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UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1999
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________
Commission file number 0-13163
ACXIOM(R) CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 71-0581897
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
1 INFORMATION WAY, P.O. BOX 8180, LITTLE ROCK, ARKANSAS 72203-8180
(Address of principal executive offices) (Zip Code)
(501) 342-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
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Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value
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(Title of Class)
Preferred Stock Purchase Rights
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(Title of Class)
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 _____
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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 non-affiliates of the
registrant, based upon the closing sale price of the registrant's Common Stock,
$.10 par value per share, as of June 7, 1999 as reported on the Nasdaq National
Market, was approximately $2,152,430,000. (For purposes of determination of
the above stated amount only, all directors, officers and 10% or more
shareholders of the registrant are presumed to be affiliates.)
The number of shares of Common Stock, $.10 par value per share, outstanding as
of June 7, 1999 was 82,995,032.
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DOCUMENTS INCORPORATED BY REFERENCE
Portions of Acxiom Corporation's Annual Report to Shareholders for the
fiscal year ended March 31, 1999 ("Annual Report") are incorporated by reference
into Parts I and II of this Form 10-K.
Portions of the Proxy Statement for the Annual Meeting of Shareholders
("1999 Proxy Statement") are incorporated by reference into Part III of this
Form 10-K.
Forward-Looking Statements or Information
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Certain statements in this filing and in other filings by Acxiom with the
Securities and Exchange Commission, and in other documents such as press
releases, presentations by Acxiom or its management and oral statements, may
constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance, or achievements of Acxiom to be
materially different from any future results, performance, or achievements
expressed or implied by such forward-looking statements. Such factors are
discussed below under the heading "Additional Information Regarding Forward-
Looking Statements@ and include, among other things, the possible adoption of
legislation or industry regulation concerning certain aspects of Acxiom's
business; the removal of data sources and/or marketing lists from Acxiom; the
ability of Acxiom to retain customers who are not under long-term contracts with
Acxiom; technology challenges; Year 2000 issues; the risk of damage to Acxiom's
data centers or interruptions in Acxiom's telecommunications links; acquisition
integration; the effects of postal rate increases; and other market factors.
PART I
Item 1. Business
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SUMMARY
We are a global leader in providing comprehensive information management
solutions using customer, consumer and business data. Our products and services
enable our clients to use information to improve business decision-making and
effectively manage existing and prospective customer relationships. We believe
that we offer our clients the most technologically advanced, accurate and timely
solutions available. Our solutions are customized to the specific needs of our
clients and the industries in which they operate.
We target organizations that view data as a strategic competitive advantage
and an integral component of business decision-making. Historically, our client
base has primarily been Fortune 1000 companies in the financial services,
insurance, information services, publishing, retail and telecommunications
industries. Current clients include AT&T, ADP, Advance Publications, Allstate,
Bank of America, Citibank, General Electric, GTE, IBM, Prudential, Sears, Trans
Union, and Wal-Mart. More recently, our industry focus has expanded to include
the pharmaceuticals/healthcare, e-commerce, Internet, utilities, automotive,
technology, packaged goods and media/entertainment industries. Representative
clients in these new industries include 3Com, DaimlerChrysler, Procter & Gamble,
Searle, Bristol-Myers Squibb, Novell and Netscape.
Our primary development initiative over the past two years has been the Acxiom
Data Network(SM) and its related linking technology. The Acxiom Data Network is
a web-enabled technology that allows us to cost effectively provide our clients
with real-time desktop access to actionable information over the Internet and
via private networks. We expect that the ease of use and low cost delivery of
the Acxiom Data Network will allow us to extend our scope of services in the
existing markets we serve and expand our client base to include the middle
market and small office/home office companies seeking customer relationship
management solutions.
We have increased revenue from $479 million in fiscal year 1997 to $730
million in fiscal year 1999, representing a compound annual growth rate of
23.4%. Over the same time period our diluted earnings per share has increased
from $0.49 to $0.78 (excluding special charges), representing a compound annual
growth rate of 26.2%. Also during this time period, our operating profit margin
(excluding special charges) has improved from 13.8% in
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1997 to 15.8% in 1999. In fiscal year 1999, approximately 53% of total revenue
was under long-term contracts with initial terms of three years or longer.
Information Services Industry
We believe the following trends and dynamics in the information services
industry will provide us growth opportunities:
. Increasing recognition of data as a competitive resource
. Increasing amount of raw data to manage
. Growth of the Internet and e-commerce
. Evolution of one-to-one marketing
. Growth in technology partnering
Competitive Strengths
We intend to reinforce our position as a leading provider of information
management solutions by capitalizing on our competitive strengths which include:
. Ability to build and manage large-scale databases
. Accurate and comprehensive data content
. Industry-leading customer relationship management technology: the Acxiom
Data Network
. Comprehensive information management services
. Ability to attract and retain talent
Growth Strategy
Using our competitive strengths, we are pursuing the following strategic
initiaves:
. Leverage the Acxiom Data Network
. Further penetrate existing and new client industries
. Expand data content
. Capture cross-selling opportunities
. Pursue international opportunities
. Seek acquisitions and alliances that complement or expand our business
RISK FACTORS
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The risks described below could materially and adversely affect our business,
financial condition and results of future operations. These risks are not the
only ones we face. Our business operations could also be impaired by additional
risks and uncertainties that are not presently known to us, or that we currently
consider immaterial.
Legislation relating to consumer privacy may affect our ability to collect
and use data
There could be a material adverse impact on our direct marketing and data
sales business due to the enactment of legislation or industry regulations
arising from public concern over consumer privacy issues. Restrictions could be
placed upon the collection and use of information that is currently legally
available, in which case our cost of collecting some kinds of data might be
increased materially. It is also possible that we could be prohibited from
collecting or disseminating certain types of data, which could in turn
materially adversely affect our ability to meet our clients' requirements.
Data suppliers might withdraw data from us, leading to our inability to
provide products and services
We could suffer a material adverse effect if owners of the data we use were to
withdraw the data from us. Data providers could withdraw their data from us if
there is a competitive reason to do so or if legislation is passed restricting
the use of the data. If a substantial number of data providers were to withdraw
their data, our ability to provide products and services to our clients could be
materially adversely impacted which could result in decreased revenues, net
income and earnings per share.
Failure to attract and retain qualified technical personnel could adversely
affect our business
Competition for qualified technical and other personnel is intense, and we
periodically are required to pay premium wages to attract and retain personnel.
There can be no assurance that we will be able to continue to hire and retain
sufficient qualified management, technical, sales and other personnel necessary
to conduct our operations successfully, particularly if the planned growth
occurs.
Short-term contracts affect predictability of our revenues
While approximately 53% of our total revenue is currently derived from long-
term client contracts (defined as contracts with initial terms of three years
or longer), the remainder is not. With respect to that portion of our business
which is not under long-term contract, revenues are less predictable, and we
must consequently engage in continual sales efforts to maintain revenue
stability and future growth.
We must continue to improve and gain market acceptance of our technology to
remain competitive and grow.
Maintaining technological competitiveness in our data products, processing
functionality, software systems and services is key to our continued success.
Our ability to continually improve our current processes and to develop and
introduce new products and services, such as the Acxiom Data Network, is
essential in order to maintain our competitive position and meet the
increasingly sophisticated requirements of our clients. If we fail to do so, we
could lose clients to current or future competitors which could result in
decreased revenues, net income and earnings per share. In addition, failure to
gain market acceptance of our new products and services, such as the Acxiom Data
Network, could adversely affect our growth.
Year 2000 problems could affect our ability to deliver products and services
Many computer systems and instruments were designed to only recognize the last
two digits of the calendar year. With the arrival of the Year 2000, these
systems may encounter operating problems due to their inability to correctly
distinguish years after 1999. We believe that with modifications to existing
software and conversions to new software the Year 2000 issue can be mitigated.
However, the systems of vendors
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on whom we rely may not be converted in a timely fashion or a vendor or customer
may fail to convert its systems to be Year 2000-ready which could materially
adversely impact our ability to deliver products and services to our clients.
Loss of data center capacity or interruption of telecommunication links could
adversely affect our business
Our ability to protect our data centers against damage from fire, power loss,
telecommunications failure or other disasters is critical to our future. The on-
line services we provide are dependent on links to telecommunication providers.
We believe we have taken reasonable precautions to protect our data centers and
telecommunication links from events that could interrupt our operations. Any
damage to our data centers or any failure of our telecommunications links that
causes interruptions in our operations could materially adversely affect our
ability to meet our clients' requirements, which could result in decreased
revenues, income, and earnings per share.
Failure to favorably negotiate or effectively integrate acquisitions could
adversely affect our business
Our growth strategy currently includes growth through acquisitions. While we
believe we have been reasonably successful in implementing this strategy during
the past three years, there is no certainty that future acquisitions will be
consummated on acceptable terms or that any acquired assets, data or businesses
will be successfully integrated into our operations. Our failure to identify
appropriate acquisition candidates, to negotiate favorable terms for future
acquisitions, or to integrate them in our operations could result in decreased
revenues, net income and earnings per share.
Postal rate increases could lead to reduced volume of business
The direct marketing industry has been negatively impacted from time to time
during past years by postal rate increases. Any future increases will, in our
opinion, force direct mailers to mail fewer pieces and to target their prospects
more carefully. This sort of response by direct mailers could affect us by
decreasing the amount of processing services purchased from us, which could
result in lower revenues, net income and earnings per share.
RECENT DEVELOPMENTS
On May 28, 1999, Acxiom acquired Computer Graphics of Arizona, Inc. and all of
its affiliated companies in a stock-for-stock merger. The acquired companies
provide computer-based information management services with a focus on direct
marketing as well as other related data-based products. The transaction was
accounted for as a pooling-of-interests. On June 21, 1999, Acxiom will file a
Current Report on Form 8-K to provide supplemental consolidated financial
statements as a result of this transaction.
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ACXIOM'S BUSINESS
Overview
We are a global leader in providing comprehensive information management
solutions using customer, consumer and business data. Our products and services
enable our clients to use information to improve business decision-making and
effectively manage existing and prospective customer relationships. We believe
that we offer our clients the most technologically advanced, accurate and timely
solutions available. Our solutions are customized to the specific needs of our
clients and the industries in which they operate.
Information Services Industry
In today's technologically advanced and competitive business environment,
companies are using vast amounts of customer, prospect and marketplace
information to manage their businesses. As a result, an information services
industry has evolved that provides a broad range of products and services.
Within this industry, the services and products we provide include data
warehousing, database management, real-time information delivery, customer
relationship management, data content, and data center and network management.
Our products and services enable our clients to use information to improve
business decision-making and manage customer relationships. This information can
be used to answer our clients' important business questions such as:
. What are the profiles of our existing customers?
. Who are our prospective customers?
. Who are our most profitable customers?
. What do our customers want and when
do they want it?
. How do we service our customers?
. How should we price our products and services?
. What distribution channels should we use?
. What new products should we develop?
We believe the trends and dynamics that will provide us growth opportunities
include the following:
Increasing recognition of data as a competitive resource. Since the 1970's,
businesses have gathered and maintained increasing amounts of customer, product,
financial, sales and marketing data in an electronic format in order to better
manage their operations. Generally, businesses maintained this data in a number
of discrete and often incompatible systems, and therefore, the data was not
readily accessible. More recently, advances in information technology have
allowed this data to be accessed and processed more cost effectively into useful
strategic information and shared more efficiently within an organization. This
has caused many companies to invest in managing and maintaining their own
internal data and integrating their data with external data sources to improve
business decision-making.
The growing importance of using data for business decision-making is
illustrated by increased corporate expenditures allocated to building data
warehouses, which are central repositories for data that resides within
businesses. International Data Corporation projects that the data warehouse
market will grow from $13.8 billion to $29.2 billion in 2002. Companies using
data as a competitive resource traditionally consisted of Fortune 1000 companies
in the financial services, insurance, publishing, information service and retail
industries. This group is expanding to include companies in the
telecommunications, pharmaceuticals/ healthcare, e-commerce, Internet,
utilities, packaged goods, automotive, technology and media/entertainment
industries. Advances in technology and reductions in hardware and software costs
have also helped expand the universe of users to include middle market and small
office/home office companies across multiple industries.
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Increasing amount of raw data to manage. The combination of demographic
shifts and lifestyle changes, the proliferation of new products and services,
and the evolution of multiple marketing channels have made the information
management process increasingly complex. Marketing channels now include cable
and satellite television, telemarketing, direct mail, direct response, in-store
point-of-sale, on-line services and the Internet. The multiplicity of these
marketing channels has created more data and compounded the growth and
complexity of managing data. Advances in computer and software technology have
also unlocked vast amounts of customer data which historically was inaccessible,
thereby further increasing the amount of existing data to manage and analyze.
Today, it is common for a business to keep several thousand to tens of thousands
of characters of information about each customer. This compares to a few hundred
characters of information kept ten years ago. As these data resources expand and
become more complex, it also becomes increasingly difficult to maintain the
quality and integrity of the data.
Growth of the Internet and e-commerce. The emergence of the Internet is
dramatically changing how consumers and businesses are purchasing products and
services. International Data Corporation estimates that transactions over the
Internet will increase from approximately $32 billion worldwide in 1998 to $426
billion worldwide in 2002. As a result of this change, traditional marketing
techniques are being challenged. Businesses are being forced to reengineer how
they market to and interact with their customers. This paradigm shift is
creating an entirely new set of marketing complexities and opportunities, which
will require businesses to better understand and utilize customer and market
data. Businesses are seeking access to highly sophisticated technology resources
in order to manage this new data rich environment and to capitalize on the
tremendous growth opportunities associated with this new medium.
Evolution of one-to-one marketing. Advances in information technology
combined with the ever increasing amounts of raw data and the changing household
and population profiles in the United States have spurred the transition from
traditional mass media to targeted one-to-one marketing. One-to-one marketing
enables the delivery of a customized message to a defined audience and the
measurement of the response to that message. The Internet has rapidly emerged as
an ideal one-to-one marketing channel. It allows marketing messages to be
customized to specific consumers and allows marketers to make immediate
modifications to their messages based on consumer behavior and response. The
Internet can also accomplish these objectives far more cost effectively than
existing marketing mediums.
Growth in technology partnering. Companies are increasingly looking outside
of their own organizations for help in managing the complexities of their
information needs. The reasons for doing so include:
. allowing a company to focus on their fundamental business operations
. avoiding the difficulty of hiring and retaining scarce technical personnel
. benefiting from the cost efficiencies of outsourcing
. avoiding the organizational and infrastructure costs of building in-house
capability
. benefiting more from the latest technologies
Competitive Strengths
We believe we possess the following competitive strengths which allow us to
benefit from these industry trends and offer solutions to the information needs
of our clients:
Ability to build and manage large-scale databases. We have extensive
experience in developing and managing large-scale databases for
some of the world's largest companies including: AT&T, Allstate, Citibank,
General Electric, IBM, Procter & Gamble, and Wal-Mart. Our state-of-the-art data
centers, computing capacity and operating scale enable us to access and process
vast amounts of raw data and cost effectively transform the data into useful
information. We house over 50 terabytes of disk storage. A terabyte is
approximately
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one trillion bytes, and is the scale often used when measuring computer storage.
Accurate and comprehensive data content. We believe that we have the most
comprehensive and accurate collection of United States consumer, business,
property and telephone data available from a single source. Our consumer
database contains approximately 17 billion data elements, which we believe
covers approximately 95% of all households in the United States. Our business
database covers approximately 15 million United States businesses. Our real
estate database, which includes most major United States metropolitan areas,
covers approximately 70 million properties in 41 states. We believe we have the
most comprehensive repository of accurate telephone number information for
business and consumer telephone numbers in the United States and Canada. We
believe we process more mailing lists than any other company in the United
States. Our clients use this data to manage existing customer relationships and
to target prospective customers.
Industry-leading customer relationship management technology: the Acxiom Data
Network. We believe the Acxiom Data Network is emerging as the leading e-
business solution for companies seeking to better manage their customer
relationships. Customer relationship management involves studying, identifying,
acquiring and retaining customers. Knowledge delivered directly and immediately
to a desktop or customer point of contact in real time is critical to the
customer relationship management process. The Acxiom Data Network is a web-
enabled solution that provides our clients with real-time desktop access to our
data via the Internet and also allows them to integrate their existing databases
together in ways that have previously been difficult or impossible. Our new
linking technology, for which a patent is pending, is a data integration tool
that permits up-to-the-minute updating of consumer and business information with
our data, thereby creating a new level of data accuracy within the industry.
Comprehensive information management services. We offer our clients
comprehensive, integrated information management solutions tailored to
their specific needs. We believe our total solution approach is a competitive
strength because it allows our clients to use a sole service provider for all of
their information management needs.
We provide a complete solution that starts with consulting, integrates data
content, applies data management technology and delivers customer relationship
management applications to the desktop. Our open system client/server
environment allows our clients to use a variety of tools, and provides the
greatest flexibility in analyzing data relationships. This open system
environment also optimizes our clients' requirements for volume, speed,
scalability and functional performance.
Ability to attract and retain talent. We believe our progressive culture
allows us to attract and retain top associates, especially those in technology
fields where critical technical skills are scarce. Our culture is based on
concepts such as leadership, associate development, and continuous improvement.
Our business culture rewards customer satisfaction, associate satisfaction and
profitability. In addition to our culture, our extensive geographic presence,
with over 45 locations in the United States and Europe, including Atlanta,
Chicago, London, New York, Phoenix, and San Diego, has enhanced our ability to
attract talented associates. We were recently ranked 19th on Fortune magazine's
listing of the 100 best companies to work for in America.
Growth Strategy
Using our competitive strengths, we are pursuing a strategy that includes
the following initiatives:
Leverage the Acxiom Data Network. Our primary development initiative over
the past two years has been the Acxiom Data Network and its related linking
technology. The Acxiom Data Network and its related linking technology are
proprietary systems that enable us to provide our clients with what we believe
to be the industry's most accurate customer, consumer and business information
in a real-time manner over the Internet or via private network. The Acxiom Data
Network can serve any size business enterprise that desires to manage existing
and prospective customer
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relationships. Our technology to deliver this capability over the Internet was
the first offered in the marketplace. Our goal is to establish this technology
as the most widely accepted standard for managing and delivering customer,
consumer and business data. We expect to market the Acxiom Data Network to
Fortune 1000 clients through our existing sales organization. The middle market
or small office/home office market will be targeted primarily through our
channel partners, who include leading e-commerce and industry specialized
software solution providers. We expect to generate revenues from the Acxiom Data
Network in two primary ways:
. Our clients can use the Acxiom Data Network as a cost effective channel for
accessing our data products. The ease of use and low cost delivery of the
Acxiom Data Network will allow us to extend our scope of services in our
existing markets and expand our client base to include the large pool of
middle market and small office/home office companies seeking customer
relationship management solutions. The middle and the small office/home
office markets have not historically been cost effective markets for us.
. Our clients can also access the Acxiom Data Network and license our linking
technology as a tool to improve the customer data residing on their
internal systems on an ongoing basis.
Further penetrate existing and new client industries. Our clients expect
information management solutions tailored to the needs of their industry. We
have developed specific knowledge for the industries we serve, including the
financial services, insurance, information services, publishing, retail,
pharmaceuticals/healthcare and telecommunications industries. We expect to
continue to expand our presence in these industries as well as to penetrate new
industries as their information management needs increase. The
telecommunications and utilities industries are examples of industries where
information about existing and prospective customers is becoming increasingly
important as they move into a deregulated environment. Other industries which we
believe are undergoing change that will increase the need for data and
information management services include the e-commerce, Internet, automotive,
technology, packaged goods and media/entertainment sectors.
Expand data content. We continue to invest substantial resources to maintain
the quality and increase the scope of our databases. We enhance our databases by
adding new data through multiple sources and increasing the accuracy of the data
through our use of our new linking technology. Expanding our data content
offerings enables us to grow existing client relationships, capture new clients
and enter new industries. Data content also represents an attractive business
model for us because we can repackage it into multiple formats or sell it
through various distribution channels, including the Acxiom Data Network, at a
marginal incremental cost.
Capture cross-selling opportunities. Our established client base is
primarily composed of Fortune 1000 companies. These clients use a single product
or service or a combination of multiple products and services. Our consultative
approach, comprehensive set of services and products and long-standing client
relationships combined with the increasing information needs of our clients
provide us with a significant opportunity to offer our existing client base new
and enhanced services and products.
Pursue international opportunities. We first entered the international
marketplace with an acquisition in the United Kingdom in 1986. During the past
year, we made additional acquisitions in Spain and France to further develop a
European presence. We believe that businesses in Europe are in the early stages
of using information to drive their strategic decision-making. We have also
recently entered into a strategic alliance through which we will offer our
services in Australia and New Zealand. We believe that our existing
international presence, combined with the emerging market demand for our
information services, represents a large growth opportunity for us.
Seek acquisitions and alliances. We will continue to seek acquisition and
alliance opportunities with companies that can complement or expand our business
by offering unique data content, strategic services or market presence in a new
industry. Since April 1998, we have completed several acquisitions, including
our merger with May & Speh. These acquisitions have significantly
extended our range of products and services, increased our client base, and
expanded our industry coverage. We currently have a number of strategic
alliances and actively seek new alliances with channel partners, software
developers and data content providers that will strengthen our position in the
marketplace.
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Lines of Business
We have three primary lines of business: Services, Data Products, and
Information Technology Management.
Services
Our Services segment provides solutions which integrate and manage customer,
consumer, and business data using our information management skills and
technology. We use our core competencies of data integration, data management
and data delivery to build customized solutions for our clients. Our primary
services include the following:
Service
Description
. Marketing strategy consulting
. Develops strategies to effectively use and
transform data into actionable information
. Selects data elements that are relevant for a
particular client's goals and industry
. Lays foundation for data warehouse/database
development and marketing campaigns
. Data integration
. Standardizes, converts, cleanses and validates
data to ensure accuracy and remove duplicative
and unnecessary data
. Creates accurate and comprehensive standardized
customer profile from disparate data sources
. Augments client's data with our proprietary data
. Data warehouse/database management and delivery
. Designs, models and builds data warehouse/database
. Provides data warehouse/database maintenance and
updates
. Delivers information through a variety of channels
including the Internet via the Acxiom Data Network
. Customer relationship management applications
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. Provides market planning, analytical and
statistical modeling, campaign management, channel
implementation, and tracking and reporting
applications
. Enables client to manage and monitor customer
relationships
. List processing
. Provides processing tools to increase accuracy,
deliverability and efficiency of marketing lists
. Cleanses and integrates mailing list data
. Addresses and pre-sorts mailing to maximum postal
discounts and minimize handling costs
Data Products
Our data products include both business and consumer data. We believe our
products are the industry's most comprehensive and accurate data product
offerings that are sold on a stand-alone basis as well as integrated with our
customized service offerings.
Our primary products include the following:
InfoBase/TM/--Consumer
Product Description
InfoBase Enhancement . Multi-sourced consumer database containing
approximately 95% of all U.S. households
. Provides relevant demographic, real estate,
telephone, socio-economic and lifestyle data for
individuals, households and geographic areas
. Collects data from multiple data services using
approximately 1.5 billion source records
Analytical Products
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InfoBase--Consumer
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Product Description
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Analytical products . Employs advanced segmentation and
modeling techniques to analyze customer
attributes and behavior
InfoBase List . Multi-sourced consumer list designed to
help target prospects
. Delivers accurate and comprehensive
lists based on multiple data categories
InfoBase Telesource/TM/ . Provides over 130 million telephone
numbers in the U.S.
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InfoBase--Business
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InfoBase Enhancement . Multi-sourced business database
containing data on approximately
15 million businesses
. Provides data on location, contacts,
line of business, size, ownership,
property, stability and market potential
Analytical Products . Provides three standard levels of
product analysis: data profile analysis,
CHAID (Chi-squared Automatic Interaction
Detector) and regression analysis
InfoBase Business List . Comprehensive business lists tailored
to meet specific marketing requirements
. Uses InfoBase business database to
deliver accurate and comprehensive
lists, based on multiple data categories
InfoBase Telesource . Provides data on over 12 million
business telephone lines in the U.S.
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DataQuick/R/
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Product Description
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Real Estate Information . Provides detailed information on over 70
million properties in the U.S.
. Information includes: ownership,
address, sale and loan data, home and
property characteristics, household
demographics and trend data by
neighborhood
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List Brokerage
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List brokerage and management . Offers clients access to customer lists
from consumer products and services
firms
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Our clients use our data products for a range of management decision-making
functions including: identification, verification and segmentation of customers
and prospects for direct marketing purposes; campaign management; Internet
marketing; point-of-sale marketing; sales force automation; risk management;
fraud prevention; and other information driven applications.
We utilize multiple data sources to compile our consumer database,
including telephone directories, motor vehicle registrations, drivers licenses,
voter registrations, product registration, questionnaires, warranty cards,
county real estate property records, purchase transactions, mail-order
transactions and postal service information. Our business database is likewise
obtained from multiple sources and covers practically every business throughout
the United States. Business data is verified by telephone at least once a year
or by matching against other sources of the data. Business data sources include:
yellow and white pages; annual reports and other SEC information; federal, state
and municipal government data; business magazines, newsletters, and newspapers;
business registries; the Internet; professional directories; outbound
telemarketers; and postal service information. Our real estate database is
obtained from county recorders' and assessors' files. We update and maintain our
databases frequently in order to provide current information to our clients.
Each data source is compiled by us or one of our data partners.
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Information Technology Management
Our Information Technology Management segment provides solutions to our
clients' information processing needs. Our significant infrastructure and scale
enable us to provide these services on a cost effective basis. Our primary
services and support functions are available 24 hours a day, seven days a week
and include the following:
- --------------------------------------------------------------------------------
Service Description
-------------------------- --------------------------------------------
Data Center Management . Manages data center and transaction
processing on behalf of clients either
on-site at client locations or at our
facilities
. Services include data center operation,
hardware installation and support,
account management systems, software
installation support, customized software
programming and licensing of software
Network and Client/Server . Services include technical support,
Management help-desk access and support, back-up
recovery, disaster recovery services,
operating support and telecommunications
support
- --------------------------------------------------------------------------------
Acxiom Data Network
The Acxiom Data Network is an on-line access and delivery system that
provides authorized clients secure network access to selected data content and
information. It enables our clients to have real-time access from their desktops
to our consumer and business data products as well as proprietary client data
content from databases that we build and manage for our clients.
The Acxiom Data Network allows us and our clients to integrate data
directly into customer relationship applications such as:
. detailed customer analysis
. Internet marketing and interactive web pages
. call centers
. direct mail initiatives
. campaign management software
. point-of-sale applications
. sales force automation software
13
<PAGE>
Delivery of information over the Internet or via private network, as
opposed to traditional delivery through CD-ROM, floppy discs, tape cartridges
and tapes, significantly reduces the turnaround time from days to minutes or
seconds and reduces the operating costs associated with extended processing and
turnaround.
Acxiom's proprietary linking technology was created to provide a new level
of data accuracy. By applying our technology, we are able to properly cleanse
data and eliminate redundancies, constantly update to reflect real-time changes,
and combine our data with our clients' data.
This affordable access to data content will enable us to more efficiently
serve our traditional Fortune 1000 client base and it will also enable us to
expand our potential client base to include what we believe to be over 20
million U.S. middle market and small office/home office businesses. We are
working with channel partners who are leading e-commerce and industry
specialized software solution providers to expand the market presence of the
Acxiom Data Network. The use of channel partners opens new markets to us,
stimulates product development, and creates new revenue generating capabilities.
Acxiom Data Network Partner Program
We have designed a four-tiered channel partner program to enhance our
marketing of the Acxiom Data Network and our data products. This program offers
our partners revenue sharing levels that vary with the amount of their sales.
The tiers include:
Strategic Partners: Partners who integrate the Acxiom Data Network into
their applications and lead with Acxiom data as an integral part of their
solution. Strategic partners receive maximum integration, technical and
marketing support from us.
Channel Partners: Partners who offer prepackaged software solutions and
intend to either fully integrate the Acxiom Data Network into their
applications, create an import/export filter for Acxiom data, or have a link to
the Acxiom Data Network web site.
Solutions Partners: Partners who build custom applications on a project-
by-project basis, integrating various products, tools and technologies including
the Acxiom Data Network to provide a customized solution to their customer.
Solutions partners usually include system integrators, application developers,
and consultants.
Data Marketing Partners: Partners who resell or re-market our data and list
products to their customers. This tier typically includes service bureaus,
consultants, brokers and agents. Data marketing partners are required to sign a
marketing agreement with us. Sales and marketing support varies based on the
sales opportunities and revenue levels achieved by the data marketing partner.
Clients
Our clients are primarily in the financial services, insurance, information
services, publishing, retail and telecommunications industries. Our ten largest
clients represented approximately 41% of our revenues in fiscal 1999. Our
largest client, Allstate, represented approximately 11.3% of our revenues over
the same period.
We seek to maintain long-term relationships with our clients. Many of our
clients typically operate under long-term contracts (defined as contracts with
initial terms of at least three years in length). In fiscal 1999, approximately
53% of our revenue was derived from long-term contracts.
Representative clients by the industries we serve include:
14
<PAGE>
Information
-----------
Financial Services Insurance Services
------------------ --------- --------
Bank of America Allstate ADP
Citibank Physicians Mutual IBM
Discover Financial Services Prudential Polk
First USA Bank Trans Union
General Electric
Publishing Retail Telecommunications
---------- ------ ------------------
Advance Publications Neiman Marcus AT&T
Sears GTE
Guideposts Wal-Mart Vodafone
Meredith
More recently, our industry focus has expanded to include the
pharmaceuticals/healthcare, e-commerce, Internet, utilities, automotive,
technology, packaged goods and media/entertainment industries. Representative
clients in these new industries include 3Com, DaimlerChrysler, Procter &
Gamble, Searle, Bristol-Myers Squibb, Novell and Netscape.
Sales and Marketing
We have two separate sales forces. One is dedicated to our Services and
Information Technology Management lines of business and the other is focused on
our representatives to concentrate on particular services, technologies and
client demands.
Our Services and Information Technology Management sales force is de-
centralized and organized by industry. Our largest clients have their own
dedicated sales personnel. Sales to these and other large accounts typically
involve business unit leaders, group leaders and other members of our senior
management. Most major contracts are negotiated with the highest levels of our
clients' organizations and therefore necessitate the involvement of our senior
executives.
Our Data Products segment sells products rather than services and thus
requires a larger sales force. This sales force is organized into four groups.
The data sales team sells primarily InfoBase products. The DataQuick sales team
sells property data content and on-line access to those products. The list
brokerage sales team sells list rental and list management products. The
channels sales team focuses on creating sales through business partners and
other alternate channels of distribution.
15
<PAGE>
Pricing for Products and Services
We have standard list pricing guidelines for many services such as list
processing, national change of address processing, merge/purge processing and
other standard processing. Data warehousing/database management services tend to
be more custom-designed and are priced individually to each client. We have
built extensive pricing guidelines and case studies for pricing based on our
experience in building large-scale data warehouses and databases.
Pricing for data warehouses and databases normally includes separate fees
for design, initial build, on-going updates, queries and outputs. We also price
separately for consulting and statistical analysis services.
We publish standard list prices for many of our data products. These
products are priced with volume discounts. Licenses for our entire consumer or
business database for one or more years are priced individually.
Information Technology Management services are priced based on the cost of
managing and operating the data center, network and client/server systems.
Strategic Alliances
In addition to our traditional sales force activity, we maintain and pursue
strategic alliances to further the development and distribution of our best
products and services. We partner with firms that can help us service our
clients. Current strategic alliances include Bigfoot (e-mail marketing), Trans
Union (information services), Exchange Applications (customer relationship
management applications software), Ceres (campaign management), and PBL
(media/entertainment) in Australia.
Our strategic alliances are structured in several ways. Because each of our
partners is unique, it is necessary to create a structure specifically suited to
our needs and the needs of our business partners. Examples of various alliance
structures in which we participate include:
. joint ventures
. channel partner relationships
. minority interests in small, early-stage companies
. joint marketing alliances
. agreements to pay commissions for business directed to us
. agreements to pay finders fees for new clients directed to us
Competition
The information services industry in which we operate is highly
competitive, with no single dominant competitor. Within the industry, there are
database marketing service providers, analytical data application vendors,
enterprise software providers, systems integrators, consulting firms, list
brokerage/list management firms and teleservices companies. Many firms offer a
limited number of services within a particular geographic area, and several
participants tend to be national or international and offer a broad array of
information services. However, we do not know of a competitor that offers our
complete line of products and services.
16
<PAGE>
In the Services market, we compete primarily with in-house information
technology departments of current clients as well as firms that provide data
warehousing and database services, mailing list processing, and consulting
services. Competition is based on the quality and reliability of products and
services, technological expertise, historical experience, ability to develop
customized solutions for clients, processing capabilities and price. Competitors
in the data warehousing and database services and mailing list processing
sectors include Harte-Hanks, Metromail and Experian (subsidiaries of Great
Universal Stores), Dynamark, (a subsidiary of Fair Isaac), Epsilon and
KnowledgeBase Marketing (a subsidiary of Young & Rubicam).
In the Data Products market, we compete with two types of firms: data
providers and list providers. Competition is based on the quality and
comprehensiveness of the information provided, the ability to deliver the
information in products and formats that the customer needs and, to a lesser
extent, on the pricing of information products and services. Our principal
competitors in this market are Abacus Direct, Donnelley Marketing (a pending
acquisition by infoUSA), Metromail, R. L. Polk and infoUSA. We also compete with
hundreds of smaller firms that provide list brokerage and list management
services.
In the Information Technology Management services market, competition is
based on the quality and reliability of services, technical expertise,
processing capabilities, processing environment and price. Our primary
competitors include Affiliated Computer Services, Lockheed Martin, PKS
Information Services and the in-house information technology departments of
current clients and those of potential clients. In addition, but on a less
frequent basis, we compete with IBM, Electronic Data Systems, Computer Sciences
Corporation, Perot Systems and MCI/Systemhouse, a subsidiary of MCI Worldcom.
Privacy
We have always taken an active approach with respect to consumer privacy
rights. The growth of e-commerce and companies wanting consumer information
means that we must work even harder to guarantee that our policies offer
individuals the protection to which they are entitled.
Consequently, we are promoting adherance to a common set of strict privacy
guidelines for the direct marketing, e-commerce, and data industries as a whole.
Industrywide compliance helps address U.S. privacy concerns and the rigorous
demands of the European Union to ensure the continued free flow of information.
Our own Fair Information Practices Policy outlines the variety of measures
we currently take to protect consumers' privacy rights. Our multi-level security
systems, for example, are designed to ensure that only authorized clients can
access our data. We go to great lengths to educate clients and associates
regarding consumer right-to-privacy issues, guidelines, and laws. Our policy
also explains the simple steps that consumers may take to have their names
removed from our InfoBase line of marketing products and to learn what non-
public information we maintain about them.
Employees
- ---------
Acxiom employs approximately 5,260 employees (associates) worldwide. With
the exception of approximately 45 associates who are engaged in lettershop and
fulfillment activities at Acxiom's Skokie, Illinois facility, none of Acxiom's
associates are represented by a labor union or are the subject of a collective
bargaining agreement. Acxiom has never experienced a work stoppage and believes
that its employee relations are good.
17
<PAGE>
Item 2. Properties
- ------- ----------
The following table sets forth the location, ownership and general use of
the principal properties of Acxiom.
<TABLE>
<CAPTION>
Location Held Use
-------- ---- ---
<S> <C> <C>
Acxiom Corporation:
Conway, Arkansas Five facilities held in Customer service facilities and
fee; one facility secures computer equipment space
a $3,392,000 encumbrance
Little Rock, Arkansas Lease Principal executive offices; customer
service facilities; and office space
Acxiom CDC, Inc.:
Chicago, Illinois Lease Office and computer equipment space
Acxiom/Direct Media, Inc.:
Greenwich, Connecticut Lease Office space; customer service facility
Acxiom Great Lakes Data Center, Inc.:
Southfield, Michigan Lease Office and computer equipment space
Acxiom Limited:
(a) London, England Lease Office space; customer service facility
(b) Sunderland, England Held in fee Office space; computer equipment and
warehouse space
Acxiom / May & Speh, Inc.
(a) Downer's Grove, Illinois Lease Office space; customer service
facility
(b) Chicago, Illinois Lease Office and warehouse space
Acxiom Australia Pty Ltd:
Sydney, Australia Lease Office space
Acxiom SDC, Inc. (d/b/a Buckley
Dement, an Acxiom Company):
Skokie, Illinois Lease Office and computer equipment space;
warehouse and letter shop space
Computer Graphics of Arizona, Inc.:
Phoenix, Arizona Held in fee Office and customer service space
DataQuick Information Systems
</TABLE>
18
<PAGE>
(d/b/a Acxiom/Data Products Group):
San Diego, California Lease Office space; customer service
facility
Acxiom's headquarters recently relocated from Conway, Arkansas to Little
Rock, Arkansas. Acxiom also completed the construction of a new customer
service facility in Little Rock, Arkansas prior to the end of the first quarter
of fiscal year 2000. The Conway facilities consist of office buildings and a
data processing center. During fiscal year 2000, construction is expected to
begin on two new customer service facilities in Conway and Little Rock,
respectively.
Acxiom leases office space in Cincinnati, Ohio and Denver, Colorado in
connection with the services Acxiom provides to Polk. In addition, pursuant to
the Guideposts data processing agreement, Guideposts provides office and
computer equipment space for Acxiom's use at Guideposts' corporate headquarters
in Carmel, New York.
In connection with the May & Speh acquisition, Acxiom acquired Strategic
Decision Services and SIGMA Marketing, Inc. and, as such, leases office space in
Atlanta, Georgia and Rochester, New York, respectively.
As a result of the acquisition of three business units of Deluxe
Corporation, Acxiom leases customer service and office space in Bloomington,
Minnesota and Memphis, Tennessee.
With the acquisition of Horizon Systems, Inc., Acxiom leases office space
in Stamford, Connecticut. In addition, following the acquisition of Computer
Graphics of Arizona, Acxiom owns a building consisting of office space and
customer services facilities, as well as adjacent property in Phoenix, Arizona.
Acxiom also leases sales office space in Arizona, California, Florida,
Georgia, Illinois, Kansas, Maryland, Massachusetts, Missouri, Mississippi,
Nevada, New Jersey, New York, North Carolina, Ohio, Oklahoma, Oregon,
Pennsylvania, South Carolina, Texas, Virginia, Washington, Washington, D.C.,
Wisconsin, Canada, and the United Kingdom.
Acxiom's International Division's corporate and customer service operations
in London, England are presently housed in two principal buildings, both of
which are leased. Acxiom also owns a facility in Sunderland, England where data
processing and fulfillment services operations are housed. In fiscal year 2000,
Acxiom expects to move into a larger facility in Sunderland, which will be
leased to Acxiom, and the present facility will be sold. The International
Division also leases office space in France and Spain.
In general, the offices, customer service and data processing facilities of
Acxiom are in good condition. Management believes that its facilities are
suitable and adequate to meet the current needs of Acxiom. As such, management
believes that, except for the Conway and Little Rock, Arkansas expansions noted
above, no substantial additional properties will be required during fiscal year
2000. A portion of the real property owned by Acxiom is pledged to secure notes
payable.
Item 3. Legal Proceedings
- ------- -----------------
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
- ------- ---------------------------------------------------
Not applicable.
19
<PAGE>
EXECUTIVE OFFICERS OF ACXIOM
Each of Acxiom's executive officers, including position held, age, and year
of initial appointment as an executive officer and business experience for the
past five years, is listed below:
Year
Name Position Held Age Elected
- ---- ------------- --- -------
Charles D. Morgan (a) Chairman of the Board 56 1972
and President (Company Leader)
Rodger S. Kline (b) Chief Operating Officer, 56 1975
Treasurer and Director
James T. Womble (c) Division Leader and Director 56 1975
C. Alex Dietz (d) Division Leader 56 1979
Paul L. Zaffaroni (e) Division Leader 52 1990
L. Lee Hodges (f) Division Leader 52 1998
Jerry C.D. Ellis (g) Division Leader 49 1991
Jerry C. Jones (h) Business Development 43 1999
and Legal Leader
Robert S. Bloom (i) Chief Financial Officer 43 1992
_________________________
(a) Mr. Morgan joined Acxiom in 1972. He has been Chairman of the Board of
Directors since 1975, and serves as Acxiom's president (Company Leader).
He is also a director of Fairfield Communities, Inc. and the Direct
Marketing Association. In addition, he serves as Chairman of the Board of
Trustees of Hendrix College. He was employed by IBM Corporation ("IBM")
prior to joining Acxiom. Mr. Morgan holds a mechanical engineering degree
from the University of Arkansas.
(b) Mr. Kline joined Acxiom in 1973. He has been a director since 1975, and
serves as Acxiom's chief operating officer and treasurer. Prior to joining
Acxiom, Mr. Kline was employed by IBM. Mr. Kline holds a degree in
electrical engineering from the University of Arkansas.
(c) Mr. Womble joined Acxiom in 1974. He has been a director since 1975, and
serves as one of Acxiom's division leaders. Mr. Womble is also a director
of Sedona Corporation. Prior to joining Acxiom, Mr. Womble was employed by
IBM. Mr. Womble holds a degree in civil engineering from the University of
Arkansas.
(d) Mr. Dietz joined Acxiom in 1970 and served as a vice president until 1975.
Between 1975 and 1979 he was an officer of a commercial bank responsible
for data processing matters. Following his return to Acxiom in 1979, Mr.
Dietz served as senior level officer of Acxiom and is presently one of
Acxiom's division leaders. Mr. Dietz holds a degree in electrical
engineering from Tulane University.
(e) Mr. Zaffaroni joined Acxiom in 1990. He serves as one of Acxiom's division
leaders. Prior to joining Acxiom, he was employed by IBM for 21 years,
most recently serving as regional sales manager. Mr. Zaffaroni holds a
degree in marketing from Youngstown State University.
20
<PAGE>
(f) Mr. Hodges joined Acxiom in 1998. He serves as one of Acxiom's division
leaders. Prior to joining Acxiom, he was employed for 6 years with Tascor,
the outsourcing subsidiary of Norrell Corporation, most recently serving as
a senior vice president. Prior to that time, Mr. Hodges served in a number
of engineering, sales, marketing and executive positions with IBM for 24
years. Mr. Hodges holds a degree in industrial engineering from The
Pennsylvania State University.
(g) Mr. Ellis joined Acxiom in 1991 as managing director of Acxiom's U.K.
operations. He serves as one of Acxiom's division leaders. Prior to 1991,
Mr. Ellis was employed for 22 years with IBM, serving most recently as
assistant to the CEO of IBM's U.K. operations. Prior to that, Mr. Ellis
served as branch manager of the IBM U.K. Public Sector division.
(h) Mr. Jones joined Acxiom in 1999. Prior to joining Acxiom, he was employed
for nineteen years as an attorney in private practice with the Rose Law
Firm, representing a broad range of business interests. Mr. Jones holds a
degree in public administration from the University of Arkansas and a law
degree from the University of Arkansas School of Law.
(i) Mr. Bloom joined Acxiom in 1992 as chief financial officer. Prior to
joining Acxiom, he was employed for six years with Wilson Sporting Goods
Co. as chief financial officer of its international division. Prior to his
employment with Wilson, Mr. Bloom was employed by Arthur Andersen & Co. for
nine years, serving most recently as manager. Mr. Bloom, a Certified
Public Accountant, holds a degree in accounting from the University of
Illinois.
There are no family relationships among any of Acxiom's executive officers
and/or directors.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
- ------- -----------------------------------------------------------------
Matters
-------
The information required by this Item appears in Acxiom's Annual Report at
p. 48, which information is incorporated herein by reference.
Item 6. Selected Financial Data
- ------- -----------------------
The information required by this Item appears in Acxiom's Annual Report at
p. 20, which information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and
- ------- ---------------------------------------------------------------
Results of Operations
---------------------
The information required by this Item appears in Acxiom's Annual Report at
pp. 21-27, which information is incorporated herein by reference.
Item 7A. Quantitative and Qualitative Disclosures about Market Risk
- ------- ----------------------------------------------------------
Acxiom's earnings are affected by changes in short-term interest rates as a
result of its revolving credit agreement, which bears interest at a floating
rate. Acxiom does not use derivative or other financial instruments to mitigate
the interest rate risk. Risk can be estimated by measuring the impact of a
near-term adverse movement of 10% in short-term market interest rates. If
short-term market interest rates average 10% more in fiscal 2000 than in 1999,
there would be no material adverse impact on Acxiom's results of operations.
Acxiom has no material future earnings or cash flow expenses from changes in
interest rates related to its other long-term debt obligations as all of
Acxiom's remaining long-term debt obligations have fixed rates. At March 31,
1999, the fair value of Acxiom's fixed rate long-term obligations approximated
carrying value.
21
<PAGE>
Although Acxiom conducts business in foreign countries, principally the
United Kingdom, foreign currency translation gains and losses are not material
to Acxiom's consolidated financial position, results of operations or cash
flows. Accordingly, Acxiom is not currently subject to material foreign
currency exchange rate risks from the effects that exchange rate movements of
foreign currencies would have on Acxiom's future costs or on future cash flows
it would receive from its foreign investment. To date, Acxiom has not entered
into any foreign currency forward exchange contracts or other derivative
financial instruments to hedge the effects of adverse fluctuations in foreign
currency exchange rates.
Item 8. Financial Statements and Supplementary Data
- ------- -------------------------------------------
The Financial Statements required by this Item appear in Acxiom's Annual
Report at pp. 28-45, which information is incorporated herein by reference. The
Financial Statement Schedule which constitutes the Supplementary Data required
by this Item is attached hereto.
Item 9. Changes In and Disagreements With Accountants on Accounting and
- ------- ---------------------------------------------------------------
Financial Disclosure
--------------------
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
- -------- --------------------------------------------------
Pursuant to general instruction G(3) of the instructions to Form 10-K,
information concerning Acxiom's executive officers is included under the caption
"Executive Officers of Acxiom" at the end of Part I of this Report. The
remaining information required by this Item appears under the caption "Election
of Acxiom Directors" in Acxiom's 1999 Proxy Statement and under the caption
"Section 16(a) Beneficial Ownership Reporting Compliance" in Acxiom's 1999 Proxy
Statement, which information is incorporated herein by reference.
Item 11. Executive Compensation
- -------- ----------------------
The information required by this Item appears under the heading "Executive
Compensation" in Acxiom's 1999 Proxy Statement, which information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
- -------- --------------------------------------------------------------
The information required by this Item appears under the heading "Security
Ownership of Certain Beneficial Owners and Management of Acxiom" in Acxiom's
1999 Proxy Statement, which information is incorporated herein by reference.
Item 13. Certain Relationships and Transactions
- -------- --------------------------------------
The information required by this Item appears under the heading "Certain
Transactions" in Acxiom's 1999 Proxy Statement, which information is
incorporated herein by reference.
22
<PAGE>
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
- -------- --------------------------------------------------------------
The following documents are filed as a part of this Report:
1. Financial Statements.
--------------------
The following consolidated financial statements of the registrant
and its subsidiaries included on pages 28 through 45 of Acxiom's Annual Report
and the Independent Auditors' Report on page 46 thereof are incorporated herein
by reference. Page references are to page numbers in the Annual Report.
<TABLE>
<CAPTION>
Page
----
<S> <C>
Consolidated Balance Sheets as of March 31, 1999 and 1998 28
Consolidated Statements of Operations for the years ended
March 31, 1999, 1998 and 1997 29
Consolidated Statements of Stockholders' Equity for the
years ended March 31, 1999, 1998 and 1997 30-31
Consolidated Statements of Cash Flows for the years ended
March 31, 1999, 1998 and 1997 32
Notes to the Consolidated Financial Statements 33-45
Independent Auditors' Report 46
</TABLE>
2. Financial Statement Schedule.
----------------------------
The following additional information for the years 1999, 1998 and
1997 is submitted herewith and appears on the two pages immediately preceding
the signature page of this Report on Form 10-K.
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts for the years ended March
31, 1999, 1998 and 1997
All other schedules are omitted because they are not applicable or not
required or because the required information is included in the consolidated
financial statements or notes thereto.
3. Exhibits and Executive Compensation Plans.
------------------------------------------
The following exhibits are filed with this Report or are
incorporated by reference to previously filed material.
Exhibit No.
- -----------
3(a) Amended and Restated Certificate of Incorporation (previously filed as
Exhibit 3(i) to Acxiom's Quarterly Report on Form 10-Q for the quarterly
period ended June 30, 1996, Commission File No. 0-13163, and incorporated
herein by reference)
23
<PAGE>
3(b) Amended and Restated Bylaws (previously filed as Exhibit 3(b) to
Acxiom's Annual Report on Form 10-K for the fiscal year ended March 31,
1991, Commission File No. 0-13163, and incorporated herein by reference)
4 Rights Agreement dated January 28, 1998 between Acxiom and First Chicago
Trust Company of New York, as Rights Agent, including the forms of
Rights Certificate and of Election to Exercise, included in Exhibit A to
the Rights Agreement and the form of Certificate of Designation and
Terms of Participating Preferred Stock of Acxiom, included in Exhibit B
to the Rights Agreement (previously filed as Exhibit 4.1 to Acxiom's
Current Report on Form 8-K dated February 10, 1998, Commission File No.
0-13163, and incorporated herein by reference)
10(a) Data Center Management Agreement dated July 27, 1992 between Acxiom and
Trans Union Corporation (previously filed as Exhibit A to Schedule 13-D
of Trans Union Corporation dated August 31, 1992, Commission File No. 5-
36226, and incorporated herein by reference)
10(b) Agreement to Extend and Amend Data Center Management Agreement and to
Amend Registration Rights Agreement dated August 31, 1994 (previously
filed as Exhibit 10(b) to Form 10-K for the fiscal year ended March 31,
1995, as amended, Commission File No. 0-13163, and incorporated herein
by reference)
10(c) Data Management Outsourcing Agreement dated April 1, 1999 between Acxiom
and Allstate Insurance Company
10(d) Acxiom Corporation Deferred Compensation Plan (previously filed as
Exhibit 10(b) to Acxiom's Annual Report on Form 10-K for the fiscal year
ended March 31, 1990, Commission File No. 0-13163, and incorporated
herein by reference)
10(e) Amended and Restated Key Associate Stock Option Plan of Acxiom
Corporation (previously filed as Exhibit 10(e) to Acxiom's Annual Report
on Form 10-K for the fiscal year ended March 31, 1997, Commission File
No. 0-13163, and incorporated herein by reference)
10(f) Acxiom Corporation U.K. Share Option Scheme (previously filed as Exhibit
10(f) to Acxiom's Annual Report on Form 10-K for the fiscal year ended
March 31, 1997, Commission File No. 0-13163, and incorporated herein by
reference)
10(g) Leadership Compensation Plan
10(h) Acxiom Corporation Non-Qualified Deferred Compensation Plan (previously
filed as Exhibit 10(i) to Acxiom's Annual Report on Form 10-K for the
fiscal year ended March 31, 1996, Commission File No. 0-13163, and
incorporated herein by reference)
10(i) Asset Purchase Agreement dated April 1, 1996 between Acxiom and Direct
Media/DMI, Inc. (previously filed as Exhibit 2 to Acxiom's Current
Report on Form 8-K dated April 30, 1996, Commission File No. 0-13613,
and incorporated herein by reference)
13 Portions of Acxiom's Annual Report
21 Subsidiaries of Acxiom
23 Consents of KPMG LLP and PricewaterhouseCoopers LLP
24 Powers of Attorney for Robert S. Bloom, Dr. Ann H. Die, William T.
Dillard II, Harry L. Gambill, Rodger S. Kline, Thomas F. (Mack) McLarty,
III, Charles D. Morgan, Robert A. Pritzker, and James T. Womble
27 Financial Data Schedule
Listed below are the executive compensation plans and arrangements
currently in effect and which are required to be filed as exhibits to this
Report:
24
<PAGE>
- Amended and Restated Key Associate Stock Option Plan of Acxiom
Corporation
- Acxiom Corporation U.K. Share Option Scheme
- Leadership Compensation Plan
- Acxiom Corporation Deferred Compensation Plan*
- Acxiom Non-Qualified Deferred Compensation Plan
_______________________________
* To date, only one grant has been made, in 1990.
4. Reports on Form 8-K.
-------------------
A report will be filed on June 21, 1999, which reported Acxiom's restated
consolidated financial statements as a result of Acxiom's merger with Computer
Graphics.
25
<PAGE>
Report of Independent Accountants
---------------------------------
To the Board of Directors and Stockholders of May & Speh, Inc.
In our opinion, the consolidated statements of operations, of cash flows and of
changes in stockholders' equity of May & Speh, Inc. (not presented separately
herein) present fairly, in all material respects, its results of operations and
its cash flows for the year ended September 30, 1996, in conformity with
generally accepted accounting principles. These financial statements are the
responsibility of the Company's management; our responsibility is to express an
opinion on these financial statements based on our audit. We conducted our audit
of these statements in accordance with generally accepted auditing standards
which 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, assessing the accounting principles
used and significant estimates made by management, and evaluating the overall
financial statement presentation. We believe that our audit provides a
reasonable basis for the opinion expressed above.
PricewaterhouseCoopers LLP
Chicago, Illinois
November 1, 1996
F-3
<PAGE>
INDEPENDENT AUDITORS' REPORT
----------------------------
The Board of Directors
Acxiom Corporation
Under date of May 28, 1999, we reported on the consolidated balance sheets of
Acxiom Corporation and subsidiaries as of March 31, 1999 and 1998, and the
related consolidated statements of operations, stockholders' equity and cash
flows for each of the years in the three-year period ended March 31, 1999, which
are included in the 1999 annual report to shareholders. These consolidated
financial statements and our report thereon are incorporated by reference in the
annual report on Form 10-K for the year ended March 31, 1999. In connection
with our audits of the aforementioned consolidated financial statements, we also
audited the related financial statement schedule of valuation and qualifying
accounts. This financial statement schedule is the responsibility of the
Company's management. Our responsibility is to express an opinion on this
financial statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
KPMG LLP
Little Rock, Arkansas
May 28, 1999
27
<PAGE>
Schedule II
-----------
ACXIOM CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended March 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
Additions
Balance at charged to Other Bad Bad Balance
beginning costs and additions debts debts at end of
of period expenses (note) written off recovered period
--------- -------- ------ ----------- --------- ------
<S> <C> <C> <C> <C> <C> <C>
1999:
Allowance for doubtful
accounts, returns
and credits $ 3,630 2,223 710 2,026 715 5,252
======= ===== ===== ===== ===== =====
1998:
Allowance for doubtful
accounts, returns
and credits $ 4,692 3,094 224 4,777 397 3,630
======= ===== ===== ===== ===== =====
1997:
Allowance for doubtful
accounts, returns
and credits $ 2,230 4,462 4,800 7,044 238 4,686
======= ===== ===== ===== ===== =====
</TABLE>
Note - Other additions represent the valuation accounts acquired in connection
with business combinations.
28
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned.
ACXIOM CORPORATION
Date: June 18, 1999 By: /s/ Catherine L. Hughes
-------------------------
Catherine L. Hughes
Secretary
Pursuant to the requirements 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 and as of the dates indicated.
Signature
- ---------
Robert S. Bloom* Chief Financial Officer June 18, 1999
- ----------------
Robert S. Bloom (Principal accounting officer)
Dr. Ann H. Die* Director June 18, 1999
- ---------------
Dr. Ann H. Die
William T. Dillard II* Director June 18, 1999
- ----------------------
William T. Dillard II
Harry C. Gambill* Director June 18, 1999
- -----------------
Harry C. Gambill
Rodger S. Kline* Chief Operating Officer, June 18, 1999
- ----------------
Rodger S. Kline Treasurer and Director
(Principal financial officer)
Thomas F. McLarty, III* Director June 18, 1999
- -----------------------
Thomas F. McLarty, III
Charles D. Morgan* Chairman of the Board and June 18, 1999
- ------------------
Charles D. Morgan President (Company Leader)
(Principal executive officer)
Robert A. Pritzker* Director June 18, 1999
- -------------------
Robert A. Pritzker
James T. Womble* Division Leader and Director June 18, 1999
- ----------------
James T. Womble
*By: /s/ Catherine L. Hughes
--------------------------
Catherine L. Hughes
Attorney-in-Fact
29
<PAGE>
EXHIBIT INDEX
Exhibits to Form 10-K
Exhibit Exhibit
No.
3(a) Amended and Restated Certificate of Incorporation (previously filed as
Exhibit 3(i) to Acxiom's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1996, Commission File No. 0-13163, and
incorporated herein by reference)
3(b) Amended and Restated Bylaws (previously filed as Exhibit 3(b) to
Acxiom's Annual Report on Form 10-K for the fiscal year ended March
31, 1991, Commission File No. 0-13163, and incorporated herein by
reference)
4 Rights Agreement dated January 28, 1998 between Acxiom and First
Chicago Trust Company of New York, as Rights Agent, including the
forms of Rights Certificate and of Election to Exercise, included in
Exhibit A to the Rights Agreement and the form of Certificate of
Designation and Terms of Participating Preferred Stock of Acxiom,
included in Exhibit B to the Rights Agreement (previously filed as
Exhibit 4.1 to Acxiom's Current Report on Form 8-K dated February 10,
1998, Commission File No. 0-13163, and incorporated herein by
reference)
10(a) Data Center Management Agreement dated July 27, 1992 between Acxiom
and Trans Union Corporation (previously filed as Exhibit A to Schedule
13-D of Trans Union Corporation dated August 31, 1992, Commission File
No. 5-36226, and incorporated herein by reference)
10(b) Agreement to Extend and Amend Data Center Management Agreement and to
Amend Registration Rights Agreement dated August 31, 1994 (previously
filed as Exhibit 10(b) to Form 10-K for the fiscal year ended March
31, 1995, as amended, Commission File No. 0-13163, and incorporated
herein by reference)
10(c) Data Management Outsourcing Agreement dated April 1, 1999 between
Acxiom and Allstate Insurance Company
10(d) Acxiom Corporation Deferred Compensation Plan (previously filed as
Exhibit 10(b) to Acxiom's Annual Report on Form 10-K for the fiscal
year ended March 31, 1990, Commission File No. 0-13163, and
incorporated herein by reference)
10(e) Amended and Restated Key Associate Stock Option Plan of Acxiom
Corporation (previously filed as Exhibit 10(e) to Acxiom's Annual
Report on Form 10-K for the fiscal year ended March 31, 1997,
Commission File No. 0-13163, and incorporated herein by reference)
10(f) Acxiom Corporation U.K. Share Option Scheme (previously filed as
Exhibit 10(f) to Acxiom's Annual Report on Form 10-K for the fiscal
year ended March 31, 1997, Commission File No. 0-13163, and
incorporated herein by reference)
10(g) Leadership Compensation Plan
10(h) Acxiom Corporation Non-Qualified Deferred Compensation Plan
(previously filed as Exhibit 10(i) to Acxiom's Annual Report on Form
10-K for the fiscal year ended March 31, 1996, Commission File No. 0-
13163, and incorporated herein by reference)
10(i) Asset Purchase Agreement dated April 1, 1996 between Acxiom and Direct
Media/DMI, Inc. (previously filed as Exhibit 2 to Acxiom's Current
Report on Form 8-K dated April 30, 1996, Commission File No. 0-13613,
and incorporated herein by reference)
30
<PAGE>
13 Portions of Acxiom's Annual Report
21 Subsidiaries of Acxiom
23 Consents of KPMG LLP and PricewaterhouseCoopers LLP
24 Powers of Attorney for Robert S. Bloom, Dr. Ann H. Die, William T. Dillard
II, Harry L. Gambill, Rodger S. Kline, Thomas F. (Mack) McLarty, III,
Charles D. Morgan, Robert A. Pritzker, and James T. Womble
27 Financial Data Schedule
31
<PAGE>
EXHIBIT 10(c)
DATA MANAGEMENT
OUTSOURCING AGREEMENT
BETWEEN
ALLSTATE INSURANCE COMPANY
AND
ACXIOM CORPORATION
CONFIDENTIAL DRAFT
DO NOT REDISTRIBUTE
March 19, 1999
Version 5.0.0
SUMMARY TABLE OF CONTENTS
-------------------------
<PAGE>
<TABLE>
<CAPTION>
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<S> <C>
SUMMARY TABLE OF CONTENTS................................................. II
DETAILED TABLE OF CONTENTS................................................ IV
INDEX OF DEFINED TERMS.................................................... IX
LIST OF SCHEDULES......................................................... XI
1. BACKGROUND AND PURPOSE................................................ 1
2. DEFINITIONS........................................................... 1
3. SERVICES.............................................................. 8
4. MASLS................................................................. 9
5. ACXIOM RESOURCES...................................................... 10
6. SECURITY OBLIGATIONS.................................................. 11
7. ALLSTATE-RETAINED AUTHORITY AND OBLIGATIONS........................... 11
8. FINANCIAL TERMS....................................................... 12
9. RELATIONSHIP MANAGEMENT............................................... 20
10. PROPRIETARY RIGHTS; OWNERSHIP OF WORK PRODUCT......................... 23
11. TERM.................................................................. 25
12. DISENTANGLEMENT....................................................... 26
13. DEFAULT............................................................... 28
14. INSURANCE............................................................. 29
15. REPORTS............................................................... 31
16. RECORDKEEPING AND AUDIT RIGHTS........................................ 32
17. CONFIDENTIALITY....................................................... 33
18. LEGAL COMPLIANCE...................................................... 34
19. REPRESENTATIONS AND WARRANTIES........................................ 35
20. INDEMNIFICATION....................................................... 38
21. DISPUTE RESOLUTION.................................................... 42
</TABLE>
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<TABLE>
<S> <C>
22. PUBLICITY............................................................ 43
23. USE OF AFFILIATES AND SUBCONTRACTORS................................. 44
24. MISCELLANEOUS........................................................ 44
</TABLE>
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DETAILED TABLE OF CONTENTS
--------------------------
<TABLE>
<CAPTION>
Page
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<S> <C>
SUMMARY TABLE OF CONTENTS............................................... II
DETAILED TABLE OF CONTENTS.............................................. IV
INDEX OF DEFINED TERMS.................................................. IX
LIST OF SCHEDULES....................................................... XI
1. BACKGROUND AND PURPOSE............................................... 1
2. DEFINITIONS.......................................................... 1
2.1. Acxiom Core Software........................................... 2
2.2. Acxiom's Contract Manager...................................... 2
2.3. Acxiom's Key Personnel......................................... 2
2.4. Acxiom's Personnel............................................. 2
2.5. Affiliate...................................................... 2
2.6. Agreement...................................................... 2
2.7. Allstate Software.............................................. 2
2.8. Allstate's Contract Manager.................................... 3
2.9. Allstate's Data................................................ 3
2.10. Allstate's Key Personnel....................................... 3
2.11. Benchmark Price................................................ 3
2.12. Confidential Information....................................... 3
2.13. Current Projects............................................... 4
2.14. Data Acquisition Cost ("DAC").................................. 4
2.15. Data Acquisition System ("DAS")................................ 4
2.16. Data Integrity................................................. 4
2.17. Effective Date................................................. 4
2.18. End-User....................................................... 4
2.19. Fee Reduction.................................................. 5
2.20. Force Majeure Event............................................ 5
2.21. Indemnitees.................................................... 5
2.22. Masl........................................................... 5
2.23. Material Default............................................... 5
2.24. Party.......................................................... 6
2.25. Person......................................................... 6
2.26. Problem........................................................ 7
2.27. Problem Report................................................. 7
2.28. Services....................................................... 7
2.29. Software....................................................... 7
2.30. Term........................................................... 7
2.31. Third-party Data Providers..................................... 7
2.32. Total Data Cost Savings ("TDCS")............................... 8
2.33. Work Order..................................................... 8
2.34. Work Product................................................... 8
3. SERVICES............................................................. 8
3.1. Provision Of Services........................................... 8
</TABLE>
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<TABLE>
<S> <C>
3.2. Current Projects................................................ 8
3.3. Data Acquisition and Related Services........................... 9
3.4. Future Projects................................................. 9
3.5. [INTENTIONALLY LEFT BLANK]...................................... 9
3.6. Business Resumption Services.................................... 9
3.7. Data Integrity Services......................................... 9
4. MASLS................................................................ 9
4.1. Specification of MASLs.......................................... 9
4.2. MASL Measurement and Reporting.................................. 9
4.3. Improvement in MASLs............................................ 10
4.4. Temporary Suspension of MASLs................................... 10
5. ACXIOM RESOURCES..................................................... 10
5.1. General......................................................... 10
5.2. Use of Data Acquisition System.................................. 10
5.3. Use of Data Network............................................. 11
5.4. Non-Exclusivity................................................. 11
6. SECURITY OBLIGATIONS................................................. 11
7. ALLSTATE-RETAINED AUTHORITY AND OBLIGATIONS.......................... 11
7.1. Allstate Authority.............................................. 11
7.2. Access to Personnel and Information............................. 12
8. FINANCIAL TERMS...................................................... 12
8.1. Data Acquisition Fees........................................... 12
8.2. Shared Savings - Data Acquisition Costs......................... 12
8.2.1. Total Data Cost Savings.................................... 12
8.2.2. Determination of Benchmark Price........................... 12
8.2.3. Effect of Supplier Price Changes on TDCS................... 13
8.3. Shared Savings - Other Costs.................................... 13
8.4. Data Network Costs.............................................. 14
8.5. Pricing Audit................................................... 14
8.6. Taxes........................................................... 15
8.7. Services Benchmarking........................................... 15
8.8. Out-of-Scope Services Rate Chart................................ 15
8.9. Fee Reductions.................................................. 16
8.10. Only Payments.................................................. 17
8.11. Invoices....................................................... 18
8.11.1. Data Acquisition Costs.................................... 18
8.11.2. Other Charges............................................. 18
8.11.3. Frequency and Format...................................... 18
8.11.4. Disputed Amounts.......................................... 19
8.11.5. Set-Off................................................... 19
8.12. Most-Favored Customer.......................................... 19
9. RELATIONSHIP MANAGEMENT.............................................. 20
9.1. Key Personnel and Contract Manager.............................. 20
9.1.1. Acxiom's Key Personnel and Contract Manager................ 20
9.1.2. Allstate's Key Personnel and Contract Manager.............. 20
9.1.3. Additional Personnel Requirements.......................... 21
9.1.4. Minimum Proficiency Levels................................. 21
</TABLE>
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<TABLE>
<S> <C>
9.1.5. Training.................................................... 21
9.1.6. Unsatisfactory Performance.................................. 21
9.2. Allstate's Policies.............................................. 21
9.2.1. Computer Information and Access............................. 22
9.2.2. Confidentiality and Intellectual Property................... 22
9.2.3. Other Policies.............................................. 22
9.2.4. Enforcement................................................. 22
9.3. Regulatory Compliance............................................ 22
9.4. Operational Change Procedure..................................... 22
9.5. Work Order Procedure............................................. 23
9.5.1. When Required............................................... 23
9.5.2. Contents of the Work Order.................................. 23
10. PROPRIETARY RIGHTS; OWNERSHIP OF WORK PRODUCT........................ 23
10.1. Rights and Licenses............................................. 24
10.2. Adverse Action.................................................. 24
11. TERM................................................................. 25
11.1. Initial Term; Renewals.......................................... 25
11.2. Extension of Termination Date................................... 25
11.3. Early Termination............................................... 25
11.3.1. Partial Termination of Services by Allstate................ 25
11.3.2. For Convenience............................................ 25
11.3.3. Change in Control of Acxiom................................ 25
11.4. Termination for Material Default................................ 26
11.5. Termination for Force Majeure Event............................. 26
11.6. Effect of Ending of Term........................................ 26
12. DISENTANGLEMENT...................................................... 26
12.1. Disentanglement Process......................................... 26
12.2. Preparation for Disentanglement................................. 27
13. DEFAULT.............................................................. 28
13.1. Remedies........................................................ 28
13.1.1. Allstate's Remedies........................................ 28
13.1.2. Acxiom's Remedies.......................................... 28
13.1.3. Limitation of Liability and Disclaimers.................... 29
13.2. Force Majeure Events............................................ 29
14. INSURANCE............................................................ 29
14.1. General Requirements............................................ 29
14.2. Coverages....................................................... 30
14.3. Miscellaneous Requirements...................................... 31
15. REPORTS.............................................................. 31
15.1. General......................................................... 31
15.2. Media........................................................... 32
16. RECORDKEEPING AND AUDIT RIGHTS....................................... 32
16.1. Recordkeeping................................................... 32
16.2. Audit Rights.................................................... 33
16.3. Open Book Policy................................................ 33
17. CONFIDENTIALITY...................................................... 33
</TABLE>
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<TABLE>
<S> <C>
17.1. Disclosure of Confidential Information.......................... 33
17.2. Required Disclosure............................................. 34
17.3. Notification.................................................... 34
17.4. Injunctive Relief............................................... 34
17.5. Return of Confidential Information.............................. 34
18. LEGAL COMPLIANCE..................................................... 34
19. REPRESENTATIONS AND WARRANTIES....................................... 35
19.1. Acxiom's Representations, Warranties, and Covenants............. 35
19.1.1. Performance of the Services................................ 35
19.1.2. Proprietary Rights Infringement............................ 35
19.1.3. Adherence to Specifications................................ 36
19.1.4. Warranty as to Viruses..................................... 36
19.1.5. Warranty of Year 2000 Compliance........................... 36
19.1.6. Legal and Corporate Authority.............................. 37
19.2. Allstate's Representations, Warranties and Covenants............ 37
19.2.1. Legal and Corporate Authority.............................. 37
19.2.2. Other...................................................... 37
20. INDEMNIFICATION...................................................... 38
20.1. Technology...................................................... 38
20.1.1. Indemnity by Acxiom........................................ 38
20.1.2. Indemnity by Allstate...................................... 39
20.2. Injury or Property Damage....................................... 39
20.2.1. Indemnity by Acxiom........................................ 39
20.2.2. Indemnity by Allstate...................................... 39
20.3. Employees....................................................... 39
20.4. Third-Party Matters............................................. 40
20.4.1. Indemnity by Acxiom........................................ 40
20.4.2. Mutual Indemnities......................................... 40
20.5. Misrepresentation............................................... 40
20.5.1. Indemnity by Acxiom........................................ 40
20.5.2. Indemnity by Allstate...................................... 41
20.6. Subrogation..................................................... 41
20.7. Procedures...................................................... 41
21. DISPUTE RESOLUTION................................................... 42
21.1. General Intent.................................................. 42
21.2. Contract Manager Level.......................................... 42
21.3. Escalation...................................................... 42
21.3.1. First Escalation........................................... 42
21.3.2. Second Escalation.......................................... 42
21.4. Critical Problems............................................... 43
21.5. Legal Action.................................................... 43
21.6. No Termination or Suspension of Services........................ 43
22. PUBLICITY............................................................ 43
23. USE OF AFFILIATES AND SUBCONTRACTORS................................. 44
24. MISCELLANEOUS........................................................ 44
24.1. Entire Agreement................................................ 44
</TABLE>
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<TABLE>
<S> <C>
24.2. Captions; Section Numbers...................................... 44
24.3. Assignment..................................................... 45
24.4. Notices to a Party............................................. 45
24.5. Amendments; Waivers............................................ 46
24.6. Legal Status of Parties........................................ 46
24.7. Severability................................................... 47
24.8. Counterparts................................................... 47
24.9. Governing Law.................................................. 47
24.10. No Third-Party Beneficiaries................................... 47
24.11. Expenses....................................................... 48
</TABLE>
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INDEX OF DEFINED TERMS
----------------------
<TABLE>
<S> <C>
A
Acxiom.................................................................. 1
Acxiom Core Software.................................................... 1
Acxiom RM-T............................................................. 1
Acxiom's Contract Manager............................................... 2
Acxiom's Key Personnel.................................................. 2
Acxiom's Personnel...................................................... 2
2
Affiliate............................................................... 2
Agreement............................................................... 2
Allstate................................................................ 1
Allstate Software....................................................... 2
Allstate's Contract Manager............................................. 3
Allstate's Data......................................................... 3
Allstate's Key Personnel................................................ 3
B
Benchmark Price......................................................... 3
C
Confidential Information................................................ 3
Current Project......................................................... 4
D
DAC..................................................................... 4
DAS..................................................................... 4
Data Integrity.......................................................... 4
Data Network............................................................ 10
Disentanglement......................................................... 25
E
Effective Date.......................................................... 4
End-User................................................................ 4
F
Failure................................................................. 16
Fee Reduction........................................................... 4
First Year Savings...................................................... 13
Force Majeure Event..................................................... 5
G
GAAP.................................................................... 31
I
Implementation Date..................................................... 13
Indemnitees............................................................. 5
Infringement Claim...................................................... 37
M
MASL or Minimum Acceptable Service Level................................ 5
</TABLE>
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<TABLE>
<S> <C>
Material Default........................................................ 5
Millenial Dates......................................................... 35
MVR..................................................................... 12
O
Optimization............................................................ 13
P
Parties................................................................. 7
Party................................................................... 7
Person.................................................................. 7
Prior Agreements........................................................ 1
Problem................................................................. 7
Problem Report.......................................................... 7
Projects................................................................ 9
PSA..................................................................... 1
R
RM-Tools Agreement...................................................... 1
S
Services................................................................ 7
Software................................................................ 7
T
TDCS.................................................................... 8
Term.................................................................... 7
Third-Party Data Providers.............................................. 8
W
Work Order.............................................................. 8
Work Product............................................................ 8
</TABLE>
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LIST OF SCHEDULES
-----------------
SCHEDULE 2.1 Acxiom Core Software
SCHEDULE 2.8 Allstate Software
SCHEDULE 2.13 Current Projects
SCHEDULE 2.31 Third-Party Data Providers
SCHEDULE 3.3 Data Acquisition and Related Services
SCHEDULE 3.6 Business Resumption Services
SCHEDULE 3.7 Data Integrity Services
SCHEDULE 4.1 Minimum Acceptable Service Levels
SCHEDULE 5.1 Interactive Data Resources Provided by Allstate
SCHEDULE 6 Security Obligations
SCHEDULE 8.1 Data Acquisition Fees
SCHEDULE 8.2.2 Determination of Benchmark Price
SCHEDULE 8.8 Out-of-Scope Services Rate Chart
SCHEDULE 9.1 Key Personnel and Contract Manager
SCHEDULE 9.2.1 Computer Information and Access Forms
SCHEDULE 9.2.2 Confidentiality Acknowledgment
SCHEDULE 15 Reports
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DATA MANAGEMENT OUTSOURCING AGREEMENT
-------------------------------------
This Data Management Outsourcing Agreement ("Agreement"), dated March ___,
1999, is a contract between Allstate Insurance Company ("Allstate"), with
business offices at Allstate Plaza, 2775 Sanders Road, Northbrook, Illinois
60062, and Acxiom RM-Tools, Inc.("Acxiom"), a wholly-owned subsidiary of Acxiom
Corporation, with business offices at 301 Industrial Boulevard, P.O. Box 2000,
Conway, Arkansas 72033-2000, under which Acxiom shall provide, subject to the
guarantee of Acxiom Corporation, Allstate and Allstate's Affiliates with certain
information-technology services on the terms and conditions set forth below.
For and in consideration of the mutual promises and covenants contained
herein, the receipt, sufficiency, and adequacy of which are hereby acknowledged,
the Parties, intending to be legally bound, hereby contract and agree as
follows:
1. BACKGROUND AND PURPOSE
Allstate and Acxiom are presently parties to that certain Agreement for
Professional Services effective as of September 14, 1992 as amended (the "PSA")
whereby Allstate engaged Acxiom to provide certain of Allstate's information
management functions and manage Allstate's relationships with certain third-
party vendors of data. After the execution of the PSA, Allstate and Acxiom
entered into that certain agreement effective as of January 31, 1995 (the "RM-
Tools Agreement" and, with the PSA, the "Prior Agreements") whereby Acxiom
agreed to remarket certain computer software and related services to the
insurance industry and Allstate agreed to provide certain computer software and
services to Acxiom in support of Acxiom's remarketing effort. Allstate wishes to
continue receiving services from Acxiom, and Acxiom wishes to continue providing
such services to Allstate and Allstate's Affiliates; accordingly, the parties
have negotiated and agreed upon the revised and updated terms and conditions set
forth in this Agreement. The Parties mutually acknowledge and agree that this
Agreement replaces and supersedes the terms and conditions of the PSA which is
hereby terminated as of the Effective Date hereof, provided, however, that such
termination (i) shall not apply to any terms or conditions thereof, which by
their terms, survive termination of such agreement and (2) shall not terminate
any proprietary rights that arose as a result of performance of such contracts.
The Parties further agree that the RM-Tools Agreement shall remain in full force
and effect until such time as they, negotiating in good faith and as promptly as
practicable, shall enter into a new agreement relating to the subject matter of
the RM-Tools Agreement.
2. DEFINITIONS
The following words and phrases, when used in this Agreement, shall have
the indicated meanings. (Terms capitalized within a particular definition have
been defined elsewhere within this Agreement.)
-1-
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2.1. Acxiom Core Software
"Acxiom Core Software" shall mean the computer programs,
documentation, and related items presently owned by Acxiom that are set
forth in Schedule 2.1. It is understood and agreed that the Parties shall
update Schedule 2.1 by mutual agreement on a quarterly basis.
2.2. Acxiom's Contract Manager
"Acxiom's Contract Manager'" shall mean, initially, the individual
who is so designated in Schedule 9.1 hereto.
2.3. Acxiom's Key Personnel
"Acxiom's Key Personnel'" shall mean, initially, those personnel and
positions so designated in Schedule 9.1 hereto.
2.4. Acxiom's Personnel
"Acxiom's Personnel'" shall mean any of Acxiom's employees,
officers, directors, subcontractors or agents involved in the provision of
services to Allstate pursuant to this Agreement.
2.5. Affiliate
"Affiliate" shall mean, as to any Person, any other Person that,
directly or indirectly, controls, is controlled by, is under common control
with such Person, whether through ownership of voting securities or
otherwise. For this purpose, and without limiting the foregoing, (a) any
Person or group of persons owning more than fifty percent (50%) of the
outstanding voting securities of any other Person shall be deemed to
control such other Person and (b) any Person having the right to direct the
management and policies of any other person shall be deemed to control such
other person.
2.6. Agreement
"Agreement" shall mean this Data Management Outsourcing Agreement
between Allstate and Acxiom dated March ___, 1999, as amended from time to
time, including all attachments, exhibits, and schedules hereto and Work
Orders entered into pursuant to this Agreement.
2.7. Allstate Software
"Allstate Software" shall mean the computer programs, documentation,
and related items presently owned by Allstate that are set forth in
Schedule 2.7 and any future computer programs, documentation, and related
items that are acquired by or developed for Allstate for use in connection
with the Services. It is understood and
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agreed that the Parties shall update Schedule 2.8 by mutual agreement on a
quarterly basis
2.8. Allstate's Contract Manager
"Allstate's Contract Manager'" shall mean, initially, the individual
who is so designated in Schedule 9.1 hereto.
2.9. Allstate's Data
"Allstate's Data'" shall mean the data provided by Allstate, Acxiom,
or a third party for procuring and use by Acxiom in connection with the
provision of the Services.
2.10. Allstate's Key Personnel
"Allstate's Key Personnel'" shall mean, initially, those personnel
who are so designated in Schedule 9.1 hereto.
2.11. Benchmark Price
"Benchmark Price" shall have the meaning given to it in Section
8.2.2 hereof.
2.12. Confidential Information
"Confidential Information" shall mean:
(a) as to either Party, all technical information, materials, data,
reports, programs, documentation, diagrams, ideas, concepts,
techniques, processes, inventions, knowledge, know-how, and
trade secrets, whether in tangible or intangible form, and
whether in written form or readable by machine, developed or
acquired by such Party, except for Work Product;
(b) as to either Party, all information and data relating to such
Party's practices, customers, products, business, costs, or
margins that is not generally known by others in the same line
of business;
(c) as to either Party, any information that such Party identifies
to the other as confidential by a stamp or other similar
notice;
(d) as to either Party, this Agreement:
(e) as to either Party, all other information relating to such
Party that a reasonably prudent technician would expect not to
be made available to third parties without restriction or
payment; and
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(f) as to Allstate, all Work Product.
Confidential Information shall not include information that a Party
can demonstrate was: (i) at the time of disclosure to such Party, in the
public domain or commonly known in either Party's industry; (ii) after
disclosure to such Party, published or otherwise a part of the public
domain through no fault of such Party; (iii) in the possession of such
Party at the time of disclosure to it, if such Party was not then under an
obligation of confidentiality with respect thereto; (iv) received after
disclosure to such Party from a third party who had a lawful right to
disclose such Confidential Information to it; or (v) independently
developed by such Party without reference to Confidential Information of
the other Party.
2.13. Current Projects
"Current Projects" shall mean those information-technology related
development projects that Acxiom is currently performing for Allstate or
that are in progress as of the Effective Date and are set forth in Schedule
2.13 hereto.
2.14. Data Acquisition Cost ("DAC")
Data Acquisition Cost ("DAC") shall mean the price charged for data
by the primary supplier of such data, including any supplier-imposed
surcharges.
2.15. Data Acquisition System ("DAS")
Data Acquisition System ("DAS") shall mean the highly integrated
system of software programs and processes developed by Acxiom and Allstate
pursuant to the PSA to support Allstate's customer-focused information
needs.
2.16. Data Integrity
"Data Integrity" shall mean the objectively measured accuracy and
consistency of acquired or purchased data as determined in accordance with
the methods described in Schedule 3.7.
2.17. Effective Date
"Effective Date" shall be April 1, 1999, and shall mean the date on
which this Agreement becomes effective.
2.18. End-User
"End-User" shall mean any Person authorized by Allstate to request
any Services from Acxiom.
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2.19. Fee Reduction
"Fee Reduction" shall mean the amount determined pursuant to Section
8.9 hereof that is the price reduction for a Failure, as defined therein.
2.20. Force Majeure Event
"Force Majeure Event" shall mean an act of God, act of governmental
body or military authority, fire, explosion, power failure, flood,
epidemic, riot or civil disturbance, war, sabotage, accidents,
insurrections, blockades, embargoes, storms, labor disputes, or similar
event; provided, however, that "Force Majeure Event" expressly excludes the
following: any event that Acxiom could reasonably have prevented.
2.21. Indemnitees
"Indemnitees" shall mean, with respect to a Party entitled to
indemnification hereunder, such Party and its Affiliates, and their
respective officers, directors, employees, agents, successors, and assigns.
2.22. MASL
"MASL," which is the acronym for "minimum acceptable service level,"
shall mean, as to each task or service for which a MASL is specified in
this Agreement, the MASL so specified for such task or service.
2.23. Material Default
"Material Default" shall mean the occurrence of any of the
following:
(a) any material failure by Acxiom to provide the Services in
accordance with an applicable MASL, if Acxiom fails to use
reasonable efforts to correct such failure or if,
notwithstanding Acxiom's reasonable efforts, such failure has
not been corrected within ten (10) business days after Acxiom
has received written notice of such failure from Allstate. (For
purposes of this definition, the words "correct" and
"corrected" shall include implementation of a work-around or
similar temporary measures, provided that Acxiom continues its
best efforts to pursue and promptly implement a full and
complete cure);
(b) a commission by either Party of a material breach of any
obligation to the other Party under Section 9 (Relationship
Management) hereof, Section 10 (Proprietary Rights; Ownership
of Work Product) hereof or Section 17 (Confidentiality) hereof,
provided that such breach, if curable, is not cured within ten
(10) business days after such breach;
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(c) the existence of any material representation or warranty made
in this Agreement by either Party that was materially false
when made; provided, however, that if such material
misrepresentation is curable and such cure will fully and
completely effect a resolution reasonably acceptable to the
other Party, there shall not be a Material Default if the
misrepresentation is cured within thirty (30) days after the
Party that has made the material misrepresentation has been
notified by the other Party of the falsity of the
representation;
(d) insolvency of a Party; general failure of a Party to pay its
debts as they become due; entrance of a Party into receivership
or any arrangement or composition with creditors generally;
filing of a voluntary or involuntary petition or other action
or proceeding for bankruptcy or reorganization or dissolution
or winding-up of a Party; a general assignment for the benefit
of creditors of a Party; or a seizure or a sale of a material
part of a Party's property by or for the benefit of any
creditor or governmental agency;
(e) an assignment or attempted assignment in violation of Section
24.3 hereof; or
(f) a failure by either Party to observe and perform any other
material obligation, covenant, or condition under this
Agreement and, in cases where the breach does not involve a
material violation of law relating to or affecting the
provision of Services: (i) the failure by the breaching Party
to cure such default within thirty (30) days after the
breaching Party has received notice of such default; or, (ii)
if the failure is not one that could be corrected with use of
best efforts within thirty (30) days, the failure by the
breaching Party to adopt a plan to cure within thirty (30) days
and to cure within sixty (60) days. (For purposes of this
definition, the word "cure" shall include implementation of a
work-around or similar temporary measures, provided Acxiom
continues its best efforts to pursue and promptly implement a
full and complete cure).
2.24. Party
"Party" shall mean Allstate or Acxiom; "Parties" shall mean both of
them.
2.25. Person
"Person" shall mean any natural person, corporation, limited
liability company, partnership, trust, association, or other legal person
or entity of any kind, legally constituted.
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2.26. Problem
"Problem" shall mean any problem or circumstance that results from
any of the following:
(a) a perceived failure by either Party to perform its obligations
under this Agreement;
(b) a perceived inadequacy or delay of either Party's performance
under this Agreement; or
(c) a request for products, services, or resources where the
Parties disagree as to whether such products, services, or
resources are within the scope of this Agreement.
2.27. Problem Report
"Problem Report" shall mean a written report executed by both
Parties describing a solution to a Problem.
2.28. Services
"Services" shall mean, collectively, all of the services to be
performed by Acxiom pursuant to Section 3.3 hereof.
2.29. Software
"Software" shall mean any software developed or procured by Acxiom
and used in connection with the provision of the Services to Allstate
hereunder. Software shall include all software used in connection with the
Services regardless of whether such Software is used by Acxiom, Allstate,
or a third party.
2.30. Term
"Term" shall mean the period during which Acxiom shall be obligated
to provide the Services, as specified in Section 11.1 hereof.
2.31. Third-Party Data Providers
"Third-Party Data Providers" shall mean those third parties
(including Acxiom Corporation or Acxiom itself) from which Acxiom procures
data for the benefit of, or to be used by, Allstate. A list of the Third-
Party Data Providers as of the Effective Date is contained in Schedule
2.31.
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2.32. Total Data Cost Savings ("TDCS")
Total Data Cost Savings ("TDCS") shall mean the difference between
the benchmark price and the DAC defined at the Allstate and PP&C user
level.
2.33. Work Order
"Work Order" shall mean a request for the performance of work that
is not being performed at a particular time but that is within the scope of
the Services.
2.34. Work Product
"Work Product" shall mean all information, computer programs,
documentation, and developments created for Allstate's use or benefit in
connection with this Agreement, by Allstate, by Acxiom, or by any other
person engaged by Allstate or Acxiom, and all intermediate and/or partial
versions thereof, including (but not limited to) all source code and object
code with respect thereto, and all designs, specifications, inventions,
discoveries, improvements, ideas, know-how, techniques, materials, program
materials, software, flow charts, notes, outlines, lists, data
compilations, manuscripts, writings, pictorial materials, schematics, other
creations, and the like, whether or not patented or patentable or otherwise
protectable by law. Work Product does not and shall not include any Acxiom
Core Software.
3. SERVICES
From and after the Effective Date, Acxiom shall provide the Services to
Allstate and such of Allstate's divisions, business units, agents, or Affiliates
as Allstate shall designate.
3.1. Provision of Services
Commencing at 12:01a.m., local time, on the Effective Date, and at
all times thereafter during the Term, except as otherwise expressly stated
herein, and subject to the qualifications, limitations, and exclusions
expressed elsewhere in this Agreement, Acxiom shall perform (i) all
services that Acxiom was performing or was obligated to perform for
Allstate immediately prior to the Effective Date under the PSA and (ii) all
other services described in this Section 3.
3.2. Current Projects
From the Effective Date, Acxiom shall continue to be responsible for
the continuing and uninterrupted development and implementation of all
Current Projects as they are being performed immediately prior to the
Effective Date for the fees previously agreed upon by the Parties pursuant
to the PSA
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3.3. Data Acquisition and Related Services
From the Effective Date, Acxiom shall provide data acquisition and
related services as set forth in Schedule 3.3 hereto.
3.4. Future Projects
From the Effective Date, Acxiom shall perform such additional
projects, relating to the Services ("Projects") in the area of data
acquisition, data processing, information management, professional
consulting, system design and development, software maintenance,
programming, and software acquisition, as Allstate may request and Acxiom
may agree from time to time. Projects may be requested orally unless
required to be specified in Work Orders pursuant to the procedures set
forth in Section 9.5, below; provided, however, that once any oral request
has been agreed upon, written documentation evidencing such agreement shall
be executed by the Parties as promptly as possible prior to the inception
of any work on such Project.
3.5. [Intentionally Left Bank]
3.6. Business Resumption Services
From the Effective Date, Acxiom shall provide business resumption
services as set forth in Schedule 3.6 hereto.
3.7. Data Integrity Services
From and after the Effective Date, Acxiom shall provide the data
integrity services as set forth in Schedule 3.7 hereto.
4. MASLS
4.1. Specification of MASLs
Schedule 4.1 specifies certain MASLs. The initial MASLs for those
Services previously provided under the PSA and not specified in Schedule
4.1 shall be the higher (i.e., the more beneficial to Allstate) of (i) the
actual service levels provided immediately prior to the Effective Date or
(ii) the MASLs, if any, previously specified for such services under the
Prior Agreements. All MASLs shall be subject to adjustment pursuant to
this Section 4.
4.2. MASL Measurement and Reporting
Acxiom shall measure and report its performance against the MASLs
during each month, by the 10th business day of the following month.
Measurements of availability shall exclude scheduled downtime, delays in
processing schedules requested by or caused by Allstate, and unscheduled
downtime to the extent attributable to Force Majeure Events, or the acts or
omissions of Allstate or its
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employees, agents, third-party contractors, and suppliers. Acxiom shall
meet with Allstate's Contract Manager at least quarterly to review Acxiom's
actual performance against the MASLs and shall recommend remedial actions
to resolve performance deficiencies.
4.3. Improvement in MASLs
MASLs shall be adjusted by written agreement of the Parties from time
to time, but not less frequently than at the end of each anniversary of the
Effective Date, to be made higher or more stringent so as to reflect
changes in technology, changes in Allstate's business and environment, and
other changes in circumstances. Acxiom shall use commercially reasonable
efforts to improve its performance in relation to the MASLs over the Term,
through the implementation of efficiency-enhancing hardware and software
technologies.
4.4. Temporary Suspension of MASLs
In the event, and to the extent, that Acxiom fails to meet a specific
MASL as a consequence of material errors or omissions of Allstate or its
employees, contractors, or agents, such MASL will be temporarily suspended
for such reasonable amount of time as is necessary for Acxiom to return to
compliance, provided that Acxiom shall use its best efforts to return to
compliance. Acxiom shall take such reasonable precautions as it deems
necessary to prevent the recurrence of any such event.
5. ACXIOM RESOURCES
5.1. General
Except as provided in Schedule 5.1, Acxiom shall have full and total
responsibility for obtaining all Software, hardware, documentation,
services, and other resources that it will need in order for it to be able
to provide the Services in accordance with the MASLs. Schedule 5.1 is a
listing of such resources to be provided by Allstate in connection with the
provisions of data interactively. All resources specified in Schedule 5.1
that have been provided by Acxiom prior to the Effective Date shall be
transferred to Allstate as of the Effective Date at no additional charge to
Allstate.
5.2. Use of Data Acquisition System
DAS will be used to support Allstate's auto and property new business
underwriting, auto and property renewal underwriting, existing auto-correct
classification processes, claims and any other areas of business upon which
the Parties may agree. Any business unit or Affiliate of Allstate or any
insurance or financial services entity in which Allstate has ownership
interest of 10% or greater may utilize the DAS for comparable risk
assessment, administrative and/or claims purposes for the same fees
described in this Agreement.
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5.3. Use of Data Network
Acxiom shall be required to use, and cause its suppliers to use, the
IBM Global network, or such other network as Allstate directs in its sole
discretion, (the "Data Network") for all data transmissions relating to the
Services. Allstate will be responsible for all charges related to
utilizing the Data Network for transmission of information to support DAS.
Allstate will coordinate Acxiom's efforts to add new suppliers to the Data
Network. Allstate will bear all Data Network transmission costs incurred
on Allstate's behalf. Acxiom will not utilize the Data Network connections
established for Allstate to transmit data for any other insurance company
without the prior written consent of Allstate.
5.4. Non-Exclusivity
Nothing herein shall prevent Allstate from obtaining any type of
Services, or any other services, from any other provider during the Term.
Notwithstanding the preceding sentence: (1) prior to obtaining Services
from another provider during the Term, Allstate shall provide Acxiom the
opportunity to submit an offer to continue to provide Services and Allstate
shall accept such offer if, in Allstate's reasonable determination, such
offer permits Allstate to continue to receive the best Services at the best
price, and (2) Allstate shall provide Acxiom the opportunity to submit an
offer to provide other services to Allstate and Allstate shall accept such
offer if, in Allstate's discretion, such offer permits Allstate to receive
the best services at the best price. Nothing herein shall prevent Allstate
from providing any Services or any other services to itself or its
Affiliates using its own facilities, employees and Affiliates.
6. SECURITY OBLIGATIONS
At all times during the Term, Acxiom shall be fully and solely responsible
for ensuring the integrity of Allstate's Data and the security of the storage,
processing, compilation, or transmission of all Allstate's Data and of all
equipment, storage facilities, and transmission facilities on which or through
which Allstate's Data is stored, processed, compiled, or transmitted, including,
but not limited to, the prevention and detection of Acxiom employee fraud,
abuse, or other inappropriate use or access by any Acxiom employee. In this
respect, Acxiom shall perform, among other things, all the tasks and take all
the measures described in Schedule 6 and shall take such other initiatives or
measures as necessary and appropriate under the circumstances.
7. ALLSTATE-RETAINED AUTHORITY AND OBLIGATIONS
7.1. Allstate Authority
Allstate shall retain all decision-making authority with respect to
the overall assessment and direction of the Services, introduction of new
products and Projects, and modification or discontinuance of products or
Projects. Acxiom shall cooperate with Allstate and provide Allstate with
advice, information, and assistance in
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identifying and defining data management projects outside the scope of the
Services and future data management requirements to meet Allstate's
business objectives.
7.2. Access to Personnel and Information
Allstate shall reasonably cooperate with Acxiom in all matters
relating to Acxiom's performance of the Services. Such cooperation shall
include (but not be limited to) reasonable access to Allstate's
administrative, technical, and other similar personnel as reasonably
required by Acxiom to provide the Services.
8. FINANCIAL TERMS
As the sole and entire consideration for all of the Services to be
performed by Acxiom and for all of the other tasks, services, and obligations of
Acxiom under this Agreement, Allstate shall pay to Acxiom the amounts set forth
in this Section 8.
8.1. Data Acquisition Fees
Unless otherwise specified in a Work Order or in Schedule 8.1 hereto,
Allstate will pay to Acxiom the DAC for any data acquired by Acxiom for
Allstate in connection with the Services plus an amount equal to three and
one-half percent (3.5%) of such DAC; provided however, that the foregoing
fees shall not apply to state Motor Vehicle Registration ("MVR") fees and
surcharges, for which Allstate shall pay the fees set forth in Schedule
8.1; and provided further that any taxes imposed upon the acquisition or
use of such data shall be paid by Allstate, and that Allstate shall not pay
Acxiom any service fees or surcharges for Acxiom's handling and payment of
such taxes.
8.2. Shared Savings - Data Acquisition Costs
8.2.1. Total Data Cost Savings
Allstate shall pay to Acxiom forty percent (40%) of the TDCS
resulting from Acxiom's performance of the Services. TDCS shall be
computed as the difference of the Benchmark Price less the DAC for
any data acquired by Acxiom for Allstate pursuant to this Agreement.
8.2.2. Determination of Benchmark Price
Acxiom shall be responsible for documenting and tracking the
Benchmark Price as follows.
8.2.2.1. For types of data previously obtained
directly by Allstate, the Benchmark Price shall be the
average price paid by Allstate for such data during the
twelve (12) month period prior to Acxiom's taking
responsibility for the acquisition of such data.
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8.2.2.2. For types of data obtained by Acxiom pursuant
to the PSA, the Benchmark Price shall be that Benchmark Price
as determined pursuant to the PSA and set forth in Schedule
8.2.2 hereto.
For types of data for which no historical pricing information
is available (e.g., new types of data), the parties shall endeavor,
in good faith, to agree upon a Benchmark Price. In the event that the
parties are unable to mutually agree upon a Benchmark Price, a
request for quote will be sent out with volume estimates supplied and
the response to such request will be used as the benchmark.
8.2.3. Effect of Supplier Price Changes on TDCS
In the event that a data supplier other than Acxiom increases
or decreases the cost of data, part or all of the increased or
decreased cost will be passed on to Allstate by Acxiom. According to
the circumstances surrounding the price increase or decrease, TDCS
may or may not be affected. The following scenarios detail when TDCS
will and will not be affected, and how the increase or decrease will
be passed on to Allstate.
8.2.3.1. If a supplier price increase is levied
against all of such suppliers' customers (e.g., an increase
in the `list price' for such data), the Benchmark Price will
be increased by the full amount of the price increase.
8.2.3.2. If a supplier price increase is levied only
against Acxiom or Allstate, the Benchmark Price will not be
adjusted.
8.2.3.3. If a supplier price decrease is applicable to
all of such suppliers' customers (e.g., a decrease in `list
price' for such data), the Benchmark Price will be decreased
by the full amount of such price decrease.
8.2.3.4. If a supplier price decrease is applicable
only to Acxiom or Allstate and such decrease is achieved as a
result of Acxiom's efforts hereunder, the Benchmark Price
will not be adjusted, provided, however that if such decrease
is not attributable to Acxiom's efforts hereunder, the
Benchmark Price will be decreased by the full amount of such
price decrease.
8.3. Shared Savings - Other Costs
As part of its responsibilities to optimize the efficiency and cost-
effectiveness of Services, Acxiom shall use its best commercial
efforts to reduce Allstate's costs associated with the Services,
without reduction in the MASLs and without increasing the overall
costs associated with the Services. Allstate will
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pay to Acxiom forty percent (40%) of the "First Year Savings"
directly resulting from each specifically identifiable "Optimization"
(e.g., improved technology reducing the number of servers required
for Allstate's requirements) that reduces Allstate's direct costs,
calculated on the following general terms:
(a) The First Year Savings will be estimated three months after the
mutually-agreed "Implementation Date" of the Optimization, and
will equal the excess (if any) of: (i) the estimated amount of
the direct costs that would have been incurred by Allstate or
paid to third-parties, for the first twelve months after the
calendar month in which the Implementation Date occurs, had the
Optimization not been implemented, over (ii) the estimated
amount of the direct costs incurred by Allstate or to be paid to
third parties for such twelve-month period.
(b) The Optimization must be specifically identifiable and any First
Year Savings must be a direct result of Acxiom's actions. Any
cost savings achieved as result of Allstate directing Acxiom to
implement a cost-saving or efficiency-optimizing solution, shall
not be deemed an Optimization and Allstate shall not pay Acxiom
for any resulting savings.
8.4. Data Network Costs
Allstate will bear all Data Network transmission costs incurred on
Allstate's behalf. Acxiom shall invoice Allstate for any Data Network
transmission costs paid by Acxiom on Allstate's behalf, and such costs
shall be payable by Allstate, without any surcharges, service fees, or
other additions.
8.5. Audit
Acxiom shall, at Allstate's request, provide Allstate's auditors with
the ability to fully audit all relevant portions (as reasonably determined
by Allstate) of Acxiom's books and records to verify the calculations
provided for in this Section 8. Acxiom shall provide such auditors with
reasonable access to such information relating to this Agreement and
Acxiom's business as may be necessary to confirm the accuracy of the
pricing model and pricing adjustment computations for any given year. Any
overcharges, undercharges, or errors in computation discovered in the
course of any such audit shall be reflected on the next invoice produced by
Acxiom hereunder. In the event that such an audit reveals net overcharges
in excess of five percent (5%) of the amount that should have been payable
by Allstate hereunder, Acxiom shall (i) reimburse Allstate for all costs
associated with such Audit; (ii) refund or credit Allstate (at Allstate's
option) the full amount of such overcharges; and, (iii) pay Allstate
interest at a rate equal to two (2) percentage points above the floating
"prime rate" as published from time to time by The Wall Street Journal.
-----------------------
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8.6. Taxes
(a) Allstate shall pay any applicable taxes that may be levied or
based upon this Agreement or upon the Services and facilities provided by Acxiom
hereunder, including without limitation sales, use, nonresident, value-added,
excise, and similar taxes, but excluding taxes levied or imposed upon the income
or business privileges of Acxiom.
(b) To the extent Acxiom is required to collect and remit any
Allstate Tax, Acxiom shall invoice Allstate, as a separate line
item, the amount of any such tax.
(c) Allstate shall have the right to contest the validity and
payment of any Allstate Tax allegedly owed under this Section.
Acxiom agrees to cooperate with Allstate in all such contests.
In the event that Allstate elects to contest the validity or
payment of any Allstate Tax, Allstate shall not be required to
pay any such tax until the contest is resolved. In no event
shall Acxiom be required to pay any Allstate Tax and Allstate
shall remit to Acxiom any such payment, as well as the payment of
any fees, penalties or late charges related thereto which Acxiom
may be required to pay, as a result of any determination in
connection with any contest with taxing authorities. Allstate
shall pay such amount within twenty-five (25) days of receipt by
Allstate of an invoice from Acxiom. Allstate shall not be
responsible for any penalties or late charges assessed due to
Acxiom's negligence. Allstate reserves the right to intervene in
any dispute with a taxing authority as to the taxability of the
Software System or services provided to Allstate pursuant to this
Agreement.
8.7. Services Benchmarking
With Allstate's direction and cooperation, and as part of the
Services, Acxiom shall propose and effect a continuing benchmarking program
and methodology acceptable to Allstate that takes into consideration
adjustments, if any, for reasonably comparable elements of the Services and
that will enable Allstate to compare the fees and MASLs set forth in this
Agreement with an annually updated database of peer companies and ensure
that said fees and MASLs are aligned with the industry's best rates and
practices and appropriate adjustments to meet such industry best rates and
practices shall be made annually as a Contract Change. At Allstate's
direction, Acxiom shall work with any benchmarking firm Allstate selects.
8.8. Out-of-Scope Services Rate Chart
Allstate shall pay for any "Out-of-Scope services" (i.e., ancillary
services that are not a part of Services), on a time-and-materials basis at
the rates set forth in the "Rate Chart" attached as Schedule 8.8. Such
rate will remain fixed until the second anniversary of the Effective Date.
Thereafter, Acxiom may increase such rates only
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once each year of the Term (and only upon and as of an anniversary of the
Effective Date) by an amount not to exceed the lesser of: (i) three percent
(3%) of the then-applicable rate; or (ii) the increase, during such year,
in the United States Department of Labor, Bureau of Labor Statistics,
Employment Cost Index, Total Compensation, Private Industry Workers By
Industry and Occupational Group for Professional Specialty and Technical.
Allstate shall reimburse Acxiom for reasonable out-of-pocket expenses
incurred by Acxiom in the performance of Out-of-Scope services, such as
reasonable travel and living expenses, provided such expenses are invoiced
with reasonable supporting documentation and authorized in writing by
Allstate prior to being incurred. Acxiom shall provide invoicing for Out-
of-Scope services with documentation that references Allstate's authorizing
documentation, Allstate account number, charges, and description. No
invoice with respect to Out-of-Scope services will be paid unless such
services were authorized in advance in writing by Allstate's Contract
Manager.
8.9. Fee Reductions
This Section 8.9 specifies certain "Fee Reductions." It is understood
that these Fee Reductions are intended to reflect, to some extent, the
diminished value of Acxiom's Services in such events; such Fee Reductions
are not intended to compensate Allstate for any breach or default by Acxiom
under this Agreement, nor to constitute penalties, damages, liquidated
damages, or other compensation for any such breach or default. Any damages
recovered by Allstate for a Material Default shall be reduced by the Fee
Reduction previously paid by Acxiom to Allstate and directly related to the
Material Default.
Upon the occurrence of any failure to meet any of the following
critical MASLs for the event in the applicable month (a "Failure"),
Allstate's Contract Manager may impose a Fee Reduction in respect of said
month as set forth in this Section 8.9 with respect to Acxiom's actual
performance as measured against the MASL.
With respect to the Failures set forth in the tables below: (i) if the
particular Failure occurs in any two (2) consecutive months, the Fee
Reduction for the second (2nd) of such months with respect to that device
or event shall be the applicable Fee Reduction amount set forth below; (ii)
if the particular Failure occurs in any three (3) consecutive months, the
Fee Reduction for the third (3rd) of such months, and for each succeeding
month until the first month when the Failure no longer occurs, shall be
three (3) times the applicable Fee Reduction amount set forth below.
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<TABLE>
<CAPTION>
---------------------------------------------------------------------------------------------------
MASL Fee Reduction
---------------------------------------------------------------------------------------------------
<S> <C>
MASLs related to delivery of data The total amount of any fee paid to
pursuant to DAS Acxiom in excess of the DAC (plus
applicable taxes)
---------------------------------------------------------------------------------------------------
MASL I Acxiom Help Desk $10 per occurrence exceeding maximum
time on help desk
---------------------------------------------------------------------------------------------------
MASL II Reporting $10 per late report
---------------------------------------------------------------------------------------------------
MASL III Processing Service Levels- Net revenue after data expense
Batch
---------------------------------------------------------------------------------------------------
MASL IV Processing Service Level- "
Interactive
---------------------------------------------------------------------------------------------------
MASL V Integrity of Data "
---------------------------------------------------------------------------------------------------
</TABLE>
Acxiom shall pay all Fee Reductions to Allstate by credit against
future invoices back to the Allstate division, business unit, agent or
Affiliate whose request generated the Fee Reduction, or, at Allstate's
written request, by wire transfer to an account designated by Allstate, on
or before the first day of the month after the month in which it receives
notice from Allstate of the assessment of said Fee Reduction.
Allstate shall give Acxiom reasonable advance notice of anticipated
changes in numbers of End-Users or processing volumes (measured by numbers
of data requests, transactions, reports, End-Users or other similar
objective and measurable criteria). Fee Reductions will not be imposed in
the event the Failure is attributable to: (i) an act or omission of
Allstate; (ii) a Force Majeure event; (iii) material changes in hardware or
software environments implemented by Allstate or a third party and not
approved by Acxiom; or (iv) increases in processing volumes for which
Acxiom did not receive reasonable advance written notice.
8.10. Only Payments
The fees set forth in this Section 8 are the only payments to be
made by Allstate to Acxiom under this Agreement. Acxiom shall be solely
responsible for, and shall indemnify Allstate against, all costs and
expenses of Acxiom necessary to meet Acxiom's obligations arising under
this Agreement, including (but not limited to) labor expenses, hardware and
software costs, and general business expenses (including, but
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not limited to, travel, meals, and overhead expenses). Except as otherwise
expressly stated, Allstate will not pay Acxiom any additional fees,
assessments, or reimbursements.
8.11. Invoices
8.11.1. Data Acquisition Costs
Acxiom shall furnish: (a) each Allstate PP&C region, each
claims office, and each other user of DAS specified by Allstate with
a separate monthly invoice for its proportionate share of DAC,
applicable surcharges, taxes, and TDCS, and (b) the Allstate
headquarters with a monthly invoice for its proportionate share of
DAC, applicable surcharges and TDCS, as well as the share of such
charges not otherwise allocated to other DAS users, which shares
shall be separately stated on such invoice. Subject to the
provisions of Sections 8.11.4 and 8.11.5 hereof, and until such time
as the Parties successfully implement an Electronic Data Interchange
system, which shall include provision of a consolidated monthly
invoice with separate line items by Allstate cost center ("EDI")
between them, Allstate shall pay each such invoice no later than 30
business days after receipt. After the successful implementation of
EDI, but still subject to the provisions of Sections 8.11.4 and
8.11.5, Allstate shall pay: (x) such invoices related to DAS
provided to PP&C regions, claims office and other DAS users not
classified by Allstate as part of Allstate's home office not later
than 15 business days after receipt, (y) such invoices related to
DAS provided to users classified by Allstate as part of Allstate's
home office not later than 30 business days after receipt, and (z)
interest at the rate of one percent (1%) per month on any undisputed
amounts not paid within the time frames referenced in this sentence.
8.11.2. Other Charges
Acxiom shall furnish Allstate with a single monthly invoice
setting forth in detail all charges payable by Allstate other than
those invoiced pursuant to Section 8.11.1 hereof. Subject to the
provisions of Sections 8.11.4 and 8.11.5 hereof, Allstate shall pay
each such invoice no later than 30 business days after receipt.
8.11.3. Frequency and Format
All invoices shall be furnished by Acxiom not later than
the tenth (10th) day of each calendar month for Services delivered
during the immediately preceding calendar month. Invoices shall be
provided in formats reasonably requested by Allstate from time to
time. Upon request of Allstate, Acxiom shall provide Allstate with a
consolidated report showing all invoices furnished to all Allstate
units, status of payments of such invoices, and such other invoicing
and payment information that is reasonably requested by Allstate.
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8.11.4. Disputed Amounts
Allstate may, in good faith, dispute any invoice or any
portion thereof and shall be required to pay to Acxiom only the
undisputed amounts until the dispute is resolved to Allstate's
satisfaction. The failure of Allstate to pay a disputed amount shall
not constitute a breach or Material Default by Allstate, provided
that Acxiom shall have been given notice of the subject of the
dispute in accordance with Section 21 hereof and that the
appropriate dispute resolution procedures of this Agreement shall
have been initiated by Allstate or Acxiom with respect to the
matter.
8.11.5. Set-Off
Allstate may set-off against any and all amounts otherwise
to be paid to Acxiom pursuant to any of the provisions of this
Agreement: (i) any and all amounts owed by Acxiom to Allstate under
the provisions of Section 20 (Indemnification); and (ii) any other
amounts claimed in good faith to be owed to Allstate by Acxiom in
respect of this Agreement. Within sixty (60) days of any set-off by
Allstate, Allstate shall provide to Acxiom a detailed written
accounting of such set-off and a written statement of the reasons
for such set-off.
8.12. Most-Favored Customer
Notwithstanding the foregoing if Acxiom offers to any new or
existing customer, any services substantially the same as those described
in this Agreement at a price lower or a discount greater than the price
charged to Allstate hereunder, or offers more comprehensive services at the
same or a lower price, then Acxiom shall offer such lower price or greater
discount to Allstate in lieu of the price thereof that is reflected in the
price set forth in this Agreement (or, if the price has already been paid,
Acxiom shall pay to Allstate a refund of the difference between the price
already paid and the lower price or shall offer to Allstate such additional
or more comprehensive services at the lower price (or greater discount).
Without limiting the generality of Section 8.11.5, Allstate may offset such
overcharge amount against any amounts due to Acxiom under this Agreement or
any other contract with Allstate. In any event, any acquisition by Allstate
of services or products from Acxiom shall be at the terms, conditions, and
prices granted by Acxiom to its most-favored customer receiving
substantially the same services or products. Acxiom shall notify Allstate
of the occurrence of the lower price or greater discount (or provision of
more comprehensive services) as described in this Section 8.12 within
thirty (30) days after its implementation of such lower price or greater
discount (or provision of more comprehensive services). Acxiom further
shall notify Allstate on a periodic basis, no less frequently than
annually, if there has been no such occurrence of lower price, greater
discount or provision of more compliance servers during such preceding
period.
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9. RELATIONSHIP MANAGEMENT
9.1. Key Personnel and Contract Manager
9.1.1. Acxiom's Key Personnel and Contract Manager
Upon thirty (30) days' prior written notice, Acxiom may
reassign any of Acxiom's Key Personnel including (but not limited
to) Key Personnel assigned solely to Allstate, to other job
functions within Acxiom; provided however, that such reassigned
persons shall not perform any services for State Farm Mutual
Insurance Company, Farmers Group, Inc., Nationwide Mutual Insurance
Company, American Family Mutual Insurance Company, United Services
Automobile Association, SAFECO Corporation, GEICO, American
International Group or The Progressive Corporation or any of their
respective subsidiaries or affiliates within six (6) months of being
reassigned. Acxiom shall promptly replace such reassigned person
with another person at lease as well qualified. Acxiom represents
that Acxiom's Contract Manager is an experienced manager who is, or
will endeavor to become, knowledgeable as to Allstate's activities
and any applicable MASLs. Allstate shall have the right to
interview, as Allstate deems necessary, and participate in the
selection of Acxiom's Key Personnel and Contract Manager, and Acxiom
shall not designate any Key Personnel or its Contract Manager
without Allstate's prior written consent, which consent shall not be
unreasonably withheld. Upon thirty (30) days' prior written notice,
Acxiom may reassign the Contract Manager to other job functions
within Acxiom; provided however, that such reassigned Contract
Manager shall not perform any services for State Farm Mutual
Insurance Company, Farmers Group, Inc., Nationwide Mutual Insurance
Company, American Family Mutual Insurance Company, United Services
Automobile Association, SAFECO Corporation, GEICO, American
International Group or The Progressive Corporation or any of their
respective subsidiaries or affiliates within six (6) months of being
reassigned. Acxiom shall promptly replace such reassigned person
with another person at least as well qualified. Acxiom's Contract
Manager will act as the primary liaison between Acxiom and
Allstate's Contract Manager, will have overall responsibility for
directing all of Acxiom's activities hereunder, and will be vested
with all necessary authority to fulfill that responsibility.
9.1.2. Allstate's Key Personnel and Contract Manager
Allstate's Key Personnel shall provide advice and
assistance to Acxiom in areas requiring particular technical or
functional expertise or work experience. If any one of Allstate's
Key Personnel is unable to perform the functions or responsibilities
assigned to him or her in connection with this Agreement, or if he
or she is no longer employed by Allstate, Allstate shall promptly
replace such person or reassign the functions or responsibilities to
another person. Allstate's Contract Manager shall act as the primary
liaison
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between Allstate and Acxiom's Contract Manager and shall have
overall responsibility for directing all of Allstate's activities
hereunder and shall be vested with all necessary authority to
fulfill that responsibility.
9.1.3. Additional Personnel Requirements
In addition to Acxiom's Key Personnel, Acxiom shall make
available such additional personnel as are necessary to properly
perform Acxiom's obligations under this Agreement at performance
levels at least equal to the MASLs.
9.1.4. Minimum Proficiency Levels
Acxiom's Key Personnel and all other personnel assigned by
Acxiom or its subcontractors to perform Acxiom's obligations under
this Agreement shall have experience, training, and expertise at
least equal to the highest commercial standards applicable to such
personnel for their responsibilities in the business in which Acxiom
is engaged and shall have sufficient knowledge of the relevant
aspects of the Services and shall promptly obtain sufficient
knowledge of Allstate's practices and areas of expertise to enable
them to properly perform the duties and responsibilities assigned to
them in connection with this Agreement. In addition, the Services
shall conform to the highest commercial standards applicable to such
Services in the business in which Acxiom is engaged.
9.1.5. Training
Acxiom shall provide, and cause its subcontractors to
provide, all such training to the employees of Acxiom and its
subcontractors as may be necessary for them to perform, on behalf of
Acxiom, all of Acxiom's duties under this Agreement.
9.1.6. Unsatisfactory Performance
Notwithstanding Section 9.1.1, if Allstate believes that
the performance or conduct of any person employed or retained by
Acxiom to perform Acxiom's obligations under this Agreement is
unsatisfactory or is not in compliance with the provisions of this
Agreement, Allstate shall so notify Acxiom and Acxiom shall promptly
address the performance or conduct of such person, or, at Allstate's
request, immediately replace such person with another person
acceptable to Allstate.
9.2. Allstate's Policies
Acxiom shall ensure that it and all Acxiom Personnel comply with the
following Allstate policies and such additional policies as may be provided
by Allstate
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to Acxiom from time to time, and Acxiom shall cooperate with Allstate to
facilitate Allstate's compliance with such policies:
9.2.1. Computer Information and Access
Prior to performing any services pursuant to this
Agreement, the Acxiom Personnel shall execute Allstate's standard
forms concerning access protection and data/software security in the
form attached hereto as Schedule 9.2.1. Computer data and software
shall be used by Acxiom Personnel only in connection with Acxiom's
obligations hereunder. Failure of Acxiom to comply with these rules
may result in Allstate restricting offending personnel from access to
Allstate computer systems or data, or if such failure is willful,
reckless or grossly negligent, immediate termination of this
Agreement.
9.2.2. Confidentiality and Intellectual Property
Prior to performing any services pursuant to this
Agreement, all Acxiom Personnel shall execute the "Acknowledgment"
attached hereto as Schedule 9.2.2 or such other similarly restrictive
document in form and substance acceptable to the parties with respect
to the protection of confidential information and assignment of
intellectual property rights.
9.2.3. Other Policies
When on Allstate's premises, Acxiom shall, and shall cause
all Acxiom Personnel to, abide by all Allstate corporate policies that
may be established by Allstate from time to time.
9.2.4. Enforcement
Acxiom shall render all reasonable assistance requested by
Allstate in the event Allstate is required to enforce any of the
foregoing policies, or Acknowledgments with respect to any current or
former Acxiom Personnel.
9.3. Regulatory Compliance
Acxiom shall assist Allstate in regulatory compliance and further
assist Allstate to the extent Acxiom's actions are attributed to Allstate.
Allstate agrees to reimburse Acxiom for all expenses reasonably incurred
and approved in advance by Allstate in complying with this Section 9.3.
9.4. Operational Change Procedure
Acxiom may make operational changes in the manner in which it
provides the Services, using such processes as the Parties mutually agree
upon from time to time. Operational changes shall include, by way of
example: Acxiom logging changes according to a documented change-control
process; conducting mutually agreed,
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regular change control meetings; Acxiom notifying Allstate and End-Users,
as appropriate, of planned change control activities with sufficient lead
times to avoid disruption; and Acxiom scheduling outages during hours that
meet Allstate operational needs and minimize disruption.
9.5. Work Order Procedure
9.5.1. When Required
A Work Order shall be required to implement any new Service
or Project or to make material modifications to an existing Service
or Project if: (i) the estimated cost to Allstate of such new or
modified Service or Project exceeds Fifty Thousand Dollars
($50,000.00); or (ii) the terms under which such new or modified
Service or Project will be provided by Acxiom are materially at
variance with the terms of this Agreement (e.g., special financial
terms); or (iii) either party requests that such new or modified
Service or Project be specified in a Work Order.
9.5.2. Contents of the Work Order
Each Work Order issued pursuant to the Agreement shall
contain the following (to the extent applicable to the services to
be performed): a detailed description of the services to be
performed; specifications; implementation plans; time schedules;
financial terms if different from those set forth herein; MASLs; and
acceptance criteria. Work Orders shall be governed by the terms and
conditions of this Agreement. All Work Orders shall be agreed to and
signed by the Allstate Contract Manager and the Acxiom Contract
Manager prior to the start of the Services set forth therein.
10. Proprietary Rights; Ownership of Work Product
Allstate shall be the sole and exclusive owner of all of the Work Product,
and of all copyright, patent, trademark, trade secret, and other proprietary
rights in the Work Product. Ownership of Work Product will inure to the benefit
of Allstate from the date of creation, or of fixation in a tangible medium of
expression, as applicable, of such Work Product. Each copyrightable aspect of
the Work Product will be considered as though it was a "work made for hire"
within the meaning of the Copyright Act of 1976, as amended. If and to the
extent that the Work Product, or any part thereof, is found as a matter of law
not to be a "work made for hire" within the meaning of the Copyright Act of
1976, as amended, Acxiom hereby assigns and agrees to assign to Allstate
exclusively all right, title, and interest in and to the Work Product, and all
copies thereof, and the copyright, patent, trademark, trade secret, and all
other proprietary rights in the Work Product, without further consideration,
free from any claim, lien for balance due, or rights of retention thereto on the
part of Acxiom. As set forth in Section 9.2.1 hereof, Acxiom shall obtain
similar written undertakings from Acxiom Personnel who will perform the services
relating to this Agreement, so as to ensure Allstate's ownership of the Work
Product. Acxiom also acknowledges that Allstate does not intend
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Acxiom to be a joint author of the Work Product within the meaning of the
Copyright Act of 1976, as amended, and that in no event shall any Work Product
be deemed to have been developed with the intent that Acxiom be a joint author
thereof. Allstate will have unrestricted access to all Acxiom's materials,
premises, and computer files containing the Work Product provided, however
Allstate shall give reasonable notice prior to exercising such right. Allstate
shall grant Acxiom a non-transferable, non-exclusive personal license to use any
Work Product solely for the provision of Services to Allstate, and, subject to
the terms and conditions of the license agreement attached hereto as Exhibit
____, Acxiom may use the Work Product in connection with the provision of
Services to Acxiom's other customers with the prior written consent of Allstate,
which may be withheld in Allstate's sole discretion. Acxiom shall promptly and
fully disclose and deliver the Work Product to Allstate, in writing if requested
by Allstate, and shall execute and deliver any and all lawful patent, copyright,
or other applications, assignments, and other documents that Allstate requests
for protecting the Work Product, whether in the United States or any other
country. Allstate shall have the full and sole power to prosecute such
applications and to take all other action concerning the Work Product, and
Acxiom shall cooperate fully and in a lawful manner, at the expense of Allstate,
in the preparation and prosecution of all such applications and in any legal
actions and proceedings concerning the Work Product. Acxiom shall retain all
right, title, and interest in all intangible ideas, know-how, and techniques
developed by Acxiom that are not Work Product and Acxiom hereby grants to
Allstate a perpetual, non-exclusive, royalty free license to use any such ideas,
know-how, and techniques that are embedded in the Work Product.
10.1. Rights and Licenses
Acxiom shall be responsible for obtaining from third parties all
rights and licenses required to perform the Services. With respect to all
technology used and to be used by Acxiom to perform the Services hereunder,
Acxiom hereby grants and agrees to grant to Allstate, or cause to be
granted by the licensor thereof, without additional charge, such licenses
and sublicenses as may be necessary in order for Allstate, and its
authorized representatives, to use, or receive the benefit of the use by
Acxiom of, such technology in connection with the Services. Further,
Acxiom shall exercise its best efforts to obtain from third parties on
behalf of Allstate, without additional charge, such licenses,
authorizations, or consents as may be necessary for Allstate and its
authorized representatives to use any technology necessary for Allstate (or
its authorized representative) to continue to perform the Services for
Allstate after a Disentanglement.
10.2. Adverse Action
Each of the Parties covenants to perform its responsibilities under
this Agreement in a manner that does not infringe, or constitute an
infringement or misappropriation of, any patent, trade secret, copyright,
or other intellectual property right of any third party, or a violation of
the other Party's software license agreements or intellectual property
rights disclosed to or known by such Party.
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11. TERM
11.1. Initial Term; Renewals
The period during which Acxiom shall be obligated to provide the
Services under this Agreement shall commence on the Effective Date and end
on the fifth (5th) anniversary of the Effective Date; provided, however,
that Allstate may, in its sole discretion, extend the Term for an
additional five (5) years by providing written notice delivered to Acxiom
at least ninety (90) days before the end of the then-current initial or
extended Term. Acxiom shall notify Allstate of the expiration of the Term,
and of any renewal thereof, no earlier than twelve (12) months, nor later
than six (6) months, before the date on which the Term would expire (if not
renewed).
11.2. Extension of Termination Date
Allstate may, at its sole option and discretion, extend the
effective date of any expiration or termination of the Term for up to six
(6) successive thirty-day (30) periods upon at least fifteen (15) days'
prior written notice to Acxiom.
11.3. Early Termination
11.3.1. Partial Termination of Services by Allstate
Allstate shall have the right to terminate any of the
Services described in Section 3 upon thirty (30) days' written
notice to Acxiom if Allstate determines, in its sole discretion,
that it no longer has need for such Services; provided, however,
that Allstate may not terminate any Services pursuant to this
Section 11.3.1 for the purpose of engaging another vendor to perform
such Services except as provided in Section 5.4 hereof.
11.3.2. For Convenience
Allstate shall have the right to terminate any of the
Services described in Section 3 for its convenience upon twelve (12)
months' written notice to Acxiom. Allstate shall have the right to
end the Term for its convenience effective at 11:59 p.m. on the
intended date of termination by delivering to Acxiom a written
notice of termination at least 12 months before said intended date
of termination.
11.3.3. Change in Control of Acxiom
In the event of a change in control of Acxiom resulting
from a single transaction or series of related transactions,
Allstate shall have the right to end the Term upon ten (10) days'
written notice to Acxiom, provided that Allstate shall have
delivered such notice to Acxiom not later than 180 days following
the effective date of such change in control. Solely for purposes of
the preceding sentence, "control" shall mean the legal, beneficial,
or equitable
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ownership, direct or indirect, of more than fifty percent (50%) of
the aggregate of all voting or equity interests in Acxiom; "change
in control" shall mean any change in the legal, beneficial, or
equitable ownership, direct or indirect, such that control of Acxiom
is no longer with the same entity as on the Effective Date.
11.4. Termination for Material Default
Section 21 (Dispute Resolution) hereof notwithstanding, the Term may
be ended by either Party, by written notice delivered to the other Party,
if the other Party commits a Material Default which remains uncured within
the time specified in Section 2.24 hereof. Termination shall be effective
at 11:59 p.m. on the last day of any applicable cure period, or if no cure
period is specified on the date specified in the notice, subject to the
provisions of Section 21.6 hereof.
11.5. Termination for Force Majeure Event
If a delay or interruption of performance by a Party resulting from
its experiencing a Force Majeure Event exceeds thirty (30) days, then the
other party may terminate the Term, effective at 11:59 p.m. on the intended
date of termination, by delivering to the non-performing Party written
notice of termination specifying the date of termination.
11.6. Effect of Ending of Term
The expiration or termination of the Term, though ending the
obligation of Acxiom to provide the Services, will not constitute a
termination of the Agreement, which will continue in effect until all other
duties and obligations of the Parties have been performed, discharged, or
excused.
12. Disentanglement
12.1. Disentanglement Process
Concurrently with the expiration or termination of the Term (or any
Services) under any of the provisions of Section 11, the following shall
occur (collectively, a "Disentanglement"):
(a) Upon notice of termination or intention not to renew this
Agreement, the Parties shall cooperate fully with one
another to facilitate a smooth transition of the Services
being terminated from Acxiom to Allstate or Allstate's
designated replacement provider;
(b) Without limiting the obligations of Acxiom pursuant to
Section 10.1 above, Acxiom shall, subject to the terms of
any third-party contracts, exercise its best efforts to
procure any third-party authorizations necessary to grant
Allstate the use and benefit of any third-party
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contracts (including, but not limited to, software licenses)
between Acxiom and third-party contractors then being
utilized by Acxiom in enabling it to provide such Services;
(c) Acxiom's obligation to provide the Services under this
Agreement shall cease in a manner and over a period of time
consistent with the Disentanglement process, but in no event
longer than one (1) year, during which period Allstate
agrees to pay Acxiom for the Services at the fees which are
in effect as of the date of notice of termination;
(d) Acxiom shall, subject to the terms of any applicable
software license, transfer, license, or sub-license to
Allstate all proprietary and third-party software (including
but not limited to Acxiom Core Software) that would be
needed in order to allow Allstate to continue to perform for
itself, or obtain from other providers, the Services, as the
same might exist at the time of Disentanglement; the license
fee for the Acxiom Core Software shall be a one-time fee in
an amount to be agreed upon by the parties or, in the event
the Parties are unable to agree upon the amount of the
license fee, a third-party software-consultant jointly
selected by the parties shall determine the amount of the
license fee and any fees charged by such third-party
software-consultant shall be evenly divided between the
Parties; and
(e) Acxiom shall deliver to Allstate, at Allstate's request, all
documentation and data related to Allstate held by Acxiom or
any of Acxiom's Personnel, and Acxiom shall destroy all
copies thereof not turned over to Allstate.
12.2. Preparation for Disentanglement
In preparation for the Disentanglement:
(a) Acxiom shall provide to Allstate sufficient information and
cooperation to enable Allstate's personnel, or that of its
other providers, to fully assume the provision to Allstate
of the Services;
(b) Acxiom shall cooperate with Allstate and all of Allstate's
other service providers to ensure a smooth transition at the
time of Disentanglement, with no interruption of Services,
no adverse impact on the provision of Services or Allstate's
activities, no interruption of any services provided by
third parties, and no adverse impact on the provision of
services provided by third parties;
(c) Acxiom shall ensure that the assets used in providing the
Services will be maintained, protected, and adequately
insured throughout the Term;
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(d) Acxiom shall obtain advance consents (including, without
limitation, obtaining consent to the time of entering into
all new licenses to be used for the benefit of Allstate)
from Acxiom's licensors to the conveyance or assignment of
licenses to Allstate upon Disentanglement; and
(e) Acxiom shall take such additional actions and perform such
additional tasks as may be necessary to ensure a timely
Disentanglement in compliance with the provision of this
Section, including full performance, on or before the date
of expiration or termination of the Term, of Acxiom's
obligations under this Section.
13. DEFAULT
13.1. Remedies
13.1.1. Allstate's Remedies
If Acxiom commits an uncured Material Default under this
Agreement, Allstate will be entitled to end the Term in accordance
with the provisions of Section 11.4 (Termination for Material
Default) hereof. Termination shall not constitute a Party's
exclusive remedy for such a Material Default, and neither Party
shall be deemed to have waived any of its rights accruing hereunder
prior to such Material Default or otherwise available at law or in
equity. If either Party ends the Term as a result of a claimed,
uncorrected Material Default by the other Party and such other Party
does not agree that a Material Default was committed, then such
other Party shall have the right to avail itself of all remedies
available to it under the law or in equity, none of which is
exclusive and any or all of which may be pursued.
13.1.2. Acxiom's Remedies
If Allstate commits an uncured Material Default under this
Agreement, Acxiom will be entitled to end the Term; provided,
however, that if the Material Default concerns Allstate's failure to
pay Acxiom the fees specified in Section 8, Acxiom shall first give
Allstate notice and an opportunity to cure such Material Default
within thirty (30) days after such notice. Termination shall not
constitute a Party's exclusive remedy for such a Material Default,
and neither Party shall be deemed to have waived any of its rights
accruing hereunder prior to such Material Default or otherwise
available at law or in equity. If either Party ends the Term as a
result of a claimed, uncorrected Material Default by the other Party
and such other Party does not agree that a Material Default was
committed, then such other Party shall have the right to avail
itself of all remedies available to it under the law or in equity,
none of which is exclusive and any or all of which may be pursued.
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13.1.3. Limitation of Liability
Subject to the express provisions and limitations of this
Section 13.1.3, the Parties intend that each Party will be liable to
the other Party for all damages (including, but not limited to,
cover) incurred as a result of the breaching Party's failure to
perform its obligations.
IN NO EVENT SHALL EITHER PARTY BE LIABLE FOR ANY SPECIAL,
INDIRECT, INCIDENTAL OR CONSEQUENTIAL DAMAGES, INCLUDING, BUT NOT
LIMITED TO, LOST INCOME OR LOST REVENUE. EXCEPT AS OTHERWISE
EXPRESSLY PROVIDED BELOW, EACH PARTY'S AGGREGATE CUMULATIVE
LIABILITY HEREUNDER FOR ALL DIRECT DAMAGES ARISING UNDER OR RELATING
TO THIS AGREEMENT NOTWITHSTANDING THE FORM (e.g., CONTRACT, TORT, OR
OTHERWISE) IN WHICH ANY ACTION IS BROUGHT, SHALL BE LIMITED TO THE
GREATER OF: (i) ACXIOM'S NET REVENUE BILLED LESS DIRECT DATA EXPENSE
WITH RESPECT TO THE SERVICES PROVIDED HEREUNDER OUT OF WHICH THE
LIABILITY AROSE; OR (ii) FIVE MILLION DOLLARS ($5,000,000). THE
FOREGOING LIMITATION UPON PROVIDER'S LIABILITY SHALL NOT APPLY TO
CLAIMS SUBJECT TO INDEMNIFICATION BY ACXIOM (SECTION 20) OR CLAIMS
WITH RESPECT TO A BREACH OF CONFIDENTIALITY (SECTION 17).
13.2. Force Majeure Events
If a Force Majeure Event affects a Party's performance hereunder,
the affected obligations, after notification by such Party to the other
Party, shall be deemed suspended until the Force Majeure Event has ended
and a reasonable period of time for overcoming the effects thereof has
passed; provided, however, that if the delay or interruption of performance
resulting from a Force Majeure Event exceeds thirty (30) days, then this
Agreement may be terminated subject to Section 11.5 (Termination for Force
Majeure Event). Both Parties shall use reasonable efforts to minimize
delays that occur due to a Force Majeure Event. Notwithstanding the above,
Acxiom shall in no event be excused from those obligations not directly
affected by a Force Majeure Event, and if the Force Majeure Event is caused
by Acxiom's failure to comply with any of its obligations under this
Agreement or by Acxiom's negligence or omission, there shall be no relief
from any of its obligations under this Agreement.
14. INSURANCE
14.1. General Requirements
Without limiting Acxiom's undertaking to defend, hold harmless, and
indemnify Allstate Indemnitees as provided in Section 20 hereof, Acxiom
shall purchase and maintain insurance to protect Acxiom from all claims of
the type set
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forth below that arise out of or result from Acxiom's operations, services,
and/or performance under this Agreement and for which Acxiom may be liable,
whether such operations, services, and/or performance are provided by
Acxiom or by any of Acxiom's agents, consultants, suppliers, or
subcontractors or by anyone directly employed by any of them, or by anyone
for whose acts any of them may be liable.
14.2. Coverages
The insurance required hereunder shall be written for not less than
the limits of coverage specified herein, or as required by law in any
jurisdiction with authority over Acxiom's operations, services, and/or
performance, whichever is greater. Coverage shall be written on an
occurrence basis.
(a) Worker's Compensation Insurance offering statutory coverage as
required by the laws of the jurisdiction in which the Services
are performed.
(b) Employers Liability Insurance with limits of not less than One
Million Dollars ($1,000,000.00) for each accident or disease.
(c) Commercial General Liability Insurance with a combined single
limit of not less than One Million Dollars ($1,000,000.00) per
occurrence for personal injury (including wrongful death), and
broad-form property damage liability inclusive of independent
contractors, blanket contractual liability for this insured
Agreement and product/completed operations coverage maintained
for not less than two (2) years following completion and
acceptance of the work.
(d) Umbrella or Excess Liability Insurance with limits not less
than Five Million Dollars ($5,000,000.00) per occurrence which
will provide additional limits for commercial general and
automobile liability insurance.
(e) Professional Liability Insurance covering errors and omissions
with limits of not less than Five Million Dollars
($5,000,000.00) per occurrence. The policy shall have an
extended reporting period of two (2) years. When policies are
renewed or replaced, the policy retroactive date must coincide
with, or precede, the commencement date of services in
connection herewith.
(f) Automobile Liability Insurance with a limit of not less than
One Million Dollars ($1,000,000.00) per accident on vehicles
owned, leased, or rented by Acxiom and used while performing
under this Agreement.
(g) Fidelity Bond coverage with limits of not less than One Million
Dollars ($1,000,000.00) per occurrence.
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14.3. Miscellaneous Requirements
Acxiom shall comply with the following terms for all insurance
coverage required by Section 14.2 hereof:
(a) Acxiom shall provide insurance coverage by insurance companies
having policy holder ratings no lower than "A" and financial
ratings not lower than "XII" in the Best's Insurance Guide,
latest edition in effect as of the date of this Agreement.
(b) Acxiom shall verify and ensure that all of Acxiom's agents,
consultants, suppliers, and subcontractors are adequately
insured against claims arising out of or relating to their
performance related to this Agreement.
(c) The Policies described in clauses (c), (d), and (e) of Section
14.2 shall name Allstate as an additional insured on a primary
basis.
(d) The insurance policies listed above shall not be restricted by
the country or state in which the Services are being performed.
In the case of Services performed outside the United States and
when required by law, the insurance must be placed with a
company admitted to do business in that country.
(e) The foregoing insurance coverages shall be primary and
non-contributing with respect to any other insurance or
self-insurance that may be maintained by Allstate and its
subsidiaries and affiliates and shall contain a cross-liability
or severability-of-interest clause. The fact that Acxiom has
obtained the insurance required in this Section 14.2 shall in
no manner lessen nor affect Acxiom's other obligations or
liabilities set forth in this Agreement. Acxiom shall supply
certificates of insurance satisfactory to Allstate and all its
subsidiaries and affiliates, demonstrating that all of the
insurance required above is in force, that not less than thirty
(30) days' written notice will be given to Allstate prior to
any cancellation or restrictive modification of the policies,
and that the waivers of subrogation are in force. At the
request of Allstate or any of its subsidiaries or affiliates,
Acxiom shall provide a certified copy of each insurance policy
required under this Agreement.
15. REPORTS
15.1. General
Acxiom shall furnish Allstate with information and reports in the
form and with the frequency, but in no event less frequently than monthly,
that Allstate may reasonably request from time to time including, but not
limited to, those reports set
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forth in Schedule 15 hereto. Acxiom's reports shall include (but not be
limited to) information regarding: Acxiom's performance of the Services;
cost-management; subcontractor relationships; and End-User satisfaction.
Acxiom shall promptly inform Allstate of any deficiencies, omissions, or
irregularities in Allstate's requirements or in Acxiom's performance of the
Services that may come to Acxiom's attention. Acxiom shall furnish Allstate
with all existing and future research and development resources, such as
published materials, and industry studies conducted for or by Acxiom, that
come to its attention and pertain to the services and that might assist
Allstate in setting its policies or requirements under this Agreement.
15.2. Media
Acxiom shall furnish Allstate with all reports in both hard copy and
electronic form per Allstate's specifications as reasonably requested by
Allstate from time to time.
16. RECORDKEEPING AND AUDIT RIGHTS
16.1. Recordkeeping
Acxiom shall maintain complete and accurate records and books of
account with respect to this Agreement utilizing generally accepted
accounting principles ("GAAP"), consistently applied and complying in all
respects with all applicable laws. Such records and books, and the
accounting controls related thereto, shall be sufficient to provide
reasonable assurance that:
(a) transactions are recorded so as to permit the preparation of
Acxiom's financial statements in accordance with GAAP and to
maintain accountability for its assets; and
(b) the recorded accountability for assets is compared with the
existing assets at reasonable intervals and appropriate action
is taken with respect to any differences.
Such records and books of account of Acxiom's business shall be
maintained by Acxiom at its principal business office and each of the
parties may examine and make extracts of information and copy any part
thereof at any reasonable time during normal business hours.
Acxiom shall retain for a period of four (4) years from the end of
each calendar year during the Term, or such longer period as may be
required by law, all records and information required to verify amounts
invoiced under this Agreement for such calendar year. Allstate, or an
auditing firm retained by Allstate, shall be granted access to the
aforesaid records during normal business hours upon reasonable notice to
Acxiom.
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16.2. Audit Rights
Allstate, or its authorized representatives, will have the right, at
any time, without any notice, to perform an operational audit with respect
to Acxiom's performance hereunder including (but not limited to) the
Services and any obligation of Acxiom related to security. Acxiom shall
grant Allstate and its representatives full and complete access, during
normal business hours and upon reasonable notice, to the relevant portion
of Acxiom's books and records as they relate to this Agreement, or as they
may be required in order for Allstate to ascertain any facts relative to
any claim against Acxiom that might become a charge against Allstate or its
property. Acxiom shall provide Allstate, or its authorized
representatives, such information and assistance as reasonably requested in
order to perform such audits. If any such audit reveals a material
inadequacy or insufficiency of Acxiom's performance, then the cost of such
audit shall be borne by Acxiom. With respect to any audit that relates to
sums to be paid hereunder, if any such audit reveals that Acxiom has
overcharged Allstate in an amount in excess of five percent (5%) above the
fees specified in any Schedule hereto during the period to which the audit
relates, then the cost of such audit shall be borne by Acxiom.
16.3. Open Book Policy
Subject to the terms of the Special confidentiality Agreement
attached hereto as Exhibit _____. Acxiom shall provide Allstate, on a
quarterly basis, full and complete reports of its current financial plans,
accounting records, and operational plans related to this Agreement,
including (but not limited to) its plans and records regarding the cost and
profitability of providing Services to Allstate. Acxiom shall promptly
respond to any questions regarding such reports.
17. CONFIDENTIALITY
17.1. Disclosure of Confidential Information
Each Party shall:
(a) use the same care to prevent disclosure of the Confidential
Information of the other Party to third parties as it employs
to avoid disclosure, publication, or dissemination of its own
information of a similar nature, but in no event less than a
reasonable standard of care;
(b) use the Confidential Information of the other Party solely for
the purpose of performing its obligations under this Agreement;
(c) not acquire any right in or assert any lien against
Confidential Information of the other Party; and
(d) promptly return, or provide a copy of, as the requesting Party
directs, Confidential Information upon the request of the other
Party.
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(e) Notwithstanding the foregoing, each Party may disclose
Confidential Information of the other Party to its employees,
agents, and subcontractors who have: (i) a need to know such
Confidential Information in order to perform their duties; and
(ii) a legal duty to protect the Confidential Information. A
Party receiving Confidential Information of the other Party
assumes full responsibility for the acts or omissions of its
subcontractors and employees with respect to such Confidential
Information.
17.2. Required Disclosure
Either Party may disclose Confidential Information to the extent
required by law or by order of a court or governmental agency; provided,
however, that the recipient of such Confidential Information shall give the
owner of such Confidential Information prompt notice and shall use its best
efforts to cooperate with the owner of such Confidential Information if the
owner wishes to obtain a protective order or otherwise protect the
confidentiality of such Confidential Information. The owner of such
Confidential Information reserves the right to obtain a protective order or
otherwise protect the confidentiality of such Confidential Information.
Further, either party may disclose the terms of this Agreement to the
extent required to enforce its terms or the rights of such Party.
17.3. Notification
In the event of any disclosure or loss of Confidential Information,
the receiving Party shall immediately notify the disclosing Party.
17.4. Injunctive Relief
Each Party acknowledges that any breach of any provision of this
Section 17 by either Party, or its personnel or subcontractors, will cause
immediate and irreparable injury to the other Party, and in the event of
such breach, the injured Party shall be entitled to injunctive relief,
without bond or other security, and to any and all other remedies available
at law or in equity.
17.5. Return of Confidential Information
Unless it is expressly authorized by this Agreement to retain the
other Party's Confidential Information, a Party shall promptly return or
destroy, at the other Party's option and request, the other Party's
Confidential Information and all copies thereof, and shall certify to the
other Party that it no longer has in its possession or under its control
any Confidential Information in any form whatsoever, or any copy thereof.
18. LEGAL COMPLIANCE
Both Acxiom and Allstate shall at all times perform their obligations
hereunder in compliance in all material respects with all applicable national,
state, and local laws and
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regulations of all applicable jurisdictions, and in such a manner as not to
cause the other to be in material violation of any applicable laws or
regulations including (but not limited to) the U.S. Fair Credit Reporting Act,
as amended by the Consumer Credit Reporting Reform Act of 1996, 15 U.S.C. 1681,
et seq. ("FCRA"), any similar state privacy laws, and any applicable
requirements of any national, state, or local authority regulating credit
reporting, insurance, health, safety, employment, the environment, or
telecommunications. If any such laws and regulations are changed, or new laws or
regulations are enacted after the date of Acxiom's execution of this Agreement
and Acxiom's cost to perform is thereby directly increased or decreased, the
amounts otherwise to be paid to Acxiom pursuant to any of the provisions of this
Agreement may be adjusted as the Parties shall mutually agree.
With respect to consumer reports that are purchased by Acxiom at Allstate's
request, Allstate hereby certifies that it or its Affiliates will be the end
user(s) of such reports and that such reports will be used for the following
purposes and for no other purposes: (a) in connection with the underwriting
(including rating) of insurance; and/or (b) in connection with the written
consent of the consumer. The Parties acknowledge that each of the above
purposes constitutes a permissible purpose under the FCRA. Allstate will
maintain copies of consumers' written consents and will make such copies
available to Acxiom reasonably promptly upon receipt of Acxiom's written
request. Allstate agrees that every request for a consumer report will
constitute a recertification to Acxiom at the time of ordering such report that:
(x) Allstate and/or its Affiliates will be the end user(s) of such report; (y)
such report is being requested for a stated permissible purpose; and (z) the
report will be used for no purpose other than the stated permissible purpose.
19. Representations and Warranties
19.1. Acxiom's Representations, Warranties, and Covenants
19.1.1. Performance of the Services
Acxiom warrants that all Services provided hereunder will
be performed to the best of Acxiom's ability and in a good
workmanlike manner and that materials provided by Acxiom hereunder
will conform to and perform in accordance with the specifications
stated herein and in each Schedule, if applicable, and in all
associated documentation. Acxiom shall manage third party vendor
relationships, quality of data Acxiom furnishes to Allstate, and
costs of data in a manner consistent with the terms and spirit of
this Agreement.
19.1.2. Proprietary Rights Infringement
Acxiom covenants that at no time during the Term shall the
use of any services, techniques, or products provided or used by
Acxiom infringe upon any third party's patent, trademark, copyright,
or other proprietary or intellectual-property right, nor make use of
any misappropriated trade secrets.
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19.1.3. Adherence to Specifications
The Software, including all enhancements, modifications,
and new releases thereof, will operate in accordance with the
specifications and documentation provided to Allstate. For a period
of ninety (90) days from Allstate's written acceptance of any
Software installed at Allstate's facilities, Acxiom will correct,
without charge to Allstate, any errors which cause the Software to
fail to perform in accordance with the relevant specifications. This
warranty will not apply to the extent that such error is a result of
modifications performed by a party not employed by or under the
control of Acxiom. For all Software not installed at Allstate's
facilities, Acxiom will correct all malfunctions without charge to
Allstate during the Term of this Agreement.
19.1.4. Warranty as to Viruses
Acxiom warrants that the Software (and any portion thereof)
does not contain any timer, clock, counter, virus or other limiting
design, routine or instructions: (i) which have destructive
capabilities; (ii) which cause the Software (or any portion thereof)
to become erased, inoperable or otherwise incapable of being used in
the full manner for which it was designed and licensed pursuant to
this Agreement (including but not limited to any design or routine
that would impede copying thereof); (iii) which would render any
hardware or software inoperable; or (iv) which would cause data to
become altered, damaged or removed. Furthermore, the Software does
not contain any limiting design or routine which would cause it to
be erased, become inoperable, or otherwise incapable of being used
in the full manner for which it was designed and licensed pursuant
to this Agreement solely because such Software has been installed or
moved to a central processing unit or system which has a serial
number, model number, or other identification different from that on
which the Software was originally installed.
19.1.5. Warranty of Year 2000 Compliance
Acxiom warrants that the use, processing or occurrence of
the date January 1, 2000 or any subsequent date ("Millennial Dates")
will not adversely affect the performance of the Software with
respect to date-dependent data, computations, output or other
functions (including, but not limited to, calculating, comparing,
searching, and sequencing) and that the Software will create, store,
process and output information related to or including Millennial
Dates without error or omissions and at no additional cost to
Allstate. At Allstate's request, Acxiom will provide evidence
sufficient to demonstrate adequate testing of the Software to meet
the foregoing requirements.
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19.1.6. Legal and Corporate Authority
Acxiom represents and warrants that: it is a corporation
duly formed and in good standing under the laws of Arkansas and is
qualified and registered to transact business in all locations where
the performance of its obligations hereunder would require such
qualification; it has all necessary rights, powers, and authority to
enter into and perform this Agreement, and the execution, delivery,
and performance of this Agreement by Acxiom have been duly
authorized by all necessary corporate action; and the execution and
performance of this Agreement by Acxiom will not violate any law,
statute, or regulation and will not breach any agreement, covenant,
court order, judgment, or decree to which Acxiom is a party or by
which it is bound. Acxiom represents and warrants that it has, and
covenants that it shall maintain in effect, all licenses and permits
necessary for it to provide the Services contemplated by this
Agreement. Acxiom represents and warrants that Acxiom owns or leases
and covenants that it will own or lease, free and clear of all liens
and encumbrances, other than lessors' interests, or security
interests of Acxiom's lenders, all right, title, and interest in and
to the tangible property and technology and the like that Acxiom
intends to use or uses to provide such Services and in and to the
related patent, copyright, trademark, and other proprietary rights,
or has received appropriate licenses, leases, or other rights from
third parties to permit such use.
19.2. Allstate's Representations, Warranties and Covenants
19.2.1. Legal and Corporate Authority
Allstate represents and warrants that: it is a corporation
duly formed and in good standing under the laws of Illinois and is
qualified and registered to transact business in all locations where
the performance of its obligations hereunder would require such
qualification; it has all necessary rights, powers, and authority to
enter into and perform this Agreement; the execution, delivery, and
performance of this Agreement by Allstate have been duly authorized
by all necessary corporate action; and the execution and performance
of this Agreement by Allstate will not violate any law, statute, or
regulation and will not breach any agreement, covenant, court order,
judgment, or decree to which Allstate is a party or by which it is
bound.
19.2.2. Other
Allstate does not make any representation or warranty with
respect to the Services or any component thereof. All hardware,
software, networks and other information-technology related assets
made available or conveyed by Allstate to Acxiom under this
Agreement are made available or conveyed to Acxiom "AS IS, WHERE IS"
and there are no warranties of any kind with
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respect to the condition, capabilities, or other attributes of such
items, except as otherwise expressly stated in this Agreement.
19.3. Disclaimer
EXCEPT AS EXPRESSLY STATED IN THIS AGREEMENT, THERE ARE NO
EXPRESS WARRANTIES BY EITHER PARTY. THERE ARE NO IMPLIED WARRANTIES
OR CONDITIONS, INCLUDING THE IMPLIED WARRANTIES OF MERCHANTABILITY
OR FITNESS FOR PARTICULAR PURPOSE.
20. INDEMNIFICATION
20.1. Technology
20.1.1. Indemnity by Acxiom
Acxiom shall defend, indemnify, and hold the Allstate
Indemnitees harmless from and shall pay all final damages and costs
awarded against any of them arising out of, any claim brought by any
third party against any of them for actual or alleged infringement
of any patent, trademark, copyright, or similar property right
including misappropriation of trade secrets, based upon technology
or data used by Acxiom in providing the Services (collectively,
"Infringement Claim"); and Acxiom shall defend, indemnify, and hold
the Allstate Indemnitees harmless from and against any and all
liabilities, losses, costs, damages, and expenses, including
reasonable attorney's fees, associated with any such claim or action
incurred by any of them in connection with any Infringement Claim
that involves technology provided or developed by Acxiom. Acxiom
may, in its reasonable discretion, either procure a license to
enable Allstate to continue to use such technology or data or
develop or obtain a non-infringing substitute acceptable to
Allstate. Acxiom will have no obligation with respect to any claim
or action to the extent that it is based solely upon: (i)
modification of a program or machine by Allstate, any third-party
contractor to Allstate, or any agent of Allstate; (ii) data provided
by Allstate to Acxiom; (iii) Allstate's combination, operation or
use with apparatus, data or programs neither furnished nor approved
by Acxiom; (iv) the use by Allstate of any software provided by any
third party other than in accordance with relevant software licenses
whether or not such license agreements are provided to Acxiom; or
(v) the use of software owned by or licensed to Allstate by a party
other than Acxiom and supplied by Allstate to Acxiom.
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20.1.2. Indemnity by Allstate
Allstate shall defend, indemnify, and hold the Acxiom
Indemnitees harmless from and shall pay all final damages and costs
awarded against any of them arising out of, any claim brought by any
third party against any of them for actual or alleged infringement
of any patent, trademark, copyright, or similar property right
including misappropriation of trade secrets, based upon software
that is proprietary to Allstate. Allstate may, in its reasonable
discretion, either procure a license to enable Acxiom to continue to
use such technology or develop or obtain a non-infringing
substitute. Allstate shall have no obligation with respect to any
claim or action to the extent that it is based solely upon: (i)
modification of a program or machine by Acxiom, any third-party
contractor to Acxiom, or any agent of Acxiom; (ii) Acxiom's
combination, operation, or use with apparatus, data, or programs not
furnished by Allstate; (iii) the use by Acxiom of any software
provided by any third party other than in accordance with relevant
software licenses whether or not such licenses are provided to
Allstate; or (iv) the use of software owned by or licensed to Acxiom
by a party other than Allstate and supplied by Acxiom to Allstate.
20.2. Injury or Property Damage
20.2.1. Indemnity by Acxiom
Without limiting Acxiom's obligations with respect to
insurance as provided in Section 14 hereof, Acxiom shall indemnify,
defend, and hold the Allstate Indemnitees harmless with respect to
any third party claim alleging bodily injury, including death, or
damage to tangible personal or real property, to the extent that
such injury or damage arises from physical acts or omissions that
constitute negligence, willful misconduct, or violations of law by
Acxiom or its personnel, agents, or subcontractors.
20.2.2. Indemnity by Allstate
Allstate shall indemnify, defend, and hold the Acxiom
Indemnitees harmless with respect to any third party claim alleging
bodily injury, including death, or damage to tangible personal or
real property, to the extent that such injury or damage arises from
physical acts or omissions that constitute negligence, willful
misconduct, or violations of law by Allstate or its personnel,
agents, or subcontractors.
20.3. Employees
Acxiom shall indemnify, defend and hold harmless the Allstate
Indemnitees, from and against any and all liabilities, losses, taxes,
withholdings, claims, demands, damages, judgments, and costs and expenses,
including reasonable attorneys' fees,
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based upon claims against any of them that arise out of or in connection
with (i) any aspect of the employment relationship or the termination of
the employment relationship between Acxiom and Acxiom's employees assigned
to provide the Services hereunder, except to the extent such liability is
caused by Allstate's acts or omissions; (ii) any action brought by any of
Acxiom's Personnel seeking to be treated as Allstate employees and/or
claiming entitlement to any of Allstate's employee benefits; (iii) any
action seeking to declare Allstate as a joint employer with Acxiom of any
of Acxiom's Personnel providing services to Allstate hereunder; (iv) any
determination resulting from or pursuant to any arbitration proceeding,
court proceeding by a court of competent jurisdiction, administrative
proceeding or other similar proceeding that Allstate was the employer of
any of Acxiom's Personnel providing services to Allstate hereunder; or (v)
theft, fraud, or misappropriation by Acxiom or its Affiliates or their
respective officers, employees, agents, subcontractors, or successors, of
tangible or intangible property of Allstate.
20.4. Third-Party Matters
20.4.1. Indemnity by Acxiom
Acxiom shall defend, indemnify, and hold the Allstate
Indemnitees harmless from and against any and all claims by any
third parties, and any and all liabilities, losses, costs, damages,
and expenses, including reasonable attorney's fees, based upon or
related to third-party services utilized by Acxiom in providing
Services.
20.4.2. Mutual Indemnities
Each Party shall defend, indemnify, and hold the other
Party's Indemnitees harmless from and against claims by third
parties based upon an alleged breach of any agreement between the
indemnifying party and such third party.
20.5. Misrepresentation
20.5.1. Indemnity by Acxiom
Acxiom shall indemnify, defend, and hold harmless the
Allstate Indemnitees from and against any claim by any third party
and any and all loss, liability, damages, costs, and expenses,
including reasonable attorney's fees, sustained or incurred by such
Indemnitee as a direct result of any misrepresentation by Acxiom in
this Agreement or any breach or default by Acxiom with respect to
any warranty, promise, agreement, duty, or obligation of Acxiom
contained in this Agreement.
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20.5.2. Indemnity by Allstate
Allstate shall indemnify, defend, and hold harmless the
Acxiom Indemnitees from and against any claim by any third party and
any and all loss, liability, damages, costs, and expenses, including
reasonable attorney's fees, sustained or incurred by such Indemnitee
as a direct result of any misrepresentation by Allstate in this
Agreement or any breach or default by Allstate with respect to any
warranty, promise, agreement, duty, or obligation of Allstate
contained in this Agreement.
20.6. Subrogation
If an indemnifying Party shall be obligated to indemnify an
Indemnitee pursuant to this Section 20, the indemnifying Party shall, upon
payment of such indemnity in full, be subrogated to all rights of the
Indemnitee with respect to the claims and defenses to which such
indemnification relates.
20.7. Procedures
If any legal action is commenced against an Indemnitee entitled to
indemnification under this Section 20, prompt written notice thereof shall
be given to the indemnifying Party. After such notice, if the indemnifying
Party shall acknowledge in writing to such Indemnitee that the right of
indemnification under this Agreement applies with respect to such claim,
then the indemnifying Party shall be entitled, if it so elects, in a
written notice delivered to the Indemnitee not fewer than ten (10) days
prior to the date on which a response to such claim is due, to take control
of the defense and investigation of such claim and to employ and engage
attorneys of its sole choice, and reasonably satisfactory to the
indemnified Party, to handle and defend same, at the indemnifying Party's
expense. The Indemnitee shall cooperate in all reasonable respects with
the indemnifying Party and its attorneys in the investigation, trial, and
defense of such claim and any appeal arising therefrom; provided, however,
that the Indemnitee may, at its own expense, participate, through its
attorneys or otherwise, in such investigation, trial, and defense of such
claim and any appeal arising therefrom. No settlement of a claim that
involves a remedy other than the payment of money by the indemnifying Party
shall be entered into by the indemnifying Party without the prior written
consent of the Indemnitee, which consent may be given or withheld in the
Indemnitee's sole discretion, to the extent that it concerns equitable
remedies or the Indemnitee's Confidential Information or proprietary
technology. After notice by the indemnifying Party of its election to
assume full control of the defense of any such claim, the Indemnitee shall
not be liable to the indemnifying Party for any legal expenses incurred
thereafter by such indemnifying Party in connection with the defense of
that claim. If the indemnifying Party does not assume full control over
the defense of a claim subject to such defense as provided in this Section,
the indemnifying Party may participate in such defense, at its expense, and
the Indemnitee shall have the right to defend the claim in such manner as
it may deem appropriate, at the expense of the indemnifying Party.
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21. DISPUTE RESOLUTION
21.1. General Intent
The Parties intend that all problems and disputes between the
parties of any nature relating to this Agreement or arising from the
transactions contemplated hereby will be resolved through the procedures of
this Section 21, provided, however, that neither party shall be under any
obligation to invoke the procedures of this Section 21 with respect to
disputes concerning any alleged breach of Section 17 (Confidentiality) or
Section 20 (Indemnification) hereof or any other dispute for which
injunctive relief is sought. The procedures in this Section 21 will not
replace or supersede any other remedy to which a party is entitled under
this Agreement or under applicable law. Moreover, the procedures will not
be construed as an agreement to arbitrate or mediate any dispute. It is the
intention of the Parties that they continue to perform their respective
duties during the pendency of any dispute subject to this Section 21.
21.2. Contract Manager Level
The parties will initially attempt to resolve disputes arising in
the ordinary course of the parties performance under this Agreement, at the
Contract Manager level by those directly involved.
21.3. Escalation
21.3.1. First Escalation
If, after a reasonable period of time, not to exceed five
(5) business days, the Contract Managers have not been able in good
faith to resolve any dispute, each party will prepare a written
statement outlining the dispute and attempted resolution and will
submit the statement to Procurement Governance Officer or such other
officer as identified by Allstate and to Acxiom's ASBU Business Unit
Leader who will discuss the dispute (either in person or by
telephone) and will attempt in good faith to resolve the dispute.
21.3.2. Second Escalation
If, after a reasonable period of time, not to exceed ten
(10) business days after receiving the written statement pursuant to
Section 21.3.1, the persons described in Section 21.3.1 have not
been able in good faith to resolve the dispute, the written
statement shall be forwarded to Allstate's Vice President of
Procurement Governance and to Acxiom's Group Leader or Acxiom
Services Division Leader who will discuss the dispute in person and
will attempt in good faith to resolve the dispute.
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21.4. Critical Problems
If the dispute or problem is related to a critical problem in which
data is corrupted or the Services are being performed in a manner that
causes financial liability to Allstate and the Contract Managers are unable
to resolve such dispute or problem within forty-eight (48) hours (twenty-
four (24) hours if the problem is related to the interactive ordering
process) after having received notice of such dispute or problem, then the
problem shall be immediately escalated to the executives specified in
Section 21.3.2. Notwithstanding the provisions of Section 21.3.2 above,
the executives shall use their best efforts to resolve the dispute or
problem within forty-eight (48) hours after the escalation to them.
21.5. Legal Action
If either Party believes in good faith that the time frames
described in this Section 21 will have a material adverse impact on such
party, then this Section 21 shall be deemed to apply no longer to such
dispute and the Parties may take any legal action in a court of law or
equity to assert or enforce a claim it has against the other Party under
this Agreement.
21.6. No Termination or Suspension of Services
Notwithstanding anything to the contrary contained herein, and even
if any Problem or other dispute arises between the Parties and regardless
of whether or not it requires at any time the use of the dispute resolution
procedures described above, in no event nor for any reason shall Acxiom
interrupt the provision of Services to Allstate or any obligations related
to Disentanglement, disable any hardware used to provide Services, or
perform any other action that prevents, slows down, or reduces in any way
the provision of Services or Allstate's ability to conduct its activities,
unless: (i) authority to do so is granted by Allstate or conferred by a
court of competent jurisdiction; (ii) the Term of this Agreement has been
terminated or expired pursuant to Section 11 hereof and a Disentanglement
satisfactory to Allstate has occurred, or (iii) Allstate has failed to pay
Acxiom any undisputed amounts due to be paid under this Agreement, after
having received written notice of such failure and the relevant cure period
has expired.
22. PUBLICITY
Each Party shall submit to the other all advertising, written sales
promotion, press releases, and other publicity matters relating to this
Agreement in which the other Party's name or mark is mentioned or language from
which the connection of said name or mark may be inferred or implied, and
neither Party shall publish or use such advertising, sales promotion, press
releases, or publicity matters without the prior written approval of the other
Party. However, either Party may include the other Party's name and a mutually
agreed factual description of the work performed and the preferential rights
granted with respect thereto under this Agreement in employee communications, in
its communications with stock analysts
-43-
<PAGE>
and investors; in its list of references, in the experience section of proposals
to third parties, in internal business planning documents, in its or its
Affiliates' annual report to stockholders, and whenever required by reason of
legal, accounting, or regulatory requirements.
23. USE OF AFFILIATES AND SUBCONTRACTORS
Acxiom shall not perform its obligations through its Affiliates or through
the use of Acxiom-selected independent contractors, including hardware and
software, without the advance written consent of Allstate, which consent may be
withheld in Allstate's sole discretion, and Acxiom shall not be relieved of its
obligations under this Agreement by use of any such Affiliates or
subcontractors; provided that Acxiom may subcontract for goods and services that
are incidental to the performance of the Services, do not involve the
acquisition of data, and do not involve the expenditure of more than Two Hundred
Fifty Thousand Dollars ($250,000) within any ninety (90) day period. Acxiom
shall be responsible for supervising the activities and performance of each
subcontractor and shall be jointly and severally responsible with each
subcontractor for any act or failure to act of such subcontractor. If Allstate
determines that the performance or conduct of any Acxiom subcontractor is
unsatisfactory, Allstate may notify Acxiom of its determination in writing,
indicating the reasons therefor, in which event Acxiom shall promptly take all
necessary actions to remedy immediately the performance or conduct of such
contractor or to replace such contractor by another third party or by Acxiom
personnel.
24. MISCELLANEOUS
24.1. Entire Agreement
This Agreement, including the Schedules and Exhibits hereto,
constitutes the entire understanding and agreement between the Parties with
respect to the transactions contemplated herein and supersedes all prior or
contemporaneous oral or written communications with respect to the subject
matter hereof. No usage of trade, or other regular practice or method of
dealing between the Parties or others, may be used to modify, interpret,
supplement, or alter in any manner the express terms of this Agreement.
24.2. Captions; Section Numbers
Captions, Tables of Contents, Indices of Definitions, and Schedule
and Exhibit titles are used herein for convenience only and may not be used
in the construction or interpretation of this Agreement. Any reference
herein to a particular Section number (e.g., "Section 2"), shall be deemed
a reference to all Sections of this Agreement that bear sub-numbers to the
number of the referenced Section (e.g., Sections 2.1, 2.1.1, etc.).
-44-
<PAGE>
24.3. Assignment
Except for subcontracting permitted under the terms of Sections 23
hereof, neither this Agreement, nor any interest therein, nor any of the
rights and obligations of Acxiom hereunder, may be directly or indirectly
assigned, sold, delegated, or otherwise disposed of by Acxiom, in whole or
in part, without the prior written consent of Allstate, which may be
withheld in its sole discretion. For purposes of this Section, an
"assignment" shall also be deemed to have occurred upon a change in control
of Acxiom resulting from a single transaction or series of related
transactions, or a restructuring of Acxiom, or transfer or removal of
assets from Acxiom or assumption of debt by Acxiom such that as a result of
such restructuring, transfer, removal, or assumption Acxiom no longer
possesses a net worth equal to or greater than that of Acxiom on the
Effective Date. Solely for purposes of the preceding sentence, "control"
shall mean the legal, beneficial, or equitable ownership, direct or
indirect, of more than fifty percent (50%) of the aggregate of all voting
equity interests in Acxiom; "change in control" shall mean any change in
the legal, beneficial, or equitable ownership, direct or indirect, such
that control of Acxiom is no longer with the same entity as on the
Effective Date.
24.4. Notices to a Party
Except as expressly otherwise stated herein, all notices, requests,
consents, approvals, or other communications provided for, or given under,
this Agreement, shall be in writing, and shall be deemed to have been duly
given to a Party if delivered personally, or transmitted by facsimile to
such Party at its telecopier number set forth below, or sent by first class
mail or overnight courier to such Party at its address set forth below, or
at such other telecopier number or address, as the case may be, as shall
have been communicated in writing by such Party to the other Party in
accordance with this Section. All notices will be deemed given when
received in the case of personal delivery or delivery by mail or overnight
courier, or when sent in the case of transmission by facsimile with a
confirmation, if confirmed by copy sent by overnight courier within one (1)
day of sending the facsimile.
Notices to Allstate shall be addressed as follows:
Allstate Insurance Company
Attention: Peggy Cardaman, Contract Manager
2775 Sanders Road, E-6
Northbrook, Illinois 60062-7965
Telecopier No.: 847-402-0578
-45-
<PAGE>
with a copy to the attention of Allstate's general counsel addressed as
follows:
Allstate Insurance Company
Attention: Hugh D. Bohlender, Counsel
2775 Sanders Road, Suite A8
Northbrook, Illinois 60062-6127
Telecopier No.: 847-402-0158
Notices to Acxiom shall be addressed as follows:
Acxiom Corporation
Attention: Karl Babij, Contract Manager
301 Industrial Boulevard
Conway, AR 72033-2000
Telecopier No.: 501-336-3902
with a copy to the attention of Acxiom's general counsel at:
Acxiom Corporation
Attention: Catherine Hughes, General Counsel
301 Industrial Boulevard
Conway, AR 72033-2000
Telecopier No.: 501-336-3723
24.5. Amendments; Waivers
Except as provided expressly herein, this Agreement may not be
modified, amended, or in any way altered except by written document duly
executed by both of the Parties hereto. No waiver of any provision of this
Agreement, nor of any rights or obligations of any Party hereunder, will be
effective unless in writing and signed by the Party waiving compliance, and
such waiver will be effective only in the specific instance, and for the
specific purpose, stated in such writing. No waiver of breach of, or
default under, any provision of this Agreement will be deemed a waiver of
any other provision, or of any subsequent breach or default of the same
provision, of this Agreement.
24.6. Legal Status of Parties
This Agreement will not be construed to constitute either Party as a
representative, agent, employee, partner, or joint venturer of the other.
Acxiom will be an independent contractor for the performance under this
Agreement. Acxiom will not have the authority to enter into any agreement,
nor to assume any liability, on
-46-
<PAGE>
behalf of Allstate, nor to bind or commit Allstate in any manner. Acxiom's
employees who provide services pursuant to this Agreement or who are
located on Allstate's premises shall remain employees of Acxiom, and Acxiom
will have sole responsibility for such employees including (but not limited
to) responsibility for payment of compensation to such personnel and for
injury to them in the course of their employment. Acxiom shall be
responsible for all aspects of labor relations with such employees
including (but not limited to) their hiring, supervision, evaluation,
discipline, firing, wages, benefits, overtime and job and shift
assignments, and all other terms and conditions of their employment, and
Allstate will have no responsibility therefor. Acxiom shall defend,
indemnify, and hold harmless Allstate Indemnitees from and against any and
all claims, liabilities, losses, costs, damages, and expenses, including
attorney's fees, based upon or related to a claim that Acxiom's or its
subcontractors' employees are employees of Allstate.
24.7. Severability
If any provision of this Agreement is determined to be invalid or
unenforceable, that provision shall be deemed stricken and the remainder of
the Agreement will continue in full force and effect insofar as it remains
a workable instrument to accomplish the intent and purposes of the Parties;
the Parties shall replace the severed provision with the provision that
will come closest to reflecting the intention of the Parties underlying the
severed provision but that will be valid, legal, and enforceable.
24.8. Counterparts
This Agreement may be executed in duplicate counterparts. Each such
counterpart shall be an original and both together shall constitute but one
and the same document. This Agreement shall not be deemed executed unless
nor until at least one counterpart bears the signatures of both parties'
designated signatories.
24.9. Governing Law
This Agreement and the performance of the Parties hereunder shall be
governed and construed in accordance with the substantive laws of the State
of Illinois. All actions or proceedings arising out of, or related to,
this Agreement shall be brought only in an appropriate federal or state
court in Cook County Illinois and the Parties hereby consent to the
jurisdiction of such courts over themselves and the subject matter of such
actions or proceedings.
24.10. No Third-Party Beneficiaries
This Agreement is an agreement between the Parties, and confers no
rights upon any of the Parties' employees, agents, or contractors or upon
any other person, partnership, or entity.
-47-
<PAGE>
24.11. Expenses
Each Party shall pay all expenses paid or incurred by it in
connection with the planning, negotiation, and consummation of this
Agreement.
The duly authorized representatives of the Parties have executed this
Agreement as of the Effective Date.
<TABLE>
<S> <C>
ALLSTATE INSURANCE COMPANY ACXIOM CORPORATION
By: ______________________________________ By: ___________________________________
George E. Ruebenson Name: Paul L. Zaffaroni
Vice President, Procurement Governance Name:: Acxiom Services Division Leader
</TABLE>
-48-
<PAGE>
ACXIOM RM-TOOLS, INC.
BY: _______________________________
Name: Paul L. Zaffaroni
Title: Vice President
-49-
<PAGE>
EXHIBIT 10(g)
Acxiom Corporation
Leadership Team
Compensation Guidelines
Leadership Compensation Plan - FY2000
<TABLE>
- -----------------------------------------------------------------------------------------------------------------------------
Leader 'Not at Risk' Base Salary Ranges Plan Structure
Classification
<S> <C> <C> <C> <C> <C>
- -----------------------------------------------------------------------------------------------------------------------------
Base At Risk LTI Yrs Granted
- -----------------------------------------------------------------------------------------------------------------------------
Level 5 35% 25% 40% 3
Salary ranges determined by
Level 4 market data for individual 40% 25% 35% 3
area of responsibility.
Level 3 50% 25% 25% 2
Level 2 60% 20% 20% 1
Level 1 70% 15% 15% 1
- -----------------------------------------------------------------------------------------------------------------------------
NOTE: At Risk Opportunity for the fiscal year is established based on Base Salary as of May 1, 1999.
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
Business Development / Sales Leadership
Compensation Plan - FY2000
- -----------------------------------------------------------------------------------------------------------------------------
Leader 'Not at Risk' Base Salary Ranges Plan Structure
Classification
-------------------------------------------------------------------------------------------------------------
Base At Risk LTI Yrs Granted
- -----------------------------------------------------------------------------------------------------------------------------
Level 3 40% 40% 20% 2
Salary ranges determined by
Level 2 market data for individual 40% 40% 20% 1
determined by area of
responsibility.
Level 1 50% 30% 20% 1
Common Commissions
Fate
75% 25%
50% 50%
25% 75%
- -----------------------------------------------------------------------------------------------------------------------------
NOTE: At Risk Opportunity for the fiscal year is established based on Base Salary as of May 1, 1999.
- -----------------------------------------------------------------------------------------------------------------------------
- -----------------------------------------------------------------------------------------------------------------------------
% Increase Guidelines for Salaries
FY2000
- -----------------------------------------------------------------------------------------------------------------------------
Rating Within Range In Excess Below Range
of Range
Low 0% 0% For ratings of Solid or High, four year market
adjustment plans have been put in place to reach
Solid Up to 6% Up to 2% market.
High Up to 8% Up to 4%
- -----------------------------------------------------------------------------------------------------------------------------
</TABLE>
1
<PAGE>
GENERAL DESCRIPTION OF THE LEADERSHIP TEAM
------------------------------------------
COMPENSATION PLAN
-----------------
FY2000
------
OBJECTIVE
- ---------
. The objective of the Leadership Team compensation plan is to implement a pay
plan which will reflect the leader's responsibility, provide compensation
that is both equitable and competitive, and which will:
. Align the leader's interests with shareholder/investor's interest.
. Motivate leaders to achieve the highest level of performance.
. Retain key leaders by linking leadership team compensation to company
performance.
. Attract the best leaders through competitive, growth-oriented plans.
. Enable sharing of growth & success between associates, leaders and
shareholders.
PLAN PROVISIONS
- ---------------
ELIGIBILITY OF PARTICIPANTS
- ---------------------------
. For purposes of the Leadership Team Compensation Plan, eligible associates
will include Division leaders, Group leaders, Business Unit leaders, Sales
leaders, Business Development leaders, Industry Application Development
leaders, Finance and Accounting leaders, Organizational Development leaders,
Legal leaders and Corporate Office leaders.
COMPONENTS AND PLAN STRUCTURE
- -----------------------------
. The components of the Leadership Team Compensation Plan are as follows:
. Base salary (not at risk)
. Base salary (at risk)
. Long-term incentive (stock options)
. Retention/Recruiting Bonus (Special Situations Only)
. Exhibit 1 of this document reflects the above components for the 5 levels of
the Leadership Team Compensation Plan. In addition, it reflects the Business
Development / Sales Leadership Plan.
2
<PAGE>
COMPONENTS AND PLAN STRUCTURE CONTINUED
- ---------------------------------------
. Each level of the plan has the following:
. Base salary based on comparable market salary for the equivalent position.
. Plan structure (reflecting percentage guideline ranges for each plan
component to total compensation as well as number of years for which
options are granted under the long-term incentive component of the plan)
. Each leader is slotted into one of the five levels based on experience, scope
of responsibility and past performance. The individual to whom the leader
reports is responsible for managing his respective slotting. Division leaders
must approve all level 3 slottings. Additionally, Division leaders must
approve all slottings of individuals on the Business Development / Sales
Leadership Compensation Plan. The Company leader must approve all slottings
of levels 4 and 5.
. Leaders slotted in the Business Development / Sales Leadership Plan must be a
senior level business development / sales leader responsible for:
. developing new business and relationships at senior executive levels of
customers and prospects, or
. providing leadership to two or more sales associates for a Group or
Division. Providing leadership means assigning quotas and territories,
conducting regular reviews of salesperson's call activity, hiring,
terminations, preparing skill development plans, performance reviews,
coaching, mentoring and overseeing the overall sales process for the area.
BASE SALARY (NOT AT RISK)
- -------------------------
. Guidelines have been established to award base salary increases for salaries
that are comparable to market. Leaders who are below market have been put on
plans to adjust their salaries to the 75th percentile for senior leaders and
to the 50th percentile for all other leaders of comparable companies within 4
years.
. The percentage increase guidelines are revised / validated annually.
. Base salaries for Business Development / Sales leaders will be established
and managed using the Level 2 salary ranges.
3
<PAGE>
BASE SALARY (AT RISK)
- ---------------------
General
- -------
. The base salary at risk (referred to as at risk throughout the remainder of
this document) amount for the full fiscal year is determined by the company
leadership as shown below and is based on the eligible associate's base
salary as of May. No adjustment is made to at risk amounts during the plan
year unless the leader moves from one plan level to another or is assigned a
different job which warrants a change. In the event there is a change in the
at risk, it will be prorated based on the date of the change.
Leader Approval of At Risk
------ -------------------
CLT, Group & Corporate Leaders Company Leader
All Other Leaders Division Leaders
. Eligible associates must be employed on the date of the actual payment to
--------------
receive payment for the quarterly and/or year-end at risk. The at risk for
eligible associates who joined the Leadership Team after the beginning of the
quarter will be pro-rated based on hire date. Additionally, the year-end at
risk amount will be prorated in the same manner.
. Division leaders have the right to withhold a leader's quarterly and/or
annual at risk payment if the leader has failed to deliver Year 2000
objectives.
At risk targets
- ---------------
. At risk will be based on the change in EVA attained with an EPS gate. (With
the exception of the commission/specific objective component of the Business
Development / Sales Leadership plans. See page 5 - Commission/specific
objective at risk targets.)
EVA Incentive Principles
- ------------------------
. Target Incentive
Competitive total compensation opportunity
. Expected EVA Improvement
Performance standard to achieve the company "target EVA" (and to meet the
market's expectation of EVA improvement required to support the price of
the Company's stock.)
. Sharing of EVA Improvement Above/Below Expected
Associates and shareholders share risks and rewards
. Incentive Bank
Cumulative performance and incentive linked
4
<PAGE>
BASE SALARY (AT RISK) CONTINUED
- -------------------------------
Target Incentives and Expected EVA Improvement
- ----------------------------------------------
. Achievement of Expected EVA Improvement results in Target Incentive Pool
Sharing of Incremental EVA Results
- ----------------------------------
. Sharing of incremental EVA (above/below "Expected") is constant
. 50% of every $1 of EVA above expected is added to incentive pool.
. 50% of every $1 of EVA below expected is subtracted from incentive pool
(EVA improvement can be below zero.)
. Associates/leaders share in all risks and rewards (no caps or floors)
Incentive Bank Principles
- -------------------------
. Over/Under attainment by Division for current year "deposited" into incentive
bank
. Bank balance distributed:
. up to 33% of the resulting bank balance - (Note - it is the intent of the
plan to distribute 33% of the bank balance under normal circumstances.
However, the actual % distribution is determined by the Compensation Team
of the Company based on funding of the payments from earnings and
analyzing the achieved results for the year. The Compensation Team may
adjust this % based on special circumstances and may elect to not
distribute any of this remaining bank balance and to carry all of it
forward into the next year. The Compensation Team may elect to pay all or
a portion of the 1/3 distribution in stock options.)
. Remaining bank balance reserved against future performance
. "Negative" bank balance "repaid" before future over attainment incentives are
paid
Incentive Funding (EPS Gates)
- -----------------------------
. Incentive attainment determined based on EVA achievement
. Incentive funding subject to pro rata reduction if EPS Gate is not achieved
. Existing bank balances also subject to forfeiture to satisfy EPS Gate.
5
<PAGE>
BASE SALARY (AT RISK) CONTINUED
- -------------------------------
Common fate at risk target breakdown
- --------------------------------------
<TABLE>
- --------------------------------------------------------------------------------
Corporate Division Group Revenue Shared
Office Leaders Leaders Unit Services
OD/FA Leaders Unit
Leaders** Leaders
- --------------------------------------------------------------------------------
<S> <C> <C> <C> <C> <C>
Common 100% 60% 50% 25% 75%
Fate Co. EVA Co. EVA Co. EVA Co. EVA Co. EVA
- -------------------------------------------------------------------------------
Unit 0% 30% 20% 75%* 25%
Performance Div EVA Div. EVA Bus. Plan
10% A/R 20% (20% Div
Group EVA EVA)*
10% A/R (45% Group
EVA)*
10% A/R
- --------------------------------------------------------------------------------
</TABLE>
* These are the default percentages unless the corporate office approves a
different documented plan. Differences should be submitted to the corporate
office by the Division leader by June 30 and by October 31 for mid-year
revisions.
** Organizational Development and Finance / Accounting leaders' at risk
percentages will be 50% Company EVA and 50% Division EVA.
Note: All at risk payments are subject to EPS gate (with the exception of the
commissions/specific objective portion of the Business Development/Sales
Leadership Plan)
Commission/specific objective at risk targets
- ---------------------------------------------
. These targets apply only to Business Development / Sales Leadership Plan.
. The commission/specific objective portion of at risk under this plan is based
on revenue and/or EVA percentage of quota attainment for the territories
assigned to the business development/sales leader. It is the responsibility
of the individual's Division and/or Group leader to establish these targets.
. The commission/specific objective portion will be funded by the Unit, Group
or Division and is not subject to the EPS gate as is the common fate portion
of at risk. Budgets and EVA targets will not be adjusted for additional
commission expense due to these plans.
6
<PAGE>
BASE SALARY (AT RISK) CONTINUED
- -------------------------------
. All commissions are calculated on a YTD, cumulative basis.
. The plan provisions and quota assigned may be changed at any time by the
Division leader.
. The Division leader may choose not to accept additional business when
resources are not available to process the work. It is the sales leader's
responsibility to make certain that the work will be accepted before customer
commitments are made.
Divisions and Units (Except Data Products Division):
- ----------------------------------------------------
. The Division, Group and unit EVA is the controllable EVA for a Division and
revenue Group/Unit which includes the direct revenue and expenses for the
unit(s) less appropriate charges for data center consumption, application
software and facilities as determined by the ABM system. Also included will
be a charge for the cost of capital including accounts receivable, data
center equipment, workstation/LAN and facilities. The target for your
Group/Unit EVA will be negotiated with your Division leader.
. Exceptions granted during the current fiscal year will affect next year's EVA
targets.
Data Products Division - Groups/Units:
- --------------------------------------
. Product Line EVA targets and attainment must be certified by the Corporate
Office.
Shared Services Units:
- ----------------------
. The business plan target component for Shared Services is to maintain your
expenses at or below your current fiscal year budget.
EPS Gate Target
- ---------------
. The EPS target for fiscal 2000 is $1.00 per share.
. All common fate at risk payments are subject to first achieving Acxiom's EPS
targets.
7
<PAGE>
BASE SALARY (AT RISK) CONTINUED
- -------------------------------
Over/Under Achievement
- ----------------------
. Above/below targeted EVA, 50% of all Incremental EVA will be added to /
subtracted from the Incentive Banks. Above/Below target funds will be added
to / subtracted from the respective incentive banks based on the Division's
performance and up to 1/3 of the resulting bank balance may be paid at the
end of the fiscal year and the remainder will be banked for future payment
(subject to the sustained business performance of the Division and Acxiom
Corporation). The Compensation Team will determine the actual payout of the
over attainment bank based on business conditions and funding considerations.
. The over/under achievement EVA will be primarily calculated at the Division
level. However, the Compensation Team has the authority to make adjustments
based on business circumstances. In no cases will the sum of the over
attainment banked be greater than the total company's over attainment.
Method of payment:
- ------------------
. It is Acxiom's intention to pay at risk in cash. However, from time to time
the Company Leadership Team (CLT), may elect to pay at risk in stock options
if conditions of the business justify it. In the event this decision is made,
the CLT will make every effort to notify the Leadership Team members within 5
business days of the decision being finalized. If at risk is paid in stock
options in lieu of cash, the Black-Scholes model will be used to calculate
the option value and number of options.
. Payments will be made quarterly based on attainment of financial objectives
up to your target incentive and subject to the EPS funding gate calculation,
as follows:
First Quarter - 1/8th of total opportunity
Second Quarter - 1/8th of total opportunity
Third Quarter - 1/8th of total opportunity
Fourth Quarter - 5/8th of total opportunity (1/8 for the 4th Quarter & 1/2
for the Annual Target)
. All over achievement incentive calculations will be deferred until the year
end. Over attainment distributions will be either in Stock Options or cash at
the discretion of the Compensation Team.
. All payments will be made within 60 days of the end of the quarter.
. All EVA and EPS gate calculations will be done on a year-to-date basis.
8
<PAGE>
BASE SALARY (AT RISK) CONTINUED
- -------------------------------
. For the first, second, third and fourth quarters, the objectives are equal to
the year-to-date financial targets as of the end of each respective quarter
and are subject to the EPS gate calculation. The total Company EVA and EPS
quarterly gate targets are shown below.
*PRELIMINARY*
-----------
EVA EVA
(in 000's) EPS (in 000's) EPS
---------- --- --------- ---
First Quarter TBD TBD Third Quarter TBD TBD
Second Quarter TBD TBD Fourth Quarter TBD TBD
TOTALS
$1.00
-----
LONG-TERM INCENTIVE
- -------------------
. For purposes of determination of the long-term incentive (LTI), eligible
associates must be employed and be a member of the Leadership Team on the
date the Board of Directors reviews the LTI grants for that year (May Board
of Directors meeting). These options fall under the Acxiom stock option plan
and will be subject to all standard provisions.
. The long-term incentive will be in the form of stock options and other
performance vehicles as necessary. The current year vehicle will be stock
options.
. Stock options will be awarded under three categories:
Category A - Fair market value at date of grant
Category B - 25% above fair market value
Category C - 50% above fair market value
. Using the Black-Scholes stock options pricing model, the mix of options to be
awarded as an approximate percentage of the total long-term incentive are:
Category A - 50% of total long-term incentive
Category B - 25% of total long-term incentive
Category C - 25% of total long-term incentive
. Under the long-term incentive plan, participants will be awarded a grant of
stock options on a cycle corresponding to the level of compensation plan to
which the leader has been assigned. Multi-year grants are awarded for levels
3 through 5.
9
<PAGE>
. In the event a leader is assigned a level with multi-year grants, they will
be awarded the number of years of options necessary to put them on the same
cycle as all other leaders on that level.
. Stock options awarded will vest over 6 years, 20% after years 2, 3, 4, 5, & 6
respectively following the date of grant. Stock options may not be
exercisable later than fifteen years after their date of grant.
. Stock options may also be granted at the October Board Meeting. The October
options include new Leadership Team members as well as adjustments for those
moving from one level to another.
. It is the current intent of the Board of Directors to continue this plan (or
a similar plan) in future years. The Board of Directors reserves the right to
modify or cancel this plan in future years for any reason at its sole
discretion.
RETENTION/RECRUITING BONUS
- --------------------------
Retention Bonus:
- ----------------
A retention bonus for key senior leaders who we are at risk of losing is being
added to the plan this year. Each Retention Bonus Plan for a senior leader must
by approved by Charles Morgan and Rodger Kline.
Retention Bonus Plan Provisions:
In addition to standard at risk plan
Up to 25% of base salary (determined by Division leader, Rodger Kline and
Charles Morgan)
To be paid at same time as at risk payments
Not subject to Corporate gate
Based on achieving predetermined, documented, individual objectives
Distribution amounts to be determined by Division leader
Recruiting Bonus:
- -----------------
In order to recruit key leaders, it may be necessary to pay a one-time
recruiting bonus.
In addition to standard At Risk plan
Up to 25% of base salary (determined by Division leader, Rodger Kline and
Charles Morgan)
To be paid upon hiring
Not subject to Corporate gate
PLAN MODIFICATIONS
- ------------------
Any modification to the standard plan described in this document must be
approved in advance by Rodger Kline.
10
<PAGE>
EXHIBIT 13
Selected Financial Data
<TABLE>
<CAPTION>
- ----------------------------------------------------------------------------------------------------
Years Ended March 31, 1999 1998 1997 1996 1995
Earnings Statement Data:
<S> <C> <C> <C> <C> <C>
Revenue $729,984 569,020 479,239 331,543 254,115
Net earnings (loss) $(16,430) 46,055 37,735 26,084 18,243
Basic earnings (loss) per share $ (.22) .64 .54 .41 .30
Diluted earnings (loss) per share $ (.22) .57 .49 .38 .29
- ----------------------------------------------------------------------------------------------------
- ----------------------------------------------------------------------------------------------------
March 31, 1999 1998 1997 1996 1995
Balance Sheet Data:
Current assets $293,066 287,870 144,147 81,916 65,358
Current liabilities $166,034 82,748 52,190 42,542 34,715
Total assets $879,327 673,150 411,629 240,853 182,148
Long-term debt, excluding
current installments $325,223 254,240 109,371 43,745 33,270
Stockholders' equity $349,181 301,194 231,828 140,385 105,878
- ----------------------------------------------------------------------------------------------------
</TABLE>
(In thousands, except per share data. Per share data are restated to reflect 2-
for-1 stock splits in fiscal 1997 and 1995.)
<PAGE>
Management's Discussion and Analysis of
Financial Condition and Results of Operations
On May 26, 1998, the Company entered into a merger agreement with May & Speh,
Inc. May & Speh, headquartered in Downers Grove, Illinois, provides computer-
based information management services with a focus on direct marketing and
information technology outsourcing services. The merger, which was completed
September 17, 1998, has been accounted for as a pooling-of-interests.
Accordingly, the consolidated financial statements have been restated as if the
combining companies had been combined for all periods presented. See note 2 to
the consolidated financial statements for a more detailed discussion of the
merger transaction.
Results of Operations
- ---------------------
For the fiscal year ended March 31, 1999, the Company recorded the highest
annual revenue, earnings, and earnings per share in its history, excluding the
special charges discussed more fully below. Consolidated revenue was a record
$730.0 million in 1999, up 28% from 1998. For fiscal 1998, revenue growth was
19% over the previous year.
The following table shows the Company's revenue by business segment for each of
the years in the three-year period ended March 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
1998 to 1997 to
1999 1998 1997 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Services $419.9 $308.4 $254.8 +36% +21%
Data Products 186.7 155.2 135.4 +20 +15
I. T. Management 164.5 128.4 109.5 +28 +17
Intercompany eliminations (41.1) (23.0) (20.5) +79 +12
----- ----- ----- --- ----
$730.0 $569.0 $479.2 +28% +19%
===== ====== ====== === ====
</TABLE>
The Services segment, the Company's largest segment, provides data warehousing,
list processing and consulting services to large corporations in a number of
industries. Revenue growth for this segment has been strong with fiscal 1999
growing 36% over the previous year after a 21% increase in 1998. This
performance has been fueled by a business trend towards data warehousing to
implement customer relationship management and one-to-one marketing initiatives
for the Company's customers. The Services segment has a particularly strong
penetration in the financial services industry, primarily assisting credit card
marketers. Financial Services grew 42% in 1999 following a 22% increase in 1998.
Included in the insurance industry is Allstate Insurance Company, the Company's
largest customer. Allstate revenues of $82.2 million in 1999 increased 10% over
the prior year and also increased 10% from 1997 to 1998. Other industries
reporting strong year-over-year growth in 1999 included retail, pharmaceutical,
technology, telecommunications and media services. These other industries are
currently smaller than the Company's revenue from the financial services and
insurance industries but the Company believes that each represents a good growth
opportunity.
The Data Products segment provides data content primarily in support of their
customers' direct marketing activities. One of the channels for the Data
Products segment is the customers of the Services segment. For internal
reporting purposes, these revenues are included in both segments and then
adjusted within the intercompany elimination. As evidenced by the intercompany
eliminations in the table above, data revenues from the Services segment's
customers grew strongly in 1999 increasing 79% over the prior year after a 12%
increase in 1998. The growth in Data Products was somewhat mitigated by slower
growth for Direct Media in 1999.
The I. T. Management segment reflects outsourcing services primarily in the
areas of data center, client/server and network management. This segment is
experiencing strong growth as a result of a trend towards business
<PAGE>
process outsourcing due to increased complexity and changes in technology.
Growth in this segment was fueled by increases of 48% and 35% for May & Speh
outsourcing business in 1999 and 1998, respectively.
The following table presents operating expenses for each of the years in the
three-year period ended March 31, 1999 (dollars in millions):
<TABLE>
<CAPTION>
1998 to 1997 to
1999 1998 1997 1999 1998
---- ---- ---- ---- ----
<S> <C> <C> <C> <C> <C>
Salaries and benefits $272.7 $210.3 $171.3 +30% +23%
Computer, communications and
other equipment 110.3 86.3 76.4 +28 +13
Data costs 106.7 88.3 77.9 +21 +13
Other operating costs and
expenses 124.9 100.3 87.3 +25 +15
Special charges 118.7 4.7 -
----- ----- ----- --- ----
$733.3 $489.9 $412.9 +50% +19%
===== ===== ====== ==== ====
</TABLE>
Salaries and benefits increased from 1998 to 1999 by 30% and from 1997 to 1998
by 23% principally due to increased headcount to support the growth of the
business and merit increases, combined with increases in incentive compensation,
new outsourcing business, and the impact of acquisitions during the year.
Computer, communications and other equipment costs increased 28% from 1998 to
1999, after rising 13% from 1997 to 1998. The increases in 1999 and 1998 reflect
depreciation on capital expenditures and amortization of software costs
expenditures made to accommodate business growth. In 1998, the impact was
lessened due to the Trans Union pass-through expenses recorded in 1997.
Data costs grew 21% in 1999 and 13% in 1998. These costs are a direct result of
Data Products segment revenue which grew 20% and 15% for 1999 and 1998,
respectively, and revenue under the data management contract with Allstate which
grew 10% in each year.
Other operating costs and expenses increased by 25% in 1999. Facilities costs
increased $5.5 million, primarily due to a new building in Downers Grove.
Outside services and temporary help costs increased $8.7 million, primarily to
support growth in new I. T. outsourcing contracts. The remainder of the increase
was in office supplies, travel and entertainment expenses, and advertising,
offset by a decrease in cost of sales for client/server equipment of $3.6
million. In total, the increase in other operating costs and expenses was less
than the increase in revenue. Other operating costs and expenses increased 15%
in 1998. The increase is primarily attributable to acquisitions, client-server
sales noted above, an increase in bad debt expense, and volume-related
increases, somewhat reduced by the impact of the sale of the Pro CD retail and
direct marketing unit.
In the second and third quarters of fiscal 1999, the Company recorded special
charges which totaled $118.7 million. These charges were merger and integration
expenses associated with the May & Speh merger and the write down of other
impaired assets. The charges consisted of approximately $10.7 million of
transaction costs, $8.1 million in associate-related reserves, $48.5 million in
contract termination costs, $11.5 million for the write down of software, $29.3
million for the write down of property and equipment, $7.8 million for the write
down of goodwill and other assets, and $2.8 million in other accruals. See note
2 to the consolidated financial statements for further information about the
special charges. In 1998, May & Speh recorded a $4.7 million special charge
primarily for severance costs.
Total spending on capitalized software and research and development expense was
$36.3 million in 1999, compared to $35.1 million in 1998 and $23.7 million in
1997. Research and development expense was $17.8 million, $13.7 million, and
$13.0 million for 1999, 1998, and 1997, respectively.
<PAGE>
Excluding the effect of the special charges on both years, income from
operations would have been $115.4 million in 1999, an increase of 38% over the
income from operations of $83.8 million in 1998. Income from operations in 1998
would have reflected an increase of 26% over 1997. The operating margin for
1999, 1998, and 1997 would have been 15.8%, 14.7%, and 13.8%, respectively.
Operating margins for the Services and I. T. Management segments are generally
higher than that of the Data Products segment. For fiscal 1999, operating
margins were 21.1%, 8.2%, and 21.2% for the Services, Data Products, and I. T.
Management segments, respectively.
Interest expense increased by $7.3 million in 1999 and by $4.3 million in 1998.
The increase is due primarily to increased debt levels, including $115 million
of convertible debt issued by May & Speh in March, 1998, increases in the
Company's revolving credit agreement, and increases in enterprise software
license liabilities.
Other, net is primarily composed of interest income on noncurrent receivables
and invested cash of $6.4 million in 1999, $2.9 million in 1998 and $1.6 million
in 1997. Other, net for 1998 also includes $0.9 million of gain on the disposal
of the Pro CD retail and direct marketing business compared with a $2.6 million
charge in 1997 due to a write-off from the sale of a facility related to a unit
previously disposed of.
The Company's effective tax rate, excluding the special charges, was 37.2%,
37.2%, and 37.7% for 1999, 1998, and 1997, respectively. In each year, the
effective rate exceeded the U.S. statutory rate because of state income taxes,
partially offset by research and experimentation tax credits. In 1999, the
effect of the special charges increased the effective tax rate as certain of the
special charges are not deductible for federal or state tax purposes.
The net loss was $16.4 million in 1999 including the special charges noted
above. Excluding the effect of the special charges, net earnings would have been
$65.5 million. Net earnings were $46.1 million in 1998, or $49.0 million
excluding the special charge. Net earnings were $37.7 million in 1997. Basic
earnings per share, excluding the special charges, would have been $.86, $.68,
and $.54 in 1999, 1998, and 1997, respectively. Diluted earnings per share would
have been $.78, $.61, and $.49, respectively.
Capital Resources and Liquidity
- -------------------------------
Working capital at March 31, 1999 totaled $127.0 million compared to $205.1
million a year previously. At March 31, 1999, the Company had available credit
lines of $126.5 million of which $55.4 million was outstanding. The Company's
debt-to-capital ratio (capital defined as long-term debt plus stockholders'
equity) was 48% at March 31, 1999 compared to 46% at March 31, 1998. Included in
long-term debt are two convertible debt facilities totaling $140 million, of
which $25.0 million was converted to equity in April, 1999. Assuming both of
these facilities will convert to equity, the Company's debt-to-capital ratio
would be reduced to 27%. Total stockholders' equity increased 16% to $349.2
million at March 31, 1999.
Cash provided by operating activities was $59.4 million for 1999 compared to
$64.4 million in 1998 and $44.0 million in 1997. Excluding the impact of special
charges, cash provided by operating activities was $87.7 million, $69.1 million
and $44.0 million in 1999, 1998 and 1997, respectively. Earnings before
interest, taxes, depreciation, and amortization ("EBITDA"), again excluding the
impact of the special charges, increased by 35% in 1999 after increasing 36% in
1998. The resulting operating cash flow was reduced by $123.4 million in 1999,
$55.4 million in 1998, and $48.8 million in 1997 due to the net change in
operating assets and liabilities. The change primarily reflects higher current
and noncurrent receivables, partially offset by higher accounts payable and
accrued liabilities resulting from the growth of the business. EBITDA is not
intended to represent cash flows for the period, is not presented as an
alternative to operating income as an indicator of operating performance, may
not be comparable to other similarly titled measures of other companies, and
should not be considered in isolation or as a substitute for measures of
performance prepared in accordance with generally accepted accounting
principles. However, EBITDA is a relevant measure of the Company's operations
and cash flows and is used internally as a surrogate measure of cash provided by
operating activities.
<PAGE>
Investing activities used $190.1 million in 1999, $86.6 million in 1998, and
$108.0 million in 1997. Investing activities in 1999 included $127.7 million in
capital expenditures, compared to $67.9 million in 1998 and $65.0 million in
1997. Capital expenditures are principally due to purchases of data center
equipment to support the Company's outsourcing agreements, as well as the
purchase of additional data center equipment in the Company's core data centers.
Approximately one-half of the capital expenditures in 1999 were related to
customer-specific projects or contractual customer requirements. The Company has
also occupied a new building in Downers Grove and is occupying two new buildings
in Little Rock, Arkansas in the first quarter of fiscal 2000.
Investing activities during 1999 also include $18.5 million in software
development costs, compared to $21.4 million in 1998 and $10.7 million in 1997.
The capitalization in 1998 included $8.1 million capitalized by May & Speh on a
project that was completed during 1998. Excluding the decrease related to this
project at May & Speh, capitalization increased $5.2 million, which was
generally due to capitalization of software related to the Acxiom Data Network.
The remainder of the software capitalization includes software tools and
databases developed for customers in all three segments of the business.
Investing activities also reflect cash paid for acquisitions of $46.0 million in
1999, $19.8 million in 1998, and $16.2 million in 1997. These outflows were
partially offset in 1998 by $15.3 million received from the sale of assets,
including $13.0 million from the sale of the retail and direct marketing assets
of Pro CD. Notes 2 and 15 to the consolidated financial statements discuss the
acquisitions and dispositions in more detail. Investing activities also reflect
the investment of $10.4 million in 1999 and $6.1 million in 1998 by the Company
in joint ventures. These investments include approximately $4.0 million invested
in each of 1999 and 1998 in Bigfoot International, Inc., an emerging company
that provides services and tools for internet e-mail users, and $3.2 million
invested in fiscal 1999 in Ceres Integrated Solutions, LLC, a provider of
software and analytical services to large retailers. Investing activities also
include purchases and sales of marketable securities. These securities were
owned by May & Speh prior to the merger. As of March 31, 1999, the Company no
longer holds any marketable securities.
Financing activities in 1999 provided $24.9 million, including sales of stock
through the Company's stock option and employee stock purchase plans and the
exercise of a warrant by Trans Union for the purchase of 4 million shares. This
warrant was issued to Trans Union in 1992 in conjunction with the data center
management agreement between Trans Union and the Company. Financing activities
in 1998 provided $128.0 million, including the issuance of the $115 million
convertible debt by May & Speh in March 1998. Financing activities in 1997
included the issuance of $30 million in senior notes and the issuance of $43.0
million of common stock by May & Speh.
During fiscal 1999, construction was substantially completed on the Company's
new headquarters building and a new customer service facility in Little Rock,
Arkansas. These two buildings were built pursuant to 50/50 joint ventures
between the Company and local real estate investors. The Company will occupy
both of these two buildings in early fiscal 2000. The Company has also occupied
a new building in Downers Grove. During fiscal 2000, the Company expects to
begin construction on a new customer service facility in Conway, as well as
another customer service facility in Little Rock. The Conway project is expected
to be completed in February, 2000 and to cost approximately $12.0 million. The
Little Rock building is expected to cost approximately $28.0 million and
construction is expected to last from August, 1999 to July, 2001. Financing
plans for these two buildings are not yet complete, although the City of Little
Rock has committed to issue revenue bonds for the Little Rock project.
While the Company does not have any other material contractual commitments for
capital expenditures, additional investments in facilities and computer
equipment continue to be necessary to support the growth of the business. In
addition, new outsourcing or facilities management contracts frequently require
substantial up-front capital expenditures in order to acquire or replace
existing assets. In some cases, the Company also sells software, hardware, and
data to customers under extended payment terms or notes receivable collectible
over one to eight years. These arrangements also require up-front expenditures
of cash, which are repaid over the life of the agreement. The Company has also
been, and will likely continue to be, actively pursuing acquisitions. As a
result, management expects that it will be necessary to raise additional capital
during the next fiscal year. Management believes that capital could be raised by
negotiating an increase in the current revolving credit agreement, by incurring
other debt on either a secured or unsecured basis, or by the issuance of
additional equity
<PAGE>
securities in either public or private offerings. Management also believes that
the Company has significant unused capacity to raise capital which could be used
to support future growth. In May of 1999, the Company arranged a $25 million
increase in the current revolving credit facility. This temporary increase will
expire July 31, 1999.
Year 2000
- ----------
Many computer systems ("IT Systems') and equipment and instruments with embedded
microprocessors ("non-IT systems") were designed to only recognize the last two
digits of a calendar year. With the arrival of the Year 2000, these systems and
microprocessors may encounter operating problems due to their inability to
distinguish years after 1999 from years preceding 1999. This could manifest in a
system failure or miscalculations causing disruption of operations, including,
among other things, a temporary inability to process or transmit data, or engage
in normal business activities. As a result, the Company is engaged in an
extensive project to remediate or replace its date-sensitive IT systems and non-
IT systems.
The following discussion of the implications of the Year 2000 issue for the
Company contains numerous forward-looking statements based on inherently
uncertain information. The information presented is based on the Company's best
estimates, which were derived utilizing a number of assumptions of future
events, including the continued availability of internal and external resources,
third party modifications, and other factors. However, there can be no guarantee
that these estimates will be achieved and actual results could differ. Although
the Company believes it will be able to make the necessary modifications in
advance, there can be no guarantee that failure to correctly modify the systems
would not have a material adverse effect on the Company.
Since 1996 the Company has been engaged in an enterprise-wide effort ("the
Project") to address the risks associated with the Year 2000 problem, both
internal and external. Under the Project, the Company has established a project
office comprised of representatives from each of the operating divisions of the
Company. A Company readiness champion and project leader are responsible for the
readiness process, which includes deliverables such as plans, reviews, and
appropriate sign-offs by the appropriate business unit leaders and the Company's
Year 2000 leadership. The Project also includes the dissemination of internal
communications and status reports on a regular basis to senior leadership.
The Company believes that it has identified and evaluated its internal Year 2000
issues and that sufficient resources have been devoted to renovating IT and non-
IT systems that were not already "Year 2000 ready." The Company set an internal
deadline of December 31, 1998 to achieve Year 2000 readiness status, with any
residual activity to conclude before March 31, 1999. Overall, this objective was
achieved as outlined in the Project and any exceptions are being managed. The
original timeline was developed to allow the Company to focus on recent mergers
and acquisitions as well as customer-driven dependencies. While the core Project
substantially ended on March 31, 1999, a transition strategy was implemented
moving the Company from a project mode to a standards-based maintenance mode.
The Project involved four phases: (1) planning; (2) remediation; (3) testing;
and (4) certification. The planning phase involved developing a detailed
inventory of applications and systems, identifying the scope of necessary
remediation to each application or system, and establishing a conversion
schedule. During the remediation phase, source codes were actually converted,
date fields were expanded or windowed, and the remediated system was tested to
ensure it is functionally the same as the existing production version. In the
testing phase, test data was prepared and the application was tested using a
variety of Year 2000 scenarios. The certification phase validated that a system
could run successfully in a Year 2000 environment and appropriate internal sign-
offs were obtained.
The following chart indicates the estimated state of completion of each phase of
the Project. It is important to note that each phase of the Project must be
completed before moving to the next phase.
<PAGE>
<TABLE>
<CAPTION>
Current Planned Planned
April December December
1999 1998 1999
---- ---- ----
<S> <C> <C> <C>
Planning 100% 100% 100%
Remediation 99% 90% 100%
Testing 95% 80% 100%
Certification 94% 75% 100%
</TABLE>
With regard to the Company's operational platforms (hardware, operating systems
and vendor software) in the Company's primary data center located at the
headquarters location, mainframes and servers are currently 95% Year 2000 ready.
The financial impact of the Project to the Company has not been, and is not
expected to be, material to its financial position or results of operations in
any given fiscal year. The costs to date associated with the Year 2000 effort
primarily represent a reallocation of existing Company resources. Because of the
range of possible issues and the large number of variables involved (including
the Year 2000 readiness of any entities acquired by the Company), it is
impossible to accurately quantify the potential cost of problems if the
Company's remediation efforts or the efforts of those with whom it does business
are not successful. Such costs and any failure of such remediation efforts could
result in a loss of business, damage to the Company's reputation, and legal
liability.
The Company currently believes that with modifications to existing software and
conversions to new software, the Year 2000 issues can be mitigated. But the
systems of vendors on which the Company's systems rely may not be converted in a
timely fashion, or a vendor or customer may fail to convert its software or may
implement a conversion that is incompatible with the Company's systems, which
could have a material adverse impact on the Company.
In order to assess the readiness status of the Company's vendors, the Company
contacted each vendor, via written and/or telephone inquiries, regarding its
Year 2000 status and set up an internal database of this information. The
Company obtained, when possible, written commitments from each vendor that the
products supplied to the Company are or will be (by a date certain) Year 2000
ready. As of March 31, 1999, the Company had received responses to 89% of its
inquiries. The Company is also relying on representations made or contained in
its vendors' web sites. The responses received were analyzed and where
necessary, testing was undertaken. Year 2000 ready versions of vendor products
were obtained, as available, and moved onto production platforms. The Company
has also identified and is communicating with customers to determine if
customers have an effective plan in place to address their Year 2000 issues, and
to determine the extent of the Company's vulnerability to the failure of
customers to remediate their own Year 2000 issues.
The Company believes that the most likely risks of serious Year 2000 business
disruptions are external in nature, such as disruptions in telecommunications,
electric, or transportation services. In addition, the Company places a high
degree of reliance on computer systems of third parties, such as customers and
computer hardware and software suppliers. Although the Company is assessing the
readiness of these third parties and preparing contingency plans, there can be
no guarantee that the failure of these third parties to modify their systems in
advance of December 31, 1999 would not have a material adverse effect on the
Company. Of all the external risks, the Company believes the most reasonably
likely worst case scenario would be a business disruption resulting from an
extended and/or extensive communications failure.
In an effort to reduce the risks associated with the Year 2000 problem, the
Company has established and is currently continuing to develop Year 2000
contingency plans that build upon existing disaster recovery and contingency
plans. Examples of the Company's existing contingency plans include alternative
power supplies and communication lines. Contingency planning for possible Year
2000 disruptions will continue to be defined, improved and implemented.
<PAGE>
Despite the best efforts of the Company, the failure to correct a material Year
2000 problem could result in an interruption in, or a failure of, certain normal
business activities or operations. Any failures could materially and adversely
affect the Company's results of operations, liquidity and financial condition.
Due to the general uncertainty inherent in the Year 2000 problem, resulting in
part from the uncertainty of the Year 2000 readiness of third party vendors and
customers, the Company is unable to determine at this time whether the
consequences of Year 2000 failures will have a material impact on the Company's
results of operations, liquidity or financial condition. The Project is expected
to significantly reduce the Company's level of uncertainty about the Year 2000
problem and, in particular, about the Year 2000 compliance and readiness of its
material third party vendors and customers. The Company believes that the
continued implementation of the Project will reduce the possibility of
significant interruptions to the Company's normal business operations.
Seasonality and Inflation
- -------------------------
Although the Company cannot accurately determine the amounts attributable
thereto, the Company has been affected by inflation through increased costs of
compensation and other operating expenses. Generally, the effects of inflation
are offset by technological advances, economies of scale and other operational
efficiencies. The Company has established a pricing policy for long-term
contracts which provides for the effects of expected increases resulting from
inflation.
The Company's operations have not proven to be significantly seasonal, although
the Company's traditional direct marketing operations experience slightly higher
revenues in the Company's second and third quarters. In order to minimize the
impact of these fluctuations, the Company continues to move toward long-term
strategic partnerships with more predictable revenues. Revenues under long-term
contract (defined as three years or longer) were 53%, 55%, and 53% of
consolidated revenues for 1999, 1998, and 1997, respectively.
Acquisitions
- -------------
In fiscal 1997, the Company completed two acquisitions, which became effective
in April 1996. The acquisition of Pro CD, Inc. was accounted for as a pooling of
interests and the acquisition of Direct Media/DMI, Inc. was accounted for as a
purchase. In 1998, the Company completed two additional acquisitions, which were
effective October 1, 1997. The acquisitions of MultiNational Concepts, Ltd. and
Catalog Marketing Services, Inc., entities which were under common control, and
Buckley Dement, L.P. and its affiliated company, KM Lists, Incorporated were
both accounted for as purchases. In fiscal 1999, the Company acquired
Normadress, SIGMA Marketing Group, Inc., May & Speh, Inc., and three business
units from Deluxe Corporation. The May & Speh acquisition was accounted for as a
pooling-of-interests and the other acquisitions were treated as purchases. See
footnote 2 to the consolidated financial statements for more information
regarding these acquisitions. The Company has also made several smaller
acquisitions which are not material either individually or in the aggregate. In
1999, these smaller acquisitions included Marketing Technology, in Spain, and
Berry Consulting, in the U.K. Subsequent to March 31, 1999, the Company also
completed a purchase acquisition of Horizon Systems, Inc. and a merger with
Computer Graphics of Arizona which will be accounted for as a pooling-of-
interests.
Other Information
- -----------------
In 1999 and 1998 the Company had one major customer who accounted for more than
10% of revenue, and in 1997 the Company had two major customers who accounted
for more than 10% of revenue. Allstate Insurance Company accounted for 11.3%,
13.1%, and 14.1% in 1999, 1998, and 1997, respectively, and Trans Union LLC
accounted for 11.8% in 1997. The Trans Union data center management agreement
and marketing services agreement both expire in 2005. The Allstate agreement has
been extended and now expires in 2004.
Acxiom, Ltd., the Company's United Kingdom business, provides services to the
United Kingdom market which are similar to the traditional direct marketing
industry services the Company provides in the United States. In addition,
Acxiom, Ltd. also provides promotional materials handling and response services
to its U.K. customers.
<PAGE>
Most of the Company's exposure to exchange rate fluctuation is due to
translation gains and losses as there are no material transactions which cause
exchange rate impact. The U.K. operation generally funds its own operations and
capital expenditures, although the Company occasionally advances funds from the
U.S. to the U.K. These advances are considered to be long-term investments, and
any gain or loss resulting from changes in exchange rates as well as gains or
losses resulting from translating the financial statements into U.S. dollars are
accumulated in a separate component of stockholders' equity. There are no
restrictions on transfers of funds from the U.K.
Efforts are continuing to expand the services of Acxiom to customers in Europe
and the Pacific region. Management believes that the market for the Company's
services in such locations is largely untapped. To date the Company has had no
significant revenues or operations outside of the United States and the United
Kingdom. The Company's United Kingdom operations earned profits of $1.9 million
in fiscal 1999, $1.5 million in fiscal 1998 and $1.0 million in fiscal 1997, and
are expected to continue to show profits in the future.
Effective March 31, 1994, the Company sold substantially all of the assets of
its former Acxiom Mailing Services operation to MorCom, Inc. In June 1996,
MorCom ceased operations. During 1997, the Company established valuation
reserves for the remaining receivables under the sale agreement. The Company
also obtained title to and sold a portion of the property related to the
mortgage note, receiving proceeds of $949,000. During 1998, the Company sold the
two remaining parcels of property which had been used by the Acxiom Mailing
Services unit. The aggregate proceeds were $2.3 million resulting in a gain on
disposal of $105,000 which is included in other income.
Effective August 22, 1997, the Company sold certain assets of its Pro CD
subsidiary to a subsidiary of American Business Information, Inc., which is now
known as infoUSA, Inc. This company acquired the retail and direct marketing
operations of Pro CD, along with compiled telephone book data for aggregate cash
proceeds of $18 million. In conjunction with the sale to infoUSA, the Company
also recorded certain valuation and contingency reserves. Included in other
income is the gain on disposal related to this transaction of $855,000.
The Accounting Standards Executive Committee (AcSEC) of the American Institute
of Certified Public Accountants has issued Statement of Position ("SOP") 98-4,
"Deferral of the Effective Date of a Provision of SOP 97-2, "Software Revenue
Recognition." SOP 97-2 is effective for fiscal year 1999 and provides guidance
on recognizing revenue on software transactions. In software transactions that
include multiple elements, SOP 97-2 requires the fee to be allocated to the
various elements based on vendor-specific objective evidence of the fair values
of the elements, and provides guidance on how to arrive at vendor-specific
objective evidence. SOP 98-4 defers until fiscal 2000 the effective date of the
provisions of SOP 97-2 that limit what constitutes vendor-specific objective
evidence. All other provisions of SOP 97-2 are effective for fiscal year 1999.
AcSEC has now issued SOP 98-9 that further defines vendor-specific objective
evidence. The Company does not expect that the effect of implementing SOP 98-9
will be material.
AcSEC has also issued SOP 98-5, "Reporting on the Costs of Start-up Activities."
SOP 98-5 is effective for fiscal year 2000 and requires that the cost of start-
up activities be expensed when incurred. The Company does not expect that the
effect of implementing this SOP will be material.
Outlook
- -------
Certain statements in this Annual Report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements, which are not statements of historical fact, may
contain estimates, assumptions, projections and/or expectations regarding the
Company's financial position, results of operations, market position, product
development, regulatory matters, growth opportunities and growth rates,
acquisition and divestiture opportunities, and other similar forecasts and
statements of expectation. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," and "should," and variations of these
words and similar expressions, are intended to identify these forward-looking
statements. Such forward-looking statements are not guarantees of future
performance. They involve known and unknown risks, uncertainties, and other
factors which may cause the actual results, performance or achievements of the
<PAGE>
achievements expressed or implied by such forward-looking statements.
Representative examples of such factors are discussed in more detail in the
Company's Annual Report on Form 10-K and include, among other things, the
possible adoption of legislation or industry regulation concerning certain
aspects of the Company's business; the removal of data sources and/or marketing
lists from the Company; the ability of the Company to retain customers who are
not under long-term contracts with the Company; technology challenges; year 2000
issues; the risk of damage to the Company's data centers or interruptions in the
Company's telecommunications links; acquisition integration; the effects of
postal rate increases; and other market factors. See "Additional Information
Regarding Forward-looking Statements" in the Company's Annual Report on Form
10-K.
The Company believes that existing customer industries (direct marketing,
financial services, insurance, information and communication services, and
media/publishing) all continue to offer good growth potential. In general, there
is an increased emphasis on customer relationship management and one-to-one
marketing in businesses which the Company believes will increase demand for the
Company's data content and services both in the U.S. and worldwide. Also, as e-
commerce continues to expand, the Company believes that its data content and
services will have increased application in support of these initiatives. The
Company continues to explore uses of its data and services beyond marketing
applications and has had some success in developing applications in the
insurance underwriting area. At the same time, the Company is also focusing on
other vertical industries such as retail, pharmaceuticals, telecommunications,
high tech, entertainment, packaged goods, and utilities as strong growth
opportunities. In addition, the Company also believes there is strong growth
potential beyond the Fortune 1000 companies that it has traditionally served
into medium-sized businesses and divisions of large corporations, as well as the
small office/home office marketplace. As a result of improved delivery systems
via the Acxiom Data NetworkSM , announced in February, 1998, these markets are
now becoming cost efficient for the Company to deliver portions of its products
and services. The Acxiom Data Network will link the customer's data to the
Company's enhancement database via the internet from the customer's desktop. It
is anticipated that the Acxiom Data Network will expand the marketplace for the
Company's data products to customers smaller than the Fortune 1000. The Company
also believes that the Acxiom Data Network should dramatically cut costs in
maintaining and updating data warehouses for current customers. In addition, the
Company has developed relationships with third party database and decision
support system providers to promote alternate channels of distribution for the
Company's products and services.
The Company believes that operating margins will continue to improve primarily
as a result of implementing the Acxiom Data Network, leveraging the Company's
data content resources, improving internal processes, and increasing the
profitability of the Company's international operations.
The Company currently expects its effective tax rate to be 37-39% for 1999. This
estimate is based on current tax law and current estimates of earnings, and is
subject to change.
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1999 and 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
Assets 1999 1998
----------------- -----------------
<S> <C> <C>
Current assets:
Cash and cash equivalents $ 9,590 115,510
Marketable securities - 11,794
Trade accounts receivable, net (note 12) 180,767 118,281
Refundable income taxes (note 9) 12,651 7,670
Deferred income taxes (note 9) 30,643 2,868
Other current assets (note 5) 59,415 31,747
----------------- -----------------
Total current assets 293,066 287,870
Property and equipment, net of accumulated depreciation
and amortization (notes 4 and 6) 224,841 185,684
Software, net of accumulated amortization of $17,941
in 1999 and $11,642 in 1998 (note 3) 37,400 38,673
Excess of cost over fair value of net assets acquired, net
of accumulated amortization of $13,517 in 1999
and $8,585 in 1998 (note 2) 122,483 73,851
Other assets (note 5) 201,537 87,072
----------------- -----------------
$ 879,327 673,150
================= =================
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt (note 6) 23,355 10,466
Trade accounts payable 59,215 21,946
Accrued expenses:
Merger and integration costs (note 2) 33,181 -
Payroll 17,706 18,293
Other 25,744 20,846
Deferred revenue 6,833 11,197
----------------- -----------------
Total current liabilities 166,034 82,748
Long-term debt, excluding current installments (note 6) 325,223 254,240
Deferred income taxes (note 9) 38,889 34,968
Stockholders' equity (notes 2, 6, 8 and 9):
Common stock 7,919 7,405
Additional paid-in capital 185,103 121,130
Retained earnings 159,516 175,946
Accumulated other comprehensive income (loss) (324) 676
Unearned ESOP compensation - (1,782)
Treasury stock, at cost (3,033) (2,181)
----------------- -----------------
Total stockholders' equity 349,181 301,194
Commitments and contingencies (notes 2, 6, 7, 10, 11 and 14)
----------------- -----------------
$ 879,327 673,150
================= =================
</TABLE>
See accompanying notes to consolidated financial statements.
2
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Operations
Years ended March 31, 1999, 1998 and 1997
(Dollars in thousands, except per share amounts)
<TABLE>
<CAPTION>
1999 1998 1997
---------------- ---------------- ---------------
<S> <C> <C> <C>
Revenue (notes 2 and 12) $ 729,984 569,020 479,239
Operating costs and expenses (notes 2, 3, 7, 10 and 11):
Salaries and benefits 272,737 210,327 171,364
Computer, communications and other
equipment 110,254 86,338 76,366
Data costs 106,680 88,246 77,874
Other operating costs and expenses 124,908 100,272 87,283
Special charges (note 2) 118,747 4,700 -
---------------- ---------------- ---------------
Total operating costs and expenses 733,326 489,883 412,887
---------------- ---------------- ---------------
Income (loss) from operations (3,342) 79,137 66,352
---------------- ---------------- ---------------
Other income (expense):
Interest expense (17,393) (10,044) (5,746)
Other, net 6,289 4,294 (71)
---------------- ---------------- ---------------
(11,104) (5,750) (5,817)
---------------- ---------------- ---------------
Earnings (loss) before income taxes (14,446) 73,387 60,535
Income taxes (note 9) 1,984 27,332 22,800
---------------- ---------------- ---------------
Net earnings (loss) $ (16,430) 46,055 37,735
================ ================ ===============
Earnings (loss) per share:
Basic $ (.22) .64 .54
================ ================ ===============
Diluted $ (.22) .57 .49
================ ================ ===============
</TABLE>
See accompanying notes to consolidated financial statements.
3
<PAGE>
ACXIOM CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended March 31, 1999, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Common Stock Additional
---------------------------------
Number Paid-in
Of Shares Amount Capital
---------------- ------------- ---------------
<S> <C> <C> <C>
Balances at March 31, 1996 64,988,536 $ 6,499 52,180
Pro CD merger (note 2) 3,313,324 331 2,647
Sale of common stock 4,381,362 438 46,828
Tax benefit of stock options exercised (note 9) - - 2,232
Issuance of common stock warrants - - 1,300
Employee stock awards and shares issued to employee
benefit plans, net of treasury shares repurchased - - 1,359
ESOP compensation earned - - -
Comprehensive income:
Foreign currency translation - - -
Net earnings - - -
---------------- ------------- ---------------
Total comprehensive income
Balances at March 31, 1997 72,683,222 7,268 106,546
May & Speh merger (note 2) 72,160 7 115
Sale of common stock 1,235,971 124 9,158
Tax benefit of stock options exercised (note 9) - - 2,763
Employee stock awards and shares issued to employee
benefit plans, net of treasury shares repurchased 57,529 6 2,548
ESOP compensation earned - - -
Comprehensive income:
Foreign currency translation - - -
Net earnings - - -
---------------- ------------- ---------------
Total comprehensive income
Balances at March 31, 1998 74,048,882 7,405 121,130
Sale of common stock 4,000,000 400 11,850
Tax benefit of stock options and warrants
exercised (note 9) - - 36,393
Issuance of warrants (note 2) - - 2,676
Employee stock awards and shares issued to employee
benefit plans, net of treasury shares repurchased 1,144,198 114 13,054
ESOP compensation earned - - -
Comprehensive loss:
Foreign currency translation - - -
Net loss - - -
---------------- ------------- ---------------
Total comprehensive loss
Balances at March 31, 1999 79,193,080 $ 7,919 185,103
================ ============= ===============
</TABLE>
See accompanying notes to consolidated financial statements.
4
<PAGE>
<TABLE>
<CAPTION>
Accumulated
other Total
comprehensive Unearned Treasury stock stockholders'
------------------------
Comprehensive Retained income ESOP Number equity
income (loss) earnings (loss) compensation of shares Amount (note 7)
------------- --------- --------------- ------------- ---------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
92,614 (863) (7,722) (1,242,242) (2,323) 140,385
(4,752) - - - - (1,774)
- - - - 47,266
- - - - - 2,232
- - - - - 1,300
- - - 145,912 (192) 1,167
- - 2,376 - - 2,376
1,141 - 1,141 - - - 1,141
37,735 37,735 - - 37,735
------------- -------- ----------- --------- ----------- -------- ----------
$ 38,876
=============
125,597 278 (5,346) (1,096,330) (2,515) 231,828
4,294 - 1,188 - - 5,604
- - - - - 9,282
- - - - - 2,763
- - - 259,410 334 2,888
- - 2,376 - - 2,376
398 - 398 - - - 398
46,055 46,055 - - - - 46,055
------------- -------- ----------- --------- ----------- -------- ----------
$ 46,453
=============
175,946 676 (1,782) (836,920) (2,181) 301,194
- - - - - 12,250
- - - - - 36,393
- - - - - 2,676
- - - 104,649 (852) 12,316
- - 1,782 - - 1,782
(1,000) - (1,000) - - - (1,000)
(16,430) (16,430) - - - - (16,430)
-------------
$ (17,430)
============= -------- ----------- --------- ----------- -------- ----------
159,516 (324) - (732,271) (3,033) 349,181
======== =========== ========= =========== ======== ==========
</TABLE>
5
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31, 1999, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
-------------- -------------- -------------
<S> <C> <C> <C>
Cash flows from operating activities:
Net earnings (loss) $ (16,430) 46,055 37,735
Adjustments to reconcile net earnings (loss) to net
cash provided by operating activities:
Depreciation and amortization 63,886 49,658 35,400
Loss (gain) on disposal or impairment
of assets 26 (960) 2,412
Provision for returns and doubtful accounts 2,223 3,094 4,462
Deferred income taxes (23,854) 12,143 8,163
Tax benefit of stock options and warrants
exercised 36,393 2,763 2,232
ESOP compensation 1,782 2,376 2,376
Special charges 118,747 4,700 -
Changes in operating assets and liabilities:
Accounts receivable (61,386) (29,453) (24,034)
Other assets (61,195) (42,258) (16,107)
Accounts payable and other liabilities 27,555 21,025 (8,649)
Merger and integration costs (28,385) (4,700) -
-------------- -------------- -------------
Net cash provided by operating
activities 59,362 64,443 43,990
-------------- -------------- -------------
Cash flows from investing activities:
Proceeds from the disposition of assets 733 15,340 2,385
Proceeds from sale of marketable securities 11,794 19,021 12,919
Purchases of marketable securities - (5,778) (31,366)
Cash received in merger - - 21
Development of software (18,544) (21,411) (10,715)
Capital expenditures (127,703) (67,865) (64,973)
Investments in joint ventures (10,400) (6,072) -
Net cash paid in acquisitions (note 2) (45,983) (19,841) (16,223)
-------------- --------------- -------------
Net cash used in investing activities (190,103) (86,606) (107,952)
-------------- -------------- ------------
Cash flows from financing activities:
Proceeds from debt 18,939 125,820 39,459
Payments of debt (18,607) (10,015) (20,994)
Sale of common stock 24,566 12,171 48,433
-------------- ------------ ----------
Net cash provided by financing
activities 24,898 127,976 66,898
-------------- --------------- -------------
(Continued)
</TABLE>
6
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Years ended March 31, 1999, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C>
Effect of exchange rate changes on cash $ (77) 2 -
------------ ------------ ------------
Net increase (decrease) in cash and cash
equivalents (105,920) 105,815 2,936
Cash and cash equivalents at beginning of year 115,510 9,695 10,183
============ ============ ============
Cash and cash equivalents at end of year $ 9,590 115,510 13,119
============ ============ ============
Supplemental cash flow information:
Cash paid (received) during the year for:
Interest $ 15,608 9,303 5,053
Income taxes (5,574) 12,627 15,131
Noncash financing and investing activities:
Issuance of warrants 2,676 - 1,300
Enterprise software licenses acquired
under software obligation 74,638 10,949 -
Acquisition of property and equipment
under capital lease - 14,939 11,373
Convertible debt issued in acquisition (note 2) - - 25,000
============ ============ ============
</TABLE>
See accompanying notes to consolidated financial statements.
7
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Schedule of Valuation and Qualifying Accounts
Years ended March 31, 1999, 1998 and 1997
(In thousands)
<TABLE>
<CAPTION>
Additions Bad
Balance at charged to Other debts Bad Balance
beginning costs and additions written debts at end
of period expenses (note) off recovered of period
------------ ------------ ------------ ------------ ------------ ------------
<S> <C> <C> <C> <C> <C> <C>
1999:
Allowance for doubtful
accounts, returns
and credits $ 3,630 2,223 710 2,026 715 5,252
============ ============ ============ ============ ============ ============
1998:
Allowance for doubtful
accounts, returns
and credits $ 4,692 3,094 224 4,777 397 3,630
============ ============ ============ ============ ============ ============
1997:
Allowance for doubtful
accounts, returns
and credits $ 2,230 4,462 4,800 7,044 238 4,686
============ ============ ============ ============ ============ ============
</TABLE>
Note - Other additions represent the valuation accounts acquired in connection
with business combinations.
<PAGE>
Notes to Consolidated Financial Statements
March 31, 1999, 1998 and 1997
Summary of Significant Accounting Policies
(a) Description of Business
Acxiom Corporation ("Acxiom" or the "Company") provides information
management solutions using customer, consumer and business data,
primarily for marketing applications. Business segments of the Company
provide list services, data warehousing, consulting, data content,
fulfillment services, and outsourcing and facilities management services
primarily in the United States (U.S.) and United Kingdom (U.K.).
(b) Principles of Consolidation
The consolidated financial statements include the accounts of the
Company and its subsidiaries. All significant intercompany balances and
transactions have been eliminated in consolidation. Investments in 20%
to 50% owned entities are accounted for using the equity method and
investments in less than 20% owned entities are accounted for at cost.
(c) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure
of contingent assets and liabilities to prepare these consolidated
financial statements in conformity with generally accepted accounting
principles. Actual results could differ from those estimates.
(d) Marketable Securities
Marketable securities are stated at cost which approximates fair market
value; gains and losses are recognized in the period realized. The
Company has classified its securities as available for sale.
(e) Accounts Receivable
Financial instruments which potentially subject the Company to
concentrations of credit risk consist primarily of trade accounts
receivable. The Company's receivables are from a large number of
customers. Accordingly, the Company's credit risk is affected by general
economic conditions. Although the Company has several large individual
customers, concentrations of credit risk are limited because of the
diversity of the Company's customers.
Trade accounts receivable are presented net of allowances for doubtful
accounts and credits of $5.3 million and $3.6 million in 1999 and 1998,
respectively.
(f) Property and Equipment
Property and equipment are stated at cost. Depreciation and amortization
are calculated on the straight-line method over the estimated useful
lives of the assets as follows: buildings and improvements, 5 - 31.5
years; office furniture and equipment, 3 - 12 years; and data processing
equipment, 2 - 10 years.
<PAGE>
Property held under capitalized lease arrangements is included in
property and equipment, and the associated liabilities are included with
long-term debt. Property and equipment taken out of service and held for
sale is recorded at net realizable value and depreciation is ceased.
(g) Software and Research and Development Costs
Capitalized and purchased software costs are amortized on a straight-
line basis over the remaining estimated economic life of the product, or
the amortization that would be recorded by using the ratio of gross
revenues for a product to total current and anticipated future gross
revenues for that product, whichever is greater. Research and
development costs incurred prior to establishing technological
feasibility of software products are charged to operations as incurred.
(h) Excess of Cost Over Fair Value of Net Assets Acquired
The excess of acquisition costs over the fair values of net assets
acquired in business combinations treated as purchase transactions
("goodwill") is being amortized on a straight-line basis over 15 to 40
years from acquisition dates. The Company periodically evaluates the
existence of goodwill impairment on the basis of whether the goodwill is
fully recoverable from the projected, undiscounted net cash flows of the
related business unit. The amount of goodwill impairment, if any, is
measured based on projected discounted future operating cash flows using
a discount rate reflecting the Company's average cost of funds. The
assessment of the recoverability of goodwill will be impacted if
estimated future operating cash flows are not achieved.
(i) Revenue Recognition
Revenue from services, including consulting, list processing and data
warehousing, and from information technology outsourcing services,
including facilities management contracts, are recognized as services
are performed. In the case of long-term outsourcing contracts, capital
expenditures incurred in connection with the contract are capitalized
and amortized over the term of the contract whereby profit is recognized
under the contracts at a consistent rate of margin as services are
performed under the contract. In certain outsourcing contracts,
additional revenue is recognized based upon attaining certain annual
margin improvements or cost savings over performance benchmarks as
specified in the contracts. Such additional revenue is recognized when
it is determinable that such benchmarks have been met.
Revenue from sales and licensing of software and data are recognized
when the software and data are delivered, the fee for such data is fixed
or determinable, and collectibility of such fee is probable. Software
and data file maintenance is recognized over the term of the agreements.
In the case of multiple-element software and data arrangements, revenue
is allocated to the respective elements based upon their relative fair
values. Billed but unearned portions of revenue are deferred.
<PAGE>
(j) Income Taxes
The Company and its domestic subsidiaries file a consolidated Federal
income tax return. The Company's foreign subsidiaries file separate
income tax returns in the countries in which their operations are based.
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective
tax bases and operating loss and tax credit carryforwards. Deferred tax
assets and liabilities are measured using enacted tax rates expected to
apply to taxable income in the years in which those temporary
differences are expected to be recovered or settled. The effect on
deferred tax assets and liabilities of a change in tax rates is
recognized in income in the period that includes the enactment date.
(k) Foreign Currency Translation
The balance sheets of the Company's foreign subsidiaries are translated
at year-end rates of exchange, and the statements of earnings are
translated at the weighted average exchange rate for the period. Gains
or losses resulting from translating foreign currency financial
statements are included in accumulated other comprehensive income (loss)
in the statement of stockholders' equity.
(l) Earnings Per Share
A reconciliation of the numerator and denominator of basic and diluted
earnings (loss) per share is shown below (in thousands, except per share
amounts):
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------- --------------
<S> <C> <C> <C>
Basic earnings per share:
Numerator-net earnings (loss) $ (16,430) 46,055 37,735
============ ============ =============
Denominator-weighted
average shares outstanding 75,969 72,199 69,279
============ ============ =============
Earnings (loss) per share $ (.22) .64 .54
============ ============ =============
Diluted earnings per share:
Numerator:
Net earnings (loss) $ (16,430) 46,055 37,735
Interest expense on convertible
debt (net of tax effect) -- 465 445
------------ ------------ -------------
$ (16,430) 46,520 38,180
============ ============ =============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------- --------------
<S> <C> <C> <C>
Denominator:
Weighted average shares
outstanding 75,969 72,199 69,279
Effect of common stock options - 3,593 3,782
Effect of common stock warrant - 3,015 3,004
Convertible debt - 2,102 2,000
------------ ------------ -------------
75,969 80,909 78,065
============ ============ =============
Earnings (loss) per share $ (.22) .57 .49
============ ============ =============
</TABLE>
All potentially dilutive securities were excluded from the above
calculations for the year ended March 31, 1999 because they were
antidilutive. The equivalent share effects of common stock options and
warrants which were excluded were 5,632. Potentially dilutive shares
related to the convertible debt which were excluded were 7,783. Also,
interest expense on the convertible debt (net of income tax effect)
excluded in computing diluted loss per share was $4,257.
Options to purchase shares of common stock that were outstanding during
1999, 1998 and 1997 but were not included in the computation of diluted
earnings (loss) per share because the option exercise price was greater
than the average market price of the common shares are shown below (in
thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
------------------ ------------------ -----------------
<S> <C> <C> <C>
Number of shares under option 1,491 2,176 1,432
Range of exercise prices $24.24 - $54.00 $15.94 - $35.92 $18.61 - $35.00
</TABLE>
(m) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed Of
Long-lived assets and certain identifiable intangibles are reviewed for
impairment whenever events or changes in circumstances indicate that the
carrying amount of an asset may not be recoverable. Recoverability of
assets to be held and used is measured by a comparison of the carrying
amount of an asset to future net cash flows expected to be generated by
the asset. If such assets are considered to be impaired, the impairment
to be recognized is measured by the amount by which the carrying amount
of the assets exceeds the fair value of the assets. Assets to be
disposed of are reported at the lower of the carrying amount or fair
value less costs to sell.
(n) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
<PAGE>
(o) Reclassifications
To conform to the 1999 presentation, certain accounts for 1998 and
1997 have been reclassified. The reclassifications had no effect on
net earnings for 1998 and 1997.
(2) Acquisitions
Effective January 1, 1999, the Company acquired three database marketing
units from Deluxe Corporation ("Deluxe"). The purchase price was $23.6
million, of which $18.0 million was paid in cash at closing and the
remainder was paid in April 1999. Deluxe's results of operations are
included in the Company's consolidated results of operations beginning
January 1, 1999. This acquisition was accounted for as a purchase. The
excess of cost over net assets acquired of $21.9 million is being amortized
using the straight-line method over 15 years. The pro forma effect of the
acquisition is not material to the Company's consolidated results of
operations for the periods reported.
On September 17, 1998, the Company issued 20,858,923 shares of its common
stock in exchange for all outstanding capital stock of May & Speh, Inc.
("May & Speh"). Additionally, the Company assumed all of the outstanding
options granted under May & Speh's stock option plans with the result that
4,289,202 shares of the Company's common stock became subject to issuance
upon exercise of such options. This business combination has been accounted
for as a pooling-of-interests and, accordingly, the consolidated financial
statements for periods prior to the combination have been restated to
include the accounts and results of operations of May & Speh.
The results of operations previously reported by the separate enterprises
and the combined amounts presented in the accompanying consolidated
financial statements are summarized below.
<TABLE>
<CAPTION>
1998 1997
------------- ------------
<S> <C> <C>
Revenue:
Acxiom $ 465,065 402,016
May & Speh 103,955 77,223
------------- -------------
Combined $ 569,020 479,239
============= =============
Net earnings:
Acxiom 35,597 27,512
May & Speh 10,458 10,223
------------- -------------
Combined $ 46,055 37,735
============= =============
</TABLE>
Included in the statement of operations for the year ended March 31, 1999
are revenues of $66.6 million and earnings of $9.3 million for May & Speh
for the period from April 1, 1998 to September 17, 1998.
<PAGE>
Prior to the combination, May & Speh's fiscal year ended September 30. In
recording the pooling-of-interests combination, May & Speh's consolidated
financial statements as of and for the year ended March 31, 1998 were
combined with Acxiom's consolidated financial statements for the same
period and May & Speh's consolidated financial statements as of and for the
year ended September 30, 1996 were combined with Acxiom's consolidated
financial statements as of and for the year ended March 31, 1997. May &
Speh's unaudited consolidated results of operations for the six months
ended March 31, 1997 included revenue of $42.9 million and net earnings of
$4.3 million. An adjustment has been made to retained earnings as of March
31, 1997 to record the net earnings of May & Speh for the six months ended
March 31, 1997.
During the year ended March 31, 1999, the Company recorded special charges
totaling $118.7 million related to merger and integration charges
associated with the May & Speh merger and the write down of other impaired
assets. The charges consisted of approximately $10.7 million of transaction
costs to be paid to investment bankers, accountants, and attorneys; $8.1
million in associate-related reserves, principally employment contract
termination costs and severance costs; $48.5 million in contract
termination costs; $11.5 million for the write down of software; $29.3
million for the write down of property and equipment; $7.8 million for the
write down of goodwill and other assets; and $2.8 million in other write
downs and accruals.
The transaction costs are fees which were incurred as a direct result of
the merger transaction. The associate-related reserves include 1) payments
to be made under a previously existing employment agreement with one
terminated May & Speh executive in the amount of $3.5 million, 2) payments
to be made under previously existing employment agreements with seven May &
Speh executives who are remaining with Acxiom, but are entitled to payments
totaling $3.6 million due to the termination of their employment
agreements, and 3) involuntary termination benefits aggregating $1.0
million to seven May & Speh and Company employees whose
positions have been or will be eliminated. One of the seven positions, for
which $0.7 million was accrued, was not related to the May & Speh merger,
but related to a Company associate whose position was eliminated as a
result of the closure of the Company's New Jersey business location. As of
March 31, 1999, one of the seven associates has been terminated.
The contract termination costs are costs which have been incurred to
terminate duplicative software contracts. The amounts recorded represent
cash payments which the Company has made or will make to the software
vendors to terminate existing May & Speh agreements.
For all other write downs and costs, the Company performed an analysis as
required under Statement of Financial Accounting Standards ("SFAS") No. 121
to determine whether and to what extent any assets were impaired as a
result of the merger. The analysis included estimating expected future cash
flows from each of the assets which were expected to be held and used by
the Company. These expected cash flows were compared to the carrying amount
of each asset to determine whether an impairment existed. If an impairment
was indicated, the asset was written down to its fair value. Quoted market
prices were used to estimate fair value when market prices were available.
In cases where quoted prices were not available, the Company estimated fair
value using internal valuation sources. In the case of assets to be
disposed of, the Company compared the carrying value of the asset to its
estimated fair value, and if an impairment was indicated, wrote the asset
down to its estimated fair value.
<PAGE>
Approximately $110.1 million of the charge was for duplicative assets or
costs directly attributable to the May & Speh merger. The remaining $8.6
million related to other impaired assets which were impaired during the
year, primarily $5.7 million related to goodwill and shut-down costs
associated with the closing of certain business locations in New Jersey,
Malaysia, and the Netherlands. Special charges in 1998 relate to employee
severance payments made to former May & Speh executives.
The following table shows the balances which were initially accrued as of
September 30, 1998, and the changes in those balances during the remainder
of the year ended March 31, 1999 (dollars in thousands):
<TABLE>
<CAPTION>
September 30, March 31,
1998 Additions Payments 1999
---------------- ------------- -------------- -------------
<S> <C> <C> <C> <C>
Transaction costs $ 9,163 - 9,163 -
Associate-related reserves 6,783 1,375 3,804 4,354
Contract termination costs 40,500 - 13,500 27,000
Other accruals 3,745 - 1,918 1,827
---------------- ------------- -------------- -------------
$ 60,191 1,375 28,385 33,181
================ ============= =============== =============
</TABLE>
The associate-related reserves and contract termination costs will be
substantially paid out during fiscal 2000. The other accruals will be paid
out over periods ranging up to five years.
Effective May 1, 1998, May & Speh acquired substantially all of the assets
of SIGMA Marketing Group, Inc. ("Sigma"), a full-service database marketing
company headquartered in Rochester, New York. Under the terms of the
agreement, May & Speh paid $15 million at closing for substantially all of
Sigma's assets, and will pay the former owners up to an additional $6
million, the substantial portion of which is contingent on certain
operating objectives being met. Sigma's former owners were also issued
warrants to acquire 276,800 shares of the Company's common stock at a price
of $17.50 per share in connection with the transaction. Sigma's results of
operations are included in the Company's consolidated results of operations
beginning May 1, 1998. This acquisition was accounted for as a purchase.
The excess of cost over net assets acquired of $23.2 million is being
amortized using the straight-line method over 20 years. The pro forma
effect of the acquisition is not material to the Company's consolidated
results of operations for the periods reported.
Effective April 1, 1998, the Company purchased the outstanding stock of
Normadress, a French company located in Paris. Normadress provides database
and direct marketing services to its customers. The purchase price was 20
million French Francs (approximately $3.4 million) in cash and other
additional cash consideration of which approximately $900,000 is guaranteed
and the remainder is based on the future performance of Normadress.
Normadress' results of operations are included in the Company's
consolidated results of operations beginning April 1, 1998. This
acquisition was accounted for as a purchase. The excess of cost over net
assets acquired of $5.7 million is being amortized using the straight-line
method over 20 years. The pro forma effect of the acquisition is not
material to the Company's consolidated results of operations for the
periods reported.
<PAGE>
Effective October 1, 1997, the Company acquired 100% ownership of
MultiNational Concepts, Ltd. ("MultiNational") and Catalog Marketing
Services, Inc. (d/b/a Shop the World by Mail), entities under common
control (collectively "STW"). Total consideration was $4.6 million (net of
cash acquired) and other cash consideration based on the future performance
of STW. MultiNational, headquartered in Hoboken, New Jersey,
is an international mailing list and database maintenance provider for
consumer catalogers interested in developing foreign markets. Shop the
World by Mail, headquartered in Sarasota, Florida, provides cooperative
customer acquisition programs, and also produces an international catalog
of catalogs whereby end-customers in over 60 countries can order catalogs
from around the world.
Also effective October 1, 1997, the Company acquired Buckley Dement, L.P.
and its affiliated company, KM Lists, Incorporated (collectively "Buckley
Dement"). Buckley Dement, headquartered in Skokie, Illinois, provides list
brokerage, list management, promotional mailing and fulfillment, and
merchandise order processing to pharmaceutical, health care, and other
commercial customers. Total consideration was $14.2 million (net of cash
acquired) and other cash consideration based on the future performance of
Buckley Dement.
Both the Buckley Dement and STW acquisitions are accounted for as purchases
and their operating results are included with the Company's results
beginning October 1, 1997. The purchase price for the two acquisitions
exceeded the fair value of net assets acquired by $12.6 million and $5.2
million for Buckley Dement and STW, respectively. The resulting excess of
cost over net assets acquired is being amortized over 20 years. The pro
forma effect of the acquisitions are not material to the Company's
consolidated results of operations for the periods reported.
On April 9, 1996, the Company issued 3,313,324 shares of its common stock
for all of the outstanding common stock and common stock options of Pro CD,
Inc., ("Pro CD"). Headquartered in Danvers, Massachusetts, Pro CD is a
publisher of reference software on CD-ROM. The business combination was
accounted for as a pooling-of-interests. The stockholders' equity and
operations of Pro CD were not material in relation to those of the Company.
As such, the Company recorded the combination by restating stockholders'
equity as of April 1, 1996, without restating prior years' financial
statements to reflect the pooling-of-interests. At April 1, 1996 Pro CD's
liabilities exceeded its assets by $1.8 million.
Also in April, 1996, the Company acquired the assets of Direct Media/DMI,
Inc. ("DMI") for $25 million and the assumption of certain liabilities of
DMI. The $25 million purchase price was payable in three years, and could,
at DMI's option, be paid in two million shares of Acxiom common stock in
lieu of cash plus accrued interest. Subsequent to March 31, 1999, the
holder of the convertible note elected to receive the two million shares of
the Company's common stock in lieu of cash. Headquartered in Greenwich,
Connecticut, DMI provides list brokerage, management and consulting
services to business-to-business and consumer list owners and mailers. At
April 1, 1996 the liabilities assumed by the Company exceeded the fair
value of the net assets acquired from DMI by approximately $1.0 million.
The resulting excess of purchase price over fair value of net assets
acquired of $26.0 million is being amortized over 20 years. The acquisition
has been accounted for as a purchase, and accordingly, the results of
operations of DMI are included in the consolidated results of operations
from the date of its acquisition.
<PAGE>
Subsequent to March 31, 1999, the Company completed the acquisition of
Computer Graphics of Arizona, Inc. ("Computer Graphics") and all of its
affiliated companies in a stock-for-stock merger. The Company issued
1,871,343 shares of its common stock in exchange for all outstanding common
stock of Computer Graphics. Computer Graphics, a privately held enterprise
headquartered in Phoenix, Arizona, is a computer service business
principally serving financial services direct marketers. The acquisition
will be accounted for as a pooling-of-interests.
Also subsequent to March 31, 1999, the Company acquired the assets of
Horizon Systems, Inc. ("Horizon") for $16.0 million in cash and common
stock of the Company and the assumption of certain liabilities of Horizon,
and other cash and stock considerations based on the future performance of
Horizon.
(3) Software and Research and Development Costs
The Company recorded amortization expense related to internally developed
computer software of $8.3 million, $5.9 million and $5.4 million in 1999,
1998 and 1997, respectively. Additionally, research and development costs
of $17.8 million, $13.7 million and $13.0 million were charged to
operations during 1999, 1998 and 1997, respectively.
(4) Property and Equipment
Property and equipment is summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
Land $ 8,141 8,344
Buildings and improvements 91,025 74,634
Office furniture and equipment 36,461 24,456
Data processing equipment 203,865 193,959
------------ -------------
339,492 301,393
Less accumulated depreciation and amortization 114,651 115,709
------------ -------------
$ 224,841 185,684
============ ==============
</TABLE>
(5) Other Assets
Included in other assets are unamortized outsourcing capital expenditure
costs in the amount of $28.4 million and $25.0 million as of March 31, 1999
and 1998, respectively. Noncurrent receivables from software license, data,
and equipment sales are also included in other assets in the amount of
$24.9 million and $20.3 million as of March 31, 1999 and 1998,
respectively. The current portion of such receivables is included in other
current assets in the amount of $24.6 million and $9.5 million as of March
31, 1999 and 1998, respectively. Certain of the noncurrent receivables have
no stated interest rate. In such cases, such receivables have been
discounted using an appropriate imputed interest rate based upon the
customer, type of agreement, collateral and payment terms. This discount is
being recognized into income using the interest method. Also included in
other assets are capitalized software license agreements of $103.5 million
and $19.8 million as of March 31, 1999 and 1998, respectively.
<PAGE>
(6) Long-Term Debt
Long-term debt consists of the following (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
------------- -------------
<S> <C> <C>
5.25% convertible subordinated notes due 2003 $ 115,000 115,000
Unsecured revolving credit agreement 55,384 36,445
6.92% Senior notes due March 30, 2007, payable
in annual installments of $4,286 commencing
March 30, 2001; interest is payable semi-annually 30,000 30,000
3.12% Convertible note, interest and principal due
April 30, 1999; convertible at maturity into two
million shares of common stock (note 2) 25,000 25,000
Capital leases on land, buildings and equipment
payable in monthly payments of $357 of principal
and interest; remaining terms of from five to
twenty years; interest rates at approximately 8% 20,587 22,818
Software license liabilities payable over terms of
from five to seven years; effective interest rates
at approximately 6% 76,748 10,949
8.5% unsecured term loan; quarterly principal
payments of $200 plus interest with the balance
due in 2003 9,000 9,800
9.75% Senior notes, due May 1, 2000, payable in annual
installments of $2,143 each May 1;
interest is payable semi-annually 4,286 6,429
ESOP loan (note 11) - 1,782
Other capital leases, debt and long-term liabilities 12,573 6,483
------------- -------------
Total long-term debt 348,578 264,706
Less current installments 23,355 10,466
------------- -------------
Long-term debt, excluding current installments $ 325,223 254,240
============= =============
</TABLE>
<PAGE>
In March 1998, May & Speh completed an offering of $115 million 5.25%
convertible subordinated notes due 2003. The notes are convertible at the
option of the holder into shares of the Company's common stock at a
conversion price of $19.89 per share. The notes also are redeemable, in
whole or in part, at the option of the Company at any time on or after
April 3, 2001. The total net proceeds to the Company were approximately
$110.8 million after deducting underwriting discounts and commissions and
estimated offering expenses.
The unsecured revolving credit agreement, which expires January 31, 2003
provides for revolving loans and letters of credit in amounts of up to $125
million. The terms of the credit agreement provide for interest at the
prime rate (or, at other alternative market rates at the Company's option).
At March 31, 1999, the effective rate was 6.275%. The agreement requires a
commitment fee equal to 3/16 of 1% on the average unused portion of the
loan. The Company also has another unsecured line of credit amounting to
$1.5 million of which none was outstanding at March 31, 1999 or 1998. The
other unsecured line expires August 31, 1999 and bears interest at
approximately the same rate as the revolving credit agreement.
In connection with the construction of the Company's new headquarters
building and a new customer service facility in Little Rock, Arkansas, the
Company has entered into 50/50 joint ventures with local real estate
developers. In each case, the Company is guaranteeing portions of the
construction loans for the buildings. The aggregate amount of the
guarantees at March 31, 1999 was $8.2 million. The total cost of the two
building projects is expected to be approximately $19.5 million.
Under the terms of certain of the above borrowings, the Company is required
to maintain certain tangible net worth levels and working capital, debt-to-
equity and debt service coverage ratios. At March 31, 1999, due to the
merger with May & Speh and the special charges booked during the year, the
Company was in violation of certain restrictive covenants under the
unsecured revolving credit agreement and the 9.75% senior notes. The
violations of each of these agreements has been waived by the respective
lenders. The violations occurred as a result of the net loss reported by
the Company for the quarter ended September 30, 1998. Since these
calculations are performed using the latest four quarters' income
statements and cash flows, the violation has been waived through the June
30, 1999 quarter. After this date the violations will have been cured since
the bulk of the special charges will no longer be included in the 12-month
period of the applicable calculations. The aggregate maturities of long-
term debt for the five years ending March 31, 2004 are as follows: 2000,
$23.4 million; 2001, $27.8 million; 2002, $23.6 million; 2003, $112.2
million; and 2004, $132.3 million.
(7) Leases
The Company leases data processing equipment, office furniture and
equipment, land and office space under noncancellable operating leases.
Future minimum lease payments under noncancellable operating leases for the
five years ending March 31, 2004 are as follows: 2000, $22.9 million; 2001,
$18.0 million; 2002, $12.0 million; 2003, $8.9 million; and 2004, $7.2
million.
<PAGE>
Total rental expense on operating leases was $24.7 million, $15.2 million
and $18.4 million for the years ended March 31, 1999, 1998 and 1997,
respectively.
(8) Stockholders' Equity
The Company has authorized 200 million shares of $.10 par value common
stock and 1 million shares of $1.00 par value preferred stock. The Board of
Directors of the Company may designate the relative rights and preferences
of the preferred stock when and if issued. Such rights and preferences
could include liquidation preferences, redemption rights, voting rights and
dividends and the shares could be issued in multiple series with different
rights and preferences. The Company currently has no plans for the issuance
of any shares of preferred stock.
On March 29, 1996, May & Speh completed an initial public offering of
3,350,000 shares of its common stock (2,680,000 shares as adjusted for
merger with Acxiom) and on April 24, 1996 completed the offering of an
additional 1,005,000 shares of common stock (804,000 shares as adjusted)
that were subject to an over-allotment granted to the underwriters of the
offering. Total net proceeds from the offering were approximately $43.5
million.
On March 30, 1998, May & Speh also completed an offering of 325,000 shares
of its common stock (260,000 shares as adjusted). Total net proceeds were
approximately $3.5 million.
In connection with its data center management agreement entered into in
August, 1992 with Trans Union Corporation, the Company issued a warrant,
which expired on August 31, 2000 and entitled Trans Union to acquire up to
4 million additional shares of newly-issued common stock. The exercise
price for the warrant stock was $3.06 per share through August 31, 1998 and
increased $.25 per share in each of the two years subsequent to August 31,
1998. The warrant was exercised for 4 million shares on August 31, 1998.
The Company intends to record $68.0 million as additional sales discounts
on its tax return for the difference in the fair value of the stock on the
date the warrant was exercised and the fair value of the warrant on the
date the warrant was issued (note 9).
The Company has for its U.S. employees a Key Employee Stock Option Plan
("Plan") for which 15.2 million shares of the Company's common stock have
been reserved. The Company has for its U.K. employees a U.K. Share Option
Scheme ("Scheme") for which 1.6 million shares of the Company's common
stock have been reserved. These plans provide that the option price, as
determined by the Board of Directors, will be at least the fair market
value at the time of the grant. The term of nonqualified options is also
determined by the Board of Directors. Incentive options granted under the
plans must be exercised within 10 years after the date of the option. At
March 31, 1999, 3,427,678 shares and 822,763 shares are available for
future grants under the Plan and the Scheme, respectively.
<PAGE>
May & Speh had options outstanding under two separate plans at March 31,
1998. Generally, such options vest and become exercisable in five equal
annual increments beginning one year after the issue date and expire 10
years after the issue date except in the event of change in control of May
& Speh all options become fully vested and exercisable. Pursuant to the
merger, the Company assumed all of the currently outstanding options
granted under the May & Speh plans with the result that shares of the
Company's common stock become subject to issuance upon exercise of such
options.
Activity in stock options was as follows:
<TABLE>
<CAPTION>
Weighted
Number average Number of
of price shares
shares per share exercisable
-------------- -------------- ---------------
<S> <C> <C> <C>
Outstanding at March 31, 1996 9,509,746 $ 7.18 3,467,728
Granted 1,300,811 17.29
Pro CD acquisition (note 2) 294,132 1.76
Exercised (835,369) 2.41
Terminated (93,255) 7.29
---------------
Outstanding at March 31, 1997 10,176,065 8.31 3,974,265
May & Speh acquisition (note 2) 217,440 16.89
Granted 2,143,176 14.88
Exercised (977,511) 3.86
Terminated (157,190) 11.89
Outstanding at March 31, 1998 11,401,980 9.63 5,316,861
Granted 1,066,891 27.82
Exercised (937,411) 6.95
Terminated (115,462) 12.96
---------------
Outstanding at March 31, 1999 11,415,998 12.19 7,913,294
===============
</TABLE>
The per share weighted-average fair value of stock options granted during
fiscal 1999, 1998 and 1997 was $13.43, $9.91 and $8.61, respectively, on
the date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions: Dividend yield of 0% for 1999, 1998
and 1997; risk-free interest rate of 5.44% in 1999, 6.79% in 1998, 6.71% in
1997; expected option life of 10 years for 1999, 1998 and 1997; and
expected volatility of 40.48% in 1999, 38.69% in 1998 and 34.85% in 1997.
<PAGE>
Following is a summary of stock options outstanding as of March 31, 1999:
<TABLE>
<CAPTION>
Options outstanding Options exercisable
--------------------------------------------------- ------------------------------
Weighted Weighted Weighted
average average average
Range of remaining exercise exercise
exercise Options contractual per Options per
prices outstanding life share exercisable share
------------------ --------------- --------------- ------------ -------------- ------------
<S> <C> <C> <C> <C> <C>
$ 1.38 - 2.54 1,239,220 6.33 years $ 2.19 1,148,996 $ 2.23
2.56 - 3.13 1,367,719 4.81 years 2.83 1,190,833 2.79
3.37 - 6.25 2,261,009 5.06 years 5.42 1,616,736 5.29
7.43 - 11.75 1,372,414 6.76 years 10.37 1,146,462 10.44
11.82 - 15.63 1,265,951 7.32 years 13.88 949,646 13.98
15.69 - 18.13 1,350,611 10.67 years 16.55 1,168,925 16.47
18.38 - 24.81 1,849,793 8.21 years 22.54 550,589 22.33
24.84 - 51.97 677,947 13.11 years 33.61 141,107 27.64
52.05 - 54.00 31,344 14.61 years 52.08 - -
------------ -------------- ------------ -------------- ------------
11,415,998 7.30 years $ 12.19 7,913,294 $ 9.49
============ ============== ============ ============== ============
</TABLE>
The Company applies the provisions of Accounting Principles Board Opinion
No. 25 and related interpretations in accounting for the stock based
compensation plans. Accordingly, no compensation cost has been recognized
by the Company in the accompanying consolidated statements of operations
for any of the fixed stock options granted. Had compensation cost for
options granted been determined on the basis of the fair value of the
awards at the date of grant, consistent with the methodology prescribed by
SFAS No. 123, the Company's net earnings (loss) would have been
reduced/increased to the following pro forma amounts for the years ended
March 31 (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ ------------
<S> <C> <C> <C> <C>
Net earnings (loss) As reported $ (16,430) 46,055 37,735
Pro forma (33,590) 39,625 36,672
Basic earnings (loss) per share As reported $ (.22) .64 .54
Pro forma (.44) .55 .53
Diluted earnings (loss) per share As reported $ (.22) .57 .49
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C>
Pro forma (.44) .50 .48
</TABLE>
Pro forma net earnings (loss) reflect only options granted after fiscal
1995. Therefore, the full impact of calculating compensation cost for stock
options under SFAS No. 123 is not reflected in the pro forma net earnings
amounts presented above because compensation cost is reflected over the
options' vesting period of 8-9 years and compensation cost for options
granted prior to April 1, 1995 is not considered.
<PAGE>
The Company maintains an employee stock purchase plan which provides for
the purchase of shares of common stock at 85% of the market price. There
were 129,741, 125,151 and 110,332 shares purchased under the plan during
the years ended March 31, 1999, 1998 and 1997, respectively.
(9) Income Taxes
Total income tax expense (benefit) was allocated as follows (dollars in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------- -------------
<S> <C> <C> <C>
Income from operations $ 1,984 27,332 22,800
Stockholders' equity, for expenses for tax
purposes in excess of amounts
recognized for financial reporting
purposes:
Compensation (9,178) (2,763) (2,232)
Sale discounts (note 8) (27,215) - -
------------ ------------- -----------
$ (34,409) 24,569 20,568
============ ============= ===========
</TABLE>
Income tax expense (benefit) attributable to earnings (loss) from
operations consists of (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------ ------------ -------------
<S> <C> <C> <C>
Current expense:
Federal $ 17,534 12,247 13,009
Foreign 1,165 1,206 83
State 7,139 1,736 1,545
------------ ------------ -------------
25,838 15,189 14,637
------------ ------------ -------------
Deferred expense (benefit):
Federal (14,780) 9,792 5,979
Foreign (248) 23 687
State (8,826) 2,328 1,497
------------ ------------ -------------
(23,854) 12,143 8,163
------------ ------------ -------------
Total tax expense $ 1,984 27,332 22,800
============ ============ =============
</TABLE>
<PAGE>
The actual income tax expense (benefit) attributable to earnings (loss)
from operations differs from the expected tax expense (benefit) (computed
by applying the U.S. Federal corporate tax rate of 35% to earnings (loss)
before income taxes) as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998 1997
----------- ------------ ------------
<S> <C> <C> <C>
Computed expected tax expense (benefit) $ (5,056) 25,685 21,187
Increase (reduction) in income taxes
resulting from:
Nondeductible merger and integration
expenses 7,836 - -
State income taxes, net of Federal
income tax benefit (1,096) 2,642 1,977
Research and experimentation credits (265) (715) (683)
Other 565 (280) 319
----------- ------------ ------------
$ 1,984 27,332 22,800
=========== ============ ============
</TABLE>
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at March 31, 1999 and
1998 are presented below (dollars in thousands).
<TABLE>
<CAPTION>
1999 1998
------------ -------------
<S> <C> <C>
Deferred tax assets:
Accrued expenses not currently deductible
for tax purposes $ 20,633 2,150
Investments, principally due to differences in
basis for tax and financial reporting purposes 328 676
Net operating loss carryforwards 7,986 -
Other 1,696 846
------------ -------------
Total deferred tax assets 30,643 3,672
------------ -------------
Deferred tax liabilities:
Property and equipment, principally due
to differences in depreciation (12,887) (11,099)
Intangible assets, principally due to
differences in amortization (3,624) (2,212)
Capitalized software and other costs
expensed as incurred for tax purposes (20,501) (20,618)
Installment sale gains for tax purposes (1,877) (1,843)
------------ -------------
Total deferred tax liabilities (38,889) (35,772)
------------ -------------
Net deferred tax liability $ (8,246) (32,100)
============ =============
</TABLE>
At March 31, 1999, the Company had available tax benefits associated with
state tax operating loss carryforwards of $45.7 million which expire
annually in varying amounts to 2014. The deferred tax effect of such
carryforwards are included above.
<PAGE>
In assessing the realizability of deferred tax assets, management considers
whether it is more likely than not that some portion or all of the deferred
tax assets will not be realized. The ultimate realization of deferred tax
assets is dependent upon the generation of future taxable income during the
periods in which those temporary differences become deductible. Based upon
the Company's history of substantial profitability and taxable income and
its utilization of tax planning strategies, management believes it is more
likely than not the Company will realize the benefits of these deductible
differences, net of any valuation allowances.
(10) Related Party Transactions
The Company leases certain equipment from a business partially owned by an
officer. Rent expense under these leases was approximately $797,000 during
the years ended March 31, 1999, 1998 and 1997, respectively. Under the
terms of the lease in effect at March 31, 1999 the Company will make
monthly lease payments of $66,000 through December, 2001. The Company has
agreed to pay the difference, if any, between the sales price of the
equipment and 70 percent of the lessor's related loan balance
(approximately $5.0 million at March 31, 1999) should the Company elect to
exercise its early termination rights or not extend the lease beyond its
initial five year term and the lessor sells the equipment as a result
thereof.
(11) Retirement Plans
The Company has a retirement savings plan which covers substantially all
domestic employees. The Company also offers a supplemental non-qualified
deferred compensation plan for certain management employees. The Company
matches 50% of the employee's salary deferred contributions under both
plans up to 6% annually and may contribute additional amounts to the plans
from the Company's earnings at the discretion of the Board of Directors.
Effective October 1, 1988, May & Speh established the May & Speh, Inc.
Employee Stock Ownership Plan ("ESOP") for the benefit of substantially all
of its employees. May & Speh borrowed $22,500,000 from a bank ("ESOP Loan")
and loaned the proceeds to the ESOP for the purpose of providing the ESOP
sufficient funds to purchase 9,887,340 shares of May & Speh's common stock
at $2.28 per share. The terms of the ESOP agreement required May & Speh to
make minimum contributions sufficient to meet the ESOP's debt service
obligations. During the year ended March 31, 1999, the ESOP loan was paid
in full and the ESOP was merged into the Company's retirement savings plan.
Company contributions for the above plans amounted to approximately $4.8
million, $4.3 million and $3.9 million in 1999, 1998 and 1997,
respectively.
(12) Major Customers
In 1999 and 1998, the Company had one major customer who accounted for more
than 10% of revenue, and in 1997, the Company had two major customers who
accounted for more than 10% of revenue. Allstate Insurance Company
("Allstate") accounted for revenue of $82.2 million (11.3%), $74.7 million
(13.1%) and $67.7 million (14.1%) in 1999, 1998 and 1997, respectively, and
Trans Union accounted for revenue of $56.6 million (11.8%) in 1997. At
March 31, 1999, accounts receivable from Allstate was $12.0 million.
<PAGE>
(13) Foreign Operations
Foreign operations are conducted primarily in the United Kingdom. The
following table shows financial information by geographic area for the
years 1999, 1998 and 1997 (dollars in thousands).
<TABLE>
<CAPTION>
United
States Foreign Consolidated
------------ ------------- --------------
<S> <C> <C> <C>
1999:
Revenue $ 688,834 41,150 729,984
Long-lived assets 452,891 10,687 463,578
============ ============= ==============
1998:
Revenue 534,374 34,646 569,020
Long-lived assets 303,569 7,860 311,429
============ ============= ==============
1997:
Revenue 450,819 28,420 479,239
Long-lived assets 206,216 6,106 212,322
============ ============= ==============
</TABLE>
(14) Contingencies
The Company is involved in various claims and legal actions in the ordinary
course of business. In the opinion of management, the ultimate disposition
of these matters will not have a material adverse effect on the Company's
consolidated financial position or its expected future consolidated results
of operations.
(15) Dispositions
Effective August 22, 1997, the Company sold certain assets of its Pro CD
subsidiary to a wholly-owned subsidiary of American Business Information,
Inc. ("ABI"). ABI is now known as infoUSA, Inc. ABI acquired the retail and
direct marketing operations of Pro CD, along with compiled telephone book
data for aggregate cash proceeds of $18.0 million, which included
consideration for a compiled telephone book data license. The Company also
entered into a data license agreement with ABI under which the Company will
pay ABI $8.0 million over a two-year period, and a technology and data
license agreement under which ABI will pay the Company $8.0 million over a
two-year period. In conjunction with the sale to ABI, the Company also
recorded certain valuation and contingency reserves. Included in other
income for the year ended March 31, 1998 is the gain on disposal related to
this transaction of $855,000.
<PAGE>
(16) Fair Value of Financial Instruments
The following methods and assumptions were used to estimate the fair value
of each class of financial instruments for which it is practicable to
estimate that value.
Cash and cash equivalents, marketable securities, trade receivables,
short-term borrowings, and trade payables - The carrying amount
approximates fair value because of the short maturity of these
instruments.
Long-term debt - The interest rate on the revolving credit agreement is
adjusted for changes in market rates and therefore the carrying value of
the credit agreement approximates fair value. The estimated fair value
of other long-term debt was determined based upon the present value of
the expected cash flows considering expected maturities and using
interest rates currently available to the Company for long-term
borrowings with similar terms. At March 31, 1999 the estimated fair
value of long-term debt approximates its carrying value.
(17) Segment Information
SFAS No. 131 "Disclosures about Segments of an Enterprise and Related
Information" ("SFAS 131") requires reporting segment information consistent
with the way management internally disaggregates an entity's operations to
assess performance and to allocate resources. As required, the Company
adopted the provisions of SFAS 131 in its fiscal 1999 consolidated
financial statements and has presented its prior-year segment information
to conform to SFAS 131's requirements.
The Company's business segments consist of Services, Data Products, and
Information Technology ("I. T.") Management. The Services segment
substantially consists of consulting, database and data warehousing and
list processing services. The Data Products segment includes all of the
Company's data content products. I. T. Management includes information
technology outsourcing and facilities management for data center
management, network management, client server management and other
complementary I. T. services. The Company evaluates performance of the
segments based on segment operating income, which excludes special charges.
The Company accounts for sales of certain data products as revenue in both
the Data Products segment and revenue of the Services segment which billed
the customer. The duplicate revenues are eliminated in consolidation.
The following tables present information by business segment (dollars in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Services $ 419,947 308,404 254,758
Data Products 186,706 155,206 135,449
I. T. Management 164,453 128,366 109,497
Intercompany eliminations (41,122) (22,956) (20,465)
------------- ------------ ------------
Total revenue $ 729,984 569,020 479,239
============= ============ ============
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
1999 1998 1997
------------- ------------ ------------
<S> <C> <C> <C>
Services 88,818 53,530 44,599
Data Products 15,370 15,664 8,878
I. T. Management 34,820 25,808 27,443
Intercompany eliminations (20,771) (11,942) (11,639)
Corporate and other (121,579) (3,923) (2,929)
------------- ------------ ------------
Income (loss) from operations $ (3,342) 79,137 66,352
============= ============ ============
Services 24,149 17,751 7,660
Data Products 19,214 12,660 8,861
I. T. Management 20,039 16,547 14,046
Corporate and other 484 2,700 4,833
------------- ------------ ------------
Depreciation and amortization $ 63,886 49,658 35,400
============= ============= ============
</TABLE>
<TABLE>
<CAPTION>
March 31,
-----------------------------
1999 1998
----------- ------------
<S> <C> <C>
Services $ 416,737 219,631
Data Products 167,111 130,704
I. T. Management 238,164 172,834
Corporate and other 57,315 149,981
----------- ------------
Total assets $ 879,327 673,150
=========== ============
</TABLE>
(18) Selected Quarterly Financial Data (Unaudited)
The table below sets forth selected financial information for each quarter
of the last two years (dollars in thousands, except per share amounts):
<TABLE>
<CAPTION>
1st 2nd 3rd 4th
quarter quarter quarter quarter
-------------- ------------ -------------- --------------
<S> <C> <C> <C> <C>
1999:
Revenue $ 158,810 174,358 187,912 208,904
Income (loss) from operations 19,711 (83,694) 25,589 35,052
Net earnings (loss) 11,356 (61,160) 13,759 19,615
Basic earnings (loss) per share .15 (.82) .18 .25
Diluted earnings (loss) per share .14 (.82) .17 .23
1998:
Revenue $ 123,952 135,876 147,043 162,149
Income from operations 14,852 20,072 20,329 23,884
Net earnings 8,186 11,995 11,766 14,108
</TABLE>
<PAGE>
<TABLE>
<S> <C> <C> <C> <C>
Basic earnings per share .11 .17 .16 .19
Diluted earnings per share .10 .15 .15 .18
</TABLE>
Independent Auditors' Report
The Board of Directors and Stockholders
Acxiom Corporation:
We have audited the accompanying consolidated balance sheets of Acxiom
Corporation and subsidiaries as of March 31, 1999 and 1998, and the related
consolidated statements of operations, stockholders' equity and cash flows for
each of the years in the three-year period ended March 31, 1999. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the consolidated
financial statements of May & Speh, Inc., a wholly-owned subsidiary, which
statements reflect total revenues constituting 16 percent of the related
consolidated total during the year ended March 31, 1997. Those statements were
audited by other auditors whose report has been furnished to us, and our
opinion, insofar as it relates to the amounts included for May & Speh, Inc., is
based solely on the report of the other auditors.
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 and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Acxiom Corporation and subsidiaries
as of March 31, 1999 and 1998, and the results of their operations and their
cash flows for each of the years in the three-year period ended March 31, 1999,
in conformity with generally accepted accounting principles.
Little Rock, Arkansas
May 28, 1999
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF ACXIOM
----------------------
U.S. SUBSIDIARIES
<TABLE>
<CAPTION>
Name Incorporated In Doing Business As
---- --------------- -----------------
<S> <C> <C>
Acxiom Asia, Ltd. Arkansas Acxiom Asia, Ltd.
Acxiom CDC, Inc. Arkansas Acxiom CDC, Inc.
Acxiom Children's Center, Inc. Arkansas Acxiom Children's Center, Inc.
Acxiom / Direct Media, Inc. Arkansas Acxiom / Direct Media, Inc.
Acxiom Great Lakes Data Center, Inc. Arkansas Acxiom Great Lakes Data Center, Inc.
Acxiom Leasing Corporation Arkansas Acxiom Leasing Corporation
Acxiom / May & Speh, Inc. Delaware Acxiom / May & Speh, Inc.
Acxiom RM-Tools, Inc. Arkansas Acxiom RM-Tools, Inc.
Acxiom RTC, Inc. Delaware Acxiom RTC, Inc.
Acxiom SDC, Inc. Arkansas Buckley Dement, an Acxiom Company
Acxiom Transportation Services, Inc. Arkansas ATS; Conway Aviation, Inc.
BSA, Inc. New Jersey MultiNational Concepts, Ltd.;
KM Lists Incorporated
Catalog Marketing Services, Inc. Florida Shop the World by Mail
Computer Graphics of Arizona, Inc. Arizona Computer Graphics of Arizona, Inc.
CG Marketing of Arizona, Inc. Arizona CG Marketing of Arizona, Inc.
Acxiom/CG, Inc. Arizona Acxiom/CG, Inc.
DQ Investment Corporation* California AccuDat
DataQuick Information Systems California Acxiom/DataQuick Products Group
Modern Mailers, Inc.* Delaware Acxiom Mailing Services
Pro CD, Inc. Delaware Data By Acxiom
</TABLE>
* Inactive
<PAGE>
INTERNATIONAL SUBSIDIARIES
<TABLE>
<CAPTION>
Name Incorporated In Doing Business As
---- --------------- -----------------
<S> <C> <C>
Acxiom Limited United Kingdom Acxiom Limited
Generator Datamarketing Limited United Kingdom Generator Datamarketing Limited
Marketlead Services, Ltd. United Kingdom N/A
(Agency company of Acxiom Limited)
Southwark Computer Services, Ltd. United Kingdom N/A
(Agency company of Acxiom Limited)
Normadress SA France Normadress
Marketing Technology SA Spain Marketing Technology
Acxiom Australia Pty Ltd Australia Acxiom Australia Pty Ltd
</TABLE>
<PAGE>
EXHIBIT 23
The Board of Directors
Acxiom Corporation
We consent to incorporation by reference in the registration statements (No.
333-72009 on Form S-3 and No. 33-17115, No. 33-37609, No. 33-37610, No. 33-
42351, No. 33-72310, No. 33-72312, No. 33-63423 and No. 333-03391 on Form S-8)
of Acxiom Corporation of our report dated May 28, 1999, relating to the
consolidated balance sheets of Acxiom Corporation and subsidiaries as of March
31, 1999 and 1998, and the related consolidated statements of operations,
stockholders' equity and cash flows for each of the years in the three-year
period ended March 31, 1999 which is incorporated by reference in the March 31,
1999 annual report on Form 10-K of Acxiom Corporation. We also consent to
incorporation by reference in the above-mentioned registration statements of our
report dated May 28, 1999 relating to the consolidated financial statement
schedule, which report appears in the March 31, 1999 annual report on Form 10-K
of Acxiom Corporation.
/s/ KPMG LLP
Little Rock, Arkansas
June 18, 1999
<PAGE>
Consent of Independent Accountants
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-3 (No. 333-72009) and on Form S-8 (No. 33-17115,
No. 33-37609, No. 33-37610, No. 33-42351, No. 33-72310, No. 33-72312,
No. 33-63423, No. 333-03391 and 333-63633) of Acxiom Corporation of our report
dated November 1, 1996, which appears in this Annual Report on Form 10-K of
Acxiom Corporation, relating to the consolidated statements of operations, of
stockholders' equity and of cash flows of May & Speh, Inc. for the year ended
September 30, 1996 (not presented separately herein).
PricewaterhouseCoopers LLP
Chicago, Illinois
June 18, 1999
<PAGE>
EXHIBIT 24
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned officer of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes as his true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution for him and in his name,
place and stead, in his capacity as the principal accounting officer of Acxiom,
to sign Acxiom's Annual Report on Form 10-K for the year ended March 31, 1999,
together with any amendments thereto, and to file the same, together with any
exhibits and all other documents related thereto, with the Securities and
Exchange Commission, granting to said attorney-in-fact and agent, full power and
authority to do and perform each and any act and thing requisite and necessary
to be done in connection therewith, as fully to all intents and purposes as the
undersigned might or could do in person, duly ratifying and confirming all that
said attorney-in-fact and agent may lawfully do or cause to be done by virtue of
the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this date.
Signature:
/s/ Robert S. Bloom
- -------------------
Robert S. Bloom
Date: June 14, 1999
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as her true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for her and in her name, place and stead, in her capacity as a director of
Acxiom, to sign Acxiom's Annual Report on Form 10-K for the year ended March 31,
1999, together with any amendments thereto, and to file the same, together with
any exhibits and all other documents related thereto, with the Securities and
Exchange Commission, granting to said attorneys-in-fact and agents, full power
and authority to do and perform each and any act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as the undersigned might or could do in person, duly ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set her hand this date.
Signature:
/s/ Ann H. Die
- --------------
Dr. Ann H. Die
Date: June 14, 1999
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of
Acxiom, to sign Acxiom's Annual Report on Form 10-K for the year ended March 31,
1999, together with any amendments thereto, and to file the same, together with
any exhibits and all other documents related thereto, with the Securities and
Exchange Commission, granting to said attorneys-in-fact and agents, full power
and authority to do and perform each and any act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as the undersigned might or could do in person, duly ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this date.
Signature:
/s/ William T. Dillard II
- ----------------------------------
William T. Dillard II
Date: June 14, 1999
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of
Acxiom, to sign Acxiom's Annual Report on Form 10-K for the year ended March 31,
1999, together with any amendments thereto, and to file the same, together with
any exhibits and all other documents related thereto, with the Securities and
Exchange Commission, granting to said attorneys-in-fact and agents, full power
and authority to do and perform each and any act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as the undersigned might or could do in person, duly ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this date.
Signature:
/s/ Harry C. Gambill
- --------------------
Harry C. Gambill
Date: June 14, 1999
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and officer
of Acxiom Corporation, a Delaware corporation (the "Company"), does hereby
constitute and appoint Catherine L. Hughes and/or Robert S. Bloom as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in his capacity as a
director and principal financial officer of Acxiom, to sign Acxiom's Annual
Report on Form 10-K for the year ended March 31, 1999, together with any
amendments thereto, and to file the same, together with any exhibits and all
other documents related thereto, with the Securities and Exchange Commission,
granting to said attorneys-in-fact and agents, full power and authority to do
and perform each and any act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as the undersigned
might or could do in person, duly ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue of
the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this date.
Signature:
/s/ Rodger S. Kline
- -------------------
Rodger S. Kline
Date: June 14, 1999
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of
Acxiom, to sign Acxiom's Annual Report on Form 10-K for the year ended March 31,
1999, together with any amendments thereto, and to file the same, together with
any exhibits and all other documents related thereto, with the Securities and
Exchange Commission, granting to said attorneys-in-fact and agent, full power
and authority to do and perform each and any act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as the undersigned might or could do in person, duly ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this date.
Signature:
/s/ Thomas F. (Mack) McLarty, III
- -------------------------------------
Thomas F. (Mack) McLarty, III
Date: June 14, 1999
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and officer
of Acxiom Corporation, a Delaware corporation (the "Company"), does hereby
constitute and appoint Catherine L. Hughes and/or Robert S. Bloom as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in his capacity as a
director and principal executive officer of Acxiom, to sign Acxiom's Annual
Report on Form 10-K for the year ended March 31, 1999, together with any
amendments thereto, and to file the same, together with any exhibits and all
other documents related thereto, with the Securities and Exchange Commission,
granting to said attorneys-in-fact and agents, full power and authority to do
and perform each and any act and thing requisite and necessary to be done in
connection therewith, as fully to all intents and purposes as the undersigned
might or could do in person, duly ratifying and confirming all that said
attorneys-in-fact and agents may lawfully do or cause to be done by virtue of
the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this date.
Signature:
/s/ Charles D. Morgan
- ---------------------
Charles D. Morgan
Date: June 14, 1999
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director of Acxiom
Corporation, a Delaware corporation (the "Company"), does hereby constitute and
appoint Catherine L. Hughes and/or Robert S. Bloom as his true and lawful
attorneys-in-fact and agents, with full power of substitution and resubstitution
for him and in his name, place and stead, in his capacity as a director of
Acxiom, to sign Acxiom's Annual Report on Form 10-K for the year ended March 31,
1999, together with any amendments thereto, and to file the same, together with
any exhibits and all other documents related thereto, with the Securities and
Exchange Commission, granting to said attorneys-in-fact and agents, full power
and authority to do and perform each and any act and thing requisite and
necessary to be done in connection therewith, as fully to all intents and
purposes as the undersigned might or could do in person, duly ratifying and
confirming all that said attorneys-in-fact and agents may lawfully do or cause
to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this date.
Signature:
/s/ Robert A. Pritzker
- ----------------------
Robert A. Pritzker
Date: June 14, 1999
<PAGE>
POWER OF ATTORNEY
-----------------
KNOW ALL MEN BY THESE PRESENTS, that the undersigned director and officer
of Acxiom Corporation, a Delaware corporation (the "Company"), does hereby
constitute and appoint Catherine L. Hughes and/or Robert S. Bloom as his true
and lawful attorneys-in-fact and agents, with full power of substitution and
resubstitution for him and in his name, place and stead, in his capacity as a
director and officer of Acxiom, to sign Acxiom's Annual Report on Form 10-K for
the year ended March 31, 1999, together with any amendments thereto, and to file
the same, together with any exhibits and all other documents related thereto,
with the Securities and Exchange Commission, granting to said attorneys-in-fact
and agents, full power and authority to do and perform each and any act and
thing requisite and necessary to be done in connection therewith, as fully to
all intents and purposes as the undersigned might or could do in person, duly
ratifying and confirming all that said attorneys-in-fact and agents may lawfully
do or cause to be done by virtue of the power herein granted.
IN WITNESS WHEREOF, the undersigned has hereunto set his hand this date.
Signature:
/s/ James T. Womble
- -------------------
James T. Womble
Date: June 14, 1999
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THE SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BE REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1999
<PERIOD-END> MAR-31-1999
<CASH> 9,590
<SECURITIES> 0
<RECEIVABLES> 180,767
<ALLOWANCES> 5,252
<INVENTORY> 0
<CURRENT-ASSETS> 293,066
<PP&E> 339,492
<DEPRECIATION> 114,651
<TOTAL-ASSETS> 879,327
<CURRENT-LIABILITIES> 166,034
<BONDS> 325,223
0
0
<COMMON> 7,919
<OTHER-SE> 341,262
<TOTAL-LIABILITY-AND-EQUITY> 879,327
<SALES> 0
<TOTAL-REVENUES> 729,984
<CGS> 0
<TOTAL-COSTS> 733,326
<OTHER-EXPENSES> (6,289)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 17,393
<INCOME-PRETAX> (14,446)
<INCOME-TAX> 1,984
<INCOME-CONTINUING> (16,430)
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> (16,430)
<EPS-BASIC> (.22)
<EPS-DILUTED> (.22)
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1998
<PERIOD-END> MAR-31-1998
<CASH> 115,510
<SECURITIES> 11,794
<RECEIVABLES> 118,281
<ALLOWANCES> 3,630
<INVENTORY> 0
<CURRENT-ASSETS> 287,870
<PP&E> 301,393
<DEPRECIATION> 115,709
<TOTAL-ASSETS> 673,150
<CURRENT-LIABILITIES> 82,748
<BONDS> 254,240
0
0
<COMMON> 7,405
<OTHER-SE> 293,789
<TOTAL-LIABILITY-AND-EQUITY> 673,150
<SALES> 0
<TOTAL-REVENUES> 569,020
<CGS> 0
<TOTAL-COSTS> 489,883
<OTHER-EXPENSES> (4,294)
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 10,044
<INCOME-PRETAX> 73,387
<INCOME-TAX> 27,332
<INCOME-CONTINUING> 46,055
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 46,055
<EPS-BASIC> .64
<EPS-DILUTED> .57
</TABLE>
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND>
THIS SCHEDULE CONTAINS SUMMARY FINANCIAL INFORMATION EXTRACTED FROM THE
CONSOLIDATED BALANCE SHEETS AND CONSOLIDATED STATEMENTS OF EARNINGS AND IS
QUALIFIED IN ITS ENTIRETY BY REFERENCE TO SUCH FINANCIAL STATEMENTS.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> MAR-31-1997
<PERIOD-END> MAR-31-1997
<CASH> 13,119
<SECURITIES> 20,334
<RECEIVABLES> 90,922
<ALLOWANCES> 4,686
<INVENTORY> 0
<CURRENT-ASSETS> 144,147
<PP&E> 235,365
<DEPRECIATION> 92,446
<TOTAL-ASSETS> 411,629
<CURRENT-LIABILITIES> 52,190
<BONDS> 109,371
0
0
<COMMON> 7,268
<OTHER-SE> 224,560
<TOTAL-LIABILITY-AND-EQUITY> 411,629
<SALES> 0
<TOTAL-REVENUES> 479,239
<CGS> 0
<TOTAL-COSTS> 412,887
<OTHER-EXPENSES> 71
<LOSS-PROVISION> 0
<INTEREST-EXPENSE> 5,746
<INCOME-PRETAX> 60,535
<INCOME-TAX> 22,800
<INCOME-CONTINUING> 37,735
<DISCONTINUED> 0
<EXTRAORDINARY> 0
<CHANGES> 0
<NET-INCOME> 37,735
<EPS-BASIC> .54
<EPS-DILUTED> .49
</TABLE>
