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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934. [NO FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934. [NO FEE REQUIRED]
For the Transition period from to
COMMISSION FILE NO. 0-11428
INFORMATION RESOURCES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 36-2947987
(STATE OR OTHER JURISDICTION OF (I.R.S. EMPLOYER
INCORPORATION OR ORGANIZATION) IDENTIFICATION NO.)
150 NORTH CLINTON STREET, CHICAGO, ILLINOIS 60661
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES) (ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (312) 726-1221
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
COMMON STOCK, $.01 PAR VALUE PER SHARE
PREFERRED STOCK PURCHASE RIGHTS
Indicate by check mark whether the registrant (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes [X] No [_]
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained, to
the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K [_]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 28, 1997 (based on the closing price as quoted by
NASDAQ as of such date) was $404,695,274.
The number of shares of the registrant's common stock, $.01 par value per
outstanding share, as of February 28, 1997 was 28,194,537.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the annual
meeting of stockholders to be held May 22, 1997 to be filed pursuant to
Regulation 14A are incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
Introduction
Information Resources, Inc. ("IRI") and its subsidiaries (collectively "the
Company") is a leading provider of information services to the consumer
packaged goods ("CPG") industry. The Company obtains consumer purchase data
primarily from electronic point-of-sale scanners in retail stores and
integrates this scan data with other proprietary data collected by the
Company. The Company maintains this data in massive data warehouses and
provides CPG manufacturers, retailers, wholesalers and brokers with timely,
detailed and accurate information regarding consumer purchasing patterns. The
Company's software products assist clients in analyzing and using the
Company's data, enabling them to make more cost-effective decisions in
marketing, selling and distributing their products.
The Company derives approximately 85% of its revenues from its U.S.
services. These services center in large part around the Company's flagship
InfoScan(R) service, which tracks consumer purchasing of products sold in
supermarkets, drug stores, mass merchandisers and convenience stores across
the United States. The Company also offers a number of other services to CPG
manufacturers, such as BehaviorScan(R), for the testing and evaluation of
alternative marketing strategies and tactics. Closely related to its
information services, the Company also markets a family of software
application products to the CPG industry based on Oracle EXPRESS(R)
multidimensional relational software technology. In July 1995, the Company
sold the underlying EXPRESS technology to Oracle Corporation ("Oracle"), while
retaining rights to market and distribute Oracle EXPRESS software.
During the past five years, the Company has been expanding internationally,
establishing information services principally in Western Europe. Revenues from
the Company's U.S. and International information services, as well as from the
software products business sold to Oracle in mid-1995, were as follows for the
periods shown (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- --------
<S> <C> <C> <C>
U.S. Services................................. $ 344,612 $317,553 $299,068
International Services........................ 60,991 42,165 13,580
--------- -------- --------
Subtotal.................................. 405,603 359,718 312,648
Software products business sold to Oracle..... -- 40,198 63,922
--------- -------- --------
Total..................................... $ 405,603 $399,916 $376,570
========= ======== ========
</TABLE>
U.S. Services
The Company's U.S. Information Services include InfoScan product tracking
services, related software product sales, analytical and consulting services,
BehaviorScan product testing services and a variety of emerging applications
for the Company's census (all stores within participating chains) scanner data
bases.
INFOSCAN. The Company's principal information service marketed in the United
States is InfoScan. InfoScan is a service used by the CPG industry to monitor
and evaluate the market performance of products sold in retail stores. The
InfoScan service provides subscribers with a variety of information including
how much product they and their competitors are selling, where the products
are being purchased, at what price the products are being sold and under what
promotional conditions sales are occurring. This information helps subscribers
make fundamental strategic and tactical decisions for their businesses in the
areas of sales, marketing, pricing, promotion and logistics.
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InfoScan utilizes universal product code ("UPC") information printed via bar
codes on CPG product packaging. Scanners at retail checkouts read the UPC code
and record product sales electronically. On an on-going basis, the Company
procures such electronic sales data (weekly and daily) along with related
promotional data from a sample of national and local market retail stores. The
Company also collects consumer purchase information directly from
approximately 70,000 individual households across the United States. The
Company processes the information at its computer facilities and stores it in
the Company's proprietary data bases. InfoScan subscribers access the
information in the Company's data bases through a variety of means, including
the use of analytical software provided by the Company.
Subscriptions to InfoScan by CPG manufacturers are a principal source of
revenue for the Company. Manufacturers subscribe to InfoScan by contracting
with the Company to obtain access to the InfoScan data bases for specified
product categories. InfoScan contracts generally have a multi-year term,
usually of three years or more.
In late 1995, the Company transitioned its Towne-Oller division's product
tracking service for health and beauty aid manufacturers into its InfoScan
service. Previously, Towne-Oller had tracked deliveries of health and beauty
care products from retailer and wholesaler warehouses to approximately 30,000
individual drug stores and supermarkets in the United States.
InfoScan Data Collection. For the Company's InfoScan sample service, the
Company continuously collects weekly product sales and price information from
approximately 4,200 representative retail outlets throughout the United
States. Included in the Company's national and local market samples are 3,000
supermarkets, 525 drug stores, 250 mass merchandisers, and 575 convenience
stores. Contracting retailers typically deliver their scanner data
electronically to the Company's computer facilities in Wood Dale, Illinois.
While most retail stores in the United States have installed scanner equipment
to record product sales information, certain convenience stores have not. When
scanner data is not available, the Company uses its field personnel to visit
stores and manually obtain sales information via a manual audit of the stores'
product purchases and inventory.
The InfoScan data bases typically contain both scanner data and "causal"
data. Causal data consist of information which might help explain changes in
product sales, such as, price, retailers' newspaper ads and in-store displays,
as well as other promotion and merchandising data related to the sale of CPG
products. The Company employs a field force of part-time workers to collect
causal data. These employees conduct weekly on-site visits to retail stores
participating in the InfoScan service to collect causal information such as
in-store promotions and displays. Field force personnel perform other services
as well, such as those related to the Company's test marketing services.
The Company's InfoScan service also collects consumer purchase information
from approximately 70,000 individual households in the United States. Shoppers
from approximately 60,000 of these households present an identification card
when shopping at participating supermarkets, thereby allowing scanners to
record specific details of their product purchases. The Company also provides
about 15,000 households with hand-held scanners to record their product
purchases made in retail outlets which either do not have scanners or do not
otherwise participate in the Company's household data collection system.
The Company often pays cash for scanner data covering a sample of retailers'
stores. However, the Company also exchanges software and other services to
obtain access to data for all stores within certain supermarket and drug
chains. (See "InfoScan Census--QScan" below.) Typical data procurement
contracts run from year to year and generally are cancelable by either party
on 90 days notice.
InfoScan Data Processing. The Company receives and processes data for its
InfoScan service at its production center and computer facilities located in
Wood Dale, Illinois. The Company's production center operates with numerous
mainframe and RISC-based computers as well as proprietary production software
and related technology developed exclusively by the Company to process and
store very large amounts of data. Through direct telecommunication connections
with InfoScan clients, the Company also provides electronic on-line access to
InfoScan data services. The Company leases its mainframe computers from third
party financial institutions.
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InfoScan Delivery. Subscriptions to the InfoScan service entitle the
Company's clients to access the Company's data bases and receive information
for specific product categories. Because large amounts of data are involved,
clients usually either take electronic delivery of the data or obtain
electronic access to the Company's data bases through the Company's on-line
service. Clients taking electronic delivery generally license software from
the Company. The Company's on-line service permits clients to build and store
their own data bases which remain resident on the Company's computers. Clients
then access the data bases through remote electronic connection. Clients also
purchase software services from the Company. (See "Software Products" below
for more information on Company revenues derived from software licensing.)
Client Service. The Company places a major emphasis on the provision of
experienced and knowledgeable client service personnel to assist InfoScan
subscribers in the use and interpretation of InfoScan data as well as the use
of the Company's analytical software. Accordingly, costs of client service
personnel are a significant component of total Company costs to deliver the
InfoScan service.
Analytical and Consulting Services. The Company provides numerous analytical
and consulting services to both CPG manufacturers and retailers. These
revenues mostly follow from subscriptions to the Company's InfoScan service
and principally relate to analytical use of InfoScan data. These services are
generally billed on a time and materials basis. Client service personnel costs
constitute the principal expenses incurred in providing these services.
Analytical and consulting services are directed at helping clients identify
new marketing opportunities, more effectively manage their marketing mix,
identify appropriate opportunities for product line optimization and increase
productivity of marketing expenditures through more effective couponing,
advertising and in-store merchandising programs. The Company's Neo, Inc.
subsidiary provides management consulting services focused on sales force
effectiveness, retailer marketing, information utilization and training and
support for selling organizations.
INFOSCAN CENSUS. InfoScan Census is a product tracking service based on
scanner data from all stores within participating retail chains, as opposed to
a sample only. InfoScan Census offers the CPG industry more complete and
accurate data than sample services, since it has no sampling or projection
errors.
Currently, InfoScan Census revenues come mainly from manufacturers
purchasing "census key account" data, which is sales data for a product
category based on all the stores of a specific retailer. This service permits
manufacturers' sales representatives to negotiate with retail buyers based on
a mutually consistent and accurate measure of consumer purchasing. In
addition, an evaluation of differences in brand and product category
purchasing across individual stores within a chain can often pin-point
opportunities to effectively build sales--to the benefit of both manufacturers
and retailers. The Company is also developing a wide variety of uses for
InfoScan Census data which go beyond "key account" information. These include
improved management of trade promotions, validation of "pay-for-performance"
promotions, more effective sales force and broker compensation programs and
improved inventory and distribution management. (See "Logistics" below.)
There are presently approximately 13,000 supermarket stores and nearly 7,000
drug stores in the Company's InfoScan Census data base.
QScan. The Company provides its QScan(TM) system to retailers in exchange
for their participation in the provision of their all-store data for InfoScan
Census. QScan is an information system designed to provide retailers with easy
access to their scanner data. The system addresses retailers' problems of
organizing and analyzing their own data bases of information for products sold
in their stores. With a RISC workstation at a retailer's buying office along
with software provided by the Company, the QScan system allows for the
processing and analysis of scanner data from all of the retailer's stores on a
weekly basis.
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SOFTWARE PRODUCTS. In close association with InfoScan, the Company markets
analytical software to the CPG industry principally for use in accessing,
managing and analyzing the Company's data bases. The Company also markets
space management software for use in managing retail shelf space, software for
the improved management of a manufacturer's promotion expenditures and
software applications to facilitate enhanced uses of InfoScan data, such as
logistics software.
The Company markets a line of software application products based on Oracle
EXPRESS(R) primarily to the CPG industry. Oracle EXPRESS is a software
technology designed for working with large and complex data bases. In July
1995, the Company sold its EXPRESS technology and certain software products to
Oracle, while retaining ownership of certain EXPRESS-based sales and marketing
software application products for use in the CPG industry. Through licensing
agreements with Oracle, the Company continues to market and distribute the
full line of Oracle EXPRESS software products.
Many of the Company's InfoScan and QScan clients need the Oracle EXPRESS-
based software application, DataServer AnalyzerTM, in order to access, manage
and analyze the Company's data bases. DataServer Analyzer is a decision
support software application built in Oracle EXPRESS and now owned by Oracle.
The product provides users with a range of analytical and reporting tools. The
Company has added specific scanner data modules to the product and now
licenses DataServer Analyzer to InfoScan clients often at the same time as
clients subscribe to the InfoScan data bases.
The Company's principal source of software revenues is on-line access
services provided to InfoScan subscribers who desire to easily and efficiently
access InfoScan data residing on the Company's computers. These services
include licenses to use various Oracle EXPRESS software products, principally
DataServer Analyzer. A secondary source of software revenues derives from
issuance of Oracle EXPRESS software product licenses to InfoScan subscribers
which load InfoScan data on their own computer systems and do not use the
Company's on-line services. Licenses typically require a one-time paid-up
license fee upon acceptance of the software and annual maintenance payments
for update and support services thereafter. Oracle is entitled to receive
royalties on most licenses granted by the Company and its distributors within
the CPG industry until July 2001. Oracle is not entitled to receive royalties
on certain licenses granted by the Company and its data affiliates to CPG end-
users. After July 2001, the Company and Oracle shall renegotiate the royalty
rates owed to Oracle.
InfoScan clients have available from the Company a number of other software
applications for use with scanner data. These include the following:
DataServer Reporter(TM) used by managers to track and analyze sales
performance for territory management; DataServer FastCast(TM) used by sales
and marketing managers to improve the accuracy of their sales forecasts; and
DataServer Partners(TM) used by sales and marketing professionals to develop
profitable product strategies and sales presentations. The Company retained
ownership of DataServer Partners. DataServer Analyzer and DataServer Reporter
were included in the EXPRESS line of products and technology sold to Oracle.
The Company markets FastCast under license from an independent third party.
Prior to the 1995 sale to Oracle, the Company operated a decision support
software business engaged in general application development using the EXPRESS
product line. Following the sale to Oracle, the Company has rights to market,
distribute and provide first line customer support for the full range of
Oracle EXPRESS products. However, it is anticipated that further software
development work by the Company is directed toward the development of
applications for specific use in the CPG industry.
Space Management. The Company markets its proprietary APOLLO Space
Management System software to CPG retailers, wholesalers, manufacturers and
brokers in the United States and overseas. APOLLO software is designed to
assist in the management of retail shelf space. The APOLLO Space Management
System provides a range of tools for space management including APOLLO
VIVID(TM) for producing picture schematics of shelf layouts, APOLLO
TotalStore(TM) for evaluating space utilization, APOLLO BriefCase(TM) for
field sales use, and the National Product Library(TM) which provides a
national data base of product dimensions and product images.
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Logistics. The Company has developed logistics software to help
manufacturers and retailers improve the efficiency of product replenishment
across their distribution channels. The Company's software products and
consulting services for retailers are aimed at forecasting consumer demand at
point-of-sale by product item, planning orders based on the forecast and
generating orders based on the plan. Developments for manufacturers are aimed
at the provision of software, census scanner data and implementation services
designed to provide comprehensive supply chain solutions.
Other Software Products. The Company develops and markets a number of other
software products for use in the CPG industry. These include DataServer
Targeter(TM), which provides sales and marketing organizations with tools to
analyze InfoScan census data on a store-by-store basis and thereby improve the
execution of comprehensive micro-marketing and sales programs. The Category
Manager(TM) is an expert software system designed to facilitate strategic
category planning for retailers and suppliers. TradeWins(TM), released during
1996, is a software system designed to help manufacturers manage their retail
trade promotion expenditures in a more effective manner. The Company owns
DataServer Targeter and TradeWins. The Category Manager was jointly developed
by the Company and The Partnering Group, Inc.
BEHAVIORSCAN(R) AND OTHER TESTING SERVICES. The Company's BehaviorScan
service is a test marketing system which enables CPG manufacturers to measure
the impact of different marketing variables on consumer purchase behavior.
Typical marketing variables tested in BehaviorScan are television
advertisements, newspaper ads, manufacturers' coupons, free samples, in-store
displays, shelf price and packaging changes. BehaviorScan tests compare the
purchases of a group of consumers exposed to test variable(s) with the
purchases of a control group of consumers not exposed to the test variable(s).
A unique feature of the BehaviorScan system is its ability to deliver
alternative television advertising to different groups of panel households
using the Company's patented targetable television technology. BehaviorScan is
currently available in six markets and is the only such electronic test
marketing system in the United States. Major costs associated with the
BehaviorScan system include payments to retailers, compensation to
participating panel households, field personnel costs, cable television studio
operation, computer resources and client service personnel costs.
The Company also provides a number of other testing services primarily for
CPG manufacturers. These include controlled retail testing, matched market
analyses and related special analyses using the Company's InfoScan data bases.
Controlled testing involves testing the placement of new products or changes
in advertising, shelf location, price or promotional conditions in different
retail outlets or different markets and involves custom manipulation and
analysis of the Company's InfoScan data bases.
International Services
Through subsidiaries and joint ventures with other leading marketing
information firms, the Company offers information services in a number of
countries outside of the United States. Specific products offered depend upon
local country competitive conditions, the stage of development of the
Company's business and the availability of scanner data, but generally provide
clients with InfoScan market tracking services based upon a representative
sample of retail scanning stores and proprietary causal data collected by the
Company. Most of the Company's major European subsidiaries and joint venture
companies rely on the Company's data production facilities in the United
States and know-how to provide InfoScan product tracking services.
The Company's only significant competitor offering product tracking services
internationally is the ACNielsen Company ("ACNielsen"). (See "Competition"
below.) The Company competes with ACNielsen in virtually every foreign market
where the Company has established information services. ACNielsen maintains a
dominant position throughout most of Europe where the Company's expenditures
to establish product tracking services have been most significant.
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United Kingdom. The Company's subsidiary in the United Kingdom offers a
product tracking service under the InfoScan name to the British market.
Organized in 1992 as a joint venture, the Company's partners are Taylor Nelson
AGB plc of the United Kingdom and GfK AG of Germany ("GfK"). The Company now
owns substantially all of the joint venture. When first formed, the joint
venture purchased certain assets of a tracking service providing retail audits
primarily of food products in grocery stores. In 1993, the venture expanded
its sample of scanning stores, initiated the collection of causal data and
began offering a fully operational scanning service covering major chains
under the InfoScan name. It also expanded the service to cover stores selling
health and beauty aids. Currently the Company is the only source of retailer
scanner-based information on sales of health and beauty products sold by the
Boots the Chemist and SuperDrug chains of drug stores representing
approximately 30% of all sales of these categories in the U.K.
Pursuant to contractual arrangements, the Company provides data production
services to the joint venture from the Company's computer facilities in Wood
Dale, Illinois.
France. The Company's subsidiary in France offers a scanning-based product
tracking service under the InfoScan name. In 1993, the Company organized a
joint venture, IRI-SECODIP S.C.S. with GfK and SECODIP S.A. to acquire the
operations of SECODIP's retail audit business and the business of a former
development-stage scanner-based operation of GfK.
In 1994, the Company funded most of the joint venture's capital
requirements. In 1995 and 1996, the Company funded all of the joint venture's
requirements and recorded 100% of the operating results and now owns
substantially all of the joint venture interests. Pursuant to contractual
arrangements, the Company provides data production services to the joint
venture from the Company's computer facilities in Wood Dale, Illinois.
Italy. In 1994, the Company began development of an information service in
Italy through the formation of a wholly-owned subsidiary, IRI InfoScan Italy.
In early 1995, the subsidiary produced its initial reports to clients. Its
basic service consists of retail sales and promotion tracking using a sample
of retail grocery outlets. Supermarket sales are tracked by means of scanning
data, while sales in smaller, traditional shops are measured by manual audit
techniques. The Company provides production services to IRI InfoScan Italy
from the Company's computer facilities in Wood Dale, Illinois.
Germany. Since 1993, the Company has had a 15% ownership interest in GfK
Panel Services GmbH ("GfK Panel"), a subsidiary of GfK. GfK Panel has been
offering both retail and consumer panel tracking services based on consumer
household panel data, retail audit data and scanner data. It also has provided
related consulting studies. Scanner data are not available from all major
retailers in Germany, and use of scanning equipment in the former East Germany
is limited. Therefore, scanner data in Germany, when available, are primarily
used for diagnostic and promotion analysis rather than for provision of a
product tracking service. GfK provides production services to GfK Panel
through GfK's own facilities in Nuremberg, Germany.
Effective February 1, 1997, the Company and GfK organized a new joint
venture company, IRI/GfK Retail Services GmbH ("IRI/GfK Retail"). The Company
has a 51% ownership interest in IRI/GfK Retail, and GfK owns the remainder.
IRI/GfK Retail purchased the German retail tracking business and related
software business from GfK Panel and will now provide those business services
to the German market.
In a separate transaction, the Company sold its 15% ownership interest in
GfK Panel to GfK. GfK Panel will continue to provide consumer panel and ad hoc
research services to the market, and GfK Panel and IRI/GfK Retail will
cooperate in selling and delivering services to appropriate customers.
Benelux. The Company and GfK also operate a joint venture which offers a
scanner-based product tracking service to the Netherlands market. This joint
venture is owned 80.1% by GfK and 19.9% by the Company. The scanner-based
product tracking service became fully-operational in 1994 and operates under
the InfoScan name. The Company provides production services to the joint
venture through the Company's computer facilities in
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Wood Dale, Illinois. The Company also has a 19.9% ownership interest in GfK
Panel Services Benelux B.V. and GfK Belgium S.A. These companies operate
household panel services in the Netherlands and Belgium.
Turkey. In 1993, the Company acquired a retail audit business in Turkey
which conducts its service in a national sample of supermarkets, large and
small grocery stores, pharmacies, cosmetic shops and other stores, provides
related special consulting services and distributes IRI software products in
Turkey.
Greece. In 1994, the Company acquired a retail audit business in Greece. The
operation includes collecting, reporting, analyzing and interpreting national
and regional sales data from manual audits.
Sweden. In 1995, the Company acquired a 9.98% interest in a newly-formed
joint venture with GfK for scanner-based product tracking services in Sweden.
The business is being operated by GfK and offers a fully operational national
scanner based tracking service.
Eastern Europe, Middle East and North Africa. In 1995, the Company entered
into an alliance with Middle East Market Research Bureau ("MEMRB"), a market
research company based in Cyprus. MEMRB provides market research throughout
more than 20 countries in the Middle East, Eastern Europe, the Mediterranean,
the Commonwealth of Independent States and North Africa. Under the terms of
the alliance, MEMRB has agreed to cooperate in the adoption of multi-country
technical standards developed by the Company and co-market certain information
and software products with the Company. The Company has an option to acquire
up to a 49% ownership interest in MEMRB.
Japan. In 1995, the Company formed a joint venture in Japan with Tokyo-based
Mitsui & Co., Ltd to provide software and information services in Japan
whereby the Company obtained 60% ownership in the joint venture.
Latin America. The Company has operations in the certain Latin American
markets through joint ventures and acquisitions in Venezuela, Puerto Rico and
Guatemala. The Company owns 49.9% of the Venezuelan joint venture, Datos
Information Resources, which provides audit-based product tracking as well as
ad hoc and software services to the Venezuelan market. The Company's wholly-
owned subsidiary, IRI Puerto Rico, is the largest full-service market research
company in Puerto Rico, offering both audit-based product tracking and ad hoc
services. The Company owns 19.9% of a Guatemalan based company called GSI/IRI
that provides research services in Central America.
TRADEMARKS, PATENTS, LICENSES AND SOFTWARE PROTECTION
The Company is the owner of various trademarks, including InfoScan(R),
InfoScan CensusTM, QScanTM, IRI SoftwareTM, IRI LogisticsTM, BehaviorScan(R),
APOLLOTM, DataServer PartnersTM, DataServer TargeterTM, TradeWinsTM, Logistics
PartnerTM, Shoppers' HotlineTM, EZPrompt(R), CouponScanTM, PromotionScanTM and
Customer Marketing ResourcesTM. The Company also holds certain patents
relating to the targetable television technology utilized in its BehaviorScan
service. The patents expire at various dates between 1999 and 2005. Loss or
infringement of these patents would likely not have a material adverse effect
upon the Company's revenues.
As a result of the sale of the EXPRESS technology and line of software
products to Oracle in July 1995, the Company no longer owns a large portion of
the software that is used in the delivery of InfoScan data. The Company
secured a license back from Oracle assuring the continued use of the EXPRESS
software in the Company's business, including rights to sublicense the
software to clients of the Company. The initial term of the license is six
years. After July 2001, the Company and Oracle shall renegotiate the royalty
rates owed to Oracle. The Company also has rights to use various trademarks
owned by Oracle, including Oracle EXPRESS(R), DataServer(TM), DataServer
Analyzer(TM) and DataServer Reporter(TM).
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The Company regards its data bases as proprietary and, in addition to
copyright protection, relies upon trade secret laws, limitations on access to
its computer source codes, confidentiality agreements with clients and
internal nondisclosure safeguards to protect its rights to proprietary
interests. The Company's own computer software is also proprietary and bears
appropriate copyright notices.
Because of the rapid pace of technological change in the computer industry,
trademark, patent or copyright protection is of less significance than the
knowledge and experience of the Company's personnel and their ability to
develop and market new systems or software products.
WORKING CAPITAL PRACTICES
The Company invoices its information service clients in accordance with
agreed contract terms. This procedure normally requires quarterly or monthly
billing for long-term contracts and payment is typically due within 30 days of
receipt of invoice. However, in specially negotiated circumstances, the
Company may grant delayed billings terms. In other circumstances, the Company
may discount its invoices for advanced payments. Software licenses generally
require payment in full upon acceptance of software.
The Company pays retailers cash in accordance with negotiated terms for
providing scanner data for use in the InfoScan sample service. Payments to
other vendors are normally made in accordance with vendor terms.
CUSTOMERS
The Company had approximately 1,700, 1,300 and 900 clients using its
information services in 1996, 1995 and 1994, respectively. Many of the
Company's clients are CPG manufacturers in the United States or in foreign
countries where the Company offers its services. No client of the Company
accounted for revenues in excess of 10% of the Company's total revenues. The
Company's top ten customers accounted for approximately 35% of the Company's
1996 revenues.
BACKLOG ORDERS
At December 31, 1996, 1995 and 1994, the Company had committed contract
revenues for information services of approximately $265 million, $235 million
and $161 million respectively. Older InfoScan contracts generally require a
minimum one-year client commitment. Contracts continuing beyond the initial
commitment are generally cancelable at any time by the client on six months
prior written notice. More recent contracts generally include commitments of
three years or more. Committed contract revenues include only the
noncancelable portion of a contract. The portion of these committed contract
revenues expected to be earned subsequent to 1997 is approximately 42%.
COMPETITION
Numerous firms supply marketing and advertising research products and
services to CPG manufacturers and retailers. However, the Company and
ACNielsen are the only two firms which provide national scanner-based product
tracking services in the United States to such manufacturers and retailers.
While the Company generates more revenues than ACNielsen in the United States
market, ACNielsen is far larger than the Company in terms of worldwide
revenues, giving it access to greater financial resources than the Company. In
the product tracking services markets across Europe, ACNielsen currently
maintains a dominant market position in most European countries and is the
Company's only competitor.
Principal competitive factors include: innovation, quality, reliability,
timeliness and comprehensiveness of analytical services and data provided;
flexibility in tailoring services to client needs; experience; the capability
of technical and client service personnel; data processing and decision
support software; reputation; price; and geographical coverage.
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RESEARCH AND DEVELOPMENT
The Company is continuously developing new business products and services.
In this regard, the Company is actively engaged in research and development of
new software services and new data base analyses and applications.
Expenditures for research and development for the years ended December 31,
1996, 1995 and 1994 approximated $24.9 million, $37.4 million and $35.1
million, respectively. Included in these expenditures were $5.8 million, $9.9
million and $11.7 million of software development costs that were capitalized.
Expenditures not capitalized were expensed as incurred.
PERSONNEL
At December 31, 1996, the Company had approximately 3,900 full-time and
2,400 part-time employees. The Company depends to a significant extent on its
skilled technical personnel. Its future success will depend to a large degree
upon its ability to continue to hire, train and retain its professional staff.
ITEM 2. PROPERTIES
The Company markets and provides its information services and software
support services to domestic clients from full-service sales offices in New
York, New York; San Francisco and Los Angeles, California; Cincinnati, Ohio;
Norwalk, Connecticut; Fairfield, New Jersey; and Toronto, Canada as well as
from its headquarters in Chicago, Illinois and software development
headquarters in Waltham, Massachusetts. The Company markets to international
clients through subsidiaries and/or offices in Australia, Belgium, Canada,
France, Germany, Guatemala, Greece, Italy, Japan, Mexico, the Netherlands,
Puerto Rico, Sweden, Turkey, United Kingdom, Venezuela and through its various
distributors.
Principal leased facilities of the Company are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR AREA
LOCATION PRINCIPAL OPERATION (SQ. FT.)
- -------- ------------------- -----------
<S> <C> <C>
Chicago, IL............. Corporate headquarters and offices for professional staff 427,000
Waltham, MA............. Professional staff and computer facilities 45,000
Wood Dale, IL........... Computer facilities 45,000
Regional sales and
client service offices. Sales, client service and analysis 263,000
International offices... Sales, client service, computer facilities and professional staff 132,000
Data collection Data collection and client test market control, cable TV studio
facilities............. facilities, warehouse 160,000
</TABLE>
ITEM 3. LEGAL PROCEEDINGS
On July 29, 1996, IRI filed an action against The Dun & Bradstreet Corp.,
ACNielsen and IMS International, Inc. in the United States District Court for
the Southern District of New York entitled Information Resources, Inc. v. The
Dun & Bradstreet Corp., et. al. No. 96 CIV. 5716 (the "Action"). IRI alleged
that, among other things, the Defendants violated Sections 1 and 2 of the
Sherman Act, 15 U.S.C. (S)(S)1 and 2, by engaging in a series of anti-
competitive practices aimed at excluding the Company from various export
markets for retail tracking services and regaining monopoly power in United
States market for such services. These practices included: i) entering into
exclusionary contracts with retailers in several countries in order to
restrict the Company's access to sales data necessary to provide retail
tracking services; ii) illegally tying services in markets over which
Defendants' had monopoly power with services in markets in which ACNielsen
competed with the Company; iii) predatory pricing; iv) acquiring foreign
market competitors with the intent of impeding the Company's efforts at export
market expansion; v) tortiously interfering with Company contracts and
relationships with clients, joint venture partners and other market research
companies; and vi) disparging the Company to financial analysts and clients.
By the Action, the Company seeks to enjoin Defendants' anti-competitive
practices and to recover damages in excess of $350 million, prior to trebling.
10
<PAGE>
The Action followed legal proceedings by the Canadian Competition Tribunal
and the European Commission against ACNielsen for anti-competitive practices.
On August 30, 1995, following a full hearing, the Canadian Competition
Tribunal issued an Order and Reasons for Order against ACNielsen in In Re: The
D&B Companies of Canada Ltd., concluding that ACNielsen had engaged in "anti-
competitive acts" with the express intent "to exclude potential competitors
generally and the Company specifically" from the Canadian retail tracking
services market. On May 4, 1996, the European Commission issued a "Statement
of Objections" against ACNielsen, following an 18 month investigation,
alleging that ACNielsen had infringed Article 86 of the Treaty of Rome through
several practices undertaken intentionally as part of a strategy to exclude
the Company from the European markets for retail tracking services. On
December 3, 1996, ACNielsen signed an Undertaking to the European Commission
agreeing to halt numerous contractual practices which the Company contended
was part of ACNielsen's intentional and unlawful strategy aimed at preventing
the Company from establishing a competitive position in Europe and eliminating
the Company as a competitor.
In the ordinary course of business, IRI and its subsidiaries become involved
as plaintiffs or defendants in various other legal proceedings. The claims and
counterclaims in such litigation, including those for punitive damages,
individually in certain cases and in the aggregate, involve amounts which may
be material. However, it is the opinion of the Company's management, based
upon the advice of counsel, that the ultimate disposition of pending
litigation against the Company will not be material.
The Company was involved in a shareholder class action suit filed by certain
shareholders in 1989. In June 1994 a federal district court jury returned a
unanimous verdict in favor of the Company. The plaintiffs appealed such
determination with the United States Court of Appeals for the Seventh Circuit.
In August 1995 the Appeals Court rendered its decision in favor of the
Company. The plaintiffs did not file any further appeals. In April 1994
certain shareholders filed a class action lawsuit against the Company, and in
October 1994 the Company entered into an agreement to settle this lawsuit.
Pursuant to the terms of the court approved settlement agreement, in December
1995 the Company satisfied its obligations by issuing 211,223 shares of Common
Stock valued at $2.6 million and paying $2.6 million in cash to the settlement
class.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY AND BUSINESS EXPERIENCE
---- --- ---------------------------------------------
<C> <C> <S>
Thomas W. Wilson Jr.. 65 Chairman of the Board of Directors of the Company
since April 1995. Director of the Company since
1991. Senior Partner of McKinsey & Company,
management consultants, from 1973 until 1990
(retired). Director of Aerial Communications Inc.
since October 1996.
Gian M. Fulgoni...... 49 Chief Executive Officer since January 1986; Chairman
of the Board of Directors of the Company from
February 1991 to April 1995; Director since 1981;
Director of PLATINUM technology, Inc.
Randall S. Smith..... 45 President of International Information Services
Group since January 1995 and President of Operations
Group since February 1996; President--International
Operations Division from December 1993 until January
1995; President of European Data Operations Division
from February 1993 until December 1993; President of
the Testing Services Division from prior to March
1992 to January 1993.
Gary M. Hill......... 49 Executive Vice President and Chief Financial Officer
of the Company since May 1995. Financial consultant
from August 1994 to December 1994. Senior Vice
President--Finance of Itel Corporation from prior to
March 1992 to July 1994.
</TABLE>
11
<PAGE>
<TABLE>
<CAPTION>
NAME AGE POSITION WITH COMPANY AND BUSINESS EXPERIENCE
---- --- ---------------------------------------------
<C> <C> <S>
Edward S. Berger........ 56 Executive Vice President since June 1993;
Secretary and General Counsel of the Company
since 1988; Division Senior Vice President of the
Company from February 1991 until June 1993.
John P. McNicholas, Jr.. 43 Controller of the Company since June 1995; Vice
President--Controller of Itel Corporation from
May 1992 to March 1995; Controller of Itel
Corporation from prior to March 1992 to May 1992.
</TABLE>
All of the foregoing executive officers hold office until the next annual
meeting of the Board of Directors and until their successors are elected and
qualified.
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER'S
MATTERS
The Company's Common Stock has been traded on the NASDAQ Stock Market under
the symbol "IRIC" since 1983. The stock currently trades on the National
Market System. Share data has been adjusted for all stock splits and stock
dividends to date.
The high and low closing sales prices for the Company's Common Stock were as
follows:
<TABLE>
<CAPTION>
QUARTERS HIGH LOW
-------- ------- ---------
<S> <C> <C>
1995
1st quarter........................................... $15 1/4 $12 1/4
2nd quarter........................................... 17 7/8 11 11/16
3rd quarter........................................... 14 3/8 12 11/16
4th quarter........................................... 13 3/8 10 1/8
1996
1st quarter........................................... 15 5/8 12 3/4
2nd quarter........................................... 15 1/8 12
3rd quarter........................................... 13 1/2 11 1/8
4th quarter........................................... 14 1/4 11 1/8
</TABLE>
The last sale price on February 28, 1997 was $14 7/8 per share. As of
February 28, 1997 there were 2,158 record holders of the Company's Common
Stock.
The Company has never paid cash dividends. It is the present policy of the
Company's Board of Directors to retain earnings for use in the Company's
business. Accordingly, the Board of Directors does not anticipate that cash
dividends will be paid in the foreseeable future. There are restrictions in
IRI's bank loan and certain lease agreements which limit the payment of
dividends and the repurchases or redemption of Common Stock. (See Note 11 of
the Notes to the Consolidated Financial Statements.)
12
<PAGE>
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
--------------------------------------
1996 1995 1994 1993 1992
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C> <C>
HISTORICAL RESULTS OF OPERATIONS (1)(2)
Revenues................................ $405.6 $399.9 $376.6 $334.5 $276.4
====== ====== ====== ====== ======
Nonrecurring expenses (3)............... (4.8) (22.8) -- (3.0) --
====== ====== ====== ====== ======
Operating profit (loss)................. (5.1) (54.9) 5.3 37.9 37.7
====== ====== ====== ====== ======
Net gain (loss) on sale of assets (4)... (4.6) 41.1 -- -- --
====== ====== ====== ====== ======
Earnings (loss) before cumulative effect
of change in accounting principle (5).. $ (7.6) $(11.7) $ (8.9) $ 22.2 $ 19.2
Cumulative effect on prior years of
change in accounting principle (2) (6). -- -- (6.6) 1.9 --
------ ------ ------ ------ ------
Net earnings (loss)..................... $ (7.6) $(11.7) $(15.5) $ 24.1 $ 19.2
====== ====== ====== ====== ======
Earnings (loss) per common and common
equivalent share (2):
Before cumulative effect of accounting
changes............................... $ (.27) $ (.43) $ (.34) $ .82 $ .78
Cumulative effect of accounting changes
(6)................................... -- -- (.26) .07 --
------ ------ ------ ------ ------
Net earnings (loss)..................... $ (.27) $ (.43) $ (.60) $ .89 $ .78
====== ====== ====== ====== ======
Weighted average common and common
equivalent shares...................... 27.8 27.0 26.1 27.2 24.8
====== ====== ====== ====== ======
BALANCE SHEET DATA (1)
Total assets............................ $334.5 $338.5 $346.8 $317.3 $263.1
====== ====== ====== ====== ======
Working capital......................... 34.6 44.4 66.9 83.4 96.2
====== ====== ====== ====== ======
Long-term debt.......................... 7.9 3.8 31.5 3.1 4.7
====== ====== ====== ====== ======
Stockholders' equity.................... $226.3 $229.8 $227.2 $228.7 $186.9
====== ====== ====== ====== ======
Book value per common and common
equivalent share....................... $ 8.12 $ 8.33 $ 8.58 $ 9.00 $ 7.61
====== ====== ====== ====== ======
Dividends paid per common share......... -- -- -- -- --
====== ====== ====== ====== ======
ADDITIONAL FINANCIAL INFORMATION (1)
Deferred data procurement costs......... $ 98.0 $ 96.8 $ 79.2 $ 68.0 $ 51.9
====== ====== ====== ====== ======
Capital expenditures.................... 18.8 24.5 24.0 25.9 20.0
====== ====== ====== ====== ======
Capitalized software costs.............. $ 5.8 $ 9.9 $ 11.7 $ 10.2 $ 8.8
====== ====== ====== ====== ======
</TABLE>
- --------
(1) In 1995, the Company purchased 39% of its French joint venture, IRI-
SECODIP, from its joint venture partner increasing IRI's ownership in the
joint venture from 50% to 89%. As a result of a disproportionate capital
contribution made in 1996, the Company now owns substantially all of the
joint venture interests. IRI-SECODIP has been consolidated effective
January 1, 1995.
(2) Effective January 1, 1994, the Company changed its method of recognizing
revenue on its information service products whereby revenue is recognized
over the term of the contract on a straight-line basis. Previously, the
Company recognized a portion of the initial contract revenue in the period
between client commitment and either the start of forward data or the test
commencement with the remaining revenue recognized ratably over the initial
contract term. Pro forma revenues and earnings per common and common
equivalent share before cumulative effect of accounting change for 1993 and
1992 were $334.6 million and $279.2 million and $.83 and $.85,
respectively.
(3) The $4.8 million nonrecurring charge in 1996 principally relates to the
disposal of certain cable TV advertising cut-in equipment originally
developed for use in the Company's market testing operations. Nonrecurring
expenses in 1995 included a $12.4 million write-down of assets, principally
accelerated recognition of deferred European data procurement costs, to net
realizable value and a $10.4 million charge
13
<PAGE>
principally relating to the Company's Towne-Oller facility closing and
related severance charge. Nonrecurring expenses in 1993 primarily related
to a loss on the disposition of certain non-strategic assets.
(4) In December 1996, the Company recorded a $4.6 million charge primarily for
the final settlement of the escrow account related to the sale of a
portion of the Company's software business to Oracle in 1995. In July
1995, the Company completed the sale to Oracle of certain assets,
liabilities and related software application products of its software
products business resulting in a $41.1 million gain. (See Note 4 of the
Notes to Consolidated Financial Statements.)
(5) The 1994 results reflected a pre-tax provision of $8.3 million related to
shareholder litigation. (See Note 13 of the Notes to Consolidated
Financial Statements.) The 1992 results reflected a pre-tax provision of
$4.4 million related to patent infringement litigation.
(6) Effective January 1, 1993, the Company adopted Statement of Financial
Accounting Standards No. 109--Accounting for Income Taxes (FAS 109).
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Overview: Over the periods presented, the Company has generated increased
revenues resulting from the continued growth of its U.S. services business and
the startup and significant expansion of its International services business.
The revenue gains in recent years were achieved in spite of an intensely
competitive pricing environment that began in late 1993, which continued
through 1995 and moderated somewhat in 1996. Due to the longer-term nature of
most InfoScan contracts, pricing changes have a delayed effect on the results
of operations as reported in the Company's consolidated financial statements.
This lagged effect is especially apparent in the Company's U.S. operations
because only a portion of all InfoScan contracts come up for renewal and are
subject to competitive bidding in any particular year.
The development of the Company's International services business has
resulted in significant operating losses which will likely continue until
these operations achieve a substantially higher level of revenues. The
Company's European operations also will continue to require substantial cash
investment. On December 3, 1996, the AC Nielsen Company ("ACNielsen") signed
an Undertaking with the European Commission ("the Commission") agreeing to
halt numerous contractual practices which the Company believes has hampered
the Company's participation in European markets. In May 1996, the Commission
issued a Statement of Objections to ACNielsen regarding various
anticompetitive activities. The Company had contended that those practices
were pursued by ACNielsen as part of an intentional and unlawful strategy
aimed at preventing the Company from establishing a competitive position in
Europe and eliminating the Company as a competitor. As a result of the
Undertaking, the Company believes that clients can now benefit from the
Company's services without risk of financial penalties being imposed by
ACNielsen and that a significant artificial barrier to the Company's efforts
to provide services to the European markets has been removed.
On an ongoing basis, the Company reviews the outlook of its European
services business, including current and near term economic conditions,
expected market growth and the regulatory and competitive environment. Based
upon currently projected operating results and cash flows, the Company's
assessment is that the realizability of its European assets is not impaired.
To the extent that actual operating results and cash flows are lower than
current projections, the Company may be required to write down a portion of
these assets in future periods.
Special Items: In July 1995, the Company completed the sale to Oracle
Corporation ("Oracle") of certain assets, liabilities and software products
relating to its on-line analytical processing business, the software products
business previously operated by the Company's software division. Since this
business was not a separate business segment, prior period's consolidated
financial statements have not been restated. The sale resulted in a pre-tax
gain of $41.1 million in 1995. In December 1996, the Company recorded a ($4.6)
million charge primarily for final settlement of the escrow account related to
the sale.
14
<PAGE>
In addition, in 1996 the Company recorded a ($4.8) million nonrecurring
charge primarily due to the disposal of certain cable TV advertising cut-in
equipment originally developed for use in the Company's market testing
operation. In 1995, the Company recorded a nonrecurring charge of ($22.8)
million primarily related to the accelerated recognition of European deferred
data procurement costs and the reorganization of the Company's Towne-Oller
unit. In addition, selling, general and administrative expenses in the third
quarter of 1995 reflect approximately ($6.7) million of special charges,
principally related to a provision for doubtful accounts.
In 1995, IRI increased its ownership in its French joint venture, IRI-
SECODIP, from 50% to 89%. As a result of a disproportionate capital
contribution made in 1996, the Company now owns substantially all of the joint
venture interests. All 1996 and 1995 consolidated financial information
reflects IRI-SECODIP as a consolidated subsidiary of the Company. All prior
period consolidated financial information reflects IRI-SECODIP as an equity
investment since its purchase by the Company in April 1993.
Operations: While overall revenues in 1996 increased over 1995 and 1994, the
Company incurred consolidated operating losses in all three years. A number of
factors influenced operating results, including: (a) the continued competitive
environment in Europe and costs relating to the development of the Company's
International services business; (b) the effects of strong price competition
on U.S. InfoScan renewals; (c) costs related to building the Company's
InfoScan Census data base and its Omega re-engineering initiatives; (d)
increased client deliverables associated with past InfoScan contract renewals;
(e) increased costs of software development efforts; (f) nonrecurring charges
in 1996 and 1995; and (g) the impact of the sale of a portion of the Company's
software business to Oracle including the net gain (loss) on sale in 1995 and
1996, respectively.
The Company considers the aggregation of operating profit (loss), equity
earnings (losses) and minority interests ("Operating Results") to be a
meaningful and readily comparable measure of the Company's relative
performance. A comparative analysis of consolidated revenues and Operating
Results for the years ended December 31, 1996, 1995 and 1994 follows (in
thousands):
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Revenues:
U.S. Services.................................. $344,612 $317,553 $299,068
International Services......................... 60,991 42,165 13,580
-------- -------- --------
Subtotal..................................... 405,603 359,718 312,648
Software products business sold to Oracle...... -- 40,198 63,922
-------- -------- --------
$405,603 $399,916 $376,570
======== ======== ========
Operating Results:
U.S. Services
Operating profit............................. $ 31,106 $ 15,286 $ 38,112
Equity in loss of affiliated companies....... -- (200) (1,215)
-------- -------- --------
Subtotal--U.S. Services...................... 31,106 15,086 36,897
International Services
Operating loss............................... (29,425) (35,756) (18,056)
Equity in earnings (loss) of affiliated
companies................................... 30 579 (7,958)
Minority interests........................... 986 304 979
-------- -------- --------
Subtotal--International Services............. (28,409) (34,873) (25,035)
Corporate and other expenses................... (1,965) (3,652) (7,535)
Software products business sold to Oracle-
operating loss................................ -- (8,044) (7,215)
Nonrecurring expenses.......................... (4,808) (22,759) --
-------- -------- --------
Operating Results.............................. $ (4,076) $(54,242) $ (2,888)
======== ======== ========
</TABLE>
Revenues from the Company's U.S. services business in 1996 were 8.5% higher
than in 1995. Revenues in 1996 reflected market growth, net share gains and
increased InfoScan Census and analytic revenues, partially offset by the
effect of the close-down of the Company's Towne-Oller service during late
1995. Revenues from
15
<PAGE>
the Company's U.S. services business in 1995 increased 6.2% over 1994.
Revenues in 1995 reflected market growth and net share gains, offset somewhat
by the difficult competitive environment resulting in severe price pressure
upon obtaining contract renewals for existing clients. U.S. Operating Results
increased $16.0 million in 1996. This increase was due to revenue gains, the
benefit of lower expense growth resulting from the Company's cost containment
initiatives and production process reengineering and the effect of $6.7
million of special charges in 1995. U.S. Operating Results in 1995 decreased
$21.8 million compared to 1994. This decline was due to a 15.4% increase in
costs related primarily to increases in personnel and system capabilities to
support current client contracts as well as to enhance future revenue and
achieve operating efficiencies, and $6.7 million of special general and
administrative expenses, primarily related to a provision for uncollectible
accounts receivable.
International service revenues in 1996 increased 44.6% over 1995 primarily
as a result of significant revenue gains in France, the U.K. and Italy due to
an increase in the number of InfoScan clients and expanded usage among
existing clients. International services revenues in 1995 also increased
significantly over 1994 due to the continuing development of the various
European start-up operations, and in part, to the consolidation of IRI-SECODIP
as of January 1, 1995. The International Operating Results were a ($28.4)
million loss in 1996 compared to a ($34.9) million loss in 1995. Results
continue to reflect a difficult competitive pricing environment in Europe, the
ramp-up of Italian operations and high retailer costs in the U.K. The
International Operating Results were a ($34.9) million loss in 1995 compared
to a ($25.0) million loss in 1994, resulting from higher costs in the United
Kingdom, the start-up of the Company's business in Italy in late 1994 and the
effect of foreign exchange rates.
Nonrecurring expenses in 1996 include a ($4.8) million write-off of certain
assets, principally related to the disposal of certain cable TV advertising
cut-in equipment originally developed for use in the Company's market-testing
operations. Nonrecurring expenses in 1995 included a ($12.4) million write-
down of assets, principally accelerated recognition of deferred European data
procurement costs to net realizable value and a ($10.4) million charge
principally relating to the Company's Towne-Oller facility closing and related
severance charge. The accelerated recognition of deferred European data
procurement costs was based upon the Company's assessment of the realizability
of these assets, in part due to lower than originally expected revenues and
operating results in the Company's startup operations in the United Kingdom
and Italy. The 1995 nonrecurring expense relating to the Company's Towne-Oller
business was initiated by the Company's decision to transition Towne-Oller
service from the use of warehouse withdrawal data to InfoScan scanner data and
close down of its New York operation.
Consolidated results in 1995 included seven-months of Operating Results of
the software products business sold to Oracle on July 27, 1995 in comparison
to full year results in 1994. Operating Results of the software products
business were an ($8.0) million loss and a ($7.2) million loss in 1995 and
1994, respectively.
Net loss on sale of assets in 1996 reflected a ($4.6) million pre-tax charge
primarily for final settlement of the escrow account related to the sale of a
portion of the Company's software business to Oracle in 1995. Net gain on sale
of assets in 1995 of $41.1 million included the pre-tax gain attributable to
the Oracle sale.
Year Ended December 31, 1996: Consolidated net loss was ($7.6) million in
1996 compared to a net loss of ($11.7) million in 1995. Results in 1996
included a ($4.8) million nonrecurring charge principally related to the
disposal of certain cable TV advertising cut-in equipment and a ($4.6) million
charge primarily related to final settlement on the sale of a portion of the
Company's software business to Oracle in 1995. Results in 1995 included
several special items including: (a) a $41.1 million pre-tax gain on sale of a
portion of the Company's software business to Oracle; (b) a $22.8 million
nonrecurring charge primarily related to the accelerated recognition of
European deferred data procurement costs and the reorganization of the
Company's Towne-Oller unit; and (c) $6.7 million of special charges included
in selling, general and administrative expenses, principally relating to a
provision for uncollectible accounts receivable.
Consolidated revenues increased 12.8% to $405.6 million in 1996, after
adjusting revenues for 1995 to remove that portion of the Company's software
business that was sold to Oracle in July 1995. Including such revenues in the
1995 base results in a 1.4% consolidated revenue increase from 1995 to 1996.
16
<PAGE>
Consolidated costs of information services sold increased $27.4 million or
8.0% to $369.0 million in 1996. Major components of the 1996 increase
included: (a) an $11.4 million or 7.4% increase in U.S. services compensation
expense resulting primarily from higher headcount required for software
development and client servicing; (b) a $9.0 million increase in International
services compensation expense resulting from the continued expansion of
operations; and (c) a $5.9 million increase in amortization of deferred data
procurement costs.
Consolidated results for 1995 included the operations of the software
products business unit sold to Oracle in July 1995. This part of the software
business reported costs of software products sold for the seven months of 1995
of approximately $41.1 million.
Consolidated selling, general and administrative expenses decreased $12.4
million or 25.2% to $36.9 million in 1996. Excluding that portion of selling,
general and administrative expenses attributable to the software products
business sold to Oracle, consolidated selling, general and administrative
expenses decreased $5.4 million or 12.6% in 1996 compared to 1995. This
decrease was attributable to the special charges of $6.7 million incurred in
1995 principally related to a provision for uncollectible accounts receivable.
Interest and other expenses for 1996 and 1995 were $1.2 million and $2.8
million, respectively. This decrease was principally due to application of
proceeds from the July 1995 Oracle sale to reduce bank debt.
The Company's 1996 and 1995 income tax benefit, resulting from pretax
losses, was lower than the income tax benefit computed using the U.S. Federal
statutory rate due to certain unbenefitted foreign losses, goodwill
amortization and other nondeductible expenses.
Year Ended December 31, 1995: Loss before cumulative effect of change in
accounting principle was ($11.7) million in 1995 compared to a loss of ($8.9)
million in 1994. Results in 1995 included several special items including: (a)
a $41.1 million pre-tax gain on sale of a portion of the Company's software
products business to Oracle in July 1995; (b) a $22.8 million nonrecurring
charge primarily related to the accelerated recognition of deferred European
data procurement costs and the reorganization of the Company's Towne-Oller
unit; and (c) $6.7 million of special charges included in selling, general and
administrative expenses, principally relating to a provision for uncollectible
accounts receivable. Results in 1994 included a pre-tax provision of $8.3
million related to settled shareholder litigation.
Exclusive of the revenues of the disposed business in both years,
consolidated revenues increased 15.1% in 1995 in comparison to 1994, due to
increases in U.S. services revenues along with increases in revenues of the
Company's developing International services business. The Company's U.S.
services revenue growth reflected the continued negative effect of an intense
pricing environment which began in late 1993. Including revenues of the
disposed business, consolidated revenues increased 6.2% to $399.9 million in
1995 compared to $376.6 million in 1994, as the above factors were reduced by
the effect of the sale of the software business to Oracle in July 1995.
Consolidated costs of information services sold increased $76.5 million, or
28.8% to $341.6 million in 1995. Major components of the 1995 increase
included: (a) a $19.8 million or 14.9% increase in U.S. services compensation
expense resulting from higher headcount required to service clients and salary
increases; (b) a $23.1 million increase in International services compensation
expense resulting from the consolidation of IRI-SECODIP and the continued
expansion of all international operations; (c) a $16.3 million increase in
amortization of deferred data procurement costs, principally arising from
expansion of the International services business in Europe; (d) and a $12.0
million increase in depreciation and computer expenses required to deliver
increasing levels of InfoScan services in Europe and the United States.
Increases in computer operations were required to support the Company's Census
product initiative and its production re-engineering and future cost reduction
projects.
Consolidated results for all periods included the operations of the software
products business until sold to Oracle in July 1995. This part of the software
business reported costs of software products sold for the seven months of 1995
of approximately $41.1 million compared to $60.4 million for the full year of
1994.
17
<PAGE>
Consolidated selling, general and administrative expenses increased $3.6
million or 7.9% to $49.4 million in 1995. Excluding that portion of selling,
general and administrative expenses attributable to the software products
business, consolidated selling, general and administrative expenses were $42.3
million in 1995 and $35.0 million in 1994. This $7.3 million increase was
primarily due to $6.7 million of special charges incurred in 1995 principally
related to a provision for uncollectible accounts receivable. In addition,
approximately $2.9 million of the increase in total selling, general and
administrative expenses for 1995 were due to the consolidation of IRI-SECODIP.
Consolidated selling, general and administrative expense in 1994 included a
one-time charge of $1.4 million incurred in connection with the canceled
acquisition of Asia-based SRG Holdings Limited.
Interest and other expenses for 1995 and 1994 were $2.8 million and $1.6
million, respectively, increasing because of extensive borrowing requirements
in the first half of 1995, which were needed to fund the expansion of the
Company's International services business in Europe. In July 1995, the Company
repaid its bank borrowings in full.
Equity in earnings (loss) of affiliated companies reflected earnings and
losses from equity investments. The reduction in the equity loss in 1995 was
primarily due to the Company's increased ownership interest in its French
affiliate which, effective January 1, 1995, has been included as a
consolidated subsidiary of the Company.
The Company's 1995 and 1994 income tax benefit, resulting from pretax
losses, was lower than the income tax benefit computed using the U.S. Federal
statutory rate due to certain unbenefitted foreign losses, goodwill
amortization and other nondeductible expenses.
LIQUIDITY AND CAPITAL RESOURCES
The expansion of its information services business in Europe has required
extensive cash investment. The Company's current cash resources include its
$12.2 million consolidated cash balance, $44.5 million available under the
bank line of credit and internally generated funds from its U.S. operations.
The Company anticipates that it will have sufficient funds from these sources
to satisfy its cash needs for the foreseeable future. Bank line availability
is subject to compliance with financial covenants relating to operating and
cash flow results, tangible net worth and leverage and quick ratios.
Certain of the Company's loan and lease agreements include various financial
covenants which require that the Company maintain a minimum tangible net
worth, as defined, and otherwise limit IRI's ability to declare dividends or
make distributions to holders of capital stock, or redeem or otherwise acquire
shares of the Company. Approximately $3.5 million is available for such
distributions under the most restrictive of these covenants.
In July 1995, the Company sold its software products business to Oracle for
approximately $100 million in cash, including $8.0 million of cash in escrow,
subject to post-closing adjustment. The $8.0 million constituted a general
escrow which was settled in December 1996. In July 1995, the entire amount
outstanding under the Company's existing credit facility was repaid by using a
portion of the proceeds from the sale. The remainder of the proceeds was used
to pay expenses associated with the sale and for general corporate purposes.
Cash Flow for the Year Ended December 31, 1996: Consolidated net cash
provided by operating activities was $102.1 million for the year ended
December 31, 1996 compared to $76.1 million in 1995. Cash provided by
operating activities increased primarily due to improved operating performance
in 1996. Consolidated cash used in net investing activities was ($121.2)
million in 1996 compared to ($43.9) million in 1995 as the 1995 period
benefitted from the $92.0 million of proceeds received from the sale of the
software products business to Oracle. Net cash provided (used) before
financing activities was ($19.1) million for 1996 and $32.2 million in 1995 as
1995 cash flow was benefitted by $92.0 million of proceeds from the Oracle
transaction. Consolidated cash
18
<PAGE>
provided by (used in) net financing activities was $7.1 million in 1996
compared to ($19.1) million in 1995. The 1995 net financing activities
primarily reflect the repayment of bank borrowings using proceeds from the
Oracle sale.
Cash Flow for the Year Ended December 31, 1995: Consolidated net cash
provided by operating activities was $76.1 million for the year ended December
31, 1995 compared to $77.7 million in 1994. Cash provided by operating
activities decreased due primarily to lower cash earnings from operations
offset by a smaller increase in accounts receivable and other working capital
in 1995. Consolidated cash used for net investing activities was ($43.9)
million in 1995 versus ($116.4) million in 1994. The decrease in consolidated
investing activities in 1995 was due to the benefit of proceeds received from
the sale of a portion of the software products business to Oracle, partially
offset by increases in data procurement costs attributable to the expansion of
the Company's data collection efforts in Europe and, to a much lesser degree,
the United States. Net cash provided (used) before financing activities was
$32.2 million in 1995 and ($38.8) million in 1994 as 1995 cash flow was
benefitted by $92.0 million of proceeds from the Oracle transaction.
Consolidated cash (used) provided by net financing activities was ($19.1)
million for the year ended December 31, 1995 in comparison to $30.3 million
for the year ended December 31, 1994. The net financing activities reflected
bank loan repayments in 1995 made possible by the sale of the software
products business to Oracle. Net financing activities in 1994 reflected net
bank borrowings of $29.0 million used to fund the Company's continuing
development of its International information operations.
Financings: In 1995, following the sale of a portion of its software
business to Oracle, the Company repaid the entire amount of bank debt
outstanding and entered into a new credit facility. The Company has a $50.0
million bank credit facility maturing in 1998, with fixed or floating interest
rate options at or below prime. Facility fees of .4% are payable on the bank
credit facility, and there are no commitment fees. The credit facility
contains financial covenants which restrict the Company's ability to incur
additional indebtedness or liens on its assets. The financial covenants also
require the Company to meet certain tangible net worth and operating income
levels and cash flow coverage and working capital ratios. The primary use of
borrowings has been for the expansion of the Company's information services in
Europe.
At December 31, 1996, $44.5 million was available under the bank credit
facility for general corporate purposes.
Other Deferred Costs and Capital Expenditures: Consolidated deferred data
procurement expenditures were $98.0 million, $96.8 million and $79.2 million
for the years ended December 31, 1996, 1995 and 1994, respectively. These
expenditures are amortized over a period of 28 months and include payments to
retailers for point-of-sale data and costs related to collecting, reviewing
and verifying other data (i.e., causal factors) which are an essential part of
the data base. The increase in deferred data procurement expenditures was
principally related to the expansion of the Company's International services
business. Deferred data procurement expenditures for the Company's U.S.
services business were $65.6 million, $64.7 million and $61.6 million for the
years ended December 31, 1996, 1995 and 1994, respectively. The Company's
International services business deferred data procurement expenditures were
$32.4 million, $32.1 million and $17.6 million for the years ended December
31, 1996, 1995 and 1994, respectively. Management expects to continue the
development of its businesses in Europe, and accordingly, the Company's
European operations will continue to require substantial investment in data
procurement costs. Based upon currently projected operating results and cash
flows, the Company's assessment is that the realizability of its European
assets is not impaired. To the extent that actual operating results and cash
flows are lower than current projections, the Company may be required to write
down a portion of these assets in future periods.
Consolidated capital expenditures were $18.8 million, $24.5 million and
$24.0 million for the years ended December 31, 1996, 1995 and 1994,
respectively. Capital expenditures for the Company's U.S. services business
were $15.2 million, $18.6 million and $17.3 million for the years ended
December 31, 1996, 1995 and 1994, respectively, while related depreciation
expense was $16.0 million, $16.1 million and $14.7 million,
respectively. The Company's International services business capital
expenditures were $3.6 million, $5.9 million
19
<PAGE>
and $6.7 million for the years ended December 31, 1996, 1995 and 1994,
respectively, while depreciation expense was $4.2 million, $4.1 million and
$2.4 million, respectively.
Consolidated capitalized software development costs were $5.8 million, $9.9
million and $11.7 million for the years ended December 31, 1996, 1995 and
1994, respectively.
NOL Carryforwards: As of December 31, 1996, the Company had cumulative U.S.
Federal net operating loss ("NOL") carryforwards of approximately $64.8
million that expire primarily in 2009 and 2011. Certain of these carryforwards
have not been examined by the Internal Revenue Service and, therefore, are
subject to adjustment. In addition, at December 31, 1996, various foreign
subsidiaries of IRI had aggregate cumulative NOL carryforwards for foreign
income tax purposes of approximately $6.2 million which are subject to various
income tax provisions of each respective country. Approximately $3.0 million
of these foreign NOLs may be carried forward indefinitely, while the remaining
$3.2 million expire in 2000 and 2001. At December 31, 1996 the Company had
general business tax credit carryforwards of approximately $4.9 million which
expire primarily between 1999 and 2010, and are available to reduce future
Federal income tax liabilities.
Impact of Inflation: Inflation has slowed in recent years and is currently
not an important determinant of the Company's results of operations. To the
extent permitted by competitive conditions, the Company passes increased costs
on to customers by adjusting sales prices and in the case of multi-year
contracts through consumer price index provisions of such agreements.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Listed below are the financial statements and supplementary data included in
this part of the Annual Report on Form 10-K:
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C>
(a) Financial Statements
Report of Independent Auditors (Ernst & Young LLP)...................... 21
Report of Independent Certified Public Accountants (Grant Thornton LLP). 22
Consolidated Balance Sheets at December 31, 1996 and 1995............... 23
Consolidated Statements of Operations for the years ended December 31,
1996, 1995 and 1994.................................................... 24
Consolidated Statements of Stockholders' Equity for the years ended
December 31, 1996, 1995 and 1994....................................... 25
Consolidated Statements of Cash Flows for the years ended December 31,
1996, 1995 and 1994.................................................... 26
Notes to Consolidated Financial Statements.............................. 27
(b) Supplementary Data
Summary of Quarterly Data............................................... 39
</TABLE>
Financial statement schedule is included on page 43 preceding the signature
pages of this report (see Item 14).
20
<PAGE>
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Information Resources, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Information
Resources, Inc. and Subsidiaries as of December 31, 1996, and the related
consolidated statements of operations, stockholders' equity and cash flows for
the year then ended. Our audit also included the financial statement schedule
listed in the Index at Item 14(a). These financial statements and schedule are
the responsibility of the Company's management. Our responsibility is to
express an opinion on these financial statements and schedule based on our
audit.
We conducted our audit in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audit provides a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Information
Resources, Inc. and Subsidiaries at December 31, 1996 and the consolidated
results of their operations and their consolidated cash flows for the year
then ended, in conformity with generally accepted accounting principles. Also,
in our opinion, the related financial statement schedule, when considered in
relation to the basic financial statements taken as a whole, presents fairly
in all material respects the information set forth therein.
Ernst & Young LLP
Chicago, Illinois
February 12, 1997
21
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors and Stockholders
Information Resources, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheet of Information
Resources, Inc. and Subsidiaries as of December 31, 1995, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the two years in the period ended December 31, 1995. These financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Information
Resources, Inc. and Subsidiaries at December 31, 1995, and the consolidated
results of their operations and their consolidated cash flows for each of the
two years in the period ended December 31, 1995, in conformity with generally
accepted accounting principles.
As discussed in NOTE 1, effective January 1, 1994, the Company changed its
method of recognizing revenue.
Grant Thornton LLP
Chicago, Illinois
February 15, 1996
22
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995
-------- --------
(IN THOUSANDS)
ASSETS
------
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................ $ 12,195 $ 24,884
Accounts receivable, net................................. 99,413 95,862
Escrow receivable........................................ -- 8,000
Prepaid expenses and other............................... 6,575 5,169
-------- --------
Total Current Assets................................... 118,183 133,915
-------- --------
Property and equipment, at cost............................ 147,398 136,946
Accumulated depreciation and amortization................ (92,806) (76,541)
-------- --------
Net property and equipment............................. 54,592 60,405
Investments................................................ 18,737 18,791
Other assets............................................... 142,981 125,425
-------- --------
$334,493 $338,536
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
CURRENT LIABILITIES
Current maturities of capitalized leases................. $ 2,805 $ 2,317
Accounts payable......................................... 36,059 36,214
Accrued compensation and benefits........................ 17,660 19,812
Accrued property, payroll and other taxes................ 4,506 3,981
Accrued expenses......................................... 7,015 11,571
Deferred revenue......................................... 15,558 15,599
-------- --------
Total Current Liabilities.............................. 83,603 89,494
-------- --------
Long-term debt............................................. 7,892 3,760
Deferred income taxes, net................................. 9,113 8,643
Deferred gain.............................................. 3,632 4,047
Other liabilities.......................................... 3,925 2,838
STOCKHOLDERS' EQUITY
Preferred stock--authorized 1,000,000 shares, $.01 par
value; none issued...................................... -- --
Common stock--authorized 60,000,000 shares, $.01 par
value; 27,886,406 and 27,587,176 shares issued and
outstanding, respectively............................... 279 276
Capital in excess of par value........................... 187,213 183,615
Retained earnings........................................ 38,270 45,828
Cumulative translation adjustment........................ 566 35
-------- --------
Total Stockholders' Equity............................. 226,328 229,754
-------- --------
$334,493 $338,536
======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
23
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
(IN THOUSANDS, EXCEPT PER
SHARE DATA)
<S> <C> <C> <C>
Revenues:
Information services........................... $405,603 $359,718 $312,648
Software products business sold to Oracle...... -- 40,198 63,922
-------- -------- --------
405,603 399,916 376,570
Costs and expenses:
Information services sold...................... (368,951) (341,566) (265,115)
Software products business sold to Oracle...... -- (41,142) (60,392)
Selling, general and administrative expenses... (36,936) (49,374) (45,757)
Nonrecurring expenses.......................... (4,808) (22,759) --
-------- -------- --------
(410,695) (454,841) (371,264)
-------- -------- --------
Operating profit (loss).......................... (5,092) (54,925) 5,306
Net gain (loss) on sale of assets................ (4,600) 41,126 --
Interest expense and other, net.................. (1,182) (2,752) (1,580)
Litigation provision............................. -- -- (8,275)
Equity in earnings (loss) of affiliated
companies....................................... 30 379 (9,173)
-------- -------- --------
Loss before income taxes, minority interests and
cumulative effect of change in accounting
principle....................................... (10,844) (16,172) (13,722)
Income tax benefit............................... 2,300 4,190 3,822
-------- -------- --------
Loss before minority interests and cumulative
effect of change in accounting principle........ (8,544) (11,982) (9,900)
Minority interests............................... 986 304 979
-------- -------- --------
Loss before cumulative effect of change in
accounting principle............................ (7,558) (11,678) (8,921)
Cumulative effect on prior years of change in
accounting principle............................ -- -- (6,594)
-------- -------- --------
Net loss..................................... $ (7,558) $(11,678) $(15,515)
======== ======== ========
Loss per common and common equivalent share:
Before cumulative effect of accounting change.. $ (.27) $ (.43) $ (.34)
Cumulative effect of accounting change......... -- -- (.26)
-------- -------- --------
Net loss..................................... $ (.27) $ (.43) $ (.60)
======== ======== ========
Weighted average common and common equivalent
shares.......................................... 27,755 26,991 26,056
======== ======== ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
24
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
CAPITAL
IN
EXCESS CUMULATIVE
COMMON OF PAR RETAINED TRANSLATION
STOCK VALUE EARNINGS ADJUSTMENT TOTAL
------ -------- -------- ----------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1993... $254 $157,972 $ 72,333 $(1,897) $228,662
---- -------- -------- ------- --------
Net loss....................... -- -- (15,515) -- (15,515)
Shares issued:
Employee stock option plans
and other................... 2 1,926 -- -- 1,928
Acquisitions and joint
ventures.................... 9 9,805 688 -- 10,502
Translation adjustment......... -- -- -- 1,624 1,624
---- -------- -------- ------- --------
Balance at December 31, 1994... 265 169,703 57,506 (273) 227,201
---- -------- -------- ------- --------
Net loss....................... -- -- (11,678) -- (11,678)
Shares issued:
Employee stock option plans
and other................... 9 10,420 -- -- 10,429
Acquisitions and joint
ventures.................... 2 3,492 -- -- 3,494
Translation adjustment......... -- -- -- 308 308
---- -------- -------- ------- --------
Balance at December 31, 1995... 276 183,615 45,828 35 229,754
---- -------- -------- ------- --------
Net loss....................... -- -- (7,558) -- (7,558)
Shares issued:
Employee stock option plans
and other................... 3 3,598 -- -- 3,601
Translation adjustment......... -- -- -- 531 531
---- -------- -------- ------- --------
Balance at December 31, 1996... $279 $187,213 $ 38,270 $ 566 $226,328
==== ======== ======== ======= ========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
25
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
1996 1995 1994
--------- -------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net loss..................................... $ (7,558) $(11,678) $ (15,515)
Adjustments to reconcile net loss to net
cash provided by
operating activities:
Amortization of deferred data procurement
costs..................................... 87,944 82,095 65,819
Depreciation............................... 20,204 20,196 17,057
Amortization of capitalized software costs. 4,125 6,701 8,839
Amortization of intangibles................ 3,015 4,219 3,258
Deferred income tax benefit................ (2,938) (5,284) (6,270)
Equity in (earnings) loss of affiliated
companies and minority interests.......... (1,016) (683) 8,194
Cumulative effect of change in accounting
principle................................. -- -- 6,594
Nonrecurring expenses...................... 4,808 22,759 --
Net (gain) loss on disposition of assets... 4,600 (41,126) --
Provision for losses on accounts
receivable................................ 719 6,295 2,584
Other...................................... (3,002) (2,543) 552
Change in assets and liabilities:
Increase in accounts receivable.......... (6,163) (7,593) (22,586)
Increase in other current assets......... (1,334) (3,760) (1,555)
Increase (decrease) in accounts payable
and accrued liabilities................. (3,314) 2,382 9,842
Increase (decrease) in deferred revenue.. (84) 3,578 2,319
Other, net............................... 2,077 583 (1,471)
--------- -------- ---------
Total adjustments...................... 109,641 87,819 93,176
--------- -------- ---------
Net cash provided by operating
activities............................ 102,083 76,141 77,661
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of assets.......... 2,900 92,000 --
Deferred data procurement costs.............. (98,005) (96,808) (79,162)
Purchase of property and equipment........... (18,772) (24,497) (23,953)
Capitalized software costs................... (5,784) (9,887) (11,681)
Investments and net assets acquired in
business acquisitions....................... (950) (4,812) (1,832)
Other........................................ (600) 62 210
--------- -------- ---------
Net cash used by investing activities.. (121,211) (43,942) (116,418)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net bank borrowings (repayments) ............ 5,500 (29,000) 29,000
Net borrowings (repayments) of capitalized
leases...................................... (880) 1,606 (435)
Proceeds from exercise of stock options and
other....................................... 2,445 8,246 1,697
--------- -------- ---------
Net cash provided (used) by financing
activities............................ 7,065 (19,148) 30,262
EFFECT OF EXCHANGE RATE CHANGES ON CASH........ (626) 41 919
--------- -------- ---------
Net increase (decrease) in cash and cash
equivalents................................. (12,689) 13,092 (7,576)
Cash and cash equivalents at beginning of
year........................................ 24,884 11,792 19,368
--------- -------- ---------
Cash and cash equivalents at end of year..... $ 12,195 $ 24,884 $ 11,792
========= ======== =========
</TABLE>
The accompanying notes to consolidated financial statements are an integral
part of these statements.
26
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1996, 1995 AND 1994
NOTE 1--SUMMARY OF ACCOUNTING POLICIES
Business
Information Resources, Inc. ("IRI") and its subsidiaries (collectively the
"Company") is a leading provider of information services to the consumer
package goods ("CPG") industry. The Company obtains consumer purchase data
from electronic point-of-sale scanners in retail stores and integrates this
scan data with other proprietary data collected by the Company's field
personnel. The Company maintains this data in massive data warehouses and
provides CPG manufacturers, retailers, wholesalers and brokers with timely,
detailed and accurate information regarding consumer purchasing patterns. The
Company's software products assist clients in analyzing and using the
Company's data, enabling them to make more cost effective decisions in
marketing, selling and distributing their products.
Principles of Consolidation
The consolidated financial statements include the accounts of IRI and all
wholly or majority owned subsidiaries and affiliates. Minority interests
reflect the non-Company owned stockholder interests in Information Resources
Japan, Ltd., IRI-SECODIP, S.C.S., (France) ("IRI-SECODIP") and IRI InfoScan
Limited (U.K.). The equity method of accounting is used for investments in
which the Company has a 20% to 50% ownership and exercises significant
influence over operating and financial policies. All significant intercompany
accounts and transactions have been eliminated in consolidation.
Accounting Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reported period. Actual results may differ from estimates.
Reclassifications
Certain reclassifications have been made in the prior years' consolidated
financial statements to conform to the 1996 presentation.
Revenue Recognition and Change in Accounting Principle
Revenues on contracts for retail tracking services, which generally have
terms not less than one year, are recognized over the terms of the contracts.
Such contracts are generally categorized into one of two classes: 1)
cancelable at the end of each year by the giving of six months written notice
by either party; or 2) multi-year contracts either non-cancelable or
cancelable only with significant penalties, generally by the giving of six
months written notice after the initial multi-year term. Revenues for special
analytical services, market research and consulting projects are recognized as
services are performed. Certain of these projects are fixed-price in nature
and use the percentage-of-completion method for the recognition of revenue.
Revenues for projects that include a timesharing aspect are allocated over the
timesharing period.
Revenues from the sale of software application products, or products sold
under licensing agreements, are recognized upon delivery when there is a
reasonable basis for estimating collectibility and the Company has no
significant remaining obligations. If there are significant other obligations,
revenues are recognized on the basis of the ratio of incurred cost to total
estimated cost over the life of the contract. Related software maintenance
fees are recognized as earned over the terms of their respective contracts.
27
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Effective January 1, 1994, the Company changed its method of recognizing
revenue on its retail tracking service products whereby revenue is recognized
over the term of the contract on a straight-line basis. Previously, the
Company recognized a portion of the initial contract revenue in the period
between client commitment and either the start of forward data or the test
commencement, with the remaining revenue recognized ratably over the initial
contract term. The cumulative effect of this change for periods prior to
January 1, 1994 of $6.6 million (after reduction for the income tax effect of
$4.4 million) is shown separately in the 1994 consolidated statement of
operations.
Research and Development
Expenditures for research and development for the years ended December 31,
1996, 1995 and 1994 approximated $24.9 million, $37.4 million and $35.1
million, respectively. Included in these expenditures were $5.8 million, $9.9
million and $11.7 million of software development costs that were capitalized
for the years ended December 31, 1996, 1995 and 1994, respectively.
Expenditures not capitalized are charged to expense as incurred.
Benefits Plan
The Company sponsors an employee savings plan that qualifies as a deferred
salary arrangement under Section 401(k) of the Internal Revenue Code. The plan
allows eligible employees to contribute a portion of their pre-tax income in
accordance with specified guidelines. The Company matches a percentage of
employee contributions up to certain limits. The expense recognized for the
401(k) plan totaled approximately $2.0 million, $1.5 million and $1.3 million
in 1996, 1995 and 1994, respectively.
Cash and Cash Equivalents
For purposes of reporting cash flows, cash and cash equivalents include cash
on hand, commercial paper and funds held in money market accounts with a
maturity of three months or less.
Fair Value of Financial Instruments and Credit Risk
The carrying value of the Company's financial instruments, cash and cash
equivalents, investments and debt obligations represent a reasonable estimate
of their fair value. As of December 31, 1996 and 1995, the Company had no
significant concentrations of credit risk related to cash equivalents and
trade receivables.
Property and Equipment
Property and equipment is recorded at cost and is depreciated over the
estimated service lives. For financial statement purposes, depreciation is
provided by the straight-line method. Leasehold improvements are amortized
over the shorter of their estimated service lives or the terms of their
respective lease agreements. Estimated useful lives are as follows:
<TABLE>
<S> <C>
Computer equipment.......................................... 3 to 5 years
Market testing and other operating equipment................ 3 to 7 years
Leasehold improvements...................................... 5 to 20 years
Equipment and furniture..................................... 3 to 8 years
</TABLE>
Other Assets
Other assets include deferred data procurement costs, intangible assets and
capitalized software costs. Data procurement costs are amortized over a period
of 28 months and include actual payments to retailers for point-of-sale data
and causal costs related to collecting, reviewing and verifying other data
(i.e., causal factors) which are
28
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
an essential part of the data base. Intangible assets include goodwill,
solicitation rights and non-compete agreements, all of which arose from
acquisitions, investment or strategic alliances. Goodwill is amortized on a
straight-line basis over periods from ten to twenty years. Solicitation rights
are amortized on a straight-line basis over the expected useful lives of six
to ten years. Non-compete agreements are being amortized over periods from
five to seven years. Capitalized costs of computer software held for sale are
amortized on a straight-line basis beginning upon the software's general
release date over a period not to exceed three years. On an ongoing basis,
management reviews the valuation and amortization of other assets to determine
possible impairment by comparing the carrying value to the undiscounted future
cash flows of the related assets. (See Notes 5 and 10.) Based upon currently
projected operating results and cash flows, the Company's assessment is that
the realizability of its European assets is not impaired. To the extent that
actual operating results and cash flows are lower than these projections, the
Company may be required to write down a portion of these assets in future
periods.
Income Taxes
Deferred income taxes are recognized at statutory rates to reflect the
future effects of tax carryforwards and temporary differences arising between
the tax bases of assets and liabilities and their financial reporting amounts
at each year end. Deferred income taxes arise in business combinations
accounted for as purchases as a result of differences between the fair value
of assets acquired and their tax bases.
Loss per Common and Common Equivalent Share and Stock-Based Compensation
Loss per common and common equivalent share is based on the weighted average
number of shares of common stock and common stock equivalents (if dilutive)
outstanding during each year. The Company has accounted and will continue to
account for stock option grants in accordance with provisions of APB Opinion
No. 25, "Accounting for Stock Issued to Employees."
Adoption of Recent Statement of Financial Accounting Standards
The Company adopted the Statement of Financial Accounting Standards, No. 121
"Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets
to Be Disposed Of" ("Standard") on January 1, 1996. The adoption of this
Standard did not have a material impact on the Company's consolidated
financial statements.
NOTE 2--SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid (refunded) for interest and income taxes during the years ended
December 31, was as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Interest........................................... $2,103 $4,876 $2,087
Income taxes....................................... $ (735) $ (855) $1,547
</TABLE>
Excluded from the consolidated statements of cash flows was the effect of
several non-cash investing and financing activities. In December 1995, the
Company issued shares of Common Stock having a market value of $2.6 million in
connection with the settlement of a 1994 shareholder lawsuit. (See Note 13.)
In addition, in 1995, the Company issued shares of its Common Stock having a
market value of $3.5 million in connection with a strategic alliance agreement
and other acquisitions. In 1994, the Company issued shares of its Common Stock
having a value of $10.5 million to acquire certain businesses and to invest in
joint ventures. (See Note 3.) In 1996, 1995 and 1994, receivables of $.7
million, $1.6 million and $7.4 million, respectively, were reclassified to
investment in joint ventures.
29
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 3--ACQUISITIONS AND JOINT VENTURES
In March 1995, IRI entered into an alliance with Middle East Market Research
Bureau International ("MEMRB"), a market research company based in Cyprus and
operating primarily in Eastern Europe, the Middle East and North Africa. In
connection with this agreement, IRI issued Common Stock having a market value
of approximately $2.6 million and obtained a long-term option to acquire up to
a 49% ownership interest in MEMRB. IRI's investment in MEMRB has been
accounted for as a cost investment in the consolidated financial statements.
In 1995, the Company purchased 39% of its French joint venture, IRI-SECODIP,
from its joint venture partner increasing IRI's ownership in the joint venture
from 50% to 89%. As a result of a disproportionate capital contribution made
in 1996, the Company now owns substantially all of the joint venture
interests. IRI-SECODIP has been consolidated effective January 1, 1995.
In September 1994, the Company acquired 19.9% of GfK Panel Services Benelux
B.V., a household consumer panel service operating in the Netherlands, for
approximately $1.9 million and a 19.9% ownership interest in GfK Belgium S.A.
for approximately $.6 million .
In January 1994, the Company acquired for $5.8 million a 49% interest in
Datos Information Resources, a joint venture with Datos C.A. of Venezuela to
offer market research services and to promote the licensing of the Company's
software and related services in Venezuela.
NOTE 4--NET GAIN (LOSS) ON DISPOSITION OF ASSETS
In July 1995, the Company completed the sale to Oracle Corporation
("Oracle") of certain assets, liabilities and related software application
products relating to its on-line analytical processing business (the "General
Software Business") previously operated by the Company's software division.
The sale transaction resulted in a pre-tax gain in 1995 of approximately $41.1
million. The Company retained sales and marketing application products for use
in the consumer packaged goods industry. In consideration for such assets and
liabilities, Oracle paid, subject to post-closing adjustment, approximately
$100 million in cash, including $8.0 million to an interest-bearing escrow
account. A portion of the sale proceeds were used to repay the Company's bank
credit facility. The remainder of the proceeds was used to pay expenses of the
sale and held for general corporate purposes. In December 1996, the Company
recorded a $4.6 million charge related primarily to the final settlement of
the escrow account.
NOTE 5--NONRECURRING EXPENSES
Nonrecurring expenses in 1996 included a $4.8 million charge principally
related to the planned disposal of certain cable TV advertising cut-in
equipment originally developed for use in the Company's market-testing
operation. Nonrecurring expenses in 1995 included a $12.4 million write-down
of assets, principally accelerated recognition of deferred European data
procurement costs to net realizable value and a $10.4 million charge
principally relating to the Company's Towne-Oller facility closing and related
severance charge. The accelerated recognition of deferred European data
procurement costs was based upon the Company's assessment of the realizability
of these assets in part due to lower than originally expected revenues and
operating results in the Company's startup operations in the United Kingdom
and Italy. The nonrecurring expense relating to the Company's Towne-Oller
business was initiated by the Company's decision to transition Towne-Oller
service from the use of warehouse withdrawal data to InfoScan scanner data and
close down its New York operation. Amounts charged against the $2.9 million
reserve established for facility operating leases and severance aggregated
$1.0 million in 1996 and $.2 million in 1995.
30
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 6--INCOME TAXES
IRI and its U.S. subsidiaries and partnerships file their U.S. Federal
income tax return on a consolidated basis. As of December 31, 1996, the
Company had cumulative U.S. Federal net operating loss ("NOL") carryforwards
of approximately $64.8 million that expire primarily in 2009 and 2011. Certain
of these carryforwards have not been examined by the Internal Revenue Service
and, therefore, are subject to adjustment. In addition, at December 31, 1996,
various foreign subsidiaries of IRI had aggregate cumulative NOL carryforwards
for foreign income tax purposes of approximately $6.2 million which are
subject to various income tax provisions of each respective country.
Approximately $3.0 million of these foreign NOLs may be carried forward
indefinitely, while the remaining $3.2 million expire in 2000 and 2001. The
Company is subject to the alternative minimum tax for financial reporting
purposes resulting in an alternative minimum tax carryforward of $1.3 million
as of December 31, 1996. This amount will be allowed as a credit carryover
against regular tax in the future when the regular tax liability exceeds the
alternative minimum tax liability. At December 31, 1996 the Company had
general business tax credit carryforwards of approximately $4.9 million which
expire primarily between 1999 and 2010, and are available to reduce future
U.S. Federal income tax liabilities.
Domestic earnings before income taxes, minority interests and cumulative
effect of changes in accounting principle were $11.7 million, $27.1 million
and $3.4 million for 1996, 1995 and 1994, respectively. The foreign loss
before income taxes, minority interests and cumulative effect of changes in
accounting principle was ($22.5) million, ($43.3) million, and ($17.1) million
for 1996, 1995 and 1994, respectively. A majority of the European foreign pre-
tax losses are deducted as partnership losses in IRI's consolidated U.S.
income tax return in accordance with the U.S. Internal Revenue Code.
Income tax (expense) benefit relating to earnings (loss) before minority
interests and cumulative effect of changes in accounting principle for the
years ended December 31, 1996, 1995 and 1994 consisted of the following
components (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------- -------
<S> <C> <C> <C>
Current income tax (expense)
Federal...................................... $ -- $ -- $ (385)
Foreign...................................... (638) (1,094) (976)
State and local.............................. -- -- (1,087)
------ ------- -------
(638) (1,094) (2,448)
------ ------- -------
Deferred income tax benefit (expense)
Federal...................................... 3,805 3,282 3,577
Foreign...................................... (937) 1,181 920
State and local.............................. 70 821 1,773
------ ------- -------
2,938 5,284 6,270
------ ------- -------
Income tax benefit............................. $2,300 $ 4,190 $ 3,822
====== ======= =======
</TABLE>
In accordance with generally accepted accounting principles, the Company has
reflected a reduction of its deferred tax liability for its Federal and state
NOL carryforwards in its consolidated financial statements. The Company's
recognition of Federal and state future tax benefits is due to the expected
utilization of those benefits based upon future receipt of substantial taxable
income, specifically resulting from over $87 million of existing net temporary
differences at December 31, 1996, primarily deferred data procurement costs,
capitalized software costs, and other items, most of which will reverse over
the next three years.
31
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
----------------
1996 1995
------- -------
<S> <C> <C>
Deferred tax liabilities:
Deferred data procurement costs....................... $40,098 $37,959
Capitalized software costs............................ 4,732 3,664
Property and equipment................................ -- 2,392
Other................................................. 5,268 710
------- -------
Total deferred tax liabilities...................... 50,098 44,725
Deferred tax assets:
Domestic NOL carryforwards............................ 25,535 16,505
Domestic tax credit carryforwards..................... 6,210 4,318
Foreign NOL carryforwards............................. 2,440 1,492
Revenue recognition change............................ 2,097 2,911
Reserve for nonrecurring items........................ 664 4,472
Other................................................. 10,583 10,504
------- -------
Total deferred tax assets........................... 47,529 40,202
Valuation allowance on deferred tax assets.............. (6,544) (4,120)
------- -------
Net deferred tax assets................................. 40,985 36,082
------- -------
Net deferred tax liability.............................. $ 9,113 $ 8,643
======= =======
</TABLE>
The valuation allowance increased by $2.4 million in 1996 and $.6 million in
1995, as it is more likely than not that the net operating loss and domestic
tax credit carryforwards generated by certain Company subsidiaries in these
years will not be utilized to offset taxable income.
Income tax expense differs from the statutory U.S. Federal income tax rate of
35% applied to earnings (loss) before income taxes, minority interests and
cumulative effect of changes in accounting principle for the years ended
December 31, 1996, 1995 and 1994 as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
<S> <C> <C> <C>
Statutory tax benefit............................ $3,795 $5,660 $4,803
Effects of--
State income taxes, net of Federal income tax
benefit....................................... 45 534 446
Nondeductible meals and entertainment.......... (365) (502) (372)
Nondeductible acquisition/organization costs... (210) (719) (231)
Other non-taxable income (nondeductible
expenses)..................................... 18 (374) (436)
Foreign taxes.................................. (1,150) (976) (171)
Change in valuation allowance.................. 419 -- --
Other.......................................... (252) 567 (217)
------ ------ ------
$2,300 $4,190 $3,822
====== ====== ======
</TABLE>
32
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 7--ACCOUNTS RECEIVABLE
Accounts receivable at December 31, were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- -------
<S> <C> <C>
Billed................................................. $ 63,102 $62,580
Unbilled............................................... 37,615 34,903
Other.................................................. 3,033 2,239
-------- -------
103,750 99,722
Reserve for accounts receivable........................ (4,337) (3,860)
-------- -------
$ 99,413 $95,862
======== =======
</TABLE>
Payments in advance of revenue recognition are reflected in the consolidated
financial statements as deferred revenue. Unbilled accounts receivable
represent revenues and fees on contracts and other services earned to date for
which customers were not invoiced as of the balance sheet date.
NOTE 8--PROPERTY AND EQUIPMENT
Property and equipment at December 31, were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Computer equipment.................................... $ 82,708 $ 69,814
Market testing and other operating equipment.......... 14,291 18,956
Leasehold improvements................................ 15,345 15,425
Equipment and furniture............................... 35,054 32,751
-------- --------
147,398 136,946
Accumulated depreciation and amortization............. (92,806) (76,541)
-------- --------
$ 54,592 $ 60,405
======== ========
</TABLE>
NOTE 9--INVESTMENTS
Investments at December 31 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Datos Information Resources, at cost plus equity in
undistributed earnings................................. $ 5,500 $ 6,399
GfK Panel Services GmbH, at cost........................ 5,772 5,772
Other investments, primarily GfK Panel Services Benelux
B.V.................................................... 7,465 6,620
------- -------
$18,737 $18,791
======= =======
</TABLE>
Effective February 1, 1997, the Company and GfK AG of Germany ("GfK")
organized a new joint venture company, IRI/GfK Retail Services GmbH ("IRI/GfK
Retail"). The Company has a 51% ownership interest in IRI/GfK Retail, and GfK
owns the remainder. IRI/GfK Retail purchased the German retail tracking
business and related software business from GfK Panel Services GmbH ("GfK
Panel") and will now provide those business services to the German market.
In a separate transaction, the Company sold its 15% ownership interest in
GfK Panel to GfK. GfK Panel will continue to provide consumer panel and ad hoc
research services to the market, and GfK Panel and IRI/GfK Retail will
cooperate in selling and delivering services to appropriate customers.
33
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 10--OTHER ASSETS
Other assets at December 31 were as follows (in thousands):
<TABLE>
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Deferred data procurement costs--net of accumulated
amortization of $102,372 in 1996 and $92,912 in
1995................................................ $113,926 $ 98,602
Intangible assets, including goodwill primarily
related to acquisitions--net of accumulated
amortization of $12,171 in 1996 and $14,026 in 1995. 13,940 13,395
Capitalized software costs--net of accumulated
amortization of $5,554 in 1996 and $3,648 in 1995... 11,516 9,857
Other................................................ 3,599 3,571
-------- --------
$142,981 $125,425
======== ========
NOTE 11--LONG-TERM DEBT
Long-term debt at December 31, was as follows (in thousands):
<CAPTION>
1996 1995
-------- --------
<S> <C> <C>
Bank borrowings...................................... $ 5,500 $ --
Capitalized leases................................... 5,197 6,077
-------- --------
10,697 6,077
Less current maturities.............................. (2,805) (2,317)
-------- --------
$ 7,892 $ 3,760
======== ========
</TABLE>
The Company has a $50.0 million bank credit facility maturing in 1998, with
fixed or floating interest rate options at or below prime. The weighted
average interest rate at December 31, 1996 was 7.1%. Facility fees of .4% are
payable on the bank credit facility, and there are no commitment fees. The
credit facility contains financial covenants which restrict the Company's
ability to incur additional indebtedness or liens on its assets. The financial
covenants also require the Company to meet certain tangible net worth and
operating income levels and cash flow coverage and working capital ratios.
Capitalized leases primarily consist of leases for computer and telephone
equipment expiring through 2000. Maturities of capitalized leases and other
long-term debt during each of the years 1997 through 2000 are $2.8 million,
$7.0 million, $.5 million and $.4 million, respectively.
Certain of the Company's loan and lease agreements include various financial
covenants which require that the Company maintain a minimum tangible net
worth, as defined, and otherwise limit IRI's ability to declare dividends or
make distributions to holders of capital stock, or redeem or otherwise acquire
shares of the Company. Approximately $3.5 million is available for such
distributions under the most restrictive of these covenants.
NOTE 12--CAPITAL STOCK
Preferred Stock
IRI has authority to issue one million shares of $.01 par value Preferred
Stock in series with the rights and limitation of each series being determined
by the Board of Directors.
34
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
Common Stock
At December 31, 1996, 1995 and 1994, 27,886,406, 27,587,176, and 26,493,277
shares of Common Stock, respectively were issued and outstanding. At December
31, 1996, .5 million and 4.6 million options were available for grant under
the Executive Stock Option Plan and the Employee Stock Option Plan,
respectively. In connection with all IRI employee and director stock plans,
13.4 million shares were reserved for issuance at December 31, 1996.
In May 1996, the Company's shareholders approved the 1996 Stock Plan for
Non-Employee Directors in Lieu of Cash Retainer (the Director's Plan),
authorizing the issuance of up to 100,000 shares of Common Stock. Under the
Directors' Plan an eligible director is paid annually in shares of Common
Stock in lieu of 75% of the cash retainer otherwise payable for services on
the Board. The number of shares issued is based upon the fair market value of
the Company's Common Stock. In 1996, the Company issued 10,692 shares at a
price of $14.25 per share under the Director's Plan.
In December 1995, the Company issued 211,223 shares of Common Stock in
settlement of a shareholder lawsuit. (See Note 13.) In 1995 and 1994 the
Company issued 244,000 and 907,000 shares of Common Stock, respectively, in
connection with a strategic alliance agreement and acquisition of businesses
and joint ventures.
There are restrictions in IRI's bank loan and lease agreements which limit
the payment of dividends and the repurchases or redemption of Common Stock.
(See Note 11.)
Stock Options
The Company has several stock option plans. The Employee Stock Option Plan
covers most employees other than executive officers and directors.
Substantially all options under these plans have been granted at fair market
value or higher. Most option grants are exercisable in equal annual increments
of 25% beginning on the first anniversary of the grant date and expire ten
years after the date of grant.
IRI also has an Executive Stock Option Plan covering executive officers and
directors which at inception authorized up to 2.5 million stock options. Most
options under this plan were granted at fair market value and are exercisable
in equal annual increments of 25% beginning on the first anniversary of the
grant date and expire ten years after the date of grant. For options granted
at less than fair market value, the Company recognizes compensation expense
over the vesting period for the difference between the total fair market value
and the total exercise price on the date of grant. Compensation expense of
approximately $.1 million, $1.8 million and $3.0 million was recognized in
1996, 1995 and 1994, respectively for such options.
In April 1994, the Board of Directors of the Company canceled certain
outstanding stock options with exercise prices exceeding $14.25 and replaced
those options with new stock options if the employee agreed to an extension in
the vesting schedule. Executive officers and directors were not eligible to
participate in this program.
In December 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, "Accounting for Stock-Based
Compensation" ("new Standard"), which establishes an alternative method of
accounting for stock-based compensation plans. The new Standard allows
companies which have stock-based compensation arrangements with employees to
continue to apply existing accounting rules under APB Opinion No. 25,
"Accounting for Stock Issued to Employees", with supplemental pro forma
disclosures.
35
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
The following table presents, on an (unaudited) pro forma basis, net loss
and net loss per share for the years ended December 31, 1996 and 1995 as if
the alternate method had been adopted (in thousands, except per share data):
<TABLE>
<CAPTION>
1996 1995
---------- --------
<S> <C> <C>
Net loss--as reported................................. $ (7,558) $(11,678)
========== ========
Net loss--unaudited pro forma......................... $ (8,673) $(13,956)
========== ========
Loss per share--as reported........................... $ (.27) $ (.43)
========== ========
Loss per share--unaudited pro forma................... $ (.31) $ (.52)
========== ========
The fair value of each option grant is estimated on the date of grant using
the Black-Scholes option-pricing model with assumed risk-free interest rates of
5.9% and 6.7% for 1996 and 1995, respectively, stock price volatility factor of
41.4% and an expected life of the options of five years. Because the Company's
employee stock options have characteristics significantly different from those
of traded options, and because changes in the subjective input assumptions can
materially affect the fair value estimate, in management's opinion, the
existing model does not necessarily provide a reliable single measure of the
fair value of its employee stock options. Using the foregoing assumptions, the
weighted-average fair value of options granted in 1996 and 1995 was $5.85 and
$5.66, respectively.
Transactions involving stock options for the Executive and Employee Stock
Option Plans are summarized as follows:
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF OPTIONS PRICE
---------- --------
<S> <C> <C>
Outstanding December 31, 1993......................... 7,298,239 $ 21.17
Granted............................................... 6,588,162 14.44
Canceled/Expired...................................... (4,145,428) 25.67
Exercised............................................. (169,926) 7.35
---------- --------
Outstanding December 31, 1994......................... 9,571,047 14.83
Granted............................................... 2,042,565 12.89
Canceled/Expired...................................... (2,122,603) 15.93
Exercised............................................. (638,748) 10.20
---------- --------
Outstanding December 31, 1995......................... 8,852,261 14.44
Granted............................................... 430,000 12.90
Canceled/Expired...................................... (645,543) 18.43
Exercised............................................. (288,538) 8.32
---------- --------
Outstanding December 31, 1996......................... 8,348,180 $ 14.26
========== ========
Exercisable December 31, 1996......................... 5,822,941 $ 14.22
========== ========
</TABLE>
Stock options outstanding at December 31, 1996 are as follows:
<TABLE>
<CAPTION>
WEIGHTED OUTSTANDING- EXERCISABLE-
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
--------------- ----------- ----------- ------------ ----------- ------------
<S> <C> <C> <C> <C> <C>
$ 7.63-$12.75........... 2,022,774 5.20 $10.33 1,431,857 $ 9.62
12.88- 13.50........... 764,513 8.43 13.10 389,260 12.98
13.63- 14.25........... 3,941,619 6.51 14.17 2,852,623 14.18
14.38- 16.50........... 755,000 7.44 14.97 420,622 14.99
17.88- 34.00........... 864,274 6.15 24.27 728,579 23.66
--------- ---- ------ --------- ------
$ 7.63-$34.00........... 8,348,180 6.41 $14.26 5,822,941 $14.22
========= ==== ====== ========= ======
</TABLE>
36
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
NOTE 13--COMMITMENTS, CONTINGENCIES AND LITIGATION
1. Lease Agreements and Other Commitments
The Company leases certain property and equipment under operating leases
expiring at various dates through 2010. The Company's headquarters lease
agreement contains financial and other covenants including restrictions on the
payment of dividends. This lease, which was part of a sale/leaseback
transaction in 1990, resulted in a $6.2 million deferred gain which is being
recognized over the lease's initial term. At December 31, 1996 obligations to
make future minimum payments under all operating leases were $140.5 million in
the aggregate and $28.5 million, $24.7 million, $17.4 million, $12.4 million
and $8.1 million for the five years ended December 31, 2001, respectively.
Rent expense for all operating leases was $32.0 million, $32.6 million and
$29.8 million for the years ended December 31, 1996, 1995 and 1994,
respectively.
2. Legal Proceedings
On July 29, 1996, IRI filed an action against The Dun & Bradstreet Corp.,
ACNielsen and IMS International, Inc. in the United States District Court for
the Southern District of New York entitled Information Resources, Inc. v. The
Dun & Bradstreet Corp., et. al. No. 96 CIV. 5716 (the "Action"). IRI alleged
that, among other things, the Defendants violated Sections 1 and 2 of the
Sherman Act, 15 U.S.C. (S)(S)1 and 2, by engaging in a series of anti-
competitive practices aimed at excluding the Company from various export
markets for retail tracking services and regaining monopoly power in United
States market for such services. These practices included: (i) entering into
exclusionary contracts with retailers in several countries in order to
restrict the Company's access to sales data necessary to provide retail
tracking services; (ii) illegally tying services in markets over which
Defendants' had monopoly power with services in markets in which ACNielsen
competed with the Company; (iii) predatory pricing; (iv) acquiring foreign
market competitors with the intent of impeding the Company's efforts at export
market expansion; (v) tortiously interfering with Company contracts and
relationships with clients, joint venture partners and other market research
companies; and (vi) disparaging the Company to financial analysts and clients.
By the Action, the Company seeks to enjoin Defendants' anti-competitive
practices and to recover damages in excess of $350 million, prior to trebling.
The Action followed legal proceedings by the Canadian Competition Tribunal
and the European Commission against ACNielsen for anti-competitive practices.
On August 30, 1995, following a full hearing, the Canadian Competition
Tribunal issued an Order and Reasons for Order against ACNielsen in In Re: The
D&B Companies of Canada Ltd., concluding that ACNielsen had engaged in "anti-
competitive acts" with the express intent "to exclude potential competitors
generally and the Company specifically" from the Canadian retail tracking
services market. On May 4, 1996, the European Commission issued a "Statement
of Objections" against ACNielsen, following an 18 month investigation,
alleging that ACNielsen had infringed Article 86 of the Treaty of Rome through
several practices undertaken intentionally as part of a strategy to exclude
the Company from the European markets for retail tracking services. On
December 3, 1996 ACNielsen signed an Undertaking to the European Commission
agreeing to halt numerous contractual practices which the Company contended
was part of ACNielsen's intentional and unlawful strategy aimed at preventing
the Company from establishing a competitive position in Europe and eliminating
the Company as a competitor.
In the ordinary course of business, IRI and its subsidiaries become involved
as plaintiffs or defendants in various other legal proceedings. The claims and
counterclaims in such litigation, including those for punitive damages,
individually in certain cases and in the aggregate, involve amounts which may
be material. However, it is the opinion of the Company's management, based
upon advice of counsel, that the ultimate disposition of pending litigation
against the Company will not be material.
37
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
In April 1994, certain shareholders filed a class action lawsuit against the
Company, and in October 1994 the Company entered into an agreement to settle
this lawsuit. Pursuant to the terms of the court approved settlement
agreement, in December 1995 the Company satisfied its obligations by issuing
211,223 shares of Common Stock valued at $2.6 million and paying $2.6 million
in cash to the settlement class.
NOTE 14--GEOGRAPHIC AREA INFORMATION
The Company develops and maintains computer-based proprietary data bases,
decision support software, and mathematical models, primarily for the analysis
of detailed information on purchasing of consumer goods, all within one
industry segment business information services. The following table presents
information about the Company by geographic areas, including operations of the
General Software Business, which was sold to Oracle in 1995, (in thousands).
<TABLE>
<CAPTION>
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Operating revenues (a):
To unaffiliated customers:
United States................................. $344,612 $329,340 $318,091
Europe........................................ 54,520 62,693 48,359
Other International........................... 6,471 7,882 10,120
Transfers between geographic areas (b):
United States................................. -- 4,343 8,802
Europe........................................ -- 1,099 1,938
Eliminations.................................. -- (5,441) (10,740)
-------- -------- --------
Total operating revenues.................... $405,603 $399,916 $376,570
======== ======== ========
Operating profit (loss) (c) (d):
United States................................. $ 26,699 $ (4,922) $ 33,421
Europe........................................ (23,864) (42,983) (17,559)
Other International........................... (5,962) (3,368) (3,021)
Corporate expenses............................ (1,965) (3,652) (7,535)
-------- -------- --------
Operating profit (loss)..................... $ (5,092) $(54,925) $ 5,306
======== ======== ========
Identifiable assets at December 31 (e):
United States................................. $230,371 $239,069 $253,885
Europe........................................ 87,380 84,109 80,051
Other International........................... 16,742 15,358 12,858
-------- -------- --------
Total identifiable assets................... $334,493 $338,536 $346,794
======== ======== ========
</TABLE>
- --------
(a) Total international revenues, including export sales, were $62.5 million,
$72.9 million and $61.9 million for 1996, 1995 and 1994, respectively.
(b) Transfers in 1995 and 1994 related to the software products business sold
to Oracle in 1995. (See Note 4.)
(c) Operating profit (loss) includes nonrecurring expenses of $4.8 million and
$22.8 million in 1996 and 1995, respectively. (See Note 5.) Operating
profit (loss) excludes net gain (loss) on disposition of assets of ($4.6)
million and $41.1 million in 1996 and 1995, respectively. (See Note 4.)
(d) Operating profit (loss) excludes litigation provision of $8.3 million in
1994. (See Note 13.)
(e) Identifiable assets includes investments aggregating $18.7 million, $18.8
million and $21.0 million at December 31, 1996, 1995 and 1994,
respectively. (See Note 9.)
38
<PAGE>
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY DATA (UNAUDITED)
Summaries of consolidated results on a quarterly basis are as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
1996
--------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues............................... $ 92,998 $102,955 $101,980 $107,670
======== ======== ======== ========
Nonrecurring expenses(a)............... -- -- -- (4,808)
======== ======== ======== ========
Operating profit (loss)................ (4,474) 771 28 (1,417)
======== ======== ======== ========
Net loss on sale of assets(b).......... -- -- -- (4,600)
======== ======== ======== ========
Net earnings (loss).................... $ (2,247) $ 242 $ 10 $ (5,563)
======== ======== ======== ========
Net earnings (loss) per common and
common equivalent shares.............. $ (.08) $ .01 $ -- $ (.20)
======== ======== ======== ========
Weighted average common and common
equivalent shares..................... 27,653 27,753 27,775 27,837
======== ======== ======== ========
<CAPTION>
1995
--------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues(b)............................ $104,795 $109,332 $ 87,288 $ 98,501
======== ======== ======== ========
Nonrecurring expenses(c)............... -- -- (22,759) --
======== ======== ======== ========
Operating loss......................... (4,980) (5,033) (44,305) (607)
======== ======== ======== ========
Net gain on sale of assets(b).......... -- -- 41,126 --
======== ======== ======== ========
Net earnings (loss).................... $ (3,291) $ (3,609) $ (4,802) $ 24
======== ======== ======== ========
Net earnings (loss) per common and
common equivalent shares.............. $ (.12) $ (.13) $ (.18) $ --
======== ======== ======== ========
Weighted average common and common
equivalent shares..................... 26,615 26,826 27,128 27,394
======== ======== ======== ========
</TABLE>
- --------
(a) The nonrecurring charge in 1996 principally relates to the disposal of
certain cable TV advertising cut-in equipment originally developed for use
in the Company's market testing operations.
(b) The net loss on sale of assets in 1996 is primarily for the final
settlement of the escrow account related to the sale of a portion of the
Company's software business to Oracle in 1995. In July 1995, the Company
completed the sale to Oracle of certain assets, liabilities and related
software application products.
(c) Nonrecurring expenses in 1995 included a $12.4 million write-down of
assets, principally accelerated recognition of deferred European data
procurement costs, to net realizable value and a $10.4 million charge
principally relating to the Company's Towne-Oller facility closing and
related severance charge.
39
<PAGE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" are incorporated by reference from the
definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with the Company's 1997 annual meeting of
stockholders scheduled for May 22, 1997. Information about the Company's
executive officers is set forth in Item 4(a) in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" excluding the Board
Compensation Committee Report and the stock price performance graph is
incorporated by reference from the definitive proxy statement to be filed with
the Securities and Exchange Commission in connection with the Company's 1997
annual meeting of stockholders scheduled for May 22, 1997.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Ownership of Securities" is incorporated by reference
from the definitive proxy statement to be filed with the Securities and
Exchange Commission in connection with the Company's 1997 annual meeting of
stockholders scheduled for May 22, 1997.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions" is incorporated by reference
from the definitive proxy statement to be filed with the Securities and
Exchange Commission in connection with the Company's 1997 annual meeting of
stockholders scheduled for May 22, 1997.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this Report:
1. Financial Statements
The consolidated financial statements of the Company are included in Part
II, Item 8 of this Report.
2. Financial Statement Schedules
<TABLE>
<CAPTION>
PAGE NO.
--------
<S> <C>
Report of Independent Certified Public Accountants on Schedule.... 42
Schedule II--Valuation and Qualifying Accounts; Allowance for
Doubtful Receivables............................................. 43
</TABLE>
All other schedules are omitted because they are not applicable, or not
required, or because the required information is included in the financial
statements or notes thereto.
40
<PAGE>
3. Exhibits
(I) See Exhibit Index (immediately following the signature pages).
(II) Executive Compensation Plans and Arrangements. The following
Executive Compensation Plans and Arrangements are listed as exhibits to
this Form 10-K:
Employment Agreement dated November 27, 1978 between the Company and
Gerald Eskin.
Employment Agreement dated March 15, 1985 between the Company and
Jeffrey Stamen.
Employment Agreement dated March 15, 1985 between the Company and
Leonard Lodish.
Noncompetition Agreements dated March 15, 1985 between the Company
and John D.C. Little, Glen Urban, and Leonard Lodish, respectively.
Letter agreement dated January 17, 1989 between the Company and Glen
Urban.
Form of letter agreement between the Company and John D.C. Little.
Consulting and Noncompetition Agreement dated January 16, 1987
between the Company and Edwin Epstein.
Agreement effective January 1, 1989 between the Company and Edwin
Epstein, amending the Consulting and Non-competition Agreement dated
January 16, 1987, which Consulting and Noncompetition Agreement is
referred to above.
Letter agreement dated August 7, 1989 between the Company and
Leonard Lodish.
Employment Agreement dated November 16, 1989 between the Company and
James G. Andress.
Amended and Restated Employment Agreement dated March 16, 1994
between the Company and Thomas M. Walker.
1992 Executive Stock Option Plan, as amended.
1992 Employee Incentive Stock Option Plan.
Employment Agreement dated November 4, 1993 between the Company and
George R. Garrick.
1994 Employee Nonqualified Stock Option Plan.
Form of Information Resources, Inc. Directorship/Officership
Agreement between the Company and its directors, its executive
officers and certain other officers.
Employment Termination Agreement dated as of March 4, 1996, between
the Company and George R. Garrick.
Employment Agreement dated as of August 22, 1996, between the
Company and Randall S. Smith and First Amendment to Employment
Agreement dated November 11, 1996.
41
<PAGE>
REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS
Board of Directors
Information Resources, Inc. and Subsidiaries
In connection with our audit of the consolidated financial statements of
Information Resources, Inc. and Subsidiaries referred to in our report dated
February 15, 1996 which is included in Part II of this form, we have also
audited Schedule II for each of the two years in the period ended December 31,
1995. In our opinion, this schedule presents fairly, in all material respects,
the information required to be set forth therein.
Grant Thornton LLP
Chicago, Illinois
February 15, 1996
42
<PAGE>
SCHEDULE II
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
RESERVE FOR ACCOUNTS RECEIVABLE
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONS
BALANCE CHARGED DEDUCTIONS BALANCE
AT TO COSTS (NET AT END
BEGINNING & WRITEOFFS/ OF
DESCRIPTION OF PERIOD EXPENSES RECOVERIES) PERIOD
- ----------- --------- --------- ----------- -------
<S> <C> <C> <C> <C>
Year ended December 31, 1994............ $2,250 $2,565 $(1,889) $2,926
Year ended December 31, 1995............ $2,926 $6,295 $(5,361) $3,860
Year ended December 31, 1996............ $3,860 $ 719 $ (242) $4,337
</TABLE>
43
<PAGE>
SIGNATURES
PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES
EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED
ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED.
Dated: March 25, 1997
Information Resources, Inc.
/s/ Gian M. Fulgoni
By: _________________________________
Gian M. Fulgoni
Chief Executive Officer
PURSUANT TO THE REQUIREMENT OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE
REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 25, 1997.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
/s/ Thomas W. Wilson, Jr. Chairman of the Board of Directors and
___________________________________________ Director
Thomas W. Wilson, Jr.
/s/ Gian M. Fulgoni Chief Executive Officer and Director
___________________________________________ [Principal executive officer]
Gian M. Fulgoni
/s/ Gary M. Hill Executive Vice President and Chief
___________________________________________ Financial Officer [Principal financial
Gary M. Hill officer]
/s/ John P. McNicholas, Jr. Controller [Principal accounting officer]
___________________________________________
John P. McNicholas, Jr.
*/s/ James G. Andress Director
___________________________________________
James G. Andress
*/s/ Gerald J. Eskin Director
___________________________________________
Gerald J. Eskin
*/s/ Edwin E. Epstein Director
___________________________________________
Edwin E. Epstein
*/s/ John D. C. Little Director
___________________________________________
John D. C. Little
*/s/ Leonard M. Lodish Director
___________________________________________
Leonard M. Lodish
*/s/ Edward E. Lucente Director
___________________________________________
Edward E. Lucente
</TABLE>
44
<PAGE>
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<S> <C>
*/s/ Edith W. Martin Director
___________________________________________
Edith W. Martin
*/s/ Jeffrey P. Stamen Director
___________________________________________
Jeffrey P. Stamen
*/s/ Glen L. Urban Director
___________________________________________
Glen L. Urban
</TABLE>
/s/ Gian M. Fulgoni
*BY:_________________________________
Gian M. Fulgoni
pursuant to a power of attorney
45
<PAGE>
EXHIBIT INDEX
The following documents are the exhibits to this Report. For convenient
reference, each exhibit is listed according to the number assigned to it in
the Exhibit Table of Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
------- ----------------------- ----------
<C> <S> <C>
3(a) Copy of the certificate of incorporation of the Company
dated May 27, 1982, as amended. (Incorporated by
reference. Previously filed as Exhibit 3(a) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1988.) IBRF
(b) Copy of the bylaws of the Company, as amended.
(Incorporated by reference. Previously filed as Exhibit
3(b) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1988.) IBRF
(c) Copy of amendments to the Certificate of Incorporation
approved by the stockholders on May 16, 1989.
(Incorporated by reference. Previously as Exhibit 3(c)
to the Company's Annual Report 10-K for the fiscal year
ended December 31, 1989.) IBRF
(d) Copy of amendments to the bylaws of the Company as
approved by the Board of Directors bringing the bylaws
into conformity with the amendments to the Certificate
of Incorporation approved by the stockholders May 16,
1989. (Incorporated by reference. Previously filed as
Exhibit 3(d) to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1989.) IBRF
(e) Certificate of Designations of Series A Participating
Preferred Stock, as adopted by the Board of Directors
of the Company on March 2, 1989 and duly filed with the
Secretary of State of the State of Delaware March 15,
1989. (Incorporated by reference. Previously filed as
Exhibit 3(e) to the Company's Annual Report on Form 10-
K for the fiscal year ended December 31, 1989.) IBRF
10 Material Contracts
(a) 1982 Incentive Stock Option Plan adopted November 3,
1982, as amended. (Incorporated by reference.
Previously filed as Exhibit 10(a) to the Company's
Registration Statement on Form S-8 filed with the SEC
on December 31, 1988.) IBRF
(b) Information Resources, Inc., Nonqualified Stock Option
Plan effective January 1, 1984, as amended.
(Incorporated by reference. Previously filed as Exhibit
10(b) to the Company's Quarterly Report on Form 10-Q
for the quarter ended June 30, 1988.) IBRF
(c) Employment Agreement dated November 27, 1978 between
the Company and Gerald Eskin. (Incorporated by
reference. Previously filed as Exhibit 10(e) to
Registration Statement No. 2-81544.) IBRF
(d) Consulting and Noncompetition Agreement dated January
16, 1987 between the Company and Edwin Epstein.
(Incorporated by reference. Previously filed as Exhibit
10(e) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1987.) IBRF
(e) Employment agreement dated March 15, 1985 between the
Company and Jeffrey Stamen. (Incorporated by reference.
Previously filed as Exhibit 10(d) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1985, as amended on Form 8 dated April 29,
1986 and August 25, 1986.) IBRF
(f) Employment agreements dated March 15, 1985 between the
Company and Leonard Lodish. (Incorporated by reference.
Previously filed as Exhibit 10.14 to Registration
Statement No. 2-96940.) IBRF
(g) Noncompetition Agreement dated March 15, 1985 between
the Company and John Little, Glen Urban, and Leonard
Lodish, respectively. (Incorporated by reference.
Previously filed as Exhibit 10.15 to Registration
Statement No. 2-96490.) IBRF
</TABLE>
1
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
------- ----------------------- ----------
<C> <S> <C>
(h) Letter agreement dated January 17, 1989 between the
Company and Glen Urban (Incorporated by reference.
Previously filed as Exhibit 10(1) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989.) IBRF
(i) Form of letter agreement between the Company and John
D.C. Little (Incorporated by reference. Previously
filed as Exhibit 10(m) to the Company's Annual Report
on Form 10-K for the fiscal year ended December 31,
1989.) IBRF
(j) Form of Rights Plan Agreement between the Company and
Harris Trust and Savings Bank. (Incorporated by
reference. Previously filed on Form 8-A Registration
Statement filed with the SEC on March 15, 1989.) IBRF
(k) Agreement effective January 1, 1989 between the Company
and Edwin Epstein, amending the Consulting and
Noncompetition Agreement dated January 16, 1987, which
Consulting and Noncompetition Agreement is referred to
in Exhibit 10(d) hereof. (Incorporated by reference.
Previously filed as Exhibit 19(a) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989.) IBRF
(l) Letter agreement dated August 7, 1989 between the
Company and Leonard Lodish (Incorporated by reference.
Previously filed as Exhibit 3(q) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1989.) IBRF
(m) Employment Agreement dated November 16, 1989 between
the Company and James G. Andress (Incorporated by
reference. Previously filed as Exhibit 3(r) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1989.) IBRF
(n) Form of 401(k) Retirement Savings Plan and Trust
adopted by the Company effective August 1, 1989.
(Incorporated by reference. Previously filed as Exhibit
3(v) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1989.) IBRF
(o) Amended and Restated Employment Agreement dated March
16, 1994 between the Company and Thomas M. Walker.
(Incorporated by reference. Previously filed as Exhibit
10(s) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993.) IBRF
(p) Lease Agreement dated September 27, 1990 between
Randolph/ Clinton Limited Partnership and the Company
(Incorporated by reference. Previously filed as Exhibit
2.1 to the Company's Current Report on Form 8-K dated
September 27, 1990.) IBRF
(q) 1992 Employee Incentive Stock Option Plan (Incorporated
by reference. Previously filed as Exhibit 10 (x) to the
Company's Annual Report on Form 10-K for the fiscal
year ended December 31, 1992.) IBRF
(r) 1994 Employee Nonqualified Stock Option Plan.
(Incorporated by reference. Previously filed as Exhibit
10(y) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1993.) IBRF
(s) Employment Agreement dated November 4, 1993 between the
Company and George Garrick. (Incorporated by reference.
Previously filed as Exhibit 10(z) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1993.) IBRF
(t) Credit Agreement dated May 13, 1994, between the
Company and Harris Trust and Savings Bank. Superseded
by Credit Agreement dated November 3, 1994 filed at
Exhibit 10(w). (Incorporated by reference. Previously
filed as Exhibit 10 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1994.) IBRF
(u) Letter regarding change in accounting principle.
(Incorporated by reference. Previously filed as Exhibit
18 to the Company's Quarterly Report on Form 10-Q for
the quarter ended March 31, 1994.) IBRF
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
------- ----------------------- ----------
<C> <S> <C>
(v) Credit Agreement dated November 3, 1994, between the
Company and Harris Trust and Savings Bank.
(Incorporated by reference. Previously filed as Exhibit
10 to the Company's Quarterly Report on Form 10-Q for
the quarter ended September 30, 1994.) IBRF
(w) Second Amendment to Lease Agreement dated September 27,
1990 between the Company and Randolph/Clinton Limited
Partnership. (Incorporated by reference. Previously
filed as Exhibit 10 to the Company's Quarterly Report
on Form 10-Q for the quarter ended March 31, 1995.) IBRF
(x) 1992 Executive Stock Option Plan, as amended effective
May 24, 1995. (Incorporated by reference. Previously
filed as Exhibit 3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995.) IBRF
(y) Amended and Restated Asset Purchase Agreement dated as
of June 12, 1995 by and between the Company and Oracle
Corporation. (Incorporated by reference. Previously
filed as Exhibit 2.1 to the Company's Current Report on
Form 8-K dated July 27, 1995 and filed August 11,
1995.) IBRF
(z) 1992 Executive Stock Option Plan, as amended effective
May 24, 1995. (Incorporated by reference. Previously
filed as Exhibit 3 to the Company's Quarterly
Reparation Form 10-Q for the quarter ended June 30,
1995.) IBRF
(aa) Licenses-Back Agreement dated as of July 27, 1995
between the Company and Oracle Corporation.
(Incorporated by reference. Previously filed as Exhibit
B to the Amended and Restated Asset Purchase Agreement
dated as of July 27, 1995 filed as Exhibit 2.1 to the
Current Report on Form 8-K dated July 27, 1995 and
filed August 11, 1995.) IBRF
(bb) Amendment to Credit Agreement dated November 3, 1994
between the Company, the Bank Parties thereto and
Harris Trust and Savings Bank, as agent. Superseded by
Credit Agreement November 10, 1995 filed at Exhibit
[10(ee)]. (Incorporated by reference. Previously filed
as Exhibit 10.2 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995.) IBRF
(cc) Credit Agreement dated November 10, 1995 between the
Company, the Bank Parties thereto and Harris Trust and
Savings Bank, as agent. (Incorporated by reference.
Previously filed as Exhibit 10 to the Company's
Quarterly Report on Form 10-Q for the quarter ended
September 30, 1995.) IBRF
(dd) Employment Termination Agreement, dated as of March 4,
1996 between the Company and George R. Garrick
(Incorporated by reference. Previously filed as Exhibit
10(dd) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.) IBRF
(ee) Form of Information Resources, Inc.
Directorship/Officership Agreement between the Company
and each of its directors, executive officers and
certain other officers. (Incorporated by reference.
Previously filed as Exhibit 10(x) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1994.) IBRF
(ff) Amendment to Credit Agreement dated November 10, 1995
between the Company, the Bank Parties thereto and
Harris Trust and Savings Bank, as agent (filed
herewith). EF
(gg) Employment Agreement dated as of August 22, 1996,
between the Company and Randall S. Smith and First
Amendment to Employment Agreement dated November 11,
1996 (filed herewith). EF
(hh) Information Resources, Inc. Amended and Restated 401(k)
Retirement Savings Plan and Trust adopted by the
Company effective May 24, 1995 (filed herewith). EF
(ii) First Amendment to the Information Resources, Inc.
Amended and Restated 401(k) Retirement Savings Plan
effective July 1, 1996 (filed herewith). EF
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
------- ----------------------- ----------
<C> <S> <C>
(jj) Second Amendment to the Information Resources, Inc.
Amended and Restated 401(k) Retirement Savings Plan
effective March 1, 1997 (filed herewith). EF
(kk) Trust Agreement between Information Resources, Inc. and
Fidelity Management Trust. Company dated as of July 1,
1996 (filed herewith). EF
(ll) First Amendment to Trust Agreement between Fidelity
Management Trust Company and Information Resources,
Inc. effective March 1, 1997 (filed herewith). EF
21 Subsidiaries of the Registrant (filed herewith). EF
23 Consent of Independent Auditors (filed herewith). EF
23.1 Consent of Independent Certified Public Accountants
(filed herewith). EF
24 Powers of Attorney (filed herewith). EF
27 Financial Data Schedule (filed herewith). EF
</TABLE>
4
<PAGE>
EXHIBIT 10(ff)
First Amendment To Credit Agreement
To Each of the Banks Signatory Hereto
Ladies and Gentlemen:
Reference is hereby made to that certain Credit Agreement dated as of
November 10, 1995 (the "Credit Agreement"), between the undersigned, Information
Resources, Inc., a Delaware corporation (the "Borrower"), Harris Trust and
Savings Bank, as agent for the Banks (the "Agent"), and you (the "Banks"). All
capitalized terms used herein without definition shall have the same meanings
herein as such terms have in the Credit Agreement.
The Borrower has requested that the Banks waive the Borrower's non-
compliance as of December 31, 1996, with Section 7.6 of the Credit Agreement
(Consolidated Tangible Net Worth), amend Sections 7.6 (Consolidated Tangible Net
Worth), 7.8 (Quick Ratio), and 7.9 (Cash Flow Coverage Ratio), add an additional
financial covenant and amend the facility fee payable under Section 2.1(a) of
the Credit Agreement, and the Banks are willing to do so on the terms and
conditions set forth in this First Amendment.
1. Waiver.
The Borrower has indicated that as of December 31, 1996, it was not in
compliance with Section 7.6 of the Credit Agreement (Consolidated Tangible Net
Worth). The Borrower hereby requests the Banks waive the foregoing and, by the
Required Banks signing below, the Banks hereby agree to waive compliance with
the same for, and only for, the period ending December 31, 1996; provided,
however, that this waiver shall not become effective unless and until the
conditions set forth in Section 3 hereof have been satisfied.
2. Amendments.
Upon the execution and delivery of this First Amendment by the Borrower and
the Required Banks in the space provided for that purpose below, the Credit
Agreement shall be and hereby is amended as follows:
(a) Section 2.1(a) of the Credit Agreement shall be amended and
restated to read as follows:
"(a) Facility Fee. The Borrower shall pay to the Agent for the
ratable account of the Banks in accordance with their Percentages a
<PAGE>
facility fee at the rate of 0.15% per annum until February 9, 1997,
and on and after February 10, 1997, at the rate per annum equal to the
Applicable Facility Fee (in each case computed on the basis of a year
of 360 days and the actual number of days elapsed) on the average
daily amount of Commitments hereunder (whether used or unused). Such
facility fee shall be payable quarter-annually in arrears on the last
day of each March, June, September and December in each year and on
the Termination Date, unless the Revolving Credit Commitments are
terminated in whole on an earlier date, in which event the facility
fee for the period to the date of such termination in whole shall be
paid on the date of such termination. For purposes hereof, the term
"Applicable Facility Fee" means .40% per annum on and after
February 10, 1997, until the next Pricing Date, and thereafter from
one Pricing Date to the next a rate per annum determined in accordance
with the following:
Cash Flow Coverage Ratio
for such Pricing Date: Applicable Facility Fee:
Less than or equal to 1.0 to 1.0 0.40%
Greater than 1.0 to 1.0 0.15%"
(b) The definition of "Pricing Date" appearing in Section 4.1 of the
Credit Agreement shall be amended and restated to read as follows:
"Pricing Date" means, for any fiscal quarter of the Borrower
ended after the date hereof, the latest date by which the Borrower is
required to deliver a Compliance Certificate for such fiscal quarter
pursuant to Section 7.5. The Eurodollar Margin and Applicable Facility
Fee established on a Pricing Date shall remain in effect until the
next Pricing Date. If the Borrower has not delivered a Compliance
Certificate by the date such Compliance Certificate is required to be
delivered under Section 7.5, until a Compliance Certificate is
delivered before the next Pricing Date, the Eurodollar Margin shall be
1% per annum and the Applicable Facility Fee shall be .40% per annum.
If the Borrower subsequently delivers such a Compliance Certificate
before the next Pricing Date, the Eurodollar Margin and Applicable
Facility Fee established by such late delivered Compliance Certificate
shall take effect from the date of delivery until the next Pricing
Date."
(c) Section 4.1 of the Credit Agreement shall be amended to include a
new definition which shall read as follows:
<PAGE>
"Consolidated Operating Income" means, with reference to any
period, the operating income (or operating loss) of the Borrower and
its Consolidated Subsidiaries for such period as computed on a
consolidated basis in accordance with GAAP.
(d) The last sentence of Section 7.5 of the Credit Agreement
shall be amended and restated to read as follows:
"Such certificate shall also set forth the calculations
supporting such statements in respect of Sections 7.6, 7.7, 7.8, 7.9
and 7.17 of this Agreement."
(e) Sections 7.6, 7.8, and 7.9 of the Credit Agreement shall each be
amended and restated to read as follows:
"Section 7.6. Consolidated Tangible Net Worth. The Borrower
shall, as of the last day of each quarter-annual accounting period of
the Borrower ending during the periods specified below, maintain
Consolidated Tangible Net Worth of not less than:
<TABLE>
<CAPTION>
Consolidated Tangible
From and To and Net Worth
Including Including Shall not Be less than:
<S> <C> <C>
12/31/96 12/30/97 $205,000,000
12/31/97 12/30/98 $210,000,000
12/31/98 and at all times thereafter $230,000,000
</TABLE>
; provided that the minimum required amount of Consolidated Tangible
Net Worth set forth above shall be increased by 100% of the net
proceeds received by the Borrower from any offering of equity
securities of the Borrower received at any time after December 31,
1996 (other than proceeds received from the exercise of stock options
to purchase shares of the Borrower's common stock existing as of the
date of this Agreement)."
"Section 7.8. Quick Ratio. The Borrower shall, as of the last day
of each quarter-annual accounting period of the Borrower, maintain a
Consolidated Quick Ratio of not less than 1.1 to 1.0."
"Section 7.9. Cash Flow Coverage Ratio. The Borrower shall, as of
the last day of each quarter-annual accounting period of the Borrower
ending during the periods specified below, maintain the ratio of
Consolidated Cash Flow for the four fiscal quarters of the Borrower
then ended to Consolidated Fixed Charges for the same four fiscal
quarters then ended (the "Cash Flow Coverage Ratio") of not less than:
<PAGE>
<TABLE>
<CAPTION>
Cash Flow Coverage
From and To and Ratio shall not
Including Including be less than:
<S> <C> <C>
12/31/96 03/30/98 .80 to 1.0
03/31/98 and at all times thereafter 1.00 to 1.0
</TABLE>
(f) Section 7 of the Credit Agreement shall be amended to include a
new Section 7.17 which shall read as follows:
"Section 7.17. Consolidated Operating Income. The Borrower shall
have Consolidated Operating Income for the fiscal quarter ending
March 31, 1997, of not less than ($2,000,000), and the Borrower shall
have Consolidated Operating Income for each fiscal quarter ending
after March 31, 1997, of not less than $1."
(g) Section 8.1(b) of the Credit Agreement shall be amended and
restated to read as follows:.
"(b) default in the observance or performance of any covenant set
forth in Sections 7.5(e), 7.6, 7.7, 7.8, 7.9, 7.10, 7.13, 7.14 or 7.17
hereof; or"
(h) The Covenant Compliance Certificate worksheet attached to Schedule
7.5 of the Credit Agreement shall be amended and restated to read as set
forth on Exhibit A attached hereto.
3. Conditions Precedent.
The effectiveness of this First Amendment is subject to the satisfaction of
all of the following conditions precedent:
(a) The Borrower, the Agent and the Required Banks shall have executed
and delivered this First Amendment.
(b) Legal matters incident to the execution and delivery of this First
Amendment shall be satisfactory to the Agent and its counsel.
4. Representations.
In order to induce the Banks to execute and deliver this First Amendment,
the Borrower hereby represents to the Banks that as of the date hereof, and
after giving effect to this First Amendment, the representations and warranties
set forth in Section 5 of the Credit Agreement are and shall be and remain true
and correct (except that the representations contained
<PAGE>
in Section 5.4 shall be deemed to refer to the most recent financial statements
of the Borrower delivered to the Banks) and the Borrower is in full compliance
with all of the terms and conditions of the Credit Agreement and no Default or
Event of Default has occurred and is continuing under the Credit Agreement or
shall result after giving effect to this First Amendment.
5. Miscellaneous.
(a) Except as specifically amended herein, the Credit Agreement shall
continue in full force and effect in accordance with its original terms.
Reference to this specific First Amendment need not be made in the Credit
Agreement, the Notes, or any other instrument or document executed in connection
therewith, or in any certificate, letter or communication issued or made
pursuant to or with respect to the Credit Agreement, any reference in any of
such items to the Credit Agreement being sufficient to refer to the Credit
Agreement as amended hereby.
(b) The Borrower agrees to pay on demand all costs and expenses of or
incurred by the Agent in connection with the negotiation, preparation, execution
and delivery of this First Amendment, including the fees and expenses of counsel
for the Agent.
(c) This First Amendment may be executed in any number of counterparts, and
by the different parties on different counterpart signature pages, all of which
taken together shall constitute one and the same agreement. Any of the parties
hereto may execute this First Amendment by signing any such counterpart and each
of such counterparts shall for all purposes be deemed to be an original. This
First Amendment shall be governed by the internal laws of the State of Illinois.
Dated as of February 10, 1997.
Information Resources, Inc.
By
Its
Accepted and agreed to as of the date and year last above written.
Harris Trust and Savings Bank,
individually and as Agent
<PAGE>
By
Its
Bank of America Illinois
By
Its
LaSalle National Bank (as assignee of
Comerica Bank-Illinois)
By
Its
<PAGE>
Exhibit A
First Amendment to Credit Agreement
Attachment To Compliance Certificate
Information Resources, Inc.
Compliance Calculations for Credit Agreement
Dated as of November 10, 1995
Calculations as of ____________, _____
- --------------------------------------------------------------------------------
A. Consolidated Tangible Net Worth (Section 7.6)
1. Consolidated total assets $_________
2. Goodwill $_________
3. Line A.1 minus A.2 $_________
4. Consolidated Total Liabilities $_________
5. Line A.3 minus A.4 (Consolidated Tangible
Net Worth) $_________
6. Line A.5 shall not be less than $_________
B. Leverage Ratio (Section 7.7)
1. Consolidated Total Liabilities (Line
A.4 above) $_________
2. Consolidated Tangible Net Worth (Line
A.5 above) $_________
3. Ratio of Line B.1 to B.2 ____ : 1.0
4. Line B.3 Ratio shall not be more than 0.75 : 1.0
C. Consolidated Quick Ratio (Section 7.8)
<PAGE>
1. Cash and cash equivalent $_________
2. Accounts receivable net of reserves $_________
3. Outstanding principal of Oracle Escrow $_________
4. Sum of Lines C.1, C.2 and C.3 $_________
5. Ratio of Line C.1 to C.4 (Consolidated
Quick Ratio) ____ : 1.0
6. Line C.5 Ratio shall not be less than 1.1 : 1.0
D. Cash Flow Coverage Ratio (Section 7.9)
1. Consolidated Net Income $_________
2. Consolidated Interest Expense $_________
3. Income Taxes $_________
4. Depreciation and Amortization $_________
5. Amortization of InfoScan Costs and Software
Costs $_________
6. Net Proceeds from Equity Security Offerings $_________
7. Net Proceeds from Subordinated Debt $
==========
8. Sum of Lines D.1 through D.7 (Consolidated
Cash Flow) $
==========
9. Principal payments on Indebtedness for
Borrowed Money $_________
10. Consolidated Interest Expense $_________
11. Capital Expenditures $_________
12. Dividends $_________
13. Cash Payments made in connection with
InfoScan Costs and Software Costs $_________
<PAGE>
14. Cash Investments $_________
15. Sum of Lines D.9 through D.14 (Consolidated
Fixed Charges) $
==========
16. Ratio of Line D.8 to D.15 ____ : 1.0
17. Line D.16 Ratio shall not be less than ____ : 1.0
E. Consolidated Operating Income (Section 7.17)
1. Consolidated Operating Income for fiscal quarter
then ended $_________
2. Line E.1 shall not be less than $_________
<PAGE>
EXHIBIT 10 (gg)
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------------
This First Amendment To Employment Agreement ("Amendment") is entered into as of
November 11, 1996 by and between INFORMATION RESOURCES, INC. ("Information
Resources") and RANDALL S. SMITH (the "Employee") for the purpose of amending
that certain Employment Agreement entered into by and between the parties hereto
as of August 22, 1996 (the "Employment Agreement").
In consideration of the mutual promises and obligations set forth below,
Information Resources and the Employee hereby agree to amend the Employment
Agreement as follows:
1. Section 4.0 of Article IV of the Employment Agreement shall be amended
by adding an additional paragraph, said paragraph to read in its entirety
as follows:
"Information Resources may choose to cause the payments described
above to be made pursuant to a term life insurance policy on the life
of Employee, with a death benefit and payment schedule equivalent to
the twelve (12) monthly Base Salary payments described above, and the
payment of such death benefit shall be in lieu of and in full
satisfaction of Information Resources' obligation to continue to pay
Employee's Base Salary subsequent to his death as described in this
Section 4.0. Employee shall be the owner of and shall pay the annual
premiums on such policy, provided that Information Resources shall
increase Employee's Base Salary by an amount that will, after tax
deductions, equal the amount of said premium (as such premium amount
may change from time to time), such increased amount to be paid in a
lump sum upon Information Resources' receiving from Employee a paid
receipt (or canceled check) evidencing payment of the annual premium.
Employee agrees to cooperate with Information Resources in applying
for and obtaining the above-described term life insurance policy.
Information Resources reserves the right to terminate this alternative
method of payment and will so notify Employee of such termination,
whereupon Information Resources will reassume the direct payment
obligation described in the preceding paragraph."
IN WITNESS WHEREOF, Information Resources and the Employee have caused this
Amendment to be executed as of the date first written above.
INFORMATION RESOURCES, INC.
/s/ Randall S. Smith By: /s/ Gary S. Newman
- -------------------------- ------------------------
EMPLOYEE
Title: EVP - H.R.
--------------------
<PAGE>
Exhibit 10(gg)
EMPLOYMENT AGREEMENT
by and between
INFORMATION RESOURCES, INC.
and
RANDALL S. SMITH
<PAGE>
EMPLOYMENT AGREEMENT
--------------------
THIS AGREEMENT ("Agreement") is made as of the 22nd day of August, 1996
(the "Effective Date") by and between INFORMATION RESOURCES, INC., a Delaware
corporation ("Information Resources" or "IRI"), and RANDALL S. SMITH (the
"Employee").
WHEREAS, Information Resources has employed the Employee in an executive
capacity since 1981 and desires to continue to employ the Employee in an
executive capacity on the terms and subject to the conditions set forth in this
Agreement; and
WHEREAS, the Employee desires to accept such employment with Information
Resources on the terms and subject to the conditions set forth in this
Agreement;
NOW THEREFORE, in consideration of the foregoing and of the mutual
covenants of Information Resources and the Employee set forth in this Agreement
and for other good and valuable consideration, the receipt and sufficiency of
which are hereby acknowledged by Information Resources and the Employee, the
parties hereto agree as follows:
ARTICLE I
---------
Employment
-----------
1.0 Employment. Information Resources agrees to employ the Employee,
and the Employee agrees to serve Information Resources on a full-time basis in
an executive capacity, according to the terms and subject to the conditions
hereinafter set forth, for the period
<PAGE>
commencing on the date hereof and ending with the effective date of termination
of employment as provided in ARTICLE VI (the "Employment Period").
1.1 Employment Duties. During the Employment Period, the Employee
shall devote his best efforts and all of his normal business time and attention
(excluding permitted vacation, holidays, personal and sick leave, and reasonable
time devoted to civic and charitable activities) to the business of Information
Resources and its affiliated companies, and to serve as President, Operations
Group and International Information Services Group of Information Resources or
to serve as such other officer or senior executive employee of Information
Resources or any of its affiliated companies as the Chief Executive Officer
and/or the Board of Directors (or the appropriate committee thereof) of IRI may
from time to time stipulate. As an officer or other senior executive of
Information Resources, the Employee shall have all the responsibilities and
authority normally incident to the office he holds as provided in the by-laws of
Information Resources or otherwise, subject to the authority and
responsibilities of the Board of Directors and its committees, and he shall have
such additional duties, not inconsistent with the responsibilities of his
office, as the Board of Directors, its committees or the Chief Executive Officer
of IRI shall prescribe. The Employee may, with the express written approval of
the Information Resources Board of Directors, serve and receive compensation as
a director of any other company affiliated with Information Resources or any
other company that, in the opinion of the Board of Directors, does not compete
with Information Resources.
1.2 Place of Employment. In connection with his employment with
<PAGE>
Information Resources, the Employee shall be based at the principal offices of
Information Resources in the Chicago metropolitan area. The Employee may be
required to perform ordinary business travel consistent with the
responsibilities of his office. Information Resources agrees that the Employee
shall not be required to relocate his principal place of business outside the
Chicago metropolitan area during the Employment Period.
ARTICLE II
----------
Compensation
------------
Information Resources agrees to compensate the Employee for the
services rendered by him during the Employment Period as follows:
2.0 Base Salary. During the Employment Period, Information
Resources shall pay the Employee a salary at an initial rate of Two Hundred
Eighty-Six Thousand Dollars ($286,000.00) per year subject to review by the
Compensation Committee of the Board of Directors for possible increase on the
same basis and at the same intervals as applicable for other senior officers of
Information Resources ("Base Salary"), it being understood that (a) increases in
the Base Salary shall be commensurate with the Employee's position, duties and
responsibilities and in conformity with IRI's policies and practices as applied
to other senior officers of IRI and (b) the Base Salary as increased from time
to time shall not decrease during the term of this Agreement unless and only to
the extent that the Compensation Committee of the Board of Directors (or its
successor) authorizes such a decrease as part of a broadly applied salary
reduction program applied in the same fashion to other senior officers in
addition to Employee.
<PAGE>
The Base Salary shall be payable in accordance with the practice followed by
Information Resources with respect to its other senior officers. Information
Resources shall not be required to pay the Employee his Base Salary for the
portion of any Disability Period with respect to which the Employee receives
disability benefit payments according to the provisions of Information
Resources' disability plans applicable to the Employee, except to the extent
provided in Article III hereof.
2.1 Bonus or Incentive Compensation. Information Resources shall
award the Employee, in respect of each calendar year during the term hereof
(including 1996) bonus or incentive compensation as provided under any present
or future incentive compensation plan of Information Resources as applied to
other senior officers of Information Resources. Information Resources shall not
be required to pay the Employee bonus or incentive compensation for the portion
of any Disability Period with respect to which the Employee receives disability
benefit payments according to the provisions of Information Resources'
disability plans applicable to the Employee.
2.2 Employee Benefit Plans. For purposes of this Agreement, the
meaning of the terms "employee benefit" and "employee benefits" shall exclude
any salary or bonus or incentive compensation, but shall include benefits under
health and welfare plans, life insurance, disability and retirement plans,
401 (k) plans, holidays, personal leave, sick leave and vacation allowances. The
Employee shall participate during the Employment Period in all employee benefit
plans generally applicable to senior officers of Information Resources, as those
plans may
<PAGE>
be in effect from time to time, and shall continue that participation after his
retirement on a basis comparable to that upon which other senior officers of
Information Resources may continue participation following their retirement.
During the Employment Period, the Employee shall be entitled to all other
employee benefits generally provided to senior officers of Information Resources
in accordance with then prevailing practice concerning such employee benefits.
The Employee shall be eligible for paid vacation at the rate of four (4) weeks
per year during 1996 and ratably for each year of service thereafter.
ARTICLE III
-----------
Disability
----------
3.0 Disability. In the event of any illness or disability of the
Employee of a nature, degree, or effect such that, within the Employment Period,
the Employee becomes unable to perform his duties under this Agreement on a
full-time basis and such that Information Resources believes (as reasonably
determined by the Chief Executive Officer of Information Resources or the Board
of Directors or appropriate committee thereof) on the basis of the facts
available that the Employee will be unable to perform his duties under the terms
of this Agreement on a full-time basis for a consecutive period of 180 days or
more (the "Disability Period"), the following provisions shall apply, it being
understood that prior to any such determination the Employee shall continue to
be paid his full Base Salary and shall continue participating in any Information
Resources bonus or incentive compensation plans.
3.1 Acting or Successor Officer. During any Disability Period, the
Chief
<PAGE>
Executive Officer of Information Resources (or the Board of Directors or
appropriate committee thereof) may appoint an acting or successor member or
officer to each position or office then held by the Employee.
3.2 Disability Benefit Plans. During any Disability Period, the
Employee shall be entitled to receive disability benefit payments according to
the provisions of Information Resources' disability plans for salaried
employees, if any, and the Employee shall continue to be an employee of IRI for
purposes of continued vesting and exercise of stock options (but not for
purposes of participation in incentive or bonus plans) and shall continue to
participate in all employee benefit plans for which he is eligible pursuant to
this Agreement or otherwise. In addition to the disability benefit payments
under said plans, during the first 180 days of any such Disability Period the
Employee shall be entitled to receive, at normal payroll dates, supplemental
disability payments directly from Information Resources in the amount necessary
for the total of such supplemental disability payments and disability benefit
plan payments to equal, on an annual basis, 100% of the Base Salary in effect at
the beginning of the Disability Period. In the event the Disability Period
continues beyond such 180 day period, Employee shall then receive, for the
remaining duration of the Disability Period, in addition to the disability
benefit payments under the provisions of IRI's disability plan(s), supplemental
disability payments directly from Information Resources at a rate equal to one-
third (33.3%) of his Base Salary in effect at the beginning of the Disability
Period, such supplemental disability payments to be adjusted on an annual basis
by the applicable percentage increase (or decrease) in the consumer price index
(All
<PAGE>
Urban Consumers) as published by the US Department of Labor, or any successor
index thereto.
3.3 Termination of Disability. If and when, in the reasonable
judgment of the Board of Directors, after the commencement of a Disability
Period the Employee regains his ability to perform his duties hereunder on a
full-time basis, such Disability Period and Information Resources' obligation to
make supplemental disability payments pursuant to Section 3.2 hereof shall
cease. The Employee shall, immediately thereafter, resume being paid his Base
Salary under the same terms as he was being paid at the commencement of the
Disability Period and resume participating in any Information Resources bonus or
incentive compensation plans, with no cost-of-living or other adjustment of the
Base Salary if the length of the Disability Period is less than 24 months. If
the Disability Period continues for 24 months or more, the Employee's Base
Salary will be adjusted upon his resumption of duties by the applicable
percentage increase (or decrease), during the Disability Period, in the consumer
price index (All Urban Consumers) as published by the US Department of Labor, or
any successor index thereto. The Board of Directors shall consider the
Employee's redesignation to the particular positions and offices held by him
prior to the Disability Period, but the Board of Directors shall be under no
obligation with respect thereto.
ARTICLE IV
----------
Supplemental Benefits
---------------------
4.0 Supplemental Benefits. In addition to any other employee
benefits to
<PAGE>
which the Employee, his spouse or his estate may be entitled, in the event of
the Employee's death during the term of this Agreement, Information Resources
shall continue to pay Employee's monthly Base Salary to his spouse, or his
estate if there is no living spouse, for a period of twelve (12) months
commencing on the first day of the month following the month of the Employee's
death.
ARTICLE V
---------
Stock Options
--------------
5.0 Stock Option Grants. Except as provided in Sections 5.1, 5.2,
5.3, 6.3 and 6.4 of this Agreement, nothing in this Agreement shall alter the
terms which govern any options previously granted to the Employee pursuant to
the Information Resources Executive Stock Option Plan or any other option plan
under which Employee receives or has received options to acquire Information
Resources, Inc. common stock (the "Plan").
5.1 Acceleration and Expiration/Cancellation. Notwithstanding any
provisions of the Plan (or any option granted pursuant to the Plan or any Stock
Option Agreement) to the contrary, in the event of any "Change of Control"
(defined as any merger, consolidation or reorganization in which Information
Resources is a merging, consolidating or reorganizing party and pursuant to
which neither Information Resources nor any entity controlled by it is the
surviving entity; or as the acquisition of beneficial ownership of, or power to
vote, forty percent (40%) or more of the outstanding voting securities of
Information Resources by any
<PAGE>
acquiror (or group of acquirors acting in concert) within any period of 90
consecutive days) which occurs after the second anniversary of the
effective date of this Agreement, then the Employee (or his estate) shall
be entitled to immediately exercise in full any unexercised options (vested
or unvested) granted pursuant to the Plan prior to the Change of Control
(other than expired options) then held by the Employee (or his estate). For
purposes of this Agreement, an unexercised option "expires" at the end of a
specified period of time after the date of grant (currently 10 years from
such date of grant) in compliance with applicable law and as specified in
the Stock Option Agreement under which the grant is made. Unvested options
held by Employee shall not be canceled by action of the Executive Stock
Option Plan Committee (or its successor) and no cancellation of unvested
options shall occur other than in accordance with Section 5.2 (c) below.
5.2 Stock Option Vesting and Exercise Following Termination.
Notwithstanding any provisions of the Plan (or any option granted pursuant
to the Plan or any Stock Option Agreement) to the contrary, upon
termination of employment hereunder, Employee (or his estate) shall have
the following vesting and exercise rights with respect to the stock options
held at the date of such termination (including but not limited to those
options which vest as a consequence of the termination of employment, which
options shall be deemed to be vested as of the date of such termination):
a. In the event of Employee's death during the Employment Period, all
unvested options will immediately vest and all options will be
exercisable by his estate for the period
<PAGE>
ending at the earlier of the expiration date of the options or 24
months from the date of death.
b. In the event that Employee's employment hereunder is terminated by
Information Resources without cause or by Employee for "Good Reason,"
vested stock options will be exercisable for the period ending at the
earlier of the expiration date of the options or 24 months from the
date of termination of employment. In the event that such termination
is effective prior to the second anniversary of the Effective Date,
all unvested options held by Employee at such termination date will
continue to vest according to the vesting schedule set forth in the
applicable Stock Option Agreement for such options (but will vest
immediately upon the death of Employee) and, upon such vesting, shall
be exercisable by Employee (or his estate) for the period ending 24
months after the date of such vesting. In the event that such
termination is effective at or subsequent to the second anniversary of
the Effective Date, the unvested options held by Employee at such
termination date will vest immediately upon such termination date and
be exercisable by Employee (or his estate) for the period ending at
the earlier of the expiration date of the options or 24 months after
the date of such termination of employment.
c. In the event that Employee's employment hereunder is terminated for
any reason other than as set forth in subsections (a) and (b) above,
all options which are vested as of the effective date of such
termination will be exercisable by Employee (or his estate) for the
period ending at the earlier of the expiration date of the options or
13 months from the
<PAGE>
date of termination of employment, and stock options which are
unvested as of the effective date of termination of employment will be
canceled as of that date.
5.3 1995 Stock Option Grant. It is hereby acknowledged and agreed
that Employee was granted 80,000 options under IRI's Executive Stock Option
Plan on May 24, 1995, which shall vest in accordance with the following
schedule:
a. one-half (50%) on May 24, 1996
b. three-quarters (75%) on May 24, 1997
c. 100% on May 24, 1998
This option grant will be further evidenced by a separate Stock Option Agreement
containing the terms and conditions under said Plan.
ARTICLE VI
Term of Employment
------------------
6.0 Term of Employment. The employment of the Employee pursuant to
this Agreement shall commence on the date hereof and shall automatically
continue thereafter until terminated in accordance with this Agreement.
6.1 Termination Without Cause. Either party to this Agreement may
terminate the employment of the Employee pursuant to this Agreement,
without cause, by giving prior written notice to the other party specifying
a termination date no earlier than 60 days and no later than 90 days
following the delivery of such notice (a "Section 6.1
<PAGE>
Notice").
6.2 Termination by the Employee for Good Reason. Except as otherwise
provided in this Section 6.2, at any time prior to the Employee's receipt
of a Section 6.1 Notice or the termination of the Employee's employment by
Information Resources for "Cause," the Employee may give notice to
terminate his employment for "Good Reason" by delivering a written notice
of termination to Information Resources specifying the "Good Reason"
(described in subsections (a) through (d) of this Section 6.2) for the
termination and further specifying the effective date of termination which
shall be no earlier than thirty (30) days and no later than sixty (60) days
after Information Resources' receipt of such written notice of termination
(a "Section 6.2 Notice"). A Section 6.2 Notice will not be effective unless
received by Information Resources within 30 days after the occurrence of
the event specified by the Employee as being the "Good Reason" for
termination. Information Resources shall have 30 days after receiving any
Section 6.2 Notice within which to initiate corrective or remedial action,
and if such action is timely initiated then upon the completion of such
corrective or remedial action the Section 6.2 Notice will be deemed
withdrawn; provided, however, that the Section 6.2 Notice shall not be
deemed withdrawn if the events specified by the Employee as being the "Good
Reason" for termination were repeated, intentional and directed at the
Employee individually. For the purpose of this Agreement, the Employee
shall have "Good Reason" to terminate his employment hereunder if, but only
if:
<PAGE>
(a) without the express written consent of the Employee, he is
assigned any duties inconsistent with Article I or his positions, duties,
responsibilities and status with Information Resources immediately prior to
a change in his reporting relationships, duties, responsibilities, title or
offices, except in connection with (1) his reassignment by the Chief
Executive Officer and/or the Board of Directors (or the appropriate
committee thereof) of Information Resources to a comparable position, in
conformity with the provisions of Section 1.2 hereof, with a comparable
level of duties and responsibilities and with the same salary, same
eligibility for bonus/incentive compensation and same grade level, or (2)
the commencement or continuation of a Disability Period; or he is removed
from or not re-elected to any of those positions except in connection with
such reassignment or the commencement or continuation of a Disability
Period;
(b) a reduction is made by Information Resources in the Employee's
Base Salary, except as provided for in Section 2.0 hereof;
(c) Information Resources fails to continue in effect any benefit,
bonus or compensation plan, stock ownership plan, stock purchase plan,
stock option plan, life insurance plan, health-and-accident plan or
disability plan (other than those plans which expire by their express
terms) in which the Employee is participating, other than as part of a
reduction or change generally applicable to other senior officers of
Information Resources, except that in no case shall the benefits available
to Employee under Article III be reduced; or
<PAGE>
(d) Information Resources fails to obtain from any successor entity
to Information Resources an agreement to perform this Agreement to the
extent and in the manner required to be performed by Information Resources.
6.3 Consequences of Termination Without Cause or for Good Reason. In
the event Information Resources terminates the employment of Employee
without cause pursuant to Section 6.1, or the Employee terminates his
employment for "Good Reason" pursuant to Section 6.2 hereof, the Employee
shall receive, for each of the twelve (12) months following any such
termination of employment, his monthly Base Salary at the rate in effect
immediately prior to the giving of the Section 6.1 Notice or Section 6.2
Notice. In addition, Employee shall receive the cash equivalent of such
Base Salary multiplied by the average percentage of base salary awarded as
a bonus (in cash or otherwise) to the other Executive Officers of
Information Resources who remained full-time employees in good standing
through the date on which the relevant bonus, if any, was paid for the year
in which such termination of Employee's employment occurs, prorated for the
portion of the relevant calendar year prior to the effective date of
termination and payable at the same time as the bonus payment for such year
is made to the other Executive Officers. By way of illustrative example,
assume a termination by Employee for "Good Reason" on June 30 of a year in
which Employee's Base Salary is $300,000 and the average percent of base
salary awarded as a bonus to Executive Officers for that year is 20%,
Employee shall receive a bonus payment of $30,000, payable at the
<PAGE>
same time as that year's bonus is paid to the other Executive Officers
(typically in March or April of the following year). In addition to the
foregoing, upon such termination, Information Resources agrees to
compensate the Employee for the amount of any premiums for COBRA insurance
coverage for the Employee and his spouse and dependent children for a
period from the date of his termination until the earlier of (a) the first
anniversary of such date or (b) the date he becomes eligible for similar
benefits under a health insurance plan at a subsequent employer. During the
12 month period following termination of employment hereunder, Employee
agrees to make himself available, at the reasonable request of Information
Resources, for up to sixty (60) hours of work on behalf of Information
Resources, at the headquarters of Information Resources or by telephone or
by such methods or under such circumstances as shall be mutually determined
and agreed by Employee and Information Resources.
6.4 Termination For Cause. In the event of "Cause," Information
Resources shall have the right to terminate the employment of the Employee
pursuant to this Agreement without prior written notice, except as provided
in this Section 6.4. "Cause" shall be deemed to exist under the following
circumstances:
(a) if the Employee refuses or fails or neglects to perform his
obligations under this Agreement and the Employee fails to rectify such
deficiency within thirty (30) days, after receiving written notice from the
Board of Directors of Information Resources, for any reason other than factors
that, if continued, would reasonably give rise to the
<PAGE>
determination or continuation of a Disability Period;
(b) if the Employee has developed or pursued interests substantially
adverse or substantially inconsistent with the material fulfillment of his
obligations hereunder to Information Resources, and fails to cease such conduct
within ten (10) days after receiving written notice from the Board of Directors
of Information Resources;
(c) if the Employee engages in illegal or other wrongful conduct which is
materially detrimental to the business or reputation of Information Resources;
or
(d) if the Employee engages in any conduct or activity prohibited by
Section 8.0 or 8.1 of this Agreement.
No notice of termination under this Section 6.4 will be effective unless
delivered by IRI to Employee within 60 days following the date on which the
Chief Executive Officer or the Chairman of the Board of Directors first becomes
aware of the nature and significance of the event specified as "Cause" for
termination. In the event of termination of the Employee's employment in
accordance with this Section 6.4, Information Resources shall have no further
liability in respect of the Employee's employment; provided, however, that
Information Resources shall (a) pay the Employee the value of any accrued salary
or other compensation due the Employee on the date of termination and (b)
Employee shall retain the rights set forth in Section 5.2 hereof.
6.5 Termination Upon Death of Employee. The employment of the
Employee under this
<PAGE>
Agreement shall automatically terminate upon the death of the Employee.
ARTICLE VII
Covenant Not To Compete
-----------------------
7.0 Covenant Not To Compete. The Employee shall not, without the
prior express written consent of Information Resources, directly or
indirectly, for himself or for any other person or entity, individually,
jointly or as a partner, stockholder (except as a holder of not more than
five percent (5%) of the outstanding shares of a publicly-held
corporation), employee, agent, consultant or otherwise:
(a) during the Employment Period, and for a period of two (2) consecutive
years immediately thereafter, work or perform any service for the Dun &
Bradstreet Corporation or the A.C. Nielsen Company, Efficient Market Services,
Inc., Cornerstone Technologies, Inc. or any parent, subsidiary, affiliate or
successor of any of the foregoing;
(b) during the Employment Period, and for a period of two (2) consecutive
years immediately thereafter, induce, attempt to induce, or participate in or
facilitate the inducing of or attempting to induce, any employee, officer,
director, consultant, sales representative or agent of Information Resources (or
any of its subsidiaries or affiliates) to terminate or alter his or her business
relationship with Information Resources (or any of its subsidiaries or
affiliates) or to breach any agreement or obligation he or she has with or to
Information Resources (or any of its subsidiaries or affiliates) or to perform
work or services for the Employee or for a competitor of Information Resources
described in Section 7.0(a), or hire any such person within six months of
<PAGE>
the termination of such business relationship; or
(c) during the Employment Period, and for a period of one (1) year
immediately thereafter, attempt in any manner to persuade any customer or
supplier of Information Resources (or any of its subsidiaries or affiliates) to
cease or reduce the amount of business which such customer or supplier engages
in or contemplates engaging in with Information Resources (or any of its
subsidiaries or affiliates), regardless of whether the relationship between such
customer or supplier and Information Resources (or its subsidiary or affiliate)
was originally established in whole or in part through Employee's efforts.
The Employee acknowledges that the restrictions set forth in this Article VII
are (a) reasonable and necessary for the protection of Information Resources'
interests and (b) are entered into by the Employee in exchange for adequate
consideration granted to him in connection with this Agreement. In the event
that any provision of this Section 7.0 is found by a court of competent
jurisdiction to be unreasonable or unenforceable, the parties agree that such
provision shall be enforceable against the Employee to the greatest extent that
would be found to be reasonable and enforceable.
ARTICLE VIII
------------
Confidentiality; Ideas and Improvements
---------------------------------------
8.0 Confidentiality. Information Resources is engaged in various lines
and methods of doing business, and utilizes processes, programs, data, software
and techniques
<PAGE>
which consist of or involve confidential business information. Such information
has been or will be available to and used by the Employee during the course of
his employment as well as confidential client information including data
disclosing the identity of clients of Information Resources, their particular
needs, methods, data and other similar information. The Employee agrees that so
long as such information is confidential in fact and is not readily
ascertainable by third parties through lawful means, the Employee will not,
during the Employment Period and for a period of five consecutive years
immediately thereafter, disclose or use such confidential information, either
directly or indirectly for the benefit of any person or entity other than
Information Resources. The Employee agrees to return all programs, manuals,
documents, records, and other information relating to the business of
Information Resources, including materials prepared by the Employee, to
Information Resources immediately upon the termination of employment hereunder.
8.1 Ideas and Improvements. The Employee agrees to promptly disclose
to Information Resources all ideas, designs, improvements, creations and
inventions, whether or not patentable or subject to other legal protection,
which have significant relationship to the business of Information Resources or
any affiliates of Information Resources, and which were developed or created by
the Employee at any place or time during the Employment Period (collectively,
"Ideas and Creations"). The Employee further agrees to take all steps necessary
to execute and deliver to Information Resources copyright or patent rights on
all matters suitable for such protection, and to execute and deliver to
Information Resources all documents which may be
<PAGE>
required to assign to Information Resources such copyright or patent rights, and
to otherwise cooperate to the extent within the Employee's control to ensure
Information Resources' use and enjoyment of such Ideas and Creations, provided
that there is no obligation to assign an invention for which no equipment,
supplies, facility, or trade secret information of Information Resources was
used and which was developed entirely on the Employee's own time, unless (a) the
invention relates to the business of Information Resources or to Information
Resources' actual or demonstrably anticipated research or development, or (b)
the invention results from any work performed by the Employee for Information
Resources.
ARTICLE IX
----------
Miscellaneous Provisions
------------------------
9.0 Legal Remedies. The Employee hereby acknowledges that Information
Resources would suffer irreparable injury if the provisions of Sections 7.0, 8.0
or 8.1 above were breached and that Information Resources' remedies at law would
be inadequate in the event of such breach. Accordingly, the Employee hereby
agrees that any such breach or threatened breach may, in addition to any other
available remedies, be preliminarily enjoined by Information Resources without
bond. In the event of litigation under this Agreement, each side shall pay its
own attorneys' fees and expenses, except that if the Employee is enjoined either
preliminarily or permanently, after an evidentiary hearing, then the Employee
shall pay the
<PAGE>
attorneys' fees and expenses of Information Resources in connection with that
evidentiary hearing and, if such evidentiary hearing results in a court refusing
a preliminary or permanent injunction, then Information Resources shall pay the
Employee's attorneys' fees and expenses in connection with such hearing.
Sections 7.0, 8.0 and 8.1 shall survive, and shall continue in effect,
notwithstanding any termination of this Agreement.
9.1 Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the Employee and Information Resources and each of
their respective heirs, personal representatives, permitted assigns, and
successors in interest, including, in the case of Information Resources, any
company with which Information Resources may be merged or consolidated or to
which all or substantially all of Information Resources' assets may be
transferred. Except as otherwise provided above, this Agreement shall not be
assignable by Information Resources or the Employee without the express written
consent of the other party.
9.2 Governing Law. This Agreement shall be construed and enforced in
accordance with the law of the State of Illinois.
9.3 Notices. All notices required or permitted hereunder shall be
given in writing, either delivered personally or by registered or certified
mail, addressed to Information Resources at its principal office to the
attention of the Corporate Secretary, or to the Employee either at his residence
address shown on the employment records of Information Resources or in care of
the principal office of Information Resources, as appropriate. Notice delivered
personally
<PAGE>
shall be deemed effectively given as of the time of personal delivery, and
notice given by mail shall be deemed effectively given as of two days after the
date of such mailing.
9.4 Entire Agreement; Amendments; Headings. This Agreement embodies
the entire agreement of Information Resources and the Employee with respect to
the subject matter hereof. No amendment or modification of the terms of this
Agreement shall be effective unless reduced to a written instrument executed by
Information Resources and the Employee. The headings of sections in this
Agreement are for convenience only.
IN WITNESS WHEREOF, Information Resources and the Employee have caused this
Agreement to be duly executed as of the date first above written.
INFORMATION RESOURCES, INC.
/s/ Randall S. Smith By: /s/ Gian M. Fulgoni
- --------------------- --------------------------
EMPLOYEE
Its: CEO
-------------------------
Final As Executed
<PAGE>
FIRST AMENDMENT TO EMPLOYMENT AGREEMENT
---------------------------------------
This First Amendment To Employment Agreement ("Amendment") is entered into as of
November 11, 1996 by and between INFORMATION RESOURCES, INC. ("Information
Resources") and RANDALL S. SMITH (the "Employee") for the purpose of amending
that certain Employment Agreement entered into by and between the parties hereto
as of August 22, 1996 (the "Employment Agreement").
In consideration of the mutual promises and obligations set forth below,
Information Resources and the Employee hereby agree to amend the Employment
Agreement as follows:
1. Section 4.0 of Article IV of the Employment Agreement shall be amended
by adding an additional paragraph, said paragraph to read in its entirety
as follows:
"Information Resources may choose to cause the payments described
above to be made pursuant to a term life insurance policy on the life
of Employee, with a death benefit and payment schedule equivalent to
the twelve (12) monthly Base Salary payments described above, and the
payment of such death benefit shall be in lieu of and in full
satisfaction of Information Resources' obligation to continue to pay
Employee's Base Salary subsequent to his death as described in this
Section 4.0. Employee shall be the owner of and shall pay the annual
premiums on such policy, provided that Information Resources shall
increase Employee's Base Salary by an amount that will, after tax
deductions, equal the amount of said premium (as such premium amount
may change from time to time), such increased amount to be paid in a
lump sum upon Information Resources' receiving from Employee a paid
receipt (or canceled check) evidencing payment of the annual premium.
Employee agrees to cooperate with Information Resources in applying
for and obtaining the above-described term life insurance policy.
Information Resources reserves the right to terminate this alternative
method of payment and will so notify Employee of such termination,
whereupon Information Resources will reassume the direct payment
obligation described in the preceding paragraph."
IN WITNESS WHEREOF, Information Resources and the Employee have caused this
Amendment to be executed as of the date first written above.
INFORMATION RESOURCES, INC.
/s/ Randall S. Smith By: /s/ Gary S. Newman
- -------------------------- ------------------------
EMPLOYEE
Title: EVP - H.R.
--------------------
<PAGE>
EXHIBIT 10(HH)
INFORMATION RESOURCES, INC.
AMENDED AND RESTATED
401(k) RETIREMENT SAVINGS PLAN AND TRUST
<PAGE>
TABLE OF CONTENTS
Article Heading Page
- --------------- ----
I. DEFINITIONS .................................................. 1
II. SERVICE ...................................................... 6
III. ELIGIBILITY FOR PARTICIPATION ................................ 8
IV. CONTRIBUTIONS AND FORFEITURES ................................ 9
V. MAXIMUM ANNUAL ADDITIONS ..................................... 17
VI. MAINTENANCE OF PARTICIPANTS' ACCOUNTS ........................ 18
VII. VESTED INTERESTS ............................................. 21
VIII. DISTRIBUTION OF BENEFITS ..................................... 23
IX. INVESTMENT DISCRETION ........................................ 26
X. ADMINISTRATION ............................................... 28
XI. AMENDMENTS AND DISCONTINUANCE ................................ 31
XII. TOP-HEAVY PROVISIONS ......................................... 33
XIII. TRUST PROVISIONS ............................................. 35
XIV. ADOPTION BY SUBSIDIARIES AND AFFILIATES ...................... 44
XV. LOANS TO PARTICIPANTS ........................................ 45
XVI. MISCELLANEOUS ................................................ 47
<PAGE>
INFORMATION RESOURCES, INC.
AMENDED AND RESTATED
401(k) RETIREMENT SAVINGS PLAN AND TRUST
This amended and restated agreement (the "Amended and Restated Plan and
Trust") is made this _____ day of ___________________, 1995 by and between
Information Resources, Inc. (hereinafter referred to as "Company") and the
Trustees of the Information Resources, Inc. 401(k) Retirement Savings Plan and
Trust.
WITNESSETH:
WHEREAS, the Company established a 401(k) Retirement Savings Plan and
Trust which became effective August 1, 1989 (the "Plan and Trust");
WHEREAS, the Plan and Trust is for the benefit of eligible employees of
the Company;
WHEREAS, the Plan and Trust is intended to be qualified under Section
401 et. seq. of the IRS Code of 1986, as amended (the "Code") and to be a tax
exempt trust under Section 501 of the Code;
WHEREAS, the Executive Committee of the Board of Directors of the
Company has, since the effective date of the Plan and Trust, adopted various
amendments to the Plan and Trust;
WHEREAS, the Executive Committee of the Board of Directors of the
Company has determined it to be in the best interests of the Company to now
incorporate all previous amendments to the Plan and Trust into one restated
document;
NOW, THEREFORE, BE IT RESOLVED, that the Plan and Trust is hereby
amended and restated, such amended and restated Plan and Trust to be known as
the "Information Resources, Inc. Amended and Restated 401(k) Retirement Savings
Plan and Trust".
<PAGE>
INFORMATION RESOURCES, INC.
AMENDED AND RESTATED
401(k) RETIREMENT SAVINGS PLAN AND TRUST
ARTICLE I
DEFINITIONS
As used in this Amended and Restated Plan and Trust, the following terms shall
have the meaning hereinafter set forth unless the context shall clearly indicate
otherwise.
1.1 "ACCRUED BENEFIT" as of any date shall mean the combined
balances of a Participant's 401(k) Account, Company Matching Contribution
Account, and Rollover Contribution Account.
1.2 "ANNUAL ADDITIONS" to a Participant's accounts for any Plan
Year shall mean the sum of the Company's contributions to the Participant's
401(k) Account and Matching Contribution Account for the Plan Year under
consideration, including the Participant's share, if any, of forfeitures in
accordance with Section 415(c)(2) of the Code.
1.3 "AUTHORIZED LEAVE OF ABSENCE" shall mean, as to any Employee,
an absence authorized by the Company for nonworking time by reason of layoff,
pregnancy, jury duty, illness, temporary disability, or military service. In
granting such Authorized Leaves of Absence, the Company shall treat similarly
situated Employees uniformly.
1.4 "BENEFICIARY" shall mean any person or persons designated by a
Participant in accordance with Section 8.6 to receive any death benefits that
may be payable under the Plan. Wherever the rights of Participants are stated
or limited herein, their Beneficiaries shall be deemed bound thereby.
1.5 "BOARD OF DIRECTORS" shall mean the Board of Directors of
Information Resources, Inc.
1.6 "CODE" shall mean the Internal Revenue Code of 1986, as amended
from time-to-time.
1.7 "COMMITTEE" shall mean the individuals designated by the Board
of Directors pursuant to Article X to administer the Plan.
1.8 "COMPANY" shall mean Information Resources, Inc. and each
affiliate or subsidiary of the Company which adopts this Plan with the consent
of the Board of Directors in accordance with the provisions of Article XIV.
1.9 "COMPENSATION" shall mean an Employee's total cash
compensation, including
<PAGE>
overtime pay and bonuses, but excluding (a) any Compensation in excess of
$150,000 or such higher amount which may from time to time be prescribed in
accordance with regulations issued by the Secretary of the Treasury or his
delegate in accordance with Section 401(a)(17) of the Code and subject to the
provisions of Article IV below, and (b) any Compensation due to a Company
contribution for life insurance, medical insurance, or disability insurance. If
a Participant enters into a Salary Reduction Agreement (as defined in Section
4.2) with the Company for a given Plan Year, his compensation for such Plan Year
for all purposes of this Plan except Sections 4.2, 4.4, and 12.3 shall be equal
to his compensation after application of the Salary Reduction Agreement. For
purposes of Sections 4.2, 4.4, and 12.3, Compensation shall be determined
without application of any Salary Reduction Agreement.
1.10 "DATE OF TERMINATION" shall mean the earlier of the following
dates:
(a) the date an Employee quits, is discharged, retires for
reasons other than disability, or dies;
(b) the date which is the first anniversary of the date of
an Employee is laid off or commences an Authorized
Leave of Absence, excluding Military Leave of Absence,
if such Employee has not returned to the active employ
of the Company by such anniversary; or
(c) the date which is the ninety-first (91st) day
following the date an Employee separates from military
service, if such Employee was on a Military Leave
of Absence, and such Employee has not returned to the
active employ of the Company by such date.
1.11 "DETERMINATION DATE" means, with respect to any Plan Year, the
last day of the preceding Plan Year. For the short Plan Year beginning August
1, 1989 and ending December 31, 1989, the Determination Date shall be the last
day of such Plan Year.
1.12 "DISABLED" or "DISABILITY" shall mean a physical or mental
condition which qualifies an Employee for disability benefits under the
Company's disability plan. Retirement due to Disability shall be granted on a
uniform basis for all Participants in similar circumstances.
1.13 "EARLY RETIREMENT DATE" shall mean, as applicable, the date an
Employee retires from the active employ of the Company on or after attaining age
fifty-five (55) and receiving credit for at least seven (7) years of Vesting
Service, or the date that an Employee who has satisfied such seven (7) year
Vesting Service requirement before separating from service with the Company
(with a nonforfeitable right to an accrued benefit), but who separated from
service prior to reaching such age requirement, attains age fifty-five (55).
1.14 "EFFECTIVE DATE" shall mean August 1, 1989.
2
<PAGE>
1.15 AN "EMPLOYEE" shall mean any individual currently in the employ
of the Company, including Leased Employees, but excluding any director of such
Company who is not in the employ of the Company.
1.16 "ERISA" shall mean the Employee Retirement Income Security Act
of 1974 as amended from time-to-time.
1.17 "FORMER PARTICIPANT" shall mean a former Employee or
Beneficiary who is entitled to receive, is receiving, or has received
distributions provided herein.
1.18 "FUND" shall mean all monies as from time-to-time held by the
Trustees.
1.19 "401(K) ACCOUNT" shall mean an account established by the
Company for each Participant to hold the Company's 401(k) Contributions made
hereunder on behalf of such Participant and a proportionate share of the net
earnings for each Plan Year. The maintenance of separate 401(k) Accounts shall
be primarily for accounting purposes and shall not restrict Fund investments.
1.20 "401(K) CONTRIBUTION" shall mean contributions made by the
Company to the Plan on behalf of a Participant under the terms of a Salary
Reduction Agreement (as defined in Section 4.2) entered into between the Company
and the Plan and the Participant.
1.21 "HIGHLY COMPENSATED EMPLOYEE" means any Employee or former
Employee who, at any time during the Plan Year or the preceding Plan Year, is a
Highly Compensated Employee as defined in Code Section 414(q) and the
implementing regulations thereunder, as amended from time to time.
1.22 "HOUR OF SERVICE" shall mean and be determined on the following
basis for all Employees:
(a) each hour for which he is either directly or
indirectly paid or entitled to payment by the Company
or an Affiliated Company for the performance of duties
(these hours shall be credited to the period in which
the duties are performed); excluding, payments on
account of a period during which no duties are
performed if such payment is made or due under a plan
maintained solely for the purpose of complying with
applicable worker's compensation, or unemployment
compensation or disability insurance laws;
(b) each hour for which he is directly or indirectly paid,
or entitled to payment, by the Company or an
Affiliated Company for reasons (such as vacation,
holiday, jury duty, sickness, or disability, layoff,
military duty or leave of absence) other than for the
performance of duties (these hours shall be credited
to the computation period or periods as determined
under the
3
<PAGE>
rules set forth in 29 Code of Federal Regulations
Section 2530.200b-2(c)(2)); and
(c) each hour for which back pay, irrespective of
mitigation of damages, has been awarded to the
Employee or Participant or agreed to by the Company or
an Affiliated Company, except that hours under this
paragraph 1.22(c) shall not duplicate hours under
paragraph 1.22(a) and (b) (these hours shall be
credited for the computation period or periods to
which the award or agreement pertains rather than the
computation period in which the award, agreement, or
payment was made).
No more than 501 hours of service shall be credited under subparagraph
1.22(b) to an Employee or Participant on account of any single continuous period
during which he performs no duties (whether or not such period occurs in a
single computation period) unless the Committee establishes uniform,
nondiscriminating rules which provides to the contrary. An Employee or
Participant who is on leave due to military duty shall be created as required by
Federal law, provided the Participant returns to an Affiliated Company within
the time provided under Federal and State laws following eligibility for
discharge, at a rate of 8 hours a day, 40 hours a week during such period of
time.
In case of payment which is made or due on account of a period during
which an Employee performs no duties, and which results in the crediting of
Hours of Service under paragraph 1.22(c), or in the case of an award or
agreement is made with respect to a period described in paragraph 1.22(b), the
number of Hours of Service to be credited shall be determined on the basis of
the rules set forth in 29 Code of Federal Regulations Section 2530.200b-2(b).
1.23 "KEY EMPLOYEE" means any Participant or Former Participant in
the Plan who, at any time during the Plan Year or any of the preceding four (4)
Plan Years, is a Key Employee as defined in Code Section 416(i)(l). Upon the
death of a Key Employee, the Key Employee's Beneficiary shall be considered a
Key Employee.
1.24 "LEASED EMPLOYEE" shall mean any individual who is not an
Employee of the Company and who provides services for the Company if
(a) such services are provided pursuant to an agreement
between the Company and any other person;
(b) such individual has performed such services for the
Company (or a related person within the meaning of
Section 144(a)(3) of the Code) on a substantially
full-time basis for a period of at least one (1) year;
and
(c) such services are of a type historically performed by
employees in the business field of the Company.
4
<PAGE>
1.25 "LIMITATION YEAR" shall mean the Plan Year.
1.25.1 "LOAN ADMINISTRATOR" shall mean the individual designated by
the Committee to administer the Plan's loan program described in Article XV. If
at any time and for any reason there ceases to be a Loan Administrator, the term
Loan Administrator shall mean the Committee until such time as a new Loan
Administrator is appointed.
1.26 "MATCHING CONTRIBUTION ACCOUNT" shall mean an account
established by the Company for each Participant to hold the Participant's share
of the Company Matching Contribution for each Plan Year, if any, and a
proportionate share of the net earnings for each Plan Year. The maintenance of
separate Matching Contribution Accounts shall be primarily for accounting
purposes and shall not restrict Fund investments.
1.27 "MILITARY LEAVE OF ABSENCE" shall mean a leave of absence
granted automatically for any period of military service in which an individual
s employment rights are protected by any law of the United States governing
military service, provided such individual returns to the service of the Company
within such individual returns to the service of the Company within ninety (90)
days of his separation from such military service.
1.28 "NON-HIGHLY COMPENSATED EMPLOYEE" shall mean an Employee who is
not a Highly Compensated Employee.
1.29 "NON-KEY EMPLOYEE" shall mean an Employee who is not a Key
Employee.
1.30 "NORMAL RETIREMENT DATE" shall mean the Participant's
sixty-fifth (65th) birthday.
1.31. "PARTICIPANT" shall mean an Employee of the Company who becomes
a Participant as provided in Article III. Once a Participant becomes eligible
for participation in the Plan, he shall continue to be a Participant under the
Plan until the date he terminates his employment with the Company.
1.32. "PLAN" shall mean the Information Resources, Inc. Amended and
Restated 401(k) Retirement Savings Plan as set forth herein or as amended from
time-to-time.
1.33 "PLAN ADMINISTRATOR" shall mean the Company.
1.34 "PLAN YEAR" shall initially mean the five-month period
beginning August 1, 1989 and ending December 31, 1989 and thereafter shall mean
the twelve-month period commencing on a January 1 and ending on the following
December 31.
1.35 "RETIREMENT DATE" shall mean a Participant's date of retirement
on or after his
5
<PAGE>
Normal Retirement Date, Early Retirement Date, or retirement due to Disability,
whichever is applicable.
1.36 "ROLLOVER CONTRIBUTION ACCOUNT" shall mean an account
established by the Company for each Participant to hold any rollover
contributions made to the Plan by or on behalf of the Participant pursuant to
Section 6.3, and a proportionate share of net earnings for each Plan Year. The
maintenance of separate Rollover Contribution Accounts shall primarily be for
accounting purposes and shall not restrict Fund investments.
1.37 "TOP-HEAVY PLAN" means a defined contribution plan where, as of
a Determination Date, the aggregate of the accounts of Key Employees under the
plan is greater than sixty percent (60%) of the aggregate of the accounts of all
Employees under such plan. The calculation of the aggregate of Employees
accounts for both Key and Non-Key Employees shall exclude amounts attributable
to (a) deductible Employee contributions (in accordance with Treasury Department
regulations Section 1.416-1, T-28 and its successor provisions), and (b)
rollover contributions from a plan of an unrelated employer accepted by the
Plan. Aggregate values of Employee's accounts shall include any distributions
made within the Plan Year that includes the Determination Date, as well as
within the four preceding Plan Years, but exclude the accounts of any
Participant or Former Participant who has not rendered any service for the
Employer during any of the five (5) Plan Years ending on the Determination Date.
1.38 "TRUST" shall mean the Information Resources, Inc. Amended and
Restated 401(k) Retirement Savings Trust as set forth herein or as amended from
time-to-time.
1.39 "TRUSTEES" shall mean the individual, individuals or
corporation designated by the Board of Directors to hold and administer the
Fund, and any successor trustees appointed in accordance with the terms of the
Trust in Article XIII.
1.40 "VALUATION DATE" shall mean June 30 and December 31 of each
Plan Year and at the discretion of the Company, but applied consistently, may be
any other additional dates selected by the Company.
ARTICLE II
SERVICE
2.1 ONE-YEAR BREAK IN SERVICE. An Employee shall suffer a One-year
Break in Service during any Plan Year in which the Employee does not complete
more than 500 Hours of Service.
Notwithstanding anything contained in this Section 2.1 to the contrary,
a Participant shall, solely for purposes of avoiding a One-Year Break in
Service, be credited with up to 501 Hours of Service as if the Participant
remained in the active employ of the Company during an
6
<PAGE>
Authorized Leave of Absence of up to one (1) year for reasons of (a) the
pregnancy of the Employee, (b) the birth of a child to the Employee or the
Employee's spouse, (c) the placement of a child with the Employee, or (d) caring
for a child immediately following birth or placement in connection with
adoption. Hours shall be credited at the rate of eight (8) hours per working day
and shall be credited solely in the Plan Year in which the leave commenced if
required to avoid a One-year Break in Service in that Plan Year or otherwise in
the Plan Year in which the one (1) year leave ended.
2.2 PARTICIPATION SERVICE. Participation Service shall mean
employment for which an Employee receives credit for purposes of determining his
eligibility for participation in the Plan. One year of Participation Service
shall be granted if, during the initial twelve-month period commencing with an
Employee's date of employment, he is credited with at least one thousand (1,000)
Hours of Service. If an Employee is not credited with at least one thousand
(1,000) Hours of Service during this initial twelve-month period, one year of
Participation Service shall be granted for the first Plan Year, commencing with
the Plan Year immediately following an Employee's date of hire, during which the
Employee is credited with at least one thousand (1,000) Hours of Service. Thirty
days of Participation Service shall be granted for the first calendar month that
an employee is credited with at least eighty-three (83) Hours of Service.
For purposes hereunder, employment with any corporation, trade, or
business which is a member of a controlled group of corporations or under common
control (as defined in Section 1563(a) and Section 414 of the Internal Revenue
Code), or is a member of an affiliated service group (as defined in Section
414(m) of the Internal Revenue Code) and any other entity required to be
aggregated with the Company pursuant to regulations under Section 414(o) of the
Internal Revenue Code shall be recognized.
In case of subsidiaries or affiliates which adopt this Plan in
accordance with Section 1.8, the Board of Directors of Information Resources,
Inc., in its sole discretion, at the time of adoption by the subsidiary or
affiliate, shall determine the date from which Participation Service is to be
credited.
2.3 VESTING SERVICE. Vesting Service shall mean employment for
which an Employee receives credit for purposes of determining his eligibility to
receive early retirement or vested benefits hereunder. An Employee shall receive
one year of Vesting Service for each calendar year in which he is credited with
1,000 or more Hours of Service. Notwithstanding the above, no Vesting Service
shall be credited for calendar years prior to 1984.
In the event an Employee suffers a One-Year Break in Service prior to
having a nonforfeitable interest in his Matching Contribution Account, as
determined in accordance with the provisions of Section 7.2, his Vesting Service
shall be forfeited if the Employee suffers the greater of (a) five (5)
consecutive One-Year Breaks in Service and (b) the number of consecutive
One-Year Breaks in Service if equal to or in excess of his Vesting Service.
For purposes hereunder, employment with any corporation, trade, or
business which is a
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member of a controlled group of corporations or under common control (as defined
in Section 1563(a) and Section 414 of the Code), or is a member of an affiliated
service group (as defined in Section 414(m) of the Code) shall be recognized.
In the case of subsidiaries or affiliates which adopt this Plan in
accordance with Article XIV, the Board of Directors of the Company, in its sole
discretion, shall determine the date from which Vesting Service is to be
credited.
2.4 PREDECESSOR COMPANY SERVICE. Notwithstanding anything herein
to the contrary, an Employee who was an employee of a predecessor company shall
receive credit for employment and Vesting Service hereunder for his service with
the predecessor company, provided, however, that where this Plan is not an
amendment, restatement or continuation of the plan of the predecessor company,
service credit may be limited to the extent permitted under regulations to
Section 414 of the Code.
ARTICLE III
ELIGIBILITY FOR PARTICIPATION
3.1 ELIGIBILITY.
(a) Employees of the Company on August 1, 1989 who have
attained age twenty-one (21) and have completed one year of Participation
Service shall become Participants on August 1, 1989. Except as provided in
subsection (b), all other Employees shall become Participants on the January 1
or July 1 coincident with or immediately following the date the Employee attains
age twenty-one (21) and completes One Year of the Participation Service (as
provided in Section 2.2 hereof), provided the Employee remains in the employ of
the Company on such January 1 or July 1.
(b) Beginning October 1, 1995, a Full-Time Employee of the
Company who has attained age twenty-one (21) and has completed thirty (30) days
of Participation Service shall become a Participant on the first day of that
quarter of a Plan Year that begins on or after the later of (1) the date on
which the Full- Time Employee attained age twenty-one (21) and (2) the date on
which the Full-Time Employee completed thirty (30) days of Participation
Service, provided that the Employee remains in the employ of the Company as a
Full-Time Employee on such first day of such first quarter. For purposes of
this Section 3.1, a Full-Time Employee is an Employee that is treated by the
Company as working for the Company at least 40 hours per week.
3.2 PARTICIPATION UPON REEMPLOYMENT. In the event a Participant
terminates his Employment and is subsequently reemployed as an Employee, he
shall resume participation as of his date of reemployment.
ARTICLE IV
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CONTRIBUTIONS AND FORFEITURES
4.1 401(K) CONTRIBUTION. For each Plan year, the Company shall
contribute to the Plan an amount equal to the total amount of contributions
which the Company has agreed to make pursuant to Salary Reduction Agreements,
subject to the limitations in Article V.
4.2 SALARY REDUCTION AGREEMENT. Subject to the provisions stated
herein, a Participant may enter into a written Salary Reduction Agreement with
the Company. The terms of such Agreement shall provide that the Participant
agrees to accept a reduction in Compensation from the Company based on multiples
of one percent (1%) of his Compensation per payroll period in an amount which is
at least two percent (2%) and does not exceed ten percent (10%). For the short
Plan Year beginning August 1, 1989 and ending December 31, 1989, the reduction
in Compensation per payroll period can not exceed twenty percent (20%). This
reduction in compensation shall not exceed $7,000 or such higher amount which
may from time-to-time be prescribed in accordance with regulations issued by the
Secretary of the Treasury or his delegate. In consideration of such Agreement,
the Company shall make a 401(k) Contribution to the Participant's 401(k) Account
on behalf of such Participant for such Plan Year in an amount equal to the total
amount by which the Participant's Compensation was reduced during the Plan Year.
The Salary Reduction Agreement and other such forms as may be required hereunder
shall be filed at the time and in the manner specified by the Committee.
The Committee shall be the agent of the Company for the purpose of
executing, amending or revoking Salary Reduction Agreements, and for giving or
receiving notices as provided herein. All Salary Reduction Agreements shall be
governed by the following:
(a) A Salary Reduction Agreement shall apply to each
payroll period during which it is on file with the
Committee until terminated, amended, or revoked as
provided herein. With the exception of the 1989 Plan
Year, each future Salary Reduction Agreement shall be
deemed to be renewed on each January 1 unless the
Company or Participant shall give not less than thirty
(30) days advance written notice of termination.
(b) Salary Reduction Agreements shall initially take
effect as of August 1, 1989, or any subsequent January
1 on which an Employee becomes a Participant
hereunder. Thereafter, any Salary Reduction Agreement
or an amendment thereto shall be effective as of the
first day of the payroll period immediately following
the January 1 or July 1 which is on or after the
thirtieth (30) day after the Salary Reduction
Agreement or amendment thereto is executed by the
Participant and filed with the Committee.
(c) The Company may amend or revoke its Salary Reduction
Agreement with any Participant at any time if the
Company determines that such revocation
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or amendment is necessary to insure that a Participant
s Annual Additions for any Plan Year will not exceed
the limitations of Article V or to insure that the
discrimination tests of Section 401(k) of the Code are
met for such Plan Year, provided that no such
amendment shall increase the salary reduction
percentage specified in a Participant's Salary
Reduction Agreement. Any such amendment or revocation
shall be done in a manner which shall not discriminate
in favor of officers, shareholders, directors or other
highly compensated Participants.
(d) A Participant may suspend 401(k) Contributions to the
Plan upon thirty (30) days written notice. A
Participant who suspends 401(k) Contributions shall
not be eligible to resume 401(k) Contributions until
the January 1 or July 1 at least six months after
suspension.
(e) The Committee may make such reasonable rules as it
shall deem desirable to reduce undue clerical and
administrative time and expense in connection with
filing or amending Salary Reduction Agreements.
(f) The Plan is to be interpreted and applied in a manner
that satisfies the requirements of Section 401(k) of
the Code, including section 401(k)(3) thereof, and the
regulations promulgated thereunder, as amended from
time to time, and all provisions of the Plan shall be
construed and applied in accordance with such
requirements. In the event the Plan shall fail in the
Committee's reasonable judgment to meet the
nondiscrimination tests for 401(k) Contributions of
Section 401(k) of the Code for any Plan Year, the
Committee may, during the 2 1/2 month period following
the close of the Plan Year, return all or any portion
of such salary reduction amounts (including income
allocable thereto for the Plan Year) to the Highly
Compensated Employees, in accordance with the
nondiscrimination test and corrective provisions of
Section 401(k) and the regulations promulgated
thereunder, as amended form time to time, including
but not limited to Treasury Regulations Sections
1.401(k)-1(g)(1)(ii), 1.401(k)-1(f)(2),
1.401(k)-1(f)(5)(i) and 1.401(k)-1(f)(5)(ii). The
amounts returned to the Highly Compensated Employees
shall be deemed Compensation to them in the year to
which the deferral applied, and the Salary Reduction
Agreements of all affected Highly Compensated
Employees shall be deemed retroactively amended as
provided in subsection (c) hereinabove.
For purposes of this subsection (f), in order to meet
the nondiscrimination tests for 401(k) Contributions,
one of the following tests must be satisfied:
(i) The average percentage of compensation
contributed by the Company to the Plan
attributable to 401(k) Contributions on behalf
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of the eligible Highly Compensated Employees
may not exceed one hundred twenty-five
percentage (125%) of the average percentage of
compensation contributed by the Company to the
Plan attributable to 401(k) Contributions on
behalf of the eligible Non-Highly Compensated
Employees.
(ii) The average percentage of compensation
contributed by the Company to the Plan
attributable to 401(k) Contributions on behalf
of the Highly Compensated Employees may not
exceed the average percentage of compensation
contributed by the Company to the Plan
attributable to 401(k) Contributions on behalf
of the eligible Non-Highly Compensated
Employees, plus two percent (2%), up to a
maximum of two hundred percent (200%) of such
average percentage on behalf of the eligible
Non-Highly Compensated Employees.
For purposes of the foregoing tests, and in accordance
with Code Sections 401(k)(9) and 414(s),
"compensation" shall be defined in accordance with
Code Sections 401(k)(9) and 414(s) and the regulations
promulgated thereunder, specifically including
Treasury Regulations Section 1.414(s)-1, as the same
may be amended from time to time.
(g) In the event the Company's tax deduction shall be
denied for any 401(k) Contribution, then all Salary
Reduction Agreements shall be deemed retroactively
amended pursuant to subsection (c) above, and upon the
Company's recovery of the amount disallowed (as
provided in Section 4.8), the amount so recovered
shall be allocated among Participants in accordance
with such amended Salary Reduction Agreements and paid
to such Participants as Compensation.
(h) In the event the 401(k) Contribution made on behalf of
a Participant for any Plan Year shall exceed $7,000
(or such higher amount as may be prescribed in
accordance with Code Section 402(g) and regulations
promulgated thereunder), the Committee may, no later
than April 15 after the close of the applicable Plan
Year, return the amount of the excess. Such amounts
returned to the affected Participants shall be deemed
Compensation to the Participants in the year to which
the deferral applied, and the Salary Reduction
Agreements of all affected Participants shall be
deemed retroactively amended.
4.3 AFTER-TAX EMPLOYEE CONTRIBUTIONS. No after-tax employee
contributions are required or permitted under the terms of this Plan.
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<PAGE>
4.4 MATCHING CONTRIBUTIONS. For each Plan Year, the Company shall
have the options, in its sole discretion, to make a Matching Contribution to the
Plan. Such contribution, if any, shall be determined solely by the Committee
and shall be announced at least thirty (30) days prior to the Plan Year to which
it applies. The Company or the Committee acting on behalf of the Company shall
be under no obligation to make this Matching Contribution, but instead, it shall
be at their sole discretion, subject to the requirements of Section 12.4, if
such section applied hereunder. Such contribution shall be made to each
Participant's Matching Contribution Account and shall be allocated as a
percentage of the total amount the Participant defers for such period from the
prior Valuation Date to the current Valuation Date that does not exceed 6% of
the Participant's compensation for the same such period.
4.5 CONTRIBUTIONS. The Company's Matching Contributions under
Section 4.4 shall be made monthly on any date or dates selected by the Company;
provided, however, that the total annual contribution for each Plan Year shall
be paid on or before the date on which the Company's federal income tax return
is due, including any extensions of time obtained for the filing of the return.
The Company's 401(k) Contributions shall be made as of the end of each
Participant's payroll period provided, however, that in no event shall any
401(k) contribution for a Plan Year be paid on or after the thirtieth (30th) day
next following the close of the Plan Year.
Notwithstanding anything herein to the contrary, the sum of the Company
s 401(k) Contributions and Matching Contributions for any Plan year shall not
exceed an amount equal to fifteen percent (15%) of Compensation otherwise paid
or accrued to all Participants for the Plan Year under consideration.
The Plan is to be interpreted and applied in a manner that satisfies
the requirements of Section 401(m) of the Code, including Section 401(m)(2)
thereof, and the regulations promulgated thereunder, as amended from time to
time, and all provisions of the Plan shall be construed and applied in
accordance with such requirements. In the event the Plan shall fail in the
Committee's reasonable judgment to meet the nondiscrimination tests for Matching
Contributions or other contributions of Section 401(m) of the Code for any Plan
Year, the Committee may, before the close of the following Plan Year, cause the
amount of the excess aggregate contributions by Highly Compensated Employees
(including the income allocable thereto) for such Plan Year to be distributed
or, if forfeitable, forfeited, to such Highly Compensated Employees in
accordance with the requirements of Section 401(m) and the regulations
thereunder. The amount of such excess aggregate contributions shall be
determined in accordance with the requirements of Section 401(m)(6) of the Code
and the regulations promulgated thereunder.
For purposes of this Section 4.5, in order to meet the
nondiscrimination tests for Matching Contributions, one of the following tests
must be satisfied:
(i) The average contribution percentage on behalf
of the eligible Highly Compensated Employees
may not exceed one hundred twenty-five
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<PAGE>
percent (125%) of the average contribution
percentage on behalf of the eligible
Non-Highly Compensated Employees.
(ii) The average contribution percentage on behalf
of the eligible Highly Compensated Employees
may not exceed the average contribution
percentage on behalf of the eligible
Non-Highly Compensated Employees, plus two
percent (2%), up to a maximum of two hundred
percent (200%) of such average contribution
percentage on behalf of the eligible
Non-Highly Compensated Employees.
Average contribution percentage for purposes of the above tests is the average
of the ratios (calculated separately for each Employee who is an eligible
employee within the meaning of Code Section 401(m)(5)) of (i) the Matching
Contributions paid under the Plan on behalf of each such Employee for the Plan
Year and (ii) such Employee's compensation for the Plan Year, computed in
accordance with Code Section 401(m) and regulations promulgated thereunder.
Optional Use of Matching Contributions to Comply With 401(k)
Nondiscrimination Test. The Company may, if it so elects, include Matching
Contributions, if any, as employer contributions for purposes of compliance with
the nondiscrimination test specified in Section 4.2(f) of this Plan, provided
that it does so in accordance with the requirements of Code Section 401(k)(3)(D)
and regulations promulgated thereunder, including but not limited to Treas. Reg.
Sections 1.401(k)-1(g)(13) and 1.401(k)-1(b)(5). In the event the Company makes
such an election, to the extent so used, such Matching Contributions shall not
additionally be taken into account under the nondiscrimination test of Code
Section 401(m) for such year, in accordance with Code Section 401(m)(3). As
required to prevent the occurrence of a multiple use of limitations prohibited
by Code Section 401(m)(9), the Company shall calculate the actual deferral
percentage of those Highly Compensated Employees eligible to make both 401(k)
and 401(m) contributions in the manner described in, and in accordance with the
requirements of, Treasury Regulations Sections 1.401(k)-1(f)(2),
1.401(m)-2(c)(1) and 1.401(m)-2(c)(3), as the same may be amended from time to
time.
4.6 FORFEITURES. If upon termination of employment, a Participant
s vested interest in his Matching Contribution Account is less than one hundred
percent (100%), a forfeiture shall occur as of the end of the Plan Year in
which the Participant's termination of employment occurs or a distribution under
the Plan is received, whichever is later. The Forfeiture shall equal the
portion of the Participant's Matching Contribution Account in which the
Participant is not vested as of his Date of Termination.
Notwithstanding anything herein to the contrary, reference to a
Matching Contribution under the Plan for any Plan Year shall mean the portion of
the Forfeitures so applied to reduce the total amount the Company is otherwise
required to contribute for that Plan Year, plus the actual amount contributed by
the Company for that Plan Year.
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<PAGE>
4.7 WITHDRAWALS. No amounts may be withdrawn by a participant
hereunder prior to his or her termination of employment with the Company or
prior to age 59-1/2 unless it is determined by the Committee upon written
application of a Participant that an immediate and heavy financial need exists
on the part of the Participant. The existence of an immediate and heavy
financial need shall be determined based on the Participant's relevant facts and
circumstances. Notwithstanding the above, a Participant's need shall
automatically be deemed an immediate and heavy financial need if it is for the
purpose of meeting one of the following events or any additional events that may
be permitted in future rulings or notices from the Commissioner of the Internal
Revenue Service:
1. Medical expenses described in Section 213(d) of the Internal
Revenue Code incurred by the Participant, the Participant's
spouse, or any dependent of the Participant;
2. Purchase (excluding mortgage payments) of a principal residence
for the Participant;
3. Payment of tuition for the next semester or quarter of
post-secondary education for the Participant, the Participant's
spouse or the Participant's children or other dependents; or
4. Payment to prevent eviction of the Participant from his
principal residence or foreclosure on the mortgage of the
Participant's principal residence.
In the event of an immediate and heavy financial need and with the
consent of the Committee, withdrawals will be permitted from the Participant's
401(k) Account and the Participant's Rollover Account (if any), but will be
restricted to the lesser of (i) the accumulated 401(k) Contributions made by the
Company on behalf of the Participant plus the Participant's Rollover Account
balance (if any), (ii) the Participant's 401(k) Account balance plus the
Participant's Rollover Account balance (if any), or (iii) the amount required to
meet the immediate and heavy financial need, with (i) and (ii) both as of the
immediately preceding Valuation Date. Such withdrawals shall be available
within a reasonable time after the notice for withdrawal is filed with and
approved by the Committee.
The Committee shall be protected in determining financial need upon the
Participant's representation that the need cannot be satisfied from other
resources of the Participant, including his spouse and minor children, to the
extent the assets are available to the Participant. This representation shall
include the following resources:
1. Reimbursement or compensation by insurance or otherwise;
2. Reasonable liquidation of the Participant's assets to the
extent such liquidation would not, in itself, cause an
immediate and heavy financial need;
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<PAGE>
3. Cessation of 401(k) Contributions; or
4. Other distributions or nontaxable loans available from this
Plan or other plans maintained by the Company or by borrowing
from commercial sources on reasonable terms.
Notwithstanding the above, the Committee may automatically determine
that the Participant's immediate and heavy financial need cannot be met through
other resources and thus waive the Participant representation requirement if
each of the following requirements are met:
1. The hardship withdrawal does not exceed the amount needed to
cover the immediate and heavy financial need.
2. The Participant has exhausted all distribution options,
excluding hardship withdrawals, and all nontaxable loans
available from the Plan or any qualified plan maintained by the
Company.
3. The Participant shall be precluded from entering into a Salary
Reduction Agreement for the twelve (12) months which
immediately follow the date of the hardship withdrawal.
4. For the Participant's taxable year in which the Participant is
again permitted to enter into a Salary Reduction Agreement
following the twelve (12) month period specified in (3) above,
the maximum 401(k) Contribution permitted for such tax year
shall be equal to (a) below less (b) below, where (a) and (b)
are as follows:
(a) The maximum 401(k) Contribution permitted for said tax
year under the terms of Section 4.2 herein as
prescribed under Section 402(g) of the Code, less
(b) The total 401(k) Contributions made on behalf of the
Participant during the Participant's taxable year in
which the hardship withdrawal was made.
For purposes of Section 4.2, a Participant shall be deemed to
have automatically revoked his Salary Reduction Agreement upon
receiving a hardship withdrawal and the provisions of Section
4.2(b) shall apply upon the end of the twelve (12) month period
specified in (3) above.
The decision of the Committee relevant to hardship withdrawals shall be
final and conclusive as it respects all Participants, and the Committee shall
carry out its duties in a manner which is uniform and nondiscriminatory for all
Participants.
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4.8 RETURN OF COMPANY CONTRIBUTIONS. It shall be impossible at any
time prior to the satisfaction of all liabilities with respect to Participants
or Former Participants and their Beneficiaries under the Plan for any part of
the corpus or income to be used for, or diverted to, purposes other than (a) the
exclusive benefit of Participants and Former Participants or the Beneficiaries,
or (b) defraying reasonable expenses of administering the Plan and Fund to the
extent such expenses are not paid by the Company, provided that:
(a) if the Plan is denied either initial qualification or
qualification due to an amendment under Section 401(a)
of the Code, any Company contribution conditioned upon
the continued qualification of the Plan shall be
returned to the Company within one (1) year of the
denial of qualification;
(b) if, and to the extent, a tax deduction for a Company
contribution under Section 404 of the Code is
disallowed, Company contributions conditioned upon
deductibility shall be returned to the Company within
one (1) year after the disallowance of the deduction;
and
(c) if, and to the extent, a Company contribution is made
through a mistake of fact, such Company contribution
shall be returned to the Company within one (1) year
of the payment of the contribution.
4.9 OBRA '93 ANNUAL COMPENSATION LIMIT. In addition to other
applicable limitations set forth in the Plan, and notwithstanding any other
provision of the Plan to the contrary, for Plan Years beginning on or after
January 1, 1994, the annual compensation of each employee taken into account
under the Plan shall not exceed the OBRA 93 annual compensation limit. The
OBRA 93 annual compensation limit is $150,000, as adjusted by the Commissioner
for increases in the cost of living in accordance with section 401(a)(17)(B) of
the Code. The cost-of-living adjustment in effect for a calendar year applies
to any period, not exceeding 12 months, over which compensation is determined
(determination period) beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA 93 annual compensation limit
will be multiplied by a fraction, the numerator of which is the number of months
in the determination period, and the denominator of which is 12.
For Plan Years beginning on or after January 1, 1994, any reference in
this Plan to the limitation under section 401(a)(17) of the Code shall mean the
OBRA 93 annual compensation limit set forth in this provision.
If compensation for any prior determination period is taken into
account in determining an employee's benefits accruing in the current Plan
Year, the compensation for that prior determination period is subject to the
OBRA 93 annual compensation limit in effect for that prior determination
period. For this purpose, for determination periods beginning before the first
day of the first Plan Year beginning on or after January 1, 1994, the OBRA 93
annual compensation limit is $150,000.
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ARTICLE V
MAXIMUM ANNUAL ADDITIONS
5.1 MAXIMUM LIMITATIONS. Notwithstanding any other provisions of
this Plan, the Annual Additions to a Participant's accounts for any Limitation
Year shall not exceed the lesser of:
(a) $30,000 or such higher amount which may from
time-to-time be prescribed in accordance with
regulations issued by the Secretary of the Treasury or
his delegate; or
(b) 25% of such Participant's nondeferred compensation
received during the Limitation Year under
consideration.
5.2 DEFINED BENEFIT PLAN FRACTION. For any Plan Year, the
numerator of the defined benefit plan fraction is the projected annual benefit
of a Participant under any defined benefit plan maintained by the Company,
determined as of the end of the Plan Year, and the denominator of the defined
benefit plan fraction is the lesser of (a) the product of 1.25 multiplied by the
dollar limitation in effect under Code Section 415(b)(1)(A) for such year, or
(b) the product of 1.4 multiplied by the amount which may be taken into account
under Code Section 415(b)(1)(B) with respect to such Participant under the plan
for such year. For any Plan Year in which a defined benefit plan maintained by
the Company is Top-Heavy, the 1.25 in (a) above shall be replaced by 1.0.
5.3 DEFINED CONTRIBUTION PLAN FRACTION. For any Plan Year, the
numerator of the defined contribution plan fraction is the sum of the Annual
Additions to a Participant's account for the Plan Year under consideration and
all prior Plan Years, and the denominator of the defined contribution plan
fraction is the sum of the lesser of the following amounts determined for the
current Plan Year and for each prior year: (a) the product of 1.25 multiplied
by the dollar limitation in effect under Code Section 415(c)(1)(A) for such year
or (b) the product of 1.4 multiplied by the amount which may be taken into
account under Code Section 415(c)(1)(B) (or subsection (c)(7) or (8), if
applicable) with respect to such Participant under the Plan for such year. For
any Plan Year in which the Plan is a Top-Heavy Plan, the 1.25 in (a) above shall
be replaced by 1.0.
5.4 COMBINED PLAN LIMITATION. In the event any Participant under
this Plan is also a Participant under a defined benefit plan maintained by the
Company, the Annual Additions to a Participant's accounts for any Plan Year
shall not cause the sum of the Participant's Defined Benefit Plan Fraction for
such Plan Year and his Defined Contribution Plan Fraction for such Plan Year to
exceed 1.0. If the sum of the Defined Benefit Plan Fraction and the Defined
Contribution Plan Fraction shall exceed 1.0 in any such Plan Year, the numerator
of the Defined Benefit Plan
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Fraction shall be adjusted so that the sum of both fractions shall not exceed
1.0 for such year.
5.5 EXCESS ADDITIONS. In the event it is determined that the
Annual Additions to a Participant's accounts for any Plan Year would be in
excess of the limitations described in Section 5.1 herein, such Annual Additions
for the Plan Year shall be reduced to the extent necessary to bring the Annual
Additions for such Plan Year within such limitations in the following order of
precedence:
(a) Reduction of the Participant's allocable share of the
Matching Contribution to his Matching Contribution
Account for the Plan Year; and
(b) Reduction of such Participant's share of the 401(k)
Contribution pursuant to his Salary Reduction
Agreement for the Plan Year, and such reduction shall
be deemed to be an amendment to the Participant's
Salary Reduction Agreement as provided in Section 4.2.
5.6 AMOUNT OF REDUCTION. If, and to the extent that the Annual
Additions to a Participants's Accounts is reduced in accordance with the
provisions of Section 5.5(a) above, the amount of such reduction shall, subject
to the limitations in Sections 5.1 and 5.4, be allocated among the respective
Accounts respectively of all remaining Participants in the proportion that the
Compensation of a Participant bears to the total Compensation of all
Participants, excluding those affected by the limitations in Sections 5.1 and
5.4.
ARTICLE VI
MAINTENANCE OF PARTICIPANTS' ACCOUNTS
6.1 ALLOCATION PROCEDURE. As of each Valuation Date, the Company
shall adjust the individual accounts of each Participant and Former Participant,
as follows, in the order indicated:
(a) Each Participant's and Former Participant's 401(k)
Account, Matching Contribution Account and Rollover
Contribution Account shall be reduced by any payments
received from such account since the prior Valuation
Date.
(b) Subject to the provisions of Sections 5.1 and 5.4,
each Participant's 401(k) Account shall be increased
on each Valuation Date by one half (1/2) of the amount
of 401(k) Contributions made by the Company on behalf
of the Participant for the period from the prior
Valuation Date to the current Valuation Date under the
terms of the Participant's Salary Reduction Agreement.
(c) Subject to the provisions of Sections 5.1 and 5.4,
each Participant's
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Matching Contribution Account shall be increased on
each Valuation Date by one half (1/2) of the amount of
Matching Contributions made on behalf of the
Participant for the period from the prior Valuation
Date to the current Valuation Date.
(d) Each Valuation Date, pursuant to the election made
under Section 9.2, if any, the value in each
Participant's accounts (including undistributed
balances of Former Participant's accounts and
including the adjustments in subsections (a), (b), and
(c) above but excluding Loan Accounts under Section
15.2), shall be proportionately increased or decreased
so that the total of all such accounts shall equal the
total assets of the Fund at fair market value as of
the current Valuation Date. In determining the assets
of the Fund, one half (1/2) of the Matching
Contributions and one half (1/2) of the 401(k)
Contributions with respect to the current Valuation
Date shall be deducted.
(e) Subject to the provisions of Sections 5.1 and 5.4,
each Participant's 401(k) Account shall be increased
on each Valuation Date by the other one half (1/2) of
the amount of 401(k) Contributions made by the Company
on behalf of the Participant for the period from the
prior Valuation Date to the current Valuation Date
under the terms of the Participant's Salary Reduction
Agreement.
(f) Subject to the provisions of Sections 5.1 and 5.4,
each Participant's Matching Contribution Account shall
be increased on each Valuation Date by the other one
half (1/2) of the amount of Matching Contributions
made on behalf of the Participant for the period from
the prior Valuation Date to the current Valuation
Date.
Notwithstanding anything herein to the contrary, in the event the
Trustees are able to accurately record investment gains and losses of
Participant's accounts due to segregated investments or otherwise, such records
shall be used in lieu of the allocation method set forth in subsection (d)
above. In all other circumstances, the method established in subsection (d)
above shall be followed.
6.2 LATE RETIREMENT. In the event a Participant remains in the
active employ of the Company beyond the Plan Year in which occurs his Normal
Retirement Date, the Participant shall be entitled to continue his participation
in the Plan in all respects as if he had not yet reached his Normal Retirement
Date.
6.3 ROLLOVERS.
(a) Requirements for Rollover Contributions. If an
Employee receives, either
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before or after becoming a Participant, an eligible
rollover distribution from a qualified trust or a
qualified annuity plan within the meaning of Section
402(c) or Section 403(a) of the Internal Revenue Code,
then such Employee may contribute to the Plan an
amount which does not exceed the portion of such
eligible rollover distribution that would be
includible in the gross income of the Employee but for
the application of Section 402(c)(1) or Section
403(a)(4) of the Internal Revenue Code. If an
Employee receives, either before or after becoming a
Participant, a distribution or distributions from an
individual retirement account, an individual
retirement annuity or a simplified employee pension
within the meaning of Section 408 of the Internal
Revenue Code, then such Employee may contribute to the
Plan an amount which does not exceed the portion of
such distribution or distributions that would be
treated as a rollover contribution within the meaning
of Section 408(d)(3) of the Internal Revenue Code.
(b) Delivery of Rollover Contributions. Any rollover
contribution pursuant to this Section shall be
delivered by the Employee to the Trustees on or before
the 60th day after the day on which the Employee
receives the distribution or on or before such later
date as may be prescribed by law. Any such
contributions must be accompanied by (i) a statement
of the Employee that to the best of his knowledge the
amount so transferred meets the conditions specified
in this Section, (ii) a copy of such documents as may
have been received by the Employee advising him of the
amount of and the character of such distribution, and
(iii) if the Employee is not a Participant, an
investment election under Section 9.1.
Notwithstanding the foregoing, the Trustees shall not
accept a rollover contribution if in its judgment,
accepting such contribution would cause the Plan to
violate any provision of the Internal Revenue Code or
regulations, or if such contribution would cause the
qualified joint and survivor annuity rules of Section
401(a)(11) of the Internal Revenue Code to take effect
hereunder.
(c) Special Accounting Rules for Rollover Contributions.
An Employee's rollover contribution shall be credited
to a Rollover Account established for this purpose, as
of the date on which such contribution is delivered to
the Trustees, and in accordance with the investment
direction pursuant to Section 9.1, to the appropriate
subaccounts of such account. For purposes of the
investment allocations under Section 6.1(c), a
Participant's Rollover Account in the year in which
the rollover contribution is received, shall be
credited with investment income (loss) on a weighted
average basis. The value shall then be increased by
the rollover contribution multiplied by a factor, with
such factor based on the timing of the rollover
contribution as set forth in the following table:
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Date Trustees Receive Rollover Contribution Factor
------------------------------------------- ------
January 1 to February 15,
or July 1 to August 15 .75
February 16 to March 31,
or August 16 to September 30 .5
April 1 to May 15,
or October 1 to November 15 .25
May 16 to June 30,
or November 16 to December 31 0
This table is based on the premise that the
allocations will be performed each June 30 and
December 31. If allocations are performed more
frequently, then equivalent time periods shall be
used.
For years subsequent to the year in which the rollover
contribution is received, the Rollover Account shall
be treated in the same manner as the 401(k) Account or
Matching Contribution Account under Section 6.1 as it
relates to the allocation of investment income.
ARTICLE VII
VESTED INTERESTS
7.1 401(K) ACCOUNT AND ROLLOVER CONTRIBUTION ACCOUNT VESTING. The
amounts credited to a Participant's 401(k) Account and Rollover Contribution
Account shall be fully vested and nonforfeitable at all times.
7.2 VESTING OF MATCHING CONTRIBUTION ACCOUNT. A Participant's
matching Contribution Account shall become vested and nonforfeitable under the
following circumstances, and to the extent indicated:
(a) In the event of the Participant's retirement (i) on or
after his Normal Retirement Date, (ii) on or after his
Early Retirement Date, or (iii) due to Disability, his
vested interest shall be 100% of his individual
Matching Contribution Account.
Notwithstanding anything herein to the contrary, a
Participant shall be one hundred percent (100%) vested
in his individual Matching Contribution Account upon
reaching his Normal Retirement Date.
(b) In the even of the Participant's death, his vested
interest shall be 100% of
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his individual Matching Contribution Account.
(c) In the event a Participant terminates employment prior
to becoming eligible for retirement as set forth in
subsection (a) or for reasons other than death, his
vested interest in his Matching Contribution Account
shall be determined from the following table:
Years of
Vesting Service Vesting Percentage
--------------- ------------------
Less than 2 0%
2 but less than 3 10%
3 but less than 4 20%
4 but less than 5 40%
5 but less than 6 60%
6 but less than 7 80%
7 or more 100%
7.3 REEMPLOYMENT. In the event (a) a Participant terminates his
employment for any reason other than retirement or death, (b) the Participant
has less than a 100% vested interest in his Matching Contribution Account on his
Date of Termination, and (c) such Participant is subsequently reemployed after
having suffered the greater of (i) five (5) consecutive One-Year Breaks in
Service or (ii) the number of consecutive One-Year Breaks in Service if equal to
or in excess of his Vesting Service, the Participant's Matching Contribution
Account shall remain fixed except for any net earnings which may be allocated to
such account in accordance with the provisions of Section 6.1(c). Upon
reemployment, the Company shall set up a new Matching Contribution Account for
the reemployed Participant, primarily for accounting purposes, such that any
additional Vesting Service that the Participant is credited with on account of
his reemployment shall cause his vested interest to increase from his vested
interest prior to reemployment, but such vested interest shall only apply to the
Participant's new Matching Contribution.
7.4 RESTORATION OF FORFEITURES. In the event a Participant who has
terminated employment resumes employment covered under the Plan prior to
incurring five (5) consecutive One-Year Breaks in Service, any Forfeiture from
his Matching Contribution Account shall be restored and shall be credited to his
Matching Contribution Account as of the end of the Plan Year in which he resumes
employment, to be held and thereafter applied to provide benefits in accordance
with the provisions of the Plan, provided if such Participant has already
received a distribution in accordance with Article VIII, the provisions of
Section 8.8 are met.
Any Forfeiture so restored shall be deducted from the Forfeitures
otherwise available for the Plan Year in which such restoration is made, or to
the extent such Forfeitures are insufficient, shall be paid to the Fund by the
Company. See Article VIII, Section 8.12, for rules regarding reemployment of a
Participant.
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ARTICLE VIII
DISTRIBUTION OF BENEFITS
8.1 RETIREMENT. Subject to the provisions of Section 8.7, in the
event a Participant becomes entitled to benefits because of his retirement on or
after his Normal Retirement Date or on or after his Early Retirement Date,
benefit payments shall commence as soon as administratively possible following
the Valuation Date coincident with or following the actual date of retirement;
provided, that with respect to an early retirement benefit, the Participant has
made a claim for benefits to the Company in accordance with Treasury Regulation
Section 1.401(a)-14(c)(1)(ii). Benefit payments shall be based on the value of
the Participant's vested amount (determined under Article VII hereof) in his or
her Matching Contribution Account, 401(k) Account, and Rollover Contribution
Account, if any, determined as of the Valuation Date immediately preceding the
benefit commencement date hereunder. At the discretion of the Committee, a
payment may be made other than on the Plan's Valuation Date; however, the value
of his accounts will be the amount determined as of the Plan's last Valuation
Date plus contributions made to the Fund after such date and no payment shall be
deferred other than in accordance with Section 8.7 hereof. No investment
experience will be credited for the period following such Valuation Date to the
date specified for the distribution.
8.2 DEATH. In the event a Participant dies in the active employ of
the Company prior to receiving his nonforfeitable rights hereunder, benefit
payments shall commence as soon as administratively possible following the
Valuation Date coincident with or following the Participant's actual date of
death. Benefit payments shall be based on the value of the Participant's
Matching Contribution Account, 401(k) Account, and Rollover Contribution
Account, if any, determined as of the Valuation Date immediately preceding the
benefit commencement date hereunder. At the discretion of the Committee, a
payment may be made other than on the Plan's Valuation Date; however, the value
of his accounts will be the amount determined as of the Plan's last Valuation
Date plus contributions made to the Fund after such date and no payment shall be
deferred other than in accordance with Section 8.7 hereof. No investment
experience will be credited for the period following such Valuation Date to the
date specified for the distribution.
8.3 DISABILITY. Subject to provisions of Section 8.7, in the event
a Participant becomes eligible for disability benefits under a Company insured
long-term disability plan, benefit payments shall commence as soon as
administratively possible following the Valuation Date coincident with or
following the actual date of disability. However, if such disability plan
benefits would be reduced by the benefits payable from this Plan, the payment of
his accounts can be deferred until the earlier of the end of the Plan Year
during which a member attains age 65 or the date as of which the insured
disability benefits cease.
Benefit payments shall be based on the value of the Participant's
Matching Contribution Account, 401(k) Account, and Rollover Contribution
Account, if any, determined as of the
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<PAGE>
Valuation Date immediately preceding the benefit commencement date hereunder. At
the discretion of the Committee, a payment may be made other than on the Plan's
Valuation Date; however, the value of his accounts will be the amount determined
as of the Plan's last Valuation Date plus contributions made to the Fund after
such date and no payment shall be deferred other than in accordance with Section
8.7 hereof. No investment experience will be credited for the period following
such Valuation Date to the date specified for the distribution.
8.4 TERMINATION. In the event a Participant terminates his
employment for reasons other than retirement, Disability, or death, payments
shall commence as soon as administratively possible following the Valuation Date
coincident with or following the Participant's actual Date of Termination.
Benefit payments shall be based on the value of the Participant's 401(k)
Account, Matching Contribution Account, and Rollover Contribution Account, if
any, determined as of the Valuation Date immediately following the Date of
Termination. At the discretion of the Committee, a payment may be made other
than on the Plan's Valuation Date; however, the value of his accounts will be
the amount determined as of the Plan's last Valuation Date plus contributions
made to the Fund after such date and no payment shall be deferred other than in
accordance with Section 8.7 hereof. No investment experience will be credited
for the period following such Valuation Date to the date specified for the
distribution.
8.5 MANNER OF DISTRIBUTION. Distribution of any Participant's
share in the Fund shall be made to the person or persons entitled to such
distribution by payment in a lump sum, unless the distribution is made to an
eligible retirement plan in accordance with Section 8.10 hereof.
8.6 BENEFICIARY. Each Participant shall designate one or more
persons to receive any distribution payable upon the death of the Participant by
filing such designation in writing with the Committee. The Participant has the
right to change and successively change his designated Beneficiary. In no
event, however, shall such designation or change of Beneficiary be valid unless
the Participant's spouse, if any, consents in writing to the designation, or
change in designation, of a Beneficiary or Beneficiaries. If the Participant has
filed no designation, the death benefits shall be paid to the Participant's
spouse, if any. If the Participant has filed no designation and there is no
spouse, or if such person or persons so designated shall have predeceased the
Participant, the death benefits shall be paid to the Participant's duly
appointed and qualified executor or administrator, or if no executor or
administrator is appointed and qualified, within sixty (60) days following
receipt by the Committee of notice of the death of the Participant, such death
benefits may be paid, as the Committee in its sole discretion may determine, to
or among any one or more of the following: the spouse, issue of the
Participant, or any person or persons found by the Committee to be equitably
entitled thereto by reason of having paid or incurred expenses on account of the
funeral or the last illness of the Participant.
8.7 REQUIRED DISTRIBUTION DATES. In no event shall any
distributions hereunder be made later than sixty (60) days after the close of
the Plan Year in which occurs the Participant's Normal Retirement Date, or, if
later, his actual retirement. Notwithstanding the above, distributions
hereunder shall be made no later than April 1 after the close of the Plan Year
in
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<PAGE>
which the Participant attains age seventy and one half (70-1/2), regardless of
whether or not the Participant actually retires.
If any distribution is made hereunder to a Participant prior to age
fifty-nine and one half (59-1/2), the Participant may be subject to a ten
percent (10%) tax based on the amount of Company contributions allocated to him.
8.8 FACILITY OF PAYMENT. If the Committee shall be of the opinion,
from information deemed by it to be reliable, that a person entitled to
distributions hereunder is unable for any reason to attend to his affairs, the
Committee may direct that benefits due shall be withheld until a guardian for
such person has been duly appointed and that such benefits be paid only to such
guardian; or, in the alternative, the Committee may direct that such benefits be
paid to any relative by blood or connection by marriage of the person appearing
to the Committee to be equitably entitled to same or best qualified to apply
same to the comfort, maintenance, and support of such person. The Committee's
decision on such matters shall be conclusive and binding on all persons and
parties in interest.
8.9 CASH-OUT. Subject to the provisions of Section 8.7, the Plan
may not make a distribution to a Participant if the value of the Participant's
account is in excess of $3,500 unless the Participant consents to such
distribution.
8.10 DIRECT ROLLOVERS. This Section applies to distributions made
on or after January 1, 1993. Notwithstanding any provision of the Plan to the
contrary that would otherwise limit a distributee's election under this Section,
a distributee may elect, at the time and in the manner prescribed by the Plan
Administrator, to have any portion of an eligible rollover distribution paid
directly to a eligible retirement plan specified by the distributee in a direct
rollover. The following definitions shall apply for purposes of the application
of this Section:
(a) ELIGIBLE ROLLOVER DISTRIBUTION. An eligible rollover
distribution is any distribution of all or any portion
of the balance to the credit of the distributee,
except that an eligible rollover distribution does not
include: any distribution that is one of a series of
substantially equal periodic payments (not less
frequently than annually) made for the life (or life
expectancy) of the distributee or the joint lives (or
joint life expectancies) of the distributee and the
distributee's designated beneficiary, or for a
specified period of ten years or more; any
distribution to the extent such distribution is
required under section 401(a)(9) of the Code; and the
portion of any distribution that is not includible in
gross income (determined without regard to the
exclusion for net unrealized appreciation with respect
to employer securities).
(b) ELIGIBLE RETIREMENT PLAN. An eligible retirement plan
is an individual retirement account described in
section 408(a) of the Code, an individual
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<PAGE>
retirement annuity described in section 408(b) of the
Code, an annuity plan described in section 403(a) of
the Code, or a qualified trust described in section
401(a) of the Code, that accepts the distributee
eligible rollover distribution. However, in the case
of an eligible rollover distribution to the surviving
spouse, an eligible retirement plan is an individual
retirement account or individual retirement annuity.
(c) DISTRIBUTEE. A distributee includes an employee or
former employee. In addition, the employee's or
former employee's surviving spouse and the employee's
or former employee's spouse or former spouse who is
the alternate payee under a qualified domestic
relations order, as defined in section 414(p) of the
Code, are distributees with regard to the interest of
the spouse or former spouse.
(d) DIRECT ROLLOVER. A direct rollover is a payment by
the Plan to the eligible retirement plan specified by
the distributee.
8.11 TAX WITHHOLDING ON DISTRIBUTIONS. The Trustee or other payor
of any distribution under the Plan is authorized to withhold from any
distribution the amount of any tax required by law to be withheld from such
distribution and to pay such amount over to the appropriate taxing authorities.
8.12 REEMPLOYMENT OF A PARTICIPANT. In the event a Participant is
reemployed by the Employer prior to incurring five (5) consecutive One-Year
Breaks in Service and the Participant had previously received a lump sum
distribution of his Accounts representing less than a one hundred percent (100%)
interest in all such Accounts, the Participant shall have the right to pay back
the amount of his lump sum distribution, and thus be entitled to a restoration
of his forfeitures in accordance with the procedures established in Section 7.4.
Such repayment shall be made not later than the earlier of five (5) consecutive
One-Year Breaks in Service or five (5) years from the date the Participant is
reemployed.
ARTICLE IX
INVESTMENT DISCRETION
9.1 INVESTMENT ACCOUNTS. The Committee shall direct the Trustee,
in accordance with the Participant's instructions, regarding the manner in which
the Participant wishes to have his accounts invested. A Participant may direct
that investments be made in either the Investment Reserve Fund, the Balanced
Blend Fund, the Low P/E Common Stock Fund, the Special Capital Fund, or a
combination of the funds. The Trustees shall establish and maintain the funds
described herein.
(a) Investment Reserve Fund - This fund is a money market
fund which
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<PAGE>
consists of short-term high-quality securities, such
as commercial paper sold by corporations that have
excellent credit ratings, and issues of the U.S.
Treasury and Government Agencies.
(b) Balanced Blend Fund - This fund is a diversified
selection of individual investment funds including
bond funds and common stock funds combined into a
single portfolio.
(c) Common Stock Fund - This fund is composed of stocks
that can be purchased at prices that are low in
relation to the amount of earnings (profits) a company
has the potential to make.
(d) Special Capital Fund - This fund provides a
systematic, disciplined investment process of choosing
mispriced and undervalued "special cap" stocks: those
with capitalization between $50 million and $500
million.
Notwithstanding the above, the Company may at some time in the future
establish additional funds or may terminate existing funds.
All charges and expenses incurred in connection with the purchase and
sale of investments for a fund shall be charged to such fund.
9.2 INVESTMENT ELECTION. Subject to the provisions of Section 9.1,
each Participant, in writing, initially as of his participation date and
thereafter on a date which is at least thirty (30) days prior to the January 1
or July 1 on which the Participant wishes to revise his investment election,
shall make an investment election which shall apply to the investment of any
contributions to his accounts, plus any investment gains or losses thereon. Such
investment election shall be to have such contributions invested either (i)
wholly in one of the funds described in Section 9.1(a, b, c or d), or (ii) in
ten percent (10%) increments in any combination of the funds described in
Section 9.1(a, b, c or d).
Notwithstanding the above, in the event the Trustees, in accordance
with the instructions from the Plan Administrator, establish additional funds or
terminate existing funds, Participants may elect to invest wholly in one of the
funds or in ten percent (10%) increments in any combination of funds.
9.3 CHANGE OF INVESTMENT ELECTION. Subject to the provisions of
Section 9.1, a Participant may elect to change his investment election with
respect to amounts credited to his 401(k) Account, Matching Contribution
Account, and Rollover Contribution Account, in writing to the Committee, at
least thirty (30) days prior to the January 1 or July 1 on which the election is
to take effect. Such change shall be limited to the investment choices
described in Section 9.2, and shall take effect on the next following applicable
January 1 or July 1, or first business day thereafter.
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<PAGE>
ARTICLE X
ADMINISTRATION
10.1 APPOINTMENT OF COMMITTEE. The Board of Directors may appoint
at least three (3) individuals to serve as the Committee responsible for
administering the Plan. These individuals may, but need not be, Employees of
the Company. A Committee member shall continue to serve as such until his
death, resignation or incapability, or until he shall be removed by action of
the Board of Directors. Such removal shall become effective upon delivery to
the Committee member of written notice to that effect. Any Committee member may
resign and such resignation shall become effective thirty (30) days after
delivery of a notice thereof to the Board of Directors, or sooner, if designated
by the Board of Directors. In the event of the death, resignation or removal of
any Committee member, the Board of Directors shall appoint a successor Committee
member.
10.2 COMMITTEE RIGHTS. The Committee shall have the following
powers, rights, and duties in addition to those given it elsewhere in the Plan:
(a) To select a secretary, if it believes it advisable,
who may, but need not be, an Employee of the Company;
(b) To determine all questions arising under the Plan,
including the power to determine the rights or
eligibility of Employees or Participants and their
Beneficiaries, or the amount in their accounts under
the Plan, and to remedy ambiguities, inconsistencies
or omissions;
(c) To adopt such rules and regulations as, in its
opinion, may be necessary for the proper and efficient
administration of the Plan, provided such rules and
regulations are consistent with the Plan;
(d) To enforce the Plan and the rules and regulations, if
any, adopted by the Committee;
(e) To direct the Trustees as respects payments under the
Plan;
(f) To prepare and distribute, in such manner as the
Committee determines to be appropriate, information
explaining the Plan; and
(g) To appoint or employ individuals to assist in the
administration of the Plan and any other agents it
deems advisable, including legal and actuarial
counsel.
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10.3 RESPONSIBILITY OF COMMITTEE. In the execution of its duties
according to Section 10.2, the Committee shall, to the best of its ability,
discharge its duties:
(a) For the exclusive purpose of providing benefits to
Participants and their Beneficiaries;
(b) For the exclusive purpose of defraying reasonable
expenses for the administration of this Plan;
(c) With the care, prudence, and diligence under the
circumstances then prevailing that a prudent man
acting in like capacity and familiar with such matters
would use in the conduct of an enterprise of a like
character with like aims; and
(d) Solely in the interest of Participants and their
Beneficiaries in accordance with the provisions of
Title 1 of the Employee Retirement Income Security Act
of 1974.
10.4 CLAIMS PROCEDURE. Each Employee, Participant, or Beneficiary
shall submit his claim for benefits to the Committee in writing in such a form
as is permitted by the Committee. A Participant or Beneficiary shall have no
right to seek review of a denial of benefits, or to bring any action in any
court to enforce a claim for benefits prior to his filing a claim for benefits
and exhausting his rights to review under this Article.
When a claim for benefits has been filed properly, such claim for
benefits shall be evaluated and the claimant shall be notified of the approval
or the denial within ninety (90) days after the receipt of such claim unless
special circumstances require an extension of time for processing the claim. If
such an extension of time for processing is required, written notice of the
extension shall be furnished to the claimant prior to the termination of the
initial ninety (90) day period which shall specify the special circumstances
requiring an extension and the date by which a final decision will be reached
(which date shall not be later than one hundred eighty (180) days after the date
on which the claim was filed). A claimant shall be given a written notice on
which the claimant shall be advised as to whether the claim is granted or
denied, in whole or in part. If a claim is denied in whole or in part, the
claimant shall be given written notice which shall contain (a) the specific
reasons for the denial, (b) references to pertinent Plan provisions on which the
denial is based, (c) a description of any additional material or information
necessary to perfect the claim, and an explanation of why such material or
information is necessary, and (d) the claimant's rights to seek review of the
denial.
If a claim is denied in whole or in part, the claimant shall have the
right to request that the Committee review the denial, provided that the
claimant files a written request for review with the Committee within sixty (60)
days after the date on which the claimant received written notification of the
denial. Within sixty (60) days after a request for review is received, the
review
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<PAGE>
shall be made and the claimant shall be advised in writing of the decision on
review, unless special circumstances require an extension of time for processing
the review, in which case the claimant shall be given a written notification
within such initial sixty (60) day period specifying the reasons for the
extension and when such review shall be completed (provided that such review
shall be completed within one hundred twenty (120) days after the date on which
the request for review was filed). The decision on review shall be forwarded to
the claimant in writing and shall include specific reasons for the decision and
references to Plan provisions upon which the decision is based. A decision on
review shall be final and binding on all persons for all purposes. If a claimant
shall fail to file a request for review in accordance with the procedures herein
outlined, such claimant shall have no rights to review and shall have no right
to bring action in any court and the denial of the claim shall become final and
binding on all persons for all purposes.
10.5 RULES GOVERNING COMMITTEE ACTION. In the administration of the
Plan, the following provisions shall apply where the context permits:
(a) A Committee member may delegate in writing any or all
of his rights, powers, duties, and discretions to any
other member, with the consent of the latter.
(b) The Committee members may act by meeting or by written
statement without meeting, and may sign any document
on behalf of the Committee by signing one document or
by signing concurrent documents.
(c) An action or a decision of a majority of Committee
members as to a matter shall be effective as if taken
or made by all Committee members.
(d) If a Committee member is also a Participant in the
Plan, he may not decide or determine any matter or
question concerning distributions of any kind to be
made to him, or the amount or nature of his benefits
with him.
(e) If, because of the number qualified to act, there is
an even division of opinion among the Committee
members as to a matter, the Company shall decide the
matter.
(f) The certificate of the majority of the Committee
members or any person the Committee may authorize to
act on their behalf as to any action the Committee has
taken as authorized shall be conclusive in favor of
any person relying on the certificate.
10.6 REIMBURSEMENT. The Committee members shall be reimbursed for
expenses reasonably incurred, but no compensation shall be paid to any Committee
member as such.
10.7 FIDUCIARY DESIGNATION. The Board of Directors and the members
of the
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Committee are hereby designated as "named fiduciaries" within the meaning of
Section 402(a) of the Employee Retirement Income Security Act, with respect to
the operation and administration of the Plan. The Trustees and the Board of
Directors are hereby designated as "named fiduciaries" of the Plan with respect
to control and management of the assets of the Plan, except as it relates to
individual investment elections under Article IX. Each named fiduciary may
establish procedures for the allocation of its fiduciary responsibilities among
its members and the designation of persons other than the named fiduciaries to
carry out its fiduciary responsibilities. In addition, the Board of Directors
or the Trustees may appoint as investment manager of all or any portion of the
assets of the Fund, one or more banks, investment advisers registered under the
Investment Advisers Act of 1940 or insurance companies qualified under the laws
of more than one state to manage assets of the Fund. Each named fiduciary shall
be responsible for the proper exercise of its own powers, duties,
responsibilities and obligations under the Plan, and to the maximum extent
allowable under ERISA, may rely upon the directions, information or actions of
any other named fiduciary as being proper under the Plan and shall not guaranty
the Trust and assets of the Trust in any manner against investment loss or
depreciation in asset value.
ARTICLE XI
AMENDMENTS AND DISCONTINUANCE
11.1 AMENDMENT OF PLAN. The provisions of this Plan may be amended
at any time and from time-to-time by the Board of Directors, provided that no
amendment:
(a) shall cause or permit any part of the Fund to revert
to or become the property of the Company or to be
diverted to purposes other than for the exclusive
benefit of Participants or their Beneficiaries
hereunder, except as provided in Section 4.8;
(b) shall increase the duties or liabilities of the
Committee without its written consent; or
(c) shall cause the Accrued Benefit of any Participant to
be decreased unless authority to decrease such Accrued
Benefit is applied for and specifically granted by the
Secretary of Labor.
11.2 RIGHT TO TERMINATE. Although the Company expects to maintain
this Plan indefinitely as a continuing program, the right to terminate the
provision of benefits hereunder is unconditionally reserved by the Company.
11.3 MERGER OR CONSOLIDATION. In the event of any merger or
consolidation of the Plan with any other plan, or the proposed transfer of
assets or liabilities, in whole or in part, of the Fund to any other fund, the
assets of the Fund shall be transferred to the other fund only if:
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(a) the other fund is maintained or established for the
benefit of some or all of the Participants of this
Plan;
(b) each Participant of this Plan would be entitled to
receive a benefit from the other plan immediately
after the date of the merger, consolidation or
transfer, if the other plan then terminated, which is
not less than the benefit the Participant was entitle
to receive under the provisions of Section 11.5 of
this Plan, if this Plan had been terminated on the
date of the merger, consolidation, or transfer;
(c) resolutions of the respective Boards of Directors of
the Company under this Plan and of any new or
successor company under the other plan authorize such
transfer of assets; and, in the case of the new or
successor company, its resolution includes an
assumption of liabilities with respect to those
Participants who, as a result of the merger,
consolidation or transfer, are participants under the
new or successor company's plan; and
(d) such other plan and trust are qualified under Sections
401(a) and 501(a) of the Code.
11.4 DISCONTINUANCE OF PLAN UPON DISSOLUTION. In the event the
Company is legally dissolved or liquidated by any procedure other than by
consolidation, merger or sale of substantially all of its assets, this Plan
shall automatically be terminated and the Fund disposed of as hereinafter
provided.
11.5 DISTRIBUTION OF FUND ON DISCONTINUANCE OF THE PLAN. In the
event this Plan shall be completely or partially terminated for any reason, or
the Company contributions permanently suspended, the Company shall, after the
Fund has been evaluated and all expenses are paid, determine or cause to be
determined the respective interests of the Participants, Former Participants and
Beneficiaries affected by the Plan termination and shall authorize and direct
the Trustees to pay out such respective interests in cash or in kind to the
Participants, Former Participants and Beneficiaries within a reasonable period
of time after the date of such termination. There shall be full vesting in the
accounts of all affected Participants at the time of the complete or partial
termination of the Plan or if Company contributions are permanently suspended,
and such accounts shall be nonforfeitable. No Participant herein who has not
yet reached his Normal Retirement Date shall receive a lump sum distribution in
excess of $3,500 without the written consent of the Participant.
11.6 RIGHTS AGAINST COMPANY. Neither the establishment of the Plan,
nor the payments of any benefits hereunder shall be construed as giving to any
Participant or any person whomsoever any legal or equitable rights against the
Company, or its officers, directors or shareholders as such. All benefits
payable under the Plan shall be paid or provided for solely from the Fund, and
the Company shall have no liability or responsibility other than to make
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contributions to such Fund as herein provided.
ARTICLE XII
TOP-HEAVY PROVISIONS
12.1 TOP-HEAVY PLAN. In accordance with Section 416 of the Code,
the Top-Heavy provisions as outlined in this Article XII shall come into effect
for any Plan Year in which this Plan is a Top-Heavy Plan, notwithstanding any
contrary provisions in any other Article of this Plan. If this Plan is not
Top-Heavy, then the provisions of this Article should have no force and effect.
12.2 MINIMUM VESTING. If this Plan is considered a Top-Heavy Plan,
then the following vesting schedule will take effect in lieu of the schedule set
forth in Section 7.2(c):
Years of
Vesting Service Vesting Percentage
--------------- ------------------
Less than 2 0%
2 but less than 3 20%
3 but less than 4 40%
4 but less than 5 60%
5 but less than 6 80%
6 or more 100%
The schedule set forth herein shall continue to be in effect until such
time that the Plan ceases to be a Top-Heavy Plan, in which event, the provisions
of Sections 7.2(c) and 12.5 shall apply. Such schedule shall not apply to
Participants who do not complete at least one Hour of Service after the Plan
becomes a Top-Heavy Plan.
12.3 COMPENSATION LIMIT. For any Plan Year in which this Plan is
considered a Top-Heavy Plan, the Compensation taken into account for that Plan
Year on behalf of any Employee shall be limited to a maximum of $200,000 (as
adjusted in accordance with regulations adopted by the Secretary of the
Treasury).
12.4 MINIMUM CONTRIBUTION. For any Plan Year in which this Plan is
considered a Top-Heavy Plan, notwithstanding the contribution allocation
procedures outlined in Section 6.1, any Participant who is not a Key Employee
and who is not a participant in any defined benefit plan maintained by the
Company shall have a minimum amount allocated to his Matching Contribution
Account. Such minimum shall be equal to the lesser of three percent (3%) of
such Participant's compensation, which shall include base pay or salary,
overtime, bonuses, commissions and any other form of remuneration included in
Section 1.415-2 of the Income Tax Regulations, or the highest amount allocated
to a Key Employee's Matching Contribution
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Account, expressed as a percent of compensation for the Plan Year as aforesaid.
Any required additional contributions hereunder shall be made by the Company.
For Participants who are not Key Employees and who also are participants in any
defined benefit plan maintained by the Company, the minimum benefit required
under the defined benefit plan shall apply in lieu of the minimum contribution
hereunder.
12.5 ANTI-CUTBACK PROVISIONS. In the event that the Top-Heavy Plan
provisions come into effect, no amendment to the vesting provisions shall
deprive a Participant of his nonforfeitable right accrued to the date such
provisions come into effect. This requirement shall also apply to any amendment
to the vesting provisions made as a result of a Top-Heavy Plan ceasing to be a
Top-Heavy Plan. Upon any amendment to the vesting provisions, each Participant
with at least two (2) years of vesting Service with the Company may elect to
have his nonforfeitable percentage computed under the Plan without regard to
such amendment. Each Participant so entitled shall be given a period of not
less than sixty (60) days following the latest of the effective date of the
amendment or the date written notice of said amendment is furnished to the
Participant in which he may make the election outlined herein. Such election
shall be made in writing to the Committee.
12.6 AGGREGATION RULES. Notwithstanding anything to the contrary
herein, this Plan shall not be considered a Top-Heavy Plan if it is part of
either a required aggregation group or a permissive aggregation group and
such aggregation group is not top-heavy. An aggregation group will be
considered top- heavy if the sum of the present value of accrued benefits and
account balances of Key Employees is more than sixty percent (60%) of the sum of
the present value of accrued benefits and account balances for all Employees.
The required aggregation group of a company includes (a) each plan of
a company in which a Key Employee participates, (b) each other plan of the
company that enables a plan covering a Key Employee to meet the
nondiscrimination requirements of Code Sections 401(a)(4) and 410, and (c) each
plan of a company which has been terminated in the five (5) Plan Years
immediately preceding the determination date. Each plan in a required
aggregation group will be top-heavy if the group is top-heavy. No plan in a
required aggregation group will be top-heavy if the group is not top-heavy.
A permissive aggregation group consists of plans that are required to
be aggregated plus one or more plans (providing comparable benefits or
contributions) that are not required to be aggregated, all of which, when taken
together, meet the requirements of Code Sections 401(a)(4) and 410. If a
permissive aggregation group is top-heavy, only those plans that are part of an
underlying top-heavy required aggregation group are top-heavy. No plan in a
permissive aggregation group will be top-heavy if the group is not top-heavy.
ARTICLE XIII
TRUST PROVISIONS
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13.1 GENERAL.
(a) Pursuant to the Plan, the Company hereby creates and
establishes a Trust to be known as the Information
Resources, Inc. 401(k) Retirement Savings Trust.
(b) The Plan shall be administered by the Company as
provided for in the Plan and the Trustee shall not be
responsible for the administration of the Plan.
(c) The Company, as provided in the Plan, may allocate
fiduciary responsibilities among fiduciaries of this
Plan and Trust. A fiduciary shall be responsible only
for the duties and responsibilities allocated to him.
13.2 CONTRIBUTIONS TO THE TRUST FUND.
The Company shall, from time to time, make contributions to the Trustee
as provided in the Plan. The Trustee shall be accountable to the Company for
all contributions received from the Company but the Trustee shall have no duty
to see that the contributions received comply with the provisions of the Plan,
nor shall the Trustee be obliged or have any right to enforce or collect any
contribution from the Company or otherwise see that the funds are deposited
according to the provisions of the Plan. Nor shall the Trustee be responsible
for establishing a funding policy for the Plan.
13.3 PAYMENTS FROM THE TRUST FUND.
(a) Payments of benefits under the Plan shall be made from
the Trust Fund by the Trustee to such persons, or
accounts, in such manner, at such times and in such
amounts as the Committee may in writing from time to
time direct. The Trustee shall be fully protected in
making payments out of the Trust Fund in accordance
with such written directions.
(b) If any payment or distribution directed to be made
from the Trust Fund is not claimed, the Trustee shall
notify the Committee of that fact promptly. The
Trustee shall have no obligation to search for or
ascertain the whereabouts of any payee or distributee
of benefits from the Trust Fund.
13.4 THE TRUST FUND.
Unless the context clearly implies or indicates the contrary, the term
Trust Fund comprises all property of any kind held by the Trustee from time to
time pursuant to this agreement. With respect to the Trust Fund, the Trustee
shall have the following powers and rights, in addition to those vested in it
elsewhere in this Agreement or by law:
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(a) To invest the Trust Fund in such bonds, notes,
debentures, mortgages, equipment trust certificates,
investment trust certificates, preferred or common
stock, insurance and annuity contracts, common or
collective trust funds, shares of registered
investment companies, including any registered
investment company advised by the Harris Trust and
Savings Bank or its affiliates (including,
specifically, HT Insight Funds, Inc.), provided the
provisions of Prohibited Transaction Class Exemption
#77-4 and other applicable laws or regulations are
adhered to), or in such other property, real or
personal, as the Trustee may deem advisable, with the
care, skill, prudence and diligence under the
circumstances then prevailing that a prudent man
acting in a like capacity and familiar with such
matters would use in the conduct of an enterprise of a
like character and with like aims. In addition, the
Trustee is specifically authorized to deposit any part
or all of the money and property of this trust with
Harris Trust and Savings Bank, Chicago, Illinois as
Trustee of the HARRIS TRUST AND SAVINGS BANK TRUST FOR
COLLECTIVE INVESTMENT OF EMPLOYEE BENEFIT ACCOUNTS,
restated by Declaration of Trust, effective August 31,
1993, and as amended, to be held and administered by
the trustee pursuant to all terms and conditions of
such Declaration of Trust which is hereby incorporated
by reference and made a part hereof. The Trustee may
hold a reasonable portion of the Trust Fund in cash to
provide for the payment of current expenses and
benefits under this Trust and otherwise as permitted
by law, and may deposit any cash so held in its
banking department without liability to the Trust Fund
for interest thereon; the Harris Trust and Savings
Bank, as Plan Trustee, shall have the power and
authority to invest plan assets in deposits in itself
or in its affiliates, which deposits shall bear a
reasonable rate of interest;
(b) To manage, sell, contract to sell, grant options to
purchase, convey, exchange, transfer, abandon,
improve, repair, insure, lease for any term even
though commencing in the future or extending beyond
the term of the Trust, and otherwise deal with all
property, real or personal, in such manner and on such
terms and conditions as the Trustee may decide; and no
person dealing with the Trustee shall be required to
see to the application of any money or property
delivered to the Trustee or to inquire into the
validity or propriety of any transaction with the
Trustee;
(c) To borrow such sum or sums from time to time as the
Trustee considers necessary or desirable and in the
best interest of the Trust Fund, and for that purpose
to mortgage or pledge any part of the Trust Fund;
provided that the consent of the Company has first
been obtained;
(d) To compromise, contest, arbitrate or abandon claims or
demands by or
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against the Trust Fund;
(e) To have, with respect to the Trust Fund, all of the
rights of an individual owner, including the power to
give proxies, to participate in voting trusts,
mergers, consolidations, foreclosures, reorganizations
or liquidations, and to exercise or sell stock
subscription or conversion rights;
(f) To hold any securities or other property in the name
of the Trustee or its nominee, or in such form as it
deems best, with or without disclosing the trust
relationship;
(g) To retain any funds or property subject to any dispute
without liability for payment of interest, or to
withhold payment or delivery thereof until final
adjudication of the dispute by a court of competent
jurisdiction;
(h) To begin, maintain or defend any litigation necessary
in connection with the administration of the Plan and
Trust, and the Company shall indemnify the Trustee
against all expenses and liabilities sustained or
anticipated by it by reason thereof;
(i) To pay out of any benefit distributable from the Trust
Fund any estate, inheritance, income or other tax,
charge or assessment attributable thereto, but the
Trustee shall give the Company notice of its intention
to make such payments as far in advance as may be
practicable, and shall defer such payments if the
Company so requests and indemnifies the Trustee to its
satisfaction in the premises. The Company and the
Trustee, or either, before making payment of any
benefit, may require such release or other documents
from any lawful taxing authority and such indemnity
from the intended payee as they respectively consider
necessary for their protection;
(j) To buy, sell and exercise call and put options on the
following; stocks, fixed income securities, stock and
fixed income indices, and stock index and interest
rate futures contracts; provided that such options
must be traded on a regulated exchange and
counterbalanced against appropriate stock, fixed
income or cash reserve positions held by the Trustee;
(k) To buy and sell interest rate and stock index futures
contracts traded on a regulated exchange which are
offset by cash reserves or counterbalanced against
appropriate fixed income or stock positions held by
the Trustee;
(l) To engage in the lending of securities to banks and
broker-dealers approved by the Trustee, pursuant to
regulations of the Department of Labor and any other
applicable regulatory authority;
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(m) To deposit securities with a clearing corporation as
defined in Article 8 of the Illinois Uniform
Commercial Code. The certificates representing
securities, including those in bearer form, may be
held in bulk form with, and may be merged into,
certificates of the same class of the same issuer
which constitute assets of other accounts or owners,
without certification as to the ownership attached.
Utilization of a book-entry system may be made for the
transfer or pledge of securities held by the Trustee
or by a clearing corporation. The Trustee shall at
all times, however, maintain a separate and distinct
record of the securities owned by the Trust Fund;
(n) To participate in and use the Federal Book-entry
account System, a service provided by the Federal
Reserve Bank for its member banks for deposit of
Treasury securities;
(o) To employ agents, experts and counsel and to delegate
discretionary powers to, and reasonably rely upon
information and advice furnished by, such agents,
experts and counsel; and
(p) To perform any and all other acts in its judgment
necessary or appropriate for the proper and
advantageous management, investment and distribution
of the Trust Fund.
(q) To make loans to Participants as directed by the
Company.
13.5 PAYMENT OF EXPENSES.
All reasonable costs, charges and expenses incurred by the Trustee in
connection with the administration of the Trust, including such reasonable
compensation of the Trustee as may be agreed upon from time to time between the
Company and the Trustee, shall be paid from the Trust Fund unless paid or
advanced by the Company. The Trustee shall also pay such expenses in connection
with the administration of the Plan as may be directed in writing by the Company
and shall be fully protected in making such payments pursuant to written
directions of the Company.
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13.6 ACCOUNTS.
(a) The Trustee shall maintain accurate and detailed
records and accounts of all investments, receipts,
disbursements and other transactions hereunder; and
all accounts, books and records relating thereto shall
be open at all reasonable times to inspection and
audit by such person or persons as the Company may
designate.
(b) The Trustee shall submit to the auditors for the
Company or to anyone the Company designates, such
valuations, reports or other information as they may
reasonably require.
(c) All monies and other property and the income therefrom
shall be held and invested as a single fund.
(d) The Trustee shall establish and maintain for
operational and accounting purposes such other
accounts and records as the Company and the Trustee
may form time to time consider necessary.
(e) In no event shall the maintenance of any account or
record by the Trustee mean that any person shall have
an interest in any specific asset of the Trust Fund.
(f) Within ninety days following the close of each
calendar year (or following the close of such other
annual period as may be agreed upon by the Trustee and
the Company) and as often as may reasonably be
requested by the Company, the Trustee shall file with
the Company a written account setting forth a
description of all securities and other property
purchased and sold, and all receipts, disbursements
and other transactions effected by it during such
annual or shorter period, and showing the securities
and other properties held at the end of such period,
and their fair market value.
(g) The Company may approve such accounting by written
notice of approval delivered to the Trustee or by
failure to express objection to such accounting in
writing delivered to the Trustee within six months
from the date upon which the accounting was delivered
to the Company.
(h) Upon the receipt of a written approval of the
accounting, or upon the passage of the period of time
within which objection may be filed without written
objections having been delivered to the Trustee, such
accounting shall be deemed to be approved, and the
Trustee shall be released and discharged as to all
items, matters and things set forth in such account,
as fully as if such accounting had been settled and
allowed by decree of a
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court of competent jurisdiction in an action or
proceeding in which the Trustee, the Company and all
persons having or claiming to have any interest in the
Trust Fund or under the Plan were parties. If the
Trustee and the Company cannot agree with respect to
any act or transaction reported in any statement, the
Trustee shall have the right to have its accounts
settled by judicial proceedings, in which event only
the Trustee and the Company shall be necessary
parties.
13.7 PROTECTION OF THE TRUSTEE.
(a) The Trustee shall not be obligated to inquire whether
any payee of funds or any distributee of benefits
designated by the Company is entitled thereto or
whether any payment, allocation or distribution
directed or authorized by the Company is proper, or
within the terms of this Agreement or the Plan, and
shall not be accountable for any payment, allocation
or distribution made by the Trustee in good faith on
the order or direction of the Company. The Trustee
shall not be liable or responsible for any payment
made by it in good faith without actual notice or
knowledge of the changed condition or status of the
payee.
(b) Evidence required of anyone under the Plan or this
Agreement may be by certificate, affidavit, document
or other information which the person acting in
reliance thereon may consider pertinent, reliable and
genuine, and to have been signed, made or presented by
the proper party or parties, except that any action
required to be taken by the Company shall be by
resolution of its Board of Directors or by a person
authorized by resolution of its Board of Directors.
The Committee appointed under the terms of the Plan to
administer the Plan, or any member of the Committee,
or any other person, may by authorized by resolution
of the Company's Board of Directors to act on behalf
of the Company. The Trustee shall not recognize or
take notice of an appointment of any representative of
the Company unless and until the Company shall have
notified the Trustee in writing of such appointment
and the extent of such representative's authority. The
Trustee may assume that such appointment and authority
continue in effect until it receives written notice to
the contrary from the Company. Any action taken or
omitted to be taken by the Trustee by authority of any
representative of the Company within the scope of his
authority shall be as effective for all purposes
hereof as if such action or nonaction had been
authorized by the Company. The Trustee, the Company
and any representative of the Company shall each be
fully protected in acting and relying upon any
evidence described in this section.
(c) The Trustee shall have no power, authority or duty
with respect to the
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determination of the rights or interests of any
persons in and to the Trust Fund or under the Plan nor
to examine into the determination of any right or
interest.
13.8 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE.
(a) Any Trustee may resign at any time by giving thirty
(30) days prior written notice to the Company.
(b) The Company may remove the Trustee at any time by
giving thirty (30) days prior written notice to the
Trustee being removed. The Company shall fill any
vacancy in the office of the Trustee, howsoever
caused.
(c) Each successor Trustee shall succeed to the title to
the Trust Fund vested in its predecessor, without the
signing or filing of any further instrument, but any
resigning or removed Trustee shall execute all
documents and do all acts necessary to vest such title
of record in any successor Trustee. Each successor
Trustee shall have and enjoy all powers, both
discretionary and ministerial, of its predecessor. No
successor Trustee shall be personally liable for any
act or failure to act of any predecessor Trustee; and,
with the approval of the Company, a successor Trustee
may accept the account rendered and the property
delivered to it by its predecessor Trustee as a full
and complete discharge to the predecessor Trustee
without incurring any liability or responsibility for
so doing.
13.9 TERMINATION.
(a) This Trust shall terminate upon the first to occur of
the following:
(i) Thirty (30) days after the receipt by the
Trustee of written notice of such termination
from the Company;
(ii) The date the Company shall be judicially
declared bankrupt or insolvent;
(iii) The dissolution, consolidation or
reorganization of the Company, or the sale by
the Company of all or substantially all of its
assets without provision for continuing this
Trust, except that in any such event provision
may be made for the continuance of this Trust
by any successor to the Company or any
purchaser of all or substantially all of its
assets, and in that event such successor or
purchaser shall be substituted for the Company
hereunder.
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(b) Upon termination of this Trust the Trustee shall first
reserve such reasonable amounts as it may deem
necessary to provide for the payment of any expenses
then or thereafter chargeable to the Trust Fund.
Subject to such reserve, the balance of the Trust Fund
shall be liquidated and distributed by the Trustee to
or for the benefit of the employees or former
employees of the Company, or their beneficiaries, as
directed by the Company, after compliance with any
requirements of ERISA, as amended from time to time,
or other applicable law. The Company shall have full
responsibility to see that such distribution is proper
and within the terms of the Plan and Trust. The
Company shall secure any necessary governmental
approval for such termination, and shall send a copy
of such approval to the Trustee before any
disbursements are to be made. Such distribution may
be effected by payment in cash, the maintenance of
another or substituted trust fund, by the purchase of
insured annuities or otherwise. The Company shall
have no beneficial interest in the Trust Fund either
during its continuance or upon termination of the
Trust.
(c) Upon termination of the Trust, the Trustee shall
continue to have such of the powers provided in this
Agreement as are necessary or desirable for the
orderly liquidation and distribution of the Trust
Fund.
13.10 AMENDMENT.
This Agreement may be amended by the Company at any time and from time
to time in whole or in part by an instrument in writing executed by the Company
and delivered to the Trustee; provided that no amendment shall cause any part of
the Trust Fund to be used for or diverted to or for the benefit of anyone other
than the employees or retired employees of the Company or their beneficiaries;
and provided further that the rights, duties or responsibilities of the Trustee
shall not be substantially changed without its written consent.
13.11 FIDUCIARY RESPONSIBILITY AND LIABILITY.
(a) In carrying out its responsibilities under the Trust,
the Trustee and any other fiduciary hereunder shall
act solely in the interest of the participants and
beneficiaries and with the care, skill, prudence and
diligence under the circumstances then prevailing that
a prudent man acting in a like capacity and familiar
with such matters would use in the conduct of an
enterprise of a like character and with like aims. The
Trustee shall be a fiduciary to the Plan to the extent
that the Trustee performs the duties of a fiduciary
to the Plan, as that term in defined in ERISA.
(b) In determining whether the requirements of prudence
and diversification stated in Sections 404(a)(1)(B)
and (C), respectively, of ERISA have been
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met, all the investments of the Trust Fund shall be
considered in their entirety, and the portion managed
by the Trustee hereunder shall be only one
consideration in making such a determination. If one
or more investment managers in addition to the Trustee
are appointed, the Company so appointing shall be
responsible for seeing that the requirement of proper
diversification of the total plan assets mentioned
above has been met, and neither the Trustee nor any
investment manager shall have any such responsibility
therefore.
(c) To the maximum extent allowed by ERISA, the Trustee
shall be indemnified and saved harmless by the
Company, from and against any and all liability to
which the Trustee shall be subjected by reason of
carrying out any directions of the Company, Committee
or any authorized person made in accordance with this
Agreement, including all expenses reasonably incurred
in its defense if the Company fails to provide such
defense. The Company's obligation to indemnify the
Trustee under this Agreement shall survive the
termination of the Trust or removal of the Trustee
with respect to any act or omission by the Trustee
arising under or in connection with this Trust
Agreement.
13.12 NONALIENATION OF BENEFITS.
Except as provided by law or by court order, in no event shall the
Trustee pay over or assign any part of an employee's or his beneficiary s
interest in the Trust which is payable, distributable, or credited to his
account, to any assignee or creditor of such employee. Prior to the time of
distribution specified herein, neither an employee nor his legal representative
shall have any right, by way of anticipation or otherwise, to assign or in any
manner dispose of any interest in the Trust; and every attempted assignment or
other disposition of such interest in the Trust shall not be merely voidable but
absolutely void.
13.13 GOVERNING LAWS.
To the extent that ERISA does not do so, the laws of the State of
Illinois shall govern, control and determine all questions arising with respect
to this Agreement and the validity, interpretation and performance of its
provisions.
13.14 COUNTERPARTS.
This Agreement may be executed in any number of counterparts, each of
which shall be considered as an original, and no other counterparts need be
produced.
13.15 LIMIT OF TRUSTEE'S RESPONSIBILITY.
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The Company shall deliver to the Trustee a certified or executed copy
of the Plan and Trust and of any amendments thereto for convenience of
reference, and the rights, powers and duties of the Trustee shall be governed
only by the terms of this Article XIII without reference to the other provisions
of the Plan and Trust.
13.16 WAIVER OF NOTICE.
Any notice required hereunder may be waived by the person entitled
thereto.
13.17 GENDER AND NUMBER.
Where the context admits, words in the masculine gender shall include
the feminine and neuter genders, the singular shall include the plural, and the
plural shall include the singular.
13.18 HEADINGS.
The headings of Sections of this Article XIII are for convenience of
reference only and shall have no substantive effect on the provisions of this
Plan and Trust.
13.19 SEVERABILITY.
In the event any provision of this Trust Agreement shall be held
illegal or invalid for any reason, such illegality or invalidity shall not
affect the remaining provisions of the Trust Agreement, and the Trust Agreement
shall be construed and enforced as if such illegal or invalid provisions had
never been contained therein.
ARTICLE XIV
ADOPTION BY SUBSIDIARIES AND AFFILIATES
14.1 ADOPTION BY SUBSIDIARIES AND AFFILIATES. Any employer which is
a subsidiary or affiliate of the Company may adopt the Plan by instrument to
that effect, and thereafter, if such adoption is consented to by the Board of
Directors, such employer shall be treated as a Company under the Plan.
14.2 DELEGATION OF AUTHORITY. Each such adopting employer hereby
irrevocably grants to the Board of Directors full and exclusive authority to
exercise all of the powers conferred on the Company by the terms of the Plan and
to take or refrain from taking any and all action which such employer might
otherwise take or refrain from taking with respect to the Plan, including the
exclusive power to amend or terminate the Plan, to appoint the Committee and
Trustees, and to exercise, enforce or waive any rights whatsoever which such
employer might otherwise have with respect to the Plan, and each such employer,
by adopting the Plan, irrevocably appoints the Board of Directors as its agent
for those purposes.
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ARTICLE XV
LOANS TO PARTICIPANTS
15.1 LOANS TO PARTICIPANTS. Upon written application to the Loan
Administrator by a Participant hereunder, specifying the reason therefore, the
Loan Administrator may, in the Loan Administrator's sole discretion, grant a
loan or loans to such Participant from such Participant's 401(k) Account,
Matching Contribution Account, and Rollover Contribution Account, if any, upon
such terms, interest and conditions as the Loan Administrator deems appropriate,
with uniform, and nondiscriminatory application to all Participants, provided,
however, that:
(a) The Loan Administrator shall determine, in its sole
discretion, that such loan is for a lawful purpose and
that the making of such loan is not prohibited under
any applicable rule or statute or regulation governing
the treatment of loans to Participants; and that the
Participant's spouse (if any) consents in writing to
such loan or loans.
(b) The Loan Administrator shall determine a reasonable
rate of interest. The rate of interest to be charged
for such loan or loans shall be the prime rate, plus
1%, which interest shall be payable contemporaneously
with payments of principal. The Loan Administrator
may contact Harris Trust and Savings Bank to determine
what Harris Trust and Savings Bank considers as its
prime interest rate on a particular date; however, the
Loan Administrator shall be responsible for the final
determination of a reasonable interest rate for each
loan.
(c) The aggregate amount loaned to a Participant shall not
exceed the lesser of fifty thousand dollars ($50,000)
or fifty percent (50%) of such Participant's then
vested interest in his 401(k) and Matching
Contribution Accounts and Rollover Contribution
Account, if any, as of the Valuation Date next
preceding the date of such loans. The $50,000 limit
shall be reduced by the difference between (i) the
Participant's highest outstanding loan balance of the
prior twelve (12) months and (ii) the outstanding
balance at the time the new loan is made.
(d) The Participant shall execute a customary form of
promissory note which shall:
(i) create in the Trust a valid first lien against
the Participant's entire right, title and
interest in and to his 401(k) and Matching
Contribution Accounts in the Plan subject to
the restrictions and requirements of
Department of Labor Regulations Section
2550.408b-
45
<PAGE>
1(f)(2) and its successor provisions;
(ii) provide for a maturity date not to exceed five
(5) years from the date of said note, and for
repayment of principal in equal installments,
not less frequently than quarterly; provided
however that if the Loan Administrator shall
determine, at the time that the loan is made,
that the proceeds of such loan are to be used
for the purpose of purchasing property which
is used, or is intended to be used within a
reasonable time after the loan is made, as the
principal residence of the Participant, then
said note may provide for a maturity date not
to exceed twenty (20) years from the date of
said note;
(iii) provide a right upon default in payment or
otherwise, to accelerate (with or without
notice) the unpaid indebtedness and to satisfy
the amount of such unpaid indebtedness from
any distribution then due; and
(iv) provide a right upon termination of the
Participant's employment or other event
permitting or requiring distribution, to
accelerate (with or without notice) the unpaid
indebtedness and to satisfy the amount of such
unpaid indebtedness from any benefits payable
or distributable to the Participant, his
Beneficiary or his estate, as the case may be.
(e) Only one (1) such loan shall be outstanding at any
time as it affects a Participant hereunder.
(f) The Participant's spouse consents, in writing and
witnessed by a notary public or officer of the
Company, to the loan in the event the Participant is
married on the date the loan is to be made.
(g) Loan Administration Expenses. Each time a Participant
obtains a loan under this Article XV, such Participant
will be charged a fee not exceeding the actual and
reasonable costs incurred by the Plan in connection
with the loan. The amount of any fee charged to a
Participant pursuant to this Section 15.1(g) must be
paid either (a) by the Participant at or prior to the
time the loan is made or (b) out of the proceeds of
the loan. The amount of fees to be charged to
Participants pursuant to this section 15.1(g) may be
adjusted periodically by the Loan Administrator.
In no event shall the Loan Administrator grant any loan hereunder for
an amount which is less than one thousand dollars ($1,000). To the extent
required by law, the repayment by a Participant of a loan or loans made pursuant
to this Section 15.1 shall be taken into account for purpose of calculating the
Annual Additions to such Participant's accounts.
46
<PAGE>
15.2 LOAN ACCOUNTS. Each loan made to a Participant hereunder
shall be a loan by the Fund; provided, however, that for Fund accounting
purposes, the loan shall be deemed made from the Participant's own 401(k)
Account and next from the Matching Contribution Account. The note executed by
the Participant shall be deemed to be an asset of his respective accounts as
hereinafter provided. Upon making a loan hereunder, the borrowing Participant s
respective accounts shall be reduced by an amount equal to the principal balance
of the loan made to such Participant, effective as of the immediately preceding
Valuation Date, and a Loan Account shall be established for each borrowing
Participant with an initial balance equal to the principal amount of such
Participant's loan. All such Loan Accounts shall be excluded for purposes of
determining the net earnings (or losses) of the Fund and for purposes of the
allocation of such earnings (or losses) pursuant to Section 6.1(d) hereof. A
borrowing Participant's payment of principal and interest shall be credited to
his respective accounts on the Valuation Date coincident with or next following
the Trustee's receipt of such payment, and on each such Valuation Date, the Loan
Account of each Participant shall be reduced by the amount of the principal
payment credited to such borrowing Participant's accounts on such date.
15.3 INTERIM LOAN PAYMENTS. The Loan Administrator may establish a
means pursuant to which a Participant may make loan repayments by payroll
deduction or other periodic payments. Such periodic payments may be accumulated
in an interest-bearing account, and the accumulated payments, plus interest
earned thereon, shall be applied against the loan as of each Valuation Date.
ARTICLE XVI
MISCELLANEOUS
16.1 INFORMATION TO BE FURNISHED BY PARTICIPANTS. Participants must
furnish to the Committee such evidence, data or information as the Committee
considers necessary to carry out the Plan. The benefits of the Plan for each
person are on the condition that they furnish prompt, true and complete
evidence, data and information requested by the Committee.
16.2 EVIDENCE. Evidence required of anyone under the Plan may be by
certificate, affidavit, document or other information which the person acting on
it considers pertinent and reliable, and signed, made or presented by the proper
party or parties. Any notice required under the Plan may be waived by the
person entitled to such notice, provided that all Participants similarly
situated are treated uniformly.
16.3 EMPLOYMENT RIGHTS. The Plan does not constitute a contract of
employment, and participation in the Plan will not give any Employee the right
to be retained in the employ of the Company, nor any right or claim to any
benefit under the Plan, unless such right or claim has specifically accrued
under the terms of the Plan.
16.4 NONALIENATION OF BENEFITS. No benefits payable under the Plan
shall be subject in any manner to attachment, anticipation, alienation, sale,
transfer, pledge, encumbrance or charge,
47
<PAGE>
and any attempt to so attach, anticipate, alienate, sell transfer, pledge,
encumber or charge shall not be recognized. No benefit payable under the Plan
shall be subject in any manner to the debts, contract, liabilities, engagements,
or torts of any person, except as may be required by law.
Notwithstanding anything to the contrary specified herein, in the case
of a qualified domestic relations order as defined in Section 414(p) of the
Code, the Committee should adopt such procedures and comply with such order in
accordance with the provisions of Section 414(p) of the Code. If a qualified
domestic relations order requires that payment be made to an alternate payee
prior to the date of the Participant's earliest retirement age as defined in
section 414(p)(4)(B) of the Code and section 206(d)(3)(E)(ii) of ERISA, a
distribution may be made out of the Plan to such alternate payee in accordance
with the terms of the qualified domestic relations order.
16.5 QUALIFICATION. The Company shall apply for a ruling by the
United States Treasury Department that the Plan is qualified under Section
401(a) and 401(k) and that the fund is exempt from Federal income taxation under
Section 501(a) of the Code. Any modification or amendment of the Plan may be
retroactive, as necessary or appropriate, to maintain such qualification and
exemption.
16.6 TERMINOLOGY. Except as otherwise indicated by the context, any
masculine terminology used herein shall also include the feminine and the
neuter, and the definition of any term in the singular may include the plural.
16.7 APPLICABLE LAWS. Subject to the provisions of ERISA, the Plan
shall be construed, administered and governed under and by the laws of the State
of Illinois.
16.8 CONTEXT TO CONTROL. The headings of the sections are included
solely for convenience of reference, and if there is any conflict between
headings and the text of this Plan, the text shall control.
48
<PAGE>
IN WITNESS WHEREOF, Information Resources, Inc. has caused this Amended
and Restated Plan and Trust to be executed by its officers thereunto duly
authorized and its corporate seal affixed and attested and the Trustees have
done the same this ______________ day of _________________, 1995.
INFORMATION RESOURCES, INC.
By:
-------------------------------
ATTEST:
--------------------
(Seal)
TRUSTEES
HARRIS TRUST AND SAVINGS BANK
By:
-------------------------------
By:
-------------------------------
By:
-------------------------------
ATTEST:
--------------------
(Seal)
49
<PAGE>
Exhibit 10(ii)
FIRST AMENDMENT TO THE
INFORMATION RESOURCES, INC.
AMENDED AND RESTATED 401(K) RETIREMENT SAVINGS PLAN
The Information Resources, Inc. Amended and Restated 401(k) Retirement
Savings Plan is hereby amended, effective July 1, 1996, as follows:
1. Section 4.2(b) (Salary Reduction Agreement) shall be
amended to read as follows:
Salary Reduction Agreements, or any changes thereto, shall be effective
as of the first day of any calendar year month, provided the
Participant submits an appropriate executed authorization and notice to
the Company prior to such calendar year month, on a form or in the
manner prescribed by the Plan Administrator. The Plan Administrator
may establish additional rules regarding the timing and frequency of a
change in the amount of salary reductions, provided such policy is
applied uniformly to all Participants.
2. Section 4.7 of the Plan (Withdrawals) shall be amended
to read as follows:
A Participant may elect in writing (or in such other form as may be
permitted from time to time by the Plan Administrator) to withdraw any
amount (but not less than $500) from his 401(k) Account or Rollover
Contribution Account at any time subject to the following conditions:
(a) The distribution of a Participant's 401(k) Account or Rollover
Contribution Account shall not commence prior to his death,
Disability, attainment of age 59-1/2, or termination of
employment, except upon his demonstration of financial
hardship. A distribution based upon financial hardship may be
made only if the Participant has an immediate and heavy
financial need, and cannot exceed the amount required to
satisfy such financial need, which may not be satisfied from
other resources reasonably available to the Participant. A
Participant shall be deemed to have an immediate and heavy
financial need if the distribution is on account of:
(1) Medical expenses described in Code Section 213(d)
incurred by the Participant, the Participant's spouse
or any of the Participant's dependents (as defined in
Code Section 152);
(2) The purchase (excluding mortgage payments) of a
principal residence of the Participant;
(3) Payment of tuition and related educational fees for
the next twelve (12) months of post- secondary
education for the Participant, his spouse, children or
dependents;
<PAGE>
(4) The need to prevent the eviction of the Participant
from his principal residence or foreclosure on the
mortgage of the Participant's principal residence; or
(5) Any other emergency that the Plan Administrator,
pursuant to a uniform and nondiscriminatory policy and
in accordance with guidelines issued by the Internal
Revenue Service, deems a bona fide financial
emergency.
(b) A distribution shall be considered necessary to satisfy an
immediate and heavy financial need if:
(1) The distribution is not in excess of the amount of the
immediate and heavy financial need of the Participant;
(2) The Participant has obtained all distributions, other
than hardship distributions, and all nontaxable loans
currently available under all plans maintained by the
Company; and
(3) The Participant does not make elective deferrals or
employee contributions under any plan maintained by
the Company for a twelve (12) month period following
the date of receipt of the hardship distribution, nor
does he make elective deferrals under any plan
maintained by the Company for the taxable year
immediately following the taxable year of the hardship
distribution in excess of the limitation imposed by
Section 402(g) of the Code for such next taxable year,
less the amount of such Participant's elective
deferrals for the taxable year of the hardship
distribution.
(c) The Participant must request a hardship withdrawal in writing
on a form provided by the Plan Administrator, or in such other
form or manner as the Plan Administrator may from time to time
determine. The Plan Administrator shall specify any supporting
data required and shall follow a uniform, nondiscriminatory
policy in determining the eligibility for, and timing of,
hardship withdrawals.
(d) A Participant shall be entitled to a hardship withdrawal
pursuant to this Section 4.7 from that portion of his 401(k)
Account that represents his 401(k) Contributions, but not on
that portion that represents any earnings credited on such
account.
-2-
<PAGE>
3. Section 7.2 of the Plan shall be amended to add the
following Paragraph (d):
(d) Effective July 1, 1996, for purposes of determining a
Participant's vested interest in accordance with this Paragraph
7.2, the Plan shall apply the "elapsed time" method of
crediting Vesting Service, based upon the Participant's date of
hire and as such method is described in Department of Labor
Regulations Section 2530.200b-9. In accordance therewith, all
Participants shall thereupon receive vested credit in a manner
that is consistent with Paragraph (f) of Department of Labor
Regulations Section 2530.200b-9; provided that, a Participant
shall be credited with no fewer years of Vesting Service as of
July 1, 1996 than he had been credited with under the Plan as
of June 30, 1996.
4. Article IX (Investment Discretion) shall be amended to read as
follows:
ARTICLE IX - INVESTMENT DISCRETION
----------------------------------
9.1 DIRECTED INVESTMENT ACCOUNTS
(a) The Company may establish separate investment funds in
which the assets of the Trust will be held. Upon such
establishment, the Trustee shall, if the Plan
Administrator so directs, and in accordance with the
Trust Agreement, permit the Participants to direct the
Trustee as to the investment of all or a portion of
their Accrued Benefit. If such authorization is given
by the Plan Administrator, Participants may, subject
to a procedure established and applied in a uniform
and nondiscri- minatory manner, direct the Trustee to
invest their Accrued Benefit in a specific investment
fund or funds. To the extent so directed, and as
permitted by law, the Trustee and the Plan
Administrator shall be relieved of their fiduciary
responsibilities under Section 404 of ERISA. That
portion of the accounts of any Participant so directed
will thereupon be considered a "Directed Investment
Account," which shall not share in Trust Fund earnings
nor be taken into consideration for purposes of
Section 6.1. In lieu thereof, the Trustee shall,
following the end of each Valuation Date, value all
assets of the Trust Fund, allocate net gains or
losses, and process additions to and withdrawals from
Participants' accounts in the following manner:
(1) The Trustee shall first compute the fair
market value of securities and/or the other
assets comprising each investment fund. Each
account shall be adjusted each business day by
applying the closing market price of the
investment fund on the current business day to
-3-
<PAGE>
the share/unit balance of the investment fund
as of the close of business on the current
business day.
(2) The Trustee then shall account for any
requests of additions or withdrawals made to
or from a specific designated investment fund
by any Participant, including allocations of
contributions. In completing the valuation
procedure described above, such adjustments in
the amounts credited to such accounts shall be
made on the business day to which the
investment activity relates. Contributions
received by the Trustee pursuant to the Plan
shall not be taken into account until the
Valuation Date coinciding with or next
following the date such contribution was both
actually paid to the Trustee and allocated
among the accounts of the Participants.
(3) Notwithstanding paragraphs 1 and 2 above, if a
pooled investment fund is created as a
designated fund for Participants, valuation of
the pooled investment fund and allocation of
earnings of the pooled investment fund shall
be governed by any agreement of such pooled
investment fund. The provisions of any
agreement shall be incorporated by reference
in this Section 9.1.
It is intended that this Section 9.1 operate to
distribute among each Participant all income of the
Trust Fund and changes in the value of the assets of
the Trust Fund.
(b) A separate Directed Investment Account shall be
established for each Participant who has directed an
investment. Transfers between a Participant's regular
account, if any, and his Directed Investment Account
shall be charged and credited as the case may be to
each account.
(c) All investments, including that of any common stock,
shall be held in the name of the Trustee or one or
more of its nominees as provided in the Trust
Agreement.
(d) Each Participant shall file an investment election
with, and on a form or in the manner provided by, the
Plan Administrator at the time he becomes a
Participant in the Plan. A Participant may change his
investment fund elections regarding existing accounts
and future contributions pursuant to procedures
established by the Plan Administrator, which may
include daily trading via the Trustee's telephonic
toll-free system. A Participant also may transfer
amounts attributable to prior contributions among the
investment funds pursuant to such procedures. All
investments and changes must be
-4-
<PAGE>
made in multiples of one percent (1%), or, for
purposes of transfers only, in multiples of one dollar
($1.00) (with minimum transfers to be equal to the
lesser of $250 or 100% of a fund account). Elections
shall become effective as soon as practicable after
receipt by the Plan Administrator, subject to such
limitations and restrictions as the Plan Administrator
may, from time to time, establish.
(e) If no election form has been executed by the
Participant for his Directed Investment Account, his
entire Accrued Benefit shall be invested by the
Trustee pursuant to the Trust Agreement.
5. Article XIII of the Plan (Trust Provisions) shall be deleted in
its entirety, and all corresponding references in the Plan to Article
XIII shall be similarly deleted, and the Information Resources, Inc.
401(k) Retirement Savings Plan Trust Agreement, which is attached
hereto, shall be established as a separate Trust Agreement by and
between Fidelity Management Trust Company and Information Resources,
Inc.
6. Article XV (Loans to Participants) shall be amended to
read as follows:
15.1 LOANS TO PARTICIPANTS
Upon application by an Employee who is a Participant or any
other party-in-interest, as defined in Section 3(14) of ERISA,
the Trustee may lend such Employee or other party-in- interest
an amount such that the aggregate of all of his outstanding
loans under this Plan and all other plans maintained by the
Company does not exceed the lesser of: (1) fifty thousand
dollars ($50,000) (reduced by the excess, if any, of (A) the
highest outstanding balance of loans from the Plan and all
other plans maintained by the Company during the one (1) year
period ending on the day before the date on which such loan is
made over (B) the outstanding balance of loans from the Plan
and all other plans maintained by the Company on the date on
which such loan is made); or (2) an amount which does not
exceed one-half (1/2) of the vested interest of his Accrued
Benefit, if any, under the Plan as of the date on which the
loan is approved. All loans shall follow a uniform,
nondiscriminatory policy. Loans shall not be made available to
Highly Compensated Employees in an amount greater than the
amount made available to other Employees.
-5-
<PAGE>
In addition to such rules and regulations as the Plan
Administrator may adopt, all loans shall comply with the
following terms and conditions:
(a) An application for a loan by an Employee or other
party-in-interest shall be made in writing to the Plan
Administrator, whose action thereon shall be final.
The Plan Administrator shall specify the form of the
application and any supporting data required.
(b) The period of repayment for any loan shall be five (5)
years, unless the loan is used to acquire a dwelling
unit which within a reasonable time shall be used as
the principal residence of the Employee or other
party-in-interest, in which case the period of
repayment shall be determined by the Plan
Administrator but shall not be greater than twenty
(20) years. Loans shall be repayable in
substantially equal amortized installments of both
principal and interest payable not less frequently
than quarterly. Loans to Employees shall be repaid
through automatic payroll deduction, and for
parties-in-interest who are not Employees, on such
other terms and conditions as the Plan Administrator
deems appropriate. To the extent that such loan is
unpaid at the time a distribution of such
Participant's Accrued Benefit becomes payable, such
unpaid amount shall be deducted from the amount
otherwise payable from his Accrued Benefit. Any loan
described in this Section 15.1 shall be considered an
investment of the account from which it was borrowed.
Such account shall not share in the allocation of
earnings under the Plan to the extent of such loan.
(c) Each loan shall bear interest at a rate which is the
rate being charged by the area banking businesses for
similar well-secured loans.
(d) Each loan shall be supported by collateral equal to no
more than fifty percent (50%) of the Employee's or
other party-in-interest's entire vested interest in
the Trust. A loan also shall be supported by the
Employee's or other party-in-interest's promissory
note for the amount of the loan, including interest,
payable to the order of the Trustee. The promissory
note shall require that the unpaid principal and
interest will become due and payable if a loan payment
is not made by the last day of the calendar year
quarter following the calendar year quarter in which
the installment was due and owing. In the event of
default, foreclosure on the note and attachment of
security will not occur until a distributable event
occurs in the Plan.
(e) Each loan shall be in an amount not less than one
thousand dollars ($1,000.00) and shall be made in
increments of not less than ten dollars ($10.00). No
more than one (1) loan may be outstanding at any one
time.
-6-
<PAGE>
(f) Each loan shall be for a period of not less than six
(6) months.
IN WITNESS WHEREOF, Information Resources, Inc. has caused this
Amendment to be executed by its officer hereto duly authorized this ____ day of
May, 1996.
INFORMATION RESOURCES, INC.,
a Delaware corporation
By:______________________________
Its:_____________________________
-7-
<PAGE>
Exhibit 10(jj)
SECOND AMENDMENT TO THE
INFORMATION RESOURCES, INC.
AMENDED AND RESTATED 401(K) RETIREMENT SAVINGS PLAN
The Information Resources, Inc. Amended and Restated 401(k) Retirement
Savings Plan (attached hereto as Exhibit A and incorporated herein by reference)
is hereby amended, effective March 1, 1997, as follows:
1. The words "or (c)" shall be inserted after the words
"subsection (b)" in sentence two of Section 3.1(a).
2. The following subsection (c) shall be added to Section 3.1:
"(c) Beginning March 1, 1997, a Full-Time Employee of the
Company who has attained age twenty-one (21) and has completed thirty
(30) days of Participation Service shall become a Participant on the
first day of the month coincident with or following the later of (1)
the date on which the Full-Time Employee attained age twenty-one and
(2) the date on which the Full-Time Employee was hired by the Company,
provided that the Employee remains in the employ of the Company as a
Full-Time Employee on such first day of such month. For purposes of
this Section 3.1, a Full-Time Employee is an Employee that is treated
by the Company as working for the Company at least 40 hours per week."
3. The following sentence shall be added as the fourth sentence of
Section 4.2:
"Effective March 1, 1997, the reduction in Compensation per
payroll period cannot exceed fifteen percent (15%)."
4. The second sentence of Section 4.2(f) shall be amended to read
as follows:
"In the event the Plan shall fail in the Committee's reasonable
judgment to meet the nondiscrimination tests for 401(k) Contributions
of Section 401(k) of the Code for any Plan Year, the Committee may,
during the 2 1/2 month period following the close of the Plan Year,
return all or any portion of such salary reduction amounts (including
income allocable thereto for the Plan Year) to the Highly Compensated
Employees, in accordance with the nondiscrimination test and corrective
provisions of Section 401(k) and the regulations promulgated
thereunder, as amended from time to time, including but not limited to
Treasury Regulations Sections 1.401(k)-1(g)(1)(ii), 1.401.(k)-1(f)(2),
1.401(k)-1(f)(5)(i) and 1.401(k)-1(f)(5)(ii); provided, however, that
any such excess contributions shall be distributed first from 401(k)
Contributions in excess of 6% of the Participant's Compensation."
<PAGE>
5. The fourth sentence of Section 4.4 shall be amended to read as
follows:
"Such contribution shall be made to Participant's Matching
Contribution Account and shall be allocated as a percentage of the
total amount of the Participant defers for such period from the prior
Valuation Date to the current Valuation Date that does not exceed 6% of
the Participant's Compensation for the same such period; provided,
however, that the Matching Contribution allocated to any Participant
that reduces his or her Compensation in accordance with Section 4.2 in
the maximum amount permitted by law during any Plan Year shall be
determined in accordance with 6% of the Participant's Compensation for
such Plan Year regardless of the percentage of Compensation deferred by
such Participant under Section 4.2."
6. The vesting schedule contained in Section 7.2(c) shall be
amended to read as follows:
"Years of
Vesting Service Vesting Percentage
--------------- ------------------
Less than 3 0%
3 but less than 4 50%
4 but less than 5 75%
5 or more 100%
; provided, however, that a Participant who has 2 but less than 3 years
of Vesting Service on March 1, 1997 shall retain a 10% vesting
percentage in his or her Matching Contribution Account until such time
as Participant has 3 years of Vesting Service, at which time such
Participant's Vesting Service shall be determined in accordance with
the vesting schedule contained in this Section 7.2(c), as amended."
7. The first sentence of Section 9.1(a) shall be amended to read
as follows:
"The Company may establish separate investment funds (including
a Company stock fund) in which the assets of the Trust will be held."
IN WITNESS WHEREOF, Information Resources, Inc. has caused this
Amendment to executed by its officer hereto duly authorized this ____ Day of
February, 1997.
INFORMATION RESOURCES, INC.
A Delaware corporation
By: ______________________
Its: ______________________
-2-
<PAGE>
EXHIBIT 10(KK)
TRUST AGREEMENT
BETWEEN
_______________________________________________________________________
INFORMATION RESOURCES, INC.
AND
FIDELITY MANAGEMENT TRUST COMPANY
_______________________________________________________________________
INFORMATION RESOURCES, INC. 401(K) RETIREMENT SAVINGS PLAN
TRUST
DATED AS OF JULY 1, 1996
<PAGE>
TABLE OF CONTENTS
-----------------
SECTION PAGE
- ------------------------------------------------------------------------- ----
1 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
2 Exclusive Benefit and Reversion of Sponsor Contributions. . . . . . . 2
3 Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2
(a) Administrator Directed Disbursements
(b) Participant Withdrawal Requests
(c) Limitations
4 Investment of Trust . . . . . . . . . . . . . . . . . . . . . . . . . 3
(a) Selection of Investment Options
(b) Available Investment Options
(c) Participant Direction
(d) Mutual Funds
(e) Notes
(f) Notes for General Purposes
(g) Notes for Purchase of Primary Residence
(h) Reliance of Trustee on Directions
(i) Trustee Powers
5 Recordkeeping and Administrative Services to Be Performed . . . . . . 7
(a) General
(b) Accounts
(c) Inspection and Audit
(d) Effect of Plan Amendment
(e) Returns, Reports and Information
6 Compensation and Expenses . . . . . . . . . . . . . . . . . . . . . . 9
7 Directions and Indemnification. . . . . . . . . . . . . . . . . . . . 9
(a) Identity of Administrator and Named Fiduciary
(b) Directions from Administrator
(c) Directions from Named Fiduciary
(d) Co-Fiduciary Liability
(e) Indemnification
(f) Survival
8 Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . 10
(a) Resignation
(b) Removal
-i-
<PAGE>
TABLE OF CONTENTS
-----------------
(CONTINUED)
SECTION PAGE
- ------------------------------------------------------------------------- ----
9 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 11
(a) Appointment
(b) Acceptance
(c) Corporate Action
10 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11
11 Resignation, Removal, and Termination Notices . . . . . . . . . . . . 12
12 Duration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
13 Amendment or Modification . . . . . . . . . . . . . . . . . . . . . . 12
14 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12
(a) Performance by Trustee, its Agents or Affiliates
(b) Entire Agreement
(c) Waiver
(d) Successors and Assigns
(e) Partial Invalidity
(f) Section Headings
15 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13
(a) Massachusetts Law Controls
(b) Trust Agreement Controls
SCHEDULES
- ---------
A. Recordkeeping and Administrative Services
B. Fee Schedule
C. Investment Options
D. Sponsor's Authorization Letter
E. Named Fiduciary's Authorization Letter
F. IRS Determination Letter or Opinion of Counsel
G. Telephone Exchange Procedures
-ii-
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TRUST AGREEMENT, dated as of the first day of July, 1996, between
INFORMATION RESOURCES, INC., a Delaware corporation, having an office at
150 North Clinton Street, Chicago, Illinois 60661-1416 (the "Sponsor"), and
FIDELITY MANAGEMENT TRUST COMPANY, a Massachusetts trust company, having an
office at 82 Devonshire Street, Boston, Massachusetts 02109 (the "Trustee").
WITNESSETH:
WHEREAS, the Sponsor is the sponsor of the Information Resources, Inc.
401(k) Retirement Savings Plan (the "Plan"); and
WHEREAS, the Sponsor wishes to establish a trust to hold and invest plan
assets under the Plan for the exclusive benefit of Participants in the Plan and
their beneficiaries; and
WHEREAS, the Committee as defined in the Plan (the "Named Fiduciary") is the
named fiduciary of the Plan (within the meaning of section 402(a) of the
Employee Retirement Income Security Act of 1974, as amended ("ERISA")); and
WHEREAS, the Trustee is willing to hold and invest the aforesaid plan assets
in trust among several investment options selected by the Named Fiduciary; and
WHEREAS, the Sponsor wishes to have the Trustee perform certain ministerial
recordkeeping and administrative functions under the Plan; and
WHEREAS, the Sponsor (the "Administrator") is the administrator of the Plan
(within the meaning of section 3(16)(A) of ERISA); and
WHEREAS, the Trustee is willing to perform recordkeeping and administrative
services for the Plan if the services are purely ministerial in
<PAGE>
nature and are provided within a framework of plan provisions, guidelines and
interpretations conveyed in writing to the Trustee by the Administrator.
NOW, THEREFORE, in consideration of the foregoing premises and the mutual
covenants and agreements set forth below, the Sponsor and the Trustee agree as
follows:
SECTION 1. TRUST. The Sponsor hereby establishes the Information Resources,
Inc. 401(k) Retirement Savings Plan Trust (the "Trust"), with the Trustee. The
Trust shall consist of an initial contribution of money or other property
acceptable to the Trustee in its sole discretion, made by the Sponsor or
transferred from a previous trustee under the Plan, such additional sums of
money as shall from time to time be delivered to the Trustee under the Plan, all
investments made therewith and proceeds thereof, and all earnings and profits
thereon, less the payments that are made by the Trustee as provided herein,
without distinction between principal and income. The Trustee hereby accepts
the Trust on the terms and conditions set forth in this Agreement. In accepting
this Trust, the Trustee shall be accountable for the assets received by it,
subject to the terms and conditions of this Agreement.
SECTION 2. EXCLUSIVE BENEFIT AND REVERSION OF SPONSOR CONTRIBUTIONS. Except as
provided under applicable law, no part of the Trust may be used for, or diverted
to, purposes other than the exclusive benefit of the Participants in the Plan or
their beneficiaries prior to the satisfaction of all liabilities with respect to
the Participants and their beneficiaries.
SECTION 3. DISBURSEMENTS.
(a) Administrator Directed Disbursements. The Trustee shall make
disbursements in the amounts and in the manner that the Administrator directs
from time to time in writing. The Trustee shall have no responsibility to
ascertain such direction's compliance with the terms of the Plan or of any
applicable law or the direction's effect for tax purposes or otherwise; nor
shall the Trustee have any responsibility to see to the application of any
disbursement.
(b) Participant Withdrawal Requests. The Sponsor hereby directs that,
pursuant to the Plan, a Participant withdrawal request (in-service or full
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withdrawal) may be made by the Participant by telephone, and the Trustee shall
process such request only after the identity of the Participant is verified by
use of a personal identification number ("PIN") and social security number. The
Trustee shall process such withdrawal in accordance with written guidelines
provided by the Sponsor and documented in the Plan Administrative Manual.
(c) Limitations. The Trustee shall not be required to make any
disbursement in excess of the net realizable value of the assets of the Trust at
the time of the disbursement. The Trustee shall not be required to make any
disbursement in cash unless the Administrator has provided a written direction
as to the assets to be converted to cash for the purpose of making the
disbursement.
SECTION 4. INVESTMENT OF TRUST.
(a) Selection of Investment Options. The Trustee shall have no
responsibility for the selection of investment options under the Trust and shall
not render investment advice to any person in connection with the selection of
such options.
(b) Available Investment Options. The Named Fiduciary
shall direct the Trustee as to what investment options: (i) the Trust shall be
invested in during the period beginning on the date of the initial transfer of
assets to the Trust and ending on the date of the completion of the
reconciliation of Participant records ("Participant recordkeeping reconciliation
period"), and (ii) the investment options in which Plan Participants may invest,
subject to the following limitations. The Named Fiduciary may determine to
offer as investment options only (i) securities issued by the investment
companies advised by Fidelity Management & Research Company ("Mutual Funds") and
(ii) notes evidencing loans to Plan Participants in accordance with the terms of
the Plan. The investment options initially selected by the Named Fiduciary are
identified on Schedules "A" and "C" attached hereto. The Named Fiduciary may
add additional investment options with the consent of the Trustee and upon
mutual amendment of this Trust Agreement and the Schedules thereto to reflect
such additions.
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(c) Participant Direction. Each Plan Participant shall direct the
Trustee in which investment option(s) to invest the assets in the Participant's
individual accounts. Such directions may be made by Plan Participants by use of
the telephone exchange system maintained for such purposes by the Trustee or its
agent, in accordance with written Telephone Exchange Guidelines attached hereto
as Schedule "G". In the event that the Trustee fails to receive a proper
direction, the assets shall be invested in the securities of the Mutual Fund set
forth for such purpose on Schedule "C", until the Trustee receives a proper
direction.
(d) Mutual Funds. The Sponsor hereby acknowledges that it has received
from the Trustee a copy of the prospectus for each Mutual Fund selected by the
Named Fiduciary as a Plan investment option or short-term investment fund. Trust
investments in Mutual Funds shall be subject to the following limitations:
(i) Execution of Purchases and Sales. Purchases and sales of
Mutual Funds (other than for exchanges) shall be made on the date on which the
Trustee receives from the Sponsor in good order all information and
documentation necessary to accurately effect such purchases and sales (or in the
case of a purchase, the subsequent date on which the Trustee has received a wire
transfer of funds necessary to make such purchase). Exchanges of Mutual Funds
shall be made in accordance with the Telephone Exchange Guidelines attached
hereto as Schedule "G".
(ii) Voting. At the time of mailing of notice of each annual or
special stockholders' meeting of any Mutual Fund, the Trustee shall send a copy
of the notice and all proxy solicitation materials to each Plan Participant who
has shares of the Mutual Fund credited to the Participant's accounts, together
with a voting direction form for return to the Trustee or its designee. The
Sponsor shall have the right to direct the Trustee as to the manner in which the
Trustee is to vote the Mutual Fund shares held in any short-term investment
fund or liquidity reserve. The Participant shall have the right to direct the
Trustee as to the manner in which the Trustee is to vote the shares credited to
the Participant's accounts (both vested and unvested). The Trustee shall vote
the shares as directed by the Participant. The Trustee shall not vote shares
for which it has received no directions from the Participant. During the
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Participant recordkeeping reconciliation period, the Sponsor shall have the
right to direct the Trustee as to the manner in which the Trustee is to vote the
shares of the Mutual Funds in the Trust including Mutual Fund shares held in any
short-term investment fund for liquidity reserve. With respect to all rights
other than the right to vote, the Trustee shall follow the directions of the
Participant and if no such directions are received, the directions of the Named
Fiduciary. The Trustee shall have no further duty to solicit directions from
Participants or the Sponsor.
(e) Notes for General Purpose (five years or less). The Administrator
shall act as the Trustee's agent for Participant loan notes and as such shall
(i) collect and remit all principal and interest payments to the Trustee and
(ii) keep the proceeds of such loans separate from the other assets of the
Administrator and clearly identify such assets as Plan assets. To originate a
Participant loan, the Plan Participant shall direct the Trustee as to the term
and amount of the loan to be made from the Participant's individual account.
Such directions shall be made by Plan Participants by use of the telephone
exchange system maintained for such purpose by the Trustee or its agent. The
Trustee shall determine, based on the current value of the Participant's account
on the date of the request and any guidelines provided by the Sponsor, the
amount available for the loan. Based on the interest rate supplied by the
Sponsor in accordance with the terms of the Plan, the Trustee shall advise the
Participant of such interest rate, as well as the installment payment amounts.
The Trustee shall distribute the loan note with the proceeds check to the
Participant. The Trustee also shall distribute truth-in-lending disclosure to
the Participant. To facilitate recordkeeping, the Trustee may destroy the
original of any promissory note made in connection with a loan to a Participant
under the Plan, provided that the Trustee first creates a duplicate by a
photographic or optical scanning or other process yielding a reasonable
facsimile of the promissory note and the Plan Participant's signature thereon,
which duplicate may be reduced or enlarged in size from the actual size of the
original promissory note.
(f) Notes for Purchase of Primary Residence (for a period greater than
five years. The Administrator shall act as the Trustee's agent for the
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<PAGE>
purpose of holding all trust investments in Participant loan notes and related
documentation and as such shall (i) hold physical custody of and keep safe the
notes and other loan documents, (ii) collect and remit all principal and
interest payments to the Trustee, (iii) keep the proceeds of such loans separate
from the other assets of the Administrator and clearly identify such assets as
Plan assets, and (iv) cancel and surrender the notes and other loan
documentation when a loan has been paid in full. To originate a Participant
loan, the Plan Participant shall direct the Trustee as to the type of loan to be
made from the Participant's individual account. Such directions shall be made
by Plan Participants by use of the telephone exchange system maintained for such
purpose by the Trustee or its agent. The Trustee shall determine, based on the
current value of the Participant's account, the amount available for the loan.
Based on the interest rate supplied by the Sponsor in accordance with the terms
of the Plan, the Trustee shall advise the Participant of such interest rate, as
well as the installment payment amounts. The Trustee shall forward the loan
document to the Participant for execution and submission for approval to the
Administrator. The Administrator shall have the responsibility for approving the
loan and instructing the Trustee to send the loan proceeds to the Administrator
or to the Participant if so directed by the Administrator. In all cases, such
instruction by the Administrator shall be made within thirty (30) days of the
Participant's initial request (the origination date).
(g) Reliance of Trustee on Directions.
(i) The Trustee shall not be liable for any loss, or by reason of
any breach, which arises from any Participant's exercise or non-exercise of
rights under this Section 4 over the assets in the Participant's accounts.
(ii) The Trustee shall not be liable for any loss, or by reason of
any breach, which arises from the Named Fiduciary's exercise or non-exercise of
rights under this Section 4, unless it was clear on their face that the actions
to be taken under the Named Fiduciary's directions were prohibited by the
fiduciary duty rules of section 404(a) of ERISA or were contrary to the terms of
the Plan or this Agreement.
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<PAGE>
(h) Trustee Powers. The Trustee shall have the following powers and
authority:
(i) Subject to paragraphs (b), (c) and (d) of this Section 4, to
sell, exchange, convey, transfer, or otherwise dispose of any property held in
the Trust, by private contract or at public auction. No person dealing with the
Trustee shall be bound to see to the application of the purchase money or other
property delivered to the Trustee or to inquire into the validity, expediency,
or propriety of any such sale or other disposition.
(ii) Subject to paragraphs (b) and (c) of this Section 4, to
invest in guaranteed investment contracts and short term investments (including
interest bearing accounts with the Trustee or money market mutual funds advised
by affiliates of the Trustee) and in collective investment funds maintained by
the Trustee for qualified plans, in which case the provisions of each collective
investment fund in which the Trust is invested shall be deemed adopted by the
Sponsor and the provisions thereof incorporated as a part of this Trust as long
as the fund remains exempt from taxation under Sections 401(a) and 501(a) of the
Internal Revenue Code of 1986, as amended.
(iii) To cause any securities or other property held as part of the
Trust to be registered in the Trustee's own name, in the name of one or more of
its nominees, or in the Trustee's account with the Depository Trust Company of
New York and to hold any investments in bearer form, but the books and records
of the Trustee shall at all times show that all such investments are part of the
Trust.
(iv) To keep that portion of the Trust in cash or cash balances as
the Named Fiduciary or Administrator may, from time to time, deem to be in the
best interest of the Trust.
(v) To make, execute, acknowledge, and deliver any and all
documents of transfer or conveyance and to carry out the powers herein granted.
(vi) To borrow funds from a bank not affiliated with the Trustee
in order to provide sufficient liquidity to process Plan transactions in a
timely
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<PAGE>
fashion, provided that the cost of borrowing shall be allocated in a reasonable
fashion to the investment fund(s) in need of liquidity.
(vii) To settle, compromise, or submit to arbitration any claims,
debts, or damages due to or arising from the Trust; to commence or defend suits
or legal or administrative proceedings; to represent the Trust in all suits and
legal and administrative hearings; and to pay all reasonable expenses arising
from any such action, from the Trust if not paid by the Sponsor.
(viii) To employ legal, accounting, clerical, and other assistance
as may be required in carrying out the provisions of this Agreement and to pay
their reasonable expenses and compensation from the Trust if not paid by the
Sponsor.
(ix) To do all other acts although not specifically mentioned
herein, as the Trustee may deem necessary to carry out any of the foregoing
powers and the purposes of the Trust.
SECTION 5. RECORDKEEPING AND ADMINISTRATIVE SERVICES TO BE PERFORMED.
(a) General. The Trustee shall perform those recordkeeping and
administrative functions described in Schedule "A" attached hereto. These
recordkeeping and administrative functions shall be performed within the
framework of the Administrator's written directions regarding the Plan's
provisions, guidelines and interpretations.
(b) Accounts. The Trustee shall keep accurate accounts of all
investments, receipts, disbursements, and other transactions hereunder, and
shall report the value of the assets held in the Trust as of the last day of
each fiscal quarter of the Plan and, if not on the last day of a fiscal quarter,
the date on which the Trustee resigns or is removed as provided in Section 8 of
this Agreement or is terminated as provided in Section 10 (the "Reporting
Date"). Within thirty (30) days following each Reporting Date or within sixty
(60) days in the case of a Reporting Date caused by the resignation or removal
of the Trustee, or the termination of this Agreement, the Trustee shall file
with the Administrator a written account setting forth all investments,
receipts, disbursements, and other transactions effected by the Trustee between
the
8
<PAGE>
Reporting Date and the prior Reporting Date, and setting forth the value of the
Trust as of the Reporting Date. Except as otherwise required under ERISA, upon
the expiration of six (6) months from the date of filing such account with the
Administrator, the Trustee shall have no liability or further accountability to
anyone with respect to the propriety of its acts or transactions shown in such
account, except with respect to such acts or transactions as to which the
Sponsor shall within such six (6) month period file with the Trustee written
objections.
(c) Inspection and Audit. All records generated by the Trustee in
accordance with paragraphs (a) and (b) shall be open to inspection and audit,
during the Trustee's regular business hours prior to the termination of this
Agreement, by the Administrator or any person designated by the Administrator.
Upon the resignation or removal of the Trustee or the termination of this
Agreement, the Trustee shall provide to the Administrator, at no expense to the
Sponsor, in the format regularly provided to the Administrator, a statement of
each Participant's accounts as of the resignation, removal, or termination, and
the Trustee shall provide to the Administrator or the Plan's new recordkeeper
such further records as are reasonable, at the Sponsor's expense.
(d) Effect of Plan Amendment. A confirmation of the current qualified
status of the Plan is attached hereto as Schedule "F". The Trustee's provision
of the recordkeeping and administrative services set forth in this Section 5
shall be conditioned on the Sponsor delivering to the Trustee a copy of any
amendment to the Plan as soon as administratively feasible following the
amendment's adoption, with, if requested, an IRS determination letter or an
opinion of counsel substantially in the form of Schedule "F" covering such
amendment, and on the Administrator providing the Trustee on a timely basis with
all the information the Administrator deems necessary for the Trustee to perform
the recordkeeping and administrative services and such other information as the
Trustee may reasonably request.
(e) Returns, Reports and Information. The Administrator shall be
responsible for the preparation and filing of all returns, reports, and
information required of the Trust or Plan by law. The Trustee shall provide the
Administrator with such information as the Administrator may reasonably
9
<PAGE>
request to make these filings. The Administrator shall also be responsible for
making any disclosures to Participants required by law including, without
limitation, such disclosures as may be required by law, except such disclosure
as may be required under federal or state truth-in-lending laws with regard to
Participant loans, which shall be provided by the Trustee.
SECTION 6. COMPENSATION AND EXPENSES. Within thirty (30) days of receipt of
the Trustee's bill, which shall be computed and billed in accordance with
Schedule "B" attached hereto and made a part hereof, as amended from time to
time, the Sponsor shall send to the Trustee a payment in such amount or the
Sponsor may direct the Trustee to deduct such amount from Participants'
accounts. All expenses of the Trustee relating directly to the acquisition and
disposition of investments constituting part of the Trust, and all taxes of any
kind whatsoever that may be levied or assessed under existing or future laws
upon or in respect of the Trust or the income thereof, shall be a charge against
and paid from the appropriate Plan Participants' accounts.
SECTION 7. DIRECTIONS AND INDEMNIFICATION.
(a) Identity of Administrator and Named Fiduciary. The Trustee shall be
fully protected in relying on the fact that the Named Fiduciary and the
Administrator under the Plan are the individuals or persons named as such above
or such other individuals or persons as the Sponsor may notify the Trustee in
writing.
(b) Directions from Administrator. Whenever the Administrator provides
a direction to the Trustee, the Trustee shall not be liable for any loss, or by
reason of any breach, arising from the direction if the direction is contained
in a writing (or is oral and immediately confirmed in a writing) signed by any
individual whose name and signature have been submitted (and not withdrawn) in
writing to the Trustee by the Administrator in the form attached hereto as
Schedule "D", provided the Trustee reasonably believes the signature of the
individual to be genuine. Such direction may also be made via electronic data
transfer (EDT) in accordance with procedures agreed to by the Administrator and
the Trustee; provided, however, that the Trustee shall be fully protected in
relying on such direction as if it were a direction made in writing by the
Administrator. The Trustee shall have no responsibility to
10
<PAGE>
ascertain any direction's (i) accuracy, (ii) compliance with the terms of the
Plan or any applicable law, or (iii) effect for tax purposes or otherwise.
(c) Directions from Named Fiduciary. Whenever the Named Fiduciary or
Sponsor provides a direction to the Trustee, the Trustee shall not be liable for
any loss, or by reason of any breach, arising from the direction (i) if the
direction is contained in a writing (or is oral and immediately confirmed in a
writing) signed by any individual whose name and signature have been submitted
(and not withdrawn) in writing to the Trustee by the Named Fiduciary in the form
attached hereto as Schedule "E" and (ii) if the Trustee reasonably believes the
signature of the individual to be genuine, unless it is clear on the direction's
face that the actions to be taken under the direction would be prohibited by the
fiduciary duty rules of section 404(a) of ERISA or would be contrary to the
terms of the Plan or this Agreement.
(d) Co-Fiduciary Liability. In any other case, the Trustee shall not be
liable for any loss, or by reason of any breach, arising from any act or
omission of another fiduciary under the Plan except as provided in section
405(a) of ERISA.
(e) Indemnification. The Sponsor shall indemnify the Trustee against,
and hold the Trustee harmless from, any and all loss, damage, penalty,
liability, cost, and expense, including without limitation, reasonable
attorneys' fees and disbursements, that may be incurred by, imposed upon, or
asserted against the Trustee by reason of any claim, regulatory proceeding, or
litigation arising from any act done or omitted to be done by any individual or
person with respect to the Plan or Trust, excepting only any and all loss, etc.,
arising solely from the Trustee's negligence or bad faith.
(f) Survival. The provisions of this Section 7 shall survive the
termination of this Agreement.
SECTION 8. RESIGNATION OR REMOVAL OF TRUSTEE.
(a) Resignation. The Trustee may resign at any time upon sixty (60)
days' notice in writing to the Sponsor, unless a shorter period of notice is
agreed upon by the Sponsor.
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(b) Removal. The Sponsor may remove the Trustee at any time upon sixty
(60) days' notice in writing to the Trustee, unless a shorter period of notice
is agreed upon by the Trustee.
SECTION 9. SUCCESSOR TRUSTEE.
(a) Appointment. If the office of Trustee becomes vacant for any
reason, the Sponsor may in writing appoint a successor trustee under this
Agreement. The successor trustee shall have all of the rights, powers,
privileges, obligations, duties, liabilities, and immunities granted to the
Trustee under this Agreement. The successor trustee and predecessor trustee
shall not be liable for the acts or omissions of the other with respect to the
Trust.
(b) Acceptance. When the successor trustee accepts its appointment
under this Agreement, title to and possession of the Trust assets shall
immediately vest in the successor trustee without any further action on the part
of the predecessor trustee. The predecessor trustee shall execute all
instruments and do all acts that reasonably may be necessary or reasonably may
be requested in writing by the Sponsor or the successor trustee to vest title to
all Trust assets in the successor trustee or to deliver all Trust assets to the
successor trustee.
(c) Corporate Action. Any successor of the Trustee or successor
trustee, through sale or transfer of the business or trust department of the
Trustee or successor trustee, or through reorganization, consolidation, or
merger, or any similar transaction, shall, upon consummation of the transaction,
become the successor trustee under this Agreement.
SECTION 10. TERMINATION. This Agreement may be terminated at any time by the
Sponsor upon sixty (60) days' notice in writing to the Trustee. On the date of
the termination of this Agreement, the Trustee shall forthwith transfer and
deliver to such individual or entity as the Sponsor shall designate, all cash
and assets then constituting the Trust. If, by the termination date, the
Sponsor has not notified the Trustee in writing as to whom the assets and cash
are to be transferred and delivered, the Trustee may bring an appropriate action
or proceeding for leave to deposit the assets and cash in a court of competent
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jurisdiction. The Trustee shall be reimbursed by the Sponsor for all costs and
expenses of the action or proceeding including, without limitation, reasonable
attorneys' fees and disbursements.
SECTION 11. RESIGNATION, REMOVAL, AND TERMINATION NOTICES. All notices of
resignation, removal, or termination under this Agreement must be in writing and
mailed to the party to which the notice is being given by certified or
registered mail, return receipt requested, to the Sponsor c/o Kimberly Mark,
Information Resources, Inc., 150 North Clinton Street, Chicago Illinois
60661-1416, and to the Trustee c/o John M. Kimpel, Fidelity Investments, 82
Devonshire Street, Boston, Massachusetts 02109, or to such other addresses as
the parties have notified each other of in the foregoing manner.
SECTION 12. DURATION. This Trust shall continue in effect without limit as to
time, subject, however, to the provisions of this Agreement relating to
amendment, modification, and termination thereof.
SECTION 13. AMENDMENT OR MODIFICATION. This Agreement may be amended or
modified at any time and from time to time only by an instrument executed by
both the Sponsor and the Trustee. Notwithstanding the foregoing, to reflect
increased operating costs the Trustee may once each calendar year amend Schedule
"B" without the Sponsor's consent upon seventy-five (75) days written notice to
the Sponsor.
SECTION 14. GENERAL.
(a) Performance by Trustee, its Agents or Affiliates. The Sponsor
acknowledges and authorizes that the services to be provided under this
Agreement shall be provided by the Trustee, its agents or affiliates, including
Fidelity Investments Institutional Operations Company or its successor, and that
certain of such services may be provided pursuant to one or more other
contractual agreements or relationships.
(b) Entire Agreement. This Agreement contains all of the terms agreed
upon between the parties with respect to the subject matter hereof.
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(c) Waiver. No waiver by either party of any failure or refusal to
comply with an obligation hereunder shall be deemed a waiver of any other or
subsequent failure or refusal to so comply.
(d) Successors and Assigns. The stipulations in this Agreement shall
inure to the benefit of, and shall bind, the successors and assigns of the
respective parties.
(e) Partial Invalidity. If any term or provision of this Agreement or
the application thereof to any person or circumstances shall, to any extent, be
invalid or unenforceable, the remainder of this Agreement, or the application of
such term or provision to persons or circumstances other than those as to which
it is held invalid or unenforceable, shall not be affected thereby, and each
term and provision of this Agreement shall be valid and enforceable to the
fullest extent permitted by law.
(f) Section Headings. The headings of the various sections and
subsections of this Agreement have been inserted only for the purposes of
convenience and are not part of this Agreement and shall not be deemed in any
manner to modify, explain, expand or restrict any of the provisions of this
Agreement.
SECTION 15. GOVERNING LAW.
(a) Massachusetts Law Controls. This Agreement is being made in the
Commonwealth of Massachusetts, and the Trust shall be administered as a
Massachusetts trust. The validity, construction, effect, and administration of
this Agreement shall be governed by and interpreted in accordance with the laws
of the Commonwealth of Massachusetts, except to the extent those laws are
superseded under section 514 of ERISA.
(b) Trust Agreement Controls. The Trustee is not a party to the Plan,
and in the event of any conflict between the provisions of the Plan and the
provisions of this Agreement, the provisions of this Agreement shall control.
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<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be
executed by their duly authorized officers as of the day and year first above
written.
INFORMATION RESOURCES, INC.
Attest: ______________________ By: ______________________________
Secretary Vice President
FIDELITY MANAGEMENT TRUST
COMPANY
Attest: ______________________ By ______________________________
Assistant Clerk Vice President
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SCHEDULE "A"
ADMINISTRATIVE SERVICES
-----------------------
Administration
- --------------
* Establishment and maintenance of Participant account and election
percentages.
* Maintenance of seven (7) plan investment options:
- Fidelity Magellan Fund
- Fidelity Money Market Trust: Retirement Money Market Portfolio
- Fidelity Puritan Fund
- Fidelity OTC Portfolio
- Fidelity U.S. Equity Index Portfolio
- Fidelity Growth & Income Portfolio
- Fidelity Overseas Fund
* Maintenance of four (4) money classifications:
- 401(k) Savings
- Matching
- Rollover
- Prior Plan P.S.
* The Trustee will provide the recordkeeping and administrative services set
forth on this Schedule "A" and as detailed in the Plan Administrative Manual and
no others.
A) PROVIDE PARTICIPANT TELEPHONE SERVICES
1. Fidelity registered representatives are available from 8:30 a.m. -
12:00 Midnight ET to provide toll free telephone service for
Participant inquiries and transactions. Additionally, Participants
have 24 hour account balance inquiry access utilizing our automated
voice response system.
2. For security purposes, all calls are recorded. In addition, several
levels of security are available including the verification of a
Personal Identification Number (PIN) and/or any other indicative data
resident on the system.
3. Through our telephone services, Fidelity provides the following
services:
- Provide mutual fund investment information.
- Maintain plan specific provisions.
- Process exchanges (transfers) between Fidelity's mutual funds on a
daily basis.
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- Maintain and process changes to Participants' contribution
allocations for all money sources.
- Allow Participants to change their deferral percentages and provide
updates via EDT for customer to apply to its payrolls accordingly.
- Consult with Participants in various loan scenarios and generate all
documentation.
- Process all Participant loan and withdrawal requests via Fidelity's
toll-free telephone service according to plan provisions on a daily
basis.
- In-service withdrawals via telephone as directed and approved by the
Sponsor.
- Hardship withdrawals via telephone as directed and approved by the
Sponsor.
B) PLAN ACCOUNTING
1. Process payroll contributions according to your payroll frequency via
electronic data transfer (EDT) or consolidated magnetic tape. The data
format will be provided by Fidelity.
2. Provide plan and Participant level accounting for up to nine (9) money
classifications for the Plan.
3. Audit and reconcile the plan and Participant accounts daily.
4. Provide daily plan and Participant level accounting for the Plan
investment options.
5. Reconcile and process Participant withdrawal requests as approved and
directed by the Sponsor. All requests are paid based on the current
market values of Participants' accounts, not advanced or estimated
values. A distribution report will accompany each check.
6. Track individual Participant loans; process loan withdrawals; re-invest
loan repayments; and prepare and deliver comprehensive reports to plan
sponsor to assist in the administration of Participant loans.
7. Maintain and process changes to Participants' prospective and existing
investment mix elections via Fidelity's toll-free telephone service.
C) PARTICIPANT REPORTING
1. Mail confirmation to Participants of all transactions initiated via
Fidelity Telephone Services within three (3) calendar days of the
transaction.
2. Prepare and mail via first class to each plan Participant a quarterly
detailed Participant statement reflecting all activity for the period.
Statements will be mailed no later than twenty (20) calendar days after
each quarter end.
17
<PAGE>
3. Mail required 402(f) notification for distribution from the plan. This
notice advises Participants of tax consequences of their plan
distribution.
D) PLAN REPORTING
1. Prepare, reconcile and deliver a monthly Trial Balance Report
presenting all money classes and investments. This report is based on
the market value as of the last business day of the month. The report
will be delivered not later than twenty (20) days after the end of each
month in the absence of unusual circumstances.
2. Prepare, reconcile and deliver a Quarterly Administrative Report
presenting both on a Participant and a total plan basis all money
classes, investment positions and a summary of all activity of the
Participant and plan as of the last business day of the quarter. The
report will be delivered not later than twenty (20) days after the end
of each quarter in the absence of unusual circumstances.
E) GOVERNMENT REPORTING
Process year-end tax reports for Participants - 1099R, as well as
financial reporting to assist in the preparation of Form 5500.
F) COMMUNICATION SERVICES
Employee communications describing available investment options,
including multimedia informational materials and group presentations.
G) OTHER
Performance of non-discrimination limitation testing upon request. In
order to obtain this service, the Sponsor shall be required to provide the
information identified in the Fidelity Discrimination Testing Package
Guidelines.
INFORMATION RESOURCES, INC. FIDELITY MANAGEMENT TRUST
COMPANY
By: _______________________ By: ____________________________
Date Vice President Date
18
<PAGE>
SCHEDULE "B"
FEE SCHEDULE
Annual Participant Fee: $8.00 per Participant*, subject to a
$15,000 per year minimum, billed and
payable quarterly.
Enrollments by Phone (optional): $5.00 per non-active employee residing
on Fidelity's Participant recordkeeping
system.
Loan Fee: Establishment fee of $35.00 per loan
account; annual fee of $15.00 per loan
account.
In-Service Withdrawals by Phone: $20.00 per withdrawal.
Remote Access: $1,000 per year. Installation of two
remote access terminals will be provided
free of charge. Installation of each
additional terminal is $1,500.
Return of Excess Contribution Fee: $25.00 per Participant, one-time charge
per calculation and check generation.
- - Other Fees: separate charges for optional non-discrimination testing,
extraordinary expenses resulting from large numbers of simultaneous manual
transactions or from errors not caused by Fidelity, or for reports not
contemplated in this Agreement. The Administrator may withdraw reasonable
administrative fees from the Trust by written direction to the Trustee.
* This fee will be imposed pro rata for each calendar quarter, or any part
thereof, that it remains necessary to keep a Participant's account(s) as part
of the Plan's records, e.g., vested, deferred, forfeiture, top-heavy and
terminated Participants who must remain on file through calendar year-end for
1099-R reporting purposes.
Note: These fees have been negotiated and accepted based on current plan assets
of $28 million, current participation of 2,252 Participants and projected net
cash flows of $6.2 million per year. Fees will be subject to revision if these
Plan characteristics change significantly by either falling below or exceeding
current or projected levels. Fees also have been based on the use of up to
19
<PAGE>
seven (7) investment options, and such fees will be subject to revision if
additional investment options are added.
INFORMATION RESOURCES, INC. FIDELITY MANAGEMENT TRUST
COMPANY
By: _______________________ By: ____________________________
Date Vice President Date
20
<PAGE>
SCHEDULE "C"
INVESTMENT OPTIONS
In accordance with Section 4(b), the Named Fiduciary hereby directs the
Trustee that Participants' individual accounts may be invested in the following
investment options:
- Fidelity Magellan Fund
- Fidelity Money Market Trust: Retirement Money Market Portfolio
- Fidelity Puritan Fund
- Fidelity OTC Portfolio
- Fidelity U.S. Equity Index Portfolio
- Fidelity Growth & Income Portfolio
- Fidelity Overseas Fund
The mutual fund advised by Fidelity Management & Research Company referred
to in Section 4(c) shall be the Fidelity Money Market Trust: Retirement Money
Market Portfolio.
INFORMATION RESOURCES, INC.
By: ______________________
Date
21
<PAGE>
SCHEDULE "D"
[ADMINISTRATOR'S LETTERHEAD]
Ms. Carolyn Redden
Fidelity Investments Institutional Operations Company
82 Devonshire Street
Boston, Massachusetts 02109
[NAME OF PLAN]
*** NOTE: This schedule should contain names and signatures for ALL
individuals who will be providing directions to Fidelity
representatives in connection with the Plan.
Fidelity representatives will be unable to accept directions from any
individual whose name does not appear on this schedule.***
Dear Ms. Redden:
This letter is sent to you in accordance with Section 7(b) of the Trust
Agreement, dated as of [date], between [name of Plan Sponsor] and Fidelity
Management Trust Company. [I or We] hereby designate [name of individual],
[name of individual], and [name of individual], as the individuals who may
provide directions upon which Fidelity Management Trust Company shall be fully
protected in relying. Only one such individual need provide any direction. The
signature of each designated individual is set forth below and certified to be
such.
You may rely upon each designation and certification set forth in this
letter until [I or we] deliver to you written notice of the termination of
authority of a designated individual.
Very truly yours,
[ADMINISTRATOR]
By
[signature of designated individual]
- ------------------------------------
[name of designated individual]
[signature of designated individual]
- ------------------------------------
[name of designated individual]
[signature of designated individual]
- ------------------------------------
22
<PAGE>
[name of designated individual]
23
<PAGE>
SCHEDULE "E"
[NAMED FIDUCIARY'S LETTERHEAD]
Ms. Carolyn Redden
Fidelity Investments Institutional Operations Company
82 Devonshire Street
Boston, Massachusetts 02109
[NAME OF PLAN]
Dear Ms. Redden:
This letter is sent to you in accordance with Section 7(c) of the Trust
Agreement, dated as of [date], between [name of Plan Sponsor] and Fidelity
Management Trust Company. [I or We] hereby designate [name of individual],
[name of individual], and [name of individual], as the individuals who may
provide directions upon which Fidelity Management Trust Company shall be fully
protected in relying. Only one such individual need provide any direction. The
signature of each designated individual is set forth below and certified to be
such.
You may rely upon each designation and certification set forth in this
letter until [I or we] deliver to you written notice of the termination of
authority of a designated individual.
Very truly yours,
[NAMED FIDUCIARY]
By
[signature of designated individual]
- ------------------------------------
[name of designated individual]
[signature of designated individual]
- ------------------------------------
[name of designated individual]
[signature of designated individual]
- ------------------------------------
[name of designated individual]
24
<PAGE>
SCHEDULE "F"
[LAW FIRM LETTERHEAD]
**NOTE : THE PLAN S IRS DETERMINATION LETTER MAY BE SUBSTITUTED; PROVIDED IT IS
NOT MORE THAN TWO YEARS OLD.
Carolyn Redden
Fidelity Institutional Retirement
Services Company
82 Devonshire Street - MM3H
Boston, MA 02109
[NAME OF PLAN]
Dear Ms. Redden:
In accordance with your request, this letter sets forth our opinion with
respect to the qualified status under section 401(a) of the Internal Revenue
Code of 1986 (including amendments made by the Employee Retirement Income
Security Act of 1974) (the "Code"), of the [name of plan], as amended to the
date of this letter (the "Plan").
The material facts regarding the Plan as we understand them are as follows.
The most recent favorable determination letter as to the Plan's qualified status
under section 401(a) of the Code was issued by the [location of Key District]
District Director of the Internal Revenue Service and was dated [date] (copy
enclosed). The version of the Plan submitted by [name of company] (the
"Company") for the District Director's review in connection with this
determination letter did not contain amendments made effective as of [date].
These amendments, among other matters, [brief description of amendments].
[Subsequent amendments were made on [date] to amend the provisions dealing with
[brief description of amendments].]
The Company has informed us that it intends to submit the Plan to the
[location of Key District] District Director of the Internal Revenue Service and
to request from him a favorable determination letter as to the Plan's qualified
status under section 401(a) of the Code. The Company may have to make some
modifications to the Plan at the request of the Internal Revenue Service in
order to obtain this favorable determination letter, but we do not expect any of
these modifications to be material. The Company has informed us that it will
make these modifications.
Based on the foregoing statements of the Company and our review of the
provisions of the Plan, it is our opinion that the Internal Revenue Service will
issue a favorable determination letter as to the qualified status of the Plan,
as modified at the request of the Internal Revenue Service, under section 401(a)
of the Code, subject to the customary condition that continued qualification of
the Plan, as modified, will depend on its effect in operation.
Sincerely,
[name of law firm]
25
<PAGE>
By [signature]
-----------------
[name of partner]
26
<PAGE>
SCHEDULE "G"
TELEPHONE EXCHANGE PROCEDURES
-----------------------------
The following telephone exchange procedures are currently employed by Fidelity
Institutional Retirement Services Company (FIRSCO).
Telephone exchange hours are 8:30 a.m. (ET) to 8:00 p.m. (ET) on each business
day. A "business day" is any day on which the New York Stock Exchange is open.
FIRSCO reserves the right to change these telephone exchange procedures at its
discretion.
EXCHANGES BETWEEN MUTUAL FUNDS
------------------------------
Participants may call on any business day to exchange between the mutual
funds. If the request is received before 4:00 p.m. (ET), it will receive
that day's trade date. Calls received after 4:00 p.m. (ET) will be
processed on a next day basis.
INFORMATION RESOURCES, INC.
By: _____________________
Date
27
<PAGE>
EXHIBIT 10(LL)
FIRST AMENDMENT TO TRUST AGREEMENT
BETWEEN FIDELITY MANAGEMENT TRUST COMPANY AND
INFORMATION RESOURCES, INC.
THIS FIRST AMENDMENT, effective as of the first day of March, 1997, by and
between Fidelity Management Trust Company (the "Trustee") and Information
Resources, Inc. (the "Sponsor");
WITNESSETH:
WHEREAS, the Trustee and the Sponsor heretofore entered into a Trust
Agreement dated July 1, 1996, with regard to the Information Resources, Inc.
401(k) Retirement Savings Plan (the "Plan"); and
WHEREAS, the Trustee and the Sponsor now desire to amend said Trust
Agreement as provided for in Section 13 thereof;
NOW THEREFORE, in consideration of the above premises, the Trustee and the
Sponsor hereby amend the Trust Agreement by:
(1) Amending Section 4(b) by adding the following subsection where
appropriate:
(iii) equity securities issued by the Sponsor or an affiliate which
are publicly-traded and which are "qualifying employer securities" within the
meaning of section 407(d)(5) of ERISA ("Sponsor Stock").
(2) Amending Section 4 by inserting the following new Section 4(g) and
relettering existing subsections and any cross references accordingly:
(g) Sponsor Stock. Trust investments in Sponsor Stock shall be made
via the Information Resources Stock Fund (the "Sponsor Stock Fund")
which shall consist of shares of Sponsor Stock and short-term liquid
investments, including Fidelity Institutional Cash Portfolios: Money
Market Portfolio: Class 1 or such other Mutual Fund or commingled
money market pool as agreed to by the Sponsor and Trustee, necessary
to satisfy the Fund's cash needs for transfers and payments. A cash
target range shall be maintained in the Sponsor Stock Fund. Such
target range may be changed as agreed to in writing by the Sponsor and
the Trustee. The Trustee is responsible for ensuring that the actual
cash held in the Sponsor Stock Fund falls within the agreed upon range
over time. Each Participant's proportional interest in the Sponsor
Stock Fund shall be measured in units of participation, rather than
shares of Sponsor Stock. Such units shall represent a proportionate
interest in all of the assets of the Sponsor Stock Fund, which
includes shares of Sponsor Stock, short-term investments and at times,
receivables
1
<PAGE>
for dividends and/or Sponsor Stock sold and payables for Sponsor Stock
purchased. A Net Asset Value ("NAV") per unit will be determined
daily for each unit outstanding of the Sponsor Stock Fund. The return
earned by the Sponsor Stock Fund will represent a combination of the
dividends paid on the shares of Sponsor Stock held by the Sponsor
Stock Fund, gains or losses realized on sales of Sponsor Stock,
appreciation or depreciation in the market price of those shares
owned, and interest on the short-term investments held by the Sponsor
Stock Fund. Dividends received by the Sponsor Stock Fund are
reinvested in additional units of the Sponsor Stock Fund. Investments
in Sponsor Stock shall be subject to the following limitations:
(i) Acquisition Limit. Pursuant to the Plan, the Trust may be
invested in Sponsor Stock to the extent necessary to comply with
investment directions under Section 4(c) of this Agreement.
(ii) Fiduciary Duty of Named Fiduciary. The Named Fiduciary
shall continually monitor the suitability under the fiduciary duty
rules of section 404(a)(1) of ERISA (as modified by section 404(a)(2)
of ERISA) of acquiring and holding Sponsor Stock. The Trustee shall
not be liable for any loss, or by reason of any breach, which arises
from the directions of the Named Fiduciary with respect to the
acquisition and holding of Sponsor Stock, unless it is clear on their
face that the actions to be taken under those directions would be
prohibited by the foregoing fiduciary duty rules or would be contrary
to the terms of the Plan or this Agreement.
(iii) Execution of Purchases and Sales.
(A) Purchases and sales of Sponsor Stock (other than for
exchanges) shall be made on the open market on the date on which the
Trustee receives from the Sponsor in good order all information and
documentation necessary to accurately effect such purchases and sales
(or, in the case of purchases, the subsequent date on which the
Trustee has received a wire transfer of the funds necessary to make
such purchases). Exchanges of Sponsor Stock shall be made in
accordance with the Telephone Exchange Guidelines attached hereto as
Schedule "G". Such general rules shall not apply in the following
circumstances:
2
<PAGE>
(1) If the Trustee is unable to purchase or sell
the total number of shares required to be purchased or sold on such
day as a result of market conditions; or
(2) If the Trustee is prohibited by the
Securities and Exchange Commission, the New York Stock Exchange, or
any other regulatory body from purchasing or selling any or all of the
shares required to be purchased or sold on such day.
In the event of the occurrence of the circumstances described in (1)
or (2) above, the Trustee shall purchase or sell such shares as soon
as possible thereafter and shall determine the price of such purchases
or sales to be the average purchase or sales price of all such shares
purchased or sold, respectively. The Trustee may follow directions
from the Named Fiduciary to deviate from the above purchase and sale
procedures provided that such direction is made in writing by the
Named Fiduciary.
(B) Purchases and Sales from or to Sponsor. If directed
by the Sponsor in writing prior to the trading date, the Trustee may
purchase or sell Sponsor Stock from or to the Sponsor if the purchase
or sale is for adequate consideration (within the meaning of section
3(18) of ERISA) and no commission is charged. If Sponsor
contributions or contributions made by the Sponsor on behalf of the
Participants under the Plan are to be invested in Sponsor Stock, the
Sponsor may transfer Sponsor Stock in lieu of cash to the Trust. In
either case, the number of shares to be transferred will be determined
by dividing the total amount of Sponsor Stock to be purchased or sold
by the 4:00 p.m. closing price of the Sponsor Stock on the New York
Stock Exchange on the trading date.
(C) Use of an Affiliated Broker. The Sponsor hereby
directs the Trustee to use Fidelity Brokerage Services, Inc. ("FBSI")
to provide brokerage services in connection with any purchase or sale
of Sponsor Stock in accordance with directions from Plan Participants.
FBSI shall execute such directions directly or through its affiliate,
National Financial Services Company ("NFSC"). The provision of
brokerage services shall be subject to the following:
3
<PAGE>
(1) As consideration for such brokerage services,
the Sponsor agrees that FBSI shall be entitled to remuneration under
this authorization provision in the amount of three and one-half cents
($.035) commission on each share of Sponsor Stock. Any change in such
remuneration may be made only by a signed agreement between Sponsor
and Trustee.
(2) Following the procedures set forth in
Department of Labor Prohibited Transaction Class Exemption 86-128, the
Trustee will provide the Sponsor with the following documents: (1) a
description of FBSI's brokerage placement practices; (2) a copy of
PTCE 86-128; and (3) a form by which the Sponsor may terminate this
authorization to use a broker affiliated with the Trustee. The
Trustee will provide the Sponsor with this termination form annually.
(3) Any successor organization of FBSI, through
reorganization, consolidation, merger or similar transactions, shall,
upon consumption of such transaction, become the successor broker in
accordance with the terms of this authorization provision.
(4) The Trustee and FBSI shall continue to rely on
this authorization provision until notified to the contrary. The
Sponsor reserves the right to terminate this authorization upon
written notice to FBSI (or its successor) and the Trustee, in
accordance with Section 11 of this Agreement.
(iv) Securities Law Reports. The Named Fiduciary shall be
responsible for filing all reports required under Federal or state
securities laws with respect to the Trust's ownership of Sponsor
Stock, including, without limitation, any reports required under
section 13 or 16 of the Securities Exchange Act of 1934, and shall
immediately notify the Trustee in writing of any requirement to stop
purchases or sales of Sponsor Stock pending the filing of any report.
The Trustee shall provide to the Named Fiduciary such information on
the Trust's ownership of Sponsor Stock as the Named Fiduciary may
reasonably request in order to comply with Federal or state securities
laws.
(v) Voting and Tender Offers. Notwithstanding any other
provision of this Agreement, the provisions of this Section shall
govern the voting and tendering of
4
<PAGE>
Sponsor Stock. The Sponsor, after consultation with the Trustee,
shall provide and pay for all printing, mailing, tabulation and other
costs associated with the voting and tendering of Sponsor Stock.
(A) Voting.
(1) When the issuer of the Sponsor Stock prepares
for any annual or special meeting, the Sponsor shall notify the
Trustee thirty (30) days in advance of the intended record date and
shall cause a copy of all materials to be sent to the Trustee. Based
on these materials the Trustee shall prepare a voting instruction
form. At the time of mailing of notice of each annual or special
stockholders' meeting of the issuer of the Sponsor Stock, the Sponsor
shall cause a copy of the notice and all proxy solicitation materials
to be sent to each Plan Participant with an interest in Sponsor Stock
held in the Trust, together with the foregoing voting instruction form
to be returned to the Trustee or its designee. The form shall show
the proportional interest in the number of full and fractional shares
of Sponsor Stock credited to the Participant's accounts held in the
Sponsor Stock Fund. The Sponsor shall provide the Trustee with a copy
of any materials provided to the Participants and shall certify to the
Trustee that the materials have been mailed or otherwise sent to
Participants.
(2) Each Participant with an interest in the
Sponsor Stock Fund shall have the right to direct the Trustee as to
the manner in which the Trustee is to vote (including not to vote)
that number of shares of Sponsor Stock reflecting such Participant's
proportional interest in the Sponsor Stock Fund (both vested and
unvested). Directions from a Participant to the Trustee concerning
the voting of Sponsor Stock shall be communicated in writing, or by
mailgram or similar means. These directions shall be held in
confidence by the Trustee and shall not be divulged to the Sponsor, or
any officer or employee thereof, or any other person. Upon its
receipt of the directions, the Trustee shall vote the shares of
Sponsor Stock reflecting the Participant's proportional interest in
the Sponsor Stock Fund as directed by the Participant. The Trustee
shall not vote shares of Sponsor Stock reflecting a Participant's
proportional interest in the Sponsor Stock Fund for which it has
received no direction from the Participant.
5
<PAGE>
(3) The Trustee shall vote that number of shares of
Sponsor Stock not credited to Participants' accounts in the same
proportion on each issue as it votes those shares credited to
particpants' accounts for which it received voting directions from
Participants.
(B) Tender Offers.
(1) Upon commencement of a tender offer for any
securities held in the Trust that are Sponsor Stock, the Sponsor shall
notify each Plan Participant with an interest in such Sponsor Stock of
the tender offer and utilize its best efforts to timely distribute or
cause to be distributed to the Participant the same information that
is distributed to shareholders of the issuer of Sponsor Stock in
connection with the tender offer, and, after consulting with the
Trustee, shall provide and pay for a means by which the Participant
may direct the Trustee whether or not to tender the Sponsor Stock
reflecting such Participant's proportional interest in the Sponsor
Stock Fund (both vested and unvested). The Sponsor shall provide the
Trustee with a copy of any material provided to the Participants and
shall certify to the Trustee that the materials have been mailed or
otherwise sent to Participants.
(2) Each Participant shall have the right to direct
the Trustee to tender or not to tender some or all of the shares of
Sponsor Stock reflecting such Participant's proportional interest in
the Sponsor Stock Fund (both vested and unvested). Directions from a
Participant to the Trustee concerning the tender of Sponsor Stock
shall be communicated in writing, or by mailgram or such similar means
as is agreed upon by the Trustee and the Sponsor under the preceding
paragraph. These directions shall be held in confidence by the
Trustee and shall not be divulged to the Sponsor, or any officer or
employee thereof, or any other person except to the extent that the
consequences of such directions are reflected in reports regularly
communicated to any such persons in the ordinary course of the
performance of the Trustee's services hereunder. The Trustee shall
tender or not tender shares of Sponsor Stock as directed by the
Participant. The Trustee shall not tender shares of Sponsor Stock
reflecting a Participant's proportional interest in the Sponsor Stock
Fund for which it has received no direction from the Participant.
6
<PAGE>
(3) The Trustee shall tender that number of shares
of Sponsor Stock not credited to Participants' accounts in the same
proportion as the total number of shares of Sponsor Stock credited to
Participants' accounts for which it has received instructions from
Participants.
(4) A Participant who has directed the Trustee to
tender some or all of the shares of Sponsor Stock reflecting the
Participant's proportional interest in the Sponsor Stock Fund may, at
any time prior to the tender offer withdrawal date, direct the Trustee
to withdraw some or all of the tendered shares reflecting the
Participant's proportional interest, and the Trustee shall withdraw
the directed number of shares from the tender offer prior to the
tender offer withdrawal deadline. Prior to the withdrawal deadline,
if any shares of Sponsor Stock not credited to Participants' accounts
have been tendered, the Trustee shall redetermine the number of shares
of Sponsor Stock that would be tendered under Section 4(g)(v)(B)(3) if
the date of the foregoing withdrawal were the date of determination,
and withdraw from the tender offer the number of shares of Sponsor
Stock not credited to Participants' accounts necessary to reduce the
amount of tendered Sponsor Stock not credited to Participants'
accounts to the amount so redetermined. A Participant shall not be
limited as to the number of directions to tender or withdraw that the
Participant may give to the Trustee.
(5) A direction by a Participant to the Trustee to
tender shares of Sponsor Stock reflecting the Participant's
proportional interest in the Sponsor Stock Fund shall not be
considered a written election under the Plan by the Participant to
withdraw, or have distributed, any or all of his withdrawable shares.
The Trustee shall credit to each proportional interest of the
Participant from which the tendered shares were taken the proceeds
received by the Trustee in exchange for the shares of Sponsor Stock
tendered from that interest. Pending receipt of directions (through
the Administrator) from the Participant or the Named Fiduciary, as
provided in the Plan, as to which of the remaining investment options
the proceeds should be invested in, the Trustee shall invest the
proceeds in the Mutual Fund described in Schedule "C".
(vi) Shares Credited. For all purposes of this Section, the
number of shares of Sponsor Stock deemed "credited" to a Participant's
accounts as of the relevant date (the record date or the date
specified in a tender offer) shall be calculated by reference to
7
<PAGE>
the number of shares reflected on the books of the transfer agent as
of the relevant date. In the case of a tender, the number of shares
credited shall be determined as of a date as closely administratively
feasible to the relevant date. For all purposes of this Section, the
number of shares of Sponsor Stock deemed "credited" or "reflected" to
a Participant's proportional interest shall be determined as of the
last preceding valuation date. The trade date is the date the
transaction is valued.
(vii) General. With respect to all rights other than the right
to vote, the right to tender, and the right to withdraw shares
previously tendered, in the case of Sponsor Stock credited to a
Participant's proportional interest in the Sponsor Stock Fund, the
Trustee shall follow the directions of the Participant and if no such
directions are received, the directions of the Named Fiduciary. The
Trustee shall have no duty to solicit directions from Participants.
With respect to all rights other than the right to vote and the right
to tender, in the case of Sponsor Stock not credited to Participants'
accounts, the Trustee shall follow the directions of the Named
Fiduciary.
(viii) Conversion. All provisions in this Section 4(g) shall
also apply to any securities received as a result of a conversion of
Sponsor Stock.
(3) Adding the following to the "investment options" portion of Schedules
"A" and "C," respectively:
Information Resources Stock Fund (Sponsor Stock Fund)
(4) Amending Schedule "B" by adding the following fee:
Trustee Fee
To the extent that assets are invested in Sponsor Stock,
.10% of such assets in the Trust payable pro rata quarterly on the
basis of such assets as of the calendar quarter's last valuation date,
with an annual minimum of $10,000 and an annual maximum of $35,000.
(5) Amending Schedule "C" by restating in its entirety the last sentence
of said Schedule as follows:
The mutual fund advised by Fidelity Management & Research Company
referred to in Sections 4(c) and 4(g)(v)(B)(5) shall be Fidelity Money
Market Trust: Retirement Money Market Portfolio.
8
<PAGE>
(6) Amending Schedule "G" by adding the following at the end thereof:
SPONSOR STOCK FUND
------------------
EXCHANGES BETWEEN MUTUAL FUNDS AND THE SPONSOR STOCK FUND
---------------------------------------------------------
Participants may call on any business day to exchange between the
mutual funds and the Sponsor Stock Fund. If the request is received
before 4:00 p.m. (ET), it will receive that day's trade date. Calls
received after 4:00 p.m. (ET) will be processed on a next day basis.
EXCHANGE RESTRICTIONS
---------------------
Investments in the Sponsor Stock Fund will consist primarily of shares
of Sponsor Stock. However, in order to satisfy daily Participant
requests for exchanges, loans and withdrawals, the Sponsor Stock Fund
will also hold cash or other short-term liquid investments in an
amount that has been agreed to in writing by the Sponsor and the
Trustee. The Trustee will be responsible for ensuring that the
percentage of these investments falls within the agreed upon range
over time. However, if there is insufficient liquidity in the Sponsor
Stock Fund to allow for such activity, the Trustee will sell shares of
Sponsor Stock in the open market. Exchange and redemption
transactions will be processed as soon as proceeds from the sale of
Sponsor Stock are received.
IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this First
Amendment to be executed by their duly authorized officers effective as of the
day and year first above written.
INFORMATION RESOURCES, INC. FIDELITY MANAGEMENT TRUST
COMPANY
By By
---------------------------- -----------------------------
Date Vice President Date
9
<PAGE>
Exhibit 21
INFORMATION RESOURCES, INC.
SUBSIDIARIES
DOMESTIC SUBSIDIARIES
<TABLE>
<CAPTION>
Subsidiary State of Incorporation
---------- ----------------------
<S> <C>
564 Randolph Co. #2....................................................... Illinois
IRI Puerto Rico, Inc. (formerly Market Trends, Inc.)...................... Puerto Rico
NEO, Inc.................................................................. Connecticut
IRI Venezuela Holdings, Inc............................................... Delaware
IRI Guatemala Holdings, Inc............................................... Delaware
IRI Greek Holdings, Inc................................................... Delaware
IRI French Holdings, Inc.................................................. Delaware
IRI Italy Holdings, Inc................................................... Delaware
InfoScan Italy Holdings, Inc.............................................. Delaware
IRI Logistics, Inc. (formerly LogiCNet, Inc.)............................. Delaware
Shoppers Hotline, Inc..................................................... Delaware
North Clinton Corporation................................................. Illinois
</TABLE>
<PAGE>
Exhibit 21
INFORMATION RESOURCES, INC.
SUBSIDIARIES
FOREIGN SUBSIDIARIES
<TABLE>
<CAPTION>
Subsidiary Country of Incorporation
---------- ---------------------------
<S> <C>
Information Resources S.A..................................................... France
IRI Software, Ltd. (formerly known as Management Decision
Systems, Limited) d/b/a Information Resources............................... United Kingdom
Information Resources GmbH.................................................... Federal Republic of Germany
Information Resources Australia Pty. Ltd...................................... Australia
Information Resources Japan, Ltd.............................................. Japan
IRI Apollo K.K................................................................ Japan
Information Resources New Zealand Pty. Ltd.................................... New Zealand
Information Resources Singapore Pte. Ltd...................................... Singapore
IRI Software (India) Private Limited.......................................... India
Panel Pazar Arastirma ve Danismanlik A.S...................................... Republic of Turkey
IRI-SECODIP, S.C.S............................................................ France
IRI Hellas, S.A............................................................... Greece
Information Resources de Mexico, S.A. de C.V. (formerly known
as IRI Software de Mexico, S.A. de C.V.).................................... Mexico
IRI InfoScan S.r.l............................................................ Italy
Precis (1136) Limited......................................................... United Kingdom
IRI InfoScan Limited (formerly InfoScan NMRA Limited)......................... United Kingdom
</TABLE>
<PAGE>
Exhibit 23.1
INFORMATION RESOURCES, INC. & SUBSIDIARIES
CONSENT OF INDEPENDENT CERTIFIED
PUBLIC ACCOUNTANTS
We have issued our reports dated February 15, 1996 accompanying the
consolidated financial statements and schedules and, March 24, 1995 accompanying
the December 31, 1994 financial statements of IRI-SECODIP, S.N.C., included in
the Annual Report of Information Resources, Inc. & Subsidiaries on Form 10-K for
the year ended December 31, 1995. We hereby consent to the incorporation by
reference of said reports in the Registration Statements of Information
Resources, Inc. on Forms S-8 (File Nos. 33-48289, 33-48290, 33-48291, 33-52719,
33-52721 and 33-54649).
Grant Thornton LLP
Chicago, Illinois
March 22, 1996
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration Statement
(Form S-8 No. 33-48289) pertaining to the Information Resources, Inc.
Nonqualified Stock Option Plan , the Registration Statement (Form S-8
No. 33-48290) pertaining to the Information Resources, Inc. 1992 Incentive Stock
Option Plan, the Registration Statement (Form S-8 No. 33-48291) pertaining to
the Information Resources, Inc. 1992 Executive Stock Option Plan, the
Registration Statement (Form S-8 No. 33-52719) pertaining to the Information
Resources, Inc. Nonqualified Stock Option Plan , the Registration Statement
(Form S-8 No. 33-52721) pertaining to the Information Resources, Inc. Employee
Nonqualified Stock Option Plan and the Registration Statement (Form S-8
No. 33-54649) pertaining to the Information Resources, Inc. 1992 Executive Stock
Option Plan and in the related Prospectuses of our report dated February 12,
1997 with respect to the consolidated financial statements and schedule of
Information Resources, Inc. included in this Annual Report (Form 10-K) for the
year ended December 31, 1996.
ERNST & YOUNG LLP
Chicago, Illinois
March 25, 1997
<PAGE>
Exhibit 24
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Gian M. Fulgoni, Gary M. Hill and Edward S. Berger, and each of them,
his true and lawful attorneys-in-fact and agents, with full power of
substitution and re-substitution, for him and in his name, place and stead, in
any and all capacities, to sign the Annual Report on Form 10-K for the year
ended December 31, 1996 of Information Resources, Inc., together with any and
all amendments to such Annual Report, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent of either of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: March 25, 1997
/s/ James G. Andress
-------------------------------------
James G. Andress, Director
/s/ Gerald J. Eskin
--------------------------------------
Gerald J. Eskin, Director
/s/ Edwin E. Epstein
--------------------------------------
Edwin E. Epstein, Director
/s/ John D.C. Little
--------------------------------------
John D.C. Little, Director
/s/ Leonard M. Lodish
--------------------------------------
Leonard M. Lodish, Director
/s/ Edward E. Lucente
--------------------------------------
Edward E. Lucente, Director
/s/ EDITH W. MARTIN
--------------------------------------
Edith W. Martin, Director
/s/ Jeffrey P. Stamen
--------------------------------------
Jeffrey P. Stamen, Director
/s/ GLEN L. URBAN
--------------------------------------
Glen L. Urban, Director
/s/ THOMAS W. WILSON, Jr.
--------------------------------------
Thomas W. Wilson, Director
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