Document:

Exhibit 10.1

 

 

Employment Agreement for David
M. Thomas

 

As Amended and Restated at January 1,
2005

 

 

IMS HEALTH INCORPORATED

 

Employment Agreement for David
M. Thomas

 

As Amended and Restated at January 1,
2005

 

	
  1. Employment

  	
   

  
	
   

  	
   

  
	
  2. Term

  	
   

  
	
   

  	
   

  
	
  3. Offices and Duties

  	
   

  
	
   

  	
   

  
	
  (a)
  Generally

  	
   

  
	
  (b) Place of Employment

  	
   

  
	
  (c) Rank of Executive Within Company

  	
   

  
	
   

  	
   

  
	
  4. Salary and Annual Incentive Compensation.

  	
   

  
	
   

  	
   

  
	
  (a)
  Base Salary

  	
   

  
	
  (b) Annual Incentive Compensation

  	
   

  
	
   

  	
   

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

  	
   

  
	
   

  	
   

  
	
  (a) Executive Compensation Plans

  	
   

  
	
  (b) Employee and Executive Benefit Plans

  	
   

  
	
  (c) Acceleration of Awards Upon a Change in
  Control

  	
   

  
	
  (d) Deferral of Compensation

  	
   

  
	
  (e) Reimbursement of Expenses

  	
   

  
	
  (f) Corporate Aircraft

  	
   

  
	
  (g) Company Registration Obligations

  	
   

  
	
  (h) Limitations Under Code Section 409A

  	
   

  
	
   

  	
   

  
	
  6. Termination Due to Retirement, Death, or
  Disability

  	
   

  
	
   

  	
   

  
	
  (a)
  Retirement

  	
   

  
	
  (b)
  Death

  	
   

  
	
  (c)
  Disability

  	
   

  
	
  (d) Other Terms of Payment Following
  Retirement, Death, or Disability

  	
   

  
	
  (e) Consulting Obligation Following
  Retirement

  	
   

  

 

i

 

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

  	
   

  
	
   

  	
   

  
	
  (a) Termination by the Company for Cause

  	
   

  
	
  (b) Termination by Executive Other Than For
  Good Reason

  	
   

  
	
  (c) Termination by the Company Without
  Cause Prior to a Change in Control

  	
   

  
	
  (d) Termination by Executive for Good
  Reason Prior to a Change in Control

  	
   

  
	
  (e) Termination by the Company Without
  Cause After a Change in Control

  	
   

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

  	
   

  
	
  (g) Other Terms Relating to Certain
  Terminations of Employment

  	
   

  
	
   

  	
   

  
	
  8. Definitions Relating to Termination
  Events

  	
   

  
	
   

  	
   

  
	
  (a)
  “Cause”

  	
   

  
	
  (b) “Change in Control”

  	
   

  
	
  (c) “Compensation Accrued at Termination”

  	
   

  
	
  (d)
  “Disability”

  	
   

  
	
  (e) “Good Reason”

  	
   

  
	
  (f) “Potential Change in Control”

  	
   

  
	
  (g) “Special SERP Benefit”.

  	
   

  
	
   

  	
   

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

  	
   

  
	
   

  	
   

  
	
  (a) Rabbi Trust Funded Upon Potential Change
  in Control

  	
   

  
	
  (b) Gross-up If Excise Tax Would Apply

  	
   

  
	
   

  	
   

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

  	
   

  
	
   

  	
   

  
	
  (a) Non-Competition

  	
   

  
	
  (b) Non-Disclosure; Ownership of Work

  	
   

  
	
  (c) Cooperation With Regard to Litigation

  	
   

  
	
  (d) Non-Disparagement

  	
   

  
	
  (e) Release of Employment Claims

  	
   

  
	
  (f) Forfeiture of Outstanding Options

  	
   

  
	
  (g)
  Survival

  	
   

  
	
   

  	
   

  
	
  11. Governing Law; Disputes; Arbitration

  	
   

  
	
   

  	
   

  
	
  (a) Governing Law

  	
   

  
	
  (b) Reimbursement of Expenses in Enforcing
  Rights

  	
   

  
	
  (c)
  Arbitration

  	
   

  
	
  (d) Interest on Unpaid Amounts

  	
   

  

 

ii

 

	
  12.
  Miscellaneous

  	
   

  
	
   

  	
   

  
	
  (a)
  Integration

  	
   

  
	
  (b) Successors; Transferability

  	
   

  
	
  (c) Beneficiaries

  	
   

  
	
  (d)
  Notices

  	
   

  
	
  (e)
  Reformation

  	
   

  
	
  (f)
  Headings

  	
   

  
	
  (g) No General Waivers

  	
   

  
	
  (h) No Obligation To Mitigate

  	
   

  
	
  (i) Offsets; Withholding

  	
   

  
	
  (j) Successors and Assigns

  	
   

  
	
  (k)
  Counterparts

  	
   

  
	
  (l) Due Authority and Execution

  	
   

  
	
  (m) Representations of Executive

  	
   

  
	
   

  	
   

  
	
  13. Indemnification

  	
   

  

 

iii

 

IMS HEALTH INCORPORATED

 

Employment Agreement for David
M. Thomas

 

As Amended and Restated at January 1,
2005

 

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

 

W I T N E S S E T H

 

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

 

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

 

1.             Employment.

 

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

 

2.             Term.

 

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

 

 

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

 

3.             Offices and Duties

 

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

 

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

 

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

 

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

 

2

 

4.             Salary and Annual Incentive Compensation.

 

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

 

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

 

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

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

4

 

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

 

In furtherance of the foregoing, during the
Term:

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

7

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)            Executive’s
Compensation Accrued at Termination;

 

8

 

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

 

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

 

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

 

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

 

(i)            Executive’s
Compensation Accrued at Termination;

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

10

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)            Executive’s
Compensation Accrued at Termination;

 

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

 

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

 

12

 

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

 

(i)            Executive’s
Compensation Accrued at Termination;

 

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

 

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

 

13

 

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

 

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

 

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

 

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

 

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

 

14

 

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

 

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

 

(i)            Executive’s
Compensation Accrued at Termination;

 

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

 

15

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

17

 

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

 

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

 

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

 

(i)            Executive’s
Compensation Accrued at Termination;

 

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

 

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

 

18

 

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

 

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

 

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

 

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

 

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

 

19

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

 

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

 

20

 

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

 

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

 

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

 

(i)            Executive’s
Compensation Accrued at Termination;

 

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

 

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

 

21

 

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

 

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

 

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

 

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

 

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

 

22

 

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

 

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

 

23

 

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

 

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

 

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

 

8.             Definitions Relating to Termination Events

 

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

 

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

 

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

 

24

 

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

 

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

 

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

 

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

 

25

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

26

 

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

 

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

 

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

 

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

 

27

 

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

 

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

 

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

 

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

 

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

 

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

 

28

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

29

 

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

 

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

 

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

 

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

 

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

 

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

 

30

 

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

 

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

 

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

 

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

 

31

 

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

 

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

 

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

 

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

 

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

 

32

 

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

 

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

 

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

 

33

 

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

 

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

 

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

 

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

 

34

 

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

 

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

 

11.           Governing Law; Disputes; Arbitration

 

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

 

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

 

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

 

35

 

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

 

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

 

12.           Miscellaneous

 

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

 

36

 

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

 

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

 

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

 

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

 

If to the Company:

 

IMS HEALTH INCORPORATED

1499 Post Road 

Fairfield, CT  06824

Attention:  General Counsel

 

If to Executive:

 

David M. Thomas

1499 Post Road 

Fairfield, CT  06824

 

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

 

37

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

38

 

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

 

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

 

13.           Indemnification

 

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

 

39

 

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

 

	
   

  	
  IMS HEALTH INCORPORATED

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  By:

  	
     /s/ David R. Carlucci

  	
   

  
	
   

  	
   

  	
  Name: David R. Carlucci

  
	
   

  	
   

  	
  Title: Chief Executive Officer

  
	
   

  	
   

  
	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  
	
   

  	
     /s/ David M. Thomas

  	
   

  
	
   

  	
  David M. Thomas

  

 

40Exhibit
10.2

 

 

Employment Agreement for David R. Carlucci

 

As Amended and Restated at January 1,
2005

 

 

IMS HEALTH INCORPORATED

 

Employment Agreement for David R. Carlucci

 

As Amended and Restated at January 1,
2005

 

	
  1.
  Employment

  	
   

  
	
   

  	
   

  
	
  2. Term

  	
   

  
	
   

  	
   

  
	
  3. Offices and Duties

  	
   

  
	
   

  	
   

  
	
  (a)
  Generally

  	
   

  
	
  (b)
  Place of Employment

  	
   

  
	
   

  	
   

  
	
  4. Salary
  and Annual Incentive Compensation.

  	
   

  
	
   

  	
   

  
	
  (a)
  Base Salary

  	
   

  
	
  (b)
  Annual Incentive Compensation

  	
   

  
	
   

  	
   

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

  	
   

  
	
   

  	
   

  
	
  (a)
  Executive Compensation Plans

  	
   

  
	
  (b)
  Employee and Executive Benefit Plans

  	
   

  
	
  (c)
  Acceleration of Awards Upon a Change in Control

  	
   

  
	
  (d) Deferral
  of Compensation

  	
   

  
	
  (e)
  Reimbursement of Expenses

  	
   

  
	
  (f)
  Company Registration Obligations

  	
   

  
	
  (g)
  Limitations Under Code Section 409A

  	
   

  
	
   

  	
   

  
	
  6.
  Termination Due to Retirement, Death, or Disability

  	
   

  
	
   

  	
   

  
	
  (a)
  Retirement

  	
   

  
	
  (b) Death

  	
   

  
	
  (c)
  Disability

  	
   

  
	
  (d)
  Other Terms of Payment Following Retirement, Death, or Disability

  	
   

  
	
   

  	
   

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

  	
   

  
	
   

  	
   

  
	
  (a)
  Termination by the Company for Cause

  	
   

  
	
  (b)
  Termination by Executive Other Than For Good Reason

  	
   

  
	
  (c)
  Termination by the Company Without Cause Prior to a Change in Control

  	
   

  
	
  (d)
  Termination by Executive for Good Reason Prior to a Change in Control

  	
   

  

 

i

 

	
  (e)
  Termination by the Company Without Cause After a Change in Control

  	
   

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

  	
   

  
	
  (g)
  Other Terms Relating to Certain Terminations of Employment

  	
   

  
	
   

  	
   

  
	
  8.
  Definitions Relating to Termination Events

  	
   

  
	
   

  	
   

  
	
  (a)
  “Cause”

  	
   

  
	
  (b) “Change
  in Control”

  	
   

  
	
  (c)
  “Compensation Accrued at Termination”

  	
   

  
	
  (d) “Disability”

  	
   

  
	
  (e) “Good
  Reason”

  	
   

  
	
  (f)
  “Potential Change in Control”

  	
   

  
	
   

  	
   

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

  	
   

  
	
   

  	
   

  
	
  (a)
  Rabbi Trust Funded Upon Potential Change in Control

  	
   

  
	
  (b)
  Gross-up If Excise Tax Would Apply

  	
   

  
	
   

  	
   

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

  	
   

  
	
   

  	
   

  
	
  (a)
  Non-Competition

  	
   

  
	
  (b)
  Non-Disclosure; Ownership of Work

  	
   

  
	
  (c)
  Cooperation With Regard to Litigation

  	
   

  
	
  (d)
  Non-Disparagement

  	
   

  
	
  (e)
  Release of Employment Claims

  	
   

  
	
  (f)
  Forfeiture of Outstanding Options

  	
   

  
	
  (g)
  Survival

  	
   

  
	
   

  	
   

  
	
  11. Governing
  Law; Disputes; Arbitration

  	
   

  
	
   

  	
   

  
	
  (a) Governing
  Law

  	
   

  
	
  (b)
  Reimbursement of Expenses in Enforcing Rights

  	
   

  
	
  (c) Arbitration

  	
   

  
	
  (d)
  Interest on Unpaid Amounts

  	
   

  
	
   

  	
   

  
	
  12. Miscellaneous

  	
   

  
	
   

  	
   

  
	
  (a) Integration

  	
   

  
	
  (b)
  Successors; Transferability

  	
   

  
	
  (c)
  Beneficiaries

  	
   

  
	
  (d)
  Notices

  	
   

  
	
  (e) Reformation

  	
   

  
	
  (f) Headings

  	
   

  
	
  (g) No
  General Waivers

  	
   

  
	
  (h)
  No Obligation To Mitigate

  	
   

  
	
  (i)
  Offsets; Withholding

  	
   

  
	
  (j)
  Successors and Assigns

  	
   

  
	
  (k)
  Counterparts

  	
   

  

 

ii

 

	
  (l)
  Due Authority and Execution

  	
   

  
	
  (m)
  Representations of Executive

  	
   

  
	
   

  	
   

  
	
  13. Indemnification

  	
   

  

 

iii

 

IMS HEALTH INCORPORATED

 

Employment Agreement for David R. Carlucci

 

As Amended and Restated at January 1,
2005

 

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

 

W I T N E S S E T H

 

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

 

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

 

1.             Employment.

 

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

 

2.             Term.

 

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

 

 

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

 

3.             Offices and Duties.

 

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

 

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

 

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

 

4.             Salary and Annual Incentive
Compensation.

 

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

 

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

 

2

 

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

 

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

 

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

 

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

 

In furtherance of the foregoing:

 

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

 

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

 

3

 

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

 

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

 

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

 

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

 

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

 

4

 

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

 

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

 

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

 

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

 

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

 

5

 

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

 

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

 

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

 

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

 

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

 

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

 

6

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)            Executive’s Compensation Accrued at
Termination;

 

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

 

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

 

7

 

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

 

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

 

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

 

(i)            Executive’s Compensation Accrued at
Termination;

 

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

 

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

 

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

 

8

 

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

 

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

 

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

 

9

 

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

 

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

 

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

 

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

 

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

 

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

 

(i)            Executive’s Compensation Accrued at
Termination;

 

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

 

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

 

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

 

10

 

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

 

(i)            Executive’s Compensation Accrued at
Termination;

 

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

 

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

 

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

 

11

 

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

 

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

 

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

 

12

 

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

 

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

 

(i)            Executive’s Compensation Accrued at
Termination;

 

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

 

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

 

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

 

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

 

13

 

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

 

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

 

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

 

14

 

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

 

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

 

(i)            Executive’s Compensation Accrued at Termination;

 

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

 

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

 

15

 

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

 

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

 

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

 

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

 

16

 

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

 

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

 

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

 

(i)            Executive’s Compensation Accrued at
Termination;

 

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

 

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

 

17

 

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

 

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

 

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

 

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

 

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

 

18

 

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

 

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

 

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

 

8.             Definitions Relating to
Termination Events.

 

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

 

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

 

19

 

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

 

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

 

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

 

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

 

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

 

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

 

20

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

21

 

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

 

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

 

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

 

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

 

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

 

22

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

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

 

23

 

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

 

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

 

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

 

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

 

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

 

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

 

24

 

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

 

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

 

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

 

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

 

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

 

25

 

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

 

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

 

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

 

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

 

26

 

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

 

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

 

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

 

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

 

11.           Governing Law; Disputes;
Arbitration.

 

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

 

27

 

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

 

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

 

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

 

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

 

12.  Miscellaneous.

 

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

 

28

 

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

 

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

 

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

 

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

 

If
to the Company:

 

IMS HEALTH INCORPORATED

1499 Post Road

Fairfield, CT  06824

Attention: General Counsel

 

29

 

If
to Executive:

 

David R. Carlucci

1499 Post Road

Fairfield, CT 06824

 

Arthur Woodard, Esq.

Kaye Scholer LLP

425 Park Avenue

New York, NY 10022-3598

(212) 836-8005

 

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

 

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

 

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

 

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

 

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

 

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

 

30

 

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

 

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

 

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

 

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

 

13.  Indemnification.

 

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

 

31

 

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

 

	
   

  	
  IMS HEALTH INCORPORATED

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  By:

  	
    /s/ David M. Thomas

  	
   

  
	
   

  	
   

  	
  Name:

  	
  David M. Thomas

  
	
   

  	
   

  	
  Title:

  	
  Executive Chairman of the
  Board

  
	
   

  	
   

  	
   

  
	
   

  	
   

  	
   

  
	
   

  	
  EXECUTIVE

  
	
   

  	
   

  	
   

  
	
   

  	
    /s/ David R. Carlucci

  	
   

  
	
   

  	
  David R. Carlucci

  
					

 

32

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