1998 IMS HEALTH INCORPORATED REPLACEMENT PLAN
FOR CERTAIN NON-EMPLOYEE DIRECTORS HOLDING COGNIZANT CORPORATION
EQUITY-BASED AWARDS
1. Purpose of the Plan
The purpose of the 1998 IMS Health Incorporated Replacement Plan for
Certain Non-employee Directors Holding Cognizant Corporation Equity-Based Awards
is to provide for the award of substantially identical replacement stock options
to certain non-employee directors of IMS Health Incorporated, a Delaware
corporation whose awards under the 1996 Cognizant Corporation Non-Employee
Directors' Stock Incentive Plan were cancelled pursuant to the spinoff of the
Company from Cognizant Corporation, a Delaware corporation and to certain
retired non-employee directors who elect, pursuant to the Spinoff, to have the
awards granted under the Cognizant Plan cancelled (the "Eligible Holders"). The
Company expects that the Plan will 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. It is the intention of the Company
that the terms of the replacement awards will (i) substantially preserve the
economic value of the cancelled Cognizant awards and (ii) except for the terms
described in Sections 7, 8 and 9 of this Plan, remain substantially identical to
the terms of the cancelled Cognizant awards.
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: Replacement Options and Replacement Restricted Stock 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.
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(e) Change in Control: The occurrence of any of the following events:
(i) any Person (other than the Company, any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, or
any company owned, directly or indirectly, by the stockholders of the
Company in substantially the same proportions as their ownership of
stock of the Company), becomes the Beneficial Owner, 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 Effective Date), individuals who at the beginning of such
period constitute the Board, and any new director (other than (A) a
director nominated by a Person who has entered into an agreement with
the Company to effect a transaction described in Sections 2(e)(i),
(iii) or (iv) of the Plan, (B) a director nominated by any Person
(including the Company) who publicly announces an intention to take or
to consider taking actions (including, but not limited to, an actual
or threatened proxy contest) which if consummated would constitute a
Change in Control or (C) a director nominated by any Person who is the
Beneficial Owner, directly or indirectly, of securities of the Company
representing 10% or more of the combined voting power of the Company's
securities) whose election by the Board or nomination for election by
the Company's stockholders was approved in advance by a vote of at
least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election
or nomination for election was previously so approved, cease for any
reason to constitute at least a majority thereof;
(iii) the stockholders of the Company approve any transaction or
series of transactions under which the Company is merged or
consolidated with any other company, other than a merger or
consolidation (A) which would result in the voting securities of the
Company outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into
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voting securities of the surviving entity) more than 66 2/3% of the
combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or
consolidation and (B) after which no Person holds 20% or more of the
combined voting power of the then-outstanding securities of the
Company or such surviving entity; or
(iv) the stockholders of the Company approve a plan of complete
liquidation of the Company or an agreement for the sale or disposition
by the Company of all or substantially all of the Company's assets.
(f) Code: The Internal Revenue Code of 1986, as amended, or any successor
thereto.
(g) Cognizant: Cognizant Corporation, a Delaware corporation.
(h) Cognizant Plan: The 1996 Cognizant Corporation Non-Employee Directors'
Stock Incentive Plan.
(i) Committee: The Compensation and Benefits Committee of the Board.
(j) Company: IMS Health Incorporated, a Delaware corporation.
(k) Daily Average Trading Prices: The average of the high and low trading
prices for stock on a given day.
(l) 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. An Eligible Holder shall not be
considered disabled unless he or she furnished such medical or other
evidence of the existence of the Disability as the Committee, in its
sole discretion, may require.
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(m) Effective Date: The date on which the Plan takes effect, as defined
pursuant to Section 14 of the Plan.
(n) Eligible Holder: As such term is defined in Section 1 of the Plan.
(o) Fair Market Value: On a given date, the arithmetic mean 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 arithmetic mean 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.
(p) Person: As such term is used in Section 13(d) or 14(d) of the Act (or
any successor section thereto).
(q) Plan: The 1998 IMS Health Incorporated Replacement Plan for Certain
Non-Employees Directors Holding Cognizant Corporation Equity-Based
Awards.
(r) Replacement Option: A stock option granted pursuant to Section 7 of
the Plan.
(s) Replacement Restricted Stock: Restricted stock granted pursuant to
Section 8 of the Plan.
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(t) Retirement: Termination of service with the Company after such
Eligible Holder has attained age 70, regardless of the length of such
Eligible Holder's service; or with the prior written consent of the
Committee (excluding any member thereof whose own Retirement is at
issue in a given case), termination of service at an earlier age after
the Eligible Holder has completed six or more years of service with
the Company.
(u) Shares: Shares of common stock, par value $.01 per share, of the
Company.
(v) Spinoff Date: The date on which the Shares are distributed to the
shareholders.
(w) Subsidiary: A subsidiary corporation, as defined in Section 424(f) of
the Code (or any successor section thereto).
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3. Shares Subject to the Plan
The total number of Shares which may be issued under the Plan is equal to
the aggregate number of Shares to be issued as replacement awards, as calculated
pursuant to Sections 7 and 8 of this Plan. The Shares may consist, in whole or
in part, of unissued Shares or treasury shares. After the initial grant of
awards, no further awards shall be granted under the Plan.
4. Administration
The Plan shall be administered by the Committee, which may delegate its
duties and powers in whole or in part to any subcommittee thereof consisting
solely of at least two "non-employee directors" within the meaning of Rule 16b-3
under the Act (or any successor rule thereto). The Committee is authorized to
interpret the Plan, to establish, amend and rescind any rules and regulations
relating to the Plan, and to make any 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, Eligible Holders and their beneficiaries or successors).
5. Eligibility
Only Eligible Holders shall receive grants of replacement stock options
under the Plan.
6. Limitations
Options hereunder shall only be granted in replacement of Cognizant Stock
Options (as defined in Section 7(a) of the Plan) held by Eligible Holders
immediately prior to the Spinoff Date.
7. 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:
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(a) Generally. As of the Spinoff, each unexercised stock option held by an
Eligible Holder that was granted under the Cognizant Plan (a "Cognizant Stock
Option") shall be cancelled, and such Eligible Holder shall receive a
replacement stock option pursuant to this Plan. The number of Shares covered by
each replacement stock option shall be determined by (i) multiplying the number
of shares of Cognizant common stock covered by the cancelled Cognizant Stock
Option by a fraction, the numerator of which is the average of the Daily Average
Trading Prices of Cognizant common stock for the five consecutive trading days
immediately preceding the first date on which Cognizant common stock is traded
ex-dividend, and the denominator of which is the average of the Daily Average
Trading Prices of the Shares for the five consecutive trading days starting on
the first date on which the Shares are traded regular way (the "Cognizant
Ratio") and (ii) rounding down the result to a whole number of shares. The
option price of each replacement stock option shall be determined by dividing
the option price of the cancelled Cognizant Stock Option by the Cognizant Ratio.
Unless otherwise specified in this Plan, all other terms of the replacement
stock options shall remain substantially identical to those of the cancelled
Cognizant Stock Options as set forth in the Cognizant Plan and related option
agreement(s).
(b) Exercisability. Except as set forth in the Plan, stock options granted
under the Plan shall have substantially identical terms as those of the stock
options originally granted under the Cognizant Plan; provided, however, that in
no event shall a replacement stock option be exercisable more than ten years
after the date the original option was granted under the Cognizant Plan.
(c) 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. For purposes of
Section 7 of the Plan, the exercise date of an Option shall be the later of the
date a notice of exercise is received by the Company and, if applicable, (A) the
date payment is received by the Company pursuant to clauses (i), (ii) or (iii)
in the following sentence or (B) the date of sale by a broker of all or a
portion of the Shares being purchased pursuant to clause (iv) in the following
sentence. 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 Eligible Holder (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, (iii) partly in cash and
partly in such Shares or (iv) through the delivery of irrevocable instructions
to a broker to
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deliver promptly to the Company an amount equal to the aggregate Option Price
for the Shares being purchased. No Eligible Holder shall have any rights to
dividends or other rights of a stockholder with respect to Shares subject to an
Option until the Eligible Holder 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.
(d) Exercisability Upon Termination of Service by Death. If an Eligible
Holder's service with the Company and its Subsidiaries terminates by reason of
death after the date of grant of an Option, (i) the unexercised portion of such
Option shall immediately vest in full and (ii) such portion may thereafter be
exercised during the shorter of (A) the remaining stated term of the Option or
(B) five years after the date of death.
(e) Exercisability Upon Termination of Service by Disability or Retirement.
If an Eligible Holder's service with the Company and its Subsidiaries terminates
by reason of Disability or Retirement after the date of grant of an Option, (i)
the unexercised portion of such Option shall immediately vest in full and (ii)
such portion may thereafter be exercised during the shorter of (A) the remaining
stated term of the Option or (B) five years after the date of such termination
of service; provided, however, that if an Eligible Holder 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
stated 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.
(f) Effect of Other Termination of Service. If an Eligible Holder's service
with the Company and its Subsidiaries terminates for any reason other than
death, Disability or Retirement after the date of grant of an Option as
described above, the unexercised portion of an Option may thereafter be
exercised during the period ending ninety days after the date of such
termination of service, but only to the extent to which such Option was
exercisable at the time of such termination of service.
8. Terms and Conditions of Restricted Stock
As of the Spinoff Date, Cognizant Restricted Stock and IMS Health
Restricted Stock held by an Eligible Holder shall be forfeited, and such
Eligible Holder shall receive replacement restricted stock pursuant to this
Plan. The number of shares of
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restricted stock shall equal (i) the number of shares of forfeited IMS Health
Restricted Stock plus (ii) the number of shares of forfeited Cognizant
Restricted Stock multiplied by a fraction, the numerator of which is the average
of the Daily Average Trading Prices of Cognizant common stock for the five
consecutive trading days starting on the ex-dividend trading date, and the
denominator of which is the average of the Daily Average Trading Prices of the
Shares for the five consecutive trading days starting on the first date on which
the Shares are traded regular way. Unless otherwise specified in this Plan, all
other terms of the replacement restricted stock shall remain substantially
identical to those of the forfeited Cognizant Restricted Stock as set forth in
the applicable Cognizant Plans and related Cognizant Restricted Stock
agreement(s).
9. Adjustments Upon Certain Events
Notwithstanding any other provisions in the Plan to the contrary, the
following provisions shall apply to all Awards granted under the Plan:
(a) Generally. In the event of any change in the outstanding Shares after
the Effective Date by reason of any Share dividend or split, reorganization,
recapitalization, merger, consolidation, spin-off, combination or exchange of
Shares or other corporate exchange, or any distribution to shareholders of
Shares other than regular cash dividends, the Committee, in its sole discretion
and without liability to any person, may make such substitution or adjustment,
if any, as it deems to be equitable, as to (i) the number or kind of shares or
other securities issued or reserved for issuance pursuant to the Plan or
pursuant to outstanding Awards, (ii) the Option Price and/or (iii) any other
affected terms of such Awards.
(b) Change in Control. In the event of a Change in Control, the Committee
in its sole discretion and without liability to any person may take such
actions, if any, as it deems necessary or desirable with respect to any Award
(including, without limitation, (i) the acceleration of an Award, (ii) the
payment of a cash amount in exchange for the cancellation of an Award and/or
(iii) the requiring of the issuance of substitute Awards that will substantially
preserve the value, rights and benefits of any affected Awards previously
granted hereunder) as of the date of the consummation of the Change in Control.
10. Successors and Assigns
The Plan shall be binding on all successors and assigns of the Company and
an Eligible Holder, including without limitation,
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the estate of such Eligible Holder and the executor, administrator or trustee of
such estate, or any receiver or trustee in bankruptcy or representative of the
Eligible Holder's creditors.
11. 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
Eligible Holder under any Award theretofore granted without such Eligible
Holder's consent.
12. Nontransferability of Awards
An Award shall not be transferable or assignable by the Eligible Holder
otherwise than by will or by the laws of descent and distribution. During the
lifetime of an Eligible Holder, an Award shall be exercisable only by such
Eligible Holder. An Award exercisable after the death of an Eligible Holder may
be exercised by the legatees, personal representatives or distributees of the
Eligible Holder. Notwithstanding anything to the contrary herein, the Committee,
in its sole discretion, shall have the authority to waive this Section 12 (or
any part thereof) to the extent that this Section 12 (or any part thereof) is
not required under the rules promulgated under any law, rule or regulation
applicable to the Company.
13. 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.
14. Effectiveness of the Plan
The Plan shall be effective as of the Spinoff Date.