996 The Dun & Bradstreet Corporation Non-Employee Directors' Stock Incentive Plan. (u) Restricted Stock: A Share of restricted stock granted pursuant to Section 7 of the Plan. (v) Retirement: Termination of service with the Company after such Participant has attained age 70, regardless of the length of such Participant's service. (w) S&P Index: The Standard & Poor's 500 Index. (x) Service Date: The first date on which a Participant commences service as a Director of the Company. (y) Shares: Shares of common stock, par value $1.00 per share, of the Company. (z) Subsidiary: A subsidiary corporation, as defined in Section 424(f) of the Code (or any successor section thereto). 3. SHARES SUBJECT TO THE PLAN The total number of Shares which may be issued under the Plan is 200,000. Shares may consist, in whole or in part, of unissued Shares or treasury Shares. The issuance of Awards shall reduce the total number of Shares available under the Plan. 5 -5- 4. ADMINISTRATION The Plan shall be administered by the Committee, which may delegate its duties and powers in whole or in part to any subcommittee thereof consisting solely of at least two "non-employee directors" within the meaning of Rule 16b-3 under the Act (or any successor rule thereto). The Committee is authorized to interpret the Plan, to establish, amend and rescind any rules and regulations relating to the Plan, and to make any other determinations that it deems necessary or desirable for the administration of the Plan. The Committee may correct any defect or supply any omission or reconcile any inconsistency in the Plan in the manner and to the extent the Committee deems necessary or desirable. Any decision of the Committee in the interpretation and administration of the Plan, as described herein, shall lie within its sole and absolute discretion and shall be final, conclusive and binding on all parties concerned (including, but not limited to, Participants and their beneficiaries or successors). 5. ELIGIBILITY All Participants shall be eligible to participate under the Plan. 6. TERMS AND CONDITIONS OF OPTIONS Options granted under the Plan shall be non-qualified stock options for federal income tax purposes, as evidenced by the related Option agreements, and shall be subject to the foregoing and the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine: 6 -6- (a) Annual Grant of Options. At each December meeting of the Board or on such later date as the Committee may determine, each Participant who is expected to serve on the Board for the following calendar year shall receive an Option to purchase a number of Shares with a nominal grant value based on competitive pay levels, as determined by the Board in its sole discretion. (b) Option Price. The Option Price per Share shall equal the Fair Market Value of one Share on the date on which an Option is granted. (c) Exercisability of Options. An Option granted under the Plan shall be fully exercisable on the first anniversary of the date on which such Option is granted. An Option shall expire on the tenth anniversary of the date on which it is granted. (d) Exercise of Options. Except as otherwise provided in the Plan or in a related Option agreement, an Option may be exercised for all, or from time to time any part, of the Shares for which it is then exercisable. The purchase price for the Shares as to which an Option is exercised shall be paid to the Company in full at the time of exercise at the election of the Participant (i) in cash, (ii) in Shares having a Fair Market Value equal to the aggregate Option Price for the Shares being purchased and satisfying such other requirements as may be imposed by the Committee or (iii) partly in cash and partly in such Shares. No Participant shall have any rights to dividends or other rights of a shareholder with respect to Shares subject to an Option until the Participant has given written notice of exercise of the Option, paid in full for such Shares and, if applicable, has satisfied any other conditions imposed by the Committee pursuant to the Plan. (e) Exercisability Upon Termination of Service by Death. If a Participant's service with the Company and its Subsidiaries terminates by reason of death after the first anniversary of the date on which an Option is granted, the unexercised portion of such Option may thereafter be exercised during the shorter of (A) the remaining term of the Option or (B) five years after the date of death. (f) Exercisability Upon Termination of Service by Disability or Retirement. If a Participant's service with the Company and its Subsidiaries terminates by reason of Disability or Retirement after the first anniversary of the date on which an Option is granted, the unexercised portion of such Option may thereafter be exercised during the shorter of (A) the remaining term of the Option or (B) five years after the date of such termination of service; provided, however, that if a Participant dies within a period of five years after such termination of service, the unexercised portion of the Option may thereafter be exercised, during the shorter of (i) the remaining term of the Option or (ii) the period that is the longer of (A) five years after the date of such termination of service or (B) one year after the date of death. 7 -7- (g) Effect of Other Termination of Service. If a Participant's service with the Company and its Subsidiaries terminates by reason of Disability or Retirement prior to the first anniversary of the date on which an Option is granted (as described above), then, to the extent the Committee, in its sole discretion, so permits, such Option may be exercised thereafter, during the shorter of (A) the remaining term of such Option or (B) five years after the date of such termination of service, for a prorated number of Shares (rounded down to the nearest whole number of Shares), equal to (i) the number of Shares subject to such Option multiplied by (ii) a fraction the numerator of which is the number of days the Participant served on the Board subsequent to the date on which such Option was granted and the denominator of which is 365. The portion of such Option which is not so exercisable shall terminate as of the date of Disability or Retirement. If a Participant's service with the Company and its Subsidiaries terminates for any other reason prior to the first anniversary of the date on which an Option is granted (as described above), such Option shall thereupon terminate. If a Participant's service with the Company and its Subsidiaries terminates for any reason other than death, Disability or Retirement after the first anniversary of the date on which an Option is granted (as described above), the unexercised portion of such Option shall thereupon terminate. (h) Nontransferability of Stock Options. Except as otherwise provided in this Section 6(h), a stock option shall not be transferable by the optionee otherwise than by will or by the laws of descent and distribution and during the lifetime of an optionee an option shall be exercisable only by the optionee. An option exercisable after the death of an optionee or a transferee pursuant to the following sentence may be exercised by the legatees, personal representatives or distributees of the optionee or such transferee. The Committee may, in its discretion, authorize all or a portion of the options previously granted or to be granted to an optionee to be on terms which permit irrevocable transfer for no consideration by such optionee to (i) any or all of the spouse, children or grandchildren of the optionee ("Immediate Family Members"), (ii) a trust or trusts for the exclusive benefit of the optionee and/or any or all of such Immediate Family Members, or (iii) a partnership in which the optionee and/or any or all of such Immediate Family Members are the only partners, provided that subsequent transfers of transferred options shall be prohibited except those in accordance with the first sentence of this Section 6(h). Following transfer, any such options shall continue to be subject to the same terms and conditions as were applicable immediately prior to transfer. The events of termination of service of Sections 6(e), 6(f) and 6(g) hereof shall continue to be applied with respect to the original optionee, following which the options shall be exercisable by the transferee only to the extent, and for the periods specified, in Sections 6(e), 6(f) and 6(g). The Committee may delegate to the Administrative Committee the authority to authorize transfers, establish terms and conditions upon which transfers may be 8 -8- made and establish classes of optionees eligible to transfer options, as well as to make other determinations with respect to option transfers. 7. TERMS AND CONDITIONS OF RESTRICTED STOCK Restricted Stock granted under the Plan shall be subject to the following terms and conditions and to such other terms and conditions, not inconsistent therewith, as the Committee shall determine: (a) One-Time Grant of Restricted Stock to New Directors. Each Participant who commences service with the Company on or after November 1, 1996 shall, on his or her Service Date, receive a one-time grant of Restricted Stock consisting of a number of Shares equal to (i) the annual retainer in effect on such Participant's Service Date, divided by (ii) the Fair Market Value of one Share on such Participant's Service Date. (b) Restrictions. Restricted Stock granted under the Plan may not be sold, transferred, pledged, assigned or otherwise disposed of under any circumstances; provided, however, that the foregoing restrictions shall elapse on the fifth anniversary of a Participant's Service Date. (c) Forfeiture of Grants. All Shares of Restricted Stock as to which restrictions have not previously elapsed pursuant to Section 7(b) of the Plan shall be forfeited upon the termination of a Participant's service with the Company for any reason (including, without limitation, by reason of death, Disability or Retirement). (d) Other Provisions. During the period prior to the date on which the foregoing restrictions elapse, (i) Shares of Restricted Stock shall be registered in the Participant's name and (ii) such Participant shall have voting rights and receive dividends with respect to such Restricted Stock. 8. TERMS AND CONDITIONS OF PHANTOM STOCK UNITS (a) One-Time Conversion of Accrued Benefits into Phantom Stock Units. Each Participant who serves on the Board as of January 1, 1997 shall have Phantom Stock Units credited to a Phantom Stock Unit account maintained for him or her on the books of the Company. The number of Phantom Stock Units to be 9 -9- credited shall equal (i) the present value as of December 31, 1996 of the Participant's accrued future retirement benefit under the Company's Plan for Compensating Directors for Post Retirement Availability and Service (calculated in accordance with (A) the assumptions used to calculate lump-sum distributions under such plan, (B) an interest rate equal to 85% of the three-month average yield on 15-year Treasury bonds and (C) information from the 1983 Group Annuity Mortality table), divided by (ii) the average Fair Market Value of one Share during the last ten trading days of 1996, rounded down to the nearest whole number of Phantom Stock Units. For purposes of the foregoing calculation, the non-accrued future retirement benefits of Participants with more than three but less than five years of service shall be accelerated to December 31, 1996. Phantom Stock units shall be credited with dividend equivalents when dividends are paid on Shares, and such dividend equivalents shall be converted into additional Phantom Stock Units (including fractional Phantom Stock Units) based on the Fair Market Value of Shares on the date credited. (b) Payment in Cash Upon Termination of Service. On the second business day of the calendar year (the "Payment Day") immediately following the calendar year containing the date on which a Participant terminates service with the Company (the "Termination Date"), the Participant shall receive a lump sum payment in cash equal to the Fair Market Value (determined as of the business day immediately preceding the Payment Day (the "Determination Day")) of the number of Phantom Stock Units (including fractional Phantom Stock Units) credited to the Participant's Phantom Stock Unit account on the Determination Day. Between the Termination Date and the Determination Day the Participant's Phantom Stock Units shall continue to be credited with dividend equivalents when dividends are paid on Shares, and such dividend equivalents shall continue to be converted into additional Phantom Stock Units (including fractional Phantom Stock Units) based on the Fair Market Value of Shares on the date credited. As an alternative to receiving such payment on the Payment Day, the Participant may elect to receive his or her payment in such form of payments (and on such terms and conditions) as are established by the Committee in its sole discretion. (c) Crediting of Stock Dividends. When non-cash dividends are paid on Shares, a Participant's Phantom Stock Units shall be credited with dividend equivalents by crediting the Participant's account with a bookkeeping entry that will at all times equal the then current value of the non-cash dividend (including any dividends on such dividend, any dividends on such dividends, etc.). Such value shall be determined in the same manner that the Fair Market Value of Shares is determined. 10 -10- 9. TERMS AND CONDITIONS OF PERFORMANCE SHARES (a) Establishment of Annual Performance Target Levels and Number of Performance Shares. In the December immediately preceding a given Performance Period, the Board shall establish performance target levels of total shareholder return for the Company for such Performance Period, expressed as target percentiles of the total shareholder return of the S&P Index. The Board shall also establish the number of Performance Shares that would be payable to Participants upon the attainment of various performance target levels during such Performance Period. The Board, in its sole discretion, may adjust performance target levels and the number of Performance Shares payable upon attainment of such target levels in December of each year with respect to the subsequent Performance Period to reflect changes in Share prices and/or competitive pay levels. (b) Payment in Unrestricted Shares. On the first trading day following the third Wednesday in February in the year following a given Performance Period, Participants shall receive unrestricted Shares equal to the number of Performance Shares earned by such Participant during such Performance Period. A Participant who did not serve on the Board during an entire Performance Period shall receive a prorated number of Shares (rounded down to the nearest whole number of Shares) based upon (i) the number of days during the Performance Period during which such Participant served on the Board and (ii) the actual total shareholder return results. (c) Authorization for Committee to Permit Deferral. Notwithstanding Section 9(b) of the Plan, a Participant may, if and to the extent permitted by the Board, elect to defer payment of any unrestricted Shares payable as a result of any Performance Shares earned by such Participant; provided, however, that any such election must be made (i) no later than June 30 of the year immediately preceding the year in which any such unrestricted Shares are to be paid and (ii) in accordance with such terms and conditions as are established by the Committee in its sole discretion. 10. ADJUSTMENTS UPON CERTAIN EVENTS Notwithstanding any other provisions in the Plan to the contrary, the following provisions shall apply to all Awards granted under the Plan: 11 -11- (a) Generally. In the event of any change in the outstanding Shares after the Effective Date by reason of any Share dividend or split, reorganization, recapitalization, merger, consolidation, spin-off, combination or exchange of Shares or other corporate exchange, or any distribution to shareholders of Shares other than regular cash dividends, the Committee, in its sole discretion and without liability to any person, may make such substitution or adjustment, if any, as it deems to be equitable, as to (i) the number or kind of Shares or other securities issued or reserved for issuance pursuant to the Plan or pursuant to outstanding Awards, (ii) the Option Price and/or (iii) any other affected terms of such Awards. (b) Change in Control. Upon the occurrence of a Change in Control, (i) all restrictions on Shares of Restricted Stock shall lapse, (ii) all Phantom Stock Units shall become payable to Participants in cash, (iii) each Participant shall receive the target number of Performance Shares for the Performance Period in which the Change in Control occurs (or, if no target number has been established for such Performance Period, the target number for the immediately preceding Performance Period shall be used) and (iv) all Stock Options shall vest and become exercisable. 11. SUCCESSORS AND ASSIGNS The Plan shall be binding on all successors and assigns of the Company and a Participant, including without limitation, the estate of such Participant and the executor, administrator or trustee of such estate, or any receiver or trustee in bankruptcy or representative of the Participant's creditors. 12. AMENDMENTS OR TERMINATION The Board may amend, alter or discontinue the Plan, but no amendment, alteration or discontinuation shall be made which would impair the rights of any Participant under any Award theretofore granted without such Participant's consent. 12 -12- 13. NONTRANSFERABILITY OF AWARDS Except as provided in Section 6(h) of the Plan, an Award shall not be transferable or assignable by the Participant otherwise than by will or by the laws of descent and distribution. During the lifetime of a Participant, an Award shall be exercisable only by such Participant. An Award exercisable after the death of a Participant may be exercised by the legatees, personal representatives or distributees of the Participant. Notwithstanding anything to the contrary herein, the Committee, in its sole discretion, shall have the authority to waive this Section 13 (or any part thereof) to the extent that this Section 13 (or any part thereof) is not required under the rules promulgated under any law, rule or regulation applicable to the Company. 14. CHOICE OF LAW The Plan shall be governed by and construed in accordance with the laws of the State of New York applicable to contracts made and to be performed in the State of New York. 13 -13- 15. EFFECTIVENESS OF THE PLAN The Plan shall be effective as of November 1, 1996. Adopted by the Board of Directors: December 18, 1996 Amended by the Board of Directors effective: January 15, 1997 July 16, 1997 December 17, 1997 EX-10.Q 15 SPECIAL CORPORATE MANAGEMENT INCENTIVE PLAN 1 EXHIBIT 10(q) THE DUN & BRADSTREET CORPORATION 1998 SPECIAL CORPORATE MANAGEMENT INCENTIVE PLAN The Executive Compensation and Stock Option Committee (the "Committee") of the Board of Directors (the "Board") of The Dun & Bradstreet Corporation (along with its subsidiaries, the "Company") currently anticipates that during 1998 the Company will be distributing to its shareholders the voting securities of an entity ("Newco") which is currently wholly owned by the Company. The purpose of this Plan is to promote the interests of the shareholders and all others who benefit by the continuing success of the Company by providing incentive to those executives (the "Executives") whose decisions and actions most significantly affect the growth and profitability of the Company, and whose employment with the Company is expected to continue following the date on which the voting securities of Newco are distributed to the Company's shareholders (the "Spin-off Date"). 1. PARTICIPANTS The participants in this Plan will be those Executives whose decisions and actions most significantly affect corporate growth and profitability. The senior officers of the Company shall recommend to the Chief Executive Officer Executives for participation in the Plan and the amount of guideline bonus opportunity for each of them under the Plan. To be recommended, an Executive will normally (1) be earning in excess of $100,000 gross compensation, and (2) be an officer of the Company or have a reporting relationship to an officer, or (3) be a general manager of a Company subsidiary, profit center, resource unit or profit center group or have a reporting relationship to a general manager. Such recommended Executives as are approved by the Chief Executive Officer shall then be 2 2 recommended to the Committee by the Chief Executive Officer as participants in this Plan as of January 1, 1998. 2. INCENTIVE AWARDS Each participant's guideline bonus opportunity shall be stated as a dollar amount. Participants may earn amounts ("awards") equal to, greater than or less than guideline bonus opportunity as follows: (a) Participants who are or who report to officers of the Company (excluding operating unit general managers), shall earn their award on the basis of one or more of (1) the following performance measures (the "corporate performance measures") established by the Committee: earnings per share, net income, operating income, revenue, working capital, return on equity, return on assets, total return to shareholders, average sales growth and cash flow, each of which may be on a corporate-wide basis or with respect to one or more operating units, divisions, acquired businesses, minority investments, partnerships or joint ventures; and (2) priority objectives or other qualitative measures. (b) Participants who are or who report to operating unit executives or senior vice presidents (or their functional equivalent) shall earn their award on the basis of a combination of corporate and operating unit or individual performance measures established by the Committee. (c) Participants who are or who report to division, profit center or resource unit general managers shall earn their award on the basis of a combination of corporate and operating unit or individual performance measures as recommended by the operating unit executive or senior vice presidents of the Company and as approved by the Chief Executive Officer. (d) The Chief Executive Officer shall recommend to the Committee for its approval (1) a minimum amount ("floor"), a target amount ("target") and, if desired, a maximum amount 3 3 ("ceiling") for the corporate performance measures, and (2) minimum, target and, if desired, ceiling, performance measures for each Company division, profit center and/or resource unit having employees who are participants in the Plan, provided that the Committee may delegate to the Chief Executive Officer the establishment of the performance measures referred to in this clause (2). Performance measures for individual divisions, profit centers and/or resource units may be consolidated, as appropriate, for the purpose of establishing corporate, operating unit or sub-unit measures. The floor, target and ceiling figures may, but need not, be based upon budgeted operating results, and will be established solely for the purpose of administering the Plan. (e) Awards shall be earned as follows in relation to the pre-established performance measures approved by the Committee: no award will be earned unless the performance floor for that portion of the award is exceeded; the guideline bonus opportunity is earned if the target amount is achieved; an amount greater or less than the guideline bonus opportunity can be earned for a level of performance above the performance floor as determined by established performance measures. (f) The Chief Executive Officer may adjust individual awards earned under the performance measures upward or downward, by an amount of up to 20% of the participant's guideline bonus opportunity, to account for demonstrated quality of performance or the occurrence of unusual or unforeseen circumstances. The total of Plan awards may not exceed 110% of the total earned amount. (g) The sole performance period for the purposes of this Plan shall commence on January 1, 1998 and terminate on the earlier of December 31, 1998 or the Spin-off Date. 3. MISCELLANEOUS (a) Each participant will be notified in writing at the time of his or her approval as a participant, of the amount and terms of his or her salary and guideline bonus opportunity. 4 4 (b) Payment of any awards earned by participants will be made as soon as practicable after the end of the performance period. (c) If a participant dies, retires, is assigned to a different position, is granted a leave of absence or if the participant's employment is otherwise terminated (except with cause by the Company), a pro rata share of the participant's award based on the period of actual participation may, at the Committee's discretion, be paid to the participant after the end of the performance period if it would have become earned and payable had the participant's employment status not changed. (d) The Chief Executive Officer may approve participation for promoted, transferred or newly-hired Executives. (e) At the end of the performance period, the Committee, on the recommendation of the Chief Executive Officer, may increase or decrease the amount of award payments to any or all participants if in its sole judgment there have been extraordinary occurrences, not anticipated when awards were approved, which have significantly affected earnings or other performance measures. (f) This 1998 Special Corporate Management Incentive Plan became effective December 16, 1997, and shall terminate following the payment of awards (as described in Section 3(b)). 4. AMENDMENTS The Committee may amend or discontinue this Plan, but no amendment or discontinuation shall be made which would impair the rights of a participant without the participant's consent. EX-10.S 16 AMENDED AND RESTATED AGREEMENT 1 EXHIBIT 10(s) EXECUTION COPY AMENDMENT NO. 1, dated as of July 14, 1997 ("Amendment No. 1"), to the Amended and Restated Agreement of Limited Partnership of D&B Investors L.P., dated as of April 1, 1997 (the "PARTNERSHIP AGREEMENT"), among Duns Investing VII Corporation, Dun & Bradstreet, Inc., Duns Holding, Inc., Utrecht-America Finance Co. and Leiden, Inc. WHEREAS, the parties hereto desire to amend the terms of the Partnership Agreement to reflect certain additional understandings. NOW, THEREFORE, the parties hereto hereby agree as follows: 1 AMENDMENT TO DEFINITION OF "PERMITTED SECURITIES." The definition of "Permitted Securities" shall be amended by deleting the amount "$15,000,000" set forth in clause (v) thereof and inserting "$50,000,000" in lieu thereof. 2 AMENDMENT TO DEFINITION OF "PRIORITY RETURN." The definition of "Priority Return" shall be amended by deleting the reference to "Section 4.02(a)" set forth therein and inserting "Section 4.01" in lieu thereof. 3 AMENDMENT TO SECTION 4.01. Section 4.01 shall be amended by (i) deleting the reference to "Section 4.02(a)" set forth therein and inserting "Section 4.02" in lieu thereof, and (ii) deleting the reference to "Section 4.01(a)" set forth therein and inserting "Section 4.01" in lieu thereof. 4 REAFFIRMATION. Except as expressly amended by this Amendment No. 1, the Partnership Agreement is and shall continue to be in full force and effect as originally written. 5 EXECUTION IN COUNTERPARTS; EFFECTIVENESS. This Amendment No. 1 may be executed in any number of counterparts and by any combination of the parties hereto in separate counterparts, each of which counterpart shall be an original and all of which when taken together shall constitute one and the same Amendment No. 1. This Amendment No. 1 shall become effective as of the date first above written when and if counterparts of this Amendment No. 1 shall have been executed by the parties hereto. On and after the effective date of this Amendment No. 1, each reference in the Partnership Agreement to "this Agreement," "hereunder," "hereof" or words of like import referring to the Partnership Agreement shall mean and be a reference to the Partnership Agreement as amended by this Amendment No. 1. 6 GOVERNING LAW. This Amendment No. 1 shall be governed by, and construed and interpreted in accordance with, the laws of the State of Delaware, without reference to its conflicts of law principles. 2 S-1 IN WITNESS WHEREOF, the undersigned have executed this Amendment No. 1 as of the day and year first above written. DUNS INVESTING VII CORPORATION By /s/ Kenneth J. Kubacki ------------------------------ Kenneth J. Kubacki Executive Vice President and Assistant Treasurer DUNS HOLDING, INC. By /s/ Kenneth J. Kubacki ------------------------------ Kenneth J. Kubacki Executive Vice President and Assistant Treasurer DUN & BRADSTREET, INC. By /s/ Philip C. Danford ----------------------------- Philip C. Danford Vice President and Treasurer THIS IS A SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF D&B INVESTORS L.P. 3 S-2 UTRECHT-AMERICA FINANCE CO. By /s/ David I. Dietz ----------------------------- Name: David I. Dietz Title: Assistant Treasurer By /s/ J. W. den Baas ----------------------------- Name: J. W. den Baas Title: Vice President LEIDEN, INC. By /s/ J. W. den Bass ----------------------------- Name: J. W. den Bass Title: Vice President By /s/ David I. Dietz ----------------------------- Name: David I. Dietz Title: Assistant Treasurer THIS IS A SIGNATURE PAGE TO AMENDMENT NO. 1 TO THE AMENDED AND RESTATED AGREEMENT OF LIMITED PARTNERSHIP OF D&B INVESTORS L.P. EX-13 17 ANNUAL REPORT TO SECURITY HOLDERS 1 EXHIBIT 13 The Dun & Bradstreet Corporation and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS OVERVIEW On December 17, 1997, The Dun & Bradstreet Corporation (the "Company") announced a plan to separate into two publicly traded independent companies, The Dun & Bradstreet Corporation and The Reuben H. Donnelley Corporation. The transaction is subject to a ruling from the Internal Revenue Service, with respect to the tax-free treatment of the distribution, and approval from the Board of Directors. The Dun & Bradstreet Corporation will consist of-Dun & Bradstreet, the operating company ("D&B"), and Moody's Investors Service ("Moody's"). The Reuben H. Donnelley Corporation ("Donnelley") will consist of-Reuben H. Donnelley, the operating company, and the DonTech partnership. The transaction is expected to be completed in the summer of 1998. On November 1, 1996, The Dun & Bradstreet Corporation reorganized into three publicly traded independent companies by spinning off through a tax-free distribution (the "Distribution") two new companies, (1) Cognizant Corporation ("Cognizant") and (2) ACNielsen Corporation ("ACNielsen"), to shareholders. In conjunction with the reorganization, the Company also disposed of Dun & Bradstreet Software ("DBS") and NCH Promotional Services ("NCH"). After the transaction was completed, The Dun & Bradstreet Corporation's continuing operations consisted of D&B, Moody's and Donnelley. For purposes of effecting the transaction and governing certain of the ongoing relationships among the Company, Cognizant and ACNielsen after the Distribution and to provide for an orderly transition, the three new companies entered into various agreements, as described in Note 2 to the consolidated financial statements. Pursuant to Accounting Principles Board Opinion ("APB") No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the 1995 consolidated financial statements of the Company have been reclassified to reflect the 1996 reorganization. Accordingly, 1996 and 1995 revenues, costs and expenses and cash flows of Cognizant, ACNielsen, DBS and NCH have been excluded from the respective captions in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows. The net operating results of these entities have been reported, net of applicable income taxes, as "Income (Loss) from Discontinued Operations," and the net cash flows of these entities have been reported as "Net Cash (Used In) Provided by Discontinued Operations." RESULTS OF OPERATIONS 1997 VERSUS 1996 CONSOLIDATED RESULTS The Company's basic earnings per share in 1997 were $.94, up $1.20 from a loss of $.26 per share reported in 1996. On a diluted basis, the Company reported earnings per share of $.93 compared with a loss of $.26 in 1996. The 1997 results include a one-time, non-cash charge for the cumulative effect of accounting changes ($.88 per share basic, $.87 per share diluted), with respect to certain of the Company's revenue recognition methods. Effective January 1, 1997, the Company changed its revenue recognition method for its Credit Information Services business and changed certain of its revenue recognition methods in the Marketing Information Services, Receivables Management Services and Moody's businesses. In accordance with APB No. 20, "Accounting Changes," the cumulative effect of these accounting changes resulted in a pre-tax non-cash charge of $254.7 million ($150.6 million after-tax). Excluding the impact of the cumulative effect of accounting changes (see Note 1 to the consolidated financial statements), basic earnings per share in 1997 were $1.82, which included a $.02 per share gain ($9.4 million pre-tax and $4.0 million after-tax) relating to the sale of the East Coast proprietary operations of Donnelley ("P-East"), compared with a loss of $.16 per share (both basic and diluted) from continuing operations in 1996. The 1996 loss included all corporate overhead expenses associated with the Company prior to the 1996 reorganization and certain transaction-related expenses. Operating revenues for the year ended December 31, 1997, of $2,154.4 million were slightly lower than the $2,159.2 million reported in 1996. Excluding the results of businesses divested in 1997 and 1996, 1997 revenues increased 3.9% to $2,076.4 million from $1,999.1 million. Full-year revenue performance for the Company reflects significant growth at Moody's, moderate growth at D&B and a decline at Donnelley. 1997 revenue growth was lower by approximately 2%, due to the negative impact of foreign currency fluctuations. Operating income in 1997 of $547.9 million increased $350.3 million. 1997 operating income included a non-recurring gain of $9.4 million relating to the sale of P-East. 1996 operating income included $161.2 million in transaction costs incurred in conjunction with the Company's 1996 reorganization and $96.7 million of losses relating to the sales of the West Coast proprietary operations of Donnelley in Southern California ("P-West") ($28.5 million) and American Credit Indemnity ("ACI") ($68.2 million). Excluding these non-recurring items and the results of divested businesses, 1997 operating income would have been $527.5 million, up 20.7% from $436.9 million in 1996. Operating income growth reflected strong growth at Moody's and growth in D&B U.S., partially offset by declines in the international operations of D&B and at Donnelley. F-1 2 The Dun & Bradstreet Corporation and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTINUED 1997 operating costs and selling and administrative expenses increased by 3.0% to $1,413.2 million, excluding the one-time gain on the sale of P-East and corporate expenses. For comparability, 1996 excludes the effects of divestitures (P-West and ACI) and corporate expenses. 1996 corporate expenses included costs associated with the corporate structure prior to the Distribution. Non-operating expense-net of $71.3 million in 1997, which primarily included interest expense on notes payable, and minority interest costs (included in other expense-net), was essentially unchanged compared with 1996. Interest expense in 1997, included a $3.2 million charge to mark-to-market certain interest rate swaps and a $2.9 million charge as a result of interest rate swap cancellations. These charges were offset by lower financing costs in 1997. In 1997, the Company's effective tax rate was 34.7% compared with 121.6% in 1996 from continuing operations. The higher 1996 tax rate primarily reflected tax implications associated with the 1996 reorganization and divested businesses. The 1997 effective tax rate also included slightly higher taxes associated with the non-recurring gain on the sale of P-East. Income from discontinued operations, net of income taxes, was $141.1 million in 1996. Also recorded in 1996 was a loss on the disposition of DBS of $220.6 million ($158.2 million after-tax). Additionally, the Company sold NCH in the fourth quarter of 1996. No gain or loss resulted from the sale. SEGMENT RESULTS Risk Management Services reported 1997 revenue growth of 1.6% to $1,811.0 million from $1,781.7 million in 1996. Excluding the results of ACI, which was divested in 1996, revenue growth would have increased 5.4% from 1996. Moody's reported revenues of $457.4 million in 1997, up 18.7% from 1996, driven by gains in corporate bonds, increased coverage in the mortgage-backed market and continued expansion outside the U.S. Corporate bonds displayed strong volume growth, especially in the high-yield market, where volumes were 30% above the prior year. D&B's 1997 revenues were up 1.7% to $1,353.6 million. U.S. revenues were up 6.4%, including increases in Marketing Information Services of 14.3% and Receivables Management Services of 9.9%. Europe's 1997 revenues of $426.1 million were 4.3% lower than 1996, resulting from the increased strength of the U.S. dollar. Excluding the impact of foreign exchange, Europe would have reported a 4.0% increase in revenues. Other regions reported an 8.8% decrease in operating revenues to $93.8 million from $102.8 million, primarily as a result of phasing out certain unprofitable operations in Latin America. Operating income for the Risk Management Services segment was $452.5 million, up 38.3% from 1996, which included a $68.2 million loss attributable to the sale of ACI. Excluding the ACI loss, operating income would have increased 14.3%. Directory Information Services reported revenues of $343.4 million in 1997 compared with $377.5 million in 1996, a 9.1% decrease. Excluding revenues for P-East for both 1997 and 1996 and revenues for P-West for 1996, reported revenues would have decreased 5.3% to $265.4 million in 1997. Decreased revenues resulted from lower revenues at DonTech as a result of the final contractual reduction in Donnelley's partnership share, the termination of the Cincinnati Bell contract during 1997 and a change in the timing of servicing certain Bell Atlantic yellow page directories from 1997 to 1998. 1997 operating income increased 2.2% to $144.2 million from $141.1 million in 1996. Excluding income from P-East in both 1997 and 1996, the gain on the sale of P-East in 1997 and the loss on the sale of P-West in 1996, operating income would have decreased 17.7% to $123.8 million in 1997. The operating income decline reflects the impact of lower revenues as discussed above as well as start-up costs for the proprietary directory in Cincinnati, Ohio, and full-year costs related to the new production facility in Raleigh, North Carolina. During July 1997, Donnelley signed a series of agreements with Ameritech advertising services, changing the structure of the existing partnership by appointing DonTech as the exclusive sales agent in perpetuity for yellow page directories published by Ameritech in Illinois and Northwest Indiana (see Note 16 to the consolidated financial statements). 1996 VERSUS 1995 CONSOLIDATED RESULTS The Company incurred a loss from continuing operations in 1996 of $27.3 million, or $.16 per share (both basic and diluted) compared with earnings of $217.5 million, or $1.28 basic earnings per share ($1.27 diluted earnings per share) in 1995. 1996 results included all corporate overhead expenses associated with the Company prior to the Distribution and certain transaction-related expenses. 1995 results included certain non-recurring charges and gains. Operating revenues from continuing operations for the year ended December 31, 1996, of $2,159.2 million were essentially unchanged from $2,158.2 million for 1995. Excluding the results of divested businesses, revenues from continuing operations increased 5.2% from $1,989.0 million in 1995 to $2,092.3 million in 1996. Operating income in 1996 of $197.6 million decreased from $398.6 million in the prior year. Included in operating income in 1996 was $161.2 million in transaction costs incurred in connection with F-2 3 the Company's 1996 reorganization. These costs included $75.0 million for professional and consulting fees and $86.2 million primarily for settlement of executive compensation plans and retention bonuses. Also included in 1996 operating income were the losses incurred as a result of the sales of P-West and ACI. The sales were completed in May and October of 1996, respectively. In connection with these divestitures, the Company recorded within operating costs a charge of $96.7 million ($28.5 million for P-West and $68.2 million for ACI). 1995 operating costs included gains on both the sales of Interactive Data Corporation ("IDC") of $90.0 million and warrants received in connection with the previous divestiture of Donnelley Marketing of $28.0 million, offset by a non-recurring charge of $206.2 million recorded in the fourth quarter of 1995. This charge primarily reflected an impairment loss in connection with the adoption of the provisions of Statement of Financial Accounting Standards ("SFAS") No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ($100.9 million), a provision for postemployment benefits ($58.1 million) under the Company's severance plan, an accrual for contractual obligations that have no future economic benefits and for penalties to cancel certain contracts ($23.1 million), and other asset revaluations ($24.1 million). Operating costs and selling and administrative expenses, excluding the effects of divestitures, transaction costs associated with the 1996 reorganization and the fourth-quarter non-recurring charge, increased 9.7% in 1996 compared with 1995. The increase reflects the Company's investments in new products and services. The Company reported 1996 non-operating expense-net of $71.2 million compared with non-operating expense-net of $68.0 million in 1995. The increase was attributable, in part, to lower interest income earned due to the high cash requirements of the 1996 reorganization and the sale of ACI, which held $111.5 million of marketable securities at the date of the sale. Despite lower reported pre-tax income, the provision for income taxes was $153.7 million, 35.9% higher than the prior year. The Company's effective tax rate was 121.6% in 1996 and 34.2% in 1995. In 1996, the higher effective tax rate primarily reflected the non-deductibility of certain transaction costs, lower tax benefits on losses from divested businesses and certain foreign taxes incurred in connection with the 1996 reorganization. The underlying effective tax rate, excluding these one-time items for 1996, was approximately 34%. Income from discontinued operations, net of income taxes, was $141.1 million in 1996 compared with $103.3 million in the prior year. The Company also reported a loss on the disposition of DBS, which was completed in the fourth quarter of 1996, of $220.6 million ($158.2 million after tax). Additionally, the Company sold NCH in the fourth quarter of 1996, with no resulting gain or loss recorded on the disposition. The 1995 results were affected by the fourth-quarter non-recurring charge of $188.6 million after tax. SEGMENT RESULTS Risk Management Services reported 1996 revenue growth of 2.7% to $1,781.7 million from $1,734.1 million in 1995. Excluding the results of divested businesses, revenue growth would have increased 6.6% from 1995. Moody's reported revenues of $385.3 million in 1996, up 16.9% from 1995, driven by strong corporate and municipal bond market volumes during the year. D&B's 1996 revenues were up 4.0% to $1,331.5 million. U.S. revenues were up 4.0%, including increases in Marketing Information Services of 9.7% and Receivables Management Services of 12.2%. Europe and other regions were up 3.1% and 7.8%, respectively. Operating income for the segment was $327.1 million in 1996 compared with $449.5 million in 1995. Operating income in 1996 included a $68.2 million loss on the sale of ACI, while in 1995, operating income included a $90.0 million gain on the sale of IDC partially offset by $45.6 million attributable to the fourth-quarter non-recurring charge. Directory Information Services reported a 10.9% decrease in operating revenues to $377.5 million from $423.7 million in 1995. Excluding the results of P-West, operating revenues would have been flat. Operating income decreased 24.3% to $141.1 million from $186.3 million in 1995 due to a reduction in the contractual share of earnings in the DonTech partnership and lower commission rates. Included in 1996 operating income was a $28.5 million loss on the sale of P-West. Additionally, higher costs associated with the transition to the new Raleigh, North Carolina, production facility negatively affected 1996 operating income. Operating income in 1995 included $17.7 million of the fourth-quarter non-recurring charge. ADOPTION OF STATEMENTS OF FINANCIAL ACCOUNTING STANDARDS In February 1997, the Financial Accounting Standards Board ("FASB") issued SFAS No. 128, "Earnings per Share" ("SFAS No. 128"), which simplifies existing computational guidelines, revises disclosure requirements and increases the comparability of earnings per share data on an international basis. The Company adopted the statement in 1997, which required restatement of all prior-period per share data presented. In June 1997, the FASB issued SFAS No. 130, "Reporting Comprehensive Income" ("SFAS No. 130"), which establishes standards for reporting and displaying comprehensive income and its components in a full set of general-purpose financial statements. This statement is effective for fiscal years beginning after December 15, F-3 4 The Dun & Bradstreet Corporation and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTINUED 1997, and requires reclassification of prior-period financial statements. The Company is currently considering the various presentation options of SFAS No. 130. Also in June 1997, the FASB issued SFAS No. 131, "Disclosures about Segments of an Enterprise and Related Information" ("SFAS No. 131"), which revises disclosure requirements about operating segments and establishes standards for related disclosures about products and services, geographic areas and major customers. SFAS No. 131 requires that public business enterprises report financial and descriptive information about their reportable operating segments. The statement is effective for fiscal years beginning after December 15, 1997, and requires restatement of prior years in the initial year of application. SFAS No. 131 is expected to affect the Company's segment disclosures, but will not affect the Company's results of operations, financial position or cash flows. The Company is in the process of evaluating the disclosure requirements. NON-U.S. OPERATING AND MONETARY ASSETS The Company has operations in 38 countries. The Company's non-U.S. operations generated approximately 26% of total revenues, including approximately 22% from European operations. Thirty-two percent of the Company's assets are located outside the U.S., and no one country had a significant concentration of cash. At December 31, 1997, the Company had approximately $117 million in forward foreign exchange contracts outstanding, with various expiration dates through March 1998 (see Note 5 to the consolidated financial statements). MARKET RISK SENSITIVE INSTRUMENTS The Company funds its operations primarily through its commercial paper program and other short-term bank lines of credit. As the Company operates in 38 countries, the Company is exposed to market risk from changes in interest rates and foreign exchange rates which could affect its results of operations and financial condition. In order to reduce the risk from fluctuations in interest rates and foreign currencies, the Company uses interest rate swap agreements and forward foreign exchange contracts. These derivative financial instruments are viewed by the Company as risk management tools that are entered into for hedging purposes only. The Company does not use derivative financial instruments for trading or speculative purposes. The Company also has investments in fixed income marketable securities. Consequently, the Company is exposed to fluctuations in rates on these marketable securities. Market risk associated with investments in marketable securities is immaterial and has been excluded from the sensitivity discussions. A discussion of the Company's accounting policies for derivative financial instruments is included in the Summary of Significant Accounting Policies in Note 1 to the consolidated financial statements, and further disclosure relating to financial instruments is included in Note 5-Financial Instruments with Off-Balance Sheet Risks. The following analysis presents the sensitivity of the fair value of the Company's market risk sensitive instruments to changes in market rates and prices. INTEREST RATE RISK The Company is exposed to market risk through its commercial paper program, where it borrows at prevailing short-term commercial paper rates, and through its variable-rate short-term bank borrowings. The Company enters into interest rate swap agreements to manage exposure to changes in interest rates. Specifically, the Company is exposed to fluctuations in both short-term commercial paper and short-term bank rates. Interest rate swaps allow the Company to raise funds at floating rates and effectively swap them into fixed rates that are lower than those available to it if fixed-rate borrowings were made directly. At December 31, 1997, the Company had $300.0 million of these interest rate swaps. The fair value for interest rate risk is calculated by the Company utilizing estimates of the termination value of the Company's interest rate swaps, commercial paper borrowings and short-term bank borrowings based upon a 10% increase, or decrease in interest rates from their December 31, 1997, levels. Fair values are the present value of projected future cash flows based on the market rates and prices chosen. At December 31, 1997, the unrealized fair value of the interest rate swaps was a loss of $11.1 million. Assuming an instantaneous parallel upward shift in the yield curve of 10% from December 31, 1997, levels, the unrealized fair value of the Company's interest rate swaps, commercial paper borrowings and short-term bank borrowings would result in a loss of $2.5 million. Assuming an instantaneous parallel downward shift in the yield curve of 10% from December 31, 1997, levels, the unrealized fair value of the Company's interest rate swaps, commercial paper borrowings and short-term bank borrowings would result in a loss of $20.5 million. FOREIGN EXCHANGE RISK The Company follows a policy of hedging substantially all cross-border intercompany transactions denominated in a currency other than the functional currency applicable to each of its various subsidiaries. The Company only uses forward foreign exchange contracts to implement its hedging strategy. Typically, these contracts have maturities of 12 months or less. These forward contracts are executed with creditworthy institutions and are denominated primarily in British Pound, German Mark, Swedish Krona and Japanese Yen. F-4 5 The fair value of foreign currency risk is calculated by using estimates of the cost of closing out all outstanding forward foreign exchange contracts given a 10% increase or decrease in forward rates from December 31, 1997, levels. At December 31, 1997, net unrealized gains related to the Company's forward contracts were $1.1 million. If forward rates increased by 10% from December 31, 1997, levels, the unrealized loss on these contracts would be $4.7 million. If forward rates decreased by 10% from December 31, 1997, levels, the unrealized gain on these contracts would be $6.9 million. However, the estimated potential gain or loss on forward contracts is expected to be offset by changes in the underlying transactions. Therefore, the impact of a 10% movement in foreign exchange rates will be immaterial. LIQUIDITY AND FINANCIAL POSITION The Company generates significant, predictable cash flows from its business operations. Management believes that these cash flows are sufficient to fund its operating needs, service debt and pay dividends. At December 31, 1997, cash and cash equivalents totaled $81.8 million, a decrease from $127.9 million in 1996. Net cash provided by operating activities increased by $233.4 million to $488.0 million in 1997. This increase is primarily due to the absence of transaction and divestiture-related costs as a result of the 1996 reorganization. Net cash used in investing activities totaled $3.6 million in 1997, compared with $86.0 million in 1996. In 1997, the Company received proceeds from the sale of P-East of $122.0 million that were offset by spending for capital expenditures, computer software and other intangibles of $145.8 million. In 1996, proceeds received from the sales of ACI and P-West were $115.2 million, and spending for capital expenditures, computer software and other intangibles totaled $170.1 million. The Company utilizes the commercial paper market as its primary source of financing. The Company has two committed bank facilities that support the commercial paper borrowings. One facility permits borrowings of up to $750 million and matures in August 2001; the other permits borrowings of up to $150 million and matures in August 1998. The Company has the ability to borrow under these facilities at prevailing short-term interest rates. The Company also has available non-committed lines of credit of $111 million. As of December 31, 1997, $29.9 million was borrowed against these facilities. On April 1, 1997, the Company completed a $300.0 million minority interest financing. Funds raised by this financing were used to repay a portion of the outstanding short-term debt in April 1997. Also during the second quarter of 1997, the Company reentered the commercial paper market and used the proceeds to repay the additional amounts outstanding on the short-term debt facility. The Company had $421.6 million in commercial paper outstanding at December 31, 1997. The Company has interest rate swap agreements, which effectively fix interest rates on $300.0 million of variable-rate debt through January 2005, at a weighted average fixed rate of 6.84% (see Note 5 to the consolidated financial statements). Currently, a portion of the swaps are marked-to-market through earnings. The Company has announced that in mid-1998 it will separate into two publicly traded independent companies. Management estimates that one-time cash outlays of approximately $25 million to $30 million will be required to complete the 1998 reorganization of the Company. These costs will be recorded as incurred. While the capital structures of the two independent companies have not been finalized, it is expected that approximately $450 million of debt will be allocated to Donnelley. It is expected that financing arrangements and cash generated from operations will be more than sufficient to meet the needs of the two companies. In January 1997, the Company announced a continuation of its systematic stock repurchase plan, authorizing the purchase of up to 9.8 million shares of common stock. The stock was held in treasury and issued upon exercise of employee stock options and for compensation plans. Under this plan, the Company repurchased 2,271,851 shares of its common stock for $60.1 million in 1997. The Company also paid dividends of $150.6 million during 1997. YEAR 2000 The Company relies on computer hardware, software and related technology, together with data, in the operation of its businesses. Such technology and data are used in creating and delivering the Company's products and services, as well as in the Company's internal operations, such as billing and accounting. The Company has initiated an enterprise-wide program to prepare for the year 2000. The Company has created a Year 2000 program office, reporting to the Chief Executive Officer and to the Chief Information Officer, to coordinate and oversee the Company's Year 2000 program. In addition, responsible Year 2000 executives have been appointed, and F-5 6 The Dun & Bradstreet Corporation and Subsidiaries MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS CONTINUED Year 2000 teams have been established at each of the Company's operating units. The Company has evaluated the technology and data used in the creation and delivery of its products and services and in its internal operations, has identified Year 2000 issues related thereto and developed and has begun to implement a plan to remediate such Year 2000 issues. The plan includes remediating the Company's Year 2000 issues that are related to its customers, suppliers and distributors, but there can be no assurances that such third parties will successfully remediate their own Year 2000 issues over which the Company has no control. The Company believes that it will substantially complete the implementation of its Year 2000 plan prior to the commencement of the year 2000, and that upon substantial completion of such implementation, and assuming that the Company's customers, suppliers and distributors successfully remediate their own Year 2000 issues over which the Company has no control, the Company will have no material business risk from such Year 2000 issues. The total cost of the Company's Year 2000 program is estimated to be $75 million to $80 million. Of this amount, approximately $11 million was incurred in 1997. It is estimated that approximately $40 million, $20 million to $25 million and $4 million will be incurred in 1998, 1999 and 2000, respectively. Maintenance and modification costs are expensed as incurred, while the costs of new hardware and software purchased by the Company are capitalized. DIVIDENDS The Company paid a quarterly dividend of $.22 per share in 1997, resulting in a full-year dividend per share of $.88, a decline of 51.6% from the 1996 dividend of $1.82 per share. In 1996, the Company reorganized into three publicly traded independent companies: The Company, Cognizant and ACNielsen. Consequently, the Company paid quarterly dividends of $.66 per share for the first half of 1996, and in the second half of 1996, the Company paid quarterly dividends of $.25 per share, reflecting the revised dividend policies of each of the three companies. Of the $.25 per share dividend declared for the third and fourth quarters of 1996, $.22 was attributable to the Company and $.03 was attributable to Cognizant. On December 17, 1997, the Board of Directors approved a first-quarter 1998 dividend of $.22 per share, payable March 10, 1998, to shareholders of record at the close of business February 20, 1998. Subject to Board of Directors approval, the Company anticipates that its current dividend policy will be maintained for 1998; however, the allocation between the two independent companies is currently being formulated. COMMON STOCK INFORMATION The Company's common stock (symbol DNB) is listed on the New York, London and Swiss stock exchanges. The number of shareholders of record was 11,449 at January 30, 1998. The following table summarizes price and cash dividend information for the Company's common stock as reported in the periods shown. The decline in price per share during the fourth quarter of 1996 reflects the special stock dividend of shares of Cognizant and ACNielsen.
PRICE PER SHARE ($) DIVIDENDS -------------------------------------- PAID 1997 1996 PER SHARE ($) -------------------------------------- ------------------ HIGH LOW HIGH LOW 1997 1996 - - -------------------------------------- ------------------ ------------------ - - -------------------------------------- ------------------ ------------------ First Quarter 271/2 231/8 693/4 593/8 .22 .66 Second Quarter 273/8 233/4 653/4 573/4 .22 .66 Third Quarter 293/4 255/8 625/8 561/4 .22 .25 Fourth Quarter 311/4 251/4 627/8 207/8 .22 .25 YEAR 311/4 231/8 693/4 207/8 .88 1.82
FORWARD-LOOKING STATEMENTS Certain statements in Management's Discussion and Analysis of Financial Condition and Results of Operations and certain other sections of this Annual Report are forward-looking. These may be identified by the use of forward-looking words or phrases such as "believe," "expect," "anticipate," "should," "planned,""estimated" and "potential," among others. These forward-looking statements are based on the Company's reasonable current expectations. The Private Securities Litigation Reform Act of 1995 provides a "safe harbor" for such forward-looking statements. In order to comply with the terms of the safe harbor, the Company notes that a variety of factors could cause the Company's actual results and experience to differ materially from the anticipated results or other expectations expressed in such forward-looking statements. The risks and uncertainties that may affect the operations, performance, development and results of the Company include: (1) the complexity and uncertainty regarding the development of new high-technology products; (2) the loss of market share through competition; (3) the introduction of competing products or technologies by other companies; (4) pricing pressures from competitors and/or customers; (5) changes in the business information, risk management and yellow pages industries and markets; (6) the Company's inability to protect proprietary information and technology or to obtain necessary licenses on commercially reasonable terms; (7) the Company's inability to complete the implementation of its Year 2000 plans timely; (8) the loss of key employees to investment or commercial banks or elsewhere; and (9) fluctuations in foreign currency exchange rates. F-6 7 REPORT OF INDEPENDENT ACCOUNTANTS TO THE SHAREHOLDERS AND THE BOARD OF DIRECTORS OF THE DUN & BRADSTREET CORPORATION: We have audited the accompanying consolidated balance sheets of The Dun & Bradstreet Corporation and Subsidiaries at December 31, 1997 and 1996, and the related consolidated statements of operations, shareholders' equity and cash flows for the years ended December 31, 1997, 1996 and 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and the significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of The Dun & Bradstreet Corporation and Subsidiaries at December 31, 1997 and 1996, and the consolidated results of their operations and their cash flows for the years ended December 31, 1997, 1996 and 1995, in conformity with generally accepted accounting principles. As discussed in Note 1 to the consolidated financial statements, the Company changed certain revenue recognition accounting policies in 1997. /s/ Coopers & Lybrand LLP New York, New York February 13, 1998 STATEMENT OF MANAGEMENT RESPONSIBILITY FOR FINANCIAL STATEMENTS TO THE SHAREHOLDERS OF THE DUN & BRADSTREET CORPORATION: Management has prepared and is responsible for the consolidated financial statements and related information that appear on pages 29 to 56. The consolidated financial statements, which include amounts based on the estimates of management, have been prepared in conformity with generally accepted accounting principles. Other financial information in the annual report is consistent with that in the consolidated financial statements. Management believes that the Company's internal control systems provide reasonable assurance at reasonable cost that assets are safeguarded against loss from unauthorized use or disposition, and that the financial records are reliable for preparing financial statements and maintaining accountability for assets. These systems are augmented by written policies, an organizational structure providing division of responsibilities, careful selection and training of qualified financial personnel and a program of internal audits. The independent accountants are engaged to conduct an audit of and render an opinion on the financial statements in accordance with generally accepted auditing standards. These standards include an assessment of the systems of internal controls and tests of transactions to the extent considered necessary by them to support their opinion. The Board of Directors, through its Audit Committee consisting solely of outside directors of the Company, is responsible for reviewing and monitoring the Company's financial reporting and accounting practices. Coopers & Lybrand L.L.P. and the internal auditors each have full and free access to the Audit Committee and meet with it regularly, with and without management. /s/ Volney Taylor Volney Taylor Chairman and Chief Executive Officer /s/Frank S. Sowinski Frank S. Sowinski Senior Vice President and Chief Financial Officer F-7 8 The Dun & Bradstreet Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF OPERATIONS
DOLLAR AMOUNTS IN MILLIONS, YEARS ENDED DECEMBER 31, EXCEPT PER SHARE DATA 1997 1996 1995 --------------------------------------------------------------------------------------------------------------- RESULTS OF OPERATING REVENUES $ 2,154.4 $ 2,159.2 $ 2,158.2 OPERATIONS Operating Costs 526.5 693.6 708.3 Selling and Administrative Expenses 926.1 949.4 886.8 Depreciation and Amortization 153.9 157.4 164.5 Reorganization Costs - 161.2 - ----------- ----------- ----------- OPERATING INCOME 547.9 197.6 398.6 ----------- ----------- ----------- Interest Income 1.8 4.4 10.2 Interest Expense (53.4) (37.1) (37.3) Other Expense-Net (19.7) (38.5) (40.9) ----------- ----------- ----------- Non-Operating Expense-Net (71.3) (71.2) (68.0) ----------- ----------- ----------- Income from Continuing Operations before Provision for Income Taxes 476.6 126.4 330.6 Provision for Income Taxes 165.6 153.7 113.1 ----------- ----------- ----------- Income (Loss) from Continuing Operations 311.0 (27.3) 217.5 ----------- ----------- ----------- Discontinued Operations: Income from Discontinued Operations, Net of Income Taxes of $155.9 and $9.7 for 1996 and 1995, respectively - 141.1 103.3 Loss on Disposal, Net of Income Tax Benefit of $62.4 - (158.2) - =========== =========== =========== Income (Loss) from Discontinued Operations - (17.1) 103.3 ----------- ----------- ----------- Income (Loss) before Cumulative Effect of Accounting Changes 311.0 (44.4) 320.8 Cumulative Effect of Accounting Changes, Net of Income Tax Benefit of $104.1 (150.6) - - ----------- ----------- ----------- NET INCOME (LOSS) $ 160.4 $ (44.4) $ 320.8 =========== =========== =========== BASIC EARNINGS Continuing Operations $ 1.82 $ (.16) $ 1.28 (LOSS) PER SHARE Discontinued Operations - (.10) .61 OF COMMON STOCK ----------- ----------- ----------- Before Cumulative Effect of Accounting Changes 1.82 (.26) 1.89 Cumulative Effect of Accounting Changes (.88) - - ----------- ----------- ----------- Basic Earnings (Loss) Per Share of Common Stock $ .94 $ (.26) $ 1.89 ----------- ----------- ----------- DILUTED EARNINGS Continuing Operations $ 1.80 $ (.16) $ 1.27 (LOSS) PER SHARE Discontinued Operations - (.10) .60 OF COMMON STOCK ----------- ----------- ----------- Before Cumulative Effect of Accounting Changes 1.80 (.26) 1.87 Cumulative Effect of Accounting Changes (.87) - - ----------- ----------- ----------- Diluted Earnings (Loss) Per Share of Common Stock $ .93 $ (.26) $ 1.87 SHARE DATA Weighted Average Number of Shares Outstanding-Basic 170,765,000 170,017,000 169,522,000 =========== =========== =========== Weighted Average Number of Shares Outstanding-Diluted 172,552,000 171,576,000 171,608,000 =========== =========== ===========
The accompanying notes are an integral part of the consolidated financial statements. F-8 9 The Dun & Bradstreet Corporation and Subsidiaries CONSOLIDATED BALANCE SHEETS
DECEMBER 31, DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA 1997 1996 ----------------------------------------------------------------------------------------------------------- ASSETS CURRENT Cash and Cash Equivalents $ 81.8 $ 127.9 ASSETS Accounts Receivable-Net of Allowance of $43.4 in 1997 and $38.1 in 1996 583.7 600.7 -------- -------- Other Current Assets 232.8 188.8 -------- -------- TOTAL CURRENT ASSETS 898.3 917.4 NON-CURRENT Investments and Notes Receivable 179.4 292.2 ASSETS Property, Plant and Equipment 342.7 373.1 Prepaid Pension Costs 200.2 172.1 Computer Software 160.1 150.7 Goodwill 194.6 218.4 Other Non-Current Assets 176.6 170.3 -------- -------- Total Non-Current Assets 1,253.6 1,376.8 -------- -------- Total Assets $2,151.9 $2,294.2 -------- -------- ----------------------------------------------------------------------------------------------------------- LIABILITIES AND SHAREHOLDERS' EQUITY CURRENT LIABILITIES Notes Payable $ 451.5 $1,120.7 Accrued and Other Current Liabilities 536.6 599.9 Unearned Subscription Income 573.5 297.0 -------- -------- TOTAL CURRENT LIABILITIES 1,561.6 2,017.6 -------- -------- Postretirement and Postemployment Benefits 402.0 354.1 Other Non-Current Liabilities 376.6 354.2 Minority Interest 301.9 - SHAREHOLDERS' Preferred Stock, par value $1 per share, authorized-10,000,000 SHARES; outstanding-none Equity Common Stock, par value $1 per share, authorized-400,000,000 shares; issued-188,420,996 shares for 1997 and 1996 188.4 188.4 Capital Surplus 80.2 72.6 Retained Earnings 405.2 480.3 Treasury Stock, at cost, 17,853,652 and 17,612,776 shares for 1997 and 1996, respectively (964.0) (1,019.7) Cumulative Translation Adjustment (162.6) (153.3) Minimum Pension Liability Adjustment (37.4) - -------- -------- Total Shareholders' Equity (490.2) (431.7) -------- -------- Total Liabilities and Shareholders' Equity $2,151.9 $2,294.2 ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-9 10 The Dun & Bradstreet Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF CASH FLOWS
Years Ended December 31, Dollar amounts in millions 1997 1996 1995 ------------------------------------------------------------------------------------------------------------------- CASH FLOWS Net Income (Loss) $ 160.4 $ (44.4) $ 320.8 FROM OPERATING Less: Income (Loss) from Discontinued Operations - (17.1) 103.3 ACTIVITIES -------- -------- -------- Income (Loss) from Continuing Operations 160.4 (27.3) 217.5 Reconciliation of Net Income (Loss) to Net Cash Provided By Operating Activities: Cumulative Effect of Accounting Changes, Net of Income Tax Benefit 150.6 - - Depreciation and Amortization 153.9 157.4 164.5 (Gain) Loss from Sale of Businesses, Net of Income Taxes (4.0) 82.2 (118.0) Dividends Received in Excess of (Less Than) Equity Earnings 66.7 (14.9) (10.4) Decrease (Increase) in Notes Receivable 48.4 (41.2) - Non-Recurring Charge - - 206.2 Restructuring Payments - (50.7) (68.9) Postemployment Benefit Payments (30.6) (50.3) (60.0) Net Increase in Accounts Receivable (52.7) (47.5) (60.4) Deferred Income Taxes (6.6) 118.1 (66.3) Accrued Income Taxes (44.1) 50.4 (57.6) Increase in Long-Term Liabilities 38.7 58.3 3.0 Net Decrease in Other Working Capital Items 52.7 33.3 55.0 Other (45.4) (13.2) 28.4 -------- -------- -------- Net Cash Provided By Operating Activities 488.0 254.6 233.0 -------- -------- -------- CASH FLOWS Proceeds from Sales of Marketable Securities 27.2 17.6 34.1 FROM INVESTING Payments for Marketable Securities (27.1) (2.4) (22.9) ACTIVITIES Proceeds from Sale of Businesses 122.0 115.2 230.0 Capital Expenditures (59.4) (73.9) (116.8) Additions to Computer Software and Other Intangibles (86.4) (96.2) (118.4) Other 20.1 (46.3) 36.6 -------- -------- -------- Net Cash (Used In) Provided By Investing Activities (3.6) (86.0) 42.6 -------- -------- -------- CASH FLOWS Payment of Dividends (150.6) (310.8) (446.1) FROM FINANCING Payments for Purchase of Treasury Shares (60.1) (25.6) (72.3) ACTIVITIES Net Proceeds from Exercise of Stock Options 40.8 63.7 42.2 Increase (Decrease) in Commercial Paper Borrowings 421.6 (405.0) (38.7) Increase in Minority Interest 300.0 - - (Decrease) Increase in Other Short-Term Borrowings (1,090.6) 1,116.2 - Payment of Redeemable Partnership Interests - (575.0) - Other 9.2 1.6 (1.6) -------- -------- -------- Net Cash Used In Financing Activities (529.7) (134.9) (516.5) -------- -------- -------- Effect of Exchange Rate Changes on Cash and Cash Equivalents (.8) (2.1) 4.0 -------- -------- -------- (Decrease) Increase in Cash and Cash Equivalents (46.1) 31.6 (236.9) Net Cash (Used In) Provided By Discontinued Operations - (50.8) 261.9 Cash and Cash Equivalents, Beginning of Year 127.9 147.1 122.1 ======== ======== ======== Cash and Cash Equivalents, End of Year $ 81.8 $ 127.9 $ 147.1 ======== ======== ========
The accompanying notes are an integral part of the consolidated financial statements. F-10 11 The Dun & Bradstreet Corporation and Subsidiaries CONSOLIDATED STATEMENTS OF SHAREHOLDERS' EQUITY
THREE YEARS ENDED DECEMBER 31, 1997 DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA - - ----------------------------------------------------------------------------------------------------------------------------------- MINIMUM COMMON CUMULATIVE PENSION TOTAL STOCK CAPITAL RETAINED TREASURY TRANSLATION LIABILITY SHAREHOLDERS' ($1 PAR VALUE) SURPLUS EARNINGS STOCK ADJUSTMENT ADJUSTMENT EQUITY -------------- ------- -------- ----- ---------- ---------- ------ BALANCE, JANUARY 1, 1995 $188.4 $ 67.2 $2,323.7 $(1,077.2) $(183.5) $ - $1,318.6 Net Income 320.8 320.8 Cash Dividends ($2.63 per share) (446.1) (446.1) Treasury Shares Reissued Under Stock Options and Deferred Compensation Plans (741,526) 2.8 34.2 37.0 Treasury Shares Reissued Under Restricted Stock Plan (174,100) 8.0 8.0 Treasury Shares Acquired (1,297,138) (72.3) (72.3) Change in Cumulative Translation Adjustment 6.2 6.2 Unrealized Gains on Investments 10.3 10.3 ------ ------ -------- --------- ------- ------ -------- BALANCE, DECEMBER 31, 1995 188.4 70.0 2,208.7 (1,107.3) (177.3) - 1,182.5 ------ ------ -------- --------- ------- ------ -------- Net Loss (44.4) (44.4) Cash Dividends ($1.82 per share) (310.8) (310.8) Stock Dividend to Shareholders of Cognizant and ACNielsen, Including 800,000 Treasury Shares (1,370.2) 49.5 79.8 (1,240.9) Treasury Shares Reissued Under Stock Options and Deferred Compensation Plans (1,525,935) 2.6 59.0 61.6 Treasury Shares Reissued Under Restricted Stock Plan (16,410) 4.7 4.7 Treasury Shares Acquired (923,199) (25.6) (25.6) Change in Cumulative Translation Adjustment (55.8) (55.8) Unrealized Losses on Investments (3.0) (3.0) ------ ------ -------- --------- ------- ------ -------- BALANCE, DECEMBER 31, 1996 188.4 72.6 480.3 (1,019.7) (153.3) - (431.7) ------ ------ -------- --------- ------- ------ -------- Net Income 160.4 160.4 Cash Dividends ($.88 per share) (150.6) (150.6) Adjustment to Stock Dividend to Shareholders of Cognizant and ACNielsen (11.3) (11.3) Treasury Shares Reissued Under Stock Options and Deferred Compensation Plans (2,010,091) 7.6 (72.4) 115.6 50.8 Treasury Shares Reissued Under Restricted Stock Plan (20,884) .2 .2 Treasury Shares Acquired (2,271,851) (60.1) (60.1) Change in Cumulative Translation Adjustment (9.3) (9.3) Minimum Pension Liability Adjustment (37.4) (37.4) Unrealized Losses on Investments (1.2) (1.2) ------ ------ -------- --------- ------- ------ -------- BALANCE, DECEMBER 31, 1997 $188.4 $ 80.2 $ 405.2 $ (964.0) $(162.6) $(37.4) $ (490.2) ------ ------ -------- --------- ------- ------ --------
The accompanying notes are an integral part of the consolidated financial statements. F-11 12 The Dun & Bradstreet Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS TABULAR DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES PRINCIPLES OF CONSOLIDATION. The consolidated financial statements include those of The Dun & Bradstreet Corporation (the "Company") and its subsidiaries and investments in which the Company has a controlling interest. Investments in companies over which the Company has significant influence but not a controlling interest are carried on an equity basis. The effects of all significant intercompany transactions have been eliminated. The financial statements of subsidiaries outside the United States and Canada reflect a fiscal year ending November 30 to facilitate timely reporting of the Company's consolidated financial results. As discussed more thoroughly in Note 2, Cognizant Corporation ("Cognizant"), ACNielsen Corporation ("ACNielsen"), Dun & Bradstreet Software ("DBS") and NCH Promotional Services ("NCH") are presented as discontinued operations. CASH EQUIVALENTS. Marketable securities that mature within 90 days of purchase date are considered cash equivalents and are stated at cost, which approximates fair value. MARKETABLE SECURITIES. In accordance with Statement of Financial Accounting Standards ("SFAS") No. 115, "Accounting for Certain Investments in Debt and Equity Securities," marketable securities at December 31, 1997 and 1996, are classified as "available for sale" and are reported at fair value, with net unrealized gains and losses reported in shareholders' equity. The fair value of current and non-current marketable securities was estimated based on quoted market prices. Realized gains and losses on marketable securities are determined on the specific identification method. The Company's marketable securities, $53.0 million and $46.1 million at December 31, 1997 and 1996, respectively, consisted primarily of debt securities of the U.S. Government and its agencies. PROPERTY, PLANT AND EQUIPMENT. Buildings, machinery and equipment are depreciated principally using the straight-line method over a period of three to 40 years. Leasehold improvements are amortized on a straight-line basis over the shorter of the term of the lease or the estimated useful life of the improvement. COMPUTER SOFTWARE, GOODWILL AND INTANGIBLE ASSETS. Certain computer software costs are capitalized in accordance with SFAS No. 86, "Accounting for the Costs of Computer Software to be Sold, Leased or Otherwise Marketed," and are reported at the lower of unamortized cost or net realizable value. Costs in connection with business process reengineering are expensed as incurred. Other intangibles result from acquisitions and database enhancements. Computer software and other intangibles are being amortized, using principally the straight-line method, over three to five years and five to 15 years, respectively. Goodwill represents the excess purchase price over the fair value of identifiable net assets of businesses acquired and is amortized on a straight-line basis over five to 40 years. The Company adopted the provisions of SFAS No. 121, "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed Of" ("SFAS No. 121") in 1995. This statement requires that long-lived assets and certain identifiable intangibles held and used by an entity be reviewed for impairment whenever events or changes in circumstances indicate that the carrying amount of an asset may not be recoverable. In general, this statement requires recognition of an impairment loss when the sum of undiscounted expected future cash flows is less than the carrying amount of such assets. The measurement for such an impairment loss is then based on the fair value of the asset (see Note 3). At each balance sheet date, the Company reviews the recoverability of goodwill, not identified with long-lived assets, based on estimated undiscounted future cash flows from operating activities compared with the carrying value of goodwill, and recognizes any impairment on the basis of such comparison. The recognition and measurement of goodwill impairment is assessed at the business unit level. REVENUE RECOGNITION. The Company recognizes revenue as services are performed, information is delivered and products and services are used by its customers. Amounts billed for service and subscriptions are credited to unearned subscription income and reflected in operating revenues over the subscription term, which is generally one year. Revenues from directory advertising sales are recognized when sold. ACCOUNTING CHANGES. Effective January 1, 1997, the Company changed its revenue recognition method for its Credit Information Services business to recognize revenue as products and services are used by its customers. Previously, the Company recognized revenue ratably over the contract period. This change is consistent with the Company's change in focus from a sales contract basis to a product usage basis in order to drive revenue growth and increase customer satisfaction. Additionally, the Company changed certain of its revenue recognition methods in the Marketing Information Services, Receivables Management Services and Moody's Investors Service ("Moody's") businesses to recognize revenue over the service period from previously recognizing revenues and costs at the time F-12 13 NOTE 1 SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) of shipment or billing. In the opinion of management, these accounting changes bring revenue recognition methods more in line with the economics of the business and provide a better measure of operating results. In accordance with Accounting Principles Board Opinion ("APB") No. 20, "Accounting Changes," the cumulative effect of changing the accounting for certain of the Company's revenue recognition policies resulted in a pre-tax, non-cash charge of $254.7 million ($150.6 million after tax or $.88 per share basic, $.87 per share diluted). On a pro-forma basis these changes would have increased 1996 and decreased 1995 net income by $3.7 million and $7.5 million, respectively. The impact on basic and diluted earnings per share would have been an increase in 1996 of $.02 per share and a decrease in 1995 of $.04 per share. FOREIGN CURRENCY TRANSLATION. For all operations outside the United States where the Company has designated the local currency as the functional currency, assets and liabilities are translated using the end-of-year exchange rates, and revenues and expenses are translated using average exchange rates for the year. For these countries, currency translation adjustments are accumulated in a separate component of shareholders' equity, whereas realized transaction gains and losses are recognized in other expense-net. For operations in countries that are considered to be highly inflationary, where the U.S. dollar is designated as the functional currency, monetary assets and liabilities are translated using end-of-year exchange rates, nonmonetary accounts are translated using historical exchange rates, and all translation and transaction adjustments are recognized in other expense-net. EARNINGS PER SHARE OF COMMON STOCK. The Company adopted SFAS No. 128, "Earnings per Share," ("SFAS No. 128"), in 1997. As required by the statement, the Company restated all prior-period per share data presented. SFAS No. 128 requires presentation of both basic and diluted earnings per share. Basic earnings per share are calculated based on the weighted average number of shares of common stock outstanding during the reporting period. Diluted earnings per share are calculated giving effect to all potentially dilutive common shares, assuming such shares were outstanding during the reporting period. FINANCIAL INSTRUMENTS. At times, the Company uses forward foreign exchange contracts and interest rate swaps to hedge existing assets, liabilities and firm commitments. The Company does not use any derivatives for trading or speculative purposes. Gains and losses on forward foreign exchange contracts that qualify as hedges of existing assets or liabilities are included in the carrying amounts of those assets or liabilities and are ultimately recognized in income as part of those carrying amounts. Gains and losses related to qualifying hedges of firm commitments are also deferred and are recognized in income or as adjustments of carrying amounts when the hedged transactions occur. For forward foreign exchange contracts, the risk reduction is assessed on a transaction basis, and contract amounts and terms are matched to existing intercompany transactions. The Company uses interest rate swaps to hedge interest rate risk on commercial paper. Settlement accounting is accorded to the swaps that have contractual, periodic payment terms considered to be aligned to the expected future commercial paper issuances. The commercial paper issuances are expected to continue through the term of the existing interest rate swaps. Periodic swap payments and receipts under the interest rate swaps are recorded as part of interest expense. Neither the swap contracts nor the gains or losses on these contracts, which are designated and effective as hedges, are recognized in the financial statements. If a hedging instrument is sold or terminated prior to maturity, gains and losses will continue to be deferred until the hedged item is recognized in income. If a hedging instrument ceases to qualify for settlement accounting, any subsequent gains and losses are recognized currently in income. ESTIMATES. The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and the disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the period. Actual results could differ from those estimates. Estimates are used in the determination of allowances for doubtful accounts, depreciation and amortization, computer software, employee benefits plans, taxes and contingencies, among others. RECLASSIFICATIONS. As discussed in Note 2, the consolidated financial statements for 1995 have been reclassified to identify separately the results of operations and cash flows of the Company's discontinued operations. In addition, certain prior-year amounts have been reclassified to conform to the 1997 presentation. F-13 14 The Dun & Bradstreet Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED TABULAR DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA NOTE 2 REORGANIZATION AND DISCONTINUED OPERATIONS On November 1, 1996, the Company reorganized into three publicly traded independent companies by spinning off through a tax-free distribution two of its businesses to shareholders (the "Distribution"). The Distribution resulted in the following three companies: 1) The Dun & Bradstreet Corporation, consisting of Dun & Bradstreet, the operating company ("D&B"), Moody's and Reuben H. Donnelley ("Donnelley"); 2) ACNielsen; and 3) Cognizant, consisting of IMS International, Inc. ("IMS"), Gartner Group, Nielsen Media Research, Pilot Software, Cognizant Technology Solutions Corporation, Cognizant Enterprises and Erisco. In connection with the Distribution, DBS and NCH were sold. On October 10, 1996, following receipt of a ruling from the Internal Revenue Service that the transaction would be tax-free to the Company and its U.S. shareholders, the Company's Board of Directors declared a dividend distribution to shareholders of record on October 21, 1996, consisting of one share of Cognizant common stock for each share of the Company's common stock and one share of ACNielsen common stock for every three shares of the Company's common stock held on such record date. The Distribution was effected on November 1, 1996. These transactions resulted in a non-cash dividend that reduced shareholders' equity by $1,240.9 million. During 1997, adjustments to the dividend of $11.3 million were recorded, primarily as a result of employee benefits plan revisions. For purposes of governing certain of the ongoing relationships among the Company, Cognizant and ACNielsen as a result of the Distribution, the three new companies entered into various agreements, including a Distribution Agreement, Tax Allocation Agreement, Employee Benefits Agreement, Indemnity and Joint Defense Agreement, Intellectual Property Agreement, Shared Transaction Services Agreement, Data Services Agreement and a Transition Services Agreement. These agreements set forth the principles to be applied in allocating certain related costs and specified portions of contingent liabilities to be shared if certain amounts are exceeded, which by their nature, cannot be predicted at this time, but could be significant. Pursuant to APB No. 30, "Reporting the Results of Operations-Reporting the Effects of Disposal of a Segment of a Business, and Extraordinary, Unusual and Infrequently Occurring Events and Transactions," the 1995 consolidated financial statements of the Company have been reclassified to reflect the dispositions of the companies that comprised the Company's Marketing Information Services, Software Services and Other Business Services business segments. These segments included the companies that made up Cognizant and ACNielsen, along with DBS and NCH. Accordingly, the revenues, costs and expenses and cash flow of Cognizant, ACNielsen, DBS and NCH have been excluded from the respective captions in the Consolidated Statements of Operations and Consolidated Statements of Cash Flows for 1996 and 1995. The net operating results of these entities have been reported, net of applicable income taxes, as "Income (Loss) from Discontinued Operations;" and the net cash flows of these entities have been reported as "Net Cash (Used-In) Provided by Discontinued Operations" for 1996 and 1995. For the years ended December 31, 1996 and 1995, operating revenues of the discontinued operations were $2,761.6 million and $3,256.9 million, respectively. 1996 revenues include the results of Cognizant, ACNielsen and DBS for the 10 months ended October 31, 1996, and the results of NCH for the full year. The Company completed the sale of DBS on November 1, 1996, for proceeds of $191.3 million, including a note of $41.2 million, resulting in a pre-tax loss of $220.6 million ($158.2 million after-tax). Pursuant to the Distribution Agreement, the cash proceeds from the sale were transferred to Cognizant. During the third quarter of 1997, cash was received from the buyer to satisfy the note receivable, which was due in May 1998. The sale of NCH was completed on December 31, 1996. Pursuant to the Distribution Agreement, the proceeds of $20.5 million from the sale of NCH, which included a note of $8.5 million, were transferred to Cognizant. At December 31, 1996, the Company recorded a receivable of $20.5 million from the buyer of NCH and a corresponding payable to Cognizant. These transactions were settled in January 1997. The Company did not incur a gain or loss on the sale. Also included in 1996 results, within discontinued operations, are tax costs allocated to discontinued operations of $49.1 million. F-14 15 NOTE 3 NON-RECURRING ITEMS In 1997, included in the Company's operating results was a pre-tax gain of $9.4 million ($4.0 million after tax), related to the sale of the East Coast proprietary operations of Donnelley ("P-East"). The 1996 results for the Company reflect after-tax non-recurring charges of $284.7 million, incurred as a result of the Distribution and the sales of the West Coast proprietary operations of Donnelley ("P-West") and American Credit Indemnity ("ACI"). Of the $284.7 million, $257.9 million was recorded in pre-tax income and a net tax cost of $26.8 million was recorded in the provision for income taxes. The $257.9 million represents reorganization costs of $161.2 million (professional and consulting fees of $75.0 million and settlement of executive compensation plans and retention bonuses of $86.2 million) and $96.7 million resulting from the losses incurred on the sales of P-West and ACI. The sales of P-West and ACI were completed in May and October of 1996, respectively. In the fourth quarter of 1995, the Company recorded within operating costs a charge of $206.2 million. This charge primarily reflected an impairment loss in connection with the adoption of the provisions of SFAS No. 121 ($100.9 million), a provision for postemployment benefits ($58.1 million) under the Company's severance plan, an accrual for contractual obligations that have no future economic benefits and for penalties to cancel certain contracts ($23.1 million) and other asset revaluations ($24.1 million). This non-recurring charge evolved from the Company's annual budget and strategic planning process, which included a review of the Company's underlying cost structure, products and services, and assets used in the business. Based upon such analysis, management, having the authority to approve such business decisions, committed in December 1995 to a plan to discontinue certain product lines and dispose of certain other assets, resulting in the charge. These decisions were not reversed or modified as a result of the Company's reorganization plan, which was reviewed and approved by the Board of Directors on January 9, 1996. Also in 1995, the Company recorded in operating costs a $28.0 million gain related to the sale of warrants received in connection with the divestiture of Donnelley Marketing and a $90.0 million gain relating to the sale of Interactive Data Corporation ("IDC"). NOTE 4 RECONCILIATION OF WEIGHTED AVERAGE SHARES
SHARE DATA IN THOUSANDS 1997 1996 1995 ---------------------------------------------------------------------------------------------------------------- Weighted Average Number of Shares-Basic 170,765 170,017 169,522 Dilutive effect of shares issuable as of year-end under stock options, restricted stock and performance unit plans 1,629 1,430 2,061 Adjustment of shares applicable to stock options exercised during the year and performance unit plans 158 129 25 ------- ------- ------- Weighted Average Number of Shares-Diluted 172,552 171,576 171,608 ------- ------- -------
As required by SFAS No. 128, the Company has provided a reconciliation of basic weighted average shares to diluted weighted average shares within the table outlined above. The conversion of diluted shares has no impact on the Company's operating results. Options to purchase 3.1 million, 4.4 million and 3.2 million shares of common stock were outstanding at December 31, 1997, 1996 and 1995, respectively, but were not included in the computation of diluted earnings per share because the options' exercise prices were greater than the average market price of the Company's common stock. The Company's options generally expire 10 years after the initial grant date. F-15 16 The Dun & Bradstreet Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED TABULAR DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA NOTE 5 FINANCIAL INSTRUMENTS WITH OFF-BALANCE SHEET RISKS The Company uses interest rate swap agreements and forward foreign exchange contracts to reduce exposure to fluctuations in interest and foreign exchange rates. The Company does not use derivative financial instruments for trading or speculative purposes. If a hedging instrument ceases to qualify as a hedge, any subsequent gains and losses are recognized currently in income. Collateral is generally not required for these types of instruments. By their nature, all such instruments involve risk, including the credit risk of non-performance by counterparties. However, at December 31, 1997 and 1996, in management's opinion there was no significant risk of loss in the event of non-performance of the counterparties to these financial instruments. The Company controls its exposure to credit risk through monitoring procedures. INTEREST RATE SWAP AGREEMENTS The Company enters into interest rate swap agreements to manage exposure to changes in interest rates. Interest rate swaps allow the Company to raise funds at floating rates and effectively swap them into fixed rates that are lower than those available to it if fixed-rate borrowings were made directly. These agreements involve the exchange of floating-rate for fixed-rate payments without the exchange of the underlying principal amount. Fixed-interest-rate payments are at rates ranging from 6.67% to 7.02%. Floating-rate payments received are based on rates tied to prevailing short-term interest rates. If the Company terminates a swap agreement, the gain or loss is amortized over the shorter of the remaining original life of the debt or the swap. In the first quarter of 1997, $2.9 million was recorded in connection with the termination of swaps and corresponding debt. At December 31, 1997, the unrealized fair value of the interest rate swaps was a loss of $11.1 million, of which $3.2 million has been recorded in 1997 relating to swaps which do not qualify for settlement accounting. At December 31, 1996, the unrealized fair value of the interest rate swaps was a loss of $15.8 million. The following table indicates the type of swaps in use at December 31, 1997 and 1996, and their weighted average interest rates. Average variable rates are those in effect at the reporting date and may change significantly over the lives of the contracts.
1997% 1996% ----------------------------------------------------------------------- Variable to fixed swaps- Notional amount $ 300.0% $ 600.0% Average pay (fixed) rate 6.84% 6.94% Average receive (variable) rate 5.75% 5.57%
The swap contracts expire from August 31, 2001, through January 15, 2005. FOREIGN EXCHANGE In order to reduce the risk of foreign currency exchange rate fluctuations, the Company follows a policy of hedging substantially all cross-border intercompany transactions denominated in a currency other than the functional currency applicable to each of its various subsidiaries. The financial instruments used to hedge these cross-border intercompany transactions are forward foreign exchange contracts with maturities of six months or less. These forward contracts are executed with creditworthy institutions and are denominated primarily in the British Pound, German Mark, Swedish Krona and Japanese Yen. The gains and losses on these forward contracts are recorded to income or expense and are essentially offset by the gains and losses on the underlying foreign currency transactions. The Company does not enter into forward foreign exchange contracts for speculative or trading purposes. At December 31, 1997 and 1996, the Company had approximately $117 million and $114 million, respectively, of forward foreign exchange contracts outstanding with various expiration dates through March 1998 and March 1997, respectively. At December 31, 1997, unrealized gains on these contracts were $1.5 million and the unrealized losses were $.4 million. At December 31, 1996, unrealized gains on these contracts were $3.5 million and the unrealized losses were $1.3 million. NOTE 6 PENSION AND POSTRETIREMENT BENEFITS PENSION PLANS The Company has pension plans covering substantially all associates in the United States. The benefits to be paid to associates under these plans were based on years of credited service and average final compensation. Pension costs are determined actuarially and funded in accordance with the Internal Revenue Code. Supplemental and excess plans in the United States are maintained to provide retirement benefits in excess of levels allowed by ERISA. Effective January 1, 1997, the Company's Retirement Plan was amended to provide retirement income based on a percentage of annual compensation, rather than final pay. The percentage of compensation allocated annually to a retirement account ranges from 3.0% to 12.5%, based on age and service. Amounts allocated under the plan also receive interest credits based on 30-year Treasury Bonds with a minimum interest credit rate of 3.0%. Associates close to or eligible for retirement as of January 1, 1997, will receive the higher of benefits provided by the final pay formula or retirement account formula. F-16 17 NOTE 6 PENSION AND POSTRETIREMENT BENEFITS PENSION PLANS (CONTINUED) In accordance with SFAS No. 87, "Employers' Accounting for Pensions," the Company has recorded an additional minimum pension liability for each benefits plan for which the accumulated benefits obligation exceeds plan assets. This amount has been recorded as a long-term liability with an offsetting intangible asset. To the extent that these additional liabilities exceeded related unrecognized prior service cost and net transition obligation, the increase in liabilities is charged directly to shareholders' equity. At December 31, 1997, $37.4 million was reported as a separate reduction of shareholders' equity. The Company has retained the obligation for pension benefits for personnel who retired prior to November 1, 1996, from the businesses that comprise discontinued operations. The Company's non-U.S. subsidiaries provide retirement benefits for associates consistent with local practices, primarily using defined benefits or termination indemnity plans. The components of net periodic pension costs for the years ended December 31, which included both continuing and discontinued operations for 1996 and 1995, are summarized as follows:
1997 1996 1995 ----------------------------------------------------------------- Service cost $ 18.4 $ 34.8 $ 43.1 Interest cost 83.4 87.4 108.5 Actual return on plan assets (242.8) (173.2) (248.1) Net amortization and deferral 137.5 67.3 126.8 ------- ------- ------- Net periodic pension (income) cost $ (3.5) $ 16.3 $ 30.3 ------- ------- -------
Discontinued operations were allocated pension expense of $10.4 million and $11.1 million in 1996 and 1995, respectively. The status of pension plans at December 31, 1997 and 1996, is as follows:
FUNDED UNFUNDED -------------------- -------------------------------------------- U.S.(1) NON-U.S. -------------------- -------------------- 1997 1996 1997 1996 1997 1996 -------------------------------------------------------------------------------------------------------------------------- Fair value of plan assets $1,328.7 $1,146.5 $ -- $ -- $ -- $ -- -------- -------- -------- -------- -------- -------- Actuarial present value of benefits obligations: Vested benefits 954.5 811.8 162.0 95.8 6.3 7.1 Non-vested benefits 18.4 35.7 3.4 4.6 -- -- -------- -------- -------- -------- -------- -------- Accumulated benefits obligations 972.9 847.5 165.4 100.4 6.3 7.1 Effect of projected future salary increases 69.3 89.7 18.3 60.5 -- -- -------- -------- -------- -------- -------- -------- Projected benefits obligations 1,042.2 937.2 183.7 160.9 6.3 7.1 -------- -------- -------- -------- -------- -------- Plan assets in excess of (less than) projected benefits obligations 286.5 209.3 (183.7) (160.9) (6.3) (7.1) Unrecognized net (loss) gain (59.0) .5 55.8 30.2 -- -- Unrecognized prior service cost 9.9 6.7 23.9 22.8 -- -- Unrecognized net transition (asset) obligation (37.2) (44.4) 1.2 1.6 -- -- Adjustment to recognize minimum liability -- -- (62.6) (6.4) -- -- -------- -------- -------- -------- -------- -------- Prepaid (accrued) pension cost $ 200.2 $ 172.1 $ (165.4) $ (112.7) $ (6.3) $ (7.1) -------- -------- -------- -------- -------- --------
(1) Represents supplemental and excess plans for which grantor trusts (with assets of $57.4 million and $58.9 million at December 31, 1997 and 1996, respectively) have been established to pay plan benefits. F-17 18 The Dun & Bradstreet Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED TABULAR DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA NOTE 6 PENSION AND POSTRETIREMENT BENEFITS PENSION PLANS (CONTINUED) The weighted average expected long-term rate of return on pension plan assets was 9.70% for 1997 and 9.75% for 1996 and 1995. At December 31, 1997 and 1996, the projected benefits obligations were determined using weighted average discount rates of 7.01% and 7.77%, respectively, and weighted average rates of increase in future compensation levels of 4.46% and 5.15%, respectively. Plan assets are invested in diversified portfolios that consist primarily of equity and debt securities. POSTRETIREMENT BENEFITS In addition to providing pension benefits, the Company provides various health-care and life-insurance benefits for retired associates. Substantially all of the Company's associates in the United States become eligible for these benefits if they reach normal retirement age while working for the Company. Certain of the Company's subsidiaries outside the United States have postretirement benefits plans, although most participants are covered by government sponsored or administered programs. The cost of Company sponsored postretirement benefits plans outside the U.S. is not significant. The Company has retained the obligation for postretirement benefits for personnel who retired prior to November 1, 1996, from the businesses that comprise discontinued operations. The components of net periodic postretirement benefits costs other than pensions for the years ended December 31, which included both continuing and discontinued operations for 1996 and 1995, are summarized as follows:
1997 1996 1995 ------------------------------------------------------------------ Service cost $ 3.5 $ 5.9 $ 5.1 Interest cost 14.6 15.4 16.0 Net amortization and deferral (4.5) (4.8) (5.0) ----- ----- ----- Net periodic postretirement benefits cost $13.6 $16.5 $16.1 ----- ----- -----
Discontinued operations were allocated net periodic postretirement benefits costs of $4.4 million and $4.8 million in 1996 and 1995, respectively. The status of postretirement benefits plans other than pensions at December 31, 1997 and 1996, is as follows:
1997 1996 ----------------------------------------------------------------------------- Actuarial present value of benefits obligation: Retirees and dependents $(175.6) $(165.9) Active associates-eligible (18.9) (15.7) Active associates-not yet eligible (22.0) (15.0) ------- ------- Accumulated postretirement benefits obligation (216.5) (196.6) Unrecognized net loss (gain) 18.0 (.2) Unrecognized prior service credit (7.3) (11.9) ------- ------- Accrued postretirement benefits obligation $(205.8) $(208.7) ======= =======
Benefits are paid as incurred from general corporate assets. The accumulated postretirement benefits obligation at December 31, 1997 and 1996, was determined using discount rates of 7.0% and 7.75%, respectively. The assumed rate of future increases in per capita cost of covered health-care benefits is 7.3% in 1998, decreasing gradually to 5.0% for the year 2021 and remaining constant thereafter. Increasing the assumed health-care cost trend rate by one percentage point in each year would increase the accumulated postretirement benefits obligation by $22.3 million and would increase annual aggregate service and interest costs by $1.9 million. NOTE 7 EMPLOYEE STOCK PLANS The Company has granted options to certain associates, under its Key Employees Stock Option Plans, to purchase shares of its common stock at the market price on the date of the grant. Under the plans, the options vest ratably over a four-year period and expire 10 years from the date of the grant. The 1991 Key Employees Stock Option Plan provides for the granting of up to 17 million shares. In November 1996, in conjunction with the Distribution, those individuals who became employees of Cognizant or ACNielsen were granted substitute awards in the stock of their new employer, and any stock awards or options held by them in respect of the Company were reflected as surrendered in the following table. For the remaining holders of unexercised options, including employees of the Company, retirees and certain other former employees of the Company, the number of shares subject to options and the option F-18 19 NOTE 7. EMPLOYEE STOCK PLANS (CONTINUED) exercise price were adjusted immediately following the Distribution to preserve, as closely as possible, the economic value of the options that existed prior to the Distribution. The Company applies APB No. 25, "Accounting for Stock Issued to Employees," and related interpretations in accounting for its plans. Accordingly, no compensation cost has been recognized for the stock option plans. The Company has adopted the disclosure-only provisions of SFAS No. 123, "Accounting for Stock-Based Compensation" ("SFAS No. 123"). Had compensation cost for the Company's stock option plan been determined based on the fair value at the grant date for awards in 1997, 1996 and 1995 consistent with the provisions of SFAS No. 123, the Company's income (loss) from continuing operations and earnings (loss) per share would have been reduced to the pro-forma amounts indicated below:
1997 1996 1995 ------- ------- ------- Income (loss) from continuing operations As reported $ 311.0 $ (27.3) $ 217.5 Pro-forma $ 307.1 $ (31.2) $ 217.5 Basic earnings (loss) per share of common stock from continuing operations As reported $ 1.82 $ (.16) $ 1.28 Pro-forma $ 1.80 $ (.18) $ 1.28 Diluted earnings (loss) per share of common stock from continuing operations As reported $ 1.80 $ (.16) $ 1.27 Pro-forma $ 1.78 $ (.18) $ 1.27 ------- ------- -------
The pro-forma disclosures shown are not representative of the effects on income (loss) and earnings (loss) per share in future years. The fair value of the Company's stock options used to compute pro-forma income (loss) and earnings (loss) per share disclosures is the estimated present value at grant date using the Black-Scholes option-pricing model. The weighted average assumptions used for 1997 were as follows: dividend yield of 3.3%, expected volatility of 20%, risk-free interest rate of 5.73%, and an expected holding period of 4.5 years. The following weighted average assumptions were used to value grants made prior to the Distribution: dividend yield of 4.7%, expected volatility of 15%, a risk-free interest rate of 6.08%, and an expected holding period of five years. The incremental fair value of the Company's options converted on October 31, 1996, used to compute pro-forma income (loss) and earnings (loss) per share disclosures and the value of new grants after November 1, 1996, was determined using the Black-Scholes option-pricing model with the following weighted average assumptions: dividend yield of 3.7%, expected volatility of 17%, a risk-free interest rate of 5.85%, and an expected holding period of 4.5 years. Options outstanding at December 31, 1997, were granted during the years 1988 through 1997 and are exercisable over periods ending not later than 2007. At December 31, 1997, 1996 and 1995, options for 8,133,155 shares, 8,313,166 shares and 4,859,596 shares of common stock, respectively, were exercisable and 1,450,195 shares, 4,240,772 shares and 10,306,592 shares, respectively, were available for future grants under the plans. Changes in stock options for the three years ended December 31, 1997, are summarized as follows:
Weighted Average Exercise Shares Price ($) ----------- ----------- Options outstanding, January 1, 1995 8,733,172 53.57 Granted 1,821,780 63.35 Exercised (736,145) 46.11 Surrendered or expired (671,079) 56.63 ----------- ----------- Options outstanding, December 31, 1995 9,147,728 55.90 Granted 10,704 60.25 Exercised (977,042) 51.09 Surrendered or expired (689,297) 59.10 ----------- ----------- Options outstanding, October 31, 1996 7,492,093 56.23 Attributable to discontinued operations (2,958,686) 57.08 ----------- ----------- Options outstanding, October 31, 1996 4,533,407 55.68 ----------- ----------- Options converted, November 1, 1996 11,958,980 21.10 Granted 4,452,250 22.96 Exercised (543,354) 21.02 Surrendered or expired (451,416) 22.87 ----------- ----------- Options outstanding, December 31, 1996 15,416,460 21.59 Granted 3,151,980 30.01 Exercised (2,008,234) 20.38 Surrendered or expired (840,878) 22.97 Options outstanding, December 31, 1997 15,719,328 23.36 ----------- -----------
The weighted average fair value of options granted during 1997, 1996 and 1995 was $5.52, $3.61 and $7.61, respectively. F-19 20 The Dun & Bradstreet Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED TABULAR DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA NOTE 7. EMPLOYEE STOCK PLANS (CONTINUED) The following table summarizes information about stock options outstanding at December 31, 1997:
STOCK OPTIONS OUTSTANDING STOCK OPTIONS EXERCISABLE ---------------------------------------------------- ------------------------------- WEIGHTED AVERAGE REMAINING WEIGHTED WEIGHTED CONTRACTUAL AVERAGE AVERAGE RANGE OF EXERCISE PRICES SHARES LIFE EXERCISE PRICE SHARES EXERCISE PRICE $15.73-$22.55 5,705,704 4.2 Years $ 19.74 5,270,726 $ 19.68 $22.75-$30.22 10,013,624 8.9 Years $ 25.42 2,862,429 $ 23.50 15,719,328 8,133,155
The plans also provide for the granting of stock appreciation rights and limited stock appreciation rights in tandem with stock options to certain key employees. At December 31, 1997, there were 34,048 stock appreciation rights attached to stock options outstanding and 1,154,495 limited stock appreciation rights ("LSARs") attached to stock options, which are exercisable only if, and to the extent that, the related option is exercisable and, in the case of LSARs, only upon the occurrence of specified contingent events. Under the 1989 Key Employees Restricted Stock Plan, key associates may be granted restricted shares of the Company's stock. The plan provides for the granting of up to 1,800,000 shares of the Company's common stock prior to December 31, 1998. During 1997, 1996 and 1995, restricted shares of 20,000, 19,779 and 184,465, respectively, were awarded under the plan. Forfeitures in 1996 and 1995 totaled 6,877 and 10,365, respectively. There were no forfeitures during 1997. The restrictions on the majority of such shares lapse over a period of three years from the date of the grant, and the cost is charged to compensation expense ratably. Under the 1997 Key Employees Performance Unit Plan, key associates may be granted shares of the Company's stock based on the achievement of two-year revenue growth goals or other key operating objectives, where appropriate. At the end of the performance period, company performance at target will yield the targeted amount of shares, while company performance above or below target will yield larger or smaller share awards, respectively. During 1997, 471,644 shares were granted at fair value of $30.94 per share. Recorded in selling and administrative expenses in 1997 was compensation expense of $14.6 million for the plan. NOTE 8 INCOME TAXES Income before provision for income taxes consisted of:
1997 1996 1995 ---- ---- ---- U.S. $466.0 $125.1 $356.4 Non-U.S 10.6 1.3 (25.8) ------ ------ ------ $476.6 $126.4 $330.6 ------ ------ ------
The provision for income taxes consisted of:
1997 1996 1995 ---- ---- ---- Current tax provision: U.S. Federal $ 99.5 $ 43.3 $121.3 State and local 51.1 (21.6) 29.2 Non-U.S. 21.6 13.9 28.9 ------ ------ ------ Total current tax provision 172.2 35.6 179.4 ------ ------ ------ Deferred tax (benefit) provision: U.S. Federal 21.0 86.9 (30.6) State and local (21.3) 15.7 (23.8) Non-U.S (6.3) 15.5 (11.9) ------ ------ ------ Total deferred tax (benefit) provision (6.6) 118.1 (66.3) ------ ------ ------ Provision for income taxes $165.6 $153.7 $113.1 ------ ------ ------
F-20 21 NOTE 8. INCOME TAXES (CONTINUED) The following table summarizes the significant differences between the U.S. Federal statutory tax rate and the Company's effective tax rate for financial statement purposes.
1997 1996 1995 ---- ----- ---- Statutory tax rate 35.0% 35.0% 35.0% State and local taxes, net of U.S. Federal tax benefit 4.1 (3.0) 1.7 Non-U.S. taxes 3.2 12.8 5.1 Recognition of capital and ordinary losses (7.2) (14.3) (13.2) Non-recurring reorganization costs -- 34.9 -- Non-deductible capital losses -- 24.0 -- Repatriation of foreign earnings -- 30.1 -- Other (.4) 2.1 5.6 ---- ----- ---- Effective tax rate 34.7% 121.6% 34.2% ---- ----- ----
Income taxes paid were $170.3 million, $170.2 million and $119.9 million in 1997, 1996 and 1995, respectively. Income taxes refunded were $37.6 million, $140.9 million and $17.8 million in 1997, 1996 and 1995, respectively. Deferred tax assets (liabilities) consisted of the following at December 31:
1997 1996 ------ ------ Deferred tax assets: Operating losses $ 53.7 $ 34.6 Postretirement benefits 88.6 83.6 Postemployment benefits 16.1 24.1 Reorganization and restructuring costs 5.4 13.1 Bad debts 14.3 11.2 Other -- 18.0 ------ ------ Total deferred tax assets 178.1 184.6 Valuation allowance (53.7) (34.6) ------ ------ Net deferred tax asset 124.4 150.0 ------ ------ Deferred tax liabilities: Intangibles (42.1) (63.3) Revenue recognition (45.8) (65.4) Tax-leasing transactions (22.1) (37.8) Depreciation (14.3) (1.1) Other (11.1) -- ------ ------ Total deferred tax liability (135.4) (167.6) ------ ------ Net deferred tax liability $(11.0) $(17.6) ------ ------
At December 31, 1997, undistributed earnings of non-U.S. subsidiaries aggregated $98.1 million. Deferred tax liabilities have not been recognized for these undistributed earnings because it is management's intention to reinvest such undistributed earnings outside the U.S. If all undistributed earnings were remitted to the U.S., the amount of incremental U.S. Federal and foreign income taxes payable, net of foreign tax credits, would be $39.3 million. During 1996, $467.9 million of non-U.S. earnings, primarily from the Cognizant and ACNielsen businesses, were repatriated by the Company in order to facilitate its 1996 reorganization. During the three-year period ended December 31, 1983, the Company invested $304.4 million in tax-leasing transactions, varying in length from 4.5 to 25 years. These leases provided the Company with benefits from tax deductions in excess of taxable income for Federal income tax purposes. These amounts are included in deferred income taxes. F-21 22 The Dun & Bradstreet Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED TABULAR DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA NOTE 9 NOTES PAYABLE Notes payable consisted of the following at December 31:
1997 1996 -------- -------- Commercial paper $ 421.6 $ -- Bank notes 29.9 1,120.7 -------- -------- $ 451.5 $1,120.7 -------- --------
The Company had commercial paper borrowings of $421.6 million at December 31, 1997. Interest rates on these borrowings ranged from 5.62% to 6.10%. The Company has two committed bank facilities that support the Company's commercial paper borrowings. One of the facilities permits borrowings of up to $750 million and matures in August 2001. The second facility permits borrowings of up to $150 million and matures in August 1998. Under these facilities the Company has the ability to borrow at prevailing short-term interest rates. At December 31, 1997, there was no outstanding balance against these facilities. At December 31, 1996, $880.0 million was borrowed against these facilities. The Company also had non-committed lines of credit of $111 million at December 31, 1997. At year-end 1997, $29.9 million was borrowed against these non-committed facilities. At December 31, 1996, $240.7 million was borrowed against non-committed facilities of $305 million. None of these arrangements had material commitment fees or compensating balance requirements. The weighted average interest rates on commercial paper and notes payable at December 31, 1997 and 1996 were 5.97% and 5.78%, respectively. Interest paid totaled $49.6 million, $43.2 million and $28.3 million for the years ended December 31, 1997, 1996 and 1995, respectively. NOTE 10 INVESTMENT PARTNERSHIPS During 1993, the Company participated in the formation of a limited partnership to invest in various securities, including those of the Company. Third-party investors held limited-partner and special investors interests totaling $500.0 million. Funds raised by the partnership provided a source of financing for the Company's repurchase in 1993 of 8.3 million shares of its common stock. During the fourth quarter of 1996, the Company redeemed these partnership interests. This redemption was financed with short-term borrowings. The partnership is presently engaged in the business of licensing database assets and computer software. One of the Company's subsidiaries serves as managing general partner, and two subsidiaries hold limited-partner interests. In April 1997, the partnership raised $300.0 million of minority interest financing from a third-party investor. The Company's subsidiaries contributed assets to the partnership, and the third-party investor contributed cash ($300.0 million) in exchange for a limited-partner interest. Funds raised by the partnership were loaned to the Company and used to repay existing short-term debt in April 1997. At December 31, 1997, the third-party investment in this partnership was included in minority interest. For financial reporting purposes, the results of operations, assets, liabilities and cash flows of the partnership described above are included in the Company's consolidated financial statements. NOTE 11 CAPITAL STOCK In October 1988, the Company adopted a Shareholders' Rights Plan. The plan is intended to protect the shareholders' interests in the event of an unsolicited attempt to acquire the Company. The plan is not intended to prevent a takeover of the Company on terms that are favorable and fair to all shareholders and will not interfere with a merger approved by the Board of Directors. Under the plan, each share of the Company's common stock has a right that trades with the stock until the right becomes exercisable. Each right entitles the shareholders to buy 1/100 of a share of Series A participating preferred stock at a purchase price of $230, subject to adjustment. The rights will not be exercisable until a person or group ("Acquiring Person") acquires beneficial ownership of, or commences a tender offer for, 20% or more of the Company's outstanding common stock. In the event the Company is acquired in a merger or other business combination or subject to other transactions, as described in the Shareholders' Rights Plan, each right will entitle its holder (other than the Acquiring Person) to receive, upon exercise, stock with a value of two times the exercise price in the form of the Company's common stock or, where appropriate, the Acquiring Person's common stock. The Company may redeem the rights, which expire in October 1998, for $.01 per right, under certain circumstances. The shareholders have authorized the issuance of 10.0 million shares of $1 par value preferred stock. The preferred stock can be issued with varying terms, as determined by the Board of Directors. F-22 23 NOTE 12 LEASE COMMITMENTS Certain of the Company's operations are conducted from leased facilities, which are under operating leases that expire over the next 10 years. The Company also leases certain computer and other equipment under operating leases that expire over the next five years. These leases are frequently renegotiated or otherwise changed as advancements in computer technology produce opportunities to lower costs and improve performance. Additionally, the Company has agreements with various third parties to purchase certain data processing and telecommunications services extending beyond one year. Rental expenses under operating leases were $91.8 million, $117.6 million and $121.9 million for the years ended December 31, 1997, 1996 and 1995, respectively. Future minimum lease payments under noncancelable leases at December 31, 1997, are as follows:
There- 1998 1999 2000 2001 2002 after Total - - ----- ----- ----- ----- ----- ----- ------ $84.8 $69.5 $45.4 $33.4 $27.7 $50.8 $311.6 - - ----- ----- ----- ----- ----- ----- ------
NOTE 13 LITIGATION The Company and its subsidiaries are involved in legal proceedings, claims and litigation arising in the ordinary course of business. In the opinion of management, the outcome of such current legal proceedings, claims and litigation could have a material effect on quarterly or annual operating results or cash flows when resolved in a future period. However, in the opinion of management, these matters will not materially affect the Company's consolidated financial position. INFORMATION RESOURCES On July 29, 1996, Information Resources, Inc. ("IRI") filed a complaint in the United States District Court for the Southern District of New York, naming as defendants the Company, A.C. Nielsen Company (a subsidiary of ACNielsen) and IMS International, Inc. The complaint alleges various violations of United States antitrust laws, including alleged violations of Section 1 and 2 of the Sherman Act. The complaint also alleges a claim of tortious interference with a contract and a claim of tortious interference with a prospective business relationship. These claims relate to the acquisition by defendants of Survey Research Group Limited ("SRG"). IRI alleges SRG violated an alleged agreement with IRI when it agreed to be acquired by the defendants and that the defendants induced SRG to breach that agreement. On October 15, 1996, defendants moved for an order dismissing all claims in the complaint. On May 6, 1997, the United States District Court for the Southern District of New York issued a decision dismissing IRI's claim of attempted monopolization in the United States, with leave to replead within 60 days. The Court denied defendants' motion with respect to the remaining claims in the complaint. On June 3, 1997, defendants filed an answer denying the material allegations in IRI's complaint, and A.C. Nielsen Company filed a counterclaim alleging that IRI has made false and misleading statements about its services and commercial activities. On July 7, 1997, IRI filed an Amended and Restated Complaint repleading its alleged claim of monopolization in the United States and realleging its other claims. By notice of motion dated August 18, 1997, defendants moved for an order dismissing the amended claim. On December 1, 1997, the Court denied the motion and, on December 16, 1997, defendants filed a supplemental answer denying the remaining material allegations of the amended complaint. IRI's complaint alleges damages in excess of $350 million, which amount IRI asked to be trebled under antitrust laws. IRI also seeks punitive damages in an unspecified amount. In connection with the IRI action, Cognizant, ACNielsen and the Company entered into an Indemnity and Joint Defense Agreement (the "Indemnity and Joint Defense Agreement") pursuant to which they have agreed (i) to certain arrangements allocating potential liabilities ("IRI Liabilities") that may arise out of or in connection with the IRI Action and (ii) to conduct a joint defense of such action. In particular, the Indemnity and Joint Defense Agreement provides that ACNielsen will assume exclusive liability for IRI Liabilities up to a maximum amount to be calculated at such time such liabilities, if any, become payable (the "ACN Maximum Amount"), and that the Company and Cognizant will share liability equally for any amounts in excess of the ACN Maximum Amount. The ACN Maximum Amount will be determined by an investment banking firm as the maximum amount that ACNielsen is able to pay after giving effect to (i) any plan submitted by such investment bank which is designed to maximize the claims-paying ability of ACNielsen without impairing the investment banking firm's ability to deliver a viability opinion (but which will not require any action F-23 24 The Dun & Bradstreet Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED TABULAR DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA NOTE 13 LITIGATION (CONTINUED) requiring stockholder approval) and (ii) payment of related fees and expenses. For these purposes, financial viability means the ability of ACNielsen, after giving effect to such plan, the payment of related fees and expenses and the payment of the ACN Maximum Amount, to pay its debts as they become due and to finance the current and anticipated operating and capital requirements of its business, as reconstituted by such plan, for two years from the date any such plan is expected to be implemented. Management is unable to predict at this time the final outcome of the IRI Action or whether the resolution of this matter could materially affect the Company's results of operations, cash flows or financial position. NOTE 14 SUPPLEMENTAL FINANCIAL DATA Other Current Assets:
At December 31, 1997 1996 ------ ------ Deferred taxes $ 20.5 $ 27.3 Prepaid expenses 200.3 136.5 Other 12.0 25.0 ------ ------ $232.8 $188.8 ------ ------
Property, Plant and Equipment-Net, carried at cost:
At December 31, 1997 1996 ------ ------ Buildings $203.2 $199.3 Machinery and equipment 503.5 499.9 ------ ------ 706.7 699.2 Less: accumulated depreciation 427.2 390.7 ------ ------ 279.5 308.5 Leasehold improvements, less: accumulated amortization of $54.1 and $49.2 34.3 35.6 Land 28.9 29.0 ------ ------ $342.7 $373.1 ------ ------
Computer Software and Goodwill:
Computer Software Goodwill ------- ------- January 1, 1996 $ 100.7 $ 295.6 Additions at cost 84.5 .8 Amortization (37.9) (16.5) Other deductions and reclassifications 3.4 (61.5 )(1) ------- ------- December 31, 1996 150.7 218.4 Additions at cost 76.0 -- Amortization (60.4) (5.2) Other deductions and reclassifications (6.2) (18.6)(2) ------- ------- December 31, 1997 $ 160.1 $ 194.6 ------- -------
(1) Sale of ACI in 1996. (2) Impact of foreign currency fluctuations. NOTE 15 REORGANIZATION PLAN On December 17, 1997, the Company announced a plan to separate into two publicly traded independent companies-The Dun &Bradstreet Corporation and The Reuben H. Donnelley Corporation. The transaction is subject to a ruling from the Internal Revenue Service, with respect to the tax-free treatment of the distribution, and approval from the Board of Directors. The Dun & Bradstreet Corporation will consist of-Dun & Bradstreet, the operating company and Moody's Investors Service. The Reuben H. Donnelley Corporation will consist of-Reuben H. Donnelley, the operating company and the DonTech partnership. The transaction is expected to be completed in the summer of 1998. F-24 25 NOTE 16 SEGMENT INFORMATION The Company, operating in 38 countries, delivers information services principally through two business segments referenced below. Risk Management Services (D&B and Moody's) provides commercial credit and business marketing information, receivables management services and debt rating and financial information for investors. Directory Information Services provides sales, marketing and publishing services for yellow pages and other directory products. Intersegment sales are immaterial. BUSINESS SEGMENTS
Years Ended December 31, 1997 1996 1995 -------- -------- -------- Operating Revenues Risk Management Services(1) $1,811.0 $1,781.7 $1,734.1 Directory Information Services 343.4 377.5 423.7 Corporate and Other -- -- .4 -------- -------- -------- Total $2,154.4 $2,159.2 $2,158.2 -------- -------- -------- Operating Income (Expense) Risk Management Services(2) $ 452.5 $ 327.1 $ 449.5 Directory Information Services(3) 144.2 141.1 186.3 Corporate and Other(4) (48.8) (270.6) (237.2) -------- -------- -------- Total 547.9 197.6 398.6 Non-Operating Expense-Net (71.3) (71.2) (68.0) -------- -------- -------- Income from Continuing Operations before Provision for Income Taxes $ 476.6 $ 126.4 $ 330.6 -------- -------- -------- Depreciation and Amortization(5) Risk Management Services $ 124.4 $ 130.5 $ 113.6 Directory Information Services 22.0 16.8 16.6 Corporate and Other 7.5 10.1 34.3 -------- -------- -------- Total $ 153.9 $ 157.4 $ 164.5 -------- -------- -------- Capital Expenditures Risk Management Services $ 45.5 $ 50.7 $ 75.0 Directory Information Services 9.1 16.0 19.3 Corporate and Other 4.8 7.2 22.5 -------- -------- -------- Total $ 59.4 $ 73.9 $ 116.8 -------- -------- -------- Assets Risk Management Services $1,221.0 $1,272.9 $1,491.7 Directory Information Services 399.2 527.9 539.7 Corporate and Other 531.7 493.4 484.4 Discontinued Operations -- -- 1,207.3 -------- -------- -------- Total $2,151.9 $2,294.2 $3,723.1 -------- -------- --------
(1) Operating Revenues from worldwide Credit Information Services was $976.8 million, $979.6 million and $965.8 million in 1997, 1996 and 1995, respectively. (2) 1996 Operating Income included a loss on the sale of ACI of $68.2 million, and 1995 included a fourth-quarter non-recurring charge of $45.6 million offset by a gain on the sale of IDC of $90.0 million. (3) 1997 Operating Income included a gain on the sale of P-East of $9.4 million, 1996 included a loss on the sale of P-West of $28.5 million and 1995 included a fourth-quarter non-recurring charge of $17.7 million. (4) 1996 Operating Expense included reorganization costs of $161.2 million. 1995 included a fourth-quarter non-recurring charge of $142.9 million, partially offset by a $28.0 million gain on the sale of warrants received in connection with the sale of Donnelley Marketing. (5) Includes depreciation and amortization of Property, Plant and Equipment, Computer Software, Goodwill and Other Intangibles. F-25 26 The Dun & Bradstreet Corporation and Subsidiaries NOTES TO CONSOLIDATED FINANCIAL STATEMENTS CONTINUED TABULAR DOLLAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA NOTE 16 SEGMENT INFORMATION (CONTINUED) GEOGRAPHIC SEGMENTS
Years Ended December 31, 1997 1996 1995 -------- -------- -------- OPERATING REVENUES United States $1,583.9 $1,564.0 $1,582.6 Europe 467.6 481.6 465.5 Other Non-U.S 102.9 113.6 110.1 -------- -------- -------- Total $2,154.4 $2,159.2 $2,158.2 -------- -------- -------- OPERATING INCOME (LOSS) United States(1) $ 540.6 $ 182.2 $ 406.4 Europe(2) 8.8 12.9 3.5 Other Non-U.S.(3) (1.5) 2.5 (11.3) -------- -------- -------- Total 547.9 197.6 398.6 -------- -------- -------- Non-Operating Expense-Net (71.3) (71.2) (68.0) Income from Continuing Operations before Provision for Income Taxes $ 476.6 $ 126.4 $ 330.6 ASSETS United States $1,466.6 $1,511.2 $1,691.4 Europe 583.6 660.0 774.1 Other Non-U.S 101.7 123.0 50.3 Discontinued Operations -- -- 1,207.3 -------- -------- -------- Total $2,151.9 $2,294.2 $3,723.1 -------- -------- --------
(1) 1997 Operating Income included a gain on the sale of P-East of $9.4 million. 1996 included losses on the sales of ACI and P-West of $68.2 million and $28.5 million, respectively, and reorganization costs of $161.2 million. 1995 included a fourth-quarter non-recurring charge of $184.7 million partially offset by gains on the sale of IDC of $90.0 million and the sale of warrants received in connection with the sale of Donnelley Marketing of $28.0 million. (2) 1995 Operating Income included a fourth-quarter non-recurring charge of $8.4 million. (3) 1995 Operating Loss included a fourth-quarter non-recurring charge of $13.1 million. The Directory Information Services segment includes the results of Donnelley and DonTech (a partnership between Donnelley and Ameritech advertising services). During July 1997, Donnelley signed a series of agreements with Ameritech advertising services changing the structure of the existing partnership by appointing DonTech the exclusive sales agent in perpetuity for yellow page directories published by Ameritech in Illinois and Northwest Indiana. Under the new sales agency agreement, DonTech performs the advertising sales function for the directories and earns a commission, while Ameritech serves as the directories' publisher. As a result of the transfer of publishing services to Ameritech, Donnelley receives a revenue participation interest from Ameritech. The Company's share of partnership earnings, which is included in operating revenues, was $61.3 million, $122.4 million and $127.7 million in 1997, 1996 and 1995, respectively. At December 31, 1997, DonTech's assets and liabilities were as follows: current assets $303.2 million, other assets $4.9 million and current liabilities $40.0 million. At December 31, 1996, DonTech's assets and liabilities were as follows: current assets $414.3 million, other assets $6.6 million and current liabilities $24.7 million. DonTech's gross revenues totaled $356.8 million, $468.5 million and $472.8 million for 1997, 1996 and 1995, respectively. Pre-tax income was $128.9 million, $226.7 million and $232.2 million for 1997, 1996 and 1995, respectively. At December 31, 1997 and 1996, the Company's investment in DonTech was $152.1 million and $215.3 million, respectively. F-26 27 NOTE 17 QUARTERLY FINANCIAL DATA (UNAUDITED)
THREE MONTHS ENDED MARCH 31 JUNE 30 SEPTEMBER 30 DECEMBER 31 YEAR --------- --------- --------- --------- --------- 1997 (1) (2) Operating Revenues $ 455.4 $ 505.0 $ 551.2 $ 642.8 $ 2,154.4 --------- --------- --------- --------- --------- Operating Income (3) $ 75.6 $ 98.9 $ 144.6 $ 228.8 $ 547.9 --------- --------- --------- --------- --------- Income before Cumulative Effect of Accounting Changes $ 34.9 $ 54.0 $ 85.2 $ 136.9 $ 311.0 Cumulative Effect of Accounting Changes, Net of Income Tax Benefit (150.6) -- -- -- (150.6) --------- --------- --------- --------- --------- Net Income (Loss) $ (115.7) $ 54.0 $ 85.2 $ 136.9 $ 160.4 --------- --------- --------- --------- --------- Basic Earnings (Loss) Per Share of Common Stock: Before Cumulative Effect of Accounting Changes $ .20 $ .32 $ .50 $ .80 $ 1.82 Cumulative Effect of Accounting Changes (.88) -- -- -- (.88) --------- --------- --------- --------- --------- Basic Earnings (Loss) Per Share of Common Stock $ (.68) $ .32 $ .50 $ .80 $ .94 --------- --------- --------- --------- --------- Diluted Earnings (Loss) Per Share of Common Stock (4): Before Cumulative Effect of Accounting Changes $ .20 $ .31 $ .49 $ .79 $ 1.80 Cumulative Effect of Accounting Changes (.87) -- -- -- (.87) --------- --------- --------- --------- --------- Diluted Earnings (Loss) Per Share of Common Stock $ (.67) $ .31 $ .49 $ .79 $ .93 --------- --------- --------- --------- --------- 1996(2)(5) Operating Revenues $ 450.4 $ 505.1 $ 509.8 $ 693.9 $ 2,159.2 --------- --------- --------- --------- --------- Operating Income (Loss) (6) $ 52.3 $ (14.2) $ 76.0 $ 83.5 $ 197.6 --------- --------- --------- --------- --------- Income (Loss): Continuing Operations, Net of Income Taxes $ 21.9 $ (43.9) $ 24.3 $ (29.6) $ (27.3) Discontinued Operations, Net of Income Taxes 42.3 .3 26.6 (86.3) (17.1) --------- --------- --------- --------- --------- Net Income (Loss) $ 64.2 $ (43.6) $ 50.9 $ (115.9) $ (44.4) --------- --------- --------- --------- --------- Basic Earnings (Loss) Per Share of Common Stock: Continuing Operations $ .13 $ (.26) $ .14 $ (.17) $ (.16) Discontinued Operations .25 -- .16 (.51) (.10) --------- --------- --------- --------- --------- Basic Earnings (Loss) Per Share of Common Stock $ .38 $ (.26) $ .30 $ (.68) $ (.26) --------- --------- --------- --------- --------- Diluted Earnings (Loss) Per Share of Common Stock: Continuing Operations $ .13 $ (.26) $ .14 $ (.17) $ (.16) Discontinued Operations .25 -- .16 (.51) (.10) --------- --------- --------- --------- --------- Diluted Earnings (Loss) Per Share of Common Stock $ .38 $ (.26) $ .30 $ (.68) $ (.26) --------- --------- --------- --------- ---------
(1) In 1997, the Company changed its revenue recognition methods as discussed in Note 1. This resulted in a one-time non-cash cumulative effect charge of $150.6 million, after tax, effective January 1, 1997. As a result of this accounting change, results for the first three quarters of 1997 have been restated as follows: revenue decreased by $3.6 million, increased by $6.8 million and decreased by $2.7 million; Operating Income decreased by $4.7 million, increased by $5.8 million and decreased by $3.8 million; Net Income (Loss) decreased by $153.6 million, increased by $3.8 million and decreased by $2.5 million, respectively. (2) In connection with the Company's adoption of SFAS No. 128, all prior-period earnings per share data were restated to reflect basic and diluted earnings per share. (3) Operating Income included a $9.4 million gain on the sale of P-East in the quarter ended December 31, 1997. (4) The number of weighted average shares outstanding changes as common shares are issued for employee plans and other purposes or as shares are repurchased. For this reason, the sum of quarterly earnings per common share may not be the same as earnings per common share for the year. (5) In the fourth quarter of 1996, the Company changed its revenue recognition methods in connection with its Directory Information Services segment, effective January 1, 1996. The Company changed to the predominant industry practice of recognizing revenue and related expenses at the time the yellow page directories are published. Previously, revenue and related expenses were reported ratably during the year consistent with historic publishing patterns. This accounting change had no impact on the full-year results. As a result of this accounting change, results for the first three quarters of 1996 were restated. (6) Operating Income (Loss) included reorganization costs of $1.4 million, $7.6 million, $18.9 million and $133.3 million incurred in the quarters ended March 31, June 30, September 30 and December 31, 1996, respectively; loss on the sale of ACI of $63.8 million and $4.4 million for quarters ended June 30 and September 30, 1996, respectively; and loss on the sale of P-West of $25.0 million and $3.5 million in the quarters ended June 30 and September 30, 1996, respectively. F-27 28 The Dun & Bradstreet Corporation and Subsidiaries FIVE-YEAR SELECTED FINANCIAL DATA
TABULAR AMOUNTS IN MILLIONS, EXCEPT PER SHARE DATA 1997 1996 1995 1994 1993 --------- --------- --------- --------- --------- Results of Operating Revenues $ 2,154.4 $ 2,159.2 $ 2,158.2 $ 2,124.9 $ 2,127.0 Operations Costs and Expenses(1) 1,606.5 1,961.6 1,759.6 1,530.0 1,794.2 --------- --------- --------- --------- --------- Operating Income 547.9 197.6 398.6 594.9 332.8 Non-Operating (Expense) Income-Net (71.3) (71.2) (68.0) (35.0) 1.8 --------- --------- --------- --------- --------- Income from Continuing Operations before Provision for Income Taxes 476.6 126.4 330.6 559.9 334.6 Provision for Income Taxes 165.6 153.7 113.1 191.3 122.7 --------- --------- --------- --------- --------- Income (Loss) from: Continuing Operations 311.0 (27.3) 217.5 368.6 211.9 Discontinued Operations, Net of Income Taxes(2) -- (17.1) 103.3 260.9 72.6 Income (Loss) before Cumulative Effect of Accounting Changes 311.0 (44.4) 320.8 629.5 284.5 Cumulative Effect of Accounting Changes- Net of Income Tax Benefit(3) (150.6) -- -- -- (246.4) --------- --------- --------- --------- --------- Net Income (Loss) $ 160.4 $ (44.4) $ 320.8 $ 629.5 $ 38.1 --------- --------- --------- --------- --------- Basic Earnings Continuing Operations $ 1.82 $ (.16) $ 1.28 $ 2.17 $ 1.20 (Loss) Per Share Discontinued Operations -- (.10) .61 1.53 .41 of Common Stock --------- --------- --------- --------- --------- Before Cumulative Effect of Accounting Changes 1.82 (.26) 1.89 3.70 1.61 Cumulative Effect of Accounting Changes(3) (.88) -- -- -- (1.38) --------- --------- --------- --------- --------- Basic Earnings (Loss) Per Share of Common Stock $ .94 $ (.26) $ 1.89 $ 3.70 $ .23 --------- --------- --------- --------- --------- Diluted Earnings Continuing Operations $ 1.80 $ (.16) $ 1.27 $ 2.15 $ 1.18 (Loss) Per Share Discontinued Operations -- (.10) .60 1.52 .41 of Common Stock --------- --------- --------- --------- --------- Before Cumulative Effect of Accounting Changes 1.80 (.26) 1.87 3.67 1.59 Cumulative Effect of Accounting Changes(3) (.87) -- -- -- (1.37) --------- --------- --------- --------- --------- Diluted Earnings (Loss) Per Share of Common Stock $ .93 $ (.26) $ 1.87 $ 3.67 $ .22 --------- --------- --------- --------- --------- Other Data Dividends Per Share $ .88 $ 1.82 $ 2.63 $ 2.56 $ 2.40 --------- --------- --------- --------- --------- Dividends Paid $ 150.6 $ 310.8 $ 446.1 $ 435.2 $ 423.0 --------- --------- --------- --------- --------- Weighted Average Number of Shares Outstanding-Basic 170.8 170.0 169.5 169.9 177.2 --------- --------- --------- --------- --------- Weighted Average Number of Shares Outstanding-Diluted 172.6 171.6 171.6 171.7 179.1 --------- --------- --------- --------- --------- Balance Sheet Total Assets(4) $ 2,151.9 $ 2,294.2 $ 3,723.1 $ 3,849.2 $ 3,651.2 --------- --------- --------- --------- --------- Shareholders' Equity $ (490.2) $ (431.7) $ 1,182.5 $ 1,318.6 $ 1,111.3 --------- --------- --------- --------- ---------
(1) 1997 included a gain of $9.4 million on the sale of P-East. 1996 included one-time charges of $161.2 million for reorganization costs and losses on sales of $68.2 million and $28.5 million for ACI and P-West, respectively. 1995 included a fourth-quarter non-recurring charge of $206.2 million partially offset by gains of $90.0 million and $28.0 million for the sale of IDC and warrants received in connection with the sale of Donnelley Marketing, respectively. 1994 included restructuring expense and a non-recurring charge of $67.9 million offset by gains on the sale of Thomson Directories Ltd. and DunsNet of $33.2 million and $36.0 million, respectively. 1993 included restructuring expense of $173.8 million partially offset by gains of $13.6 million for the redemption of preferred shares received from the 1991 sale of Donnelley Marketing, $9.5 million on the sale of Donnelley Marketing and $8.9 million for the redemption of notes related to the 1992 sale of Datastream International. (2) Income taxes on Discontinued Operations were $93.5 million, $9.7 million, $58.4 million and $36.7 million in 1996, 1995, 1994 and 1993, respectively. (3) 1997 included the impact of a change in revenue recognition (see Note 1). 1993 included the impact of $130.9 million or $.73 per share (basic and diluted) for the adoption of SFAS No. 112 and $115.5 million or $.65 per share basic and $.64 per share diluted for the adoption of SFAS No. 106. (4) Included Net Assets of Discontinued Operations of $1,207.3 million, $1,342.3 million and $1,186.4 million in 1995, 1994 and 1993, respectively. F-28 EX-18 18 LETTER RE CHANGE IN ACCOUNTING PRINCIPLES 1 EXHIBIT 18 February 13, 1998 The Dun & Bradstreet Corporation One Diamond Hill Road Murray Hill, New Jersey 07974 We are providing this letter to you for your inclusion as an exhibit to your Form 10-K filing pursuant to Item 601 of Regulation S-K. We have read management's justification for the change in accounting in the Company's Credit Information Services business to recognize revenue as products and services are used by its customers from recognizing revenue ratably over the contract period, and in the Company's Marketing Information Services, Receivables Management Services and Moody's Investors Service businesses to recognize revenue over the service period from recognizing revenues and costs at time of shipment or billing, as contained in the Company's Form 10-K for the year ended December 31, 1997. Based on our reading of the data and discussions with Company officials of the business judgments and business planning factors relating to these changes, we believe management's justification to be reasonable. Accordingly, we concur that the newly adopted accounting principles described above are preferable in the Company's circumstances to the methods previously applied. /s/ COOPERS & LYBRAND L.L.P. EX-21 19 SUBSIDIARIES OF THE REGISTRANT 1 EXHIBIT 21 THE DUN & BRADSTREET CORPORATION LIST OF ACTIVE SUBSIDIARIES AS OF DECEMBER 31, 1997
STATE OR OTHER % OWNERSHIP JURISDICTION OF (100% EXCEPT NAME ORGANIZATION AS NOTED) ---- ------------------------ ------------ D&B ESPANA S.A. Spain DUN & BRADSTREET (SWITZERLAND) AG Delaware/Switzerland DUN & BRADSTREET COMPUTER LEASING, INC. Delaware Fillupar Leasing Partnership Delaware 98.00 DUN & BRADSTREET, INC. Delaware Dun & Bradstreet RMS Franchise Corporation Delaware Duns Holding, Inc. Delaware D&B Acquisition Corp. Delaware Corinthian Leasing Corporation Delaware DUN & BRADSTREET INFORMATION SERVICES INDIA PVT. LTD. India DUN & BRADSTREET INTERNATIONAL, LTD. Delaware Dun & Bradstreet S.A. Argentina Dun & Bradstreet (Australia) Holdings Pty. Australia Dun & Bradstreet (Australia) Group Pty. Ltd. Australia Arrebnac Pty. Ltd. Australia D&B Pty. Ltd. (Australia) Australia College Mercantile Pty. Ltd. Australia Dun & Bradstreet (Australia) Pty. Limited Australia Dun & Bradstreet Unit Trust Australia Moody's Investors Service Pty. Limited Australia Dun & Bradstreet Information Services Ges.mbH Austria Dun & Bradstreet Canada Holding, Ltd. Canada The D&B Companies of Canada Ltd. Canada Dun & Bradstreet Do Brasil, Ltda. Delaware/Brazil N.V. Dun & Bradstreet-Eurinform S.A. Delaware/Belgium Dun & Bradstreet International Consultant (Shanghai) Co. Ltd. China D&B Group, Ltd. Delaware D&B Europe Limited England Dun & Bradstreet Limited England Dun & Bradstreet Limited Ireland Dun & Bradstreet Finance Ltd. England Dun & Bradstreet (U.K.) Ltd. England Dun & Bradstreet Pension Trustees Ltd. England Moody's Investors Service Ltd. England Dun & Bradstreet Credit Control, Ltd. Delaware Dun & Bradstreet (HK) Limited Hong Kong Dun & Bradstreet Deutschland GmbH Germany D&B Schimmelpfeng Unterstutzungskasse GmbH Germany Dun & Bradstreet Holdings B.V. The Netherlands
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STATE OR OTHER % OWNERSHIP JURISDICTION OF (100% EXCEPT NAME ORGANIZATION AS NOTED) ---- ------------------------ ------------ DUN & BRADSTREET INTERNATIONAL, LTD. (CONTINUED)
STATE OR OTHER % OWNERSHIP JURISDICTION OF (100% EXCEPT NAME ORGANIZATION AS NOTED) ---- ------------------------ ------------ Dun & Bradstreet Kosmos S.p.A. Italy Argus Situazioni Aziendali S.r.1. Italy Data Tech S.r.1. Italy Orefro L'Informazione S.p.A. Italy Consorzio Manifatturieri S.r.1. Italy Ore. Tel S.r.L. Italy Orefro Data S.r.1. Italy Te.ma.Tel S.r.1. Italy Dun & Bradstreet B.V. The Netherlands Perfect Data International N.V. The Netherlands Antilles Perfect Data Services B.V. The Netherlands Dun & Bradstreet Holding (Norway) A/S Norway Dun & Bradstreet Norge A/S Norway Dun & Bradstreet Soliditet A/S Norway Dun & Bradstreet (C&EE) Holding B.V. The Netherlands 80.00 Dun & Bradstreet spol s r.o. Czech Republic 80.00 Dun & Bradstreet Hungaria Informacio Szogaltato Korlatolt Felelosegu Tarasag Hungary 80.00 Dun & Bradstreet Poland sp. zo.o. Poland 80.00 Dun & Bradstreet S.C.S. France D&B Management S.A.S. France Moody's France S.A. France S&W S.A.S. France Dun & Bradstreet Danmark Holding A/S Denmark Dun & Bradstreet Denmark A/S Denmark Dun & Bradstreet (Israel) Ltd. Israel Dun & Bradstreet Japan Ltd. Japan D&B Information Services (M) Sdn. Bhd. Malaysia Dun & Bradstreet de Mexico S.A. de C.V. Mexico Dun & Bradstreet (New Zealand) Limited New Zealand Dun & Bradstreet S.A. Peru Dun & Bradstreet Portugal, Ltda. Portugal Dun & Bradstreet (Singapore) Pte. Ltd. Singapore Dun & Bradstreet Nordic AB Sweden Dun & Bradstreet Finland OY Finland Dun & Bradstreet Sverige AB Sweden Beheer en Beleggingsmaatschappij Stivaco B.V. The Netherlands Dun & Bradstreet Zimbabwe (Private) Limited Zimbabwe DUNS INVESTING VII CORPORATION Delaware DUNSNET INC. Delaware Dun & Bradstreet Marketing Pty. Ltd. Australia MOODY'S INVESTORS SERVICE, INC. Delaware Financial Proformas, Inc. Delaware Moody's Overseas Holdings, Inc. Delaware Moody's Interbank Credit Services Limited Cyprus Moody's America Latina Ltda. Brazil
3
STATE OR OTHER % OWNERSHIP JURISDICTION OF (100% EXCEPT NAME ORGANIZATION AS NOTED) ---- ------------------------ ------------ MOODY'S INVESTORS SERVICE, INC. (CONTINUED) Moody's Canada Inc. Canada Moody's Deutschland GmbH Germany Moody's Asia Pacific Limited Hong Kong Moody's Japan Kabushiki Kaisha Japan Moody's Singapore Pte Ltd. Singapore Moody's Investors Service Espana, S.A. Spain PALMETTO ASSURANCE LTD. Bermuda THE REUBEN H. DONNELLEY CORPORATION Delaware Am-Don Partnership Illinois 50.00 The CenDon Partnership Illinois 50.00
EX-23 20 CONSENTS OF EXPERTS AND COUNSEL 1 EXHIBIT 23 CONSENT OF INDEPENDENT ACCOUNTANTS We consent to the incorporation by reference in the registration statements of The Dun & Bradstreet Corporation on Forms S-8 (File Nos. 2-53006, 33-21719, 33-25774, 33-27144, 33-44551, 33-49060, 33-51005, 33-56289, 33-64317, 333-15255, 333-40079 and 333-46615) and Form S-3 (File No. 333-40081) of our reports, which include an explanatory paragraph regarding the Company's change in certain revenue recognition accounting policies, dated February 13, 1998, on our audits of the consolidated financial statements and financial statement schedule of The Dun & Bradstreet Corporation at December 31, 1997 and 1996 and for the years ended December 31, 1997, 1996 and 1995, which reports are incorporated by reference or included in this Annual Report on Form 10-K. /s/ COOPERS & LYBRAND L.L.P. New York, New York March 19, 1998 EX-27 21 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1997 DEC-31-1997 81,838 1,296 583,678 0 0 898,276 824,017 481,335 2,151,849 2,135,063 0 0 0 188,421 (678,590) 2,151,849 0 2,154,359 0 526,442 0 0 53,415 476,587 165,606 310,981 0 0 (150,557) 160,424 0.94 0.93
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