<PAGE> 1
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 10-Q
(Mark One)
[X] Quarterly Report Pursuant to Section 13 or 15(d) of The Securities
Exchange Act of 1934.
For the quarterly period ended June 30, 1999
[ ] Transition report pursuant to Section 13 or 15(d) of the Securities
Exchange Act of 1934.
Commission file number 0-11428
INFORMATION RESOURCES, INC.
---------------------------
(Exact name of registrant as specified in its charter)
Delaware 36-2947987
--------------------------
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
150 North Clinton Street, Chicago, Illinois 60661
-------------------------------------------------
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code (312) 726-1221
--------------
Securities registered pursuant to Section 12(g) of the Act:
Title of each class
-------------------
Common, $.01 Par Value Per Share
Preferred Stock Purchase Rights
Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes X No
--- ---
The number of shares of the registrant's common stock, $.01 par value per share
outstanding, as of July 31, 1999 was 28,111,847.
<PAGE> 2
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
INDEX
<TABLE>
<CAPTION>
PAGE
NUMBER
------
<S> <C>
PART I. FINANCIAL INFORMATION
Condensed Consolidated Balance Sheets 3
Condensed Consolidated Statements of Operations 4
Condensed Consolidated Statements of Cash Flows 5
Notes to Condensed Consolidated Financial Statements 6
Management's Discussion and Analysis of
Financial Condition and Results of Operations 10
PART II. OTHER INFORMATION
Item 6 - Exhibits and Reports Form 8-K 19
Signatures 20
</TABLE>
2
<PAGE> 3
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE DATA)
<TABLE>
<CAPTION>
ASSETS JUNE 30, 1999 DECEMBER 31, 1998
- ------ ------------- -----------------
(UNAUDITED)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents $ 11,562 $ 11,149
Accounts receivable, net 95,928 87,637
Prepaid expenses and other 11,776 9,223
--------- -----------
Total Current Assets 119,266 108,009
--------- -----------
Property and equipment, at cost 189,960 177,443
Accumulated depreciation (109,479) (97,940)
--------- -----------
Net property and equipment 80,481 79,503
Investments 10,210 9,792
Other assets 174,572 171,989
--------- -----------
$ 384,529 $ 369,293
========= ===========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of capitalized leases $ 445 $ 521
Accounts payable 38,400 43,640
Accrued compensation and benefits 21,407 20,925
Accrued property, payroll and other taxes 5,643 4,486
Accrued expenses 14,036 11,287
Deferred revenue 33,240 21,940
--------- -----------
Total Current Liabilities 113,171 102,799
--------- -----------
Long-term debt 12,534 4,575
Deferred income taxes, net 13,880 14,017
Other liabilities 10,519 9,450
STOCKHOLDERS' EQUITY
Preferred stock-authorized, 1,000,000 shares,
$.01 par value; none issued -- --
Common stock - authorized 60,000,000 shares,
$.01 par value, 28,111,847 and
27,867,884 shares issued and
outstanding, respectively 281 279
Capital in excess of par value 190,640 190,701
Retained earnings 49,995 49,778
Accumulated other comprehensive loss (6,491) (2,306)
--------- -----------
Total Stockholders' Equity 234,425 238,452
--------- -----------
$ 384,529 $ 369,293
========= ===========
</TABLE>
The accompanying notes are an integral part of these statements.
3
<PAGE> 4
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(UNAUDITED)
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ----------------------
JUNE 30 JUNE 30
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Information services revenues $ 137,847 $ 129,392 $ 269,592 $ 248,582
Costs and expenses:
Information services sold (124,318) (112,039) (245,049) (216,408)
Selling, general and administrative expenses (13,135) (11,436) (25,923) (22,971)
--------- --------- --------- ---------
(137,453) (123,475) (270,972) (239,379)
--------- --------- --------- ---------
Operating profit (loss) 394 5,917 (1,380) 9,203
Interest expense and other, net (424) (45) (590) (210)
Equity in earnings (losses) of affiliated companies (98) 220 96 294
Minority interests benefit (expense) 1,100 (251) 2,285 (136)
--------- --------- --------- ---------
Earnings before income taxes 972 5,841 411 9,151
Income tax expense (504) (2,400) (194) (3,800)
--------- --------- --------- ---------
Net earnings $ 468 $ 3,441 $ 217 $ 5,351
========= ========= ========= =========
Net earnings per common share - basic $ .02 $ .12 $ .01 $ .19
========= ========= ========= =========
Net earnings per common and
common equivalent share - diluted $ .02 $ .12 $ .01 $ .18
========= ========= ========= =========
Weighted average common shares - basic 28,080 28,860 27,973 28,766
========= ========= ========= =========
Weighted average common and
common equivalent shares - diluted 28,098 29,839 27,990 29,393
========= ========= ========= =========
</TABLE>
The accompanying notes are an integral part of these statements.
4
<PAGE> 5
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(UNAUDITED)
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
--------------------
JUNE 30
--------------------
1999 1998
-------- --------
<S> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings $ 217 $ 5,351
Adjustments to reconcile net earnings to net cash provided by
operating activities:
Amortization of deferred data procurement costs 59,193 55,500
Depreciation 13,014 11,244
Amortization of capitalized software costs and intangibles 3,225 2,916
Deferred income tax expense 194 3,800
Equity in earnings of affiliated companies and minority interests (2,381) (158)
Other (857) (429)
Change in assets and liabilities:
Increase in accounts receivable, net (8,405) (3,507)
Decrease (increase) in other current assets (2,552) 108
Decrease in accounts payable and accrued liabilities (851) (3,837)
Increase in deferred revenue 11,300 8,963
Other, net 1,847 (2,159)
-------- --------
Total adjustments 73,727 72,441
-------- --------
Net cash provided by operating activities 73,944 77,792
CASH FLOWS FROM INVESTING ACTIVITIES:
Deferred data procurement costs (64,476) (58,672)
Purchase of property, equipment and software (15,053) (17,587)
Capitalized software costs (3,454) (4,763)
Other, net 2,890 98
-------- --------
Net cash used in investing activities (80,093) (80,924)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net borrowings (repayments) 7,961 (752)
Purchases of Common Stock (95) (5,424)
Proceeds from exercise of stock options and other (92) 4,794
-------- --------
Net cash provided (used) by financing activities 7,774 (1,382)
EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,212) (157)
-------- --------
Net increase (decrease) in cash and cash equivalents 413 (4,671)
Cash and cash equivalents at beginning of period 11,149 20,925
-------- --------
Cash and cash equivalents at end of period $ 11,562 $ 16,254
======== ========
</TABLE>
The accompanying notes are an integral part of these statements.
5
<PAGE> 6
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(UNAUDITED)
NOTE 1 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES
Basis of presentation: The accompanying condensed consolidated
financial statements should be read in conjunction with the consolidated
financial statements included in Information Resources, Inc.'s Annual Report on
Form 10-K for the year ended December 31, 1998. The condensed consolidated
financial information furnished herein reflects all adjustments (consisting of
normal recurring accruals) which are, in the opinion of management, necessary
for a fair presentation of the condensed consolidated financial statements for
the periods shown.
Principles of consolidation: The condensed consolidated financial
statements include the accounts of Information Resources, Inc. and all wholly or
majority owned subsidiaries and affiliates (collectively "the Company").
Minority interests reflect the non-Company owned stockholder interests in
international operations. The equity method of accounting is used for
investments in which the Company has a 20% to 50% ownership interest and
exercises significant influence over operating and financial policies. All
significant intercompany accounts and transactions have been eliminated in
consolidation.
Earnings per Common and Common Equivalent Share: Net earnings per share
is based upon the weighted average number of shares of common stock outstanding
during each period. Net earnings per common and common equivalent share--diluted
is based upon the weighted average number of shares of common stock and common
stock equivalents, entirely comprised of stock options, outstanding during each
period.
NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION
Cash paid for interest and income taxes during the period was as
follows (in thousands):
<TABLE>
<CAPTION>
SIX MONTHS ENDED
----------------
JUNE 30
----------------
1999 1998
------ -------
<S> <C> <C>
Interest $ 622 $ 557
Income taxes 229 (78)
</TABLE>
6
<PAGE> 7
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
NOTE 3 - ACCOUNTS RECEIVABLE
Accounts receivable were as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Billed $ 76,776 $ 71,141
Unbilled 23,376 21,258
--------- ---------
100,152 92,399
Reserve for accounts receivable (4,224) (4,762)
--------- ---------
$ 95,928 $ 87,637
========= =========
</TABLE>
NOTE 4 - OTHER ASSETS
Other assets were as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Deferred data procurement costs -
net of accumulated amortization of
of $134,590 in 1999 and $123,440 in 1998 $139,460 $138,356
Intangible assets, including goodwill -
net of accumulated amortization of
$15,011 in 1999 and $13,616 in 1998 17,216 18,610
Capitalized software costs - net of
accumulated amortization of $4,528
in 1999 and $3,701 in 1998 11,549 9,876
Other 6,347 5,147
-------- --------
$174,572 $171,989
======== ========
</TABLE>
7
<PAGE> 8
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
NOTE 5 - LONG TERM DEBT
Long-term debt was as follows (in thousands):
<TABLE>
<CAPTION>
JUNE 30, 1999 DECEMBER 31, 1998
------------- -----------------
<S> <C> <C>
Bank borrowings $ 11,750 $ 3,000
Capitalized leases and other 1,229 2,096
-------- --------
12,979 5,096
Less current maturities (445) (521)
-------- --------
$ 12,534 $ 4,575
======== ========
</TABLE>
On February 10, 1999 the Company amended its existing $75 million bank
revolving credit facility to (1) reduce the maximum commitments to $60 million,
(2) extend the termination date to 2002, and (3) amend certain financial
covenants and other terms and conditions of the agreement. The amended facility
has floating rate options at or below prime and commitment fees of up to .25%
payable on the unused portion.
The financial covenants in the bank credit agreement, as well as in the
lease agreement for the Company's Chicago headquarters, require the Company to
maintain a minimum tangible net worth and to meet certain cash flow coverage and
leverage ratios. The agreements also limit the Company's ability to declare
dividends or make distributions to holders of capital stock, or redeem or
otherwise acquire shares of the Company. Approximately $22.3 million is
currently available for such distributions under the most restrictive of these
covenants. The bank credit agreement also contains covenants which restrict the
Company's ability to incur additional indebtedness.
NOTE 6 - COMPREHENSIVE INCOME (LOSS)
The comprehensive income (loss) summary shown below sets forth certain
items that affect stockholders' equity but are excluded from the presentation of
net earnings. The components of comprehensive income (loss) for the three and
six months ended June 30, 1999 and 1998 were as follows (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
------------------ ----------------
JUNE 30 JUNE 30
------------------ ----------------
1999 1998 1999 1998
------------------ ----------------
<S> <C> <C> <C> <C>
Net earnings $ 468 $ 3,441 $ 217 $ 5,351
Foreign currency translation
adjustment (909) (708) (4,185) (1,573)
------- ------- ------- -------
Comprehensive income (loss) ($ 441) $ 2,733 ($3,968) $ 3,778
======= ======= ======= =======
</TABLE>
8
<PAGE> 9
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D.
(UNAUDITED)
NOTE 7 - SEGMENT INFORMATION
The Company's business information services are conducted almost
exclusively in the United States and Europe. The Company's operations in other
markets account for approximately 1% of consolidated revenues. The executive
management of the Company considers revenues from third parties and the
aggregation of operating profit (loss), equity earnings (losses) and minority
interests, ("Operating Results"), on a geographic basis to be the most
meaningful measure of the operating performance of each respective geographic
segment and of the Company as a whole.
The following table and discussion present certain information
regarding the operations of the Company by geographic segment as of June 30,
1999 and 1998 (in thousands):
<TABLE>
<CAPTION>
THREE MONTHS ENDED SIX MONTHS ENDED
---------------------- ----------------------
JUNE 30 JUNE 30
---------------------- ----------------------
1999 1998 1999 1998
--------- --------- --------- ---------
<S> <C> <C> <C> <C>
Revenues:
U.S. Services $ 105,629 $ 99,371 $ 207,953 $ 193,943
International Services 32,218 30,021 61,639 54,639
--------- --------- --------- ---------
Total $ 137,847 $ 129,392 $ 269,592 $ 248,582
========= ========= ========= =========
Operating Results:
U.S. Services $ 7,021 $ 11,536 $ 12,243 $ 21,087
International Services:
Operating loss (4,169) (3,973) (9,211) (8,961)
Equity in earnings (losses) of
affiliated companies (98) 220 96 294
Minority interest benefit (expense) 1,100 (251) 2,285 (136)
--------- --------- --------- ---------
Subtotal--International Services (3,167) (4,004) (6,830) (8,803)
Corporate and other expenses (2,458) (1,646) (4,412) (2,923)
--------- --------- --------- ---------
Operating Results 1,396 5,886 1,001 9,361
Interest expense and other, net (424) (45) (590) (210)
--------- --------- --------- ---------
Earnings before income taxes $ 972 $ 5,841 $ 411 $ 9,151
========= ========= ========= =========
</TABLE>
9
<PAGE> 10
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF OPERATIONS
Operations: The Company's consolidated net earnings were $0.5 million
or $.02 per diluted share for the second quarter of 1999 compared to
consolidated net earnings of $3.4 million or $.12 per diluted share for the
corresponding 1998 quarter. The Company's consolidated net earnings were $0.2
million or $.01 per diluted share for the six months ended June 30, 1999
compared to consolidated net earnings of $5.4 million or $.18 per diluted share
for the corresponding 1998 period. Consolidated revenues for the quarter ended
June 30, 1999 were $137.8 million, an increase of 7% over the corresponding
quarter in 1998. This increase was the result of revenue growth of $6.3 million
in the U.S. services business and a $2.2 million increase in international
revenues. Consolidated revenues were $269.6 million for the six months ended
June 30, 1999, an increase of 8% over the corresponding period of 1998. This
increase was the result of revenue growth of $14.0 million in the U.S. services
business and a $7.0 million increase in international revenues.
Consolidated costs of information services sold increased 11% to $124.3
million for the three months ended June 30, 1999 compared to costs of $112.0
million for the second quarter of 1998. The major components of the 1999
increase included a $5.1 million increase in compensation expense resulting from
higher employee costs in the U.S. and growing European operations, and costs
related to increased data collection efforts and household panel expansion.
Consolidated costs of information services sold increased 13% to $245.0 million
for the six months ended June 30, 1999. Major components of the 1999 increase
included a $12.0 million increase in compensation expense resulting from higher
employee costs in the U.S. and growing European operations, and costs related to
increased data collection efforts resulting from the Company's expanded
convenience store and household panel operations. The Company is currently
developing a program which is intended to improve productivity and operating
efficiencies, and result in a reduction of its on-going cost structure.
Consolidated selling, general and administrative expenses increased 15%
to $13.1 million for the three months ended June 30, 1999 and 13% to $25.9
million for the six months ended June 30, 1999. These increases were primarily
associated with employee-related costs related to the reorganization and
transformation of the Company's U.S. sales, marketing and other operating
functions, and higher legal costs in the U.S. The increased legal costs related
to the Company's anti-trust lawsuit against the Dun and Bradstreet Corporation,
ACNielsen Company and IMS International, Inc. The case is currently in the
discovery and deposition phase, and the Company anticipates that it will
continue to incur a high level of legal expenses as the case continues to
progress toward trial.
For all periods presented, the Company's effective income tax rate is
greater than the U.S. Federal statutory rate due to certain unbenefitted foreign
losses, goodwill amortization and other nondeductible expenses.
10
<PAGE> 11
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
In the second quarter of 1999, revenues from the Company's U.S.
services business were $105.6 million, an increase of 6% over the corresponding
1998 quarter. For the six months ended June 30, 1999, revenues from the
Company's U.S. services business were $208.0 million, an increase of 7% over the
first half of 1998. These revenue increases were due primarily to the increased
sales of the Company's product tracking services including its retailer specific
and all-store (i.e. Census) databases. Operating Results for the Company's U.S.
services business were $7.0 million in the second quarter of 1999 versus $11.5
million in the second quarter of 1998. Operating Results for the Company's U.S.
services business were $12.2 million for the six months ended June 30, 1999
compared to $21.1 million for the corresponding 1998 period. The U.S. operating
margins were negatively affected by higher employee costs, Year 2000 costs and
increased data collection expenses related to the Company's expanded convenience
store and household panel operations.
Second quarter 1999 revenues from the Company's International services
business, primarily from Europe, were $32.2 million, an increase of 7% over the
corresponding 1998 quarter. International services revenues were $61.6 million
for the six months ended June 30, 1999, an increase of 13% over the
corresponding 1998 period. These increases reflect continued strong growth in
each of the major European businesses, offset somewhat by the effect of weaker
Euro-currencies against the dollar. Excluding foreign exchange effects, European
revenues for 1999 increased 12% over the second quarter of 1998 and 16% over the
first half of 1998. Operating Results for the International service business
were a ($3.2) million loss for the second quarter of 1999, a 21% improvement
compared to the ($4.0) million loss in the corresponding 1998 quarter. Operating
Results for the International services business were a ($6.8) million loss for
the six months ended June 30, 1999, a 22% improvement compared to the ($8.8)
million loss for the corresponding 1998 period. These improvements were largely
due to continued revenue growth, partially offset by incremental costs
associated with the launch of the Company's InfoScan service in Spain.
Corporate and other expenses increased for the three and six months
ended June 30, 1999 due to higher legal costs, primarily attributable to the
Company's anti-trust litigation.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current cash resources include its $11.6 million
consolidated cash balance and $48.2 million available under the Company's bank
revolving credit facility. The Company anticipates that it will have sufficient
funds from these sources and internally generated funds from its U.S. operations
to satisfy its cash needs for the foreseeable future.
11
<PAGE> 12
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
Financings: On February 10, 1999 the Company amended its existing $75
million bank revolving credit facility to (1) reduce the maximum commitments to
$60 million, (2) extend the termination date to 2002, and (3) amend certain
financial covenants and other terms and conditions of the agreement. The amended
facility has floating rate options at or below prime and commitment fees of up
to .25% payable on the unused portion.
The financial covenants in the bank credit agreement, as well as in the
lease agreement for the Company's Chicago headquarters, require the Company to
maintain a minimum tangible net worth and to meet certain cash flow coverage and
leverage ratios. The agreements also limit the Company's ability to declare
dividends or make distributions to holders of capital stock, or redeem or
otherwise acquire shares of the Company. Approximately $22.3 million is
currently available for such distributions under the most restrictive of these
covenants. The bank credit agreement also contains covenants which restrict the
Company's ability to incur additional indebtedness.
Cash Flow: Consolidated net cash provided by operating activities was
$73.9 million for the six months ended June 30, 1999 compared to $77.8 million
for the same period in 1998. This reduction was primarily attributable to lower
earnings. Consolidated cash flow used in net investing activities was ($80.1)
million in 1999 compared to ($80.9) million for the same period in 1998.
Investing activities in 1999 reflect higher expenditures for data procurement
primarily related to the release of retailer specific data in certain European
countries. Net cash used before financing activities was ($6.1) million for the
six months ended June 30, 1999 compared to ($3.1) for the same period in 1998.
Consolidated cash flow provided (used) by net financing activities reflects
borrowings of $8.8 million under its revolving line of credit in 1999. Financing
activities include $0.1 million and $5.4 million of purchases of the Company's
common stock for the six months ended June 30, 1999 and 1998, respectively.
Other Deferred Costs and Capital Expenditures: Consolidated deferred
data procurement expenditures were $64.5 million for the six months ended June
30, 1999 and $58.7 million for the same period in 1998. These expenditures are
amortized over a period of 28 months and include payments and services to
retailers for point-of-sale data and other costs related to collecting,
reviewing and verifying panel, causal and other data which are an essential part
of the Company's database. Such expenditures were $40.2 million and $37.8
million for the periods ended June 30, 1999 and 1998, respectively, for the
Company's U.S. services business and $24.3 million and $20.9 million,
respectively, for the Company's International services business.
Consolidated capital expenditures were $15.1 million and $17.6 million
for the six months ended June 30, 1999 and 1998, respectively. Capital
expenditures for the Company's U.S. services business were $13.0 million and
$15.0 million, while depreciation expense was $10.7 million and $8.9 million for
the six months ended June 30, 1999 and 1998, respectively. The Company's
International services business capital expenditures were $2.1 million and $2.6
million while depreciation expense was $2.3 million and $2.3 million, for the
six months ended June 30, 1999 and 1998, respectively.
12
<PAGE> 13
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
Consolidated capitalized software development costs, primarily in the
U.S., were $3.5 million and $4.8 million for the six months ended June 30, 1999
and 1998, respectively.
Common Stock Purchase Plan: In November 1997 the Company's Board of
Directors approved a plan to purchase up to two million shares of the Company's
common stock from time to time in the open market. Purchases under the plan are
subject to a number of considerations including the market price of the
Company's common stock and general market conditions. As of June 30, 1999, the
Company had purchased and retired 1,947,900 shares under the plan at an average
cost of $12.29 per share. During the first half of 1999, the Company purchased
86,100 shares at an average cost of $8.54 per share.
NOL Carryforwards: As of December 31, 1998, the Company had cumulative
U.S. Federal net operating loss ("NOL") carryforwards of approximately $67.9
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. At December 31, 1998, the Company also had general
business tax credit carryforwards of approximately $9.6 million which expire
primarily between 1999 and 2012, 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 in such agreements.
YEAR 2000 ISSUES
Background: Many systems (including computers, software and other
equipment) include programming code in which calendar year data is abbreviated
to only two digits. As a result of this design decision, some of these systems
could fail to operate or to produce correct results if "00" is interpreted to
mean "1900". For the Company, such failures would cause disruptions of
operations including, among other things, a temporary inability to obtain data
from retailers, process transactions, communicate information to tracking
service clients, send invoices or engage in normal business activities.
13
<PAGE> 14
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
In 1996 and 1997, various internal review teams within the Company
began addressing the Year 2000 issue in their respective areas. In early 1998, a
steering committee was established to represent all operating, administrative
and finance areas of the Company to direct the process of identifying, assessing
and resolving significant Year 2000 issues in a timely manner. The process
includes development of remediation plans, where necessary, as they relate to
internally used software, commercial software applications licensed to clients,
computer hardware and the use of computer applications in the Company's data
warehouse operations. In addition, the Company is engaged in assessing the Year
2000 issue with third parties including significant suppliers, such as data
vendors and tracking service clients. Executive management is represented on the
steering committee and monitors the status of the Company's Year 2000 plans. In
addition, management reports the status of the Year 2000 project to the Board of
Directors.
The operations of office and facilities equipment, such as fax
machines, photocopiers, telephone switches, security systems, elevators and
other common devices may also be affected by the Year 2000. The Company's
current assessment of the potential effect of the Year 2000 issues on its office
and facilities equipment is considered to be minimal, in terms of risk and
incremental cost of remediation.
Risks: The Company has identified potential Year 2000 risks in the
following four categories:
(1) reliance upon third party retailers in the U.S. and Europe for data for use
in its InfoScan tracking services;
(2) processing of data by the various computer applications in its Wood Dale,
Illinois facilities;
(3) commercial software products and applications produced and/or marketed by
the Company; and
(4) Company data interfaces with client developed applications.
Third Party Retailers: The Company has identified and contacted, using
surveys, all of its retailers in the U.S. and Europe to determine the extent to
which the Company's interface systems are vulnerable to those third parties'
failure to remedy their own Year 2000 issues. To the extent that retailer
responses to Year 2000 readiness surveys were unsatisfactory, the Company is
following up to assess whether all critical retailers are Year 2000 compliant.
It is expected that full certification of Year 2000 compliance for all key
suppliers of tracking data to the Company will be completed during the fourth
quarter of 1999. The Company is also investigating alternative sources or
methodologies to provide the Company with reasonable assurance of source
retailer data should a key U.S. or European retailer encounter unforeseen
difficulties during early 2000.
14
<PAGE> 15
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
Wood Dale Computer Applications: The Company has reviewed its
information and operational systems used to process data in its InfoScan
tracking services in order to identify those systems that are not Year 2000
compliant. The Company has determined that its InfoScan tracking service is
largely Year 2000 compliant due to the Company's main feature of programming
design which accounts for data by "weeks" as opposed to calendar dates. However,
the Company has identified certain systems which might be negatively impacted by
Year 2000. Appropriate remediation efforts are underway to address these issues.
In addition, the Company has built and is currently utilizing a Year 2000 test
environment to assess compliance on programs affecting major services to
clients. The Company estimates that remediation and testing for major services
to clients will be completed by the third quarter of 1999.
Commercial Software Products and Applications: During 1997, the Company
began an internal review of each of its software products which it intends to
maintain through the Year 2000. Based upon this assessment, the Company
concluded that its standard policy of regular software maintenance, upgrades and
lifecycle evaluation will provide adequate assurance that the Company's current
portfolio of software products will be Year 2000 compliant during the second
half of 1999. In 1998, the Company began the process of identifying and
contacting clients and former clients in both the U.S. and Europe for whom the
Company previously developed custom applications. These investigations have
determined the extent to which custom applications developed by the Company
require Year 2000 remediation and whether the Company will provide software
consulting services in order to assist these clients and former clients in such
remediation. The Company believes it has completed the identification of all
material custom application issues and that its outstanding obligations for
remediation are not significant.
Data Interfaces with Client Applications: As part of its ongoing
services, the Company has assigned each of its client service teams to identify
and coordinate the resolution of potential Year 2000 issues resulting from
Company interfaces with client applications, including any custom applications
developed by clients. However, management believes that it may not be possible
for it to determine with complete certainty that Year 2000 issues affecting
client applications can be identified or corrected due to the complexity of
these applications and the fact that these systems interact and operate with
computer systems which are not under the Company's control. Consequently, the
Company is unable to estimate a timetable for remediation and any related costs,
as the decision to allow the Company to conduct such investigations on a timely
basis resides with each client.
15
<PAGE> 16
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
Costs: The Company uses both internal and external resources in the
assessment and remediation of Year 2000 issues and believes these resources will
provide adequate support for such resolution. While the costs of external
resources are quantifiable, the costs of internal resources who deal with data
vendors and tracking service and software clients on a daily basis on a variety
of subjects, including Year 2000 issues, are difficult for the Company to
estimate. Accordingly, costs included in the Company's disclosures are subject
to uncertainty with respect to internal personnel. The Company currently
estimates that the combined 1998 and 1999 internal and external Year 2000
project costs will range from $10 million to $12 million and will be funded
through operating cash flow. To date, the Company estimates that approximately
$4 million has been spent and expensed. Of the remaining $6 million to $8
million the Company expects to spend, up to approximately $4 million may be
capitalized for new systems and equipment.
Most Likely Consequences of Year 2000 Problems: The Company expects to
identify and resolve all Year 2000 issues that could materially adversely affect
its business operations. However, management believes that it may not be
possible for it to determine with complete certainty that all Year 2000 issues
affecting the Company will be identified or corrected on a timely basis. The
number of devices that could be affected and the interactions among these
devices are innumerable. In addition, accurate predictions of the extent of Year
2000 problem-related failures or the severity, duration, or financial
consequences of these failures, cannot be made. As a result, management expects
that the Company could potentially suffer the following consequences:
1. A significant number of operational inconveniences, inefficiencies,
and temporary disruptions in service for the Company, its retailers and its
clients may divert management's time and attention and financial and human
resources from their ordinary business activities; and
2. A lesser number of serious system failures may require significant
efforts by the Company, its retailers or its clients to prevent or alleviate
material business disruptions.
Contingency Plans: The Company is currently developing contingency
plans to be implemented as part of its efforts to identify and correct Year 2000
issues affecting its internal systems. This is an ongoing process of which the
bulk of the contingency plans will be completed in the third quarter of 1999.
Depending on the systems affected, these plans could include accelerated
replacement of affected equipment or software, short to medium-term use of
backup equipment and software, or use of contract personnel to correct on an
accelerated schedule any Year 2000 issues that arise or to provide manual
workarounds for information systems, and similar approaches. If the Company
actually is required to implement any of these contingency plans, it could have
a material effect on the Company's financial condition and results of
operations. However, based on the activities described above, the Company does
not believe that the Year 2000 issues will have a material adverse effect on the
Company's business or results of operations.
16
<PAGE> 17
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
Disclaimer: The discussion of the Company's efforts, and management's
expectations, relating to Year 2000 compliance are forward-looking statements.
The Company's ability to achieve Year 2000 compliance and the level of
incremental costs associated therewith, could be adversely impacted by, among
other things, the availability and cost of programming and testing resources,
retailers' and vendors' ability to modify proprietary software, and
unanticipated problems subsequently identified in the ongoing compliance review.
EUROPEAN CURRENCY CONVERSION ISSUES
In accordance with the 1992 treaty of the European Union, on January 1,
1999, a new single European currency, the "euro", became legal tender, which
will replace the sovereign currencies ("legacy currencies") of the eleven
initial members of the European Union ("participating countries"). On this date,
fixed conversion rates between the euro and the legacy currencies in those
particular countries were established. During the transition period, which ends
on January 1, 2002, the entities within participating countries have the option
of accounting for their transactions in either euros or their legacy currencies.
Euros are currently available for non-cash transactions only; euro bills and
coins will be available for cash transactions at the conclusion of the
transition period. No later than July 1, 2002, the participating countries will
withdraw their legacy currencies from circulation and they will cease to be
legal tender. Participating countries have ceded certain aspects of their
monetary policy authority, including money supply and official interest rates
for the euro, to the European Central Bank.
As the Company has operations in several of the participating
countries, it will be affected by issues surrounding the introduction of and
transition to the euro. The Company's European Executive Committee ("the
Committee") is charged with formulating and executing all aspects of the
Company's response concerning the conversion to the euro.
The Committee is currently investigating the impact of the euro on all
computer systems that affect the Company. Specific systems concerns include the
ability to provide its clients InfoScan services in euros and to pay bills, to
receive payments, to invoice and to provide pricing in euros. The Company
expects all systems issues to be resolved by the conclusion of the transition
period and accordingly, anticipates no significant interruptions in its business
operations.
During the transition period, the Company's clients have the right to
settle transactions in either the euro or legacy currencies. The Company may
also be affected by other economic, legal, political, and social factors
relating to the transition to the euro. The Company may also be impacted by: the
ability of the banking systems to function smoothly during and after the
transition period; the monetary policy as set by the European Central Bank; the
interpretation of the Company's contracts and tax laws, regulations and treaties
within the European Union, United States and the World Trade Organization; and
by additional macroeconomic and other factors beyond the Company's control.
17
<PAGE> 18
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D.
FORWARD LOOKING INFORMATION
Certain matters discussed above are forward-looking statements that are
subject to risks and uncertainties that could cause actual results to differ
materially from those anticipated, including customer renewals of service
contracts, the timing of significant new customer engagements, the success of
transforming its domestic operations, competitive conditions, the success of
implementing cost containment initiatives, changes in client spending for the
non-contractual services the Company offers, the release of chain-specific data
by European retailers, foreign currency exchange rates, Year 2000 and European
currency conversion issues and other factors beyond the Company's control. These
risks and uncertainties are described in reports and other documents filed by
the Company with the Securities and Exchange Commission.
18
<PAGE> 19
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
PART II
OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K
a. Exhibits
Exhibit No. Description of Exhibit Page
----------- ---------------------- ----
10.(kk) Employment agreement dated April 30, 1999 between the
Company And Joseph P. Durrett. EF
10.(ll) Restricted stock agreement dated April 30, 1999
between the Company and Joseph P. Durrett. EF
10.(mm) Employment agreement dated May 28, 1999 between the
Company And Rick Kurz. EF
27 Financial Data Schedule (filed herewith). EF
b. Reports on Form 8-K.
None.
19
<PAGE> 20
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
INFORMATION RESOURCES, INC.
---------------------------------
(Registrant)
/s/ Gary M. Hill
---------------------------------
Gary M. Hill
Executive Vice President
and Chief Financial Officer
(Authorized officer of Registrant and
Principal Financial Officer)
/s/ Sheri L. Huston
---------------------------------
Sheri L. Huston
Senior Vice President
and Controller
(Principal Accounting Officer)
August 16, 1999
20
<PAGE> 1
Exhibit 10.kk
EMPLOYMENT AGREEMENT
--------------------
THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 30th day of
April, 1999 by and between Information Resources, Inc., a Delaware corporation
(the "Company"), and Joseph P. Durrett ("Executive").
W I T N E S S E T H:
WHEREAS, the Company desires to employ Executive on the terms and subject
to the conditions set forth in
this Agreement; and
WHEREAS, Executive desires to accept such employment with the Company 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 the Company and Executive set forth in this Agreement and for other
good and valuable consideration, the receipt and sufficiency of which are hereby
acknowledged by the Company and Executive, the parties agree as follows:
ARTICLE I
---------
Employment
----------
1.0 Employment. The Company agrees to employ Executive and Executive agrees
to be employed by the Company on a full-time basis in an executive capacity,
according to the terms and subject to the conditions hereinafter set forth, for
the period commencing on the date hereof (the "Effective Date"), and ending with
the effective date of termination of employment as provided in Article V (the
"Employment Period").
1.1 Employment Duties. As of the Effective Date and continuing during the
Employment Period, Executive shall be employed in the capacity of President and
Chief Executive Officer, and he shall possess such powers and duties as are
normally incident to such position, as provided in the Company's By-laws and in
accordance with Delaware General Corporation Law. During the Employment Period,
Executive shall devote his best efforts and all of his normal business time and
attention (excluding permitted vacation, holidays and personal and sick leave,
and reasonable time devoted to civic and charitable activities) to the business
of the Company and its affiliated companies. Executive may, with the express
written approval of the Company's Board of Directors or an appropriate committee
thereof (the "Board"), serve and receive compensation as a director of any other
company affiliated with the Company or any non-affiliated company that, in the
opinion of the Board, does not compete with the Company.
1.2 Board Position. Contemporaneously with the execution and delivery of
this Agreement, the Board has appointed Executive to be a director of the
Company and has elected Executive Chairman of the Board. Executive agrees to
serve in such capacity until the end of the Employment Period or his successor
is elected and shall have qualified.
<PAGE> 2
1.3 Place of Employment. Initially, Executive shall be based at the
Company's offices in Norwalk, Connecticut. Beginning on the Effective Date and
continuing until August 31, 2000, Executive shall be reimbursed for expenses for
business travel between Connecticut and Chicago pursuant to Section 2.4 hereof
and the Company shall provide at the Company's expense a two-bedroom apartment
at Presidential Towers (or the reasonable equivalent thereof) in Chicago, to
accommodate Executive's business travel to Chicago.
ARTICLE II
----------
Compensation and Certain Benefits
---------------------------------
The Company agrees to compensate Executive for the services rendered by
him during the Employment Period as follows:
2.0 Base Salary. During the Employment Period, the Company shall pay
Executive a base salary (the "Base Salary") at an annual rate of Five Hundred
Twenty-Five Thousand Dollars ($525,000.00), subject to annual review and
increase on or about May 1 by the Board, it being understood that the Base
Salary as increased from time to time shall not decrease during the Employment
Period unless and only to the extent that the Board authorizes such a decrease
as part of a salary reduction program applied in a similar fashion to senior
officers other than Executive. The Base Salary shall be payable in accordance
with the Company's payroll practices, less appropriate deductions for applicable
taxes. Except to the extent provided in Article III hereof, the Company shall
not be required to pay Executive his Base Salary for the portion of any
Disability Period (as defined in Article III) with respect to which Executive
receives disability benefit payments according to the provisions of the
Company's disability plans applicable to Executive.
2.1 Incentive Compensation. In addition to his Base Salary, Executive shall
be eligible to receive incentive compensation as follows:
(a) Management Incentive Plan. Executive shall be eligible to receive
incentive compensation provided under the Company's Management Incentive Plan
currently in effect (the "MIP"). Executive's target incentive bonus shall be an
amount that is equal to 60% of the Base Salary paid to Executive for a given
year ("Target Bonus Amount"). Within 90 days after the Effective Date, Executive
and the Board shall mutually determine the initial incentive objectives to apply
to Executive's participation in the MIP for the remainder of the 1999 fiscal
year. Incentive objectives shall be subject to adjustment by the Board
periodically during the Employment Period. Any incentive compensation awarded
under the MIP shall be payable according to the provisions of the MIP. Executive
shall be eligible to participate in any other applicable future incentive
compensation plan of the Company which may succeed or replace the MIP or, in the
absence of any such plan, such bonus or incentive compensation as the Board
deems appropriate in light of the amount of bonus or other incentive
compensation awarded by the Company to other similarly situated executives
employed by the Company. The Company shall not be required to pay Executive
bonus or incentive compensation under this provision for the portion of any
Disability Period with respect to which Executive receives disability benefit
2
<PAGE> 3
payments according to the provisions of the Company's disability plans
applicable to Executive.
(b) Supplemental Bonus. Executive shall be eligible to receive three equal
annual supplemental bonuses of Forty-Four Thousand Dollars ($44,000) each,
payable in accordance with the following Supplemental Bonus Payout Schedule,
provided Executive is employed by the Company as President and Chief Executive
Officer at the time of each such bonus payout:
Supplemental Bonus Payout Schedule
----------------------------------
First Bonus Payout: June 1, 2000
Second Bonus Payout: June 1, 2001
Third Bonus Payout: June 1, 2002
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
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 (which shall be no less than
four weeks per year). Executive shall participate during the Employment Period
in all employee benefit plans (as those plans may be in effect from time to
time) generally applicable to senior officers of the Company.
2.3 Death Benefits. In the event of Executive's death during the Employment
Period, the Company shall continue to pay the Executive's monthly Base Salary to
his spouse, or his estate if there is no living spouse, for a period of 12
months commencing on the first day of the month following the month of
Executive's death (the "Death Benefit"). In lieu of the Death Benefit, the
Company may elect to cause payments in an amount equal to the Death Benefit to
be made pursuant to a term life insurance policy on the life of Executive with a
payment schedule reasonably equivalent to the Death Benefit schedule (the
"Alternative Death Benefit"). If the Company elects to use the Alternative Death
Benefit, Executive (or, in the alternative, a trust entity that he may
designate) shall be the owner of and shall pay the annual premiums on the life
insurance policy and the Company shall increase Executive's Base Salary by an
amount that will, after tax deductions, equal the amount of such premium.
Executive shall cooperate with the Company in applying for and obtaining any
such life insurance policy. The Company reserves the right to terminate the
Alternative Death Benefit at any time and will so notify Executive of any such
termination, whereupon the Company will be obligated to pay the Death Benefit.
2.4 Expenses. The Company shall reimburse Executive for the reasonable and
necessary business expenses incurred by him in connection with the performance
of his duties and obligations as set forth herein during the Employment Period.
Such expenses shall include, but are not limited to, all travel and living
expenses while travelling between Connecticut and Chicago on business or at the
request and in the service of the Company, provided that such expenses are
properly incurred and accounted for in accordance with the applicable policies
and procedures established by the Company. Reimbursement shall be made upon
presentation by Executive to the Company of reasonably detailed statements of
such expenses. In addition, the Company shall reimburse Executive for his
expenses incurred for professional financial planning
3
<PAGE> 4
services, in an amount not to exceed $7,500 per year, as well as relocation
expenses incurred upon his relocation from Connecticut to Chicago pursuant to
the Company's executive relocation policy (including, if necessary, the purchase
of his residence in Connecticut in accordance with such policy).
2.5 Supplemental Executive Retirement Plan. Executive shall be entitled to
receive from the Company, pursuant to the terms and conditions of this Section
2.5, a supplemental executive retirement plan benefit ("SERP") in the amount of
One Million Six Hundred Fourteen Thousand Dollars ($1,614,000) (the "SERP
Amount"), which the parties agree is equivalent to the amount of One Hundred
Fifty Thousand Dollars ($150,000) payable on an annual basis over 18 years (life
expectancy) at a discount rate of seven percent.
(a) Commencement and Payment. Subject to Section 2.5(b), the Company will
pay the SERP Amount to Executive in one lump sum payment only if Executive
completes seven full years of service with the Company. Subject to Section
2.5(b), the SERP Amount will be paid on the date that is the later to occur of
(i) the date Executive attains age 63 or (ii) the date of termination of
Executive's employment with the Company. In no event shall the SERP be paid
either in whole or in part while Executive continues in the employment of the
Company.
(b) Accrual and Vesting. Except as otherwise provided in this Section
2.5(b), the SERP shall fully vest and become nonforfeitable when Executive
completes seven full years of service with the Company. If, at any time after
Executive has completed seven full years of service with the Company,
Executive's employment is terminated by the Company without Cause, or if
Executive voluntarily terminates his employment with the Company with or without
Good Reason, or if Executive dies or sustains a Disability resulting in the
termination of his employment, then Executive (or his designated beneficiary, or
if no beneficiary has been designated, his spouse on the date of his death)
shall be entitled to receive the SERP Amount in a lump sum upon the date that is
the later to occur of (1) the date Executive attains age 63 (or the date
Executive would have attained age 63 if he dies before he reaches age 63) or (2)
the date of termination of Executive's employment with the Company. Executive
shall forfeit the SERP in its entirety and shall not be entitled to receive
payment of the SERP Amount if (i) Executive has not completed seven full years
of service with the Company (except for a termination of employment following a
Change of Control), or (ii) at any time, whether before or after Executive has
completed seven full years of service with the Company, the Company terminates
Executive's employment for Cause or the Executive breaches, during the
Employment Period, any of his obligations under Sections 6.0, 7.0 or 7.1 of this
Agreement. Upon Executive's termination of employment following a Change of
Control (other than a termination for Cause), unless Executive has breached,
prior to such termination, any of his obligations under Sections 6.0, 7.0 or 7.1
hereof, the present value of the SERP (based on actuarial assumptions determined
by an independent benefits consultant which is reasonably acceptable to
Executive and the Company) shall be paid to Executive by the Company, whether or
not he has then attained age 63 or completed seven years of service with the
Company.
4
<PAGE> 5
(c) Funding. All payments for the SERP shall be from the general funds of
the Company. The Company may, at its expense, establish and contribute assets to
a trust pursuant to which the SERP shall be paid, subject to the claims of the
Company's unsecured creditors.
ARTICLE III
-----------
Disability
----------
3.0 Disability. In the event of any disability or illness of Executive (a
"Disability") of a nature, degree, or effect such that, within the Employment
Period, Executive becomes unable to perform his duties under this Agreement on a
full-time basis and such that the Company believes (as reasonably determined by
the Board or an appropriate committee thereof) on the basis of the facts
available that Executive 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 Executive shall continue to be
paid his full Base Salary and shall continue participating in any Company
incentive compensation plans in which he is then participating, subject to
Sections 2.0 and 2.1 hereof.
3.1 Acting or Successor Officer. During any Disability Period, the Board
(or an appropriate committee thereof) may appoint an acting or successor member
or officer to each position or office then held by Executive.
3.2 Disability Benefit Plans. During any Disability Period, Executive shall
be entitled to receive disability benefit payments according to the provisions
of the Company's disability plans for salaried employees, if any, and Executive
shall continue to be an employee of the Company for purposes of continued
vesting and exercise of stock options (but not for purposes of participation in
incentive plans) and shall continue to participate in all employee benefit plans
for which he is eligible pursuant to this Agreement or otherwise. To the extent
that Executive remains employed by the Company during a Disability Period, in
addition to the disability benefit payments under such plans, during the first
180 days of any such Disability Period, Executive shall be entitled to receive,
at normal payroll dates, supplemental disability payments directly from the
Company 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 and Executive
remains employed the Company, Executive shall then receive, for the remaining
duration of the Disability Period for as long as he remains employed, in
addition to the disability benefit payments under the provisions of the
Company's disability plan(s), supplemental disability payments directly from the
Company at a rate equal to one-third (33%) 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 Urban Consumers) as published by the US
Department of Labor, or any successor index thereto.
5
<PAGE> 6
3.3 Employment Upon Termination of Disability. If and when, in the
reasonable judgment of the Board, after the commencement of a Disability Period
Executive regains his ability to perform his duties hereunder on a full-time
basis, such Disability Period and the Company's obligation to make supplemental
disability payments pursuant to Section 3.2 shall cease and Executive may resume
employment with the Company, unless the Employment Period has previously
terminated. If Executive resumes employment with the Company, he 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 Company incentive compensation plans in which he was then
participating, 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, Executive'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.
ARTICLE IV
Equity Incentives
4.0 Stock Options. Pursuant to the Company's 1992 Executive Stock Option
Plan, as amended (the "Executive Option Plan"), or any other option plan of the
Company in which Executive may be eligible to participate, as determined by the
Company (the "Option Plan") as administered by the Board (or an appropriate
committee thereof), the Company shall grant to Executive options (the "Stock
Options") to purchase shares of the Company's common stock ("Common Stock") as
provided in this Section 4.0 and in the form of the Company's Executive Stock
Option Agreement attached hereto as Exhibit A (as amended from time to time) to
be entered into by the Company and Executive contemporaneously with each Stock
Option grant.
(a) Stock Option Grants. The Company shall grant to Executive Stock Options
as provided in this subsection (a).
(i) On the Effective Date (the "First Grant Date"), the Company shall
grant to Executive 250,000 Stock Options, at an exercise price equal to the
Fair Market Value (as defined in the Option Plan) per share on the First
Grant Date, which, subject to the provisions of subsections (b), (c) and
(d) of this Section 4.0, shall vest and become exercisable in three annual
installments as follows: 83,334 shares on the first anniversary of the
First Grant Date; 83,333 shares on the second anniversary of the First
Grant Date; and 83,333 shares on the third anniversary of the First Grant
Date.
(ii) Effective on the date that the Company's stockholders approve the
requisite amendment to the Executive Option Plan (which is expected to be
May 20, 1999) (the "Second Grant Date"), the Company shall grant to
Executive 350,000 Stock Options, at an exercise price equal to $8.375 per
share, which, subject to the provisions of subsections (b), (c) and (d) of
this Section 4.0, shall vest and become exercisable in three annual
installments as follows: 116,667 shares on the first anniversary of the
Second Grant Date; 116,666 shares on the second anniversary of the Second
6
<PAGE> 7
Grant Date; and 116,666 shares on the third anniversary of the Second Grant
Date.
(iii) In the event that Executive is employed by the Company on the
first anniversary of the Effective Date, and subject to stockholder
approval of additional Stock Options available for issuance under the
Option Plan, if necessary, then, on any business day selected by the
Company during calendar year 2000 up to and including May 20, 2000, the
Company shall grant to Executive 300,000 Stock Options, at the exercise
price of $12.00 per share, which, subject to the provisions of subsections
(b), (c) and (d) of this Section 4.0, shall vest and become exercisable in
three equal annual installments of 100,000 shares on each of May 20, 2001,
May 20, 2002 and May 20, 2003.
(b) Vesting and Exercise Upon Change of Control After Two Years. In the
event of any Change of Control (as hereafter defined) that occurs on or after
the second anniversary of the Effective Date, then, upon the termination of the
Employment Period for any reason other than for Cause within six months of such
Change of Control, Executive, or his estate if Executive is not then living,
shall be entitled to immediately exercise in full any unexercised Stock Options,
whether vested or unvested (other than terminated or expired options) then held
by Executive or his estate if Executive is not then living, provided that
Executive shall have a period of two years after the date the Employment Period
terminates to exercise such Stock Options, to the extent they shall not have
earlier expired. In the event Executive's employment is terminated for Cause, he
may exercise only such Stock Options as are vested and exercisable on the date
of termination of his employment, which such exercise shall occur, if at all, no
later than 30 days after the date of such termination, and all other Stock
Options held by Executive shall terminate. As used in this Agreement, "Change of
Control" means:
(i) Any "person" (as such term is used in Sections 13(d) and 14(d) of
the Securities Exchange Act of 1934, as amended (the "Act")) is or becomes
the "beneficial owner" (as defined in Rule 13d-3 of the Act), directly or
indirectly, of securities of the Company representing 30% or more of the
total voting power represented by the Company's then outstanding voting
securities; or
(ii) A change in the composition of the Board occurring within a
two-year period, as a result of which fewer than a majority of the
directors are Incumbent Directors. "Incumbent Directors" shall mean
directors who either (A) are directors of the Company as of the date
hereof, or (B) are elected, or nominated for election, to the Board with
the affirmative votes of at least a majority of the Incumbent Directors at
the time of such election or nomination (but shall not include an
individual whose election or nomination is in connection with an actual or
threatened proxy contest relating to the election of directors to the
Company); or
(iii) The date of the consummation of a merger or consolidation of the
Company with any other entity that has been approved by the stockholders of
the Company, other than a merger or consolidation which would result in the
voting securities of the Company outstanding immediately prior thereto
continuing to represent (either by
7
<PAGE> 8
remaining outstanding or by being converted into voting securities of the
surviving entity) at least 50% of the total voting power represented by the
voting securities of the Company or such surviving entity outstanding
immediately after such merger or consolidation, or the stockholders of the
Company approve a plan of complete liquidation of the Company or an
agreement for the sale or disposition by the Company of all or
substantially all of the Company's assets.
(c) Vesting and Exercise Upon Change of Control Within Two Years. In the
event of any Change of Control that occurs before the second anniversary of the
Effective Date, any Stock Options then held by Executive shall vest and become
exercisable as provided in this Section 4.0(c). Unless Executive is terminated
for Cause, such Stock Options shall vest, whether or not Executive continues to
be employed by the Company, in accordance with the applicable vesting schedule
provided in Section 4.0(a) and in the applicable Option Agreement and Executive
shall have a period of 30 days after all of his Stock Options are fully vested
and exercisable to exercise such Stock Options. In the event Executive's
employment is terminated for Cause, he may exercise only such Stock Options as
are vested and exercisable on the date of termination of his employment, which
such exercise shall occur, if at all, no later than 30 days after the date of
such termination, and all other Stock Options held by Executive shall terminate.
(d) Vesting and Exercise Upon Termination of Employment Period Absent a
Change of Control. Except as expressly provided in subsections (b) and (c) of
this Section 4.0, all Stock Options granted to Executive as of the time of
termination of the Employment Period shall vest and become exercisable by
Executive, or his estate if he is not living, as follows:
(i) in the event of Executive's death during the Employment Period,
or termination of the Employment Period as a result of a Disability as
provided in Section 5.6, all unvested Stock Options shall immediately vest
and be exercisable by Executive or his estate for a period of 24 months
from the date of death or termination of employment, as applicable;
(ii) in the event Executive terminates the Employment Period for Good
Reason, any Stock Options then held by Executive shall continue to vest
after such termination in accordance with the applicable schedule as
provided herein and in the applicable Option Agreement, and Executive shall
have a period of 30 days after all such Stock Options are fully exercisable
to exercise such Stock Options;
(iii) in the event the Executive terminates the Employment Period
without Good Reason, Executive's Stock Options which are vested and
exercisable on the date of termination of employment will be exercisable
for the period ending at the earlier of the expiration date of such Stock
Options or 30 days after the date of termination of employment;
(iv) in the event the Company terminates the Employment Period without
Cause, Executive's Stock Options which are vested and exercisable on the
date of termination will be exercisable for the period ending at the
earlier of the expiration date
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<PAGE> 9
of such Stock Options or 24 months after the date of termination of
employment; and
(v) in the event the Company terminates the Employment Period for
Cause, Executive's Stock Options which are vested and exercisable on the
date of termination will be exercisable for the period ending at the
earlier of the expiration date of such Stock Options or 30 days after the
date of termination of employment.
4.1 Restricted Stock. On the Effective Date, the Company shall grant
to Executive 310,000 shares of Common Stock, which shall be subject to such
restrictions and other terms and conditions as are provided in the form of
Restricted Stock Agreement attached hereto as Exhibit B.
ARTICLE V
---------
Term of Employment
------------------
5.0 Term of Employment. The employment of Executive under this Agreement
shall commence on the date hereof and continue for a period of three years
("Initial Period") unless earlier terminated pursuant to this Article V.
Following the expiration of the Initial Period, Executive's employment shall
automatically continue until terminated in accordance with this Article V.
5.1 Termination Without Cause. Either party may terminate the employment of
Executive pursuant to this Agreement, without Cause or Good Reason, by giving
the other party prior written notice specifying a termination date no earlier
than 90 days and no later than 120 days following the delivery of such notice (a
"No Cause Notice"). In the event the Company terminates Executive's employment
without Cause in accordance with this Section 5.1 (i) Executive shall be paid
during the next three years following such termination of employment, his Base
Salary at the rate in effect immediately prior to the giving of the No Cause
Notice (payable in accordance with the Company's payroll practices, less
appropriate deductions for applicable taxes), (ii) Executive shall be entitled
to continue to participate, during such three-year period, in the employee
benefit plans identified in Section 2.2 in accordance with the terms thereof,
(iii) the SERP Amount shall be payable, if at all, in accordance with the
provisions of Section 2.5 hereof, and (iv) to the extent that Executive would
have received the Target Bonus Amount had he continued to be employed by the
Company through the end of the fiscal year in which he is terminated, Executive
shall be entitled to receive a portion of such Target Bonus Amount as pro rated
through the date of termination, which amount shall be payable according to the
provisions of the MIP.
5.2 Termination by Executive for Good Reason. Except as otherwise provided
in this Section 5.2, at any time prior to Executive's receipt of a No Cause
Notice or the termination of Executive's employment by the Company for Cause,
Executive may give notice to terminate his employment for "Good Reason"
(described in subsections (a) through (c) of this Section 5.2) by delivering a
written notice of termination to the Company specifying the Good Reason for the
9
<PAGE> 10
termination and further specifying the effective date of termination which shall
be no earlier than 30 days and no later than 60 days after the Company' receipt
of such written notice of termination (a "Good Reason Notice"). A Good Reason
Notice will not be effective unless received by the Company within 30 days after
the occurrence of the event specified by Executive as being the "Good Reason"
for termination. The Company shall have 30 days after receiving any Good Reason
Notice within which to initiate corrective or remedial action, and if such
action is timely initiated, then upon completion of such corrective or remedial
action the Good Reason Notice shall be deemed withdrawn. For the purposes of
this Agreement, Executive shall have "Good Reason" to terminate his employment
hereunder if, but only if:
(a) without the consent of Executive, he is assigned any duties
inconsistent with Article I or his positions, duties, responsibilities and
status with the Company immediately prior to a change in his titles or offices,
or he is removed from or not re-elected to any of such positions, except in
connection with (1) the termination of his employment for Cause or Disability or
by him other than for "Good Reason" as hereafter provided or as a result of his
death, or (2) the commencement or continuation of a Disability Period;
(b) a reduction is made by the Company in Executive's Base Salary, except
as provided in Section 2.0 hereof;
(c) The Company 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 the express terms thereof) in which Executive is
participating, without providing him with a plan having substantially similar
benefits, or takes any action which would adversely affect his participation in
or materially reduce his benefits under any of such plans or deprive him of a
material fringe benefit enjoyed by him, in any case other than as part of a
reduction or change generally applicable to other senior officers of the
Company; or
(d) The Company fails to obtain from any successor entity to the Company an
agreement to perform this Agreement to the extent and in the manner required to
be performed by the Company.
In the event Executive terminates his employment for "Good Reason" in
accordance with this Section 5.2, Executive shall be paid during the next three
years following such termination of employment (1) his Base Salary at the rate
in effect immediately prior to the giving of the Good Reason Notice (payable in
accordance with the Company's payroll practices, less appropriate deductions for
applicable taxes) and (2) that portion of the Target Bonus Amount (as defined in
Section 2.1) that is related to the Company's component goals to the extent such
goals are satisfied under the MIP during such three-year period. During such
three-year period, Executive shall also be entitled to continue to participate
in the employee benefit plans identified in Section 2.2 in accordance with the
terms thereof. The SERP Amount shall be payable, if at all, in accordance with
the provisions of Section 2.5 hereof.
5.3 Termination After Change of Control. In the event Executive's
employment
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<PAGE> 11
hereunder terminates for any reason, other than a termination for Cause, within
six months of a Change of Control, Executive shall be paid during the next three
years following such termination of employment, his Base Salary at the rate in
effect immediately prior to the date of such termination (payable in accordance
with the Company's payroll practices, less appropriate deductions for applicable
taxes) and Target Bonus Amount (as defined in Section 2.1), and, during such
three-year period, shall also be entitled to continue to participate in the
employee benefit plans identified in Section 2.2 in accordance with the terms
thereof. The SERP Amount shall be payable, if at all, in accordance with the
provisions of Section 2.5 hereof.
5.4 Termination For Cause. In the event of "Cause" (as defined below), the
Company shall have the right to terminate this Agreement, either during or after
the Initial Period, without any prior written notice to Executive. "Cause" shall
be deemed to exist under the following circumstances:
(a) if Executive refuses or fails or neglects to perform his obligations
under this Agreement and Executive fails to rectify such deficiency within 30
days after receiving written notice from the Board, for any reason other than
factors that, if continued, would reasonably give rise to the determination or
continuation of a Disability Period;
(b) if Executive has developed or pursued interests substantially adverse
or substantially inconsistent with the material fulfillment of his obligations
hereunder to the Company, and fails to cease such conduct within ten days after
receiving written notice from the Board;
(c) if Executive engages in illegal or other wrongful conduct which is
detrimental to the business or reputation of the Company; or
(d) if Executive engages in any conduct or activity prohibited by Section
6.0, 7.0 or 7.1 of this Agreement.
In the event of termination in accordance with this Section 5.4, the
Company shall have no further liability in respect of Executive's employment;
provided, however, that the Company shall pay Executive the value of any accrued
salary or other compensation due Executive on the date of termination. The SERP
Amount shall be payable, if at all, in accordance with the provisions of Section
2.5 hereof.
5.5 Termination Upon Death of Executive. The employment of Executive
under this Agreement shall automatically terminate upon the death of Executive.
5.6 Termination Upon Executive's Disability. Either party may terminate the
employment of Executive pursuant to this Agreement in the event that Executive
suffers a Disability as defined in Section 3.0 hereof. Such termination shall
take effect upon the termination date specified in a written notice delivered by
the terminating party to the other party. In the event the Employment Period is
terminated in accordance with this Section 5.6, Executive shall be paid during
the next three years following such termination of employment, an amount equal
to the amount of his Base Salary at the rate in effect immediately prior to the
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<PAGE> 12
giving of such termination notice less any disability benefits and Social
Security payments received by Executive during such period (payable in
accordance with the Company's payroll practices, less appropriate deductions for
applicable taxes). The SERP Amount shall be payable, if at all, in accordance
with the provisions of Section 2.5 hereof.
5.7 Release; Future Conduct. Prior to receiving any termination payment
under this Article V, Executive shall deliver a release, in a form reasonably
satisfactory to the Company and Executive, of any and all claims he may have
against the Company. In the event that Executive breaches any of his obligations
under Sections 6.0, 7.0 or 7.1 of this Agreement, the Company shall have no
obligation to pay or continue to pay to Executive any termination payment
hereunder.
ARTICLE VI
----------
Restrictive Covenants
---------------------
6.0 Covenant Not to Compete. For the period beginning on the Effective Date
and ending on the third anniversary of the date of termination of the Employment
Period, Executive shall not, directly or indirectly, whether on Executive's own
behalf or in the service of or on behalf of any other individual or entity,
either as a proprietor, employee, agent, independent contractor, executive,
director, officer, partner or stockholder (other than a stockholder of a
corporation listed on a national securities exchange or whose stock is regularly
traded in the over-the-counter market, provided that Executive at no time owns,
directly or indirectly, in excess of 5% of the outstanding stock of any class of
any such corporation):
(a) participate or engage in developing, manufacturing, marketing or
distributing any products or services offered, or planned to be offered, by the
Company ("Competitive Activities"), including, without limitation:
(i) selling products or rendering services of the type (or similar
to the type) sold or rendered by the Company;
(ii) soliciting any person or entity that is or has been a customer
during the Employment Period or that is or was a prospective customer prior
to or during the Employment Period, in each case, of the Company or an
affiliate of the Company
(iii) (provided that it shall not be deemed a breach of this Agreement
if Executive solicits such customers for products or services unrelated to
the Competitive Activities); or
(iv) assisting any person in any way to do, or attempt to do,
anything prohibited by clauses (i) or (ii) above;
(v) being employed by any person or entity that has received
services of the type described above from Executive or with which Executive
otherwise had material contact during the Employment Period or which
received services of the type described
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<PAGE> 13
above from any officer or employee of the Company over which Executive had
management responsibility, in either case to provide or supervise, directly
or indirectly, the services comprising a Competitive Activity; or
(b) perform any action, activity or course of conduct which is detrimental
in any material respect to the businesses or business reputation of the Company
(or any of its affiliates), including without limitation;
(i) soliciting, recruiting or hiring any employees of the Company
(or any of its affiliates) or persons who have worked for the Company (or
any of its affiliates) at any time since the Effective Date, provided that
any entity which employs Executive may hire, without Executive's knowledge
or assistance, an employee of the Company or person who may have worked for
the Company, and provided further that Executive may hire any employee of
the Company that has been terminated by the Company; and
(ii) soliciting or encouraging any employee of the Company (or any of
its affiliates) to leave the employment of the Company.
6.1 Acknowledgement. Executive acknowledges that the restrictions set forth
in this Article VI are (a) reasonable and necessary for the protection of the
Company's interests and (b) are entered into by Executive in exchange for
adequate consideration granted to him in connection with this Agreement. In the
event that any provision of this Article VI is found by a court of competent
jurisdiction to be unreasonable or unenforceable, the parties agree that such
provision shall be enforceable against Executive to the greatest extent that
would be found to be reasonable and enforceable.
ARTICLE VII
-----------
Confidentiality; Ideas and Improvements.
----------------------------------------
7.0 Confidentiality. The Company is engaged in various lines and methods of
doing business, and utilizes processes, programs, data, software and techniques
which consist of or involve confidential business information. Such information
has been or will be available to and used by Executive during the course of his
employment as well as confidential client information including data disclosing
the identity of clients of the Company, their particular needs, methods, data
and other similar information. Executive agrees that so long as such information
is confidential in fact and is not readily ascertainable by third parties
through lawful means, he 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 the Company. Executive agrees to return all
programs, manuals, documents, records, and other information relating to the
business of the Company, including materials prepared by Executive, to the
Company immediately upon the termination of employment hereunder.
7.1 Ideas and Improvements. Executive agrees to promptly disclose to the
Company all ideas, designs, improvements, creations and inventions, whether or
not patentable or subject
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<PAGE> 14
to other legal protection, which have significant relationship to the business
of the Company or any affiliates of the Company, and which were developed or
created by Executive at any place or time during the Employment Period
(collectively, "Ideas and Creations"). Executive further agrees to take all
steps necessary to execute and deliver to the Company copyright or patent rights
on matters suitable for such protection, and to execute and deliver to the
Company all documents which may be required to assign to the Company such
copyright or patent rights, and to otherwise cooperate to the extent within
Executive's control to ensure the Company's 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 the Company was
used and which was developed entirely on Executive's own time, unless (a) the
invention relates to the business of the Company or to the Company's actual or
demonstrably anticipated research or
development, or (b) the invention results from any work performed by Executive
for the Company.
ARTICLE VIII
------------
Miscellaneous Provisions
------------------------
8.0 Legal Remedies. Executive hereby acknowledges that the Company would
suffer irreparable injury if the provisions of Sections 6.0, 7.0 or 7.1 above
were breached and that the Company's remedies at law would be inadequate in the
event of such breach. Accordingly, Executive hereby agrees that any such breach
or threatened breach may, in addition to any other available remedies, be
preliminarily enjoined by the Company without bond. In the event of litigation
under this Agreement, each side shall pay its own attorneys' fees and expenses,
except that if Executive is enjoined either preliminarily or permanently, after
an evidentiary hearing, then Executive shall pay the attorneys' fees and
expenses of the Company in connection with that evidentiary hearing and, if such
evidentiary hearing results in a court refusing a preliminary or permanent
injunction, then the Company shall pay Executive's attorneys' fees and expenses
in connection with such hearing. Sections 6.0, 7.0 and 7.1 shall survive, and
shall continue in effect, notwithstanding any termination of this Agreement.
8.1 Successors and Assigns. This Agreement shall be binding upon and shall
inure to the benefit of Executive and the Company and each of their respective
heirs, personal representatives, permitted assigns, and successors in interest,
including, in the case of the Company, any company with which the Company may be
merged or consolidated or to which all or substantially all of the Company'
assets may be transferred. Except as otherwise provided above, this Agreement
shall not be assignable by the Company or Executive without the express written
consent of the other party.
8.2 Governing Law. This Agreement shall be construed and enforced in
accordance with the law of the State of Illinois.
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<PAGE> 15
8.3 Notices. All notices required or permitted hereunder shall be given in
writing, either delivered personally or by registered or certified mail,
addressed to the Company at its principal office to the attention of the General
Counsel, or to Executive either at his residence address shown on the employment
records of the Company or in care of the principal office of the Company, with a
copy to Martin Cohn, Martin Cohn & Associates, 116 South Michigan Avenue, 14th
Floor, Chicago, Illinois 60603. Notice delivered personally shall be deemed
effectively given as of the time of personal delivery, and notice given by mail
shall be deemed effectively given as of the date of such mailing.
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<PAGE> 16
8.4 Entire Agreement; Amendments; Headings. This Agreement embodies the
entire Agreement of the Company and Executive with respect to the subject matter
hereof, and replaces and supersedes any prior understandings, whether written or
oral, regarding such subject matter, provided that in the event that any
provision of this Agreement is inconsistent with any provision of the Restricted
Stock Agreement or any Option Agreement, then the provision of this Agreement
shall control. No amendment or modification of the terms of this Agreement shall
be effective unless reduced to a written instrument executed by the Company and
Executive. The headings of sections in this Agreement are for convenience only.
IN WITNESS WHEREOF, the Company and Executive have caused this Employment
Agreement to be duly executed as of the date first written above.
INFORMATION RESOURCES, INC.
ATTEST: By: /s/ Thomas W. Wilson, Jr.
--------------------------------
/s/ Monica M. Weed Thomas W. Wilson, Jr.
- --------------------------- Chief Executive Officer
Monica M. Weed
Assistant Secretary
/s/ Joseph P. Durrett
------------------------------------
Joseph P. Durrett
16
<PAGE> 1
Exhibit 10.LL
RESTRICTED STOCK AGREEMENT
--------------------------
This agreement ("Agreement") is executed and made effective as of this 30th
day of April, 1999 (the "Effective Date"), by and between Joseph P. Durrett (the
"Executive") and Information Resources, Inc., a Delaware corporation (the
"Company").
W I T N E S S E T H
-------------------
WHEREAS, the Company and the Executive have executed, on the Effective
Date, agreements governing the terms of the Executive's employment by the
Company (the "Employment Agreement") and the award of stock options to the
Executive (the "Stock Option Agreement");
WHEREAS, the Company and the Executive desire that the Executive should
receive an award of the Company's common stock, par value $0.01 per share
("Common Stock"), as compensation for the Executive's service to Company; and
WHEREAS, the Company desires to impose certain restrictions upon the
Executive's rights to retain and/or transfer such Common Stock.
NOW THEREFORE, in consideration of the premises and the mutual covenants
and agreements hereinafter set forth and for other good and valuable
consideration, the receipt and sufficiency of which is hereby acknowledged, the
parties hereto (the "Parties") hereby agree as follows:
1. Award of Stock. The Company hereby awards to the Executive, and the
Executive hereby accepts, as compensation for the Executive's service to the
Company, Three Hundred Ten Thousand (310,000) shares of Company Common Stock
(the "Restricted Stock"). The Restricted Stock shall be (a) comprised of One
Hundred Twenty Thousand (120,000) shares, hereinafter referred to as "First
Tranche Restricted Shares," plus Ninety Five Thousand (95,000) shares,
hereinafter referred to as "Second Tranche Restricted Shares," plus Ninety Five
Thousand (95,000) shares, hereinafter referred to as "Third Tranche Restricted
Shares," and (b) subject to the terms, conditions and restrictions described in
this Agreement.
2. Rights as Stockholder. Except as otherwise provided in this Agreement,
the Executive shall have the rights of a stockholder of the Company (including
the rights to receive dividends and vote) with respect to the Restricted Stock
until the Restricted Stock is canceled and forfeited pursuant to Section 3(b).
3. Vesting and Forfeiture Conditions. The Restricted Stock shall become
non-forfeitable and freely transferable ("Vested"), only under the conditions,
and only to the extent, described in this Section 3:
<PAGE> 2
(a) (i) Subject to the provisions of Section 3(b), all of the
Restricted Stock shall automatically be fully Vested as of the
seventh anniversary of the Effective Date.
(ii) All of the Restricted Stock shall automatically be fully
Vested immediately upon the Company's termination of Executive's
employment with the Company if such termination by the Company
occurs within the six months following a "Change of Control"
(within the meaning of Section 4.0(b) of the Employment
Agreement) which occurred on or after the second anniversary of
the Effective Date.
(iii) If on any date (a "First Tranche Measurement Date")
following the Effective Date the 10 Day Trading Price of Company
Common Stock is equal to or greater than $20.00 per share, then
subject to the provisions of Section 3(b), (a) a sufficient
number of the First Tranche Restricted Shares shall automatically
become Vested as of the later of such First Tranche Measurement
Date and the second anniversary of the Effective Date such that
at least 40,000 of the First Tranche Restricted Shares shall be
Vested as of such later date; (b) a sufficient number of the
First Tranche Restricted Shares shall automatically become Vested
as of the later of such First Tranche Measurement Date and the
third anniversary of the Effective Date such that at least 80,000
of the First Tranche Restricted Shares shall be Vested as of such
later date; and (c) all 120,000 First Tranche Restricted Shares
shall automatically be Vested as of the later of such First
Tranche Measurement Date and the fourth anniversary of the
Effective Date.
(iv) If on any date (a "Second Tranche Measurement Date")
following the Effective Date the 10 Day Trading Price of Company
Common Stock is equal to or greater than $25.00 per share, then
subject to the provisions of Section 3(b), (a) a sufficient
number of the Second Tranche Restricted Shares shall
automatically become Vested as of the later of such Second
Tranche Measurement Date and the second anniversary of the
Effective Date such that at least 31,667 of the Second Tranche
Restricted Shares shall be Vested as of such later date; (b) a
sufficient number of the Second Tranche Restricted Shares shall
automatically become Vested as of the later of such Second
Tranche Measurement Date and the third anniversary of the
Effective Date such that at least 63,333 of the Second Tranche
Restricted Shares shall be Vested as of such later date; and (c)
all 95,000 Second Tranche Restricted Shares shall automatically
be Vested as of the later of such Second Tranche Measurement Date
and the fourth anniversary of the Effective Date.
(v) If on any date (a "Third Tranche Measurement Date")
following the Effective Date the 10 Day Trading Price of Company
Common Stock is
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<PAGE> 3
equal to or greater than $30.00 per share, then subject to the
provisions of Section 3(b), (a) a sufficient number of the Third
Tranche Restricted Shares shall automatically become Vested as of
the later of such Third Tranche Measurement Date and the second
anniversary of the Effective Date such that at least 31,667 of
the Third Tranche Restricted Shares shall be Vested as of such
later date; (b) a sufficient number of the Third Tranche
Restricted Shares shall automatically become Vested as of the
later of such Third Tranche Measurement Date and the third
anniversary of the Effective Date such that at least 63,333 of
the Third Tranche Restricted Shares shall be Vested as of such
later date; and (c) all 95,000 Third Tranche Restricted Shares
shall automatically be Vested as of the later of such Third
Tranche Measurement Date and the fourth anniversary of the
Effective Date.
(b) (i)Notwithstanding the provisions of Section 3(a), if at any time
on or after the Effective Date the Executive ceases to be
employed by the Company in the capacity of chief executive
officer of the Company, then except as provided in Section 3(c),
(a) no shares of Restricted Stock shall become Vested after the
date of such cessation of the Executive's employment (the
"Termination Date"), and (b) all shares of Restricted Stock which
are not Vested as of such Termination Date shall be immediately
canceled and forfeited to Company, and all of the Executive's
(and/or any other holder's) rights therein shall immediately
cease.
(ii) In the event that any shares of the Restricted Stock shall
be forfeited prior to becoming Vested for any reason, the
Executive agrees to return to the Company promptly any stock
certificate or certificates evidencing such shares of Restricted
Stock.
(c) If the Termination Date occurs as the direct result of the
Executive's Termination of his employment for "Good Reason"
(within the meaning of Section 5.2 of the Employment Agreement),
Section 3(b)(i) of this Agreement shall not apply with respect to
the Restricted Stock during the three year period immediately
following such Termination Date.
(d) For purposes of this Agreement, the term "10 Day Trading Price"
as of a specific date means (i) the price per share of Common
Stock determined by the average of the closing bid prices for
Common Stock reported on the National Association of Securities
Dealers Automated Quotation System's National Market System for
the period of 10 consecutive trading days prior to and ending on
the day preceding such specific date; or, if the foregoing
information is not determinable, (ii) the average of the daily
high and low prices at which one share of Common Stock has traded
on the stock exchange on which the Common Stock generally has the
greatest trading volume, for
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<PAGE> 4
the period of 10 consecutive trading days prior to and ending on
the day preceding such specific date.
(e) After shares of Restricted Stock have become Vested, the
restrictions imposed with respect to Restricted Stock under this
Agreement shall no longer apply to such Vested shares.
4. Restricted Stock Non-Transferable Prior to Vesting. Prior to the time
that the Restricted Stock has Vested, the Restricted Stock may not be
transferred, pledged, hypothecated, assigned or otherwise disposed of to anyone
other than a transfer to Executive's Immediate Family or a trust for the benefit
of Executive's Immediate Family. "Immediate Family" as used in this Agreement
shall mean spouse, lineal descendant or antecedent, father, mother, brother or
sister. In such case, as a condition to any such transfer, the transferee shall
agree in writing to comply with and be subject to the provisions of this
Agreement, and there shall be no further transfer, pledge, hypothecation,
assignment or other disposition of such Restricted Stock except in accordance
with the terms of this Agreement. Any transfer, pledge, hypothecation,
assignment or other disposition of the Restricted Stock prior to the time that
the Restricted Stock has Vested, other than as permitted under this Section 4,
shall cause the Restricted Stock to be immediately forfeited and canceled, and
shall cause all of Executive's (and/or any other holder's) rights therein to
immediately cease.
5. Withholding on Income Taxable to Executive. Company shall withhold
from Executive's net cash bonus or net regular cash compensation the amounts of
federal, state and local income taxes and Social Security or other
employment-related taxes that Company reasonably determines are required to be
withheld pursuant to any law, rule or regulation. If Company reasonably
determines that the withholding obligations arising in connection with or as a
result of the award or Vesting of the Restricted Stock cannot be satisfied from
amounts due from Company to Executive, then upon written request from Company,
Executive shall pay to Company an additional amount of cash sufficient to permit
Company to timely satisfy all necessary withholding obligations arising in
connection with or as a result of the award or Vesting of such Restricted Stock.
6. Investment Purpose; Transfers in Compliance with Securities Laws.
Executive represents and warrants to Company that (a) Executive is aware of
Company's business affairs and financial condition, and has acquired sufficient
information about Company to reach an informed and knowledgeable decision to
acquire the Restricted Stock, and (b) Executive is acquiring the Restricted
Stock for Executive's own account for investment purposes only and not with a
view to, or for the resale in connection with, any "distribution" thereof for
purposes of the Securities Act of 1933, as amended (the "Securities Act").
Executive acknowledges that Executive understands that the Restricted Stock must
be held indefinitely unless subsequently registered under the Securities Act or
unless an exemption from registration is otherwise available. Executive
understands that the certificate(s) evidencing the Restricted Stock will be
imprinted with a legend which prohibits the transfer of the Restricted Stock
unless the Restricted Stock is registered or such registration is not required
in the opinion of counsel reasonably satisfactory to Company, in form and
substance reasonably satisfactory to Company.
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<PAGE> 5
7. Award Not Compensation for Certain Purposes. Executive agrees that,
except as required by law, the Restricted Stock acquired pursuant to this
Agreement shall not be considered or included as part of the annual compensation
of Executive for purposes of computing Company's contribution to any qualified
or non-qualified deferred compensation arrangements.
8. Restrictive Legends and Stop-Transfer Orders.
(a) Certificates and Legends. Certificates shall be issued in respect
of the Restricted Stock, and shall be registered in the name of the
Executive. Executive understands and agrees that Company shall cause the
legends set forth below or legends substantially equivalent thereto, to be
placed upon any certificate(s) evidencing ownership of the Restricted Stock
together with any other legends that may be required by state or federal
securities laws:
THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE
SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED,
SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND
UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, IN FORM AND SUBSTANCE
SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR
TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE
SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN
CONDITIONS OF FORFEITURE AND RESTRICTIONS ON TRANSFER AS SET FORTH IN
THE RESTRICTED STOCK AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL
HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE
PRINCIPAL OFFICE OF THE ISSUER. SUCH CONDITIONS OF FORFEITURE AND
TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES.
(b) Stop-Transfer Notices. Executive agrees that, in order to ensure
compliance with the restrictions referred to herein, Company may issue
appropriate "stop transfer" instructions to its transfer agent, if any, and
that, if Company transfers its own securities, it may make appropriate
notations to the same effect in its own records.
(c) Refusal to Transfer. Company shall not be required (i) to
transfer on its books any shares of Restricted Stock that have been sold or
otherwise transferred in violation of any of the provisions of this
Agreement or (ii) to treat as owner of such Restricted Stock
-5-
<PAGE> 6
or to accord the right to vote or pay dividends to any purchaser or other
transferee to whom such Restricted Stock shall have been so transferred.
(d) Custody of Certificates. Any stock certificate(s) evidencing
shares of the Restricted Stock shall be held in custody by a bank or other
institution, or by the Company itself (at the Company's election), until
such shares of Restricted Stock are Vested, or until such shares of
Restricted Stock are canceled and forfeited, in accordance with the
provisions of this Agreement. The Executive hereby agrees, as a condition
to the award of Restricted Stock hereunder, to deliver to the Company a
stock power endorsed in blank relating to the Restricted Stock covered by
this Agreement so that, in the event of cancellation and forfeiture of
shares of Restricted Stock, those shares will be transferred to the
Company.
9. Miscellaneous. This Agreement (a) constitutes the entire agreement and
supersedes all prior agreements and understandings, both written and oral, among
the Parties with respect to the subject matter hereof, provided that if any
provision of this Agreement conflicts with any provision of the Employment
Agreement, the provision of the Employment Agreement shall control; (b) is not
intended to confer upon any other persons any rights or remedies hereunder,
except as hereinafter provided; (c) shall be binding on the Parties hereto and
their respective heirs, executors, personal representatives, successors and
assigns, and to any permitted transferees expressly permitted herein, and shall
not be assigned by operation of law or otherwise except as expressly permitted
herein, and any attempt to do so shall be void; (d) in case any provision in
this Agreement shall be invalid, illegal or unenforceable, the validity,
legality and enforceability of the remaining provisions shall not in any way be
affected or impaired thereby; (e) may be amended only by a written instrument
duly executed by the Parties hereto; (f) may be executed in counterparts, each
of which shall be an original, but each of which together shall constitute one
and the same agreement; and (g) shall be governed in all respects, including
validity, interpretation and effect, by the laws of the State of Illinois.
[Signature page follows]
-6-
<PAGE> 7
IN WITNESS WHEREOF, the Parties hereto have caused this Restricted Stock
Agreement to be executed as of the date first written above.
INFORMATION RESOURCES, INC.
ATTEST: By: /s/ Thomas W. Wilson, Jr.
--------------------------------
/s/ Monica M. Weed Thomas W. Wilson, Jr.
- ------------------ Chief Executive Officer
Monica M. Weed
Assistant Secretary
/s/ Joseph P. Durrett
------------------------------------
Joseph P. Durrett
-7-
<PAGE> 1
Exhibit 10.mm
May 28, 1999
Mr. Rick Kurz
Two Morgan Place
Avon, CT 06001
Dear Rick:
We are delighted to offer you employment and new career opportunities
at IRI. The purpose of this letter is to summarize our verbal offer to you.
You will be employed as Division President for Strategic Business
Development and Planning reporting to Joe Durrett. Your base salary will be
$281,500 per year, your next review date will be May 1, and annually each May
thereafter. Your May 1, 2000 increase will be pro-rated based on your start
date. Your initial annual bonus target will be 35% of your base salary, and your
final bonus will be based on your performance and IRI's bonus plan formula. You
will not be bonus eligible for 1999. We will also provide you with a $203,000
sign on bonus that is intended to cover your Advo bonus and stock options you
will lose by joining IRI. You will receive the sign on bonus in the following
manner: $58,500 on October 1, 1999, $43,000 on December 1, 1999, $43,000 on
January 3, 2000 and $58,500 on or about March 20, 2000. You will be required to
repay the sign on bonus to IRI, if you are terminated for cause or you
voluntarily resign your position before your one-year anniversary.
You will enjoy all employee benefits and perquisites available
generally to the other senior executive officers of the Company. This includes
IRI's flexible benefits program which consists of health and welfare plans, life
insurance, disability, 401(k) plan, holidays, personal leave, sick leave and
vacation allowance (four weeks vacation per year), and IRI's Executive Deferred
Compensation Program. In addition, we will reimburse you for any Cobra expense
to continue your medical insurance when you leave Advo and start at IRI.
In addition, you will be reimbursed for 12 months of temporary living
expenses (maximum of $2,500 per month including utilities). In addition, we will
reimburse you for your personal travel home weekly for a 12 month period. Both
the temporary apartment and airfare will be considered compensation, and we will
gross this up for tax purposes. Further, we will purchase you a cellular phone
and laptop computer which meet IRI's technical requirements.
You also will receive IRI's comprehensive relocation package for senior
executives, which includes relocation assistance in planning your move to
Chicago from a third party relocation company. You'll find the services first
class. Enclosed is information regarding IRI's benefits and relocation package.
Please contact me directly regarding questions pertaining to IRI's benefits and
relocation assistance.
<PAGE> 2
Mr. Rick Kurz
May 28, 1999
Page 2
On your start date, the Company will grant you 90,000 options under its
senior management Stock Option plan, to be evidenced by the Company's customary
form of stock option agreement. For these 90,000 options the following
conditions will apply:
- 40,000 options will be issued on your first day of employment.
These options will vest one third each year for three years. The
strike price will be the closing stock price published in the WSJ
the day before you start at IRI.
- 25,000 options will be issued on the first day of employment with a
strike price based on the previous day's closing price prior to
start date. You will vest in these shares when both the following
two conditions occur. You will vest in one third of the shares each
year, and when the stock price hits $12. Both occurrences must
occur for you to be vested. For example, if you pass your third
year anniversary, and the stock price is $11.50, you will not be
vested until the stock price hits $12. If the stock reaches $12
after two years of service, but before your three years of service,
you will be fully vested in two thirds of these shares. The
remaining one third will be fully vested on your third anniversary,
regardless if the share price falls below $12. Again, for all these
options the stock option strike price will be the stock price
issued on the first day of employment.
- You will receive 25,000 additional options with the same conditions
as stated above, but the performance target for these shares will
be $15 rather than $12. The service vesting will be one-third each
year, and both the performance and service targets both must be
achieved to vest.
- For the 25,000 options that has a $12 performance target for
vesting and the 25,000 options which have a $15 performance target,
the following condition will apply: For these 50,000 shares, if
your age and service equals 64 with a minimum of four years of
completed service, you will automatically be vested in these 50,000
shares regardless of the performance targets established for
vesting. Again, you will receive a stock option agreement that
states all of these terms within 30 days of employment. You will
also be eligible, based on performance, additional annual stock
option grants with approval from IRI's Compensation Committee.
Should a "change of control" (defined as the sale of the Company,
whether by merger or otherwise, or the acquisition of more than 25% of the
company's common stock by an acquirer, or group acting in concert) occur during
your employment, the following will apply. If a change in control occurs before
the second anniversary of your employment and you leave the Company within one
year thereafter for any reason (other than for cause), your options (including
any granted to you in the future) will continue to vest and become exercisable
(until 30 days after the last options vest) in accordance with their vesting
schedules notwithstanding the termination of your employment. If a change in
control occurs after the second anniversary of your employment, all your
unvested options will immediately vest and you will have 24 months from the
termination date to exercise your options.
<PAGE> 3
Mr. Rick Kurz
May 28, 1999
Page 3
Upon starting with the Company, you will be expected to execute a
customary noncompetition and confidentiality agreement (attached). Should your
employment be terminated (including a reduction in responsibility) for any
reason other than for cause, death or your voluntary resignation (except in case
of resignation within one year following a change in control), you will continue
for the next twelve months to receive all benefits including 135% of your base
salary then in effect. Again, if your employment terminates for cause or as the
result of your death, or your voluntary resignation (except for change of
control as stated above) you will receive no severance benefits. Also, any
options that would otherwise vest in the succeeding 18 month period following
such termination not otherwise vested pursuant to the above change in control
provision will vest immediately.
Rick, Joe and I are extremely excited about your joining our team. I
know everyone else will feel the same way upon meeting you. We know you can make
a difference for IRI, and believe we can offer you the challenges you desire. On
behalf of the Company and our entire senior management team, we are looking
forward to your joining IRI and our team.
Sincerely,
Gary Newman
Executive Vice President
Human Resources
Accepted this 28th day of May, 1999
/s/ Rick Kurz
- -------------------------------------------
Rick Kurz
cc: Joe Durrett
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<PERIOD-TYPE> 6-MOS
<FISCAL-YEAR-END> DEC-31-1999
<PERIOD-END> JUN-30-1999
<CASH> 11,562
<SECURITIES> 0
<RECEIVABLES> 100,152
<ALLOWANCES> 4,224
<INVENTORY> 0
<CURRENT-ASSETS> 119,266
<PP&E> 189,960
<DEPRECIATION> 109,479
<TOTAL-ASSETS> 384,529
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<BONDS> 0
0
0
<COMMON> 281
<OTHER-SE> 234,144
<TOTAL-LIABILITY-AND-EQUITY> 384,529
<SALES> 0
<TOTAL-REVENUES> 269,592
<CGS> 0
<TOTAL-COSTS> 270,972
<OTHER-EXPENSES> 0
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<INTEREST-EXPENSE> 590
<INCOME-PRETAX> 411
<INCOME-TAX> (194)
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