<PAGE>
As filed with the Securities and Exchange Commission on June 21, 1999
Registration No. 333-
- -------------------------------------------------------------------------------
- -------------------------------------------------------------------------------
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
--------------
FORM S-3
REGISTRATION STATEMENT
under
THE SECURITIES ACT OF 1933
--------------
ACXIOM(R) CORPORATION
(Exact name of registrant as specified in charter)
Delaware 71-0581897
(State or other jurisdiction (I.R.S. Employer
of incorporation or organization) Identification No.)
1 Information Way
Little Rock, Arkansas 72202
(501) 342-1000
(Address, including zip code and telephone number,
including area code, of registrant's principal
executive offices)
Charles D. Morgan
Acxiom Corporation
1 Information Way
Little Rock, Arkansas 72202
(501) 342-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
Copies to:
Paul B. Benham Thomas J. Murphy
Friday, Eldredge & Clark McDermott, Will & Emery
400 West Capitol Avenue, Suite 2000 227 West Monroe Street
Little Rock, Arkansas 72201-3493 Chicago, Illinois 60606-5096
(501) 370-1517 (312) 372-2000
--------------
Approximate date of commencement of proposed sale to the public: As soon as
practicable after this registration statement becomes effective.
If the only securities being registered on this Form are being offered
pursuant to dividend or interest reinvestment plans, please check the
following box. [_]
If any of the securities being registered on this Form are to be offered on
a delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933 other than securities offered only in connection with dividend or
interest reinvestment plans, check the following box. [_]
If this Form is filed to register additional securities for an offering
pursuant to Rule 462(b) under the Securities Act, please check the following
box and list the Securities Act registration statement number of the earlier
effective registration statement for the same offering. [_]
If this Form is a post-effective amendment filed pursuant to Rule 462(c)
under the Securities Act, check the following box and list the Securities Act
registration statement number of the earlier effective registration statement
for the same offering. [_]
If delivery of the prospectus is expected to be made pursuant to Rule 434,
please check the following box. [_]
--------------
CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
Proposed maximum
maximum aggregate Amount of
Title of each class of securities to be Amount to be offering price offering Registration
registered registered per unit(1) price(1) Fee(2)
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<S> <C> <C> <C> <C>
Common Stock ($0.10 Par Value).................. 2,390,076(3) $28.9375 $69,162,842 $19,228
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</TABLE>
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(1) Calculated pursuant to Rule 457(c) on the basis of the average of the high
and low reported sales prices on the Nasdaq National Market System on June
17, 1999.
(2) As set forth below, an additional 3,921,000 shares of the registrant's
common stock are being carried forward to this registration statement
pursuant to Rule 429. A filing fee of $9,480 was previously paid in
connection with the prior registration statements.
(3) Includes 800,000 shares which the underwriters have the right to purchase
to cover over-allotments.
--------------
The registrant hereby amends this registration statement on such date or
dates as may be necessary to delay its effective date until the registrant
shall file a further amendment which specifically states that this
registration statement shall thereafter become effective in accordance with
Section 8(a) of the Securities Act of 1933 or until the registration statement
shall become effective on such date as the Commission, acting pursuant to said
Section 8(a), may determine.
Pursuant to Rule 429, the prospectus filed as a part of this registration
statement is being filed as a combined prospectus with respect to 3,921,000
shares of the registrant's common stock remaining unsold under Registration
Statements 33-63431 and 333-08011.
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<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This prospectus is not an +
+offer to sell these securities and it is not soliciting an offer to buy these +
+securities in any state where the offer or sale is not permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
PROSPECTUS (Subject to Completion)
Issued June 21, 1999
5,511,076 Shares
[LOGO]
Acxiom(R) Corporation
Common Stock
------------
Acxiom(R) Corporation is selling 1,500,000 shares of Acxiom common stock and
the selling stockholders, as described on page 27, are selling 4,011,076 shares
of Acxiom common stock. Acxiom will not receive any proceeds from the sale of
shares by the selling stockholders.
Our common stock is quoted on the Nasdaq Stock Market under the symbol
"ACXM." On June 17, 1999, the closing sale price of our common stock was $28
5/8 per share.
Investing in the Common Stock involves certain risks.
See "Risk Factors" beginning on page 4.
<TABLE>
<CAPTION>
Per
Share Total
-------- --------
<S> <C> <C>
Public Offering Price........................................ $ $
Underwriting Discount........................................ $ $
Proceeds to Acxiom........................................... $ $
Proceeds to the Selling Stockholders......................... $ $
</TABLE>
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
adequacy or accuracy of this prospectus. Any representation to the contrary is
a criminal offense.
Acxiom has granted an option to the underwriters to purchase a maximum of
800,000 shares of common stock from Acxiom within 30 days following the date of
this prospectus to cover over-allotments.
The underwriters are severally underwriting the shares of common stock being
offered. The underwriters expect to deliver the shares to purchasers in New
York, New York, on , 1999.
------------
Joint Lead Managers
ABN AMRO Rothschild Merrill Lynch & Co. Salomon Smith Barney
a division of ABN AMRO Incorporated
------------
William Blair & Company PaineWebber Incorporated
Robert W. Baird & Co. Stephens Inc.
Incorporated
The date of this Prospectus is , 1999.
<PAGE>
[Chart depicting Acxiom's key assets and market opportunities.]
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary........................................................ 1
Risk Factors.............................................................. 4
Recent Developments....................................................... 5
Use of Proceeds........................................................... 5
Price Range of Common Stock and Dividends................................. 6
Capitalization............................................................ 6
Selected Supplemental Consolidated Financial Data......................... 7
Management's Discussion and Analysis of Financial Condition and Results of
Operations............................................................... 8
Business.................................................................. 13
Management................................................................ 25
Selling Stockholders...................................................... 27
Underwriting.............................................................. 28
Legal Matters............................................................. 29
Experts................................................................... 29
Where You Can Find More Information....................................... 30
Index to Supplemental Consolidated Financial Statements................... F-1
</TABLE>
----------------
As used in this prospectus, references to "we," "our," "us" and "Acxiom"
refer to Acxiom Corporation, its consolidated subsidiaries and its predecessors
and not to the underwriters or to the selling stockholders. The term "common
stock" means Acxiom's common stock, par value $0.10 per share.
This prospectus contains forward-looking statements, primarily in the
sections captioned "Prospectus Summary," "Risk Factors," "Management's
Discussion and Analysis of Financial Condition and Results of Operations" and
"Business." Forward-looking statements represent our judgment relating to,
among other things, future results of operations, growth plans, sales, capital
requirements and general industry and business conditions applicable to us.
They are based on our current expectations. Our actual results could differ
materially from the information contained in the forward-looking statements due
to a number of factors, including the risks described below, changes in the
economy or the industry in general, and other unanticipated events that may
prevent us from competing successfully in existing or new markets, and hinder
our ability to manage our growth effectively.
Our principal executive office is located at 1 Information Way, Little Rock,
Arkansas 72202 and our telephone number is 501-342-1000. We maintain a World
Wide Web site at www.acxiom.com. Information contained on our Web site does not
constitute part of this prospectus.
Except as otherwise noted, all information in this prospectus has been
restated to give effect to the May 1999 acquisition of Computer Graphics of
Arizona, Inc. which has been accounted for as a pooling of interests and
assumes no exercise of the underwriters' over-allotment option.
<PAGE>
PROSPECTUS SUMMARY
This summary highlights information contained in other parts of this
prospectus. It is not complete and may not contain all of the information that
you should consider before deciding to invest in shares of our common stock.
The other information is important, so you should read the entire prospectus
carefully.
ACXIOM
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 NetworkSM 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 $499 million in fiscal year 1997 to $754
million in fiscal year 1999, representing a compound annual growth rate of
22.9%. 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 13.7% in 1997 to 15.6% in 1999.
In fiscal year 1999, approximately 51% 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
1
<PAGE>
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
initiatives:
. 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
THE OFFERING
The following information is based on 82,995,032 shares outstanding at June
7, 1999. This number excludes 13,317,762 shares of common stock issuable upon
exercise of stock options outstanding on June 7, 1999 at a weighted average
exercise price of $13.54 per share and 2,451,296 shares of common stock
reserved for future issuance under our stock option plans and employee stock
purchase plan. This number also excludes 376,800 shares of common stock
issuable upon exercise of warrants outstanding on June 7, 1999 at a weighted
average exercise price of $21.38 per share.
<TABLE>
<C> <S>
Common stock offered by Acxiom............... 1,500,000 shares
Common stock offered by selling stockholders. 4,011,076 shares
Common stock to be outstanding after the
offering.................................... 84,495,032 shares
Use of proceeds.............................. We will use the proceeds from
our sale of shares to reduce
the outstanding balance on our
revolving credit facility. We
will not receive any proceeds
from the sale of shares by the
selling stockholders.
Risk Factors................................. For a discussion of certain
risks you should consider
before investing in the shares,
see "Risk Factors" on page 4.
Nasdaq Stock Market symbol................... ACXM
</TABLE>
2
<PAGE>
SUMMARY SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA
The following summary supplemental consolidated financial data gives
retroactive effect to our acquisitions of Computer Graphics on May 28, 1999,
and May & Speh on September 17, 1998, both of which were accounted for by the
pooling-of-interests accounting method.
<TABLE>
<CAPTION>
Fiscal Years Ended March 31,
------------------------------
1999(/1/) 1998(/2/) 1997
--------- --------- --------
(in thousands, except per
share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue.......................................... $754,057 $592,329 $499,232
Operating costs and expenses..................... 755,441 511,420 431,026
Income (loss) from operations.................... (1,384) 80,909 68,206
Net earnings (loss).............................. (15,142) 47,155 38,944
Basic earnings (loss) per share.................. (0.19) 0.64 0.55
Diluted earnings (loss) per share................ (0.19) 0.58 0.49
Weighted average shares outstanding.............. 77,840 74,070 71,150
Weighted average shares outstanding, including
common share equivalents........................ 77,840 82,780 79,936
Operating and Other Data(/3/):
Income from operations........................... $117,363 $ 85,609 $ 68,206
Income from operations as a percentage of
revenues........................................ 15.6% 14.5% 13.7%
Basic earnings per share......................... $ 0.86 $ 0.68 $ 0.55
Diluted earnings per share....................... 0.78 0.61 0.49
Cash provided from operating activities.......... 88,796 70,188 44,156
Percentage of revenue under long-term contracts.. 51% 53% 51%
</TABLE>
<TABLE>
<CAPTION>
March 31, 1999
----------------------
As
Actual Adjusted(/4/)
-------- -------------
<S> <C> <C>
Balance Sheet Data:
Cash and marketable securities........................... $ 12,604
Current assets........................................... 301,999
Working capital.......................................... 134,084
Total assets............................................. 889,800
Long-term debt, including current installments........... 348,578
Total stockholders' equity............................... 357,773
</TABLE>
- --------
(1) For the fiscal year ended March 31, 1999, operating expenses include
special charges of $118.7 million related to merger and integration charges
associated with the May & Speh merger and the write-down of other impaired
assets.
(2) For the fiscal year ended March 31, 1998, operating expenses include
special charges of $4.7 million related to May & Speh severance costs.
(3) Excludes special charges of $4.7 million for fiscal year ended March 31,
1998, and $118.7 million for fiscal year ended March 31, 1999.
(4) Gives effect to the common stock to be offered by Acxiom in this offering
and the application of the estimated net proceeds as described under "Use
of Proceeds."
3
<PAGE>
RISK FACTORS
You should carefully consider the risks described below before deciding to
invest in our common stock. These risks could materially and adversely affect
our business, financial condition and results of future operations. If that
were to happen, the trading price of our common stock could decline, and you
could lose all or part of your investment.
The risks described below 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 of our business occurs.
Short-term contracts affect predictability of our revenues
While approximately 51% 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, including 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
4
<PAGE>
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 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
telecommunication links that causes interruptions in our operations could
materially adversely affect our ability to meet our clients' requirements,
which could result in decreased revenues, net income and earnings per share.
The 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 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. The supplemental consolidated
financial statements included in this prospectus are restated to give effect to
this transaction.
USE OF PROCEEDS
We estimate that the net proceeds from the sale of the 1,500,000 shares of
common stock that we are selling in this offering will be approximately $
million ($ million if the underwriters exercise in full their over-
allotment option). Our estimate is based on an assumed public offering price of
$ . per share and reflects the deduction of the estimated underwriters'
discount and offering expenses. We will not receive any proceeds from the sale
of shares by the selling stockholders.
We expect to use the net proceeds to reduce the outstanding balance on our
revolving credit facility of which approximately $139.9 million was outstanding
as of June 17, 1999. The facility currently bears interest at the rate of
approximately 6.0% per annum and expires on January 31, 2003. To the extent
that the outstanding balance of this facility is reduced, that amount will be
available for acquisitions, working capital and other general corporate
purposes.
5
<PAGE>
PRICE RANGE OF COMMON STOCK AND DIVIDENDS
The following table shows for the periods indicated the high and low closing
sales prices of our common stock as reported on the Nasdaq Stock Market.
<TABLE>
<CAPTION>
Fiscal Year Ended High Low
----------------- -------- ---------
<S> <C> <C>
March 31, 1997:
First Quarter........................................ $17 5/8 $12 3/8
Second Quarter....................................... 20 9/16 16 3/8
Third Quarter........................................ 24 5/8 18 3/4
Fourth Quarter....................................... 22 7/8 14 3/8
March 31, 1998:
First Quarter........................................ $20 1/2 $12 1/8
Second Quarter....................................... 21 1/8 17 5/16
Third Quarter........................................ 19 1/4 15 1/8
Fourth Quarter....................................... 25 5/8 17
March 31, 1999:
First Quarter........................................ $25 5/8 $20 1/8
Second Quarter....................................... 28 1/8 20
Third Quarter........................................ 31 16 5/8
Fourth Quarter....................................... 29 5/8 21 15/16
March 31, 2000:
First Quarter (through June 17, 1999)................ $29 3/8 $23
</TABLE>
The common stock is listed on the Nasdaq Stock Market under the symbol
"ACXM." The closing sales price of our common stock on June 17, 1999 was $28
5/8 per share.
We have never paid cash dividends on our common stock. We presently intend
to retain earnings to provide funds for our business operations and expansion.
Thus, we do not anticipate paying cash dividends in the foreseeable future.
CAPITALIZATION
The following table sets forth our consolidated capitalization at March 31,
1999 on a supplemental basis giving effect to our acquisition of Computer
Graphics and as adjusted to reflect the sale of 1,500,000 shares of common
stock offered by us in this offering and the application of the estimated net
proceeds as described under "Use of Proceeds." This table should be read in
conjunction with "Management's Discussion and Analysis of Financial Condition
and Results of Operations" and our Supplemental Consolidated Financial
Statements and related notes included elsewhere in this prospectus.
<TABLE>
<CAPTION>
March 31, 1999
------------------------
Supplemental As Adjusted
------------ -----------
(in thousands)
<S> <C> <C>
Long-term debt, including current installments.. $348,578
Stockholders' equity:
Common stock, $0.10 par value per share,
200,000,000 shares authorized; 81,064,416
shares issued and 82,564,416 shares issued,
as adjusted.................................. 8,106
Additional paid-in capital.................... 186,011
Retained earnings............................. 167,013
Accumulated other comprehensive income (loss). (324)
Treasury stock, at cost; 732,271 shares....... (3,033)
--------
Total stockholders' equity.................. 357,773
-------- ---
Total capitalization...................... $706,351
======== ===
</TABLE>
6
<PAGE>
SELECTED SUPPLEMENTAL CONSOLIDATED FINANCIAL DATA
The following selected supplemental consolidated financial data gives
retroactive effect to our acquisitions of Computer Graphics on May 28, 1999,
and May & Speh on September 17, 1998, both of which were accounted for by the
pooling-of-interests accounting method. This data should be read in conjunction
with "Management's Discussion and Analysis of Financial Condition and Results
of Operations," our Supplemental Consolidated Financial Statements and related
notes and other financial information included elsewhere or incorporated by
reference in this prospectus. This data is derived from our audited
supplemental consolidated financial statements.
<TABLE>
<CAPTION>
Fiscal Years Ended March
31,
----------------------------
1999 1998 1997
-------- -------- --------
(in thousands, except per
share data)
<S> <C> <C> <C>
Statement of Operations Data:
Revenue.......................................... $754,057 $592,329 $499,232
Operating costs and expenses:
Salaries and benefits.......................... 283,659 219,339 178,684
Computer, communications and other equipment... 111,876 87,529 77,631
Data costs..................................... 111,395 93,382 80,758
Other operating costs and expenses............. 129,764 106,470 93,953
Special charges(/1/)........................... 118,747 4,700 --
-------- -------- --------
Total operating costs and expenses........... 755,441 511,420 431,026
-------- -------- --------
Income (loss) from operations.................... (1,384) 80,909 68,206
-------- -------- --------
Other income (expense)
Interest expense............................... (17,393) (10,091) (5,840)
Other, net..................................... 6,478 4,402 183
-------- -------- --------
Earnings (loss) before income taxes.............. (12,299) 75,220 62,549
Income taxes..................................... 2,843 28,065 23,605
-------- -------- --------
Net earnings (loss).............................. $(15,142) $ 47,155 $ 38,944
======== ======== ========
Basic earnings (loss) per share.................. $ (0.19) $ 0.64 $ 0.55
======== ======== ========
Weighted average shares outstanding.............. 77,840 74,070 71,150
======== ======== ========
Diluted earnings (loss) per share................ $ (0.19) $ 0.58 $ 0.49
======== ======== ========
Weighted average shares outstanding, including
common share equivalents........................ 77,840 82,780 79,936
======== ======== ========
Operating and Other Data(/2/):
Income from operations........................... $117,363 $ 85,609 $ 68,206
Income from operations as a percentage of
revenue......................................... 15.6% 14.5% 13.7%
Basic earnings per share......................... $ 0.86 $ 0.68 $ 0.55
Diluted earnings per share....................... 0.78 0.61 0.49
Cash provided from operating activities.......... 88,796 70,188 44,156
Percentage of revenue under long-term contracts.. 51% 53% 51%
<CAPTION>
March 31,
----------------------------
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Balance Sheet Data:
Cash and marketable securities................... $ 12,604 $129,446 $ 35,305
Current assets................................... 301,999 294,704 150,805
Working capital.................................. 134,084 210,503 96,761
Total assets..................................... 889,800 681,634 419,788
Long-term debt, including current installments... 348,578 264,706 119,309
Total stockholders' equity....................... 357,773 308,225 237,606
</TABLE>
- --------
(1) For the fiscal year ended March 31, 1998, includes special charges related
to May & Speh severance costs. For the fiscal year ended March 31, 1999,
includes special charges related to merger and integration charges
associated with the May & Speh merger and the write down of other impaired
assets.
(2) Excludes special charges of $4.7 million for the fiscal year ended March
31, 1998, and $118.7 million for the fiscal year ended March 31, 1999.
7
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS
OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
On May 26, 1998, we 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, our consolidated financial statements have been restated as if the
combining companies had been combined for all periods presented. See note 2 to
the Supplemental Consolidated Financial Statements for a more detailed
discussion of the merger transaction.
On May 28, 1999, Acxiom acquired Computer Graphics 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. The Supplemental Consolidated Financial Statements
included elsewhere in this Prospectus have been restated to reflect this
transaction. See note 2 to the Supplemental Consolidated Financial Statements
for a more detailed discussion of the merger transactions.
Results of Operations
For the fiscal year ended March 31, 1999, we recorded the highest annual
revenue, earnings, and earnings per share in our history, excluding the special
charges discussed more fully below. Consolidated revenue was a record $754.1
million in 1999, up 27% from 1998. For fiscal 1998, revenue growth was 19% over
the previous year.
In 1999 and 1998 we had one major customer who accounted for more than 10%
of revenue, and in 1997 we had two major customers who accounted for more than
10% of revenue. Allstate accounted for 10.9%, 12.6%, and 13.6% in 1999, 1998
and 1997, respectively, and Trans Union accounted for 11.3% 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. Revenues under long term contracts (defined as contracts having an
initial term of three years or longer) were 51%, 53%, and 51% of consolidated
revenues for 1999, 1998 and 1997, respectively.
The following table shows our revenue by business segment for each of the
years in the three-year period ended March 31, 1999 and the percentage changes
between years (dollars in millions):
<TABLE>
<CAPTION>
1998 1997
to to
1999 1998 1997 1999 1998
------ ------ ------ ---- ----
<S> <C> <C> <C> <C> <C>
Services............................... $444.0 $331.7 $274.8 +34% +21%
Data Products.......................... 186.7 155.2 135.4 +20 +15
Information Technology Management...... 164.5 128.4 109.5 +28 +17
Intercompany eliminations(/1/)......... (41.1) (23.0) (20.5) +79 +12
------ ------ ------
$754.1 $592.3 $499.2 +27 +19
====== ====== ======
</TABLE>
- --------
(1) Represents Data Products sold to the Services segment customers.
The Services segment, the Company's largest segment, provides data
warehousing, database management, 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 34% over the previous year after a
21% increase in 1998. This performance has been fueled by a business trend to
develop data warehouses to implement customer relationship management
applications and one-to-one marketing initiatives for our clients.
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<PAGE>
The Data Products segment provides data content, primarily in support of our
customers' direct marketing activities. Revenue growth for this segment in
fiscal 1999 grew 20% over the previous year after a 15% increase in 1998. 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 previous table, revenues from customers of
the Services segment grew strongly in 1999, increasing 79% over the prior year
after a 12% increase in 1998.
The Information Technology Management segment reflects outsourcing services,
primarily in the areas of data center, client/server and network management.
Revenue growth for this segment in fiscal 1999 grew 28% over the previous year
after a 17% increase in 1998. This segment is experiencing strong growth as a
result of a trend towards business 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's 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 and the percentage change between years
(dollars in millions):
<TABLE>
<CAPTION>
1998 to 1997 to
1999 1998 1997 1999 1998
------ ------ ------ ------- -------
<S> <C> <C> <C> <C> <C>
Salaries and benefits............... $283.7 $219.3 $178.7 +29% +23%
Computer, communications and other
equipment.......................... 111.9 87.5 77.6 +28 +13
Data costs.......................... 111.4 93.4 80.8 +19 +16
Other operating costs and expenses.. 129.7 106.5 93.9 +22 +13
Special charges..................... 118.7 4.7 -- NM NM
------ ------ ------
$755.4 $511.4 $431.0 +48 +19
====== ====== ======
</TABLE>
Salaries and benefits increased by 29% from 1998 to 1999 and by 23% from
1997 to 1998 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 cost
expenditures made to accommodate business growth. In 1998, the percentage
increase was lessened due to the Trans Union pass-through expenses recorded in
1997.
Data costs grew 19% in 1999 and 16% in 1998. These costs are a direct result
of growth in the Data Products segment and increased data purchases under our
contract with Allstate.
Other operating costs and expenses increased by 22% in 1999. Facilities
costs increased $5.5 million, primarily due to a new building in Downers Grove,
Illinois. Outside services and temporary help costs increased $8.7 million,
primarily to support growth in new Information Technology Management
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
percentage increase in other operating costs and expenses was less than the
percentage increase in revenue. Other operating costs and expenses increased
13% 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, we 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
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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 Supplemental 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.
Excluding the effect of the special charges on both years, income from
operations would have been $117.4 million in 1999, an increase of 37% over the
income from operations of $85.6 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 15.6%, 14.5%, and 13.7%, respectively.
Operating margins for the Services and
Information Technology Management segments are generally higher than that of
the Data Products segment. For fiscal 1999, operating margins were 20.4%, 8.2%,
and 21.2% for the Services, Data Products, and Information Technology
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
our 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 previously disposed of unit.
Our effective tax rate, excluding the special charges, was 37.3%, 37.3%, 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 $15.1 million in 1999 including the special charges noted
above. Excluding the effect of the special charges, net earnings would have
been $66.8 million. Net earnings were $47.2 million in 1998, or $50.1 million
excluding the special charges. Net earnings were $38.9 million in 1997. Basic
earnings per share, excluding the special charges, would have been $0.86,
$0.68, and $0.55 in 1999, 1998, and 1997, respectively. Diluted earnings per
share would have been $0.78, $0.61, and $0.49, respectively.
Seasonal and Quarterly Comparisons
Our operations have not proven to be significantly seasonal, although our
traditional direct marketing operations experience slightly higher revenues in
our second and third quarters. This seasonal impact should decrease as we
continue to move toward long-term strategic partnerships with more predictable
revenues. The following table sets forth certain quarterly financial
information for the quarters indicated.
<TABLE>
<CAPTION>
Three Months Ended
------------------------------------------------------------------------------
6/30/97 9/30/97 12/31/97 3/31/98 6/30/98 9/30/98 12/31/98 3/31/99
-------- -------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Statement of Operations
Data(/1/):
Revenue................ $129,390 $141,739 $152,892 $168,308 $164,512 $180,030 $193,910 $215,605
Income from operations. 15,006 21,000 25,525 24,078 20,321 26,665 35,333 35,044
Net earnings........... 8,265 12,575 15,035 14,241 11,737 15,473 19,944 19,631
Percentage of
Revenue(/1/):
Income from operations. 11.6% 14.8% 16.7% 14.3% 12.4% 14.8% 18.2% 16.3%
Net earnings........... 6.4 8.9 9.8 8.5 7.1 8.6 10.3 9.1
</TABLE>
- --------
(1) Excludes special charges for the fiscal year ended March 31, 1998 related
to May & Speh severance costs and for the fiscal year ended March 31, 1999
related to merger and integration charges associated with the May & Speh
merger and the write down of other impaired assets.
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<PAGE>
Capital Resources and Liquidity
Working capital at March 31, 1999 totaled $134.1 million compared to $210.5
million a year previously. At March 31, 1999, we had available credit lines of
$126.5 million, of which $55.4 million was outstanding. Our debt-to-capital
ratio (capital defined as long-term debt plus stockholders' equity) was 48% at
March 31, 1999, compared to 45% 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, our debt-to-capital ratio would be reduced
to 27% as of March 31, 1999. Total stockholders' equity increased to $357.8
million at March 31, 1999, from $308.2 million at March 31, 1998.
In May 1999, we arranged a $25.0 million increase in our current revolving
credit facility. This temporary increase will expire on July 31, 1999. As of
June 17, 1999, $139.9 million was outstanding compared to $55.4 million at
March 31, 1999. The increase in the amount outstanding under our revolving
credit facility was the result of acquisition payments, capital expenditures
and working capital needs. We intend to use the net proceeds of this offering
to pay down a portion of the outstanding balance of this facility.
Cash provided by operating activities was $60.4 million for 1999 compared to
$65.5 million in 1998 and $44.2 million in 1997. Excluding the impact of
special charges, cash provided by operating activities was $88.8 million, $70.2
million and $44.2 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 34% in 1999 after also increasing
34% in 1998. The operating cash flow was reduced by $124.1 million in 1999,
$55.7 million in 1998, and $50.8 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 our business. EBITDA is not
intended to represent operating cash flow, 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 our operations and cash flows and is used
internally as a surrogate measure of cash provided by operating activities.
Investing activities used $190.3 million in 1999, $86.8 million in 1998, and
$108.3 million in 1997. Investing activities in 1999 included $127.9 million in
capital expenditures, compared to $68.1 million in 1998 and $65.3 million in
1997. The increase in capital expenditures was principally due to purchases of
data center equipment to support our outsourcing agreements, as well as the
purchase of additional data center equipment in our core data centers.
Approximately one-half of the capital expenditures in 1999 were related to
customer-specific projects or contractual customer requirements. We occupied a
new building in Downers Grove, Illinois in fiscal 1999 and two new buildings in
Little Rock, Arkansas in the first quarter of fiscal 2000.
Investing activities during 1999 also include $18.5 million in capitalized
software development costs, compared to $21.4 million in 1998 and $10.7 million
in 1997. The capitalized costs 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, capitalized software development costs
increased $5.2 million from 1998 to 1999, primarily due to capitalized software
costs related to the Acxiom Data Network. The remainder of the capitalized
software costs includes software tools and databases developed for customers in
all three segments of our 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 our
Supplemental 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 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
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<PAGE>
marketable securities. These securities were purchased by May & Speh prior to
the merger. As of March 31, 1999, we no longer held any marketable securities.
Financing activities in 1999 provided $24.9 million of cash, including sales
of stock through our stock option and employee stock purchase plans and the
exercise of a warrant by Trans Union for the purchase of 4.0 million shares.
This warrant was issued to Trans Union in 1992 in conjunction with our data
center management agreement with Trans Union. Financing activities in 1998
provided $127.4 million of cash, including the issuance of the $115.0 million
convertible debt by May & Speh in March 1998. Financing activities in 1997
included the issuance of $30.0 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 our 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 us and local real estate investors and were occupied in the first
quarter of fiscal 2000. We have also occupied a new building in Downers Grove,
Illinois. During fiscal 2000, we expect to begin construction on a new customer
service facility in Conway, Arkansas as well as another customer service
facility in Little Rock, Arkansas. The Conway facility is expected to be
completed in February 2000 and to cost approximately $12.0 million. The Little
Rock facility 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 facility.
While we do 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 our 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, we also sell 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. We have also been, and will
likely continue to be, actively pursuing acquisitions. As a result, we expect
that it will be necessary to raise additional capital during the next fiscal
year. We believe that capital could be raised by negotiating an increase in our
current revolving credit agreement, by incurring other debt on either a secured
or unsecured basis, or by the issuance of additional equity securities in
either public or private offerings. We believe we have significant unused
capacity to raise capital which could be used to support future growth.
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<PAGE>
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:
. How do we service our customers?
. What are the profiles of our existing customers?
. What distribution channels
. Who are our prospective customers? should we use?
. Who are our most profitable customers?. What new products should we
develop?
. What do our customers want and when do they want it?
. How should we price our products
and services?
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. International Data
Corporation projects that the data warehouse market will grow from $13.8
billion in 1998 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 services 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.
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 complexity of
managing the 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
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<PAGE>
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 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
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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 is critical to the customer
relationship management process. 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 and 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.
[Graphic describing Acxiom's total solution approach]
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 focuses on 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.
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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 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 and small office/home office markets 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
16
<PAGE>
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.
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 and . Develops strategies to effectively use and
database consulting 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. Designs, models and builds data warehouse/database
management and delivery
. Provides data warehouse/database maintenance and
updates
. Delivers information through a variety of channels
including the Internet via the Acxiom Data Network
Customer relationship . Provides market planning, analytical and
management applications 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 maximize postal
discounts and minimize handling costs
17
<PAGE>
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 . 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 . Provides over 130 million telephone numbers in the
Telesource(TM) U.S.
- --------------------------------------------------------------------------------
InfoBase--Business
- --------------------------------------------------------------------------------
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.
- --------------------------------------------------------------------------------
DataQuick(R)
- --------------------------------------------------------------------------------
Product Description
--------------------- ------------------------------------------------------
Real estate . Provides detailed information on over 70 million
information U.S. properties
. Information includes: ownership, address, sale and
loan data, home and property characteristics,
household demographics and trend data by
neighborhood
- --------------------------------------------------------------------------------
List Brokerage
- --------------------------------------------------------------------------------
List brokerage and
management . Offers clients access to customer lists from
consumer products and services firms
18
<PAGE>
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 obtained from multiple
sources and covers approximately 15 million businesses throughout the United
States. Business data is verified by telephone 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. Each data source is compiled by us or licensed
from one of our data partners. We update and maintain our databases frequently
in order to provide current information to our clients.
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 . Manages data center and transaction processing on
management 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 . Services include technical support, help-desk
client/server access and support, back-up recovery, disaster
management recovery services, operating support and
telecommunications support
19
<PAGE>
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.
[Chart depicting the Acxiom Data Network and how it links data content
with customer relationship management applications via the internet.]
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
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 will also enable us to
expand our potential client base to include what we believe to be over 20
20
<PAGE>
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. Integration and technical support are also available.
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 40% of our revenues in fiscal 1999. Our
largest client, Allstate, represented approximately 10.9% 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
51% of our revenue was derived from long-term contracts.
Representative clients by the industries we serve include:
<TABLE>
<CAPTION>
Information
Financial Services Insurance Services
------------------ --------- -----------
<S> <C> <C>
Bank of America Allstate ADP
Citibank Physicians Mutual IBM
Discover Financial Services Prudential Polk
First USA Bank Trans Union
General Electric
<CAPTION>
Publishing Retail Telecommunications
---------- ------ ------------------
<S> <C> <C>
Advance Publications Neiman Marcus AT&T
Guideposts Sears GTE
Meredith Wal-Mart Vodafone
</TABLE>
21
<PAGE>
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
Data Products. We maintain separate sales forces to allow our sales
representatives to concentrate on particular services, technologies and client
demands.
Our Services and Information Technology Management sales force is
decentralized 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.
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 customer. 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.
22
<PAGE>
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
. minority interests in small, early-stage companies
. channel partner relationships
. 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 offer
a broad array of information services on a national or international basis.
However, we do not know of a competitor that offers our complete line of
products and services.
In the Services market, we compete primarily with in-house information
technology departments of current clients and those of potential 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 (a subsidiary of Great Universal Stores), 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.
23
<PAGE>
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 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
As of March 31, 1999, we had over 5,000 associates worldwide. With the
exception of approximately 45 associates who are engaged in lettershop
fulfillment activities, none of our associates are represented by a labor union
or are the subject of a collective bargaining agreement. We have never
experienced any work stoppages, and we consider our relations with our
associates to be excellent.
24
<PAGE>
MANAGEMENT
The following table provides information about our directors and executive
officers as of June 17, 1999:
<TABLE>
<CAPTION>
Year
Name Age Elected Position Held
---- --- ------- -------------
<C> <C> <C> <S>
Charles D. Morgan............. 56 1972 Chairman of the Board and
President (Company Leader)
Rodger S. Kline............... 56 1975 Chief Operating Officer,
Treasurer and Director
James T. Womble............... 56 1975 Division Leader and Director
C. Alex Dietz................. 56 1979 Division Leader
Paul L. Zaffaroni............. 52 1990 Division Leader
L. Lee Hodges................. 52 1999 Division Leader
Jerry C.D. Ellis.............. 49 1991 Division Leader
Jerry C. Jones................ 43 1999 Business Development/Legal Leader
Robert S. Bloom............... 43 1992 Chief Financial Officer
Dr. Ann H. Die................ 54 1993 Director
William T. Dillard II......... 54 1988 Director
Harry C. Gambill.............. 53 1992 Director
Thomas F. (Mack) McLarty, III. 52 1999 Director
Robert A. Pritzker............ 72 1994 Director
</TABLE>
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 of the Direct Marketing
Association. Mr. Morgan is Chairman of the Board of Trustees of Hendrix
College. He was employed by IBM prior to joining Acxiom and holds a mechanical
engineering degree from the University of Arkansas.
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.
Mr. Womble joined Acxiom in 1974. He has been a director since 1975, and
serves as one of Acxiom's five 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.
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 a 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.
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.
Mr. Hodges joined Acxiom in 1998. He serves as one of Acxiom's division
leaders. Prior to joining Acxiom, he was a senior vice president with Tascor,
the outsourcing subsidiary of Norrell Corporation. 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.
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.
25
<PAGE>
Mr. Jones joined Acxiom in 1999. Prior to joining Acxiom, he was employed
for 19 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.
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 a manager. Mr. Bloom, a certified public accountant, holds a
degree in accounting from the University of Illinois.
Dr. Die was elected as a director in 1993. She has served as President of
Hendrix College in Conway, Arkansas since 1992. She is a member of the Board of
Directors of the National Merit Scholarship Corporation, The Foundation for
Independent Higher Education, and the American Council on Education. She is
also Chair of the National Collegiate Athletic Association (NCAA) Division III
Presidents Council and a member of the NCAA Executive Committee. She is past
Chair of the Board of Directors of the National Association of Independent
Colleges and Universities. Prior to coming to Hendrix, she served as Dean of
the H. Sophie Newcomb Memorial College and Associate Provost at Tulane
University. Dr. Die graduated summa cum laude from Lamar University, earned a
master's degree from the University of Houston and a Ph.D. in counseling
psychology from Texas A&M University.
Mr. Dillard was elected as a director in 1988. He has served since 1968 as a
member of the Board of Directors and is Chief Executive Officer of Dillard's,
Inc., of Little Rock, Arkansas, a regional chain of traditional department
stores with retail outlets in the Southeast, Southwest and Midwest areas of the
United States. In addition to Dillard's, Inc., Mr. Dillard is also a director
of Barnes & Noble, Inc. and Chase Bank of Texas, Inc. He holds a master's
degree in business administration from Harvard University and a bachelor's
degree in the same field from the University of Arkansas.
Mr. Gambill was appointed to fill a vacancy on our Board of Directors in
1992 and was elected as a director in 1993. He is a director and has held the
positions of Chief Executive Officer and President of Trans Union, a company
engaged in the business of providing consumer credit reporting services, since
April 1992. Mr. Gambill joined Trans Union in 1985 as Vice President/General
Manager of the Chicago Division. In 1987 he was named Central Region Vice
President. In 1990, he was named President of Trans Union, and assumed the
added title of President of TransMark in 1992. Mr. Gambill is also a director
of Associated Credit Bureaus and the International Credit Association. He holds
degrees in business administration and economics from Arkansas State
University.
Mr. McLarty was appointed to fill a vacancy on our Board of Directors in
1999. He is Chairman of the McLarty Companies, a third generation family
business and one of the nation's leading automotive dealership groups. He is a
board member of the Financial Times Advisory Board of London, England, the
Americas Society of New York City, the Inter-American Dialogue of Washington,
D.C., the M.D. Anderson Cancer Center in Houston, and Entergy Corporation. In
1983 he became chairman and chief executive officer of Arkla, Inc., a Fortune
500 natural gas company. He was appointed by President Bush to the National
Petroleum Council and the National Council on Environmental Quality, and he was
a member of the St. Louis Federal Reserve Board from 1989 through 1992.
Beginning in 1992, he served President Clinton in several key positions: Chief
of Staff, Counselor to the President, and Special Envoy for the Americas, with
over five years of service in the President's Cabinet and on the National
Economic Council. He holds a degree in business administration from the
University of Arkansas.
Mr. Pritzker was appointed to fill a newly created position on our Board of
Directors in 1994 and was elected a director in 1996. Since before 1992, Mr.
Pritzker has been a director and the Chairman of Trans Union, a company engaged
in the business of providing consumer credit reporting services, a director and
the President of Union Tank Car Company, a company principally engaged in the
leasing of railway tank cars and
26
<PAGE>
other railcars, and Marmon Holdings, Inc., a holding company of diversified
manufacturing and services businesses. Mr. Pritzker is also a director of Hyatt
Corporation, a company which owns and operates domestic and international
hotels, and a director of Southern Peru Copper Corporation, a company which
mines, smelts, refines and markets copper. Mr. Pritzker holds an industrial
engineering degree from the Illinois Institute of Technology.
There are no family relationships among any of the Company's executive
officers and/or directors.
SELLING STOCKHOLDERS
Four selling stockholders are offering an aggregate of 4,011,076 shares of
our common stock. One selling stockholder, the Pritzker Foundation, an Illinois
private foundation, is offering 3,921,000 shares, which is all of its current
holdings. Following the offering, it will not own any shares of our common
stock. Robert A. Pritzker, one of our directors, is a member of the board of
directors of the Pritzker Foundation.
In 1992, Acxiom acquired certain hardware and computer equipment associated
with Trans Union's Chicago data center pursuant to a data center management
agreement in exchange for 1,920,000 shares of Acxiom's common stock. In 1994,
Acxiom and Trans Union's parent company, Marmon Industrial LLC, entered into a
stock purchase agreement under which Marmon Industrial purchased an additional
2,000,000 shares of Acxiom common stock. In 1997, Trans Union transferred its
1,920,000 shares (together with an additional 1,000 shares it had previously
acquired from Mr. Gambill, one of our directors) to the Pritzker Foundation. At
the same time, Marmon Industrial also transferred its 2,000,000 shares to the
Pritzker Foundation.
In connection with the 1992 data center management agreement, Trans Union
also received a warrant to purchase an additional 4,000,000 shares of Acxiom
common stock. In August 1998, Trans Union exercised the warrant. In the first
quarter of fiscal 2000, Trans Union sold 400,000 shares and as a result
currently owns approximately 3.6 million shares.
The remaining three selling stockholders, Messrs. Jeffrey Lund, Eric S.
Gewirtz and Mark R. Sullivan, all of whom we employ, are offering an aggregate
of 90,076 shares of our common stock. Each of these selling stockholders
currently owns 55,182 shares of our common stock or 165,546 shares in the
aggregate. Mr. Gewirtz is offering all of the 55,182 shares he currently owns,
Mr. Sullivan is offering 18,394 shares and Mr. Lund is offering 16,500 shares.
Following the offering Mr. Gewirtz will not own any shares of our common stock,
Mr. Lund will own 38,682 shares and Mr. Sullivan will own 36,788 shares.
Messrs. Lund, Gewirtz and Sullivan received their shares as partial payment of
the purchase price for our April 1999 acquisition of the assets of Horizon
Systems, Inc.
27
<PAGE>
UNDERWRITING
Acxiom and the selling stockholders have entered into an underwriting
agreement with the underwriters named below. ABN AMRO Incorporated, Merrill
Lynch, Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc., William
Blair & Company, L.L.C., PaineWebber Incorporated, Robert W. Baird & Co.
Incorporated and Stephens Inc. are acting as representatives (the
"Representatives") for the underwriters.
The underwriting agreement provides for each underwriter to purchase the
number of shares of common stock shown opposite its name below, subject to the
terms and conditions of the underwriting agreement. The underwriters'
obligations are several, which means that each underwriter is required to
purchase the specified number of shares, but is not responsible for the
commitment of any other underwriter to purchase shares.
<TABLE>
<CAPTION>
Number of
Underwriter Shares
----------- ---------
<S> <C>
ABN AMRO Incorporated...........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated........................................
Salomon Smith Barney Inc........................................
William Blair & Company, L.L.C..................................
PaineWebber Incorporated........................................
Robert W. Baird & Co. Incorporated..............................
Stephens Inc....................................................
---------
Total...................................................... 5,511,076
=========
</TABLE>
This is a firm commitment underwriting, which means that the underwriters
have agreed to purchase all of the shares offered by this prospectus if they
purchase any shares (other than those covered by the over-allotment option
described below). The underwriting agreement provides that if an underwriter
defaults in its commitment to purchase shares, the commitments of non-
defaulting underwriters may be increased or the underwriting agreement may be
terminated, depending on the circumstances.
The Representatives have advised us and the selling stockholders that the
underwriters propose to offer the shares directly to the public at the public
offering price that appears on the cover page of this prospectus. In addition,
the underwriters may offer some of the shares to selected securities dealers at
the public offering price less a concession of $ per share. The
underwriters may also allow, and these dealers may reallow, a concession not in
excess of $ per share to other dealers. After the shares are released for
sale to the public, the underwriters may change the offering price and other
selling terms at various times.
We have granted the underwriters an over-allotment option. This option,
which is exercisable for up to 30 days after the date of this prospectus,
permits the underwriters to purchase a maximum of 800,000 additional shares
from us to cover over-allotments. If the underwriters exercise all or part of
this option, they will purchase shares covered by the option at the initial
public offering price that appears on the cover page of this prospectus, less
the underwriting discount. The underwriters have severally agreed that, to the
extent the over-allotment option is exercised, they will each purchase a number
of additional shares proportionate to each underwriter's initial commitment
reflected in the foregoing table.
The following table shows the underwriting fees to be paid to the
underwriters by us and the selling stockholders in connection with this
offering. The fees to be paid by us and the selling stockholders are shown
assuming both no exercise and full exercise of the underwriters' over-allotment
option.
<TABLE>
<CAPTION>
Paid by
Selling
Paid by Us Stockholders
-------------- -------------
No No
Exercise Full Exercise Full
-------- ----- -------- ----
<S> <C> <C> <C> <C>
Per share.................................... $ $ $ $
Total........................................ $ $ $ $
</TABLE>
28
<PAGE>
We will pay the offering expenses, estimated to be $ .
Trans Union and the Pritzker Foundation have agreed to a 120-day "lockup"
and our officers and directors have agreed to a 90-day "lockup" with respect to
the shares of common stock and any other Acxiom securities that they
beneficially own or have the right to acquire upon exercise of options. We have
agreed to a 120-day "lockup" with respect to previously-unissued or treasury
shares. This means that, with certain exceptions, during the "lockup" periods,
Acxiom, Trans Union, the Pritzker Foundation and these officers and directors
may not offer, sell, pledge or otherwise dispose of our common stock without
the prior written consent of ABN AMRO Incorporated.
The rules of the Securities and Exchange Commission may limit the ability of
the underwriters to bid for or purchase shares before the distribution of the
shares is completed. However, the underwriters may engage in the following
activities under the rules:
. Stabilizing transactions--The underwriters may make bids or purchases
for the purpose of pegging, fixing or maintaining the price of shares,
so long as stabilizing bids do not exceed a specified maximum and may
discontinue these bids or purchases at any time.
. Over-allotments and syndicate covering transactions--The underwriters
may create a short position in the shares by selling more shares than
are shown on the cover page of this prospectus. If a short position is
created in connection with the offering, the representatives may engage
in syndicate covering transactions by purchasing shares in the open
market. The representatives may also elect to reduce any short position
by exercising all or part of the over-allotment option.
We and the selling stockholders have agreed to indemnify the underwriters
against certain liabilities, including liabilities under the Securities Act of
1933, and to contribute to payments the underwriters may be required to make to
satisfy any such liabilities.
Stephens Group, Inc., the parent company of Stephens Inc., one of the
underwriters, has agreed to sell property located in Little Rock, Arkansas to
us for 54,450 shares of common stock pursuant to an agreement dated April 13,
1999. The purchase price for the property was negotiated on an arms-length
basis.
William Blair & Company, L.L.C., one of the underwriters, has stated in
filings with the Securities and Exchange Commission that it owns approximately
5,860,000 shares of common stock, or approximately 7.1% of our issued and
outstanding common stock.
LEGAL MATTERS
The validity of the shares of common stock offered hereby will be passed
upon for us by Friday, Eldredge & Clark, LLP, Little Rock, Arkansas. Certain
other legal matters will be passed upon for the underwriters by McDermott, Will
& Emery, Chicago, Illinois.
EXPERTS
The supplemental consolidated financial statements and related supplemental
financial statement schedule of Acxiom as of March 31, 1999 and 1998, and for
each of the years in the three year period ended March 31, 1999, included in
the prospectus and the registration statement, except as to the supplemental
consolidated financial statements as they relate to May & Speh, Inc. for the
year ended September 30, 1996, have been audited by KPMG LLP, independent
accountants, and as they relate to May & Speh, Inc. for the year ended
September 30, 1996 (not presented separately herein), by PricewaterhouseCoopers
LLP, independent accountants, whose reports have been included in the
prospectus and registration statement upon the authority of said firms as
experts in auditing and accounting.
29
<PAGE>
The consolidated financial statements and related financial statement
schedule of Acxiom as of March 31, 1999 and 1998, and for each of the years in
the three year period ended March 31, 1999, which are incorporated in the
Acxiom Annual Report on Form 10-K for the year ended March 31, 1999 which is
incorporated by reference in the prospectus and the registration statement,
except as to the consolidated financial statements as they relate to May &
Speh, Inc. for the year ended September 30, 1996, have been audited by KPMG
LLP, independent accountants, and as they relate to May & Speh, Inc. for the
year ended September 30, 1996 (not presented separately therein), by
PricewaterhouseCoopers LLP, independent accountants, whose reports have been
incorporated by reference in the prospectus and registration statement upon the
authority of said firms as experts in auditing and accounting.
WHERE YOU CAN FIND MORE INFORMATION
The SEC allows us to "incorporate by reference" into this prospectus
information filed with it, which means that we can disclose important
information to you by referring you directly to those documents. The
information incorporated by reference is considered to be a part of this
prospectus. In addition, information we file with the SEC in the future will
automatically update and supersede information contained in this prospectus.
We incorporate by reference the documents listed below and any future
filings made with the SEC under Sections 13(a), 13(c), 14 or 15(d) of the
Securities Exchange Act of 1934 until this offering is completed:
(i) Annual Report on Form 10-K for the fiscal year ended March 31, 1999;
(ii) Form 8-K filed on June 21, 1999;
(iii) The description of our capital stock contained in the
registration statement on Form 8-A of CCX Network, Inc., which is now
known as Acxiom Corporation, dated February 4, 1985, and any amendments
or updates to that form; and
(iv) The description of our preferred stock purchase rights contained
in the registration statement on Form 8-A/A dated June 4, 1998.
We have filed a registration statement on Form S-3 with the SEC and we also
file annual, quarterly and periodic reports, proxy statements and other
information. You may read and copy the registration statement and any other
documents filed by us at the public reference room of the SEC at Room 1024, 450
Fifth Street, N.W., Washington, D.C. 20549. You may obtain information on the
operation of the public reference room by calling the SEC at 1-800-SEC-0330.
Our filings with the SEC also are available to the public at the SEC's web site
at http://www.sec.gov.
We will provide you with free copies of any of these documents, without
exhibits, unless an exhibit is incorporated into the document by reference, if
you write us or call us at: Acxiom Corporation, 1 Information Way, Little Rock,
Arkansas 72202, Attention: Catherine L. Hughes, telephone (501) 342-1320.
30
<PAGE>
ACXIOM CORPORATION
AND SUBSIDIARIES
INDEX TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Independent Auditors' Reports............................................. F-2
Supplemental Consolidated Balance Sheets--March 31, 1999 and 1998......... F-4
Supplemental Consolidated Statements of Operations--Years ended March 31,
1999, 1998 and 1997...................................................... F-5
Supplemental Consolidated Statements of Stockholders' Equity--Years ended
March 31, 1999, 1998 and 1997............................................ F-6
Supplemental Consolidated Statements of Cash Flows--Years ended March 31,
1999, 1998 and 1997...................................................... F-8
Notes to Supplemental Consolidated Financial Statements................... F-9
Supplemental Financial Statement Schedule--Valuation and Qualifying
Accounts--Years ended March 31, 1999, 1998 and 1997...................... F-26
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors and Stockholders
Acxiom Corporation:
We have audited the accompanying supplemental consolidated financial
statements of Acxiom Corporation and subsidiaries as listed in the accompanying
index. In connection with our audits of the supplemental consolidated financial
statements, we have also audited the supplemental financial statement schedule
as listed in the accompanying index. These supplemental consolidated financial
statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these supplemental 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 15 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 provide a reasonable basis
for our opinion.
The supplemental consolidated financial statements give retroactive effect
to the merger of Acxiom Corporation and Computer Graphics of Arizona, Inc. on
May 28, 1999, which has been accounted for as a pooling of interests as
described in Note 2 to the supplemental consolidated financial statements.
Generally accepted accounting principles proscribe giving effect to a
consummated business combination accounted for by the pooling-of-interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation.
However, they will become the historical consolidated financial statements of
Acxiom Corporation and subsidiaries after financial statements covering the
date of consummation of the business combination are issued.
In our opinion, based on our audits and the report of the other auditors,
the supplemental 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 applicable after financial statements are issued for a period which
includes the date of consummation of the business combination. Also in our
opinion, based on our audits and the report of other auditors, the related
supplemental financial statement schedule, when considered in relation to the
basic supplemental consolidated financial statements taken as a whole, presents
fairly in all material respects the information set forth therein.
KPMG LLP
Little Rock, Arkansas
June 11, 1999
F-2
<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>
ACXIOM CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED BALANCE SHEETS
March 31, 1999 and 1998
(Dollars in thousands)
<TABLE>
<CAPTION>
1999 1998
ASSETS -------- --------
<S> <C> <C>
Current assets:
Cash and cash equivalents... $ 12,604 $117,652
Marketable securities....... -- 11,794
Trade accounts receivable,
net (note 12)................ 184,799 122,413
Refundable income taxes
(note 9)................... 12,651 7,670
Deferred income taxes (note
9)......................... 30,643 2,868
Other current assets (note
5)......................... 61,302 32,307
-------- --------
Total current assets.... 301,999 294,704
Property and equipment, net of
accumulated depreciation and
amortization (notes 4
and 6)....................... 226,381 187,258
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 87,148
-------- --------
$889,800 $681,634
======== ========
<CAPTION>
LIABILITIES AND STOCKHOLDERS'
EQUITY
<S> <C> <C>
Current liabilities:
Current installments of
long-term debt (note 6).... $ 23,355 $ 10,466
Trade accounts payable...... 60,216 22,876
Accrued expenses:
Merger and integration
costs (note 2)........... 33,181 --
Payroll................... 18,224 18,466
Other..................... 25,744 20,846
Deferred revenue............ 7,195 11,547
-------- --------
Total current
liabilities............ 167,915 84,201
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................ 8,106 7,592
Additional paid-in capital.. 186,011 122,038
Retained earnings........... 167,013 182,155
Accumulated other
comprehensive income
(loss)..................... (324) 676
Unearned ESOP compensation.. -- (2,055)
Treasury stock, at cost..... (3,033) (2,181)
-------- --------
Total stockholders'
equity................. 357,773 308,225
Commitments and contingencies
(notes 2, 6, 7, 10, 11 and
14)..........................
-------- --------
$889,800 $681,634
======== ========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-4
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL 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)........................ $754,057 $592,329 $499,232
Operating costs and expenses (notes 2, 3, 7, 10
and 11):
Salaries and benefits......................... 283,659 219,339 178,684
Computer, communications and other equipment.. 111,876 87,529 77,631
Data costs.................................... 111,395 93,382 80,758
Other operating costs and expenses............ 129,764 106,470 93,953
Special charges (note 2)...................... 118,747 4,700 --
-------- -------- --------
Total operating costs and expenses.......... 755,441 511,420 431,026
-------- -------- --------
Income (loss) from operations............... (1,384) 80,909 68,206
-------- -------- --------
Other income (expense):
Interest expense.............................. (17,393) (10,091) (5,840)
Other, net.................................... 6,478 4,402 183
-------- -------- --------
Total other income.......................... (10,915) (5,689) (5,657)
-------- -------- --------
Earnings (loss) before income taxes............. (12,299) 75,220 62,549
Income taxes (note 9)........................... 2,843 28,065 23,605
-------- -------- --------
Net earnings (loss)......................... $(15,142) $ 47,155 $ 38,944
======== ======== ========
Earnings (loss) per share:
Basic......................................... $ (.19) $ .64 $ .55
======== ======== ========
Diluted....................................... $ (.19) $ .58 $ .49
======== ======== ========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-5
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY
Years ended March 31, 1999, 1998 and 1997
(Dollars in thousands)
<TABLE>
<CAPTION>
Common stock
----------------- Additional
Number of paid-in
shares Amount capital
---------- ------ ----------
<S> <C> <C> <C>
Balances at March 31, 1996........................ 66,859,872 $6,686 $ 53,088
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........................ 74,554,558 7,455 107,454
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........................ 75,920,218 7,592 122,038
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........................ 81,064,416 $8,106 $186,011
========== ====== ========
</TABLE>
See accompanying notes to supplemental consolidated financial statements.
F-6
<PAGE>
<TABLE>
<CAPTION>
Accumulated Treasury stock Total
other Unearned ------------------- stockholders'
Comprehensive Retained comprehensive ESOP Number of equity
income (loss) earnings income (loss) compensation shares Amount (note 7)
- ------------- -------- ------------- ------------ ---------- ------- -------------
<S> <C> <C> <C> <C> <C> <C>
$ 96,514 $ (863) $(8,906) (1,242,242) $(2,323) $144,196
(4,752) -- -- -- -- (1,774)
-- -- -- -- -- 47,266
-- -- -- -- -- 2,232
-- -- -- -- -- 1,300
-- -- -- 145,912 (192) 1,167
-- -- 3,134 -- -- 3,134
1,141 -- 1,141 -- -- -- 1,141
38,944 38,944 -- -- -- -- 38,944
-------- -------- ------ ------- ---------- ------- --------
$ 40,085
========
130,706 278 (5,772) (1,096,330) (2,515) 237,606
4,294 -- 1,188 -- -- 5,604
-- -- -- -- -- 9,282
-- -- -- -- -- 2,763
-- -- -- 259,410 334 2,888
-- -- 2,529 -- -- 2,529
398 -- 398 -- -- -- 398
47,155 47,155 -- -- -- -- 47,155
-------- -------- ------ ------- ---------- ------- --------
$ 47,553
========
182,155 676 (2,055) (836,920) (2,181) 308,225
-- -- -- -- -- 12,250
-- -- -- -- -- 36,393
-- -- -- -- -- 2,676
-- -- -- 104,649 (852) 12,316
-- -- 2,055 -- -- 2,055
(1,000) -- (1,000) -- -- -- (1,000)
(15,142) (15,142) -- -- -- -- (15,142)
-------- -------- ------ ------- ---------- ------- --------
$(16,142)
========
$167,013 $ (324) -- (732,271) $(3,033) $357,773
======== ====== ======= ========== ======= ========
</TABLE>
F-7
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
SUPPLEMENTAL 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)........................... $ (15,142) $ 47,155 $ 38,944
Adjustments to reconcile net earnings (loss)
to net cash provided by operating activities:
Depreciation and amortization................. 64,097 49,808 35,640
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............................. 2,055 2,529 3,134
Special charges............................... 118,747 4,700 --
Changes in operating assets and liabilities:
Accounts receivable.......................... (61,286) (29,670) (24,683)
Other assets................................. (62,446) (41,998) (16,930)
Accounts payable and other liabilities....... 27,983 20,624 (9,218)
Merger and integration costs................. (28,385) (4,700) --
--------- -------- ---------
Net cash provided by operating activities... 60,411 65,488 44,156
--------- -------- ---------
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.......................... (127,880) (68,093) (65,286)
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....... (190,280) (86,834) (108,265)
--------- -------- ---------
Cash flows from financing activities:
Proceeds from debt............................ 18,939 125,820 39,509
Payments of debt.............................. (18,607) (10,542) (20,994)
Sale of common stock.......................... 24,566 12,171 48,433
--------- -------- ---------
Net cash provided by financing activities... 24,898 127,449 66,948
--------- -------- ---------
Effect of exchange rate changes on cash........ (77) 2 --
--------- -------- ---------
Net increase (decrease) in cash and cash
equivalents................................... (105,048) 106,105 2,839
Cash and cash equivalents at beginning of year. 117,652 11,547 12,132
--------- -------- ---------
Cash and cash equivalents at end of year....... $ 12,604 $117,652 $ 14,971
========= ======== =========
Supplemental cash flow information:
Cash paid (received) during the year for:
Interest...................................... $ 15,608 $ 9,350 $ 5,147
Income taxes.................................. (4,715) 13,360 15,936
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 supplemental consolidated financial statements.
F-8
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS
March 31, 1999, 1998 and 1997
(1) 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) Basis of Presentation and Principles of Consolidation
The supplemental consolidated financial statements give retroactive effect
to the merger of Acxiom Corporation and Computer Graphics of Arizona, Inc. on
May 28, 1999, which has been accounted for as a pooling of interests as
described in Note 2 to the supplemental consolidated financial statements.
Generally accepted accounting principles proscribe giving effect to a
consummated business combination accounted for by the pooling-of-interests
method in financial statements that do not include the date of consummation.
These financial statements do not extend through the date of consummation.
However, they will become the historical consolidated financial statements of
Acxiom Corporation and subsidiaries after financial statements covering the
date of consummation of the business combination are issued.
The supplemental 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 supplemental 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 $5.6 million and $3.8 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.
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.
F-9
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(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.
(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
F-10
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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)................ $(15,142) $47,155 $38,944
======== ======= =======
Denominator-weighted average shares
outstanding................................. 77,840 74,070 71,150
======== ======= =======
Earnings (loss) per share.................... $ (.19) $ .64 $ .55
======== ======= =======
Diluted earnings per share:
Numerator:
Net earnings (loss)........................ $(15,142) $47,155 $38,944
Interest expense on convertible debt (net
of tax effect)............................ -- 465 445
-------- ------- -------
$(15,142) $47,620 $39,389
======== ======= =======
Denominator:
Weighted average shares outstanding.......... 77,840 74,070 71,150
Effect of common stock options............... -- 3,593 3,782
Effect of common stock warrant............... -- 3,015 3,004
Convertible debt............................. -- 2,102 2,000
-------- ------- -------
77,840 82,780 79,936
======== ======= =======
Earnings (loss) per share...................... $ (.19) $ .58 $ .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.
F-11
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(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.
(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
On May 28, 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 was 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 Computer Graphics.
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 Acxiom, May & Speh and
Computer Graphics and the combined amounts presented in the accompanying
supplemental consolidated financial statements are summarized below.
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Revenue:
Acxiom...................................... $729,984 $465,065 $402,016
May & Speh.................................. -- 103,955 77,223
Computer Graphics........................... 24,073 23,309 19,993
-------- -------- --------
Combined.................................... $754,057 $592,329 $499,232
======== ======== ========
Net earnings (loss):
Acxiom...................................... $(16,430) $ 35,597 $ 27,512
May & Speh.................................. -- 10,458 10,223
Computer Graphics........................... 1,288 1,100 1,209
-------- -------- --------
Combined.................................... $(15,142) $ 47,155 $ 38,944
======== ======== ========
</TABLE>
F-12
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
Included in the statement of operations for the year ended March 31, 1999
are revenue of $66.6 million and net earnings of $9.3 million for May & Speh
for the period from April 1, 1998 to September 17, 1998.
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.
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
F-13
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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,
F-14
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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.
F-15
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(4) Property and Equipment
Property and equipment is summarized as follows (dollars in thousands):
<TABLE>
<CAPTION>
1999 1998
-------- --------
<S> <C> <C>
Land................................................... $ 8,224 $ 8,427
Buildings and improvements............................. 92,417 75,969
Office furniture and equipment......................... 36,765 24,777
Data processing equipment.............................. 204,435 194,392
-------- --------
341,841 303,565
Less accumulated depreciation and amortization......... 115,460 116,307
-------- --------
$226,381 $187,258
======== ========
</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.
F-16
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(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>
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.
F-17
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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 LLC, 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).
F-18
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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
average Number of
Number 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>
F-19
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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 31,334 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 $(15,142) $47,155 $38,944
Pro forma (32,302) 40,725 37,881
Basic earnings (loss) per share........... As reported (.19) .64 .55
Pro forma (.41) .55 .53
Diluted earnings (loss) per share......... As reported (.19) .58 .49
Pro forma (.41) .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.
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.
F-20
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
(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...................... $ 2,843 $28,065 $23,605
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) -- --
-------- ------- -------
$(33,550) $25,302 $21,373
======== ======= =======
</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....................................... $ 18,285 $12,889 $13,714
Foreign....................................... 1,165 1,206 83
State......................................... 7,247 1,827 1,645
-------- ------- -------
26,697 15,922 15,442
-------- ------- -------
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........................... $ 2,843 $28,065 $23,605
======== ======= =======
</TABLE>
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)....... $(4,305) $26,327 $21,892
Increase (reduction) in income taxes resulting
from:
Nondeductible merger and integration
expenses................................... 7,836 -- --
State income taxes, net of Federal income
tax benefit................................ (1,026) 2,701 2,042
Research and experimentation credits........ (265) (715) (683)
Other....................................... 603 (248) 354
------- ------- -------
$ 2,843 $28,065 $23,605
======= ======= =======
</TABLE>
F-21
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
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 that
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
F-22
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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 (10.9%), $74.7 million (12.6%) and $67.7
million (13.6%) in 1999, 1998 and 1997, respectively, and Trans Union accounted
for revenue of $56.6 million (11.3%) in 1997. At March 31, 1999, accounts
receivable from Allstate was $12.0 million.
(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................................... $712,907 $41,150 $754,057
Long-lived assets......................... 454,631 10,687 465,318
======== ======= ========
1998:
Revenue................................... 557,683 34,646 592,329
Long-lived assets......................... 305,219 7,860 313,079
======== ======= ========
1997:
Revenue................................... 470,812 28,420 499,232
Long-lived assets......................... 207,717 6,106 213,823
======== ======= ========
</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
F-23
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Continued)
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.
(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 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.
Information Technology Management includes information technology outsourcing
and facilities management for data center management, network management,
client server management and other complementary information technology
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.
F-24
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO SUPPLEMENTAL CONSOLIDATED FINANCIAL STATEMENTS--(Concluded)
The following tables present information by business segment (dollars in
thousands):
<TABLE>
<CAPTION>
1999 1998 1997
-------- -------- --------
<S> <C> <C> <C>
Services.................................... $444,020 $331,713 $274,751
Data Products............................... 186,706 155,206 135,449
Information Technology Management........... 164,453 128,366 109,497
Intercompany eliminations................... (41,122) (22,956) (20,465)
-------- -------- --------
Total revenue............................. $754,057 $592,329 $499,232
======== ======== ========
Services.................................... $ 90,776 $ 55,302 $ 46,453
Data Products............................... 15,370 15,664 8,878
Information Technology 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........... $ (1,384) $ 80,909 $ 68,206
======== ======== ========
Services.................................... $ 24,360 $ 17,901 $ 7,900
Data Products............................... 19,214 12,660 8,861
Information Technology Management........... 20,039 16,547 14,046
Corporate and other......................... 484 2,700 4,833
-------- -------- --------
Depreciation and amortization........... $ 64,097 $ 49,808 $ 35,640
======== ======== ========
</TABLE>
<TABLE>
<CAPTION>
March 31,
-----------------
1999 1998
-------- --------
<S> <C> <C>
Services................................................ $427,210 $228,115
Data Products........................................... 167,111 130,704
Information Technology Management....................... 238,164 172,834
Corporate and other..................................... 57,315 149,981
-------- --------
Total assets........................................ $889,800 $681,634
======== ========
</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.................................. $164,512 $180,030 $193,910 $215,605
Income (loss) from operations............ 20,321 (82,707) 25,958 35,044
Net earnings (loss)...................... 11,737 (60,548) 14,038 19,631
Basic earnings (loss) per share.......... .16 (.79) .18 .25
Diluted earnings (loss) per share........ .14 (.79) .16 .22
1998:
Revenue.................................. $129,390 $141,739 $152,892 $168,308
Income from operations................... 15,006 21,000 20,825 24,078
Net earnings............................. 8,265 12,575 12,074 14,241
Basic earnings per share................. .11 .17 .16 .19
Diluted earnings per share............... .10 .15 .15 .17
</TABLE>
F-25
<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 Balance
beginning costs and additions written Bad 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.............. $3,847 2,373 710 2,026 715 $5,619
====== ===== ===== ===== === ======
1998:
Allowance for doubtful
accounts, returns and
credits.............. $4,898 3,105 224 4,777 397 $3,847
====== ===== ===== ===== === ======
1997:
Allowance for doubtful
accounts, returns and
credits.............. $2,402 4,496 4,800 7,044 238 $4,898
====== ===== ===== ===== === ======
</TABLE>
Note--Other additions represent the valuation accounts acquired in connection
with business combinations.
F-26
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
[ACXIOM LOGO]
----------------
PROSPECTUS
----------------
ABN AMRO Rothschild
a division of ABN AMRO Incorporated
Merrill Lynch & Co.
Salomon Smith Barney
William Blair & Company
PaineWebber Incorporated
Robert W. Baird & Co.
Incorporated
Stephens Inc.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
<TABLE>
<S> <C>
Securities and Exchange Commission registration fee............. $ 19,228
National Association of Securities Dealers, Inc. fee............ 18,762
Nasdaq Stock Market listing fee................................. 17,500
Printing expenses............................................... 100,000*
Legal fees and expenses......................................... 85,000*
Auditors' fees and expenses..................................... 60,000*
Transfer Agent and Registrar fees............................... 2,500
Miscellaneous expenses.......................................... 7,010
--------
TOTAL....................................................... $310,000
========
</TABLE>
--------
* Estimated
Item 15. Indemnification of Directors and Officers.
Exculpation. Section 102(b)(7) of the Delaware General Corporation Law
permits a corporation to include in its certificate of incorporation a
provision eliminating or limiting the personal liability of a director to the
corporation or its stockholders for monetary damages for breach of fiduciary
duty as a director, provided that such provision may not eliminate or limit the
liability of a director for any breach of the director's duty of loyalty to the
corporation or its stockholders, for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, for any
unlawful payment of dividends or unlawful stock purchase or redemption, or for
any transaction from which the director derived an improper personal benefit.
The Acxiom Certificate of Incorporation provides that, to the fullest extent
permitted by Delaware corporate law, a director shall not be liable to Acxiom
and its stockholders for monetary damages for a breach of fiduciary duty as a
director.
Indemnification. Section 145 of the Delaware General Corporation Law permits
a corporation to indemnify any of its directors or officers who was or is a
party or is threatened to be made a party to any third party proceeding by
reason of the fact that such person is or was a director or officer of the
corporation, against expenses (including attorneys' fees), judgments, fines and
amounts paid in settlement actually and reasonably incurred by such person in
connection with such action, suit or proceeding, if such person acted in good
faith and in a manner such person reasonably believed to be in or not opposed
to the best interests of the corporation, and, with respect to any criminal
action or proceeding, had no reasonable cause to believe that such person's
conduct was unlawful. In a derivative action, i.e., one by or in the right of a
corporation, the corporation is permitted to indemnify any of its directors or
officers against expenses (including attorneys' fees) actually and reasonably
incurred by such person in connection with the defense or settlement of such
action or suit if such person shall have been adjudged liable to the
corporation, unless and only to the extent that the court in which such action
or suit was brought shall determine upon application that such person is fairly
and reasonably entitled to indemnity for such expenses despite such
adjudication of liability.
The Acxiom Certificate of Incorporation provides for indemnification of
directors and officers of Acxiom against liability they may incur in their
capacities as and to the extent authorized by Delaware corporate law.
Insurance. Acxiom has in effect directors' and officers' liability insurance
and fiduciary liability insurance. The fiduciary liability insurance covers
actions of directors and officers as well as other employees with fiduciary
responsibilities under ERISA.
II-1
<PAGE>
Item 16. Exhibits.
<TABLE>
<CAPTION>
Number Description
------ -----------
<C> <S>
1 Form of Underwriting Agreement
*3.1 Amended and Restated Certificate of Incorporation of the
Registrant (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).
*3.2 Amended and Restated Bylaws of the Registrant (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).
*4.1 Specimen Common Stock Certificate (previously filed as Exhibit
4.1 to the Registrant's Registration Statement on Form S-4 (No.
333-61639) filed August 17, 1998 and incorporated herein by
reference).
*4.2 Rights Agreement, dated January 28, 1998 between Acxiom and
First Chicago Trust Company of New York (now First Chicago Trust
Company, a division of EquiServe), as Rights Agent (the "Rights
Agreement"), 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 the Registrant, included in
Exhibit B to the Rights Agreement (previously filed as Exhibit
4.1 to the Registrant's Current Report on Form 8-K dated
February 10, 1998, Commission File No. 0-13163, and incorporated
herein by reference).
*4.3 Amendment Number One, dated as of May 26, 1998, to the Rights
Agreement (previously filed as Exhibit 4 to the Registrant's
Current Report on Form 8-K dated June 4, 1998, Commission File
No. 0-13163, and incorporated herein by reference).
5 Opinion of Friday, Eldredge & Clark, LLP, regarding the validity
of the securities being registered.
23.1 Consent of KPMG LLP.
23.2 Consent of Friday, Eldredge & Clark, LLP, (included in the
opinion filed as Exhibit 5 to this Registration Statement and
incorporated herein by reference).
23.3 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney.
</TABLE>
- --------
* incorporated herein by reference as indicated
Item 17. Undertakings.
The undersigned registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933 (the "Act"), each
filing of the registrant's annual report pursuant to Section 13(a) or Section
15(d) of the Securities Exchange Act of 1934 that is incorporated by reference
in the registration statement shall be deemed to be a new registration
statement relating to the securities offered therein, and the offering of such
securities at that time shall be deemed to be the initial bona fide offering
thereof.
Insofar as indemnification for liabilities arising under the Act may be
permitted to directors, officers and controlling persons of the registrant
pursuant to the foregoing provisions referred to in Item 15 above, or
otherwise, the registrant has been advised that in the opinion of the
Securities and Exchange Commission such indemnification is against public
policy as expressed in the Act and is, therefore, unenforceable. In the event
that a claim for indemnification against such liabilities (other than the
payment by the registrant of expenses
II-2
<PAGE>
incurred or paid by a director, officer or controlling person of the registrant
in the successful defense of any action, suit or proceeding) is asserted by
such director, officer or controlling person in connection with the securities
being registered, the registrant will, unless in the opinion of its counsel the
matter has been settled by controlling precedent, submit to a court of
appropriate jurisdiction the question whether such indemnification by it is
against public policy as expressed in the Act and will be governed by the final
adjudication of such issue.
The undersigned registrant also hereby undertakes that:
(1) For purposes of determining any liability under the Act of the
information omitted from the form of prospectus filed as part of this
registration statement in reliance upon Rule 430A and contained in a form
of prospectus filed by the registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
registration statement as of the time it was declared effective.
(2) For the purpose of determining any liability under the Securities
Act of 1933, each post-effective amendment that contains a form of
prospectus shall be deemed to be a new registration statement relating to
the securities offered therein, and the offering of such securities at that
time shall be deemed to be the initial bona fide offering thereof.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, Acxiom certifies
that it has reasonable grounds to believe that it meets all the requirements
for filing on Form S-3 and has duly caused this registration statement to be
signed on its behalf by the undersigned, thereunto duly authorized, in the City
of Little Rock, State of Arkansas, on the 18th day of June, 1999.
Acxiom Corporation
/s/ Catherine L. Hughes
-------------------------------------
Catherine L. Hughes,
(Secretary and Corporate Counsel)
Pursuant to the requirements of the Securities Act of 1933, this
registration statement has been signed below by the following persons in the
capacities indicated, on the 18th day of June, 1999.
<TABLE>
<CAPTION>
Signature Title
--------- -----
<S> <C>
* Chief Financial Officer (principal
___________________________________________ financial officer and principal
(Robert S. Bloom) accounting officer)
* Director
___________________________________________
(Dr. Ann H. Die)
* Director
___________________________________________
(William T. Dillard II)
* Director
___________________________________________
(Harry C. Gambill)
* Chief Operating Officer, Treasurer and
___________________________________________ Director
(Rodger S. Kline)
* Director
___________________________________________
(Thomas F. (Mack) McLarty, III)
* Chairman of the Board and President
___________________________________________ (principal executive officer)
(Charles D. Morgan)
* Director
___________________________________________
(Robert A. Pritzker)
* Director
___________________________________________
</TABLE> (James T. Womble)
/s/ Catherine L. Hughes
*By: ________________________________
Catherine L. Hughes
(Attorney-in-Fact)
Catherine L. Hughes, by signing her name hereto, does sign this document on
behalf of each of the persons indicated above pursuant to powers of attorney
duly executed by such persons, filed or to be filed with the Securities and
Exchange Commission as supplemental information.
II-4
<PAGE>
INDEX TO EXHIBITS
<TABLE>
<CAPTION>
Exhibit
Number Exhibit
------- -------
<C> <S>
1 Form of Underwriting Agreement.
*3.1 Amended and Restated Certificate of Incorporation of the Registrant
(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).
*3.2 Amended and Restated Bylaws of the Registrant (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).
*4.1 Specimen Common Stock Certificate (previously filed as Exhibit 4.1 to
the Registrant's Registration Statement on Form S-4 (No. 333-61639)
filed August 17, 1998 and incorporated herein by reference).
*4.2 Rights Agreement, dated January 28, 1998 between Acxiom and First
Chicago Trust Company of New York (now First Chicago Trust Company, a
division of EquiServe), as Rights Agent (the "Rights Agreement"),
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 the Registrant, included in Exhibit B to the Rights Agreement
(previously filed as Exhibit 4.1 to the Registrant's Current Report on
Form 8-K dated February 10, 1998, Commission File No. 0-13163, and
incorporated herein by reference).
*4.3 Amendment Number One, dated as of May 26, 1998, to the Rights
Agreement (previously filed as Exhibit 4 to the Registrant's Current
Report on Form 8-K dated June 4, 1998, Commission File No. 0-13163,
and incorporated herein by reference).
5 Opinion of Friday, Eldredge & Clark, LLP, regarding the validity of
the securities being registered.
23.1 Consent of KPMG LLP.
23.2 Consent of Friday, Eldredge & Clark, LLP, (included in the opinion
filed as Exhibit 5 to this Registration Statement and incorporated
herein by reference).
23.3 Consent of PricewaterhouseCoopers LLP.
24 Powers of Attorney.
</TABLE>
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*incorporated herein by reference as indicated
<PAGE>
EXHIBIT 1
5,511,076 Shares/1/
ACXIOM CORPORATION
Common Stock
UNDERWRITING AGREEMENT
______________ , 1999
ABN AMRO Incorporated
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Smith Barney Inc.
William Blair & Company, L.L.C.
PaineWebber Incorporated
Robert W. Baird & Co. Incorporated
Stephens Inc.
As Representatives of the
several Underwriters named
in Schedule I hereto
c/o ABN AMRO Incorporated
208 South LaSalle Street
Chicago, Illinois 60604
Ladies and Gentlemen:
Pursuant to the terms of this Underwriting Agreement (this "Agreement"),
Acxiom Corporation, a Delaware corporation (the "Company"), proposes, subject to
the terms and conditions set forth herein, to sell an aggregate of 1,500,000
shares of Common Stock, par value $0.10 per share (the "Common Stock"), of the
Company to the several underwriters named in Schedule I hereto (collectively,
the "Underwriters") and the stockholders of the Company named in Schedule II
hereto (the "Selling Stockholders") propose, subject to the terms and conditions
set forth herein, to sell to the Underwriters an aggregate of 4,011,076 shares
of Common Stock. The Company has agreed to sell the several Underwriters, upon
the terms and conditions set forth in Section 2 hereof, up to an additional
800,000 shares of Common Stock. The aggregate of 5,511,076 shares to be sold by
the Company and the Selling Stockholders are herein called the "Firm Shares" and
the 800,000 additional shares to be sold by the Company are herein called the
"Additional Shares." The Firm Shares and the Additional Shares are hereinafter
collectively referred to as the "Shares." ABN AMRO Incorporated, Merrill Lynch,
Pierce, Fenner & Smith Incorporated, Salomon Smith Barney Inc., William Blair &
Company, L.L.C., PaineWebber Incorporated, Robert W. Baird & Co. Incorporated,
and Stephens Inc. are acting individually and as
- ----------------
/1/ Plus an option to purchase up to 800,000 Additional Shares to cover over-
allotments
<PAGE>
representatives of the several Underwriters and in such capacity are hereinafter
referred to as the "Representatives."
Prior to the purchase and public offering of the Shares by the several
Underwriters, the Company, the Selling Stockholders and the Representatives
shall enter into an agreement substantially in the form of Exhibit A hereto (the
"Pricing Agreement"). The Pricing Agreement may take the form of an exchange of
any standard form of written telecommunication between the Company, the Selling
Stockholders and the Representatives and shall specify such applicable
information as is indicated in Exhibit A hereto. The offering of the Shares will
be governed by this Agreement, as supplemented by the Pricing Agreement. From
and after the date of the execution and delivery of the Pricing Agreement, this
Agreement shall be deemed to incorporate the Pricing Agreement.
The Company and the Selling Stockholders are advised by the Representatives
that the Underwriters have agreed to make a public offering of their respective
portions of the Shares as soon after the Registration Statement (as defined in
Section 1(a)(i) below) has become effective and the Pricing Agreement has been
executed as in the judgment of the Representatives is advisable and to first
offer the Shares upon the terms set forth in the Prospectus (as defined in
Section 1(a)(i) below).
The Company, the Selling Stockholders, the Representatives and the other
Underwriters hereby agree to the following matters with respect to the purchase
and sale of the Shares:
Section 1. Representations and Warranties of the Company and the Selling
Stockholders.
(a) The Company represents and warrants to each Underwriter that:
(i) The Company has prepared and filed with the Securities and
Exchange Commission (the "Commission") in accordance with the provisions of
the Securities Act of 1933, as amended, and the rules and regulations of
the Commission thereunder (collectively, the "Act"), a registration
statement on Form S-3 (File No. 333-______), including a preliminary
prospectus, relating to the Shares and certain amendments thereto. The
Company will next file with the Commission one of the following: (A) prior
to effectiveness of such registration statement, a further amendment
thereto, including the form of final prospectus, (B) a final prospectus in
accordance with Rules 430A and 424(b) under the Act or (C) a term sheet
(the "Term Sheet") as described in and in accordance with Rules 434 and
424(b) under the Act. As filed, the final prospectus, if one is used, or
the Term Sheet and the latest Preliminary Prospectus, if a final prospectus
is not used, shall include all Rule 430A Information (as defined below).
There have been or will promptly be delivered to you three signed copies of
such registration statement and amendments, together with three copies of
all documents incorporated by reference therein, three copies of each
exhibit filed therewith, and conformed copies of such registration
statement and amendments (but without exhibits) and of the related
preliminary prospectus or prospectuses and final forms of prospectus or
Term Sheet, if a Term Sheet is used, for each of the Underwriters. The term
"Registration
-2-
<PAGE>
Statement" as used in this Agreement shall mean such registration statement
at the time such registration statement becomes effective and, in the event
any amendment thereto becomes effective prior to the Closing Date (as
hereinafter defined), shall also mean such registration statement as so
amended; provided, however, that such term shall also include all Rule 430A
Information deemed to be included in such registration statement at the
time such registration statement becomes effective as provided by Rule 430A
and, if a Term Sheet is used, shall also include all information deemed to
be included in such registration statement at the time such registration
statement becomes effective as provided by Rule 434; provided, further,
that if the Company files a registration statement under the Act to
register a portion of the Shares and relies on Rule 462(b) for such
registration statement to become effective upon filing with the Commission
(the "Rule 462 Registration Statement"), then any reference to
"Registration Statement" herein shall be deemed to be to both the
registration statement referred to above (No. 333-_______) and the Rule 462
Registration Statement, as each such registration statement may be amended
pursuant to the Act. The term "Preliminary Prospectus" as used in this
Agreement shall mean any preliminary prospectus relating to the Shares
filed with the Commission under the Act and the rules and regulations
thereunder, including any preliminary prospectus included in the
Registration Statement at the time it becomes effective that omits Rule
430A Information. The term "Prospectus" as used in this Agreement shall
mean: (X) the prospectus relating to the Shares in the form in which it is
first filed with the Commission pursuant to Rule 424(b) under the Act; (Y)
if a Term Sheet is not used and no filing pursuant to Rule 424(b) under the
Act is required, the form of final prospectus included in the Registration
Statement at the time the Registration Statement becomes effective; or (Z)
if a Term Sheet is used in lieu of a prospectus, the Term Sheet in the form
in which it is first filed with the Commission pursuant to Rule 424(b)
under the Act, together with the latest Preliminary Prospectus included in
the Registration Statement at the time it becomes effective (such Term
Sheet and Preliminary Prospectus are sometimes collectively referred to
herein as the "Rule 434 Prospectus"). The term "Rule 430A Information" as
used in this Agreement shall mean information with respect to the Shares
and the offering thereof permitted to be omitted from the Registration
Statement when it becomes effective pursuant to Rule 430A under the Act.
The Securities Exchange Act of 1934, as amended, and the rules and
regulations of the Commission thereunder are hereinafter collectively
referred to as the "Exchange Act." Any reference herein to any Preliminary
Prospectus or the Prospectus shall be deemed to refer to and include the
documents incorporated by reference therein pursuant to Form S-3 under the
Act ("Incorporated Documents"), as of the date of such Preliminary
Prospectus or Prospectus, as the case may be. The Incorporated Documents,
when they were filed with the Commission, conformed in all material
respects to the requirements of the Exchange Act and none of such documents
contained an untrue statement of a material fact or omitted to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(ii) The Commission has not issued any order preventing or suspending
the use of any Preliminary Prospectus, and each Preliminary Prospectus
complied in all
-3-
<PAGE>
material respects when so filed with the requirements of the Act (except to
the extent that, in conformity with the Act, such Preliminary Prospectus is
subject to completion).
(iii) The Registration Statement in the form in which it becomes
effective and also in such form as it may be when the Pricing Agreement is
executed or any post-effective amendment to the Registration Statement
shall become effective, and the Prospectus when and in the form last filed
with the Commission as part of the Registration Statement prior to
effectiveness or, if applicable, first filed pursuant to Rule 424(b) under
the Act, and when any supplement or amendment thereto is filed with the
Commission, each will comply in all material respects with the requirements
of the Act, will not at any such time contain an untrue statement of a
material fact or omit to state a material fact required to be stated
therein or necessary to make the statements therein, in light of the
circumstances under which they were made, not misleading. This
representation and warranty does not apply to statements in or omissions
from the Registration Statement or the Prospectus (or any supplement or
amendment thereto) made in reliance upon and in conformity with information
relating to any Underwriter furnished to the Company in writing by or on
behalf of such Underwriter through the Representatives specifically for use
in the Registration Statement.
(iv) There is no contract or other document of a character required to
be described in the Registration Statement or Prospectus or to be filed as
an exhibit to the Registration Statement which is not described or filed as
required.
(v) The accountants, including KPMG LLP and PricewaterhouseCoopers
LLP, who have expressed their opinions with respect to certain of the
financial statements of the Company or any of its subsidiaries included or
incorporated by reference in the Registration Statement and the Prospectus,
are independent public accountants as required by the Act.
(vi) The consolidated financial statements, together with the notes
thereto, of the Company included or incorporated by reference in the
Registration Statement and the Prospectus comply in all material respects
with the Act and present fairly the consolidated financial position of the
Company as of the dates indicated, and the consolidated results of
operations, cash flows and changes in financial position of the Company for
the periods specified. The consolidated financial statements, together with
the notes thereto, of May & Speh, Inc. ("May & Speh") included or
incorporated by reference in the Registration Statement and the Prospectus
comply in all material respects with the Act and present fairly the
consolidated financial position of May & Speh as of the dates indicated,
and the consolidated results of operations, cash flows and changes in
financial position of May & Speh for the periods specified. Such financial
statements have been prepared in conformity with generally accepted
accounting principles applied on a consistent basis throughout the entire
period involved except to the extent disclosed therein.
(vii) The Company has been duly incorporated and is validly existing
as a corporation in good standing under the laws of the State of Delaware,
with full
-4-
<PAGE>
corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement and
Prospectus. The Company is duly qualified to do business as a foreign
corporation and in good standing in each jurisdiction in which the
ownership or leasing of its properties or the conduct of its business
requires such qualification, except in any such case in which the failure
to so qualify or be in good standing would not have a material adverse
effect upon the business of the Company and its subsidiaries, taken as a
whole; and no proceeding of which the Company has knowledge has been
instituted in any such jurisdiction, revoking, limiting or curtailing, or
seeking to revoke, limit or curtail, such power and authority or
qualification.
(viii) The only subsidiaries of the Company are the subsidiaries
listed on Exhibit 21 to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1999. Each of the Company's subsidiaries has
been duly incorporated and is validly existing as a corporation in good
standing under the laws of its jurisdiction of incorporation, with full
corporate power and authority to own, lease and operate its properties and
conduct its business as described in the Registration Statement and
Prospectus. Each of the Company's subsidiaries is duly qualified to do
business as a foreign corporation in good standing in each jurisdiction in
which the ownership or leasing of its properties or the conduct of its
business requires such qualification, except in any such case in which the
failure to so qualify or be in good standing would not have a material
adverse effect on the business of the Company and its subsidiaries, taken
as a whole. Each of the Company's subsidiaries has all authorizations,
approvals, orders, certificates and permits of and from all state, federal
and other regulatory officials and bodies necessary to own its properties
and to conduct its business as described in the Registration Statement and
Prospectus, except where the failure to have any such authorization,
approval, order, certificate or permit would not have a material adverse
effect on the business affairs, business prospects, properties, financial
condition or results of operations of the Company and its subsidiaries,
taken as a whole. Except for the capital stock of the subsidiaries and
except as otherwise described in the Prospectus, the Company does not own
any capital stock of, or other securities evidencing a material equity
interest in, any corporation, partnership or other entity. All of the
issued and outstanding shares of capital stock of the Company's
subsidiaries have been duly and validly authorized and issued, are fully
paid and non-assessable, and except as described in the Prospectus, are
owned by the Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature. Except as described in the
Prospectus, there are no outstanding subscriptions, rights, warrants or
options to acquire, or instruments convertible into or exchangeable for,
any shares of capital stock of any of the Company's subsidiaries.
(ix) The Company has an authorized and outstanding capitalization as
set forth in the Prospectus and the Shares conform to the description
thereof contained in the Prospectus. Except as described in the Prospectus,
all of the issued and outstanding shares of Common Stock (including the
Shares to be sold by the Selling Stockholders to the Underwriters) have
been duly authorized and validly issued and are fully paid and non-
assessable and free of preemptive or other similar rights. At Closing, all
of the issued and
-5-
<PAGE>
outstanding shares of Common Stock (including the Shares to be sold by the
Selling Stockholders to the Underwriters) will have been duly authorized
and validly issued and will be fully paid and non-assessable and, except as
described in the Prospectus, free of preemptive or other similar rights.
There are no options, agreements, contracts or other rights in existence to
acquire from the Company any shares of Common Stock, except as set forth in
the Prospectus.
(x) The Shares to be sold by the Company pursuant to this Agreement
and the Pricing Agreement have been duly authorized and, when issued and
paid for in accordance with this Agreement and the Pricing Agreement, will
be validly issued, fully paid and non-assessable; the holders of the Shares
will not be subject to personal liability by reason of being such holders;
except as disclosed in the Prospectus, there are no holders of securities
of the Company having rights, contractual or otherwise, to registration
thereof or preemptive rights to purchase Common Stock; all corporate
actions required to be taken for the authorization, issue and sale of the
Shares have been validly and sufficiently taken; and upon delivery of and
payment for such Shares hereunder, the Underwriters will acquire valid and
marketable title thereto, free and clear of any security interest, claim,
lien, encumbrance or adverse interest of any nature.
(xi) Since the respective dates as of which information is given in
the Registration Statement and the Prospectus, except as otherwise stated
or contemplated therein, there has not been (A) any material adverse change
in the condition (financial or otherwise), earnings, affairs, business or
prospects of the Company and its subsidiaries, taken as a whole, whether or
not arising in the ordinary course of business, (B) any material
transaction entered into, or any material liability or obligation incurred,
by the Company or its subsidiaries other than in the ordinary course of
business, (C) any change in the capital stock (other than as a result of
certain issuances of Common Stock by the Company in connection with the
Company's employee benefit plans), or material increase in the short-term
debt or long-term debt of the Company or its subsidiaries, or (D) any
dividend or distribution of any kind declared, paid or made by the Company
or its subsidiaries on its capital stock.
(xii) The Company and each of its subsidiaries have good and
marketable title to all properties and assets reflected as owned in the
financial statements hereinabove described or described in the Prospectus
as owned by them, free and clear of all liens, charges, encumbrances or
restrictions of any kind, except such as are referred to in such financial
statements or the Prospectus or which are not material to the business of
the Company and its subsidiaries, taken as a whole; all of the leases and
subleases material to the business of the Company and its subsidiaries,
taken as a whole or under which the Company or its subsidiaries holds
properties are in full force and effect; and neither the Company nor any of
its subsidiaries has received any notice of any material claim of any sort
which has been asserted by anyone adverse to the rights of the Company or
any subsidiary as owner or as lessee or sublessee under any of the leases
or subleases mentioned above, or affecting or questioning the rights of the
Company or such subsidiary to
-6-
<PAGE>
the continued possession of the leased or subleased premises under any such
lease or sublease.
(xiii) Neither the Company nor any of its subsidiaries is in default
in the observance of any provision of its Certificate of Incorporation or
by-laws, or in the performance or observance of any obligation, agreement,
covenant or condition contained in any contract, indenture, mortgage, loan
agreement, note, lease or other instrument to which it is a party or by
which it or any of its properties may be bound, the effect of which could
be materially adverse to the condition (financial or otherwise), earnings,
affairs, business or prospects of the Company and its subsidiaries, taken
as a whole.
(xiv) The execution and delivery of this Agreement and the Pricing
Agreement, the issuance and delivery of the Shares, the consummation of the
transactions contemplated herein and in the Registration Statement and
compliance with the terms of this Agreement and the Pricing Agreement have
been duly authorized by all necessary corporate action and will not result
in any violation of the Certificate of Incorporation or by-laws of the
Company or any of its subsidiaries, and will not conflict with or result in
a breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge,
encumbrance or restriction of any kind upon any property or assets of the
Company or any of its subsidiaries under any contract, indenture, mortgage,
loan agreement, note, lease or other agreement or instrument to which the
Company or any of its subsidiaries is a party or by which the Company or
any of its subsidiaries, or any of their respective properties, is bound,
or any existing applicable law, rule, regulation, judgment, order or decree
of any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Company or any of its subsidiaries or
any of their respective properties. No approval, authorization or consent
of any court, regulatory body, administrative agency or other governmental
body having jurisdiction over the Company or any of its subsidiaries is
required in connection with the execution of this Agreement, the Pricing
Agreement or the sale of the Shares to the Underwriters, except such as may
be required under the Act, state securities or Blue Sky laws or from the
clearance of the offering with the National Association of Securities
Dealers, Inc. (the "NASD").
(xv) There is no action, suit or proceeding before or by any court or
governmental agency or body, domestic or foreign, or any arbitrator or
arbitration panel, now pending or, to the knowledge of the Company,
threatened against or affecting the Company or any of its subsidiaries
which could result in any material adverse change to the condition
(financial or otherwise), earnings, affairs, business or prospects of the
Company and its subsidiaries, taken as whole; and there is no decree,
judgment or order of any kind in existence against or restraining the
Company or any of its subsidiaries, or any of their respective officers,
employees or directors, from taking any actions of any kind in connection
with the business of the Company or any such subsidiary.
-7-
<PAGE>
(xvi) The Company and each of its subsidiaries own or possess or have
obtained all material governmental licenses, permits, consents, orders,
approvals and other authorizations necessary to lease or own, as the case
may be, and to operate their properties and to carry on their businesses as
presently conducted, and neither the Company nor any such subsidiary has
received any notice of proceedings related to revocation or modification of
any such licenses, permits, consents, orders, approvals or authorizations
which singly or in the aggregate, if the subject of an unfavorable ruling
or finding, would be materially adverse to the condition (financial or
otherwise), earnings, affairs, business or prospects of the Company and its
subsidiaries, taken as a whole.
(xvii) The conduct of the business of the Company and each of its
subsidiaries is in compliance with all applicable federal, state and local
laws and regulations that regulate or are concerned in any way with the
business of the Company or such subsidiaries, where the effect of the
failure to comply would be materially adverse to the condition (financial
or otherwise), earnings, affairs, business or prospects of the Company and
its subsidiaries, taken as a whole.
(xviii) The Company together with its subsidiaries owns or possesses,
or can acquire on reasonable terms, all right, title and interest in or to,
or has duly licensed from third parties, all patents, trademarks, service
marks, copyrights, trade names, trade secrets and other proprietary rights
("Trade Rights") necessary to conduct the business now or proposed to be
conducted by it, and neither the Company nor any of its subsidiaries has
received any notice of, and has no knowledge of, infringement of or
conflict with asserted rights of others with respect to any such Trade
Rights which, singly or in the aggregate, if the subject of any unfavorable
decision, ruling or finding, would be materially adverse to the condition
(financial or otherwise), earnings, affairs, business or prospects of the
Company and its subsidiaries, taken as a whole.
(xix) The Company has filed all tax returns required to be filed and
has paid all taxes which were payable pursuant to said returns or any
assessments with respect thereto, other than any tax returns which the
Company is contesting in good faith or which are not material to the
Company and there is no tax deficiency that has been, or to the knowledge
of the Company might be, asserted against the Company or any of its
properties or assets that would or could be expected to have a material
adverse effect upon the condition (financial or otherwise) or results of
operations of the Company and its subsidiaries, taken as a whole.
(xx) This Agreement has been duly executed and delivered by the
Company.
(xxi) A registration statement relating to the Common Stock has been
declared effective by the Commission pursuant to the Exchange Act and the
Common Stock is duly registered thereunder. The Shares have been authorized
for trading on the Nasdaq Stock Market, subject to notice of issuance or
sale, as the case may be.
-8-
<PAGE>
(xxii) The Company is not, and does not intend to conduct its
business in a manner in which it would become, an "investment company" as
defined in Section 3(a) of the Investment Company Act of 1940, as amended
(the "Investment Company Act").
(xxiii) All offers and sales of the Company's capital stock prior to
the date hereof were at all relevant times either registered under the Act
or exempt from the registration requirements of the Act and were duly
registered with, or the subject of an available exemption from, the
registration requirements of the applicable state securities or Blue Sky
laws.
(xxiv) The Company has not taken and will not take, directly or
indirectly, any action designed to cause or result in, or that has
constituted or might reasonably be expected to constitute, the
stabilization or manipulation of the price of any security of the Company.
(xxv) Except as disclosed in the Registration Statement and the
Prospectus, no transaction has occurred between or among the Company, on
the one hand, and any of its officers or directors or any affiliate or
affiliates of any such officer or director, on the other hand, that is
required to be so disclosed, including, but not limited to, any outstanding
loans, advances or guaranties of indebtedness by the Company to or for the
benefit of any affiliates of the Company, or any of the officers or
directors of the Company, or any family member of any of them.
(xxvi) The Company has not, directly or indirectly, at any time (A)
made any contributions to any candidate for foreign political office, or if
made, failed to disclose fully any such contribution made in violation of
law, or (B) made any payment to any state, federal or foreign governmental
officer or official, or other person charged with similar public or quasi-
public duties, other than payments or contributions required or allowed by
applicable law. The Company's internal accounting controls and procedures
are sufficient to cause the Company to comply in all material respects with
the Foreign Corrupt Practices Act of 1977, as amended.
(xxvii) The Company and each of its subsidiaries (a) are in
compliance with any and all applicable foreign, federal, state and local
laws and regulations relating to the protection of human health and safety,
the environment or hazardous or toxic substances or wastes, pollutants or
contaminants ("Environmental Laws"), (b) have received all permits,
licenses or other approvals required of them under applicable Environmental
Laws to conduct their respective businesses and (c) are in compliance with
all terms and conditions of any such permit, license or approval, except
where such noncompliance with Environmental Laws, failure to receive
required permits, licenses or other approvals or failure to comply with the
terms and conditions of such permits, licenses or approvals would not,
singly or in the aggregate, have a material adverse effect on the Company
and its subsidiaries, taken as a whole.
(xxviii) The Company has filed all documents and reports required to
be filed with the Commission under the Exchange Act. Such documents or
reports,
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<PAGE>
when they were filed with the Commission, conformed in all material
respects to the requirements of the Exchange Act and none of such documents
or reports contained an untrue statement of a material fact or omitted to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading.
(xxix) There are no holders of securities of the Company having
rights to registration thereof or preemptive rights to purchase Common
Stock except as disclosed in the Prospectus and the holders of such
registration rights who are not Selling Stockholders have waived such
rights with respect to the offering being made by the Prospectus.
(b) Representations, Warranties and Covenants of the Selling Stockholders.
(i) The Pritzker Foundation represents and warrants and agrees with
the Company and the Underwriters that:
(A) Such Selling Stockholder is the sole legal and beneficial
owner of and has good and valid title to the Shares proposed to be
sold by such Selling Stockholder hereunder and has full right, power
and authority to enter into this Agreement and the Pricing Agreement
and to sell, assign, transfer and deliver such Shares hereunder, free
and clear of all voting trust arrangements, security interests,
claims, liens, encumbrances, community property rights or adverse
interests of any nature; and upon delivery of and payment for such
Shares hereunder, the Underwriters will acquire valid and marketable
title thereto, free and clear of all voting trust arrangements,
security interests, claims, liens, encumbrances, property rights or
adverse interests of any nature.
(B) The execution and delivery of this Agreement and the
Pricing Agreement, the consummation of the transactions contemplated
herein and in the Registration Statement and compliance with the terms
of this Agreement and the Pricing Agreement have been duly authorized
by all necessary corporate action and will not result in any violation
of the Articles of Incorporation or by-laws of the Selling Stockholder
or any of its subsidiaries, and will not conflict with or result in a
breach of any of the terms or provisions of, or constitute a default
under, or result in the creation or imposition of any lien, charge,
encumbrance or restriction of any kind upon any property or assets of
the Selling Stockholder or any of its subsidiaries under any contract,
indenture, mortgage, loan agreement, note, lease or other agreement or
instrument to which the Selling Stockholder or any of its subsidiaries
is a party or by which the Selling Stockholder or any of its
subsidiaries, or any of their respective properties, is bound, or any
existing applicable law, rule, regulation, judgment, order or decree
of any government, governmental instrumentality or court, domestic or
foreign, having jurisdiction over the Selling Stockholder or any of
its subsidiaries or any of their respective properties. No approval,
authorization or consent of any court,
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<PAGE>
regulatory body, administrative agency or other governmental body
having jurisdiction over the Selling Stockholder or any of its
subsidiaries is required in connection with the sale of the Shares by
such Selling Stockholder to the Underwriters, execution and delivery
of this Agreement or the Pricing Agreement or the consummation of the
transactions contemplated herein or therein, except such as may be
required under the Act, state securities or Blue Sky laws or from the
clearance of the offering with the National Association of Securities
Dealers, Inc. (the "NASD").
(C) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which might be
reasonably expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares.
(D) The statements in the sections captioned "Prospectus
Summary," "Certain Transactions," and "Selling Stockholders" included
or incorporated by reference in each Preliminary Prospectus, solely
insofar as they relate to such Selling Stockholder, as of the date of
such Preliminary Prospectus, have conformed in all material respects
with the requirements of the Act and, as of its date, have not
included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein not misleading;
and the Registration Statement at the time of effectiveness, and at
all times subsequent thereto, (x) the statements, in the sections
captioned "Prospectus Summary," "Selling Stockholders" and "Certain
Transactions" included or incorporated by reference in the
Registration Statement and the Prospectus and any amendments or
supplements thereto, solely insofar as they relate to such Selling
Stockholder, and the Registration Statement and the Prospectus and any
amendments or supplements thereto, contained or will contain all
statements that are required to be stated therein in accordance with
the Act and in all material respects conformed or will in all material
respects conform to the requirements of the Act, and (y) neither the
Registration Statement nor the Prospectus, nor any amendment or
supplement thereto, solely insofar as it relates to such statements in
the sections captioned "Prospectus Summary," "Selling Stockholders"
and "Certain Transactions" with respect to such Selling Stockholder,
included or will include any untrue statement of a material fact or
omitted or will omit to state any material fact required to be stated
therein or necessary to make the statements therein not misleading;
provided that neither clause (x) nor (y) shall have any affect if
information has been given by such Selling Stockholder to the Company
and the Representatives in writing which would eliminate or remedy any
such untrue statement or omission.
(E) Such Selling Stockholder and its affiliates agree with the
Company and the Underwriters not to sell, contract to sell or
otherwise dispose of any Common Stock or rights to purchase Common
Stock for a period of 120
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days after the date of the Pricing Agreement without the prior written
consent from the Representatives.
(F) In order to document the Underwriter's compliance with the
reporting and withholding provisions of the Internal Revenue Code of
1986, as amended, with respect to the transactions herein
contemplated, the Selling Stockholder agrees to deliver to you prior
to or on the Closing Date, as hereinafter defined, a properly
completed and executed United States Treasury Department Form W-8 or
Form W-9 (or other applicable form of statement specified by Treasury
Department regulations in lieu thereof).
(ii) Each [Individual] Selling Stockholder severally represents and
warrants and agrees with the Company and the Underwriters that:
(A) Such Selling Stockholder is the sole legal and beneficial
owner of and has good and valid title to the Shares proposed to be
sold by such Selling Stockholder hereunder and has full right, power,
capacity and authority to enter into this Agreement, the Pricing
Agreement, the Power of Attorney and the Custody Agreement and to
sell, assign, transfer and deliver such Shares hereunder, free and
clear of all voting trust arrangements, security interests, claims,
liens, encumbrances, community property rights or adverse interests of
any nature; and upon delivery of and payment for such Shares
hereunder, the Underwriters will acquire valid and marketable title
thereto, free and clear of all voting trust arrangements, security
interests, claims, liens, encumbrances, property rights or adverse
interests of any nature.
(B) The execution and delivery of this Agreement, the Pricing
Agreement, the Power of Attorney and the Custody Agreement, the
consummation of the transactions contemplated herein and in the
Registration Statement and compliance with the terms of this
Agreement, the Pricing Agreement, the Power of Attorney and the
Custody Agreement and will not conflict with or result in a breach of
any of the terms or provisions of, or constitute a default under, or
result in the creation or imposition of any lien, charge, encumbrance
or restriction of any kind upon any property or assets of the Selling
Stockholder under any contract, indenture, mortgage, loan agreement,
note, lease or other agreement or instrument to which the Selling
Stockholder is a party or by which the Selling Stockholder, or any of
his properties, is bound, or any existing applicable law, rule,
regulation, judgment, order or decree of any government, governmental
instrumentality or court, domestic or foreign, having jurisdiction
over the Selling Stockholder or any of his properties. No approval,
authorization or consent of any court, regulatory body, administrative
agency or other governmental body having jurisdiction over the Selling
Stockholder is required in connection with the sale of the Shares to
the Underwriter, execution and delivery of this Agreement, the Pricing
Agreement, the Power of Attorney and the Custody Agreement or
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the consummation of the transactions contemplated herein or therein,
except such as may be required under the Act, state securities or Blue
Sky laws or from the clearance of the offering with the NASD.
(C) Such Selling Stockholder has not taken and will not take,
directly or indirectly, any action designed to or which might be
reasonably expected to cause or result, under the Exchange Act or
otherwise, in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the
Shares.
(D) Such Selling Stockholder has executed and delivered a Power
of Attorney ("Power of Attorney") among the Selling Stockholder and
______________[, _________________, and _________________] (the
"Agents"), naming the Agents as such Selling Stockholder's attorneys-
in-fact (and, by the execution by any Agent of this Agreement, such
agent hereby represents and warrants that he has been duly appointed
an attorney-in-fact by the Selling Stockholders pursuant to the Power
of Attorney) for the purpose of entering into and carrying out this
Agreement and the Pricing Agreement, and the Power of Attorney has
been duly executed by such Selling Stockholder and a copy thereof has
been delivered to you.
(E) Such Selling Stockholder further represents and warrants and
agrees that such Selling Stockholder has deposited in custody, under a
Custody Agreement ("Custody Agreement") with ________________________,
as custodian ("Custodian"), certificates in negotiable form for the
Shares to be sold hereunder by such Selling Stockholder, for the
purpose of further delivery pursuant to this Agreement. Such Selling
Stockholder agrees that the Shares to be sold by such Selling
Stockholder on deposit with the Custodian are subject to the interests
of the Company, the Underwriters and the other Selling Stockholders,
that the arrangements made for such custody, and the appointment of
the Agents pursuant to the Power of Attorney, are to that extent
irrevocable, and that the obligations of such Selling Stockholder
hereunder and under the Power of Attorney and the Custody Agreement
shall not be terminated except as provided in this Agreement, the
Power of Attorney or the Custody Agreement by any act of such Selling
Stockholder, by operation of law, whether, in the case of an
individual Selling Stockholder, by the death or incapacity of such
Selling Stockholder or, in the case of a trust or estate, by the death
of the trustee or trustees or the executor or executors or the
termination of such trust or estate, or, in the case of a partnership
or corporation, by the dissolution, winding-up or other event
affecting the legal life of such entity, or by the occurrence of any
other event. If any individual Selling Stockholder, trustee or
executor should die or become incapacitated, or any such trust,
estate, partnership or corporation should be terminated, or if any
other event should occur before the delivery of the Shares hereunder,
the
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documents evidencing Shares then on deposit with the Custodian shall
be delivered by the Custodian in accordance with the terms and
conditions of this Agreement as if such death, incapacity, termination
or other event had not occurred, regardless of whether or not the
Custodian shall have received notice thereof. Each Agent has been
authorized by such Selling Stockholder to execute and deliver this
Agreement and the Pricing Agreement and the Custodian has been
authorized to receive and acknowledge receipt of the proceeds of sale
of the Shares to be sold by such Selling Stockholder against delivery
thereof and to otherwise act on behalf of such Selling Stockholder.
The Custody Agreement has been duly executed by such Selling
Stockholder and a copy thereof has been delivered to you.
(F) The statements in the sections captioned "Prospectus
Summary," "Selling Stockholders" and "Certain Transactions," included
or incorporated by reference in each Preliminary Prospectus solely
insofar as they relate to such Selling Stockholder, as of the date of
such Preliminary Prospectus, have conformed in all material respects
with the requirements of the Act and, as of its date, have not
included any untrue statement of a material fact or omitted to state a
material fact necessary to make the statements therein not misleading;
and the Registration Statement at the time of effectiveness, and at
all times subsequent thereto, (A) the statements in the sections
captioned "Prospectus Summary," "Selling Stockholders" and "Certain
Transactions" in the Registration Statement and the Prospectus and any
amendments or supplements thereto, solely insofar as they relate to
such Selling Stockholder, and the Registration Statement and the
Prospectus and any amendments or supplements thereto, contained or
will contain all statements that are required to be stated therein in
accordance with the Act and in all material respects conformed or will
in all material respects conform to the requirements of the Act, and
(B) neither the Registration Statement nor the Prospectus, nor any
amendment or supplement thereto, solely insofar as it relates to such
statements in the sections captioned "Prospectus Summary," "Selling
Stockholders" and "Certain Transactions" with respect to such Selling
Stockholder, included or will include any untrue statement of a
material fact or omitted or will omit to state any material fact
required to be stated therein or necessary to make the statements
therein not misleading; provided that neither clause (A) nor (B) shall
have any affect if information has been given by such Selling
Stockholder to the Company and the Representatives in writing which
would eliminate or remedy any such untrue statement or omission.
(G) Such Selling Stockholder agrees with the Company and the
Underwriters not to sell, contract to sell or otherwise dispose of any
Common Stock or rights to purchase Common Stock for a period of 120
days after the date of the Pricing Agreement without the prior written
consent from the Representatives.
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(H) In order to document the Underwriter's compliance with the
reporting and withholding provisions of the Internal Revenue Code of
1986, as amended, with respect to the transactions herein
contemplated, the Selling Stockholder agrees to deliver to you prior
to or on the Closing Date, as hereinafter defined, a properly
completed and executed United States Treasury Department Form W-8 or
Form W-9 (or other applicable form of statement specified by Treasury
Department regulations in lieu thereof).
Section 2. Agreement to Sell and Purchase.
(a) Subject to such adjustments to eliminate any fractional share sales or
purchases as the Representatives in their discretion may make, (i) the Company
hereby agrees to issue and sell to the Underwriters an aggregate of 1,500,000
Firm Shares, (ii) the Selling Stockholders hereby agree, severally and not
jointly, to sell to the Underwriters in the respective amounts set forth in
Schedule II hereto, an aggregate of 4,011,076 Firm Shares, and (iii) on the
basis of the representations, warranties and agreements of the Company and the
Selling Stockholders herein contained and subject to the terms and conditions
set forth herein, each Underwriter agrees, severally and not jointly, to
purchase from (A) the Company and the Selling Stockholders, at the purchase
price per Share set forth in the Pricing Agreement (the "Purchase Price per
Share"), the number of Firm Shares set forth opposite the name of such
Underwriter in Schedule I hereto (or such number of Firm Shares as such
Underwriter shall be obligated to purchase pursuant to the provisions of Section
9 hereof) and (B) the Selling Stockholders the number of Firm Shares set further
opposite the name of such Selling Stockholder in Schedule II hereto.
(b) The Company agrees to sell to the Underwriters and, on the basis of
the representations, warranties and agreements of the Company and the Selling
Stockholders set forth herein and subject to the terms and conditions set forth
herein, the Underwriters shall have the right to purchase, severally and not
jointly, from the Company up to 800,000 Additional Shares, at the Purchase Price
per Share upon delivery to the Company of the notice hereinafter referred to.
Such Additional Shares may be purchased solely for the purpose of covering over-
allotments made in connection with the offering of the Firm Shares. If any
Additional Shares are to be purchased, each Underwriter, severally and not
jointly, agrees to purchase from the Company and the Stockholders, the number of
Additional Shares (subject to such adjustments to eliminate fractional Shares as
the Representatives may determine) which bears the same proportion to the total
number of Additional Shares to be purchased from the Company as the number of
Firm Shares set forth opposite such Underwriter's name in Schedule I (or such
number of Firm Shares increased pursuant to the terms set forth in Section 9
hereof) bears to the total number of Firm Shares.
Section 3. Delivery of the Shares and Payment Therefor.
(a) Delivery to the Underwriters of the Firm Shares shall be made against
payment therefor at 9:00 a.m., Chicago, Illinois time, on the third full
business day following the date of the Pricing Agreement (the "Closing Date") at
the offices of McDermott, Will & Emery, 227 West Monroe Street, Chicago,
Illinois. The place of the Closing and the Closing Date may be varied by
agreement among the Representatives and the Company.
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<PAGE>
(b) Delivery to the Underwriters of any Additional Shares to be purchased
by the several Underwriters shall be made in Chicago, Illinois against payment
therefor at the offices of McDermott, Will & Emery, 227 West Monroe Street,
Chicago, Illinois at such time on such date (the "Option Closing Date"), which
may be the same as the Closing Date, but shall in no event be earlier than the
Closing Date nor earlier than three nor later than ten business days after the
giving of the notice hereinafter referred to, as shall be specified in written
notice from the Representatives to the Company and the Agents of the
determination to purchase a number, specified in said notice, of Additional
Shares. Said notice may be given at any time within 30 days after the date of
the execution of the Pricing Agreement. The place of the Closing and the Option
Closing Date may be varied by agreement among the Representatives and the
Company.
(c) If the Representatives, the Company and the Selling Stockholders have
elected to enter into the Pricing Agreement after the Registration Statement is
effective, the Purchase Price per Share to be paid by the several Underwriters
for the Shares shall be an amount equal to the initial public offering price,
less an amount to be determined by agreement between the Representatives, the
Selling Stockholders and the Company. The initial public offering price per
Share of the Shares shall be a fixed price to be determined by agreement between
the Representatives and the Company. The initial public offering price and the
Purchase Price per Share, when so determined, shall be set forth in the Pricing
Agreement. If such prices have not been agreed upon and the Pricing Agreement
has not been executed and delivered by all parties thereto by the close of
business on the fourth business day following the date of this Agreement, this
Agreement shall terminate forthwith, without liability of any party to any other
party, unless otherwise agreed to by the Company, the Selling Stockholders and
the Representatives and except as otherwise provided in Section 5 hereof. If the
Representatives, the Company and the Selling Stockholders have elected to enter
into the Pricing Agreement prior to the Registration Statement becoming
effective, the initial public offering price and the Purchase Price per Share to
be paid by the several Underwriters for the Shares having each been determined
and set forth in the Pricing Agreement, the Company agrees to file an amendment
to the Registration Statement and the Prospectus before the Registration
Statement becomes effective.
(d) Certificates for the Firm Shares and for the Additional Shares shall
be registered in such names and in such denominations as the Representatives
shall request upon at least 48 hours prior notice to the Company, the Selling
Stockholders and the Custodian preceding the Closing Date or the Option Closing
Date, as the case may be. Such certificates shall be made available to the
Representatives at the office of The Depository Trust Company, New York, New
York, for inspection and packaging not later than at least 24 hours prior to the
Closing Date or the Option Closing Date, as the case may be. The certificates
evidencing the Firm Shares and the Additional Shares shall be delivered to the
Representatives on the Closing Date or the Option Closing Date, as the case may
be, with any transfer taxes thereon duly paid by the Company or the Selling
Stockholders, as the case may be, for the respective accounts of the several
Underwriters, against payment of the purchase price therefor by wire or other
immediately available funds by wire transfer in federal (same day) funds,
subject to change by written agreement of the Company and the Representatives.
It is understood by the Company and the Selling Stockholders that each of the
Underwriters has authorized the Representatives, for its account, to accept
delivery of, receipt for and make payment of the purchase price for, the Shares
it has agreed to purchase.
Section 4. Agreements of the Company. The Company covenants and agrees
with the several Underwriters that:
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(a) The Company will endeavor to cause the Registration Statement to
become effective and will advise the Representatives promptly and, if
requested by the Representatives, will confirm such advice in writing, (i)
when the Registration Statement has become effective and when any post-
effective amendment to it becomes effective, and of the filing of any final
prospectus or supplement or amendment to the Prospectus, (ii) of any
request by the Commission for amendments or supplements to the Registration
Statement or Prospectus or any Preliminary Prospectus or for additional
information, (iii) of the issuance by the Commission of any stop order
suspending the effectiveness of the Registration Statement or of the
suspension of qualification of the Shares for offering or sale in any
jurisdiction, or the initiation or contemplation of any proceeding for such
purposes, and (iv) within the period of time referred to in paragraph (f)
below, of the happening of any event which makes any statement made in the
Registration Statement or Prospectus (as then amended or supplemented)
untrue in any material respect or which requires the making of any
additions to or changes in the Registration Statement or Prospectus (as
then amended or supplemented) in order to make the statements therein not
misleading or the necessity to amend or supplement the Prospectus to comply
with the Act or any other law. If at any time the Commission shall issue
any stop order suspending the effectiveness of the Registration Statement,
the Company will make every reasonable effort to obtain the withdrawal of
such order at the earliest possible moment. If the Company elects to rely
on Rule 434 of the Act, the Company will prepare a Term Sheet that complies
with the requirements of Rule 434 of the Act and will provide the
Representatives with copies of the form of Rule 434 Prospectus in such
numbers as you may reasonably request and file or transmit for filing with
the Commission the form of Prospectus complying with Rule 434(c)(2) of the
Act in accordance with Rule 424(b) of the Act by the close of business in
Chicago on the business day immediately succeeding the date hereof. If the
Company elects not to rely on Rule 434, the Company will provide you with
copies of the form of Prospectus in such numbers as you may reasonably
request and file or transmit for filing with the Commission such Prospectus
in accordance with Rule 424(b) of the Act, by the close of business in
Chicago on the business day immediately succeeding the date hereof.
(b) If, at the time that the Registration Statement becomes
effective, any information shall have been omitted therefrom in reliance
upon Rule 430A under the Act, then promptly following the execution of the
Pricing Agreement, the Company will prepare and file with the Commission,
in accordance with Rule 430A and Rule 424(b) under the Act, copies of an
amended Prospectus, or, if required by Rule 430A, a post-effective
amendment to the Registration Statement (including an amended Prospectus)
containing all information so omitted.
(c) Neither the Company nor any of its subsidiaries will, prior to
the earlier of the Option Closing Date or termination or expiration of the
related option, incur any liability or obligation, direct or contingent, or
enter into any material transaction, other than in the ordinary course of
business, except as contemplated in the Prospectus.
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(d) The Company will not file any amendment to the Registration
Statement or make any amendment or supplement to the Prospectus of which
the Representatives shall not previously have been advised or to which the
Representatives shall promptly after being so advised reasonably object in
writing.
(e) Prior to the effective date of the Registration Statement, the
Company has delivered or will deliver to each of the Underwriters, without
charge, copies of each form of Preliminary Prospectus in such quantities as
they have reasonably requested or may hereafter reasonably request. The
Company consents to the use, in accordance with the provisions of the Act
and with the securities or Blue Sky laws of the jurisdictions in which the
Shares are offered by the several Underwriters and by dealers, prior to the
effective date of the Registration Statement, of each Preliminary
Prospectus so furnished by the Company.
(f) On the effective date of the Registration Statement and
thereafter from time to time during such period as in the opinion of
counsel for the Underwriters a prospectus relating to the Shares is
required by law to be delivered in connection with offers or sales of the
Shares by an Underwriter or a dealer, the Company will deliver to each
Underwriter and dealer, without charge, as many copies of the Registration
Statement, the Prospectus and each Preliminary Prospectus and the
Incorporated Documents (and of any amendment or supplement to such
documents) as they may reasonably request. During such period, if any event
occurs which in the judgment of the Company, or in the opinion of counsel
for the Underwriters, should be set forth in the Prospectus in order to
ensure that no part of the Prospectus includes an untrue statement of a
material fact or omits to state a material fact necessary in order to make
the statements therein, in the light of the circumstances at the time the
Prospectus is delivered to a purchaser, not misleading, the Company will
forthwith prepare, submit to the Representatives, file with the Commission
and deliver, without charge to the several Underwriters and dealers (whose
names and addresses will be furnished by the Representatives to the
Company) to whom shares have been sold by the Underwriters or to other
dealers any amendments or supplements to the Prospectus so that the
statements in the Prospectus, as so amended or supplemented, will comply
with the standards set forth in this sentence. The Company consents to the
use of such Prospectus (and of any amendments or supplements thereto) in
accordance with the provisions of the Act and with the securities or Blue
Sky laws of the jurisdictions described in the preliminary Blue Sky
memorandum in which the Shares are lawfully offered by the several
Underwriters and by all dealers to whom Shares may be sold, both in
connection with the offering or sale of the Shares and for such period of
time thereafter as the Prospectus is required by law to be delivered in
connection therewith. In case any Underwriter is required to deliver a
Prospectus (and any amendment or supplement thereto) more than nine months
after the first date upon which the Shares are offered to the public, the
Company will, upon request, but at the expense of such Underwriter,
promptly prepare and furnish such Underwriter with reasonable quantities of
a Prospectus complying with Section 10(a)(3) of the Act.
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(g) The Company will cooperate with the Representatives and counsel
for the Underwriters in connection with the registration or qualification
of the Shares for offer and sale by the several Underwriters and by dealers
under the securities or Blue Sky laws of such jurisdictions as the
Representatives may designate, will continue such registrations or
qualifications in effect so long as reasonably required for the
distribution of the Shares and will file such consents to service of
process or other documents as may be necessary in order to effect such
registration or qualification; provided that in no event shall the Company
be obligated (i) to qualify to do business in any jurisdiction where it is
not now so qualified, (ii) to file any general consent to service of
process, or (iii) take any action that would subject it to income taxation
in any jurisdiction where it is not so qualified.
(h) For a period of five years after the date of the Pricing
Agreement:
(i) the Company will furnish to the Representatives (A) as soon
as available, a copy of each report of the Company of general interest
mailed to any class of its security holders (B) copies of all annual
reports and current reports filed with the Commission on Forms 10-K,
10-Q and 8-K and any amendment thereto or such other similar forms as
may be designated by the Commission and (C) from time to time, such
other information concerning the Company as the Representatives may
reasonably request;
(ii) if at any time during such five year period, the Company
shall cease filing with the Commission the annual reports and current
reports on Forms 10-K, 10-Q and 8-K or other similar forms referred to
in clause (i) above, the Company will forward to its stockholders
generally and the Representatives and upon request to each of the
other Underwriters (A) as soon as practicable after the end of each
fiscal year, copies of a balance sheet and statements of income and
retained earnings of the Company as of the end of and for such fiscal
year, certified by independent public accountants, and (B) as soon as
practicable after the end of each quarterly fiscal period, except for
the last quarterly fiscal period in each fiscal year, a summary
statement (which need not be certified) of income and retained
earnings of the Company for such period, which shall also be made
publicly available; and
(iii) the Company will furnish to the Representatives and to the
NASD, and by issuance of a press release, on the date of declaration,
notice of all dividends, including the amount and medium of payment,
the record date (which shall be not less than ten days subsequent to
the declaration date) and the payment date (which shall be not less
than ten days subsequent to the record date).
(i) The Company will make generally available to its security holders
an earnings statement of the Company, which need not be audited, covering a
twelve-month period commencing after the effective date of the Registration
Statement
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and ending not later than 15 months thereafter, as soon as practicable
after the end of such period, which earnings statement shall satisfy the
provisions of Section 11(a) of the Act and the rules and regulations of the
Commission thereunder (including Rule 158).
(j) If this Agreement shall be terminated pursuant to any of the
provisions hereof (otherwise than by notice given by the Representatives'
termination of this Agreement pursuant to Section 10 hereof), or if this
Agreement shall be terminated by the several Underwriters because of any
failure or refusal on the part of the Company to comply with the terms or
fulfill any of the conditions of this Agreement, the Company agrees to
reimburse the several Underwriters for all out-of-pocket expenses
(including reasonable fees and expenses of counsel for the Underwriters)
reasonably incurred by them in connection herewith but without any further
obligation of the Company for lost profits or otherwise. If this Agreement
is terminated pursuant to Section 10 hereof, the several Underwriters shall
themselves bear any such out-of-pocket expenses incurred by them.
(k) The Company will not sell, contract to sell or otherwise dispose
of any Common Stock or rights to purchase Common Stock (other than in
connection with any acquisition and the granting of employee stock options
in the ordinary course of business) for a period of 120 days after the date
of the Pricing Agreement without the prior written consent of ABN AMRO
Incorporated. The Company will also obtain similar agreements from each of
its executive officers and directors.
Section 5. Payment of Expenses. The Company will pay, or reimburse if
paid by the Representatives, whether or not the transactions contemplated hereby
are consummated or this Agreement is terminated, all costs and expenses incident
to the performance by it of its obligations under this Agreement and the Pricing
Agreement, including, without limiting the generality of the foregoing, (a)
preparation, printing, filing and distribution (including postage, air freight
charges and charges for counting and packaging) of the original registration
statement, the Registration Statement, each Preliminary Prospectus, the
Prospectus (including any Incorporated Documents, exhibits and financial
statements and any Term Sheet delivered by the Company pursuant to Rule 434 of
the Act), each amendment and/or supplement to any of the foregoing, and this
Agreement, the Pricing Agreement, the Agreement Among Underwriters, Selected
Dealers Agreement, Powers of Attorney and Underwriters' Powers of Attorney and
Questionnaires, (b) furnishing to the several Underwriters and dealers copies of
the foregoing materials (provided, however, that any such copies furnished by
the Company more than nine months after the first date upon which the Shares are
offered to the public shall be at the expense of the several Underwriters or
dealers so requesting as provided in Section 4(f) above), (c) the registrations
or qualifications referred to in Section 4(g) above (including filing fees and
fees and disbursements of counsel in connection therewith) and expenses of
printing and delivering to the several Underwriters copies of the preliminary
and final Blue Sky memoranda, (d) the review of the terms of the public offering
of the Shares by the NASD (including the filing fees paid to the NASD in
connection therewith) and the reasonable fees and disbursements of counsel for
the Underwriters in connection therewith, (e) the performance by the Company and
each of the Selling Stockholders of its other obligations under this Agreement,
including the fees of the Company's and, if applicable, each Selling
Stockholder's counsel and accountants, (f) the issuance of the Shares and the
preparation and printing of the stock certificates representing the Shares,
including any stamp taxes payable in connection with the original issuance of
the Shares, but excluding the transfer taxes, if any, with respect to the sale
and delivery of the Shares to the
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Underwriters, which shall be paid by the Selling Stockholders, and (g)
furnishing to the several Underwriters copies of all reports and information
required by Section 4(h) above, including reasonable costs of shipping and
mailing.
Section 6. Conditions of the Underwriters' Obligations. The several
obligations of the Underwriters to purchase the Firm Shares hereunder are
subject to the following conditions:
(a) That the Registration Statement shall have become effective not
later than 1:00 p.m., Chicago time, on the first full business day after
the date of this Agreement, or at such later date and time as shall be
consented to in writing by the Representatives, and, if the Representatives
and the Company have elected to rely upon Rule 430A, the price of the
Shares and any price-related or other information previously omitted from
the effective Registration Statement pursuant to such Rule 430A shall have
been transmitted to the Commission for filing pursuant to Rule 424(b)
within the prescribed time period, and, if the Representatives and the
Company have elected to rely upon a Term Sheet, such Term Sheet shall have
been transmitted to the Commission for filing pursuant to Rule 434 and Rule
424(b) within the prescribed time period, and on or prior to the Closing
Date, the Company shall have provided evidence satisfactory to the
Representatives of such timely filing, or a post-effective amendment
providing such information shall have been promptly filed and declared
effective in accordance with the requirements of Rule 430A. No stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been instituted or
shall be pending or, to the knowledge of the Company or the Selling
Stockholders, shall be contemplated by the Commission and there shall not
have come to the attention of the Representatives any facts that would
cause them to believe that the Prospectus, at the time it was required to
be delivered to purchasers of the Shares, contained any untrue statement of
material fact or omitted to state any material fact necessary in order to
make the statements therein, in light of the circumstances under which
there were made, not misleading.
(b) That subsequent to the effective date of the Registration
Statement, (i) there shall not have occurred any change, or any development
involving a prospective change, in or affecting particularly the business
or properties of the Company or its subsidiaries not contemplated by the
Prospectus, which, in the Representatives' opinion, as Representatives of
the several Underwriters, would materially adversely affect the market for
the Shares or make it impracticable or inadvisable to proceed with the
offering or the delivery of the Shares, as contemplated herein and in the
Prospectus, or to attempt to enforce contracts for the purchase of Shares,
and (ii) the business and operations of the Company shall not have been
adversely affected by strike, fire, flood, accident or other calamity
(whether or not insured).
(c) The Representatives shall have received from Friday, Eldredge &
Clark, counsel for the Company, a favorable opinion dated the Closing Date
and satisfactory to the Representatives and the Underwriters' counsel to
the effect that:
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(i) The Company has been duly incorporated and is validly
existing as a corporation in good standing under the laws of the State
of Delaware, with full corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
Registration Statement. The Company is duly qualified to do business
as a foreign corporation and in good standing in each jurisdiction
where the ownership or leasing of its properties or the conduct of its
business requires such qualification, except in any such case where
the failure to so qualify or be in good standing would not have a
material adverse effect on the condition (financial or otherwise) or
results of operations of the Company and its subsidiaries, taken as a
whole.
(ii) An opinion to the same general effect as clause (i) of this
subparagraph (c) in respect of each direct and indirect subsidiary of
the Company.
(iii) All of the issued and outstanding capital stock of the
subsidiaries of the Company has been duly authorized and validly
issued and is fully paid and non-assessable and, with the exception of
Acxiom CDC, Inc., the Company owns directly or indirectly 100 percent
of the outstanding capital stock of each subsidiary and, to the best
knowledge of such counsel, such stock is owned free and clear of any
security interests, claims, liens, encumbrances or adverse interests
of any nature.
(iv) The issued and outstanding capital stock of the Company has
been duly authorized and validly issued and is fully paid and non-
assessable and free of preemptive rights, except as set forth in the
Prospectus.
(v) The authorized capitalization of the Company consists
entirely of 200,000,000 shares of Common Stock, of which ________ were
issued and outstanding on the date of the Prospectus and 1,000,000
shares of Preferred Stock, par value $1.00 per share, of which no
shares were issued and outstanding on the date of the Prospectus, and
all of which conforms to the description thereof in the Registration
Statement and the Prospectus.
(vi) The certificates for the Shares to be delivered hereunder
are in due and proper form, and when duly countersigned by the
Company's transfer agent and delivered to the Representatives against
payment of the agreed consideration therefor in accordance with the
provisions of this Agreement and the Pricing Agreement, the Shares
represented thereby will be duly authorized and validly issued, fully
paid and nonassessable and free of preemptive rights, except as set
forth in the Prospectus, and, to the knowledge of such counsel, will
be free of any security interest, claim, lien, encumbrance or adverse
interest of any nature, or rights of first refusal in favor of,
stockholders with respect to any of the Shares or the issuance or sale
thereof, pursuant to the Certificate of Incorporation or by-laws of
the Company and, to such counsel's knowledge, except as disclosed in
the Prospectus, there are no contractual preemptive rights, rights of
first refusal, rights of co-sale or other similar rights which exist
with respect to any of the Shares or the issuance and sale thereof;
and the Shares to be sold
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hereunder have been duly and validly authorized and qualified for
inclusion on the Nasdaq Stock Market, subject to notice of issuance.
(vii) This Agreement and the Pricing Agreement have been duly and
validly authorized, executed and delivered by the Company and are
legal, valid and binding obligations of the Company, enforceable in
accordance with their terms, except as enforceability may be limited
by bankruptcy, insolvency, reorganization, moratorium or other similar
laws affecting creditors' rights generally and by general principles
of equity, and except that such counsel need express no opinion as to
those provisions relating to indemnities for liabilities under the
Act.
(viii) No authorization, approval, order or consent of any
governmental authority or agency is required for the valid issuance
and sale of the Shares, except such as may be required under the Act
or state securities laws as to which such counsel need express no
opinion.
(ix) The execution, delivery and performance of this Agreement
and the Pricing Agreement by the Company, the issue and sale of the
Shares, and the consummation of the transactions contemplated hereby
and thereby will not conflict with or result in a breach of any of the
provisions of, or constitute a default under (A) the Company's
Certificate of Incorporation or by-laws or any agreement, franchise,
license, indenture, mortgage, deed of trust or other instrument or
agreement known to such counsel to which the Company or any of its
subsidiaries is a party or by which Company or any of its subsidiaries
is bound or to which any of their respective properties is subject or
(B) so far as known to such counsel, any statute, order, rule or
regulation applicable to the Company or any of its subsidiaries of any
court or other governmental authority or body having jurisdiction over
the Company or any of its subsidiaries or any of its properties.
(x) All documents incorporated by reference in the Prospectus,
when they were filed with the Commission, complied as to form in all
material respects with the requirements of the Exchange Act; and such
counsel has no reason to believe that any of such documents, when they
were so filed, contained an untrue statement of a material fact or
omitted to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they
were made when such documents were so filed, not misleading; such
counsel need express no opinion as to the financial statements or
other financial or statistical data contained in any such document.
(xi) The Registration Statement has become effective under the
Act, and, to the knowledge of such counsel, no stop order suspending
the effectiveness of the Registration Statement has been issued and no
proceedings for that purpose have been instituted or are pending or
contemplated under the Act.
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(xii) The Registration Statement (including the information
deemed to be part of the Registration Statement at the time of
effectiveness pursuant to Rule 430A(b), if applicable) as amended or
supplemented (except for the financial statements and notes thereto,
the financial statement schedules and other statistical or financial
data included therein as to which such counsel need express no
opinion) and the Prospectus and any supplements or amendments thereto
(except for the financial statements and notes thereto, the financial
statement schedules and other statistical or financial data included
therein, as to which such counsel need express no opinion) comply as
to form in all material respects with the requirements of the Act and
the rules of the Commission thereunder and nothing has come to the
attention of such counsel that would cause such counsel to believe
that the Registration Statement (including the information deemed to
be part of the Registration Statement at the time of effectiveness
pursuant to Rule 430A(b), if applicable) as amended or supplemented
(except for the financial statements and notes thereto, the financial
statement schedules and other statistical or financial data included
therein as to which such counsel need express no opinion) at the time
it became effective, at the time the Pricing Agreement was executed
and at the Closing Date, contained any untrue statement of a material
fact or omitted or omits to state any material fact required to be
stated therein or necessary to make the statements therein not
misleading, or that, as of its date, the Prospectus or any amendment
or supplement thereto (except for the financial statements and notes
thereto, the financial statement schedules and other statistical or
financial data included therein as to which such counsel need express
no opinion) included or includes any untrue statement of a material
fact or omitted or omits to state any material fact necessary to make
the statements therein, in light of the circumstances under which they
were made, not misleading. To the extent applicable, the Rule 434
Prospectus conforms to the requirements of Rule 434 of the Act.
(xiii) The statements in the Prospectus and the documents
incorporated by reference therein in the sections captioned "Risk
Factors," "Business," "Certain Transactions" and "Executive
Compensation" in each case insofar as such statements reflect a
summary of the material legal matters or the documents referred to
therein, fairly and accurately present the information called for by
the Act and the applicable rules and regulations promulgated
thereunder.
(xiv) To the knowledge of such counsel there are no statutes or
regulations, provisions of the Delaware General Corporation Law, as
amended, or any pending or threatened litigation or governmental
proceedings against the Company required to be described in the
Prospectus which are not so described, nor of any contracts or
documents of a character required to be described in or filed as a
part of the Registration Statement which are not described or filed as
required.
(xv) To such counsel's knowledge, except as disclosed in the
Prospectus, no person has the right, contractual or otherwise, to
cause the
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Company to register pursuant to the Act any shares of capital stock of
the Company, upon the issuance and sale of the Shares to be sold by
the Company and the Selling Stockholders to the Underwriters pursuant
to this Agreement.
(xvi) Neither the Company nor any of its subsidiaries is an
"investment company" or a person "controlled by" an "investment
company" within the meaning of the Investment Company Act.
(xvii) To such counsel's knowledge, all offers and sales of the
Company's and each of its subsidiaries capital stock prior to the date
hereof were at all relevant times were either registered pursuant to
the Act or exempt from the registration requirements of the Act and
were duly registered or the subject of an available exemption from the
registration requirements of the applicable state securities or blue
sky laws.
In rendering such opinion, such counsel may state that they are
relying upon the certificate of the Selling Stockholders and of officers of
the Company and the transfer agent for the Common Stock, as to the number
of shares of Common Stock at any time or times outstanding, and that
insofar as their opinion under clause (xii) above relates to the accuracy
and completeness of the Prospectus and Registration Statement, it is based
upon a general review with the Company's representatives and independent
accountants of the information contained therein, without independent
verification by such counsel of the accuracy or completeness of such
information. Such counsel may also rely upon the opinions of other
competent counsel and, as to factual matters, on certificates of officers
of the Company and of state officials, in which case their opinion is to
state that they are so doing and copies of such opinions or certificates
are to be attached to the opinion unless such opinions or certificates (or,
in the case of certificates, the information therein) have been furnished
to the Representatives otherwise.
(d) The Representatives shall have received from Neal, Gerber &
Eisenberg, counsel for the Pritzker Foundation, a favorable opinion dated
the Closing Date and satisfactory to the Representatives and the
Underwriters' counsel to the effect that:
(i) With respect to such Selling Stockholder, this Agreement and
the Pricing Agreement have been duly authorized, executed and
delivered by or on behalf of each such Selling Stockholder; the
officers of each such Selling Stockholder have been duly and validly
authorized to carry out all transactions contemplated herein on behalf
of each such Selling Stockholder; and the execution and performance of
this Agreement and the Pricing Agreement, the sale and transfer of the
Shares by such Selling Stockholder and the consummation of the
transactions contemplated herein by such Selling Stockholder will not
contravene, conflict with any of the provisions of, or result in a
breach or default under, the Articles of Incorporation and by-laws of
each such Selling Stockholder or any of its subsidiaries, any
agreement, franchise, license, indenture, mortgage, deed of trust or
other agreement or instrument known to such counsel to which any of
such Selling Stockholders
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or any of its subsidiaries is a party or by which any are bound or to
which any of the property of such Selling Stockholders or any of its
subsidiaries is subject, nor will such actions violate any order, rule
or regulation known to such counsel of any court or regulatory or
governmental body having jurisdiction over any of such Selling
Stockholders or any of its respective properties; and no consent,
approval, authorization or order of any court or governmental agency
or body is required for the consummation of the transactions
contemplated by this Agreement and the Pricing Agreement or the sale
of Shares to be sold by such Selling Stockholders hereunder, except
such as may be required under the Act or state securities laws as to
which counsel need express no opinion;
(ii) Each Selling Stockholder has full right, power and
authority to enter into this Agreement and the Pricing Agreement and
to sell, transfer and deliver the Shares to be sold on the Closing
Date or the Option Closing Date, as the case may be, by such Selling
Stockholder hereunder; upon registration in the name of the
Underwriters of such Shares to be sold by such Selling Stockholder
hereunder, the Underwriters (who counsel may assume to be bona fide
purchasers) will acquire valid title to such Shares so sold, free and
clear of all voting trust arrangements, security interests, claims,
liens, encumbrances, community property rights or any adverse
interests of any nature imposed on such Shares by such Selling
Stockholder or the Company.
(iii) This Agreement and the Pricing Agreement are legal, valid
and binding agreements of each Selling Stockholder except as
enforceability of the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity, and except that
such counsel need express no opinion to those provisions relating to
indemnities for liabilities arising under the Act.
(e) The Representatives shall have received from _________________,
counsel for the [Individual] Selling Stockholder, a favorable opinion dated
the Closing Date and satisfactory to the Representatives and the
Underwriters' counsel to the effect that:
(i) With respect to each Selling Stockholder, this Agreement,
the Pricing Agreement, the Power of Attorney and the Custody Agreement
have been duly authorized, executed and delivered by or on behalf of
each such Selling Stockholder; the Agents and the Custodian for each
such Selling Stockholder have been duly and validly authorized to
carry out all transactions contemplated herein on behalf of each such
Selling Stockholder; and the execution and performance of this
Agreement and the Pricing Agreement, the sale and transfer of the
Shares by such Selling Stockholder and the consummation of the
transactions contemplated herein by such Selling Stockholder will not
contravene, conflict with any of the provisions of, or result in a
breach or default under, any agreement, franchise, license, indenture,
mortgage, deed of trust or other agreement or instrument known to
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such counsel to which any of such Selling Stockholders is a party or
by which any are bound or to which any of the property of such Selling
Stockholders is subject, nor will such actions violate any order, rule
or regulation known to such counsel of any court or regulatory or
governmental body having jurisdiction over any of such Selling
Stockholders or any of their properties; and no consent, approval,
authorization or order of any court or governmental agency or body is
required for the consummation of the transactions contemplated by this
Agreement, the Pricing Agreement, the Power of Attorney and the
Custody Agreement or the sale of Shares to be sold by such Selling
Stockholders hereunder, except such as may be required under the Act
or state securities laws as to which counsel need express no opinion;
(ii) Each Selling Stockholder has full right, power, capacity
and authority to enter into this Agreement, the Pricing Agreement, the
Power of Attorney and the Custody Agreement and to sell, transfer and
deliver the Shares to be sold on the Closing Date or the Option
Closing Date, as the case may be, by such Selling Stockholder
hereunder; upon registration in the name of the Underwriters of such
Shares to be sold by such Selling Stockholder hereunder, the
Underwriters (who counsel may assume to be bona fide purchasers) will
acquire valid title to such Shares so sold, free and clear of all
voting trust arrangements, security interests, claims, liens,
encumbrances, community property rights or any adverse interests of
any nature imposed on such Shares by such Selling Stockholder or the
Company.
(iii) This Agreement and the Pricing Agreement are legal, valid
and binding agreements of each Selling Stockholder except as
enforceability of the same may be limited by bankruptcy, insolvency,
reorganization, moratorium or other similar laws affecting creditors'
rights generally and by general principles of equity, and except that
such counsel need express no opinion to those provisions relating to
indemnities for liabilities arising under the Act.
(iv) The Power of Attorney and Custody Agreement have been duly
executed and delivered by each Selling Stockholder and constitute
valid and binding agreements of each such Selling Stockholder in
accordance with their terms.
(f) That the Representatives shall have received on the Closing Date
a favorable opinion dated the Closing Date from McDermott, Will & Emery,
counsel for the Underwriters, as to such matters as the Representatives may
reasonably require.
(g) That the Representatives shall have received letters addressed to
the Representatives and dated the date hereof and the Closing Date from
each of KPMG LLP and PricewaterhouseCoopers LLP, who have been or are
currently independent public accountants for the Company or one of its
subsidiaries, to the effect set forth in Schedule III(a) and III(b),
respectively. There shall not have been any change or decrease specified in
the letters referred to in this
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subparagraph which makes it impractical or inadvisable in the judgment of
the Representatives to proceed with the public offering or purchase of the
Shares as contemplated hereby.
(h) That (i) no stop order suspending the effectiveness of the
Registration Statement shall have been issued and no proceedings for that
purpose shall have been taken or, to the knowledge of the Company, shall be
contemplated by the Commission at or prior to the Closing Date; (ii) there
shall not have been any change in the capital stock of the Company nor any
material increase in the short or long-term debt of the Company from that
set forth or contemplated in the Registration Statement; (iii) there shall
not have been, since the respective dates as to which information is given
in the Registration Statement and the Prospectus, except as may otherwise
be set forth or contemplated in the Registration Statement and the
Prospectus, any material adverse change in the financial condition or
results of operations of the Company; (iv) the Company shall not have
incurred any material liabilities or obligations, direct or contingent
(whether or not in the ordinary course of business), other than those
reflected in the Registration Statement, and (v) all of the representations
and warranties of the Company contained in this Agreement shall be true and
correct on and as of the date hereof and the Closing Date as if made on and
as of each such date, and the Representatives shall have received a
certificate, dated the Closing Date and signed by the chief executive
officer and the principal financial officer (or such other officers as are
acceptable to the Representatives) to the effect set forth in this Section
6(h) and in Section 6(i) hereof.
(i) That the Company shall not have failed at or prior to the Closing
Date to have performed or complied in all material respects with any of the
agreements herein contained and required to be performed or complied with
by it at or prior to the Closing Date.
(j) Within 24 hours after the Registration Statement becomes
effective, or within such longer period as to which the Representatives
shall have consented, the Shares shall have been qualified for sale or
exempted from such qualification under the securities laws of such
jurisdictions as the Representatives shall have designated prior to the
time of execution of the Pricing Agreement and such qualification or
exemption shall continue in effect to and including the Closing Date.
(k) That the representations and warranties of each Selling
Stockholder contained in this Agreement shall be true and correct on and as
of the date hereof and the Closing Date as if made on and as of each such
date, and the Representatives shall have received a certificate, dated the
Closing Date, to the effect set forth in this Section 6(k).
(l) That the Representatives shall have received from Trans Union
LLC a letter agreeing that neither Trans Union LLC nor any of its
affiliates shall sell or otherwise dispose of any Common Stock or rights to
purchase Common Stock for a period of 120 days after the date of the
Pricing Agreement without the prior written consent of ABN AMRO
Incorporated.
The several obligations of the Underwriters to purchase Additional
Shares hereunder are subject to the satisfaction on and as of the Option
Closing Date of the conditions set forth in paragraphs (a) through (l);
except that the opinions called for
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in paragraphs (c) and (f) shall be revised to reflect the sale of
Additional Shares and shall be dated the Option Closing Date, if different
from the Closing Date.
Section 7. Indemnification and Contribution.
(a) The Company and each of the Selling Stockholders, severally in
proportion to the number of Firm Shares to be sold by such Selling Stockholder,
agree to indemnify and hold harmless each Underwriter and each person, if any,
who controls any Underwriter within the meaning of the Act or the Exchange Act
from and against any and all losses, claims, damages or liabilities, joint or
several, whatsoever (including any investigation, legal or other expenses
incurred in connection with, and any amount paid in settlement of, any action,
suit or proceeding or any claim asserted) to which such Underwriter, or such
controlling person may become subject, arising out of or based upon any untrue
statement or alleged untrue statement of a material fact contained in any
Preliminary Prospectus or the Registration Statement or the Prospectus or in any
amendment or supplement thereto or arising out of or based upon any omission or
alleged omission to state therein a material fact required to be stated therein
or necessary to make the statements therein not misleading, and will reimburse
each Underwriter for any legal or other expenses reasonably incurred by such
Underwriter in connection with investigating or defending any such action or
claim as such expenses are incurred, except insofar as such losses, claims,
damages or liabilities arise out of or are based upon any such untrue statement
or omission or allegation thereof which has been made therein or omitted
therefrom in reliance upon and in conformity with information relating to such
Underwriter furnished in writing to the Company by or on behalf of any
Underwriter through the Representatives expressly for use therein; provided,
however, that the indemnification contained in this paragraph with respect to
any Preliminary Prospectus shall not inure to the benefit of any Underwriter (or
of any person controlling such Underwriter) with respect to any action or claim
arising from the sale of the Shares by such Underwriter brought by any person
who purchased Shares from such Underwriter if (i) a copy of the Prospectus (as
amended or supplemented if any amendments or supplements thereto shall have been
furnished to the Underwriter prior to the written confirmation of the sale
involved) shall not have been given or sent to such person by or on behalf of
the Underwriter with or prior to the written confirmation of the sale involved
and (ii) the untrue statement or omission of a material fact contained in such
Preliminary Prospectus was corrected in the Prospectus (as amended or
supplemented if amended or supplemented as aforesaid). Notwithstanding the
foregoing, the liability of each Selling Stockholder under this Section 7(a)
shall be limited to an amount equal to such Selling Stockholder's proceeds (net
of any underwriting discounts) from the public offering of the Shares. In
addition, each Selling Stockholder shall not be liable under this Section 7(a)
except to the extent that any such loss, claim, damage or liability (or action
in respect thereof) arises out of or is based upon an untrue statement or
alleged untrue statement or omission or alleged omission made in any Preliminary
Prospectus, the Registration Statement or the Prospectus or any such amendment
or supplement in reliance upon and in conformity with written information
furnished to the Company by such Selling Stockholder (in such capacity)
expressly for use therein.
(b) If any action or claim shall be brought against any Underwriter or any
person controlling such Underwriter, in respect of which indemnity may be sought
against the Company, such Underwriter shall promptly notify the Company in
writing, and the Company shall assume the defense thereof, including the
employment of counsel and payment of all fees and expenses.
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Any Underwriter or any such person controlling such Underwriter shall have the
right to employ separate counsel in any such action and participate in the
defense thereof, but the fees and expenses of such counsel shall be at the
expense of such Underwriter or such controlling person and shall be reimbursed
as they are incurred unless (i) the Company has agreed in writing to pay such
fees and expenses, (ii) the Company has failed to assume the defense and employ
counsel, or (iii) the named parties to any such action (including any impleaded
party) included such Underwriter or controlling person and the Company and such
Underwriter or controlling person shall have been advised by such counsel that
there may be one or more legal defenses available to it which are different from
or additional to those available to the Company and which may also result in a
conflict of interest (in which case if such Underwriter or controlling person
notifies the Company, the Company shall not have the right to assume the defense
of such action on behalf of such Underwriter or controlling person, it being
understood, however, that the Company shall not, in connection with any one such
action or separate but substantially similar or related actions in the same
jurisdiction arising out of the same general allegations or circumstances, be
liable for the reasonable fees and expenses of more than one separate firm of
attorneys for all such Underwriters and controlling persons, which firm shall be
designated in writing by the Representatives). The Company shall not be liable
for any settlement or any such action effected without the written consent of
the Company, but if settled with the written consent of the Company, or if there
shall be a final judgment for the plaintiff in any such action and the time for
filing all appeals has expired, the Company agrees to indemnify and hold
harmless any Underwriter and any such controlling person from and against any
loss or liability by reason of such settlement or judgment.
(c) Each Underwriter will severally indemnify and hold harmless the
Company, its directors, its officers who sign the Registration Statement and
each Selling Stockholder, and any person controlling the Company within the
meaning of the Act or the Exchange Act to the same extent as the foregoing
indemnity from the Company to each Underwriter, but only with respect to
information relating to such Underwriter furnished in writing to the Company by
or on behalf of such Underwriter through the Representatives expressly for use
in the Registration Statement, the Prospectus or any Preliminary Prospectus. If
any action or claim shall be brought or asserted against the Company, any of its
directors, any such officer, any such Selling Stockholder, or any such
controlling person based on the Registration Statement, the Prospectus or any
Preliminary Prospectus and in respect of which indemnity may be sought against
any Underwriter, such Underwriter shall have the rights and duties given to the
Company pursuant to Section 7(b) hereof (except that if the Company shall have
assumed the defense thereof, such Underwriter shall not be required to do so,
but may employ separate counsel therein and participate in the defense thereof
but the fees and expenses of such counsel shall be at the expense of such
Underwriter), and the Company, its directors, any such officer, any such Selling
Stockholder, and any such controlling person shall have the rights and duties
given to the Underwriters by Section 7(b) hereof.
(d) (i) If the indemnification provided for in this Section 7 is
unavailable as a matter of law to any indemnified party under this Section 7 in
respect of any losses, claims, damages, liabilities or expenses referred to
therein, then the indemnifying party in lieu of indemnifying such indemnified
party thereunder, shall contribute to the amount paid or payable by damages,
liabilities or expenses (A) in such proportion as is appropriate to reflect the
relative benefits received by the Company, the Selling Stockholders and the
Underwriters from the offering of the
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Shares or (B) if the allocation provided by clause (A) above is not permitted by
applicable law, in such proportion as is appropriate to reflect not only the
relative benefits referred to in clause (A) above but also the relative fault of
the Company, the Selling Stockholders and the Underwriters in connection with
the statements or omissions which resulted in such losses, claims, damages,
liabilities or expenses, as well as any other relevant equitable considerations.
The respective relative benefits received by the Company, the Selling
Stockholders and the Underwriters shall be deemed to be in the same proportion
in the case of the Company and the Selling Stockholders, as the total price paid
to the Company and the Selling Stockholders for the Shares by the Underwriters
(net of underwriting discount but before deducting expenses), and in the case of
the Underwriters as the underwriting discount received by them bears to the
total of such amounts paid to the Company and the Selling Stockholders and
received by the Underwriters as underwriting discount, in each case as
contemplated by the Prospectus. The relative fault of the Company, the Selling
Stockholders and the Underwriters shall be determined by reference to, among
other things, whether the untrue or alleged untrue statement of a material fact
or the omission or alleged omission to state a material fact relates to
information supplied by the Company or the Selling Stockholders or by the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission. The amount
paid or payable by an indemnified party as a result of the losses, claims,
damages, liabilities and expenses referred to in this Section shall be deemed to
include, subject to the limitations set forth in this Section, any legal or
other expenses reasonably incurred by such indemnified party in connection with
investigating or defending any such action or claim.
(ii) The Company, the Selling Stockholders and the Underwriters agree
that the determination of contribution pursuant to this Section based on pro
rata allocation or by any other method of allocation which does not take account
of the equitable considerations referred to in the immediately preceding
paragraph would not be just and equitable (even if the several Underwriters were
treated as one entity for such purpose). Notwithstanding the provisions of this
Section, no Underwriter shall be required to contribute any amount in excess of
the amount by which the total price at which the Shares underwritten by it and
distributed to the public exceeds the amount of any damages which such
Underwriter has otherwise been required to pay by reason of such untrue or
alleged untrue statement or omission or alleged omission. No person guilty of
fraudulent misrepresentation (within the meaning of Section 11(f) of the Act)
shall be entitled to contribution from any person who was not guilty of such
fraudulent misrepresentation. The Underwriters' obligations to contribute
pursuant to this Section are several in proportion to their respective
underwriting commitments and not joint.
(e) The indemnity and contribution agreements contained in this Section
and the representations and warranties of the Company and the Selling
Stockholders set forth in this Agreement shall remain operative and in full
force and effect, regardless of (i) any investigation made by or on behalf of
any Underwriter or any person controlling any Underwriter, the Company or its
directors or officers or any Selling Stockholder, (or any person controlling the
Company or any Selling Stockholder), (ii) acceptance of any Shares and payment
therefor hereunder and (iii) any termination of this Agreement. A successor or
assign of an Underwriter, the Company or its directors or officers, and their
legal and personal representatives (or of any person controlling an Underwriter,
the Company or any Selling Stockholder) shall be entitled to the benefits of the
indemnity, contribution and reimbursement agreements contained in this Section.
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Section 8. Effective Date of Agreement. This Agreement shall become
effective upon execution and delivery of this Agreement by the parties hereto.
Section 9. Default of Underwriters.
(a) If any one or more of the Underwriters shall fail or refuse to
purchase Firm Shares which it or they have agreed to purchase under this
Agreement and the Pricing Agreement and the aggregate number of Firm Shares
which such defaulting Underwriter or Underwriters agreed but failed or refused
to purchase is not more than one-tenth of the aggregate number of Firm Shares,
each non-defaulting Underwriter shall be obligated, severally, in the proportion
which the number of Firm Shares set forth opposite its name in Schedule I bears
to the aggregate number of Firm Shares set forth opposite the names of all non-
defaulting Underwriters or in such other proportion as the Representatives may
specify in accordance with the Agreement Among Underwriters to purchase the Firm
Shares which such defaulting Underwriter or Underwriters agreed but failed or
refused to purchase. If any Underwriter or Underwriters shall fail or refuse to
purchase Firm Shares and the aggregate number of Firm Shares with respect to
which such default occurs is more than one-tenth of the aggregate number of Firm
Shares and arrangements satisfactory to the Representatives and the Company for
the purchase of such Firm Shares are not made within 36 hours after such
default, this Agreement will terminate without liability on the part of any non-
defaulting Underwriter or the Company. In any such case which does not result in
termination of this Agreement, either the Representatives or the Company shall
have the right to postpone the Closing Date, but in no event for longer than
seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any defaulting
Underwriter from liability in respect of any such default of any such
Underwriter under this Agreement.
(b) Any notice under this Section 9 may be made by telecopy or telephone
but shall be subsequently confirmed by letter.
Section 10. Termination of Agreement. This Agreement and the Pricing
Agreement shall be subject to termination by notice given by you to the Company
and the Selling Stockholders, if (a) after the execution and delivery of this
Agreement and the Pricing Agreement and prior to the Closing Date (and with
respect to the Additional Shares, the Option Closing Date) (i) trading generally
shall have been suspended or materially limited on or by, as the case may be,
any of the New York Stock Exchange, the American Stock Exchange, the National
Association of Securities Dealers, Inc., the Chicago Board of Options Exchange,
the Chicago Mercantile Exchange or the Chicago Board of Trade, (ii) trading of
any securities of the Company shall have been suspended on any exchange or in
any over-the-counter market, (iii) a general moratorium on commercial banking
activities in New York or in Chicago shall have been declared by either Federal,
New York or Illinois State authorities or (iv) there shall have occurred any
outbreak or escalation of hostilities or any change in financial markets or any
calamity or crisis that, in your judgment, is material and adverse and (b) in
the case of any of the events specified in clauses (a)(i) through (iv), such
event, singly or together with any other such event, makes it, in your judgment,
impracticable to market the Shares on the terms and in the manner contemplated
in the Prospectus. Notice of such cancellation shall be given to the Company and
the Selling Stockholders by telecopy or telephone but shall be subsequently
confirmed by letter.
-32-
<PAGE>
Section 11. Reimbursement of Underwriters' Expenses. If the sale to the
Underwriters of the Shares on the Closing Date is not consummated because any
condition to the Underwriters' obligations hereunder is not satisfied or because
of any refusal, inability or failure on the part of the Company or the Selling
Stockholders to perform any agreement herein or to comply with any provision
hereof, unless such failure to satisfy such condition or to comply with any
provision hereof is due to the default or omission of any Underwriter, the
Company and the Selling Stockholders agree to reimburse you and the other
Underwriters upon demand for all out-of-pocket expenses (including reasonable
fees and disbursements of counsel) that shall have been reasonably incurred by
you and them in connection with the proposed purchase and the sale of the
Shares. Any such termination shall be without liability of any party to any
other party except that the provisions of this Section, Section 5 and Section 7
shall at all times be effective and shall apply.
Section 12. Notices. Except as otherwise provided in Sections 9 and 10
hereof, notice given pursuant to any of the provisions of this Agreement shall
be in writing and shall be delivered (a) if to the Company, at the office of the
Company at Acxiom Plaza, 1 Information Way, Little Rock, Arkansas 72202,
Attention: Ms. Catherine L. Hughes, Esq., with a copy to Friday, Eldredge &
Clark, 400 West Capitol Avenue, Suite 2000, Little Rock, Arkansas 72201-3493,
Attention: Paul B. Benham or (b) if to the Representatives, at the offices of
ABN AMRO Incorporated, 208 South LaSalle Street, 4th Floor, Chicago, Illinois
60604, Attention: Corporate Finance Department, with a copy to McDermott, Will &
Emery, 227 West Monroe Street, Chicago, Illinois 60606, Attention: Thomas J.
Murphy, P.C., (c) if to the Pritzker Foundation at the office of Marmon Group,
225 West Washington Street, Chicago, Illinois 60606, Attention: Robert Webb,
with a copy to Neal, Gerber & Eisenberg, Two North LaSalle Street, Chicago,
Illinois 60602, Attention: Ross Emmerman or (d) if to the [Individual] Selling
Stockholders, to the Agents and the Custodian at such address as they have
previously furnished to the Company and the Representatives, with a copy to
_________________, Attention: _____________ or in any case to such other address
as the person to be notified may have requested in writing.
Section 13. Successors. The Agreement and the Pricing Agreement are made
solely for the benefit of the several Underwriters, the Company, their directors
and officers and other controlling persons referred to in Section 7 hereof, and
their respective successors and assigns, and no other person shall acquire or
have any right under or by virtue of this Agreement or the Pricing Agreement.
The term "successors and assigns" as used in this Agreement shall not include a
purchaser from any of the several Underwriters of any of the Shares in his
status as such purchaser.
Section 14. Representation of Underwriters. The Representatives will act
for the several Underwriters in connection with the purchase, offering and sale
of the Shares, and any action taken by the Representatives will be binding upon
all the Underwriters.
Section 15. Partial Unenforceability. If any section, paragraph or
provision of this Agreement is for any reason determined to be invalid or
unenforceable, such determination shall not affect the validity or
enforceability of any other section, paragraph or provision hereof.
Section 16. Applicable Law. This Agreement and the Pricing Agreement
shall be governed by and construed in accordance with the laws of the State of
Illinois.
Section 17. Counterparts. This Agreement may be signed in various
counterparts which together shall constitute one and the same instrument.
* * *
-33-
<PAGE>
Please confirm that the foregoing correctly sets forth the agreement among
the Company and the several Underwriters.
Very truly yours,
ACXIOM CORPORATION
By: _________________________________________
Name:
Title:
PRITZKER FOUNDATION
By: _________________________________________
Name:
Title:
[INDIVIDUAL SELLING STOCKHOLDERS], listed on
Schedule II to the Underwriting Agreement
By: _________________________________________
Agent and Attorney-in-Fact
Accepted and delivered as of
the date first written above.
ABN AMRO INCORPORATED
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
SALOMON SMITH BARNEY INC.
WILLIAM BLAIR & COMPANY, L.L.C.
PAINEWEBBER INCORPORATED
ROBERT W. BAIRD & CO. INCORPORATED
STEPHENS INC.
Acting as Representatives of
the Several Underwriters named
in Schedule I hereto.
By: ABN AMRO Incorporated
By: _________________________________
Name:
Title:
<PAGE>
ACXIOM CORPORATION
SCHEDULE I
Underwriters
------------
<TABLE>
<CAPTION>
Name Firm Shares
- ---- -----------
<S> <C>
ABN AMRO Incorporated.........................................
Merrill Lynch, Pierce, Fenner & Smith
Incorporated......................................
Salomon Smith Barney Inc......................................
William Blair & Company, L.L.C................................
PaineWebber Incorporated......................................
Robert W. Baird & Co. Incorporated............................
Stephens Inc..................................................
TOTAL.................................................. 5,511,076
=========
</TABLE>
<PAGE>
ACXIOM CORPORATION
SCHEDULE II
Selling Stockholders
--------------------
Number of
Firm Shares
Name to be sold
- ---- -----------
TOTAL................................................ ___________
<PAGE>
ACXIOM CORPORATION
SCHEDULE III(A)
Comfort Letter of KPMG LLP
[TO BE COMPLETED]
<PAGE>
ACXIOM CORPORATION
SCHEDULE III(B)
Comfort Letter of PricewaterhouseCoopers LLP
[TO BE COMPLETED]
<PAGE>
EXHIBIT A
__________ Shares/2/
Acxiom Corporation
Common Stock
PRICING AGREEMENT
-----------------
__________, 1999
ABN AMRO Incorporated
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Smith Barney Inc.
William Blair & Company, L.L.C.
PaineWebber Incorporated
Robert W. Baird & Co. Incorporated
Stephens Inc.
Individually and as Representatives of the
Several Underwriters Named in Schedule I
to the Underwriting Agreement
c/o ABN AMRO Incorporated
208 South LaSalle Street
4th Floor
Chicago, Illinois 60604
Ladies and Gentlemen:
Reference is made to the Underwriting Agreement, dated _______ __,
1999 (the "Underwriting Agreement"), relating to the purchase by the several
Underwriters named in Schedule II thereto (collectively, the "Underwriters"),
for whom you are acting individually and as representatives (the
"Representatives"), of the above referenced Common Stock (the "Shares") of
Acxiom Corporation (the "Company").
Pursuant to Section 3 of the Underwriting Agreement, the Company agrees
with each of the Underwriters as follows:
1. The initial public offering price per share of the Shares
determined as provided in said Section 3 shall be $_______.
2. The purchase price per share of the Shares to be paid by the
several Underwriters shall be $________, being an amount equal to the
initial public offering price set forth above, less $_______ per Share.
- ---------------
/2/* Plus an option to purchase up to ___________ Additional Shares to cover
over-allotments
<PAGE>
If the foregoing is in accordance with your understanding of our
agreement, please sign and return to the Company a counterpart hereof, whereupon
this instrument, along with all counterparts, will become a binding agreement
among the Underwriters and the Company in accordance with its terms.
Very truly yours,
ACXIOM CORPORATION
By:____________________________
Name:
Title:
PRITZKER FOUNDATION
By:____________________________
Name:
Title:
[INDIVIDUAL SELLING STOCKHOLDERS],
listed on Schedule II to the
Underwriting Agreement
By:____________________________
Agent and Attorney-in-Fact
Confirmed and Accepted, as of the date
first above written for themselves and
as Representatives of the other Underwriters
named in the Underwriting Agreement:
ABN AMRO Incorporated
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
Salomon Smith Barney Inc.
William Blair & Company, L.L.C.
PaineWebber Incorporated
Robert W. Baird & Co. Incorporated
Stephens Inc.
Acting as Representatives of the Several
Underwriters named in Schedule I to
the Underwriting Agreement
By: ABN AMRO Incorporated
By:________________________________
<PAGE>
EXHIBIT 5
June 18, 1999
Acxiom Corporation
1 Information Way
Little Rock, Arkansas 72202
Ladies and Gentlemen:
This opinion is being provided in connection with the Registration
Statement on Form S-3 (the "Registration Statement") being filed with the
Securities and Exchange Commission on or about this date by Acxiom Corporation
(the "Company") and certain selling stockholders for registration under the
Securities Act of 1933, as amended (the "Act"), of 2,390,076 shares of the
Company's common stock, $.10 par value per share (the "Shares").
It is our opinion that all action necessary to register the Shares under
the Act will have been taken when the Registration Statement shall have become
effective in accordance with the applicable provisions of the Act.
It is our further opinion that the Shares to be issued and sold by the
Company will be, upon issuance in the manner contemplated by the Registration
Statement, validly authorized, validly issued, fully paid and non-assessable.
This opinion does not pass upon the matter of compliance with "Blue Sky" laws or
similar laws relating to the sale or distribution of the Shares.
We are members of the Arkansas Bar and do not hold ourselves out as experts
on the laws of any other State.
We hereby consent to the use of this opinion as an exhibit to the
Registration Statement, as it may be amended, and consent to such reference to
us as are made therein.
Very truly yours,
/s/ Friday, Eldredge & Clark, LLP
Friday, Eldredge & Clark, LLP
<PAGE>
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors
Acxiom Corporation:
We consent to the use of our reports included and incorporated by reference
herein and to the reference to our firm under the heading "Experts" in the
Registration Statement.
/s/ KPMG LLP
Little Rock, Arkansas
June 18, 1999
<PAGE>
Exhibit 23.3
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Registration Statement on Form S-3 of
Acxiom Corporation of our report dated November 1, 1996, 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). We also consent to the reference to us under the heading
"Experts" in such Registration Statement.
/s/ 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 Registration Statement on Form S-3, 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 Registration Statement on Form S-3, 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 Registration Statement on Form S-3, 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 Registration Statement on Form S-3, 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
Registration Statement on Form S-3, 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 Registration Statement on Form S-3, 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
Registration Statement on Form S-3, 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 Registration Statement on Form S-3, 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 Registration Statement on Form
S-3, 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
