<PAGE> 1
SCHEDULE 14A
(RULE 14A-101)
INFORMATION REQUIRED IN PROXY STATEMENT
SCHEDULE 14A INFORMATION
PROXY STATEMENT PURSUANT TO SECTION 14(A) OF THE SECURITIES
EXCHANGE ACT OF 1934 (AMENDMENT NO. )
Filed by the registrant [X]
Filed by a party other than the registrant [ ]
Check the appropriate box:
[ ] Preliminary proxy statement [ ] Confidential, for Use of the
Commission Only (as permitted by
Rule 14a-6(e)(2))
[X] Definitive proxy statement
[ ] Definitive additional materials
[ ] Soliciting material pursuant to Rule 14a-11(c) or Rule 14a-12
INFORMATION RESOURCES, INC.
- --------------------------------------------------------------------------------
(Name of Registrant as Specified in Its Charter)
- --------------------------------------------------------------------------------
(Name of Person(s) Filing Proxy Statement, if other than the Registrant)
Payment of filing fee (Check the appropriate box):
[X] No fee required.
[ ] Fee computed on table below per Exchange Act Rules 14a-6(i)(1) and
0-11.
(1) Title of each class of securities to which transaction applies:
- --------------------------------------------------------------------------------
(2) Aggregate number of securities to which transaction applies:
- --------------------------------------------------------------------------------
(3) Per unit price or other underlying value of transaction computed
pursuant to Exchange Act Rule 0-11 (Set forth the amount on which the filing fee
is calculated and state how it was determined):
- --------------------------------------------------------------------------------
(4) Proposed maximum aggregate value of transaction:
- --------------------------------------------------------------------------------
(5) Total fee paid:
- --------------------------------------------------------------------------------
[ ] Fee paid previously with preliminary materials.
- --------------------------------------------------------------------------------
[ ] Check box if any part of the fee is offset as provided by Exchange Act
Rule 0-11(a)(2) and identify the filing for which the offsetting fee was paid
previously. Identify the previous filing by registration statement number, or
the form or schedule and the date of its filing.
(1) Amount previously paid:
- --------------------------------------------------------------------------------
(2) Form, schedule or registration statement no.:
- --------------------------------------------------------------------------------
(3) Filing party:
- --------------------------------------------------------------------------------
(4) Date filed:
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<PAGE> 2
INFORMATION RESOURCES, INC.
150 NORTH CLINTON STREET
CHICAGO, ILLINOIS 60661
NOTICE OF THE ANNUAL MEETING OF STOCKHOLDERS
TO BE HELD MAY 20, 1999
To the Stockholders of
INFORMATION RESOURCES, INC.
NOTICE IS HEREBY GIVEN that the Annual Meeting of the stockholders of
INFORMATION RESOURCES, INC. (the "Company"), will be held at the offices of the
Company, 150 North Clinton Street, Chicago, Illinois 60661 on Thursday, May 20,
1999, at 10:00 am Central Daylight Time, for the purpose of considering and
acting upon the following matters:
1. To elect four directors to the Board of Directors of the Company,
each to serve for a term of three years;
2. To consider and act upon a proposal to approve an amendment to the
Company's Executive Stock Option Plan (the "Executive Option Plan")
designed to preserve the tax deductibility of certain compensation paid
thereunder; and
3. To consider and act upon such other business as may properly come
before the Meeting or any adjournment thereof.
Stockholders of record as of the close of business on April 9, 1999 will be
entitled to notice of and to vote at the Meeting. The transfer books will not be
closed. For ten days prior to the Meeting, a list of stockholders entitled to
vote at the Meeting with the address of and number of shares held by each will
be kept on file at the offices of the Company at 150 North Clinton Street,
Chicago, Illinois 60661 and will be subject to inspection by any stockholder at
any time during the Company's usual business hours. The list will also be
available for inspection by any stockholder during the Meeting. Stockholders who
do not expect to attend in person are urged to execute and return the
accompanying proxy in the envelope enclosed.
The annual report of the Company for the year 1998 is being mailed to all
stockholders of record and accompanies this Proxy Statement.
By order of the Board of Directors,
INFORMATION RESOURCES, INC.
Edward S. Berger
Secretary
Chicago, Illinois
April 23, 1999
------------------------
YOUR VOTE IS IMPORTANT
PLEASE SIGN, DATE AND RETURN YOUR PROXY PROMPTLY
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING
------------------------
<PAGE> 3
PROXY STATEMENT
INFORMATION RESOURCES, INC.
ANNUAL MEETING OF STOCKHOLDERS
MAY 20, 1999
GENERAL INFORMATION
This Proxy Statement is being furnished to the stockholders of Information
Resources, Inc., a Delaware corporation (the "Company"), 150 North Clinton
Street, Chicago, Illinois 60661, in connection with the solicitation of proxies
by its Board of Directors for use at the Annual Meeting of stockholders to be
held on May 20, 1999, and any adjournments thereof (the "Meeting"). Stockholders
of record as of the close of business on April 9, 1999 are entitled to notice of
and to vote at the Meeting. The approximate date on which this Proxy Statement
and the accompanying proxy are first being sent to stockholders is April 23,
1999.
Stockholders are urged to sign, date and complete the accompanying form of
proxy and return it as soon as possible in the envelope provided for that
purpose. Returning a proxy card will not prevent a stockholder from attending
the Meeting. If the enclosed proxy is properly executed and returned in time for
voting with a choice specified thereon, the shares represented thereby will be
voted as indicated on such proxy. If no specification is made, the proxy will be
voted by the persons designated on the proxy (i) for the election as directors
of the nominees named below (or substitutes therefor if any nominees are unable
or unwilling to serve), (ii) for the adoption of the proposed amendment to the
Executive Option Plan relating to Section 162(m) of the Internal Revenue Code,
and (iii) in the discretion of such persons, upon such matters not presently
known or determined which may properly come before the Meeting. A stockholder
who wishes to designate a person or persons to act as his or her proxy at the
Meeting, other than the proxies designated by the Board of Directors, may strike
out the names appearing on the enclosed form of proxy, insert the name of any
other such person or persons, sign the form, and transmit it directly to such
other designated person or persons for use at the Meeting.
A stockholder who has given a proxy may revoke it at any time before it is
voted by (i) submitting a subsequently dated proxy, (ii) written notification to
the persons named therein as proxies, which may be mailed or delivered to the
Secretary of the Company at the above address, or (iii) attendance at the
Meeting and voting in person. Attendance at the Meeting will not, in and of
itself, constitute a revocation of a proxy. All shares represented by effective
proxies will be voted at the Meeting and at any adjournments thereof.
The presence in person or by proxy of holders of record of a majority of
the outstanding shares of Common Stock is required for a quorum to transact
business at the Meeting. If a quorum should not be present, the Meeting may be
adjourned from time to time until a quorum is obtained. Under applicable
Delaware law, abstentions and "broker non-votes" (i.e., proxies from brokers or
nominees indicating that such persons have not received instructions from the
beneficial owner or other persons entitled to vote shares as to a matter with
respect to which the brokers or nominees do not have discretionary power to
vote) will be treated as present for purposes of determining the presence of a
quorum at the Meeting.
Directors will be elected by the plurality vote of the holders of Common
Stock entitled to vote at the Meeting and present in person or by proxy. Votes
withheld and broker non-votes are not counted toward a nominee's total. The
remaining proposals described herein require the vote of holders of a majority
of the shares of Common Stock entitled to vote at the Meeting and present in
person or by proxy. Under applicable Delaware law, abstentions will be deemed
present and entitled to vote on a proposal and will, therefore, have the effect
of a negative vote on a proposal. A broker non-vote on a proposal is not
considered to be present and entitled to vote and thus will have no effect on
the outcome of the vote for that proposal.
The Company has one class of stock outstanding, common stock, $.0l par
value per share ("Common Stock"). On April 9, 1999, 27,864,806 shares of Common
Stock were outstanding and entitled to one vote each on all matters considered
at the Meeting. There are no cumulative voting rights with respect to the
election of directors.
<PAGE> 4
OWNERSHIP OF SECURITIES
The following table shows the total number of shares of Company Common
Stock beneficially owned as of the dates designated below, and the percentage of
Company Common Stock so owned as of that date, with respect to each person who
is known to be the beneficial owner of more than 5% of the Company's Common
Stock:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP PERCENT OF CLASS(1)
------------------------ -------------------- -------------------
<S> <C> <C>
Merrill Lynch Asset Management 2,391,403(2) 8.58
800 Scudders Mill Road
Plainsboro, NJ. 08536
State of Wisconsin Investment Board 2,289,000(3) 8.21
P.O. Box 7842
Madison, WI. 53707
R. Eliot King and Associates, Inc. 2,017,760(4) 7.24
3000 Sand Hill Road, Building 2, Suite 245
Menlo Park, CA. 94025
Grantham, Mayo, Van Otterloo & Company L.L.C. 1,551,500(5) 5.57
40 Rowes Wharf, Fourth Floor
Boston, MA. 02110
</TABLE>
The following table shows the total number of shares of Company Common
Stock beneficially owned as of April 9, 1999, and the percentage of Company
Common Stock so owned as of that date with respect to (i) each director of the
Company, (ii) each executive officer named in the Summary Compensation Table
below (the "Named Executive Officers"), and (iii) all directors and executive
officers as a group:
<TABLE>
<CAPTION>
AMOUNT AND
NATURE OF
NAME OF BENEFICIAL OWNER BENEFICIAL OWNERSHIP(6)(7) PERCENT OF CLASS
------------------------ -------------------------- ----------------
<S> <C> <C>
James G. Andress..................................... 36,941 *
James R. Chambers.................................... 41,666 *
Edwin E. Epstein..................................... 37,241 *
Gerald Eskin, Ph.D................................... 478,160 1.71
Gian M. Fulgoni...................................... 772,797 2.73
Gary M. Hill......................................... 170,798 *
John D.C. Little, Ph.D............................... 222,207 *
Leonard M. Lodish, Ph.D.............................. 60,275 *
Edward E. Lucente.................................... 20,816 *
Edith W. Martin, Ph.D................................ 17,956 *
John P. McNicholas, Jr............................... 32,834 *
Randall S. Smith..................................... 325,350 1.16
Jeffrey P. Stamen.................................... 6,941 *
Glen L. Urban, Ph.D.................................. 52,509 *
Thomas W. Wilson, Jr................................. 100,000 *
All directors and executive officers as a group (16 2,389,743 8.17
persons)...........................................
</TABLE>
- ---------------
* Less than 1%.
2
<PAGE> 5
(1) Based on 27,864,806 shares outstanding on April 9, 1999.
(2) Number of shares is based upon information set forth in Schedule 13G filed
with the SEC as of February 3, 1999, which indicates that such shares are
held on behalf of numerous clients of this stockholder, a registered
investment adviser.
(3) Number of shares is based upon information set forth in Schedule 13G filed
with the SEC as of February 2, 1999, which indicates that this stockholder
is a government agency, which manages public pension funds.
(4) Number of shares is based upon information set forth in Schedule 13G filed
with the SEC as of January 14, 1999, which indicates that such shares are
held on behalf of numerous clients of this stockholder, a registered
investment adviser.
(5) Number of shares is based upon information set forth in Schedule 13G filed
with the SEC as of February 12, 1999, which indicates that such shares are
held on behalf of numerous clients of this stockholder, a registered
investment adviser.
(6) Unless otherwise indicated, each person has sole voting and investment power
with respect to all such shares. The number of shares disclosed for the
following individuals includes stock options which are exercisable within 60
days of April 9, 1999 in the following amounts: (i) James G. Andress --
33,750 options; (ii) James R. Chambers -- 41,666 options; (iii) Edwin E.
Epstein -- 21,250 options; (iv) Gerald Eskin, Ph.D. -- 122,202 options; (v)
Gian M. Fulgoni -- 456,281 options; (vi) Gary M. Hill -- 166,625 options;
(vii) John D.C. Little, Ph.D. -- 44,016 options; (viii) Leonard M. Lodish,
Ph.D. -- 55,550 options; (ix) Edward E. Lucente -- 15,625 options; (x) Edith
W. Martin, Ph.D. -- 14,375 options; (xi) John P. McNicholas, Jr. -- 31,500
options; (xii) Randall S. Smith -- 240,531 options; (xiii) Jeffrey P. Stamen
-- 3,750 options; (xiv) Glen L. Urban, Ph.D. -- 21,250 options; (xv) Thomas
W. Wilson, Jr. -- 90,000 options; and (xvi) all directors and officers as a
group (16 persons) -- 1,371,518 options.
(7) Amounts include stock held for the benefit of the named individual in the
Company's 401(k) Retirement Savings Plan as of April 9, 1999 in the
following amounts: (i) Gian M. Fulgoni -- 90 shares; (ii) Gary M. Hill --
173 shares; (iii) John P. McNicholas, Jr. -- 134 shares; (iv) Randall S.
Smith -- 131 shares; and (v) all officers as a group (7 persons) -- 633
shares.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934 ("Section 16") sets
forth certain filing requirements relating to securities ownership by directors,
executive officers and ten percent stockholders of a publicly-held company. To
the Company's knowledge, all filing requirements were satisfied by the Company's
directors and executive officers. In making the foregoing disclosure, the
Company has relied solely on written representations of its directors and
executive officers and copies of the Section 16 reports that they have filed
with the SEC.
3
<PAGE> 6
ELECTION OF DIRECTORS
(PROPOSAL NUMBER 1 ON THE ENCLOSED PROXY CARD)
The By-laws of the Company provide that the number of directors of the
Company shall not be less than five nor more than fifteen and will be determined
from time to time by resolution of the Board of Directors. The number of
directors is currently set at twelve. The Certificate of Incorporation of the
Company provides for a classified Board of Directors consisting of three classes
(as nearly equal in number as possible) and that the directors will be elected
to hold office for terms of three years or until their successors are elected
and qualified. Those directors identified below as nominees for election have
been nominated for election to full three-year terms ending in 2002. Also listed
below are the remaining directors of the Company whose terms expire as indicated
below. If the listed nominees are elected at the Meeting, the Board of Directors
will have one vacancy. The Board of Directors is continuing its search for a new
director and this vacancy will be filled when the evaluation process is
completed.
It is intended that, in the absence of contrary specifications, votes will
be cast pursuant to the enclosed proxies for the election of the listed
nominees. Proxies will not be voted for a greater number of nominees. Should any
of the nominees become unable or unwilling to accept nomination or election, it
is intended, in the absence of contrary specification, that the proxies will be
voted for the balance of those named and for a substitute nominee or nominees.
However, as of the date of this Proxy Statement, officials of the Company know
of no reason to anticipate such an occurrence. All of the nominees have
consented to be named as nominees and to serve as directors if elected.
NOMINEES FOR ELECTION:
<TABLE>
<CAPTION>
POSITIONS WITH COMPANY, BUSINESS
NAME AGE EXPERIENCE AND OTHER POSITIONS
- ------------------------------------------ --- ----------------------------------------------------
<S> <C> <C>
James G. Andress.......................... 60 Director of the Company since 1989; Current member
of the Executive Committee and Audit Committee;
Current Chairman of the Compensation Committee;
President and Chief Operating Officer of the Company
from March 1994 to September 1995; Chief Executive
Officer from May 1990 to September 1995; Vice
Chairman from July 1993 until March 1994; Chairman,
Director and Chief Executive Officer of
Warner-Chilcott PLC since October 1996; Director of
The Liposome Company, Inc., Sepracor, Inc., Option
Care, Inc., Xoma Corporation, Favorite Brands
International, Inc. and Allstate Corporation.
Edwin E. Epstein.......................... 75 Director of the Company since 1987; Current member
of the Executive Committee and Chairman of the Audit
Committee; President of Retailing Insights, Inc.,
food industry consultants, since 1971.
Edward E. Lucente......................... 59 Director of the Company since 1991; Current member
of the Compensation Committee; Current Chairman of
the Executive Stock Option Committee; President,
Chief Executive Officer and Chairman of the Board of
QMS, Inc. since January 1998; President and Chief
Executive Officer of Liant Software Corp. from May
1995 to January 1998; Head of worldwide sales and
marketing of Digital Equipment Corp. from March 1993
until April 1994; Director of Saga Software, Inc.
</TABLE>
4
<PAGE> 7
<TABLE>
Jeffrey P. Stamen. 53 Director of the Company since March 1994; President -- IRI
Software from February 1991 to July 1995; Vice President of
the Company from January 1986 to July 1995; Chief
Executive Officer and Director of Syncra Software, Inc. since
September 1998; Senior Vice-President of the OLAP
Division of Oracle Corporation from July 1995 to September
1998.
<S> <C> <C>
TERMS EXPIRING IN 2000:
Gerald J. Eskin, Ph.D..................... 64 Co-founder of the Company; Director of the Company since
1977; Vice Chairman since December 1981; Professor of
Marketing at the University of Iowa since 1974 (currently
adjunct status).
John D.C. Little, Ph.D.................... 71 Director of the Company since 1985; Current member of the
Executive Committee; Institute Professor, Massachusetts
Institute of Technology since 1989.
Glen L. Urban, Ph.D....................... 59 Director of the Company since 1986; Current member of the
Audit Committee; Professor of Management Science at The Sloan
School of Management, Massachusetts Institute of Technology
since 1966.
TERMS EXPIRING IN 2001:
Gian M. Fulgoni........................... 51 Director of the Company since 1981; Current member of the
Executive Committee; Chief Executive Officer from January
1986 to November 1998; Chairman of the Board of Directors
from February 1991 until April 1995; Consultant since
November 1998; Chief Executive Officer and Chairman of the
Board of Directors of Lancaster Marketing Group, L.L.C. since
April 1999; Director of Platinum Technology, Inc.
Leonard M. Lodish, Ph.D................... 55 Director of the Company since 1985; Samuel R. Harrell
Professor of the Marketing Department at the Wharton School
of Business, University of Pennsylvania since 1968; Director
of Franklin Electronic Publishers, Inc. and J&J Snack Foods
Corp.
Edith W. Martin, Ph.D..................... 53 Director of the Company since 1991; Current member of the
Compensation Committee and Executive Stock Option Committee;
Vice President, Chief Information Officer for Halliburton
Company since March 1999; Vice President, Information Systems
and Chief Information Officer for Eastman Kodak, Co. from
1996 to 1998; Executive Vice President and Chief Technology
Officer for the Student Loan Marketing Association (Sallie
Mae) from August 1994 until January 1996; Executive Vice
President and Chief Information Officer for Intelsat from
July 1992 until August 1994; Director of Immunex Corporation
and Pharmacopeia, Inc.
</TABLE>
5
<PAGE> 8
<TABLE>
Thomas W. Wilson, Jr.. 67 Chief Executive Officer since November 1998; Director of
the Company since 1991; Chairman of the Board of Directors
since April 1995; Current Chairman of the Executive
Committee; Senior Partner of McKinsey & Company,
management consultants, from 1973 until 1990 (retired);
Director of Aerial Communications, Inc.
<S> <C> <C>
</TABLE>
COMMITTEES OF THE BOARD OF DIRECTORS, MEETINGS AND COMPENSATION OF DIRECTORS
During 1998, the Board of Directors met on five occasions, and all members
with the exception of Glen L. Urban attended at least 75% of the Board of
Directors' meetings and their respective Committee meetings.
The Board of Directors maintains an Executive Committee, Audit Committee,
Compensation Committee and Executive Stock Option Committee. The Company has no
nominating committee. The nominating function is performed by the Board of
Directors, which has not established a formal policy or procedure for
considering potential nominees including potential nominees recommended by
stockholders.
The Executive Committee is empowered to exercise the authority of the Board
of Directors in the management of the business and affairs of the Company
between the meetings of the Board, except as provided by the by-laws or limited
by the provisions of the Delaware General Corporation Law. The Executive
Committee met during 1998 on one occasion.
The Audit Committee recommends to the Board of Directors the appointment of
the independent auditors for the following year and reviews the scope of the
audit, the independent auditors report and the auditors' comments relative to
the adequacy of the Company's system of internal controls and accounting
policies. The Audit Committee met during 1998 on three occasions.
The Compensation Committee is responsible for reviewing and approving
salaries and other compensation for the Company's executive officers. The
Committee also makes recommendations to the Executive Stock Option Committee
with respect to stock option grants to the Company's directors and executive
officers pursuant to the Executive Option Plan. The Compensation Committee met
during 1998 on two occasions.
The Executive Stock Option Committee is responsible for making
determinations regarding the grant of stock options from time to time to the
Company's directors and executive officers pursuant to the Executive Option
Plan. During 1998, the Executive Stock Option Committee approved all director
and executive stock option grants throughout the course of the year.
Directors of the Company who are also employees do not receive any fee or
remuneration for services as members of the Board of Directors or of any
Committee of the Board of Directors. Pursuant to the Company's Stock Plan for
Independent Directors, non-employee Directors are issued shares of common stock
in lieu of 75 percent of the cash retainer otherwise payable for his or her
services on the Board. Pursuant to this plan, each non-employee Director
received 906 shares of common stock in 1998 and an annual retainer fee of
$5,250. Non-employee Directors who serve on a committee (excluding the
Chairperson) each receive an additional annual cash fee of $2,500. Chairpersons
of such committees each receive an additional annual cash fee of $5,000. Total
cash fees for committee membership and the cash portion of the annual retainer
paid during 1998 to non-employee Directors were as follows: Mr. Andress,
$16,500; Mr. Epstein, $15,250; Mr. Eskin, $3,938; Mr. Little, $9,750; Mr.
Lodish, $5,250; Mr. Lucente, $12,750; Dr. Martin, $7,688; Mr. Stamen, $3,938;
and Mr. Urban, $5,813. All directors are reimbursed for travel expenses.
Each non-employee Director receives an annual grant of 2,500 stock options.
During 1998, the Company granted options to purchase 2,500 shares of the
Company's Common Stock to each of the non-employee Directors listed above. The
exercise price of these options for all non-employee Directors except the
members of the Executive Stock Option Committee was $17.50, the market value of
the Company's Common Stock on the date of grant. The exercise price of these
options for the non-employee Directors who serve as members of the Executive
Stock Option Committee was $15.75, the market value of the Company's Common
Stock on the date of grant specified by the terms of the Executive Option Plan.
6
<PAGE> 9
EXECUTIVE COMPENSATION
The following information regarding compensation is given with respect to
persons who served as Chief Executive Officer of the Company during 1998 and the
four other highest paid executive officers of the Company (the "Named Executive
Officers").
REPORT ON EXECUTIVE COMPENSATION
The Compensation Committee of the Board of Directors (the "Committee") is
responsible for reviewing and approving the annual salary, bonus and other
compensation of the Company's executive officers. The Committee also makes
recommendations to the Executive Stock Option Committee with respect to stock
option grants to the Company's executive officers. The Committee is composed
entirely of outside directors.
The goals of the Company's compensation programs are to align executive
compensation with the Company's performance, and to attract, retain and reward
executive officers who contribute to the Company's success within a highly
competitive information and software service industry. The programs are intended
to support the goal of increasing stockholder value by achieving specific
financial and strategic objectives.
The Committee has considered the potential impact of Section 162(m) of the
Internal Revenue Code on executive compensation in future years. Section 162(m)
disallows a tax deduction by any publicly-held corporation for individual
compensation exceeding $1 million in any taxable year for a Named Executive
Officer, unless compensation is performance based. The Committee has determined
that, while Section 162(m) should be given consideration in compensating
executive officers, the Committee's compensation philosophy should not be
arbitrarily altered in order to limit or maintain executive compensation within
the Section 162(m) deduction limit. The Committee has, however, determined that
it will make every reasonable effort, consistent with sound executive
compensation principles and the needs of the Company, to permit all amounts paid
to the Named Executive Officers to be deductible by the Company.
Compensation of Executive Officers Generally
The Company's fundamental compensation philosophy is to relate the total
compensation package for an executive officer directly to his or her
contribution to the Company's performance objectives. Each executive's
incentive, or "at risk," compensation is typically directly tied to the
achievement of both Company and individual objectives, including both
quantitative and qualitative objectives. The performance objectives of each
executive officer differs depending upon individual roles and responsibilities
within the management group and typically include performance objectives for
both the Company and a business unit or function for which the executive officer
has direct involvement. Certain elements of compensation for individual
executive officers are also dictated by employment agreements that are in place.
In 1998, the Committee emphasized financial, strategic and quality/service
oriented objectives. It generally based its determination of executive
performance upon the achievement of the following pre-established objectives:
(i) improvement of the Company's earnings per share; (ii) improvement of the
Company's cash flow; and (iii) other quantitative and qualitative strategic
objectives. These other objectives included a quantitative goal for the
reduction of required rework levels based on production benchmarks, the
development and implementation of enhanced financial and management information
systems and a reduction in the ratio of accounts receivable to sales.
For the year ended December 31, 1998, the Company's consolidated revenues
increased 12% over 1997. Revenues from the Company's ongoing U.S. businesses
were up 8% over 1997, while earnings from U.S. operations declined by 20% from
1997 levels. International revenues increased 28% versus the prior year and the
loss from operations was reduced by 25% versus 1997. Overall, consolidated
operating results for the twelve months ended December 31, 1998 were
substantially below 1997 results. Net earnings were $3.8 million or $ .13 per
diluted share compared to $7.7 million or $ .26 per diluted share in 1997. The
Company's consolidated cash flow provided (used) before financing activities was
($1.2) million in 1998 and $3.8 million in 1997.
7
<PAGE> 10
The Company's executive compensation package consists of three principal
components: (i) base salary; (ii) potential for an annual cash bonus; and (iii)
the opportunity to earn stock options grants. The Company generally seeks to
position its compensation package for each executive position at a level which,
for outstanding performance, is at or somewhat above industry average. In
addition, the Company strives to make as much of the total compensation mix as
possible variable, based on performance.
Salary. The Committee reviews each executive officer's salary annually. In
determining appropriate salary levels, the Committee considers the level and
scope of responsibility, experience, Company and individual performance compared
to the preceding year, contractual provisions in employment and other
agreements, as well as competitive market data on salary levels. On May 1, 1998
seven executive officers received salary increases based on their 1997
performance, market adjustments and contractual provisions in employment and
other agreements.
Cash Bonuses. During fiscal year 1998, each executive officer of the
Company was eligible for a target annual incentive bonus calculated by the
Committee as a percentage of the officer's base salary. Target bonus is defined
as the payment earned if an officer achieves 100% of his/her objectives. The
Company's bonus plan allows for the payment of adjusted (i.e. lower or higher)
amounts based on the comparison of results against objectives. For 1998, bonus
targets ranged from 28% to 50% of an executive officer's salary. As stated
above, in determining the cash bonuses, the Committee considered company
performance as well as other qualitative objectives. A specified portion of this
target bonus (generally as high as 70%) is based on the achievement of
company-wide financial objectives. The balance is based on individual objectives
which may be either quantitative or qualitative. In 1999, five executive
officers received limited cash bonuses for services rendered in 1998. Of these
five, only one executive officer, who achieved a substantial portion of his
international financial objectives, received a bonus for the company-wide
financial objective portion (up to 70% of target) of his/her targeted bonus
potential. The limited cash bonuses that were provided to three of these five
executive officers were based solely on the individual's performance in
achieving certain qualitative objectives such as the progress made on the
implementation of financial and management information systems. In addition, one
executive officer received a cash bonus of $80,000 as required under the terms
of his 1997 employment agreement with the Company. The bonus amounts awarded to
the Company's executive officers ranged from 0% to 34% of their targeted bonus
potential, or 0% to 12% of salary.
Option Grants. The Committee is responsible for recommending to the
Executive Stock Option Committee the individuals to whom grants should be made,
the timing of the grants, the exercise price per share and the number of shares
subject to each option. The Executive Stock Option Committee has final approval
of option grants made to executive officers. Stock options granted to executive
officers generally vest over a four-year period and are typically granted with
an exercise price equal to the fair market value of the Company's Common Stock
as of the date of grant. The ultimate value of stock options is directly tied to
change in the value of a share of Common Stock. The Committee also considers the
amount and terms of options already held by a particular officer, the amount and
terms of options granted to that officer's peers, the role of each executive in
accomplishing the Company's performance objectives and the highly competitive
nature of the Company's industry.
The Committee believes that stock based incentives for executive officers
are an important feature of the Company's executive compensation package. The
Committee believes that stock options directly motivate an executive to maximize
long-term stockholder value and provide the executive officer with the
opportunity to share in the appreciation of the value of the stock of the
Company. During 1998, the Company awarded stock options to one executive
officer.
Compensation of the Chief Executive Officers. The office of Chief
Executive was served by Mr. Gian M. Fulgoni until his resignation in November
1998. The office of Chief Executive is currently served by Mr. Thomas W. Wilson,
Jr. who has been serving as Chief Executive Officer since the resignation of Mr.
Fulgoni. During 1998, the Company compensated Mr. Fulgoni and Mr. Wilson
utilizing the same philosophy and general criteria used for other executive
officers as described above. Mr. Fulgoni's principal quantitative performance
objectives included a specific earnings per share and cash flow targets and
other
8
<PAGE> 11
personal objectives including production and service/product enhancements. Mr.
Wilson's principal performance objective was to assist the Company in
transitional matters upon the resignation of Mr. Fulgoni.
During 1998, Mr. Fulgoni received a $383,753 salary, an increase of $28,543
(8%) over the amount paid in 1997 based on 1997 performance and a market
adjustment. The committee awarded Mr. Fulgoni no cash bonus for 1998 based on
the financial performance of the Company in 1998.
During 1998, Mr. Wilson received a base salary of $283,514. Mr. Wilson
received a 3% increase in salary for 1997 performance, increasing his salary by
$8,514. For 1998, Mr. Wilson did not receive any bonus payout, nor did he
receive any additional cash compensation for his Chief Executive Officer
responsibilities.
The foregoing report has been approved by the current members of the
Committee.
The Compensation Committee
James G. Andress, Chairman
Edward E. Lucente*
Edith W. Martin*
- ---------------
* Also members of the Executive Stock Option Committee.
SUMMARY COMPENSATION TABLE
The following table sets forth all compensation to the Named Executive
Officers for services rendered to the Company for the Company's last three
fiscal years:
<TABLE>
<CAPTION>
LONG TERM
COMPENSATION
AWARDS
------------
NUMBER OF
ANNUAL COMPENSATION SECURITIES
-------------------------- UNDERLYING ALL OTHER
NAME AND PRINCIPAL POSITION YEAR SALARY BONUS OPTIONS COMPENSATION(1)
--------------------------- ---- -------- -------- ------------ ---------------
<S> <C> <C> <C> <C> <C>
Thomas W. Wilson, Jr.(2)................. 1998 $283,514 $ 0 0 $ 0
Chief Executive Officer and 1997 275,000 78,400 0 0
Chairman of the Board 1996 275,000 22,000 0 0
Gian M. Fulgoni(2)....................... 1998 383,753 0 0 4,403
Chief Executive Officer 1997 355,210 101,200 0 3,709
until November 1998 1996 330,750 55,600 35,000(3) 3,325
James R. Chambers(4)..................... 1998 319,439 80,000(5) 125,000(6) 0
Group President, 1997 54,519 40,000 125,000(7) 0
U.S. Commercial Businesses
Randall S. Smith......................... 1998 310,125 37,685 0 4,403
Group President, International 1997 288,493 89,600 0 3,709
Services and Corporate Development 1996 286,000 53,700 30,000(3) 3,325
Gary M. Hill............................. 1998 294,855 31,128 0 4,403
Executive Vice President and 1997 281,854 85,200 0 3,709
Chief Financial Officer 1996 275,000 47,300 27,500(3) 2,288
John P. McNicholas, Jr................... 1998 160,356 12,000 0 4,403
Senior Vice-President, Controller 1997 154,157 25,000 3,000 3,709
and Chief Accounting Officer 1996 148,333 22,000 0 3,291
</TABLE>
- ---------------
9
<PAGE> 12
(1) Except as otherwise noted, represents contributions made by the Company to
the Information Resources, Inc. 401 (k) Retirement Savings Plan.
(2) Mr. Fulgoni resigned from his position as Chief Executive Officer on
November 21, 1998. Mr. Wilson was appointed Chief Executive Officer on that
date.
(3) Options granted May 24, 1996, in connection with a salary freeze imposed on
executive officers in 1996.
(4) Mr. Chambers joined the Company's executive management team during the
fourth quarter of fiscal year 1997.
(5) Minimum of $80,000 bonus guaranteed as part of employment contract.
(6) Options granted August 28, 1998 pursuant to an amendment to employment
contract.
(7) Options granted November 10, 1997 as an inducement to join the Company's
executive management team.
STOCK OPTION GRANTS IN THE LAST FISCAL YEAR
The following table sets forth information concerning individual grants of
stock options made during the Company's last fiscal year to each of the Named
Executive Officers:
<TABLE>
<CAPTION>
INDIVIDUAL GRANTS
------------------------- POTENTIAL REALIZABLE VALUE AT
NUMBER OF % OF TOTAL ASSUMED ANNUAL RATES OF
SECURITIES OPTIONS STOCK PRICE APPRECIATION FOR
UNDERLYING GRANTED TO OPTION TERM(2)
OPTIONS EMPLOYEES IN EXERCISE EXPIRATION ------------------------------
NAME GRANTED FISCAL YEAR PRICE(1) DATE 5% 10%
---- ---------- ------------ -------- ---------- ------------ --------------
<S> <C> <C> <C> <C> <C> <C>
James R. Chambers............. 125,000(3) 7.77 $10.938 8/28/08 $859,856 $2,179,044
</TABLE>
- ---------------
(1) Represents the fair market value of the Company's Common Stock on August 28,
1998, the date of grant.
(2) The amounts shown under these columns are the result of calculations at the
5% and 10% rates required by the Securities and Exchange Commission and are
not intended to forecast future appreciation of the price of the Company's
common stock.
(3) The options are exercisable beginning on the first anniversary of the grant
date.
AGGREGATE STOCK OPTION EXERCISES IN THE LAST FISCAL YEAR
AND FISCAL YEAR-END STOCK OPTION VALUES
The following table sets forth certain stock option information, including
exercises during the Company's last fiscal year for each of the Named Executive
Officers:
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES UNDERLYING IN-THE-MONEY
SHARES UNEXERCISED OPTIONS AT YEAR-END OPTIONS AT YEAR-END(1)
ACQUIRED ON VALUE ----------------------------------- ---------------------------
NAME EXERCISE REALIZED EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
---- ----------- -------- ------------------- ------------- ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Thomas W. Wilson, Jr.... 0 $ 0 89,375 20,625 $ 0 $ 0
Gian M. Fulgoni......... 0 0 447,531 17,500 70,194 0
James L. Chambers....... 0 0 41,666 208,334 0 0
Randall S. Smith........ 0 0 233,031 15,000 138,928 0
Gary M. Hill............ 4,000 5,760 143,083 30,417 0 0
John P. McNicholas,
Jr.................... 0 0 20,750 12,250 0 0
</TABLE>
- ---------------
(1) The value of "in-the-money options" represents the difference between the
exercise price of such option and the stock price which was $10.188 per
share at the close of business on December 31, 1998.
10
<PAGE> 13
STOCK PERFORMANCE GRAPH
The following graph compares cumulative total stockholder return on the
Company's Common Stock over the past five fiscal years with the cumulative total
return of (i) the Standard & Poors 500 Composite Index, and (ii) The Paine
Webber LLC Marketing Services Index.
PERFORMANCE GRAPH
<TABLE>
<CAPTION>
INFORMATION RESOURCES PAINEWEBBER S & P 500
--------------------- ----------- ---------
<S> <C> <C> <C>
Dec-93 100.00 100.00 100.00
Dec-94 35.71 95.39 101.32
Dec-95 32.14 142.63 139.40
Dec-96 36.36 198.14 171.40
Dec-97 34.74 183.05 228.59
Dec-98 26.46 227.11 293.91
</TABLE>
EMPLOYMENT AGREEMENTS
The Company has employment agreements with three of its Named Executive
Officers, Randall S. Smith, Group President, International Services and
Corporate Development, Gary M. Hill, Executive Vice President and Chief
Financial Officer, and James R. Chambers, Group President, U.S. Commercial
Businesses. Mr. Smith's agreement provides for: (i) a minimum base salary of
$286,000 per year; (ii) bonus or other incentive compensation as provided under
any present or future incentive compensation plan of the Company as applied to
other senior officers of the Company; and (iii) the right to participate during
the employment period in all benefit plans applicable to senior officers of the
Company. Mr. Smith's agreement may be terminated: (i) by Mr. Smith for "Good
Reason" (as defined in the agreement) upon one month's prior written notice; or
(ii) by the Company with or without "Cause" (as defined in the agreement) upon
two months' prior written notice. If the agreement is terminated without Cause
or for "Good Reason," Mr. Smith is entitled to receive: (i) his base salary for
a period of twelve months following the termination date; (ii) a pro rated bonus
(determined based upon the average bonus awarded to other executive officers of
the Company); and (iii) an extended option exercise period. In the event of Mr.
Smith's death during the Employment Period all unvested options will immediately
vest and be exercisable for 24 months from the date of death. In the event of a
change of control (as defined in the Agreement) which occurs at least two years
following the effective date of the Agreement, all of Mr. Smith's options,
whether or not then vested, become immediately exercisable.
Mr. Hill's agreement provides for: (i) a minimum base salary of $275,000
per year, (ii) participation in the Company's bonus plan; and (iii) the right to
participate in all benefit plans applicable to senior officers of the Company.
In the event of a change of control (as defined in the agreement), all of Mr.
Hill's unvested
11
<PAGE> 14
options will vest immediately. In the event Mr. Hill's employment is terminated
for any reason, other than for cause, Mr. Hill's death or voluntary resignation
(except in case of such resignation within one year following a change of
control), Mr. Hill is entitled, for a period of 12 months, to continue to
receive all benefits and to be paid at a rate equal to 130% of his base salary
then in effect.
Mr. Chambers' agreement provides for: (i) a minimum base salary of $315,000
per year, (ii) participation in the Company's bonus plan; (iii) a guaranteed
minimum bonus of $80,000 for 1998; and (iv) the right to participate in all
benefit plans applicable to senior officers of the Company. In the event of a
change of control (as defined in the agreement) before the second anniversary of
Mr. Chambers' employment and Mr. Chambers terminates his employment within one
year after the change of control occurs for any reason other than for cause, Mr.
Chambers' options will continue to vest and become exercisable in accordance
with their original vesting schedule. In the event Mr. Chambers' employment is
terminated for any reason other than for cause, Mr. Chambers' death or voluntary
resignation, Mr. Chambers is entitled, for a period of 12 months, to continue to
receive all benefits and to be paid at a rate equal to 140% of his base salary
then in effect. In addition, any options that would otherwise vest in the
succeeding 18 month period following termination of Mr. Chambers' employment
will vest immediately (except for the 250,000 options referred to in the
following sentence and any options that will vest otherwise pursuant to the
change in control provision above). If Mr. Chambers' employment is terminated
without cause or for "Good Reason" (as defined in the agreement) before the
second anniversary of his employment, the 125,000 options granted to him in 1997
and the 125,000 options granted to him in 1998 will continue to vest and become
exercisable (other than terminated or expired options) within 30 days after the
last of such options vest. If Mr. Chambers' employment is terminated without
cause or for "Good Reason" after the second anniversary of his employment, all
unvested options of these 250,000 options will vest immediately and will be
exercisable for a period of 24 months from the date of termination of employment
(other than terminated or expired options).
CERTAIN TRANSACTIONS
The Company has entered into consulting agreements with Leonard M. Lodish,
Ph.D. and Gian M. Fulgoni, each a director of the Company. Pursuant to the
agreement with Dr. Lodish, Dr. Lodish was paid $108,000 in 1998. Pursuant to the
consulting agreement with Mr. Fulgoni, which the Company entered into after his
resignation as Chief Executive Officer of the Company, Mr. Fulgoni has agreed to
provide consulting services to the Company for a period of three years from the
date of his resignation in consideration for an annual consulting fee of
$402,730. Mr. Fulgoni is also entitled to participate in certain benefit plans
of the Company during the consulting term. Mr. Fulgoni's agreement may be
terminated: (i) by Mr. Fulgoni for "Good Reason" (as defined in the agreement);
(ii) by Mr. Fulgoni after the first anniversary of the agreement upon 60 days
prior written notice; (iii) by Mr. Fulgoni prior to July 31, 1999 if the Company
and Mr. Fulgoni fail to enter into a joint venture agreement or a data licensing
agreement prior to June 30, 1999; or (iv) by the Company with "Cause" (as
defined in the agreement). Mr. Fulgoni shall cease to be bound by the non-
competition provisions contained in the agreement if he terminates the agreement
for "Good Reason" or because the Company and Mr. Fulgoni have failed to enter
into a joint venture agreement or a data licensing agreement prior to June 30,
1999. All stock options held by Mr. Fulgoni (other than terminated or expired
options) shall remain exercisable through the termination or expiration of the
non-compete period defined in the agreement.
12
<PAGE> 15
PROPOSAL TO APPROVE AMENDMENT
TO THE COMPANY'S EXECUTIVE OPTION PLAN
The Board of Directors has approved for submission to the Company's
stockholders a proposal relating to the Company's Executive Option Plan. This
proposal is being made to amend certain provisions of the Executive Option Plan
that are designed to permit the Company to deduct compensation paid thereunder
for Federal income tax purposes without regard to the limits on deductibility of
compensation expense imposed pursuant to Section 162(m) of the Internal Revenue
Code of 1986, as amended (the "Code").
On April 21, 1999, the closing price of the Company's Common Stock on the
NASDAQ Stock Market was $7 5/8.
The Board of Directors and stockholders of the Company approved the current
Executive Option Plan in 1992. The Executive Option Plan was created in response
to the SEC's adoption of certain rules pursuant to Section 16 of the Securities
Exchange Act of 1934 (the "Exchange Act"). These rules regulate the ownership
and trading of securities by directors and executive officers of public
companies. In 1995, the Company modified the Executive Option Plan to comply
with Section 162(m) of the Code.
The eligible participants in the Executive Option Plan are the Company's
executive officers and directors. Because actual participation in the Executive
Option Plan will be dependent on the number of executive officers and directors
of the Company existing from time to time, the number of eligible participants
under the Executive Option Plan cannot be determined as of this date. There are
currently sixteen executive officers and directors of the Company.
The Executive Option Plan is administered by the Executive Stock Option
Committee which consists of at least two directors (the "Committee") who are
"disinterested persons" within the meaning of Rule 16b-3 under the Exchange Act.
Committee members are eligible to participate under the Executive Option Plan
and receive, on June 15 of every year, stock options to purchase 2,500 shares of
Common Stock of the Company at an exercise price equal to the fair market value
of the Common Stock on the date of grant of the option. Subject to the terms of
the Executive Option Plan, the Committee has the authority to determine the
material terms and provisions under which options are granted, including the
persons to whom such options are granted, the exercise prices, the number of
shares subject to options, the time or times during which options may be
exercised and certain other terms and conditions of the respective options
granted.
Options granted under the Executive Option Plan may be either incentive
stock options ("ISOs"), as defined in Section 422 of the Code or non-qualified
stock options. No option designated as an ISO can be exercised by the option
holder until such individual has been employed by the Company or its subsidiary
for at least three months following the date of grant. No option designated as
an ISO may be granted to a non-employee director of the Company.
When adopted in 1992, the Company reserved for future issuance up to
2,000,000 shares of Common Stock to be issued upon the exercise of options
granted or to be granted pursuant to the Executive Option Plan. In 1995, the
Company increased the number of shares reserved for issuance under the plan by
500,000 shares. In the event that any outstanding option granted under the
Executive Option Plan terminates or expires prior to its exercise, for any
reason, then the underlying shares of Common Stock shall not be charged against
the maximum limit of shares available under the Executive Option Plan and such
shares shall become available for future grants of options under the Executive
Option Plan. Because actual participation in the Executive Option Plan will be
determined at the discretion of the Committee, future grants or allocations
under the Executive Option Plan cannot be determined precisely at this time.
There are currently 847,498 options available for issuance pursuant to the
Executive Option Plan.
The exercise price of ISOs granted under the Executive Option Plan may not
be less than 100% of the fair market value of the Common Stock on the date of
grant and, in the case of ISOs granted to holders of more than 10% of the voting
stock of the Company or any subsidiary of the Company, not less than 110% of the
fair market value of the Common Stock on the date of grant. The aggregate fair
market value (determined at the time of grant) of shares issuable upon the
exercise of ISOs granted to an option holder under all plans of
13
<PAGE> 16
the Company or any subsidiary that become exercisable for the first time during
any one calendar year may not exceed $100,000.
The exercise price of non-qualified options are fixed by the Committee on
the date of grant and may be less than, equal to or greater than the fair market
value of the Common Stock on such date.
The duration of options granted under the Executive Option Plan are fixed
by the Committee but no longer than 10 years from the date of grant and, for
ISOs granted to holders of more than 10% of the voting stock of the Company or
any subsidiary, no more than five years from the date of grant. The duration of
an option may be reduced in connection with the termination of the option
holder's employment, if applicable, or death of the option holder or, at the
discretion of the Committee, due to the option holder's less than satisfactory
performance.
If the Committee determines that the option holder is not satisfactorily
performing the duties to which he or she was assigned on the date the option was
granted or duties of at least equal responsibility, the Committee may prescribe
longer time periods and additional requirements with respect to the exercise of
a nonvested option or terminate in whole or in part such portion of any
nonvested option.
During the option holder's lifetime, all options granted under the
Executive Option Plan are exercisable only by the option holder or by his or her
legal representative. In addition, options granted under the Executive Option
Plan are not transferable, other than by will or the laws of descent and
distribution. Such options shall become null and void upon any attempt by the
option holder to otherwise transfer, assign, pledge, hypothecate, or dispose of
the option, or upon the levy of any attachment or similar process upon such
option.
Options granted will terminate upon the earlier of (i) the date of
expiration or (ii) either one year after termination of the Option holder's
employment or directorship with the Company or its subsidiary (unless a shorter
or longer time period is approved by the Committee or the Board of Directors),
or in the event such Options are designated as ISOs and the termination of
employment is due to retirement, three months following the Option holder's
retirement (unless a shorter or longer time period is approved by the Committee
or the Board of Directors).
No option or shares of Common Stock issued pursuant to the exercise of an
option shall be disposed of until six months following the date of grant.
The number of shares of Common Stock available under the Executive Option
Plan and the exercise price and number of shares subject to outstanding options
under such Plan will be proportionately adjusted to prevent any dilution or
enlargement of rights that would otherwise result by reason of stock dividends,
stock splits, recapitalization, mergers, consolidations or other such changes in
the capital structure of the Company. In no event will fractional shares be
issued under the Executive Option Plan.
The Board of Directors may, from time to time, amend the Executive Option
Plan as it relates to the terms and conditions of any options granted or to be
granted under the Executive Option Plan, but in no event shall such amendment
affect the rights of an option holder with respect to a previously granted
option, unless the option holder consents. Any amendment which would (i)
increase or decrease the number of shares issuable upon the exercise of an
option, with the exception of any increase or decrease in the number of shares
resulting from a stock adjustment, (ii) change the class of persons to whom
options may be granted or (iii) extend the period or periods during which
options may be granted or exercised, must be approved by a majority of the
holders of the Company's Common Stock within 12 months of such amendment.
The Executive Option Plan will remain in full force and effect until the
close of business on May 27, 2002, at which time the right to grant options
under the Plan shall automatically terminate. Any options granted before the
termination of the right to grant options under the Plan will continue to be
governed thereafter by the terms of the Plan.
14
<PAGE> 17
The table below shows the number of options granted under the Executive
Option Plan to the following individuals and groups during the Company's 1998
calendar year. See also "-- Executive Compensation." Employees who are not
executive officers or directors are not eligible to participate in the Executive
Option Plan.
<TABLE>
<CAPTION>
NUMBER OF
NAME AND POSITION/GROUP OPTIONS
- ----------------------- ---------
<S> <C>
Thomas W. Wilson, Jr........................................ 0
Chief Executive Officer and Chairman of the Board
Gian M. Fulgoni............................................. 0
Chief Executive Officer until November 1998
James R. Chambers........................................... 125,000
Group President, U.S. Commercial Businesses
Randall S. Smith............................................ 0
Group President, International Services and Corporate
Development
Gary M. Hill................................................ 0
Executive Vice President and Chief Financial Officer
John P. McNicholas, Jr...................................... 0
Senior Vice President, Controller and Chief Accounting
Officer
All current executive officers.............................. 125,000
All current directors (non-executive officers).............. 22,500
All director nominees....................................... 10,000
</TABLE>
Federal Income Tax Treatment of the Executive Option Plan.
The following discussion is not intended to serve as a comprehensive
description of all Federal income tax consequences associated with stock
options, does not reflect any consideration of minimum tax or foreign, state or
local tax consequences, and is based upon an assumption that any stock acquired
by exercising an option will not be subject to any substantial risk of
forfeiture or restriction as to transferability.
A person who is granted a stock option under the Executive Option Plan will
not be subject to federal income tax at the time of grant, and the Company will
not be entitled to a tax deduction by reason of such grant. Upon exercise of a
non-qualified option, the difference between the option price and the fair
market value of the stock on the date of exercise will be considered ordinary
income to the grantee.
Although no taxable income will be recognized by the employee upon exercise
of an ISO and the Company is not entitled to a tax deduction by reason of such
exercise, the excess of the fair market value on the date of exercise over the
exercise price is an adjustment which increases alternative minimum taxable
income ("AMTI"), the base upon which alternative minimum tax is computed. In
determining the amount of gain or loss recognized on the later disposition of
stock acquired pursuant to the exercise of an ISO, the tax basis of the stock
for alternative minimum tax purposes (but not regular tax purposes) is increased
by the excess of the fair market value of the stock over the option price at the
time of exercise. If stock purchased pursuant to the exercise of an ISO is sold
within two years from the date of grant or within one year after the transfer of
such stock to the employee, then the difference, with certain adjustments,
between the fair market value of the Company Common Stock at the date of
exercise and the option price will be considered ordinary income to the grantee.
The Company is generally entitled to an income tax deduction for any
compensation income taxed to participants for non-qualified options issued
pursuant to the Executive Option Plan. The Company, however, would not be
entitled to a deduction for compensation paid to certain covered executives to
the extent the non-excludable compensation paid to any such person exceeds $1
million in a given year. Compensation
15
<PAGE> 18
attributable to a stock option is not considered compensation that is subject to
the $1 million limit provided the option is granted pursuant to a plan that
satisfies certain requirements. The proposed amendment to the Executive Option
Plan which amends the limits on the maximum number of shares with respect to
which options may be granted to an individual employee during a specified time
period, is intended to conform the Executive Option Plan to the applicable
requirements for exclusion of compensation attributable to options from the $1
million limit. See "-- Proposal to Approve An Amendment to the Executive Option
Plan Increasing the Number of Options That May Be Granted In a Single Year."
PROPOSAL TO APPROVE AN AMENDMENT TO THE EXECUTIVE OPTION PLAN
INCREASING THE NUMBER OF OPTIONS THAT MAY BE GRANTED
IN A SINGLE YEAR
(Proposal Number 2 on the Enclosed Proxy Card)
In 1995, the Company's stockholders approved an amendment to the Executive
Option Plan to change certain provisions thereof so that the Company will be
entitled to deduct compensation paid thereunder for Federal income tax purposes
without regard to the limitations on deductibility of compensation expense
imposed pursuant to Section 162(m) of the Code. See " -- Federal Income Tax
Treatment of the Executive Option Plan." That amendment set an annual limit on
the number of options that could be granted to an individual participant at
250,000 shares.
The Board of Directors has proposed that the limit be increased to 700,000
shares per year. If the proposed amendment of the Executive Option Plan is
approved, no employee shall be granted an option under the Executive Option Plan
in any given year in excess of 700,000 shares.
As of the date of this Proxy Statement, the Board of Directors is actively
considering candidates to serve as the Company's Chief Executive Officer. In
order to attract a qualified candidate, the Company anticipates that it may
require a comprehensive compensation package that includes a substantial option
grant. If the proposal to increase the annual option grant limitation under the
Executive Plan is not approved, the Company may be limited in the number or
types of candidates that will consider the position of Chief Executive Officer
of the Company and still be able to deduct fully for income tax purposes the
entire compensation paid to such executive.
THE BOARD OF DIRECTORS RECOMMENDS A VOTE "FOR" APPROVAL OF THE AMENDMENT TO
THE EXECUTIVE OPTION PLAN INCREASING THE NUMBER OF OPTIONS THAT MAY BE GRANTED
IN A SINGLE YEAR.
RELATIONSHIP WITH INDEPENDENT AUDITORS
The Company's financial statements for the year ended December 31, 1998
have been audited by Ernst & Young LLP, independent auditors. Ernst & Young has
been selected as the Company's independent auditors for the calendar year 1999.
It is expected that a representative of Ernst & Young LLP will attend the
Meeting and will be available to make a statement, if they desire to do so, or
respond to appropriate questions.
STOCKHOLDER PROPOSALS FOR 2000 ANNUAL MEETING
In order for a proposal by a stockholder of the Company to be included in
the Company's proxy statement and form of proxy for the 2000 Annual Meeting of
stockholders, the proposal must be received by the Company at its executive
offices located at 150 North Clinton, Chicago, Illinois 60661-1416 no later than
December 24, 1999. If the Company is not notified of a stockholder proposal by
March 9, 2000, then the proxies held by management of the Company may provide
the discretion to vote against such stockholder proposal, even though such
proposal is not discussed in the Proxy Statement.
16
<PAGE> 19
OTHER MATTERS
The Company knows of no matters, other than those referred to herein, which
will be presented at the Meeting. If, however, any other appropriate business
should properly be presented at the Meeting, the proxies named in the enclosed
form of proxy will vote the proxies in accordance with their best judgment.
EXPENSES OF SOLICITATION
All expenses incident to the solicitation of proxies by the Company will be
paid by the Company. Solicitation may be made personally, or by telephone,
telegraph or mail, by one or more employees of the Company, without additional
compensation. The Company has engaged Georgeson & Co., Inc. to assist in the
distribution of proxy materials to shareholders of the Company. Georgeson will
receive a fee for such services of approximately $3,000, plus reimbursement of
its reasonable out-of-pocket expenses. The Company will reimburse brokerage
houses and other custodians, nominees and fiduciaries for reasonable
out-of-pocket expenses incurred in forwarding copies of solicitation material to
beneficial owners of Common Stock held of record by such persons.
ADDITIONAL INFORMATION
A copy of the Company's Annual Report on Form 10K, filed with the
Securities and Exchange Commission, is available without charge upon written
request addressed to the Corporate Secretary of the Company, 150 North Clinton,
Chicago, Illinois 60661-1416.
By order of the Board of Directors,
INFORMATION RESOURCES, INC.
Edward S. Berger
Secretary
Chicago, Illinois
April 23, 1999
17
<PAGE> 20
PROXY PROXY
INFORMATION RESOURCES, INC.
150 NORTH CLINTON STREET
CHICAGO, ILLINOIS 60661-1416
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR THE ANNUAL MEETING OF STOCKHOLDERS - MAY 20, 1999
The undersigned hereby appoints Thomas W. Wilson, Jr. and Edward S. Berger as
Proxies, each with power to appoint his substitute, and hereby authorizes them,
together or separately, to represent and to vote, as designated below, all
shares of Common Stock of Information Resources, Inc. (the "Company") held of
record by the undersigned on April 9, 1999, at the Annual Meeting of
Stockholders to be held on May 20, 1999, or any adjournment thereof.
PLEASE MARK, SIGN AND DATE ON THE REVERSE SIDE,
AND RETURN IN THE ENCLOSED ENVELOPE.
(Continued and to be signed on reverse side.)
- --------------------------------------------------------------------------------
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY.
<TABLE>
<S> <C> <C>
1. Election of Directors - For Withhold For All 3. In their discretion, the Proxies are authorized
Nominees: James G. Andress, All All Except to vote upon such other business as may
Edwin E. Epstein, Edward E. Lucente [ ] [ ] [ ] properly come before the meeting.
and Jeffrey P. Stamen
- --------------------------------------
(Except Nominee(s) written above)
2. To consider and act upon a proposal For Against Abstain This proxy when properly executed, will be voted
to approve an amendment to the [ ] [ ] [ ] in the manner directed herein by the undersigned
Company's Executive Stock Option stockholder(s). IF NO DIRECTION IS MADE, THE PROXY
Plan designed to preserve the tax WILL BE VOTED FOR PROPOSALS 1 and 2.
deductibility of certain compensation
paid thereunder.
Date: 1999
------------------------------
Signature(s)
------------------------
------------------------------------
Please sign exactly as your name
appears herein. When shares are held
by joint tenants, both should sign. When
signing as attorney, executor, admin-
istrator, trustee or guardian, please
give full title as such. If a corporation,
please sign in full corporate name by
president or other authorized officer.
If a partnership, please sign in partnership
name by authorized person.
</TABLE>
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FOLD AND DETACH HERE
YOUR VOTE IS IMPORTANT!
PLEASE MARK, SIGN AND DATE, AND RETURN
IN THE ENCLOSED ENVELOPE.
4634 - INFORMATION RESOURCES, INC.
