<PAGE>
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934
Filed by the registrant [X]
Filed by a party other than the registrant [_]
Check the appropriate box:
[_] Preliminary proxy statement
[X] Definitive proxy statement
[_] Definitive additional materials
[_] Solicitation material pursuant to Rule 14a-11(c) or Rule 14a-12
Information Resources, Inc.
- -------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- -------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement)
Payment of filing fee (Check the appropriate box):
[X] $125 per Exchange Act Rule 0-11(c)(1)(ii), 14a-6(i)(1), or
14a-6(j)(2).
[_] $500 per each party to the controversy pursuant to Exchange Act Rule
14a-6(i)(3).
[_] Fee computed on table below per Exchange Act Rules 14a-6(i)(4)
and 0-11.
(1) Title of each class of securities to which transaction applies:
- -------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- -------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11:/1/
- -------------------------------------------------------------------------------
- ----------------
/1/Set forth the amount on which the filing fee is calculated and state how it
was determined.
<PAGE>
(4) Proposed maximum aggregate value of transaction:
- -------------------------------------------------------------------------------
(5) Total fee paid:
- -------------------------------------------------------------------------------
[_] Fee paid previously with preliminary materials
[_] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- -------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- -------------------------------------------------------------------------------
(3) Filing party:
- -------------------------------------------------------------------------------
(4) Date filed:
- -------------------------------------------------------------------------------
<PAGE>
INFORMATION RESOURCES, INC.
150 NORTH CLINTON STREET
CHICAGO, ILLINOIS 60661
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 24, 1995
To the Stockholders of
Information Resources, Inc.
Notice Is Hereby Given that the Annual Meeting of the stockholders of
INFORMATION RESOURCES, INC. (the "Company"), will be held at the offices of the
Company, 150 North Clinton Street, Chicago, Illinois 60661, on Wednesday, May
24, 1995, at 10:00 am Central Daylight Time, for the purpose of considering and
acting upon the following matters:
1. To elect five directors to the Board of Directors of the Company, each
to serve for a term of three years;
2. To ratify the appointment of Grant Thornton LLP, independent certified
public accountants for the Company, for the year ended December 31, 1995;
3. To consider and act upon a proposal to approve an amendment to the
Company's Executive Stock Option Plan (the "Executive Option Plan")
increasing the number of shares authorized for issuance thereunder;
4. To consider and act upon a proposal to approve an amendment to the
Executive Option Plan designed to preserve the tax deductibility of certain
compensation paid thereunder to be effected only if Proposal Number 3
described above is approved;
5. To consider and act upon such other business as may properly come
before the Meeting.
Stockholders of record as of the close of business on April 14, 1995, will be
entitled to notice of and to vote at the Meeting. The transfer books will not
be closed. For ten days prior to the Meeting, a list of stockholders entitled
to vote at the Meeting with the address of and number of shares held by each
will be kept on file at the offices of the Company at 150 North Clinton Street,
Chicago, Illinois 60661 and will be subject to inspection by any stockholder at
any time during the Company's usual business hours. The list will also be
available for inspection by any stockholder during the Meeting. Stockholders
who do not expect to attend in person are urged to execute and return the
accompanying proxy in the envelope enclosed.
The annual report of the Company for the year 1994 is being mailed to all
stockholders of record and accompanies this Proxy Statement.
By order of the Board of Directors,
Information Resources, Inc.
Edward S. Berger
Secretary
Chicago, Illinois
April 28, 1995
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING
----------------
<PAGE>
PROXY STATEMENT
INFORMATION RESOURCES, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 24, 1995
GENERAL INFORMATION
This Proxy Statement is being furnished to the stockholders of Information
Resources, Inc., a Delaware corporation (the "Company"), 150 North Clinton
Street, Chicago, Illinois 60661, in connection with the solicitation of proxies
by its Board of Directors for use at the Annual Meeting of stockholders to be
held on May 24, 1995, and any adjournments thereof. Stockholders of record as
of the close of business on April 14, 1995 are entitled to notice of and to
vote at the Meeting. The approximate date on which this Proxy Statement and the
accompanying proxy are first being sent to stockholders is April 28, 1995.
Stockholders are urged to sign the accompanying form of proxy and return it
as soon as possible in the envelope provided for that purpose. Returning a
proxy card will not prevent a stockholder from attending the Meeting. If the
enclosed proxy is properly executed and returned in time for voting with a
choice specified thereon, the shares represented thereby will be voted as
indicated on such proxy. If no specification is made, the proxy will be voted
by the proxies (i) for the election as directors of the nominees named below
(or substitutes therefor if any nominees are unable or unwilling to serve),
(ii) for the ratification of the selection of Grant Thornton LLP as independent
certified public accountants for the Company for the year ended December 31,
1995, (iii) for the adoption of the amendment to the Executive Option Plan
increasing the number of shares authorized for issuance thereunder, (iv) for
the adoption of the specified amendment to the Executive Option Plan proposed
in connection with Section 162 of the Internal Revenue Code and (v) in the
discretion of such proxies, upon such matters not presently known or determined
which may properly come before the Meeting. A stockholder who wishes to
designate a person or persons to act as his or her proxy at the Meeting, other
than the proxies designated by the Board of Directors, may strike out the names
appearing on the enclosed form of proxy, insert the name of any other such
person or persons, sign the form, and transmit it directly to such other
designated person or persons for use at the Meeting.
A stockholder who has given a proxy may revoke it at any time before it is
voted by (i) a subsequently dated proxy, (ii) written notification to the
persons named therein as proxies, which may be mailed or delivered to the
Company at the above address, or (iii) attendance at the Meeting and voting in
person. Attendance at the Meeting will not, in and of itself, constitute a
revocation of a proxy. All shares represented by effective proxies will be
voted at the Meeting and at any adjournments thereof.
The Company has one class of stock outstanding, common stock, $.01 par value
per share ("Common Stock"). On March 15, 1995, 26,798,926 shares of Common
Stock were outstanding and entitled to one vote each on all matters considered
at the Meeting. There are no cumulative voting rights with respect to the
election of directors.
OWNERSHIP OF SECURITIES
The following table shows the total number of shares of Company Common Stock
beneficially owned as of March 15, 1995, and the percentage of Company Common
Stock so owned as of that
<PAGE>
date, with respect to each person who is known to be the beneficial owner of
more than 5% of the Company's Common Stock:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------------ ------------ --------
<S> <C> <C>
Tiger Management Corporation......................... 2,642,900(2) 9.86
101 Park Avenue
New York, New York 10021
Wisconsin (State of) Investment Board................ 2,478,000(3) 9.25
P.O. Box 7842
Madison, Wisconsin 53707
Essex Investment Management Company.................. 1,461,715(4) 5.45
125 High Street, 29th Floor
Boston, Massachusetts 02110
GeoCapital Corporation............................... 1,453,700(5) 5.42
767 Fifth Avenue
New York, New York 10153
</TABLE>
The following table shows the total number of shares of Company Common Stock
beneficially owned as of March 15, 1995, and the percentage of Company Common
Stock so owned as of that date with respect to (i) each director of the
Company, (ii) each executive officer named in the Summary Compensation Table
below (the "Named Executive Officers"), and (iii) all directors and executive
officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
BENEFICIAL PERCENT
NAME OF BENEFICIAL OWNER OWNERSHIP(1) OF CLASS
------------------------ ------------ --------
<S> <C> <C>
James G. Andress...................................... 354,779 1.31
Gerald J. Eskin....................................... 404,416 1.51
Edwin E. Epstein...................................... 25,105 *
Gian M. Fulgoni....................................... 564,856 2.09
John D.C. Little...................................... 202,134 *
Leonard M. Lodish..................................... 41,047 *
Edward E. Lucente..................................... 5,625 *
Edith W. Martin....................................... 5,625 *
George G. Montgomery, Jr. ............................ 18,775 *
Randall S. Smith...................................... 217,624 *
Jeffrey P. Stamen..................................... 265,603 *
Glen L. Urban......................................... 51,515 *
Thomas M. Walker...................................... 264,395 *
Thomas W. Wilson, Jr. ................................ 5,625 *
All directors and executive officers as a group (16
persons)............................................. 2,454,294 8.68
</TABLE>
- --------
*Less than 1%.
(1) Unless otherwise indicated, each person has sole voting and investment
power with respect to all such shares. The number of shares disclosed for
the following individuals includes stock options which are exercisable
within 60 days in the following amounts: (i) James G. Andress--354,779
options; (ii) Gerald J. Eskin--57,649 options; (iii) Edwin E. Epstein--
9,375 options; (iv) Gian M. Fulgoni--260,496 options; (v) John D.C.
Little--24,000 options; (vi) Leonard M. Lodish--39,513 options; (vii)
Edward E. Lucente--5,625 options; (viii) Edith W. Martin--5,625 options;
(ix) George G. Montgomery, Jr.--9,375 options; (x) Randall S. Smith--
154,724 options; (xi) Jeffrey P. Stamen--265,603 options; (xii) Glen L.
Urban--13,447 options; (xiii) Thomas M. Walker--264,395 options; and (xiv)
Thomas W. Wilson, Jr.--5,625 options.
2
<PAGE>
(2) Number of shares is based upon information set forth in Schedule 13G filed
with the Securities and Exchange Commission ("SEC") as of February 7, 1995,
which indicates that such shares are held on behalf of numerous clients of
this stockholder, a registered investment adviser.
(3) Number of shares is based upon information set forth in Schedule 13G filed
with the SEC as of February 13, 1995, which indicates that this stockholder
is a government agency which manages public pension funds.
(4) Number of shares is based upon information set forth in Schedule 13G filed
with the SEC as of January 9, 1995, which indicates that such shares are
held on behalf of numerous clients of this stockholder, a registered
investment adviser.
(5) Number of shares is based upon information set forth in Schedule 13G filed
with the SEC as of February 9, 1995, which indicates that such shares are
held on behalf of numerous clients of this stockholder, a registered
investment adviser.
COMPLIANCE WITH SECTION 16(A) OF EXCHANGE ACT
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16") sets
forth certain filing requirements relating to securities ownership by
directors, executive officers and ten percent stockholders of a publicly-held
company. To the Company's knowledge, all filing requirements were satisfied by
the Company's directors and executive officers during 1994. In making the
foregoing disclosure, the Company has relied solely on written representations
of its directors and executive officers and copies of the Section 16 reports
that they have filed with the SEC.
ELECTION OF DIRECTORS
(PROPOSAL NUMBER 1 ON THE ENCLOSED PROXY CARD)
The By-Laws of the Company provide that the number of directors of the
Company shall not be less than five nor more than 15 and will be determined
from time to time by resolution of the Board of Directors. The number of
directors is currently set at 12. The Certificate of Incorporation of the
Company provides for a classified Board of Directors consisting of three
classes (as nearly equal in number as possible) and that the directors will be
elected to hold office for terms of three years or until their successors are
elected and qualified. Those directors identified below as nominees for
election have been nominated for election to full three-year terms ending in
1998. Also listed below are the remaining directors of the Company whose terms
expire as indicated below. If the listed nominees are elected at the Meeting,
the Board of Directors will reallocate the directors into three classes as
nearly equal in number as possible by moving one of the directors elected at
the Meeting to the class in which the term expires in 1996.
It is intended that, in the absence of contrary specifications, votes will be
cast pursuant to the enclosed proxies for the election of the listed nominees.
Proxies will not be voted for a greater number of nominees. Should any of the
nominees become unable or unwilling to accept nomination or election, it is
intended, in the absence of contrary specification, that the proxies will be
voted for the balance of those named and for a substitute nominee or nominees.
However, as of the date of this proxy statement, officials of the Company know
of no reason to anticipate such an occurrence. All of the nominees have
consented to be named as nominees and to serve as directors if elected.
A. NOMINEES FOR ELECTION:
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY, BUSINESS
NAME AGE EXPERIENCE AND OTHER POSITIONS
- ---- --- --------------------------------
<S> <C> <C>
Gian M. Fulgoni............ 47 Chief Executive Officer since January 1986;
Chairman of the Board of Directors from February
1991 until April 1995; Vice Chairman from Novem-
ber 1988 until February 1991; Director since
1981; Current member of the Executive Committee;
Director of PLATINUM technology, inc., U.S. Ro-
botics Corporation and Intouch, Inc.
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY, BUSINESS
NAME AGE EXPERIENCE AND OTHER POSITIONS
- ---- --- --------------------------------
<S> <C> <C>
James G. Andress........... 56 President and Chief Operating Officer of the
Company since March 1994; Chief Executive Offi-
cer since May 1990; Acting Chief Financial Offi-
cer since January 1995; Vice Chairman from July
1993 until March 1994; President from November
1989 until July 1993; Chief Operating Officer
from November 1989 until May 1990; Director
since November 1989; Current member of the Exec-
utive Committee; Director of the Liposome Co.,
Inc., NeoRx Corp., Sepracor, Inc., Genelabs
Technologies, Inc., Genetics Institute, Inc.,
Option Care, Inc., America Online, Inc., Walsh
International, Inc. and Allstate Insurance Co.,
Inc.
Leonard M. Lodish, Ph.D.... 51 Director of the Company since January 1986; Cur-
rent member of the Compensation Committee;
Samuel R. Harrell Professor of the Marketing De-
partment at The Wharton School of Business, Uni-
versity of Pennsylvania; Director of Franklin
Electronic Publishing and J&J Snack Foods, Inc.
Edith W. Martin, Ph.D...... 49 Director of the Company since 1991; Current mem-
ber of the Compensation Committee and Executive
Stock Option Committee; Vice President and Chief
Technology Officer for the Student Loan Market-
ing Association (SallieMae) since August 1994;
Vice President and Chief Information Officer for
INTELSAT from July 1992 until August 1994; Vice
President of High Technology Center for The
Boeing Company from 1984 to 1992; Director of
Medtronic, Inc. and Immunex, Inc.
Thomas W. Wilson, Jr....... 63 Director of the Company since 1991; Chairman of
the Board of Directors since April 1995; Current
member of the Audit Committee and Chairman of
the Executive Committee; Senior Partner of
McKinsey & Company, management consultants, from
1973 until 1990 (retired); Director of UNIQUEST,
Inc.
B. TERMS EXPIRING IN 1996:
Edwin E. Epstein........... 71 Director of the Company since 1987; Current mem-
ber of the Executive Committee and Audit Commit-
tee; President of Retailing Insights, Inc., food
industry consultants, since 1971.
Edward E. Lucente.......... 54 Director of the Company since 1991; Head of
world-wide sales and marketing of Digital Equip-
ment Corp. from March 1993 until April 1994; Ex-
ecutive Vice President of Northern Telecom Lim-
ited from January 1992 until March 1993; Member
of the Executive Office of Northern Telecom Lim-
ited from February 1991 until March 1993; Senior
Vice President of Marketing for Northern Telecom
Limited from February 1991 until January 1992;
President and Representative Director of IBM
World Trade Asia Corporation from 1988 until
February 1991; Corporate Vice President of In-
ternational Business Machines Corporation
("IBM") from 1981 until February 1991; Member of
IBM's Corporate Management Board from February
1986 until February 1991; Director of Genicom
Corporation.
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY, BUSINESS
NAME AGE EXPERIENCE AND OTHER POSITIONS
- ---- --- --------------------------------
<S> <C> <C>
Jeffrey P. Stamen....... 49 President--IRI Software since February 1991;
Vice President of the Company since January
1986; President of the DSS Division from Febru-
ary 1988 until February 1991; Director since
March 1994.
C. TERMS EXPIRING IN 1997:
Gerald J. Eskin, Ph.D... 60 Co-founder of the Company; Director since 1977;
Vice Chairman since December 1981; Professor of
Marketing at the University of Iowa since 1974
(currently adjunct status).
John D.C. Little, Ph.D.. 67 Director of the Company since 1985; Current mem-
ber of the Executive Committee; Professor of
Management Science at The Sloan School of Man-
agement, Massachusetts Institute of Technology.
George G. Montgomery, 61 Director of the Company since 1982; Current
Jr..................... Chairman of the Compensation Committee and Exec-
utive Stock Option Committee; Managing Director
of Hambrecht & Quist Incorporated, investment
bankers.
Glen L. Urban, Ph.D..... 55 Director of the Company since January 1986; Cur-
rent member of the Audit Committee; Professor of
Management Science at, and Dean of, The Sloan
School of Management, Massachusetts Institute of
Technology; Director of The Dexter Corporation.
</TABLE>
MEETINGS OF THE BOARD OF DIRECTORS
During 1994, the Board of Directors met eight times, and all members attended
at least 75% of the Board meetings and their respective Committee meetings.
The Board of Directors maintains an Executive Committee, Audit Committee,
Compensation Committee and Executive Stock Option Committee. The Company has no
nominating committee. The nominating function is performed by the Executive
Committee, which has not established any policy or procedure for considering
nominees recommended by stockholders.
The Executive Committee is empowered to exercise the authority of the Board
of Directors in the management of the business and affairs of the Company
between the meetings of the Board, except as provided by the By-Laws or limited
by the provisions of the Delaware General Corporation Law. During 1994, the
Executive Committee met or took formal action by unanimous written consent on
eleven occasions.
The Audit Committee recommends to the Board of Directors the appointment of
the independent certified public accountants for the following year and reviews
the scope of the audit, the independent certified public accountants report and
the auditors' comments relative to the adequacy of the Company's system of
internal controls and accounting policies. The Audit Committee met during 1994
on four occasions.
5
<PAGE>
The Compensation Committee is responsible for making determinations regarding
salaries and other compensation for the Company's executive officers. The
Committee also makes recommendations to the Executive Stock Option Committee
with respect to stock option grants to the Company's directors and executive
officers pursuant to the Executive Option Plan. The Compensation Committee met
on three occasions during 1994.
The Executive Stock Option Committee is responsible for making determinations
regarding the grant of stock options from time to time to the Company's
directors and executive officers pursuant to the Executive Option Plan. During
1994, the Executive Stock Option Committee met on four occasions and approved
all director and executive stock option grants throughout the course of the
year.
EXECUTIVE COMPENSATION
The following information regarding compensation is given with respect to the
Chief Executive Officers and the three other highest paid executive officers of
the Company (the "Named Executive Officers").
REPORT ON EXECUTIVE COMPENSATION
The Company's Compensation Committee of the Board of Directors (the
"Committee"), is responsible for determining the annual salary, bonus, stock
option awards and other compensation of the Company's executive officers. A
majority of the members of the Committee are outside, non-management directors.
The goals of the Company's compensation programs are to align executive
compensation with the Company's performance, and to attract, retain and reward
executive officers who contribute to the Company's success within a highly
competitive industry. The programs are intended to support the goal of
increasing stockholder value by achieving specific financial and strategic
objectives.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code on executive compensation in future years. Section 162(m)
disallows a tax deduction by any publicly-held corporation for individual
compensation exceeding $1 million in any taxable year for certain executive
officers, unless compensation is performance based. The Committee has
determined that, while Section 162(m) should be given consideration in
compensating executive officers, the Committee's compensation philosophy should
not be arbitrarily altered in order to limit or maintain executive compensation
within the Section 162(m) deduction limit. The Committee has, however,
determined that it will make every reasonable effort, consistent with sound
executive compensation principles and the needs of the Company, to permit all
amounts paid to the applicable executive officers to be deductible by the
Company. To preserve tax deductibility of compensation for executive officers
in future years, the Committee has recommended an amendment to the Company's
Executive Option Plan. See "Proposal to Approve An Amendment to the Executive
Option Plan".
Compensation of Executive Officers Generally
The Company's fundamental compensation philosophy is to relate the total
compensation package for an executive officer directly to his or her
contribution to the Company's performance objectives. Each executive's
incentive, or "at risk," compensation is directly tied to the achievement of
both Company and individual objectives, including both quantitative and
qualitative objectives (though quantitative, strategic and tactical objectives
are emphasized). Although the performance objectives of each executive officer
may differ depending upon the role and responsibilities within
6
<PAGE>
the management team, the performance objectives for the executive officers as a
group generally include the following: (i) Company revenues and earnings per
share; (ii) business unit revenues and profitability and (iii) qualitative
objectives toward tactical and strategic goals. During 1994, these qualitative
objectives included successful new product or service introductions (such as
ECR, "Pay for Performance" and logistics products/services), the further
development and implementation of systems and procedures to provide cost
controls (i.e., Project Omega), the completion of certain strategic
acquisitions, the furtherance of international expansion consistent with
guidelines established by the Board, among other objectives. Depending upon the
individual executive officer, a differing set of performance objectives are
ascribed to that officer. These performance objectives are applied when making
annual determinations of cash bonus payments and stock option grants.
Individual and Company performance also affects the annual determination of
salary levels, though individual and Company performance is generally
considered over a longer term when establishing or adjusting salary levels.
Historically, the Committee has not assigned specific weighting to the
performance objectives and the performance of a particular executive officer is
judged based upon overall performance relative to the relevant performance
objectives. Certain elements of compensation for individual executive officers
are also dictated by employment contracts that may be in place. The Committee
believes that its actions and policies for the last fiscal year were generally
consistent with each element of compensation addressed by such employment
agreements.
The Company's executive compensation package consists of three principal
components: (i) base salary; (ii) potential for an annual cash bonus based upon
Company, business unit and individual performance; and (iii) the opportunity to
earn equity-based incentives (i.e. stock options) to reward individual
performance, which is intended to encourage continued superior achievement and
to further align management and stockholder interests. The Company generally
seeks to position its compensation package for each executive position at a
level which, for outstanding performance, is higher than an industry average.
For the cash portions of such compensation package, such comparison is based
against a broad group of comparable and general industry companies. For this
purpose, the Committee used the compensation surveys of a major compensation
consulting firm. The compensation surveys reviewed by the Committee were
generally oriented to service and software companies with revenues comparable
to the revenues of the Company as a whole or, where applicable, to companies
with revenues comparable to the revenues of the Company's two principal
operating groups, the "Information Services Group" and "IRI Software." The
companies included in the compensation surveys include a broad group of
companies, including several companies which are not included in the industry
index cited in the Performance Graph shown below. Several of the companies
included in such industry index were not in the compensation survey. The
Committee has not obtained a compensation survey which includes only those
companies included in such industry index. Historically, the determination of
the number of performance option grants has been made without reference to
compensation surveys.
Salary. The Committee reviews each executive officer's salary annually. In
determining appropriate salary levels, the Committee considers the level and
scope of responsibility, experience, Company and individual performance for the
previous year, contractual provisions in employment agreements, as well as
competitive market data on salary levels. Following the 1993 fiscal year, the
Committee generally awarded merit salary increases to certain of the Company's
executive officers which were paid during 1994. As reflected by the performance
of the Company during 1993, the Committee concluded that these executive
officers satisfactorily achieved or exceeded their performance objectives
during 1993 and awarded appropriate salary increases that were paid during
1994. Salary increases were also awarded to certain of the executive officers
serving as divisional presidents to more closely align such officers' salary
amount with their peers within the Company. Based upon the performance of the
Company during 1994 and consistent with the Company's recently adopted cash
conservation measures, the Committee has concluded not to award salary
increases to its executive officers for 1995.
7
<PAGE>
Cash Bonuses. Each year the Company's group and applicable divisional
presidents set individual and relevant group and/or divisional performance
objectives which are approved by the Company's Chief Executive Officers.
Although these performance objectives may vary from person to person, the
greatest emphasis is placed on objectives that are tied directly to group
and/or divisional contribution to the Company's profit. Historically, the
Committee has not assigned specific weighting to the performance objectives and
the performance of an executive officer is judged based upon overall
performance on the relevant performance objectives. At the beginning of each
year, target cash bonuses (based as a percentage of each executive officer's
salary) are set for each executive officer. Bonus targets ranged from 28.5% to
60% for executive officers during 1994. Depending upon the level of achievement
of these quantitative and qualitative objectives, a particular executive
officer may be awarded a cash bonus that meets, exceeds or falls short of his
or her target percentage bonus. However, the Committee retains the
discretionary authority to either increase or decrease the bonus or, if
applicable, not pay the executive officer a bonus for the year based on its
evaluation of qualitative factors as well as the Company's long-term and short-
term operating results. Based upon the results of the Company's performance in
1994, the Company's executive officers were not awarded a cash bonus in 1994.
In reaching this decision, the Committee concluded that the overall performance
of the Company as measured by its revenues, earnings and shareholder return,
did not warrant the payment of performance bonuses.
Option Grants. During the second quarter of 1994, the Company awarded stock
options to its executive officers (i) in lieu of the executive officer's earned
1993 cash bonus, (ii) as a reward for performance for outstanding services
rendered in 1993, (iii) as an inducement to retain the services of a key member
of the Company's executive management team and (iv) as an inducement for a
member of the executive management team to enter into a noncompetition
agreement. See table entitled "Stock Option Grants in Last Fiscal Year" below.
Based upon the results of the Company's performance in 1994, the Company's
executive officers were not awarded stock option performance grants for 1994
services. In reaching this decision, the Committee concluded that the overall
performance of the Company as measured by its revenues, earnings and
shareholder return, did not warrant the payment of performance option grants.
The Committee believes that stock based incentives for executive officers are
an important feature of the Company's executive compensation package. Except
for special option grants, such as options granted in lieu of a cash bonus,
stock options granted to executive officers generally vest over a four-year
period and are typically granted with an exercise price equal to the fair
market value of the Company's Common Stock as of the date of grant. The
ultimate value of stock options is directly tied to the value of a share of
Common Stock. In determining the size and terms of stock option performance
grants for 1993 performance, the Committee focused both on individual
performance and Company results for calendar year 1993 which, in certain cases,
substantially exceeded expectations. The Committee also considered the amount
and terms of options already held by a particular officer, the amount and terms
of options granted to that officer's peers, the role of each executive in
accomplishing the Company's performance objectives and the highly competitive
nature of the Company's industry. Based upon their 1993 achievements, the
executive officers, as a group, were entitled to receive approximately 85% of
their 1993 cash bonus potential, with individual ratings ranging from 80% to
100% of potential. This performance rating, together with the Company's
performance during 1993, was applied by the Committee when considering the size
of option grants rewarding 1993 services. The Committee also considered the
financial results of the Company and its principal operating units. During 1993
the Company's revenues increased approximately 21% to $334.5 million following
similarly successful years in 1991 and 1992. Net income also increased steadily
over the three year period, rising to approximately $24 million in 1993.
Compensation of the Chief Executive Officers. During 1994, the Office of the
Chief Executive was served by two members, Mr. Gian M. Fulgoni and Mr. James G.
Andress. Messrs. Fulgoni and Andress were compensated in 1994 utilizing the
same philosophy and general criteria used for other
8
<PAGE>
executive officers as described above. Principal performance objectives of the
Chief Executive Officers for 1994 included (i) the attainment of specific
revenue, profit margin and earnings per share thresholds, (ii) satisfactory
completion of capital raising initiatives, (iii) meeting cash flow objectives,
(iii) the successful new product or service introductions (such as ECR, "Pay
for Performance", and logistics products/services), (iv) the further
development and implementation of systems and procedures to provide cost
controls (i.e., Project Omega), (v) the completion of certain strategic
acquisitions, (vi) the furtherance of international expansion consistent with
guidelines established by the Board, among other objectives. The Committee did
not assign specific weighting to such performance objectives and the
performance of the Chief Executive Officers was judged based upon overall
performance on the relevant performance objectives.
During 1994, Messrs. Fulgoni and Andress each received a $330,750 salary, the
same amount paid in 1993. In lieu of a salary increase for 1994, the Committee
increased each of Mr. Fulgoni's and Mr. Andress' 1994 targeted cash bonus
potential from 30% of their base salary to 60%. Based upon the results of the
Company's performance in 1994, Mr. Fulgoni and Mr. Andress were not awarded a
cash bonus or stock option grant for 1994 services. In reaching this decision,
the Committee concluded that the overall performance of the Company as measured
by its revenues, earnings and shareholder return, did not warrant the payment
of a cash bonus or an award of stock options. During 1994, Mr. Fulgoni and Mr.
Andress received stock options (i) in lieu of their 1993 cash bonuses (11,465
each) and (ii) as performance options as compensation for services performed in
1993 (150,000 each). Consideration of the Company's 1993 performance was made
on behalf of Mr. Fulgoni and Mr. Andress in the same manner as described above
with respect to the executive officers as a group. The performance options vest
in four equal installments, with 25% vested at the date of grant and the
balance vesting in annual installments thereafter.
It is the Committee's view that each of Mr. Fulgoni's and Mr. Andress' total
compensation package was based on an appropriate balance of (i) the Company's
performance in 1994 (or 1993 in the case of the performance option grants made
during the second quarter of 1994), (ii) individual performance levels and
(iii) competitive standards.
The foregoing report has been approved by current and former members of the
Committee.
The Compensation Committee
George G. Montgomery, Jr., Chairman*
Leonard M. Lodish
Edith W. Martin*
- --------
*Also a member of the Executive Stock Option Committee.
9
<PAGE>
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation to the Named Executive
Officers for services rendered to the Company for the Company's last three
fiscal years:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
ANNUAL COMPENSATION AWARDS
--------------------- ------------
NUMBER OF
SECURITIES
NAME AND PRINCIPAL UNDERLYING ALL OTHER
POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(14)
- ------------------ ---- -------- ------- ------------ ----------------
<S> <C> <C> <C> <C> <C>
Gian M. Fulgoni.......... 1994 $330,750 $ 0 161,465(1) $2,772
Chairman of the Board 1993 330,750 0 120,374(2) 1,826
and Chief Executive Of-
ficer 1992 315,000 0 55,735(3) 1,746
James G. Andress......... 1994 $330,750 $ 0 161,465(1) 2,772
President, Chief Execu-
tive Officer 1993 330,750 0 120,374(2) 2,698
and Chief Operating Of-
ficer 1992 315,000 0 55,735(3) 2,618
Jeffrey P. Stamen........ 1994 $280,000 $ 0 211,453(4) 2,772
President--IRI Software 1993 239,398 0 155,735(5) 2,698
1992 222,600 56,683 26,055(6) 2,618
Thomas M. Walker (7)..... 1994 $275,538 $ 0 158,861(8) 2,772
Chief Financial Officer,
Treasurer 1993 210,000 0 79,010(9) 2,520
and Executive Vice-Pres-
ident 1992 209,999 42,294 25,267(10) 2,618
Randall S. Smith......... 1994 $275,465 $ 0 7,764(11) 2,772
President--International 1993 202,000 0 21,466(12) 2,698
Information Services
Group 1992 190,000 27,214 27,624(13) 2,618
</TABLE>
- --------
(1) Includes 11,465 options granted in lieu of the cash bonus for services
rendered in 1993 and 150,000 performance options granted for services
rendered in 1993.
(2) Includes 13,696 options granted in lieu of the cash bonus for services
rendered in 1992, 100,000 performance options granted for services
rendered in 1992 and 6,678 options granted in lieu of a portion of the
cash bonus for services rendered in 1993.
(3) Includes 14,000 options granted in lieu of the cash bonus for services
rendered in 1991, 33,167 performance options granted for services rendered
in 1991 and 6,678 options granted in lieu of a portion of the cash bonus
for services rendered in 1992. Also includes 1,890 options granted in lieu
of a salary increase for 1992.
(4) Includes 11,453 options granted in lieu of the cash bonus for services
rendered in 1993 and 200,000 options granted for services rendered in 1993
and in connection with the execution by Mr. Stamen of a noncompetition
agreement with the Company.
(5) Includes 1,252 options granted in lieu of a portion of the cash bonus for
services rendered in 1992, 150,000 performance options granted for
services rendered in 1992 and 4,483 options granted in lieu of a portion
of the cash bonus for services rendered in 1993.
(6) Includes 20,000 performance options granted for services rendered in 1991,
4,719 options granted in lieu of a portion of the cash bonus for services
rendered in 1992 and 1,336 options granted in lieu of a salary increase
for 1992.
(7) Resigned as an executive officer of the Company in January 1995.
(8) Includes 150,000 options granted pursuant to an employment agreement which
was amended and restated on March 16, 1994 and 8,861 options granted in
lieu of the cash bonus for services rendered in 1993.
10
<PAGE>
(9) Includes 75,000 performance options granted for services rendered in 1992
and 4,010 options granted in lieu of a portion of the cash bonus for
services rendered in 1993.
(10) Includes 20,000 performance options granted for services rendered in 1991,
4,007 options granted in lieu of a portion of the cash bonus for services
rendered in 1992 and 1,260 options granted in lieu of a salary increase
for 1992.
(11) Options granted in lieu of the cash bonus for services rendered in 1993.
(12) Includes 17,000 performance options granted for service rendered in 1992,
707 options granted in lieu of the cash bonus for services rendered in
1992 and 3,759 options granted in lieu of a portion of the cash bonus for
services rendered in 1993.
(13) Includes 20,000 performance options granted for services rendered in 1991,
1,719 options granted in lieu of the cash bonus for services rendered in
1991, 2,280 options granted in lieu of a salary increase for 1992 and
3,625 options granted in lieu of a portion of the cash bonus for services
rendered in 1992.
(14) Represents contributions made by the Company to the Information Resources,
Inc. 401(k) Retirement Savings Plan.
STOCK OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during the Company's last fiscal year to each of the Named
Executive Officers:
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
VALUE AT ASSUMED
ANNUAL RATES OF STOCK
PRICE APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM(7)
-------------------- ---------------------
% OF
TOTAL
OPTIONS
NUMBER OF GRANTED
SECURITIES TO
UNDERLYING EMPLOYEES
OPTIONS IN FISCAL EXERCISE EXPIRATION
NAME GRANTED YEAR(5) PRICE(6) DATE 5% 10%
- ---- ---------- --------- -------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
Gian M. Fulgoni......... 150,000(1) 2.3% $15.00 04/07/04 $1,415,013 $3,585,921
11,465(2) 0.2 14.00 04/29/04 100,944 255,812
James G. Andress........ 150,000(1) 2.3 15.00 04/07/04 1,415,013 3,585,921
11,465(2) 0.2 14.00 04/29/04 100,944 255,812
Jeffrey P. Stamen....... 200,000(1) 3.0 15.00 04/07/04 1,886,684 4,781,227
11,453(2) 0.2 14.00 04/29/04 100,838 255,544
Thomas M. Walker........ 150,000(3) 2.3 20.75 03/16/04 1,957,435 4,960,523
8,861(2) 0.1 14.00 04/29/04 78,017 197,710
Randall S. Smith........ 7,764(4) 0.1 13.75 05/26/04 67,138 170,140
</TABLE>
- --------
(1) Represents performance options granted on April 7, 1994 for services
rendered in 1993, which are exercisable in quarterly installments beginning
on the first anniversary of the grant date and on the next three
anniversaries thereafter.
(2) Represents options granted on April 29, 1994 in lieu of the cash bonus for
services rendered in 1993, which are exercisable on the date of grant.
(3) Represents options granted March 16, 1994 pursuant to an employment
agreement which was amended and restated effective as of March 16, 1994,
which are all currently exercisable.
(4) Represents options granted on May 26, 1994 in lieu of the cash bonus for
services rendered in 1993, which are exercisable on the date of grant.
(5) Includes the effect of a 1994 program for employees other than the
Company's executive officers and directors in which options to purchase
3,711,766 shares were cancelled in April 1994 and were replaced with new
stock options at the current market price. Excluding the
11
<PAGE>
effect of such program, the percentage of total options granted to each
Named Executive Officer was: Fulgoni--5.7%; Andress--5.7%; Stamen--7.4%;
Walker--5.6%; and Smith--0.3%.
(6) Represents the fair market value of the Company's Common Stock on the date
of grant.
(7) The amounts shown under these columns are the result of calculations at the
5% and 10% rates required by the Securities and Exchange Commission and are
not intended to forecast future appreciation of the price of the Company's
Common Stock.
AGGREGATE STOCK OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
The following table sets forth information concerning each exercise of stock
options during the Company's last fiscal year by each of the Named Executive
Officers and the fiscal year-end value of unexercised stock options:
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY
SHARES OPTIONS AT F-Y END OPTIONS AT F-Y END
ACQUIRED ON VALUE ------------------------- -------------------------
NAME EXERCISE (#) REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
- ---- ------------ -------- ----------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Gian M. Fulgoni......... 0 $ 0 180,515 284,004 $515,653 $42,279
James G. Andress........ 0 0 275,091 282,029 755,975 42,279
Jeffrey P. Stamen....... 0 0 174,581 326,022 545,778 14,969
Thomas M. Walker........ 0 0 264,395 0 22,372 0
Randall S. Smith........ 0 0 143,724 24,500 581,474 7,437
</TABLE>
12
<PAGE>
PERFORMANCE GRAPH
The following line graph compares the annual percentage change in the
Company's cumulative total stockholder return on its Common Stock over the past
five fiscal years with the cumulative total return of (i) the Standard & Poors
500 Composite Index and (ii) the Hambrecht & Quist Incorporated Technology
Index. The cumulative total returns displayed below have assumed the
reinvestment of a special dividend in October of 1990, declared in connection
with the Company's tax-free spin off of VideOcart, Inc.
<TABLE>
[GRAPH APPEARS HERE]
COMPARISON OF FIVE YEAR CUMULATIVE TOTAL RETURN
AMONG INFORMATION RESOURCES, S&P 500 INDEX AND H & Q TECHNOLOGY
<CAPTION>
Measurement Period INFORMATION S&P
(Fiscal Year Covered) RESOURCES 500 INDEX H & Q TECHNOLOGY
- ------------------- ----------- --------- ----------------
<S> <C> <C> <C>
Measurement Pt-
12/31/89 $100.00 $100.00 $100.00
FYE 12/31/90 $ 77.67 $ 96.90 $ 91.42
FYE 12/31/91 $213.59 $126.42 $135.14
FYE 12/31/92 $244.66 $136.05 $155.45
FYE 12/31/93 $299.03 $149.76 $169.64
FYE 12/31/94 $106.80 $151.74 $196.90
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with two of its current
Named Executive Officers. These agreements have been entered into with James G.
Andress, President, Chief Executive Officer and Chief Operating Officer and
Jeffrey P. Stamen, President--IRI Software. Thomas M. Walker, former Executive
Vice President and Chief Financial and Administrative Officer is also party to
an employment agreement with the Company. Mr. Walker resigned from his position
as an executive officer of the Company in January 1995.
Mr. Andress' agreement provides for a minimum base salary of $300,000 per
year plus a bonus or other incentive compensation as the Board of Directors
deems appropriate. Mr. Andress' agreement may be terminated by either party
upon six months prior written notice. In the event Mr. Andress terminates the
agreement for "Good Reason" (as defined in the agreement), he shall receive his
base salary for the unexpired term of the agreement, and he may immediately
exercise in full any unexercised stock options held by him. In addition, in the
event the agreement is terminated for any reason, including the foregoing, Mr.
Andress or his estate, as the case may be, shall have the right to exercise the
stock options for a period of one year and one month thereafter. Upon Mr.
Andress' death during the term of the agreement, the Company shall continue to
pay his base salary to his spouse for a period of six months thereafter.
13
<PAGE>
Mr. Walker's agreement was amended and restated effective as of March 16,
1994. On January 12, 1995, Mr. Walker gave notice of his election to terminate
the agreement. In connection with such notice, Mr. Walker resigned from all
offices held with the Company and any of its subsidiaries. Mr. Walker's
agreement provides for a minimum base salary of $280,000 per year. Pursuant to
his agreement, Mr. Walker is entitled to receive his base salary until the
earlier of the expiration of 24 months following notice of termination or the
engagement by Mr. Walker of comparable full-time employment. Mr. Walker is also
entitled to participate in all employee benefit plans applicable to him during
such period.
Mr. Andress' and Mr. Walker's agreements both provide that all stock options
held by the executive, or by his estate if the executive is not then living,
may be exercised immediately in the event of a Change of Control. If for any
reason such options are unexercisable at that time, the Company shall pay the
executive or his estate an amount of cash equal to the difference between the
exercise price of all such unexercisable options and the greater of: (i) the
mean between the high and low price of one share of Common Stock on the date of
such Change of Control or (ii) the highest price per share actually paid in
connection with any Change of Control of the Company. A Change of Control
generally includes any merger, consolidation or reorganization of the Company
pursuant to which the Company or any entity controlled by it is not the
surviving entity, or any change in beneficial ownership or power to vote 30% or
more of the voting securities of the Company. Prior to Mr. Walker's notice of
termination, all of his options were determined to be immediately exercisable
as a result of the change in beneficial ownership that had occurred with
respect to voting securities of the Company.
Mr. Stamen's agreement provides for a minimum base salary and participation
in all Company benefit plans on the same basis as other executive officers of
the Company. Mr. Stamen's agreement may be terminated by either party upon 90
days written notice or by the Company in the event of cause, or upon Mr.
Stamen's death or disability.
DIRECTOR COMPENSATION
In 1994, directors who are not full-time employees of the Company each
received an annual fee of $15,000 plus $1,500 for each Board meeting attended,
with the exception of Dr. Lodish, who, pursuant to an employment/retainer
agreement with the Company, received a fee of $25,000. See "--Compensation
Committee Interlocks and Insider Participation" below. Members of the Board who
serve on a committee each receive an annual fee of $2,500 per committee.
Chairpersons of such committees receive an annual fee of $5,000. Total fees
paid during 1994 to non-employee directors were as follows: Mr. Epstein,
$27,250; Dr. Little, $21,000; Dr. Lodish, $23,500; Mr. Lucente, $21,000; Dr.
Martin, $24,750; Mr. Montgomery, $29,750; Dr. Urban, $23,500 and Mr. Wilson,
$22,250. All directors are reimbursed for travel expenses. Effective February
3, 1995, Mr. Wilson became Chairman of the Company's Executive Committee. Mr.
Wilson is currently paid an annual salary of $140,000 for such services.
In addition to options disclosed elsewhere herein which were granted to
certain directors who are also Named Executive Officers of the Company, the
Company granted options to directors during 1994 to purchase the following
shares: (i) 2,500 shares to Messrs. Epstein and Montgomery and Dr. Martin at an
exercise price of $14.50 and to Mr. Lucente and Dr. Urban at an exercise price
of $13.75; (ii) 7,431 shares to Mr. Eskin at an exercise price of $13.75; (iii)
13,053 shares to Dr. Little at an exercise price of $14.00; (iv) 11,939 shares
to Dr. Lodish at an exercise price of $14.00; and (v) 20,000 shares to Mr.
Wilson at an exercise price of $13.75. In all cases, the exercise price of the
options granted was equal to the fair market value per share of the Company's
Common Stock on the date of grant.
14
<PAGE>
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1994, the Human Relations Committee consisted of George G. Montgomery,
Jr., Leonard M. Lodish and Edith W. Martin. Mr. Montgomery and Dr. Lodish had
certain business relationships with the Company during 1994. Mr. Montgomery is
managing director of Hambrecht & Quist Incorporated, an investment banking
firm. Hambrecht & Quist Incorporated rendered certain investment banking
services to the Company, all in the regular course of business. These services
included acting as an underwriter of a public offering of Common Stock in 1992
and acting as a special advisor in 1994 to the Company in connection with its
consideration of certain financing alternatives. The Company has an agreement
with Leonard M. Lodish, whereby the Company pays Dr. Lodish, as a part-time
employee. During 1994, Dr. Lodish was paid $164,574 pursuant to this
arrangement.
PROPOSAL TO RATIFY APPOINTMENT OF
INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
(Proposal Number 2 on the Enclosed Proxy Card)
The Company's financial statements for the year ended December 31, 1994 have
been audited by Grant Thornton LLP, independent certified public accountants.
It is expected that representatives of Grant Thornton LLP will attend the
Meeting to make an appropriate statement if desired and will be available to
respond to appropriate questions.
The Board of Directors has appointed Grant Thornton LLP as the Company's
independent certified public accountants to examine the financial statements of
the Company for the year ended December 31, 1995. Unless otherwise directed,
the proxy will be voted in favor of the ratification of this appointment.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" THE RATIFICATION OF THE
APPOINTMENT OF GRANT THORNTON LLP AS THE COMPANY'S INDEPENDENT CERTIFIED PUBLIC
ACCOUNTANTS.
PROPOSALS TO APPROVE CERTAIN AMENDMENTS
TO THE COMPANY'S EXECUTIVE OPTION PLAN
The Board of Directors has approved for submission to the Company's
stockholders certain proposals relating to the Company's Executive Option Plan.
These proposals are being made to (i) increase in the number of shares
authorized for issuance under this plan by 500,000 and (ii) change certain
provisions thereof so that the Company will be entitled to deduct compensation
paid thereunder for Federal income tax purposes without regard to the limits on
deductibility of compensation expense imposed pursuant to Section 162(m) of the
Internal Revenue Code of 1986, as amended (the "Code"). See "--Federal Income
Tax Treatment of the Executive Option Plan".
On April 24, 1995, the closing price of the Company's Common Stock on the
NASDAQ Stock Market was $13 9/16.
The Board of Directors and stockholders of the Company originally approved
the Executive Option Plan in 1992. The Executive Option Plan was created in
response to the SEC's adoption of certain rules pursuant to Section 16 of the
Securities Exchange Act of 1934 (the "Exchange Act"). These rules regulate the
ownership and trading of securities by directors and executive officers of
public companies.
15
<PAGE>
The eligible participants in the Executive Option Plan are the Company's
executive officers and directors. Because actual participation in the Executive
Option Plan will be dependent on the number of executive officers and directors
of the Company existing from time to time, the number of eligible participants
under the Executive Option Plan cannot be determined as of this date. There are
currently 15 executive officers and directors of the Company.
The Executive Option Plan is administered by the Executive Stock Option
Committee which consists of at least two directors (the "Committee") who are
"disinterested persons" within the meaning of Rule 16b-3 under the Exchange
Act. Committee members are eligible to participate under the Executive Option
Plan and receive, on June 15 of every year, stock options to purchase 2,500
shares of Common Stock of the Company at an exercise price equal to the fair
market value of the Common Stock on the date of grant of the option. Subject to
the terms of the Executive Option Plan, the Committee has the authority to
determine the material terms and provisions under which options are granted,
including the persons to whom such options are granted, the exercise prices,
the number of shares subject to options, the time or times during which options
may be exercised and certain other terms and conditions of the respective
options granted.
Options granted under the Executive Option Plan may be either incentive stock
options ("ISOs"), as defined in Section 422 of the Code or non-qualified stock
options. No option designated as an ISO can be exercised by the option holder
until such individual has been employed by the Company or its subsidiary for at
least three months following the date of grant. No option designated as an ISO
may be granted to a non-employee director of the Company.
When adopted in 1992, the Company reserved for future issuance up to
2,000,000 shares of Common Stock to be issued upon the exercise of options
granted or to be granted pursuant to the Executive Option Plan. There are
currently 4,367 options available for issuance pursuant to the Executive Option
Plan.
In the event that any outstanding option granted under the Executive Option
Plan terminates or expires prior to its exercise, for any reason, then the
underlying shares of Common Stock shall not be charged against the maximum
limit of shares available under the Executive Option Plan and such shares shall
become available for future grants of options under the Executive Option Plan.
Because actual participation in the Executive Option Plan will be determined at
the discretion of the Committee, future grants or allocations under the
Executive Option Plan cannot be determined precisely at this time.
The exercise price of ISOs granted under the Executive Option Plan may not be
less than 100% of the fair market value of the Common Stock on the date of
grant and, in the case of ISOs granted to holders of more than 10% of the
voting stock of the Company or any subsidiary of the Company, not less than
110% of the fair market value of the Common Stock on the date of grant. The
aggregate fair market value (determined at the time of grant) of shares
issuable upon the exercise of ISOs granted to an option holder under all plans
of the Corporation or any subsidiary that become exercisable for the first time
during any one calendar year may not exceed $100,000.
The exercise price of non-qualified options are fixed by the Committee on the
date of grant and may be less than, equal to or greater than the fair market
value of the Common Stock on such date.
The duration of options granted under the Executive Option Plan are fixed by
the Committee but no longer than 10 years from the date of grant and, for ISOs
granted to holders of more than
16
<PAGE>
10% of the voting stock of the Company or any subsidiary, no more than five
years from the date of grant. The duration of an option may be reduced in
connection with the termination of the option holder's employment, if
applicable, or death of the option holder or, at the discretion of the
Committee, due to the option holder's less than satisfactory performance.
If the Committee 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, the Committee may
prescribe longer time periods and additional requirements with respect to the
exercise of a nonvested option or terminate in whole or in part such portion of
any nonvested option.
During the option holder's lifetime, all options granted under the Executive
Option Plan are exercisable only by the option holder or by his or her legal
representative. In addition, options granted under the Executive Option Plan
are not transferable, other than by will or the laws of descent and
distribution. Such options shall become null and void upon any attempt by the
option holder to otherwise transfer, assign, pledge, hypothecate, or dispose of
the option, or upon the levy of any attachment or similar process upon such
option.
Options granted will terminate upon the earlier of (i) the date of expiration
or (ii) either one year after termination of the Option holder's employment or
directorship with the Company or its subsidiary (unless a shorter or longer
time period is approved by the Committee or the Board of Directors), or in the
event such Options are designated as ISO's and the termination of employment is
due to retirement, three months following the Option holder's retirement
(unless a shorter or longer time period is approved by the Committee or the
Board of Directors).
No option or shares of Common Stock issued pursuant to the exercise of an
option shall be disposed of until six months following the date of grant.
The number of shares of Common Stock available under the Executive Option
Plan and the exercise price and number of shares subject to outstanding options
under such Plan will be proportionately adjusted to prevent any dilution or
enlargement of rights that would otherwise result by reason of stock dividends,
stock splits, recapitalization, mergers, consolidations or other such changes
in the capital structure of the Company. In no event will fractional shares be
issued under the Executive Option Plan.
The Board of Directors may, from time to time, amend the Executive Option
Plan as it relates to the terms and conditions of any options granted or to be
granted under the Executive Option Plan, but in no event shall such amendment
affect the rights of an option holder with respect to a previously granted
option, unless the option holder consents. Any amendment which would (i)
increase or decrease the number of shares issuable upon the exercise of an
option, with the exception of any increase or decrease in the number of shares
resulting from a stock adjustment, (ii) change the class of persons to whom
options may be granted or (iii) extend the period or periods during which
options may be granted or exercised, must be approved by a majority of the
holders of the Company's Common Stock within 12 months of such amendment.
The Executive Option Plan will 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 will continue to be
governed thereafter by the terms of the Plan.
17
<PAGE>
The table below shows the number of options granted under the Executive
Option Plan to the following individuals and groups during the Company's 1994
calendar year. Options issued to persons who are executive officers of the
Company were issued in 1994 principally in consideration for services rendered
in 1993. See "Executive Compensation." Employees who are not executive officers
or directors are not eligible to participate in the Executive Option Plan.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION/GROUP OPTIONS
- ----------------------- ---------
<S> <C>
Gian M. Fulgoni....................................................... 161,465
Chairman of the Board
and Chief Executive Officer
James G. Andress...................................................... 161,465
President, Chief Executive Officer
and Chief Operating Officer
Jeffrey P. Stamen..................................................... 211,453
President--IRI Software
Thomas M. Walker...................................................... 158,861
Chief Financial Officer, Treasurer
and Executive Vice President (resigned)
Randall S. Smith...................................................... 7,764
President--International Information
Services Group
All current executive officers........................................ 546,189
All current directors (non-executive officers)........................ 64,923
All director nominees................................................. 357,369
</TABLE>
FEDERAL INCOME TAX TREATMENT OF THE EXECUTIVE OPTION PLAN.
The following discussion is not intended to serve as a comprehensive
description of all Federal income tax consequences associated with stock
options, does not reflect any consideration of minimum tax or foreign, state or
local tax consequences, and is based upon an assumption that any stock acquired
by exercising an option will not be subject to any substantial risk of
forfeiture or restriction as to transferability.
A person who is granted a stock option under the Executive Option Plan will
not be subject to federal income tax at the time of grant, and the company will
not be entitled to a tax deduction by reason of such grant. Upon exercise of a
non-qualified option, the difference between the option price and the fair
market value of the stock on the date of exercise will be considered ordinary
income to the grantee.
Although no taxable income will be recognized by the employee upon exercise
of an ISO and the Company is not entitled to a tax deduction by reason of such
exercise, the excess of the fair market value on the date of exercise over the
exercise price is an adjustment which increases alternative minimum taxable
income ("AMTI"), the base upon which alternative minimum tax is computed. In
determining the amount of gain or loss recognized on the later disposition of
stock acquired pursuant to the exercise of an ISO, the tax basis of the stock
for alternative minimum tax purposes (but not regular tax purposes) is
increased by the excess of the fair market value of the stock over the option
price at the time of exercise. If stock purchased pursuant to the exercise of
an ISO is sold within two years from the date of grant or within one year after
the transfer of such stock to the employee, then the difference, with certain
adjustments, between the fair market value of the Company Common Stock at the
date of exercise and the option price will be considered ordinary income to the
grantee.
18
<PAGE>
The Company is generally entitled to an income tax deduction for any
compensation income taxed to participants for non-qualified options issued
pursuant to the Executive Option Plan. The Company, however, would not be
entitled to a deduction for compensation paid to certain covered executives to
the extent the non-excludable compensation paid to any such person exceeds $1
million. Compensation attributable to a stock option is not considered
compensation that is subject to the $1 million limit provided the option is
granted pursuant to a plan that satisfies certain requirements. The proposed
amendment to the Executive Option Plan which adds individual limits on the
maximum number of shares with respect to which options may be granted to an
employee during a specified time period, is intended to conform the Executive
Option Plan to the applicable requirements for exclusion of compensation
attributable to options from the $1 million limit. See "--Proposal to Approve
An Amendment to the Executive Option Plan."
PROPOSAL TO APPROVE AN AMENDMENT TO THE EXECUTIVE OPTION PLAN
INCREASING THE NUMBER OF SHARES AUTHORIZED FOR ISSUANCE
(Proposal Number 3 on the Enclosed Proxy Card)
The Board of Directors and the Executive Stock Option Committee approved,
subject to stockholder approval, an increase in the number of shares authorized
to be issued pursuant to the Executive Option Plan by 500,000 shares to a total
of 2,500,000 shares. There are currently 4,367 options available for future
issuance. If the proposal is not approved by the Company's stockholders, the
Company will not issue options pursuant to the Executive Option Plan
representing the 500,000 shares being proposed hereby. If the proposal is
approved, the Company may utilize such increased option authorization during
1995 or thereafter to compensate its executive officers and directors. Although
no commitments have been made, such option grants could be made to compensate
executive officers and directors for services rendered to the Company, to
induce persons to join the Company's executive management team, and to
compensate certain executive officers and directors for services rendered
during 1993 who would have received an option grant during 1994 except for the
fact that insufficient options were authorized pursuant to the Executive Option
Plan. Groups who would have received such an option grant in 1994 for 1993
services include: All Current Executive Officers--approximately 30,000 options;
and All Current Directors (non-executive officers)--approximately 50,000
options.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE EXECUTIVE OPTION PLAN INCREASING THE NUMBER OF SHARES AUTHORIZED FOR
ISSUANCE.
PROPOSAL TO APPROVE AN AMENDMENT TO THE
EXECUTIVE OPTION PLAN
(Proposal Number 4 on the Enclosed Proxy Card)
The Executive Stock Option Committee of the Board of Directors approved an
amendment to the Executive Option Plan to change certain provisions thereof so
that the Company will be entitled to deduct compensation paid thereunder for
Federal income tax purposes without regard to the limitations on deductibility
of compensation expense imposed pursuant to Section 162(m) of the Code. See "--
Federal Income Tax Treatment of the Executive Option Plan." The proposal is
being submitted with the understanding that if approval of Proposal Number 3
described above is not received, then the proposed amendment to the Executive
Option Plan set forth in this Proposal Number 4 shall be withdrawn.
19
<PAGE>
If the proposed amendment of the Executive Option Plan is approved, no
employee shall be granted an option under the Executive Option Plan in any
given year in excess of 250,000 shares. This limitation is being added to the
Executive Option Plan to satisfy the applicable requirements of Section 162(m)
of the Code as such section relates to options. See "--Federal Income Tax
Treatment of the Executive Option Plan." If stockholders fail to approve this
proposed amendment, the Company may lose the ability to take a deduction for
tax purposes of certain compensation paid to certain of the Company's executive
officers.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE EXECUTIVE OPTION PLAN.
MANAGEMENT RELATIONSHIPS AND RELATED TRANSACTIONS
George G. Montgomery, Jr., a director of the Company, is managing director of
Hambrecht & Quist Incorporated, an investment banking firm. Hambrecht & Quist
Incorporated rendered certain investment banking services to the Company, all
in the regular course of business. These services included acting as an
underwriter of a public offering of Common Stock in 1992 and acting as a
special advisor to the Company in connection with its consideration of certain
financing alternatives. The Company has an agreement with Leonard M. Lodish,
whereby the Company pays Dr. Lodish, as a part-time employee. During 1994, Dr.
Lodish was paid $164,574 pursuant to this arrangement. In March 1994, Dr.
Lodish agreed to decrease his retainer arrangement by 30%. Thomas W. Wilson,
Jr., a director of the Company, is currently paid a $140,000 annual salary in
consideration for services rendered to the Company as Chairman of the Company's
Executive Committee. During 1994, Mr. Wilson was paid $98,333 in consideration
of certain consulting services provided to the Company. Pursuant to an
employment agreement between the Company and George R. Garrick, the Company
made a personal, unsecured, non-interest bearing loan to Mr. Garrick. The
largest principal balance of the loan during 1994 was $1.2 million. As of March
31, 1995, the principal balance of the loan was $800,000.
STOCKHOLDER PROPOSALS FOR 1996 ANNUAL MEETING
In order for a proposal by a stockholder of the Company to be included in the
Company's proxy statement and form of proxy for the 1996 Annual Meeting of
stockholders, the proposal must be received by the Company at its executive
offices located at 150 North Clinton, Chicago, Illinois 60661 no later than
December 29, 1995.
QUORUM AND VOTING PROCEDURES
The presence in person or by proxy of holders of record of a majority of the
outstanding shares of Common Stock is required for a quorum to transact
business at the Meeting, but if a quorum should not be present, the Meeting may
be adjourned from time to time until a quorum is obtained. Under applicable
Delaware law, abstentions and "broker non-votes" (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares as to a matter with
respect to which the brokers or nominees do not have discretionary power to
vote) will be treated as present for purposes of determining the presence of a
quorum at the Meeting.
Directors will be elected by the plurality vote of the holders of Common
Stock entitled to vote at the Meeting and present in person or by proxy. The
remaining proposals described herein require the vote of holders of a majority
of the shares of Common Stock entitled to vote thereon
20
<PAGE>
and present in person or by proxy. Under applicable Delaware law, abstentions
will be deemed present and entitled to vote and will, therefor, have the effect
of a negative vote on the particular proposal other than the election of
directors, but will have no effect on the outcome of the election of directors.
A broker non-vote will have no effect on any proposal described in the proxy
statement, including the election of directors.
OTHER MATTERS
The Company knows of no matters, other than those referred to herein, which
will be presented at the Meeting. If, however, any other appropriate business
should properly be presented at the Meeting, the proxies named in the enclosed
form of proxy will vote the proxies in accordance with their best judgment.
EXPENSES OF SOLICITATION
All expenses incident to the solicitation of proxies by the Company will be
paid by the Company. Solicitation may be made personally, or by telephone,
telegraph or mail, by one or more employees of the Company, without additional
compensation. The Company has engaged Georgeson & Company Inc. to assist in the
solicitation of proxies from brokers, bank nominees, institutional holders and
certain individual holders of record. Georgeson & Company will receive a fee
from the Company of approximately $9,000, plus reimbursement of its out-of-
pocket expenses. The Company will reimburse brokerage houses and other
custodians, nominees and fiduciaries for reasonable out-of-pocket expenses
incurred in forwarding copies of solicitation material to beneficial owners of
Common Stock held of record by such persons.
By order of the Board of Directors,
Information Resources, Inc.
Edward S. Berger
Secretary
Chicago, Illinois
April 28, 1995
21
<PAGE>
APPENDIX A
[SIDE 1]
PROXY PROXY
INFORMATION RESOURCES, INC.
150 NORTH CLINTON STREET
CHICAGO, ILLINOIS 60661
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS --- MAY 24, 1995
The undersigned hereby appoints Gian M. Fulgoni, James G. Andress and
Edward S. Berger as Proxies, each with power to appoint his substitute, and
hereby authorizes each of them, together or separately, to represent and to
vote, as designated below, all shares of Common Stock of Information Resources,
Inc. (the "Company") held of record by the undersigned on April 14, 1995, at the
Annual Meeting of stockholders to be held on May 24, 1995, or any adjournment
thereof.
PLEASE MARK, SIGN AND DATE ON THE REVERSE SIDE
AND RETURN IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
________________________________________________________________________________
[SIDE 2]
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY
1. Election of Directors --- FOR WITHHOLD FOR ALL
Nominees: Gian M. Fulgoni, James G. [_] [_] [_]
Andress, Leonard M. Lodish, Ph.D., (except for nominee(s) written
Edith W. Martin, Ph.D. and Thomas W. below) (Instruction: To withhold
Wilson, Jr. authority to vote for any
individual nominee, write that
nominee's name in the space
provided.)
_________________________________
2. Proposal to Ratify Appointment of Grant FOR AGAINST ABSTAIN
Thornton LLP as Independent Certified [_] [_] [_]
Public Accountants for 1995.
3. Proposal to Amend the Executive Option FOR AGAINST ABSTAIN
Plan Increasing Number of Shares [_] [_] [_]
Authorized for Issuance.
4. Proposal to Amend the Executive Option FOR AGAINST ABSTAIN
Plan to Comply with Section 162(m) of [_] [_] [_]
Internal Revenue Code. (Conditional upon
approval of Proposal 3).
5. In their discretion, the Proxies are
authorized to vote upon such other
business as may properly come before
the meeting.
<PAGE>
This proxy, when properly executed,
will be voted in the manner directed
herein by the undersigned
stockholder(s). IF NO DIRECTION IS
MADE, THE PROXY WILL BE VOTED FOR
PROPOSALS 1, 2, 3 AND 4.
Dated: _____________________, 1995
Signature(s) __________________________
_______________________________________
Please sign exactly as your name
appears above. When shares are held by
joint tenants, both should sign. When
signing as attorney, executor,
administrator, trustee or guardian,
please give full title as such. If a
corporation, please sign in full
corporate name by president or other
authorized officer. If a partnership,
please sign in partnership name by
authorized person.
<PAGE>
APPENDIX B
INFORMATION RESOURCES, INC.
1992 EXECUTIVE STOCK OPTION PLAN
(AS PROPOSED TO BE AMENDED)
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
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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 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.
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<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
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<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
B-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
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<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.
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<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
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<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
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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.
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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.
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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
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