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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM 10-K
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(Mark One)
[X]
ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
FOR THE FISCAL YEAR ENDED DECEMBER 31, 1998
OR
[ ]
TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934 (NO FEE REQUIRED)
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FOR THE TRANSITION PERIOD FROM TO
COMMISSION FILE NO. 0-11428
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INFORMATION RESOURCES, INC.
(Exact name of registrant as specified in its charter)
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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)
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REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE (312) 726-1221
SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT:
TITLE OF EACH CLASS
COMMON STOCK, $.01 PAR VALUE PER SHARE
PREFERRED STOCK PURCHASE RIGHTS
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Indicate by check mark whether the registrant (1) has filed all reports required
to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during
the preceding 12 months (or for such shorter period that the registrant was
required to file such reports), and (2) has been subject to such filing
requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by nonaffiliates of the
registrant as of February 26, 1999 (based on the closing price as quoted by
NASDAQ as of such date) was $224,887,627.
The number of shares of the registrant's common stock, $.01 par value per
outstanding share, as of February 26, 1999 was 27,867,884.
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's definitive proxy statement for the annual meeting
of stockholders to be held May 20, 1999 to be filed pursuant to Regulation 14A
are incorporated by reference into Part III of this Form 10-K.
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PART I
ITEM 1. BUSINESS
INTRODUCTION
Information Resources, Inc. ("IRI") and its subsidiaries (collectively the
"Company") is a leading provider of universal product code ("UPC"),
scanner-based business solutions services to the consumer packaged goods ("CPG")
industry, offering services in the U.S., Europe and other international markets.
The Company supplies CPG manufacturers, retailers and brokers with information
and analysis critical to their sales, marketing and supply chain operations. IRI
provides services designed to deliver value through an enhanced understanding of
the consumer to a majority of the Fortune 500 companies in the CPG industry.
The Company currently generates approximately 78% of its revenues from
sales and services provided in the U.S. These services center in large part
around the Company's flagship InfoScan(R) service, which tracks consumer
purchasing of products sold in grocery stores, drug stores, mass merchandisers,
convenience stores and other retail outlets across the United States. The
Company also offers a number of other services to CPG manufacturers, including
household-level information collected via consumer panels. One such service is
BehaviorScan(R) which is used for the testing and evaluation of alternative
marketing strategies and tactics for both new and established products. Closely
related to its information services, the Company also markets its suite of
software applications to the CPG industry. In addition, the Company maintains a
family of software application products based on EXPRESS(TM) technology owned by
Oracle Corporation ("Oracle"). In July 1995, the Company sold its EXPRESS
technology to Oracle, while retaining certain rights to market and distribute
Oracle EXPRESS software.
The Company provides business information services in Europe and other
international markets primarily using scanner based data. Revenues from the
Company's U.S. and International Services were as follows for the years ended
December 31 (in thousands):
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1998 1997 1996
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U.S. Services...................................... $396,992 $366,678 $344,612
International Services............................. 114,331 89,649 60,991
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Total.................................... $511,323 $456,327 $405,603
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U.S. AND INTERNATIONAL SERVICES
The Company's U.S. and International Services include InfoScan product
tracking services, related software product sales, consumer panel services,
analytical and consulting services, BehaviorScan product testing services and a
variety of applications of the Company's census (i.e., all stores within
participating retail chains) scanner databases.
InfoScan. The Company's principal information service marketed in the
United States and internationally is InfoScan. InfoScan is a service used by the
CPG industry to monitor and evaluate the market performance of products sold in
retail stores. The InfoScan service provides subscribers with a variety of
information including how much product they and their competitors are selling,
where the products are being purchased, at what price the products are being
sold and under what promotional conditions sales are occurring. This information
helps subscribers make fundamental strategic and tactical decisions for their
businesses in the areas of sales, marketing, pricing, promotion and logistics.
InfoScan utilizes data collected from UPC bar codes on CPG product
packaging. Scanners at retail checkouts read the UPC code and record product
sales electronically. On an on-going basis, the Company procures such electronic
sales data along with related promotional data from a sample of national and
local market retail stores. The Company also collects consumer purchase
information directly from individual households across the United States using
consumer identification cards in a store and/or proprietary in-home scanning
devices. The consumer purchase information can be used in a complementary
fashion with InfoScan data. The Company processes the information at its
computer facilities and stores it in the Company's
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proprietary databases. InfoScan subscribers access the information in the
Company's databases through a variety of means, including the use of analytical
software provided by the Company.
Subscriptions to InfoScan by CPG manufacturers are a principal source of
revenue for the Company. Manufacturers subscribe to InfoScan by contracting with
the Company to obtain access to the InfoScan databases for specified product
categories. InfoScan contracts generally have multi-year terms, usually of three
years or more in the U.S.
InfoScan Census. InfoScan Census applications are derived from a product
tracking service based on scanner data collected from all stores within
participating retail chains, as opposed to collection from a sample of such
stores. InfoScan Census offers the CPG industry more complete and accurate data
than sample services, since it has no sampling or projection errors, and its
applications can go beyond traditional market tracking uses.
InfoScan Census revenues come primarily from manufacturers purchasing key
account data, which are sales data for a product category based on all the
stores of a specific retailer. This service enables manufacturers' sales
representatives to negotiate with retail buyers based on a mutually consistent
and accurate measure of retail product movement. In addition, an evaluation of
differences in brand and product category purchasing across individual stores
within a chain can often pin-point opportunities to effectively build sales to
the benefit of both manufacturers and retailers. Beyond key account information,
census applications include improved management of trade promotions, validation
of "pay-for-performance" promotions, more effective sales force and broker
compensation programs and improved inventory and distribution management.
There are presently approximately 14,800 grocery stores, approximately
11,200 drug stores and approximately 3,100 mass merchandisers in the Company's
InfoScan Census U.S. database. The Company is also beginning to develop InfoScan
Census services in certain European markets.
InfoScan Data Collection. For the Company's InfoScan sample service, the
Company continuously collects weekly product sales and price information from
representative retail outlets. Included in the Company's national and local
market samples in the U.S. are approximately 4,500 stores in the aggregate,
including grocery stores, drug stores, mass merchandisers and convenience
stores. Contracting retailers typically deliver their scanner data
electronically to the Company's computer facilities in Wood Dale, Illinois.
While most retail stores in the United States have installed scanner equipment
to record product sales information, certain convenience stores and other retail
outlets have not. When scanner data are not available, the Company's field
personnel visit stores and obtain sales information via a manual audit of the
stores' product purchases and inventory. Collection practices for weekly product
sales information in the Company's operation in foreign countries are largely
scanner-based, though they vary somewhat on a country-by-country basis, as does
scanner data availability.
The InfoScan U.S. and international databases typically contain both
product movement and price information and "causal" data. Causal data consist of
information which may explain changes in product sales, such as price
promotions, retailers' newspaper ads and in-store displays, as well as other
promotion and merchandising data related to the sale of CPG products. The
Company employs a field force of full-time and part-time workers to collect
causal data. These employees conduct weekly on-site visits to retail stores
participating in the InfoScan service to collect causal information such as
in-store promotions and displays. Field force personnel perform other services
as well, including those related to the Company's test marketing services and
InfoForce services.
The Company often pays cash for scanner data covering a sample or census of
retailers' stores. However, the Company also exchanges software, product
movement information and other services to obtain access to data for all stores
within certain grocery stores and drug chains. The Company provides its QScan(R)
system to U.S. retailers in exchange for their participation in the provision of
their all-store data for InfoScan Census. QScan is an information system
designed to provide retailers with easy access to their scanner data. The system
addresses retailers' problems of organizing and analyzing their own databases of
information for products sold in their stores. With a RISC workstation at a
retailer's buying office or the Company's data
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center along with software provided by the Company, the QScan system allows for
the processing and analysis of scanner data from all of the retailer's stores on
a weekly basis. Typical data procurement contracts run from year-to-year and
generally are cancelable by either party on 90 days notice.
Consumer Panel. The Company also collects consumer purchase information
from approximately 115,000 individual households in the United States. Shoppers
from approximately 60,000 of these households present an identification card
when shopping at participating grocery stores, thereby allowing scanners to
record specific details of their product purchases. The Company also provides
about 55,000 households with hand-held scanners to record their product
purchases. Thus the Company is able to ascertain product movement information
from stores which either do not have scanners or do not otherwise participate in
the Company's household data collection system. Household panel information is
available in European markets usually from alliance partners of the Company.
Data Processing. With respect to its operations in the U.S., Great Britain,
France, Italy, the Netherlands and Spain, the Company receives and processes
data at its production center and computer facilities located in Wood Dale,
Illinois. The Company's production center operates with numerous mainframe and
RISC-based computers as well as proprietary production software and related
technology developed exclusively by the Company to process and store very large
amounts of data. Through direct telecommunication connections with InfoScan
clients in the U.S., the Company also provides electronic on-line access to
InfoScan data services. The Company typically leases its mainframe computers
from third party financial institutions.
Data Delivery. Subscriptions to the InfoScan service entitle the Company's
clients to access the Company's databases and receive information for specific
product categories. Because large amounts of data are involved, clients usually
either take electronic delivery of the data or obtain electronic access to the
Company's databases through the Company's on-line service. Clients taking
electronic delivery generally license software from the Company. The Company's
on-line service permits clients to build and store their own databases which
remain resident on the Company's computers. Clients then access the databases
through remote electronic connection. Clients may also purchase software
services from the Company. (See "Software and Related Products" below for more
information on Company revenues derived from software licensing.)
Other Client Services. The Company places a major emphasis on the provision
of experienced and knowledgeable client service personnel to assist InfoScan
subscribers in the use and interpretation of InfoScan data as well as the use of
the Company's analytical software. The Company also provides numerous analytical
and consulting services to both CPG manufacturers and retailers. These revenues
mostly follow from subscriptions to the Company's InfoScan service and
principally relate to analytical use of InfoScan data. These services are
generally billed on a time and materials basis.
Analytical and consulting services are directed at helping clients identify
new marketing opportunities, more effectively manage their marketing mix,
identify appropriate opportunities for product line optimization and increase
productivity of marketing expenditures through more effective couponing,
advertising and in-store merchandising programs. The Company's Neo, Inc.
subsidiary provides management consulting services focused on sales force
effectiveness, retailer marketing, information utilization and training and
support for selling organizations.
Software and Related Products. In close association with its retail
tracking services around the world, the Company markets analytical software to
the CPG industry principally for use in accessing, managing and analyzing the
Company's databases. The Company also markets the Apollo line of space
management software for use in managing retail shelf space, software for the
improved management of a manufacturer's promotion expenditures and software
applications to facilitate enhanced uses of InfoScan data. The Company markets a
line of software application products based on Oracle EXPRESS technology
primarily to the CPG industry. Oracle EXPRESS is a software technology designed
for working with large and complex databases. In July 1995, the Company sold its
EXPRESS technology and certain software products to Oracle, while retaining
ownership of certain EXPRESS-based sales and marketing software application
products for use in the CPG industry. Through licensing agreements with Oracle,
the Company continues to market and distribute many Oracle EXPRESS software
products.
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Many of the Company's U.S. and International clients use the Oracle
EXPRESS-based software application, Oracle Sales Analyzer(R), in order to
access, manage and analyze the Company's databases. Oracle Sales Analyzer is a
decision support software application built in Oracle EXPRESS and now owned by
Oracle. The product provides users with a range of analytical and reporting
tools. The Company typically licenses its own applications as well as Oracle
Sales Analyzer in conjunction with a client's InfoScan data subscription.
A principal source of software revenues is the provision of on-line access
services to InfoScan subscribers who access InfoScan databases residing in the
Company's data warehouses. Other software revenues derive from the sale of
Oracle software product licenses to InfoScan subscribers who load InfoScan data
on their own computer systems and do not use the Company's on-line services.
Licenses typically require a one-time paid-up license fee upon acceptance of the
software and annual maintenance payments for update and support services
thereafter. Oracle is generally entitled to receive royalties on relevant
licenses granted by the Company and its distributors within the CPG industry
until July 2001; however, the Company is not required to pay royalties to Oracle
on licenses granted by the Company and its data affiliates to CPG end-users for
use with data provided by the Company or its data affiliates. The Company
anticipates that it and Oracle will negotiate new royalty rates payable to
Oracle after July 2001.
Prior to the 1995 sale to Oracle, the Company operated a decision support
software business engaged in general application development using the EXPRESS
product line. Following the sale to Oracle, the Company obtained rights to
market, distribute and provide first line customer support for many of the
Oracle EXPRESS products. Software development work by the Company is now
directed exclusively toward the development of applications for specific use in
the CPG industry using the best available technology.
The Company markets its proprietary APOLLO(R) Space Management System
software to CPG retailers, wholesalers, manufacturers and brokers in the United
States and internationally. APOLLO software is designed to assist in the
management of retail shelf space, providing a range of tools for space
management including production of picture schematics of shelf layouts, software
for evaluating space utilization and a national database of product dimensions
and product images. Variety Planner(R) is a product assortment application
offered by the Company which can be used independently or in conjunction with
the APOLLO product.
The Company develops and markets a number of other software products for
use in the CPG industry. These include a variety of tools which help clients
receive, analyze and interpret InfoScan data.
Testing Services. The Company also provides a number of testing services
primarily for CPG manufacturers. These include controlled retail testing,
matched market analyses and related special analyses using the Company's
InfoScan databases. Controlled testing involves testing the placement of new
products or changes in advertising, shelf location, price or promotional
conditions in different retail outlets or different markets and involves custom
manipulation and analysis of the Company's InfoScan databases. The Company's
BehaviorScan service is a test marketing system available in the United States
which enables CPG manufacturers to measure the impact of different marketing
variables on consumer purchase behavior on new and existing products. Typical
marketing variables tested in BehaviorScan are television advertisements,
newspaper ads, manufacturers' coupons, free samples, in-store displays, shelf
price and packaging changes. BehaviorScan tests compare the purchases of a group
of consumers exposed to test variable(s) with the purchases of a control group
of consumers not exposed to the test variable(s). A unique feature of the
BehaviorScan system is its ability to deliver alternative television advertising
to different groups of panel households using the Company's patented targetable
television technology. BehaviorScan is currently available in seven markets and
is the only such electronic test marketing system in the United States. Major
costs associated with the BehaviorScan system include payments to retailers,
compensation to participating panel households, field personnel costs, cable
television studio operation, computer resources and client service personnel
costs.
INTERNATIONAL BUSINESS DEVELOPMENT
Through subsidiaries and joint ventures with other leading marketing
information firms, the Company in 1992 began offering information services in a
number of countries outside of the United States. Specific
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services offered depend upon local country competitive conditions and the
general retailer environment. The Company's major European subsidiaries and
joint venture companies rely on the Company's data production facilities in the
United States as well as the Company's know-how and trade secrets to provide
InfoScan retail tracking services.
The Company's only significant competitor offering product tracking
services internationally is the ACNielsen Company ("ACNielsen"). (See
"Competition" below.) The Company competes with ACNielsen in virtually every
foreign market where the Company has established information services. ACNielsen
maintains a dominant market position throughout most of Europe where the
Company's expenditures to establish product tracking services over the last five
years have been most significant.
United Kingdom. The Company's subsidiary in the United Kingdom offers a
retail tracking service under the InfoScan name to the British market. Organized
in 1992 as a joint venture, the Company's initial partners were Taylor Nelson
AGB plc of the United Kingdom and GfK AG of Germany ("GfK"). The Company now
owns substantially all of the joint venture. In 1993, the venture expanded its
sample of scanning stores, initiated the collection of causal data and began
offering a fully operational scanning service covering major chains under the
InfoScan name. It also expanded the service to cover stores selling health and
beauty aids. Pursuant to contractual arrangements, the Company provides data
production services to the subsidiary from the Company's computer facilities in
Wood Dale, Illinois.
France. The Company's subsidiary in France offers scanner-based tracking
services under the InfoScan name. In 1993, the Company organized a joint
venture, IRI-SECODIP S.C.S. with GfK and SECODIP S.A. to acquire the operations
of SECODIP's retail audit business and the business of a former
development-stage scanner-based operation of GfK. Since 1994, the Company has
funded substantially all of the joint venture's capital requirements and the
Company now owns substantially all of the joint venture interests. Pursuant to
contractual arrangements, the Company provides data production services to the
subsidiary from the Company's computer facilities in Wood Dale, Illinois.
Italy. In 1994, the Company began development of an information service in
Italy through the formation of a wholly-owned subsidiary, IRI InfoScan Italy. In
early 1995, the subsidiary produced its initial reports to clients. Its basic
service consists of retail sales and promotion tracking using a sample of retail
grocery outlets. Supermarket sales are tracked by means of scanning data, while
sales in smaller, traditional shops are measured by manual audit techniques.
Pursuant to contractual arrangements, the Company provides production services
to IRI InfoScan Italy from the Company's computer facilities in Wood Dale,
Illinois.
Germany. The Company operates a retail tracking service joint venture in
Germany through a subsidiary whose minority shares are held by GfK. From 1993
through 1996, the Company owned a 15% interest in GfK Panel Services GmbH ("GfK
Panel"), then a subsidiary of GfK. During that time, GfK Panel offered both
retail and consumer panel tracking services based on consumer household panel
data, retail audit data, scanner data and provided related consulting studies.
In February 1997, the retail tracking service and related software
businesses were put into a new joint venture company, IRI/GfK Retail Services
GmbH ("IRI/GfK Retail") in which the Company took a 51% ownership interest and
GfK the remainder. Scanner data are not available from all major retailers in
Germany. Such scanner data, when available, are primarily used for diagnostic
and promotion analysis rather than for provision of a product tracking service
as in other major European countries. GfK provides production services to
IRI/GfK Retail through GfK's facilities in Nuremberg, Germany.
In 1997, the Company sold its 15% ownership interest in GfK Panel to GfK.
GfK Panel continues to provide consumer panel and ad hoc research services to
the German market, and GfK Panel and IRI/GfK Retail cooperate in selling and
delivering services to common clients.
Benelux. The Company and GfK operate a joint venture which offers a
scanner-based retail tracking service to the Netherlands market. This
scanner-based retail tracking service became fully-operational in 1994. Until
early 1998, this joint venture was owned 80.1% by GfK and 19.9% by the Company.
In February 1998, the Company increased its ownership to 51% and took over
management responsibilities. It
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operates under the InfoScan name, and pursuant to contractual arrangements, the
Company provides production services to the joint venture through the Company's
computer facilities in Wood Dale, Illinois.
In 1998, the Company also sold a 9.9% interest in GfK Panel Services
Benelux B.V. and GfK Belgium S.A. reducing its ownership to 10%. Those companies
operate household panel services in the Netherlands and Belgium and continue to
cooperate with the Netherlands joint venture scanner operation in the sale and
delivery of services to common customers.
Spain. IRI began a start-up venture in Spain during April 1998. In November
1998, the Company executed a joint venture agreement with Media Planning, S.A.
to create a new retail tracking business to serve the Spanish market under the
name Information Resources Espana, S.L. ("IRI-Spain"). In January 1999,
IRI-Spain and Dympanel, S.A. signed a cooperation agreement which added
Dympanel, S.A. as a third investor in IRI-Spain. The aforementioned agreements
resulted in the Company, Media Planning, S.A., and Dympanel, S.A. owning 60%,
30% and 10%, respectively, of the capital shares of IRI-Spain. IRI-Spain will
begin providing InfoScan service to the Spanish market in early 1999, using the
Company's production facilities in Wood Dale, Illinois.
Turkey. Until December 1998, the Company owned and operated a retail audit
business in Turkey which it acquired in 1993. This business conducted its
service in a national sample of supermarkets, large and small grocery stores,
pharmacies, cosmetic shops and other stores, provided related special consulting
services and distributed IRI software products in Turkey. Effective January 1999
the Company contributed all of the operating assets and liabilities of its
Turkish subsidiary ("IRI-Turkey") to a joint venture, Panel-IRI Pazar Arastirma
ve Danismanlik A.S. ("Panel"), a Turkish company. IRI-Turkey owns 35% of Panel.
Greece. The Company operates a retail audit business in Greece which it
acquired in 1994. The operation includes collecting, reporting, analyzing and
interpreting national and regional sales data from retail audits.
Sweden. The Company owns an 8% interest in a joint venture formed in 1995
with GfK for the provision of scanner-based product tracking services in Sweden.
The business is managed by GfK.
Eastern Europe, Middle East and North Africa. In 1995, the Company entered
into a strategic alliance with Middle East Market Research Bureau ("MEMRB"), a
market research company based in Cyprus. MEMRB provides market research
throughout more than 20 countries in the Middle East, Eastern Europe, the
Mediterranean, the Commonwealth of Independent States and North Africa. Under
the terms of the agreement, MEMRB has agreed to cooperate in the adoption of
multi-country technical standards developed by the Company and co-market certain
information and software products with the Company. In October 1998, IRI
exercised its option to acquire a 19.9% ownership interest in MEMRB. The Company
holds an option to increase its ownership interest of MEMRB to 49%.
Asia and Australia. The Company has a wholly-owned software distribution
subsidiary and a joint venture in Japan with Tokyo-based Mitsui & Co., Ltd., to
provide software and information services, respectively, in Japan. The Company's
ownership in the joint venture, which was formed in 1995, was 60%. Effective May
21, 1998, Mitsui & Co., Ltd., increased its ownership to 60% and the Company's
ownership was reduced to 40%. The Company also has a wholly-owned software
distribution subsidiary in Australia and New Zealand.
Latin America. The Company has operations in certain Latin American markets
through joint ventures and subsidiaries in Venezuela, Puerto Rico and Guatemala.
The Company owns 49% of the Venezuelan joint venture, Datos Information
Resources, which provides audit-based product tracking as well as ad hoc and
software services to the Venezuelan market. The Company's subsidiary in Puerto
Rico offers both audit-based product tracking and ad hoc marketing research
services. The Company owns 19.9% of a Guatemalan based company that provides
research services in Central America. The Company has strategic alliance
agreements with companies in Peru and Argentina.
TRADEMARKS, PATENTS, LICENSES AND SOFTWARE PROTECTION
The Company is the owner of various trademarks, including InfoScan(R),
InfoScan Census(TM), InfoForce(TM), QScan(TM), IRI Software(TM), IRI
Logistics(TM), BehaviorScan(R), APOLLO(TM), The Partners(TM), Targeter(TM),
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TradeWins(TM), Shoppers' Hotline(R), EZPrompt(R), CouponScan(TM), InSite
Reporting(TM), XLerate(TM), PromoProphet(TM), ReviewNet(TM) and
PromotionScan(TM). The Company also holds certain patents relating to the
targetable television technology utilized in its BehaviorScan service. The
patents expire at various dates between 1999 and 2005. Loss or infringement of
these patents would likely not have a material adverse effect upon the Company's
revenues.
As a result of the sale of the EXPRESS technology and line of software
products to Oracle in July 1995, the Company no longer owns a large portion of
the software that is used in the delivery of InfoScan data. The Company secured
a license back from Oracle assuring the continued use of certain of the EXPRESS
software products in the Company's business, including rights to sublicense
software to clients of the Company. The initial term of the license is six
years. After July 2001, the royalty rates owed to Oracle will be subject to
renegotiation between the Company and Oracle. The Company also has rights to use
various trademarks owned by Oracle, including Oracle EXPRESS(R).
The Company regards its databases as proprietary and, in addition to
copyright protection, relies upon trade secret laws, limitations on access to
its computer source codes, confidentiality agreements with clients and internal
nondisclosure safeguards to protect its rights to proprietary interests. The
Company's own computer software is also proprietary and bears appropriate
copyright notices.
Because of the rapid pace of technological change in the computer industry,
trademark, patent or copyright protection is of less significance than the
knowledge and experience of the Company's personnel and their ability to develop
and market new systems or software products.
WORKING CAPITAL PRACTICES
The Company invoices its information service clients in accordance with
agreed contract terms. Typical billing cycles are quarterly or monthly for
long-term contracts and payment is typically due within 30 days of receipt of
invoice. Software licenses generally require payment in full upon acceptance of
software.
The Company pays certain retailers cash in accordance with negotiated terms
for providing scanner data for use in the InfoScan sample service. Payments to
other vendors are normally made in accordance with vendor terms.
CUSTOMERS
The Company had approximately 2,400, 2,300 and 1,700 clients using its
information services in 1998, 1997 and 1996, respectively. Most of the Company's
clients are CPG manufacturers in the United States or in foreign countries where
the Company offers its services. No client of the Company accounted for revenues
in excess of 10% of the Company's total revenues. The Company's top ten clients
accounted for approximately 33% of the Company's 1998 revenues.
BACKLOG ORDERS
At December 31, 1998, 1997 and 1996, the Company had committed contract
revenues for information services of approximately $392 million, $335 million
and $265 million, respectively. Revenues on contracts generally have terms of
not less than one year. Such contracts are generally categorized into one of two
classes: 1) cancelable at the end of each year by the giving of six months
written notice by either party, or 2) multi-year contracts either non-cancelable
or cancelable only with significant penalties, generally by the giving of six
months written notice after the initial multi-year term. Committed contract
revenues include only the noncancelable portion of a contract. The portion of
these committed contract revenues expected to be earned subsequent to 1999 is
approximately 49%.
COMPETITION
Numerous firms supply marketing and advertising research products and
services to CPG manufacturers and retailers. However, the Company and ACNielsen
are the only two firms which provide national scanner-based product tracking
services in the United States to such manufacturers and retailers. While the
Company
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generates more revenues than ACNielsen in the United States market, ACNielsen is
far larger than the Company in terms of worldwide revenues, giving it access to
greater financial resources than the Company. In the product tracking services
markets across Europe, ACNielsen currently maintains a dominant market position
in most European countries and is the Company's only competitor.
Principal competitive factors include: quality, reliability, timeliness and
comprehensiveness of analytical services and data provided; flexibility and
innovation in tailoring services to client needs; experience; the capability of
technical and client service personnel; data processing and decision support
software; reputation; price; and geographical coverage.
RESEARCH AND DEVELOPMENT
The Company is continuously developing new business products and services.
In this regard, the Company is actively engaged in research and development of
new software services and new database analyses and applications. Expenditures
for research and development for the years ended December 31, 1998, 1997 and
1996 approximated $33.0 million, $25.0 million and $24.9 million, respectively.
Included in these expenditures were $7.1 million, $3.7 million and $5.8 million
of software development costs that were capitalized. Expenditures not
capitalized were expensed as incurred.
PERSONNEL
At December 31, 1998, the Company had approximately 4,600 full-time and
2,900 part-time employees worldwide. The Company depends to a significant extent
on its skilled technical personnel. Its future success will depend to a large
degree upon its ability to continue to hire, train and retain its professional
staff.
ITEM 2. PROPERTIES
The Company markets and provides its information services and software
support services to U.S. clients from full-service sales offices in San
Francisco and Los Angeles, California; Norwalk, Connecticut; Atlanta, Georgia;
Cincinnati, Ohio; Minneapolis, Minnesota; Fairfield, New Jersey; Winston-Salem,
North Carolina; Fort Washington, Pennsylvania as well as from its corporate
headquarters in Chicago, Illinois and software development headquarters in
Waltham, Massachusetts. The Company markets to international clients through
subsidiaries, joint ventures and/or offices in Australia, Belgium, Canada,
France, Germany, Guatemala, Greece, Italy, Japan, Mexico, the Netherlands, New
Zealand, Puerto Rico, Spain, Sweden, United Kingdom, Venezuela and through its
various distributors.
Principal leased facilities of the Company are as follows:
<TABLE>
<CAPTION>
APPROXIMATE
FLOOR AREA
LOCATION PRINCIPAL OPERATION (SQ. FT.)
- -------- ------------------- -----------
<S> <C> <C>
Chicago, IL........................ Corporate headquarters and offices
for professional staff 427,000
Waltham, MA........................ Professional staff and computer
facilities 72,000
Wood Dale, IL...................... Computer facilities 45,000
Regional sales and client service
offices.......................... Sales, client service and analysis 254,000
International offices.............. Sales, client service, computer
facilities and professional staff 231,000
Data collection facilities......... Data collection and client test
market control, cable TV studio
facilities, warehouse 160,000
</TABLE>
8
<PAGE> 10
ITEM 3. LEGAL PROCEEDINGS
On July 29, 1996, IRI filed an action against The Dun & Bradstreet Corp.,
The A.C. Nielsen Company (now a subsidiary of ACNielsen) and IMS International,
Inc. (collectively, "the Defendants") in the United States District Court for
the Southern District of New York entitled Information Resources, Inc. v. The
Dun & Bradstreet Corp., et. al. No. 96 CIV. 5716 (the "Action"). IRI alleged
that, among other things, the Defendants violated Sections 1 and 2 of the
Sherman Act, 15 U.S.C. Sections 1 and 2, by engaging in a series of
anti-competitive practices aimed at excluding the Company from various export
markets for retail tracking services and regaining monopoly power in the United
States market for such services. These practices included: i) entering into
exclusionary contracts with retailers in several countries, in order to restrict
the Company's access to sales data necessary to provide retail tracking
services; ii) illegally tying/bundling services in markets over which
Defendants' had monopoly power with services in markets in which ACNielsen
competed with the Company; iii) predatory pricing; iv) acquiring foreign market
competitors with the intent of impeding the Company's efforts at export market
expansion; v) tortiously interfering with Company contracts and relationships
with clients, joint venture partners and other market research companies; and
vi) disparaging the Company to financial analysts and clients. By the Action,
the Company seeks to enjoin the Defendants' anti-competitive practices and to
recover damages in excess of $350 million, prior to trebling.
The Action followed legal proceedings by the Canadian Competition Tribunal
in 1995 and the European Commission in 1996 against ACNielsen for
anti-competitive practices. In 1995, the Canadian Competition Tribunal concluded
that ACNielsen had engaged in "anti-competitive acts" with the express intent
"to exclude potential competitors generally and IRI specifically" from the
Canadian retail tracking and services market. In December 1996, ACNielsen signed
an Undertaking to the European Commission agreeing to halt numerous contractual
practices which the Company contended was part of ACNielsen's intentional and
unlawful strategy aimed at preventing the Company from establishing a
competitive position in Europe and eliminating the Company as a competitor.
On January 15, 1999, IRI filed an action against Manugistics, Inc.
("Manugistics") in the Circuit Court of Cook County, Illinois, Case No. 99 L
00599. In its two count action, IRI has alleged that Manugistics has breached a
Data Marketing and Revenue Agreement between IRI and Manugistics ("Agreement")
by failing to pay certain amounts due to IRI thereunder. The Agreement was
entered into by IRI and Manugistics in connection with the sale by IRI to
Manugistics of certain assets relating to the manufacture, sale and servicing of
certain logistics software. IRI has also alleged that Manugistics committed an
anticipatory breach of the Agreement with respect to certain other amounts not
yet due thereunder. IRI seeks damages in excess of $11.9 million in connection
with these claims. IRI has also alleged that Manugistics breached a related non-
competition and solicitation agreement between IRI and Manugistics. IRI seeks
unspecified damages to be determined at trial under this count. On March 2,
1999, Manugistics filed a Motion to Stay Proceedings and Compel Arbitration
which is currently pending before the Court.
In the ordinary course of business, IRI and its subsidiaries become
involved as plaintiffs or defendants in various other legal proceedings. The
claims and counterclaims in such litigation, including those for punitive
damages, individually in certain cases and in the aggregate, involve amounts
which may be material. However, it is the opinion of the Company's management,
based upon the advice of counsel, that the ultimate disposition of pending
litigation against the Company will not be material.
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS
None.
9
<PAGE> 11
ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
<TABLE>
<CAPTION>
POSITION WITH COMPANY
NAME AGE AND BUSINESS EXPERIENCE
- ---- --- -----------------------
<S> <C> <C>
Thomas W. Wilson, Jr....................... 67 Chairman of the Board of Directors of the Company
since April 1995. Chief Executive Officer since
November 1998. Director of the Company since 1991.
Senior Partner of McKinsey & Company, management
consultants, from 1973 until 1990 (retired).
Director of Aerial Communications Inc. since
October 1996.
Randall S. Smith........................... 47 President of International Services Group since
January 1995 and President of Information
Technology Group from February 1996 until March
1998; President -- International Operations
Division from prior to March 1994 until January
1995.
James R. Chambers.......................... 41 President of U.S. Commercial Businesses Group since
October 1997; President -- Refrigerated Foods
Division of Nabisco Foods from January 1996 to
October 1997; Senior Vice President -- Sales and
Customer Service of Nabisco Foods from prior to
March 1994 to December 1996.
Gary M. Hill............................... 51 Executive Vice President and Chief Financial
Officer of the Company since May 1995. Financial
consultant from August 1994 to December 1994.
Senior Vice President -- Finance of Itel
Corporation from prior to March 1994 to July 1994.
Monica M. Weed............................. 38 Executive Vice President and General Counsel of the
Company since November 1998; Assistant Secretary
since May 1993; Senior Vice President and Assistant
General Counsel of the Company from December 1994
to November 1998; Vice President of the Company
from prior to March 1994 to December 1994.
John P. McNicholas, Jr..................... 45 Senior Vice President and Controller of the Company
since June 1995; Vice President -- Controller of
Itel Corporation from prior to March 1994 to March
1995.
</TABLE>
All of the foregoing executive officers hold office until the next annual
meeting of the Board of Directors and until their successors are elected and
qualified.
10
<PAGE> 12
PART II
ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER'S MATTERS
The Company's Common Stock has been traded on the NASDAQ Stock Market under
the symbol "IRIC" since 1983. The stock currently trades on the National Market
System. Share data has been adjusted for all stock splits and stock dividends to
date.
The high and low closing sales prices for the Company's Common Stock were
as follows:
<TABLE>
<CAPTION>
QUARTERS HIGH LOW
- -------- ------- -------
<S> <C> <C>
1997
1st quarter............................................... $16.000 $13.500
2nd quarter............................................... 15.125 11.875
3rd quarter............................................... 18.563 14.000
4th quarter............................................... 19.625 13.375
1998
1st quarter............................................... $16.250 $12.750
2nd quarter............................................... 19.188 15.750
3rd quarter............................................... 19.250 9.750
4th quarter............................................... 13.000 6.938
</TABLE>
The last sale price on February 26, 1999 was $8.375 per share. As of
February 26, 1999 there were 1,706 record holders of the Company's Common Stock.
The Company has never paid cash dividends. It is the present policy of the
Company's Board of Directors to retain earnings for use in the Company's
business. Accordingly, the Board of Directors does not anticipate that cash
dividends will be paid in the foreseeable future. There are restrictions in
IRI's bank revolving credit facility and certain lease agreements which limit
the payment of dividends and the purchases or redemption of Common Stock. (See
Note 9 of the Notes to the Consolidated Financial Statements.)
11
<PAGE> 13
ITEM 6. SELECTED FINANCIAL DATA
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31
------------------------------------------
1998 1997 1996 1995 1994
------ ------ ------ ------ ------
(IN MILLIONS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C> <C> <C>
HISTORICAL RESULTS OF OPERATIONS(1)(2)(3)
Revenue........................................... $511.3 $456.3 $405.6 $399.9 $376.6
====== ====== ====== ====== ======
Nonrecurring expenses(5).......................... -- -- (4.8) (22.8) --
====== ====== ====== ====== ======
Operating profit (loss)........................... 7.0 14.8 (5.1) (54.9) 5.3
====== ====== ====== ====== ======
Net gain (loss) on sale of assets(6).............. -- -- (4.6) 41.1 --
====== ====== ====== ====== ======
Net earnings (loss) before cumulative effect of
change in accounting principle(7)............... $ 3.8 $ 7.7 $ (7.6) $(11.7) $ (8.9)
Cumulative effect on prior years of change in
accounting principle(4)......................... -- -- -- -- (6.6)
------ ------ ------ ------ ------
Net earnings (loss)............................... $ 3.8 $ 7.7 $ (7.6) $(11.7) $(15.5)
====== ====== ====== ====== ======
Net earnings (loss) per common share -- basic:
Before cumulative effect of accounting
changes...................................... $ .13 $ .27 $ (.27) $ (.43) $ (.34)
Cumulative effect of accounting changes......... -- -- -- -- (.26)
------ ------ ------ ------ ------
Net earnings (loss)............................. $ .13 $ .27 $ (.27) $ (.43) $ (.60)
====== ====== ====== ====== ======
Weighted average common shares -- basic........... 28.6 28.5 27.8 27.0 26.1
====== ====== ====== ====== ======
Net earnings (loss) per common and common
equivalent share -- diluted:
Before cumulative effect of accounting
changes...................................... $ .13 $ .26 $ (.27) $ (.43) $ (.34)
Cumulative effect of accounting changes(4):..... -- -- -- -- (.26)
------ ------ ------ ------ ------
Net earnings (loss) -- diluted.................. $ .13 $ .26 $ (.27) $ (.43) $ (.60)
====== ====== ====== ====== ======
Weighted average common and common equivalent
shares -- diluted............................... 29.0 29.1 27.8 27.0 26.1
====== ====== ====== ====== ======
BALANCE SHEET DATA(1)(2)(3)
Total assets...................................... $369.3 $366.6 $334.5 $338.5 $346.8
====== ====== ====== ====== ======
Working capital................................... 5.2 24.9 34.6 44.4 66.9
====== ====== ====== ====== ======
Long-term debt.................................... 4.6 .6 7.9 3.8 31.5
====== ====== ====== ====== ======
Stockholders' equity.............................. $238.5 $241.5 $226.3 $229.8 $227.2
====== ====== ====== ====== ======
Book value per common and common equivalent
share........................................... $ 8.56 $ 8.41 $ 8.12 $ 8.33 $ 8.58
====== ====== ====== ====== ======
Dividends paid per common share................... -- -- -- -- --
====== ====== ====== ====== ======
ADDITIONAL FINANCIAL INFORMATION(1)
Deferred data procurement costs................... $120.5 $111.8 $ 98.0 $ 96.8 $ 79.2
====== ====== ====== ====== ======
Capital expenditures.............................. 33.7 34.4 18.8 24.5 24.0
====== ====== ====== ====== ======
</TABLE>
- ---------------
(1) In February 1998, the Company increased its ownership to 51% in a joint
venture which offers a retail tracking service to the Netherlands market. In
addition, effective May 21, 1998, the Company reduced its ownership of
Information Resources Japan, Ltd. from 60% to 40%. The consolidation of the
Netherlands joint venture operations, the exercise of its MEMRB option, and
the deconsolidation of Information Resources Japan, Ltd., did not have a
material impact on the consolidated financial results or position of the
Company.
12
<PAGE> 14
(2) In February 1997, the Company and GfK formed a new company, IRI/GfK Retail,
of which the Company has a 51% ownership interest. IRI/GfK Retail purchased
the German retail tracking business of GfK Panel. The consolidation of
IRI/GfK Retail did not have a material impact on the consolidated financial
results or position of the Company.
(3) In 1995, the Company purchased 39% of its French joint venture, IRI-SECODIP,
from its joint venture partner increasing IRI's ownership from 50% to 89%.
As a result of capital contributions made since 1994, the Company now owns
substantially all of the joint venture interests. IRI-SECODIP has been
consolidated effective January 1, 1995.
(4) Effective January 1, 1994, the Company changed its method of recognizing
revenue on its information service products whereby revenue is recognized
over the term of the contract on a straight-line basis. Previously, the
Company recognized a portion of the initial contract revenue in the period
between client commitment and either the start of forward data or the test
commencement, with the remaining revenue recognized ratably over the initial
contract term.
(5) The $4.8 million nonrecurring charge in 1996 principally related to the
disposal of certain cable TV advertising cut-in equipment originally
developed for use in the Company's market testing operation. Nonrecurring
expenses in 1995 included a $12.4 million write-down of assets, principally
related to European deferred data procurement costs, to net realizable value
and a $10.4 million charge principally related to a U.S. facility closing.
(6) In December 1996, the Company recorded a $4.6 million charge primarily for
the final settlement of the escrow account related to the sale of a portion
of the Company's software business to Oracle in 1995. In July 1995, the
Company sold to Oracle certain assets, liabilities and related software
application products of its software products business, resulting in a $41.1
million gain. (See Note 4 of the Notes to Consolidated Financial
Statements.)
(7) The 1994 results reflected a pre-tax provision of $8.3 million related to
shareholder litigation.
13
<PAGE> 15
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS
OF OPERATIONS
RESULTS OF OPERATIONS
Overview: Over the periods presented, the Company has generated increased
revenues in its U.S. business in spite of a period of intensely competitive
pricing that began in 1993, through the offering of new products and services.
While this intense price competition began moderating somewhat in 1996, pricing
changes have a somewhat delayed effect on reported revenues in the Company's
consolidated financial statements. This lagging effect is due to the long-term
nature of many contracts and the fact that only a portion of such contracts come
up for renewal and therefore are subject to competitive bidding in any
particular year. In addition, because of the relatively high fixed cost
component of the Company's database operations, small variations in revenue can
have a significant impact on profitability.
In 1992, the Company began introducing its InfoScan tracking service into
Europe. Due to the inherent fixed cost nature of the business and the alleged
anticompetitive business practices and tactics of its major competitor,
ACNielsen, losses from the International services business have been
significant. In December 1996, ACNielsen signed an Undertaking to the European
Commission agreeing to halt numerous contractual practices which the Company
believes had hampered the Company's participation in European markets. As a
result of the Undertaking, the Company believes that ACNielsen clients can begin
to benefit from the Company's services without risk of financial penalties being
imposed by ACNielsen, and that a significant artificial barrier to the Company's
efforts to provide services to the European markets has been removed. While the
Company's International losses are now declining, cash investment in Europe will
be significant until revenues increase further.
Special Items: In 1996 the Company recorded a $4.8 million nonrecurring
charge principally due to the disposal of certain cable TV advertising cut-in
equipment originally developed for use in the Company's market testing operation
and a $4.6 million net loss on sale of assets attributable to the final
settlement of the sale of assets to Oracle Corporation.
Operations: Consolidated revenues in 1998 increased 12.1% over 1997 while
1997 revenues were 12.5% higher than 1996. Net earnings were $3.8 million in
1998, compared to net earnings of $7.7 million in 1997, and a net loss of ($7.6)
million in 1996.
The Company considers the aggregation of operating profit (loss), equity
earnings (losses) and minority interests, ("Operating Results"), on a geographic
basis to be a meaningful measure of the Company's operating performance. A
comparative analysis of consolidated revenues and Operating Results for the
years ended December 31, 1998, 1997 and 1996 follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
U.S. Services...................................... $396,992 $366,678 $344,612
International Services............................. 114,331 89,649 60,991
-------- -------- --------
Total...................................... $511,323 $456,327 $405,603
======== ======== ========
Operating Results:
U.S. Services...................................... $ 31,515 $ 38,613 $ 31,106
International Services
Operating loss.................................. (15,689) (19,920) (29,425)
Minority interests benefit (expense)............ 342 (304) 986
Equity in earnings of affiliated companies...... 443 444 30
-------- -------- --------
Subtotal -- International Services......... (14,904) (19,780) (28,409)
Corporate and other expenses....................... (8,856) (3,926) (1,965)
Nonrecurring expenses.............................. -- -- (4,808)
-------- -------- --------
Operating Results.......................... $ 7,755 $ 14,907 $ (4,076)
======== ======== ========
</TABLE>
14
<PAGE> 16
Revenues from the Company's U.S. services business in 1998 were 8.3% higher
than in 1997, while revenues in 1997 increased 6.4% over 1996. These revenue
increases were primarily due to the expanded use of the Company's services and
products, particularly its retailer specific and all store (i.e., Census)
databases. Revenue increases came primarily from existing customers, as the
Company's market share in the U.S. has remained relatively unchanged over the
period. U.S. operating profit decreased 18.4% in 1998 due to an 11.4% increase
in expenses. Results in 1998 were negatively affected by higher costs, including
compensation, benefits, training and recruiting and by increased data collection
efforts related to the Company's expanded household panel and convenience store
operations. U.S. operating profit increased 24.1% in 1997 as margins expanded on
the benefit of lower expense growth resulting from the Company's cost
containment and reengineering initiatives.
Total international service revenues in 1998 increased 27.5% over 1997.
Revenues in 1998 reflect the benefit of the consolidation of IRI's
majority-owned Netherlands operation, IRI/GfK Retail Services, B.V., effective
in 1998. Excluding the Netherlands, European revenues increased 21.8% compared
to 1997. International service revenues in 1997 increased 47.0% over 1996 in
dollar terms despite the dampening effect of a strong U.S. dollar against
European currencies. Revenues in 1997 also reflect the benefit of the
consolidation of IRI's majority-owned German operation, IRI/GfK Retail,
effective in early 1997. Excluding the German results and foreign exchange
effect, European revenues increased 27.0% in 1997 compared to 1996 as the
Company made continued inroads with multi-national customers. Operating Results
for the Company's International businesses were a ($14.9) million loss in 1998,
24.7% below the ($19.8) million loss in 1997. The improved International
Operating Results were principally due to continuing revenue growth of the
Company's major European services, primarily France, the U.K. and Italy. The
International Operating Results were a ($19.8) million loss in 1997 compared to
a ($28.4) million loss in 1996. The reduced international losses are principally
due to continued sharp revenue increases in each of the Company's major European
countries.
Corporate and other expenses increased in 1998 and 1997 over prior years
due to higher legal expenses in the U.S. attributable to the anti-trust
litigation, and increased compensation expense in 1998 primarily related to
severance and recruiting costs.
Year Ended December 31, 1998: Consolidated net earnings were $3.8 million
in 1998 compared to net earnings of $7.7 million in 1997. Results in 1998
reflect a decrease in operating earnings in the Company's U.S. business caused
by increased employee related expenses and data collection costs.
Consolidated revenues increased 12.1% to $511.3 million in 1998. Revenues
in 1998 reflect strong market share growth in Europe specifically in the U.K.,
France and Italy. Revenues in 1998 also benefited somewhat from the inclusion of
the Company's majority-owned operations in the Netherlands, effective February
1, 1998.
Consolidated cost of information services sold increased by $48.4 million,
or 12.0% to $450.2 million in 1998. Major components of the 1998 increase
included: (a) a $26.8 million increase in compensation expense resulting
primarily from salary increases in the U.S. and growing European operations; (b)
a $10.1 million increase in the amortization of deferred data procurement costs,
principally resulting from expansion of information services businesses in
Europe; and (c) a $5.8 million increase in operating expenses due to the 1998
consolidation of the Netherlands operation.
Consolidated selling, general and administrative expenses increased by
$14.4 million or 36.4% to $54.1 million for 1998. This increase was primarily
attributable to recruiting, training and severance costs relating to the
reorganization and transformation of the Company's U.S. sales, marketing and
other operating functions, legal expenses in the U.S., and worldwide increases
in other general expenses, including compensation. Increased legal expenses
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.
15
<PAGE> 17
Interest and other expenses were $1.2 million for 1998 compared to $.5
million in 1997. The increase in 1998 is due to increased bank borrowings during
1998 primarily resulting from the Company's purchases of Common Stock. The
Company's 1998 income tax expense was higher than the income tax expense
computed using the U.S. Federal statutory rate due to certain unbenefitted
foreign losses, goodwill amortization and other nondeductible expenses.
Year Ended December 31, 1997: Consolidated net earnings were $7.7 million
in 1997 compared to a net loss of ($7.6) million in 1996. Results in 1996
included a $4.8 million nonrecurring pretax charge principally related to the
disposal of certain cable TV advertising cut-in equipment and a $4.6 million
pretax charge primarily related to the final settlement on the sale of a portion
of the Company's software business to Oracle in 1995.
Consolidated revenues increased 12.5% to $456.3 million in 1997. Revenues
in 1997 reflected strong market share growth in Europe. International revenues
also reflected the benefit of consolidating IRI's majority-owned German
operation, IRI/GfK Retail, effective February 1, 1997. Excluding the German
results and foreign exchange effect, consolidated revenues increased 9.5%
compared to 1996.
Consolidated cost of information services sold increased by $32.9 million,
or 8.9% to $401.9 million in 1997. Major components of the 1997 increase
included: (a) a $15.9 million increase in operating expenses due to the 1997
consolidation of the German operation; (b) a $10.3 million increase in the
amortization of deferred data procurement costs, principally resulting from the
expansion of the information services business in Europe; and (c) a $9.1 million
increase in compensation expense resulting primarily from the growing European
operations and salary increases in the U.S.
Consolidated selling, general and administrative expenses increased by $2.7
million or 7.4% to $39.7 million in 1997. These increases were primarily
attributable to higher compensation expenses worldwide and legal expenses in the
U.S. Increased legal expenses related directly to the Company's antitrust
lawsuit against The Dun & Bradstreet Corporation, ACNielsen Company and IMS
International, Inc. In that suit, the Company is seeking $1 billion in trebled
damages from the defendants for violations of U.S. antitrust laws. The case is
currently in the discovery phase, and the Company anticipates incurring
continued high legal expenses as the case progresses toward trial.
Interest and other expenses were $.5 million for 1997 compared to $1.2
million in 1996. The decrease in 1997 is due to decreased bank borrowings in
1997 resulting from positive cash flow from operations. The Company's 1997
income tax expense was higher than the income tax expense computed using the
U.S. Federal statutory rate due to certain unbenefitted foreign losses, goodwill
amortization and other nondeductible expenses.
LIQUIDITY AND CAPITAL RESOURCES
The Company's current cash resources include its $11.1 million consolidated
cash balance and $57.0 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. The Company's bank credit agreement
contains covenants which restrict the Company's ability to incur additional
indebtedness.
Cash Flow for the Year Ended December 31, 1998: Consolidated net cash
provided by operating activities was $159.8 million for the year ended December
31, 1998 compared to $151.4 million in 1997. While earnings were lower in 1998,
operating cash flow in 1998 contained greater amortization and depreciation
elements than in 1997. Consolidated cash used in net investing activities was
($161.1) million in 1998 compared to ($147.6) million in 1997. Investing
activity in 1998 reflects higher expenditures for data procurement and software
development. Net cash provided (used) before financing activities was ($1.2)
million in 1998 and $3.8 million in 1997 primarily due to higher investing
activities in 1998. Consolidated cash provided (used) by net financing
activities was ($8.7) million in 1998 compared to $6.4 million in 1997. The
Company borrowed $3.0 million under its revolving line of credit during 1998 and
during 1998 purchased $20.2 million of the Company's stock under its stock
purchase plan.
16
<PAGE> 18
Cash Flow for the Year Ended December 31, 1997: Consolidated net cash
provided by operating activities was $151.4 million for the year ended December
31, 1997 compared to $102.1 million for the year ended December 31, 1996. Cash
provided by operating activities increased primarily due to improved operating
performance both in Europe and in the U.S. and significantly lower working
capital investment in the U.S. in 1997. Consolidated cash used in net investing
activities was ($147.6) million in 1997 compared to ($121.2) million in 1996.
Investing activity for 1997 reflected higher purchases of equipment and deferred
data procurement costs offset by lower investment in capitalized software
compared to 1996. Net cash provided (used) before financing activities was $3.8
million in 1997 and ($19.1) million for 1996. Consolidated cash provided by
financing activities was $6.4 million in 1997 compared to $7.1 million in 1996
when the bank line was used to fund international operating needs. Proceeds from
exercises of stock options were approximately $17.2 million in 1997 and $1.7
million in 1996. In the fourth quarter of 1997, the Company purchased shares of
Common Stock at an aggregate purchase price of $3.0 million.
Financings: On February 10, 1999, the Company amended its $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 weighted average interest rate at December
31, 1998 was 6.25%. In October 1997, the Company replaced its $50 million bank
revolving credit facility maturing in 1998 with a $75 million facility maturing
in 2001.
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 $23.0 million is
currently available for such distributions under the most restrictive of these
covenants. The bank credit agreement contains covenants which restrict the
Company's ability to incur additional indebtedness.
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 December 31, 1998,
the Company had purchased and retired 1,861,800 shares under the plan at an
average cost of $12.46 per share of which 1,442,600 shares were purchased during
1998 at an average cost of $11.96 per share.
Other Deferred Costs: Consolidated deferred data procurement expenditures
were $120.5 million, $111.8 million and $98.0 million for the years ended
December 31, 1998, 1997 and 1996, respectively. These expenditures are amortized
over a period of 28 months and include payments to retailers for point-of-sale
data and costs related to collecting, reviewing and verifying other data (i.e.,
causal factors) which are an essential part of the Company's database. The
increase in deferred data procurement expenditures was related to the expansion
of the Company's International services business and increased convenience store
collection costs and expenses related to the expansion of its multi-outlet
household panel in the U.S., in 1998 and 1997. Deferred data procurement
expenditures for the Company's U.S. services business were $76.9 million, $71.7
million and $65.6 million for the years ended December 31, 1998, 1997 and 1996,
respectively. The Company's International services business deferred data
procurement expenditures were $43.6 million, $40.1 million and $32.4 million for
the years ended December 31, 1998, 1997 and 1996, respectively.
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. In addition, at December 31, 1998, various foreign subsidiaries of
IRI had aggregate cumulative NOL carryforwards for foreign income tax purposes
of approximately $10.9 million which are subject to various income tax
provisions of each respective country. Approximately $3.6 million of
17
<PAGE> 19
these foreign NOLs may be carried forward indefinitely, while the remaining $7.3
million expire in 2000 through 2003.
Impact of Inflation: Inflation has slowed in recent years and is currently
not an important determinant of the Company's results of operations. To the
extent permitted by competitive conditions, the Company passes increased costs
on to customers by adjusting sales prices and, in the case of multi-year
contracts, through consumer price index provisions of such agreements.
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.
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 including the
Company's chairman of the Board of Directors 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 which may not be
Year 2000 compliant.
Third Party Retailers: The Company has identified and has initially
contacted, using surveys, all of its critical 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. 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. To the extent that retailer responses to Year 2000 readiness are
unsatisfactory, the Company intends to follow up to assess whether all critical
retailers are Year 2000 compliant. In addition, the Company is currently
investigating alternative sources or methodologies to provide the Company with
reasonable assurance of source retailer data should a U.S. or European key
retailer encounter unforeseen difficulties during early 2000.
Wood Dale Computer Applications: The Company has commenced a review of 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
18
<PAGE> 20
negatively impacted by Year 2000. Accordingly, it is building a Year 2000 test
database and a test environment to assess compliance on programs affecting major
services to clients. The test environment will also provide an ongoing benefit
to the Company for future programs developed by the Company. The Company
estimates that completion of the test database and test environment will occur
by mid-1999 and that remediation 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 by mid-year 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 will determine 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 has no significant obligation for remediation.
Data Interfaces with Client Applications: As part of its ongoing services,
the Company has begun making inquiries of major clients to identify and resolve
potential Year 2000 issues resulting from IRI 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 completion of this assessment including remediation and any
related costs, as the decision to allow the Company to conduct such
investigations on a timely basis resides with each client.
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
$2 million has been spent and expensed, and of the remaining estimated costs, 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 likely suffer the following consequences:
1. A significant number of operational inconveniences and
inefficiencies 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. The Company expects to
19
<PAGE> 21
complete its contingency plans by mid-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.
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 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 both the euro and 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.
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, 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
20
<PAGE> 22
risks and uncertainties are described in reports and other documents filed by
the Company with the Securities and Exchange Commission.
ITEM 7A. QUANTITATIVE AND QUALITATIVE DISCLOSURES ABOUT MARKET RISK
Not applicable.
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA
Listed below are the financial statements and supplementary data included
in this part of the Annual Report on Form 10-K:
<TABLE>
<CAPTION>
PAGE
NO.
----
<S> <C> <C>
(a) Financial Statements
Report of Independent Auditors.............................. 22
Consolidated Balance Sheets at December 31, 1998 and 1997... 23
Consolidated Statements of Operations for the years ended
December 31, 1998, 1997 and 1996............................ 24
Statement of Changes in Stockholders' Equity and
Comprehensive Income for the years ended December 31, 1998,
1997 and 1996............................................... 25
Consolidated Statements of Cash Flows for the years ended
December 31, 1998, 1997 and 1996............................ 26
Notes to Consolidated Financial Statements.................. 27
(b) Supplementary Data
Summary of Quarterly Data................................... 40
</TABLE>
Financial statement schedule is included on page 43 preceding the signature
pages of this report (see Item 14).
21
<PAGE> 23
REPORT OF INDEPENDENT AUDITORS
Board of Directors and Stockholders
Information Resources, Inc. and Subsidiaries
We have audited the accompanying consolidated balance sheets of Information
Resources, Inc. and Subsidiaries as of December 31, 1998 and 1997 and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the three years in the period ended December 31, 1998. Our
audits also included the financial statement schedule listed in the Index at
Item 14(a). These financial statements and schedule are the responsibility of
the Company's management. Our responsibility is to express an opinion on these
financial statements and schedule based on our audits.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits provide a reasonable basis for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the consolidated financial position of Information
Resources, Inc. and Subsidiaries at December 31, 1998 and 1997, and the
consolidated results of their operations and their cash flows for each of the
three years in the period ended December 31, 1998, in conformity with generally
accepted accounting principles. Also, in our opinion, the related financial
statement schedule, when considered in relation to the basic financial
statements taken as a whole, presents fairly in all material respects the
information set forth therein.
ERNST & YOUNG LLP
Chicago, Illinois
February 11, 1999
22
<PAGE> 24
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEETS
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------
1998 1997
-------- ---------
(IN THOUSANDS)
<S> <C> <C>
CURRENT ASSETS
Cash and cash equivalents................................. $ 11,149 $ 20,925
Accounts receivable, net.................................. 87,637 96,209
Prepaid expenses and other................................ 9,223 9,563
-------- ---------
Total Current Assets.............................. 108,009 126,697
-------- ---------
Property and equipment, at cost........................... 177,443 180,043
Accumulated depreciation.................................. (97,940) (111,628)
-------- ---------
Net Property and Equipment........................ 79,503 68,415
Investments............................................... 9,792 13,061
Other assets.............................................. 171,989 158,447
-------- ---------
$369,293 $ 366,620
======== =========
LIABILITIES AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES
Current maturities of capitalized leases.................. $ 521 $ 2,266
Accounts payable.......................................... 43,640 49,306
Accrued compensation and benefits......................... 20,925 20,357
Accrued property, payroll and other taxes................. 4,486 3,068
Accrued expenses.......................................... 11,287 6,324
Deferred revenue.......................................... 21,940 20,469
-------- ---------
Total Current Liabilities......................... 102,799 101,790
-------- ---------
Long-term debt............................................ 4,575 640
Deferred income taxes, net................................ 14,017 13,660
Other liabilities......................................... 9,450 8,988
STOCKHOLDERS' EQUITY
Preferred stock -- authorized 1,000,000 shares, $.01 par
value; none issued..................................... -- --
Common stock -- authorized 60,000,000 shares, $.01 par
value; 27,867,884 and 28,713,943 shares issued and
outstanding, respectively.............................. 279 287
Capital in excess of par value............................ 190,701 198,537
Retained earnings......................................... 49,778 45,932
Accumulated other comprehensive income (loss)............. (2,306) (3,214)
-------- ---------
Total Stockholders' Equity........................ 238,452 241,542
-------- ---------
$369,293 $ 366,620
======== =========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
23
<PAGE> 25
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF OPERATIONS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
--------------------------------------
1998 1997 1996
---------- ---------- ----------
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<S> <C> <C> <C>
Information services revenues........................... $ 511,323 $ 456,327 $ 405,603
Costs and expenses:
Information services sold............................. (450,236) (401,876) (368,951)
Selling, general and administrative expenses.......... (54,117) (39,684) (36,936)
Nonrecurring expenses................................. -- -- (4,808)
--------- --------- ---------
(504,353) (441,560) (410,695)
--------- --------- ---------
Operating profit (loss)................................. 6,970 14,767 (5,092)
Net loss on sale of assets.............................. -- -- (4,600)
Interest expense and other, net......................... (1,174) (545) (1,182)
Equity in earnings of affiliated companies.............. 443 444 30
Minority interests benefit (expense).................... 342 (304) 986
--------- --------- ---------
Earnings (loss) before income taxes..................... 6,581 14,362 (9,858)
Income tax (expense) benefit............................ (2,735) (6,700) 2,300
--------- --------- ---------
Net earnings (loss)..................................... $ 3,846 $ 7,662 $ (7,558)
========= ========= =========
Net earnings (loss) per common share -- basic........... $ .13 $ .27 $ (.27)
========= ========= =========
Net earnings (loss) per common and common equivalent
share -- diluted...................................... $ .13 $ .26 $ (.27)
========= ========= =========
Weighted average common shares -- basic................. 28,578 28,476 27,755
========= ========= =========
Weighted average common and common equivalent shares --
diluted............................................... 28,986 29,069 27,755
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
24
<PAGE> 26
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY AND COMPREHENSIVE INCOME
YEARS ENDED DECEMBER 31,
<TABLE>
<CAPTION>
ACCUMULATED
OTHER TOTAL
COMMON PAID-IN RETAINED COMPREHENSIVE STOCKHOLDERS'
STOCK CAPITAL EARNINGS INCOME EQUITY
------ -------- -------- ------------- -------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
Balance at December 31, 1995.............. $276 $183,615 $45,828 $ 35 $229,754
---- -------- ------- ------- --------
Comprehensive income (loss):
Net loss................................ -- -- (7,558) -- (7,558)
Other comprehensive income (loss),
foreign currency translation
adjustment........................... -- -- -- 531 531
--------
Comprehensive income (loss)............. (7,027)
Shares issued from employee stock option
plan exercises and other................ 3 3,598 -- -- 3,601
---- -------- ------- ------- --------
Balance at December 31, 1996.............. 279 187,213 38,270 566 226,328
---- -------- ------- ------- --------
Comprehensive income:
Net earnings............................ -- -- 7,662 -- 7,662
Other comprehensive income, foreign
currency translation adjustment...... -- -- -- (3,780) (3,780)
--------
Comprehensive income.................... 3,882
Shares issued from employee stock option
plan exercises and other................ 12 17,269 -- -- 17,281
Shares purchased and retired.............. (4) (5,945) -- -- (5,949)
---- -------- ------- ------- --------
Balance at December 31, 1997.............. 287 198,537 45,932 (3,214) 241,542
---- -------- ------- ------- --------
Comprehensive income:
Net earnings............................ -- -- 3,846 -- 3,846
Other comprehensive income, foreign
currency translation adjustment...... -- -- -- 908 908
--------
Comprehensive income.................... 4,754
Shares issued from employee stock option
plan exercises and other................ 6 9,398 -- -- 9,404
Shares purchased and retired.............. (14) (17,234) -- -- (17,248)
---- -------- ------- ------- --------
Balance at December 31, 1998.............. $279 $190,701 $49,778 $(2,306) $238,452
==== ======== ======= ======= ========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
25
<PAGE> 27
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENTS OF CASH FLOWS
<TABLE>
<CAPTION>
YEARS ENDED DECEMBER 31,
---------------------------------
1998 1997 1996
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CASH FLOWS FROM OPERATING ACTIVITIES:
Net earnings (loss)....................................... $ 3,846 $ 7,662 $ (7,558)
Adjustments to reconcile net earnings (loss) to net cash
provided by operating activities:
Amortization of deferred data procurement costs......... 112,111 101,625 87,944
Depreciation............................................ 23,238 20,421 20,204
Amortization of capitalized software costs and
intangibles.......................................... 6,894 6,689 7,140
Deferred income tax expense (benefit)................... 2,606 6,329 (2,938)
Equity in earnings of affiliated companies and minority
interests............................................ (785) (140) (1,016)
Nonrecurring expenses and loss on disposition of
assets............................................... -- -- 9,408
Other................................................... (2,864) (3,529) (3,002)
Change in assets and liabilities:
Decrease (increase) in accounts receivable, net...... 9,615 6,514 (5,444)
Increase (decrease) in other current assets.......... 560 (2,379) (1,334)
Increase (decrease) in accounts payable and accrued
liabilities........................................ 3,147 8,168 (3,314)
Increase (decrease) in deferred revenue.............. 1,471 (672) (84)
Other, net........................................... 3 679 2,077
--------- --------- ---------
Total adjustments............................... 155,996 143,705 109,641
--------- --------- ---------
Net cash provided by operating activities....... 159,842 151,367 102,083
CASH FLOWS FROM INVESTING ACTIVITIES:
Proceeds from disposition of assets....................... -- 1,500 2,900
Deferred data procurement costs........................... (120,493) (111,814) (98,005)
Purchase of property, equipment and software.............. (33,731) (34,444) (18,772)
Capitalized software costs................................ (7,167) (3,682) (5,784)
Investments and net assets acquired in business
acquisitions and other, net............................. 319 889 (1,550)
--------- --------- ---------
Net cash used by investing activities........... (161,072) (147,551) (121,211)
CASH FLOWS FROM FINANCING ACTIVITIES:
Net bank borrowings (repayments).......................... 3,000 (5,500) 5,500
Net borrowings (repayments) of capitalized leases......... (810) (2,291) (880)
Purchases of Common Stock................................. (20,185) (3,012) --
Proceeds from exercise of stock options and other......... 9,256 17,154 2,445
--------- --------- ---------
Net cash provided (used) by financing
activities.................................... (8,739) 6,351 7,065
EFFECT OF EXCHANGE RATE CHANGES ON CASH................... 193 (1,437) (626)
--------- --------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (9,776) 8,730 (12,689)
Cash and cash equivalents at beginning of year............ 20,925 12,195 24,884
--------- --------- ---------
Cash and cash equivalents at end of year.................. $ 11,149 $ 20,925 $ 12,195
========= ========= =========
</TABLE>
The accompanying notes to consolidated financial statements are
an integral part of these statements.
26
<PAGE> 28
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
DECEMBER 31, 1998, 1997 AND 1996
1. SUMMARY OF ACCOUNTING POLICIES
BUSINESS
Information Resources, Inc. ("IRI") and its subsidiaries (collectively the
"Company") is a leading provider of universal product code ("UPC"),
scanner-based business solutions services to the consumer packaged goods ("CPG")
industry, offering services in the U.S., Europe and other international markets.
The Company supplies CPG manufacturers, retailers and brokers with information
and analysis critical to their sales, marketing and supply chain operations. IRI
provides services designed to deliver value through an enhanced understanding of
the consumer to a majority of the Fortune 500 companies in the CPG industry.
PRINCIPLES OF CONSOLIDATION
The consolidated financial statements include the accounts of Information
Resources, Inc. and all wholly or majority owned subsidiaries and affiliates.
Minority interests reflect the non-Company owned stockholder interests in IRI
InfoScan Limited (U.K.), IRI/GfK Retail Services GmbH (Germany) ("IRI/GfK
Retail"), effective February 1997, IRI/GfK Retail Services B.V. (the
Netherlands), effective February 1998 and Information Resources Espana, S.L.,
effective November 1998. 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.
ACCOUNTING ESTIMATES
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the reported
period. Actual results may differ from estimates.
RECLASSIFICATIONS
Certain reclassifications have been made in the prior years' consolidated
financial statements to conform to the 1998 presentation.
REVENUE RECOGNITION
Revenues on contracts for retail tracking services, which generally have
terms of not less than one year, are recognized over the terms of the contracts.
Such contracts are generally categorized into one of two classes: 1) cancelable
at the end of each year by the giving of six months written notice by either
party; or 2) multi-year contracts either non-cancelable or cancelable only with
significant penalties, generally by the giving of six months written notice
after the initial multi-year term. Revenues for special analytical services,
market research and consulting projects are recognized as services are
performed. Certain of these projects are fixed-price in nature and use the
percentage-of-completion method for the recognition of revenue.
Revenues from the sale of software application products, or products sold
under licensing agreements, are recognized upon delivery when there is a
reasonable basis for estimating collectibility and the Company has no
significant remaining obligations. Related software maintenance fees are
recognized as earned over the terms of their respective contracts.
27
<PAGE> 29
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
RESEARCH AND DEVELOPMENT
Expenditures for research and development for the years ended December 31,
1998, 1997 and 1996 approximated $33.0 million, $25.0 million and $24.9 million,
respectively. Included in these expenditures were $7.1 million, $3.7 million and
$5.8 million of commercial software development costs that were capitalized for
the years ended December 31, 1998, 1997 and 1996, respectively. Expenditures not
capitalized are charged to expense as incurred.
BENEFITS PLAN
The Company sponsors an employee savings plan that qualifies as a deferred
salary arrangement under Section 401(k) of the Internal Revenue Code. The plan
allows eligible employees to contribute a portion of their pre-tax income in
accordance with specified guidelines. The Company matches a percentage of
employee contributions up to certain limits. The expense recognized for the
401(k) plan totaled approximately $2.9 million, $2.4 million and $2.0 million in
1998, 1997 and 1996, respectively.
CASH AND CASH EQUIVALENTS
For purposes of reporting cash flows, cash and cash equivalents include
cash on hand, commercial paper and funds held in money market accounts with a
maturity of three months or less.
FAIR VALUE OF FINANCIAL INSTRUMENTS AND CREDIT RISK
The carrying value of the Company's financial instruments, cash and cash
equivalents, investments and debt obligations represent a reasonable estimate of
their fair value. As of December 31, 1998 and 1997, the Company had no
significant concentrations of credit risk related to cash equivalents and
accounts receivable.
PROPERTY AND EQUIPMENT
Property and equipment is recorded at cost and is depreciated over the
estimated service lives. For financial statement purposes, depreciation is
provided by the straight-line method. The Company also capitalizes the cost of
internal-use computer software as incurred and amortizes such costs over the
related project estimated useful lives of three to seven years. Leasehold
improvements are amortized over the shorter of their estimated service lives or
the terms of their respective lease agreements. Estimated useful lives are as
follows:
<TABLE>
<S> <C>
Computer equipment and software............................. 3 to 7 years
Market testing and other operating equipment................ 3 to 7 years
Leasehold improvements...................................... 5 to 20 years
Equipment and furniture..................................... 3 to 8 years
</TABLE>
OTHER ASSETS
Other assets include deferred data procurement costs, intangible assets and
capitalized software costs held for sale. Data procurement costs are amortized
over a period of 28 months and include payments and services to retailers for
point-of-sale data and causal costs related to collecting, reviewing and
verifying other data (i.e., causal factors) which are an essential part of the
database. Intangible assets include goodwill, solicitation rights and
non-compete agreements, all of which arose from acquisitions, investments or
strategic alliances. Goodwill is amortized on a straight-line basis over periods
from ten to twenty years. Solicitation rights are amortized on a straight-line
basis over the expected useful lives of six to ten years. Non-compete agreements
are being amortized over periods from five to seven years. Capitalized costs of
computer software
28
<PAGE> 30
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
held for sale are amortized on a straight-line basis beginning upon the
software's general release date over a period not to exceed three years.
On an ongoing basis, management reviews the valuation and amortization of
these assets to determine possible impairment by comparing the carrying value to
the undiscounted future cash flows of the related assets. Based upon currently
projected cash flows, the Company's assessment is that the realizability of
these assets is not impaired.
INCOME TAXES
Deferred income taxes are recognized at statutory rates to reflect the
future effects of tax carryforwards and temporary differences arising between
the tax bases of assets and liabilities and their financial reporting amounts at
each year end. Deferred income taxes arise in business combinations accounted
for as purchases as a result of differences between the fair value of assets
acquired and their tax bases.
EARNINGS (LOSS) PER COMMON AND COMMON EQUIVALENT SHARE AND STOCK-BASED
COMPENSATION
The Company adopted the Statement of Financial Accounting Standards No.
128, "Earnings per Share" effective January 1, 1997. Net earnings (loss) per
share is based upon the weighted average number of shares of common stock
outstanding during each year. Net earnings (loss) 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 year. For the years ended December 31, 1998 and
1997, stock options with an exercise price greater than $17.41 and $16.50 per
share, aggregating 540,176 and 750,262, respectively, were excluded from the
weighted average shares outstanding calculation because they were antidilutive.
The Company accounts for stock option grants in accordance with provisions
of APB Opinion No. 25, "Accounting for Stock Issued to Employees."
ADOPTION OF RECENT STATEMENT OF FINANCIAL ACCOUNTING STANDARDS
Adoption of Recent Statement of Financial Accounting Standards: The Company
adopted Statement of Financial Accounting Standards No. 130, "Reporting
Comprehensive Income", and Statement of Financial Accounting Standards No. 131,
"Disclosures about Segments of an Enterprise and Related Information", in its
December 31, 1998 consolidated financial statements.
2. SUPPLEMENTAL CASH FLOW INFORMATION
Interest expense paid and income taxes paid (refunded) during the years
ended December 31, was as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ ------
<S> <C> <C> <C>
Interest................................................... $1,257 $1,346 $2,103
Income taxes............................................... 1,548 262 (735)
</TABLE>
Excluded from the consolidated statements of cash flows was the effect of
several non-cash investing and financing activities. In 1998, 1997 and 1996,
receivables of $1.6 million, $.5 million and $.7 million, respectively, were
reclassified to investment in joint ventures.
3. ACQUISITIONS AND JOINT VENTURES
IRI began a start-up venture in Spain during April 1998. In November 1998,
the Company executed a joint venture agreement with Media Planning, S.A. to
create a new retail tracking business to serve the
29
<PAGE> 31
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Spanish market under the name Information Resources Espana, S.L. ("IRI-Spain").
On January 18, 1999, IRI-Spain and Dympanel, S.A. signed a cooperation agreement
which added Dympanel, S.A. as a third investor in IRI-Spain. The aforementioned
agreements resulted in the Company, Media Planning, S.A., and Dympanel, S.A.
owning 60%, 30% and 10%, respectively, of the capital shares of IRI-Spain.
Under the terms of a 1995 agreement, the Company had a strategic alliance
with Middle East Market Research Bureau ("MEMRB"), a market research company
based in Cyprus. In October 1998 IRI exercised its option to acquire a 19.9%
ownership interest in MEMRB and holds an option to increase its ownership
interest of MEMRB to 49%.
The Company and GfK AG of Germany ("GfK") operate a joint venture which
offers a scanner-based product tracking service to the Netherlands market
operating under the InfoScan name. Until early 1998, this joint venture was
owned 80.1% by GfK and 19.9% by the Company. In February 1998, the Company
increased its ownership to 51% and assumed overall management responsibilities.
In 1998, the Company sold a 9.9% interest in GfK Panel Services Benelux
B.V. and GfK Belgium S.A., reducing its ownership to 10%. Those companies
operate household panel services in the Netherlands and Belgium and continue to
cooperate with the Netherlands InfoScan operation in the sale and delivery of
services to common customers.
Effective May 21, 1998, the Company reduced its ownership in Information
Resources, Japan, Ltd., from 60% to 40% by selling a 20% ownership interest to
Mitsui & Co., Ltd.
In February 1997, the Company and GfK organized a new joint venture
company, IRI/GfK Retail. The Company has a 51% ownership interest in IRI/GfK
Retail, and GfK owns the remainder. IRI/GfK Retail purchased the German retail
tracking business of GfK Panel Services GmbH ("GfK Panel").
In a separate transaction, the Company sold its previously held 15%
ownership interest in GfK Panel to GfK at no book gain or loss. GfK Panel, a
provider of consumer panel and ad hoc research services, will cooperate with
IRI/GfK Retail in selling and delivering services to customers.
The consolidation of the Company's Netherlands operations, the exercise of
its MEMRB option and the sale of its 20% interest in Information Resources
Japan, Ltd. did not have a material impact on the consolidated financial results
or position of the Company.
4. NONRECURRING EXPENSES AND NET LOSS ON DISPOSITION OF ASSETS
Nonrecurring expenses in 1996 included a $4.8 million charge principally
related to the disposal of certain cable TV advertising cut-in equipment
originally developed for use in the Company's market-testing operation.
In 1995, the Company sold to Oracle Corporation certain assets, liabilities
and related software application products relating to the on-line analytical
processing business previously operated by the Company's software division. A
portion of the cash proceeds were placed into an interest-bearing escrow
account. In December 1996, the Company recorded a $4.6 million charge related
primarily to the final settlement of the escrow account.
5. INCOME TAXES
IRI and its U.S. subsidiaries and partnerships file their U.S. Federal
income tax return on a consolidated basis. As of December 31, 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
30
<PAGE> 32
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
approximately $9.6 million which expire primarily between 1999 and 2012, and are
available to reduce future U.S. Federal income tax liabilities. In addition, at
December 31, 1998, various foreign subsidiaries of IRI had aggregate cumulative
NOL carryforwards for foreign income tax purposes of approximately $10.9 million
which are subject to the various income tax provisions of each respective
country. Approximately $3.6 million of these foreign NOLs may be carried forward
indefinitely, while the remaining $7.3 million expire in 2000 through 2003.
Domestic earnings before income taxes were $16.6 million, $31.4 million and
$11.7 million for 1998, 1997 and 1996, respectively. The foreign loss before
income taxes was ($10.0) million, ($17.0) million and ($21.6) million for 1998,
1997 and 1996, respectively. A majority of the foreign pre-tax losses are
deducted as partnership losses in IRI's consolidated U.S. Federal income tax
return in accordance with the U.S. Internal Revenue Code.
Income tax (expense) benefit relating to earnings (loss) for the years
ended December 31, 1998, 1997 and 1996 consisted of the following components (in
thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Current income tax (expense) benefit
Federal................................................ $ -- $ -- $ --
Foreign................................................ (129) (371) (638)
State and local........................................ -- -- --
------- ------- ------
(129) (371) (638)
------- ------- ------
Deferred income tax (expense) benefit
Federal................................................ (1,939) (6,366) 3,805
Foreign................................................ 21 549 (937)
State and local........................................ (688) (512) 70
------- ------- ------
(2,606) (6,329) 2,938
------- ------- ------
Income tax (expense) benefit............................. $(2,735) $(6,700) $2,300
======= ======= ======
</TABLE>
The Company has reduced its deferred tax liability by its Federal, state
and certain foreign NOL carryforwards in its consolidated financial statements.
The Company's recognition of future tax benefits is due to the expected
utilization of those benefits based upon future receipt of substantial taxable
income, specifically resulting from over $110.0 million of existing net
temporary differences at December 31, 1998, primarily deferred data procurement
costs, capitalized software costs, and other items, most of which will reverse
over the next three years.
31
<PAGE> 33
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Significant components of the Company's deferred tax liabilities and assets
were as follows (in thousands):
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1998 1997
------- -------
<S> <C> <C>
Deferred tax liabilities:
Deferred data procurement costs........................... $48,581 $45,366
Capitalized software costs................................ 2,385 4,669
Acquisition related costs................................. 4,536 4,493
Other..................................................... 11,767 8,635
------- -------
Total deferred tax liabilities.................... 67,269 63,163
Deferred tax assets:
Domestic NOL carryforwards................................ 25,003 26,904
Domestic tax credit carryforwards......................... 9,571 9,467
Foreign NOL carryforwards................................. 4,409 3,648
Revenue recognition change................................ 710 1,404
Reserve for compensation related items.................... 4,866 5,021
Other..................................................... 17,486 11,785
------- -------
Total deferred tax assets......................... 62,045 58,229
Valuation allowance on deferred tax assets.................. (8,793) (8,726)
------- -------
Net deferred tax assets..................................... 53,252 49,503
------- -------
Net deferred tax liability.................................. $14,017 $13,660
======= =======
</TABLE>
The valuation allowance increased by $.1 million in 1998 and $2.2 million
in 1997, as it is more likely than not that the net operating loss and domestic
tax credit carryforwards recorded by certain Company subsidiaries in these years
will not be fully utilized to offset taxable income.
Income tax (expense) benefit differs from the statutory U.S. Federal income
tax rate of 35% applied to earnings (loss) before income taxes for the years
ended December 31, 1998, 1997 and 1996 as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997 1996
------- ------- ------
<S> <C> <C> <C>
Statutory tax (expense) benefit.......................... $(2,303) $(5,027) $3,450
Effects of --
State income taxes, net of Federal income tax
benefit............................................. (447) (333) 45
Nondeductible meals and entertainment.................. (428) (407) (365)
Nondeductible acquisition/organization costs........... (180) (127) (210)
Other non-taxable income (nondeductible expenses)...... -- (11) 18
Foreign losses and taxes............................... 558 (1,089) (805)
Change in valuation allowance.......................... 400 216 419
Other.................................................. (335) 78 (252)
------- ------- ------
$(2,735) $(6,700) $2,300
======= ======= ======
</TABLE>
32
<PAGE> 34
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
6. ACCOUNTS RECEIVABLE
Accounts receivable at December 31, were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------- --------
<S> <C> <C>
Billed...................................................... $71,141 $ 70,761
Unbilled.................................................... 21,258 29,288
------- --------
92,399 100,049
Reserve for accounts receivable............................. (4,762) (3,840)
------- --------
$87,637 $ 96,209
======= ========
</TABLE>
Payments received in advance of revenue recognition are reflected in the
consolidated financial statements as deferred revenue. Unbilled accounts
receivable represent revenues and fees on contracts and other services earned to
date for which customers were not invoiced as of the balance sheet date.
7 . PROPERTY AND EQUIPMENT
Property and equipment at December 31, were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- ---------
<S> <C> <C>
Computer equipment and software............................. $ 96,302 $ 102,283
Market testing and other operating equipment................ 30,730 24,581
Leasehold improvements...................................... 14,963 16,513
Equipment and furniture..................................... 35,448 36,666
-------- ---------
177,443 180,043
Accumulated depreciation.................................... (97,940) (111,628)
-------- ---------
$ 79,503 $ 68,415
======== =========
</TABLE>
8. INVESTMENTS AND OTHER ASSETS
Investments at December 31 were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------ -------
<S> <C> <C>
Datos Information Resources, at cost plus equity in
undistributed earnings.................................... $5,268 $ 5,143
GfK Panel Services Benelux B.V., at cost.................... 1,272 5,919
Other....................................................... 3,252 1,999
------ -------
$9,792 $13,061
====== =======
</TABLE>
Other assets at December 31 were as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
-------- --------
<S> <C> <C>
Deferred data procurement costs -- net of accumulated
amortization of $123,440 in 1998 and $108,491 in 1997..... $138,356 $126,733
Intangible assets, including goodwill -- net of accumulated
amortization of $13,616 in 1998 and $10,233 in 1997....... 18,610 16,463
Capitalized software costs -- net of accumulated
amortization of $3,701 in 1998 and $3,578 in 1997......... 9,258 6,093
Other....................................................... 5,765 9,158
-------- --------
$171,989 $158,447
======== ========
</TABLE>
33
<PAGE> 35
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
9. LONG-TERM DEBT
Long-term debt at December 31, was as follows (in thousands):
<TABLE>
<CAPTION>
1998 1997
------ -------
<S> <C> <C>
Bank borrowings............................................. $3,000 $ --
Capitalized leases and other................................ 2,096 2,906
------ -------
5,096 2,906
Less current maturities..................................... (521) (2,266)
------ -------
$4,575 $ 640
====== =======
</TABLE>
Financings: On February 10, 1999 the Company amended its $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 weighted average interest rate at December
31, 1998 was 6.25%. In October 1997, the Company replaced its $50 million bank
revolving credit facility maturing in 1998 with a $75 million facility maturing
in 2001.
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 $23.0 million is
currently available for such distributions under the most restrictive of these
covenants. The bank credit agreement contains covenants which restrict the
Company's ability to incur additional indebtedness.
Capitalized leases and other primarily consist of leases for computer and
communications equipment expiring through 2000. Maturities of capitalized leases
in 1999 and 2000 are $.5 million and $1.6 million, respectively.
10. CAPITAL STOCK
PREFERRED STOCK PURCHASE RIGHTS
In 1989, IRI adopted a shareholder rights plan which attached preferred
stock rights ("Rights") to each share of its Common Stock. Each Right entitles
the holder to purchase one one-hundredth share of Preferred Stock at an exercise
price of $60. The Rights become exercisable upon the acquisition of a certain
percentage of IRI Common Stock or a tender offer or exchange offer for IRI
Common Stock by a person or group. IRI may redeem the Rights at $.01 per Right
at any time prior to a public announcement that a person or group has acquired a
certain percentage of IRI's Common Stock. The Rights will expire on October 27,
2007. IRI has authority to issue one million shares of $.01 par value Preferred
Stock.
COMMON STOCK
At December 31, 1998, 1997 and 1996, 27,867,884, 28,713,943 and 27,886,406
shares of Common Stock, respectively were issued and outstanding. At December
31, 1998, .9 million and 3.3 million options were available for grant under the
Executive Stock Option Plan and the Employee Stock Option Plan, respectively. In
connection with all IRI employee and director stock plans, 11.6 million shares
were reserved for issuance at December 31, 1998.
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
34
<PAGE> 36
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
subject to a number of considerations including the market price of the
Company's Common Stock and general market conditions. As of December 31, 1998,
the Company had purchased and retired 1,861,800 shares under the plan at an
average cost of $12.46 per share, including 1,442,600 shares purchased during
1998 at an average cost of $11.96 per share.
In May 1996, the Company's shareholders approved a stock plan for
non-employee directors (the Director's Plan), authorizing the issuance of up to
100,000 shares of Common Stock. Under the Directors' Plan an eligible director
is paid annually in shares of Common Stock in lieu of 75% of the cash retainer
otherwise payable for services on the Board. The number of shares issued is
based upon the fair market value of the Company's Common Stock. The Company
issued 8,154, 9,873, and 10,692 shares in 1998, 1997 and 1996 at a price of
$17.38, $14.36 and $14.25 per share, respectively, under the Director's Plan.
There are restrictions in IRI's bank revolving credit facility and lease
agreements which limit the payment of dividends and the purchases or redemption
of Common Stock. (See Note 9.)
STOCK OPTIONS
The Company has several stock option plans. The Employee Stock Option Plan
covers most employees other than executive officers and directors. Substantially
all options under these plans have been granted at fair market value or higher.
Most option grants are exercisable in equal annual increments of 25% beginning
on the first anniversary of the grant date and expire ten years after the date
of grant. IRI also has an Executive Stock Option Plan covering executive
officers and directors which at inception authorized up to 2.5 million stock
options. Most options under this plan were granted at fair market value and are
exercisable in equal annual increments of 25% beginning on the first anniversary
of the grant date and expire ten years after the date of grant. For options
granted at less than fair market value, the Company recognizes compensation
expense over the vesting period for the difference between the total fair market
value and the total exercise price on the date of grant.
The following table presents, on a pro forma basis, net earnings (loss) and
net earnings (loss) per share for the years ended December 31, 1998, 1997 and
1996 as if an alternate method of accounting as prescribed by Statement of
Financial Accounting Standard No. 123 "Accounting for Stock-Based Compensation"
for stock options had been adopted (in thousands, except per share data):
<TABLE>
<CAPTION>
1998 1997 1996
------ ------ -------
<S> <C> <C> <C>
Net earnings (loss) -- as reported........................ $3,846 $7,662 $(7,558)
====== ====== =======
Net earnings (loss) -- pro forma.......................... $ 981 $6,096 $(8,673)
====== ====== =======
Net earnings (loss) per common share -- basic -- as
reported................................................ $ .13 $ .27 $ (.27)
====== ====== =======
Net earnings (loss) per common share -- basic -- pro
forma................................................... $ .03 $ .21 $ (.31)
====== ====== =======
Net earnings (loss) per common and common equivalent
share -- diluted -- as reported......................... $ .13 $ .26 $ (.27)
====== ====== =======
Net earnings (loss) per common and common equivalent
share -- diluted -- pro forma........................... $ .03 $ .21 $ (.31)
====== ====== =======
</TABLE>
The above table is based upon the valuation of option grants using the
Black-Scholes pricing model for traded options with assumed risk-free interest
rates of 5.5%, 6.6% and 6.7% for 1998, 1997 and 1996, respectively; stock price
volatility factor of 55.9%, 46.6% and 41.4% for 1998, 1997 and 1996,
respectively; and an expected life of the options of five years. Using the
foregoing assumptions, the calculated weighted-average fair value of options
granted in 1998, 1997 and 1996 was $6.64, $7.21 and $5.85, respectively. Because
the Company's employee stock options have characteristics significantly
different from those of traded options, and because changes in the input
assumptions can materially affect the fair value estimate, in management's
opinion, the model does not necessarily provide a reliable single measure of the
fair value of its employee stock options.
35
<PAGE> 37
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Transactions involving stock options for the Executive and Employee Stock
Option Plans are summarized as follows:
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
NUMBER EXERCISE
OF OPTIONS PRICE
---------- --------
<S> <C> <C>
Outstanding January 1, 1996................................. 8,852,261 $14.44
Granted..................................................... 430,000 12.90
Canceled/Expired............................................ (645,543) 18.43
Exercised................................................... (288,538) 8.32
---------- ------
Outstanding December 31, 1996............................... 8,348,180 14.26
Granted..................................................... 801,390 14.59
Canceled/Expired............................................ (651,083) 17.06
Exercised................................................... (1,236,864) 12.38
---------- ------
Outstanding December 31, 1997............................... 7,261,623 14.36
Granted..................................................... 1,647,345 12.52
Canceled/Expired............................................ (997,762) 15.89
Exercised................................................... (584,972) 13.88
---------- ------
Outstanding December 31, 1998............................... 7,326,234 $13.73
========== ======
Exercisable December 31, 1998............................... 4,985,449 $14.16
========== ======
</TABLE>
Stock options outstanding at December 31, 1998 are as follows:
<TABLE>
<CAPTION>
WEIGHTED OUTSTANDING EXERCISABLE
AVERAGE WEIGHTED WEIGHTED
REMAINING AVERAGE AVERAGE
NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE
RANGE OF EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE
- ------------------------ ----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
$ 6.94-$12.75................ 1,941,440 5.87 $10.09 1,107,791 $10.23
$12.78-$14.00................ 2,314,345 7.34 13.74 1,222,558 13.60
$14.13-$17.25................ 2,530,273 4.90 14.50 2,216,049 14.40
$17.50-$34.00................ 540,176 4.96 23.25 439,051 24.43
--------- ---- ------ --------- ------
$ 6.94-$34.00................ 7,326,234 5.93 $13.73 4,985,449 $14.16
========= ==== ====== ========= ======
</TABLE>
11. COMMITMENTS, CONTINGENCIES AND LITIGATION
LEASE AGREEMENTS AND OTHER COMMITMENTS
The Company leases certain property and equipment under operating leases
expiring at various dates through 2010. At December 31, 1998 obligations to make
future minimum payments under all operating leases were $124.0 million in the
aggregate and $27.8 million, $21.8 million, $13.5 million, $11.9 million and
$11.3 million for the five years ended December 31, 2003, respectively. Rent
expense for all operating leases was $30.9 million, $36.1 million and $32.0
million for the years ended December 31, 1998, 1997 and 1996, respectively.
LEGAL PROCEEDINGS
In July 1996, IRI filed an action against The Dun & Bradstreet Corp., The
A.C. Nielsen Company (now a subsidiary of ACNielsen) ("ACNielsen") and IMS
International, Inc. (collectively, "the Defendants") in the United States
District Court for the Southern District of New York entitled Information
Resources, Inc. v. The Dun & Bradstreet Corp., et. al. No. 96 CIV. 5716 (the
"Action"). IRI alleged that, among other
36
<PAGE> 38
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
things, the Defendants violated Sections 1 and 2 of the Sherman Act, 15 U.S.C.
Section 1 and 2, by engaging in a series of anti-competitive practices aimed at
excluding the Company from various export markets for retail tracking services
and regaining monopoly power in the United States market for such services.
These practices included: (i) entering into exclusionary contracts with
retailers in several countries, in order to restrict the Company's access to
sales data necessary to provide retail tracking services; (ii) illegally
tying/bundling services in markets over which Defendants' had monopoly power
with services in markets in which ACNielsen competed with the Company; (iii)
predatory pricing; (iv) acquiring foreign market competitors with the intent of
impeding the Company's efforts at export market expansion; (v) tortiously
interfering with Company contracts and relationships with clients, joint venture
partners and other market research companies; and (vi) disparaging the Company
to financial analysts and clients. By the Action, the Company seeks to enjoin
the Defendants' anti-competitive practices and to recover damages in excess of
$350 million, prior to trebling.
The Action followed legal proceedings by the Canadian Competition Tribunal
in 1995 and the European Commission in 1996 against ACNielsen for
anti-competitive practices. In 1995, the Canadian Competition Tribunal concluded
that ACNielsen had engaged in "anti-competitive acts" with the express intent
"to exclude potential competitors generally and IRI specifically" from the
Canadian retail tracking and services market. In December 1996, ACNielsen signed
an Undertaking to the European Commission agreeing to halt numerous contractual
practices which the Company contended was part of an intentional and unlawful
strategy aimed at preventing the Company from establishing a competitive
position in Europe and eliminating the Company as a competitor.
On January 15, 1998, IRI filed an action against Manugistics, Inc.
("Manugistics") in the Circuit Court of Cook County, Illinois, Case No. 99 L
00599. In its two count action, IRI has alleged that Manugistics has breached a
Data Marketing and Revenue Agreement between IRI and Manugistics ("Agreement")
by failing to pay certain amounts due to IRI thereunder. The Agreement was
entered into by IRI and Manugistics in connection with the sale by IRI to
Manugistics of certain assets relating to the manufacture, sale and servicing of
certain logistics software. IRI has also alleged that Manugistics committed an
anticipatory breach of the Agreement with respect to certain other amounts not
yet due thereunder. IRI seeks damages in excess of $11.9 million in connection
with these claims. IRI has also alleged that Manugistics breached a related non-
competition and solicitation agreement between IRI and Manugistics. IRI seeks
unspecified damages to be determined at trial under this count. On March 2,
1999, Manugistics filed a Motion to Stay Proceedings and Compel Arbitration
which is currently pending before the Court.
In the ordinary course of business, IRI and its subsidiaries become
involved as plaintiffs or defendants in various other legal proceedings. The
claims and counterclaims in such litigation, including those for punitive
damages, individually in certain cases and in the aggregate, involve amounts
which may be material. However, it is the opinion of the Company's management,
based upon advice of counsel, that the ultimate disposition of pending
litigation against the Company will not be material.
12. SEGMENT INFORMATION
The Company develops and maintains databases, decision support software,
and mathematical models, primarily for the analysis of detailed information on
purchasing of consumer goods, all within one industry segment -- business
information services. The 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. Executive
management of the Company routinely evaluates the performance of its operations
against short-term and long-term objectives.
In December 1998, the Company adopted the provisions of SFAS No. 131. As a
result, the Company's segment disclosure has been reported along geographic
areas, which is consistent with the management structure of the Company. The
executive management of the Company considers revenues from third parties
37
<PAGE> 39
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
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 tables and discussion present certain information regarding
the operations of the Company by geographic segment as of December 31, 1998,
1997, and 1996 (in thousands):
Segmented Results:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Revenues:
U.S. Services............................................. $396,992 $366,678 $344,612
International Services.................................... 114,331 89,649 60,991
-------- -------- --------
Total............................................. $511,323 $456,327 $405,603
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
Operating Results:
U.S. Services............................................. $ 31,515 $ 38,613 $ 31,106
International Services:
Operating loss............................................ (15,689) (19,920) (29,425)
Minority interests benefit (expense)...................... 342 (304) 986
Equity in earnings of affiliated companies................ 443 444 30
-------- -------- --------
Subtotal -- International Services................ (14,904) (19,780) (28,409)
Corporate and other expenses................................ (8,856) (3,926) (1,965)
Nonrecurring expenses (a)................................... -- -- (4,808)
-------- -------- --------
Operating Results................................. 7,755 14,907 (4,076)
-------- -------- --------
Net gain (loss) on sale of assets........................... -- -- (4,600)
Interest expense and other, net............................. (1,174) (545) (1,182)
-------- -------- --------
Earnings (loss) before income taxes............... $ 6,581 $ 14,362 $ (9,858)
======== ======== ========
</TABLE>
Identifiable Assets:
<TABLE>
<CAPTION>
1998 1997 1996
-------- -------- --------
<S> <C> <C> <C>
U.S. Services............................................... $232,851 $237,755 $211,634
International Services...................................... 126,650 115,804 104,122
Corporate(b)................................................ 9,792 13,061 18,737
-------- -------- --------
Total Identifiable Assets......................... $369,293 $366,620 $334,493
======== ======== ========
</TABLE>
- ---------------
(a) Operating profit includes nonrecurring expenses of $4.8 million in 1996.
Operating profit excludes net loss on disposition of assets of ($4.6)
million in 1996. (See Note 4.)
(b) Identifiable corporate assets represent investments aggregating $9.8
million, $13.1 million and $18.7 million at December 31, 1998, 1997 and
1996, respectively. (See Note 8.)
38
<PAGE> 40
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS -- (CONTINUED)
Other Cash Flow Information:
<TABLE>
<CAPTION>
UNITED
STATES INTERNATIONAL CORPORATE TOTAL
------- ------------- --------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C>
Capital expenditures
1998............................................. $26,976 $ 5,453 $1,302 $ 33,731
1997............................................. 27,293 5,136 2,015 34,444
1996............................................. 14,428 3,614 730 18,772
Depreciation expense
1998............................................. $16,556 $ 4,921 $1,761 $ 23,238
1997............................................. 14,745 3,916 1,760 20,421
1996............................................. 14,212 4,208 1,784 20,204
Data procurement expenditures
1998............................................. $76,940 $43,553 $ -- $120,493
1997............................................. 71,757 40,057 -- 111,814
1996............................................. 65,613 32,392 -- 98,005
Amortization of data procurement expenditures
1998............................................. $74,583 $37,528 $ -- $112,111
1997............................................. 69,844 31,781 -- 101,625
1996............................................. 64,410 23,534 -- 87,944
</TABLE>
39
<PAGE> 41
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
SUMMARY OF QUARTERLY DATA (UNAUDITED)
Summaries of consolidated results on a quarterly basis are as follows (in
thousands, except per share data):
<TABLE>
<CAPTION>
1998
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues................................... $119,190 $129,392 $125,346 $137,395
======== ======== ======== ========
Operating profit (loss).................... $ 3,286 $ 5,917 $ (2,341) $ 108
======== ======== ======== ========
Net earnings (loss)........................ $ 1,910 $ 3,441 $ (1,538) $ 33
======== ======== ======== ========
Net earnings (loss) per common
share -- basic........................... $ .07 $ .12 $ (.05) $ --
======== ======== ======== ========
Net earnings (loss) per common and common
equivalent share -- diluted.............. $ .07 $ .12 $ (.05) $ --
======== ======== ======== ========
Weighted average common shares -- basic.... 28,671 28,860 28,708 28,071
======== ======== ======== ========
Weighted average common and common
equivalent shares -- diluted............. 28,946 29,839 28,708 28,093
======== ======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
1997
-----------------------------------------
FIRST SECOND THIRD FOURTH
QUARTER QUARTER QUARTER QUARTER
-------- -------- -------- --------
<S> <C> <C> <C> <C>
Revenues................................... $105,128 $113,973 $115,601 $121,625
======== ======== ======== ========
Operating profit (loss).................... $ (38) $ 4,587 $ 4,282 $ 5,936
======== ======== ======== ========
Net earnings............................... $ 55 $ 2,129 $ 1,982 $ 3,496
======== ======== ======== ========
Net earnings per common share -- basic..... $ -- $ .08 $ .07 $ .12
======== ======== ======== ========
Net earnings per common and common
equivalent share -- diluted.............. $ -- $ .07 $ .07 $ .12
======== ======== ======== ========
Weighted average common shares -- basic.... 28,052 28,260 28,610 28,974
======== ======== ======== ========
Weighted average common and common
equivalent shares -- diluted............. 28,563 28,553 29,468 29,691
======== ======== ======== ========
</TABLE>
ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES
None
40
<PAGE> 42
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
The sections entitled "Election of Directors" and "Section 16(a) Beneficial
Ownership Reporting Compliance" are incorporated by reference from the
definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with the Company's 1999 annual meeting of stockholders
scheduled for May 20, 1999. Information about the Company's executive officers
is set forth in Item 4(a) in Part I of this Report.
ITEM 11. EXECUTIVE COMPENSATION
The section entitled "Executive Compensation" excluding the Board
Compensation Committee Report and the stock price performance graph is
incorporated by reference from the definitive proxy statement to be filed with
the Securities and Exchange Commission in connection with the Company's 1999
annual meeting of stockholders scheduled for May 20, 1999.
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT
The section entitled "Ownership of Securities" is incorporated by reference
from the definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with the Company's 1999 annual meeting of stockholders
scheduled for May 20, 1999.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
The section entitled "Certain Transactions" is incorporated by reference
from the definitive proxy statement to be filed with the Securities and Exchange
Commission in connection with the Company's 1999 annual meeting of stockholders
scheduled for May 20, 1999.
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K
(a) Documents filed as a part of this Report:
<TABLE>
1. Financial Statements
The consolidated financial statements of the Company are
included in Part II, Item 8 of this Report.
PAGE
NO.
--
<S> <C> <C>
2. Financial Statement Schedules
Schedule II -- Valuation and Qualifying Accounts; Reserve
for Accounts Receivable..................................... 43
All other schedules are omitted because they are not
applicable, or not required, or because the required
information is included in the financial statements or notes
thereto.
3. Executive Compensation Plans and Arrangements. The following
Executive Compensation Plans and Arrangements are listed as
exhibits to this Form 10-K:
Employment Agreement dated November 27, 1978 between the
Company and Gerald Eskin.
Employment Agreement dated March 15, 1985 between the
Company and Jeffrey Stamen.
Employment Agreement dated March 15, 1985 between the
Company and Leonard Lodish.
</TABLE>
41
<PAGE> 43
Noncompetition Agreements dated March 15, 1985
between the Company and John D.C. Little, Glen
Urban, and Leonard Lodish, respectively.
Letter agreement dated January 17, 1989 between
the Company and Glen Urban.
Form of letter agreement between the Company
and John D.C. Little.
Consulting and Noncompetition Agreement dated
January 16, 1987 between the Company and Edwin
Epstein.
Agreement effective January 1, 1989 between the
Company and Edwin Epstein, amending the
Consulting and Non-competition Agreement dated
January 16, 1987, which Consulting and
Noncompetition Agreement is referred to above.
Letter agreement dated August 7, 1989 between
the Company and Leonard Lodish.
Employment Agreement dated November 16, 1989
between the Company and James G. Andress.
Amended and Restated Employment Agreement dated
March 16, 1994 between the Company and Thomas
M. Walker.
1992 Executive Stock Option Plan, as amended.
1992 Employee Incentive Stock Option Plan.
Employment Agreement dated November 4, 1993
between the Company and George R. Garrick.
1994 Employee Nonqualified Stock Option Plan.
Form of Information Resources, Inc.
Directorship/Officership Agreement between the
Company and its directors, its executive
officers and certain other officers.
Employment Termination Agreement dated as of
March 4, 1996, between the Company and George
R. Garrick.
Employment Agreement dated as of August 22,
1996, between the Company and Randall S. Smith
and First Amendment to Employment Agreement
dated November 11, 1996.
Information Resources, Inc. Executive Deferred
Compensation Plan effective January 1, 1999.
Consulting Agreement dated as of February 16,
1999, between the Company and Gian M. Fulgoni.
Employment letter agreement dated April 26,
1995 between the Company and Gary M. Hill.
Employment letter agreement dated September 23,
1997 between the Company and James R. Chambers,
as amended by letter agreement dated August 31,
1998.
(b) Reports on 8-K:
None
(c) Exhibits
See Exhibit Index (immediately following the signature pages)
42
<PAGE> 44
SCHEDULE II
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
VALUATION AND QUALIFYING ACCOUNTS
RESERVE FOR ACCOUNTS RECEIVABLE
(IN THOUSANDS)
<TABLE>
<CAPTION>
CHARGED
BALANCE AT TO COSTS DEDUCTIONS BALANCE AT
BEGINNING AND (NET WRITEOFFS/ END OF
DESCRIPTION OF PERIOD EXPENSES RECOVERIES) PERIOD
----------- ---------- -------- --------------- ----------
<S> <C> <C> <C> <C>
Year ended December 31, 1996..................... $3,860 $ 719 $ (242) $4,337
Year ended December 31, 1997..................... $4,337 $1,046 $(1,543) $3,840
Year ended December 31, 1998..................... $3,840 $1,883 $ (961) $4,762
</TABLE>
43
<PAGE> 45
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the Registrant has duly caused this report to be signed on
its behalf by the undersigned thereunto duly authorized.
Dated: March 29, 1999
INFORMATION RESOURCES, INC.
By: /s/ THOMAS W. WILSON, JR.
----------------------------------
Thomas W. Wilson, Jr.
Chief Executive Officer
Pursuant to the Requirement of the Securities Exchange Act of 1934, this
report has been signed below by the following persons on behalf of the
Registrant and in the capacities indicated on March 29, 1999.
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
/s/ THOMAS W. WILSON, JR. Chairman of the Board of Directors
- --------------------------------------------- Chief Executive Officer and Director
Thomas W. Wilson, Jr.
/s/ GARY M. HILL Executive Vice President and Chief Financial
- --------------------------------------------- Officer
Gary M. Hill [Principal financial officer]
/s/ JOHN P. MCNICHOLAS, JR. Senior Vice President and Controller
- --------------------------------------------- [Principal accounting officer]
John P. McNicholas, Jr.
* /s/ JAMES G. ANDRESS Director
- ---------------------------------------------
James G. Andress
* /s/ GERALD J. ESKIN Director
- ---------------------------------------------
Gerald J. Eskin
* /s/ EDWIN E. EPSTEIN Director
- ---------------------------------------------
Edwin E. Epstein
* /s/ GIAN M. FULGONI Director
- ---------------------------------------------
Gian M. Fulgoni
* /s/ JOHN D.C. LITTLE Director
- ---------------------------------------------
John D.C. Little
* /s/ LEONARD M. LODISH Director
- ---------------------------------------------
Leonard M. Lodish
* /s/ EDWARD E. LUCENTE Director
- ---------------------------------------------
Edward E. Lucente
* /s/ EDITH W. MARTIN Director
- ---------------------------------------------
Edith W. Martin
</TABLE>
44
<PAGE> 46
<TABLE>
<CAPTION>
SIGNATURE TITLE
--------- -----
<C> <S>
* /s/ JEFFREY P. STAMEN Director
- ---------------------------------------------
Jeffrey P. Stamen
* /s/ GLEN L. URBAN Director
- ---------------------------------------------
Glen L. Urban
*By: /s/ THOMAS W. WILSON, JR.
- ---------------------------------------------
Pursuant to a Power of Attorney
</TABLE>
45
<PAGE> 47
EXHIBIT INDEX
The following documents are the exhibits to this Report. For convenient
reference, each exhibit is listed according to the number assigned to it in the
Exhibit Table of Item 601 of Regulation S-K.
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
- ------- ----------------------- ----------
<C> <S> <C>
3(a) -- Copy of the certificate of incorporation of the Company
dated May 27, 1982, as amended. (Incorporated by
reference. Previously filed as Exhibit 3(a) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1988.) IBRF
(b) -- Copy of the bylaws of the Company, as amended.
(Incorporated by reference. Previously filed as Exhibit
3(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1988.) IBRF
(c) -- Copy of amendments to the Certificate of Incorporation
approved by the stockholders on May 16, 1989.
(Incorporated by reference. Previously as Exhibit 3(c) to
the Company's Annual Report 10-K for the fiscal year
ended December 31, 1989.) IBRF
(d) -- Copy of amendments to the bylaws of the Company as
approved by the Board of Directors bringing the bylaws
into conformity with the amendments to the Certificate of
Incorporation approved by the stockholders May 16, 1989.
(Incorporated by reference. Previously filed as Exhibit
3(d) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1989.) IBRF
(e) -- Certificate of Designations of Series A Participating
Preferred Stock, as adopted by the Board of Directors of
the Company on March 2, 1989 and duly filed with the
Secretary of State of the State of Delaware March 15,
1989. (Incorporated by reference. Previously filed as
Exhibit 3(e) to the Company's Annual Report on Form 10-K
for the fiscal year ended December 31, 1989.) IBRF
10 -- Material Contracts
(a) -- 1982 Incentive Stock Option Plan adopted November 3,
1982, as amended. (Incorporated by reference. Previously
filed as Exhibit 10(a) to the Company's Registration
Statement on Form S-8 filed with the SEC on December 31,
1988.) IBRF
(b) -- Information Resources, Inc., Nonqualified Stock Option
Plan effective January 1, 1984, as amended. (Incorporated
by reference. Previously filed as Exhibit 10(b) to the
Company's Quarterly Report on Form 10-Q for the quarter
ended June 30, 1988.) IBRF
(c) -- Employment Agreement dated November 27, 1978 between the
Company and Gerald Eskin. (Incorporated by reference.
Previously filed as Exhibit 10(e) to Registration
Statement No. 2-81544.) IBRF
(d) -- Consulting and Noncompetition Agreement dated January 16,
1987 between the Company and Edwin Epstein. (Incorporated
by reference. Previously filed as Exhibit 10(e) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1987.) IBRF
(e) -- Employment agreement dated March 15, 1985 between the
Company and Jeffrey Stamen. (Incorporated by reference.
Previously filed as Exhibit 10(d) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1985, as amended on Form 8 dated April 29, 1986 and
August 25, 1986.) IBRF
(f) -- Employment agreements dated March 15, 1985 between the
Company and Leonard Lodish. (Incorporated by reference.
Previously filed as Exhibit 10.14 to Registration
Statement No. 2-96940.) IBRF
(g) -- Noncompetition Agreement dated March 15, 1985 between the
Company and John Little, Glen Urban, and Leonard Lodish,
respectively. (Incorporated by reference. Previously
filed as Exhibit 10.15 to Registration Statement No.
2-96490.) IBRF
</TABLE>
<PAGE> 48
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
- ------- ----------------------- ----------
<C> <S> <C>
(h) -- Letter agreement dated January 17, 1989 between the
Company and Glen Urban (Incorporated by reference.
Previously filed as Exhibit 10(1) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1989.) IBRF
(i) -- Form of letter agreement between the Company and John
D.C. Little (Incorporated by reference. Previously filed
as Exhibit 10(m) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1989.) IBRF
(j) -- Agreement effective January 1, 1989 between the Company
and Edwin Epstein, amending the Consulting and
Noncompetition Agreement dated January 16, 1987, which
Consulting and Noncompetition Agreement is referred to in
Exhibit 10(d) hereof. (Incorporated by reference.
Previously filed as Exhibit 19(a) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1989.) IBRF
(k) -- Letter agreement dated August 7, 1989 between the Company
and Leonard Lodish (Incorporated by reference. Previously
filed as Exhibit 3(q) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1989.) IBRF
(l) -- Employment Agreement dated November 16, 1989 between the
Company and James G. Andress (Incorporated by reference.
Previously filed as Exhibit 3(r) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1989.) IBRF
(m) -- Amended and Restated Employment Agreement dated March 16,
1994 between the Company and Thomas M. Walker.
(Incorporated by reference. Previously filed as Exhibit
10(s) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.) IBRF
(n) -- Lease Agreement dated September 27, 1990 between
Randolph/Clinton Limited Partnership and the Company
(Incorporated by reference. Previously filed as Exhibit
2.1 to the Company's Current Report on Form 8-K dated
September 27, 1990.) IBRF
(o) -- 1992 Employee Incentive Stock Option Plan (Incorporated
by reference. Previously filed as Exhibit 10(x) to the
Company's Annual Report on Form 10-K for the fiscal year
ended December 31, 1992.) IBRF
(p) -- 1994 Employee Nonqualified Stock Option Plan.
(Incorporated by reference. Previously filed as Exhibit
10(y) to the Company's Annual Report on Form 10-K for the
fiscal year ended December 31, 1993.) IBRF
(q) -- Employment Agreement dated November 4, 1993 between the
Company and George Garrick. (Incorporated by reference.
Previously filed as Exhibit 10(z) to the Company's Annual
Report on Form 10-K for the fiscal year ended December
31, 1993.) IBRF
(r) -- Second Amendment to Lease Agreement dated September 27,
1990 between the Company and Randolph/Clinton Limited
Partnership. (Incorporated by reference. Previously filed
as Exhibit 10 to the Company's Quarterly Report on Form
10-Q for the quarter ended March 31, 1995.) IBRF
(s) -- 1992 Executive Stock Option Plan, as amended effective
May 24, 1995. (Incorporated by reference. Previously
filed as Exhibit 3 to the Company's Quarterly Report on
Form 10-Q for the quarter ended June 30, 1995.) IBRF
(t) -- Amended and Restated Asset Purchase Agreement dated as of
June 12, 1995 by and between the Company and Oracle
Corporation. (Incorporated by reference. Previously filed
as Exhibit 2.1 to the Company's Current Report on Form
8-K dated July 27, 1995 and filed August 11, 1995.) IBRF
</TABLE>
<PAGE> 49
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
- ------- ----------------------- ----------
<C> <S> <C>
(u) -- Licenses-Back Agreement dated as of July 27, 1995 between
the Company and Oracle Corporation. (Incorporated by
reference. Previously filed as Exhibit B to the Amended
and Restated Asset Purchase Agreement dated as of July
27, 1995 filed as Exhibit 2.1 to the Current Report on
Form 8-K dated July 27, 1995 and filed August 11, 1995.) IBRF
(v) -- Employment Termination Agreement, dated as of March 4,
1996 between the Company and George R. Garrick
(Incorporated by reference. Previously filed as Exhibit
10(dd) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1995.) IBRF
(w) -- Form of Information Resources, Inc.
Directorship/Officership Agreement between the Company
and each of its directors, executive officers and certain
other officers. (Incorporated by reference. Previously
filed as Exhibit 10(x) to the Company's Annual Report on
Form 10-K for the fiscal year ended December 31, 1994.) IBRF
(x) -- Employment Agreement dated as of August 22, 1996, between
the Company and Randall S. Smith and First Amendment to
Employment Agreement dated November 11, 1996.
(Incorporated by reference. Previously filed as Exhibit
10(gg) to the Company's Annual Report on Form 10-K for
the fiscal year ended December 31, 1996.) IBRF
(y) -- Information Resources, Inc. Amended and Restated 401(k)
Retirement Savings Plan and Trust adopted by the Company
effective May 24, 1995. (Incorporated by reference.
Previously filed as Exhibit 10(hh) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996. IBRF
(z) -- First Amendment to the Information Resources, Inc.
Amended and Restated 401(k) Retirement Savings Plan
effective July 1, 1996. (Incorporated by reference.
Previously filed as Exhibit 10(ii) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.) IBRF
(aa) -- Second Amendment to the Information Resources, Inc.
Amended and Restated 401(k) Retirement Savings Plan
effective March 1, 1997. (Incorporated by reference.
Previously filed as Exhibit 10(jj) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.) IBRF
(bb) -- Trust Agreement between Information Resources, Inc. and
Fidelity Management Trust Company dated as of July 1,
1996. (Incorporated by reference. Previously filed as
Exhibit 10(kk) to the Company's Annual Report on Form
10-K for the fiscal year ended December 31, 1996.) IBRF
(cc) -- First Amendment to Trust Agreement between Fidelity
Management Trust Company and Information Resources, Inc.
effective March 1, 1997. (Incorporated by reference.
Previously filed as Exhibit 10(ll) to the Company's
Annual Report on Form 10-K for the fiscal year ended
December 31, 1996.) IBRF
(dd) -- Credit Agreement dated October 31, 1997 among the
Company, the Bank Parties thereto and Harris Trust and
Savings Bank, as Agent. (Incorporated by reference.
Previously filed as Exhibit 10 to the Company's Quarterly
Report on Form 10-Q for the quarter ended September 30,
1997.) IBRF
</TABLE>
<PAGE> 50
<TABLE>
<CAPTION>
SEQUENTIAL
EXHIBIT DOCUMENT
NUMBER DESCRIPTION OF DOCUMENT FILING
- ------- ----------------------- ----------
<C> <S> <C>
(ee) -- Rights Agreement between Information Resources, Inc. and
Harris Trust and Savings Bank, amended and restated as of
October 27, 1997. (Incorporated by reference. Previously
filed as Exhibit 4.2 to the Company's Current Report on
Form 8-A/A dated October 27, 1997 and filed October 28,
1997.) IBRF
(ff) -- Information Resources, Inc. Executive Deferred
Compensation Plan effective January 1, 1999 EF
(gg) -- Consulting Agreement dated as of February 16, 1999,
between the Company and Gian M. Fulgoni EF
(hh) -- First Amendment to Credit Agreement dated as of February
10, 1999 between the Company, the Banks Party thereto and
Harris Trust and Savings Bank, as agent for the Banks EF
(ii) -- Employment letter agreement dated April 26, 1995 between
the Company and Gary M. Hill. EF
(jj) -- Employment letter agreement dated September 23, 1997
between the Company and James R. Chambers, as amended by
letter agreement dated August 31, 1998. EF
18 -- Letter regarding change in accounting principle.
(Incorporated by reference. Previously filed as Exhibit
18 to the Company's Quarterly Report on Form 10-Q for the
quarter ended March 31, 1994.) IBRF
21 -- Subsidiaries of the Registrant (filed herewith). EF
23 -- Consent of Independent Auditors (filed herewith). EF
24 -- Powers of Attorney (filed herewith). EF
27 -- Financial Data Schedule (filed herewith). EF
</TABLE>
<PAGE> 1
INFORMATION RESOURCES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
EFFECTIVE: JANUARY 1, 1999
<PAGE> 2
EXHIBIT ff
INFORMATION RESOURCES, INC.
EXECUTIVE DEFERRED COMPENSATION PLAN
I. PURPOSE
The purpose of the Information Resources, Inc. Executive Deferred
Compensation Plan is to provide a means whereby the Company may afford
certain employees and senior management with an opportunity to
accumulate additional financial security, by providing a vehicle to
defer compensation amounts in excess of the dollar limitation of
Internal Revenue Code Section 402(g) applicable to the amount of
compensation which may be deferred under the Information Resources,
Inc. 401(k) Retirement Savings Plan. By providing a means whereby
Salary and/or Bonus may be deferred into the future, the Plan will aid
in attracting and retaining executives of exceptional ability.
Compensation reductions made pursuant to the Plan will be credited with
investment gains or losses, in accordance with the Plan, and benefits
will be paid to the Participant (or his or her Beneficiary) as
described herein. The Plan is also designed to provide additional
financial security at the time of Retirement, and to supplement other
Company-sponsored benefits in the event of death or Disability.
II. DEFINITIONS
2.02 "Administrative Committee" and "Committee" mean the Plan Committee
appointed pursuant to Article VI to manage and administer the Plan.
2.03 "Age" means the Participant's chronological age on the relevant date.
2.04 "Agreement" means the Information Resources, Inc. Executive Deferred
Compensation Plan Participation Agreement, executed between a
Participant and the Company, whereby a Participant agrees to defer a
portion of his or her Salary and/or Bonus pursuant to the provisions of
the Plan, and the Company agrees to make benefit payments in accordance
with the provisions of the Plan.
2.05 "Beneficiary" means the person, persons or trust who under the Plan,
becomes entitled to receive a Participant's interest in the event of
the Participant's death.
2.06 "Board of Directors" means the Board of Directors of Information
Resources, Inc. or any committee acting within the scope of its
authority.
2.07 "Bonus" means the cash compensation paid during a calendar year to the
Participant in excess of Salary.
2.08 "Company" means Information Resources, Inc. (also known as IRI), and
its successors and assigns.
2.09 "Company Matching Contribution" means an amount added to a
Participant's Deferred Compensation Account, as provided in Section
3.05.
1
<PAGE> 3
2.010 "Deferred Compensation Account" means the account(s) maintained by the
Company for each Participant, pursuant to Article III. Notwithstanding
the provisions of Section 8.10, a Participant's Deferred Compensation
Account shall not constitute or be treated as a trust fund or escrow
arrangement of any kind.
2.11 "Determination Date" means the date on which the amount of a
Participant's Deferred Compensation Account is determined as provided
in Article III hereof. The last day of each calendar quarter and the
date of a Participant's Termination of Service shall be a Determination
Date.
2.12 "Disability" shall have the same meaning and shall be determined in the
same manner as in the Company's Long-Term Disability Plan.
2.13 "ERISA Funded" means that the Plan is prevented from meeting the
"unfunded" criterion of the exceptions to the application of Parts 2
through 4 of Subtitle B of Title I of the Employee Retirement Income
Security Act of 1974 (ERISA).
2.14 "Executive Deferred Compensation Plan Trust" and "Trust" mean the
Information Resources, Inc. Executive Deferred Compensation Plan Trust,
an irrevocable grantor trust or trusts established by the Company, in
accordance with Section 8.10, with an independent trustee for the
benefit of persons entitled to receive payments under this Plan.
2.15 "Participant" means an employee of the Company who is eligible to
participate in the Plan pursuant to Section 3.01, and who enters into
an Agreement.
2.16 "Plan" means the Information Resources, Inc. Executive Deferred
Compensation Plan, as amended from time-to-time.
2.17 "Plan Effective Date" means January 1, 1999.
2.18 "Plan Year" means a calendar year.
2.19 "Retirement Date" and "Retirement" mean the date of a Termination of
Service of a Participant for reasons other than death or Disability
after he or she attains age fifty (50) and the sum of such
Participant's Years of Service and age equals or is greater than 55.
2.20 "Retirement Savings Plan" means the Information Resources, Inc. 401(k)
Retirement Savings Plan as in effect and amended from time-to-time.
2.21 "Salary" for purposes of the Plan shall be the total of the
Participant's base salary paid during a calendar year, and considered
"wages" for Medicare and federal income tax withholding, but before any
deferrals made pursuant to this or any other plan. For purposes of the
Plan, Salary shall not include severance or other payments made in
connection with a Participant's Termination of Service.
2.22 "Tax Funded" means that the interest of a Participant in the Plan will
be includable in the gross income of the Participant for federal income
tax purposes prior to actual receipt of Plan benefits by the
Participant.
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2.23 "Termination of Service" means the Participant's ceasing his or her
employment with the Company for any reason whatsoever, whether
voluntarily or involuntarily, including by reason of Retirement, death,
or Disability.
2.24 "Years of Service" shall have the same meaning as defined and measured
under the Information Resources, Inc. 401(k) Retirement Savings Plan.
X. ELIGIBILITY; PARTICIPATION LIMITS
3.03 a) Eligibility to Participate. Participation in the Plan shall be
limited to executives of the Company at the Senior Vice-President
level and above or any other executive of the Company approved to
participate by the Committee. It is the intention of the Company
that all Participants satisfy the term a "select group of
management or highly compensated employees" as provided in
Sections 201(2), 301(a)(3), 401(a)(1) and 4021(b)(6) of ERISA.
a) Acknowledgement of Eligibility and Election to Participate. Each
eligible employee shall annually acknowledge his or her
eligibility to participate at such time and in such form as the
Administrative Committee may require or permit. An eligible
employee may elect to become a Participant with respect to a Plan
Year by filing a properly completed Agreement with the
Administrative Committee no later than December 1st of the
preceding calendar year. An eligible employee shall become a
Participant with respect to a Plan Year upon acceptance of his or
her Agreement by the Administrative Committee. An Agreement, once
accepted by the Administrative Committee, shall be irrevocable.
b) New Participants. A Participant who first attains status of
Senior Vice-President level and above or any other executive of
the Company approved to participate by the Committee subsequent
to January 1, 1999, shall be eligible to participate in the Plan
after satisfying the requirements of Section 3.01(a) and (b) and
shall be bound by all the terms and conditions of the Plan,
provided, however, that his or her Agreement is filed no later
than thirty (30) days following notification by the
Administrative Committee of his or her eligibility to
participate.
3.02 Deferral of Salary and/or Bonus. A Participant may elect to defer
between zero percent (0%) and seventy-five percent (75%) of his or her
Salary in five percent (5%) increments during a Plan Year. In addition,
a Participant may elect to defer between zero percent (0%) and one
hundred percent (100%) of his or her Bonus payable during a Plan Year
in twenty percent (20%) increments,. At the time of election, a
Participant may elect to defer a different percentage of his or her
Salary or Bonus for each Plan Year and may also elect not to defer any
portion of his or her Salary or Bonus in a Plan Year.
A Participant shall make an annual election for an upcoming Plan Year
by December 1st of the year preceding the Plan Year for which the
election is being made. Except as provided in Section 4.07, "Hardship
Distributions; Waiver of Deferral," any election so made shall be
irrevocable with respect to Salary and Bonus applicable to the Plan
Year. A Participant who does not file an Agreement for a Plan Year may
file an Agreement for any subsequent Plan Year.
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3.03 Suspension of Agreement to Defer Salary and/or Bonus. A Participant's
Agreement to defer Salary and/or Bonus shall be suspended in the event
that the Administrative Committee, in its sole discretion, reasonably
determines that a Participant ceases to meet the eligibility
requirements of the Plan.
3.04 Timing of Deferral Credits. The amount of Salary and/or Bonus that a
Participant elects to defer in his or her Agreement shall cause an
equivalent reduction in the Participant's Salary and/or Bonus,
respectively. Deferrals shall be credited to the Participant's Deferred
Compensation Account throughout the Plan Year as the Participant
otherwise would have been paid the deferred portion of Salary and/or
Bonus.
3.05 Company Matching Contribution. The Company may credit a Company
Matching Contribution to a Participant's Deferred Compensation Account
at some future date to be determined by the Administrative Committee.
3.06 Vesting. A Participant shall be one hundred percent (100%) vested in
his or her Deferred Compensation Account equal to the amount of Salary
and/or Bonus the Participant deferred into his or her Deferred
Compensation Account and the investment gains or losses credited
thereon. In the event a Company Matching Contribution is credited to a
Participant's Deferred Compensation Account, the Company Matching
Contribution and the investment gain or losses credited thereon shall
vest in the same manner as under the Company's Retirement Savings Plan.
3.07 Determination of Account. Each Participant's Deferred Compensation
Account as of each Determination Date shall consist of the balance of
the Participant's Deferred Compensation Account as of the immediately
preceding Determination Date adjusted for:
- additional deferrals pursuant to Section 3.02,
- Company Matching Contributions (if any) pursuant to Section 3.05,
- distributions (if any); and
- the appropriate investment earnings and gains and/or losses and
expenses pursuant to Section 3.08.
All adjustments and earnings related thereto,will be determined on a
daily basis.
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3.08 Deferred Compensation Account Investment Options. The Administrative
Committee shall designate from time to time one or more investment
options in which Deferred Compensation Accounts may be deemed invested.
A Participant or Beneficiary shall allocate his or her Deferred
Compensation Account among the deemed investment options by filing with
the Administrative Committee a Deferral Allocation Election Form. A
Participant may elect to allocate his or her Deferred Compensation
Account, in ten percent (10%) increments among as many of the
investment options which are offered by the Company. For the Plan Year
beginning January 1, 1999, and until changed by the Administrative
Committee, the Administrative Committee has designated the following
phantom investment options:
- Short-Term Bond Portfolio
- Equity Index Portfolio
- Large Cap Growth Portfolio
- Enhanced U.S. Equity Portfolio
- Mid Cap Value Portfolio
Any such investment allocation election shall be made initially on the
Deferral Allocation Election Form and shall be subject to such rules as
the Administrative Committee may prescribe, including, without
limitation, rules concerning the manner of making deferral allocation
elections and, the frequency and timing of changing such deferral
allocation elections.
The Administrative Committee shall have the sole discretion to
determine the number of investment options to be designated hereunder
and the nature of the options and may change or eliminate the
investment options provided hereunder from time to time. For each
investment option, the Administrative Committee shall, in its sole
discretion, select a mutual fund, or an investment index, or shall
create a phantom portfolio of such investments as it deems appropriate,
to constitute the investment option. The Company may, but is under no
obligation to, acquire any investment or otherwise set aside assets for
the deemed investment of Deferred Compensation Accounts hereunder.
The Administrative Committee shall determine the amount and rate of
investment gains or losses with respect to any such investment option
for any period, and may take into account deemed expenses which would
be incurred if actual investments were made.
3.09 Change of Investment Election. Effective as of any January 1, April 1,
July 1 or October 1 (or if the New York Stock Exchange is not open for
trading on such day, the close of the last business day of the prior
month on which the New York Stock Exchange was open for trading), a
Participant may elect by a written notice delivered to the
Administrative Committee no later than the 20th day of the prior
calendar month, to transfer all or any portion of his or her deemed
investment and/or change the manner in which his or her future
deferrals are deemed invested among the then-available investment
options.
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II. DISTRIBUTIONS
4.01 Distribution on Retirement. Upon a Participant's Termination of
Service on or after a Retirement Date, distribution of the
Participant's Deferred Compensation Account, determined under Section
3.07, as of the Determination Date coincident with or next following
such Retirement Date, shall be made or commence. The distribution shall
be made as designated by the Participant in his or her Retirement
Payout Election Form, subject to Section 4.05. In the event a
distribution is made pursuant to this Section 4.01, the Participant
shall immediately cease to be eligible for any other benefit provided
under this Plan.
4.02 Distribution on Death. Upon the death of a Participant prior to the
distribution of all of his or her Deferred Compensation Account,
distribution of the unpaid balance of the Deferred Compensation Account
shall be made or continue to be made to such Participant's Beneficiary.
If the distribution of the Participant's Deferred Compensation Account
has not yet commenced as of the date of death, distribution to the
Beneficiary shall be made or commence as soon as practicable and in any
event within ninety (90) days following the Participant's death. The
method of distribution shall be as designated by the Participant in his
or her Retirement Payout Election Form, subject to Section 4.05.
In addition to the distribution of the unpaid balance of a
Participant's Deferred Compensation Account, in the event a Participant
dies prior to his or her Retirement Date, the Company will pay the
Participant's Beneficiary a $50,000 lump-sum survivor benefit. The
Beneficiary of an employee who is eligible to participate in the Plan
but elects not to participate is still eligible to receive the survivor
benefit.
4.03 Distribution on Termination of Service. Unless otherwise directed by
the Administrative Committee, upon the Termination of Service of a
Participant prior to his or her Retirement Date for reasons other than
death or Disability, distribution of the Participant's Deferred
Compensation Account shall be made as soon as practicable and in any
event within ninety (90) days after such Termination of Service, in a
single lump sum, notwithstanding the provisions of Section 4.05(a) and
(b). Upon a Termination of Service prior to his or her Retirement Date
or death or Disability, the Participant shall immediately cease to be
eligible for any other benefit provided under this Plan.
4.04 Disability Benefit. In the event a Participant incurs a Disability
which first manifests itself after the Participant's initial
participation in the Plan but prior to his or her Retirement Date,
distribution of the Participant's Deferred Compensation Account shall
be made or commence as soon as practicable after the Participant incurs
the Disability and in any event within ninety (90) days, following
receipt of notice by the Committee of the Participant's Disability. The
distribution shall be made as designated by the Participant in his or
her Retirement Payout Election Form, subject to Section 4.05. Such
benefit shall be payable until the earliest of the following events:
(i) there is no longer any balance in the Participant's Deferred
Compensation Account; (ii) the Participant ceases to be Disabled and
resumes employment with the Company; or (iii) the Participant
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<PAGE> 8
dies. Disability benefits shall be treated as distributions from a
Participant's Deferred Compensation Account.
If a Disability occurs during the period elected in the Agreement, the
disabled Participant's Agreement shall be suspended, and further
deferrals shall not be required during the period of Disability.
4.05 Method of Timing of Distribution.
e) Election in Agreement. Except in the case of a Termination of
Service prior to a Participant's Retirement Date for reasons
other than death or Disability, distribution of the Participant's
Deferred Compensation Account shall be made in a lump sum or
installments, as elected by the Participant in his or her
Retirement Payout Election Form relating to each respective
Deferred Compensation Account. Installment payments shall be made
monthly over a period not to exceed twenty (20) years, as elected
by the Participant in his or her Retirement Payout Election Form.
The amount of each monthly installment shall be determined
annually and shall be equal to the quotient obtained by dividing
the balance of the Participant's Deferred Compensation Account
being distributed in installments by the number of installments
remaining to be paid, including the current installment.
f) Election to Change Method of Distribution. A Participant may, by
written request filed with the Administrative Committee at least
thirteen (13) months prior to the distribution or commencement of
distribution of a Deferred Compensation Account, change the
method of distribution elected with respect to a Deferred
Compensation Account to any other method permitted under Section
4.05(a), provided that such request shall not be effective unless
and until approved by the Committee. After a Participant's death,
the Participant's Beneficiary may petition the Administrative
Committee requesting an acceleration of benefit payments
otherwise due to be paid to the Beneficiary. The Administrative
Committee may, but is not required to, grant the Beneficiary's
request.
g) Notwithstanding any payment method elected by a Participant or
Beneficiary, the Company may, in its sole discretion, elect to
pay in a lump sum any Deferred Compensation Account whose balance
is less than $10,000.
4.01 Interim Distribution. At the time a Participant executes an Agreement,
he or she may elect to receive an interim distribution equal to the
lesser of the principal amount deferred pursuant to such Agreement or
the value as of the time of the interim distribution of the Deferred
Compensation Account relating to such Agreement. The interim
distribution election shall specify the year ("Distribution Year") in
which such interim distribution shall be made, which shall be no less
than three (3) Plan Years after the Plan Year in which the deferral was
originally made. Provided the Participant has not had an earlier
Termination of Service, Disability or death, the interim distribution
shall be made in a lump sum no later than January 31st of the
Distribution Year. Once a Participant elects to receive an interim
distribution, the election shall be irrevocable. Any interim
distribution paid shall be deemed a distribution, and shall be deducted
from the Participant's Deferred Compensation Account. A separate
interim distribution election shall be made for each
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<PAGE> 9
Plan Year in which amounts are deferred and a separate interim
distribution election shall be made for both Salary and Bonus
deferrals.
If a Participant is not currently deferring any portion of his or her
Salary or Bonus pursuant to the terms of this Plan at the time he or
she is scheduled to receive an interim distribution, and
his or her remaining Deferred Compensation Account balance after the
interim distribution was paid would be less than $5,000, the
Participant will be paid his or her total Deferred Compensation
Account balance at the time the interim distribution is due to be
paid.
4.02 Hardship Distributions; Waiver of Deferral. In the event that the
Administrative Committee, upon written petition of the Participant or
his or her Beneficiary, determines in its sole discretion, that the
Participant or his or her Beneficiary has suffered an unforeseeable
financial emergency, the Company may pay to the Participant or his or
her Beneficiary as soon as reasonably practicable following such
determination, an amount, not in excess of the Participant's Deferred
Compensation Account, necessary to satisfy the emergency. For purposes
of this Plan, an unforeseeable financial emergency is an unanticipated
emergency that is caused by an event beyond the control of the
Participant or Beneficiary and that would result in severe financial
hardship to the individual if the emergency distribution were not
permitted, as may result from illness, casualty loss or sudden
financial reversal. Financial needs arising from foreseeable events,
such as the purchase of a residence or education expenses for children,
shall not be considered a financial emergency. The Committee shall also
grant a waiver of the Participant's Agreement to defer a percentage of
Salary and/or Bonus upon finding that the Participant has suffered an
unforeseeable financial emergency. The waiver shall be for such period
of time as the Committee deems necessary under the circumstances.
4.03 Withholding; Employment Taxes. To the extent required by the law in
effect at the time payments are made, the Company shall withhold any
taxes required to be withheld by the federal, or any state or local,
government.
4.04 Commencement of Payments. Unless otherwise provided, payments under
this Plan shall commence as soon as practicable following the
Participant's eligibility for payment, but in no event later than
ninety (90) days following receipt of notice by the Administrative
Committee of an event which entitles a Participant or a Beneficiary to
payments under this Plan, or at such other date as may be determined by
the Administrative Committee in its sole discretion.
4.5 Lump-sum Settlement Option. Notwithstanding any other provision of this
Plan, any Participant or Beneficiary may, at any time elect to receive
an immediate lump sum payment of the balance of his or her Deferred
Compensation Account, reduced by a penalty equal to ten percent (10%)
of the value of the Participant's remaining Deferred Compensation
Account. The ten percent (10%) penalty amount shall be permanently
forfeited and shall not be paid to, or in respect of, the Participant
or his or her Beneficiary. In the event no such request is made by a
Participant or Beneficiary, the Participant's Deferred Compensation
Account shall be paid in accordance with the provisions of this Article
IV. Any Participant who elects to receive an immediate lump
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<PAGE> 10
sum payment pursuant to this Section 4.10, shall forego further
participation in the Plan for the remainder of the Plan Year in which
the payment is received, in addition to the subsequent Plan Year.
4.6 Recipients of Payments: Designation of Beneficiary. All payments to be
made by the Company under the Plan shall be made to the Participant
during his or her lifetime, provided that if the Participant dies prior
to the commencement or completion of such payments, then all subsequent
payments under the Plan shall be made by the Company to the Beneficiary
determined in accordance with this Section 4.11. The Participant may
designate a Beneficiary by filing a written notice of such designation
with the Committee in such form as the Committee requires and may
include a contingent Beneficiary. The Participant may from time-to-time
change the designated Beneficiary by filing a new designation in
writing with the Committee. If no designation is in effect at the time
any benefits payable under this Plan become due, the Beneficiary shall
be the Beneficiary designated by the Participant in the Retirement
Savings Plan, if any, or if no such designation exists under the
Retirement Savings Plan, the Participant's estate.
4.7 Distributions in Cash. All distributions of Deferred Compensation
Accounts shall be paid in United States dollars.
X. CLAIM FOR BENEFITS PROCEDURE
5.05 Claim for Benefits. Any claim for benefits under the Plan shall be made
in writing to the Committee. If such claim for benefits is wholly or
partially denied by the Committee, the Committee shall, within a
reasonable period of time, but not later than sixty (60) days after
receipt of the claim, notify the claimant of the denial of the claim.
Such notice of denial shall be in writing and shall contain:
a) The specific reason or reasons for the denial of the claim;
b) A reference to the relevant Plan provisions upon which the denial
is based;
c) A description of any additional material or information necessary
for the claimant to perfect the claim, together with an
explanation of why such material or information is necessary; and
d) An explanation of the Plan's claim review procedure.
5.01 Request for Review of a Denial of a Claim for Benefits. Upon the
receipt by the claimant of written notice of the denial of a claim, the
claimant may file a written request within ninety (90) days to the
Committee requesting a review of the denial of the claim, which review
shall include a hearing if deemed necessary by the Committee. In
connection with the claimant's appeal of the denial of his or her
claim, he or she may review relevant documents and may submit issues
and comments in writing. To provide for fair review and a full record,
the claimant must submit in writing all facts, reasons and arguments in
support of his or her position within the time allowed for filing a
written request for review. All issues and matters not raised for
review will be deemed waived by the claimant.
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5.02 Decision Upon Review of a Denial of a Claim for Benefits. The Committee
shall render a decision on the claim review promptly, but no more than
sixty (60) days after the receipt of the claimant's request for review,
unless special circumstances (such as the need to hold a hearing)
require an extension of time, in which case the sixty (60) day period
shall be extended to one hundred-twenty (120) days. Such decision
shall:
b) Include specific reasons for the decision;
c) Be written in a manner calculated to be understood by the
claimant; and
d) Contain specific references to the relevant Plan provisions upon
which the decision is based.
The decision of the Committee shall be final and binding in all
respects on the Company, the claimant and any other person claiming an
interest in the Plan through or on behalf of the claimant. No
litigation may be commenced by or on behalf of a claimant with respect
to this Plan until after the claim and review process described in this
Article V has been exhausted. Judicial review of Committee action shall
be limited to whether the Committee acted in an arbitrary and
capricious manner.
VI. ADMINISTRATION
6.06 Plan Administrative Committee. The Plan shall be administered by the
Administrative Committee. The Administrative Committee may assign
duties to an officer or other employees of the Company, and may
delegate such duties as it sees fit. A member of the Administrative
Committee who is also a Participant shall not be involved in the
decisions of the Administrative Committee regarding any
determination of any specific claim for benefit with respect to
himself or herself.
6.07 General Rights, Powers and Duties of Administrative Committee. The
Administrative Committee shall be responsible for the management,
operation and administration of the Plan. In addition to any powers,
rights and duties set forth elsewhere in the Plan, it shall have
complete discretion to exercise the following powers and duties:
a) To adopt such rules and regulations consistent with the
provisions of the Plan as it deems necessary for the proper and
efficient administration of the Plan;
b) To administer the Plan in accordance with its terms and any rules
and regulations it establishes;
c) To maintain records concerning the Plan sufficient to prepare
reports, returns, and other information required by the Plan or
by law;
d) To construe and interpret the Plan, and to resolve all questions
arising under the Plan;
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e) To direct the Company to pay benefits under the Plan, and to give
such other directions and instructions as may be necessary for
the proper administration of the Plan;
f) To employ or retain agents, attorneys, actuaries, accountants or
other persons, who may also be Participants in the Plan or be
employed by or represent the Company, as it deems necessary for
the effective exercise of its duties, and may delegate to such
persons any power and duties, both ministerial and discretionary,
as it may deem necessary and appropriate, and the Committee shall
be responsible for the prudent monitoring of their performance;
and
g) To be responsible for the preparation, filing, and disclosure on
behalf of the Plan of such documents and reports as are required
by any applicable federal or state law.
6.01 Information to be Furnished to Committee. The records of the Company
shall be determinative of each Participant's period of employment,
Termination of Service and the reason therefore, Disability, leave of
absence, reemployment, Years of Service, personal data, and Salary
and/or Bonus. Participants and their Beneficiaries shall furnish to the
Committee such evidence, data or information, and execute such
documents as the Committee requests.
6.02 Responsibility. No member of the Administrative Committee shall be
liable to any person for any action taken or omitted in connection with
the administration of this Plan unless attributable to his or her own
fraud or willful misconduct (or that of the Committee, in which he or
she participated); nor shall the Company be liable to any person for
any such action unless attributable to fraud or willful misconduct on
the part of a director, officer or employee of the Company. This
indemnification shall not duplicate, but may supplement, any coverage
available under any applicable insurance coverage.
III. AMENDMENT AND TERMINATION
7.07 Amendment. The Plan may be amended in whole or in part by a written
instrument adopted by the Company at any time. Notice of any material
amendment shall be given in writing to the Administrative Committee and
to each Participant and each Beneficiary. No amendment shall
retroactively decrease either the balance of a Participant's Deferred
Compensation Account or a Participant's interest in his or her Deferred
Compensation Account as existing immediately prior to the later of the
effective date or adoption date of such amendment.
7.08 Company's Right to Terminate. The Company reserves the sole right to
terminate, by action of its Administrative Committee, the Plan and/or
the Agreement pertaining to a Participant at any time prior to the
commencement of payment of his or her benefits. In the event of any
such termination, a Participant shall be deemed to have incurred a
Termination of Service, and his or her Deferred Compensation Account
shall be paid in the manner provided in Section 4.03.
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7.09 Special Termination. Any other provision of the Plan to the contrary
notwithstanding, the Plan shall terminate if:
The Plan is held to be ERISA Funded or Tax Funded by a federal
court,and appeals from that holding are no longer timely or have been
exhausted. The Company may terminate the Plan if it determines, based
on a legal opinion which is satisfactory to the Company, that either
judicial authority or the opinion of the U.S. Department of Labor,
Treasury Department or Internal Revenue Service (as expressed in
proposed or final regulations, advisory opinions or rulings, or similar
administrative announcements) creates a significant risk that the Plan
will be held to be ERISA Funded or Tax Funded, and failure to so amend
the Plan could subject the Company or the Participants to material
penalties. Upon any such termination, the Company may:
a) Transfer the rights and obligations of the Company and some
or all Participants as determined by the Company in its
discretion, to a new plan established by the Company, which
is not deemed to be ERISA Funded or Tax Funded, but which
is substantially similar in all other respect to this Plan,
if the Company determines that it is possible or desirable
to establish such a Plan;
b) If the Company, in its sole discretion, determines that it
is not possible or desirable to establish the Plan in (a)
above, for some or all Participants, such Participants
shall be paid a lump sum equal to the value of his or her
Deferred Compensation Account;
c) Pay to a Participant a lump sum benefit equal to the value
of his or her Deferred Compensation Account to the extent
that a federal court has held that the interest of the
Participant in the Plan is includable in the gross income
of the Participant for federal income tax purposes prior to
actual payment of Plan benefits;
d) Pay to a Participant a lump sum benefit equal to the value
of his or her Deferred Compensation Account if, based on a
legal opinion satisfactory to the Company, there is a
significant risk that such Participant will be determined
not to be part of a "select group of management or highly
compensated employees" for purposes of ERISA.
A lump sum payment to be made in accordance with this Section shall be
subject to the provisions of Section 4.09.
VIII. MISCELLANEOUS
8.08 Separation of Plan: No Implied Rights. Neither the establishment of the
Plan nor any amendment thereof shall be construed as giving any
Participant, Beneficiary, or any other person any legal or equitable
right unless such right shall be specifically provided for in the Plan
or conferred by specific action of the Company in accordance with the
terms and provisions of the Plan. Except as expressly provided in this
Plan, the Company shall not be required or be liable to make any
payment under this Plan.
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8.09 No Right to Company Assets. Neither the Participant nor any other
person shall acquire by reason of the Plan any right in or title to any
assets, funds or property of the Company whatsoever, including, without
limiting the generality of the foregoing, any specific funds, assets or
other property which the Company, in its sole discretion, may set aside
in anticipation of a liability hereunder. Any benefits which become
payable hereunder shall be paid from the general assets of the Company.
The Participant and his or her Beneficiary shall have only a
contractual right to the amounts, if any, payable hereunder, unsecured
by any asset of the Company. Nothing contained in the Plan constitutes
a guarantee by the Company that the assets of the Company shall be
sufficient to pay any benefits to any person.
8.010 No Employment Rights. Nothing herein shall constitute a contract of
employment or of continuing service or in any manner obligate the
Company to continue the services of the Participant, or obligate the
Participant to continue in the service of the Company, or as a
limitation of the right of the Company to discharge any of its
employees, with or without cause. Nothing herein shall be construed as
fixing or regulating the Salary and/or bonus payable to the
Participant.
8.011 Offset. If, at the time payments or installments of payments are to be
made hereunder, the Participant or Beneficiary is indebted or obligated
to the Company, then the payments remaining to be made to the
Participant or the Beneficiary may, at the discretion of the Company,
be reduced by the amount of such indebtedness or obligation. However,
an election by the Company not to reduce any such payment or payments
shall not constitute a waiver of its claim, or prohibit or otherwise
impair the Company's right to offset future payments for such
indebtedness or obligation.
8.012 Protective Provisions. In order to facilitate the payment of benefits
hereunder, each employee designated eligible to participate in the
Plan, shall cooperate with the Company by furnishing any and all
information requested by the Company, including taking such physical
examinations as the Company may deem necessary, and taking such other
actions as may be requested by the Company. If the employee refuses to
cooperate, he or she shall not become a Participant in the Plan and the
Company shall have no further obligation to him or her under the Plan,
including, but not limited to, the survivor benefit provided under
Section 4.02. In the event a Participant has a balance in his or her
Deferred Compensation Account, the Participant or his or her
Beneficiary shall receive a benefit equal to his or her Deferred
Compensation Account determined pursuant to Section 3.08 and paid in
accordance with Section 4.03.
8.013 Non-assignability. Neither the Participant nor any other person shall
have any voluntary or involuntary right to commute, sell, assign,
pledge, anticipate, mortgage or otherwise encumber, transfer,
hypothecate, or convey in advance of actual receipt the amounts, if
any, payable hereunder, or any part thereof, which are expressly
declared to be unassignable and non-transferable. No part of the
amounts payable shall be, prior to actual payment, subject to seizure
or sequestration for the payment of any debts, judgments, alimony or
separate maintenance owed by the Participant or any other person, or be
transferable by operation of law in the event of the Participant's or
any other person's bankruptcy or insolvency.
13
<PAGE> 15
8.014 Gender and Number. Wherever appropriate herein, the masculine may mean
feminine and the singular may mean the plural, or vice versa.
8.015 Notice. Any notice required or permitted to be given under the Plan
shall be sufficient if in writing and hand delivered, or sent by
registered or certified mail, and if given to the Company, delivered to
the principal office of the Company, directed to the attention of the
Administrative Committee. Such notice shall be deemed given as of the
date of delivery, or, if delivery is made by mail, as of the date shown
on the postmark or the receipt for registration or certification.
8.016 Governing Laws. The Plan shall be construed and administered according
to the laws of the State of Illinois to the extent not pre-empted by
Federal Law.
8.17 Executive Deferred Compensation Plan Trust. The Company may establish a
Trust with (an) independent trustee(s), and shall comply with the terms
of the Trust. The Company may transfer to the trustee(s) an amount of
cash, marketable securities, or other property acceptable to the
trustee(s) ("Trust Property") equal in value to all or a portion of the
amount necessary, calculated in accordance with the terms of the Trust,
to pay the Company's obligations under the Plan (the "Funding Amount"),
and may make additional transfers to the trustee(s) as may be necessary
in order to maintain the Funding Amount. Trust Property so transferred
shall be held, managed, and disbursed by the trustee(s) in accordance
with the terms of the Trust. To the extent that Trust Property shall be
used to pay the Company's obligations under the Plan, such payments
shall discharge obligations of the Company; however, the Company shall
continue to be liable for amounts not paid by the Trust. Trust Property
will nevertheless be subject to claims of the Company's creditors in
the event of bankruptcy or insolvency of the Company, and the
Participant's rights under the Plan and Trust shall at all times be
subject to the provisions of Section 8.02.
IN WITNESS WHEREOF, the Company has adopted the Information Resources, Inc.
Executive Deferred Compensation Plan effective January 1, 1999.
INFORMATION RESOURCES, INC.
By:
----------------------------------------
Its:
----------------------------------------
14
<PAGE> 1
EXHIBIT gg
CONSULTING AGREEMENT
THIS CONSULTING AGREEMENT ("AGREEMENT"), is dated as of February 16,
1999, between Information Resources, Inc., a Delaware corporation (the
"Company"), and Gian M. Fulgoni ("Consultant");
R E C I T A L S
WHEREAS, Consultant has served as Chief Executive Officer of the
Company and has acknowledged skills and experience in the business conducted by
the Company; and
WHEREAS, Consultant has submitted his resignation as Chief Executive
Officer of the Company, such resignation being effective as of November 21,
1998; and
WHEREAS, Consultant is willing and able to render services to the
Company, from and after the date hereof, on the terms and conditions set forth
in this Agreement.
A G R E E M E N T S
NOW, THEREFORE, in consideration of the premises and the mutual
agreements, provisions and covenants contained in this Agreement, the Company
and Consultant hereby agree as follows:
1. CONSULTING DUTIES.
(a) General Duties. During the Consulting Term, Consultant will report
directly to the Chief Executive Officer of the Company and will make himself
reasonably available to consult with the Company on matters relating to the
Company. Consultant will perform such services as the parties shall mutually
agree (which agreement Consultant shall not unreasonably withhold) for and on
behalf of the Company as shall be requested from time-to-time by the Chief
Executive Officer. Such services shall consist principally of (a) transitional
matters and (b) assistance in the maintenance and development of client and
employee relationships, in order to preserve the goodwill and existing
relationships between the Company, and its customers and employees. Consistent
with Consultant's obligations hereunder, Consultant shall not be prohibited from
engaging in other consulting and employment opportunities with other persons
except to the extent prohibited by Section 6 below.
(b) Cooperation. During the Consulting Term (as defined in Section 2
below) and thereafter (regardless of the reason for termination of the
Consulting Term), if requested by the Company, Consultant will cooperate fully
with respect to any claims, litigations or investigations currently pending or
to be brought by or against the Company as to which Consultant may have
knowledge of the facts and circumstances, which cooperation will include, but
not be limited to, providing testimony both by deposition, and at any trial or
related hearing. This obligation shall survive the termination or expiration of
this Agreement.
<PAGE> 2
(c) Consultant shall cooperate with the Company with respect to
miscellaneous issues that may arise in connection with Consultant's resignation
and the resulting transition, including tendering resignations from positions as
officers and\or directors of affiliated entities and transferring to the Company
equity interests in such affiliated entities that are held by Consultant in a
nominee or similar capacity.
2. TERM OF CONSULTING SERVICES.
Unless terminated as provided in Section 3 hereof, Consultant's
obligation to provide consulting services hereunder shall terminate on the
earlier of the third anniversary of the effective date of Consultant's
resignation as Chief Executive Officer of the Company or Consultant's death (the
"Consulting Term").
3. TERMINATION.
(a) By the Company. This Agreement as it relates to Consultant's
obligation to render services hereunder may be terminated at any time at the
option of the Company for cause (as such term is hereinafter defined), effective
upon the giving of written notice of termination to Consultant. As used herein,
the term "for cause" shall mean and be limited to: (i) any felony conviction;
(ii) the willful misconduct or gross negligence by Consultant in connection with
the performance of Consultant's duties, responsibilities, agreements and
covenants hereunder, or Consultant's refusal to render the consulting services
to the Company as required by Section 1 hereof, which misconduct, negligence or
refusal to so comply shall continue for a period of 45 days after written notice
from the Company; or (iii) the breach of Sections 5 or 6 of this Agreement.
(b) By Consultant.
(i) For Good Reason. Consultant may terminate this Agreement at
any time for Good Reason (as such term is defined below) effective on
the giving of written notice of termination to the Company. As used
herein, "Good Reason" shall mean and be limited to the Company's
material breach of its obligations hereunder which breach shall
continue for a period of 45 days after written notice from Consultant.
(ii) Upon Notice. Consultant may terminate this Agreement as it
relates to his obligation to render services hereunder after the first
anniversary of this Agreement by giving the Company 60 days prior
written notice of such election to terminate.
(c) Survival of Terms. The termination of this Agreement by either
party as set forth in Section 3(a) or 3 (b)(ii) above shall not serve to
terminate Consultant's obligations under Sections 1(b), 1(c), 5 or 6 hereof. If
Consultant terminates the Agreement pursuant to Section 3(b)(i), it shall
terminate Consultant's obligations under Sections 1(b), 5 and 6 hereof.
2
<PAGE> 3
(d) At Consultant's option, upon written notice to the Company prior
to July 31, 1999, except as set forth in the last sentence of this Section 3(d)
this Agreement shall terminate in its entirety and have no further force and
effect if, (i) the Board of Directors of the Company has not approved the
principal terms of a mutually acceptable joint venture arrangement among the
Company and Consultant or (ii) if such approval is obtained, the definitive
agreements reflecting such joint venture arrangement have not been agreed to
prior to June 30, 1999. Notwithstanding the foregoing, Consultant shall not be
entitled to terminate this Agreement as contemplated in this Section 3(d) if, as
an alternative to such joint venture arrangement, the Company and Consultant
enter into a mutually acceptable data license arrangement on or before June 30,
1999 providing for the license of certain data to a business venture formed by
Consultant. Notwithstanding the termination of this Agreement pursuant to this
Section 3(d), the Company and Consultant agree that Section 5(a) will continue
to apply with respect to confidential information of the Company that is
disclosed to Consultant following the date of Consultant's resignation as Chief
Executive Officer and prior to the date of termination of this Agreement
pursuant to this Section 3(d).
4. COMPENSATION AND BENEFITS.
(a) Compensation. Unless Consultant's obligation to render services
hereunder has been terminated by the Company or Consultant as described in
Section 3(a) or 3(b)(ii), the Company shall pay and provide to Consultant for
each year during the Consulting Term, as compensation for the services to be
rendered by Consultant hereunder, (i) a consulting fee equal to [a] Consultant's
salary paid by the Company immediately prior to his resignation as chief
executive officer of the Company, plus [b] the incremental dollar amount, on an
after tax basis, of social security and unemployment compensation benefits
previously paid by the Company on Consultant's behalf, and (ii) make available
fringe benefits described in subsection (c) below. All payments provided under
this Agreement or any other agreement which may be or have been in effect are in
lieu of any severance payments or any other payments to which Consultant may be
entitled at any time. At Consultant's option, the Company shall direct payment
of the consulting fees to an entity wholly or partly owned by Consultant.
(b) Expenses. Unless Consultant's obligation to render services
hereunder has been terminated by the Company or Consultant as described in
Section 3(a) or 3(b)(ii), during the Consulting Term the Company shall,
consistent with the expense reimbursement policy in effect from time to time,
reimburse Consultant, upon presentment by Consultant to the Company of
appropriate receipts and vouchers, for any reasonable business expenses incurred
by Consultant in connection with the performance of his duties specifically
requested by the Company hereunder (including reimbursement of business related
telephone charges). As part of such reimbursement plan and consistent with past
practice, Consultant shall be entitled to reimbursement of first class business
travel (including lodging) expenses incurred by him if and to the extent such
reimbursement practice remains consistent with the travel reimbursement practice
in place for other senior executive officers of the Company.
3
<PAGE> 4
(c) Fringe Benefits. For the purposes of this Agreement, the term
"fringe benefits" shall exclude any salary, bonus or incentive compensation or
outside directors fees, but shall include benefits under health and welfare
plans, life insurance, auto insurance, disability and retirement plans and
executive deferred compensation plans and the other benefits and perquisites
historically provided to Consultant. During the Consulting Term, Consultant
shall be acting as an independent contractor of the Company. The Company shall
not be required to make any social security, state or federal unemployment
compensation payments required by law. Unless (i) Consultant's obligation to
render services hereunder has been terminated by the Company or Consultant as
described in Section 3(a) or 3(b)(ii), or (ii) Consultant's participation in any
such fringe benefit plan is prohibited by law or would cause such plan to be
disqualified as a tax qualified plan, during the Consulting Term the Company
shall make available to Consultant all fringe benefits made available to
Consultant immediately prior to his resignation as chief executive officer of
the Company. Such fringe benefits shall made available in amounts and consistent
with the terms made available to Consultant immediately prior to such
resignation. If such a fringe benefit is terminated or discontinued by the
Company and is replaced by a comparable fringe benefit and Consultant's
participation in such comparable plan would not be prohibited by law or cause
such plan to be disqualified as a tax qualified plan, then Consultant shall be
entitled to participate in such fringe benefit during the Consulting Term in
amounts and consistent with the terms generally made available by the Company to
other senior executive officers of the Company. During the Consulting Term, the
Company shall make a cash payment to Consultant equal to the amount of the
matching payment the Company would have made to the Company 401(k) plan had
Consultant been an employee of the Company. The Company shall provide Consultant
with reasonable dedicated office facilities and secretarial and other
administrative assistance to the extent necessary to permit Consultant to
adequately render the consulting services contemplated hereby. Consultant shall
be entitled to retain and use during the Consulting Term the portable phone,
laptop computer and residential fax machines previously provided to Consultant
and, upon termination of the Consulting Term, shall be entitled to purchase such
equipment from the Company at its then book value. Assuming Consultant continues
to qualify for such benefit, Consultant shall be entitled to maintain his
"platinum" status through the Company's travel plan with American Airlines and
Hertz.
(d) Stock Options. If during the Consulting Term, the Company acts to
reprice (through the cancellation and re-grant of options, or otherwise) stock
options previously granted to all of its directors and executive officers
(within the meaning of the Securities Act of 1934), the Company shall similarly
reprice options held by Consultant on the same basis as such directors and
executive officers. Except to the extent the 10-year term of such options
terminate pursuant to the terms of the applicable option plan, all options held
by Consultant shall remain exercisable through, and shall terminate on, the
termination or expiration of the Noncompete Period.
4
<PAGE> 5
5. CONFIDENTIAL INFORMATION.
(a) Disclosure and Use. The Company and the Consultant acknowledge
that during his employment with the Company and in the performance of his
consulting duties hereunder, the Consultant has learned and may learn certain
information not generally known within the Company's industry that must be kept
confidential. Consultant agrees that he shall maintain in strict confidence all
such confidential or proprietary information which has been or may be obtained
prior to or during the Consulting Term concerning the Company or the Company's
business, including specific lines and methods of doing business, specific
processes, programs, data, software and techniques which consist of or involve
business information, as well as confidential client information.
Notwithstanding the foregoing, Consultant shall be entitled to use, exploit,
publish and disclose, in a manner which does not otherwise violate the terms and
provisions of this Agreement, any information which (i) is or becomes generally
available to the public through no fault or action by Consultant, or (ii) is or
becomes available to Consultant from a source, other than the Company, or (iii)
is subject to disclosure pursuant to applicable law, for instance in response to
a subpoena or court or administrative order, or (iv) is used in a manner which
maintains its confidentiality in connection with the business activities
conducted by the joint venture or other business initiative entered into by the
Company and Consultant, if any. Consultant further agrees to return all
programs, manuals, documents, records and other information relating to the
business of the Company, including materials prepared or obtained by Consultant,
in his capacity as same, during the Consulting Term, immediately upon the
termination of the Consulting Term.
(b) Ideas and Improvements. Consultant agrees promptly to disclose to
the Company all ideas, designs, improvements, creations and inventions, whether
or not patentable, or subject to other legal protection, which have significant
relationship to the Company's business which were developed and created by
Consultant for the Company directly as part of his Consulting Duties during the
Consulting Term (collectively, "Ideas and Creations"). Consultant further agrees
to take all steps necessary to execute and deliver to the Company copyright or
patent rights on all matters suitable for such protection, if any, and to
execute and deliver to the Company all documents which may be required to assign
to the Company such copyright or patent rights, if any, and to otherwise
cooperate to the extent within Consultant's control to ensure the Company' use
and enjoyment of such Ideas and Creations, provided that there is no obligation
for the Consultant 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 Consultant's own time, unless (a) the invention relates
directly to the Consultant's Consulting Duties and (b) the invention results
from Consulting Duties performed by Consultant for the Company.
5
<PAGE> 6
6. RESTRICTIVE COVENANT.
During the Noncompete Period (as defined below), Consultant shall not,
without the prior written consent of the Company, directly or indirectly, for
himself or for any other person or entity, individually, jointly or as a
partner, stockholder (except as a holder of not more than five percent (5%) of
the outstanding shares of a publicly-held corporation), employee, agent,
consultant or otherwise:
(a) work or perform any service for Dun & Bradstreet Corporation,
ACNielsen Corporation, Efficient Market Services, Inc., Paragren Technologies,
Inc., IMS International, Inc., Spectra Marketing (or any of the other market
research businesses of VNU) or any parent, subsidiary, affiliate or successor of
any of the foregoing;
(b) induce, attempt to induce, or participate in or facilitate the
inducing of or attempting to induce, any employee, officer, director,
consultant, sales representative or agent of the Company to terminate or alter
his or her business relationship with the Company or to breach any agreement or
obligation he or she has with or to the Company or to perform work or services
for the Consultant or for a competitor of the Company described in Section 6(a),
or, without the prior written consent of the Company (which shall not be
unreasonably withheld) hire any such person within 12 months of the termination
of such business relationship (unless the Company has previously terminated such
employee). Notwithstanding the foregoing, Consultant shall be free to hire any
former employee of the Company within 12 months of the termination of his/her
employment with the Company if (i) such employee terminated his/her employment
with the Company prior to November 23, 1998; and (ii) the Company is not also
involved in good faith negotiations to re-hire such former employee; or
(c) except with the Company's prior written consent (which consent
shall not be unreasonably withheld), attempt in any manner to persuade any
customer or supplier of the Company to cease or reduce the amount of business
which such customer or supplier engages in or contemplates engaging in with the
Company, regardless of whether the relationship between such customer or
supplier and the Company was originally established in whole or in part through
Consultant's efforts.
Consultant acknowledges that the restrictions set forth in this
Agreement are (x) reasonable and necessary for the protection of the Company'
interests and (y) are entered into by Consultant in exchange for adequate
consideration granted to him in connection with this Agreement. In the event
that any provision of this Section 6 is found by a court of competent
jurisdiction to be unreasonable or unenforceable, the parties agree that such
provision shall be enforceable against Consultant to the greatest extent that
would be found to be reasonable and enforceable.
For purposes hereof, the term "Noncompete Period" shall mean three
years from the effective date of Consultant's resignation as Chief Executive
Officer of the Company.
6
<PAGE> 7
Notwithstanding the foregoing, if Consultant terminates this Agreement pursuant
to Section 3(b)(ii), the Noncompete Period shall be the earlier of (i) one year
following the effective date of such termination and (ii) three years from the
date of Consultant's resignation as chief executive officer of the Company. In
addition, the Noncompete Period shall terminate if Consultant terminates this
Agreement pursuant to Section 3(b)(i) hereof.
7. SEVERABILITY.
If any provision of this Agreement is held invalid or unenforceable,
either in its entirety or by virtue of its scope or application to given
circumstances, such provision shall thereupon be deemed modified only to the
extent necessary to render same valid, or not applicable to given circumstances,
or excised from this Agreement, as the situation may require, and this Agreement
shall be construed and enforced as if such provision had been included herein as
so modified in scope or application, or had not been included herein, as the
case may be.
8. LEGAL REMEDIES.
Consultant hereby acknowledges that the Company would suffer
irreparable injury if the provisions of paragraphs 5 and 6 above, which shall
survive the termination of this Agreement, were breached and that the Company's
remedies at law would be inadequate in the event of such breach. Accordingly,
Consultant hereby agrees that any such breach or threatened breach may, in
addition to any and all other available remedies, be preliminarily enjoined by
the Company without bond. In the event of litigation under this Agreement, each
of the Company and Consultant shall pay his or its own attorneys' fees and
expenses.
9. NON-ASSIGNABILITY.
In light of the unique personal services to be performed by Consultant
hereunder, it is acknowledged and agreed that any purported or attempted
assignment or transfer by Consultant of this Agreement or any of Consultant's
duties, responsibilities or obligations hereunder shall be void.
10. NOTICES.
Any notice, request, demand or other communication required or
permitted under this Agreement shall be in writing and shall be deemed to have
been given when delivered personally or when mailed by certified mail, return
receipt requested, addressed as follows:
7
<PAGE> 8
If to the Company:
Information Resources, Inc.
150 North Clinton Street
Chicago, Illinois 60661
Attn: Chief Executive Officer
If to Consultant:
Gian M. Fulgoni
65 East Bellevue Place
Chicago, Illinois 60611
or to such other address or addresses as may be specified from time to time by
notice; provided, however, that any notice of change of address shall not be
effective until its receipt by the party to be charged therewith.
11. GENERAL.
(a) Amendments. Neither this Agreement nor any of the terms or
conditions hereof may be waived, amended or modified except by means of a
written instrument duly executed by the party to be charged therewith.
(b) Captions and Headings. The captions and paragraph headings used in
this Agreement are for convenience of reference only, and shall not affect the
construction or interpretation of this Agreement or any of the provisions
hereof.
(c) Governing Law. This Agreement, and all matters or disputes
relating to the validity, construction, performance or enforcement hereof, shall
be governed, construed and controlled by and under the laws of the State of
Illinois without regard to principles of conflicts of law.
(d) Successors and Assigns. This Agreement shall be binding upon and
shall inure to the benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns.
(e) Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be deemed to be an original hereof, but all of
which together shall constitute one and the same instrument.
(f) Entire Agreement. Except as otherwise set forth or referred to in
this Agreement, this Agreement constitutes the sole and entire agreement and
understanding between the parties hereto as to the subject matter hereof, and
supersedes all prior discussions, agreements and
8
<PAGE> 9
understandings of every kind and nature between them as to such subject matter.
Except as provided herein, it is understood that this Agreement supersedes any
prior employment compensation agreement, whether written, oral or implied in law
or implied in fact between Consultant and the Company (including, but not
limited to, that certain letter agreement, dated March 24, 1981, between the
Company and Consultant).
(g) Reliance by Third Parties. This Agreement is intended for the sole
and exclusive benefit of the parties hereto and their respective heirs,
executors, administrators, personal representatives, successors and permitted
assigns, and no other person or entity shall have any right to rely on this
Agreement or to claim or derive any benefit therefrom absent the express written
consent of the party to be charged with such reliance or benefit.
[signature page follows]
9
<PAGE> 10
IN WITNESS WHEREOF, the parties hereto have executed this Agreement on
and of the date first set forth above.
INFORMATION RESOURCES, INC.
By:
--------------------------------
Name:
------------------------------
Title:
------------------------------
- ------------------------------------
Gian M. Fulgoni
10
<PAGE> 1
EXHIBIT hh
INFORMATION RESOURCES, INC.
FIRST AMENDMENT TO CREDIT AGREEMENT
This First Amendment to Credit Agreement (herein, the "Amendment")
is entered into as of February 10, 1999, between Information Resources, Inc.,
the Banks party thereto, and Harris Trust and Savings Bank, as Agent for the
Banks.
PRELIMINARY STATEMENTS
A. The Borrower and the Banks entered into a certain Credit
Agreement, dated as of October 31, 1997 (the "Credit Agreement"). All
capitalized terms used herein without definition shall have the same meanings
herein as such terms have in the Credit Agreement.
B. The Borrower has requested that the Banks (i) reduce the amount
of the Revolving Credit Commitments from $75,000,000 to $60,000,000, (ii) extend
the Termination Date from October 31, 2001 to October 31, 2002, (iii) amend the
Eurodollar Margin, (iv) increase the amount of the Swing Line Commitment from
$5,000,000 to $10,000,000, (v) amend certain financial covenants, and (vi) make
certain other amendments to the Credit Agreement, and the Banks are willing to
do so under the terms and conditions set forth in this Amendment.
NOW, THEREFORE, for good and valuable consideration, the receipt and
sufficiency of which is hereby acknowledged, the parties hereto agree as
follows:
SECTION 1. WAIVER
The Borrower has informed the Agent and the Banks that as of December
31, 1998, the Borrower was not in compliance with Section 7.8 of the Credit
Agreement (Cash Flow Coverage Ratio). The Borrower has requested that the Banks
waive compliance with Section 7.8 of the Credit Agreement and, by signing below,
the Banks hereby agree to waive compliance with Section 7.8 of the Credit
Agreement through the period ending on (but not after) December 31, 1998.
Notwithstanding anything herein to the contrary, the waiver in this Section 1
shall not become effective unless and until the conditions precedent set forth
in Section 3 hereof have been satisfied.
SECTION 2. AMENDMENTS.
2.1 The address, lending office and amount of the Revolving Credit
Commitments set forth on the signature pages for the Banks shall be amended in
their entirety to read as set forth below:
<PAGE> 2
<TABLE>
<CAPTION>
AMOUNT OF COMMITMENTS: NAME OF BANK AND ADDRESS
<S> <C>
Revolving Credit Commitment: HARRIS TRUST AND SAVINGS BANK
$32,000,000 Address:
111 West Monroe Street
Chicago, Illinois 60603
Attention: Mr. Richard H. Robb
Telecopy: (312) 293-4856
Telephone: (312) 987-4856
Lending Office:
111 West Monroe Street
Chicago, Illinois 60603
Revolving Credit Commitment: LASALLE NATIONAL BANK
$20,000,000 Address:
135 South LaSalle Street, No. 217
Chicago, Illinois 60603
Attention: Mr. John McGuire
Telecopy: (312) 904-4660
Telephone: (312) 904-4657
Lending Office:
135 South LaSalle Street
Chicago, Illinois 60603
Revolving Credit Commitment: THE BANK OF NEW YORK
$8,000,000 Address:
Central Division, 19th Floor
One Wall Street
New York, New York 10286
Attention: Mr. Ian Nalitt
Telecopy: (212) 635-1208
Telephone: (212) 635-1243
Lending Office:
Central Division, 19th Floor
1 Wall Street
New York, New York 10286
</TABLE>
2.2 The definition of "Eurodollar Margin" appearing in Section 1.3
(b) of the Credit Agreement shall be amended and restated to read as follows:
"Eurodollar Margin" means, from one Pricing Date to the
next, a rate per annum determined in accordance with the
following schedule:
-2-
<PAGE> 3
<TABLE>
<CAPTION>
CASH FLOW COVERAGE RATIO EURODOLLAR MARGIN:
FOR SUCH PRICING DATE:
<S> <C>
Less than 1.0 to 1.0 1.35%
Equal to or greater than 1.0 to 1.0, but 1.20%
less than or equal to 1.05 to 1.0
Greater than 1.05 to 1.0 1.0%
</TABLE>
The Borrower and the Banks acknowledge and agree that from and
after the effective date of the First Amendment to Credit
Agreement dated as of February 10, 1999, by and among the
Borrower, the Banks, and the Agent (the "First Amendment"),
until the next Pricing Date, the Eurodollar Margin shall be
1.35%.
2.3 The last sentence of Section 2.1 of the Credit Agreement shall
be amended and restated to read as follows:
For purposes hereof, the term "Applicable Commitment
Fee" means, from one Pricing Date to the next, a rate
per annum determined in accordance with the following:
<TABLE>
<CAPTION>
CASH FLOW COVERAGE RATIO APPLICABLE
FOR SUCH PRICING DATE: COMMITMENT FEE:
<S> <C>
Less than 1.0 to 1.0 0.25%
Equal to or greater than 1.0 to 1.0, 0.20%
but less than or equal to 1.05 to 1.0
Greater than 1.05 to 1.0 0.15%
</TABLE>
The Borrower and the Banks acknowledge and agree the from and
after the effective date of the First Amendment until the next
Pricing Date, the Applicable Commitment Fee shall be .25%.
2.4 The definition of "Swing Line Commitment" appearing in Section
4.1 of the Credit Agreement shall be amended and restated to read as follows:
"Swing Line Commitment" means the commitment of Harris
Bank to make Swing Loans in the aggregate amount of
$10,000,000 at any one time outstanding.
2.5 The definition of "Termination Date" appearing in Section 4.1
of the Credit Agreement shall be amended and restated to read as follows:
-3-
<PAGE> 4
"Termination Date" means October 31, 2002, or such later
date to which the same may be extended pursuant to
Section 2.2 hereof, or such earlier date on which the
Revolving Credit Commitments are terminated in whole
pursuant to Section 1.19, 8.2 or 8.3 hereof.
2.6 Section 7.6 of the Credit Agreement shall be amended and
restated to read as follows:
Section 7.6. Consolidated Tangible Net Worth. The Borrower
shall, as of the last day of each quarter-annual accounting
period of the Borrower, maintain Consolidated Tangible Net Worth
in an amount not less than the sum of (i) $200,000,000 plus (ii)
25% of Consolidated Net Income for each fiscal year ending on
and after December 31, 1999, for which such Consolidated Net
Income is a positive amount (i.e., there shall be no reduction
to the amount of Consolidated Tangible Net Worth required to be
maintained hereunder for any fiscal year in which Consolidated
Net Income is less than zero); provided that the minimum
required amount of Consolidated Tangible Net Worth set forth
above shall be further increased by 100% of the net proceeds
received by the Borrower from any offering of equity securities
of the Borrower received at any time after December 31, 1998
(other than proceeds received from the exercise of stock options
to purchase shares of the Borrower's common stock existing as of
October 31, 1997.
2.7 Section 7.7 of the Credit Agreement shall be amended and
restated to read as follows:
Section 7.7. Leverage Ratio. The Borrower shall, as of the last
day of each quarter-annual accounting period of the Borrower,
maintain a ratio of Consolidated Total Liabilities to
Consolidated Tangible Net Worth of not more than 1.0 to 1.0.
2.8 Section 7.8 of the Credit Agreement shall be amended and
restated to read as follows:
-4-
<PAGE> 5
Section 7.8. Cash Flow Coverage Ratio. The Borrower shall, as
of the last day of each quarter-annual accounting period of
the Borrower ending during the periods specified below,
maintain the ratio of Consolidated Cash Flow for the four
fiscal quarters of the Borrower then ended to Consolidated
Fixed Charges for the same four fiscal quarters then ended
(the "Cash Flow Coverage Ratio") of not less than:
<TABLE>
<CAPTION>
FROM AND TO AND CASH FLOW COVERAGE
INCLUDING INCLUDING RATIO SHALL NOT BE LESS
THAN:
<S> <C> <C>
12/31/98 12/30/99 .85 to 1.0
12/31/99 12/30/00 .90 to 1.0
12/31/00 and at all times thereafter 1.05 to 1.0
</TABLE>
2.9 Exhibit A-1 to the Credit Agreement shall be amended and
restated to read as set forth on Schedule I attached hereto.
2.10 The Attachment to Compliance Certificate appearing in Schedule
7.5 to the Credit Agreement shall be amended by deleting the ratio "1.30:1.0"
appearing in line B-4 thereof and replacing it with the ratio "1.0:1.0" in lieu
thereof.
SECTION 3. CONDITIONS PRECEDENT.
The effectiveness of this Amendment is subject to the satisfaction of
all of the following conditions precedent:
3.1 The Borrower and the Banks shall have executed and delivered
this Amendment.
3.2 The Borrower shall have executed and delivered to (a) the
Agent the Swing Line Note (the "New Swing Line Note") payable to Harris Trust
and Savings Bank in the form of note attached hereto as Schedule I, and (b) the
Agent for each Bank a Committed Loan Note (the "New Committed Loan Notes") in
the amount of each Bank's Revolving Credit Commitment as amended hereby.
3.3 The Agent shall have received copies (executed or certified,
as may be appropriate) of all legal documents or proceedings taken in connection
with the execution and delivery of this Amendment to the extent the Agent or its
counsel may reasonably request.
3.4 Legal matters incident to the execution and delivery of this
Amendment shall be satisfactory to the Agent and its counsel.
3.5 The Agent shall have received for each of the Banks an
amendment fee equal to 0.10% of each Bank's amended Revolving Credit Commitment.
-5-
<PAGE> 6
Upon the effectiveness of this Amendment, each Bank shall return to the
Agent (for return to the Borrower) the prior Committed Loan Notes and Swing Loan
Note (which are being replaced by the New Committed Loan Notes and the New Swing
Line Note, respectively) held by such Banks marked "Replaced by promissory note
dated February 10, 1999" or words of like import.
SECTION 4. REPRESENTATIONS.
In order to induce the Banks to execute and deliver this Amendment, the
Borrower hereby represents to the Banks that as of the date hereof, the
representations and warranties set forth in Section 5 of the Credit Agreement
are and shall be and remain true and correct (except that the representations
contained in Section 5.4 shall be deemed to refer to the most recent financial
statements of the Borrower delivered to the Banks) and the Borrower is in
compliance with the terms and conditions of the Credit Agreement and no Default
or Event of Default has occurred and is continuing under the Credit Agreement or
shall result after giving effect to this Amendment.
SECTION 5. MISCELLANEOUS.
5.1 Except as specifically amended herein, the Credit Agreement
shall continue in full force and effect in accordance with its original terms.
Reference to this specific Amendment need not be made in the Credit Agreement,
the Notes, or any other instrument or document executed in connection therewith,
or in any certificate, letter or communication issued or made pursuant to or
with respect to the Credit Agreement, any reference in any of such items to the
Credit Agreement being sufficient to refer to the Credit Agreement as amended
hereby.
5.2 The Borrower agrees to pay on demand all costs and expenses of
or incurred by the Agent in connection with the negotiation, preparation,
execution and delivery of this Amendment and the replacement Notes, including
the fees and expenses of counsel for the Agent.
5.3 This Amendment may be executed in any number of counterparts,
and by the different parties on different counterpart signature pages, all of
which taken together shall constitute one and the same agreement. Any of the
parties hereto may execute this Amendment by signing any such counterpart and
each of such counterparts shall for all purposes be deemed to be an original.
This Amendment shall be governed by the internal laws of the State of Illinois.
[SIGNATURE PAGES TO FOLLOW]
-6-
<PAGE> 7
This First Amendment to Credit Agreement is dated as of the date first
above written.
INFORMATION RESOURCES, INC.
By
Name
--------------------------------------
Title
-------------------------------------
Accepted and agreed to as of the date and year first above written.
HARRIS TRUST AND SAVINGS BANK, in its
individual capacity as a Bank and as Agent
By
Name
--------------------------------------
Title
-------------------------------------
LASALLE NATIONAL BANK
By
Name
--------------------------------------
Title
-------------------------------------
THE BANK OF NEW YORK
By
Name
--------------------------------------
Title
-------------------------------------
-7-
<PAGE> 8
SCHEDULE I
EXHIBIT A-1
SWING LINE NOTE
Chicago, Illinois
$10,000,000.00 __________, 1999
On the Termination Date, for value received, the undersigned,
Information Resources, Inc., a Delaware corporation (the "Borrower") hereby
promises to pay to the order of Harris Trust and Savings Bank (the "Bank"), at
the principal office of Harris Trust and Savings Bank in Chicago, Illinois, the
principal sum of (i) Ten Million and 00/100 Dollars ($10,000,000.00), or (ii)
such lesser amount as may at the time of the maturity hereof, whether by
acceleration or otherwise, be the aggregate unpaid principal amount of all Swing
Loans owing from the Borrower to the Bank under the Swing Line Commitment
provided for in the Credit Agreement hereinafter mentioned.
This Note evidences Swing Loans made and to be made to the Borrower by
the Bank under the Swing Line Commitment provided for under that certain Credit
Agreement dated as of October 31, 1997, as amended, by and among the Borrower,
Harris Trust and Savings Bank, individually and as Agent thereunder, and the
other Banks which are now or may from time to time hereafter become parties
thereto (said Credit Agreement, as the same may from time to time be modified,
amended or restated being referred to herein as the "Credit Agreement"), and the
Borrower hereby promises to pay interest at the office described above on each
Swing Loan evidenced hereby at the rates and at the times and in the manner
specified therefor in the Credit Agreement.
Each Swing Loan made under the Swing Line Commitment provided for in
the Credit Agreement by the Bank to the Borrower against this Note, any
repayment of principal hereon and the interest rates applicable thereto shall be
endorsed by the holder hereof on a schedule to this Note or recorded on the
books and records of the holder hereof (provided that such entries shall be
endorsed on a schedule to this Note prior to any negotiation hereof). The
Borrower agrees that in any action or proceeding instituted to collect or
enforce collection of this Note, the entries so endorsed on a schedule to this
Note or recorded on the books and records of the holder hereof shall be prima
facie evidence of the unpaid principal balance of this Note and the interest
rates applicable thereto.
This Note is issued by the Borrower under the terms and provisions of
the Credit Agreement, and this Note and the holder hereof are entitled to all of
the benefits and security provided for thereby or referred to therein, to which
reference is hereby made for a statement thereof. This Note may be declared to
be, or be and become, due prior to its expressed maturity, voluntary prepayments
may be made hereon, and certain prepayments are required to be made
<PAGE> 9
hereon, all in the events, on the terms and with the effects provided in the
Credit Agreement. All capitalized terms used herein without definition shall
have the same meanings herein as such terms have in the Credit Agreement.
This Note is issued in substitution for and in replacement of, and
evidences (among other things) the indebtedness previously evidenced by, that
certain Swing Line Note dated October 31, 1997 payable to the order of the Bank
in the original principal amount of $5,000,000.
This Note shall be construed in accordance with, and governed by, the
internal laws of the State of Illinois without regard to principles of conflict
of law.
The Borrower hereby promises to pay all reasonable costs and expenses
(including attorneys' fees) suffered or incurred by the holder hereof in
collecting this Note or enforcing any rights in any collateral therefor. The
Borrower hereby waives presentment for payment and demand.
INFORMATION RESOURCES, INC.
By
Name
-----------------------------------
Title
----------------------------------
-2-
<PAGE> 1
EXHIBIT ii
[INFORMATION RESOURCES INC LETTERHEAD]
April 26, 1995
Mr. Gary M. Hill
4033 Ellington Avenue
Western Springs, Illinois 60558
Dear Gary:
We are delighted that you have accepted our offer of employment. The purpose
of this letter is to summarize our understanding of the terms to which we have
agreed.
You will be employed as Executive Vice President, Chief Financial Officer
and Treasurer of Information Resources, Inc. (the "Company"). Your base salary
will be $275,000 per year, reviewable annually by the Board of Directors. Your
initial annual target bonus will be 30% of your base salary, subject to
performance.
You will enjoy all employee benefits and perquisites available generally to
the other senior executive officers of the Company. These include health and
welfare plans, life insurance, disability and retirement plans, 401(k) plans,
holidays, personal leave, sick leave and vacation allowances (four weeks
vacation per year). To cover any preexisting medical conditions, the Company
will either indemnify you for uninsured costs or reimburse you for COBRA
payments until such conditions are covered by the Company's Group Health Plan.
The Company will also pay the initiation fee for your membership in one social
club of your choice, up to 10% of your base salary. The Company will also pay
the club's dues for as long as you are an executive officer of the Company.
On the date of your acceptance of this employment arrangement, the Company
will grant you 150,000 options under its Executive Stock Option Plan, to be
evidenced by the Company's customary form of stock option agreement. Of those
options, 50,000 will vest according to the Company's normal vesting schedule for
such grants (i.e., one-third on the second anniversary of your employment,
one-third on the third anniversary and one-third on the fourth anniversary). Of
the remaining 100,000 options, one-third will vest on each of the first three
anniversaries of the starting date of your employment.
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 illegal or fraudulent conduct, i.e.,
"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 become
exercisable.
<PAGE> 2
Mr. Gary Hill
Page 2
Upon starting with the Company, you will be expected to execute a customary
noncompetition and confidentiality agreement. Should your employment be
terminated (including a reduction in responsibility or compensation, other than
a reduction in compensation applicable to all executive officers of the Company)
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 and to be paid at a
rate equal to 130% of your base salary then in effect. 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. You will have one year thereafter to exercise
your options.
As you know, the Board is currently reviewing the appropriateness of formal
employment agreements for senior management officials of the Company. As CFO,
you will likely be asked to work with the Board's Compensation Committee in this
regard. A more formal employment agreement may then be made available to you
upon completion of the review, assuming the Board concludes as a matter of
policy that such agreements will continue to be appropriate for the Company's
senior management officials.
Notwithstanding the foregoing, if any of the above provisions create
unintended accounting effects, we will negotiate appropriate modification in
good faith. Assuming this fairly states our understanding, please so indicate
your concurrence by signing below. On behalf of the Company, the Board of
Directors and our entire senior management team, we express our great pleasure
at your arrival and look forward to a long term and mutually rewarding
professional relationship with you. Welcome aboard!
Sincerely,
Gian M. Fulgoni
Co-CEO
Accepted this 26th day of April, 1995
- --------------------------------------
Gary M. Hill
<PAGE> 1
EXHIBIT jj
[INFORMATION RESOURCES INC. LETTERHEAD]
September 23, 1997
Mr. James R. Chambers
425 Cherry Lane
Mendham, NJ 07945
Dear Jim:
We are delighted that you have accepted our offer of employment. The
purpose of this letter is to summarize our understanding of the terms to which
we have agreed.
You will be employed as Group President responsible for IRI's U.S.
Commercial Businesses which include Customer Sales and Service, Product
Management, Solution Centers, Retail, and Marketing. Your base salary will be
$315,000 per year, and will be reviewed on May 1, 1998, and annually thereafter.
You will receive merit consideration based on your performance, and any increase
will be pro-rata based on your start date. Your initial annual bonus target will
be 40% of your base salary, and your final bonus will be based on your
performance, and IRI's bonus plan formula. For 1998, we will guarantee you a
minimum bonus of $80,000, payable on or about March 15, 1999. We will also
provide you with a $40,000 sign on bonus payable 15 days after your start date.
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).
On you start date, the Company will grant you 125,000 options under its
Executive Stock Option Plan, to be evidenced by the Company's customary form of
stock option agreement. For these 125,000 options, one-third will vest on each
of the first three anniversaries of the starting date of your employment.
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 become exercisable.
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 or
compensation) 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 compensation at a rate equal to 140% 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.
<PAGE> 2
JAMES R. CHAMBERS
PAGE 2
You will also receive initially IRI's full relocation package for
executive officers. As we have discussed, you will work out of IRI's Fairfield,
NJ office, but will be expected to work in Chicago an average two days per week.
Our intent is to have you move to Chicago, one year from your start date, but I
will evaluate with you how things are working on or about July 1, 1998,
regarding this issue. Please contact Gary Newman regarding any aspects of your
employment offer, especially IRI's benefits and relocation policies.
Jim, everyone is extremely excited about your joining our team. We know
you can make a difference for IRI, and believe we can offer your the challenges
and career opportunities you desire. On behalf of the Company, the Board of
Directors and our entire senior management team, we express our great pleasure
at your forthcoming arrival and look forward to a long term and mutually
rewarding professional relationship with you. Welcome aboard!
Sincerely,
Gian M. Fulgoni
Chief Executive Officer
Accepted this 3rd day of October 1997
- --------------------------------
James R. Chambers
cc: Gary Newman
<PAGE> 3
[INFORMATION RESOURCES INC. LETTERHEAD]
August 31, 1998
Mr. James R. Chambers
425 Cherry Lane
Mendham, NJ 07945
Dear Jim:
This letter will confirm our oral and electronic mail communications
regarding amending your September 23, 1997 employment letter and the terms of
new stock options recently approved by the IRI Compensation Committee. The
option vesting and exercise rights described in this letter are in addition to
those described in your offer letter of September 23, 1997.
The 125,000 options currently held by you will vest and be exercisable
according to the terms set forth below, in the event that your employment is
terminated by IRI without cause or is terminated by you for "Good Reason".
For purposes of this letter, you shall have ""Good Reason" to terminate
your employment hereunder if, but only if:
(a) without your express written consent, you are assigned any duties
inconsistent with your position, duties, responsibilities and status
immediately prior to a change in your reporting responsibilities, title
or offices, except (i) in connection with your reassignment by the
senior management of Information Resources to a comparable position
(i.e., same salary and grade level), (b) the commencement or
continuation of a disability preventing you from performing your duties
and responsibilities; or (c) you are removed from or not re-elected to
any of your offices or positions except in connection with such
reassignment or the commencement or continuation of a disability
period;
(b) a reduction is made by Information Resources in your base salary,
except as and only to the extent that the Compensation Committee of the
Board of Directors (or its successor) decreases the base salary of all
senior officers who are at the rank then held by you in the same
fashion.
(c) Information Resources fails to continue in effect any benefit, bonus or
compensation plan, stock ownership plan, stock purchase plan, stock
option plan, life insurance plan, health-and-accident plan or
disability plan (other than those plans which expire by their express
terms) in which you are participating, other than as part of a
reduction or change generally applicable to other senior officers of
Information Resources; or
(d) Information Resources fails to obtain from any successor entity to
Information Resources an agreement to perform this Agreement to the
extent and in the manner required to be performed by Information
Resources.
If any such termination by IRI without cause or by you for "Good
Reason" occurs before the second anniversary of your employment, your options
will continue to vest and become exercisable (other than terminated or expired
options until 30 days after the last options vest) in accordance with their
vesting schedules notwithstanding the termination of your employment. If any
such termination occurs after the second anniversary of your employment, all
your unvested options will immediately vest and all your options (other than
terminated or expired options) shall be exercisable for a period of 24 months
from the date of termination of employment.
<PAGE> 4
Jim Chambers
August 31, 1998
Page 2
Further, if Gian Fulgoni ceases to be the Chief Executive Officer of
IRI or Tom Wilson ceases to be Chairman, such change shall be treated as if it
were a "change of control" for purposes of accelerated option vesting and
exercise periods, as described in IRI's offer letter to you of September 23,
1997.
You have also been granted another 125,000 stock options with a grant
price of $10.938 as of August 25, 1998. You will become vested in these options
after one year from the grant date. These options will have all of the
conditions as the original options granted to you and stated above. This
includes a two year time period to exercise your options when a change of
control, good reason or any type of termination (except cause) occurs.
Very truly yours,
Gary S. Newman
Executive Vice President
Human Resources
Accepted:
------------------------------------
James R. Chambers
cc: Gian Fulgoni
<PAGE> 1
EXHIBIT 21
INFORMATION RESOURCES, INC.
SUBSIDIARIES
DOMESTIC SUBSIDIARIES
<TABLE>
<CAPTION>
STATE OF
SUBSIDIARY INCORPORATION
---------- -------------
<S> <C>
564 Randolph Co. #2 Illinois
IRI Puerto Rico, Inc. (formerly Market Trends, Inc.) Puerto Rico
NEO, Inc Connecticut
IRI Venezuela Holdings, Inc Delaware
IRI Guatemala Holdings, Inc Delaware
IRI Greek Holdings, Inc Delaware
IRI French Holdings, Inc Delaware
IRI Italy Holdings, Inc Delaware
InfoScan Italy Holdings, Inc Delaware
IRI Logistics, Inc. (formerly LogiCNet, Inc.) Delaware
Shoppers Hotline, Inc Delaware
North Clinton Corporation Illinois
</TABLE>
<TABLE>
<CAPTION>
FOREIGN SUBSIDIARIES
COUNTRY OF
SUBSIDIARY INCORPORATION
---------- -------------
<S> <C>
Information Resources S.A. France
IRI Software, Ltd. (formerly known as Management Decision
Systems, Limited) d/b/a Information Resources United Kingdom
Information Resources GmbH Federal
Republic of
Germany
Information Resources Australia Pty. Ltd. Australia
Information Resources Japan, Ltd. Japan
IRI Apollo K.K. Japan
Information Resources New Zealand Pty. Ltd. New Zealand
Information Resources Singapore Pte. Ltd. Singapore
IRI Software (India) Private Limited India
Panel Pazar Arastirma ve Danismanlik A.S. Republic of Turkey
IRI-SECODIP, S.N.S. France
IRI Hellas, S.A. Greece
Information Resources de Mexico, S.A. de C.V. (formerly
known as IRI Software de Mexico, S.A. de C.V.) Mexico
IRI InfoScan S.r.1 Italy
Precis (1136) Limited United Kingdom
IRI InfoScan Limited (formerly InfoScan NMRA Limited) United Kingdom
IRI/GfK Retail Services GmbH Federal Republic
of Germany
IRI/GfK Retail Services B.V. (formerly GfK InfoScan B.V.) The Netherlands
Information Resources Espana, S.L. Spain
</TABLE>
<PAGE> 1
EXHIBIT 23
CONSENT OF INDEPENDENT AUDITORS
We consent to the incorporation by reference in the Registration
Statement (Form S-8 No. 33-48289) pertaining to the Information Resources, Inc.
Nonqualified Stock Option Plan, the Registration Statement (Form S-8 No.
33-48290) pertaining to the Information Resources, Inc. 1992 Incentive Stock
Option Plan, the Registration Statement (Form S-8 No. 33-48291) pertaining to
the Information Resources, Inc. 1992 Executive Stock Option Plan, the
Registration Statement (Form S-8 No. 33-52719) pertaining to the Information
Resources, Inc. Nonqualified Stock Option Plan, the Registration Statement (Form
S-8 No. 33-52721) pertaining to the Information Resources, Inc. Employee
Nonqualified Stock Option Plan, the Registration Statement (Form S-8 No.
33-54649) pertaining to the Information Resources, Inc. 1992 Executive Stock
Option Plan and the Registration Statement (Form S-8 No. 333-24041) pertaining
to the Information Resources, Inc. 401(k) Retirement Savings Plan and Trust of
our report dated February 11, 1999 with respect to the consolidated financial
statements and schedule of Information Resources, Inc. included in the Annual
Report (Form 10-K) for the year ended December 31, 1998.
ERNST & YOUNG LLP
Chicago, Illinois
March 29, 1999
<PAGE> 1
EXHIBIT 24
INFORMATION RESOURCES, INC. AND SUBSIDIARIES
POWER OF ATTORNEY
KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and
appoints Thomas W. Wilson, Gary M. Hill and Monica M. Weed, and each of them,
his/her true and lawful attorneys-in-fact and agents, with full power of
substitution and re-substitution, for him and in his name, place and stead, in
any and all capacities, to sign the Annual Report on Form 10-K for the year
ended December 31, 1998 of Information Resources, Inc., together with any and
all amendments to such Annual Report, and to file the same, with all exhibits
thereto, and other documents in connection therewith, with the Securities and
Exchange Commission, granting unto said attorneys-in-fact and agents, and each
of them, full power and authority to do and perform each and every act and thing
requisite and necessary to be done, as fully to all intents and purposes as he
might or could do in person, hereby ratifying and confirming all that said
attorneys-in-fact and agent of either of them, or their substitute or
substitutes, may lawfully do or cause to be done by virtue hereof.
Dated: March 29, 1999
/s/ JAMES G. ANDRESS
----------------------------------
James G. Andress, Director
/s/ GERALD J. ESKIN
----------------------------------
Gerald J. Eskin, Director
/s/ EDWIN E. EPSTEIN
----------------------------------
Edwin E. Epstein, Director
/s/ GIAN M. FULGONI
----------------------------------
Gian M. Fulgoni, Director
/s/ JOHN D.C. LITTLE
----------------------------------
John D.C. Little, Director
/s/ LEONARD M. LODISH
----------------------------------
Leonard M. Lodish, Director
/s/ EDWARD E. LUCENTE
----------------------------------
Edward E. Lucente, Director
/s/ EDITH W. MARTIN
----------------------------------
Edith W. Martin, Director
/s/ JEFFREY P. STAMEN
----------------------------------
Jeffrey P. Stamen, Director
/s/ GLEN L. URBAN
----------------------------------
Glen L. Urban, Director
<TABLE> <S> <C>
<ARTICLE> 5
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1998
<PERIOD-END> DEC-31-1998
<CASH> 11,149
<SECURITIES> 0
<RECEIVABLES> 92,399
<ALLOWANCES> 4,762
<INVENTORY> 0
<CURRENT-ASSETS> 108,009
<PP&E> 177,443
<DEPRECIATION> 97,940
<TOTAL-ASSETS> 369,293
<CURRENT-LIABILITIES> 102,799
<BONDS> 0
0
0
<COMMON> 279
<OTHER-SE> 238,173
<TOTAL-LIABILITY-AND-EQUITY> 369,293
<SALES> 0
<TOTAL-REVENUES> 511,323
<CGS> 0
<TOTAL-COSTS> 504,353
<OTHER-EXPENSES> 0
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 1,256
<INCOME-PRETAX> 6,581
<INCOME-TAX> 2,735
<INCOME-CONTINUING> 3,846
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 3,846
<EPS-PRIMARY> 0.13
<EPS-DILUTED> 0.13
</TABLE>
