Exhibit 10.9


 


IMS Health Incorporated


 


Compliance Rules Under Section 409A of the Internal Revenue
Code


(Including Global Amendment to Certain Outstanding


Restricted Stock Units and Long-Term Incentive Plan Awards)


 


Introduction


 


Section 409A
of the Internal Revenue Code (“409A”) regulates deferred compensation, which it
defines very broadly to include arrangements not usually considered to be deferred
compensation.  This potentially can
include Restricted Stock Units (“RSUs,” which includes any form of shares that
are deliverable at a future date subject to a service requirement or
performance conditions) and also can include awards under a long-term incentive
plan.


 


Most
RSUs granted by IMS Health Incorporated (the “Company”) under the 1998
Employees’ Stock Incentive Plan (the “1998 Plan”) and the 2000 Stock Incentive
Plan (the “2000 Plan”) will not be affected by 409A in a way that participants
will notice.  These awards will qualify
under the 409A regulations’ “short-term deferral” rules, because in every circumstance these awards will be settled – that
is, shares will be delivered to the participant – within a limited period of
time after the “risk of forfeiture” lapses. 
In simple terms, the “risk of forfeiture” under 409A means the risk
that, if the participant voluntarily quits his or her employment, the RSUs will
be forfeited.


 


Likewise,
in most cases awards under the Company’s Long-Term Incentive Plan (“LTIP Awards”)
will qualify as short-term deferrals, so that Section 409A compliance will
not impose restrictions that a participant would view as significant.


 


Some
RSUs and LTIP Awards, however, will not qualify under the short-term deferral
rules, and therefore will be fully subject to the rules under 409A (these
will be referred to here as “409A Awards”). 
Failure to comply with the 409A rules could result in harsh income
tax consequences for the participant, including treatment of the Awards as
income to be taxed long before the RSUs or LTIP Awards are settled, with interest
on any unpaid taxes and a 20% tax penalty. 
States may impose similar taxes and penalties, too.


 


While
it can be complicated to identify which RSUs and LTIP Awards are 409A Awards,
the actual restrictions that apply to 409A Awards will affect them only in a
few circumstances.  The effect in some cases
may be to delay the distribution of shares in settlement of RSUs or shares or
cash in settlement of an LTIP Award by six months, where a distribution is
triggered by a termination of employment or service.  But, the 409A rules do
not increase the risk that a participant will forfeit RSUs or LTIP Awards – the
rules would simply to delay the distribution in settlement of the Award.


 


This
document (the “409A Compliance Rules”) explains the rules and procedures
to ensure compliance for 409A Awards.


 


When Will Plan Administrators Need to Apply Special 409A Compliance
Rules?


 


Administratively,
compliance with 409A for 409A Awards can be monitored based on the occurrence
of specific triggering events:


 


·                  A
participant’s termination of employment or service which does not result in
forfeiture of RSUs or an LTIP Award


·                  A
participant’s change to part-time employment or consultant status


·                  A
Change in Control


 

















 


During
the life cycle of an award of RSUs or an LTIP Award, if these events do not
occur, the Award generally can be administered in the same way as in the past,
whether or not the RSUs or LTIP Award constitute a 409A Award.


 


Which RSUs and LTIP Awards are Deemed To Be 409A Awards?


 


RSUs
are 409A Awards if the participant has made an election to defer settlement of
the Award to a time after the year in which the RSUs vest.  Likewise, an election to defer a payout of
shares under the LTIP would make that a 409 Award.  Elective deferrals are the most common case
under which current RSUs and LTIP Awards will constitute 409A Awards.


 


In
addition, RSUs and LTIP Awards may be 409A Awards if the Company were to provide
special termination provisions in a given grant that allow the employee to
retire or otherwise choose the time of termination without forfeiting the RSUs
or LTIP Award, or where any other termination could occur but the RSUs or LTIP
Award will remain outstanding until a settlement date beyond March 15 of
the year following termination.  In the case
of an LTIP Award, it might still qualify as a short-term deferral if, following
termination of employment, the earning of the Award still requires a
performance goal to be met.  These kinds
of termination provisions are not part of the standard RSU or LTIP Award terms,
and therefore apply in isolated cases (if at all).


 


What are the Effects of Being 409A Awards?


 


If
RSUs or LTIP Awards are 409A Awards, the following restrictions will apply:


 


(1)           The “six-month delay rule”


 


·                  The
six-month delay rule will apply to 409A Awards if these four conditions
are met:


 


·                  The
participant has a separation from service (within the meaning of Treasury
Regulation § 1.409A-1(h))


·                  A
distribution of shares is triggered by the separation from service (but not due
to death)


·                  The
Participant is a “key employee” (as defined in Code Section 416(i) without
regard to paragraph (5) thereof).  The
Company will determine status of “key employees” annually, under administrative
procedures applicable to all Section 409A plans and arrangements


·                  The
Company’s stock is publicly traded on an established securities market or
otherwise.


 


·                  If
it applies, the six-month delay rule will delay a distribution in
settlement of 409A Awards triggered by separation from service where the
distribution otherwise would be within six months after the separation from
service


 


·                  Any
delayed payment shall be made on the date six months after separation from
service


·                  During
the six-month delay period, accelerated distribution will be permitted in the
event of the participant’s death and for no other reason (including no
acceleration upon a Change in Control), except for very limited exceptions
under the Section 409A regulations. 
However, if a 409A Award was to be settled upon the earlier of a fixed
date or a separation from service, and the fixed date fell within the six-month
delay period, the 409A Award would be settled on the fixed date


·                  Any
payment that is not triggered by a separation from service, or triggered by a
separation from service but which would be made more than six months after
separation (without applying this six-month delay rule), shall be unaffected by
the six-month delay rule.  Each payment
in a 


 


2

















 


series of installments would be treated as a separate payment for this
purpose.


·                  If
the terms of a 409A Award agreement impose this six-month delay rule in
circumstances in which it is not required for compliance with Section 409A,
those terms shall not be given effect.


 


(2)           Change in Control Rule:


 


·                  Any
distribution of 409A Awards triggered by a Change in Control will be made only
if, in connection with the Change in Control, there occurs a change in the
ownership of the Company, a change in effective control of the Company, or a
change in the ownership of a substantial portion of the assets of the Company
as defined in Treasury Regulation § 1.409A-3(i)(5) (a “409A Change in
Control”).


·                  Note:  Events constituting a Change in Control in
most instances will also trigger a distribution under Section 409A, except
an acquisition of Beneficial Ownership of 20% of the outstanding voting
securities but less than 30% of the voting power likely would not trigger a
distribution under 409A.


·                  In
this case, settlement of the 409A Award shall occur within five business days
after (i) the occurrence of a 409A Change in Control occurring at the time
of or following the Change in Control or (ii) upon occurrence of the
Change in Control occurring within 90 days after the 409A Change in Control,
but only if the occurrence of the Change in Control is non-discretionary and
objectively determinable at the time of the 409A Change in Control (in this
case, the Participant shall have no influence on when during such 90-day period
the settlement shall occur).


·                  Upon
a Change in Control during the six-month delay period, no accelerated
distribution applies (even if the events involve a 409A Change in Control) to a
distribution delayed by application of the six-month delay rule.


·                  If
a Change in Control occurs but settlement of a 409A Award does not occur under
the preceding sentence, such 409A Award shall be settled at the earliest of (i) the
earliest permitted time of settlement that would have applied in the absence of
a Change in Control, (ii) occurrence of a 409A Change in Control, or (iii) your
separation from service, subject to the six-month delay rule set forth
above.


·                  In
the event that any RSUs that constitute 409A Awards cannot be settled upon a
Change in Control or immediately upon your separation from service after a
Change in Control, you will have the right to elect to denominate such RSUs in
cash (based on the then Fair Market Value of Shares) both at the time of the
Change in Control and again upon separation from service following the Change
in Control.  If you elect to denominate
such 409A Awards in cash, the Company will adjust the cash payment to reflect
the deferred settlement date by multiplying the cash amount by the product of
the six-month CMT Treasury Bill annualized yield rate as published by the U.S.
Treasury for the date on which the award was denominated in cash (or the most
appropriate surrogate for such rate if such rate is not available) multiplied
by a fraction, the numerator of which is the number of days from and including
the date on which the award was denominated in cash until and including the
date of payment of such award to Executive and the denominator of which is 365,
and pay such adjusted amount at settlement.


 


(3)           Switch to part-time employment or
consultant


 


·                  For
purposes of any 409A Award, a “termination of employment” will occur only if it
is a “separation from service” within the meaning of Treasury Regulation
§ 1.409A-1(h).  Thus, if a
participant switches to part-time employment or becomes a consultant in
connection with a termination of employment, such event will be deemed a 


 


3

















 


termination of employment for purposes of 409A Awards if and only if it
qualifies as a “separation from service” under the Treasury Regulation.


 


(4)           No acceleration by the Company.


 


·                  The
settlement of 409A Awards may not be accelerated by the Company except to the
extent permitted under Section 409A.


 


Any
restriction imposed on 409A Awards under these 409A Compliance Rules or
imposed on RSUs and LTIP Awards under the terms of other documents solely to
ensure that a deferral of compensation as defined under Section 409A
complies with applicable Section 409A requirements shall not be applied to
an RSU or LTIP Award that is not a 409A Award. 
If any mandatory term required for 409A Awards to avoid tax penalties
under Section 409A is not otherwise explicitly provided under this
document or other applicable documents, such term is hereby incorporated by
reference and fully applicable as though set forth at length herein.


 


Global Amendment to Agreements and Documents Governing Restricted Stock
Units and LTIP Awards


 


                This document (including the
provisions above) shall be deemed a global amendment to RSU agreements and
other documents relating to RSUs and to the terms of LTIP Awards under the LTIP,
the 1998 Plan and the 2000 Plan granted on or before December 31, 2008 and
which vested or will vest on or after January 1, 2005 and which remain
outstanding after December 31, 2008.


 


                In addition, such Non-409A RSUs (excluding
electively deferred Awards) are amended to provide that settlement shall occur
within 15 days after the lapse of the substantial risk of forfeiture.  The requirements of Section 17(a)(vi) of
the 1998 ESIP and Section 16(a)(vi) of the 2000 Plan, that the
employee exercise no influence over the year in which settlement occurs if the
15-day period covers parts of two years, applies.  Other provisions of Section 17 of the
1998 Plan and Section 16 of the 2000 Plan, and the Long-Term Incentive
Plan as amended and restated October 20, 2008, also apply to the
outstanding RSUs and LTIP Awards.


 


Approved
by:  The Human Resources Committee of the
Board of Directors


 


Date:
October 20, 2008


 


4