<PAGE>
SECURITIES AND EXCHANGE COMMISSION
----------------------------------
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
X Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
---- Exchange Act of 1934.
For the quarterly period ended June 30, 1995
____ Transition report pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934.
Commission file number 0-11428
INFORMATION RESOURCES, INC.
--------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2947987
------------------------------- -----------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 North Clinton Street, Chicago, Illinois 60661
------------------------------------------- -----------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 726-1221
--------------
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Common, $.01 par value per share
Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
-------- -------
The number of shares of the registrant's common stock, $.01 par value per share
outstanding, as of July 28, 1995, was 26,884,375.
<PAGE>
INFORMATION RESOURCES, INC. and Subsidiaries
INDEX
-----
PAGE
NUMBER
------
PART I. FINANCIAL INFORMATION
- -------------------------------
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 7
Management's Discussion and Analysis of
Financial Condition and Results
of Operations 11
PART II. OTHER INFORMATION
- ---------------------------
Item 4 - Submission of Matters to Vote of Security Holders 17
Item 6 - Exhibits and Reports on Form 8-K 18
Signatures 19
2
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1995 DECEMBER 31, 1994
- ------ ------------- -----------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 12,778 $ 11,792
Accounts receivable, net 143,885 119,851
Deferred income taxes 4,963 4,471
Prepaid expenses and other 7,994 7,075
-------- --------
Total Current Assets 169,620 143,189
-------- --------
Property and equipment 147,471 145,537
Accumulated depreciation and amortization (82,348) (85,244)
-------- --------
65,123 60,293
Investments 19,604 20,995
Other assets 148,737 130,077
-------- --------
$403,084 $354,554
======== ========
LIABILITIES AND STOCKHOLDERS' EQUITY
- ------------------------------------
CURRENT LIABILITIES
Current maturities of capitalized leases $ 2,103 $ 1,998
Accounts payable 28,997 19,665
Accrued expenses 29,974 28,012
Deferred revenue 36,118 17,733
Other 5,915 6,207
-------- --------
Total Current Liabilities 103,107 73,615
-------- --------
Long-term debt 53,750 29,000
Long-term capitalized leases 3,471 2,452
Deferred income taxes 9,441 16,122
Deferred gain 4,255 4,463
Other liabilities 1,772 1,701
STOCKHOLDERS' EQUITY
Preferred stock-authorized, 1,000,000 shares
$.01 par value - none issued -- --
Common stock - authorized 60,000,000 shares
in 1995 and in 1994, $.01 par value,
issued and outstanding in 1995:
26,868,000 shares; issued and outstanding
in 1994: 26,493,277 shares 269 265
Capital in excess of par value 175,154 169,703
Retained earnings 50,606 57,506
Cumulative translation adjustment 1,259 (273)
-------- --------
Total Stockholders' Equity 227,288 227,201
-------- --------
$403,084 $354,554
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
UNAUDITED
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
-------------------- ----------------------
JUNE 30 JUNE 30
-------------------- ----------------------
<S> <C> <C> <C> <C>
1995 1994 1995 1994
--------- -------- --------- ---------
Revenues $ 109,332 $ 92,183 $ 214,127 $ 179,861
Costs and expenses:
Operating expenses (101,956) (79,200) (200,107) (151,781)
Selling, general and
administrative expenses (12,409) (10,842) (24,033) (21,413)
--------- -------- --------- ---------
(114,365) (90,042) (224,140) (173,194)
--------- -------- --------- ---------
Operating profit (loss) (5,033) 2,141 (10,013) 6,667
Interest expense and other, net (1,732) (311) (2,686) (256)
Litigation provision -- -- -- (5,000)
Equity in gain (loss) of affiliated companies 204 (2,071) 155 (4,329)
--------- -------- --------- ---------
Loss before income taxes,
minority interest and cumulative effect
of change in accounting principle (6,561) (241) (12,544) (2,918)
Income tax (expense) benefit 2,952 (9) 5,644 886
--------- -------- --------- ---------
Loss before minority interest
and cumulative effect of change in
accounting principle (3,609) (250) (6,900) (2,032)
Minority interest -- 262 -- 756
--------- -------- --------- ---------
Earnings (loss) before cumulative effect
of change in accounting principle (3,609) 12 (6,900) (1,276)
Cumulative effect on prior years of
change in accounting principle -- -- -- (6,594)
--------- -------- --------- ---------
Net earnings (loss) $ (3,609) $ 12 $ (6,900) $ (7,870)
========= ======== ========= =========
Earnings (loss) per common and
common equivalent share:
Before cumulative effect of accounting change $ (.13) $ $ (.26) $ (.05)
Cumulative effect of accounting change -- -- -- (.26)
--------- -------- --------- ---------
Net earnings (loss) $ (.13) $ -- $ (.26) $ (.31)
========= ======== ========= =========
Weighted average common and common
equivalent shares 26,826 26,091 26,721 25,835
========= ======== ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
UNAUDITED
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE 30
--------------------------
1995 1994
------------ ------------
<S> <C> <C>
OPERATING ACTIVITIES:
Net loss $ (6,900) $ (7,870)
Adjustments to reconcile net loss to net cash
provided by operating activities:
Depreciation and amortization 12,933 9,872
Amortization of capitalized software costs 4,597 3,975
Amortization of deferred data procurement costs 40,767 31,033
Deferred income taxes (7,508) (861)
Equity in (gain) loss of affiliated companies and minority interest (155) 3,573
Cumulative effect of change in revenue recognition -- 6,594
Other 2,378 337
Change in assets and liabilities:
Increase in current assets (22,179) (20,828)
Increase in other assets (1,333) (1,165)
Increase in current liabilities, principally deferred revenue in 1995 20,011 1,918
Other, net (92) 374
-------- --------
Total adjustments 49,419 34,822
-------- --------
Net cash provided by operating activities 42,519 26,952
INVESTING ACTIVITIES:
Purchase of property and equipment - net (11,064) (13,021)
Software costs (5,043) (6,146)
Deferred data procurement costs (48,404) (39,283)
Investment in joint ventures (4,812) (1,832)
-------- --------
Net cash used in investing activities (69,323) (60,282)
FINANCING ACTIVITIES:
Net borrowings (repayments) of capitalized leases 1,124 (864)
Net bank borrowings 24,750 23,500
Proceeds from exercise of stock options 1,236 732
Capital contributions from minority interest -- 132
-------- --------
Net cash provided by financing activities 27,110 23,500
Effect of exchange rate on cash 680 754
-------- --------
Net increase (decrease) in cash 986 (9,076)
Cash and cash equivalents at beginning of period 11,792 19,368
-------- --------
Cash and cash equivalents at end of period $ 12,778 $ 10,292
======== ========
</TABLE>
(continued)
5
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS, CONT'D.
UNAUDITED
(IN THOUSANDS)
SUPPLEMENTAL DISCLOSURES OF CASH FLOW INFORMATION:
SIX MONTHS ENDED JUNE 30
------------------------
1995 1994
------- ----
Cash paid (refunded) during the period for:
Interest $ 2,408 $ 770
Income taxes (refund) $(1,064) $(393)
In March, 1995, the Company and Middle East Market Research Bureau ("MEMRB")
International entered into a strategic alliance agreement. In connection with
this agreement, the Company issued 176,000 shares of its common stock having a
market value of approximately $2.6 million to the stockholders of MEMRB and
obtained an option to acquire up to a 49% ownership interest in MEMRB.
The accompanying notes are an integral part of these statements.
6
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
- ---------------------------------------------------
Basis of presentation: The accompanying condensed consolidated financial
statements should be read in conjunction with the consolidated financial
statements included in Information Resources, Inc.'s Annual Report on Form 10-K
for the year ended December 31, 1994. The condensed consolidated financial
information furnished herein reflects all adjustments (consisting of normal
recurring accruals) which are, in the opinion of management, necessary for a
fair presentation of the condensed consolidated financial statements for the
periods shown.
Principles of consolidation: The condensed consolidated financial statements
include the accounts of Information Resources, Inc. and its subsidiaries
(collectively "the Company") after elimination of intercompany transactions.
Reclassifications: Certain amounts in the 1994 consolidated financial
statements have been reclassified to conform to the 1995 presentation.
NOTE 2 - ACCOUNTS RECEIVABLE
- ----------------------------
Accounts receivable are as follows:
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
------------- -----------------
<S> <C> <C>
(in 000's)
Billed $ 83,907 $ 58,666
Unbilled 57,987 59,806
Other 5,739 4,305
-------- --------
147,633 122,777
Allowance for doubtful receivables (3,748) (2,926)
-------- --------
$143,885 $119,851
======== ========
</TABLE>
NOTE 3 - INVESTMENTS
- --------------------
In February 1995, the Company purchased 39% of its French joint venture,
IRI-SECODIP, from its joint venture partner increasing the Company's ownership
in the joint venture from 50% to 89%. IRI - SECODIP has been consolidated since
January 1, 1995.
7
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
In March 1995, the Company entered into an alliance with MEMRB, a market
research company based in Cyprus. In connection with this agreement, the
Company issued 176,000 shares of its common stock having a market value of
approximately $2.6 million and obtained an option to acquire up to a 49%
ownership interest in MEMRB. The Company's $2.6 million investment in MEMRB has
been accounted for as a cost investment in the consolidated financial
statements.
MEMRB provides market research throughout 22 countries in the Middle East,
Eastern Europe, the Mediterranean, the Commonwealth of Independent States and
North Africa. Under the terms of the alliance, MEMRB has agreed to cooperate in
the adoption of multi-country technical standards developed by the Company for
its InfoScan syndicated tracking business and co-market certain information and
software products with the Company.
NOTE 4 - OTHER ASSETS
- ---------------------
Other assets are as follows:
<TABLE>
<CAPTION>
June 30, 1995 December 31, 1994
-------------- -----------------
(in 000's)
<S> <C> <C>
Deferred data procurement costs -
net of accumulated amortization of
of $119,175 in 1995 and
$78,408 in 1994 $103,385 $ 87,799
Capitalized software costs - net of
accumulated amortization of
$18,852 in 1995 and
$14,255 in 1994 24,186 23,357
Goodwill - net of accumulated
amortization of $2,311 in
1995 and $1,436 in 1994 8,532 4,450
Other 12,634 14,471
-------- --------
$148,737 $130,077
======== ========
</TABLE>
NOTE 5 - LONG TERM DEBT
- -----------------------
In November 1994, the Company established a three-year unsecured revolving bank
credit facility. The credit facility allows borrowings of up to $65,000,000
through December 30, 1995 decreasing to $55,000,000 on December 31, 1995 and to
$45,000,000 on December 31, 1996. The credit facility contains certain
financial covenants including restrictions on additional indebtedness and
liens, limitations on acquisitions and investments, and maintenance of minimum
levels of tangible net worth, current, leverage and cash flow coverage ratios.
At June 30, 1995 the Company was not in compliance with certain financial
covenants and noncompliance with these covenants was waived by the banks. The
Company has classified its debt according to its terms. In the third quarter of
1995, the entire amount outstanding under the credit facility was repaid by
application of proceeds from the sale of the Company's general software
business. (See Note 6 - Subsequent Event).
8
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
NOTE 6 - SUBSEQUENT EVENT
- -------------------------
On July 27, 1995 (the "Closing Date"), Information Resources, Inc. ("IRI")
completed the sale to Oracle Corporation ("Oracle") of certain assets,
liabilities and related software application products relating to its on-line
analytical processing business ("the General Software Business") previously
operated by IRI's software division. The sale transaction was consummated
pursuant to the terms of an Amended and Restated Asset Purchase Agreement dated
as of June 12, 1995 between IRI and Oracle (the "Purchase Agreement"). Oracle
acquired the EXPRESS technology and the general purpose EXPRESS-based products
including the DataServer platform, Express Financial Management System and
Express Enterprise Information System. The Company retained sales and marketing
application products for use in the consumer packaged goods industry. IRI and
Oracle also entered into certain on-going licensing and support agreements. In
consideration for such assets and liabilities Oracle paid approximately $100
million in cash, subject to post-closing adjustment. Approximately $11.8 million
of the sales proceeds were deposited to an interest-bearing escrow trust
account. Of that amount, $8.0 million constitutes a general escrow to be held
for at least one year. The remaining $3.8 million will be released upon
completion of various closing events in Europe, which the Company anticipates
will take place within 60 days after the closing. A portion of the sale proceeds
were used to repay the bank credit facility. The remainder of the proceeds will
be used to pay expenses of the sale and held for general corporate purposes.
The following information sets forth, for the periods and at the dates
indicated, summarized unaudited pro forma condensed consolidated financial
information for the Company. This financial information is derived from the
historical consolidated financial statements and notes thereto and reflects (a)
the condensed consolidated results of operations as if the following
transactions had occurred on December 31, 1993 and (b) the condensed
consolidated balance sheet as if the sale of the General Software Business
occurred on June 30, 1995.
The transactions impacting pro forma financial information are:
(1) In July 1995 the Company sold its General Software Business to Oracle for
approximately $100 million.
(2) In July 1995 the Company repaid all of its outstanding bank borrowings
using the cash proceeds of the sale.
The pro forma condensed consolidated financial information reflects: (1)
recognition of the impact of the sale of the General Software Business to Oracle
and (2) the decrease of net interest expense resulting from the assumed payment
of bank loans with proceeds from the sale. The net gain on the sale of the
General Software Business to Oracle is not reflected in the unaudited pro forma
condensed consolidated statement of operations for the periods presented. In
addition, in accordance with the rules and regulations of the Securities and
Exchange Commission, interest income on the remaining excess cash proceeds from
the sale of the General Software Business after repayment of bank indebtedness
and related expenses has not been benefited in the unaudited pro forma condensed
consolidated statements of operations for the periods presented. The pro forma
unaudited condensed consolidated financial information is not necessarily
indicative of the consolidated results of operations as they might have been if
the sales had been consummated on the assumed date.
9
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
NOTE 6 - SUBSEQUENT EVENT, CONT'D.
- ---------------------------------
The following table presents, on a pro forma basis, a condensed consolidated
balance sheet at June 30, 1995 and a condensed consolidated statement of
operations for the six months ended June 30, 1995 and the year ended
December 31, 1994 (in millions, except per share data):
Condensed Consolidated Balance Sheet
- ------------------------------------
<TABLE>
<CAPTION>
Pro Forma
June 30, 1995
-------------
<S> <C>
Current assets $ 161.7
Property and equipment, net 59.7
Investments 19.6
Deferred data procurement costs, net 103.4
Capitalized software, net 7.5
Other assets 20.0
-------
$ 371.9
=======
Current liabilities $ 85.0
Long-term debt --
Other long-term liabilities,
principally deferred income taxes 35.6
Stockholders' equity 251.3
-------
$ 371.9
=======
</TABLE>
Condensed Consolidated Statement of Operations
- ----------------------------------------------
<TABLE>
<CAPTION>
Pro Forma Pro Forma
Six Months Ended Twelve Months Ended
June 30, 1995 December 31, 1994
---------------- -------------------
<S> <C> <C>
Revenues $ 177.4 $ 313.3
======= =======
Operating profit (loss) (5.6) 12.5
======= =======
Interest expense and other, net (.1) .3
======= =======
Loss before income taxes,
minority interest and cumulative
effect of change in accounting principle (5.8) (4.7)
======= =======
Net loss before cumulative effect
of change in accounting principle $ (2.8) $ (3.5)
======= =======
Net loss per common and common
equivalent share $ (.11) $ (.13)
======= =======
Weighted average common and common
equivalent shares 26,721 26,056
======= =======
</TABLE>
If the remaining excess cash proceeds from sale were invested in U.S. Treasury
securities, pro forma net loss before cumulative effect of change in accounting
principle would be benefited by $.02 and $.07 per share for the six months ended
June 30, 1995 and the year ended December 31, 1994, respectively.
10
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENTS'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, the percentage
relationship to revenue of certain items in the Condensed Consolidated
Statements of Operations, and the percentage changes from period to period in
such items.
<TABLE>
<CAPTION>
PERCENTAGE INCREASE/(DECREASE)
PERCENTAGE OF REVENUE OVER PRIOR PERIOD
------------------------- ------------------------------
THREE MONTHS SIX MONTHS THREE MONTHS SIX MONTHS
ENDED ENDED ENDED ENDED
JUNE 30 JUNE 30 1995/ 1995/
1995 1994 1995 1994 1994 1994
------ ------ ------ ------ ------------ ----------
<S> <C> <C> <C> <C> <C> <C>
Revenues 100.0% 100.0% 100.0% 100.0% 18.6% 19.1%
Operating expenses (93.3) (85.9) (93.5) (84.4) 28.8 31.8
Selling, general & admin. (11.3) (11.8) (11.2) (11.9) 14.8 12.1
Operating profit (loss) (4.6) 2.3 (4.7) 3.7 * *
Interest expense and
other, net (1.6) * (1.3) * * *
Litigation provision -- -- -- (2.8) -- *
Equity in gain (loss)
of affiliates * (2.2) * (2.4) * *
Income tax (expense)
benefit 2.7 -- 2.6 .5 * *
Minority interest -- * -- * * *
Cumulative effect of
accounting change -- -- -- (3.7) -- *
Net earnings (loss) (3.3) -- (3.2) (4.4) * *
</TABLE>
* Not meaningful
11
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
REVENUES
Revenues attributable to the Company's data and analysis services and business
intelligence software are as follows:
<TABLE>
<CAPTION>
SIX MONTHS ENDED THREE MONTHS ENDED
JUNE 30 JUNE 30
------------------- ------------------
1995 1994 1995 1994
-------- -------- --------- -------
<S> <C> <C> <C> <C>
(IN 000'S)
Domestic Data and Analysis Services:
InfoScan and Testing Services $116,945 $110,637 $ 59,883 $56,790
Towne-Oller and Other 7,686 8,235 3,375 4,074
Retailer Services 7,969 6,285 3,710 3,401
-------- -------- -------- -------
Total Domestic Data and Analysis Services 132,600 125,157 66,968 64,265
-------- -------- -------- -------
International Data and Analysis Services 18,499 5,519 9,613 2,921
-------- -------- -------- -------
Total Data and Analysis Services 151,099 130,676 76,581 67,186
-------- -------- -------- -------
Business Intelligence Software 63,028 49,185 32,751 24,997
-------- -------- -------- -------
Total Revenues $214,127 $179,861 $109,332 $92,183
======== ======== ======== =======
</TABLE>
The Company's consolidated revenue from operations for the six months ended June
30, 1995 increased 19.1% to $214.1 million compared to $179.9 million for the
first six months of 1994. Consolidated revenue for the three month period ended
June 30, 1995 increased 18.6% to $109.3 million compared to $92.2 million for
the same period of 1994. The revenue growth resulted principally from sharply
increased revenues from its business intelligence software products and the
expansion of international data and analysis services.
Revenues from the Company's domestic data and analysis services business for the
six months ended June 30, 1995 were $132.6 million, an increase of 5.9% over the
same period in 1994. Domestic data and analysis services revenues for the
second quarter of 1995 were $67.0 million, an increase of 4.2% over the same
three month period in 1994. Revenue growth of the Company's domestic data and
analysis services business was lower than the prior year comparable periods due
to the continued effects of an intense pricing environment which began in late
1993. The Company's InfoScan contract revenues were most severely affected,
and as a result, base contract revenues remained relatively constant compared
to the prior year. However, non-base contract, or ad hoc use of the Company's
information services continued to increase.
The Company's international data and analysis services business made a
significant contribution to the overall revenue growth. International data and
analysis services revenue for the six months ended June 30, 1995 increased $13.0
million to $18.5 million from $5.5 million in the comparable period of 1994.
Revenue for the three months ended June 30, 1995 increased $6.7 million to $9.6
million from $2.9 million in the comparable period of 1994. Revenues generated
by the Company's data business operating in France, which was consolidated
beginning in 1995, were $7.1 million and $3.9 million for the six and three
month periods ended June 30, 1995.
12
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
In dollar terms the Company's foreign revenues also benefited from the
weakening of the U.S. dollar compared to certain local currencies.
Revenues from the Company's business intelligence software products for the
first six months of 1995 and 1994 were $63.0 million and $49.2 million,
respectively, and for the second quarter of 1995 and 1994 were $32.8 million and
$25.0 million, respectively. Consolidated results for all periods include the
operations of the General Software Business which was sold to Oracle on July 27,
1995. This part of the software business reported revenue for the six and three
months ended June 30, 1995 of approximately $37 million and $19 million,
respectively, compared to approximately $26 million and $13 million for the same
periods in 1994, respectively, as revenues rebounded from somewhat depressed
year-earlier levels. The portion of the software business being retained by the
Company reported revenue of approximately $26 million for the six months ended
June 30, 1995, an 11.2% increase compared to the revenue achieved for the same
period of 1994. The portion of the software business retained by the Company
reported revenue of approximately $13 million for the three months ended June
30, 1995, a 10.3% increase compared to second quarter of 1994. The Company
achieved revenue growth in its business intelligence software products due to
sharp increases in both delivery of software applications to new and existing
customers and additional consulting revenue along with increased software
maintenance revenue.
OPERATING EXPENSES
Consolidated operating expenses increased $48.3 million or 31.8% to $200.1
million in the first six months of 1995 from $151.8 million in the first six
months of 1994. Consolidated operating expenses increased $22.8 million or
28.8% to $102.0 million in the second quarter of 1995 from $79.2 million in the
second quarter of 1994. For the six and three months ended June 30, 1995
approximately $19.6 million and $9.7 million, respectively, of the increases
were attributable to the expansion of the Company's international data and
analysis services business, of which approximately $11.0 million and $5.4
million, respectively, is due to the inclusion in the consolidated financial
statements of the Company's recently acquired majority interest in its French
affiliate. Expenses for foreign operations were also negatively affected by the
weakening of the U.S. dollar.
The overall increase in the Company's total operating expenses for the six month
period ended June 30, 1995 reflected a $13.8 million increase in domestic
compensation expense, a $13.0 million increase in international compensation
expense, a $9.7 million increase in amortization of deferred data procurement
costs, principally in Europe, and a $5.2 million increase in computer expenses
required to deliver InfoScan services in Europe and the United States. Aside
from expense increases relating to the international expansion, consolidated
operating expenses also increased as a result of increases in computer
operations and in client service staff to support current and planned future
revenue increases, primarily related to census data. In addition, increases in
computer operations to support the Company's "OMEGA" production re-engineering
and cost reduction project were required.
Consolidated results for all periods include the operations of the General
Software Business sold to Oracle Corporation on July 27, 1995. This part of the
software business reported operating expenses for the six and three months ended
June 30, 1995 of approximately $35.1 million and $18.3 million compared to $27.4
million and $14.3 million for the same periods in 1994.
13
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
SELLING, GENERAL AND ADMINISTRATIVE EXPENSES
Consolidated selling, general and administrative expenses increased $2.6 million
or 12.1% to $24.0 million in the first six months of 1995 from $21.4 million in
the same six month period in 1994. Consolidated selling, general and
administrative expenses increased $1.6 million or 14.8% to $12.4 million in the
second quarter of 1995 compared to $10.8 million in the same three month period
of 1994. For the six and three months ended June 30, 1995 approximately $1.2
million and $.8 million, respectively, of the increase in total selling, general
and administrative expense were due to consolidation of the Company's French
affiliate. The dollar increases in consolidated selling, general and
administrative expenses were attributable to increased spending in corporate
related expenditures, promotion and advertising and employee recruiting and
development. Consolidated selling, general and administrative expense in 1994
includes a one-time charge of $1.4 million incurred in connection with the
cancelled acquisition of Asia-based SRG Holdings Limited.
Consolidated results for all periods include the operations of a portion of the
Company's General Software Business sold to Oracle on July 27, 1995. This part
of the software business reported selling, general and administrative expenses
for the six and three months ended June 30, 1995 of approximately $5.9 million
and $2.8 million compared to $4.7 million and $2.9 million for the same periods
in 1994.
OTHER EXPENSE
Other expenses for the six months ended June 30, 1995 and 1994 were $2.7 million
and $5.3 million, respectively. Other expenses for the quarter ended June 30,
1995 and 1994 were $1.7 million and $.3 million respectively. The 1994 results
reflect a pre-tax provision of $5.0 million related to shareholder litigation,
for which a settlement was approved by the federal district court on March 3,
1995. Interest expense relating to bank borrowings increased in the first six
months of 1995 by $1.9 million relative to the first six months of 1994, due to
extensive cash requirements needed to further the expansion of the Company's
international data and analysis services business into Europe.
EQUITY IN GAIN (LOSS) OF AFFILIATED COMPANIES
Equity in gain (loss) of affiliated companies reflects gains and losses
recognized related to equity investments. The increase was primarily due to the
Company's increased ownership interest in its French affiliate which, effective
January 1, 1995, has been included as a consolidated subsidiary of the Company.
INCOME TAXES
The Company's effective tax rate on operations including minority interest was
45.0% and 41% for the six months ended June 30, 1995 and 1994, respectively.
The principle causes of the Company's effective tax rate in excess of the
Federal statutory rate are state and local taxes and, in 1995, certain
unbenefited foreign losses.
CUMULATIVE EFFECT ON PRIOR YEARS OF CHANGE IN ACCOUNTING PRINCIPLE
Effective January 1, 1994, the Company changed its method of recognizing revenue
on InfoScan, PromotionScan and BehaviorScan products. Revenue now is recognized
over the term of the contract on a straight-line basis. Previously, the Company
recognized a portion of the initial contract revenue in the period between
client commitment and either the start of forward data or the test commencement.
14
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
NET EARNINGS (LOSS)
As a result of the factors described above, net loss was ($3.6) million for the
second quarter of 1995 and ($6.9) million for the six months ended June 30, 1995
versus break-even for the second quarter of 1994 and a net loss of ($7.9)
million for the six months ended June 30, 1994. Included in 1994 results,
however, were one-time charges of ($10.3) million, or ($0.41) per share relating
to the cumulative effect of change in accounting principle for revenue
recognition, shareholder litigation reserves and charges for the cancelled
acquisition of SRG Holdings Limited.
FINANCIAL LIQUIDITY AND CAPITAL RESOURCES
CASH FLOW: Consolidated net cash provided by operating activities was $42.5
million for the first six months of 1995 compared to $27.0 million for the same
period in 1994. Cash provided by operating activities increased due primarily to
cash received from customers in 1995 reflected as deferred revenue. Cash used
for net investing activities was $69.3 million for the first six months of 1995
versus $60.3 million for the same period in 1994. This increase is primarily due
to data procurement costs attributable to the expansion of the Company's data
collection efforts in Europe and, to a much lesser degree, the United States.
Cash provided by financing activities was $27.1 million for the first six months
of 1995 in comparison to $23.5 million for the first six months of 1994. The net
financing activities in 1995 and 1994 reflect net bank borrowings of $24.8
million and $23.5 million, respectively used to fund the Company's continuing
development of its international data and analysis services business.
SALE OF GENERAL SOFTWARE BUSINESS: On July 27, 1995, the Company sold its
General Software Business to Oracle for approximately $100 million in cash, of
which $11.8 million was placed in escrow. On July 28, 1995 the entire amount
outstanding under the credit facility was repaid by application of a portion of
the proceeds from the sale of the General Software Business. The remainder of
the proceeds will be used to pay expenses associated with the sale and held for
general corporate purposes.
FINANCINGS: The Company increased its bank borrowings to $53.8 million at June
30, 1995 from $29.0 million at December 31, 1994. The primary use of borrowings
has been the expansion of the Company's data and analysis services business in
Europe. The Company's bank credit facility is limited to $65.0 million and
decreases to $55.0 million at December 31, 1995 and to $45.0 million at December
31, 1996. At June 30, 1995 the Company was not in compliance with certain
financial covenants, and noncompliance with these covenants was waived by the
banks.
The Company intends to renegotiate or replace its bank credit facility during
the second half of 1995. As a result of the cash generated from the sale of the
General Software Business to Oracle in July 1995 the Company does not expect to
have any drawings under its bank credit facility during the remainder of 1995.
The Company has agreed not to borrow under the current bank credit facility
until new financial covenants have been established.
15
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
CAPITAL EXPENDITURES: Consolidated capital expenditures were $11.1 million and
$13.0 million for the six months of 1995 and 1994, respectively. This decline
was due to the implementation of an aggressive program to minimize capital
spending in the first half of 1995.
Consolidated deferred data procurement expenditures were $48.4 million and $39.3
million for the six months of 1995 and 1994, respectively. The increase in
deferred data procurement expenditures is principally related to the expansion
of the Company's international data and analysis services business. Management
expects to continue its investment in its information data and analysis services
business in Europe. These operations will continue to require substantial
investment through at least the end of 1996.
Consolidated software development costs were $5.0 million and $6.1 million for
the six months of 1995 and 1994, respectively. Due to the sale of the General
Software Business to Oracle, software development costs are expected to
decrease over the remaining months of 1995 compared to 1994.
16
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 4. Submission of Matters to Vote of Security Holders.
(a) The annual meeting of Stockholders of the Company was held May 24, 1995.
(b) Without solicitation in opposition, the nominees listed in the proxy
statement soliciting proxies were elected as directors to serve for a
three-year term ending in 1998 as follows:
<TABLE>
<CAPTION>
Name Votes For Votes Withheld
---- ---------- --------------
<S> <C> <C>
Gian M. Fulgoni 22,024,297 127,501
James G. Andress 22,025,197 126,601
Leonard M. Lodish, Ph.D. 22,025,265 126,533
Edith W. Martin, Ph.D. 22,025,497 126,301
Thomas W. Wilson, Jr. 22,025,397 126,401
</TABLE>
Following is the name of each other director whose term of office as a
director continued after the meeting for terms ending in either 1996 or 1997:
Edwin E. Epstein, Edward E. Lucente, Jeffrey P. Stamen, Gerald J. Eskin, John
D.C. Little, Ph.D., George G. Montgomery, Jr., and Glen L. Urban, Ph.D.
(c) The appointment of Grant Thornton LLP, independent certified public
accountants for the Company for the year ended December 31, 1995, was
ratified as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Withheld
---------- ------------- --------------
<S> <C> <C>
22,067,811 46,075 37,912
</TABLE>
(d) The amendment to the Executive Stock Option Plan increasing the number of
shares authorized for issuance thereunder was approved as follows:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Withheld Broker Non-Votes
- ------------------ ------------- -------------- ----------------
<S> <C> <C> <C>
14,352,291 7,580,623 80,947 137,937
</TABLE>
(e) The amendment to the Executive Stock Option designed to preserve the tax
deductibility of certain compensation paid thereunder was approved as
follows:
<TABLE>
<CAPTION>
Votes For Votes Against Votes Withheld Broker Non-Votes
- ------------------ ------------- -------------- ----------------
<S> <C> <C> <C>
21,820,765 162,760 88,742 79,531
</TABLE>
17
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION (CONT'D.)
Item 6. Exhibits and Reports on Form 8-K.
a. Exhibits
Exhibit No. Description of Exhibit Page
----------- ---------------------- -------
2 Amended and Restated Asset Purchase
Agreement dated as of June 12, 1995 by and
between the Company and Oracle
Corporation (Incorporated by reference.
Previously filed as Exhibit 2.1 to the
Company's Current Report on Form 8-K dated
July 27, 1995 and filed August 11, 1995). IBRF
3 1992 Executive Stock Option Plan, as
amended effective May 24, 1995 (filed
herewith). EF
10.2 Amendment to Credit Agreement dated
November 3, 1994, between the Company and
Harris Trust and Savings Bank (filed
herewith). EF
10.2 Licenses - Back Agreement dated as of
July 27, 1995 between the Company and Oracle
Corporation (Incorporated by reference.
Previously filed as Exhibit B to the Amended
and Restated Asset Purchase Agreement dated
as of July 27, 1995 filed as Exhibit 2.1 to
the Current Report on Form 8-K dated July 27,
1995 and filed August 11, 1995). IBRF
27 Financial Data Schedule (filed herewith). EF
b. Reports on Form 8-K.
Form 8-K dated July 27, 1995 (filed with the SEC on August 11, 1995).
Items Reported:
Item 2: Disposition of Assets
Item 7: Financial Statements and Exhibits
18
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned, Registrant's principal financial officer, thereunto duly
authorized.
INFORMATION RESOURCES, INC.
---------------------------
(Registrant)
/s/ Gary M. Hill
----------------------------------------
Gary M. Hill
Executive Vice President
and Chief Financial Officer
(Authorized officer of Registrant and
principal financial officer)
August 14, 1995
19
<PAGE>
EXHIBIT 3
INFORMATION RESOURCES, INC.
1992 EXECUTIVE STOCK OPTION PLAN
(AS AMENDED EFFECTIVE MAY 24, 1995)
1. Introduction and Purpose. The purpose of this Stock Option Plan is to
advance the interests of Information Resources, Inc. by encouraging and enabling
the acquisition of a larger personal proprietary interest in the Corporation by
Eligible Executives upon whose judgment and keen interest the Corporation and
its Subsidiaries are largely dependent for the successful conduct of their
service and operations. It is anticipated that the acquisition of such
proprietary interest in the Corporation will stimulate the efforts of such
Eligible Executives, on behalf of the Corporation and its Subsidiaries, and
strengthen their desire to remain with the Corporation and its Subsidiaries. It
is also expected that the opportunity to acquire such a proprietary interest
will enable the Corporation and its Subsidiaries to attract desirable candidates
for the Corporation's Board of Directors and executive management.
2. Definitions. when used in this Plan, unless the context otherwise
requires:
(a) "Board of Directors" or "Board" shall mean the Board of Directors
of Information Resources, Inc. as constituted at any time.
(b) "Committee" shall mean the Stock Option Committee, as described in
Section 3 hereof, appointed by the Board to administer this Plan.
(c) "Common Stock" means the common stock of the Corporation at a par
value of $.01, including outstanding shares, treasury shares and authorized
but unissued shares, or any equity security of the Corporation issued in
substitution, exchange or lieu of such common stock.
(d) "Corporation" shall mean Information Resources, Inc.
(e) "Eligible Executives" shall mean the directors and executive
officers of the Corporation or its Subsidiaries who are potential
recipients of Options pursuant to this Plan, as provided in Section 4
herein.
(f) "Fair Market Value" on a specified date shall mean (i) the
average of the bid and asked prices at which one Share is traded on the
over-the-counter market, as reported on the National Association of
Securities Dealers Automated Quotation System, but if there are no sales on
such date, then on the last previous date on which a Share was so traded;
or (ii) if the foregoing is not applicable, the average of the high and low
prices at which one Share is traded on the stock exchange on which the
Common Stock generally has the greatest trading volume, but if there are no
sales on such date, then on
<PAGE>
the last previous date on which a Share was so traded; or (iii) if neither
of the above is applicable, the value of a Share as established by the
Committee for such date using any reasonable method of valuation consistent
with Section 422(c)(7) of the Internal Revenue Code.
(g) "Internal Revenue Code" shall mean the Internal Revenue Code of
1986, as amended, or any successor thereto.
(h) "Options" shall mean the stock options issued pursuant to this
Plan.
(i) "Plan" shall mean this Information Resources, Inc. 1992 Executive
Stock Option Plan, effective as of the date set forth in Section 23 hereof,
1992, and as amended from time to time.
(j) "Plan Year" means the calendar year.
(k) "Retirement Date" shall mean, with respect to an Eligible
Executive, the effective date of his or her retirement from the Corporation
or one of its Subsidiaries upon reaching the age of 60 years, or, if
applicable, his or her retirement upon such earlier date as shall be
permitted under the Corporation s or Subsidiary's retirement plan, as the
case may be.
(l) "Rule 16b-3" means Rule 16b-3 of the General Rules and Regulations
under the Securities Exchange Act of 1934, as amended from time to time, or
any successor thereto.
(m) "Securities Act of 1933" shall mean the Securities Act of 1933, as
amended from time to time, or any successor thereto.
(n) "Securities Exchange Act of 1934" shall mean the Securities
Exchange Act of 1934, as amended from time to time. or any successor
thereto.
(o) "Share" shall mean a share of Common Stock of the Corporation at a
par value of $.01.
(p) "Subsidiary" shall mean any "subsidiary corporation", as such term
is defined in Section 424(f) of the Internal Revenue Code.
(q) "Voting Power," as of any date, means the total combined voting
power of all classes of stock of the Corporation or its parent, if any, or
Subsidiary, as measured for purposes of Section 422(b)(6) of the Internal
Revenue Code.
2
<PAGE>
3. Administration of the Plan.
(a) The Committee shall be appointed by the Board of Directors and
shall consist of at least two members of the Board of Directors, who shall
each be a "disinterested person" within the meaning of Rule 16b-3. The
Committee shall have the authority, subject to the provisions of this Plan,
to (i) determine which Eligible Executives shall receive Options and the
number of Options each Eligible Executive shall receive, (ii) grant the
Options, (iii) determine the terms and conditions of the Options,
including, but not limited to, exercise dates, limitations on exercise and
the price and payment terms, (iv) determine the limitation, if any, on the
number of Shares acquired under an Option which may be sold by the Option
holder in any year; (v) prescribe the form or forms of the instruments
evidencing any Options granted under the Plan and of any other instruments
required under the Plan and to change such forms from time to time, and
(vi) administer the Plan as provided herein and, in exercising this
authority, shall establish such rules and procedures as are necessary or
advisable to administer the Plan.
(b) Each member of the Committee shall hold his or her position on the
Committee until the next regular annual meeting of the Board of Directors
following his or her designation and until his or her successor is
designated as a member of the Committee; provided, however, that (i) any
member of the Committee may be removed at any time, with or without cause,
by resolution adopted by a majority of the Board of Directors and (ii) a
member of the Committee may resign from the Committee at any time by giving
written notice to the President, Secretary or Assistant Secretary of the
Corporation in person or by certified or registered mail, return receipt
requested, sent to 150 North Clinton Street, Chicago, Illinois 60661, and,
unless otherwise specified therein, such resignation shall take effect upon
receipt of such written notice. The acceptance of such resignation by the
President, Secretary or Assistant Secretary of the Corporation shall not be
necessary for such resignation to be effective. Any vacancy in the
Committee may be filled by a resolution adopted by a majority of the Board
of Directors.
(c) Each member of the Committee shall receive, annually, Options to
purchase 2,500 shares of Common Stock. Such Options shall be issued on June
15 of each year, beginning in 1992, and, except as otherwise provided in
this Plan, the exercise price per share of Common Stock thereunder shall be
equal to the Fair Market Value of one Share as of the date of Option
issuance. Except as provided in this Section 3(c), no Options shall be
granted to Committee members under this Plan. The provisions of this
Section 3(c) may not be amended more than once every six months, other than
to comport with the changes in the Internal Revenue Code, the Employee
Retirement Income Security Act of 1974, as amended, and the rules or
regulations under such statutes.
4. Plan Participants. Except as hereinafter provided, the class of
individuals who are potential recipients of Options to be granted under this
Plan ("Eligible Executives") consists of those individuals who are executive
officers or directors of the Corporation or any of its Subsidiaries and are
subject to Section 16 of the Exchange Act. Directors who, at the time of
3
<PAGE>
such Option grants, are not also executive officers or employees of the
Corporation or its Subsidiaries shall be Eligible Executives; provided that only
Options which the Committee has designated as non-qualified stock options may be
granted to such directors.
5. Shares of Stock Subject to the Plan. The Committee may, but shall not
be required to, grant Options under the Plan to purchase an aggregate of up to
2,500,000 Shares, which may be either treasury Shares or authorized but unissued
Shares. The exercise of an Option in any manner shall result in a decrease in
the number of Shares which thereafter may be available under this Plan, and the
amount of such decrease shall be the number of Shares as to which the Option is
exercised. If any such Option expires or is terminated for any reason, without
being exercised in full, the Shares covered by the unexercised portion of such
Option may again be made subject to Options under the Plan.
6. Listing and Registration of Shares. Each Option shall be subject to
the requirement that, if at any time the Committee shall determine, in its sole
and exclusive discretion, (i) the listing, registration, or qualification of the
Shares covered thereby upon any securities exchange or over-the-counter market
or under any state, federal or foreign law, (ii) the consent or approval of any
government regulatory body or (iii) obtaining an investment intent
representation or other undertaking from the Option holder, is necessary or
desirable as a condition of, or in connection with, the granting of such Option
or the issue or purchase of Shares thereunder, such Option may not be exercised
in whole or in part unless and until such listing, registration, qualification,
consent, approval, representation, or undertaking shall have been effected or
obtained free of any conditions not acceptable to the Committee.
7. Requirements of Law.
(a) In the event the Shares issuable upon the exercise of an Option
are not registered under the Securities Act of 1933, the Corporation shall
imprint on the certificate representing such Shares the following legend or
any other legend which counsel for the Corporation considers necessary or
advisable to comply with the Securities Act of 1933:
The shares of stock represented by this certificate have not been
registered under the Securities Act of 1933 or under the securities
laws of any State and may not be sold or transferred except upon such
registration or upon receipt by the Corporation of an opinion of
counsel in form and substance satisfactory to the Corporation that
registration is not required for such sale or transfer.
(b) The Corporation may, but in no event shall be obligated to,
register any securities covered hereby pursuant to the Securities Act of
1933, as now in effect or as hereafter amended, and, in the event any
Shares are so registered, the Corporation may remove any legend on
certificates representing such Shares. The Corporation shall make
reasonable efforts to cause the exercise of an Option or the issuance of
Shares pursuant
4
<PAGE>
thereto to comply with any law or regulation of any governmental authority.
(c) Notwithstanding any other provision of this Plan, no Option may be
granted or exercised pursuant to the provisions of this Plan when such
Option, or the granting or exercise thereof, may result in the violation of
any federal or state law, order or regulation.
(d) Notwithstanding any other provision of this Plan, any provision
included herein which is inconsistent with Rule 16b-3 shall be inoperative
and shall not affect the validity of the Plan.
8. Grant of Options.
(a) Options granted under this Plan may be either non-qualified stock
options or incentive stock options within the meaning of Section 422 of the
Internal Revenue Code. Options which are not designated as incentive stock
options shall not be treated as incentive stock options for purposes of
this Plan or the Internal Revenue Code.
(b) Subject to the provisions of this Plan, the Committee may, from
time to time prior to the termination of the Plan, grant Options to
Eligible Executives to purchase the number of Shares authorized by the
Committee, subject to such terms and conditions as the Committee may
determine in accordance with the provisions herein; provided that, if such
Option is designated as an incentive stock option, then such terms and
conditions shall not be inconsistent with Section 422 of the Internal
Revenue Code. The day on which the Committee approves the granting of an
Option shall be considered the date on which such Option is granted unless
the Committee designates a subsequent date as the effective date of the
grant.
(c) The terms and conditions of the Option shall be set forth in
writing in a certificate or agreement (the "Option Agreement") signed by
the Option holder and on behalf of the Corporation by the President, any
Vice President or the Treasurer of the Corporation. The Option Agreement
shall designate the Option as either an incentive stock option or a non-
qualified stock option.
(d) In no event may an Eligible Executive be granted an Option under
the Plan in any year in excess of that person's Individual Limit. For
purposes hereof, the "Individual Limit" is 250,000 shares.
9. Price. Except with respect to an Option described in Section 3(c)
herein, the exercise price per Share to be purchased pursuant to any Option
shall be fixed by the Committee at the time an Option is granted and may be less
than, equal to, or greater than the Fair Market Value of one Share on the date
such Option is granted; and provided that, if the Option is designated as an
incentive stock option, in no event shall the price be less than the greater of
(i) the Fair Market Value of a Share on the day on which the Option is granted
or (in) if the Option
5
<PAGE>
holder owns stock possessing more than 10% of the Voting Power, the price
specified in Section 14 herein.
10. Duration of Options. The duration of any Option granted under this
Plan shall be for a period fixed by the Committee, in its sole and exclusive
discretion, but not longer than (i) 10 years from the date upon which the Option
is granted or (ii) in the case of an Option designated as an incentive stock
option where the Option holder owns stock possessing more than 10% of the Voting
Power, the duration specified in Section 14 herein. The period of the Option,
once it is granted, may be reduced only as provided for in Section 17 herein, in
connection with the termination of employment or death of the Option holder, or
in Section 13(a) herein, in the case of less than satisfactory performance.
11. Amount Exercisable. Except as otherwise provided in this Plan, an
Option granted in accordance with Section 8 herein shall be exercisable by the
Option holder at such rate and times as may be fixed by the Committee at the
time the Option is granted. The partial exercise of an Option or a combination
of such Options shall in no event be for less than 100 Shares, unless a purchase
of fewer Shares would entirely exhaust the Options held by the Option holder;
provided however, that no Option may be exercised in part or in full prior to
the approval of the Plan by a majority vote of the stockholders of the
Corporation, as provided in Section 23 herein.
12. Method of Exercising Options.
(a) An Option shall be exercised by the delivery of a written notice
duly signed by the Option holder (or the transferee of the Option, as
permitted herein), together with the Option Agreement and either (i) cash,
(ii) a certified check payable to the order of the Corporation, (iii)
outstanding Shares duly endorsed over to the Corporation (which Shares
shall be valued at their Fair Market Value as of the date preceding the day
of such exercise) or (iv) any combination of such methods of payment which
together amount to the full exercise price of the Shares purchased pursuant
to the exercise of the Option. Such payment shall be delivered to the
Treasurer, Secretary or Assistant Secretary of the Corporation who has been
designated for the purpose of receiving the same.
(b) Within a reasonable time after the exercise of an Option, the
Corporation shall cause to be delivered to the person entitled thereto a
certificate for the Shares purchased pursuant to the exercise of the
Option. If the Option shall have been exercised with respect to less than
all of the Shares subject to the Option, the Corporation shall (i) cause to
be delivered to the person entitled thereto a new Option Agreement in
replacement of the Option Agreement surrendered at the time of the exercise
of the Option, indicating the number of Shares with respect to which the
Option remains available for exercise or (ii) endorse the original Option
Agreement to give effect to the partial exercise thereof.
6
<PAGE>
13. Limitations on Exercise of Options.
(a) Following the grant of an Option, the Committee may, in its sole
and exclusive discretion, if it determines that the Option holder is not
satisfactorily performing the duties to which he or she was assigned on the
date the Option was granted or duties of at least equal responsibility, (i)
prescribe longer time periods and additional requirements with respect to
the exercise of an Option which has not yet become exercisable and (ii)
terminate in whole or in part any portion of an Option which has not yet
become exercisable. With the exception of those Eligible Executives
described in Section 4 herein who are directors of the Corporation but who
are not also executive officers of the Corporation or a Subsidiary and,
subject to the provisions of this Section 13 and Section 17 herein, no
Option may be exercised unless the Option holder is at the time of such
exercise in the employ of the Corporation or of a Subsidiary and shall have
been continuously so employed since the grant of the Option.
(b) In no event may an Option be exercised after the expiration of its
term or after its termination.
(c) Notwithstanding any other provision of this Plan, any Option
granted under this Plan which is designated as an incentive stock option
shall not be exercisable to the extent that (i) the Fair Market Value of
the Shares (determined as of the date of Option grant), with respect to
which such Option (and any other incentive stock option granted to the
Option holder under this Plan or any other stock option plan maintained by
the Corporation or any Subsidiary or parent corporation) first becomes
exercisable in any calendar year, exceeds $100,000; and (ii) Section 422(d)
of the Internal Revenue Code would otherwise preclude such Option from
being treated as an incentive stock option.
(d) No Option designated as an incentive stock option shall be
exercised by an Eligible Executive until such individual has been in the
employ of the Corporation for a period of at least three months following
the date such Option is granted.
14. Limitations Regarding Ten Percent Stockholders. No Option which is
designated as an incentive stock option may be granted under this Plan to any
Eligible Executive who, at the time the Option is granted, owns, or is
considered to own, within the meaning of Section 422 of the Internal Revenue
Code, Shares possessing more than 10% of the Voting Power, unless (i) the
exercise price under such Option is at least 110% of the Fair Market Value of a
Share on the date such Option is granted and (ii) the duration of such Option is
no more than five years.
15. Option Holder Not a Stockholder. An Option holder, or his or her
legal representative, legatees or distributees, as the case may be
("Successor"), shall not be deemed to be the holder of Common Stock or to have
any of the rights of a stockholder with respect to any Shares subject to such
Option, unless and until (i) the Option shall have been exercised pursuant to
the terms thereof, (ii) the Corporation shall have issued and delivered stock
certificates for such Shares to the Option holder or his or her Successor, and
(iii) the Option holder's or his or
7
<PAGE>
her Successor's name shall have been entered as a stockholder of record on the
books of the Corporation. Thereupon, the Option holder or his or her Successor
shall have full voting, dividend and other ownership rights with respect to such
Shares; provided, however, that, except as otherwise provided in Section 19
herein, no adjustment for dividends or otherwise shall be made if the
Corporation's record date is prior to the issuance of such stock certificate.
16. Non-Transferability of Options. Options and all rights thereunder
shall be non-transferable and non-assignable by the Option holder thereof
otherwise than by will or the laws of descent and distribution and, during the
Option holder's lifetime, shall be exercisable only by the Option holder or,
except as prohibited under Internal Revenue Code Section 422 with respect to an
Option designated as an incentive stock option, by his or her legal
representative. Except as permitted by the preceding sentence, no Option granted
under the Plan or any of the rights and privileges thereby conferred shall be
transferred, assigned, pledged, or hypothecated in any way, whether by operation
of law or otherwise, and no such Option, right, or privilege shall be subject to
execution, attachment or similar process. Upon any attempt so to transfer,
assign, pledge, hypothecate, or otherwise dispose of the Option, or of any right
or privilege conferred thereby, contrary to the provisions hereof, or upon the
levy of any attachment or similar process upon such Option, right or privilege,
the Option and such rights and privileges shall immediately become null and
void.
17. Effect of Termination of Employment, Death, Disability or Retirement
of Option Holder.
(a) Except as otherwise provided herein or except as otherwise set
forth in an agreement authorized by the Committee or the Board of
Directors, all Options granted hereunder shall terminate upon the earlier
of the date of the expiration of such Options or the date one year after
termination of the employment or directorship relationship between the
Corporation or a Subsidiary and the Option holder, provided that the stock
Option Agreement may provide for a shorter time period in cases other than
termination of employment or directorship due to death or disability, and,
to the extent such Options are otherwise exercisable within the provisions
of this Plan or of the Option Agreement, may be exercised in whole or in
part during such one year period, subject to the terms and conditions of
the Plan and of the Option Agreement; provided, however, that in the event
of the termination of employment of an Option holder by reason of the
Option holder's retirement at his or her Retirement Date, all Options
granted hereunder to the Option holder which are designated as incentive
stock options shall terminate upon the earlier of the date of expiration of
such Options or the date three months after such termination of employment
and those Options which have vested at his or her Retirement Date may be
exercised in whole or in part during such three month period, subject to
the terms and conditions of the Plan and of the Option Agreement. In the
event of the termination of employment or directorship of an Option holder
by reason of the Option holder's death or disability, but not in the event
of other termination of employment or directorship, all Options held by the
Option holder shall become immediately exercisable in full. For purposes of
this Plan, "disability" shall be defined in the same manner as such
8
<PAGE>
term is defined in Section 22(e)(3) of the Internal Revenue Code.
(b) The Committee, in its sole discretion, shall determine whether the
Option holder's authorized leave of absence from his or her employment from
the Corporation or a Subsidiary or absence on military or government
service shall constitute termination, severance or interruption of
employment by the Option holder, for purpose of this Section 17, except
that, in the case of an Option designated as an incentive stock option, the
determination by the Committee shall not be inconsistent with the
characterization of such leave of absence as being (or not being) an
interruption of employment for purposes of Internal Revenue Code Section
422. The transfer of an Option holder from the employment of the
Corporation to a Subsidiary, or vice versa, or from one Subsidiary to
another, shall not be deemed to constitute a termination of employment for
purposes of this Plan.
18. Disposition of Shares. No Option or the Shares issued pursuant to the
exercise of an Option shall be disposed of, within the meaning of Rule 16b-3,
until six months after the date such Option was granted.
19. Adjustment of Shares. In the event of a capital adjustment resulting
from a stock dividend, stock split, reorganization, merger, consolidation, or a
combination or exchange of Shares, the number of Shares subject to issuance
under the Plan and subject to issuance upon the exercise of Options granted or
to be granted under the Plan shall be adjusted in a manner consistent with such
capital adjustment. In addition, the price of any Shares under the Options shall
be adjusted so that there will be no change in the aggregate purchase price
payable upon the exercise of any such Option. The Corporation shall not be
required to issue fractional Shares pursuant to this Plan. Any fractional Shares
resulting from appropriate adjustments made by the Committee in accordance with
this Section 19 shall be eliminated from the respective Options, and no
adjustments shall be made for cash, dividends or the issuance to the stockholder
of rights to subscribe for additional Common Stock or other equity securities of
the Corporation.
20. Amendment of the Plan. Except as hereinafter provided, the Board of
Directors may, at any time and from time to time, modify or amend the Plan;
provided, however, that no such modification or amendment shall (i) increase or
decrease the number of Shares issuable under the Plan or under any Option or the
exercise price associated with such Option, with the exception of an increase or
decrease resulting from a stock split, stock dividend or any other increase or
decrease as provided in Section 19 herein, (ii) change the class of individuals
to whom Options may be granted, or (iii) extend the period or periods during
which Options may be granted or exercised, without the approval of the
stockholders of the Corporation within 12 months of such modification or
amendment. In no event shall such modification or amendment of the Plan affect
an Option holder's rights with respect to an Option granted to the Option holder
without his or her consent.
9
<PAGE>
21. Employment Obligation. Nothing contained herein or in the Option
Agreement shall be construed to confer on any Eligible Executive any right to
continue in the employ of the Corporation or its Subsidiaries or derogate from
any right of the Corporation or its Subsidiaries to request, in its sole and
exclusive discretion, the retirement, resignation or discharge of such Eligible
Executive, at any time, with or without cause.
22. Applicability of Plan to Outstanding Stock Options. This Plan shall
not affect the terms and conditions of any stock options heretofore granted to
any employee of the Corporation or its Subsidiaries pursuant to any other plan
of the Corporation or its Subsidiary, including, without limitation, the
Corporation's 1982 or 1992 Incentive Stock Option Plan and Non-qualified Stock
Option Plan, nor shall it affect any of the rights of any employee of the
Corporation or its Subsidiaries to whom such stock options were granted.
23. Effective Date of the Plan. This Plan is conditioned upon its
approval by the stockholders of the Corporation on or before June 30, 1992,
pursuant to the affirmative vote of the holders of a majority of the outstanding
Shares of the Corporation's voting stock, either in person, by proxy or by
consent; except that, prior to or following such approval of the Plan by the
stockholders of the Corporation, this Plan shall be adopted and approved by the
Board of Directors or the Executive Committee of the Board of Directors to
permit the grant of Options. Notwithstanding any other provision of this Plan,
in the event that this Plan is not approved by the stockholders of the
Corporation as aforesaid, this Plan and any Options granted hereunder shall be
void and of no force or effect.
24. Expiration and Termination of the Plan. The Plan shall remain in full
force and effect until the close of business on May 27, 2002, at which time the
right to grant Options under the Plan shall automatically terminate. Any Options
granted before the termination of the right to grant Options under the Plan
shall continue to be governed thereafter by the terms of the Plan. No Option
shall be granted pursuant to the Plan after 10 years from the effective date of
the Plan.
25. Severability. If any provision herein shall be held unlawful or
otherwise invalid or unenforceable in whole or in part, such unlawfulness,
invalidity or unenforceability shall not affect any other provision of the Plan
or part thereof, each of which shall remain in full force and effect. If the
making of any payment or issuance required under the Plan shall be held unlawful
or otherwise invalid or unenforceable, such unlawfulness, invalidity or
unenforceability shall not prevent any other payment or issuance from being made
under the Plan, and if the making of any such payment or issuance in full, as
required under the Plan, would be unlawful or otherwise invalid or
unenforceable, then such unlawfulness, invalidity or unenforceability shall not
prevent such payment or issuance from being made in part, to the extent that it
would not be unlawful, invalid, or unenforceable, and the maximum payment or
issuance that would not be unlawful, invalid or unenforceable shall be made
under the Plan.
10
<PAGE>
26. Governing Law. The Plan and all determinations made and actions taken
hereunder, to the extent not otherwise governed by the Code or the laws of the
United States of America, shall be governed by the laws of the State of Illinois
and construed accordingly.
Information Resources, Inc.
By: /s/ Gian M. Fulgoni
----------------------------
Gian M. Fulgoni, Chairman
11
<PAGE>
EXHIBIT 10.2
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
AMENDMENT TO CREDIT AGREEMENT
Information Resources, Inc.
150 North Clinton Street
Chicago, IL 60606
Gentlemen:
We refer to the Credit Agreement dated as of November 3, 1994, as amended,
between you (the "Borrower") and us (the "Banks") (the "Credit Agreement"). All
capitalized terms used herein without definition shall have the same meanings
herein as such terms are defined in the Credit Agreement.
The Borrower has notified the Banks that the Borrower intends to sell its
EXPRESS technology and certain related assets of the Borrower to Oracle
Corporation for a purchase price of approximately $100,000,000, all as more
fully set forth in the Borrower's June 12, 1995 press release regarding the sale
heretofore furnished to the Banks (the "Oracle Sale"). Pursuant to Section
11.13 of the Credit Agreement, the Borrower has requested that the Required
Banks waive Section 7.15 of the Credit Agreement to permit the Oracle Sale. To
induce the Required Banks to waive Section 7.15 of the Credit Agreement to
permit the Oracle Sale, the Borrower hereby agrees that (i) upon the occurrence
of the Oracle Sale, all Loans outstanding under the Credit Agreement shall be
repaid within two Business Days of the Oracle Sale together with any amounts due
the Banks under Section 1.11 of the Credit Agreement, (ii) following the Oracle
Sale, the Borrower and the Banks agree to negotiate in good faith to reestablish
financial covenants applicable to the Borrower and its Subsidiaries pursuant to
such financial covenants and established at such amounts and ratios are
acceptable to the Borrower and all of the Banks, (iii) upon the occurrence of
the Oracle Sale and thereafter prior to the establishment of amended financial
covenants pursuant to clause (ii) above, the Borrower agrees that it will not
request any new Loans or request any new Letters of Credit under the Credit
Agreement and (iv) if the Borrower and all of the Banks fail to establish
mutually agreeable financial covenants pursuant to clause (ii) above on or
before 60 days after the occurrence of the Oracle Sale, the Borrower hereby
agrees that the Commitments shall terminate on the date occurring 60 days after
the occurrence of the Oracle Sale, and all Obligations owing under the Credit
Agreement and the other Loan Documents shall then be paid and satisfied in full.
Nothing herein contained shall prohibit the Borrower from terminating the
Commitments pursuant to Section 1.12 of the Credit Agreement.
By signing in the space provided for that purpose below, the Required Banks
hereby agree to waive Section 7.15 to permit the Oracle Sale, provided that (a)
the Oracle Sale occur on or before December 31, 1995, and (b) this waiver shall
be subject to each of the conditions set forth in clauses (i) through (iv)
above, it being understood and agreed by the Borrower that its promises set
forth in clauses (i) through (iv) above have been relied on by the Banks in
agreeing to the waiver set forth herein.
<PAGE>
Except as specifically waived hereby, all of the terms and conditions of
the Credit Agreement shall stand and remain unchanged and in full force and
effect. This waiver letter may be executed in any number of counterparts, all
of which taken together shall constitute one instrument.
Dated this 14th day of July 1995.
HARRIS TRUST AND SAVINGS BANK, COMERICA BANK - ILLINOIS
individually and as Agent
By: /s/ Richard H. Robb By: /s/ Harve C. Light
-------------------- -------------------------
Name: Richard H. Robb Name: Harve C. Light
Title: Vice President Title: Corporate Banking Officer
NBD BANK, NATIONAL ASSOCIATION THE SAKURA BANK, LIMITED
By: /s/ Art Littlefield By: /s/ Hajima Miyagi
-------------------- ----------------------
Name: Art Littlefield Name: Hajima Miyagi
Title: -------------------- Title: Deputy General Manager
MERCANTILE BANK OF ST. LOUIS
NATIONAL ASSOCIATION
By: /s/ David Bensinger
---------------------------
Name: David Bensinger
Title: Vice President
Accepted and agreed to as of the date last above written.
INFORMATION RESOURCES, INC.
By: /s/ Edward S. Berger
---------------------------
Name: Edward S. Berger
Title: Vice President
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<FISCAL-YEAR-END> DEC-31-1995
<PERIOD-END> JUN-30-1995
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