AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON APRIL 20, 1999
Registration No. 333-72135
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1 TO
FORM S-4
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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ACXIOM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 7374 71-0581897
State or other jurisdiction (Primary standard industrial (I.R.S. Employer
of incorporation or classification code number) Identification No.)
organization)
P.O. BOX 2000
301 INDUSTRIAL BOULEVARD
CONWAY, ARKANSAS 72033-2000
(501) 336-1000
(Address, Including Zip Code, and Telephone Number Including Area Code, of
Registrant's Principal Executive Offices)
CHARLES D. MORGAN
PRESIDENT
ACXIOM CORPORATION
P.O. BOX 2000
301 INDUSTRIAL BOULEVARD
CONWAY, ARKANSAS 72033-2000
(501) 336-1000
(Name, address, including zip code, and telephone number,
including area code, of agent for service)
<PAGE>
Copy to:
John Clayton Randolph
Friday, Eldredge & Clark
400 W. Capitol Avenue, Suite 2000
Little Rock, Arkansas 72201-3493
501-370-1559
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Approximate Date of Commencement of Proposed Sale to the Public:
Upon the effective date of the mergers described in this registration statement.
If the securities being registered on this form are being offered in connection
with the formation of a holding company and there is compliance with General
Instruction G, 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, 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(d) 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. [ ]
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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.
<PAGE>
April __, 1999
Computer Graphics of Arizona, Inc.
CG Marketing of Arizona, Inc.
Enstech Resources, Inc.
Norman, Riley & Associates, Inc.
Vi-Tech, Inc.
Dear Shareholder:
You are cordially invited to attend a joint special meeting of shareholders of
each of Computer Graphics of Arizona, Inc., CG Marketing of Arizona, Inc.,
Enstech Resources, Inc., Norman, Riley & Associates, Inc. and Vi-Tech, Inc. to
be held on ______ __, 1999 at 19621 N. 23rd Avenue, Phoenix, Arizona, at 9:00
A.M., local time.
The Notice of the Special Meeting and Information Statement/Prospectus
accompanying this letter describe in detail the business to be acted upon at
this Joint Special Meeting. At this Joint Special Meeting, you will be asked to
consider and to vote upon a proposal to approve and adopt the Acquisition
Agreement, dated as of December 31, 1998, and amended as of April 12, 1999,
among Acxiom Corporation, CGA Acquisition Corporation #1, CGA Acquisition
Corporation #2, CGA Acquisition Corporation #3, each a wholly-owned subsidiary
of Acxiom, Ronald L. Jensen, James K. Martens, Computer Graphics of Arizona,
Inc., CG Marketing of Arizona, Inc., Enstech Resources, Inc., Norman, Riley &
Associates, Inc., and Vi-Tech, Inc. pursuant to which (i) CGA Acquisition
Corporation #1 will be merged with and into Computer Graphics with Computer
Graphics continuing as the surviving corporation and as a wholly-owned
subsidiary of Acxiom, (ii) CGA Acquisition Corporation #2 will be merged with
and into CG Marketing with CG Marketing continuing as the surviving corporation
and as a wholly-owned subsidiary of Acxiom, (iii) Enstech, Norman Riley and
Vi-Tech will be merged with and into CGA Acquisition Corporation #3 with CGA
Acquisition Corporation #3 continuing as the surviving corporation and as a
wholly-owned subsidiary of Acxiom and (iv) each outstanding share of common
stock (other than dissenting shares, if any) of Computer Graphics, CG Marketing,
Enstech, Norman Riley and Vi-Tech will be converted into the right to receive
shares of common stock of Acxiom as more fully described in the attached
Information Statement/Prospectus.
THE BOARD OF DIRECTORS OF EACH OF COMPUTER GRAPHICS, CG MARKETING, ENSTECH,
NORMAN RILEY AND VI-TECH HAS UNANIMOUSLY APPROVED THE MERGERS DESCRIBED ABOVE
AND THE ACQUISITION AGREEMENT AND RECOMMENDS THAT YOU VOTE FOR APPROVAL AND
ADOPTION OF THEM AND THE ACQUISITION AGREEMENT.
The attached Information Statement/Prospectus describes the proposed
transactions more fully and includes other information about Acxiom and Computer
<PAGE>
Graphics, CG Marketing, Enstech, Norman Riley and Vi-Tech. Please give this
information your thoughtful attention. We look forward to seeing you at the
meeting.
Sincerely,
Ronald L. Jensen
President and Chief Executive Officer
Computer Graphics of Arizona, Inc.
CG Marketing of Arizona, Inc.
Enstech Resources, Inc.
Norman, Riley & Associates, Inc.
Vi-Tech, Inc.
<PAGE>
COMPUTER GRAPHICS OF ARIZONA, INC.
CG MARKETING OF ARIZONA, INC.
ENSTECH RESOURCES, INC.
NORMAN, RILEY & ASSOCIATES, INC.
VI-TECH, INC.
19621 N. 23RD DRIVE
PHOENIX, ARIZONA 85027
NOTICE OF JOINT SPECIAL MEETING OF SHAREHOLDERS
______ __, 1999
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NOTICE IS HEREBY GIVEN that a joint special meeting of shareholders of Computer
Graphics of Arizona, Inc., CG Marketing of Arizona, Inc., Enstech Resources,
Inc., Norman, Riley & Associates, Inc. and Vi-Tech, Inc. will be held at 19621
N. 23rd Avenue, Phoenix, Arizona, on _________, 1999 at 9:00 A.M., local time,
for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt the Acquisition
Agreement, dated as of December 31, 1998, as amended on April 12, 1999, among
Acxiom Corporation, CGA Acquisition Corporation #1, CGA Acquisition Corporation
#2, CGA Acquisition Corporation #3, each a wholly-owned subsidiary of Acxiom,
Ronald L. Jensen, James K. Martens, Computer Graphics, CG Marketing, Enstech,
Norman Riley and Vi-Tech pursuant to which (i) CGA Acquisition Corporation #1
will be merged with and into Computer Graphics with Computer Graphics continuing
as the surviving corporation and as a wholly-owned subsidiary of Acxiom, (ii)
CGA Acquisition Corporation #2 will be merged with and into CG Marketing with CG
Marketing continuing as the surviving corporation and wholly-owned subsidiary of
Acxiom, (iii) Enstech, Norman Riley and Vi-Tech will be merged with and into CGA
Acquisition Corporation #3 with CGA Acquisition Corporation #3 continuing as the
surviving corporation and as a wholly-owned subsidiary of Acxiom and (iv) each
outstanding share of common stock (other than dissenting shares, if any) of
Computer Graphics, CG Marketing, Enstech, Norman Riley and Vi-Tech will be
converted into the right to receive shares of common stock of Acxiom as more
fully described in the attached Information Statement/Prospectus.
(2) To transact such other and further business as may properly come before the
meeting or any postponement or adjournment thereof.
Under the Arizona Business Corporation Act, shareholders of each of Computer
Graphics, CG Marketing, Enstech, Norman Riley and Vi-Tech will have the right to
assert dissenters' rights in connection with the proposed mergers. See
Dissenters' Rights in the Information Statement/Prospectus accompanying this
notice.
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Only shareholders of record of common stock of each of Computer Graphics, CG
Marketing, Enstech, Norman Riley and Vi-Tech at the close of business on [insert
date one day prior to date notice is sent], 1999 are entitled to notice of and
to vote at the joint special meeting or any postponement or adjournment thereof.
By Order of the Boards of Directors,
Ronald L. Jensen
President and CEO
Computer Graphics of Arizona, Inc.
CG Marketing of Arizona, Inc.
Enstech Resources, Inc.
Norman, Riley & Associates, Inc.
Vi-Tech, Inc.
<PAGE>
PROSPECTUS
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INFORMATION STATEMENT FOR THE
JOINT SPECIAL MEETING OF SHAREHOLDERS OF
COMPUTER GRAPHICS OF ARIZONA, INC.
CG MARKETING OF ARIZONA, INC.
ENSTECH RESOURCES, INC.
NORMAN, RILEY & ASSOCIATES, INC.
VI-TECH, INC.
TO BE HELD ON __________, 1999
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This information statement of Computer Graphics of Arizona, Inc., CG Marketing
of Arizona, Inc., Enstech Resources, Inc., Norman, Riley & Associates, Inc. and
Vi-Tech, Inc. is for use in connection with the joint special meeting of
shareholders of these five companies. These shareholders are being asked to
approve and adopt the mergers described in this document.
If the shareholders approve the mergers, the shareholders of Computer Graphics,
CG Marketing, Enstech, Norman Riley and Vi-Tech will be entitled to receive, in
the aggregate, shares of Acxiom common stock having an aggregate value, based on
the average market price of Acxiom shares for the 15 trading days ending two
business days prior to the closing of the mergers, of between $43.0 million and
$46.2 million. A more detailed discussion of the exchange ratio that will
constitute the number of shares of Acxiom common stock that each shareholder of
each acquired company will receive on consummation of the mergers is on pages ii
and 11.
This information statement also constitutes the prospectus of Acxiom with
respect to the Acxiom common stock to be issued in connection with the proposed
mergers. Acxiom common stock is traded on the Nasdaq National Market System
under the symbol "ACXM."
A discussion of the risk factors associated with this offering appears at page
1.
This information statement/prospectus is first being mailed to the shareholders
on ___________________, 1999.
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Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or passed upon the
accuracy or adequacy of this information statement/prospectus. Any
representation to the contrary is a criminal offense.
The date of this information statement/prospectus is _______, 1999.
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TABLE OF CONTENTS
PAGE
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SUMMARY...................................................................
General...................................................................
The Joint Special Meeting.................................................
Exchange Ratio............................................................
The Transactions..........................................................
Dissenters' Rights........................................................
Federal Income Tax Consequences...........................................
Comparison of Rights of Acxiom and Acquired Companies Shareholders........
Accounting Treatment......................................................
Comparative Stock Prices..................................................
RISK FACTORS..............................................................
Acxiom Average Market Price May Decrease..................................
Integration of the Businesses of Acxiom and the Acquired Companies
May Not Prove to be Cost Efficient......................................
Legislation Relating to Consumer Privacy May Affect
Acxiom's Ability to Collect Data........................................
Postal Rate Increases Could Lead to Reduced Volume of Business............
Data Suppliers Might Withdraw Data From Acxiom............................
Short-term Contracts Affect Predictability of Revenues....................
Acxiom Must Continue to Improve Technology to Remain
Competitive.............................................................
YEAR 2000 PROBLEMS COULD AFFECT ACXIOM'S ABILITY TO DELIVER
PRODUCTS AND SERVICES...................................................
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS..........................
ACXIOM CORPORATION SELECTED HISTORICAL FINANCIAL DATA.....................
THE ACQUIRED COMPANIES SELECTED UNAUDITED HISTORICAL FINANCIAL DATA.......
ACXIOM CORPORATION AND THE ACQUIRED COMPANIES SELECTED
UNAUDITED PRO FORMA FINANCIAL INFORMATION...............................
COMPARATIVE PER SHARE DATA................................................
INFORMATION CONCERNING THE JOINT SPECIAL MEETING..........................
THE MERGERS...............................................................
General...................................................................
Real Estate Acquisition by Acxiom.........................................
Background of the Transactions............................................
Board of Director Recommendations.........................................
Effective Time of the Mergers; Exchange of Stock Certificates.............
Conduct of Business Pending the Mergers...................................
Conditions; Representations and Warranties/Indemnification/Escrow;
Amendment and Termination...............................................
Federal Income Tax Considerations.........................................
Comparison of Rights of Acxiom and Acquired Companies Shareholders........
<PAGE>
Accounting Treatment......................................................
Dissenters' Rights........................................................
INFORMATION CONCERNING THE ACQUIRED COMPANIES BUSINESS....................
Acquired Companies' Stock and Dividend Information........................
Security Ownership of Certain Beneficial Owners and Management
of the Acquired Companies...............................................
Additional Interests of Mr. Martens and Mr. Jensen in the Mergers.........
Management's Discussion and Analysis of Results of Operations
and Financial Condition of the Acquired Companies.......................
INFORMATION CONCERNING ACXIOM.............................................
AVAILABLE INFORMATION.....................................................
LEGAL MATTERS.............................................................
EXPERTS...................................................................
Index to Financial Statements
Annex A - Acquisition Agreement Between Acxiom Corporation and CGA
Acquisition Corporation #1; CGA Acquisition Corporation #2;
and CGA Acquisition Corporation #3; and Computer Graphics of
Arizona, Inc.; CG Marketing of Arizona, Inc.; Enstech
Resources, Inc.; Norman, Riley & Associates, Inc.; and
Vi-Tech, Inc.; and Ronald L. Jensen and James K. Martens,
Dated as of December 31, 1998, as amended April 12, 1999 ........ A-1
Annex B - Chapter 13 of the Arizona Business Corporation Act .............. B-1
Annex C - Acxiom's Annual Report on Form 10-K for the fiscal year
ended March 31, 1998, as amended by the Annual Report on
Form 10-K/A dated July 29, 1998 and the Annual Report on
Form 10-K/A dated August 4, 1998 ................................ C-1
Annex D - Quarterly Reports on Form 10-Q for the fiscal quarters ended
June 30, 1998, September 30, 1998 and December 31, 1998 ......... D-1
Annex E - Acxiom's Joint Proxy Statement/Prospectus dated August 17, 1998 . E-1
Annex F - Current Reports on Form 8-K dated June 4, 1998, September
18, 1998 and February 8, 1999 ................................... F-1
Annex G - Form 8-A of CCX Network, Inc. (now known as Acxiom
Corporation) dated February 4, 1985 ............................. G-1
Annex H - Form 8-A dated January 28, 1998, as amended by Form 8-A/A
dated June 4, 1998 .............................................. H-1
<PAGE>
We Are Not Asking You For A Proxy And You Are Requested Not To Send Us A Proxy
SUMMARY
The following is a brief summary of certain information contained in this
information statement/prospectus. Shareholders of the acquired companies are
urged to review the entire information statement/prospectus, including the
documents attached as Annexes A through H.
GENERAL
Acxiom has entered into an acquisition agreement dated December 31, 1998, as
amended April 12, 1999, with Computer Graphics of Arizona, Inc.; CG Marketing of
Arizona, Inc.; Enstech Resources, Inc.; Norman, Riley & Associates, Inc.;
Vi-Tech, Inc., each an Arizona corporation, and James K. Martens and Ronald L.
Jensen, the principal shareholders of the acquired companies.
Acxiom is acquiring the acquired companies in a series of merger transactions
in which Acxiom will issue 2,000,000 shares of Acxiom common stock to the
shareholders of the acquired companies. However, if the value of 2,000,000
shares of Acxiom common stock on the closing date for the mergers is greater
than $46.2 million or less than $43.0 million based on the average market price
of Acxiom shares over the fifteen trading days ending two business days prior to
the closing, the number of shares Acxiom will issue will be adjusted so that the
shareholders receive shares having a value no greater than $46.2 million and no
less than $43.0 million based on that average market price. The total Acxiom
shares to be issued will be allocated among the acquired companies as follows:
Acquired Company Allocation Percentage
Computer Graphics 50%
CG Marketing 30%
Enstech 10%
Norman Riley 5%
Vi-Tech 5%
For more detailed information about the proposed mergers see the discussion
under the heading The Mergers beginning at page 10.
In addition to the mergers, Acxiom will acquire from Martens, Jensen &
Associates, an Arizona general partnership which is controlled by Mr. Martens
and Mr. Jensen, real estate which is used by the acquired companies as their
principal offices. Acxiom is acquiring this real estate from the partnership
through the issuance of a number of shares of Acxiom common stock having an
aggregate value of $5,047,500, based on the average market price of Acxiom
shares over the
-i-
<PAGE>
fifteen trading days ending two business days prior to the closing. For more
detailed information about the proposed real estate acquisition, see the
discussion under the heading Real Estate Acquisition by Acxiom beginning at page
12.
The mergers and the acquisition of real estate from the partnership are being
accounted for by Acxiom as a single, integrated transaction as a
pooling-of-interests. Although the mergers and the acquisition of real estate
from the partnership are separate legal transactions, for the purposes of this
information statement/prospectus they are being treated as a single transaction.
THE JOINT SPECIAL MEETING
A joint special meeting of the shareholders of the acquired companies is
scheduled to be held at the main office of Computer Graphics of Arizona, Inc. at
19621 North 23rd Avenue, Phoenix, Arizona 85027 on _____________, 1999 at 9:00
a.m. local time. The purpose of the joint special meeting will be to consider
and vote upon the approval and adoption of the acquisition agreement and the
approval of the mergers. Only holders of shares of common stock of the acquired
companies of record at the close of business on _________________, 1999 will be
entitled to vote at the joint special meeting. For more detailed information
about the joint special meeting, see the discussion under the heading
Information Concerning the Joint Special Meeting beginning at page 10.
As of the record date, 60% of the outstanding shares of Computer Graphics were,
directly or indirectly, beneficially owned by Mr. Martens and Mr. Jensen. As of
the record date, 100% of the outstanding shares of common stock of CG Marketing,
Enstech, Norman Riley and Vi-Tech were, directly or indirectly, beneficially
owned by Mr. Martens and Mr. Jensen. Mr. Martens and Mr. Jensen own sufficient
shares in each of the acquired companies to approve and adopt the acquisition
agreement and the mergers. For more detailed information about the ability of
Mr. Martens and Mr. Jensen to approve the mergers, see the discussion under the
heading Security Ownership of Certain Beneficial Owners and Management of the
Acquired Companies beginning at page 26.
EXCHANGE RATIO
Acxiom will issue 2,000,000 shares of its common stock in the mergers. However,
if the value of 2,000,000 shares of Acxiom common stock on the closing date for
the mergers is greater than $46.2 million or less than $43.0 million based on
the average of the high and low price of Acxiom shares for the 15 trading days
ending two business days prior to the closing, the number of shares Acxiom will
issue will be adjusted so that the shareholders receive shares having a value no
greater than $46.2 million and no less than $43.0 million based on that average
price. The average market price for Acxiom shares for the fifteen days ended
March 31, 1999 was $25.24. If that market price was applicable at the closing,
Acxiom would be required to issue an aggregate of 1,830,303 shares in the
mergers and the exchange ratio for each share of stock of each acquired company
based on the allocation percentages discussed on page -i- would be as follows:
-ii-
<PAGE>
Acquired Company Exchange Ratio
Computer Graphics 45.75768
CG Marketing 274.54605
Enstech 915.15352
Norman 45.75768
Vi-Tech 45.75768
The exchange ratio represents the number of Acxiom shares that will be issued in
exchange for each share of each acquired company. The table above is included
for illustrative purposes only. The actual average market price of Acxiom shares
and the number of Acxiom shares to be issued in the mergers will not be known
until just prior to closing. Neither party has the right to walk away from the
transaction and there are no re-distribution obligations if the value of Acxiom
shares fall below a certain price.
The parties anticipate that the shareholder vote and the closing will occur on
the same date, if the shareholders approve the mergers. The shareholders will be
able to determine the exchange ratio that will apply at the time they vote on
the mergers and will know the number of shares of Acxiom common stock they will
receive at the closing. For more detailed information about the exchange ratio,
see the discussion under the heading The Mergers-General beginning at page 11.
THE TRANSACTIONS
Background of Transactions
The management of Acxiom and the acquired companies began considering a
potential transaction in August, 1998. A letter of intent was finalized and
executed on September 29, 1998. The acquisition agreement was executed on
December 31, 1998. The acquisition agreement was approved by the boards of
directors of the acquired companies on December 28, 1998.
Board of Director Recommendations
The boards of directors of the acquired companies voted to approve the
acquisition agreement as being in the best interest of the shareholders of the
acquired companies and recommend that the shareholders of the acquired companies
vote for the approval of the mergers and the approval and adoption of the
acquisition agreement. For more detailed information about the boards' decisions
to recommend the transactions, see the discussion under the heading Board of
Directors Recommendations beginning at page 13.
<PAGE>
Effective Time of the Mergers; Exchange of Stock Certificates
The mergers will be consummated at the time and on the date that articles of
merger are filed with the Arizona Secretary of State or at a later time if
specified in the articles of merger. It is presently contemplated that this
closing will occur as soon as possible after the necessary approvals of the
shareholders of the acquired companies have been obtained. On the date the
mergers are completed, stock certificates held by the shareholders of the
acquired companies and title to the acquired real estate held by the partnership
will be delivered to Acxiom and exchanged for the shares of Acxiom common stock
that the shareholders and the owners of the real estate are entitled to receive
as a result of the mergers and the real estate acquisition. For more detailed
information about the exchange of Acxiom shares for acquired companies shares,
see the discussion under the heading Effective Time of the Mergers; Exchange of
Stock Certificates beginning at page 14.
Conditions; Representations and Warranties; Amendment and Termination
The obligations of Acxiom and the acquired companies to consummate the mergers
are subject to:
- - the necessary vote of the shareholders of the acquired companies approving
the mergers;
- - Mr. Martens and Mr. Jensen having delivered to Acxiom covenants not to
compete;
- - the receipt by Acxiom of evidence reasonably satisfactory to Acxiom that
the acquired companies have rights to use software used in products of
Vi-Tech and developed under agreement by a third-party vendor for the
acquired companies without the requirement of a payment to the third-party
vendor;
- - Acxiom acquiring the real estate from the partnership;
- - Acxiom having received an opinion from KPMG LLP that the mergers and the
acquisition of the real estate will qualify for pooling-of-interests
accounting treatment;
- - The acquired companies and Mr. Martens and Mr. Jensen having received a
favorable opinion from Hughes Hubbard & Reed LLP that each of the mergers
will qualify as a reorganization within the meaning of Section 368(a) of
the internal revenue code.
Each of these conditions may be waived by the party that has required it.
The acquisition agreement may be amended by agreement between Acxiom, Mr.
Martens and Mr. Jensen, and the acquired companies. The acquisition agreement
may be terminated by either Acxiom or the acquired companies if by June 30,
1999, the conditions specified in the acquisition agreement have not been
satisfied or waived. For more detailed information about conditions to the
mergers and amendment of the acquisition agreement, see the discussion under the
heading Conditions; Representations and Warranties/Indemnification/Escrow;
Amendment and Termination beginning at page 16.
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DISSENTERS' RIGHTS
Chapter 13 of the Arizona Business Corporation Act gives shareholders in each
acquired company the right to dissent from the merger involving that acquired
company and to obtain payment of the fair value of the shareholder's shares of
acquired company's stock rather than receiving shares of Acxiom common stock. In
order for a shareholder to dissent and to obtain payment for his shares, he must
comply with the requirements and procedures set forth in the Arizona Act. The
obligation of the acquired companies and Mr. Martens and Mr. Jensen to effect
the mergers is subject to the receipt by the acquired companies of a tax opinion
from Hughes Hubbard & Reed LLP. The obligations of Acxiom to effect the mergers
is subject to the transactions being accounted for by Acxiom as a
pooling-of-interests. Depending on the number of shareholders of the acquired
companies that exercise dissenters' rights, Hughes Hubbard & Reed LLP may not be
able to issue the required tax opinion and Acxiom may be prevented from
accounting for the transactions as a pooling-of-interests. For more detailed
information about the right to dissent, see the discussion under the heading
Dissenters' Rights beginning at page 23.
FEDERAL INCOME TAX CONSIDERATIONS
The mergers have been structured with the intent that they be tax-free to the
shareholders of the acquired companies for U.S. federal income tax purposes. The
obligations of the acquired companies and Mr. Martens and Mr. Jensen to effect
the mergers are subject to the receipt by the acquired companies of an opinion
of Hughes Hubbard & Reed LLP, special counsel to the acquired companies, to the
effect that each of the mergers will qualify as a reorganization within the
meaning of Section 368(a) of the Code. For more detailed information about the
tax consequences of the mergers, see the discussion under the heading Federal
Income Tax Considerations beginning at page 18.
The acquisition by Acxiom of the real estate will be a taxable transaction to
the partnership.
COMPARISON OF RIGHTS OF ACXIOM AND ACQUIRED COMPANIES SHAREHOLDERS
Each of the acquired companies is incorporated under the laws of Arizona. Acxiom
is incorporated under the laws of Delaware. Upon consummation of the mergers,
the shareholders of the acquired companies, whose rights are governed by the
laws of Arizona and the articles of incorporation and by-laws of the acquired
companies, will become shareholders of Acxiom and their rights will be governed
by the laws of Delaware and the certificate of incorporation and by-laws of
Acxiom. The most significant differences between being an Acxiom shareholder and
being an acquired company shareholder are the following:
- - 80% shareholder approval is required to amend Acxiom's charter regarding:
election of directors, action of shareholders without a meeting, amendment
of bylaws, and fair price
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provisions for business combinations --- the acquired companies' articles
of incorporation only require majority vote to amend articles;
- - Acxiom's charter requires supermajority voting for some business
combinations --- the acquired companies' articles only require majority
vote for all business combinations;
- - Acxiom shareholders have dissenters' rights only when Acxiom is involved in
a merger or consolidation --- acquired companies' shareholders have
dissenters' rights when their company is involved in a merger or when there
is a sale of all of their company's assets or when specific amendments to
the articles or bylaws are approved;
- - Acxiom has a shareholder rights plan in place which may deter a party from
attempting to acquire Acxiom --- none of the acquired companies has a
similar plan;
For a more detailed comparison of the rights of Acxiom and acquired companies'
shareholders, see the discussion under the heading Comparison of Rights of
Acxiom and Acquired Companies Shareholders beginning at page 20.
ACCOUNTING TREATMENT
Acxiom believes that the mergers and the acquisition of the real estate from the
partnership will qualify as a pooling-of-interests for accounting and financial
reporting purposes. Consummation of the transactions is conditioned upon receipt
by Acxiom of an opinion from KPMG LLP, Acxiom's independent public accountants,
stating that the transactions will qualify for pooling-of-interests accounting
treatment.
COMPARATIVE STOCK PRICES
The reported closing sale price of Acxiom common stock on the Nasdaq National
Market System on December 30, 1998, the last full day of trading for Acxiom
common stock prior to execution of the acquisition agreement, was $28.25 per
share. There is no active market for the shares of common stock of any of the
acquired companies. See Acquired Companies' Stock and Dividend Information at
page 25. As of December 31, 1998, the book value per share of the acquired
companies was $288.85.
Based on an assumed aggregate exchange ratio of 62.41978 shares of Acxiom common
stock for each share of common stock of the acquired companies, the fair market
value of each share of common stock of the acquired companies is $1,763.36. The
aggregate value of Acxiom common stock to be received by all holders of each
acquired company's common stock would be as follows based on the assumptions
described below:
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<PAGE>
Exchange Ratio Value
Computer Graphics 40.88496 $23,100,000
CG Marketing 245.30973 13,860,000
Enstech 817.69912 4,620,000
Norman Riley 40.88496 2,310,000
Vi-Tech 40.88496 2,310,000
For purposes of this calculation, we used a fair market price for Acxiom's
common stock of $28.25 and we then used the procedure for determining the number
of shares to be issued in connection with the mergers and the percentages for
allocating the total shares to be issued to each acquired company that are
described under The Mergers - General at page 11. The exchange ratio represents
the number of shares of Acxiom common stock that would be issued based on this
price and aggregate values for each share of each acquired company. This fair
market price, aggregate values and exchange ratios are not necessarily the fair
market price of Acxiom common stock, the resulting aggregate values of Acxiom
common stock and the exchange ratios that will be applicable as of the closing
of the mergers, each of which will be calculated at that time based on the terms
of the acquisition agreement.
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<PAGE>
RISK FACTORS
The following are factors that should be considered by the shareholders of the
acquired companies in evaluating the mergers and the investment in Acxiom common
stock as a result of the mergers.
ACXIOM AVERAGE MARKET PRICE MAY DECREASE
In considering whether to approve the acquisition agreement, shareholders of the
acquired companies should consider the following:
- - the actual exchange ratio to be used for each share of stock of the
acquired companies will be based on the average market price of Acxiom
common stock;
- - the market price of Acxiom common stock at the effective time of the
mergers can be expected to vary from the market prices as of the date of
this information statement/prospectus due to changes in the business,
operations or prospects of Acxiom, and general market and economic
conditions;
- - the market price of Acxiom common stock can vary after the effective time
of the mergers due to changes in the business, operations or prospects of
Acxiom, and general market and economic conditions;
INTEGRATION OF THE BUSINESSES OF ACXIOM AND THE ACQUIRED COMPANIES MAY NOT PROVE
TO BE COST EFFICIENT
The mergers involve the integration of two businesses that have previously
operated independently. As soon as practicable following the mergers, Acxiom
intends to integrate the operations of the acquired companies into its
operations. However, there can be no assurance that Acxiom will successfully
integrate the operations of the acquired companies with those of Acxiom or that
all of the benefits expected from such integration will be realized. Acxiom
believes that the potential obstacles to successful integration will be: the
consolidation of the data center operations; the integration and combination of
the business units supporting the various industry segments; and the necessary
support staffing required to meet the combined entity's business growth
opportunities. Any delay in completing the integration may negatively impact the
combined entity's ability to provide ongoing quality products and services which
in turn may negatively impact the future revenues, net income and earnings per
share of the combined entity. Additionally, unexpected costs incurred in
connection with the integration could decrease operating margins and negatively
impact net income and earnings per share of the combined entity. There can be no
assurance that the operations, management and personnel of the businesses will
be compatible or that Acxiom or the acquired companies will not experience the
loss of key personnel.
-1-
<PAGE>
LEGISLATION RELATING TO CONSUMER PRIVACY MAY AFFECT ACXIOM'S ABILITY TO COLLECT
DATA
There could be a material adverse impact on Acxiom's direct marketing and data
sales business due to the enactment of legislation or industry regulations
arising from the increase in public concern over consumer privacy issues.
Restrictions upon the collection and use of information which is currently
legally available could be adopted, in which case the cost to Acxiom of
collecting certain kinds of data might be materially increased. It is also
possible that Acxiom could be prohibited from collecting or disseminating
certain types of data, which could in turn materially adversely affect Acxiom's
ability to meet its customers' requirements.
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
Acxiom's opinion, force direct mailers to mail fewer pieces and to target their
prospects more carefully. This sort of response by direct mailers could affect
Acxiom by decreasing the amount of processing services purchased from Acxiom,
which could result in lower revenues, net income and earnings per share.
DATA SUPPLIERS MIGHT WITHDRAW DATA FROM ACXIOM
Acxiom could suffer a material adverse effect if owners of the data used by
Acxiom were to withdraw the data from Acxiom. If a substantial number of data
suppliers were to remove their data, Acxiom's ability to provide products and
services to its customers may be materially adversely impacted resulting in
decreased revenue, net income and earnings per share.
SHORT-TERM CONTRACTS AFFECT PREDICTABILITY OF REVENUES
While approximately 54% of Acxiom's total revenue is currently derived from
long-term customer contracts of over three years, the remainder is not. With
respect to that portion of the business which is not under long-term contract,
revenues are less predictable, and Acxiom must consequently engage in continual
sales efforts to maintain its revenue stability and future growth.
ACXIOM MUST CONTINUE TO IMPROVE TECHNOLOGY TO REMAIN COMPETITIVE
Maintaining technological competitiveness in its data products, processing
functionality, software systems and services is key to Acxiom's continued
success. Acxiom's ability to continually improve its current processes and to
develop and introduce new products and services is essential in order to meet
its competitors' technological developments and the increasingly sophisticated
requirements of its customers. If Acxiom failed to do so, Acxiom could lose
customers to current or future competitors resulting in decreased revenue, net
income and earnings per share.
-2-
<PAGE>
YEAR 2000 PROBLEMS COULD AFFECT ACXIOM'S ABILITY TO DELIVER PRODUCTS AND
SERVICES
Many computer systems and equipment and instruments were designed to only
recognize the last two digits of the calendar year. With the arrival of the Year
2000, these systems may encounter operating problems due to their inability to
distinguish years after 1999 from years preceding 1999. Acxiom believes that
with modifications to existing software and conversions of new software the Year
2000 issue can be mitigated. However, the systems of vendors on which Acxiom
relies may not be converted in a timely fashion or a vendor or customer may fail
to convert its systems to be Year 2000 compliant which could materially
adversely impact Acxiom's ability to deliver products and services to its
customers. Acxiom's efforts to address the Year 2000 risk are discussed in the
Form 10-Q for the quarter ended December 31, 1998 attached to this information
statement/prospectus as Annex D.
INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This information statement/prospectus includes, and future filings by Acxiom
with the Commission and future oral and written statements by Acxiom and its
management may include, forward-looking statements. These statements include
statements regarding Acxiom's or the acquired companies' financial position,
results of operations, market position, product development, software
replacement and/or remediation efforts, regulatory matters, growth opportunities
and growth rates, acquisition and divestiture opportunities, and other similar
forecasts and statements of expectation. Words such as expects, anticipates,
intends, plans, believes, seeks, estimates and should, and variations of these
words and similar expressions, are intended to identify these forward-looking
statements. These statements are not statements of historical fact. Rather, they
are based on Acxiom's or the acquired companies' estimates, assumptions,
projections and current expectations, and are not guarantees of future
performance. Acxiom and each acquired company disclaim any obligation to update
or revise any forward-looking statement based upon the occurrence of future
events, the receipt of new information, or otherwise. Some of the more
significant factors that could cause Acxiom's or the acquired companies' actual
results and other matters to differ materially from the results, projections and
expectations expressed in the forward-looking statements are the economic
climate and various pending legislation.
-3-
<PAGE>
ACXIOM CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of Acxiom. The
selected historical financial data as of March 31, 1997 and 1998 and for each of
the three years ended March 31, 1996, 1997 and 1998 are derived from the audited
consolidated financial statements of Acxiom. The selected historical financial
data as of March 31, 1994, 1995 and 1996 and for the years ended March 31, 1994
and 1995 were derived from combining Acxiom historical audited information and
May & Speh historical audited information. The historical financial data as of
December 31, 1998 and for the nine months ended December 31, 1997 and 1998 are
derived from unaudited condensed consolidated financial statements of Acxiom and
have been prepared on the same basis as the historical information derived from
audited consolidated financial statements and, in the opinion of management,
contain all adjustments, consisting only of normal recurring accruals, necessary
for the fair presentation of the results of operations for such periods. The
data should be read in conjunction with the consolidated financial statements
and related notes of Acxiom attached as Annexes C, D, and F to this information
statement/prospectus.
NINE MONTHS
FOR THE FISCAL YEARS ENDED MARCH 31, ENDED DECEMBER 31,
------------------------------------------- ------------------
1994 1995 1996 1997 1998 1997 1998
------- ------- ------- ------- ------- ------- -------
STATEMENT OF
EARNINGS DATA
Revenue $193,461 $254,115 $331,543 $479,239 $569,020 $406,870 $521,080
Net earnings 11,803 18,243 26,084 37,735 46,055 32,468 (36,045)
Basic earnings
per share 0.20 0.30 0.41 0.54 0.64 0.45 (0.48)
Diluted earnings
per share 0.19 0.29 0.38 0.49 0.57 0.41 (0.48)
Shares used in
computing
earnings
per share:
Basic 60,248 61,025 63,398 69,279 72,199 72,042 75,230
Diluted 62,014 63,574 68,567 78,065 80,909 80,660 75,230
AS OF MARCH 31,
------------------------------------------- DECEMBER 31,
1994 1995 1996 1997 1998 1998
------- ------- ------- ------- ------- -------
BALANCE SHEET
DATA
Total assets $153,349 $182,148 $240,853 $411,629 $673,150 $744,328
Long-term debt,
excluding
current
installments 52,689 33,270 43,745 109,371 254,240 312,582
Redeemable
common stock 7,692 0 0 0 0 0
Stockholders'
equity 65,885 105,878 140,385 231,828 301,194 286,358
-4-
<PAGE>
THE ACQUIRED COMPANIES
SELECTED UNAUDITED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of the
acquired companies. The selected historical financial data are derived from the
unaudited combined financial statements of all of the acquired companies and, in
the opinion of management, the financial statements include all adjustments
necessary to present the financial statements in accordance with generally
accepted accounting principles. The data should be read in conjunction with the
unaudited combined financial statements of the acquired companies included
elsewhere in this document.
Pro forma basic and diluted earnings per share have been computed by converting
the outstanding shares of the acquired companies into Acxiom common shares
according to the terms of the acquisition agreement. The exchange ratio used in
converting the acquired companies' outstanding shares into Acxiom common shares
assumes a 15-day average market price of Acxiom common stock of $25.24 per
share, which is the 15-day average as of March 31, 1999. This assumed 15-day
average market price and the resulting exchange ratios are not necessarily the
15-day average market price of Acxiom common stock and the exchange ratios that
will be applicable as of the closing of the mergers, each of which will be
calculated at that time based on the terms of the acquisition agreement.
NINE MONTHS
FOR THE FISCAL YEARS ENDED MARCH 31, ENDED DECEMBER 31,
-------------------------------------- -----------------
1994 1995 1996 1997 1998 1997 1998
------ ------ ------ ------ ------ ------ ------
STATEMENT OF
EARNINGS DATA
Revenue $12,891 $14,021 $15,128 $19,993 $23,309 $17,150 $17,372
Net earnings 562 623 1,200 1,209 1,100 1,062 1,118
Pro forma basic
and diluted
earnings per $0.31 $0.34 $0.66 $0.66 $0.60 $0.58 $0.61
share
Shares used in
computing pro
forma basic and
diluted earnings
per share: 1,830 1,830 1,830 1,830 1,830 1,830 1,830
Cash dividends
paid $0 $0 $0 $116 $153 $153 $160
AS OF MARCH 31,
----------------------------------------- DECEMBER 31,
1994 1995 1996 1997 1998 1998
----- ----- ----- ----- ----- -----
BALANCE SHEET
DATA
Total assets $7,174 $7,313 $6,173 $7,621 $7,946 $9,226
Long-term debt,
excluding
current 0 0 1,477 527 0 0
installments
Stockholders'
equity 1,370 1,748 2,273 5,240 6,493 7,883
-5-
<PAGE>
ACXIOM CORPORATION AND THE ACQUIRED COMPANIES
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth certain selected unaudited pro forma financial
data for Acxiom after giving effect to the mergers and the acquisition of real
estate from the partnership for the periods indicated applying the
pooling-of-interests method of financial accounting. The following table should
be read together with the consolidated financial statements and accompanying
notes of Acxiom attached as Annexes C, D, and F to this information
statement/prospectus and the combined financial statements and accompanying
notes of the acquired companies included on pages F-1 through F-8. The selected
pro forma statement of earnings data includes Acxiom's historical results of
operations for the nine months ended December 31, 1998 and the three fiscal
years ended March 31, 1996, 1997 and 1998, respectively, and the acquired
companies combined historical results of operations for the nine months ended
December 31, 1998 and the twelve months ended March 31, 1996, 1997 and 1998,
respectively. The unaudited pro forma balance sheet data presents the historical
balance sheet of Acxiom and the acquired companies as of December 31, 1998 and
the historical book value of the real estate to be acquired from the partnership
as of December 31, 1998. The fiscal year end of Acxiom is March 31; the
unaudited statements of earnings of Acxiom for the nine months ended December
31, 1998 and the balance sheet of Acxiom as of December 31, 1998 used in the
selected unaudited pro forma financial information have been prepared on the
same basis as the historical information derived from audited financial
statements and, in the opinion of management, contain all adjustments consisting
only of normal recurring accruals necessary for the fair presentation of the
results of operations for such periods. The companies included in the combined
financial statements of the acquired companies have various fiscal year ends.
The unaudited historical financial statements of the acquired companies, in the
opinion of management, contain all adjustments necessary for the fair
presentation of such financial statements in accordance with generally accepted
accounting principles. Pro forma total assets and stockholders' equity include
$538 related to the acquisition of certain real estate from the partnership. See
The Mergers - Real Estate Acquisition by Acxiom at page 12. The pro forma
financial data in the table below are presented for information and do not
indicate what the financial position or the results of operations of Acxiom
would have been had the mergers occurred as of the dates or for the periods
presented or what the financial position or future results of operations of
Acxiom will be. No adjustment has been included in the pro forma financial data
for transaction costs, integration costs or cost savings, if any, resulting from
the mergers.
Basic and diluted earnings per share have been computed by converting the
outstanding shares of the acquired companies into Acxiom common shares according
to the terms of the acquisition agreement. The exchange ratio used in converting
the acquired companies' outstanding shares into Acxiom common shares assumes a
15-day average market price of Acxiom common stock of $25.24 per share, which is
the 15-day average as of March 31, 1999. This assumed 15-day average market
price and the resulting exchange ratios are not necessarily the 15-day average
-6-
<PAGE>
market price of Acxiom common stock and the exchange ratios that will be
applicable as of the closing of the mergers, each of which will be calculated at
that time based on the terms of the acquisition agreement.
NINE MONTHS
FOR THE FISCAL YEARS ENDED ENDED
MARCH 31, DECEMBER 31,
------------------------------- -----------
1996 1997 1998 1998
------- ------- ------- -------
STATEMENT OF EARNINGS
DATA
Revenue $346,671 $499,232 $592,329 $538,452
Net earnings 27,284 38,944 47,155 (34,927)
Basic earnings per share $0.42 $0.55 $0.64 ($0.45)
Diluted earnings per $0.39 $0.49 $0.58 ($0.45)
share
Shares used in computing
earnings per share:
Basic 65,228 71,109 74,029 77,060
Diluted 70,397 79,895 82,739 77,060
DECEMBER 31,
1998
-------
BALANCE SHEET DATA
Total assets $754,092
Long-term debt, excluding current installments 312,582
Stockholders' equity 294,779
-7-
<PAGE>
COMPARATIVE PER SHARE DATA
The following table sets forth actual historical earnings and book value per
common share information for Acxiom and the acquired companies and unaudited
information on a pro forma combined basis and per share equivalent pro forma
basis for the acquired companies. No cash dividends have ever been paid on the
Acxiom common stock. Dividends paid by the five acquired companies on their
common stock are described in Acquired Companies Stock and Dividend Information
at page 25. Pro forma combined information is derived from the combined pro
forma information presented on pages 6-7 which gives effect to the mergers under
the pooling-of-interests accounting method as if the mergers had occurred at
April 1, 1995, with respect to earnings per share data and December 31, 1998
with respect to per share book value data. The historical data are based on the
historical consolidated financial statements and related notes of Acxiom
included in the annexes to this information statement/prospectus and the
historical combined financial statements of the acquired companies included in
this information statement/prospectus and the historical book value of the real
estate acquired from the partnership. This table should be read together with
the historical audited and unaudited consolidated financial statements of Acxiom
and the unaudited combined financial statements of the acquired companies and
related notes. The data presented do not indicate Acxiom's future results of
operations or actual results that would have occurred if the mergers had
occurred at the beginning of the periods indicated. No adjustments have been
included for transaction costs, integration costs or cost savings, if any,
resulting from the mergers.
Acxiom's historical book value per share is computed by dividing stockholders'
equity by the number of shares of common stock outstanding at the end of each
period. Pro forma acquired companies historical book value per share is computed
by dividing the acquired companies stockholders' equity by the pro forma
outstanding shares of the acquired companies. Pro forma outstanding shares have
been computed based on the exchange ratio reflected below. Pro forma historical
basic and diluted earnings per share of the acquired companies have been
computed by converting the outstanding shares of the acquired companies into
Acxiom common shares based upon the exchange ratio reflected below.
The pro forma combined basic and diluted earnings per share are based on the
combined weighted average number of common and dilutive shares of Acxiom common
stock and the acquired companies' common stock for each period based on an
aggregate estimated exchange ratio of Acxiom common stock for each acquired
company's share of 69.85905. The 15-day average market price used in computing
the exchange ratio was assumed to be, for purposes of this calculation, $25.24
per Acxiom common share, which is the 15-day average market price as of March
31, 1999.
Book value per share for the pro forma combined presentation is based on
outstanding Acxiom common shares, adjusted to include an estimate of the shares
of Acxiom common stock to be issued in the mergers, including 199,966 shares
estimated to be issued in connection with the acquisition of certain real
estate. See The Mergers - Acquisition of Real Estate by Acxiom at page 12.
-8-
<PAGE>
The acquired companies' pro forma per share equivalent data is based upon the
exchange ratio for the acquired companies as described above.
NINE MONTHS
FOR THE FISCAL YEARS ENDED AND ENDED
AS OF MARCH 31, DECEMBER 31,
------------------------------ -----------
1996 1997 1998 1998
---- ---- ---- ----
ACXIOM HISTORICAL
Basic earnings per share $0.41 $0.54 $0.64 ($0.48)
Diluted earnings per share 0.38 0.49 0.57 (0.48)
Book value per share 4.11 3.68
PRO FORMA ACQUIRED COMPANIES
HISTORICAL
Basic and diluted earnings per
share $0.66 $0.66 $0.60 $0.61
Book value per share 3.46 4.15
PRO FORMA COMBINED
Basic earnings per $0.42 $0.55 $0.64 ($0.45)
share
Diluted earnings per share 0.39 0.49 0.58 (0.45)
Book value per share 4.10 3.69
ACQUIRED COMPANIES PRO FORMA
PER SHARE EQUIVALENTS
Basic earnings per share $0.42 $0.55 $0.64 ($0.45)
Diluted earnings per share 0.39 0.49 0.58 (0.45)
Book value per share 4.10 3.69
-9-
<PAGE>
INFORMATION CONCERNING THE JOINT SPECIAL MEETING
The Joint Special Meeting
Only shareholders of record of the acquired companies at the close of business
on ________, 1999 are entitled to receive notice of and to vote at the joint
special meeting. The joint special meeting will be held at 19621 N. 23rd Avenue,
Phoenix, Arizona on _______, 1999 at 9:00 a.m., local time. Each shareholder of
an acquired company will be entitled to one vote per share with respect to the
merger of that acquired company. At the joint special meeting, the shareholders
of the acquired companies will vote whether to approve the mergers and to adopt
and approve the acquisition agreement.
Vote Required
Under the Arizona Business Corporation Act, the affirmative vote of a majority
of the issued and outstanding shares of an acquired company is required to
approve the merger of that acquired company and to adopt and approve the
acquisition agreement. If a shareholder abstains from voting, or if a broker
holds shares and cannot vote those shares, then this will have the same effect
as a vote against that particular merger.
As of the record date, 60% of the outstanding shares of common stock of Computer
Graphics was, directly or indirectly, beneficially owned by Mr. Martens and Mr.
Jensen. As of the record date, 100% of the outstanding shares of common stock of
CG Marketing, Enstech, Norman Riley and Vi-Tech was, directly or indirectly,
beneficially owned by Mr. Martens and Mr. Jensen. Mr. Martens and Mr. Jensen
plan to vote in favor of the approval of the mergers and the approval and
adoption of the acquisition agreement at the joint special meeting. The vote of
the shares of common stock of each of the acquired companies beneficially owned
by Mr. Martens and Mr. Jensen is sufficient to approve the mergers and the
acquisition agreement without any action on the part of any other shareholders
of any of the acquired companies.
At the date of this information statement/prospectus, Acxiom does not own any
shares of common stock of any of the acquired companies.
Other Matters To Be Considered
It is not anticipated that any other matter will be brought before the
shareholders of any of the acquired companies at the joint special meeting.
THE MERGERS
The terms and conditions of the mergers are set forth in the acquisition
agreement, which is attached to this document as Annex A. The following is a
discussion of the material provisions of the acquisition agreement.
-10-
<PAGE>
GENERAL
The acquisition agreement provides for:
1. the merger of CGA Acquisition Corporation #1 with and into Computer Graphics
of Arizona, Inc. with Computer Graphics of Arizona, Inc. continuing as the
surviving corporation and as a wholly-owned subsidiary of Acxiom;
2. the merger of CGA Acquisition Corporation #2 with and into CG Marketing of
Arizona, Inc. with CG Marketing of Arizona, Inc. continuing as the surviving
corporation and as a wholly-owned subsidiary of Acxiom; and
3. the merger of Enstech Resources, Inc., Norman, Riley & Associates, Inc. and
Vi-Tech, Inc. with and into CGA Acquisition Corporation #3 with CGA Acquisition
Corporation #3 continuing as the surviving corporation and as a wholly-owned
subsidiary of Acxiom.
Each of the mergers shall be in accordance with the Arizona Business Corporation
Act. Upon consummation of the mergers, each of the issued and outstanding shares
of common stock of the acquired companies will be converted into the right to
receive shares of Acxiom common stock.
The aggregate number of shares of Acxiom common stock to be issued in connection
with the mergers will be 2,000,000 Acxiom shares. However, if the value of
2,000,000 shares of Acxiom common stock on the closing date for the mergers is
greater than $46.2 million or less than $43.0 million based on the average of
the high and low price of Acxiom shares over the fifteen trading days ending two
business days prior to the closing, the number of shares Acxiom will issue will
be adjusted so that the shareholders receive shares having a value no greater
than $46.2 million and no less than $43.0 million based on that average market
price. The total Acxiom shares to be issued will be allocated among the acquired
companies as follows:
Acquired Company Allocation Percentage
Computer Graphics 50%
CG Marketing 30%
Enstech 10%
Norman Riley 5%
Vi-Tech 5%
The number of shares of Acxiom common stock allocated to each acquired company
shall be further allocated and delivered to the shareholders of each acquired
company based upon each individual shareholder's ownership interest in the
acquired company.
-11-
<PAGE>
Based on the 15-day average market price of Acxiom common stock as of March 31,
1999 of $25.24, the following exchange ratios would apply:
Acquired Company Exchange Ratio
Computer Graphics 45.75768
CG Marketing 274.54605
Enstech 915.15352
Norman Riley 45.75768
Vi-Tech 45.75768
Based on this 15-day average market price and the resulting exchange ratios, the
shareholders of the acquired companies would own approximately 2% of the Acxiom
common stock as a result of the mergers. The actual 15-day average market price
applicable at the closing of the mergers and the resulting exchange ratios and
ownership percentages may be different from the amounts based on this 15-day
average market price.
No fractional shares of Acxiom common stock will be issued as a result of the
mergers. In lieu of the issuance of fractional shares, each shareholder of an
acquired company who would otherwise be entitled to a fractional share of Acxiom
common stock will receive a cash payment equal to the product of the 15-day
average market price of a share of Acxiom common stock multiplied by the
fractional share of Acxiom common stock otherwise issuable to that shareholder.
REAL ESTATE ACQUISITION BY ACXIOM
The mergers are conditioned upon Acxiom acquiring, through the issuance of
Acxiom common stock, real estate from the partnership as of the closing date for
the mergers. The real estate Acxiom is acquiring is an office building leased by
the partnership to Computer Graphics. The operations of all the acquired
companies are conducted in this office building. There are no other tenants in
this office building.
Acxiom is acquiring this real estate from the partnership through the issuance
of a number of shares of Acxiom common stock, based on the 15-day average market
price of Acxiom common stock, having an aggregate value equal to $5,047,500 .
The purchase price for the real estate was established by an appraisal procedure
previously agreed on by the partnership and Acxiom. This procedure required that
each of Acxiom and Mr. Martens and Mr. Jensen obtain independent appraisals of
the fair market value of the real estate. If the fair market value determined by
the appraisal obtained by Acxiom was within 10% of the fair market value from
the appraisal obtained by Mr. Martens and Mr. Jensen, the purchase price for the
real estate would be the average of those two values. Because the Acxiom
appraisal was within 10% of the Martens and Jensen appraisal, the $5,047,500
purchase price for the real estate was determined by averaging those two
appraisals.
-12-
<PAGE>
No fractional shares of Acxiom common stock will be issued to the partnership in
the acquisition of the real estate. In lieu of the issuance of a fractional
share, the partnership will receive a cash payment equal to the product of the
15-day average market price multiplied by the fractional share of Acxiom common
stock otherwise issuable.
BACKGROUND OF THE TRANSACTIONS
The management of Acxiom and the acquired companies began considering a
potential combination in August, 1998. A letter of intent was finalized and
executed on September 29, 1998. The acquisition agreement was executed on
December 31, 1998. The acquisition agreement was approved by the boards of
directors of the acquired companies on December 28, 1998.
BOARD OF DIRECTOR RECOMMENDATIONS
The boards of directors of the acquired companies believe the mergers are in the
best interest of the shareholders of the acquired companies and recommend that
the shareholders of the acquired companies vote for the approval of the mergers
and the approval of the acquisition agreement. The boards of directors of each
of the acquired companies in approving and recommending the mergers to their
shareholders reviewed the following factors:
- - the financial condition, assets, results of operations, business and
prospects of the acquired companies and the risks involved in achieving
those prospects in view of the current industry, economic and market
conditions;
- - the aggregate value of Acxiom shares to be received by the shareholders
compared to the book value of the acquired companies;
- - the enhanced liquidity to the shareholders resulting from exchanging a
privately held, illiquid investment for shares of a publicly traded
company;
- - the shareholders would receive shares of stock in Acxiom, a much larger
company operating in a broader sector of the information management and
delivery industry;
- - the expected tax-free treatment of the mergers;
- - the expected accounting treatment of the mergers as a pooling-of-interests;
- - the strategic and financial alternatives available to the acquired
companies, including remaining as independent companies;
- - the historical prices of shares of Acxiom common stock; and
-13-
<PAGE>
- - certain publicly available information with respect to the financial
condition and results of operations of Acxiom.
Based on their reviews of these factors the boards did not believe that a
fairness opinion would be material to the decision by the shareholders to
approve the mergers. The boards also took into account the views of the
controlling shareholders that they did not believe a fairness opinion was
necessary and that the costs of obtaining a fairness opinion would outweigh any
benefits that it would provide. In addition, in view of the wide variety of
material factors considered in connection with their evaluation of the mergers,
the boards of directors of the acquired companies did not find it practicable
to, and did not, quantify or otherwise attempt to assign relative weights to
specific factors considered in reaching their determinations.
The $5,047,500 purchase price for the real estate was determined by averaging
independent appraisals obtained by each of Acxiom and Mr. Jensen and Mr. Martens
as discussed on page 12 under Real Estate Acquisition by Acxiom.
EFFECTIVE TIME OF THE MERGERS; EXCHANGE OF STOCK CERTIFICATES
The mergers will be consummated on the date that articles of merger are filed
with the Arizona Secretary of State or at a later time if specified in the
articles of merger. The parties contemplate that this closing will occur as soon
as possible after the necessary approvals of the shareholders of the acquired
companies have been obtained. On the date the mergers are consummated, stock
certificates held by the shareholders of the acquired companies and title to the
acquired real estate held by the partnership will be delivered to Acxiom and
exchanged for the shares of Acxiom common stock that the shareholders and the
owners of the real estate are entitled to receive.
CONDUCT OF BUSINESS PENDING THE MERGERS
Each of the acquired companies has agreed that prior to consummation of the
mergers,
- - it will conduct its businesses in the ordinary course,
- - it will use its reasonable best efforts to preserve its organization intact
and to keep available the services of its present officers and employees,
and to preserve the goodwill of customers, suppliers, and others having
business relations with it,
- - it will maintain its properties in the same working order and condition as
its properties are in as of the date of the acquisition agreement,
reasonable wear and tear excepted,
- - it will not make or permit any change in its articles of incorporation or
bylaws, or in its authorized, issued or outstanding securities,
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- - it will not grant any stock option or right to purchase any security of the
acquired companies, issue any security convertible into such securities,
purchase, redeem, retire or otherwise acquire any of such securities, or
agree to do any of these things,
- - it will not make any nonrequired contribution to, or distribution from, any
employee benefit plan, pension plan, stock bonus plan, 401(k) plan or
profit sharing plan,
- - it will not increase the compensation payable or to become payable by it to
any officer, director, employee, consultant or agent and not make any bonus
payment or arrangement to any officer, director, employee, consultant or
agent other than in the ordinary course of business consistent with past
practice,
- - it will not take any action, or permit any action to be taken within its
control, which would prevent the qualification of any of the mergers as a
reorganization within the meaning of Section 368(a) of the Code,
- - it will not enter into any data or software license agreement with a term
of one year or longer or involving aggregate obligations in excess of
$150,000 which is not assignable without restriction in connection with the
mergers,
- - it will not change any of its banking arrangements or grant any powers of
attorney and
- - it will not change any of its accounting methods or practices.
Acxiom has agreed that prior to consummation of the mergers
- - it will conduct its businesses and the businesses of its subsidiaries only
in the ordinary and usual course of business and consistent with past
practices,
- - there will be no material changes in the conduct of Acxiom's operations,
- - it will not sell or pledge or agree to sell or pledge any stock owned by it
in any of its subsidiaries, amend its certificate of incorporation or
by-laws, split, combine or reclassify any shares of its outstanding capital
stock, declare, set aside or pay any dividend or other distribution payable
in cash, stock or property, redeem or otherwise acquire any shares of its
capital stock or shares of the capital stock of any of its subsidiaries or
consolidate or merge with or into another company unless at least 50% of
the board of directors of the surviving entity are members of the board of
directors of Acxiom immediately prior to such merger or consolidation or
are otherwise designated by Acxiom,
- - neither it nor any of its subsidiaries will authorize for issuance, issue
or sell or agree to issue or sell any additional shares of, or rights of
any kind to acquire any shares of, its
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capital stock of any class or enter into any contract, agreement,
commitment or arrangement with respect to the matters in this clause,
- - it will use its reasonable best efforts to preserve the business
organization of Acxiom and its subsidiaries, keep available the services of
its and its subsidiaries' present officers and key employees, and preserve
the goodwill of those having business relationships with it and its
subsidiaries,
- - it will not enter into any transaction not in the ordinary course of
business if that transaction would have a material adverse effect on the
business or financial condition of Acxiom and its subsidiaries or a
material adverse effect on the shares to be issued in connection with the
transactions contemplated by the acquisition agreement, and
- - it will not take any action, or permit any action within its control, which
would prevent the treatment of Acxiom's acquisition of the acquired
companies as a pooling-of-interests for accounting purposes or the
qualification of any of the mergers as a reorganization within the meaning
of Section 368(a) of the Code.
CONDITIONS; REPRESENTATIONS AND WARRANTIES/INDEMNIFICATION/ESCROW; AMENDMENT AND
TERMINATION
Conditions
The obligations of the acquired companies to consummate the mergers are subject
to the satisfaction or waiver of the following conditions at or before the
closing for the mergers:
- - The necessary vote of the shareholders of the acquired companies approving
the mergers;
- - Mr. Martens and Mr. Jensen having delivered to Acxiom covenants not to
compete;
- - The receipt by Acxiom of evidence reasonably satisfactory to Acxiom that
the acquired companies have rights to use software used in products of
Vi-Tech and developed under agreement by a third-party vendor for the
acquired companies without the requirement of a payment to the third-party
vendor;
- - Acxiom acquiring the real estate from the partnership;
- - Acxiom having received an opinion from KPMG LLP that the mergers and the
acquisition of the real estate will qualify for pooling-of-interests
accounting treatment;
- - The acquired companies and Mr. Martens and Mr. Jensen having received a
favorable opinion from Hughes Hubbard & Reed LLP that each of the mergers
will qualify as a reorganization within the meaning of Section 368(a) of
the internal revenue code.
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Each of these conditions may be waived by the party that has required it.
Representations and Warranties/Indemnification/Escrow
The acquisition agreement contains a number of representations and warranties by
Acxiom, the acquired companies and Mr. Martens and Mr. Jensen. The material
accuracy of these representations and warranties as of the closing date for the
transactions is a condition to the obligation of the parties to the acquisition
agreement to consummate the transactions. The representations and warranties
relate to matters such as the organization of each company, the authority of
each company to transact its business, to enter into the acquisition agreement
and to consummate the transactions contemplated by the acquisition agreement and
the absence of changes in the financial condition of the acquired companies
since October 31, 1998.
The acquisition agreement contains provisions which require the indemnification
of losses incurred by a party to the acquisition agreement as a result of a
breach by another party of a representation, warranty or covenant in the
acquisition agreement. No indemnification shall be payable by the shareholders
of the acquired companies until the aggregate amount of all losses covered by
their obligations to indemnify exceeds $450,000. At the closing, the
shareholders of the acquired companies and the partnership will be required to
deposit into escrow five percent (5%) of the shares of Acxiom common stock
received at the closing for general and specific indemnification matters. These
deposits are for the purpose of securing the indemnification obligation relating
to the representations, warranties or covenants of the acquired companies and
Mr. Martens and Mr. Jensen in the acquisition agreement.
Those escrowed shares that are not designated for specific tax and software
contract matters will be held until one year after the closing. Any of these
shares remaining in escrow after one year will be released, except shares
sufficient to cover possible losses from pending claims will be held until the
pending claims are resolved.
Part of the shares in escrow are designated to cover specific tax and software
contract matters that might require indemnification of Acxiom and will be held
until June 30, 2000 or, for tax matters, until the applicable statute of
limitations has expired. Any shares remaining after these periods will be
released, except that shares sufficient to cover possible losses from pending
claims will be held until the pending claims are resolved. Upon the resolution
of any indemnification claims for which shares are held and not used to satisfy
a loss arising from the indemnification claims, those remaining shares shall be
distributed to the shareholders of the acquired companies in accordance with the
provisions described above. No claims for indemnification of the type indicated
may be made by Acxiom after each of the dates discussed above. No claims for
indemnification may be made by Mr. Martens and Mr. Jensen after June 30, 2000.
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By voting in favor of the mergers, a shareholder of an acquired company is
approving the terms and conditions of the escrow arrangements described in the
acquisition agreement as well as the escrow agreement covering those
arrangements and is thereby agreeing to share in the obligations to indemnify
Acxiom under the acquisition agreement to the extent of the shares deposited in
escrow.
Amendment/Termination
The acquisition agreement may be amended by agreement among Acxiom, the acquired
companies and Mr. Martens and Mr. Jensen. The acquisition agreement may be
terminated by either Acxiom or the acquired companies and Mr. Martens and Mr.
Jensen if, by June 30, 1999, specified conditions in the acquisition agreement
have not been satisfied or waived. If material terms of the acquisition
agreement are amended after distribution of the information
statement/prospectus, Acxiom will redistribute an information
statement/prospectus that reflects the amendments.
FEDERAL INCOME TAX CONSIDERATIONS
The following discussion sets forth the material U.S. federal income tax
consequences of the mergers and is based on the advice of Hughes Hubbard & Reed
LLP. The discussion of United States income tax laws set out below is based on
the Internal Revenue Code of 1986, as amended, Treasury regulations, judicial
decisions, and published positions of the Internal Revenue Service as of the
date hereof and is subject to any changes occurring in United States law after
that date. No rulings have been or will be requested from the IRS regarding
these matters.
This discussion does not deal with (a) all aspects of U.S. federal income
taxation that may be relevant to a particular acquired company's shareholders
based on each shareholder's particular circumstances, (b) an acquired company
shareholder who acquires or acquired shares of any acquired company's stock as
compensation, or (c) any aspect of state, local or non-United States tax laws.
Finally, this discussion is limited to investors who held shares of any acquired
company's stock and will hold shares of Acxiom common stock as "capital assets"
within the meaning of Section 1221 of the Code.
Each acquired company shareholder is urged to consult his or her own tax advisor
concerning the consequences to him or her of the mergers.
Transfer of Acquired Companies Shares Pursuant to the Mergers
The mergers have been structured with the intent that each will qualify as a
reorganization within the meaning of Section 368(a) of the Code. If they so
qualify, then for U.S. federal income tax purposes:
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(a) except with respect to cash received in lieu of a fractional share
of Acxiom common stock, no gain or loss will be recognized by
shareholders of the acquired companies who exchange their shares of
stock of any acquired company for shares of Acxiom common stock
pursuant to the mergers;
(b) the tax basis of Acxiom common stock received in the mergers will
be the same as the tax basis of the shares of acquired companies stock
exchanged;
(c) the holding period of shares of Acxiom common stock in the hands of
shareholders of the acquired companies will include the holding period
of the shares of acquired companies stock exchanged; and
(d) cash payments received by dissenting shareholders of the acquired
companies will be treated as distributions in redemption of the shares
of acquired companies stock subject to the provisions and limitations
of Section 302 of the Code. In general, a shareholder of an acquired
company will recognize capital gain or loss equal to the difference
between the cash received and the shareholder's tax basis in the shares
of acquired company stock provided that the shareholder does not own
and is not considered to own, under the constructive ownership rules of
the Code, any shares of Acxiom common stock after the mergers.
Shareholders of the acquired companies who receive cash in lieu of fractional
shares of Acxiom common stock in the mergers will be treated as though they
actually received fractional shares and those fractional shares were redeemed by
Acxiom immediately after receipt. Any redemption payments will generally result
in the recognition of capital gain or loss equal to the difference between the
cash received and the tax basis of the fractional share.
The obligations of the acquired companies to effect the mergers are conditioned
upon the receipt by Mr. Martens and Mr. Jensen and the acquired companies of an
opinion by Hughes Hubbard & Reed LLP substantially to the effect that each of
the mergers will qualify as a reorganization within the meaning of Section
368(a) of the Code.
The opinion of Hughes Hubbard & Reed LLP will be based on certain assumed facts,
including the assumption that cash received by shareholders of each acquired
company who exercise dissenter's rights will not exceed 10 percent of the net
assets that the acquired company held immediately prior to the consummation of
the mergers, and will not exceed 30 percent of the gross assets that the
acquired company held immediately prior to the consummation of the mergers. The
opinion will also be based on representations received from Acxiom, the acquired
companies, and Mr. Martens and Mr. Jensen.
If Hughes Hubbard & Reed LLP is unable to render its opinion and if Mr. Martens
and Mr. Jensen and the acquired companies determine to proceed with the mergers
without the opinion of Hughes, Hubbard & Reed LLP, Acxiom will supplement this
information statement/prospectus with a discussion of any material changes in
U.S. federal income tax consequences of the mergers.
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Acquisition of Real Estate From Partnership
The purchase of the real estate by Acxiom from the partnership will be a taxable
exchange to the partnership.
Resale Restrictions
The shares of Acxiom common stock to be issued to shareholders of the acquired
companies in connection with the mergers have been registered under the
Securities Act. All shares of Acxiom common stock received by shareholders of
the acquired companies in the mergers will be freely transferable, except that
shares of Acxiom common stock received by persons who are deemed to be
affiliates of the acquired companies prior to the mergers may be resold by them
only in transactions permitted by the resale provisions of Rule 145 promulgated
under the Securities Act. Persons who are affiliates of the acquired companies
or Acxiom generally include individuals or entities that control, are controlled
by, or are under common control with, that party and may include certain
officers and directors as well as principal stockholders of each party. This
information statement/prospectus does not cover resales of Acxiom common stock
received by any person who may be deemed to be an affiliate of the acquired
companies. Mr. Martens and Mr. Jensen and the ESOP may be deemed to be
affiliates. It is a condition to Acxiom's obligations under the acquisition
agreement that the ESOP and each of Mr. Martens and Mr. Jensen execute an
affiliate letter setting forth restrictions on each affiliate's ability to sell
the shares of Acxiom common stock received in the mergers. The restrictions
arise from the applicable provisions of Rules 144 and 145 under the Securities
Act.
In addition, in order for the transactions to qualify as a pooling-of-interests
for accounting and financial reporting purposes, an affiliate of either Acxiom
or the acquired companies may not sell, except for minimal amounts, or in any
other way reduce his risk relative to, the shares of Acxiom common stock until
after Acxiom publishes financial results covering at least 30 days of combined
post-merger operations of Acxiom and the acquired companies.
COMPARISON OF RIGHTS OF ACXIOM AND ACQUIRED COMPANIES SHAREHOLDERS
Acxiom is incorporated under the laws of the State of Delaware. Each of the
acquired companies is incorporated under the laws of the State of Arizona. If
the mergers are consummated in accordance with the terms of the acquisition
agreement, the holders of common stock of the acquired companies will become
stockholders of Acxiom and their rights following the mergers will be governed
by the amended and restated certificate of incorporation of Acxiom, the by-laws
of Acxiom, the Rights Agreement dated January 28, 1998 between Acxiom and First
Chicago Trust Company of New York, and the Delaware General Corporation Law,
rather than the respective articles of incorporation and by-laws for the
acquired company and the Arizona Business Corporation Act.
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The following is a comparison of the material rights of holders of common stock
of the acquired companies and of Acxiom. Copies of the Acxiom charter, the
Acxiom by-laws and the Acxiom rights agreement may be obtained by calling
Catherine Hughes at Acxiom at 501-342-1000.
Amendments to Charter. The Acxiom charter provides that the Acxiom charter may
be altered, amended, or repealed and other provisions may be added by the
affirmative vote of a majority of the votes entitled to be cast; provided,
however, that the affirmative vote of the holders of at least 80% of the votes
entitled to be cast is required to amend or adopt any provision inconsistent
with the articles of the Acxiom charter concerning: directors; meetings of
holders of common stock and action by holders of common stock without a meeting;
by-laws; fair price provisions; and amendments.
The articles of incorporation of each acquired company may be altered, amended
or repealed and other provisions may be added by affirmative vote of a majority
of the votes entitled to be cast.
Mergers and Other Fundamental Transactions. The Acxiom charter requires the
affirmative vote of the holders of not less than 80% of the votes entitled to be
cast for the approval of certain business combinations, including any merger,
consolidation, interested stockholder transactions, plan of liquidation or
dissolution or recapitalization, with interested stockholders or affiliates of
these entities. However, these interested stockholder business combinations
require only the vote as is required by law and other Acxiom charter provisions
if there is approval by a majority of the disinterested directors on the Acxiom
board of directors or certain price and procedural requirements are met.
The Acxiom charter also provides that any merger or consolidation of Acxiom with
any other person, any sale, lease, mortgage, pledge, or other disposition by
Acxiom of its property or assets, any dissolution or liquidation of Acxiom, or
revocation of the Acxiom charter that Delaware corporate law requires be
approved by holders of Acxiom common stock, must be approved by the holders of
at least 66 2/3% of the votes entitled to be cast by the holders of Acxiom
common stock.
The articles and by-laws of each acquired company do not address the question of
the required stockholder vote for mergers and other business combinations. In
these cases, the Arizona Act requires transactions like the mergers to be
approved by a majority of the outstanding stock of the corporation entitled to
vote thereon.
Preemptive Rights. Neither the Acxiom charter nor Acxiom by-laws grants
preemptive rights to Acxiom stockholders. The articles of incorporation for each
of Norman Riley and Enstech grant preemptive rights to their respective
stockholders.
Dissenters'/Appraisal Rights. Chapter 13 of the Arizona Act provides that a
shareholder of an Arizona corporation may be entitled to dissent and obtain
payment for the fair value of the shareholder's shares for the consummation of a
plan of merger to which the corporation is a
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party. In addition, under the Arizona Act a shareholder is also entitled to
dissent with respect to the consummation of a plan of share exchange,
consummation of a sale or exchange of all or substantially all of the property
of the corporation, some amendments to the articles of incorporation and some
amendments to the by-laws of the corporation. With respect to the mergers,
shareholders of the acquired companies should see Dissenters' Rights at page
23 for a further explanation of these rights.
The Delaware corporate law provides for appraisal rights to stockholders of
Delaware corporations that are similar to the dissenters' rights under the
Arizona Act; however, these rights are available only in the event of the merger
or consolidation of the corporation. In addition, these rights do not apply to
shares of a corporation which has more than 2,000 shareholders or whose shares
are listed on a national securities exchange.
Special Meetings of Shareholders. A special meeting of shareholders of an
Arizona corporation may be called by the corporation's board of directors or the
persons authorized to do so by its articles of incorporation or by-laws.
Shareholders of Delaware corporations do not have a right to call special
meetings unless such right is conferred upon the shareholders in the
corporation's certificate of incorporation or by-laws. The by-laws of each of
the acquired companies provide that special meetings of shareholders may be
called at any time by the President, the holders of fifty percent (50%) or more
of the capital stock entitled to vote or, in the case of Enstech and Norman
Riley, the Chairman, or, in the case of Computer Graphics, CG Marketing and
Vi-Tech, a majority of the board of directors. The Acxiom by-laws provide that a
special meeting may be called by the President, the Chief Executive Officer, the
board of directors, by a committee of the board of directors which has been
authorized by a resolution including this power or by the President if more than
50% of the holders of Acxiom common stock have filed a written demand for a
meeting.
Shareholder Rights Plan. Acxiom has adopted a shareholder rights plan which may
have the effect of delaying, deferring or preventing a change of control or
acquisition of Acxiom. The shareholder rights plan provides that one preferred
stock purchase right is attached to each outstanding share of Acxiom common
stock and that each right can entitle its holder to purchase either Acxiom
common stock or the stock of an acquiring company at a discount. The rights are
triggered when a person becomes the beneficial owner of 20% or more of Acxiom's
outstanding common stock. The rights are described in the registration statement
on Form 8-A dated January 28, 1998, as amended by Form 8-A/A dated June 4, 1998,
which is attached to this document as Annex H. The purpose of the rights
agreement is to encourage potential acquirors to negotiate with Acxiom's board
of directors prior to attempting a takeover and to give the board leverage in
negotiating on behalf of all shareholders the terms of any proposed takeover.
None of the acquired companies has adopted a shareholder rights plan.
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ACCOUNTING TREATMENT
Acxiom believes that the mergers and the acquisition of real estate from
Martens, Jensen & Associates will qualify as a pooling-of-interests for
accounting and financial reporting purposes. Consummation of the mergers is
conditioned upon receipt by Acxiom of an opinion from KPMG LLP, Acxiom's
independent public accountants, stating that the mergers and the real estate
acquisition will qualify for pooling-of-interests accounting treatment.
DISSENTERS' RIGHTS
Chapter 13 of the Arizona Business Corporation Act gives shareholders in each
acquired company the right to dissent from the merger involving that acquired
company and to obtain payment of the fair value of the shareholder's shares
rather than receiving shares of Acxiom common stock. To receive payment of the
fair value of his shares, the shareholder must comply in all respects with the
requirements and procedures set forth in the Arizona Act for the exercise of
dissenters' rights.
Any holder of stock of an acquired company who wishes to dissent from the merger
involving that company and to obtain payment of the fair value of his shares
shall deliver to the applicable acquired company, before the vote is taken on
the merger, written notice of the shareholder's intention to demand payment for
his shares if the merger is effectuated and not vote his shares in favor of such
merger.
If the merger is approved, the surviving corporation in the merger shall, no
later than ten days after consummation of the merger, deliver a written notice
to all dissenting shareholders. The notice to the dissenters shall:
- - state where the dissenting shareholder's demand for payment must be sent
and where and when share certificates shall be deposited,
- - supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
merger and that requires that the person asserting dissenters' rights
certify whether he acquired beneficial ownership of the shares before the
announcement date,
- - set a date by which the surviving corporation must receive the payment
demand, which date shall be at least 30 but not more than 60 days after the
date this notice to the dissenters is delivered and
- - be accompanied by a copy of Sections 10-1320 through 10-1328 of the Arizona
Act.
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Each dissenting shareholder who has received this notice must demand payment
before the demand date, certify whether he acquired beneficial ownership of his
or her shares of stock of the acquired company before the date of the first
announcement of the terms of the proposed mergers and deposit the certificates
representing the shares in accordance with the terms of this notice to the
dissenters. A dissenting shareholder who has complied with these obligations is
referred to as a complying shareholder. A dissenting shareholder who does not
demand payment or deposit his share certificates by the demand date is not
entitled to payment for his shares pursuant to Sections 10-1320 through 10-1328
of the Arizona Act.
Upon receipt of a payment demand, the acquired company shall pay each complying
shareholder the amount the acquired company estimates to be the fair value of
the complying shareholder's shares of stock plus accrued interest. The fair
value of the shares shall be the value thereof immediately before the effective
time of the merger, excluding any appreciation or depreciation in anticipation
of the merger.
If a complying shareholder believes that the amount paid by the acquired company
is less than the fair value of the shares or that the interest was incorrectly
calculated, if the acquired company fails to make payment within 60 days after
the demand date, or if the acquired company, having failed to effectuate the
merger, does not return the share certificates deposited with it within 60 days
after the demand date, the complying shareholder may give written notice to the
acquired company of the complying shareholder's own estimate of the fair value
of his shares of stock and of the amount of interest due and may demand payment
of this estimate, less any payment previously made by the acquired company. A
complying shareholder waives the right to demand an additional payment unless he
causes the acquired company to receive the additional payment notice within 30
days after the acquired company made payment for the complying shareholder's
shares of stock.
If an additional payment notice remains unsettled, the acquired company shall
commence a proceeding within 60 days after receiving the additional payment
notice and shall petition the court to determine the fair value of the shares of
stock and accrued interest. If the acquired company does not commence the
proceeding within the 60-day period, it shall pay to each complying shareholder
whose additional payment notice remains unsettled the amount demanded therein.
The obligation of the acquired companies and Mr. Martens and Mr. Jensen to
effect the mergers is subject to the receipt by the acquired companies of a tax
opinion from Hughes Hubbard & Reed LLP. Depending on the number of shareholders
of the acquired companies who exercise dissenters' rights, Hughes Hubbard & Reed
LLP may not be able to issue the required tax opinion.
In addition, the obligation of Acxiom to effect the mergers is subject to KPMG
LLP rendering an opinion that Acxiom may account for the transactions as a
pooling-of-interests. Depending on the number of shareholders of the acquired
companies who exercise dissenters' rights, KPMG LLP may not be able to issue the
required opinion.
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Failure to take any required step in connection with the exercise of dissenters'
rights may result in the loss of the rights. In view of the complexity of these
provisions of the Arizona Act, shareholders of the acquired companies who are
considering exercising their dissenters' rights under the Arizona Act should
review Annex B carefully and should consult their legal advisors.
INFORMATION CONCERNING THE ACQUIRED COMPANIES BUSINESS
For purposes of this information statement/prospectus, Computer Graphics of
Arizona, Inc., CG Marketing of Arizona, Inc, Enstech Resources, Inc., Norman,
Riley and Associates, Inc. and Vi-Tech, Inc. have been combined and are
presented as a single entity because they operate as a single business. The
businesses and operations of the acquired companies are so significantly
inter-related with one another that to discuss any acquired company separate
from any others would not be meaningful. Computer Graphics and CG Marketing are
the primary providers of services while Vi-Tech provides limited data products
to customers. Enstech and Norman Riley only provide consulting and maintenance
services to Computer Graphics. Additionally, Computer Graphics provides all of
the computer processing services to CG Marketing.
Computer Graphics of Arizona, Inc.was incorporated in 1970.
CG Marketing of Arizona, Inc. was incorporated in 1989.
Enstech Resources, Inc. was incorporated in 1996.
Norman, Riley & Associates, Inc. was incorporated in 1994.
Vi-Tech, Inc. was incorporated in 1984 as Mail Management Services.
The acquired companies provide computer-based information management services
with a focus on direct marketing as well as other related data-based products.
The acquired companies' services include project design, cleaning, production
and processing of data lists and programming. Additionally, the acquired
companies offer the following data-related products: ACOLLAID, BDS Alert,
Tele-pend and Vi-Tech. These products are delivered to customers using methods
of matching data which are designed specifically by the acquired companies'
staff and include data provided by a variety of comprehensive consumer
databases. The acquired companies' customer base is primarily in the financial
services industry and the collections industry. The acquired companies provide
list processing services to 2 of the top 10 credit card issuers in the country.
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ACQUIRED COMPANIES' STOCK AND DIVIDEND INFORMATION
Each of the acquired companies is a privately-held company and there is no
established trading market for shares of common stock of any of the acquired
companies. As of the date of this information statement/prospectus, Computer
Graphics had four shareholders of record, each of Enstech and Norman Riley had
two shareholders of record and each of CG Marketing and Vi-Tech had three
shareholders of record. Computer Graphics has paid the following total dividends
to its shareholders: $160,000 paid in June 1998; $152,922 paid in June 1997; and
$116,172 paid in June 1996. The Ronald L. Jensen Revocable Trust, the Clara L.
Jensen Revocable Trust and the James K. Martens and Constance Jean Martens
Trust, the record owners of 60% of the outstanding stock of Computer Graphics,
have waived their rights to receive any dividends paid by Computer Graphics. As
a result of such waivers, the Trusts did not receive any portion of the
dividends paid in 1996, 1997 and 1998.
None of the other acquired companies has ever paid any dividends on its capital
stock.
The acquisition agreement prohibits each of the acquired companies from
declaring or paying any dividends until the closing date for the mergers or the
earlier termination of the acquisition agreement.
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF THE ACQUIRED
COMPANIES
The following tables set forth for each of the acquired companies the following
information regarding beneficial ownership of the common stock of the acquired
company as of March 31, 1999:
- - ownership by each person owning beneficially more than 5% of the
outstanding shares,
- - ownership by each executive officer and director of the company,
- - ownership by all directors and executive officers as a group, and
- - ownership estimate of the shares of Acxiom common stock to be owned by
these persons upon consummation of the mergers based on a 15-day average
market price for Acxiom common stock of $25.24, which is the 15-day average
as of March 31, 1999.
As of March 31, 1999, there were (a) 20,000 shares of common stock of Computer
Graphics outstanding, (b) 2,000 shares of common stock of CG Marketing
outstanding, (c) 2,000 shares of common stock of Norman Riley outstanding, (d)
200 shares of common stock of Enstech outstanding and (e) 2,000 shares of common
stock of Vi-Tech outstanding. The address of each shareholder listed below is
c/o Computer Graphics of Arizona, Inc., 19621 N. 23rd Drive, Phoenix, AZ 85027.
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Computer Graphics of Arizona, Inc.
Number of Percentage of
Number of Acxiom Acxiom
Shares Percent Shares Common
Beneficially of Beneficially Stock
Name Owned Class Owned Owned
Ronald L. Jensen 6,000 30% 274,546 .353%
James K. Martens 6,000 30% 274,546 .353%
Computer Graphics of
Arizona, Inc. Employee
Stock Ownership Plan 8,000 40% 366,061 .470%
All Executive Officers
and Directors as a
Group (2 persons) 12,000 60% 549,092 .705%
CG Marketing of Arizona, Inc.
Number of Percentage of
Number of Acxiom Acxiom
Shares Percent Shares Common
Beneficially of Beneficially Stock
Name Owned Class Owned Owned
Ronald L. Jensen 1,000 50% 274,546 .353%
James K. Martens 1,000 50% 274,546 .353%
All Executive Officers
and Directors as a
Group (2 persons) 2,000 100% 549,092 .705%
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Norman, Riley & Associates, Inc.
Number of Percentage of
Number of Acxiom Acxiom
Shares Percent Shares Common
Beneficially of Beneficially Stock
Name Owned Class Owned Owned
Ronald L. Jensen 1,000 50% 45,757 .059%
James K. Martens 1,000 50% 45,757 .059%
All Executive Officers
and Directors as a
Group (2 persons) 2,000 100% 91,514 .118%
Enstech Resources, Inc.
Number of Percentage of
Number of Acxiom Acxiom
Shares Percent Shares Common
Beneficially of Beneficially Stock
Name Owned Class Owned Owned
Ronald L. Jensen 100 50% 91,515 .118%
James K. Martens 100 50% 91,515 .118%
All Executive Officers
and Directors as a
Group (2 persons) 200 100% 183,030 .235%
-28-
<PAGE>
Vi-Tech, Inc.
Number of Percentage of
Number of Acxiom Acxiom
Shares Percent Shares Common
Beneficially of Beneficially Stock
Name Owned Class Owned Owned
Ronald L. Jensen 1,000 50% 45,757 .059%
James K. Martens 1,000 50% 45,757 .059%
All Executive Officers
and Directors as a
Group (2 persons) 2,000 100% 91,514 .118%
Based on this 15-day average market price, Mr. Martens and Mr. Jensen will each
own 732,121 Acxiom shares following the mergers. Each will own approximately 1%
of Acxiom's outstanding shares.
ADDITIONAL INTERESTS OF MR. MARTENS AND MR. JENSEN IN THE MERGERS
In connection with the mergers, Acxiom has agreed to purchase from Martens,
Jensen & Associates, an Arizona general partnership of which Mr. Martens and Mr.
Jensen are the general partners, the building and premises located at 19621
North 23rd Drive, Phoenix, Arizona. The building presently is leased by the
partnership to Computer Graphics on a month-to-month basis and serves as the
principal place of business of the acquired companies. The purchase price for
the building and premises will be $5,047,500 and was established by an appraisal
procedure previously agreed to by the partnership and Acxiom and will be paid,
concurrently with the closing of the mergers, to the partnership in Acxiom
common stock based on the 15-day average market price of Acxiom common stock.
The consummation of the mergers is conditioned on the concurrent completion of
this acquisition. The appraisal procedure required that each of Acxiom and Mr.
Martens and Mr. Jensen obtain independent appraisals of the fair market value of
the real estate. If the fair market value determined by the appraisal obtained
by Acxiom was within 10% of the fair market value from the appraisal obtained by
Mr. Martens and Mr. Jensen, the purchase price for the real estate would be the
average of those two values. Because the Acxiom appraisal was within 10% of the
Martens and Jensen appraisal, the $5,047,500 purchase price for the real estate
was determined by averaging those two appraisals.
Each of Mr. Martens and Mr. Jensen will have as of the closing date a loan
payable to Computer Graphics. As of the date of the acquisition agreement,
December 31, 1998, the loans to Mr. Martens and Mr. Jensen were in the amount of
approximately $469,000 and $712,000, respectively. The acquisition agreement
requires these loans to be repaid between 12 and 14 months after the closing
date for the mergers and provides that the loans may be repaid with shares of
Acxiom common stock based on the 15-day average market price of Acxiom common
stock at the time of repayment. The loans shall bear interest at the short-term
interest rate
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<PAGE>
determined, as of the closing date, pursuant to Section 1274(d) of the Internal
Revenue Code. In accordance with Section 1274(d) of the Code, the short term
interest rate will be the Federal short term rate determined by the Secretary of
the Treasury for the month during which the closing occurs. Section 1274(d)
states that the rate will be based on the average market yield on outstanding
marketable obligations of the United States with remaining periods to maturity
of 3 years or less.
Except as noted above, no officer or director of any of the acquired companies
has any interest in the mergers that is in addition to his or her interest as a
shareholder.
MANAGEMENT'S DISCUSSION AND ANALYSIS OF RESULTS OF OPERATIONS AND FINANCIAL
CONDITION OF THE ACQUIRED COMPANIES
Results of Operations
Nine Months Ended December 31, 1998 Compared with Nine Months Ended December
31,1997
In mid 1997, the acquired companies adopted a strategic plan to focus on more
profitable areas such as data products and database services. Internal costing
analysis indicated laser print services contributed operating margins that were
below the acquired companies' aggregate operating margin. The laser print
operations consumed a disproportionate share of resources that otherwise could
be redeployed to the more profitable areas of the acquired companies. As a
result, management decided to transition from these less profitable operations
and channel resources into development of data products and to increase efforts
to develop expertise in the marketing database industry.
Combined revenues for the nine months ended December 31, 1998 were $17,372,000
compared to $17,150,000 for the same period a year ago, a 1% increase. Decreased
revenues from laser print operations were the primary reason for the low growth.
Revenues from laser print operations for the nine-month period ended December
31, 1998 were $1,238,000 compared to $3,269,000 for the same period a year ago.
Excluding the laser print operations, revenues were $16,134,000 for the
nine-month period ended December 31, 1998 compared to $13,881,000 for the same
period a year ago, a 16% increase.
Salaries and benefits for the nine months ended December 31, 1998 were
$7,751,000 compared to $6,663,000 for the same period a year ago, an increase of
16%. The primary reason for the increase was an increase in associates to
support the business growth. Computer, communications and other equipment
expenses, which include leases, software, maintenance and supplies, were
$1,146,000 for the nine months ended December 31, 1998 compared to $890,000 for
the same period a year ago, an increase of 29%. The increase was attributable to
increased lease expense and the related software costs for a new computer system
required for business growth. Data costs, which include royalties and licensed
data, were $2,891,000 for the nine months ended December 31, 1998 compared to
$2,992,000 for the same
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<PAGE>
period a year ago, a decrease of 3%. The decrease was primarily attributable to
the discontinuation of the laser print operations.
Other operating costs and expenses, which include subcontract printing,
consulting, rent and administrative, were $3,875,000 for the period ended
December 31, 1998 compared to $4,872,000 for the same period a year ago, a
decrease of 20%. The decrease was primarily attributable to a decrease in
expenses of laser print operations of $1,976,000 related to discontinuation of
that service. Excluding the laser print operations, other operating costs and
expenses were $2,877,000 for the period ended December 31, 1998 compared to
$1,898,000 for the same period a year ago, an increase of 52%. Of this increase,
$202,000 was related to an increase in consulting expenses related to a new
accounting software installation and requirements for technical resources,
$68,000 was related to increased promotion and advertising, $150,000 was related
to rent expense, $400,000 was related to outside consulting and compensation and
$159,000 was related to increased travel to support revenue.
Year Ended March 31, 1998 Compared with Year Ended March 31, 1997
Combined revenues for the year ended March 31, 1998 were $23,309,000 compared to
$19,993,000 for the same period a year ago, a 17% increase. Revenue from laser
print operations was $3,573,000 for the year ended March 31, 1998 compared to
$4,648,000 for the comparable period one year ago. Excluding the laser print
operations, revenues were $19,736,000 for the year ended March 31, 1998 compared
to $15,345,000 for the same period a year ago, an increase of 29%.
Salaries and benefits were $9,012,000 for the year ended March 31, 1998 compared
to $7,320,000 for the same period a year ago, an increase of 23%. The increase
was primarily due to a 25% increase in the number of associates. Computer,
communications and other equipment costs were $1,191,000 for the year ended
March 31, 1998 compared to $1,265,000 for the same period a year ago, a decrease
of 6%. The decrease was primarily due to computer equipment becoming fully
depreciated. Data costs were $5,136,000 for the year ended March 31, 1998
compared to $2,884,000 for the same period a year ago, a 78% increase. The
increase was primarily attributable to costs for new data products.
Other operating costs were $6,198,000 for the year ended March 31, 1998 compared
to $6,670,000 for the prior year. This 7% decrease was attributable to a
decrease in laser print operations costs of $815,000 relating to the
discontinuation of those services. Excluding the effect of the discontinuation
of laser print operations, other operating costs increased $343,000 or 14% for
the year ended March 31, 1998 compared to the prior year. This 14% increase was
due to normal growth in expenses necessary to support revenue.
-31-
<PAGE>
Year Ended March 31, 1997 Compared with Year Ended March 31, 1996
Combined revenues for the year ended March 31, 1997 were $19,993,000 compared to
$15,128,000 for the prior year, a 32% increase. The increase was attributable to
increased data products sales of $2,942,000 and additional business within the
financial services industry of $1,923,000.
Salaries and benefits increased 51% to $7,320,000 for the year ended March
31,1997 compared to $4,835,000 for the prior year. The increase was due to
additional associates to support the business growth experienced during fiscal
1997. Computer, communications and other equipment costs increased 32% to
$1,265,000 for the year ended March 31, 1997 compared to $961,000 for the same
period one year ago. The increase is attributable to additional maintenance
costs necessary to support increased processing requirements. Data costs were
$2,884,000 for the year ended March 31, 1997 compared to $1,575,000 for the
prior year, an increase of 83%. The increase was due to costs of $720,000
associated with growth in revenue from data products and $589,000 associated
with the development of new data products.
Other operating costs and expenses increased 16% to $6,670,000 for the year
ended March 31, 1997 compared to $5,743,000 for the prior year. Of this
increase, $592,000 was related to laser print operations, which were
subsequently discontinued, $92,000 was related to the installation of a
management software system and $243,000 was related to increases in rent.
Capital Resources and Liquidity
Working capital at December 31, 1998 totaled $6,747,000 compared to $5,381,000
at March 31, 1998. As of both December 31, 1998 and March 31, 1998 the acquired
companies had no long-term debt. Cash provided by operating activities was
$215,000 for the nine months ended December 31, 1998 compared to $499,000 for
the same period one year ago. The primary reason for the decrease in cash
provided by operating activities is an increase in other current assets,
including $772,000 in shareholder loans.
Investing activities used $146,000 in the nine months ended December 31, 1998
compared to $214,000 in the year-earlier period. All of the investing activities
in the period and the same period a year ago related to capital expenditures.
Financing activities in the current period provided $273,000, which represents
payments from the ESOP on a note payable.
While the acquired companies do not have any material contractual commitments
for capital expenditures, additional investments in facilities and computer
equipment will continue to be necessary to support the growth of the business.
In addition, new contracts frequently require up-front capital expenditures in
order to acquire or replace existing assets. Management believes that the
combination of existing working capital and anticipated funds to be generated
from future operations are sufficient to meet the acquired companies' current
operating needs as well as to fund the anticipated levels of expenditures. If
additional funds are required, the acquired companies would attempt to secure
credit lines to generate cash, followed by additional borrowings to be secured
by the acquired companies' assets. Management believes that the acquired
companies have adequate borrowing capacity to raise capital, which could be used
to support future growth.
-32-
<PAGE>
INFORMATION CONCERNING ACXIOM
Information about Acxiom's business and its financial statements can be found in
the Annual Report on Form 10-K, as amended, which is included with this document
as Annex C and in the Current Reports on Form 8-K, which are included with this
document as Annex F. Reports on Form 10-Q for the quarterly periods ended June
30, 1998, September 30, 1998 and December 31, 1998 are included with this
document as Annex D. Information concerning Acxiom's directors and executive
officers, including their compensation and ownership of Acxiom common stock, can
be found in the joint proxy statement/prospectus dated August 17, 1998, which is
included with this document as Annex E. A description of Acxiom common stock and
the preferred share purchase rights attached to the common stock can be found in
the registration statements on Form 8-A, which are included with this document
as Annexes G and H, respectively.
AVAILABLE INFORMATION
Acxiom is subject to the information requirements of the Securities Exchange Act
of 1934 and files reports, proxy statements and other information with the
Securities and Exchange Commission. Acxiom has also filed a registration
statement on Form S-4 with the Commission, and this information
statement/prospectus constitutes a part of that filing. These reports, proxy
statements, registration statements and other information can be inspected and
copies made at the public reference room of the Commission, 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 Commission at
1-800-SEC-0330. Acxiom's filings with the Commission also are available to the
public at the Commission's web site: "http://www.sec.gov."
No person has been authorized to give any information or make any representation
not contained in this information statement/prospectus and, if so given or made,
the information or representation must not be relied upon as having been
authorized. This information statement/prospectus does not constitute an offer
to sell or a solicitation of an offer to buy any securities other than those to
which it relates or an offer to sell or a solicitation of an offer to buy any
securities in any jurisdiction in which, or to any person to whom, it is
unlawful to make such offer or solicitation. Neither the delivery of this
information statement/prospectus nor the sale of any securities offered by it
shall imply that the information contained in this document or in the documents
incorporated in this document by reference is correct at any time subsequent to
the date of this information statement/prospectus or the documents incorporated
by reference.
-33-
<PAGE>
LEGAL MATTERS
The validity of the issuance of the shares of Acxiom common stock being offered
hereby will be passed upon for Acxiom by Catherine L. Hughes, Esq., General
Counsel of Acxiom. Certain United States federal income tax matters with respect
to the mergers will be passed upon for the acquired companies by Hughes Hubbard
& Reed LLP.
EXPERTS
The consolidated financial statements of Acxiom Corporation, which are included
in the Acxiom current report on Form 8-K dated February 8, 1999 attached as
Annex F to this information statement/prospectus, except as they relate to May &
Speh, Inc. as of September 30, 1996 and for the years ended September 30, 1996
and 1995, have been audited by KPMG LLP, independent accountants, and as they
relate to May & Speh, Inc. as of September 30, 1996 and for the years ended
September 30, 1996 and 1995, by PricewaterhouseCoopers LLP, independent
accountants, whose reports appear in the Form 8-K. These financial statements
have been annexed in reliance on the reports of these independent accountants
given on the authority of these firms as experts in auditing and accounting.
-34-
<PAGE>
INDEX TO FINANCIAL STATEMENTS
OF THE ACQUIRED COMPANIES
Page
Index To Financial Statements F-1
Unaudited Combined Statements of Earnings F-2
Unaudited Combined Balance Sheets F-3
Unaudited Combined Statements of Cash Flows F-4
Notes to Unaudited Combined Financial Statements F-5
F-1
<PAGE>
ACQUIRED COMPANIES
UNAUDITED COMBINED STATEMENTS OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
FOR THE FISCAL YEARS ENDED NINE MONTHS
MARCH 31, ENDED DECEMBER 31,
---------------------------- ------------------
1996 1997 1998 1997 1998
------ ------ ------ ------ ------
Revenue $15,128 $19,993 $23,309 $17,150 $17,372
Operating costs and
expenses:
Salaries and benefits 4,835 7,320 9,012 6,663 7,751
Computer, communications
and other equipment 961 1,265 1,191 890 1,146
Data costs 1,575 2,884 5,136 2,992 2,891
Other operating costs
and expenses 5,743 6,670 6,198 4,872 3,875
------ ------ ------ ------ ------
Total operating costs
and expenses 13,114 18,139 21,537 15,417 15,663
------ ------ ------ ------ ------
Income from operations 2,014 1,854 1,772 1,733 1,709
Other income (expense):
Interest expense (67) (94) (47) (47) 0
Other, net 53 254 108 83 154
------ ------ ------ ------ ------
Earnings before income
taxes 2,000 2,014 1,833 1,769 1,863
Income taxes 800 805 733 707 745
------ ------ ------ ------ ------
Net earnings $ 1,200 $ 1,209 $ 1,100 $ 1,062 $ 1,118
====== ====== ====== ====== ======
Pro Forma earnings per
share
Basic and diluted $0.66 $0.66 $0.60 $0.58 $0.61
Pro Forma average common
shares outstanding
Basic and diluted 1,830 1,830 1,830 1,830 1,830
- ---------------------------
See accompanying notes to unaudited combined financial statements.
F-2
<PAGE>
ACQUIRED COMPANIES
UNAUDITED COMBINED BALANCE SHEETS
(IN THOUSANDS)
AS OF MARCH 31, DECEMBER 31,
------------------- -----------
1997 1998 1998
----- ----- -----
ASSETS
Current Assets:
Cash and cash equivalents $1,852 $2,142 $2,484
Trade accounts receivable, net 3,915 4,132 3,865
Other current assets 891 560 1,741
----- ----- -----
Total current assets 6,658 6,834 8,090
Property and equipment 1,406 1,634 1,780
Less - Accumulated depreciation
and amortization 448 598 721
----- ----- -----
Property and equipment, net 958 1,036 1,059
Other assets 5 76 77
----- ----- -----
Total assets $7,621 $7,946 $9,226
===== ===== =====
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities:
Trade accounts payable $1,004 $930 $863
Accrued expenses 500 173 130
Deferred revenue 350 350 350
----- ----- -----
Total current liabilities 1,854 1,453 1,343
Long-term debt, excluding current
installments 527 0 0
Stockholders' equity:
Common stock 27 27 27
Additional paid-in capital 1,068 1,068 1,068
Retained earnings 4,571 5,671 6,788
Unearned ESOP compensation (426) (273) 0
----- ----- -----
Total stockholders' equity 5,240 6,493 7,883
----- ----- -----
Total liabilities and stockholders'
equity $7,621 $7,946 $9,226
===== ===== =====
- ----------------------------
See accompanying notes to unaudited combined financial statements.
F-3
<PAGE>
ACQUIRED COMPANIES
UNAUDITED COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
NINE MONTHS
FOR THE FISCAL YEARS ENDED ENDED
MARCH 31, DECEMBER 31,
-------------------------- --------------
1996 1997 1998 1997 1998
----- ----- ----- ----- -----
Cash flows from operating
activities:
Net income $1,200 $1,209 $1,100 $1,062 $1,118
Depreciation and
amortization 273 240 150 113 123
Changes in operating assets and
liabilities:
Trade accounts receivable, net (744) (649) (217) (1) 267
Other current assets 58 (848) 331 612 (1,181)
Trade accounts payable 200 (327) (74) (949) (67)
Accrued expenses 344 (242) (327) (319) (43)
Other assets (25) 25 (71) (19) (2)
----- ----- ----- ----- -----
Net cash provided by (used in)
operating activities 1,306 (592) 892 499 215
Cash flows from investing activities:
Capital expenditures (278) (313) (228) (214) (146)
----- ----- ----- ----- -----
Net cash used in investing activities (278) (313) (228) (214) (146)
Cash flows from financing activities:
Increase (decrease) in long-term
debt 1,477 (950) (527) (527) 0
Initial capitalization of Enstech 0 1,000 0 0 0
Initial ESOP funding (1,184) 0 0 0 0
Dividends paid, net of ESOP
remittance 0 758 153 153 273
Other changes in equity 2 0 0 0 0
----- ----- ----- ----- -----
Net cash provided (used) by
financing activities 295 808 (374) (374) 273
Net increase (decrease) in cash
and cash equivalents 1,323 (97) 290 (89) 342
Beginning cash balance 626 1,949 1,852 1,852 2,142
----- ----- ----- ----- -----
Ending cash balance $1,949 $1,852 $2,142 $1,763 $2,484
===== ===== ===== ===== =====
Supplemental cash flow information:
Cash paid during the year for:
Interest $67 $94 $47 $46 $0
Income taxes 263 1,970 958 578 1,060
- -----------------------------------
See accompanying notes to unaudited combined financial statements.
F-4
<PAGE>
Notes to Unaudited Combined Financial Statements of the Acquired Companies
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
The Company (as defined in (b)) provides computer based information management
technology services with a focus on direct marketing as well as other data based
products.
(b) Financial Statement Presentation
The financial statements include the accounts of Computer Graphics of Arizona,
Inc., CG Marketing of Arizona, Inc., Enstech Resources, Inc., Norman, Riley and
Associates, Inc., and Vi-Tech, Inc., ("Company") all of which are principally
owned by two major shareholders who also serve as officers. The financial
statements of the individual entities have been combined similar to a
pooling-of-interests. The individual entities have different fiscal year ends.
The financial statements of each entity, prior to combining, were recast to a
March 31 year end for purposes of this presentation and in the opinion of
management include all adjustments necessary to present the financial statements
in accordance with generally accepted accounting principles.
Revenue and net income from each of the combined entities is summarized as
follows:
NINE MONTHS
FOR THE FISCAL YEARS ENDED ENDED
MARCH 31, DECEMBER 31,
-------------------------- ------------
1996 1997 1998 1997 1998
------ ------ ------ ----- -----
REVENUES
Computer Graphics of Arizona, Inc. $ 8,321 $10,796 $11,374 $9,003 $7,327
CG Marketing of Arizona, Inc. 6,807 9,197 11,921 8,147 9,658
Enstech Resources, Inc. 0 0 0 0 0
Norman, Riley & Associates, Inc. 0 0 0 0 0
Vi-Tech, Inc. 0 0 14 0 387
------ ------ ------ ------ ------
Total Acquired Companies $15,128 $19,993 $23,309 $17,150 $17,372
====== ====== ====== ====== ======
NET EARNINGS
Computer Graphics of Arizona, Inc. $636 $665 $517 $521 $481
CG Marketing of Arizona, Inc. 564 544 582 541 612
Enstech Resources, Inc. 0 0 0 0 0
Norman, Riley & Associates, Inc. 0 0 0 0 0
Vi-Tech, Inc. 0 0 1 0 25
----- ----- ----- ----- -----
Total Acquired Companies $1,200 $1,209 $1,100 $1,062 $1,118
===== ===== ===== ===== =====
F-5
<PAGE>
(c) Accounts Receivable
Financial instruments which potentially subject the Company to concentration of
credit risk consist primarily of trade receivables. The Company's credit risk is
affected by general economic conditions. Additionally, the Company has two large
customers which may be affected by changing economic conditions. Accounts
receivable are presented net of allowance for doubtful accounts of $445,000 and
$217,000 as of March 31, 1997 and 1998, respectively, and $203,000 at December
31, 1998.
(d) Property and Equipment
Property and equipment are stated at cost and depreciated over the estimated
useful life. Depreciation on computer and related equipment is calculated using
an accelerated method over 3-5 years. Depreciation lives on other assets are as
follows: leasehold improvements, 5-30 years; furniture and fixtures, 3-7 years;
office equipment, 3-5 years and buildings, 31 years.
(e) Revenue Recognition
The Company recognizes revenue when services are performed. All billed but
unearned portions of revenue are reported as deferred revenue.
(f) Income Taxes
Each affiliate included in these financial statements files separate income tax
returns. Income taxes are accounted for under the asset and liability method.
The Company does not have any deferred tax assets or liabilities for the periods
presented.
(g) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(h) ESOP
During fiscal 1995, the Company established the Computer Graphics of Arizona
Employee Stock Ownership Plan for the benefit of the Company's employees. In
fiscal 1996, the Company borrowed $1,500,000 from two officers of the Company
and loaned the proceeds to the ESOP for the purpose of providing sufficient
funds to purchase shares of the Computer Graphics stock. These loans have been
fully paid as of December 31, 1998.
(i) 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 related disclosures
to prepare these combined financial statements in conformity with generally
accepted accounting principles. Actual results could differ from these
estimates.
(j) Earnings per Share
Pro forma earnings per share has been calculated by dividing net earnings by the
pro forma weighted average shares outstanding. Pro forma shares outstanding have
been computed by
F-6
<PAGE>
assuming the conversion of the outstanding shares of the acquired companies into
Acxiom common shares based on the terms of the acquisition agreement between the
acquired companies and Acxiom using an assumed 15-day average market price for
Acxiom common stock of $25.24. See the discussion under Mergers-General in the
information statement/prospectus.
(2) Property and Equipment
Property and equipment is summarized as follows:
March 31, December 31,
------------------------ ------------
1997 1998 1998
--------- --------- ---------
Land $ 83,000 83,000 83,000
Buildings and improvements 746,000 797,000 854,000
Computer equipment 242,000 433,000 554,000
Furniture and fixtures 78,000 43,000 43,000
Office equipment 257,000 278,000 246,000
--------- --------- ---------
Total property and equipment 1,406,000 1,634,000 1,780,000
Less accumulated depreciation 448,000 598,000 721,000
--------- --------- ---------
$ 958,000 $1,036,000 $1,059,000
(3) Leases
The Company leases office space, data processing equipment and office equipment
under noncancellable operating leases. Future minimum lease payments under the
noncancellable operating leases for the five years ending March 31, 2003 were as
follows: 1999, $400,000; 2000, $400,000; 2001, $400,000; 2002, $127,000; 2003,
$36,000. Rent expense for fiscal 1996, 1997 and 1998 was $845,000, $964,000 and
$1,040,000, respectively. Rent expense was $560,000 and $1,035,000 for the nine
months ended December 31, 1997 and 1998, respectively.
(4) Stockholders' Equity
The following is a summary of capital stock for each acquired company in the
combined financial statements as of March 31, 1997 and 1998 and December 31,
1998:
Acquired Company Par Value Outstanding
- ---------------- --------- -----------
Computer Graphics $1.00 20,000
CG Marketing None 2,000
Enstech $5.00 200
F-7
<PAGE>
Norman Riley None 2,000
Vi-tech None 2,000
(5) Income Tax Expense
Income tax expense differs from the expected tax expense (computed by applying
the U.S. Federal corporate tax rate of 35% to earnings before income taxes)
primarily because of the effect of state income taxes, net of Federal income tax
benefit.
(6) Related Party Transactions The Company leases its primary operating
facilities from a partnership owned by two officers. Rent expense under the
lease was $845,000, $949,000, and $1,021,000, for the years ended March 31,
1996, 1997 and 1998, respectively. Rent expense was $560,000 and $1,035,000 for
the nine months ended December 31, 1997 and 1998, respectively. The lease
expired in June of 1998 and is now on a month to month term. The above rent
expense amounts are also included in note 3. As of December 31, 1998, the
Company had loans receivable from its two major shareholders of $1,181,000
included in other current assets.
(7) Major Customers
In fiscal 1996, 1997 and 1998, the Company provided services to two major
customers who accounted for more than 10% of revenue. The two customers
accounted for 60%, 64% and 74% of total revenues in fiscal 1996, 1997 and 1998,
respectively. For the year ended March 31, 1996, the two customers accounted for
revenues of $5,800,000 and $3,200,000, respectively. For the year ended March
31, 1997, the two customers accounted for revenues of $7,600,000 and $5,100,000,
respectively. For the year ended March 31, 1998, the two customers accounted for
revenues of $11,500,000 and $5,800,000, respectively. For the nine months ended
December 31, 1997, the two customers accounted for revenues of $6,028,000 and
$4,241,000, respectively. For the nine months ended December 31, 1998 the two
customers accounted for revenues of $7,001,000 and $4,536,000, respectively.
F-8
<PAGE>
Annex A
FIRST AMENDMENT TO ACQUISITION AGREEMENT
This First Amendment ("Amendment") is made as of 12 April, 1999, to
that certain Acquisition Agreement ("Acquisition Agreement") dated as of
December 31, 1998, by and among:
Acxiom Corporation, a Delaware corporation (hereinafter referred to as
"Purchaser");
CGA Acquisition Corporation #1, an Arizona corporation and a wholly-owned
subsidiary of Purchaser (hereinafter referred to as "Merger Sub #1"), CGA
Acquisition Corporation #2, an Arizona corporation and a wholly-owned subsidiary
of Purchaser (hereinafter referred to as "Merger Sub #2") and CGA Acquisition
Corporation #3, an Arizona corporation and a wholly-owned subsidiary of
Purchaser (hereinafter referred to as "Merger Sub #3) (Merger Sub #1, Merger Sub
#2 and Merger Sub #3 are collectively referred to herein as the "Merger Subs");
Computer Graphics of Arizona, Inc., an Arizona corporation (hereinafter referred
to as "CGA"), CG Marketing of Arizona, Inc., an Arizona corporation (hereinafter
referred to as "CG Marketing"), Enstech Resources, Inc., an Arizona corporation
(hereinafter referred to as "Enstech"), Norman, Riley & Associates, Inc., an
Arizona corporation (hereinafter referred to as "Norman") and Vi-Tech, Inc., an
Arizona corporation (hereafter referred to as "Vi-Tech") (CGA, CG Marketing,
Enstech, Norman and Vi-Tech are hereinafter individually referred to as an
"Acquired Company" or collectively as the "Acquired Companies"); and,
Ronald L. Jensen and James K. Martens, collectively, as trustees of certain
revocable trusts, the majority shareholders of CGA, CG Marketing and Vi-Tech,
and collectively the sole shareholders of Enstech and Norman (the
"Shareholders").
Purchaser, the Merger Subs, the Acquired Companies and the Shareholders may be
referred to individually as "Party" and collectively as the "Parties."
WHEREAS, the Parties expected to consummate the transactions set forth
in the Acquisition Agreement prior to March 31, 1999, and now anticipate that
the Closing will not take place until after that date.
WHEREAS, the Parties desire to amend the Acquisition Agreement to
extend the deadline for Closing and other provisions of the Acquisition
Agreement set forth herein.
NOW, THEREFORE, in consideration of the above recitals and other good
and valuable consideration, the receipt and sufficiency of which is
acknowledged, the Parties amend the Acquisition Agreement as follows:
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<PAGE>
1. The references to March 31, 1999 in Sections 8.1, 10.1.2 and 10.1.3 are
changed to June 30, 1999.
2. Sections 2.11.4 and 2.11.5 are amended in full to read as follows:
2.11.4 Employee Benefit Plans. For the period of time
between the Acquired Companies Effective Date and the Participation
Date, Purchaser shall continue the qualified employee benefit plans of
the Acquired Companies as in effect on the Acquired Companies Effective
Date and the Affected Employees shall participate in such plans through
the Participation Date. For purposes of Sections 2.11.4 and 2.11.5, the
"Participation Date" is (i) in the event the Closing Date is on or
before the tenth (10th) calendar day of a month, the first day of the
month following the month in which the Closing Date occurs, or (ii) in
the event the Closing is after the tenth (10th) calendar day of a
month, the first day of the second month following the month in which
the Closing Date occurs. Subject to the terms of the Purchaser's
qualified employee benefit plans, beginning on the Participation Date,
the Affected Employees shall participate in the qualified employee
benefit plans of the Purchaser. Subject to Exhibit 2.11.4, Purchaser
shall, or shall cause the Surviving Corporations to, give Affected
Employees full credit for purposes of eligibility, vesting and
determination of the level of benefits (but not for the purpose of
benefit accrual under any defined benefit plan) under any qualified
employee benefit plans maintained by the Purchaser or the Surviving
Corporations on or after Participation Date for such Affected
Employees' service with the Surviving Corporations and the Acquired
Companies prior to Participation Date to the same extent recognized by
the Surviving Corporations and the Acquired Companies under their
plans. Notwithstanding the foregoing, the parties agree that the
persons and entities listed in Exhibit 3.21 shall no longer participate
or be eligible to participate in the qualified benefit plans of the
Acquired Companies or Purchaser after the Closing Date. Notwithstanding
anything in this Agreement to the contrary, the Acquired Companies
shall have the right to amend any of their qualified employee benefits
plans and take whatever other action the Acquired Companies deem
necessary to accomplish the requirements of the immediately preceding
sentence.
2.11.5 Other Purchaser Benefits. For the period of
time between the Acquired Companies Effective Date and the
Participation Date, Purchaser shall continue the welfare benefit plans
of the Acquired Companies as in effect on the Acquired Companies
Effective Date and the Affected Employees shall participate in such
plans through the Participation Date. Subject to the terms of the
Purchaser's welfare benefit plans, including stock-based compensation
plans, beginning on the Participation Date, the Affected Employees
shall participate in such welfare benefit plans of Purchaser. Purchaser
shall, or shall cause the Surviving Corporations to, (i) waive all
limitations as to preexisting conditions exclusions and waiting periods
with respect to participation and coverage requirements applicable to
the Affected Employees under any such welfare benefit plans that such
Affected Employees may be eligible to participate in on or after the
Participation Date, other than limitations or waiting periods that are
in effect with respect to such Affected Employees and that have not
been satisfied as of the Participation Date under any such welfare
benefit plans of the Acquired Companies maintained for the Affected
Employees immediately prior to the Participation Date, (ii) provide
each Affected Employee with credit for any co-payments and deductibles
paid during the plan year of the Acquired Companies' welfare benefit
plans that includes the Participation Date in satisfying any applicable
deductible or out-of-pocket requirements under such welfare benefit
plans that such Affected Employees are eligible to participate in on or
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<PAGE>
after the Participation Date, and (iii) give Affected Employees full
credit for purposes of eligibility, vesting and determination of the
level of benefits in any such welfare benefit plans maintained by the
Purchaser or the Surviving Corporations on or after the Participation
Date for such Affected Employees' service with the Surviving
Corporations and the Acquired Companies prior to the Participation Date
to the same extent previously recognized by the Surviving Corporations
and the Acquired Companies under their plans. Notwithstanding the
foregoing, the parties agree that the persons and entities listed in
Exhibit 3.21 shall no longer participate or be eligible to participate
in the welfare benefit plans of the Acquired Companies or Purchaser
after the Closing Date. Notwithstanding anything in this Agreement to
the contrary, the Acquired Companies shall have the right to amend any
of their welfare benefit plans and take whatever other action the
Acquired Companies deem necessary to accomplish the requirements of the
immediately preceding sentence.
3. The reference in Section 3.23 to $1,500,000 is changed to $2,000,000.
4. The first sentence in Section 2.3.4 is amended by adding at the end thereof
the following:
", except for the agreement between Experian Information Solutions,
Inc. and CG Marketing of Arizona, Inc. effective January 1, 1999."
5. The reference in clause (A) of Section 2.1.5.1(a) to $42,500,000 is changed
to $43,000,000 and the reference in clause (B)(i) to $45,000,000 is changed to
$46,200,000.
6. The third sentence of Section 3.3.2 is amended by adding at the end thereof
the following:
", except pursuant to the shareholders agreements for CGA, CG
Marketing and Vi-Tech set forth in Section 3.10."
7. The reference to Exhibits 3.14.2 and 3.1.7.2 in Section 3.7.1 is changed to
Exhibits 3.15.2 and 3.7.1.2.
8. The reference to Exhibits 3.7.1 and 3.7.2 in Section 3.7.2 is changed to
Exhibits 3.7.1.1 and 3.7.2.
-3-
<PAGE>
9. Section 4.3 is added as follows:
"4.3 Shareholders Agreements. In the event the
Registration Statement is declared effective prior to the termination
of this Agreement, Acxiom, the Acquired Companies and the Shareholders
shall diligently pursue (i) the satisfaction of the conditions in
Sections 6 and 7 and (ii) the Closing of the transactions contemplated
by this Agreement."
10. Section 6.6 is amended by (i) deleting the proviso at the end thereof that
reads as follows: ", provided that any change arising out of the matter set
forth in Exhibit 3.18 shall not be considered to result in any manner in the
non-satisfaction of this condition", and (ii) adding the following sentences to
the end thereof:
"The parties agree that the outstanding request for proposal from MBNA
as disclosed in Exhibits 3.11, 3.18 and elsewhere is not a failure of
the condition set forth in this Section 6.6. However, the parties
further agree that any change in the status of the request for
proposal, whether by action taken by MBNA or otherwise, between April
12, 1999 and the Closing may be taken into account by Acxiom in
determining if this condition has been satisfied."
11. Exhibit 3.11 is amended to add, and Exhibit 3.18 is amended to state, the
following:
"The Acquired Companies have received from MBNA a Request for Proposal
for List Processing dated November 23, 1998. The Acquired Companies and
at least four other vendors have responded to that Request for
Proposal."
12. Section 6.8(a) is amended to read as follows:
"(a) the purchase price for the Real Property shall be $5,047,500
(the "Purchase Price");"
13. Section 6.8(d) and Item 1 of Exhibit 6.11 are deleted.
14. Section 6.12 is added as follows:
"6.12 Purchaser shall have received evidence reasonably satisfactory to
Purchaser that any rights under the shareholder agreements described in Exhibits
3.10 and 3.14 to purchase shares of any Acquired Company arising out of the
transactions contemplated by this Agreement have been waived by the applicable
Acquired Company and shareholders thereof."
15. The reference to Baxter & Jewell, P.A. in Section 7.7 is changed to read
Friday, Eldredge & Clark, LLP.
-4-
<PAGE>
16. Section 8.2.1(n) is deleted and Section 8.2.1(o) becomes Section 8.2.1(n).
17. The reference to Section 3.24 in Section 11.4 is changed to Section 3.23.
18. The following agreements are added at the end of Exhibits 3.10 and 3.14:
Agreement between Experian Information Solutions, Inc. and CG Marketing
of Arizona, Inc. effective as of January 1, 1999.
Shareholders Agreement effective as of November 12, 1991 among Computer
Graphics of Arizona, Inc., The James K. Martens and Constance Jean
Martens Revocable Trust dated December 5, 1989, The Ronald L. Jensen
Revocable Trust dated December 11, 1989 and The Clara Louise Jensen
Revocable Trust dated December 11, 1989.
Shareholders Agreement effective as of November 12, 1991 among CG
Marketing, Inc. (now known as Vi-Tech, Inc.), The James K. Martens and
Constance Jean Martens Revocable Trust dated December 5, 1989, The
Ronald L. Jensen Revocable Trust dated December 11, 1989 and The Clara
Louise Jensen Revocable Trust dated December 11, 1989.
Shareholders Agreement effective as of November 12, 1991 among CG
Marketing of Arizona, Inc., The James K. Martens and Constance Jean
Martens Revocable Trust dated December 5, 1989, The Ronald L. Jensen
Revocable Trust dated December 11, 1989 and The Clara Louise Jensen
Revocable Trust dated December 11, 1989.
19. All defined terms not otherwise defined in this Amendment will have the same
meaning set forth in the Acquisition Agreement.
20. Except as herein expressly amended, the Acquisition Agreement is ratified,
confirmed and remains unchanged in all respects and will remain in full force
and effect in accordance with its respective terms.
21. All references to the Acquisition Agreement will mean the Acquisition
Agreement as it is amended hereby and as it may in the future be amended,
restated, supplemented or modified from time to time.
22. This Amendment may be executed in one or more counterparts, each of which
will be an original and all of which will constitute one and the same agreement.
[Signature Pages to Follow]
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<PAGE>
IN WITNESS WHEREOF, each party hereto has executed or caused
this Agreement to be executed on its behalf, all on the day and year first above
written.
PURCHASER:
Acxiom Corporation
By---------------------------
Name:
Title:
ACQUIRED COMPANIES:
Computer Graphics of Arizona, Inc.
By---------------------------
Name:
Title:
CG Marketing of Arizona, Inc.
By---------------------------
Name:
Title:
Enstech Resources, Inc.
By---------------------------
Name:
Title:
Norman, Riley & Associates, Inc.
By---------------------------
Name:
Title:
Vi-Tech, Inc.
By---------------------------
Name:
Title:
-6-
<PAGE>
MERGER SUBS:
CGA Acquisition Corporation #1
By---------------------------
Name:
Title:
CGA Acquisition Corporation #2
By---------------------------
Name:
Title:
CGA Acquisition Corporation #3
By---------------------------
Name:
Title:
SHAREHOLDERS:
- ----------------------------- -----------------------------
Ronald L. Jensen James K. Martens
- ----------------------------- -----------------------------
Ronald L. Jensen, Trustee of the James K. Martens, Co-Trustee
Ronald L. Jensen Revocable of the James K. Martens and
Trust dated December 11, 1989 Constance Jean Martens Trust
dated December 5, 1989
- ----------------------------- -----------------------------
Ronald L. Jensen, Trustee of the Constance Jean Martens,
Clara L. Jensen Revocable Co-Trustee of James K. Martens
Trust dated December 11, 1989 and Constance Jean Martens Trust
dated December 5, 1989
-7-
<PAGE>
ACQUISITION AGREEMENT
BETWEEN
ACXIOM CORPORATION
AND
CGA ACQUISITION CORPORATION #1;
CGA ACQUISITION CORPORATION #2;
AND CGA ACQUISITION CORPORATION #3
AND
COMPUTER GRAPHICS OF ARIZONA, INC.;
CG MARKETING OF ARIZONA, INC.;
ENSTECH RESOURCES, INC.;
NORMAN, RILEY & ASSOCIATES, INC.;
AND VI-TECH, INC.
AND
RONALD L. JENSEN AND JAMES K. MARTENS
<PAGE>
Table of Contents
1. DEFINITIONS...............................................................2
1.1 Definition Cross-Reference Index.....................................2
1.2 Additional Definitions...............................................2
2. COVENANTS AND UNDERTAKINGS................................................4
2.1 Agreement to Merge the Acquired Companies............................4
2.1.1 Mergers........................................................4
2.1.2 Effective Date of Mergers......................................4
2.1.3 Effect of Mergers..............................................4
2.1.4 Acquired Companies Common Stock................................5
2.1.5 Exchange of the Acquired Companies Stock.......................5
2.1.6 Fractional Shares..............................................6
2.1.7 Tax-Free Reorganization........................................7
2.1.8 Dissenting Shares..............................................7
2.1.9 Pooling of Interests...........................................7
2.2 Compliance with Securities Laws......................................7
2.3 Conduct of the Business of the Acquired Companies Prior to Closing...7
2.3.1 Conduct of Business............................................7
2.3.2 Bank Accounts..................................................8
2.3.3 Accounting Methods.............................................8
2.3.4 New License Agreements.........................................8
2.4 Filing of Tax Returns................................................8
2.5 Resignation..........................................................9
2.6 Examination of Property and Records..................................9
2.7 Consents and Approvals...............................................9
2.8 Supplying of Financial Statements....................................9
2.9 Covenant Not to Compete..............................................9
2.10 Other Actions........................................................9
2.11 Purchaser Covenants.................................................10
2.11.1 Conduct of Business Prior to Closing......................10
2.11.2 Other Actions.............................................11
2.11.3 Acquired Companies Employees..............................11
2.11.4 Employee Benefit Plans....................................11
2.11.5 Other Purchaser Benefits..................................11
2.11.6 Examination of Property and Records.......................11
2.11.7 Supplying of Financial Statements.........................12
3. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANIES AND THE
SHAREHOLDERS.............................................................12
3.1 Organization, Standing and Foreign Qualification....................13
3.2 Authority and Status................................................13
3.3 Capitalization......................................................13
3.3.1 Authorized and Issued Stock...............................13
<PAGE>
3.3.2 No Other Shares or Options................................14
3.4 Absence of Equity Investments.......................................14
3.5 Financial Statements, Liabilities and Obligations of the
Acquired Companies..................................................14
3.6 Tax Returns.........................................................15
3.7 Ownership of Assets and Leases......................................16
3.8 Indebtedness of the Acquired Companies..............................17
3.9 Accounts Receivable and Notes Receivable............................17
3.10 Agreement Does Not Violate Other Instruments........................17
3.11 Absence of Changes..................................................18
3.12 Litigation..........................................................19
3.13 Licenses and Permits; Compliance With Law...........................19
3.14 Contracts, Etc......................................................20
3.15 Intellectual Property; Computer Software............................22
3.15.1 Intellectual Property.....................................22
3.15.2 Computer Software.........................................23
3.16 Labor Matters.......................................................24
3.17 Benefit Plans.......................................................24
3.18 Acquired Companies Customers........................................26
3.19 Environmental Matters...............................................26
3.20 Insurance...........................................................27
3.21 Related Party Relationships.........................................27
3.22 Brokers.............................................................27
3.23 Loans and Advances..................................................27
3.24 Year 2000...........................................................28
3.25 Information in Registration Statement...............................29
3.26 Exhibits............................................................29
3.27 WARRANTY DISCLAIMER.................................................29
REGISTRATION STATEMENT/ADDITIONAL AGREEMENTS..................................29
4.1 Registration Statement..............................................29
4.2 Affiliate Agreements................................................29
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND THE MERGER SUBS..........30
5.1 Organization and Standing and Foreign Qualifications................30
5. Authority and Status................................................30
5.3 Capitalization......................................................30
5.4 Subsidiaries........................................................31
5.5 SEC Filings; No Undisclosed Liabilities.............................31
5.6 Title to Properties; Encumbrances...................................32
5.7 Agreement Does Not Violate Other Instruments........................32
5.8 Ownership of the Stock of the Merger Sub............................33
5.9 Absence of Changes..................................................33
5.10 Merger Sub..........................................................33
5.11 Licenses and Permits; Compliance With Law...........................33
5.12 Labor Matters.......................................................34
5.13 Information in Registration Statement...............................34
5.14 WARRANTY DISCLAIMER.................................................34
<PAGE>
6.CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND THE MERGER SUBS........34
6.1 Representations True at Closing.....................................34
6.2 Covenants of the Acquired Companies.................................35
6.3 No Injunction, Etc..................................................35
6.4 Opinion of Counsel..................................................35
6.5 Consents, Approvals and Waivers.....................................35
6.6 Absence of Adverse Changes..........................................35
6.7 Covenant Not to Compete.............................................35
6.8 Acquisition of Real Property........................................35
6.9 Opinion of KMPG.....................................................36
6.10 Registration Statement..............................................36
6.11 Other Closing Conditions............................................36
7.CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRED COMPANIES AND
SHAREHOLDERS TO CLOSE.......................................................36
7.1 Representations True at Closing.....................................36
7.2 Covenants of Purchaser..............................................37
7.3 No Injunction, Etc..................................................37
7.4 Covenants Not to Compete............................................37
7.5 Consents, Approvals and Waivers.....................................37
7.6 Shareholder Approvals...............................................37
7.7 Opinion of Purchaser's Counsel......................................37
7.8 Tax Opinion.........................................................37
7.9 Absence of Adverse Changes..........................................37
7.10 Registration Statement..............................................38
8.CLOSING.....................................................................38
8.1 Time and Place of Closing...........................................38
8.2 Transactions at Closing.............................................38
8.2.1 The Acquired Companies' Performance...........................38
8.2.2 Performance by Purchaser and the Merger Subs..................39
8.3 Delivery of Share Certificates and Cash.............................40
SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS/INDEMNIFICATION......40
9.1 Survival of Representations and Warranties and Covenants............41
9.1.1 General Indemnification Obligations...........................41
9.1.2 Specific Contingencies........................................42
9.1.3 Timing of Claims..............................................42
9.2 Indemnification.....................................................42
9.3 Escrow by Shareholders..............................................43
Specific Contingencies..............................................43
9.3.2 General Representations and Warranties........................43
9.3.3 Return of Escrowed Shares.....................................44
9.3.4 Priority......................................................44
9.4 Notification and Defense of Claims..................................44
9.5 Minimum Aggregate Liability.........................................46
<PAGE>
9.6 Maximum Aggregate Liability.........................................46
9.7 Adjustment..........................................................46
9.8 Exclusive Remedy....................................................46
10.TERMINATION................................................................47
10.1 Method of Termination...............................................47
10.2 Effect of Termination...............................................47
11.GENERAL PROVISIONS.........................................................47
11.1 Notices.............................................................47
11.2 Further Assurances..................................................49
11.3 Waiver..............................................................49
11.4 Expenses............................................................49
11.5 Nondisclosure of Terms..............................................49
11.6 Materiality.........................................................50
11.7 Binding Effect......................................................50
11.8 Headings............................................................50
11.9 Entire Agreement....................................................50
11.10 Governing Law......................................................50
11.11 Counterparts.......................................................50
11.12 Pronouns...........................................................50
11.13 Exhibits Incorporated..............................................50
11.14 No Shareholder Approval............................................50
<PAGE>
ACQUISITION AGREEMENT
THIS ACQUISITION AGREEMENT ("Agreement") made this 31st day of December, 1998
(the "Execution Date"), by and among:
Acxiom Corporation, a Delaware corporation (hereinafter referred to as
"Purchaser");
CGA Acquisition Corporation #1, an Arizona corporation and a wholly-owned
subsidiary of Purchaser (hereinafter referred to as "Merger Sub #1"), CGA
Acquisition Corporation #2, an Arizona corporation and a wholly-owned subsidiary
of Purchaser (hereinafter referred to as "Merger Sub #2") and CGA Acquisition
Corporation #3, an Arizona corporation and a wholly-owned subsidiary of
Purchaser (hereinafter referred to as "Merger Sub #3) (Merger Sub #1, Merger Sub
#2 and Merger Sub #3 are collectively referred to herein as the "Merger Subs");
Computer Graphics of Arizona, Inc., an Arizona corporation (hereinafter referred
to as "CGA"), CG Marketing of Arizona, Inc., an Arizona corporation (hereinafter
referred to as "CG Marketing"), Enstech Resources, Inc., an Arizona corporation
(hereinafter referred to as "Enstech"), Norman, Riley & Associates, Inc., an
Arizona corporation (hereinafter referred to as "Norman") and Vi-Tech, Inc., an
Arizona corporation (hereafter referred to as "Vi-Tech") (CGA, CG Marketing,
Enstech, Norman and Vi-Tech are hereinafter individually referred to as an
"Acquired Company" or collectively as the "Acquired Companies"); and,
Ronald L. Jensen and James K. Martens, collectively, as trustees of certain
revocable trusts, the majority shareholders of CGA, CG Marketing and Vi-Tech,
and collectively the sole shareholders of Enstech and Norman (the
"Shareholders").
W I T N E S S E T H:
WHEREAS, the parties hereto desire to enter into this Agreement pursuant to
which Purchaser will acquire all of the issued and outstanding shares of capital
stock of the Acquired Companies pursuant to the merger transactions and upon the
terms and subject to the conditions set forth herein;
WHEREAS, upon the effective date of the merger transactions, all of the shares
of stock of the Acquired Companies, issued and outstanding immediately prior
thereto, will be converted into shares of common stock of Purchaser;
WHEREAS, the parties hereto contemplate that the transactions herein shall
constitute a reorganization within the meanings of Section 368(a)(1)(A) and
Sections 368(a)(2)(D) and (a)(2)(E), as applicable, of the Internal Revenue Code
of 1986, as amended;
<PAGE>
NOW, THEREFORE, for and in consideration of the premises and the mutual
promises, agreements, representations, warranties and covenants hereinafter set
forth, the parties hereto agree as follows:
1. DEFINITIONS.
1.1 Definition Cross-Reference Index. Attached hereto as Exhibit A is a list of
defined terms herein (other than those terms set forth in Section 1.2) and a
cross-reference to the Section of this Agreement in which such term is defined.
1.2 Additional Definitions. As used in this Agreement:
(a) "Acquired Companies Shareholders" shall mean those persons listed in the
attached Exhibit B, such persons constituting all of the shareholders of
each of the Acquired Companies as reflected in Exhibit B.
(b) "Acxiom Stock" shall mean the $0.10 par value per share common stock of the
Purchaser.
(c) "Applicable Federal Rate" shall mean the short-term interest rate determined
in accordance with Section 1274(d) of the Code as of the Closing Date.
(d) "Code" shall mean the Internal Revenue Code of 1986, as amended.
(e) "ESOP" shall mean the Computer Graphics of Arizona, Inc. Employee Stock
Ownership Plan and Trust.
(f) "Exchange Shares" shall mean the Shares delivered by Purchaser pursuant to
Section 2.1.5.1 and 2.1.5.2.
(g) "Fair Market Value" shall mean the average of the average of the high and
low prices of one share of Acxiom Stock for each of the fifteen (15) trading
days immediately preceding the second business day prior to the Closing Date as
set forth on the NASDAQ stock market.
(h) "GAAP" shall mean generally accepted accounting principles, consistently
applied.
(i) "knowledge of the Acquired Companies and the Shareholders" (or words of
similar import) shall mean the actual knowledge of any of the Shareholders or
Carol Basso or, solely with respect to the
<PAGE>
representations and warranties set forth in Sections 3.10, 3.11, 3.12, 3.14 and
3.18, Ed Vartabedian or, solely with respect to the representations and
warranties set forth in Sections 3.7, 3.10, 3.11, 3.12 and 3.15, Victor Jackson;
provided that actual knowledge shall include matters which could have been known
to any of the above upon reasonable inquiry.
(j) "Permitted Liens" shall mean (i) liens for taxes not yet due and payable,
that are payable without penalty or interest or that are being contested in good
faith, (ii) liens arising or resulting from any action taken by the Purchaser or
any its affiliates, (iii) liens created by, arising out of, or specifically
contemplated or permitted by this Agreement, (iv) materialmen's, mechanics',
workmen's, repairmen's, employees' or other like liens arising in the course of
construction or in the ordinary course of operation or maintenance, in each such
case securing obligations which are not delinquent or which are being contested
in good faith and for which adequate reserves have been taken or securing
obligations which are bonded in a reasonable manner, (v) zoning restrictions,
easements, licenses or other restriction on the use of real property or other
minor irregularities in title thereto or encumbrances thereon, so long as the
same do not, individually or in the aggregate, materially interfere with or
impair the use of such property in the manner historically used by the Acquired
Companies, (vi) with respect to any real property or interests therein owned by
the Acquired Companies, any defects or irregularities in title which would not
reduce the value of the property by more than $25,000, (vii) liens arising out
of judgments or awards rendered against any of the Acquired Companies as of the
Execution Date with respect to which at the time an appeal or proceeding for
review is prosecuted in good faith if adequate reserves with respect thereto
have been established and are being maintained and with respect to which there
shall have been secured a stay of execution pending such appeal or proceeding
for review or (viii) liens that are not material to the value of the property or
the assets encumbered.
(k) "Purchaser Material Adverse Effect" shall mean with respect to Purchaser and
the Purchaser Subsidiaries a material adverse effect on the business, assets,
liabilities, condition (financial or otherwise) or results of operations of
Purchaser and the Purchaser Subsidiaries, taken as a whole.
(l) "SEC" shall mean the Securities and Exchange Commission.
(m) "Surviving Corporations" shall mean collectively CGA Surviving Corporation,
CGM Surviving Corporation and CGA #2 Surviving Corporation.
<PAGE>
2. COVENANTS AND UNDERTAKINGS.
2.1 Agreement to Merge the Acquired Companies.
2.1.1 Mergers. Subject to the terms and conditions hereinafter set forth and in
accordance with the applicable laws of the State of Arizona, the parties to this
Agreement agree to effect the following mergers (collectively the "Acquired
Companies Mergers"):
(a) the merger of Merger Sub #1 with and into CGA, with CGA as the surviving
corporation in such merger in accordance with the Plan of Merger #1 attached
hereto as Exhibit C1;
(b) the merger of Merger Sub #2 with and into CG Marketing, with CG Marketing as
the surviving corporation in such merger in accordance with the Plan of Merger
#2 attached hereto as Exhibit C2; and
(c) the merger of Enstech, Norman and Vi-Tech with and into Merger Sub #3 with
Merger Sub #3 as the surviving corporation in such merger in accordance with
Plan of Merger #3 attached hereto as Exhibit C3.
2.1.2 Effective Date of Mergers. Each of the Acquired Companies Mergers shall
become effective as provided under the applicable provisions of the Arizona
Business Corporation Act at the time set forth in the Articles of Merger filed
with the Secretary of State of the State of Arizona for the Acquired Companies
Mergers (the "Acquired Companies Effective Date"). Such filings shall take place
at the Closing.
2.1.3 Effect of Mergers. At the Acquired Companies Effective Date:
(a) the separate existence of Merger Sub #1 shall cease, and CGA shall be the
corporation surviving such merger (the "CGA Surviving Corporation") and shall
continue its corporate existence under the name "Computer Graphics of Arizona,
Inc". The Articles of Incorporation and Bylaws of CGA shall, in accordance with
the Plan of Merger #1, be the Articles of Incorporation and Bylaws of the CGA
Surviving Corporation, the directors of Merger Sub #1 immediately prior to the
Acquired Companies Effective Date will become the directors of the CGA Surviving
Corporation, and the officers of Merger Sub #1 immediately prior to the Acquired
Companies Effective Date will become the officers of the CGA Surviving
Corporation;
(b) the separate existence of Merger Sub #2 shall cease, and CG Marketing shall
be the corporation surviving such merger (the "CGM Surviving Corporation") and
shall continue its corporate existence under the name "CG Marketing of Arizona,
Inc". The Articles of Incorporation and Bylaws of CG Marketing shall, in
accordance with the Plan of Merger #2, be the Articles of
<PAGE>
Incorporation and Bylaws of the CGM Surviving Corporation, the directors of
Merger Sub #2 immediately prior to the Acquired Companies Effective Date will
become the directors of the CGM Surviving Corporation, and the officers of
Merger Sub #2 immediately prior to the Acquired Companies Effective Date will
become the officers of the CGM Surviving Corporation;
(c) the separate existence of Enstech, Norman and Vi-Tech shall cease, and
Merger Sub #3 shall be the corporation surviving such merger (the "CGA #2
Surviving Corporation") and shall continue its corporate existence under the
name "Acxiom/CG, Inc". The Articles of Incorporation and Bylaws of the CGA #2
Surviving Corporation shall, in accordance with the Plan of Merger #3, be the
Articles of Incorporation and Bylaws of Merger Sub #3, the directors of Merger
Sub #3 immediately prior to the Acquired Companies Effective Date will become
the directors of the CGA #2 Surviving Corporation, and the officers of Merger
Sub #3 immediately prior to the Acquired Companies Effective Date will become
the officers of the CGA #2 Surviving Corporation.
2.1.4 Acquired Companies Common Stock. At the Acquired Companies Effective Date,
each of the shares of capital stock of the Acquired Companies issued and
outstanding immediately prior to the Acquired Companies Effective Date shall
cease to exist and shall, in accordance with the Plan of Merger #1, the Plan of
Merger #2 and the Plan of Merger #3, respectively, and without any further
action on the part of any holder thereof, be automatically converted into the
right to receive shares of Acxiom Stock ("Shares") as set forth in Section 2.1.5
and in accordance with Section 8.3.
2.1.5 Exchange of the Acquired Companies Stock.
2.1.5.1 Exchange Shares for Stock of the Acquired Companies.
(a) Subject to the remaining provisions of this Agreement, based upon the Fair
Market Value, Purchaser shall deliver (pursuant to Section 8.3) an aggregate
number of Shares equal to the greater of (A) the number of Shares which have an
aggregate Fair Market Value of $42,500,000 or (B) the lesser of (i) an aggregate
of 2,000,000 Shares or (ii) such number of Shares which have an aggregate Fair
Market Value of $45,000,000. The parties hereto acknowledge that such Shares
issued in the Acquired Companies Mergers shall include an associated preferred
stock purchase right (a "Preferred Stock Right") in accordance with the Rights
Agreement, dated as of January 28, 1998 (as amended, the "Rights Agreement"),
between Purchaser and First Chicago Trust Company of New York. Any reference
herein to Shares shall be deemed to include the associated Preferred Stock
Right.
<PAGE>
(b) The Shares to be delivered by Purchaser pursuant to Section 2.1.5.1(a) shall
be allocated among the Acquired Companies in the percentages set forth in this
Section 2.1.5.1(b). The number of Shares allocated to each Acquired Company
shall be further allocated and delivered to the Acquired Companies Shareholders
of such Acquired Company based upon such shareholder's ownership interest in the
applicable Acquired Company as set forth in Exhibit B.
(i) 50% to CGA;
(ii) 30% to CG Marketing;
(iii) 10% to Enstech;
(iv) 5% to Norman; and
(v) 5% to Vi-Tech.
2.1.5.2 Exchange Shares for Real Property. In addition to the Shares in 2.1.5.1
and subject to the remaining provisions of this Agreement, Purchaser shall
deliver to Martens, Jensen & Associates Shares which have an aggregate Fair
Market Value equal to the Purchase Price (as determined by Purchaser and
Martens, Jensen & Associates prior to the Closing) of the Real Property.
2.1.5.3 Delivery to Escrow. Each Acquired Companies Shareholder shall, and the
Shareholders shall cause Martens, Jensen & Associates to, deposit into escrow
the number of the Exchange Shares of Acxiom Stock described in Section 9 to be
held in accordance with the terms of Section 9 and the Escrow Agreement.
2.1.5.4 Recapitalization, Etc. If, prior to the Acquired Companies Effective
Date, Purchaser recapitalizes through a subdivision of its outstanding Shares
into a greater number of Shares, or a combination of its outstanding Shares into
a lesser number of shares, or reorganizes, reclassifies or otherwise changes its
outstanding Shares into the same or a different number of shares of other
classes of capital stock, or declares a dividend on its outstanding Shares
payable in shares of its capital stock or securities convertible into shares of
its capital stock or makes any other extraordinary distribution of cash or other
assets which affects the capitalization of the Purchaser, then the number of
Shares set forth in Sections 2.1.5.1 and 2.1.5.2 will be adjusted appropriately
to provide the Acquired Companies Shareholders with the same economic effect as
contemplated by this Agreement prior to such recapitalization, combination,
reorganization, reclassification, change or declaration.
2.1.6 Fractional Shares. No fractional Shares will be issued in connection with
the Acquired Companies Mergers, but in lieu thereof each holder of capital stock
in an Acquired Company who would otherwise be entitled to receive a fraction of
a Share will receive from the Purchaser, at such time as such holder shall
receive a certificate representing Shares as contemplated by Section 2.1.5, an
amount of cash equal to the per share market value of Acxiom Stock (based on
Fair Market Value) multiplied by the fraction of a Share to which such holder
<PAGE>
would otherwise be entitled. The fractional interests of each Acquired Company
Shareholder of each Acquired Company will be aggregated so that no such
Shareholder will receive cash in an amount equal to or greater than the Fair
Market Value of one full Share with respect to such Acquired Company.
2.1.7 Tax-Free Reorganization. The parties hereto intend to adopt this Agreement
and the Acquired Companies Mergers described herein as tax-free plans of
reorganization under Section 368(a)(1)(A) of the Code by virtue of the
provisions of Section 368(a)(2)(D) of the Code with respect to Plan of Merger
#3, and Section 368(a)(2)(E) of the Code with respect to Plan of Merger #1 and
Plan of Merger #2.
2.1.8 Dissenting Shares. If, prior to the Closing, dissenter's rights have been
properly exercised in accordance with Arizona law by any holder of any shares of
CGA, at the Closing CGA shall deposit into an escrow account cash in an amount
equal to the aggregate value of such shares based on Fair Market Value.
2.1.9 Pooling of Interests. The parties hereto intend that the Mergers be
treated as a "pooling of interests" for accounting purposes. The affiliates of
each of the Acquired Companies shall execute and deliver Affiliate Agreements,
as contemplated by Section 4.2, to ensure compliance by such affiliates with the
restrictions required to allow such accounting treatment to be utilized.
2.2 Compliance with Securities Laws. In connection with the transactions
contemplated by this Agreement, the parties hereto agree to cooperate with one
another in complying with the provisions of the 1933 Act, the Exchange Act and
the General Rules and Regulations thereunder, and all other applicable federal
and state securities laws, and each of them agree to furnish the other, or its
counsel, with such information and to take such actions as may be reasonably
requested in respect of such compliance.
2.3 Conduct of the Business of the Acquired Companies Prior to Closing.
2.3.1 Conduct of Business. Except as set forth in Exhibit 2.3.1, with the prior
written consent of Purchaser or as otherwise expressly permitted by this
Agreement, the Acquired Companies covenant and agree that, between the Execution
Date and the Closing Date, each of the Acquired Companies will conduct its
businesses in the ordinary course, and they will: (a) use their reasonable best
efforts to preserve the organization of the Acquired Companies intact and to
keep available the services of its present officers and employees, and to
preserve the goodwill of customers, suppliers, and others having business
relations with the Acquired Companies; (b) maintain the properties of the
Acquired Companies in the same working order and condition as such properties
are in as of the date of this Agreement, reasonable wear and tear excepted; (c)
keep in force at no less than their present limits all existing bonds and
policies of insurance insuring the Acquired Companies and their respective
properties; (d) not enter into any contract, commitment, arrangement or
transaction of the type described in Sections 3.14.1 through 3.14.18 other than
in the ordinary course of business consistent with past practice or engage in
any of the transactions described in Section 3.11 (except for the payment of any
health, disability and life insurance premiums which may become due and
distributions required to be made pursuant to the terms currently in effect of
any Benefit Plans or pursuant to any change in any applicable law) to the extent
such transactions are within the control of the Acquired Companies; (e) not
cause any of the events in Section 3.11 (except for the payment of any health,
disability and life insurance premiums which may become due and distributions
required to be made pursuant to the terms currently in effect of any Benefit
Plans or pursuant to
<PAGE>
any change in any applicable law) to the extent such events are within the
reasonable control of the Acquired Companies; (f) not make or permit any change
in the Articles of Incorporation or Bylaws of the Acquired Companies, or in
their authorized, issued or outstanding securities; (g) not grant any stock
option or right to purchase any security of the Acquired Companies, issue any
security convertible into such securities, purchase, redeem, retire or otherwise
acquire any of such securities, or agree to do any of the foregoing; (h) not
make any contribution to, or distribution from, any employee benefit plan,
pension plan, stock bonus plan, 401(k) plan or profit sharing plan (except for
contributions under existing Benefit Plans in accordance with past practice and
the payment of any health, disability and life insurance premiums which may
become due and contributions and distributions required to be made pursuant to
the terms currently in effect of any Benefit Plans or pursuant to any change in
any applicable law); (i) not declare, make, or permit any payment of dividends,
distributions or other payments with respect to the capital stock, or any other
securities, of the Acquired Companies; (j) not increase the compensation payable
or to become payable by the Acquired Companies to any officer, director,
employee, consultant or agent and not make any bonus payment or arrangement to
any officer, director, employee, consultant or agent other than in the ordinary
course of business consistent with past practice; and (k) promptly advise
Purchaser in writing of any matters arising or discovered after the date of this
Agreement which, if existing or known at the date hereof, would be required to
be set forth or described in this Agreement or the Exhibits hereto.
2.3.2 Bank Accounts. Except with the prior written consent of Purchaser, the
Acquired Companies will not make, between the Execution Date and the Closing
Date, any change in its banking or safe deposit arrangements or grant any powers
of attorney. A list of all bank accounts, investment accounts, safe deposit
boxes (and the contents thereof) and powers of attorney of the Acquired
Companies and of all persons authorized to act with respect thereto is attached
hereto as Exhibit 2.3.2.
2.3.3 Accounting Methods. Except with the prior written consent of Purchaser,
the Acquired Companies will not make, between the Execution Date and the Closing
Date, any changes in its accounting methods or practices.
2.3.4 New License Agreements. Between the Execution Date and the Closing Date,
the Acquired Companies shall not enter into any data or software license
contract which has a term of one year or longer or which involves an aggregate
payment obligation of $150,000 or more over the term of such contract, unless
such contract is either (i) assignable without the consent of the other parties
thereto or (ii) expressly permits the assignment by the Acquired Companies in
connection with the transactions contemplated hereby.
2.4 Filing of Tax Returns. The Acquired Companies covenant to cause all of the
federal, state and local tax returns of the Acquired Companies required to be
filed before Closing to be timely and accurately filed with the appropriate
taxing authorities. For purposes of this Section 2.4, such returns shall be
deemed timely filed if the Acquired Companies have obtained an
<PAGE>
extension from the appropriate taxing authority as to the time in which it may
file such tax returns and such extensions have not expired as of the Closing.
The Acquired Companies shall submit all such tax returns to Purchaser prior to
the date they must be filed. Purchaser or the Merger Subs will file all such tax
returns due after the Closing.
2.5 Resignation. The Acquired Companies covenant to cause to be delivered at the
Closing the resignation of each of the directors and officers of the Acquired
Companies, with such resignations to be effective immediately following the
Acquired Companies Effective Time.
2.6 Examination of Property and Records. Between the Execution Date and the
Closing Date, the Acquired Companies will allow Purchaser, its counsel, its
accountants and other representatives full access to all the books, records,
files, documents, assets, properties, contracts and agreements of the Acquired
Companies that may be reasonably requested, and shall furnish Purchaser, its
officers and representatives during such period with all information concerning
the affairs of the Acquired Companies that may be reasonably requested.
Purchaser will conduct any investigation in a manner which will not unreasonably
interfere with the business of the Acquired Companies.
2.7 Consents and Approvals. The Acquired Companies agree to use commercially
reasonable efforts to obtain the waiver, consent and approval of all persons
whose waiver, consent or approval (i) is required in order to consummate the
transactions contemplated by this Agreement or (ii) is required by any
agreement, lease, instrument, arrangement, judgment, decree, order or license to
which any of the Acquired Companies is a party or subject on the Closing Date
and (a) which would prohibit, or require the waiver, consent or approval of any
person to, such transactions or (b) under which, without such waiver, consent or
approval, such transactions would constitute an occurrence of default, result in
the acceleration of any obligation thereunder or give rise to a right of any
party thereto to terminate its obligations thereunder. All obtained written
waivers, consents and approvals shall be produced at the Closing in form and
content reasonably satisfactory to Purchaser.
2.8 Supplying of Financial Statements. The Acquired Companies covenant to
deliver to Purchaser all regularly prepared unaudited financial statements of
the Acquired Companies prepared after the Execution Date, in the format
historically utilized, as soon as available.
2.9 Covenant Not to Compete. The Shareholders shall enter at the Closing into a
Covenant Not to Compete substantially in the form of Exhibit 2.9 attached
hereto..
2.10 Other Actions. The Acquired Companies and the Shareholders shall, before or
after the Closing, (A) not take any action, or permit any action within the
Acquired Companies' control or other than as contemplated by this Agreement,
that would prevent any Acquired Companies Merger from qualifying as a tax-free
reorganization under Section 368(a)(1)(A) of the Code, (B) not take any action
which is not permitted by the Affiliate Agreement or this Agreement, or (C) use
their reasonable best efforts to prevent any of the officers or directors of the
Acquired Companies from taking or permitting any such action within such
person's control.
<PAGE>
2.11 Purchaser Covenants.
2.11.1 Conduct of Business Prior to Closing. Between the Execution Date of this
Agreement and the Closing, unless other agreed by the Acquired Companies in
writing, or except as otherwise permitted by this Agreement:
(a) the respective businesses of the Purchaser and the Purchaser Subsidiaries
shall be conducted only in the ordinary course of business consistent with past
practices, and there shall be no material changes in the conduct of the
Purchaser's operations;
(b) Purchaser shall (i) not sell or pledge or agree to sell or pledge any stock
owned by it in any of the Purchaser Subsidiaries, (ii) not amend its Certificate
of Incorporation or By-Laws, (iii) not split, combine or reclassify any shares
of its outstanding capital stock or declare, set aside or pay any dividend or
other distribution payable in cash, stock or property, or redeem or otherwise
acquire any shares of its capital stock or shares of the capital stock of any of
the Purchaser Subsidiaries, (iv) not consolidate or merge with or into another
company unless at least 50% of the members of the Board of Directors of the
surviving entity are members of the Board of Directors of Purchaser immediately
prior to such merger or consolidation or are otherwise designated by Purchaser
and Purchaser is the surviving entity, or (v) not enter into any transaction not
in the ordinary course of business if such transaction would have a Purchaser
Material Adverse Effect or a material adverse effect on the Shares;
(c) neither Purchaser nor any Purchaser Subsidiary shall (i) authorize for
issuance, issue or sell or agree to issue or sell any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any class
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise) except for (a) unissued Shares
reserved for issuance upon the exercise of the employee stock options of the
Purchaser pursuant to existing stock options plans and (b) unissued Shares to be
granted pursuant to Purchaser's Employee Stock Benefit and Recognition Program
or (ii) enter any contract, agreement or commitment with respect to any of the
foregoing;
(d) Purchaser shall use its reasonable best efforts to preserve intact the
business operations of Purchaser and the Purchaser Subsidiaries, to keep
available the services of its and their present officers and key employees, and
to preserve the goodwill of those having business relationships with Purchaser
or the Purchaser Subsidiaries;
(e) Nothing set forth in subsection (a) through (d) above shall limit
Purchaser's ability to authorize or propose, enter into, or consummate
agreements relating to acquisitions, mergers or other business combinations,
including any such transaction pursuant to which Purchaser issues shares of its
capital stock; provided that in connection with any transaction Purchaser will
not consolidate or merge with
<PAGE>
or into another company unless at least 50% of the members of the Board of
Directors of the surviving entity are members of the Board of Directors of
Purchaser immediately prior to such merger or consolidation or are otherwise
designated by Purchaser and Purchaser is the surviving entity.
2.11.2 Other Actions. Purchaser shall, before or after the Closing, (A) not take
any action, or permit any action within Purchaser's control or other than as
contemplated by this Agreement (including, but not limited to, the exercise of
Purchaser's rights under the Escrow Agreement), that would prevent any Acquired
Companies Merger from qualifying as a tax-free reorganization under Section
368(a)(1)(A) of the Code, (B) not take any action or permit any action within
Purchaser's control, or other than as contemplated by this Agreement, that would
prevent the Mergers from qualifying for accounting as a pooling of interests, or
(C) use its reasonable best efforts to prevent any of its officers or directors
from taking or permitting such action within such person's control.
2.11.3 Acquired Companies Employees. Purchaser agrees that individuals who are
employed by the Acquired Companies as of the Acquired Companies Effective Date
shall become employees of the Surviving Corporations on the Acquired Companies
Effective Date (each such employee, an "Affected Employee"); provided, however,
that nothing contained in this Section 2.11.3 shall require the Surviving
Corporations to continue the employment of any Affected Employee for any period
of time following the Acquired Companies Effective Date.
2.11.4 Employee Benefit Plans. For the period of time between the Acquired
Companies Effective Date and March 31, 1999, Purchaser shall continue the
qualified employee benefit plans of the Acquired Companies as in effect on the
Acquired Companies Effective Date and the Affected Employees shall participate
in such plans through March 31, 1999. Subject to the terms of the Purchaser's
qualified employee benefit plans, beginning April 1, 1999, the Affected
Employees shall participate in the qualified employee benefit plans of the
Purchaser. Subject to Exhibit 2.11.4, Purchaser shall, or shall cause the
Surviving Corporations to, give Affected Employees full credit for purposes of
eligibility, vesting and determination of the level of benefits (but not for the
purpose of benefit accrual under any defined benefit plan) under any qualified
employee benefit plans maintained by the Purchaser or the Surviving Corporations
on or after April 1, 1999 for such Affected Employees' service with the
Surviving Corporations and the Acquired Companies prior to April 1, 1999 to the
same extent recognized by the Surviving Corporations and the Acquired Companies
under their plans. Notwithstanding the foregoing, the parties agree that the
persons and entities listed in Exhibit 3.21 shall no longer participate or be
eligible to participate in the qualified benefit plans of the Acquired Companies
or Purchaser after the Closing Date. Notwithstanding anything in this Agreement
to the contrary, the Acquired Companies shall have the right to amend any of
their qualified employee benefits plans and take whatever other action the
Acquired Companies deem necessary to accomplish the requirements of the
immediately preceding sentence.
2.11.5 Other Purchaser Benefits For the period of time between the Acquired
Companies Effective Date and March 31, 1999, Purchaser shall continue the
welfare benefit plans of the Acquired Companies as in effect on the Acquired
Companies Effective Date and the Affected Employees shall participate in such
plans through March 31, 1999. Subject to the
<PAGE>
terms of the Purchaser's welfare benefit plans, including stock-based
compensation plans, beginning April 1, 1999, the Affected Employees shall
participate in such welfare benefit plans of Purchaser. Purchaser shall, or
shall cause the Surviving Corporations to, (i) waive all limitations as to
preexisting conditions exclusions and waiting periods with respect to
participation and coverage requirements applicable to the Affected Employees
under any such welfare benefit plans that such Affected Employees may be
eligible to participate in after March 31, 1999, other than limitations or
waiting periods that are in effect with respect to such Affected Employees and
that have not been satisfied as of March 31, 1999 under any such welfare benefit
plans of the Acquired Companies maintained for the Affected Employees
immediately prior to April 1, 1999, (ii) provide each Affected Employee with
credit for any co-payments and deductibles paid during the plan year of the
Acquired Companies' welfare benefit plans that includes March 31, 1999 in
satisfying any applicable deductible or out-of-pocket requirements under such
welfare benefit plans that such Affected Employees are eligible to participate
in after March 31, 1999, and (iii) give Affected Employees full credit for
purposes of eligibility, vesting and determination of the level of benefits in
any such welfare benefit plans maintained by the Purchaser or the Surviving
Corporations on or after April 1, 1999 for such Affected Employees' service with
the Surviving Corporations and the Acquired Companies prior to April 1, 1999 to
the same extent previously recognized by the Surviving Corporations and the
Acquired Companies under their plans. Notwithstanding the foregoing, the parties
agree that the persons and entities listed in Exhibit 3.21 shall no longer
participate or be eligible to participate in the welfare benefit plans of the
Acquired Companies or Purchaser after the Closing Date. Notwithstanding anything
in this Agreement to the contrary, the Acquired Companies shall have the right
to amend any of their welfare benefit plans and take whatever other action the
Acquired Companies deem necessary to accomplish the requirements of the
immediately preceding sentence.
2.11.6 Examination of Property and Records. Between the Execution Date and the
Closing Date, Purchaser will allow the Acquired Companies, the Shareholders,
their counsel and their respective accountants and other representatives full
access to all the books, records, files, documents, assets, properties,
contracts and agreements of Purchaser and its subsidiaries, if any, that may be
reasonably requested, and shall furnish such persons during such period with all
information concerning the affairs of Purchaser and its subsidiaries that may be
reasonably requested. Such persons will conduct any investigation in a manner
which will not unreasonably interfere with the business of Purchaser and its
subsidiaries.
2.11.7 Supplying of Financial Statements. Between the Execution Date and the
Closing Date, Purchaser covenants to deliver to the Acquired Companies and the
Shareholders all regularly prepared unaudited financial statements of Purchaser
prepared after the Execution Date, in the format historically utilized, as soon
as available, and a copy of each report, schedule and other document filed or
received by it pursuant to the requirements of federal or state securities laws.
3. REPRESENTATIONS AND WARRANTIES OF THE ACQUIRED COMPANIES AND THE
SHAREHOLDERS.
<PAGE>
The Acquired Companies and the Shareholders, jointly and severally, represent
and warrant to, and for the benefit of, Purchaser and the Merger Subs as
follows:
3.1 Organization, Standing and Foreign Qualification.
3.1.1 The Acquired Companies are corporations duly organized, validly existing
and in good standing under the laws of the State of Arizona and each has the
full power and authority (corporate and otherwise) to carry on its business in
the places, and as, it is now being conducted and to own and lease the
properties and assets which it now owns or leases.
3.1.2 The Acquired Companies are now, and will be at the Closing, duly qualified
and/or licensed to transact business, and in good standing as a foreign
corporation, in the jurisdictions listed in Exhibit 3.1.2, and the character of
the property owned or leased by the Acquired Companies and the nature of the
business conducted by each of them does not require such qualification and/or
licensing in any other jurisdictions other than in such jurisdictions where the
failure so to qualify or to be licensed or in good standing would not have a
material adverse effect on the Acquired Companies.
3.2 Authority and Status. Except for the requirement to obtain the approval of
each Acquired Companies' respective Acquired Companies Shareholders in
accordance with applicable law, the Acquired Companies and the Shareholders have
the capacity and authority to execute and deliver this Agreement, to perform
hereunder and to consummate the transactions contemplated hereby without the
necessity of any act or consent of any other person whomsoever. The execution,
delivery and performance by the Acquired Companies of this Agreement and each
and every agreement, document, exhibit, and instrument provided for herein have
been duly authorized and approved by the Board of Directors of each Acquired
Company and will be, as of the Closing, authorized and approved by the Acquired
Companies Shareholders. This Agreement and each and every agreement, document,
exhibit, and instrument to be executed, delivered and performed by the Acquired
Companies or the Shareholders in connection with the express terms hereof
constitute or will, when executed and delivered, constitute the valid and
legally binding obligations of the Acquired Companies or the Shareholders, as
the case may be, enforceable against each of them in accordance with their
respective terms, except as enforceability may be limited by applicable
equitable principles or by bankruptcy, insolvency, reorganization, moratorium,
or similar laws from time to time in effect affecting the enforcement of
creditors' rights generally. Attached hereto as Exhibit 3.2 are true, correct
and complete copies of the Articles of Incorporation certified by the Secretary
of State of Arizona as in effect on the date shown thereon and Bylaws of each of
the Acquired Companies.
3.3 Capitalization.
3.3.1 Authorized and Issued Stock. The entire authorized capital stock of the
Acquired Companies are as follows:
(a) For CGA, 1,000,000 shares of common stock, 1.00 par value per share, of
which 20,000 shares are issued and outstanding.
<PAGE>
(b) For CG Marketing, 100,000 shares of common stock, no par value per share, of
which 2,000 shares are issued and outstanding.
(c) For Enstech, 1,000,000 shares of common stock, $5 par value per share, of
which 200 shares are issued and outstanding.
(d) For Norman, 100,000 shares of common stock, no par value per share, of which
2,000 shares are issued and outstanding.
(e) For Vi-Tech, 100,000 shares of common stock, no par value per share, of
which 2,000 shares are issued and outstanding.
3.3.2 No Other Shares or Options. The Acquired Companies have no other shares of
capital stock authorized, issued or outstanding other than those set forth in
Section 3.3.1. All of the issued and outstanding shares of common stock of the
Acquired Companies have been validly issued and are fully paid and nonassessable
and are owned by the Acquired Companies Shareholders as set forth in Exhibit B,
and, as of the Closing, will be free and clear of all liens, claims, charges and
encumbrances of any nature whatsoever. The authorization or consent of no other
person or entity is required in order to consummate the transactions
contemplated hereby by virtue of any such person or entity having an equitable
or beneficial interest in the Acquired Companies or the capital stock of the
Acquired Companies. Further, except pursuant to the terms of the ESOP, there are
no outstanding options, warrants, calls, commitments or other agreements which
obligate any Acquired Company to pay any dividends on such shares or to
purchase, redeem, or retire any outstanding shares of the capital stock of the
Acquired Companies, nor are there any outstanding securities or obligations
which are convertible into or exchangeable for any shares of capital stock of
any of the Acquired Companies.
3.4 Absence of Equity Investments. None of the Acquired Companies, either
directly or indirectly, own of record or beneficially any shares or other equity
interests in any corporation, partnership, limited partnership, joint venture,
trust or other business entity. None of the Shareholders own of record or
beneficially, directly or indirectly, shares or other equity interests in any
corporation, partnership, limited partnership, limited liability company, joint
venture, trust, or other business entity (except as a holder of less than one
percent (1%) of the equity interest in an entity whose shares are traded on a
national or regional securities exchange or in the over-the-counter market), all
or a portion of the business of which is competitive with that of the Acquired
Companies.
3.5 Financial Statements, Liabilities and Obligations of the Acquired Companies.
3.5.1 Attached hereto as Exhibit 3.5.1 are true, correct and complete copies of
the unaudited balance sheets of the Acquired Companies at each Acquired
Company's fiscal year end in 1996 and 1997 and the related unaudited statements
of income and retained earnings for the years then ended (herein respectively
referred to as the "1996 Financial Statements and 1997 Financial Statements").
Also attached hereto as Exhibit 3.5.1 are true and complete copies of the
unaudited balance sheets of the Acquired Companies as of October 31, 1998 and
the related unaudited statement of income for the period then ended reflected
therein (the "Interim
<PAGE>
Financial Statements"). The 1996, 1997 and Interim Financial Statements have
been prepared from and are in complete accordance with the books and records of
the Acquired Companies, are true, complete, and accurate statements of the
financial position of the Acquired Companies as of their respective dates, have
been prepared in accordance with the Acquired Companies' historical accounting
principles and practices, consistently applied, and do not reflect the deferred
income tax liabilities of the Acquired Companies, and otherwise fairly and
accurately present, in all material respects, the financial position and results
of operations of the Acquired Companies as of the respective dates thereof.
3.5.2 The Acquired Companies have no liabilities or obligations (whether
accrued, absolute, contingent or otherwise) which are of a nature required to be
reflected in financial statements prepared in accordance with GAAP (including,
without limitation, any liability which might result from an audit of its tax
returns by any appropriate authority), except for (A) the liabilities and
obligations which are disclosed, or reserved against, in the Interim Financial
Statements or Exhibit 3.5.2, to the extent and in the amounts so disclosed or
reserved against, (B) deferred income tax liabilities of the Acquired Companies
and (C) liabilities incurred or accrued in the ordinary course of business since
October 31, 1998 and which would not, either individually or in the aggregate,
have an adverse effect on the business, assets or operations of any of the
Acquired Companies.
3.5.3 Except as disclosed in the Interim Financial Statements or Exhibit 3.5.3,
the Acquired Companies are not in default with respect to any liabilities or
obligations other than where such default would not have an adverse effect on
the Acquired Companies, and all such liabilities or obligations shown or
reflected in the Interim Financial Statements or Exhibit 3.5.3 and such
liabilities incurred or accrued subsequent to October 31, 1998 have been, or are
being, paid and discharged as they become due, and all such liabilities and
obligations were incurred in the ordinary course of business except as indicated
in Exhibit 3.5.3.
3.6 Tax Returns. The Acquired Companies have, as of the date hereof, and will
have prior to the Closing, timely and accurately filed all federal, state,
foreign and local tax returns and reports (including, without limitation,
income, sales, use, excise, payroll, real and personal property tax returns and
reports) required to be filed by them prior to such date (giving effect to any
applicable extensions of statutes of limitations) and have timely paid, or will
timely pay prior to the Closing, all taxes shown on such returns as owed for the
periods of such returns, including all withholding or other payroll related
taxes shown on such returns. In the event any of the Acquired Companies has
extended any tax return to a date which is after the Closing, such Acquired
Company has made all deposits or payments required with such extension. No
assessments or notices of deficiency or other written communications from any
taxing authority with respect to any unpaid taxes, assessments or deficiencies
have been received by any of the Acquired Companies with respect to any such tax
return which have not been paid, discharged or fully reserved against in the
Interim Financial Statements or described on Exhibit 3.6, and no amendments or
applications for refund have been filed or are planned with respect to any such
return. Except as described on Exhibit 3.6, there are no agreements between any
of the Acquired Companies and any taxing authority, including, without
limitation, the Internal Revenue Service, waiving or extending any statute of
limitations with respect to any tax return or any consent or election under the
Code, other than such consents and elections, if any, reflected in the tax
returns of an Acquired Company for its
<PAGE>
taxable years ending on or before October 31, 1998, but after June 30, 1994.
True and complete copies of the state and federal income tax returns required to
be filed by the Acquired Companies for the three (3) taxable years prior to the
Closing have been provided to Purchaser. Except as described on Exhibit 3.6, the
federal and state income tax returns of the Acquired Companies have never been
audited by the Internal Revenue Service.
3.7 Ownership of Assets and Leases.
3.7.1 Exhibit 3.7.1.1 attached hereto contains a list of all fixed asset groups
(by type and year acquired) owned by each of the Acquired Companies, including,
but not limited to, all leasehold improvements and all machinery and equipment,
office furniture and equipment, and all vehicles owned by the Acquired Companies
as of October 31, 1998. The Acquired Companies have good and marketable title to
all of the assets shown on Exhibit 3.7.1.1. Except as shown on Exhibit 3.8, such
assets are not subject to any mortgage, pledge, lien, security interest,
conditional sale agreement, encumbrance, charge or adverse claim whatsoever,
other than Permitted Liens. Except as shown on Exhibit 3.7.1.2 or Exhibit
3.15.2, none of the properties or assets material to the businesses of the
Acquired Companies are held under any lease, or as conditional vendee under any
conditional sale or other title retention agreement. Exhibit 3.7.1.2 includes a
list of all leases of all land, buildings, machinery, and equipment on the books
of, or used in connection with the operations of, the Acquired Companies of
which the Acquired Companies are tenants or lessees and involving obligations of
more than $25,000 per annum, including respective expiration dates and monthly
rentals. None of the property, real, personal, intangible, or mixed, of the
Acquired Companies shown on Exhibits 3.7.1.1 or 3.7.1.2 is leased by the
Acquired Companies to any other person or entity except as set forth thereon.
There is no real property that is employed or used in connection with the
businesses or operations of the Acquired Companies which is not described in
Exhibits 3.7.1.1 or 3.7.1.2, and there are no items of machinery and equipment
or vehicles material to the businesses of the Acquired Companies which are not
described in Exhibits 3.7.1.1 or 3.7.1.2. Exhibit 3.7.1.1 includes depreciation
schedules of the assets shown thereon. Except as set forth on Exhibit 3.7.1.1,
all buildings, machinery and equipment owned or leased by the Acquired Companies
are usable and operable in the businesses of the Acquired Companies as they are
now being conducted and are in good operating condition and reasonable state of
repair, subject only to ordinary wear and tear. The Acquired Companies do not
have nor do they maintain in the ordinary course of their businesses inventories
of a nature which are readily salable. The Acquired Companies have not received
any notice of violation of any applicable zoning regulation, ordinance or other
law, regulation or requirement relating to its operations and properties,
whether owned or leased, and there is no such violation or, to the knowledge of
the Acquired Companies and the Shareholders, grounds therefor which could
materially adversely affect the operation of the businesses conducted by the
Acquired Companies. Except pursuant to this Agreement and except as set forth in
Exhibits 3.15.2 and 3.1.7.2, neither the Acquired Companies nor the Shareholders
are a party to any contract or obligation whereby there has been granted to
anyone an absolute or contingent right to purchase, obtain or acquire any rights
in any of the material assets, properties or operations which are owned by the
Acquired Companies or which are used in connection with the businesses of the
Acquired Companies. The assets of the Acquired Companies (owned, leased or
licensed) are now, and at the Closing will be, sufficient for the operation of
the businesses of the Acquired Companies consistent with their operations for
the most recent fiscal year.
<PAGE>
3.7.2 Except as disclosed in Exhibits 3.7.1 and 3.7.2, the Acquired Companies
will not own as of the Acquired Companies Effective Date, and have not owned
during the three (3) year period prior to the Closing Date, any real property.
3.7.3 No water or sewer charges or other similar assessments relating to any
real property or the improvements thereon occupied by the Acquired Companies and
for which the Acquired Companies are responsible for paying are delinquent,
including, to the knowledge of the Acquired Companies and the Shareholders, any
special charges or assessments pending or threatened against such real property
or the improvements thereon.
3.7.4 There are no pending, or, to the knowledge of the Acquired Companies and
the Shareholders, threatened or contemplated, eminent domain proceedings
affecting the real property or any part thereof occupied by the Acquired
Companies.
3.8 Indebtedness of the Acquired Companies. Attached hereto as Exhibit 3.8 is a
list of all instruments, agreements or arrangements pursuant to which the
Acquired Companies have borrowed any money, incurred any indebtedness, or
established any line of credit which represents a liability of the Acquired
Companies on the date hereof and which involve obligations of greater than
$25,000 per annum. The Acquired Companies have performed all the obligations
required to be performed by them through the date hereof pursuant to the
obligations listed on Exhibit 3.8 and the Acquired Companies are not in default
under any mortgage, indenture, note or other obligation for, or relating to,
borrowed money to which any of the Acquired Companies is a party, or to which
any property or assets belonging to, or used by, any of the Acquired Companies
is subject, and there has not occurred any event which, but for the passage of
time or giving of notice, or both, would constitute a default under any such
instrument, document or obligation other than where such default would not have
an adverse affect on any of the Acquired Companies.
3.9 Accounts Receivable and Notes Receivable. Attached hereto as Exhibit 3.9 is
a true and complete list of all of the accounts receivable of the Acquired
Companies included as part of the Interim Financial Statements and all of the
notes receivable of the Acquired Companies. All services rendered between
October 31, 1998 and the Closing have been, or will have been, (as applicable)
properly recorded consistent with past practice on the books of the Acquired
Companies in the ordinary course of business.
3.10 Agreement Does Not Violate Other Instruments. Except as listed in Exhibit
3.10, the execution and delivery of this Agreement by the Acquired Companies or
the Shareholders does not, and the consummation of the transactions contemplated
hereby will not, violate any provision of the Articles of Incorporation, as
amended, or Bylaws, as amended, of the Acquired Companies or violate or
constitute an occurrence of default under any provision of, or conflict with, or
result in acceleration of any obligation under, or give rise to a right by any
party to terminate its obligations under, any mortgage, deed of trust,
conveyance to secure debt, note, loan, lien, lease, license, agreement,
instrument, or any order, judgment, decree or other arrangement to which any of
the Acquired Companies or a Shareholder are a party or are bound or by which the
assets of any of the Acquired Companies are bound, except for such violations,
defaults, conflicts, acceleration and rights to terminate which would not
prevent the consummation of the transactions contemplated hereby. Except as
listed on Exhibit 3.10 and except for the filing of the Articles of Merger for
each of the Acquired Companies Mergers as required by the Arizona Business
Corporation Act, no consent, approval, order or authorization of, or
registration, declaration or filing with, any governmental entity is required to
be obtained or made by or with respect to the Acquired Companies, or any assets,
properties or operations of the Acquired Companies or a Shareholder, in
connection with the execution and delivery by the Acquired Companies or the
Shareholders of this Agreement or the consummation of the transactions
<PAGE>
contemplated hereby except for such consents, approvals, order or
authorizations, or registrations, declarations or filings the failure of which
to obtain or make would not prevent the consummation of the transactions
contemplated hereby.
3.11 Absence of Changes. Except as disclosed on Exhibit 3.11, since October 31,
1998, the Acquired Companies have not:
3.11.1 Transferred, assigned, conveyed or liquidated into current assets any of
their assets or businesses or entered into any transaction or incurred any
liability or obligation, other than in the ordinary course of their businesses;
3.11.2 Suffered any adverse change in their businesses, operations, or financial
condition or become aware of any event or state of facts which would reasonably
likely result in any such adverse change;
3.11.3 Suffered any destruction, damage or loss, whether or not covered, by
insurance;
3.11.4 Suffered, permitted or incurred the imposition of any lien, charge,
encumbrance (which as used herein includes, without limitation, any mortgage,
deed of trust, conveyance to secure debt or security interest) or claim upon any
of their assets, other than in the ordinary course of business or any Permitted
Liens;
3.11.5 Committed, suffered, permitted or incurred any default in any agreement,
liability or obligation binding on any Acquired Company;
3.11.6 Made or agreed to any material adverse change in the terms of any
contract or instrument to which any of them is a party;
3.11.7 Waived, canceled, sold or otherwise disposed of any claim or right which
any of them have against others and which had a value reasonably estimated to be
greater than $25,000;
3.11.8 Declared, promised or made any distribution or other payment to the
Acquired Companies Shareholders (other than compensation for services actually
rendered paid in the ordinary course consistent with past practices) or issued
any shares or rights, options or calls with respect to the shares of capital
stock of the Acquired Companies, or redeemed, purchased or otherwise acquired
any of the shares of capital stock of the Acquired Companies, or made any change
whatsoever in the capital structure of the Acquired Companies, except for any
such
<PAGE>
distributions or payments made to the ESOP in the ordinary course of business
consistent with past practice;
3.11.9 Paid, agreed to pay or incurred any obligation for any payment for, any
contribution or other amount to, or with respect to, any Benefit Plan (except
pursuant to the existing terms of such plans and pursuant to any change in any
applicable law), or paid any bonus to, or granted any increase in the
compensation of, the directors, officers, consultants, agents or employees of
the Acquired Companies, or made any increase in the pension, retirement or other
benefits of their directors, officers, consultants, agents, field
representatives or other employees except in the ordinary course of business
consistent with past practice;
3.11.10 Incurred any other liability or obligation or entered into any
transaction other than in the ordinary course of business or other than in
connection with the transactions contemplated hereby and disclosed herein;
3.11.11 Received any notices, and neither the Acquired Companies nor the
Shareholders have reason to believe, that any supplier has taken or is
contemplating taking any steps which could materially disrupt the business
relationship of any of the Acquired Companies with said supplier or could result
in the material diminution in the value of the Acquired Companies as a going
concern;
3.11.12 Paid, agreed to pay, or incurred any obligation for any payment of, any
indebtedness (other than in connection with the transactions contemplated hereby
and as disclosed herein) except (i) current liabilities incurred in the ordinary
course of business, and (ii) payments as they become due pursuant to governing
agreements disclosed hereunder as such agreements existed on the Execution Date
(or as amended thereafter as not otherwise prohibited by this Agreement);
3.11.13 Delayed or postponed the payment of any liabilities, whether current or
long term, or failed to pay in the ordinary course of business any liability on
a timely basis consistent with prior practice, except for any liability being
challenged in good faith by the Acquired Companies; or,
3.11.14 Except as set forth in Exhibit 2.11.4, amended or modified any Benefit
Plan to increase benefits or accelerate eligibility or vesting thereunder or
added any Benefit Plan.
3.12 Litigation. There is no suit, action, proceeding, claim or investigation
pending or, to the knowledge of the Acquired Companies or the Shareholders,
threatened against any of the Acquired Companies and, to the knowledge of the
Acquired Companies and the Shareholders, there exists no substantial basis or
grounds for any such suit, action, proceeding, claim or investigation that would
be reasonably likely to result in an outcome adverse to the Acquired Companies.
3.13 Licenses and Permits; Compliance With Law. The Acquired Companies hold all
licenses, certificates, permits, franchises and rights from all appropriate
federal, state or
<PAGE>
other governmental or regulatory authorities reasonably necessary for the
conduct of their businesses and the use of their assets other than where the
failure to hold such licenses, certificates, permits, franchises and rights
would not have an adverse effect on any of the Acquired Companies. All such
licenses, certificates, permits, franchises and rights which are reasonably
necessary to the businesses are listed in Exhibit 3.13. Except as noted in
Exhibit 3.13, the Acquired Companies are presently conducting their businesses
so as to comply in all material respects with all applicable statutes,
ordinances, rules, regulations and orders of any governmental or regulatory
authority applicable thereto. Further, the Acquired Companies are neither
presently charged with nor, to the knowledge of the Acquired Companies and
Shareholders, under governmental investigation with respect to, any actual or
alleged violation of any statute, ordinance, rule or regulation, nor are
presently the subject of any pending or, to the knowledge of the Acquired
Companies and Shareholders, threatened adverse proceeding by any regulatory
authority having jurisdiction over their businesses, properties or operations.
Neither the execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the termination of any license,
certificate, permit, franchise or right held by any of the Acquired Companies
reasonably necessary to conduct their businesses.
3.14 Contracts, Etc. Exhibit 3.14 hereto consists of a true and complete list of
all contracts, agreements and other instruments to which the Acquired Companies
are a party which requires or is likely to require the payment by the Acquired
Companies of an amount, or requires the Acquired Companies to provide goods or
services having a sales price or fair market value, equal to $25,000 or more per
annum, except for those contracts, insurance policies and Benefit Plans listed
in Exhibits 3.7.1.2, 3.8, 3.9, 3.13, 3.14, 3.15.1, 3.15.2 and 3.17,
respectively. On or prior to the delivery to Purchaser of the Exhibits to this
Agreement, the Acquired Companies have delivered a true and complete copy of
each such contract, agreement or instrument, including those listed in Exhibits
3.7.1.2, 3.8, 3.9, 3.13, 3.14, 3.15.1, 3.15.2 and 3.17. Except as set forth in
Exhibits 3.7.1.2, 3.8, 3.9, 3.13, 3.14, 3.15.1, 3.15.2 or 3.17, none of the
Acquired Companies is a party or subject to, whether oral or written, any of the
following:
3.14.1 Any contracts, commitments or agreements, the consummation or performance
of which would, either singly or in the aggregate, have a material adverse
impact upon their businesses, operations or financial condition;
3.14.2 Any contract or agreement which is outside of the ordinary course of
their businesses or at a price or prices materially in excess of those otherwise
available at the time such contract or commitment was entered into;
3.14.3 Any contract or agreement which requires services to be provided or
performed by the Acquired Companies or which authorizes others to perform
services for, through or on behalf of the Acquired Companies (except in the
ordinary course of business) having a sales price or fair market value, equal to
$25,000 or more per annum;
3.14.4 Any lease, rental agreement or other contract for the lease of any real
or personal property and any maintenance or service agreements, in each case
requiring aggregate annual payments in excess of $25,000 relating to any real or
personal property;
<PAGE>
3.14.5 Any note receivable;
3.14.6 Any contract or agreement providing for payments based in any manner upon
the sales, purchases, receipts, income or profits of the Acquired Companies;
3.14.7 Any contract or agreement, or sales or purchase order, which involves
future payments, performance of services or delivery of goods and/or materials,
to or by the Acquired Companies with an annual amount or value in the aggregate
in excess of $25,000 (other than trade accounts payable incurred in the ordinary
course of business with an amount or value of less than $25,000);
3.14.8 Any franchise agreement, marketing agreement or royalty agreement;
3.14.9 Any contract or agreement with a creditor not made in the ordinary course
of business;
3.14.10 Any employment contract or arrangement regarding employees, independent
contractors, consultants or field representatives which is not terminable by any
Acquired Company within thirty (30) days without payment of any amount for any
reason whatsoever, or without any required continuing payment of any type or
nature, including, without limitation, any bonuses and vested commissions;
3.14.11 Any plan or other arrangement providing for life insurance, pensions,
stock rights, distributions, options, deferred compensation, retirement
payments, profit sharing, medical reimbursements or other benefits for officers
or other employees or independent contractors or field representatives;
3.14.12 Any contract or agreement restricting the Acquired Companies from
carrying on their businesses;
3.14.13 Any instrument or agreement evidencing or related to indebtedness for
money borrowed or to be borrowed, whether directly or indirectly, by way of
purchase money obligation, guaranty, subordination, conditional sale,
lease-purchase or otherwise;
3.14.14 Any contract with any labor organization;
3.14.15 Any policy of life, fire, liability, medical or other form of insurance;
3.14.16 Any order or written approval of any federal, state or local
governmental or regulatory authority required to conduct their businesses; or,
3.14.17 Any contract or agreement with any contract programmer, independent
contractor, consultant, nonemployee agent or other entities (other than an
employee) to perform computer programming services for the Acquired Companies.
<PAGE>
All of the contracts, agreements, policies of insurance or instruments described
in Exhibits 3.7.1.2, 3.8, 3.9, 3.13, 3.14, 3.15.1, 3.15.2 and 3.17 hereto are
valid and binding upon the Acquired Companies and, to the knowledge of the
Acquired Companies and the Shareholders, the other parties thereto and are in
full force and effect and enforceable in accordance with their terms, except as
enforceability may be limited by applicable equitable principles or by
bankruptcy, insolvency, reorganization, moratorium, or similar laws from time to
time in effect affecting the enforcement of creditors' rights generally and
neither the Acquired Companies nor, to the knowledge of the Acquired Companies
and the Shareholders, any other party to any such contract, commitment or
arrangement has breached any provision of, or is in default under, the terms
thereof. Except for items specifically described in Exhibit 3.14, neither the
Acquired Companies nor the Shareholders have received any payment from any
contracting party in connection with or as an inducement for entering into any
contract, agreement, policy or instrument except for payment for actual services
rendered or to be rendered by the Acquired Companies.
3.15 Intellectual Property; Computer Software.
3.15.1 Intellectual Property.
3.15.1.1 Exhibit 3.15.1 hereto sets forth a complete and correct list and
summary description of all trademarks, trade names, service marks, service
names, brand names, copyrights and patents, registrations thereof and
applications therefor, owned by or used in the businesses of each of the
Acquired Companies together with a complete list of all licenses granted by or
to the Acquired Companies with respect to any of the above. Except as set forth
on Exhibit 3.15.1, all such trademarks, trade names, service marks, service
names, brand names, copyrights and patents are either (i) owned by an Acquired
Company, free and clear of all liens, and encumbrances of any nature whatsoever,
other than Permitted Liens or (ii) licensed by an Acquired Company pursuant to
valid, binding license agreements which are set forth on Exhibit 3.15.1. The
Acquired Companies are not currently in receipt of any notice of any alleged
violation of, and, to the knowledge of the Acquired Companies and the
Shareholders, the Acquired Companies are not violating, the rights of others in
any trademark, trade name, service mark, copyright, patent, trade secret,
know-how or other intangible asset.
3.15.1.2 Also, attached hereto as Exhibit 3.15.1 sets forth the Certificates of
Registration issued by the U.S. Patent and Trademark Office for the trademarks
listed thereon for which registrations have been issued (the "Marks"). The
trademark registrations set forth on Exhibit 3.15.1 are owned exclusively by the
Acquired Companies designated in Exhibit 3.15.1, free and clear of all liens,
security interests and encumbrances of any nature whatsoever, other than
Permitted Liens.
<PAGE>
3.15.1.3 The designated Acquired Company is the owner of the federal
Registration Nos. listed in Exhibit 3.15.1 in the U.S. Patent and Trademark
Office for the Marks noted thereon for use in connection with its business, and
such registrations are in full force and effect.
3.15.1.4 Except as described in Exhibit 3.15.1, the Acquired Companies have not
granted any license, permits or other authorization to any other person or
entity to use said Marks and have made no conveyance of any such rights;
3.15.1.5 There have been, and are, no past or present disputes or litigation or,
to the knowledge of the Acquired Companies and the Shareholders demands,
challenging on the ownership by the Acquired Companies or any predecessor, of
any of the said Marks or challenging the validity of any of the Marks or the
registration thereof;
3.15.1.6 There are no prior settlements, agreements, or administrative or
judicial decisions affecting ownership or validity of the Marks or limiting the
right of the Acquired Companies, or to the knowledge of the Acquired Companies
and the Shareholders, any predecessor owner, to use or register the Marks or to
grant this assignment; and,
3.15.1.7 There are no other agreements, contracts or licenses to which any of
the Acquired Companies is a party granting, limiting, encumbering or otherwise
directly or indirectly affecting the ownership or use of, or the right to use or
assign, the Marks by the Acquired Companies.
3.15.2 Computer Software. The designated Acquired Company has good and
marketable title to that computer software (and any code (object and source),
design documentation, user, system, installation or similar manuals,
specifications, diagrams, documentation, flow charts, functional descriptions,
ideas, know-how, trade secrets, methods, processes, training materials and other
related materials, regardless of the media on which such materials reside)
reasonably necessary to the conduct of the business of the Acquired Companies as
presently conducted and which is not Licensed Software (the "Owned Software"),
free of all claims, including claims or rights of employees, agents, consultants
or other parties involved in the development or creation of such computer
software. Except as set forth on Exhibit 3.15.2, the designated Acquired Company
has the right and license to use, sublicense, modify and copy that software
described as "Licensed Software" on Exhibit 3.15.2 (the "Licensed Software")
free and clear of any limitations or encumbrances except as may be set forth in
any agreements listed in Exhibit 3.15.2. Exhibit 3.15.2 sets forth a list of all
license fees, rents, royalties or other charges that each such Acquired Company
is expressly obligated to pay after the Closing with respect to Licensed
Software that is substantially in excess of the amounts the Acquired Companies
are paying as of Execution Date with respect to the Licensed Software. The
Acquired Companies are in compliance, in all material respects, with all
provisions of any license, lease or other similar agreement pursuant to which
they have rights to use the Licensed Software. Except as disclosed on Exhibit
3.15.2, none of the Licensed Software has been incorporated into or made a part
of any Owned Software or any other Licensed Software by any Acquired Company and
none of the Owned Software is dependent on any Licensed Software in violation of
any rights of third parties. The Owned Software and Licensed Software constitute
all software used in the businesses of such Acquired Companies, excluding object
code, end-user, non-exclusive licenses granted to any Acquired Company as an
end-user in the ordinary course of business that permit the use of such software
products without a right to modify, distribute or sublicense such products (the
"Acquired Companies Software"). To the knowledge of the Acquired Companies and
the Shareholders, the Acquired Companies are not infringing any intellectual
property rights of any other person or entity
<PAGE>
with respect to the Acquired Companies Software, and, to the knowledge of the
Acquired Companies and the Shareholders, no other person or entity is infringing
any intellectual property rights in the Acquired Companies Software which the
Acquired Companies leases or licenses to it.
3.16 Labor Matters. The Acquired Companies have provided Purchaser with a
complete and accurate list of all employees and independent contractors of the
Acquired Companies and their current salaries or rates and the salary increase
guidelines of the Acquired Companies as of October 31, 1998. In addition, the
Acquired Companies have provided Purchaser with a complete and accurate copy of
the commission formula used, as of the Execution Date, to determine compensation
for those employees who are compensated based, in whole or in part, upon
commissions from the sales of products or services of the Acquired Companies.
Except as set forth on Exhibit 3.16, within the last three (3) years none of the
Acquired Companies have been the subject of any union activity or labor dispute,
nor has there been any strike of any kind called, or, to the knowledge of the
Acquired Companies and the Shareholders, threatened to be called against any of
them. Except as set forth on Exhibit 3.16 and to the knowledge of the Acquired
Companies and the Shareholders, the Acquired Companies have not violated, in any
material respect, any applicable federal or state law or regulation relating to
labor, labor practices, or employment practices. The staffing and employment
levels of the Acquired Companies are now, and will be at the Closing, sufficient
to run the businesses of the Acquired Companies at levels of production, sales,
marketing and administration consistent with the levels of production, sales,
marketing and administration for the prior fiscal year.
3.17 Benefit Plans.
3.17.1 Exhibit 3.17 lists every pension, retirement, profit-sharing, deferred
compensation, stock option, employee stock ownership, severance pay, vacation,
bonus or other incentive plan, any other written or unwritten employee program,
arrangement, agreement or understanding, (whether arrived at through collective
bargaining or otherwise), any medical, vision, dental or other health plan, any
life insurance plan or any other employee benefit plan or fringe benefit plan,
including, without limitation, any "employee benefit plan," as that term is
defined in Section 3(3) of the Employee Retirement Income Security Act of 1974
as amended ("ERISA") and any multiemployer plan within the meaning of Section
3(37) of ERISA, currently or previously adopted, maintained, sponsored in whole
or in part or contributed to by the Acquired Companies for any current or former
member of a commonly controlled group of trades or businesses (as defined in
Section 4001(b)(1) of ERISA) including the Acquired Companies for the benefit of
employees, retirees, dependents, spouses, directors, independent contractors or
other beneficiaries of the Acquired Companies under which employees, retirees,
dependents, spouses, directors, independent contractors or other beneficiaries
of the Acquired Companies are eligible to participate or under or in connection
with which the Acquired Companies have any contingent or noncontingent liability
of any kind whether or not probable of assertion (collectively, the "Benefit
Plans"). Any of the Benefit Plans which is an "employee pension benefit plan,"
as that term is defined in Section 3(2) of ERISA, or an "employee welfare
benefit plan" as that term is defined in Section 3(1) of ERISA, is referred to
herein as an "ERISA Plan." No Benefit Plan is or has been a multiemployer plan
within the meaning of Section 3(37) of ERISA or a defined benefit plan within
the meaning of Section 4001(a)(15) of ERISA.
<PAGE>
3.17.2 Exhibit 3.17 also lists: (a) all trust agreements or other funding
arrangements, including insurance contracts, and all amendments thereto
applicable to the Benefit Plans; (b) where applicable, with respect to any such
plan or plan amendments, the most recent determination letters issued by the
United States Internal Revenue Service; (c) all rulings, opinion letters,
information letters or advisory opinions issued by the United States Department
of Labor after December 31, 1994, with respect to such Benefit Plan; (d) annual
reports or returns and audited or unaudited financial statements for the most
recent three plan years and any amendments thereto; and (e) the most recent
summary plan descriptions and any material modifications thereto with respect to
such Benefit Plans. Contemporaneous with the delivery of the Exhibits to this
Agreement, the Acquired Companies and the Shareholders have delivered a true and
complete copy of each such Benefit Plan, agreements, letters, rulings, opinions,
reports, returns, financial statements and/or summary descriptions described in
Section 3.17.1 or 3.17.2.
3.17.3 All the Benefit Plans and the related trusts subject to ERISA comply with
and have been administered in compliance, in all material respects, with all
applicable provisions of ERISA and the Code and all other applicable laws, rules
and regulations and collective bargaining agreements, and neither the Acquired
Companies nor the Shareholders have received any notice from any governmental or
regulatory authority questioning or challenging such compliance. To the
knowledge of the Acquired Companies and the Shareholders, no event has occurred
which will or could give rise to disqualification of any such plan under
Sections 401(a) or 501(a) of the Code or to a tax under Section 511 of the Code.
3.17.4 Neither the Acquired Companies nor, to the knowledge of the Acquired
Companies and the Shareholders, any administrator or fiduciary of any such
Benefit Plan (or agent or delegate of any of the foregoing) has engaged in any
transaction or acted or failed to act in any manner which could subject the
Acquired Companies to any direct or indirect material liability (by indemnity or
otherwise) for a breach of any fiduciary, co-fiduciary or other duty under
ERISA. Except as disclosed in Exhibit 3.17 and other than routine, non-contested
claims for benefits, there are no unresolved claims or disputes under the terms
of, or in connection with, the Benefit Plans, and no action, legal or otherwise,
has been commenced with respect to any claim.
3.17.5 To the knowledge of the Acquired Companies or the Shareholders, no "party
in interest" (as defined in Section 3(14) of ERISA) or "disqualified person" (as
defined in Section 4975(e)(2) of the Code) of any Benefit Plan has engaged in
any non-exempt "prohibited transaction" (within the meaning of Section 4975(c)
of the Code or Section 406 of ERISA) that would subject the Acquired Companies
to any material liability. There has been no (a) "reportable event" (as defined
in Section 4043 of ERISA), or event described in Section 4062(f) or Section
4063(a) of ERISA or (b) termination or partial termination, withdrawal or
partial withdrawal with respect to any of the ERISA Plans which the Acquired
Companies (or any member of a controlled group of trades or businesses as
defined in Section 4001(b) which has, since January 1, 1992, included the
Acquired Companies) maintain or contribute to or have maintained or contributed
to or were required to maintain or contribute to for the benefit of employees of
the Acquired Companies or any subsidiaries thereof now or formerly in existence
which could result in a material liability to the Acquired Companies or any
beneficiary thereof.
<PAGE>
3.17.6 Except as disclosed in Exhibit 3.17, the Acquired Companies had no
liability as of October 31, 1998, under any Benefit Plan that was not reflected
in the Interim Financial Statements that was required to be so reflected in
accordance with the historical accounting practices and procedures of the
Acquired Companies.
3.17.7 The Acquired Companies do not maintain any Benefit Plan providing
deferred or stock based compensation which is not reflected in the Interim
Financial Statements.
3.17.8 The Acquired Companies have not maintained, and do not now maintain, a
Benefit Plan providing post-retirement medical or life benefits to employees
after retirement or other separation of service except to the extent required
under Part 6 of Title I of ERISA and Code Section 4980B.
3.17.9 Except as disclosed in Exhibit 3.17, the consummation of the transactions
contemplated by this Agreement will not (i) entitle any current or former
employee of the Acquired Companies to severance pay or any payment contingent
upon a change in control or ownership of any of the Acquired Companies, or (ii)
accelerate the time of payment or vesting, or increase the amount, of any
compensation due to any such employee or former employee.
3.17.10 All Benefit Plans subject to section 4980B of the Code as amended from
time to time or Part 6 of Title I of ERISA or both have been maintained in
compliance, in all material respects, with the requirements of such laws and any
regulations issued thereunder.
3.18 Acquired Companies Customers. As of the Acquired Companies Effective Date,
the Acquired Companies will have provided Purchaser with a true and correct list
of all customers of each of the Acquired Companies as of the Acquired Companies
Effective Date setting forth as to each customer its name, address, telephone
number and principal person of contact. Except as disclosed in Exhibit 3.18, the
Acquired Companies have not received any notice and have no knowledge that any
such customer of the Acquired Companies has taken or is contemplating taking any
steps which could result in the material diminution in the value of the business
of the Acquired Companies with such customer or which could result in the
material diminution in the value of the businesses of the Acquired Companies as
a going concern.
3.19 Environmental Matters. Except as set forth in Exhibit 3.19, to the
knowledge of the Acquired Companies and the Shareholders, no real property
owned, used or leased by the Acquired Companies (the "Property") has been used
by the Acquired Companies or any other party for the handling, treatment,
storage or disposal into the environment of any Hazardous Substance (as
hereinafter defined) during the period of the ownership, use or lease by the
Acquired Companies. Except as set forth in Exhibit 3.19, no release, discharge,
spillage or disposal of any Hazardous Substance and no soil, water or air
contamination by any Hazardous Substance has occurred or is occurring in, from
or on the Property the result of which would have a material adverse effect on
the Acquired Companies. Except as set forth in Exhibit 3.19, the Acquired
Companies have complied, in all material respects, with all reporting
requirements under any applicable federal, state or local environmental laws and
permits, and there are no existing violations by the Acquired Companies of any
such environmental laws or permits. Except as set
<PAGE>
forth in Exhibit 3.19, there are no actions, suits, proceedings or
investigations against any of the Acquired Companies related to the presence,
release, production, handling, discharge, spillage, transportation or disposal
of any Hazardous Substance or ambient air conditions or contamination of soil,
water or air by any Hazardous Substance pending or, to the knowledge of the
Acquired Companies and the Shareholders, threatened with respect to the Property
or otherwise against any of the Acquired Companies in any court or before any
state, federal or other governmental or regulatory authority or private
arbitration tribunal and, to the knowledge of the Acquired Companies and the
Shareholders, there is no basis for any such claim, action, suit, proceeding or
investigation. To the knowledge of the Acquired Companies, there are no
underground storage tanks on the Property, and no building or other improvement
included in the Property contains any asbestos or any asbestos-containing
materials, and such buildings and improvements are free from radon
contamination. For the purposes of this Agreement, "Hazardous Substance" shall
mean any hazardous or toxic substance or waste as those terms are defined by any
applicable federal, state or local law, ordinance, regulation, policy, judgment,
decision, order or decree including, without limitation, the Comprehensive
Environmental Recovery Compensation and Liability Act, 42 U.S.C. 9601 et seq.
("CERCLA"), the Hazardous Materials Transportation Act, 49 U.S.C. 1801 et seq.
and the Resource Conservation and Recovery Act, 42 U.S.C. 6901 et seq., ("RCRA")
and petroleum, petroleum products and oil.
3.20 Insurance. The Acquired Companies have provided Purchaser with true and
complete copies of all insurance policies which the Acquired Companies
maintained with respect to their businesses, properties or employees within the
preceding two years and which are currently still in full force and effect. No
event has occurred which would give any insurance carrier a right to terminate
any such policy. Such policies, with respect to their amounts and types of
coverage, are reasonable in the context of industry practice. Except as set
forth in Exhibit 3.20, since October 31, 1998, there has not been any change in
the premiums payable pursuant to such policies other than in accordance with the
terms of such policies.
3.21 Related Party Relationships. To the knowledge of the Acquired Companies and
the Shareholders, and except as set forth in Exhibit 3.21, no Shareholder nor
any officer or director of the Acquired Companies possesses, directly or
indirectly, any beneficial interest in, or is a director, officer or employee
of, any corporation, partnership, firm, association or business organization
which is a client, supplier, customer, lessor, lessee, lender, creditor,
borrower, debtor or contracting party with or of the Acquired Companies (except
as a holder of less than a one percent (1%) equity interest in an entity whose
shares are traded on national or regional securities exchange or in the
over-the-counter market).
3.22 Brokers. No investment banker, broker or finder has acted for the Acquired
Companies or the Shareholders in connection with this Agreement or any of the
transactions contemplated hereby.
3.23 Loans and Advances. Except as set forth in Exhibit 3.23, there are no loans
and advances made by the Acquired Companies to any Acquired Companies
Shareholders or any other employee or contractor of such Acquired Companies.
Prior to or at the Closing and except for the loans set forth in Exhibit 3.23,
all loans and advances made by the Acquired Companies to any Acquired Companies
Shareholder or any other employee or contractor of the Acquired
<PAGE>
Companies shall be repaid along with all accrued interest and as of the Closing,
and except for the loans set forth on Exhibit 3.23, no outstanding amounts shall
be due to the Acquired Companies from any such Shareholder or employee or
contractor. The Acquired Companies have not forgiven any such indebtedness nor
have they dispersed funds by way of bonus or otherwise to any Shareholder or any
employee or contractor for the direct or indirect purpose of providing funds to
repay such loans or advances. In no event will the aggregate outstanding loans
to the Shareholders exceed $1,500,000 on the Closing Date; provided that such
amount will not apply to costs of the Shareholders or the Acquired Companies to
enter into the transactions contemplated by this Agreement. Except for payments
by the Acquired Companies of the costs of the Shareholders and the Acquired
Companies to enter into the transactions contemplated by this Agreement, whether
paid before, on or after the Execution Date (which payments shall be treated as
loans to the Shareholders), no loans or advances will be made by the Acquired
Companies to its other employees or contractors after the Execution Date. Any
such costs incurred by the Surviving Corporations for services rendered after
the Closing Date shall not be the responsibility of the Shareholders. With
respect to those loans or advances to the Shareholders described in Exhibit
3.23, such amounts shall be repaid in full, with interest thereon from the
Closing Date at the Applicable Federal Rate, more than one year (but not more
than fourteen months) following the Closing which amounts may be repaid in
Shares based upon the then current fair market value on the last business day
preceding such repayment. At the request of the Purchaser after the Closing
Date, Shareholders agree to execute and deliver to Purchaser promissory notes
(which notes shall include the interest and payment terms described in this
Section 3.23) reasonable acceptably to Purchaser to evidence the repayment
obligation of the Shareholders hereunder.
3.24 Year 2000. The Acquired Companies have formed a Year 2000 task force and
developed and implemented a Year 2000 project plan for its information
technology, in order to assure that its information technology is "Year 2000
Compliant" by June 30, 1999. The Acquired Companies have diligently pursued the
tasks and deadlines set forth in the project plan, and with respect to those
tasks which have not been completed as of the Closing Date in accordance with
the deadlines occurring prior to such date as set forth in the plan, such tasks
have been rescheduled in a manner which will meet the June 30, 1999 compliance
date. To the knowledge of the Acquired Companies and the Shareholders, there are
no existing facts, events or circumstances which are reasonably likely to
prevent the information technology of the Acquired Companies from becoming Year
2000 Compliant on or before June 30, 1999. For purposes of this provision, "Year
2000 Compliant" means the information technology of the Acquired Companies will
accurately receive, provide and process date/time data (including, but not
limited to, calculating, comparing, sequencing, displaying and reporting) from,
into and between the 20th and 21st centuries, including the years 1999 and 2000,
and leap year calculations and will not malfunction, cease to function or
provide invalid or incorrect results as a result of date/time data, to the
extent that other information technology used in combination with the
information technology of the Acquired Companies, properly provides and
exchanges valid and correct date/time data with it. For purposes of this
provision, "information technology" means any material computer hardware,
computer software, computer firmware or databases (whether for a specific or
general purpose), that are used by the Acquired Companies in the conduct of
their businesses. For purposes of this Section 3.24, information technology of
the Acquired Companies does not include software or databases which are licensed
by the Acquired Companies for which any Acquired Company is a non-exclusive
end-user in the ordinary course of business and for
<PAGE>
which such Acquired Company is permitted to use such software products without a
right to modify, distribute or sublicense such products. With respect to
Licensed Software that the Acquired Companies have installed all updates or
similar releases made available to the Acquired Companies by the providers of
such software and databases for the purpose of making such software or databases
Year 2000 Compliant, and for that software or databases for which no update or
similar Year 2000 release has been made available to the Acquired Companies, the
Acquired Companies have sought assurances from the providers that such software
or databases will be Year 2000 Compliant in accordance with the Acquired
Companies' Year 2000 project plan.
3.25 Information in Registration Statement. None of the information to be
supplied by the Acquired Companies for inclusion in the Registration Statement
will, at the time the Registration Statement becomes effective and at the
Acquired Companies Effective Date and at the time the Registration Statement is
first delivered to the Acquired Companies Shareholders and at the time of the
meetings of the shareholders of the Acquired Companies to be held in connection
with the transactions contemplated by this Agreement, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
3.26 Exhibits. All Exhibits attached hereto are true, correct and complete as of
the date of this Agreement and will be true, correct and complete as of the
Closing, except to the extent that such Exhibits may be untrue, incorrect or
incomplete due to changes occurring due to the operation of the Acquired
Companies in the ordinary course or as permitted by this Agreement.
3.27 WARRANTY DISCLAIMER. THE PARTIES HERETO AGREE THAT EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT, INCLUDING THE EXHIBITS HERETO, THE ACQUIRED COMPANIES
AND THE SHAREHOLDERS MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND OR
CHARACTER, EXPRESS OR IMPLIED.
4. REGISTRATION STATEMENT/ADDITIONAL AGREEMENTS.
4.1 Registration Statement. As promptly as practicable after the Execution Date,
the parties shall prepare and file with the SEC a Registration Statement on Form
S-4 under the Securities Act for the purposes of registering the Exchange
Shares. Each of the Purchaser, the Acquired Companies and the Shareholders shall
use their respective commercially reasonable efforts to have the Registration
Statement declared effective as promptly as possible. Purchaser shall also as
promptly as possible use its commercially reasonable efforts to take any action
required to be taken under state securities or blue sky laws in connection with
the issuance of the Shares pursuant to this Agreement. Purchaser and the
Acquired Companies shall furnish each other with all information concerning
Purchaser and the Acquired Companies, as the case may be, and the holders of
their capital stock and shall take such other action as each party hereto may
reasonably request in connection with the preparation of the Registration
Statement and the issuance of the Shares.
4.2 Affiliate Agreements. Within ten (10) days after the Execution Date, the
Acquired Companies shall cause to be delivered to Purchaser a list of all
persons who are, or are
<PAGE>
expected to be, "affiliates" of the Acquired Companies as the term is used in
Rule 145 under the Securities Act or under applicable SEC accounting releases
with respect to pooling of interests accounting treatment. The Acquired
Companies shall use their reasonable best efforts to cause each person who is
identified as a possible "affiliate" in the list furnished pursuant to this
Section 4.2 to deliver to Purchaser at Closing a written agreement in
substantially the form attached hereto as Exhibit 4.2.
5. REPRESENTATIONS AND WARRANTIES OF PURCHASER AND THE MERGER SUBS.
Purchaser and the Merger Subs, jointly and severally, represent and warrant to,
and for the benefit of, the Acquired Companies and the Acquired Companies
Shareholders as follows:
5.1 Organization and Standing and Foreign Qualifications. Purchaser is a
corporation duly organized, validly existing and in good standing under the laws
of the State of Delaware and the Merger Subs are corporations duly organized,
validly existing and in good standing under the laws of the State of Arizona,
and each has the full power and authority (corporate and otherwise) to carry on
its business in the places, and as, it is now being conducted and to own and
lease the properties and assets which it now owns or leases. Purchaser is now,
and will be at the Closing, duly qualified and/or licensed to transact business,
and in good standing as a foreign corporation, in each other jurisdiction in
which the character of the property owned or leased by Purchaser and the nature
of the business conducted by it requires such qualification and/or licensing,
except for such failures to be so qualified, licensed or in good standing which
would not have a Purchaser Material Adverse Effect.
5.2 Authority and Status. Each of Purchaser and the Merger Subs have the
capacity and authority to execute and deliver this Agreement, to perform
hereunder and to consummate the transactions contemplated hereby without the
necessity of any act or consent of any other person whomsoever. The execution,
delivery and performance by Purchaser and the Merger Subs of this Agreement and
each and every agreement, document, exhibit, and instrument provided for herein
have been duly authorized and approved by its respective Board of Directors or
Executive Committee thereof and by the Purchaser as sole shareholder of each of
the Merger Subs. This Agreement and each and every other agreement, document,
exhibit, and instrument to be executed, delivered and performed by Purchaser or
the Merger Subs in connection herewith constitute or will, when executed and
delivered, constitute the valid and legally binding obligations of Purchaser and
the Merger Subs, as the case may be, enforceable against each of them in
accordance with their respective terms, except as enforceability may be limited
by applicable equitable principles or by bankruptcy, insolvency, reorganization,
moratorium, or similar laws from time to time in effect affecting the
enforcement of creditors' rights generally.
5.3 Capitalization. The authorized capital stock of Purchaser consists of
200,000,000 Shares, par value $0.10 per share, and 1,000,000 shares of Preferred
Stock, par value $1.00 per share ("Preferred Stock"), of which 200,000 shares
have been designated as Series A Participating Preferred Stock (the
"Participating Preferred Stock"). As of December 28, 1998, (i) 77,871,734 Shares
were issued and outstanding and (ii) no shares of Preferred Stock were issued
and outstanding. All of the issued and outstanding Shares are validly issued,
fully paid and non-
<PAGE>
assessable and free of preemptive rights. All of the Shares
issuable in exchange for the shares of the capital stock of the Acquired
Companies at the Acquired Companies Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and non-assessable and the issuance thereof is not subject to any preemptive or
other similar rights. Purchaser has no other shares of capital stock authorized,
issued or outstanding other than as set forth above. Except as set forth in
Exhibit 5.3, there are no outstanding options, warrants, subscriptions, calls,
rights, convertible securities or other agreements or commitments obligating
Purchaser to issue, transfer or sell any of its securities other than (i) rights
to acquire shares of Participating Preferred Stock pursuant to the Rights
Agreement and (ii) as of December 28, 1998, options to receive or acquire
11,853,882 Shares pursuant to employee incentive or benefit plans, programs and
arrangements of the Purchaser or any of its subsidiaries ("Purchaser Stock
Options").
5.4 Subsidiaries. Exhibit 5.4 sets forth each direct or indirect equity interest
owned by Purchaser in any corporation, partnership, limited partnership, joint
venture, trust or other business entity of which Purchaser or any of its other
Purchaser Subsidiaries owns, directly or indirectly, greater than fifty percent
of the shares of capital stock or other equity interests (including partnership
interests) entitled to cast at least a majority of the votes that may be cast by
all shares or equity interests having ordinary voting power for the election of
directors or other governing body of such entity (each such entity is
hereinafter referred to as a "Purchaser Subsidiary" and are hereinafter
collectively referred to as the "Purchaser Subsidiaries"). Each Purchaser
Subsidiary is a corporation duly organized, validly existing and in good
standing under the laws of its jurisdiction of incorporation. Each Purchaser
Subsidiary is duly qualified and/or licensed to transact business, and in good
standing as a foreign corporation, in each other jurisdiction in which the
character of the property owned or leased by such Purchaser Subsidiary and the
nature of the business conducted by it requires such qualification and/or
licensing, except for such failures to be so qualified, licensed or in good
standing which would not have a Purchaser Material Adverse Effect. Each
Purchaser Subsidiary has the full power and authority (corporate and otherwise)
to carry on its business in the places, and as, it is now being conducted and to
own and lease the properties and assets which it now owns of leases. All of the
outstanding shares of capital stock of the Purchaser Subsidiaries owned by
Purchaser or by a Purchaser Subsidiary are free and clear of any liens, claims,
charges or encumbrances of any nature whatsoever. There are not now, and at the
Acquired Companies Effective Time there will not be, any outstanding options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating Purchaser or any Purchaser Subsidiary to
issue, transfer or sell any securities of any Purchaser Subsidiary. There are
not now, and as of the Acquired Companies Effective Time there will not be, any
voting trusts or other agreements or understandings to which Purchaser or any of
the Purchaser Subsidiaries is a party or is bound with respect to the voting of
the capital stock of Purchaser or any of the Purchaser Subsidiaries.
5.5 SEC Filings; No Undisclosed Liabilities.
5.5.1 Since March 31, 1996, Purchaser has filed all reports, registration
statements and other filings required to be filed by it with the SEC under the
Securities Act and the Securities Exchange Act of 1934, as amended (the
"Exchange Act"). All reports, registration statements and other filings
(including all notes, exhibits and schedules thereto and documents incorporated
by reference therein) filed by Purchaser with the SEC since March 31, 1996,
together
<PAGE>
with any amendments thereto, are collectively referred to as the "Purchaser SEC
Filings." Purchaser has furnished to the Acquired Companies and the Shareholders
true and complete copies of the Purchaser SEC Filings. As of the respective
dates of their filing with the SEC, the Purchaser SEC Filings complied in all
material respects with the Securities Act, the Exchange Act and the rules and
regulations of the SEC thereunder (as applicable thereto), and did not contain
any untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements made therein,
in light of the circumstances under which they were made, not misleading. No
Purchaser Subsidiary is required to file any report, registration statement or
other filing with the SEC.
5.5.2 Each of the consolidated financial statements of the Purchaser (including
any related notes or schedules) included in the Purchaser SEC Filings fairly
present the consolidated financial position of Purchaser and the Purchaser
Subsidiaries as of the dates thereof and the results of operations and cash
flows for the periods then ended (subject, where appropriate, to normal year-end
adjustments), all in conformity with GAAP during the periods involved or
otherwise noted therein.
5.5.3 Neither Purchaser nor any of its subsidiaries has any liabilities or
obligations (whether accrued, absolute, contingent or otherwise) which are of a
nature required to be reflected in financial statements prepared in accordance
with GAAP, consistently applied, (including, without limitation, any liability
which might result from an audit of its tax returns by any appropriate
authority), except for (A) the liabilities and obligations which are disclosed,
or reserved against, in the Purchaser SEC Filings, to the extent and in the
amounts so disclosed or reserved against, and (B) liabilities or obligations
incurred or accrued in the ordinary course of business since the date of the
most recent balance sheet of Purchaser and its subsidiaries included within any
Purchaser SEC Filings and which would not, either individually or in the
aggregate, have a Purchaser Material Adverse Effect.
5.6 Title to Properties; Encumbrances. Except as described in the following
sentence, each of Purchaser and the Purchaser Subsidiaries has good and valid
and marketable title to, or a valid leasehold interest in, all of the properties
and assets (real, personal and mixed, tangible and intangible) material to the
operation of the businesses of Purchaser and the Purchaser Subsidiaries,
including, without limitation, all such properties and assets reflected in the
most recent consolidated balance sheet of Purchaser and the Purchaser
Subsidiaries included within any Purchaser SEC Filings (except for properties
and assets disposed of in the ordinary course of business and consistent with
past practices since the date of such balance sheet). None of such properties or
assets are subject to any mortgage, pledge, lien, security interest, conditional
sale agreement, encumbrance, charge or adverse claim whatsoever of any kind,
except (i) as set forth in the Purchaser SEC Filings and (ii) such encumbrances
that do not individually or in the aggregate have a Purchaser Material Adverse
Effect.
5.7 Agreement Does Not Violate Other Instruments. The execution and delivery of
this Agreement by Purchaser and the Merger Subs do not, and the consummation of
the transactions contemplated hereby will not, violate any provisions of the
Certificate of Incorporation, as amended, or Bylaws, as amended, of Purchaser or
the Articles of Incorporation or Bylaws of the Merger Subs, or violate or
constitute an occurrence of default under any
<PAGE>
provision of, or conflict with, or result in acceleration of any obligation
under, or give rise to a right by any party to terminate its obligations under,
any mortgage, deed of trust, conveyance to secure debt, note, loan, lien, lease,
agreement, instrument, or any order, judgment, decree or other arrangement to
which Purchaser or any Merger Sub is a party or is bound or by which any of them
or their assets are affected. Except for applicable requirements of the 1933
Act, the Exchange Act, the rules and regulations of NASDAQ, state securities and
blue sky laws, and the filing and recordation of the Articles of Merger for each
of the Acquired Companies Mergers as required by the Arizona Business
Corporation Act, no approval, order or authorization of, or registration,
declaration or filing with any governmental or regulatory authority is required
to be obtained or made by or with respect to Purchaser or any Merger Sub, or any
assets, properties or operations of Purchaser, in connection with the execution
and delivery by Purchaser or the Merger Subs of this Agreement or the
consummation of the transactions contemplated hereby, except for such approvals,
order or authorizations, or registrations, declarations or filings, the failure
of which to obtain or make would not have a Purchaser Material Adverse Effect or
prevent the consummation of the transactions contemplated hereby.
5.8 Ownership of the Stock of the Merger Sub. Purchaser owns beneficially and of
record, free and clear of any lien or other encumbrance, all of the issued and
outstanding shares of the Merger Subs.
5.9 Absence of Changes. Except as set forth in the Purchaser SEC Filings, since
December 31, 1997, neither Purchaser nor any of the Purchaser Subsidiaries has
(a) suffered any change which had or would have a Purchaser Material Adverse
Effect or (b) subsequent to the date hereof, except as permitted by this
Agreement, conducted its business and operations other than in the ordinary
course of business and consistent with past practices.
5.10 Merger Sub. The Merger Subs have been formed solely for the purpose of
effecting the Acquired Companies Mergers and have not carried on any business.
5.11 Licenses and Permits; Compliance With Law. Purchaser and the Purchaser
Subsidiaries hold all licenses, certificates, permits, franchises and rights
from all appropriate federal, state or other public authorities reasonably
necessary for the conduct of their businesses and the use of their assets other
than where the failure to hold such licenses, certificates, permits, franchises
or rights would not have a Purchaser Material Adverse Effect. Purchaser and the
Purchaser Subsidiaries are presently conducting their businesses so as to comply
in all material respects with all applicable statutes, ordinances, rules,
regulations and orders of any governmental or regulatory authority applicable
thereto. Further, neither Purchaser nor any Purchaser Subsidiary is presently
charged with or, to the knowledge of Purchaser, under governmental investigation
with respect to, any actual or alleged violation of any statute, ordinance, rule
or regulation, nor is presently the subject of any pending or, to the knowledge
of Purchaser, threatened adverse proceeding by any regulatory authority having
jurisdiction over their businesses, properties or operations. Neither the
execution and delivery of this Agreement nor the consummation of the
transactions contemplated hereby will result in the termination of any license,
certificate, permit, franchise or right held by Purchaser or any of the
Purchaser Subsidiary reasonably necessary to conduct their businesses.
<PAGE>
5.12 Labor Matters. Except as set forth on Exhibit 5.12, within the last three
(3) years, neither Purchaser nor any Purchaser Subsidiary has been the subject
of any union activity, nor has there been any strike of any kind called, or
threatened to be called against any of them. Except as set forth on Exhibit 5.12
and to the knowledge of Purchaser, neither Purchaser nor any Purchaser
Subsidiary has violated any applicable federal or state law or regulation
relating to labor, labor practices, or employment practices.
5.13 Information in Registration Statement. None of the information to be
supplied by the Purchaser and its subsidiaries for inclusion in the Registration
Statement will, at the time the Registration Statement becomes effective and at
the Acquired Companies Effective Date and at the time the Registration Statement
is first delivered to the Acquired Companies Shareholders and at the time of the
meetings of the shareholders of the Acquired Companies to be held in connection
with the transactions contemplated by this Agreement, contain any untrue
statement of a material fact or omit to state any material fact required to be
stated therein or necessary in order to make the statements therein, in light of
the circumstances under which they are made, not misleading.
5.14 WARRANTY DISCLAIMER. THE PARTIES HERETO AGREE THAT EXCEPT AS EXPRESSLY SET
FORTH IN THIS AGREEMENT, INCLUDING THE EXHIBITS HERETO, PURCHASER AND THE MERGER
SUBS MAKE NO REPRESENTATIONS OR WARRANTIES OF ANY KIND OR CHARACTER, EXPRESS OR
IMPLIED.
6. CONDITIONS PRECEDENT TO OBLIGATIONS OF PURCHASER AND THE MERGER SUBS.
All of the obligations of Purchaser and the Merger Subs to consummate the
transactions contemplated by this Agreement shall be contingent upon and subject
to the satisfaction, on or before the Closing Date, of each and every one of the
following conditions, all or any of which may be waived, in whole or in part, by
Purchaser and the Merger Subs for purposes of consummating such transactions,
but without prejudice to any other right or remedy which they may have hereunder
as a result of any misrepresentation by, or breach of any covenant or warranty
of, the Acquired Companies or the Shareholders contained in this Agreement or
any other certificate or instrument furnished by the Acquired Companies or the
Shareholders hereunder.
6.1 Representations True at Closing. With such exceptions as would not have, in
the aggregate, a material adverse effect on the businesses, assets, liabilities,
condition (financial or otherwise) or results of operations of the Acquired
Companies, taken as a whole, the representations and warranties made by the
Acquired Companies and the Shareholders to Purchaser and the Merger Subs in this
Agreement, the Exhibits hereto or any document or instrument delivered at the
Closing (other than the documents described in Sections 6.8 and 7.4) to
Purchaser, the Merger Subs or their representatives hereunder shall be true and
correct on the Closing Date with the same force and effect as though such
representations and warranties had been made on and as of such date (except to
the extent a different date is specified therein, in
<PAGE>
which case such representation and warranty shall be true and correct as of such
date), except for changes contemplated by this Agreement and any changes in the
ordinary course of business.
6.2 Covenants of the Acquired Companies. The Acquired Companies and the
Shareholders shall have duly performed, in all material respects, all of the
covenants, acts and undertakings to be performed by them on or prior to the
Closing Date, and the President of each of the Acquired Companies and the
Shareholders shall deliver to Purchaser and the Merger Subs a certificate dated
as of the Closing Date certifying to the fulfillment of this condition and the
condition set forth in Section 6.1.
6.3 No Injunction, Etc. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit or obtain
substantial damages in respect of, or which is related to, or arises out of,
this Agreement or the consummation of the transactions contemplated hereby, or
which is related to or arises out of the businesses of the Acquired Companies,
if such action, proceeding, investigation, regulation or legislation would make
it likely to result in a material adverse effect in the businesses of the
Acquired Companies, taken as a whole.
6.4 Opinion of Counsel. Purchaser and the Merger Subs shall have received from
Hughes, Hubbard & Reed LLP, counsel for the Acquired Companies and the
Shareholders, an opinion in a form which mutually agreed by the parties hereto.
6.5 Consents, Approvals and Waivers. Purchaser and the Merger Subs shall have
received a true and correct copy of each and every consent, approval and waiver
(whether governmental or private) set forth in Exhibit 6.5.
6.6 Absence of Adverse Changes. Between the Execution Date and the Closing, the
Acquired Companies shall not have suffered any change or changes that would in
the aggregate have a material adverse effect on the businesses, assets,
liabilities, condition (financial or otherwise) or results in operations of the
Acquired Companies, taken as a whole; provided that any change arising out of
the matter set forth in Exhibit 3.18 shall not be considered to result in any
manner in the non-satisfaction of this condition.
6.7 Covenant Not to Compete. The Shareholders shall have individually entered
into a Covenant Not to Compete substantially in the form of Exhibit 2.9.
6.8 Acquisition of Real Property. Purchaser (or its designees) shall acquire, in
a closing simultaneous with the Closing of the remaining transactions
contemplated by this Agreement, from Martens, Jensen & Associates (an Arizona
general partnership controlled by the Shareholders) the building and premises
located at 19621 North 23rd Drive, Phoenix, Arizona (the "Real Property"),
subject to Section 2.1.5.2 and the following conditions:
(a) the parties have agreed upon the purchase price in accordance with the
procedures set forth in that certain appraisal agreement between the Purchaser
<PAGE>
and Martens, Jensen & Associates dated as of the Execution Date (the "Purchase
Price) of the Real Property not later than January 31, 1999;
(b) title to the Real Property shall be conveyed to the Purchaser (or its
designee) pursuant to a special warranty deed in a form reasonably acceptable to
Purchaser;
(c) Purchaser (or its designee) shall have received a title insurance policy for
the Real Property reasonably acceptable to Purchaser; and,
(d) Purchaser shall have received an indemnity agreement with respect to matters
substantially similar to those set forth in Section 3.19 (Environmental
Matters).
6.9 Opinion of KMPG. The Purchaser shall have received the opinion of KMPG Peat
Marwick LLP that this transaction will qualify as a pooling of interests
transaction under Opinion No. 16 of the Accounting Principles Board.
6.10 Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act.
6.11 Other Closing Conditions. Those additional conditions set forth in Exhibit
6.11.
7. CONDITIONS PRECEDENT TO THE OBLIGATIONS OF THE ACQUIRED COMPANIES AND
SHAREHOLDERS TO CLOSE.
All of the obligations of the Acquired Companies and the Shareholders to
consummate the transactions contemplated by this Agreement shall be contingent
upon and subject to the satisfaction, on or before the Closing Date, of each and
every one of the following conditions, all or any of which may be waived, in
whole or in part, by the Acquired Companies and the Shareholders, but without
prejudice to any other right or remedy which they may have hereunder as a result
of any misrepresentation by, or breach of any covenant or warranty of, Purchaser
or the Merger Subs contained in this Agreement, or any certificate or instrument
furnished by it hereunder.
7.1 Representations True at Closing. With such exceptions as would not have, in
the aggregate, a material adverse effect on the businesses, assets, liabilities,
condition (financial or otherwise) or results of operations of Purchaser and the
Purchaser Subsidiaries, taken as a whole, the representations and warranties
made by Purchaser and the Merger Subs in this Agreement to the Acquired
Companies and the Shareholders or any document or instrument delivered at the
Closing to the Acquired Companies, the Shareholders or their representatives
hereunder shall be true and correct on the Closing Date with the same force and
effect as though such representations and warranties had been made on and as of
such date (except to the extent a different date is specified therein, in which
case such representation and warranty shall be true and
<PAGE>
correct as of such date), except for changes contemplated by this Agreement and
changes in the ordinary course of business.
7.2 Covenants of Purchaser. Purchaser and the Merger Subs shall have duly
performed, in all material respects, all of the covenants, acts and undertakings
to be performed by them on or prior to the Closing Date, and a duly authorized
officer of Purchaser and the Merger Subs shall deliver a certificate dated as of
the Closing Date certifying to the fulfillment of this condition and the
condition set forth under Section 7.1.
7.3 No Injunction, Etc. No action, proceeding, investigation, regulation or
legislation shall have been instituted, threatened or proposed before any court,
governmental agency or legislative body to enjoin, restrain, prohibit or obtain
substantial damages in respect of, or which is related to or arises out of, this
Agreement or the consummation of the transactions contemplated hereby, or which
is related to or arises out of, the business of Purchaser, if such action,
proceedings, investigation, regulation or legislation, would have a material
adverse effect on the business of the Purchaser.
7.4 Covenants Not to Compete. Purchaser and the Merger Subs shall have entered
into Covenants Not to Compete with each of the Shareholders, substantially in
the form of Exhibit 2.9.
7.5 Consents, Approvals and Waivers. The consent to the Acquired Companies
Mergers of each party whose consent is required and is material to the
continuation of the businesses of the Purchaser and the Acquired Companies
following such Mergers shall have been received.
7.6 Shareholder Approvals. The principal terms of this Agreement and the
Acquired Companies Mergers shall have been approved and adopted by the
shareholders of each of the Acquired Companies in accordance with applicable law
and each respective Acquired Company's Articles of Incorporation and Bylaws.
7.7 Opinion of Purchaser's Counsel. The Acquired Companies shall have received
from Baxter & Jewell, P.A., counsel to the Purchaser, an opinion in a form which
mutually agreed by the parties hereto.
7.8 Tax Opinion. The Acquired Companies shall have received an opinion of Hughes
Hubbard & Reed LLP, in form and substance satisfactory to them, to the effect
that the Acquired Companies Mergers will be treated for federal income tax
purposes as a tax-free reorganization within the meaning of Section 368(a)(1)(A)
of the Code by virtue of the provisions of Sections 368(a)(2)(D) and
368(a)(2)(E), as applicable, of the Code. In preparing the tax opinions, counsel
may rely upon and, to the extent reasonably required, the parties hereto shall
make, representations related thereto.
7.9 Absence of Adverse Changes. Between the Execution Date and the Closing,
Purchaser shall not have suffered any change or changes that would in the
aggregate have a
<PAGE>
material adverse effect on the businesses, assets, liabilities, condition
(financial or otherwise) or results in operations of Purchaser or the Purchaser
Subsidiaries, taken as a whole.
7.10 Registration Statement. The Registration Statement shall have become
effective in accordance with the provisions of the Securities Act.
8. CLOSING.
8.1 Time and Place of Closing. The consummation of the transactions provided for
in this Agreement (herein referred to as the "Closing") shall be held at the
offices of CGA as promptly as practicable, but in any event no later than two
(2) business days, after approval of the transactions contemplated by this
Agreement by the Acquired Companies Shareholders (herein referred to as the
"Closing Date") unless another place or date is agreed to in writing by the
Acquired Companies, Purchaser and the Merger Subs. Notwithstanding the
foregoing, in the event the transactions contemplated herein have not been
completed by March 31, 1999, any party to this Agreement may terminate this
Agreement without further obligation or liability to the other parties by
providing written notice to the other parties, and in such event all documents
held in escrow shall be returned to the party from whom they were delivered and
this Agreement shall be null and void.
8.2 Transactions at Closing. At the Closing, each of the following transactions
shall occur:
8.2.1 The Acquired Companies' Performance. At the Closing, the Acquired
Companies shall deliver or cause to be delivered to Purchaser and the Merger
Subs the following:
(a) all certificates representing all of the shares of the outstanding capital
stock of the Acquired Companies, duly endorsed for transfer or accompanied by
instruments of transfer reasonably satisfactory in form and substance to
Purchaser and its counsel;
(b) the certificate of the President of each of the Acquired Companies and the
Shareholders described in Section 6.2;
(c) copies of the consents, approvals and waivers described in Section 2.7 and
Section 6.5;
(d) certificates of compliance or certificates of good standing of the Acquired
Companies, as of the most recent practicable date, from the appropriate
governmental authority of the jurisdiction of its incorporation and any other
jurisdiction which is set forth in Exhibit 3.1.2;
<PAGE>
(e) certified copies of resolutions of the Boards of Directors of the Acquired
Companies approving the transactions set forth in this Agreement and the
applicable Plan of Merger;
(f) certified copies of resolutions of the Acquired Companies Shareholders
approving the transactions set forth in this Agreement and the applicable Plan
of Merger;
(g) certificates of incumbency for the officers of each of the Acquired
Companies;
(h) resignations of each director and officer of the Acquired Companies and of
each trustee under any Benefit Plan maintained by the Acquired Companies;
(i) the Covenants Not to Compete executed by the Shareholders, substantially in
the form of Exhibit 2.9;
(j) opinion of counsel described in Section 6.4;
(k) the affiliate agreements executed by each of the Acquired Companies
Shareholders set forth on the list provided pursuant to Section 4.2,
substantially in the form of Exhibit 4.2;
(l) the Escrow Agreement substantially in the form attached hereto as Exhibit
9.3;
(m) the consummation of the purchase of the Real Pproperty described in Section
6.8;
(n) the opinion of KPMG Peat Marwick LLP described in Section 6.9; and
(o) such other evidence of the performance of all covenants and satisfaction of
all conditions required of the Acquired Companies and the Shareholders by this
Agreement, at or prior to the Closing, as Purchaser, the Merger Subs or their
counsel may reasonably require.
8.2.2 Performance by Purchaser and the Merger Subs. At the Closing, (A) the
Plans of Merger described in Section 2.1.2 shall be filed with the Secretary of
State of the State of Arizona and (B) Purchaser and the Merger Subs shall
deliver to the Acquired Companies and the Shareholders the following:
(a) the certificates of the authorized officers described in Section 7.2;
(b) certificate of incumbency of the officers of Purchaser and the Merger Subs
who are executing this Agreement and the other documents contemplated hereunder;
<PAGE>
(c) the Covenants Not to Compete executed by the Purchaser, substantially in the
form of Exhibit 2.9;
(d) the Shares and cash for the fractional shares contemplated in Section 2.1
(to be delivered as described in Section 8.3 below);
(e) certified copy of resolutions of the Board of Directors or Executive
Committee thereof of Purchaser approving the transactions set forth in this
Agreement and the Plans of Merger;
(f) certified copies of resolutions of the Boards of Directors of the Merger
Subs approving the transactions set forth in this Agreement and the applicable
Plans of Merger;
(g) certified copies of resolutions of Purchaser as sole shareholder of the
Merger Subs approving the applicable Plans of Merger;
(h) opinion of counsel described in Section 7.7;
(i) the Escrow Agreement substantially in the form attached hereto as Exhibit
9.3; and,
(j) such other evidence of the performance of all the covenants and satisfaction
of all of the conditions required of Purchaser and the Merger Subs by this
Agreement at or before the Closing as the Acquired Companies, the Shareholders
or their counsel may reasonably require.
8.3 Delivery of Share Certificates and Cash. At the Closing, Purchaser and the
Merger Subs shall deliver: (i) to the Acquired Companies Shareholders,
certificates representing the Shares as determined pursuant to Section 2.1
(which certificates shall be issued to each Acquired Companies Shareholder in
the number equal to such shareholder's percentage of such aggregate number of
Shares based on the percentage set forth in Exhibit 8.2.2; provided that
separate certificates shall be issued in the name of each Acquired Companies
Shareholder and delivered directly by the Purchaser to the Escrow Agent (as
defined in Escrow Agreement) for those Shares representing such shareholder's
pro rata portion of the Shares required to be deposited at the Closing into
escrow pursuant to Section 9) and the applicable Plan of Merger, (ii) to
Martens, Jensen & Associates, certificates representing the Shares as determined
pursuant to Section 2.1.5.2; provided that separate certificates shall be issued
in the name of Martens, Jensen & Associates and delivered directly by the
Purchaser to the Escrow Agent for those Shares representing Martens, Jensen &
Associates portion of the Shares required to be deposited at the Closing into
escrow pursuant to Section 9, and (iii) cash for fractional Shares determined
pursuant to Section 2.1.6.
9. SURVIVAL OF REPRESENTATIONS AND WARRANTIES AND COVENANTS/INDEMNIFICATION.
<PAGE>
9.1 Survival of Representations and Warranties and Covenants. All
representations and warranties and covenants made or undertaken by the Acquired
Companies and the Shareholders, on the one hand, and by Purchaser and the Merger
Subs, on the other, in this Agreement or in any document or instrument executed
and delivered at the Closing pursuant hereto are material, have been relied
upon, respectively, by Purchaser and the Merger Subs and by the Acquired
Companies and the Shareholders, shall survive the Closing (i) with respect to
the Indemnification Obligation of the Acquired Companies and the Shareholders
contained herein (other than those subject to clauses (ii) and (iii) below) and
the related representations and warranties, until the date described in the
first sentence set forth in Section 9.1.1, (ii) with respect to the
Indemnification Obligation of the Acquired Companies and the Shareholders (other
than arising out of Sections 3.6 and 3.17) regarding matters which are Specific
Contingency Items and the related representations and warranties, until June 30,
2000, (iii) with respect to the representations and warranties of the Acquired
Companies and the Shareholders set forth in Sections 3.6 and 3.17 regarding
matters which are Specific Contingency Items and the related Indemnification
Obligations, until the 30th day after expiration of the applicable statute of
limitations (including any extensions thereto that such statute of limitations
may be tolled) or (iv) with respect to the Indemnification Obligations of
Purchaser and the Merger Subs, until June 30, 2000, and shall not merge in the
performance of any obligation by any party hereto. Further, if any claim for
indemnification hereunder, which has been previously asserted by any party
pursuant to a notice of a claim in accordance with Section 9.4, is still pending
as of the applicable termination date set forth in the preceding sentence, such
claim shall continue to be subject to the indemnification provisions of this
Section 9 until resolved. No claim for indemnification may be asserted after the
applicable termination date.
9.1.1 General Indemnification Obligations. Subject to the provisions of Section
9.1.2 below, the obligations of the Acquired Companies Shareholders pursuant to
this Section 9 to indemnify the Purchaser and Merger Subs from and against any
Indemnifiable Loss arising out of an Indemnification Obligation which is not a
Specific Contingency Item (the "General Indemnification Obligation") shall
terminate upon the earlier of (A) the date of completion of the first audit of
the combined financial statements of the Purchaser and the Acquired Companies
after the Closing Date which contains at least 30 days of combined operations of
the Purchaser and the Acquired Companies or (B) the date which is 12 months
after the Closing Date. Notwithstanding the foregoing, immediately prior to such
termination date with respect to any matter that is reasonably likely to give
rise to an General Indemnification Obligation for which an Indemnification Event
or Third Party Claim (each as described in Section 9.4) has not arisen,
Purchaser may, after consultation with and approval by the Representatives (as
defined in the Escrow Agreement) (which approval will not be unreasonably
withheld), designate any such matter as being a "Specific Contingency Item"
specifying an estimated indemnity amount for such item, provided that such item
and amount satisfies the following criteria: (1) Purchaser has provided the
Representatives with a reasonably detailed description of the matter, (2) the
indemnity amount is reasonable in relation to the Indemnifiable Loss that may be
reasonably likely to arise from such matter and (3) Purchaser has provided the
Representatives with the period for contingency, if the period is shorter than
the period described in clauses (ii) or (iii) of Section 9.1, in which case the
Indemnification Obligation for such Item shall survive the termination date and
shall thereafter be governed by the provisions of Sections 9.1(ii) or (iii), as
applicable, and 9.3.1 below. If the
<PAGE>
Representatives do not agree with the designation of any such matter as a
Specific Contingency Item after the Closing, such dispute shall be settled as
promptly as practicable either by mutual agreement of the Purchaser and the
Representatives or by a binding and final arbitration proceeding conducted by a
single arbitrator in accordance with the commercial arbitration rules of the
American Arbitration Association to determine whether such matter and amount
satisfy the criteria set forth in the immediately preceding sentence. The costs
of such arbitration shall be split between the Purchaser and the
Representatives. In the event the Representatives do not agree with the
designation, the date of designation by Purchaser shall govern with respect to
Purchaser's obligation to make such designation prior to the applicable
termination date.
9.1.2 Specific Contingencies. As of the Execution Date the parties hereto have
agreed to, and identified in writing, those matters ("Specific Contingency
Items") that may be the basis for a claim for which the Acquired Companies or
the Shareholders may have an Indemnification Obligation to indemnify Purchaser
or a Merger Sub pursuant to this Section 9. The parties hereto agree to remove
Specific Contingency Items which have been resolved or for which the applicable
limitations period described in Section 9.1(ii) or (iii) has expired.
9.1.3 Timing of Claims. In the event an Indemnification Event or Third Party
Claim arises prior to the date described in the first sentence of Section 9.1.1,
then the Acquired Companies Shareholders will indemnify the Purchaser and Merger
Subs for the entire amount of the Indemnifiable Loss, if any, attributable to
such event or claims (subject to Sections 9.5 and 9.6) when such amount has been
determined in accordance with the procedures set forth in Section 9.4. Recovery
for any Indemnifiable Loss which is the result of an Indemnification Event or
Third Party Claim which arises prior to the date described in the first sentence
of Section 9.1.1 and which is not a Specific Contingency Item shall only be
limited by the provisions of Section 9.6 and shall not be limited to the Shares
escrowed pursuant to this Section 9.
9.2 Indemnification. Subject to the provisions of this Section 9, the Acquired
Companies Shareholders will, in accordance with this Section 9 and the Escrow
Agreement, indemnify and hold harmless Purchaser, the Merger Subs or any
assignee of Purchaser or the Merger Subs from and against and in respect of, any
liability, claim, deficiency, loss, damage, or injury and all reasonable costs
and expenses (including reasonable counsel fees and costs of any suit related
thereto) (each an "Indemnifiable Loss") suffered or incurred by Purchaser or the
Merger Subs as a result of the following: (i) any misrepresentation by, or
breach of any representation or warranty of, the Acquired Companies or the
Shareholders contained in this Agreement or any document or instrument furnished
at the Closing by the Acquired Companies or the Shareholders (other than the
documents described in Sections 6.7 and 6.8) hereunder; or (ii) breach of any
covenant on the part of the Acquired Companies under this Agreement. Subject to
the provisions of this Section 9, Purchaser will, in accordance with Section 9,
indemnify and hold harmless the Acquired Companies Shareholders or any assignee
of the Acquired Companies Shareholders from and against, and in respect of, any
Indemnifiable Loss suffered or incurred by an Acquired Companies Shareholder as
a result of the following: (A) any misrepresentation by, or breach of any
representation or warranty of, Purchaser or the Merger Subs contained in this
Agreement or any document or instrument furnished at the Closing by Purchaser or
the Merger Subs; or (B) any breach of any covenant on the part of Purchaser or
the Merger Subs under this Agreement. The obligation to indemnify a party,
pursuant to this Section 9, for an Indemnifiable
<PAGE>
Loss as a result of any misrepresentation by, or breach of any representation or
warranty of, a party contained in this Agreement or any document or instrument
furnished at the Closing or breach of any covenant on the part of a party under
this Agreement shall be referred to herein as an "Indemnification Obligation".
Since following the Closing Merger Sub #1 and Merger Sub #2 will be merged into
CGA and CG Marketing, respectively, and CGA and CG Marketing will be owned by
the Purchaser, the parties to this Agreement agree that the Acquired Companies
Shareholders will have no right of reimbursement or contribution against the
CGA, CG Marketing, Merger Sub #1 or Merger Sub #2 (including without limitation,
any rights of contribution or reimbursement under CERCLA, RCRA or any similar
state or federal law), and any liability, loss, damage or injury and reasonable
costs and expenses (including reasonable counsel fees and costs of any suit
related thereto) suffered or incurred by CGA, CG Marketing, Merger Sub #1 or
Merger Sub #2 against which Purchaser is indemnified and held harmless as
provided above shall be deemed suffered by Purchaser, which shall, either
independently or jointly with the Merger Subs, be entitled to enforce such
indemnity. Any examination, inspection or audit of the properties, financial
condition or other matters of the Acquired Companies and their businesses
conducted by Purchaser or the Merger Subs pursuant to this Agreement shall in no
way limit, affect or impair the ability of Purchaser or the Merger Subs to rely
upon the representations and warranties, of the Acquired Companies and the
Acquired Companies Shareholders set forth herein. Any examination, inspection or
audit of the properties, financial condition or other matters of Purchaser and
its subsidiaries and their businesses conducted by the Acquired Companies and
the Shareholders pursuant to this Agreement shall in no way limit, affect or
impair the ability of the Shareholders to rely upon the representations and
warranties of Purchaser and the Merger Subs set forth herein.
9.3 Escrow by Acquired Companies Shareholders.
9.3.1 Specific Contingencies. In accordance with Section 8.3, the Acquired
Companies Shareholders shall deposit with the Escrow Agent pursuant to the terms
of the escrow agreement attached hereto as Exhibit 9.3 (the "Escrow Agreement")
Shares having an aggregate Fair Market Value equal to the aggregate of the
amounts designated for the Specific Contingency Items (the "First Escrowed
Shares"). The certificates for such First Escrowed Shares shall be delivered by
Purchaser, on behalf of the Acquired Companies Shareholders, directly to the
Escrow Agent at Closing. In addition, if additional Specific Contingency Items
are identified pursuant to the second sentence of Section 9.1.1 during the
period set forth in Section 9.1.1, at the written instruction of the Purchaser
Second Escrowed Shares deposited with the Escrow Agent pursuant to Section 9.3.2
below having an aggregate Fair Market Value equal to the amount determined
pursuant to the second sentence of Section 9.1.1 shall be redesignated as First
Escrowed Shares and retained by Escrow Agent to indemnify the Purchaser and the
Surviving Corporations from any Indemnifiable Losses arising out of such
Specific Contingency Items pursuant to this Section 9. All or a portion of the
First Escrowed Shares held by the Escrow Agent pursuant to this Section 9.3.1
shall be returned to the Acquired Companies Shareholders in accordance with the
provisions of Section 9.3.3 as such Specific Contingency Items are resolved or
the applicable limitations period described in Section 9.1 for each such
Specific Contingency Item expires.
9.3.2 General Representations and Warranties. In addition to the First Escrowed
Shares described in Section 9.3.1, in accordance with Section 8.3, the Acquired
<PAGE>
Companies Shareholders shall deposit with the Escrow Agent pursuant to the terms
of the Escrow Agreement, Shares having an aggregate Fair Market Value equal to
the General Indemnity Amount (the "Second Escrowed Shares" and together with the
First Escrowed Shares, the "Escrowed Shares"). The certificates for such Second
Escrowed Shares shall be delivered by Purchaser, on behalf of the Acquired
Companies Shareholders, directly to the Escrow Agent at the Closing. The
"General Indemnity Amount" shall mean the amount equal to (i) 5% of the
aggregate Fair Market Value of the Exchange Shares minus (ii) the aggregate Fair
Market Value of the First Escrowed Shares as of the Closing. All or a portion of
the Second Escrowed Shares held by the Escrow Agent pursuant to this Section
9.3.2 shall be returned to the Acquired Companies Shareholders in accordance
with the provisions of Section 9.3.3 as Indemnification Obligations are resolved
or the applicable limitations period described in Section 9.1 for
Indemnification Obligations expire.
9.3.3 Return of Escrowed Shares. Any Escrowed Shares that remain after the
applicable limitations period has expired shall be distributed by the escrow
agent to the Acquired Companies Shareholders based on their pro rata ownership
and after application of the priorities in Section 9.3.4.
9.3.4 Priority. The Purchaser and the Merger Subs shall be required to obtain
payment for any Indemnifiable Losses arising out of the General Indemnification
Obligations pursuant to this Section 9 first from the Second Escrowed Shares
pursuant to the terms of the Escrow Agreement before taking any other action
against the Acquired Companies Shareholders with respect to seeking payment for
such Indemnifiable Losses. Further, the Acquired Companies Shareholders shall
indemnify the Purchaser and the Merger Subs subject to the following order of
priority: (i) first, in the event a General Indemnity Obligation is solely
attributable to a single Acquired Company, the Acquired Companies Shareholders
of such Acquired Company to which such Indemnifiable Loss is attributable shall
be responsible for indemnifying Purchaser and the Merger Subs for such
Indemnifiable Loss pro rata in accordance with their ownership of such Acquired
Company out of the Second Escrowed Shares attributable to such Acquired Company,
and (ii) second, in the event the Shares which have been delivered for such
Acquired Company have a Fair Market Value less than the Indemnifiable Loss in
(i) above or if the Indemnifiable Loss can not be attributed to a single
Acquired Company, the remaining Acquired Companies Shareholders shall be
responsible for such Indemnifiable Loss on a pro rata basis out of the Second
Escrowed Shares attributable to such other Acquired Companies. Notwithstanding
the foregoing, the Indemnification Obligation of the ESOP shall apply to only
its pro rata share of any Indemnifiable Loss (or portion thereof) which is
attributable to CGA.
9.4 Notification and Defense of Claims. (a) As promptly as practicable, and in
any event within 30 days, after Purchaser, any Merger Sub (or their successors)
or any of their respective assignees, on the one hand, or any Acquired Companies
Shareholder or any of its respective assignees, on the other hand, shall receive
any notice of, or, through any officer or director of Purchaser or any Purchaser
Subsidiary or any Acquired Companies Shareholder, as the case may be, otherwise
become aware of, the commencement of any action, suit or proceeding, the
assertion of any claim, the occurrence of any event, or the incurrence of any
Indemnifiable Loss, for which indemnification is provided for (assuming, only
for the purposes of this Section 9.4(a) and of the terms defined in this Section
9.4(a), that the Minimum Aggregate Liability Amount was zero) by Section 9.2 (an
"Indemnification Event"), the party entitled to such indemnification
<PAGE>
(an "Indemnified Party") shall give written notice (an "Indemnification Claim")
to the party from which such indemnification is (or, under such assumption,
could be) sought (an "Indemnifying Party") describing in reasonable detail the
Indemnification Event and the basis on which indemnification is (or, under such
assumption, could be) sought. If the Indemnifying Party is not so notified by
the Indemnified Party within 30 days after the date of the receipt by the
Indemnified Party or any of its affiliates of notice of, or of the Indemnified
Party or any of its affiliates otherwise becoming aware of, any particular
Indemnification Event, the Indemnifying Party shall be relieved of all liability
hereunder in respect of such Indemnification Event (or the facts or
circumstances giving rise thereto) if, and only to the extent that, such
Indemnifying Party is prejudiced or harmed as a consequence of such failure
(and, to such extent, all Indemnifiable Losses resulting from such
Indemnification Event shall be disregarded for purposes of determining whether
the Minimum Aggregate Liability Amount has been exceeded).
(b) If any Indemnification Event involves the claim of any third party (a
"Third-Party Claim"), the Indemnifying Party shall be entitled to, and the
Indemnified Party shall provide the Indemnifying Party with the right to,
participate in, and assume sole control over, the defense and settlement of such
Third-Party Claim (with counsel of its choice); provided, however, that (i) the
Indemnified Party shall be entitled to participate in the defense of such
Third-Party Claim and to employ counsel at its own expense to assist in the
handling of such Third-Party Claim and (ii) the Indemnifying Party shall obtain
the prior written approval of the Indemnified Party before entering into any
settlement of such Third-Party Claim or ceasing to defend against such
Third-Party Claim, if (1) as a result of such settlement or ceasing to defend,
injunctive or other equitable relief would be imposed against the Indemnified
Party, (2) in the case of a settlement, the Indemnified Party would not thereby
receive from the claimant an unconditional release from all further liability in
respect of such Third-Party Claim, (3) such settlement involves any non-monetary
consideration or (4) such settlement is in excess of the maximum aggregate
liability set forth in Section 9.6. In the event the Indemnifying Party receives
a settlement offer which will meet each the requirements set forth in the
preceding sentence, the Indemnifying Party desires to settle the Third-Party
Claim based upon such offer and the Indemnified Party refuses to consent to such
settlement, the Indemnifying Party shall have the right to transfer control of
the defense of such claim to the Indemnified Party and the Indemnifying Party's
indemnification obligations shall be limited to those contained in such offer.
After written notice by the Indemnifying Party to the Indemnified Party of its
election to assume control of the defense of any such Third-Party Claim, the
Indemnifying Party shall not be liable hereunder to indemnify any person for any
legal expenses subsequently incurred in connection therewith. If the
Indemnifying Party does not assume sole control over the defense or settlement
of such Third-Party Claim as provided in this Section 9.4(b) within thirty days
after receipt of written notice under this Agreement of such claim, or, after
assuming such control, fails to defend against such Third-Party Claim (it being
agreed that settlement of such Third-Party Claim does not constitute such a
failure to defend), the Indemnified Party shall have the right (as to itself) to
defend and, upon obtaining the written consent of the Indemnifying Party, which
shall not be unreasonably withheld or delayed, settle the claim in such manner
as it may deem appropriate, and the Indemnifying Party shall promptly reimburse
the Indemnified Party therefor in accordance with this Section 9.
Notwithstanding the foregoing provisions of this Section 9.4(b), the Indemnified
Party shall have the right at all times to take over and assume the control (as
to itself) of the defense or settlement of any Third-Party Claim; provided,
however, that in such event (x) the Indemnifying Party shall cease to have any
obligation
<PAGE>
under Section 9.2 in respect of such Third-Party Claim and (y) all Indemnifiable
Losses resulting from such Third-Party Claim will not be considered for purposes
of determining the Minimum Aggregate Liability Amount has been exceeded. The
Indemnifying Party shall not be liable under Section 9 for any settlement or
compromise effected without its consent.
(c) Subject to Section 11.2, the Indemnified Party and the Indemnifying Party
shall each cooperate fully (and shall each cause its affiliates to cooperate
fully) with the other in the defense of any Third-Party Claim pursuant to
Section 9.4(b). Without limiting the generality of the foregoing, each such
person shall furnish the other such person with such documentary or other
evidence as is then in its or any of its affiliates' possession as may
reasonably be requested by the other person for the purpose of defending against
any such Third-Party Claim.
(d) Upon payment of any amount pursuant to any Indemnification Claim, the
Indemnifying Party shall be subrogated, to the extent of such payment, to all of
the Indemnified Party's rights of recovery (and, if the Acquired Companies
Shareholders are the Indemnifying Parties, the Indemnified Party shall cause the
Acquired Companies Shareholders to be subrogated to all of Purchaser's or the
Acquired Companies' rights of recovery) against any third party with respect to
the matters to which such Indemnification Claim relates.
9.5 Minimum Aggregate Liability. The Acquired Companies Shareholders shall not
be required, pursuant to this Section 9, to indemnify and hold harmless
Purchaser, the Merger Subs or any of their respective assignees until the
aggregate amount of the Indemnifiable Losses exceeds $450,000 (the "Minimum
Aggregate Liability Amount"), after which the Acquired Companies Shareholders
shall be obligated to indemnify such Indemnified Parties for Indemnifiable
Losses in excess of the Minimum Aggregate Liability Amount; provided however
that the foregoing provisions of this Section 9.5 shall not apply to any
indemnification obligation with respect to Indemnifiable Losses resulting from
the breach of Sections 3.22 and 11.4.
9.6 Maximum Aggregate Liability. Notwithstanding any other provisions herein to
the contrary, the cumulative aggregate Indemnification Obligations of the
Acquired Companies Shareholders, on the one hand, and, Purchaser and Merger
Subs, on the other hand, pursuant to this Section 9 shall in no event exceed
fifty percent (50%) of the aggregate Fair Market Value of the Exchange Shares.
In addition, the aggregate Indemnification Obligation with respect to each
Specific Contingency Item shall be limited to the Escrowed Shares with respect
to such Specific Contingency Item.
9.7 Adjustment. Any payment pursuant to this Section 9 or the Escrow Agreements,
shall be deemed to be an adjustment to the aggregate consideration paid by
Purchaser hereunder.
9.8 Exclusive Remedy. The sole and exclusive remedy of Purchaser and the Merger
Subs for breach of any representation and warranty made by the Acquired
Companies or the Shareholders or any breach of any covenant or agreement to be
performed by the Shareholders or the Acquired Companies under this Agreement or
other document or instrument delivered at the Closing (other than the documents
described in Sections 6.7 and 6.8 for which Purchaser shall have such remedies
as are set forth in such documents but not any remedies pursuant to this Section
9)
<PAGE>
shall be the remedies expressly provided in this Section 9 and the Acquired
Companies Shareholders shall have no other obligations with respect thereto.
10. TERMINATION.
10.1 Method of Termination. This Agreement constitutes the binding and
irrevocable agreement of the parties hereto to consummate the transactions
contemplated hereby, the consideration for which is (a) the covenants set forth
in Article 2 hereof, and (b) expenditures and obligations incurred and to be
incurred by Purchaser and the Merger Subs, on the one hand, and by the Acquired
Companies and the Shareholders, on the other hand, in respect of this Agreement,
and this Agreement may be terminated or abandoned only as follows:
10.1.1 By the mutual consent of the Acquired Companies, Purchaser and the Merger
Subs, notwithstanding prior approval by the shareholders of any or all of such
corporations;
10.1.2 By the Shareholders and the Acquired Companies after March 31, 1999, if
any of the conditions set forth in Article 7 hereof, to which their obligations
are subject, have not been fulfilled or waived, unless such non-fulfillment has
been caused by such party's breach of any covenant or agreement contained
herein; or
10.1.3 By Purchaser and the Merger Subs after March 31, 1999, if any of the
conditions set forth in Article 6 hereof, to which their obligations are subject
have not been fulfilled or waived, unless such non-fulfillment has been caused
by such party's breach of any covenant or agreement contained herein. .
10.2 Effect of Termination. In the event of a termination of this Agreement
pursuant to Section 10.1.1 hereof, each party hereto shall pay the costs and
expenses incurred by it in connection with this Agreement, and no party hereto
(or any of its officers, directors, employees, agents, representatives or
shareholders) shall be liable to any other party hereto for any costs, expenses,
damage or loss of anticipated profits hereunder. In the event of any other
termination, the parties hereto shall retain any and all rights attendant to a
breach of any covenant, representation or warranty made hereunder.
11. GENERAL PROVISIONS.
11.1 Notices. All notices, requests, demands and other communications hereunder
shall be in writing and shall be deemed to have been delivered (i) when
personally delivered by a party hereto or by messenger or express courier, (ii)
when delivered by telex, telecopier or facsimile (and immediately confirmed by
mail) or (iii) three (3) business days after having been mailed by registered or
certified mail, return receipt requested, addressed as follows:
11.1.1 If to the Acquired Companies or, prior to the Closing, the Shareholders:
Computer Graphics of Arizona, Inc..
<PAGE>
19621 N. 23rd Drive
Phoenix, AZ 85027
Attn: Mr. Ronald L. Jensen
Mr. James K. Martens
If to the Shareholders after the Closing:
Ronald L. Jensen
4812 W. Avenida Del Ray
Glendale, AZ 85310
James K. Martens
11980 E. Desert Trail Road
Scottsdale, AZ 85259
with a copy to:
Hughes Hubbard & Reed LLP
One Battery Park Plaza
New York, New York 10004-1482
Attn: Mr. Ed Kaufmann
11.1.2 If to Purchaser or the Merger Subs:
Acxiom Corporation
301 Industrial Boulevard
Conway, AR 72032
Attn: Chief Operating Officer
with copies to:
Acxiom Corporation
301 Industrial Boulevard
Conway, AR 72032
Attention: General Counsel
Friday, Eldredge & Clark
400 West Capitol Avenue
Suite 2000
Little Rock, Arkansas 72201
Attn: Samuel R. Baxter
11.1.3 If delivered personally, the date on which a notice, request, instruction
or document is delivered shall be the date on which such delivery is made. If
delivered by mail, the date on which such notice, request, instruction or
document is received shall be the date of delivery. In the event any such
notice, request, instruction or document is mailed to a party
<PAGE>
in accordance with this Article 11 and is returned to the sender as
nondeliverable, then such notice, request, instruction or document shall be
deemed to have been delivered or received on the fifth day following the deposit
of such notice, request, instruction or document in the United States mails.
11.1.4 Any party hereto may change its address specified for notices herein by
designating a new address by notice in accordance with this Section 11.1.
11.2 Further Assurances. Each party hereto covenants that at any time, and from
time to time, after the Closing Date, it will execute such additional
instruments and take such actions as may be reasonably requested by the other
parties hereto to confirm or perfect or otherwise to carry out the intent and
purposes of this Agreement.
11.3 Waiver. Any failure on the part of any party hereto to comply with any of
its obligations, agreements or conditions hereunder may be waived by any other
party hereto to whom such compliance is owed. No waiver of any provision of this
Agreement shall be deemed, or shall constitute, a waiver of any other provision,
whether or not similar, nor shall any waiver constitute a continuing waiver.
11.4 Expenses. Subject to Section 3.24, each party to this Agreement shall bear
its costs incurred to enter into the transactions contemplated by this
Agreement.
11.5 Nondisclosure of Terms. The parties hereto agree that, except to the extent
required by law or by valid legal process: (i) each such party will treat all
confidential information (as defined in the Confidentiality Agreement described
in the immediately succeeding sentence) as permanently confidential; (ii) no
such party will use any Confidential Information, other than in connection with
its consideration and evaluation of the transaction contemplated by this
Agreement; and (iii) no such party will disclose any Confidential Information to
any person or entity. The obligations in this Section 11.5 are in addition to
the obligations set forth in that certain Confidentiality Agreement dated as of
March 17, 1998 between Purchaser and CGA, which shall be binding on the parties
hereto until terminated in accordance with the terms thereof. However,
notwithstanding the preceding sentence, a party hereto may disclose Confidential
Information to those of its representatives who need to know such Confidential
Information for purposes of assisting such party with the transaction
contemplated by this Agreement and who agree or are otherwise legally bound to
hold such Confidential Information in confidence. In addition, the parties
hereto agree that the trustees of the ESOP, or their designees, may disclose the
terms and conditions of the transactions contemplated hereby, and such other
information as such trustees or their designees deem reasonably necessary, to
the participants of such plan to permit the participants to vote, or direct the
trustee to vote, the shares of CGA allocated to such participants on such
transactions. All Confidential Information is and will remain the property of
the disclosing party. Each party hereto represents and warrants that prior to
the execution hereof they have not disclosed any of the terms, conditions,
obligations or matters contained in or relating to this Agreement and the
transactions contemplated herein, if such disclosure would have violated this
Section 11.5.
<PAGE>
11.6 Materiality. When an item in this Agreement is characterized as "material,"
such item shall be deemed "material" even though individually it may not be
material, or even though the individual adverse effect on the assets or
businesses of all or any one of the Acquired Companies may not be material, if
the liability, loss, damage or injury (including all reasonable costs and
expenses related thereto) arising from any misrepresentation or other breach
under this Agreement in connection with such item and any other item or items
(regardless of their characterization as material) are in the aggregate
material.
11.7 Binding Effect. No party to this Agreement may assign any of its rights or
obligations hereunder without the prior written consent of the other parties.
This Agreement shall be binding upon and inure to the benefit of the parties
hereto and their respective heirs, legal representatives, executors,
administrators, successors and assigns. The invalidity or nonenforceability of
this Agreement as to any Shareholder shall not affect the validity or
enforceability of this Agreement as to any other Shareholder.
11.8 Headings. The section and other headings in this Agreement are inserted
solely as a matter of convenience and for reference, and are not a part of this
Agreement.
11.9 Entire Agreement. This Agreement constitutes the entire agreement among the
parties hereto and supersedes and cancels any prior agreements, representations,
warranties, or communications, whether oral or written, among the parties hereto
relating to the transactions contemplated hereby or the subject matter herein,
except for that certain Confidentiality Agreement dated as of March 17, 1998
between Purchaser and CGA which shall be binding on the parties hereto until
terminated in accordance with the terms thereof. Neither this Agreement nor any
provision hereof may be changed, waived, discharged or terminated orally, but
only by an agreement in writing signed by the party against whom or which the
enforcement of such change, waiver, discharge or termination is sought.
11.10 Governing Law. This Agreement shall be governed by and construed in
accordance with the laws of the State of Arkansas.
11.11 Counterparts. This Agreement may be executed in two or more counterparts,
each of which shall be deemed an original, but all of which together shall
constitute one and the same instrument.
11.12 Pronouns. All pronouns used herein shall be deemed to refer to the
masculine, feminine or neuter gender as the context requires.
11.13 Exhibits Incorporated. All Exhibits attached hereto are incorporated
herein by reference.
11.14 No Shareholder Approval. Notwithstanding the execution of this Agreement
by an Acquired Company Shareholder, such execution shall not represent approval
of or a vote to approve the Acquired Companies Mergers by such shareholder and
such approval shall only be provided pursuant to a shareholders' meeting held,
or a written consent obtained, in accordance
<PAGE>
with applicable law. The Purchaser and the Merger Subs shall be entitled to rely
upon the certified resolutions required by Section 8.2.1(f) at the Closing as
evidence of such shareholder approval.
[SIGNATURE PAGES TO FOLLOW]
<PAGE>
IN WITNESS WHEREOF, each party hereto has executed or caused
this Agreement to be executed on its behalf, all on the day and year first above
written.
PURCHASER:
Acxiom Corporation
By
Name:
Title:
ACQUIRED COMPANIES:
Computer Graphics of Arizona, Inc.
By
Name:
Title:
CG Marketing of Arizona, Inc.
By
Name:
Title:
Enstech Resources, Inc.
By
Name:
Title:
Norman, Riley & Associates, Inc.
By
Name:
Title:
Vi-Tech, Inc.
By
Name:
Title:
<PAGE>
MERGER SUBS:
CGA Acquisition Corporation #1
By
Name:
Title:
CGA Acquisition Corporation #2
By
Name:
Title:
CGA Acquisition Corporation #3
By
Name:
Title:
SHAREHOLDERS:
Ronald L. Jensen James K. Martens
Ronald L. Jensen, Trustee of the James K. Martens, Co-Trustee of
Ronald L. Jensen Revocable the James K. Martens and
Trust dated December 11, 1989 Constance Jean Martens Trust
dated December 5, 1989
Ronald L. Jensen, Trustee of the Constance Jean Martens, Co-Trustee
Clara L. Jensen Revocable of James K. Martens, Co-Trustee of
Trust dated December 11, 1989 Constance Jean Martens Trust
dated December 5, 1989
<PAGE>
LIST OF EXHIBITS
EXHIBITS
A Definition Cross-Reference Index
B Acquired Companies Shareholders.
C1 Plan of Merger #1
C2 Plan of Merger #2
C3 Plan of Merger #3
2.3.1 Conduct of Business Prior to Closing.
2.3.2 List of Bank Accounts, Investment Accounts, Safe Deposit Boxes
and Powers of Attorney.
2.9 Form of Covenant Not to Compete
2.11.4 ESOP Matters.
3.1.2 List of Foreign Jurisdictions Where There is Good Standing
Status.
3.2 Articles of Incorporation and Bylaws of the Acquired Companies
3.5.1 1996 Financial Statements, 1997 Financial Statements and
Interim Financial Statements.
3.5.2 List of Liabilities Not Disclosed in the Interim Financial
Statements.
3.5.3 List of Defaults.
3.6 List of Tax Matters.
3.7.1.1 List of Fixed Assets owned by the Acquired Companies;
Depreciation Schedules.
3.7.1.2 List of Leases.
3.7.2 Acquired Company Owned Real Property
3.8 Indebtedness of the Acquired Companies.
<PAGE>
3.9 List of Accounts Receivable and Notes Receivable.
3.10 List of Required Consents.
3.11 List of Changes.
3.13 List of Licenses and Permits.
3.14 List of Contracts.
3.15.1 List of Trademarks, Trade Names, Service Marks, Service Names,
Etc.
3.15.2 List of Owned Software, List of Licensed Software; List of
Problems with Software Licenses.
3.16 Labor Matters.
3.17 List of Benefit Plans.
3.18 Acquired Companies Customers
3.19 List of Environmental Matters.
3.20 Insurance Changes
3.21 List of Related Party Relationships.
3.23 Loans or Advances.
4.2 Affiliate Agreements.
5.3 Capitalization.
5.4 Purchaser Subsidiaries.
5.12 Labor Matters.
6.5 Consents Required at Closing.
6.11 Other Closing Conditions.
8.2.2 Percentage Allocation of Shares
9.3 Escrow Agreement.
<PAGE>
Annex B
10-1301. Definitions
In this article, unless the context otherwise requires:
1. "Beneficial shareholder" means the person who is a beneficial owner of shares
held in a voting trust or by a nominee as the record shareholder.
2. "Corporation" means the issuer of the shares held by a dissenter before the
corporate action or the surviving or acquiring corporation by merger or share
exchange of that issuer.
3. "Dissenter" means a shareholder who is entitled to dissent from corporate
action under section 10-1302 and who exercises that right when and in the manner
required by article 2 of this chapter.
4. "Fair value" with respect to a dissenter's shares means the value of the
shares immediately before the effectuation of the corporate action to which the
dissenter objects, excluding any appreciation or depreciation in anticipation of
the corporate action unless exclusion is inequitable.
5. "Interest" means interest from the effective date of the corporate action
until the date of payment at the average rate currently paid by the corporation
on its principal bank loans or, if none, at a rate that is fair and equitable
under the circumstances.
6. "Record shareholder" means the person in whose name shares are registered in
the records of a corporation or the beneficial owner of shares to the extent of
the rights granted by a nominee certificate on file with a corporation.
7. "Shareholder" means the record shareholder or the beneficial shareholder.
10-1302. Right to dissent
A. A shareholder is entitled to dissent from and obtain payment of the fair
value of the shareholder's shares in the event of any of the following corporate
actions:
1. Consummation of a plan of merger to which the corporation is a party if
either:
(a) Shareholder approval is required for the merger by section 10-1103 or the
articles of incorporation and if the shareholder is entitled to vote on the
merger.
(b) The corporation is a subsidiary that is merged with its parent under section
10-1104.
2. Consummation of a plan of share exchange to which the corporation is a party
as the corporation whose shares will be acquired, if the shareholder is entitled
to vote on the plan.
<PAGE>
3. Consummation of a sale or exchange of all or substantially all of the
property of the corporation other than in the usual and regular course of
business, if the shareholder is entitled to vote on the sale or exchange,
including a sale in dissolution, but not including a sale pursuant to a court
order or a sale for cash pursuant to a plan by which all or substantially all of
the net proceeds of the sale will be distributed to the shareholders within one
year after the date of sale.
4. An amendment of the articles of incorporation that materially and adversely
affects rights in respect of a dissenter's shares because it either:
(a) Alters or abolishes a preferential right of the shares.
(b) Creates, alters or abolishes a right in respect of redemption, including a
provision respecting a sinking fund for the redemption or repurchase, of the
shares.
(c) Alters or abolishes a preemptive right of the holder of the shares to
acquire shares or other securities.
(d) Excludes or limits the right of the shares to vote on any matter or to
cumulate votes other than a limitation by dilution through issuance of shares or
other securities with similar voting rights.
(e) Reduces the number of shares owned by the shareholder to a fraction of a
share if the fractional share so created is to be acquired for cash under
section 10-604.
5. Any corporate action taken pursuant to a shareholder vote to the extent the
articles of incorporation, the bylaws or a resolution of the board of directors
provides that voting or nonvoting shareholders are entitled to dissent and
obtain payment for their shares.
B. A shareholder entitled to dissent and obtain payment for his shares under
this chapter may not challenge the corporate action creating the shareholder's
entitlement unless the action is unlawful or fraudulent with respect to the
shareholder or the corporation.
C. This section does not apply to the holders of shares of any class or series
if the shares of the class or series are redeemable securities issued by a
registered investment company as defined pursuant to the investment company act
of 1940 (15 United States Code section 80a-1 through 80a-64).
D. Unless the articles of incorporation of the corporation provide otherwise,
this section does not apply to the holders of shares of a class or series if the
shares of the class or series were registered on a national securities exchange,
were listed on the national market systems of the national association of
securities dealers automated quotation system or were held of record by at least
two thousand shareholders on the date fixed to determine the shareholders
entitled to vote on the proposed corporate action.
10-1303. Dissent by nominees and beneficial owners
<PAGE>
A. A record shareholder may assert dissenters' rights as to fewer than all of
the shares registered in the record shareholder's name only if the record
shareholder dissents with respect to all shares beneficially owned by any one
person and notifies the corporation in writing of the name and address of each
person on whose behalf the record shareholder asserts dissenters' rights. The
rights of a partial dissenter under this subsection are determined as if the
shares as to which the record shareholder dissents and the record shareholder's
other shares were registered in the names of different shareholders.
B. A beneficial shareholder may assert dissenters' rights as to shares held on
the beneficial shareholder's behalf only if both:
1. The beneficial shareholder submits to the corporation the record
shareholder's written consent to the dissent not later than the time the
beneficial shareholder asserts dissenters' rights.
2. The beneficial shareholder does so with respect to all shares of which the
beneficial shareholder is the beneficial shareholder or over which the
beneficial shareholder has power to direct the vote.
10-1320. Notice of dissenters' rights
A. If proposed corporate action creating dissenters' rights under section
10-1302 is submitted to a vote at a shareholders' meeting, the meeting notice
shall state that shareholders are or may be entitled to assert dissenters'
rights under this article and shall be accompanied by a copy of this article.
B. If corporate action creating dissenters' rights under section 10-1302 is
taken without a vote of shareholders, the corporation shall notify in writing
all shareholders entitled to assert dissenters' rights that the action was taken
and shall send them the dissenters' notice described in section 10-1322.
10-1321. Notice of intent to demand payment
A. If proposed corporate action creating dissenters' rights under section
10-1302 is submitted to a vote at a shareholders' meeting, a shareholder who
wishes to assert dissenters' rights shall both:
1. Deliver to the corporation before the vote is taken written notice of the
shareholder's intent to demand payment for the shareholder's shares if the
proposed action is effectuated.
2. Not vote the shares in favor of the proposed action.
B. A shareholder who does not satisfy the requirements of subsection A of this
section is not entitled to payment for the shares under this article.
10-1322. Dissenters' notice
<PAGE>
A. If proposed corporate action creating dissenters' rights under section
10-1302 is authorized at a shareholders' meeting, the corporation shall deliver
a written dissenters' notice to all shareholders who satisfied the requirements
of section 10-1321.
B. The dissenters' notice shall be sent no later than ten days after the
corporate action is taken and shall:
1. State where the payment demand must be sent and where and when certificates
for certificated shares shall be deposited.
2. Inform holders of uncertificated shares to what extent transfer of the shares
will be restricted after the payment demand is received.
3. Supply a form for demanding payment that includes the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action and that requires that the person asserting dissenters' rights
certify whether or not the person acquired beneficial ownership of the shares
before that date.
4. Set a date by which the corporation must receive the payment demand, which
date shall be at least thirty but not more than sixty days after the date the
notice provided by subsection A of this section is delivered.
5. Be accompanied by a copy of this article.
10-1323. Duty to demand payment
A. A shareholder sent a dissenters' notice described in section 10-1322 shall
demand payment, certify whether the shareholder acquired beneficial ownership of
the shares before the date required to be set forth in the dissenters' notice
pursuant to section 10-1322, subsection B, paragraph 3 and deposit the
shareholder's certificates in accordance with the terms of the notice.
B. A shareholder who demands payment and deposits the shareholder's certificates
under subsection A of this section retains all other rights of a shareholder
until these rights are canceled or modified by the taking of the proposed
corporate action.
C. A shareholder who does not demand payment or does not deposit the
shareholder's certificates if required, each by the date set in the dissenters'
notice, is not entitled to payment for the shareholder's shares under this
article.
10-1324. Share restrictions
A. The corporation may restrict the transfer of uncertificated shares from the
date the demand for their payment is received until the proposed corporate
action is taken or the restrictions are released under section 10-1326.
<PAGE>
B. The person for whom dissenters' rights are asserted as to uncertificated
shares retains all other rights of a shareholder until these rights are canceled
or modified by the taking of the proposed corporate action.
10-1325. Payment
A. Except as provided in section 10-1327, as soon as the proposed corporate
action is taken, or if such action is taken without a shareholder vote, on
receipt of a payment demand, the corporation shall pay each dissenter who
complied with section 10-1323 the amount the corporation estimates to be the
fair value of the dissenter's shares plus accrued interest.
B. The payment shall be accompanied by all of the following:
1. The corporation's balance sheet as of the end of a fiscal year ending not
more than sixteen months before the date of payment, an income statement for
that year, a statement of changes in shareholders' equity for that year and the
latest available interim financial statements, if any.
2. A statement of the corporation's estimate of the fair value of the shares.
3. An explanation of how the interest was calculated.
4. A statement of the dissenter's right to demand payment under section 10-1328.
5. A copy of this article.
10-1326. Failure to take action
A. If the corporation does not take the proposed action within sixty days after
the date set for demanding payment and depositing share certificates, the
corporation shall return the deposited certificates and release the transfer
restrictions imposed on uncertificated shares.
B. If after returning deposited certificates and releasing transfer
restrictions, the corporation takes the proposed action, it shall send a new
dissenters' notice under section 10-1322 and shall repeat the payment demand
procedure.
10-1327. After-acquired shares
A. A corporation may elect to withhold payment required by section 10-1325 from
a dissenter unless the dissenter was the beneficial owner of the shares before
the date set forth in the dissenters' notice as the date of the first
announcement to news media or to shareholders of the terms of the proposed
corporate action.
<PAGE>
B. To the extent the corporation elects to withhold payment under subsection A
of this section, after taking the proposed corporate action, it shall estimate
the fair value of the shares plus accrued interest and shall pay this amount to
each dissenter who agrees to accept it in full satisfaction of his demand. The
corporation shall send with its offer a statement of its estimate of the fair
value of the shares, an explanation of how the interest was calculated and a
statement of the dissenters' right to demand payment under section 10-1328.
10-1328. Procedure if shareholder dissatisfied with payment or offer
A. A dissenter may notify the corporation in writing of the dissenter's own
estimate of the fair value of the dissenter's shares and amount of interest due
and either demand payment of the dissenter's estimate, less any payment under
section 10-1325, or reject the corporation's offer under section 10-1327 and
demand payment of the fair value of the dissenter's shares and interest due, if
either:
1. The dissenter believes that the amount paid under section 10-1325 or offered
under section 10-1327 is less than the fair value of the dissenter's shares or
that the interest due is incorrectly calculated.
2. The corporation fails to make payment under section 10-1325 within sixty days
after the date set for demanding payment.
3. The corporation, having failed to take the proposed action, does not return
the deposited certificates or does not release the transfer restrictions imposed
on uncertificated shares within sixty days after the date set for demanding
payment.
B. A dissenter waives the right to demand payment under this section unless the
dissenter notifies the corporation of the dissenter's demand in writing under
subsection A of this section within thirty days after the corporation made or
offered payment for the dissenter's shares.
10-1330. Court action
A. If a demand for payment under section 10-1328 remains unsettled, the
corporation shall commence a proceeding within sixty days after receiving the
payment demand and shall petition the court to determine the fair value of the
shares and accrued interest. If the corporation does not commence the proceeding
within the sixty day period, it shall pay each dissenter whose demand remains
unsettled the amount demanded.
B. The corporation shall commence the proceeding in the court in the county
where a corporation's principal office or, if none in this state, its known
place of business is located. If the corporation is a foreign corporation
without a known place of business in this state, it shall commence the
proceeding in the county in this state where the known place of business of the
domestic corporation was located.
<PAGE>
C. The corporation shall make all dissenters, whether or not residents of this
state, whose demands remain unsettled parties to the proceeding as in an action
against their shares, and all parties shall be served with a copy of the
petition. Nonresidents may be served by certified mail or by publication as
provided by law or by the Arizona rules of civil procedure.
D. The jurisdiction of the court in which the proceeding is commenced under
subsection B of this section is plenary and exclusive. There is no right to
trial by jury in any proceeding brought under this section. The court may
appoint a master to have the powers and authorities as are conferred on masters
by law, by the Arizona rules of civil procedure or by the order of appointment.
The master's report is subject to exceptions to be heard before the court, both
on the law and the facts. The dissenters are entitled to the same discovery
rights as parties in other civil proceedings.
E. Each dissenter made a party to the proceeding is entitled to judgment either:
1. For the amount, if any, by which the court finds the fair value of his shares
plus interest exceeds the amount paid by the corporation.
2. For the fair value plus accrued interest of the dissenter's after-acquired
shares for which the corporation elected to withhold payment under section
10-1327.
10-1331. Court costs and attorney fees
A. The court in an appraisal proceeding commenced under section 10-1330 shall
determine all costs of the proceeding, including the reasonable compensation and
expenses of any master appointed by the court. The court shall assess the costs
against the corporation, except that the court shall assess costs against all or
some of the dissenters to the extent the court finds that the fair value does
not materially exceed the amount offered by the corporation pursuant to sections
10-1325 and 10-1327 or that the dissenters acted arbitrarily, vexatiously or not
in good faith in demanding payment under section 10-1328.
B. The court may also assess the fees and expenses of attorneys and experts for
the respective parties in amounts the court finds equitable either:
1. Against the corporation and in favor of any or all dissenters if the court
finds that the corporation did not substantially comply with the requirements of
article 2 of this chapter.
2. Against the dissenter and in favor of the corporation if the court finds that
the fair value does not materially exceed the amount offered by the corporation
pursuant to sections 10-1325 and 10-1327.
3. Against either the corporation or a dissenter in favor of any other party if
the court finds that the party against whom the fees and expenses are assessed
acted arbitrarily, vexatiously or not in good faith with respect to the rights
provided by this chapter.
<PAGE>
C. If the court finds that the services of an attorney for any dissenter were of
substantial benefit to other dissenters similarly situated and that the fees for
those services should not be assessed against the corporation, the court may
award to these attorneys reasonable fees to be paid out of the amounts awarded
the dissenters who were benefitted.
<PAGE>
Annex C
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the fiscal year ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ---------- to ----------.
Commission file number 0-13163
ACXIOM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 71-0581897
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 2000, 301 INDUSTRIAL BOULEVARD, CONWAY, ARKANSAS 72033-2000
(Address of principal executive offices) (Zip Code)
(501) 336-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value
(Title of Class)
Preferred Stock Purchase Rights
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days. Yes [X] No [ ]
Indicate by check mark if disclosure of delinquent filers pursuant to Item 405
of Regulation S-K is not contained herein, and will not be contained, to the
best of registrant's knowledge, in definitive proxy or information statements
incorporated by reference in Part III of this Form 10-K or any amendment to this
Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of the
registrant, based upon the closing sale price of the registrant's Common Stock,
$.10 par value per share, as of June 17, 1998 as reported on the Nasdaq National
Market, was approximately $875,422,220. (For purposes of determination of the
above stated amount only, all directors, officers and 10% or more shareholders
of the registrant are presumed to be affiliates.)
The number of shares of Common Stock, $.10 par value per share, outstanding as
of June 17, 1998 was 52,479,289.
<PAGE>
DOCUMENTS INCORPORATED BY REFERENCE
Portions of the registrant's Annual Report to Shareholders for the fiscal
year ended March 31, 1998 ("Annual Report") are incorporated by reference into
Parts I and II.
Portions of the Proxy Statement for the Annual Meeting of Shareholders
("1998 Proxy Statement") are incorporated by reference into Part III.
Forward-Looking Statements or Information
Certain statements in this filing and elsewhere (such as in other filings
by the Company with the Securities and Exchange Commission ("SEC"), press
releases, presentations by the Company or its management and oral statements)
may constitute "forward-looking statements" within the meaning of the Private
Securities Litigation Reform Act of 1995. Such forward-looking statements
involve known and unknown risks, uncertainties, and other factors which may
cause the actual results, performance or achievements of the Company to be
materially different from any future results, performance or achievements
expressed or implied by such forward-looking statements. Such factors are
discussed below under the heading "Additional Information Regarding
Forward-Looking Statements" and include, among other things, the possible
adoption of legislation or industry regulation concerning certain aspects of the
Company's business; the removal of data sources and/or marketing lists from the
Company; the ability of the Company to retain customers who are not under
long-term contracts with the Company; technology challenges; Year 2000 software
issues; the risk of damage to the Company's data centers or interruptions in the
Company's telecommunications links; acquisition integration; the effects of
postal rate increases; and other market factors.
PART I
Item 1. Business
General
The Company is in the business of data delivery and information integration
and management for customers in the United States and the United Kingdom, and,
to a smaller extent, Canada, Europe and Malaysia. While in the past the
Company's traditional business was focused upon the provision of data processing
and related computer-based services mainly to direct marketing organizations,
the Company's business has expanded in recent years beyond the direct marketing
industry. For some of its major customers, the Company provides assistance in
the form of information/database management, data center management and/or the
provision of data, the primary purpose of which may be for activities other than
direct marketing. For example, the Company's largest customer, Allstate
Insurance Company, uses the Company's information management services and data
for the purpose of underwriting insurance. The Company's second largest
customer, Trans Union Corporation, one of the three major credit bureaus in the
U.S., has among other things outsourced the operation of its data center to the
Company.
In the traditional direct marketing area, the Company is one of the leading
providers of computer-based marketing information services and marketing data.
The Company offers a broad range of services and data to direct marketers and to
other businesses which utilize direct marketing techniques such as targeted
direct mail, database marketing and data warehousing. The Company assists its
customers with the marketing process, including project design, list brokering
and management, list cleaning, list enhancement and list production, database
creation and management, and fulfillment and consumer response analysis.
Corporate Information
The Company was originally incorporated in 1969 as Demographics, Inc., an
Arkansas corporation which later became known as Conway Communications Exchange,
Inc. In connection with its initial public offering in 1983, the Company was
reincorporated in Delaware as CCX Network, Inc. In 1988, the name Acxiom
Corporation was adopted. The Company is headquartered in Conway, Arkansas, and
has additional operations in twenty-four
<PAGE>
states, the District of Columbia, Canada, France, the Netherlands, the U.K., and
Malaysia. The Company's Internet address is http://www.acxiom.com.
Several acquisitions were completed by the Company during the past fiscal
year. Effective October 1, 1997, the Company acquired the stock of MultiNational
Concepts, Ltd. ("MultiNational"), and Catalog Marketing Services, Inc., d/b/a
Shop the World by Mail ("Shop The World"). MultiNational is the largest leading
international mailing list and database maintenance provider for consumer
catalogers interested in developing foreign markets. Shop The World is the
global industry leader in cooperative customer acquisition programs and
represents the first cataloger to be added to Acxiom's portfolio of data
maximization businesses. See the detailed description of both MultiNational's
and Shop The World's businesses below under "The Company's Products and
Services, Acxiom Data Products Division."
Effective October 1, 1997, the Company purchased all of the general and
limited partnership interests in Buckley Dement, L.P. ("Buckley Dement"), as
well as the assets of its affiliated company, KM Lists, Incorporated ("KML").
Buckley Dement, the oldest direct marketing company in the U.S., provides list
brokerage, list management, promotional mailing and fulfillment, and merchandise
order processing to pharmaceutical, health care, and other commercial customers.
Buckley Dement is the leading manager of eleven companies licensed by the
American Medical Association ("AMA") to sell the AMA's proprietary list of
physicians. See the detailed description of Buckley Dement's business below
under "The Company's Products and Services, Acxiom Services Division and Acxiom
International Division."
The past year's acquisitions were preceded by two acquisitions in the
prior year, when the Company purchased substantially all of the assets and
assumed certain liabilities of Direct Media(TM)/DMI, Inc., and acquired all of
the outstanding capital stock of Pro CD(R), Inc. The former, the largest list
management/list brokerage operation in the world, provides list management, list
brokerage and other list consulting services to business-to-business and
consumer list owners and mailers. See "The Company's Products and Services,
Acxiom Data Products Division" below. The latter provides reference data derived
from telephone directories for the U.S. and Canada. See "The Company's Products
and Services, Acxiom Data Products Division" below.
In addition to the foregoing acquisitions, in July 1997, the Company
completed an initial investment of approximately $4 million in Bigfoot
International, Inc. ("Bigfoot"), an emerging company that provides services and
tools for Internet E-mail users. The Company completed a second investment of $4
million in Bigfoot in June 1998. See the detailed description of Bigfoot's
business below under "The Company's Products and Services, Acxiom Data Products
Division."
The Company's Board of Directors adopted a shareholder rights plan in
February 1998. The plan provides for a dividend distribution of one preferred
stock purchase right (a "Right") for each outstanding share of common stock,
distributed to stockholders of record on February 9, 1998. The Rights will be
exercisable only if a person or group acquires twenty percent (20%) or more of
the Company's common stock or announces a tender offer for twenty percent (20%)
or more of the common stock. Each Right will entitle stockholders to buy one
one-thousandth of a share of newly created Participating Preferred Stock, par
value $1.00 per share, of the Company at an initial exercise price of $100 per
Right. If a person acquires twenty percent (20%) or more of the Company's
outstanding common stock, each Right will entitle its holder to purchase common
stock (or, in certain circumstances, Participating Preferred Stock) of the
Company having a market value at that time of twice the Right's exercise price.
Under certain conditions, each Right will entitle its holder to purchase stock
of an acquiring company at a discount. Rights held by the twenty percent (20%)
holder will become void. The Rights will expire on February 9, 2008, unless
earlier redeemed by the Board at $0.01 per Right.
The plan is intended to protect the Company and its stockholders against
unfair or coercive takeover tactics and offers which may not provide adequate
value to the stockholders. The plan was not adopted in response to an effort to
acquire control of the Company and is similar to stockholder protective plans
adopted by many other companies. The rights agreement does not in any way weaken
the Company's financial strength or interfere with its business plans. The
issuance of the Rights has no dilutive effect, will not affect reported earnings
per share, is not taxable to the Company or its stockholders, and will not
change the way in which the Company's shares are traded.
<PAGE>
On May 26, 1998, the Company entered into an Agreement and Plan of Merger
(the "Merger Agreement"), among the Company, ACX Acquisition Co., Inc., a
wholly-owned subsidiary of the Company, and May & Speh, Inc. ("May & Speh"), a
company based in Downers Grove, Illinois. Under the terms of the Merger
Agreement, the Company will exchange 0.80 shares of the Company's common stock
for each share of May & Speh common stock. It is expected that the merger will
give the Company additional strengths in predictive modeling, software, data
warehousing, and data center outsourcing. The combined entity will continue
under the Acxiom name. The Merger Agreement, which has been approved by both
companies' Boards of Directors, is subject to regulatory and shareholder
approval. The Company anticipates that the merger will be consummated in August
1998.
With the May & Speh merger, Chicago will become the Company's second
largest location by adding over 650 May & Speh associates. In connection with
this merger, on June 4, 1988, the Company filed a Current Report on Form 8-K,
Commission File No. 0-13163.
Technology Applications
In the past, the Company relied heavily in its traditional data processing
business upon the use of mainframe hardware (older and less expensive versions)
for batch processing, and utilized more current technology for on-line
processing. Due to increased customer demand for access to information, the
Company has begun using faster and more cost-effective ways to deliver its
services through client/server and networking solutions. The Company has
incorporated a number of new strategies into its processing environment: (1)
Several of the Company's core application systems products have been
re-engineered to run on open systems platforms or a parallel processing
architecture, thereby allowing the Company to significantly reduce its
processing cycle time and improve the scalability of its legacy list processing
applications; (2) Dedicated stand-alone mainframes have been utilized as
attached processors to the Company's computing enterprise, resulting in the
ability to off-load high volume list processing work onto cost efficient data
processing platforms; (3) The Company installed a Local Area Network ("LAN")
system and implemented extensive use of personal computers ("PCs") as front-end
client workstations, providing a graphical user interface ("GUI") front-end user
access capability to all internal and customer applications, as well as the
ability to institute a client/server architecture within the Company's existing
computing enterprise. The Company has also set up a LAN dedicated for Internet
E-Commerce purposes as well as a Wide Area Network ("WAN") for customer decision
support system ("DSS") client connections; and (4) Relationships with several
third party database and DSS software providers have been developed pursuant to
which the Company is authorized to sublicense the DSS products of such providers
as part of its overall customer solution. The third party database and DSS
providers with whom the Company currently has alliances are International
Business Machines, Inc.; Oracle Corporation; Red Brick Systems, Inc.;
Microstrategy, Inc.; Arbor Software Corporation; Trajecta, Inc.; Business
Objects, Inc.; Appsource Corporation; Exchange Applications, Inc.; and Informix
Software, Inc.
In addition, the Company has recently announced the development of new
application technology that will deliver data to its customers via a
revolutionary on-line data access and delivery system. This new technology,
introduced as the Acxiom Data Network(SM), will allow the Company's customer
data warehouses, independent software vendor applications, and solutions to be
easily "content enabled" no matter how much or how little information is
requested by the customer. A detailed description of the Acxiom Data Network can
be found below under "The Company's Products and Services, Acxiom Data Products
Division."
The Company has also begun to use new application design tools and enhanced
programming languages that allow applications to be developed using a
component/object based architecture. This architecture permits applications to
be highly customizable for specific customer requirements and reduces
duplication of development efforts by providing the ability to re-use components
across applications.
To accommodate a balanced distribution of processes among the client/server
technology, DSS and mainframes, the Company has incorporated an industry
standard network environment using the "TCP/IP" protocol (Transmission Control
Protocol/Internet Protocol), which is the standard currently used in most
private networks.
<PAGE>
As the processes grow on the Company's server network, the requirement to
move data across the network grows as well. To meet this requirement, the
Company has adopted an infrastructure that will enable direct peer-to-peer
communications between mainframe and server-based applications, along with
increased bandwidth. This strategy is designed to provide much faster and more
reliable application access than was available in the past. While management
believes that this configuration will be adequate for the foreseeable future,
the Company will continue to assess other technologies that can be implemented
in a phased approach. Network stability, security and manageability are also
being addressed to support this distributed environment. Management believes
that this approach to networking enhances the Company's ability to deliver
improved functionality within its network as well as connectivity to customer
networks.
The Company's Products and Services
The Company has four operating divisions which were established to maximize
synergies between similar business units. The divisions are referred to as the
Acxiom Data Products Division, the Acxiom Services Division, the Acxiom
International Division, and the Acxiom Alliances Division. The products and
services of each division are discussed below:
Acxiom Data Products Division
The focus of the Company's recent acquisitions has been to strengthen the
Company's position as a leading provider of data. With the addition of real
property data, marketing lists, and telephone reference data, the Company has
made substantial progress towards this goal. When combined with the consumer
household and business data already offered by the Company and the developing
Acxiom Data Network, opportunities exist for a variety of applications for the
Company's existing customers. The acquisitions, coupled with the Acxiom Data
Network, have also created the potential for new markets, such as the middle
market and small companies market ("Middle Tier Market"), Internet and consumer
markets.
The Data Products Division is headquartered in Conway, Arkansas and has
additional locations in Arizona, California, Colorado, Connecticut, Florida,
Georgia, Illinois, Massachusetts, Nevada, New Jersey, New York, Ohio, Oregon,
South Carolina, Virginia, Washington, Canada, the United Kingdom, and the
Netherlands. Approximately 1,325 associates work in this division. The products
and services offered by the Data Products Division are as follows:
InfoBase(TM) Products and Services
InfoBase is a list enhancement service for companies engaged in direct
marketing to consumers and businesses. The household data which comprises the
IBConsumer(R) database includes data owned by the Company as well as data owned
by data contributors who permit the Company to access their data for purposes
such as list enhancement, list analysis, segmentation modeling, and merge/purge
screening. The type of data made available includes consumer names, addresses
and telephone numbers, as well as such demographic information as age, gender,
approximate income brackets, occupation, marital status, the presence of other
household members, and car and home ownership. The DataQuick(R) ListServices(TM)
real property data may be combined with InfoBase demographic data for use by
target marketers for such purposes as determining types and sizes of homes, the
year a home was built, and length of current ownership. Management believes that
the IBConsumer database is the most complete database of its kind in the United
States, covering over 95% of all U.S. households. A computerized listing
("Telephone White Pages," or the "EDGE File") of all U.S. telephone book white
page information is also available as part of the InfoBase services. In addition
to its IBConsumer database, the Company offers a business database,
IBBusiness(R), to companies engaged in direct marketing to businesses. Providing
information on over 13 million businesses, the type of data made available
includes business address information (including full mailing address), contact
information (including telephone number and executive name), Standard Industrial
Classification codes, and business characteristics (e.g., company size).
<PAGE>
Acxiom/Direct Media(TM) Products and Services
The Acxiom/Direct Media services include list management, list brokerage,
package insert marketing, Internet marketing, Web site brokerage and management,
and analytical and modeling services to business-to-business and consumer list
owners and mailers. The Company's sales staff dedicated to selling the Direct
Media services is the largest in the industry and has substantial experience in
the market segments served by the Company in this arena. As a list manager, the
Company controls over 1200 lists in the U.S. and 175 lists in the U.K. As a list
broker, the Company offers a variety of services, including private prospecting
databases from which a mailer may choose the lists that best fit its specific
needs to build its own database. Cooperative databases are offered as a more
economical alternative to the private databases. Included among the cooperative
databases is SmartBase(TM), comprised of the mailing lists of hundreds of the
country's best consumer merchandise vendors. By specifying the demographic
characteristics of its targeted market (instead of requesting particular lists),
a user may generate a mailing list using SmartBase. Management estimates that
approximately 12% of all third class mail in the U.S. is processed through the
Company. For 20 years prior to the acquisition, Direct Media/DMI, Inc. had been
one of the Company's primary customers. The acquisition has enabled the Company
to offer its customers expanded capabilities and services which should result in
a significant competitive advantage in the marketplace. By combining Direct
Media/DMI, Inc.'s marketing expertise with the Company's software systems, more
efficient mailing programs are now possible for the Company's customers.
Two of the Company's recent acquisitions, MultiNational and Shop the World,
have been incorporated into the Data Products Division, and their services have
been united with the Direct Media services. As the largest leading international
mailing list and database maintenance provider for consumer catalogers
interested in developing foreign markets, the acquisition of MultiNational gave
the Company access to over 70 global catalog customers with approximately 2.7
million foreign names. The acquisition of Shop the World, the global industry
leader in cooperative customer acquisition programs, gave the Company further
access to international customers. In particular, Shop the World produces an
international "catalog of catalogs" whereby end-customers in over 60 countries
can order catalogs from around the world.
DataQuick(R) Products and Services
The DataQuick real property data products are offered in conjunction with
list targeting, list fulfillment, and file enhancement. Data is gathered from a
number of sources including county assessors, county recorders and the U.S.
Census Bureau. The Company currently has 17 on-line databases containing
information on over 70 million properties affecting over 140 million consumers
across the country. Through alliances with several regional real property data
providers in other parts of the U.S., the Company offers additional databases
containing real property information on other major Metropolitan Statistical
Areas ("MSAs") throughout the country. Several CD-ROM titles are offered,
including Countywide Property Data (currently available for seven western
states), Assessors Parcel Maps (actual plat maps for the seven states), and
CD-ShareData(TM) (a product for lenders which can be used to measure market
potential and analyze product performance). Specifically for the title insurance
industry, the Company offers TitleShare(R), a product designed to assist in
market share analysis and long-term planning; TOPS (Title Operations Property
System), a product which provides property profiles; and GOTOPS, an Internet
access product exclusively available to the title insurance industry which
provides property reports with custom comparable sales, nearby homeowners,
neighborhood information, U.S demographic census data, schools and maps, all for
a defined area. Other lists focus on new homeowners who have moved within the
last six months, and real estate investors. Another file provides market values,
the available and lendable equity, loan-to-value ratio, and purchase and loan
amounts. For the general public, the Company offers DQ Express where customized
reports drawn from all of the DataQuick information databases can be obtained.
In all, the Company has over 40 DataQuick real property databases, products and
services. The information is distributed on a variety of media: On-line,
Internet, CD-ROM, magnetic tape, floppy disk, Bulletin Board Service (electronic
transmission), microfiche, and hard copy reports or mailing labels. The
DataQuick data has a broad range of applications and a variety of markets,
including appraisal, real estate, banking, mortgage, investments,
credit/collection, marketing, insurance, home improvements, home products
marketing, and research. Management believes that the combination of the
DataQuick products and services with the Company's other data products and
marketing capabilities gives it a competitive advantage in the marketplace.
<PAGE>
Data By Acxiom Products and Services
The Company's telephone reference products, "InfoBase Telephone
Directories," consist of over 110 million business and residential listings
throughout the U.S. and Canada. The Company's customers can license the data in
their choice of quantity, media and/or format, or combine it with the Company's
search, interface and network access technologies. Among the telephone reference
products are InfoBase Telephone Directories FS (a database containing every
published listing from every directory in the U.S. and designed to run on most
network configurations), InfoBase Telephone Directories QuickSearch (an advanced
client/server application that produces fast lookups using minimal network
resources), InfoBase Telephone Directories Intranet (a client/server solution
that enables customers to host the entire InfoBase directory database on an
Intranet site for access with the most popular Web browsers), and InfoBase
Telephone Directories Developer Tools (enables customers to create custom
applications for integrating InfoBase Telephone Directories with the customer's
existing programs). All products are available with either U.S. or Canadian
listings, as well as the combined listings of both countries.
Effective August 22, 1997, the Company sold the retail and direct marketing
operations of its telephone reference products, as well as the rights to the
"Pro CD" and "Select Phone" brand names, to CD-Rom Technologies, Inc., a
wholly-owned subsidiary of American Business Information, Inc. (collectively
known as "ABI"). The Company retained the corporate sales operations, now known
as "Data By Acxiom." The departmental and enterprise-wide data solutions of Data
By Acxiom have been re-branded as "InfoBase Telephone Directories" and will
continue to be enhanced, sold and supported by the Company. The Company provides
telephone data derived from telephone directories for the U.S. and Canada,
mapping data, and other related reference products and services. The products
contained in the InfoBase Telephone Directories are distributed as CD-ROM,
on-line and batch products. Through this family of products, Data By Acxiom
provides electronic telephone, name and address data for approximately 112
million residential and business listings as published in the U.S. and Canadian
telephone directories, searchable by name, street, city, county, state, ZIP
Code, telephone number, SIC code, geographic location, and Metropolitan
Statistical Area ("MSA").
Interactive Information Services Products and Services
Through its Interactive Information Services, the Company provides
customers with secure, on-line access to the demographic, real estate and
telephone data described above. This information is available 24 hours a day,
seven days a week, except for regularly scheduled weekly maintenance periods.
Many traditional services of the Company are offered as well, including
Addressability(R), an address standardization and geographic coding system that
corrects and standardizes the city, state and ZIP Code components of an address,
and which assigns the carrier route, ZIP+4, delivery point and other postal
codes. Also offered is Geo-Coding On-Line, which is used to enhance a mailer's
addresses with geo-demographic information. Other elements which may be
overlayed are latitude, longitude, Census Tract Code, Census Block Code, and MSA
Code.
During the past fiscal year, the Company purchased an equity interest in
Bigfoot as part of a strategic alliance. The Company had contracted to purchase
a promissory note from Bigfoot for an additional investment of $4,000,000,
convertible into Bigfoot common stock ("Purchase Note"). This purchase was
completed in June 1998. The additional commitment by the Company was subject to
performance by Bigfoot of certain financial and operating covenants. Due to the
conversion of the Purchase Note, the Company now has an option to acquire up to
fifty-one percent (51%) of the outstanding stock of Bigfoot. The first offering
from the Company and Bigfoot is a service called E-Mail Campaign Management(SM)
("ECM") (formerly known as Acxiom Preferred Mail). ECM enables marketers to
establish one-on-one, interactive relationships with their customers via e-mail
in a consumer controlled fashion. ECM provides Internet-based consumers with a
new standard of privacy, control and choice when participating in the electronic
marketplace. For the direct marketer, it provides one-to-one marketing,
"real-time" response to promotions, communications and transactions.
Most significantly, the Company recently announced the development of the
Acxiom Data Network, an innovative on-line data access and delivery system. The
Acxiom Data Network will provide authorized businesses, utilizing the same
database software subscribers use on a daily basis, secured network access to
selected data
<PAGE>
products offered by the Company. The Acxiom Data Network will extend a
customer's data management capabilities by matching consumers and businesses
from a customer's databases to consumers and businesses in the Company's
databases. The Company will provide software that complies to the most widely
used open standards. This software will be installed on subscribers' computers
and will communicate to software on the Company's servers over the Internet or a
private network. Delivery of the data in such a manner, as opposed to delivery
through CD-ROMs, floppy discs and/or tapes, is expected to reduce the Company's
average turnaround time of seven to ten days down to minutes.
The Company also believes that the matching process and software will join
to give the Acxiom Data Network information linking capability that no other
company is currently providing. By allowing customers to link their lists to the
Company's InfoBase data, subscribers to the Acxiom Data Network will have access
to demographic information, geo-demographic information, and personal interest
information. It is anticipated that the Acxiom Data Network will provide an
unprecedented supply of accurate data in a real-time environment to allow
marketing professionals to make informed decisions quickly, thereby helping them
acquire new customers and enhance relationships with existing customers. As a
result, the Company will be able to offer new products to existing customers and
will also be able to deliver its traditional products, as well as new products,
to mid-sized and small businesses on an affordable basis. The Acxiom Data
Network is expected to be operational in fiscal 1999.
It is the Company's intention to initially introduce the Acxiom Data
Network exclusively to Fortune 1000 companies. Over time, the Acxiom Data
Network will be offered to qualifying mid-sized and small businesses. In
addition, there are other planned innovations for the Acxiom Data Network, such
as the ability to integrate data directly into call centers, interactive Web
pages, point-of-sale applications and sales force automation software.
Additionally, "push notification" may be made available. This technology will
automatically alert subscribers when customer data has changed, keeping their
data as current as possible.
Acxiom Services Division and Acxiom International Division
The services provided by the Acxiom Services Division and the Acxiom
International Division have historically formed the core of the Company's
business and continue to be key to its operations. The revenue units comprising
the Acxiom Services Division are Citicorp, IBM, Retail, Insurance,
Pharmaceuticals, Publishing, Telecommunications, Utilities, and High Tech
Information Services. Approximately 810 associates are employed within this
division, which is headquartered in Conway, Arkansas, with additional locations
in California, Colorado, Georgia, Illinois, Kansas, Minnesota, New York, Texas
and Washington, D.C.
The International Division, with headquarters in London, England, employs
approximately 600 associates. The International Division consists of five
revenue units, three of which are client industry focused and two having a
product specialization (i.e., Internet services and data sales). The
International Division operations are supported by the International Services
Group and the International Business Leadership Team. Business operations
outside of the U.K. include the Malaysian branch and a newly acquired French
information technology business located in Paris.
Through the Services Division and the International Division, the Company
offers data processing and related services to the direct marketing industry and
to a variety of other businesses. Management believes, based upon its knowledge
of the industry, that the Company is one of the leading suppliers of information
services to the direct marketing industries in the United States and the United
Kingdom, offering companies that use direct marketing access to extensive
customer lists and databases of information, as well as providing a wide range
of services and software that permit customers to precisely tailor their mailing
lists in accordance with specifically targeted marketing plans.
The International Division is continuing its expansion into continental
Europe, as well as Malaysia. Efforts are currently underway to expand the
International Division's services to customers in the Netherlands, France, and
Germany. Recent small acquisitions have established the Company's presence in
the Netherlands and in France, and the Company has an office in Malaysia.
Management believes that the market for the Company's services in these
locations is largely untapped. Some of the considerations which must be
considered are the existence of strict
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data protection laws in some countries, which would require the Company to make
adjustments in the way in which it collects and disseminates data. Several
European countries require an "opt-in" process whereby prior consent by an
individual consumer is necessary in order for certain data about the consumer to
be sold. Additionally, the Company's proprietary software would have to be
adapted to fit the address requirements, languages and character sets of other
countries. The strength of any local competing businesses would have to be
evaluated, and cultural differences would have to be taken into account.
Currently, through the Services Division and the International Division,
the Company provides computer-based targeted marketing support for direct
marketers, which support consists of planning and project design, list cleaning,
list enhancement, list order fulfillment, database services and response
analysis. In addition to focusing upon direct marketing programs designed to
obtain new business prospects for its customers, the Company assists its
customers in creating marketing databases which enable the customers to focus
upon developing their existing clientele. Such databases allow a marketer to
analyze its customers' buying habits, and to narrowly target advertising
campaigns to those customers who are most likely to respond. In addition, the
Company offers integrated data processing software systems and enhancement
services which provide its customers with rapid access to marketing information
housed at the Company's Conway, Arkansas and Sunderland, England data centers.
The direct marketing industry is composed of businesses that use direct
mail order and other methods of direct consumer contact to promote their
products or services. Unlike traditional forms of advertising which are aimed at
a broad audience through print or broadcast media, direct marketing involves
targeted advertising sent directly to potential customers. Historically, direct
marketing programs have had a positive response rate of approximately 1 to 3%.
Direct marketers are heavily dependent upon specific market information and the
application of statistics and computer modeling to assist them in predicting
market behavior and thereby maximizing the response rate. The products and
services offered by the Company are designed to assist its customers to achieve
a higher rate of return on their marketing investments by selectively targeting
their marketing efforts to individuals who are most likely to respond.
An integral aspect of the Services and International Divisions' business is
offering the Company's customers access to extensive marketing lists and
databases of information. The Company either provides its proprietary data or
acts as a link between those who own or manage lists and those who buy or use
lists for direct marketing purposes. Based upon its knowledge of the operations
of its competitors and its customers, management believes that the Company has
been entrusted with the largest aggregation of names, addresses and related data
available to the U.S. and the U.K. direct marketing industry and to other
businesses.
Direct marketing programs require the analysis and segmentation of large
amounts of data on past customers and known marketplace prospects to identify
desired purchasing characteristics. Using advanced technology, the Company can
integrate the diversified databases of its customers into a single database.
Then external InfoBase data, consisting of demographic, behavioral and
comparative customer information, is overlayed to create a unified customer
database. The customer's information then becomes accessible and actionable
enterprise-wide through the Company's proprietary desktop tools and services
and/or through third party DSS tools.
Typically, decision support involves the ability to extract user-defined
segments from an aggregation of data ("data warehouse") via a query capability
and then to profile and/or report on a data segment, as well as the ability to
perform more detailed analysis. From the resulting information, specific
targeted marketing strategies and personalized communications can be generated.
Through its data communications network, the Company provides access to data
warehouse information to drive decision support strategies for its customers.
The Company also provides several decision support software tools and services
which are designed to provide customers with access to their data warehouse
resources and to further allow them to design and execute their strategic
marketing initiatives. As noted above (see "Technology Applications"), the
Company has expanded its architecture to include the DSS environment. In this
area, the Company offers custom systems integration services that may combine
the Company's software with third party DSS software products to provide a
customized decision support solution for a customer or an industry.
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The Company's primary vehicle for rapid delivery of these services in the
U.S. is its data communications network through which direct marketing customers
receive authorized access to lists and databases housed at the Company's Conway
data center. Management believes that the Company has one of the largest
capacities for database management, mailing list processing, and networking in
the industry. Through its communication network, lists may be interrogated and
regrouped with marketing information selected by a customer, including
geographic, demographic, psychographic and previous consumer response data, so
as to create the desired universe of names. A customer can then create, select,
merge and enhance the lists available to it for even more precise market
segmentation, thus enabling each mailing program to be tailored for a carefully
targeted sales audience.
The Company also offers several front-end desktop DSS products, including
the third party DSS software described above (see "Technology Applications") and
the Company's proprietary Acxiom MarketGuide(TM) and Rapidus products, as well
as the new Acxiom Data Network. Such products are designed to permit users with
even minimal training to extract information from large databases via desktop
computers. The Company has also established a unified software development team
composed of both U.S. and U.K. associates. These associates will focus on the
development of key generic software products for use by the Company's customers.
Part of this initiative is aimed at linking Company tools and/or data with third
party tools and/or data to provide a full function system to database marketers
for data analysis, promotion design, database build, campaign fulfillment,
management, and tracking. This team is also involved in developing a PC-based
software tool designed to provide support to marketers for campaign
administration, response profiling and database scoring.
In addition to the traditional marketing services provided by the Services
Division, the Company, through its subsidiary, Acxiom RM-Tools, Inc. ("Acxiom
RM-T"), is managing the outside purchasing and internal processing of the
consumer data Allstate Insurance Company ("Allstate") uses for the underwriting
of its lines of automobile insurance. The information management agreement
initially entered into in 1992 is currently being renegotiated for an extended
term. The functions now being performed for Allstate were previously handled
through Allstate's various regional offices. The savings which result from
Acxiom RM-T's management of this data are shared equally by the two parties.
Under the agreement, Acxiom RM-T provides software systems and database
management for Allstate to use in connection with new automobile insurance
policies across the United States. Included among the data which Acxiom RM-T
furnishes to Allstate is motor vehicle registration information, automatic
claims history, driver information, financial stability information, vehicle
verifications, property telephone inspections, property replacement costs and
property claims history. The agreement with Allstate reflects the Company's
strategy to obtain long-term, large-volume contracts which generate predictable
revenue. During the past fiscal year, Allstate accounted for approximately $74.7
million of total revenues.
The Company is pursuing contracts with other insurance companies whereby
the Company would provide information management services to assist with the
insurers' risk management, underwriting, claims and marketing functions. During
the past fiscal year, the Application Verification Service ("AVS") was
introduced as the vehicle for delivering these services. AVS can also be used to
assist other industries to verify information required on an employment, credit,
and/or membership application. Together with Fair, Isaac and Company,
Incorporated ("Fair Isaac"), a leading developer of scoring technology for the
insurance and credit industries, the Company also offers risk management
information services to the insurance industry. The Company and Fair Isaac have
completed development of InfoScore(TM), a demographic marketing scorecard for
the personal lines insurance industry segment that is used to rank applicants by
risk level.
In addition to the data processing services offered by the Company in the
U.K., the Company also provides comprehensive promotional materials handling and
response services to its U.K. customers. Based upon its knowledge of the
industry, management believes that it is one of the largest firms of its kind in
the U.K. Among the services provided are promotional fulfillment, competition
handling, in-bound telemarketing and response handling, lead monitoring,
contract packing and mailing, coupon redemption, and optical character
recognition support. Through the use of computerized tracking and monitoring
systems, the Company is able to provide customers with current reports on the
progress of their marketing campaigns and can furnish customers with information
useful for promotion analysis and subsequent database campaigns. In response to
the growing demand for telephone-based response services in the U.K., the
Company has invested significantly in the latest Computer Telephony Integration
("CTI") systems in the last twelve months and plans provide for this investment
to continue. The Company is
<PAGE>
currently one of the top 10 companies in the U.K. providing large scale
telephone services. CTI systems-related services will continue to be an area of
business development for the Company as it bridges the two primary areas of
expertise that the Company provides in the U.K. -- large scale, complex
information technology database systems and response services capability. The
Company's proprietary software product Tracx(TM) also provides support for
points redemption processing for loyalty programs.
The Company recently added a Pharmaceuticals business unit based upon the
acquisition of Buckley Dement, which provides list brokerage, list management,
promotional mailing and fulfillment, and merchandise order processing to
pharmaceutical, health care, and other commercial customers. The Company regards
the pharmaceutical industry as an emerging growth opportunity and has formed the
Pharmaceuticals business unit to focus on providing database marketing services
to major pharmaceutical companies in the U.S.
Acxiom Alliances Division
The Alliances Division encompasses strategic relationships which the
Company has with its outsourcing and finance industry customers (all finance
industry customers are served by this division, with the exception of Citibank,
N.A., which is served by the Acxiom Services Division). The Company provides
outsourcing services whereby it manages a customer's data center and/or provides
information systems functions, both on-site at the customer's location and from
the Company's Conway, Arkansas data center. The services currently provided by
the Company to such customers include data center management; information
management; hardware installation and support; account management systems;
installation, support and enhancement of software; customized software
programming; and licensing of the Company's proprietary and/or third party
software. For its finance industry customers, the Company provides more
traditional direct marketing services as described above under the "Acxiom
Services Division and Acxiom International Division" discussion.
The revenue units within the Alliances Division are Trans Union, Polk, ADP,
Strategic Alliances (Guideposts, Sears and M/A/R/C), and five business units
within the Financial Services Group. Headquartered in Conway, Arkansas, the
Alliances Division has additional operations in Colorado, Illinois, Kansas,
Michigan, New York, and Ohio. Approximately 725 associates are in this division.
A description of the Company's key relationships within the Alliances Division
follows.
Under a thirteen-year data center management agreement effective since 1992
with Trans Union Corporation ("Trans Union"), one of the three largest credit
bureaus in the U.S., the Company, through its subsidiary Acxiom CDC, Inc.,
manages Trans Union's data processing center in Chicago, Illinois. In 1994 a
long-term agreement was executed between the Company and Trans Union's Marketing
Services Division. Under the Marketing Services Agreement, the Company provides
all of the data processing services, as well as application enhancements, for
Trans Union's Marketing Services Division. The term of that agreement expires in
2005. Management anticipates aggregate revenues in excess of $350 million over
the remaining life of both contracts.
In 1995, the Company entered into data center management agreements with
Automatic Data Processing ("ADP"), and The Polk Company ("Polk"), one of the
largest data compilation companies in the United States. Pursuant to the
agreements, both companies outsourced certain of their data center functions to
the Company. These functions have been transferred to the Company's Conway,
Arkansas data center. The terms of the agreements are five (5) years and ten
(10) years, respectively. Annual revenues from the ADP agreement are expected to
be approximately $3.7 million, while annual revenues from the Polk agreement are
expected to be approximately $24 million.
Pursuant to an agreement with Guideposts, Inc., a church corporation
("Guideposts"), one of the largest magazine publishers in the U.S., the Company
manages Guideposts' data processing personnel, computer technology and
operations. The agreement, which originally began in 1989, was extended in July
1997 for an additional ten year term. Under related agreements, the Company has
agreed to provide software development services to Guideposts, and has sold all
of the rights to the GS/2000 R97 subscription fulfillment software to
Guideposts. Under the original 1989 agreement, the Company acquired an exclusive
license to develop, and to ultimately purchase, Guideposts' proprietary
subscription fulfillment software ("GS/2000(R)"). GS/2000 R97 is a
<PAGE>
Guideposts-specific version of the GS/2000 software. The Company stopped
marketing other customized versions of GS/2000 in 1995, after having installed
the customized software at three publishing companies and at one membership and
continuity organization.
The Alliances Division also has agreements with several major financial
institutions. The Division's Financial Services Group provides various services,
including traditional data processing and direct marketing services, database
build and management services, and list enhancement services. (See the
discussion above under "Acxiom Services Division and Acxiom International
Division" for a compete description of these traditional direct marketing
services.) The Division continues to expand its coverage of the largest
financial institutions within the U.S. through extensive sales and marketing
efforts.
It is the Company's intention to continue seeking outsourcing and
information management agreements in the future. Because of the Company's skills
and technology in the area of data processing, and because of the long-term
contracts generally associated with such arrangements, management believes that
these types of agreements will provide substantial benefits to the Company and
will result in cost-effective data processing solutions for its customers.
Intellectual Property
The Company generally relies upon its trade secret protection and
non-disclosure safeguards to protect its proprietary information and
technologies. In the case of the Acxiom Data Network, the Company has taken the
additional precaution of filing for patent protection for certain of the
processes contained therein. The Company enters into license or other agreements
with its customers in the ordinary course of business which contain terms and
conditions prohibiting unauthorized reproduction or use of the Company's and,
where applicable, its vendor's products and/or services. As a general rule, the
Company also enters into confidentiality agreements with its associates,
contractors, customers, potential customers, suppliers and vendors who have
access to sensitive information. In addition, the Company limits access to, and
distribution of, its proprietary information. While there can be no assurance
that the steps taken by the Company will be adequate to deter misappropriation
of its proprietary rights or independent third party development of
substantially similar products and technology, the Company believes that legal
protection of its proprietary information is less significant than the knowledge
and experience of the Company's management and personnel, and their ability to
develop, enhance and market existing and new products and services.
Competition
Acxiom Data Products Division - Competition
There are at least five other companies that offer products which compete
with the Company's InfoBase product, including some of the companies who
contribute their data to InfoBase. Management believes that the Company can
effectively compete due to the leadership position which it has established in
the industry thus far and due to its technical capabilities.
The Company has approximately 50 smaller competitors in the
business-to-business and consumer list brokerage/list management industry which
compete with the Company's Direct Media services. Since the Company's operations
in this area are the largest of their type in the U.S., with over 15% of the
market share, management is of the opinion that the Company can effectively
compete in the U.S. marketplace. With regard to international operations in this
area, the Company has approximately 25 competitors. Management believes that
such competitors' operations are not as extensive as its own and that,
therefore, the Company is well-positioned to compete in the U.K. and abroad.
Management believes that by combining its marketing expertise with its software
systems, more efficient mailing programs are possible for the Company's
customers than are available from competitors.
The Company has two major competitors in connection with the distribution
of its DataQuick property data to the real estate, finance and insurance
industries. However, management believes that the expansion of data
<PAGE>
coverage from regional to national, combined with timeliness and reliability of
its data, will place it in a competitive position within this industry.
Management also believes that the combination of the DataQuick information and
services with the Company's other data products and marketing capabilities gives
it a competitive advantage in the marketplace.
The Company previously had two primary competitors in the business of
providing CD-ROM telephone listings and mapping data to consumers and small
office/home office businesses. During the prior fiscal year, one of the two
competitors acquired the other, thus creating only one major competitor, ABI, to
the Company. During the past year, the Company sold the retail and direct
marketing operations of the Company's subsidiary, Pro CD, Inc., to ABI. For
additional discussion, see Note 14 of the Notes to Consolidated Financial
Statements in the Company's Annual Report on p. 37, which information is
incorporated herein by reference. The Company will, however, continue its
efforts to sell its telephone reference products directly to large corporations,
which represents a fast-growing and highly profitable market.
With regard to competitive forces affecting the services provided by the
Data Products Division's Interactive Information Services, the Company believes
that its competitors in the traditional direct marketing industry are pursuing
similar initiatives to offer services via the Internet. Management intends to
focus on creating the technological infrastructure required to offer highly
differentiated services to its customers. See, also, the discussion below under
"Acxiom Services Division and Acxiom International Division - Competition."
Acxiom Services Division and Acxiom International Division - Competition
The Company experiences competition from at least six other service bureaus
(which list currently includes May & Speh) in the U.S. direct marketing industry
and ten in the U.K. direct marketing industry with respect to certain targeted
marketing services, including merge/purge, list enhancement, and database and
data warehouse services. While some direct competitors are divisions of larger
corporations having greater financial, research and development, and/or
marketing resources than the Company, management believes that the Company's
unique application software, its ability to build open solutions, its experience
building and managing some of the largest databases within the industry, its
knowledge of the various industries it serves, its business partner
relationships, and the skills and experience of its associates enable it to
effectively compete. Technological developments are expected to continue at a
rapid pace in the field of direct marketing database management and market data
collection, analysis and distribution, and management intends to utilize the
best tools available to it to build fully integrated solutions that meet each
customer's unique requirements. It is management's belief that most of its
competitors do not provide their customers with such solution flexibility.
There are many diverse businesses which offer DSS software and/or services.
However, based upon the broad spectrum of software and services in the
marketplace, the Company's recent alliances with various DSS software providers
(see "Technology Applications" above), and the Company's unique data management
services, management believes that the effects of competition are minimal. In
addition, management believes that by using the TCP/IP protocol (discussed above
under "Technology Applications"), the Company's products will be significantly
less difficult to implement at customer sites. Management further believes that
through continued investment in research and development (e.g., the Acxiom Data
Network), the Company will be able to maintain or improve its present position
in the marketplace. See "Research and Development," below.
Acxiom Alliances Division - Competition
The Company is aware of numerous other major businesses which offer
outsourcing services and/or information management services. Due to the recent
emergence of this industry, and due to the fact that the market for such
services remains largely untapped, the Company anticipates that the effects of
competition will be minimal.
With regard to competitive forces affecting the services provided by the
Alliances Division to its finance industry customers, see the discussion above
under "Acxiom Services Division and Acxiom International Division -
Competition."
<PAGE>
Customers
The Company's customers include financial institutions, insurance
companies, consumer credit organizations, utility companies, seminar companies,
communications companies, pharmaceutical companies, catalogers, retailers,
television shopping networks, publishers, consumer goods manufacturers,
membership and continuity associations, real estate and appraisal firms, title
companies, advertising agencies, charities, and governmental entities. Other
customers include list users (direct mailers and telemarketers), list owners
(customers who generate and own their lists), and list managers and brokers
(agents who manage lists and provide direct marketing consulting services). The
Company's customers also include corporate purchasers of the telephone reference
products. Although most of the Company's customers are in the U.S. and the U.K.,
the Company has a small number of customers in Canada, the Netherlands, France
and Malaysia. Many are companies which specialize in the direct marketing
industry, as well as the marketing departments of large corporations who have
turned to targeted marketing techniques to sell their goods and services. The
Company also provides data, data processing and information management services
to companies that are not in the direct marketing business. The Company's
practice has been to extend payment terms to its customers for periods of up to
60 days and, accordingly, the Company uses operating capital to finance its
accounts receivable. In fiscal 1998, the following customers accounted for 10%
or more of the Company's total revenue: Allstate Insurance Company (16.1%) and
Trans Union Corporation (11.8%).
Additional Information Regarding Forward-Looking Statements
This Report on Form 10-K and the Company's Annual Report to Shareholders
include, and future SEC filings by the Company and future oral and written
statements by the Company and its management may include, certain
forward-looking statements. Such statements may include, among other things,
statements regarding the Company's financial position, results of operations,
market position, product development, software replacement and/or remediation
efforts, regulatory matters, growth opportunities and growth rates, acquisition
and divestiture opportunities, and other similar forecasts and statements of
expectation. Words such as "expects," "anticipates," "intends," "plans,"
"believes," "seeks," "estimates" and "should," and variations of these words and
similar expressions, are intended to identify these forward-looking statements.
Such statements are not statements of historical fact. Rather, they are based on
the Company's estimates, assumptions, projections and current expectations, and
are not guarantees of future performance. The Company disclaims any obligation
to update or revise any forward-looking statement based upon the occurrence of
future events, the receipt of new information, or otherwise. Some of the more
significant factors that could cause the Company's actual results and other
matters to differ materially from the results, projections and expectations
expressed in the forward-looking statements are set forth below. There may be
additional factors which could also affect actual results.
Consumer Privacy, Legislative and Regulatory Concerns
There could be a material adverse impact on the Company's direct marketing
and data sales business due to the enactment of legislation or industry
regulations arising from, among other things, the increase in public concern
over consumer privacy issues. Restrictions upon the collection and use of
information which is currently legally available could be adopted, in which case
the cost to the Company of collecting certain kinds of data might be materially
increased. It is also possible that the Company could be prohibited from
collecting or disseminating certain types of data, which could in turn
materially adversely affect the Company's business.
Recently, the Collections of Information Antipiracy Act ("CIAA") was passed
by the U.S. House of Representatives and is now pending before the U.S. Senate.
The intent of this proposed legislation is to protect collections of information
from unauthorized copying and use in the marketplace. However, as passed by the
U.S. House of Representatives, a portion of this bill may have a material
adverse effect upon the Company as it will prevent the Company, as well as some
of the Company's competitors, from compiling marketing databases from various
sources (e.g., telephone directories). Consistent with the U.S. Supreme Court's
decision in Feist Publications v. Rural Telephone Service Co., Inc., 499 U.S.
340 (1991), publishers of telephone directories have traditionally been deemed
not to be entitled to copyright protection. In its current form, the CIAA would
confer a new intellectual property right upon such publishers and, as a result,
prohibit the Company from its traditional
<PAGE>
compilation endeavors. Management will continue to actively monitor this
proposed legislation and intends to participate in efforts to contest passage of
the CIAA in its current form.
Senior management of the Company has taken a proactive role in the privacy
arena. Internally, the Company has formulated and distributed to each of its
associates a written privacy policy which supports consumers' rights to control
the dissemination of information about themselves. Privacy is included as a
topic in the Company's corporate culture education program in which all
associates participate. Associates of the Company are required to sign a privacy
acknowledgment form as a condition of continued employment. The privacy policy
reflects the Company's continuing commitment to strict data security systems, as
well as the Company's support of the Direct Marketing Association's ("DMA") Mail
and Telephone Preference Service programs, which permit consumers to "opt-out"
of unrequested marketing solicitations. The Company has adopted a practice of
purging its customers' prospecting databases of all names appearing on such DMA
opt-out lists free of charge.
In addition, the Company includes in its customer contracts a commitment
that any data sent to the Company has been legally obtained and that the
customer's subsequent use of any data received from the Company will be in
compliance with all data protection laws, as well as with applicable industry
policies. The Company also includes in its information provider contracts a
commitment that the data the Company receives has been legally obtained for the
uses to which it will be put, and the Company further agrees to comply with any
restrictions that the providers place upon the data.
The Company also participates in other industry-specific associations
focused on privacy issues such as the Magazine Publishers Association and the
Advertising and Mail Marketing Association. In addition, the Company became a
member of the Individual Reference Services Group ("IRSG") in December 1997. The
IRSG is composed of approximately 15 leading companies in the information
business that have agreed to impose upon themselves meaningful, self-regulatory
standards with respect to non-public information, which standards were developed
in consultation with the Federal Trade Commission. These guidelines, which the
Company has pledged to follow, commit the Company to acquire data used for its
reference products and services only from reputable sources, to restrict
distribution of non-public information in its reference products and services
through safeguards appropriately calibrated to the type of use made of the
information and to educate the public concerning these guidelines. The Company
will be subject to an annual audit to monitor its compliance with these
guidelines.
Loss of Data and/or Customer Lists
The Company could suffer a material adverse effect if owners of the data
used by the Company were to withdraw the data from the Company. In order to
reduce this risk, management has undertaken a strategy to obtain ownership of as
much data as possible, and, in the alternative, to enter into long-term data
supply agreements with the data owners that remain essential to its business.
The owners of the marketing lists maintained by the Company could decide to
remove their lists from the Company's possession, and if a substantial number of
lists were removed, a material adverse impact upon the Company's operations
could result. However, management believes that any such actions are unlikely in
that the value of the lists is enhanced through manipulation by the Company's
software and through combination with other lists. Further, management believes
that the Company's acquisition of Direct Media/DMI, Inc. further solidified the
Company's relationship with many list owners. Historically, only a few list
owners utilizing the Company's services have removed their lists.
Effects of Short-Term Contracts
While approximately 54% of the Company's total revenue is currently derived
from long-term (over three years) customer contracts, the remainder is not. With
respect to that portion of the business which is not under long-term contract,
revenues are less predictable, and the Company must consequently engage in
continual sales efforts to maintain its revenue stability and future growth.
Management has emphasized the importance of securing as much revenue as possible
under long-term contracts, having increased the percentage from 9% to 54% over
the past six years.
<PAGE>
Technology Challenges
Maintaining technological competitiveness in its data products, processing
functionality, software systems and services is key to the Company's continued
success. The Company's ability to continually improve its current processes and
to develop and introduce new products and services is essential in order to meet
its competitors' technological developments and the increasingly sophisticated
requirements of its customers. If the Company failed to do so, its business
could be materially adversely affected.
Year 2000 Issue
The "Year 2000 Issue" is the result of computer programs being written
using two digits, rather than four, to define an applicable year. Any of the
Company's computer programs that have date-sensitive software may recognize a
date using "00" as the year 1900, rather than the year 2000. This could result
in a system failure or miscalculations causing disruptions of operations,
including, among other things, a temporary inability to process or transmit
data, or engage in normal business activities. The Company, like most owners of
computer software, has assessed and is in the process of modifying, where
needed, its computer applications to ensure they will function properly in the
year 2000 and beyond. The Company has been replacing or renovating the systems
and applications where necessary, using both internal staff and external
consultants. In addition, the Company has initiated formal communications with
all of its significant suppliers and large customers to determine the extent to
which the Company is vulnerable to a failure by such a third party to adequately
address its own Year 2000 Issue.
The Company is currently operating under an internal deadline to ensure all
of its computer applications are "year 2000 ready" by December 31, 1998. The
Company currently believes that with modifications to existing software and
conversions to new software, the Year 2000 Issue can be mitigated. But the
systems of vendors on which the Company's systems rely may not be converted in a
timely fashion, or a vendor may fail to convert its software or may implement a
conversion that is incompatible with the Company's systems, which would have a
material adverse impact on the Company.
The cost of the project is estimated to be between $3 million and $5.5
million. These costs are based on management's best estimates, which are derived
utilizing numerous assumptions of future events. Still, there can be no
guarantee that these estimates will be achieved and the actual results could
differ materially from those plans. However, the financial impact to the Company
has not been, and is not expected to be, material to its financial position or
results of operations in any given fiscal year.
Loss of Data Center Capacity or Interruption of Telecommunications Links
The Company's success is dependent upon its ability to protect its various
data centers against damage from fire, power loss, telecommunications failure or
other disasters. The on-line services provided by the Company are dependent on
links to telecommunications servers. Management has taken reasonable precautions
to protect its data centers and telecommunications links from events that could
interrupt the Company's operations. Any damage to the Company's data centers or
any failure of the Company's telecommunication links that causes interruptions
in the Company's operations could have a material adverse effect on the
Company's business.
Acquisitions
The Company's growth strategy currently includes growth through
acquisitions. While management believes that the Company has been reasonably
successful 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 the Company's operations.
<PAGE>
Postal Rate Increases
The direct marketing industry has been negatively impacted from time to
time during past years by postal rate increases. The most recent postal rate
increase, which became effective in January 1995, and any future increases will,
in the Company's opinion, force direct mailers to mail fewer pieces and to
target their prospects more carefully. Through its software products and data
processing services, the Company has the capability to assist its direct
marketing customers to target their mailings to consumers who are most likely to
favorably respond, thereby meeting its customers' increasing need to market more
effectively. The Company experienced no significant negative financial impact as
a result of the most recent postal rate increase, but there is no assurance that
future postal increases will have no impact upon the Company.
Litigation
Revenues could be materially adversely affected if the Company became
involved in litigation in which the Company was unsuccessful in its cause of
action or defense of a cause of action, or if the Company's insurance carrier
were to deny coverage with respect to a legal proceeding. In addition, adverse
publicity surrounding litigation could materially affect the Company.
Other Factors
Revenues could be materially adversely affected if the Company failed to be
competitive within its industry. In addition, the expenses associated with
acquiring data, and the timing of acquisitions and the costs and expenses
associated therewith, might also affect operating results. A downturn in the
general economic conditions in the primary marketplaces served by the Company
could also have a material adverse effect upon the Company's business.
Employees
The Company employs approximately 3,600 employees ("associates") worldwide.
With the exception of approximately 45 associates who are engaged in lettershop
and fulfillment activities at the Company's Skokie, Illinois facility, none of
the Company's associates are represented by a labor union or are the subject of
a collective bargaining agreement. The Company has never experienced a work
stoppage and believes that its employee relations are good.
Item 2. Properties
The following table sets forth the location, ownership and general use of
the principal properties of the Company.
Location Held Use
Acxiom Corporation:
Conway, Arkansas Five facilities held Principal executive
in fee; one facility offices; customer
secures a $3,719,000 service facilities and
encumbrance computer equipment space
Little Rock, Arkansas Lease Customer service
facilities; office space
Acxiom CDC, Inc.:
Chicago, Illinois Lease Office and computer
equipment space
<PAGE>
Acxiom/Direct Media, Inc.:
Greenwich, Connecticut Lease Office space; customer
service facility
Acxiom Great Lakes Data
Center, Inc.:
Southfield, Michigan Lease Office and computer
equipment space
Acxiom SDC, Inc.
(d/b/a Buckley Dement,
an Acxiom Company):
Skokie, Illinois Lease Office and computer
equipment space;
warehouse and letter shop
space
Acxiom Limited (formerly
known as Acxiom U.K., Ltd.):
(a) London, England Lease Office space; customer
service facility
(b) Sunderland, England Held in fee Office space; computer
equipment and warehouse
space
DataQuick Information
Systems (d/b/a Acxiom/Data
Products Group):
San Diego, California Lease Office space; customer
service facility
The Company's headquarters are presently located in Conway, Arkansas. The
Conway facilities also consist of office buildings and a data processing center.
During fiscal year 1999, construction is expected to be completed on the
Company's new headquarters in Little Rock, Arkansas. The Company also expects to
complete the construction of a new customer service facility in Little Rock,
Arkansas prior to the end of fiscal year 1999.
Pursuant to its data center management agreement with Trans Union discussed
above under Item 1, the Company leases office and computer equipment space at
Trans Union's corporate headquarters in Chicago, Illinois.
Pursuant to its data center management agreement with Polk discussed above
under Item 1, the Company leases office and computer equipment space in
Southfield, Michigan. In addition, the Company leases office space in
Cincinnati, Ohio and Denver, Colorado in connection with the services the
Company provides to Polk.
As a result of the Company's acquisition of DataQuick Information Systems,
the Company leases two facilities in San Diego, California. It also leases sales
office space in Arizona, California, Nevada, Oregon, Utah and Washington.
Due to the acquisition of Direct Media/DMI, Inc., the Company leases
primary office and customer service space in Greenwich, Connecticut. In
addition, the Company leases sales office space in California, Florida,
Illinois, New Jersey, New York, Ohio, South Carolina, Canada, England, and the
Netherlands.
With the acquisition of Buckley Dement, the Company leases primary office
and warehouse space in Skokie, Illinois. In addition, with respect to Buckley
Dement and its affiliated company, KML, the Company leases sales office space in
California, Georgia and New Jersey.
In addition to the foregoing, pursuant to the Guideposts data processing
agreement, Guideposts provides office and computer equipment space for the
Company's use at Guideposts' corporate headquarters in Carmel, New York.
<PAGE>
The Company also leases sales offices in California, Illinois, Kansas,
Massachusetts, New Jersey, New York, North Carolina, Texas, Virginia,
Washington, D.C. and Wisconsin.
The Company's International Division's corporate and customer service
operations in London, England are presently housed in two principal buildings,
both of which are leased. The Company also leases a facility in Sunderland,
England where data processing and fulfillment services operations are housed.
The International Division also leases office space in Malaysia and France.
During the most recent fiscal year, the Company sold a warehouse facility
in Warminster, Pennsylvania, which it had previously used in connection with the
operation of its mailing services division. The Company also completed the sale
of a warehouse facility in Philadelphia.
In general, the offices, customer service and data processing facilities of
the Company are in good condition. Management believes that its facilities are
suitable and adequate to meet the current needs of the Company. As such,
management believes that, except for the Little Rock, Arkansas expansion noted
above, no substantial additional properties will be required during fiscal 1999.
A portion of the real property owned by the Company is pledged to secure notes
payable.
Item 3. Legal Proceedings
Not applicable.
Item 4. Submission of Matters to a Vote of Security Holders
Not applicable.
EXECUTIVE OFFICERS OF THE COMPANY
Each of the Company's executive officers, including position held, age, and
year of initial appointment as an executive officer and business experience for
the past five years, is listed below: Year Name Position Held Age Elected
Charles D. Morgan (a) Chairman of the Board 55 1972
and President (Company Leader)
Rodger S. Kline (b) Chief Operating Officer, 55 1975
Treasurer and Director
James T. Womble (c) Division Leader and Director 55 1975
C. Alex Dietz (d) Division Leader 55 1979
Paul L. Zaffaroni (e) Division Leader 51 1990
Jerry C.D. Ellis (f) Division Leader 48 1991
Robert S. Bloom (g) Chief Financial Officer 42 1992
- ------------------------------------
<PAGE>
(a) Mr. Morgan joined the Company in 1972. He has been Chairman of the Board of
Board of Directors since 1975, and serves as the Company's president
(Company Leader). He was employed by IBM Corporation ("IBM") prior to
joining the Company. Mr. Morgan holds a mechanical engineering degree from
the University of Arkansas.
(b) Mr. Kline joined the Company in 1973. He has been a director since 1975,
and serves as the Company's chief operating officer and treasurer. Prior to
joining the Company, Mr. Kline was employed by IBM. Mr. Kline holds a
degree in electrical engineering from the University of Arkansas.
(c) Mr. Womble joined the Company in 1974. He has been a director since 1975,
1975, and serves as one of the Company's four division leaders. Prior to
joining the Company, Mr. Womble was employed by IBM. Mr. Womble holds a
degree in civil engineering from the University of Arkansas.
(d) Mr. Dietz joined the Company 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 the
Company in 1979, Mr. Dietz served as senior level officer of the Company
and is presently one of the Company's four division leaders. Mr. Dietz
holds a degree in electrical engineering from Tulane University.
(e) Mr. Zaffaroni joined the Company in 1990. He serves as one of the Company's
four division leaders. Prior to joining the Company, 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.
(f) Mr. Ellis joined the Company in 1991 as managing director of the Company's
Company's U.K. operations. He serves as one of the Company's four 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.
(g) Mr. Bloom joined the Company in 1992 as chief financial officer. Prior to
joining the Company, he was employed for six years with Wilson Sporting
Goods Co. as chief financial officer of its international division. Prior
to his employment with Wilson, Mr. Bloom was employed by Arthur Andersen &
Co. for nine years, serving most recently as manager. Mr. Bloom, a
Certified Public Accountant, holds a degree in accounting from the
University of Illinois.
There are no family relationships among any of the Company's executive
officers and/or directors.
PART II
Item 5. Market for the Registrant's Common Equity and Related Stockholder
Matters
The information required by this Item appears in the Company's Annual
Report at p. 40, which information is incorporated herein by reference.
Item 6. Selected Financial Data
The information required by this Item appears in the Company's Annual
Report at p. 16, which information is incorporated herein by reference.
Item 7. Management's Discussion and Analysis of Financial Condition and Results
of Operations
The information required by this Item appears in the Company's Annual
Report at pp. 18-23, which information is incorporated herein by reference.
<PAGE>
Item 8. Financial Statements and Supplementary Data
The Financial Statements required by this Item appear in the Company's
Annual Report at pp. 24-37, which information is incorporated herein by
reference. The Financial Statement Schedule which constitutes the Supplementary
Data required by this Item is attached hereto.
Item 9. Changes In and Disagreements With Accountants on Accounting and
Financial Disclosure
Not applicable.
PART III
Item 10. Directors and Executive Officers of the Registrant
Pursuant to general instruction G(3) of the instructions to Form 10-K,
information concerning the Company's executive officers is included under the
caption "Executive Officers of the Company" at the end of Part I of this Report.
The remaining information required by this Item appears under the caption
"Election of Acxiom Directors" in the Company's 1998 Proxy Statement and under
the caption "Section 16(a) Beneficial Ownership Reporting Compliance" in the
Company's 1998 Proxy Statement, which information is incorporated herein by
reference.
Item 11. Executive Compensation
The information required by this Item appears under the heading "Executive
Compensation" in the Company's 1998 Proxy Statement, which information is
incorporated herein by reference.
Item 12. Security Ownership of Certain Beneficial Owners and Management
The information required by this Item appears under the heading "Security
Ownership of Certain Beneficial Owners and Management of Acxiom" in the
Company's 1998 Proxy Statement, which information is incorporated herein by
reference.
Item 13. Certain Relationships and Transactions
The information required by this Item appears under the heading "Certain
Transactions" in the Company's 1998 Proxy Statement, which information is
incorporated herein by reference.
PART IV
Item 14. Exhibits, Financial Statement Schedule and Reports on Form 8-K
The following documents are filed as a part of this Report:
1. Financial Statements.
The following consolidated financial statements of the
registrant and its subsidiaries included on pages 24 through 37 of the Company's
Annual Report and the Independent Auditors' Report on page 38 thereof are
incorporated herein by reference. Page references are to page numbers in the
Annual Report.
Page
Consolidated Balance Sheets as of March 31, 1998 and 1997 24
<PAGE>
Consolidated Statements of Earnings for the years ended
March 31, 1998, 1997 and 1996 25
Consolidated Statements of Stockholders' Equity for the
years ended March 31, 1998, 1997 and 1996 26-27
Consolidated Statements of Cash Flows for the years ended
March 31, 1998, 1997 and 1996 28
Notes to the Consolidated Financial Statements 29-37
Independent Auditors' Report 38
2. Financial Statement Schedule.
The following additional information for the years 1998, 1997 and
1996 is submitted herewith and appears on the two pages immediately preceding
the signature page of this Report on Form 10-K.
Independent Auditors' Report
Schedule II - Valuation and Qualifying Accounts for the years ended March 31,
1998, 1997 and 1996
All other schedules are omitted because they are not applicable
or not required or because the required information is included in the
consolidated financial statements or notes thereto.
3. Exhibits and Executive Compensation Plans.
The following exhibits are filed with this Report or are
incorporated by reference to previously filed material.
Exhibit No.
3(a) Amended and Restated Certificate of Incorporation (previously filed as
Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1996, Commission File No. 0-13163, and
incorporated herein by reference)
3(b) Amended and Restated Bylaws (previously filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1991, Commission File No. 0-13163, and incorporated herein by
reference)
4 Rights Agreement dated January 28, 1998 between the Company and First
Chicago Trust Company of New York, as Rights Agent, including the forms
of Rights Certificate and of Election to Exercise, included in Exhibit
A to the Rights Agreement and the form of Certificate of Designation
and Terms of Participating Preferred Stock of the Company, included in
Exhibit B to the Rights Agreement (previously filed as Exhibit 4.1 to
the Company's Current Report on Form 8-K dated February 10, 1998,
Commission File No.
0-13163, and incorporated herein by reference)
10(a) Data Center Management Agreement dated July 27, 1992 between the
Company and Trans Union Corporation (previously filed as Exhibit A to
Schedule 13-D of Trans Union Corporation dated August 31, 1992,
Commission File No. 5-36226, and incorporated herein by reference)
10(b) Agreement to Extend and Amend Data Center Management Agreement and to
Amend Registration Rights Agreement dated August 31, 1994 (previously
filed as Exhibit 10(b) to Form 10-K for the fiscal year ended March 31,
1995, as amended, Commission File No. 0-13163, and incorporated herein
by reference)
<PAGE>
10(c) Agreement for Professional Services dated November 23, 1992 between the
Company and Allstate Insurance Company (previously filed as Exhibit 28
to Amendment No. 1 to the Company's Current Report on Form 8-K dated
December 9, 1992, Commission File No. 0-13613, and incorporated herein
by reference)
10(d) Acxiom Corporation Deferred Compensation Plan (previously filed as
Exhibit 10(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1990, Commission File No. 0-13163, and
incorporated herein by reference)
10(e) Amended and Restated Key Associate Stock Option Plan of Acxiom
Corporation (previously filed as Exhibit 10(e) to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1997,
Commission File No. 0-13163, and incorporated herein by reference)
10(f) Acxiom Corporation U.K. Share Option Scheme (previously filed as
Exhibit 10(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997, Commission File No. 0-13163, and
incorporated herein by reference)
10(g) Leadership Compensation Plan
10(h) Acxiom Corporation Non-Qualified Deferred Compensation Plan (previously
filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996, Commission File No.
0-13163, and incorporated herein by reference)
10(i) Asset Purchase Agreement dated April 1, 1996 between the Company and
Direct Media/DMI, Inc. (previously filed as Exhibit 2 to the Company's
Current Report on Form 8-K dated April 30, 1996, Commission File No.
0-13613, and incorporated herein by reference)
13 Portions of the Company's Annual Report
21 Subsidiaries of the Company
23 Consent of KPMG Peat Marwick LLP
24 Powers of Attorney for Robert S. Bloom, Dr. Ann H. Die, William T.
Dillard II, Harry L. Gambill, Rodger S. Kline, Charles D. Morgan,
Robert A. Pritzker, Walter V. Smiley and James T. Womble
27 Financial Data Schedule
Listed below are the executive compensation plans and arrangements
currently in effect and which are required to be filed as exhibits to this
Report:
- Amended and Restated Key Associate Stock Option Plan of Acxiom
Corporation
- Acxiom Corporation U.K. Share Option Scheme
- Leadership Compensation Plan
- Acxiom Corporation Deferred Compensation Plan*
- Acxiom Non-Qualified Deferred Compensation Plan
- -------------------------------
* To date, only one grant has been made, in 1990.
4. Reports on Form 8-K.
A report was filed on February 10, 1998, which reported the Company's
adoption of a shareholder rights plan.
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Acxiom Corporation
Under date of May 8, 1998, we reported on the consolidated balance sheets of
Acxiom Corporation and subsidiaries as of March 31, 1998 and 1997, and the
related consolidated statements of earnings, stockholders' equity and cash flows
for each of the years in the three-year period ended March 31, 1998, which are
included in the 1998 annual report to shareholders. These consolidated financial
statements and our report thereon are incorporated by reference in the annual
report on Form 10-K for the year ended March 31, 1998. In connection with our
audits of the aforementioned consolidated financial statements, we also audited
the related financial statement schedule of valuation and qualifying accounts.
This financial statement schedule is the responsibility of the Company's
management. Our responsibility is to express an opinion on this financial
statement schedule based on our audits.
In our opinion, such financial statement schedule, when considered in relation
to the basic consolidated financial statements taken as a whole, presents
fairly, in all material respects, the information set forth therein.
Little Rock, Arkansas
May 8, 1998
<PAGE>
Schedule II
ACXIOM CORPORATION AND SUBSIDIARIES
Valuation and Qualifying Accounts
Years ended March 31, 1998, 1997 and 1996
(In thousands)
Additions
Balance at charged to Other Bad debts Bad Balance
beginning costs and additions written debts at end
of period expenses (note) off recovered of period
1998:
Allowance
for
doubtful
accounts,
returns
and
credits $ 4,333 3,090 224 4,744 397 3,300
===== ===== === ===== === =====
1997:
Allowance
for
doubtful
accounts,
returns
and
credits $ 1,880 4,399 4,800 7,044 298 4,333
===== ===== ===== ===== === =====
1996:
Allowance
for
doubtful
accounts,
returns
and
credits $ 2,143 150 131 726 182 1,880
===== === === === === =====
Note - Other additions in 1998 represent the valuation accounts acquired in the
Multinational and STW acquisitions. Other additions in 1997 represent the
valuation accounts acquired in the Pro CD and DMI acquisitions. Other
additions in 1996 represent the valuation accounts acquired in the
Generator and DataQuick acquisitions.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the Securities
Exchange Act of 1934, the registrant has duly caused this Report to be signed on
its behalf by the undersigned.
ACXIOM CORPORATION
Date: June 23, 1998 By: /s/ Catherine L. Hughes
------------------------------------
Catherine L. Hughes
Secretary
Pursuant to the requirements of the Securities Exchange Act of 1934, this
Report has been signed below by the following persons on behalf of the
registrant and in the capacities and as of the dates indicated.
Signature
Robert S. Bloom* Chief Financial Officer June 23, 1998
- --------------------------- (Principal accounting officer)
Robert S. Bloom
Dr. Ann H. Die* Director June 23, 1998
- ---------------------------
Dr. Ann H. Die
William T. Dillard II* Director June 23, 1998
- ---------------------------
William T. Dillard II
Harry C. Gambill* Director June 23, 1998
Harry C. Gambill
Rodger S. Kline* Chief Operating Officer, June 23, 1998
- --------------------------- Treasurer and Director
Rodger S. Kline (Principal financial officer)
Charles D. Morgan* Chairman of the Board and June 23, 1998
- -------------------- President (Company Leader)
Charles D. Morgan (Principal executive officer)
Robert A. Pritzker* Director June 23, 1998
Robert A. Pritzker
Walter V. Smiley* Director June 23, 1998
Walter V. Smiley
James T. Womble* Division Leader and Director June 23, 1998
- --------------------
James T. Womble
*By: /s/ Catherine L. Hughes
-----------------------------------
Catherine L. Hughes
Attorney-in-Fact
<PAGE>
EXHIBIT INDEX
Exhibits to Form 10-K
Exhibit
No. Exhibit
3(a) Amended and Restated Certificate of Incorporation (previously filed as
Exhibit 3(i) to the Company's Quarterly Report on Form 10-Q for the
quarterly period ended June 30, 1996, Commission File No. 0-13163, and
incorporated herein by reference)
3(b) Amended and Restated Bylaws (previously filed as Exhibit 3(b) to the
Company's Annual Report on Form 10-K for the fiscal year ended March
31, 1991, Commission File No. 0-13163, and incorporated herein by
reference)
4 Rights Agreement dated January 28, 1998 between the Company and First
Chicago Trust Company of New York, as Rights Agent, including the forms
of Rights Certificate and of Election to Exercise, included in Exhibit
A to the Rights Agreement and the form of Certificate of Designation
and Terms of Participating Preferred Stock of the Company, included in
Exhibit B to the Rights Agreement (previously filed as Exhibit 4.1 to
the Company's Current Report on Form 8-K dated February 10, 1998,
Commission File No.
0-13163, and incorporated herein by reference)
10(a) Data Center Management Agreement dated July 27, 1992 between the
Company and Trans Union Corporation (previously filed as Exhibit A to
Schedule 13-D of Trans Union Corporation dated August 31, 1992,
Commission File No. 5-36226, and incorporated herein by reference)
10(b) Agreement to Extend and Amend Data Center Management Agreement and to
Amend Registration Rights Agreement dated August 31, 1994 (previously
filed as Exhibit 10(b) to Form 10-K for the fiscal year ended March 31,
1995, as amended, Commission File No. 0-13163, and incorporated herein
by reference)
10(c) Agreement for Professional Services dated November 23, 1992 between the
Company and Allstate Insurance Company (previously filed as Exhibit 28
to Amendment No. 1 to the Company's Current Report on Form 8-K dated
December 9, 1992, Commission File No. 0-13613, and incorporated herein
by reference)
10(d) Acxiom Corporation Deferred Compensation Plan (previously filed as
Exhibit 10(b) to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1990, Commission File No. 0-13163, and
incorporated herein by reference)
10(e) Amended and Restated Key Associate Stock Option Plan of Acxiom
Corporation (previously filed as Exhibit 10(e) to the Company's Annual
Report on Form 10-K for the fiscal year ended March 31, 1997,
Commission File No. 0-13163, and incorporated herein by reference)
10(f) Acxiom Corporation U.K. Share Option Scheme (previously filed as
Exhibit 10(f) to the Company's Annual Report on Form 10-K for the
fiscal year ended March 31, 1997, Commission File No. 0-13163, and
incorporated herein by reference)
10(g) Leadership Compensation Plan
10(h) Acxiom Corporation Non-Qualified Deferred Compensation Plan (previously
filed as Exhibit 10(i) to the Company's Annual Report on Form 10-K for
the fiscal year ended March 31, 1996, Commission File No.
0-13163, and incorporated herein by reference)
10(i) Asset Purchase Agreement dated April 1, 1996 between the Company and
Direct Media/DMI, Inc. (previously filed as Exhibit 2 to the Company's
Current Report on Form 8-K dated April 30, 1996, Commission File No.
0-13613, and incorporated herein by reference)
13 Portions of the Company's Annual Report
21 Subsidiaries of the Company
23 Consent of KPMG Peat Marwick LLP
24 Powers of Attorney for Robert S. Bloom, Dr. Ann H. Die, William T.
Dillard II, Harry L. Gambill, Rodger S. Kline, Charles D. Morgan,
Robert A. Pritzker, Walter V. Smiley and James T. Womble
27 Financial Data Schedule
<PAGE>
EXHIBIT 10(g)
GENERAL DESCRIPTION OF THE LEADERSHIP TEAM
COMPENSATION PLAN
OBJECTIVE
- - The objective of the Leadership Team compensation plan is to implement a
pay plan which will reflect the leader's responsibility, provide
compensation that is both equitable and competitive, and which will:
- Align the leader's interests with shareholder/investor's interest.
- Motivate leaders to achieve the highest level of performance.
- Retain key leaders by linking leadership team compensation to company
performance.
- Attract the best leaders through competitive, growth-oriented plans.
- Enable sharing of growth & success between associates, leaders and
shareholders.
PLAN PROVISIONS
Eligibility of Participants
- - For purposes of the Leadership Team Compensation plan, eligible associates
will include Division leaders, Group leaders, Business Unit leaders, Sales
leaders, Business Development leaders, Industry Application Development
leaders, Finance and Accounting leaders Organizational Development leaders,
and Corporate Office leaders.
COMPONENTS AND PLAN STRUCTURE
- - The components of the Leadership Team Compensation Plan are as follows:
- Base salary (not at risk)
- Base salary (at risk)
- Long-term incentive (stock options)
- Retention/Recruiting Bonus (Special Situations Only)
- - Exhibit 1 of this document reflects the above components for the 5 levels
of the Leadership Team Compensation Plan. In addition, it reflects the
Business Development / Sales Leadership plan.
- - Each level of the plan has the following:
- Base salary ranges (lower and upper)
- Plan structure (reflecting percentage guideline ranges for each plan
component to total compensation as well as number of years for which
options are granted under the long-term incentive component of the
plan)
- - Each leader is slotted into one of the five levels based on their
experience, scope of responsibility and past performance. The individual to
whom the leader reports is responsible for managing their respective
slotting. Division leaders must approve all level 3 slottings.
Additionally, Division leaders must approve all slottings of individuals on
the Business Development / Sales Leadership compensation plan. The Company
leader must approve all slottings of levels 4 and 5.
<PAGE>
- - Leaders slotted in the Business Development / Sales Leadership plan must be
a senior level business development / sales leader responsible for:
- developing new business and relationships at senior executive levels
of customers and prospects, or
- providing leadership to two or more sales associates for a Group or
Division. Providing leadership means assigning quotas and territories,
conducting regular reviews of salesperson's call activity, hiring,
terminations, preparing skill development plans, performance reviews,
coaching, mentoring and overseeing the overall sales process for the
area.
BASE SALARY (NOT AT RISK)
- - Guidelines have been established to award Base salary increases for
salaries that are "within range," "in excess of range" and "below range."
- - The percentage increase guidelines are revised/validated annually.
- - Base salaries for Business Development/Sales leaders will be established
and managed using the Level 2 salary ranges.
BASE SALARY (AT RISK)
General
- - The base salary at risk (referred to as at risk throughout the remainder of
this document) amount for the full fiscal year is determined by the company
leadership as shown below and is based on the eligible associate's base
salary as of May. No adjustment is made to at risk amounts during the plan
year unless the leader moves from one plan level to another or is assigned
a different job which warrants a change. In the event there is a change in
the at-risk, it will be prorated based on the date of the change.
Leader Approval of At Risk
CLT and Group Leaders Company Leader
All Other Leaders Division Leaders
- - Eligible associates must be employed on the date of the actual payment to
receive payment for the quarterly and/or year-end at risk. The at risk for
eligible associates who joined the Leadership Team after the beginning of
the quarter will be pro-rated based on hire date. Additionally, the
year-end at risk amount will be prorated in the same manner.
At risk targets
- - At risk will be based on the change in EVA attained with an EPS gate. (With
the exception of the commission/specific objective component of the
Business Development/Sales Leadership plans. See page 5 - Commission/
specific objective at risk targets.)
EVA Incentive Principles
- - Target Incentive
Competitive total compensation opportunity
- - Expected EVA Improvement
Performance standard to achieve the company "target EVA" (and to meet
the market's expectation of EVA improvement required to support the
price of the Company's stock.)
<PAGE>
- - Sharing of EVA Improvement Above/Below Expected
Associates and shareholders share risks and rewards
- - Incentive Bank
Cumulative performance and incentive linked
Target Incentives and Expected EVA Improvement
- - Achievement of Expected EVA Improvement results in Target Incentive Pool
Sharing of Incremental EVA Results
- - Sharing of incremental EVA (above/below "Expected") is constant
- - 50% of every $1 of EVA above expected is added to incentive pool.
- - 50% of every $1 of EVA below expected is subtracted from incentive pool
(EVA improvement can be below zero.)
- - Associates/leaders share in all risks and rewards (no caps or floors)
Incentive Bank Principles
- - Incentive Pool for current year "deposited" into incentive bank
- - Bank balance distributed:
- - 100% up to "target" incentive - (Note - it is the intent of the plan to
distribute 33% of the bank balance above the achieved target incentive
under normal circumstances. However, the actual % distribution is
determined by the Compensation Committee of the Company based on analyzing
the achieved results for the year. The Committee may adjust this percentage
based on special circumstances and may elect to not distribute any of this
remaining bank balance and to carry all of it forward into the next year.)
- - Up to 33% above "target" incentive
- - Remaining bank balance reserved against future performance
- - "Negative" bank balance "repaid" before future incentives are paid
Incentive Funding (EPS Gates)
- - Incentive attainment determined based on EVA achievement
- - Incentive funding subject to pro rata reduction if EPS Gate is not achieved
- - Bank "deposits" equal to Incentive Attained Times Funding Factor. (Funding
factor equals Incentives funded divided by Incentives Attained.)
- - Existing bank balances also subject to forfeiture to satisfy EPS Gate.
<PAGE>
Common fate at risk target breakdown
Group Leaders Revenue Shared
Corporate Division OD/FA Unit Services
Office Leaders Leaders** Leaders Unit Leaders
- --------------------------------------------------------------------------------
Common 100% 60% 50% 25% 75%
Fate Co. EVA Co. EVA Co. EVA Co. EVA Co. EVA
- --------------------------------------------------------------------------------
Unit 0% 40% 25% 75%* 25%
Performance Div EVA Div. EVA Bus. Plan
25% (25% Div
Group EVA EVA)*
(25% Group
EVA)*
(25% Unit
EVA)*
* These are the default percentages unless the corporate office approves a
different documented plan. Differences should be submitted to the corporate
office by the Division leader by July 11 and by October 31 for mid-year
revisions.
** Organizational Development and Finance/Accounting Leaders' at risk
percentages will be 50% Company EVA and 50% Division EVA.
Note: All at risk payments are subject to EPS gate (with the exception of
the commissions/specific objective portion of the Business
Development/Sales Leadership plan)
Commission/specific objective at risk targets
- - These targets apply only to Business Development/Sales Leadership plan.
- - The commission/specific objective portion of at risk under this plan is
based on revenue and/or EVA percentage of quota attainment for the
territories assigned to the business development/sales leader. It is the
responsibility of the individual's Division and/or Group Leader to
establish these targets.
- - The commission/specific objective portion will be funded by the Unit, Group
or Division and is not subject to the EPS gate as is the common fate
portion of at risk. Budgets and EVA targets will not be adjusted for
additional commission expense due to these plans.
- - All commissions are calculated on a YTD, cumulative basis.
- - The plan provisions and quota assigned may be changed at any time by the
Division Leader.
- - The Division Leader may choose not to accept additional business when
resources are not available to process the work. It is the sales leader's
responsibility to make certain that the work will be accepted before
customer commitments are made.
<PAGE>
Divisions and Units (Except Data Products Division):
- - The Division, Group and unit EVA is the controllable EVA for a Division and
revenue Group/Unit which includes the direct revenue and expenses for the
unit(s) less appropriate charges for data center consumption, application
software and facilities as determined by the ABM system. Also included will
be a charge for the cost of capital including accounts receivable, data
center equipment, workstation/LAN and facilities. The target for your
Group/Unit EVA will be negotiated with your Division Leader.
Data Products Division - Groups/Units:
- - Product Line EVA targets and attainment must be certified by the corporate
office.
Shared Services Units:
- - The business plan target component for Shared Services is to maintain your
expenses at or below your current fiscal year budget.
EPS Gate Target
- - The EPS target for fiscal 1999 is $.75 per share.
- - All common fate at risk payments are subject to first achieving Acxiom's
EPS targets.
Over Achievement
- - Above the funding at targeted EVA, 50% of all Incremental EVA will be added
to Incentive Funding with no gate calculation. Above target funds will be
added to the respective incentive banks and up to 1/3 will be paid at the
end of the fiscal year and the remainder will be banked for future payment
(subject to the sustained business performance of Acxiom Corporation).
- - The over achievement EVA will be funded at the corporate level and
distributed to the Divisions, Groups and Units that over achieved their
respective EVA targets.
Method of payment:
- - It is Acxiom's intention to pay at risk in cash. However, from time to time
the Company Leadership Team (CLT), may elect to pay at risk in stock
options if conditions of the business justify it. In the event this
decision is made, the CLT will make every effort to notify the Leadership
Team members within 5 business days of the decision being finalized. If at
risk is paid in stock options in lieu of cash, the Black-Scholes model will
be used to calculate the option value and number of options.
- - Payments will be made quarterly based on attainment of financial objectives
up to your target incentive and subject to the EPS funding gate
calculation, as follows:
First Quarter - 1/8th of total opportunity
Second Quarter - 1/8th of total opportunity
Third Quarter - 1/8th of total opportunity
Fourth Quarter - 5/8th of total opportunity (1/8 for the 4th Quarter & 1/2
for the Annual Target)
- - All over achievement incentive calculations will be deferred until the year
end.
- - All payments will be made within 60 days of the end of the quarter.
- - All EVA and EPS gate calculations will be done on a year-to-date basis.
<PAGE>
- - For the first, second and third quarters, the objectives are equal to the
Year-to-date financial targets as of the end of each respective quarter and
are subject to the EPS gate calculation. The total Company EVA and EPS
quarterly gate targets for FY '99 will be finalized after Business Planning
has been completed.
LONG-TERM INCENTIVE
- - For purposes of determination of the long-term incentive (LTI), eligible
associates must be employed and be a member of the Leadership Team on the
date the Board of Directors reviews the LTI grants for that year (May Board
of Directors meeting). There is no provision for prorating partial years.
These options fall under the Acxiom stock option plan and will be subject
to all standard provisions.
- - The long-term incentive will be in the form of stock options and other
performance vehicles as necessary. The current year vehicle will be stock
options.
- - Stock options will be awarded under three categories:
Category A - Fair market value at date of grant
Category B - 50% above fair market value
Category C - 100% above fair market value
- - Using the Black-Scholes stock options pricing model, the mix of options to
be awarded as an approximate percentage of the total long-term incentive
are:
Category A - 50% of total long-term incentive
Category B - 25% of total long-term incentive
Category C - 25% of total long-term incentive
- - Under the long-term incentive plan, participants will be awarded a grant of
stock options on a cycle corresponding to the level of compensation plan to
which the leader has been assigned. Multi-year grants are awarded for
levels 3 through 5.
- - In the event a leader is assigned a level with multi-year grants, they will
be awarded the number of years of options necessary to put them on the same
cycle as all other leaders on that level.
- - Stock options awarded will vest equally on each of the nine anniversary
dates following the date of grant. Stock options may not be exercisable
later than fifteen years after their date of grant.
- - Stock options may also be granted at the October Board Meeting. The October
options include new Leadership Team members as well as adjustments for
those moving from one level to another.
- - It is the current intent of the Board of Directors to continue this plan
(or a similar plan) in future years. The Board of Directors reserves the
right to modify or cancel this plan in future years for any reason at its
sole discretion.
RETENTION/RECRUITING BONUS
Retention Bonus:
A Retention Bonus for key Senior Leaders who we are at risk of losing is being
added to the plan this year. Each Retention Bonus Plan for a Senior Leader must
by approved by Charles Morgan and Rodger Kline.
<PAGE>
Retention Bonus Plan Provisions:
In addition to standard At Risk plan
Up to 25% of base salary (determined by Division Leader, Rodger Kline and
Charles Morgan)
To be paid at same time as at risk payments
Not subject to Corporate gate
Based on achieving predetermined, documented, individual objectives
Distribution amounts to be determined by Division Leader
Recruiting Bonus:
In order to recruit key leaders, it may be necessary to pay a one-time
recruiting bonus.
In addition to standard At Risk plan
Up to 25% of base salary (determined by Division Leader, Rodger Kline and
Charles Morgan)
To be paid upon hiring
Not subject to Corporate gate
PLAN MODIFICATIONS
Any modification to the standard plan described in this document must be
approved in advance by Rodger Kline.
EVA EVA
(in 000's) EPS (in 000's) EPS
----------------- -----------------
First Quarter ($) $.11 Third Quarter $ $.24
Second Quarter $ $.18 Fourth Quarter $ $.22
- ----
TOTALS $ $.75
= ====
<PAGE>
EXHIBIT 13
(This page and the following seven (7) pages correspond to pages 16-23 of the
Company's Annual Report.)
Selected Financial Data
Years Ended March 31, 1998 1997 1996 1995 1994
- ------------------------------ ------- ------- ------- ------- -------
Earnings Statement Data:
Revenue $ 465,065 402,016 269,902 202,448 151,669
Net Earnings $ 35,597 27,512 18,223 12,405 8,397
Basic earnings per share $ .68 .54 .39 .29 .20
Diluted earnings per share $ .60 .47 .35 .27 .19
============================== ======= ======= ======= ======= =======
March 31, 1998 1997 1996 1995 1994
- ------------------------------ ------- ------- ------- ------- -------
Balance Sheet Data:
Current assets $ 114,552 87,472 54,014 43,517 35,857
Current liabilities $ 68,300 39,127 31,159 24,964 12,895
Total assets $ 394,310 299,668 194,049 148,170 123,378
Long-term debt, excluding
current installments $ 99,917 87,120 26,885 18,219 34,992
Redeemable common stock $ - - - - 7,692
Stockholders' equity $ 200,128 156,097 122,741 97,177 61,896
============================== ======= ======= ======= ======= =======
(In thousands, except per share data. Per share data are restated to reflect
2-for-1 stock splits in fiscal 1997 and 1995.)
<PAGE>
The following table is submitted in lieu of the required graphs:
YEAR 1994 1995 1996 1997 1998
- ------------------------ ----- ----- ----- ----- -----
Revenue (Dollars in Millions) $151.7 $202.4 $269.9 $402.0 $465.1
Diluted Earnings Per Share
(In Dollars) $0.19 $0.27 $0.35 $0.47 $0.60
Stock Price (In Dollars) at
March 31 $5.19 $8.38 $11.94 $14.38 $25.63
Pretax Margin (In Percent) 8.9% 9.9% 10.9% 11.0% 12.1%
Return on Equity (In Percent) 13.2% 15.3% 16.5% 20.3% 20.4%
Earnings Before Interest,
Taxes, Depreciation and
Amortization ("EBITDA")
(Dollars in Millions) $35.6 $42.0 $52.9 $81.2 $103.2
<PAGE>
Management's Discussion and Analysis of Financial Condition and Results of
Operations
Results of Operations
In fiscal 1998, the Company recorded the highest annual revenues, earnings, and
earnings per share in its history.
The following table shows the Company's revenue by division for each of the
years in the three-year period ended March 31, 1998 (dollars in millions):
1997 to 1996 to
1998 1997 1996 1998 1997
----- ----- ----- ---- ----
Services Division $152.5 $129.5 $105.2 +18% +23%
Alliances Division 146.7 129.0 89.0 +14 +45
Data Products Division 132.3 115.3 58.0 +15 +99
International Division 33.6 28.2 17.7 +19 +59
----- ----- ----- ---- ----
$465.1 $402.0 $269.9 +16% +49%
Consolidated revenue was a record $465.1 million in 1998, up 16% from 1997.
Adjusting for Trans Union pass-through revenue recorded last year and the Pro CD
retail business which was sold in 1998, the increase for 1998 was 22%. For 1997,
revenue grew 49%, reflecting 29% due to internal growth and 20% resulting from
the Pro CD and DMI acquisitions which were completed at the beginning of 1997.
Services Division revenue increased 18% for 1998, after increasing 23% in
1997. Business units with double-digit revenue increases from 1997 to 1998
included Retail, High Tech, Publishing, and Utilities, along with the business
units serving Allstate, Citicorp, and IBM. The Services Division results also
include revenue from the Buckley Dement acquisition for the second half of the
year. These increases were partially offset by a decrease in the
Telecommunications business unit revenue from the prior year resulting from the
continued inability of the regional Bell operating companies to effectively
compete in the long distance phone market. The revenue increase for the Services
Division in fiscal 1997 is primarily due to growth in the Publishing, High Tech,
and Retail business units, along with the business unit serving Allstate.
Alliances Division revenue increased 14% from 1997 to 1998, following an
increase of 45% from 1996 to 1997. However, after adjusting for a reduction in
pass-through revenue recorded on the Trans Union marketing services agreement in
1997 of approximately $11 million, revenue actually increased by 24% in 1998.
Financial services revenue jumped by 58% in 1998 reflecting the Company's
success in delivering open data mart solutions to credit card marketers.
Included in this revenue is the revenue for equipment and software sold in
connection with these solutions. Trans Union revenue decreased when compared to
1997, but again adjusting for the pass-through revenue recorded last year, Trans
Union revenue actually increased 19%, reflecting growth in the data center
contract and revenue related to the marketing services agreement. Growth in
other Alliances Division business units was offset by lower revenue from the
Polk business unit due to a software sale in 1997. The revenue increase for the
Alliances Division in 1997 reflects growth in credit card processing revenues of
31% and incremental revenues from the outsourcing contract with Polk, which was
still ramping up in 1996.
Data Products Division revenue increased 15% in 1998 after almost doubling
in 1997. Pro CD revenue decreased by $6.6 million in 1998 reflecting the sale of
the retail and direct marketing side of the business to American Business
Information, Inc. ("ABI") in August 1997 which offset growth in the corporate
side of the business. Gains were also reported by other Data Products business
units including Acxiom Data Group (InfoBase), up 50%, DataQuick, up 21%, and
DMI, up 14%. The increase in revenue in 1997 is due primarily to the DMI and Pro
CD acquisitions which were completed at the beginning of fiscal 1997.
The International Division recorded revenue increases of 19% and 59% for
1998 and 1997, respectively. The increases in 1998 and 1997 were attributable to
an increase in the level of fulfillment activity and increases in database
services.
<PAGE>
The following table shows the Company's revenue distribution by customer
industry for each of the years in the three-year period ended March 31, 1998
(dollars in millions):
1997 to 1996 to
1998 1997 1996 1998 1997
----- ----- ----- ---- ----
Direct Marketing $155.5 $136.9 $ 72.1 +14% +90%
Financial Services 113.8 80.4 72.0 +42 +12
Insurance 92.0 81.2 67.1 +13 +21
Information &
Communication Services 77.3 81.1 42.1 - 5 +93
Media/Publishing 26.5 22.4 16.6 +18 +35
----- ----- ----- ---- ----
$465.1 $402.0 $269.9 +16% +49%
The 1998 growth was led by the financial services sector as a result of strength
in credit card-related revenue. Direct marketing and information & communication
services growth was mitigated by the Trans Union pass-through revenue and the
sale of the Pro CD retail and direct marketing business noted earlier. The 1997
growth was impacted favorably by the acquisitions of DMI and Pro CD at the
beginning of the year.
The following table presents operating expenses for each of the years in
the three-year period ended March 31, 1998 (dollars in millions):
1997 to 1996 to
1998 1997 1996 1998 1997
----- ----- ----- ---- ----
Salaries and benefits $173.9 $145.0 $ 98.1 +20% +48%
Computer, communications
and other equipment 60.9 58.6 41.0 + 4 +43
Data costs 86.5 76.3 63.4 +13 +20
Other operating costs
and expenses 84.3 72.8 36.7 +16 +98
----- ----- ----- ---- ----
$405.6 $352.7 $239.2 +15% +47%
Salaries and benefits increased from 1997 to 1998 by 20% principally due to
increased headcount to support the growth of the business and merit increases,
combined with increases in incentive compensation and the impact of acquisitions
during the year. Salaries and benefits increased from 1996 to 1997 by 48% due
primarily to the acquisitions of DMI and Pro CD. After adjusting for the
acquisitions, the resulting 20% growth primarily reflects increased headcount to
support the growth of the business.
Computer, communications and other equipment costs rose 4% from 1997 to
1998. The increase reflects depreciation on capital expenditures made to
accommodate business growth, mostly offset by the effect of the Trans Union
pass-through expenses recorded in the prior year. Computer, communications and
other equipment costs increased 43% in 1997. After adjusting for the
acquisitions of Pro CD and DMI and the pass-through expenses, computer costs
increased 15% due primarily to additional depreciation and other equipment costs
related to increases in data center equipment to support the growth of the
business, including the Polk outsourcing contract.
Data costs grew 13% in 1998 and 20% in 1997. In both years, the primary
reason for the increase was the growth in revenues under the Allstate contract.
<PAGE>
Other operating costs and expenses increased 16% in 1998. The increase is
primarily attributable to acquisitions, the server sales by the Alliances
Division noted above, an increase in bad debt expense, and volume-related
increases, reduced by the impact of the sale of the Pro CD retail and direct
marketing business. For 1997, other operating costs and expenses increased 98%.
After adjusting for the impact of the DMI and Pro CD acquisitions and the
ramp-up of the Polk contract, the increase was 24% reflecting increased costs
necessary to support increased revenues.
Software and research and development spending was $23.3 million in 1998
compared to $17.2 million in 1997 and 10.4 million in 1996.
Income from operations in 1998 was a record $59.4 million, an increase of
21% over 1997. Income from operations in 1997 reflected an increase of 61% over
1996. The operating margin in 1998 was 12.8%, compared to 12.3% in 1997 and
11.4% in 1996.
Interest expense increased by over $2 million in both 1998 and 1997 due
primarily to increased average debt levels each year.
Other, net for 1998 includes $1.0 million in gains on the disposals of the
Pro CD retail and direct marketing business compared with a $2.6 million charge
in 1997 due to a write-off related to the sale of an Acxiom Mailing Services
facility. Other, net in 1998 also includes interest income on noncurrent
receivables of $1.9 million compared with interest income of $0.5 million in
1997.
The Company's effective tax rate was 37.0%, 37.5%, and 38.0% for 1998,
1997, and 1996, respectively. In each year, the effective rate exceeded the U.S.
statutory rate primarily because of state income taxes, partially offset by
research and experimentation tax credits.
Net earnings were a record $35.6 million in 1998, an increase of 29% from
1997, after increasing 51% from 1996 to 1997. Basic earnings per share increased
26% to $0.68 in 1998 after increasing 38% in 1997. Diluted earnings per share
were $0.60, up 28% from 1997, after increasing 34% in 1997.
Capitol Resources and Liquidity
Working capital at March 31, 1998 totaled $46.3 million compared to $48.3
million a year previously. At March 31, 1998, the Company had available credit
lines of $119.9 million of which $36.4 million was outstanding. The Company has
renewed and expanded the revolving credit agreement which now allows for
revolving loans and letters of credit of up to $125 million. The Company has
been allowed by the holders of the $25 million convertible note payable to
reduce the amount of the letter of credit which collateralizes the convertible
note to $6.6 million, which increases the Company's available credit line under
the revolving credit agreement to $118.4 million. The Company also has a
short-term unsecured credit agreement in the amount of $1.5 million. The
Company's debt-to-capital ratio (capital defined as long-term debt plus
stockholders' equity) was 33% at March 31, 1998 compared to 36% at March 31,
1997. Total stockholders' equity increased 28% to $200.1 million at March 31,
1998.
Cash provided by operating activities was $64.2 million for 1998 compared
to $35.1 million in 1997 and $39.3 million in 1996. Earnings before interest,
taxes, depreciation, and amortization ("EBITDA") increased by 27% in 1998 after
increasing 54% in 1997. The resulting operating cash flow was reduced by $24.7
million in 1998 and $41.1 million in 1997 due to the net change in operating
assets and liabilities. The change primarily reflects higher current and
noncurrent receivables, offset in 1998 by higher accounts payable and accrued
liabilities resulting from the growth of the business and advances from
customers.
Investing activities used $78.7 million in 1998, $64.1 million in 1997, and
$46.9 million in 1996. Investing activities in 1998 included $55.8 million in
capital expenditures, compared to $59.8 million in 1997 and $39.0 million in
1996. Capital expenditures are principally due to purchases of data center
equipment to support the Company's outsourcing agreements with Polk and Trans
Union, as well as the purchase of additional data center equipment in the
Company's core data centers. Over the last few years, the Company has been
expanding its data centers to provide for incremental capacity and has been
re-engineering a number of key proprietary processes to run on client servers
using low-cost parallel processors. In 1996, the Company also completed an
expansion of its Conway data center and a new 100,000 square-foot customer
service building on its main campus in Conway, Arkansas, at a cost of
approximately $12 million, funded through current operations and existing credit
lines.
<PAGE>
Investing activities during 1998 also include $13.3 million in software
development costs, compared to $6.7 million in 1997 and $3.9 million in 1996. In
general, the increase is due to software development undertaken to support large
customer contracts in the Alliances Division. Investing activities also reflect
the cash of $18.8 million paid for the purchases of STW and Buckley Dement,
partially offset 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 13 and 14 to the consolidated financial statements discuss the
acquisitions and dispositions in more detail. Investing activities also reflect
the investment of $6.1 million by the Company in joint ventures, including an
investment of approximately $4 million in Bigfoot International, Inc., an
emerging company that provides services and tools for internet e-mail users.
Financing activities in 1998 provided $17.5 million, including sales of
common stock through the Company's stock option and employee stock purchase
plans, and additional borrowings under the revolving line of credit. Financing
activities in 1997 include the issuance of $30 million in senior notes, the
issuance of a $25 million convertible note in connection with the purchase
acquisition of DMI, and increases under the revolving credit facility. Financing
activities in 1997 also reflect the payment of short-term bank debt assumed when
the Company acquired DMI. Financing activities in 1996 include the effects of
cash dividends and common stock transactions made by DataQuick prior to its
acquisition in August, 1995.
During fiscal 1999, construction is expected to be completed on the
Company's new headquarters building and a new customer service facility in
Little Rock, Arkansas. These two buildings are being built pursuant to 50/50
joint ventures between the Company and local real estate investors. The total
cost of the headquarters and customer service projects is expected to be
approximately $6.4 million and $9.1 million, respectively. The Company expects
other capital expenditures of $55-$65 million in fiscal 1999.
While the Company does not have any other material contractual commitments
for capital expenditures, additional investments in facilities and computer
equipment continue to be necessary to support the growth of the business. In
addition, new outsourcing or facilities management contracts frequently require
substantial up-front capital expenditures in order to acquire or replace
existing assets. In some cases, the Company also sells software, hardware, and
data to customers under extended payment terms or notes receivable collectible
over one to eight years. These arrangements also require up-front expenditures
of cash, which are repaid over the life of the agreement. Management believes
that the combination of existing working capital, anticipated funds to be
generated from future operations, and the Company's available credit lines is
sufficient to meet the Company's current operating needs as well as to fund the
anticipated levels of expenditures. If additional funds are required, the
Company would use existing credit lines to generate cash, followed by either
additional borrowings to be secured by the Company's assets or the issuance of
additional equity securities in either public or private offerings. Management
believes that the Company has significant unused capacity to raise capital which
could be used to support future growth.
The Company, like many owners of computer software, has assessed and is in
the process of modifying, where needed, its computer applications to ensure they
will function properly in the year 2000 and beyond. The financial impact to the
Company has not been and is not expected to be material to its financial
position or results of operations in any given year. The Company is currently
operating under an internal goal to ensure all of its computer applications are
"year 2000 ready" by December 31, 1998.
Seasonality and Inflation
Although the Company cannot accurately determine the amounts attributable
thereto, the Company has been affected by inflation through increased costs of
compensation and other operating expenses. Generally, the effects of inflation
are offset by technological advances, economies of scale and other operational
efficiencies. The Company has established a pricing policy for long-term
contracts which provides for the effects of expected increases resulting from
inflation.
The Company's operations have not proved to be significantly seasonal,
although the Company's traditional direct marketing operations experience
slightly higher revenues in the Company's second and third quarters. In order to
minimize the impact of these fluctuations, the Company continues to move toward
long-term strategic partnerships with more predictable revenues. Revenues under
long-term contract (defined as three years or longer) were 54%, 50%, and 52% of
consolidated revenues for 1998, 1997, and 1996, respectively.
<PAGE>
Acquisitions
In fiscal 1997, the Company completed two acquisitions, which became effective
in April 1996. The acquisition of Pro CD, Inc. was accounted for as a
pooling-of-interests and the acquisition of Direct Media/DMI, Inc. was accounted
for as a purchase. In 1998, the Company completed two additional acquisitions,
which were effective October 1, 1997. The acquisitions of MultiNational
Concepts, Ltd. and Catalog Marketing Services, Inc., entities which were under
common control, and Buckley Dement, L.P. and its affiliated company, KM Lists,
Incorporated were both accounted for as purchases. See footnote 13 to the
consolidated financial statements for more information regarding these
acquisitions. The Company has also made several smaller acquisitions, which are
not material either individually or in the aggregate.
Other Information
In 1998, 1997, and 1996, the Company had two customers that accounted for more
than 10% of revenue. Allstate accounted for 16.1%, 16.8%, and 20.7% in 1998,
1997, and 1996, respectively, and Trans Union accounted for 11.8%, 14.1%, and
15.5% in 1998, 1997, and 1996, respectively. The Trans Union data center
management agreement and marketing services agreement have been extended and now
expire in 2005. A long-term extension of the Allstate agreement, which was
originally signed for a five-year term expiring in September, 1997 and has been
extended until September 1998 is currently being negotiated. The Company does
not have any reason to believe that either of these customers will not continue
to do business with the Company.
Acxiom U.K., the Company's United Kingdom business, provides services to
the United Kingdom market which are similar to the traditional direct marketing
industry services the Company provides in the United States. In addition, Acxiom
U.K. also provides promotional materials handling and response services to its
U.K. customers. Most of the Company's exposure to exchange rate fluctuation is
due to translation gains and losses as there are no material transactions which
cause exchange rate impact. The U.K. operation generally funds its own
operations and capital expenditures, although the Company occasionally advances
funds from the U.S. to the U.K. These advances are considered to be long-term
investments, and any gain or loss resulting from changes in exchange rates as
well as gains or losses resulting from translating the financial statements into
U.S. dollars are accumulated in a separate component of stockholders' equity.
There are no restrictions on transfers of funds from the U.K.
Efforts are continuing to expand the services of Acxiom U.K. to customers
in Europe and the Asia Pacific region. Management believes that the market for
the Company's services in such locations is largely untapped. To date the
Company has had no significant revenues or operations outside of the United
States and the United Kingdom.
As noted in footnote 11 to the consolidated financial statements, the
Company's United Kingdom operations earned profits of $1.5 million in fiscal
1998 and $1 million in fiscal 1997, and are expected to continue to show profits
in the future. The U.K. operations reflected in the footnote include the
International Division, with 1998 pretax earnings of $3 million, up 77% from
1997, offset by losses in the U.K. and Netherlands operations of DMI which are
included in the Data Products Division. The U.K. operations sustained losses of
$399,000 in 1996.
Effective March 31, 1994, the Company sold substantially all of the assets
of its former Acxiom Mailing Services operation to MorCom, Inc. In June 1996,
MorCom ceased operations. During 1997, the Company established valuation
reserves for the remaining receivables under the sale agreement. The Company
also obtained title to and sold a portion of the property related to the
mortgage note, receiving proceeds of $949,000. During 1998, the Company sold the
two remaining parcels of property which had been used by the Acxiom Mailing
Services unit. The aggregate proceeds were $2.3 million resulting in a gain on
disposal of $105,000 which is included in other income.
Effective August 22, 1997, the Company sold certain assets of its Pro CD
subsidiary to ABI. ABI acquired the retail and direct marketing operations of
Pro CD, along with compiled telephone book data for aggregate cash proceeds of
$18 million. In conjunction with the sale to ABI, the Company also recorded
certain valuation and contingency reserves. Included in other income is the gain
on disposal related to this transaction of $855,000.
The Financial Accounting Standards Board has issued Statements No. 130,
"Reporting Comprehensive Income," No. 131, "Disclosures about Segments of an
Enterprise and Related Information," and No. 132, "Employers' disclosures about
Pensions and Other Postretirement Benefits." Each of these statements is
required to be adopted by the Company in fiscal 1999. Statement No. 130 will
require the Company to report comprehensive income, as defined in the statement,
in a financial statement that is displayed with the same prominence as other
financial statements. Management does not expect any significant impact to the
financial statements from this additional disclosure requirement. Statement No.
131 will require the Company to report additional information about business
segments than what has historically been reported. The statement will require
the Company to report additional information about these business segments and
to reconcile the segment information to the consolidated financial statements.
Management intends to present this segment information using the operating
divisions into which it is currently organized. Other than these additional
disclosure requirements, the Company does not expect any significant impact to
the financial statements. Statement No. 132 revises employers' disclosures about
pension and other postretirement benefit plans. It does not change the
measurement or recognition of those plans. Management does not expect any
material impact from the adoption of this statement.
<PAGE>
The Accounting Standards Executive Committee (AcSEC) of the American
Institute of Certified Public Accountants has issued Statement of Position
("SOP") 98-4, "Deferral of the Effective Date of a Provision of SOP 97-2,
Software Revenue Recognition." SOP 97-2 is effective for fiscal year 1999 and
provides guidance on recognizing revenue on software transactions. In software
transactions that include multiple elements, SOP 97-2 requires the fee to be
allocated to the various elements based on vendor-specific objective evidence of
the fair values of the elements, and provides guidance on how to arrive at
vendor-specific objective evidence. SOP 98-4 defers until fiscal 2000 the
effective date of the provisions of SOP 97-2 that limit what constitutes
vendor-specific objective evidence. All other provisions of SOP 97-2 are
effective for fiscal year 1999. The Company intends to follow the revenue
recognition requirements of SOP 97-2 that are currently effective and
anticipates that AcSEC will issue additional guidance on what constitutes
vendor-specific objective evidence within the next year. The Company does not
expect that the effect of implementing this SOP will be material.
AcSEC has also issued SOP 98-5, "Reporting on the Costs of Start-up
Activities." SOP 98-5 is effective for fiscal year 2000 and requires that the
cost of start-up activities be expensed when incurred. The Company does not
expect that the effect of implementing this SOP will be material.
Outlook
Certain statements in this Annual Report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements, which are not statements of historical fact, may
contain estimates, assumptions, projections and/or expectations regarding the
Company's financial position, results of operations, market position, product
development, regulatory matters, growth opportunities and growth rates,
acquisition and divestiture opportunities, and other similar forecasts and
statements of expectation. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," and "should," and variations of these
words and similar expressions, are intended to identify these forward-looking
statements. Such forward-looking statements are not guarantees of future
performance. They involve known and unknown risks, uncertainties, and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Representative examples of such factors are discussed in more detail in the
Company's Annual Report on Form 10K and include, among other things, the
possible adoption of legislation or industry regulation concerning certain
aspects of the Company's business; the removal of data sources and/or marketing
lists from the Company; the ability of the Company to retain customers who are
not under long-term contracts with the Company; technology challenges; year 2000
software issues; the risk of damage to the Company's data centers or
interruptions in the Company's telecommunications links; acquisition
integration; the effects of postal rate increases; and other market factors. See
"Additional Information Regarding Forward-looking Statements" in the Company's
Annual Report on Form 10-K.
The Company believes that existing customer industries (direct marketing,
financial services, insurance, information and communication services, and
media/publishing) all continue to offer good growth potential. In general, there
is an increased emphasis on one-to-one marketing in businesses which the Company
believes will increase demand for the Company's data content and services both
in the U.S. and worldwide. The Company continues to explore uses of its data and
services beyond marketing applications and has had some success in developing
applications in the insurance underwriting area. At the same time, the Company
is also focusing on industries such as retail, pharmaceuticals,
telecommunications, high tech, entertainment, packaged goods, and utilities as
strong growth opportunities. In addition, the Company also believes there is
strong growth potential beyond the Fortune 1000 companies that it has
traditionally served into medium-sized businesses and divisions of large
corporations, as well as the small office/home office marketplace. As a result
of improved delivery systems via the Acxiom Data Network(SM) ("ADN"), announced
in February 1998, these markets are expected to become cost efficient for the
Company to deliver portions of its products and services. The ADN will link the
customer's data to the Company's enhancement database via the internet from the
customer's desktop. It is anticipated that the ADN will expand the marketplace
for the Company's data products to customers smaller than the Fortune 1000. The
Company also believes that the ADN should dramatically cut costs in maintaining
and updating data warehouses for current customers. In addition, the Company has
developed relationships with third party database and decision support system
providers to promote alternate channels of distribution for the Company's
products and services.
The Company believes that operating margins will continue to improve
primarily as a result of implementing the ADN, leveraging the Company's data
content resources, improving internal processes, and increasing the
profitability of the Company's international operations.
The Company currently expects its effective tax rate to be 37-39% for 1999.
This estimate is based on current tax law and current estimates of earnings, and
is subject to change.
<PAGE>
(This page and the following thirteen (13) pages correspond to pages 24-37 of
the Company's Annual Report.)
Consolidated Balance Sheets
March 31, 1998 and 1997
(Dollars in thousands) 1998 1997
---- ----
Assets
Current assets:
Cash and cash equivalents $ 5,675 $ 2,721
Trade accounts receivable, net 86,360 70,636
Refundable income taxes - 1,809
Other current assets (note 7) 22,517 12,306
------- -------
Total current assets 114,552 87,472
Property and equipment, net of accumulated
depreciation and amortization (notes 3 and 4) 130,554 116,171
Software, net of accumulated amortization of
$11,472 in 1998 and $11,330 in 1997 (note 2) 24,143 18,627
Excess of cost over fair value of net assets
acquired, net of accumulated amortization of
$7,753 in 1998 and $4,924 in 1997 (note 13) 54,002 38,297
Other assets 71,059 39,101
------- -------
$394,310 $299,668
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt (note 4) 3,979 4,081
Trade accounts payable 18,448 15,323
Accrued expenses:
Payroll 14,950 7,519
Other 17,492 8,667
Deferred revenue 11,197 3,537
Income taxes 2,234 -
------- -------
Total current liabilities 68,300 39,127
Long-term debt, excluding current installments
(note 4) 99,917 87,120
Deferred income taxes (note 7) 25,965 17,324
Stockholders' equity (notes 4, 6, 7 and 13):
Common stock 5,321 5,274
Additional paid-in capital 68,977 61,322
Retained earnings 127,335 91,738
Foreign currency translation adjustment 676 278
Treasury stock, at cost (2,181) (2,515)
------- -------
Total stockholders' equity 200,128 156,097
Commitments and contingencies (notes 4, 5, 8, 9
and 12)
------- -------
$394,310 $299,668
======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Earnings
Years ended March 31, 1998, 1997 and 1996
(Dollars in thousands, except per share
amounts) 1998 1997 1996
------- ------- -------
Revenue (note 10) $465,065 $402,016 $269,902
Operating costs and expenses (notes 2, 5, 8
and 9):
Salaries and benefits 173,925 145,038 98,075
Computer, communications and other equipment 60,858 58,552 40,972
Data costs 86,483 76,282 63,442
Other operating costs and expenses 84,354 72,817 36,696
------- ------- -------
Total operating costs and expenses 405,620 352,689 239,185
------- ------- -------
Income from operations 59,445 49,327 30,717
------- ------- -------
Other income (expense):
Interest expense (5,956) (3,903) (1,863)
Other, net (note 14) 3,014 (1,386) 542
------- ------- -------
(2,942) (5,289) (1,321)
------- ------- -------
Earnings before income taxes 56,503 44,038 29,396
Income taxes (note 7) 20,906 16,526 11,173
------- ------- -------
Net earnings $ 35,597 $ 27,512 $ 18,223
======= ======= =======
Earnings per share:
Basic $.68 $.54 $.39
======= ======= =======
Diluted $.60 $.47 $.35
======= ======= =======
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Stockholders' Equity
Years ended March 31, 1998, 1997 and 1996
Common stock
----------------------------
Number of
(Dollars in thousands) shares Amount
---------- ------
Balances at March 31, 1995 46,152,582 $4,615
DataQuick merger (note 13) 1,969,678 197
Retirement of DataQuick common stock prior to
merger - -
Sale of DataQuick common stock prior to merger - -
DataQuick dividends prior to merger - -
Sale of common stock 562,794 56
Tax benefit of stock options exercised (note 7) - -
Employee stock awards and shares issued to
employee benefit plans, net of treasury shares
repurchased 13,356 2
Translation adjustment - -
Net earnings - -
---------- ------
Balances at March 31, 1996 48,698,410 4,870
Pro CD merger (note 13) 3,313,324 331
Sale of common stock 724,164 73
Tax benefit of stock options exercised (note 7) - -
Employee stock awards and shares issued to
employee benefit plans, net of treasury shares
repurchased - -
Translation adjustment - -
Net earnings - -
---------- ------
Balances at March 31, 1997 52,735,898 5,274
Sale of common stock 411,411 41
Tax benefit of stock options exercised (note 7) - -
Employee stock awards and shares issued to
employee benefit plans, net of treasury shares
repurchased 57,529 6
Translation adjustment - -
Net earnings - -
---------- ------
Balances at March 31, 1998 53,204,838 $5,321
---------- ------
See accompanying notes to consolidated financial statements.
<PAGE>
Consolidated Statements of Stockholders' Equity (Continued)
Years ended March 31, 1998, 1997 and 1996
Foreign Treasury stock
Additional currency ----------------------- Total
paid-in Retained translation Number of stockholders'
capital earnings adjustment shares Amount equity (note 6)
------ ------- ----- --------- ----- -------
$44,186 $ 50,776 $ 7 (1,311,570) $(2,407) $ 97,177
5,113 447 - - - 5,757
(1,010) - - - - (1,010)
190 - - - - 190
- (468) - - - (468)
2,063 - - - - 2,119
656 - - - - 656
881 - - 69,328 84 967
- - (870) - - (870)
- 18,223 - - - 18,223
------ ------- ----- --------- ----- -------
52,079 68,978 (863) (1,242,242) (2,323) 122,741
2,647 (4,752) - - - (1,774)
3,553 - - - - 3,626
1,684 - - - - 1,684
1,359 - - 145,912 (192) 1,167
- - 1,141 - - 1,141
- 27,512 - - - 27,512
------ ------- ----- --------- ----- -------
61,322 91,738 278 (1,096,330) (2,515) 156,097
3,640 - - - - 3,681
1,467 - - - - 1,467
2,548 - - 259,410 334 2,888
- - 398 - - 398
- 35,597 - - - 35,597
------ ------- ----- --------- ----- -------
$68,977 $127,335 $676 (836,920) $(2,181) $200,128
====== ======= ===== ========= ===== =======
<PAGE>
Consolidated Statements of Cash Flows
Years ended March 31, 1998, 1997 and 1996
(Dollars in thousands) 1998 1997 1996
---- ---- ----
Cash flows from operating activities:
Net earnings $35,597 $27,512 $18,223
Adjustments to reconcile net earnings to
net cash provided by operating activities:
Depreciation and amortization 40,746 33,244 21,602
Loss (gain) on disposal or impairment of
assets (960) 2,412 49
Provision for returns and doubtful accounts 3,090 5,530 149
Deferred income taxes 8,917 5,776 3,434
Tax benefit of stock options exercised 1,467 1,684 656
Changes in operating assets and liabilities:
Accounts receivable (17,090) (21,972) (4,092)
Other assets (29,029) (14,669) (5,173)
Accounts payable and other liabilities 21,455 (4,432) 4,459
------ ------ ------
Net cash provided by operating activities 64,193 35,085 39,307
------ ------ ------
Cash flows from investing activities:
Disposition of assets 15,310 2,385 402
Cash received in merger - 21 1,624
Development of software (13,319) (6,725) (3,944)
Capital expenditures (55,834) (59,784) (39,021)
Investments in joint ventures (6,072) - -
Net cash paid in acquisitions (note 13) (18,791) - (5,914)
------ ------ ------
Net cash used in investing activities (78,706) (64,103) (46,853)
------ ------ ------
Cash flows from financing activities:
Proceeds from debt 14,991 39,459 11,995
Payments of debt (4,095) (15,982) (4,897)
Sale of common stock 6,569 4,793 2,309
DataQuick pre-merger retirement of common
stock - - (1,010)
DataQuick pre-merger dividends - - (468)
------ ------ ------
Net cash provided by financing activities 17,465 28,270 7,929
------ ------ ------
Effect of exchange rate changes on cash 2 - (63)
------ ------ ------
Net increase (decrease) in cash and cash
equivalents 2,954 (748) 320
Cash and cash equivalents at beginning of year 2,721 3,469 3,149
------ ------ ------
Cash and cash equivalents at end of year $ 5,675 $ 2,721 $ 3,469
====== ====== ======
Supplemental cash flow information:
Convertible debt issued in acquisition
(note 13) $ - $25,000 $ -
Cash paid during the year for:
Interest 5,232 3,210 2,214
Income taxes 6,477 9,360 8,660
====== ====== ======
See accompanying notes to consolidated financial statements.
<PAGE>
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
The Company provides information management technology and other related
services, primarily for marketing applications. Operating units of the Company
provide list services, data warehouse services, data and information products,
fulfillment services, computerized list, postal and database services, and
outsourcing and facilities management services primarily in the United States
(U.S.) and United Kingdom (U.K.), along with limited activities in Canada,
Netherlands and Asia.
(b) Consolidation Policy
The consolidated financial statements include the accounts of Acxiom Corporation
and its subsidiaries ("Company"). 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.
(c) Use of Estimates
Management of the Company has made a number of estimates and assumptions
relating to the reporting of assets and liabilities and the disclosure of
contingent assets and liabilities to prepare these consolidated financial
statements in conformity with generally accepted accounting principles. Actual
results could differ from those estimates.
(d) Accounts Receivable
Financial instruments which potentially subject the Company to concentrations of
credit risk consist primarily of trade receivables. All of 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 $3.3 million and $4.3 million in 1998 and 1997,
respectively.
(e) 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, 5-30 years; office furniture and
equipment, 3-10 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) 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.
(g) 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 25 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.
(h) Revenue Recognition
Revenues from the production and delivery of direct marketing lists and
enhancement data are recognized when shipped. Revenues from data warehouses and
outsourcing and facilities management services are recognized when the services
are performed. Costs incurred in connection with the conversion phase of
outsourcing and facilities management contracts are deferred and amortized over
the life of the contract. Revenues from software licenses are recognized
primarily when the software is installed or when the Company fulfills its
obligations under the sales contract.
<PAGE>
The Company recognizes revenue from long-term contracts using the
percentage-of-completion method, based on performance milestones specified in
the contract where such milestones fairly reflect progress toward contract
completion. In other instances, progress toward completion is based on
individual contract costs incurred to date compared with total estimated
contract costs. Billed but unearned portions of revenues are reported as
deferred revenues.
Included in other assets are unamortized conversion costs in the amount of
$25.0 million and $18.1 million as of March 31, 1998 and 1997, respectively.
Noncurrent receivables from software license, data, and equipment sales are also
included in other assets in the amount of $20.3 million and $9.6 million as of
March 31, 1998 and 1997, respectively. The current portion of such receivables
is included in other current assets in the amount of $9.5 million and $2.9
million as of March 31, 1998 and 1997, respectively.
(i) 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.
(j) Foreign Currency Translation
The balance sheets of the Company's foreign subsidiaries are translated at
year-end rates of exchange, and the statements of earnings are translated at the
weighted average exchange rate for the period. Gains or losses resulting from
translating foreign currency financial statements are accumulated in a separate
component of stockholders' equity.
(k) Earnings Per Share
The Company adopted Statement of Financial Accounting Standards ("SFAS") No.
128, "Earnings Per Share" during the year ended March 31, 1998. Below is the
calculation and reconciliation of the numerator and denominator of basic and
diluted earnings per share (in thousands, except per share amounts):
1998 1997 1996
---- ---- ----
Basic earnings per share:
Numerator (net earnings) $35,597 $27,512 $18,223
====== ====== ======
Denominator (weighted average
shares outstanding) 52,044 51,172 47,057
====== ====== ======
Earnings per share $.68 $.54 $.39
====== ====== ======
Diluted earnings per share:
Numerator:
Net earnings $35,597 $27,512 $18,223
Interest expense on convertible
debt (net of tax effect) 445 445 -
------ ------ ------
$36,042 $27,957 $18,223
====== ====== ======
Denominator:
Weighted average shares outstanding 52,044 51,172 47,057
Effect of common stock options 2,628 2,967 2,726
Effect of common stock warrant 3,015 3,004 2,295
Convertible debt 2,000 2,000 -
------ ------ ------
59,687 59,143 52,078
====== ====== ======
Earnings per share $.60 $.47 $.35
====== ====== ======
Options to purchase shares of common stock that were outstanding during 1998,
1997 and 1996 but were not included in the computation of diluted earnings per
share because the option exercise price was greater than the average market
price of the common shares are shown below.
1998 1997 1996
---- ---- ----
Number of shares under option 252,536 1,485,569 1,798,828
Range of exercise prices $26.06-$35.92 $18.61-$35.00 $12.25-$24.81
<PAGE>
(l) 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.
(m) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(n) Reclassifications
To conform to the 1998 presentation, certain accounts for 1997 and 1996 have
been reclassified. The reclassifications had no effect on net earnings.
(2) Software and Research and Development Costs
The Company recorded amortization expense related to internally developed
computer software of $5.0 million, $5.4 million and $3.1 million in 1998, 1997
and 1996, respectively. Additionally, research and development costs of $10.0
million, $10.5 million and $6.4 million were charged to operations during 1998,
1997 and 1996, respectively.
(3) Property and Equipment
Property and equipment is summarized as follows (dollars in thousands):
1998 1997
---- ----
Land $ 2,309 $ 2,238
Buildings and improvements 57,747 56,825
Office furniture and equipment 18,265 13,484
Data processing equipment 156,149 126,739
------- -------
234,470 199,286
Less accumulated depreciation and amortization 103,916 83,115
------- -------
$130,554 $116,171
======= =======
(4) Long-Term Debt
Long-term debt consists of the following (dollars in thousands):
1998 1997
---- ----
Unsecured revolving credit agreement $ 36,445 $21,454
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; partially collateralized
by letter of credit; convertible at maturity
into two million shares of common stock (note 13) 25,000 25,000
9.75% Senior notes, due May 1, 2000, payable in
annual installments of $2,143 each May 1;
interest is payable semi-annually 6,429 8,571
Other 6,022 6,176
------- ------
Total long-term debt 103,896 91,201
Less current installments 3,979 4,081
------- ------
Long-term debt, excluding current installments $ 99,917 $87,120
======= ======
<PAGE>
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, 1998, the effective rate was 7.175%. The agreement requires a commitment fee
equal to 3/16 of 1% on the average unused portion of the loan. A letter of
credit in the amount of $6.6 million is outstanding in connection with an
acquisition (see note 13), leaving $118.4 million available for revolving loans.
The Company also has another unsecured line of credit amounting to $1.5 million
of which none was outstanding at March 31, 1998 or 1997. The other unsecured
line expires July 30, 1998 and bears interest at the prime rate less 1/2 of 1%.
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, 1998, the Company
was in compliance with all such financial requirements. The aggregate maturities
of long-term debt for the five years ending March 31, 2003 are as follows: 1999,
$4.0 million; 2000, $28.0 million; 2001, $7.1 million; 2002, $4.8 million; and
2003, $43.0 million.
(5) 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, 2003 are as follows: 1999, $4.6 million; 2000, $4.1 million; 2001,
$3.4 million; 2002, $1.9 million; and 2003, $1.8 million.
Total rental expense on operating leases was $5.9 million, $6.7 million and
$3.7 million for the years ended March 31, 1998, 1997 and 1996, respectively.
(6) Stockholders' Equity
The Company has authorized 200 million shares of $.10 par value common stock and
1 million shares of authorized but unissued $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.
In connection with its data center management agreement ("Agreement")
entered into in August 1992 with Trans Union Corporation ("Trans Union"), the
Company issued a warrant, which expires on August 31, 2000 and entitles Trans
Union to acquire up to 4 million additional shares of newly-issued common stock.
The exercise price for the warrant stock is $3.06 per share through August 31,
1998 and increases $.25 per share in each of the two years subsequent to August
31, 1998. Trans Union is precluded from exercising the warrant to the extent
that the shares acquired thereunder would cause its percentage ownership of the
Company's common stock acquired pursuant to the Agreement to exceed 10% of the
Company's then issued and outstanding common stock. Based on shares outstanding
at March 31, 1998, Trans Union would be entitled to purchase approximately 3.7
million total shares under the warrant.
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, 1998, 2,161,461 shares and 824,163
shares are available for future grants under the Plan and the Scheme,
respectively.
Activity in stock options was as follows:
Weighted Number
Number of average price of shares
shares per share exercisable
--------- ----- ---------
Outstanding at March 31, 1995 4,928,696 $ 4.68 1,715,966
Granted 1,560,556 19.12
DataQuick acquisition (note 13) 1,616,740 2.93
Exercised (371,046) 2.49
Terminated (6,000) 1.42
--------- ----- ---------
Outstanding at March 31, 1996 7,728,946 7.88 3,467,728
Granted 454,251 25.02
Pro CD acquisition (note 13) 294,132 1.76
Exercised (662,117) 2.36
Terminated (93,255) 7.29
--------- ----- ---------
Outstanding at March 31, 1997 7,721,957 9.34 3,652,744
Granted 579,336 16.48
Exercised (412,951) 4.87
Terminated (116,390) 13.61
--------- ----- ---------
Outstanding at March 31, 1998 7,771,952 $10.05 4,432,667
========= ===== =========
<PAGE>
The per share weighted-average fair value of stock options granted during fiscal
1998, 1997 and 1996 was $9.91, $8.61 and $4.14, respectively, on the date of
grant using the Black-Scholes option pricing model with the following
weighted-average assumptions: Dividend yield of 0% for 1998, 1997 and 1996;
risk-free interest rate of 6.79% in 1998, 6.71% in 1997 and 6.16% in 1996;
expected option life of 10 years for 1998, 1997 and 1996; and expected
volatility of 38.69% in 1998, 34.85% in 1997 and 28.53% in 1996.
Following is a summary of stock options outstanding as of March 31, 1998:
Options outstanding Options exercisable
------------------------------------ -----------------------
Weighted
average Weighted Weighted
Range of remaining average average
exercise Options contractual exercise Options exercise
prices outstanding life per share exercisable per share
- ------------- --------- ----------- ----- --------- -----
$ 1.38-$ 2.54 1,413,970 6.72 years $ 2.13 1,270,298 $ 2.17
$ 2.56-$ 4.69 1,673,111 5.86 years $ 3.78 1,146,878 $ 3.75
$ 5.38-$ 6.25 1,500,635 5.12 years $ 6.11 891,683 $ 6.04
$ 7.43-$15.70 1,473,862 9.28 years $13.20 779,027 $14.05
$15.75-$24.81 1,440,498 8.68 years $22.22 318,186 $22.27
$25.34-$35.92 269,876 12.82 years $31.00 26,595 $30.96
--------- ----------- ----- --------- -----
7,771,952 7.28 years $10.05 4,432,667 $ 7.06
========= =========== ===== ========= =====
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 earnings 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 would
have been reduced to the following pro forma amounts for the years ended March
31 (dollars in thousands, except per share amounts):
1998 1997 1996
---- ---- ----
Net earnings As reported $35,597 $27,512 $18,223
Pro forma 31,707 26,953 18,041
Basic earnings per share As reported .68 .54 .39
Pro forma .61 .53 .38
Diluted earnings per share As reported .60 .47 .35
Pro forma .53 .46 .35
Pro forma net earnings 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 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
125,151, 110,332 and 190,470 shares purchased under the plans during the years
ended March 31, 1998, 1997 and 1996, respectively.
(7) Income Taxes
Total income tax expense was allocated as follows (dollars in thousands):
1998 1997 1996
---- ---- ----
Income from operations $20,906 $16,526 $11,173
Stockholders' equity, for compensation
expense for tax purposes in excess of
amounts recognized for financial
reporting purposes (1,467) (1,684) (656)
------ ------ ------
$19,439 $14,842 $10,517
====== ====== ======
<PAGE>
Income tax expense attributable to earnings from operations consists of (dollars
in thousands):
1998 1997 1996
---- ---- ----
Current expense:
Federal $ 9,736 $ 9,884 $ 6,720
Foreign 1,206 83 -
State 1,047 783 1,019
------ ------ ------
11,989 10,750 7,739
------ ------ ------
Deferred expense:
Federal 7,169 3,898 2,706
Foreign 23 687 161
State 1,725 1,191 567
------ ------ ------
8,917 5,776 3,434
------ ------ ------
Total tax expense $20,906 $16,526 $11,173
====== ====== ======
The actual income tax expense attributable to earnings from operations differs
from the expected tax expense (computed by applying the U.S. Federal corporate
tax rate of 35% to earnings before income taxes) as follows (dollars in
thousands):
1998 1997 1996
---- ---- ----
Computed expected tax expense $19,776 $15,413 $10,289
Increase (reduction) in income taxes
resulting from:
State income taxes, net of Federal income
tax benefit 1,802 1,283 1,031
Research and experimentation credits (715) (683) (800)
Other 43 513 653
------ ------ ------
$20,906 $16,526 $11,173
====== ====== ======
The tax effects of temporary differences that give rise to significant portions
of the deferred tax assets and liabilities at March 31, 1998 and 1997 are
presented below (dollars in thousands).
1998 1997
---- ----
Deferred tax assets:
Accrued expenses not currently deductible
for tax purposes $ 1,616 $ 1,407
Investments, principally due to differences
in basis for tax and financial reporting
purposes 676 327
Net operating loss carryforwards - 1,208
Other 417 903
Valuation allowance - (1,208)
------ ------
Total deferred tax assets 2,709 2,637
------ ------
Deferred tax liabilities:
Property and equipment, principally due to
differences in depreciation (6,536) (6,390)
Intangible assets, principally due to
differences in amortization (2,029) (482)
Capitalized software and other costs
expensed as incurred for tax purposes (16,231) (10,519)
Installment sale gains for tax purposes (1,843) (259)
------ ------
Total deferred tax liabilities (26,639) (17,650)
------ ------
Net deferred tax liability $(23,930) $(15,013)
====== ======
The valuation allowance for deferred tax assets as of March 31, 1997 was $1.2
million. The net change in the total valuation allowance for the years ended
March 31, 1998 and 1997 was a decrease of $1.2 million and an increase of
$880,000, respectively. In assessing the realizability of deferred tax assets,
management considers whether it is more likely than not that some portion or all
of the deferred tax assets will not be realized. The ultimate realization of
deferred tax assets is dependent upon the generation of future taxable income
during the periods in which those temporary differences become deductible. Based
upon the Company's history of substantial profitability and taxable income and
its utilization of tax planning strategies, management believes it is more
likely than not the Company will realize the benefits of these deductible
differences, net of any valuation allowances. Included in other current assets
are deferred tax assets of $2.0 million and $2.3 million at March 31, 1998 and
1997, respectively.
<PAGE>
(8) 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, 1998 and 1997, respectively, and $371,000 during the year
ended March 31, 1996. Under the terms of the lease in effect at March 31, 1998
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
$5.4 million at March 31, 1998) 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.
(9) Retirement Plans
The Company has a retirement savings plan which covers substantially all
domestic employees. The Company also offers a supplemental non-qualified
deferred compensation plan for certain management employees. The Company matches
50% of the employee's salary deferred contributions under both plans up to 6%
annually and may contribute additional amounts to the plans from the Company's
earnings at the discretion of the Board of Directors. Company contributions
amounted to approximately $1.9 million, $1.5 million and $.8 million in 1998,
1997 and 1996, respectively.
(10) Major Customers
In 1998, 1997 and 1996, the Company had two major customers who accounted for
more than 10% of revenue. Allstate Insurance Company accounted for revenue of
$74.7 million (16.1%), $67.7 million (16.8%), and $55.8 million (20.7%) in 1998,
1997 and 1996, respectively, and Trans Union accounted for revenue of $54.9
million (11.8%), $56.6 million (14.1%) and $42.0 million (15.5%) in 1998, 1997
and 1996, respectively.
(11) Foreign Operations
The following table shows financial information by geographic area for the years
1998, 1997 and 1996 (dollars in thousands).
United United Consolidated
States Kingdom
1998:
Revenue $430,419 $34,646 $465,065
Earnings before income taxes 54,061 2,442 56,503
Net earnings 34,059 1,538 35,597
Total assets 364,854 29,456 394,310
Total tangible assets 318,560 21,748 340,308
Total liabilities 182,667 11,515 194,182
Total equity 182,187 17,941 200,128
======= ====== =======
1997:
Revenue $373,596 $28,420 $402,016
Earnings before income taxes 42,365 1,673 44,038
Net earnings 26,466 1,046 27,512
Total assets 276,832 22,836 299,668
Total tangible assets 246,262 15,109 261,371
Total liabilities 135,039 8,532 143,571
Total equity 141,793 14,304 156,097
======= ====== =======
1996:
Revenue $252,190 $17,712 $269,902
Earnings(loss) before income taxes 29,634 (238) 29,396
Net earnings 18,622 (399) 18,223
Total assets 176,321 17,728 194,049
Total tangible assets 169,971 10,096 180,067
Total liabilities 65,172 6,136 71,308
Total equity 111,149 11,592 122,741
======= ====== =======
(12) 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.
(13) Acquisitions
On August 25, 1995, the Company acquired all of the outstanding capital stock of
DataQuick Information Systems (formerly an "S" Corporation) and DQ Investment
Corporation (collectively, "DataQuick"). The Company exchanged 1,969,678 shares
of its common stock for all of the outstanding shares of capital stock of
DataQuick. Additionally, the Company assumed all of the currently outstanding
options granted under DataQuick's stock option plans, with the result that
1,616,740 shares of the Company's common stock became subject to issuance upon
exercise of such options (see note 6). The acquisition was accounted for as a
pooling-of-interests.
DataQuick, headquartered in San Diego, California, provides real property
information to support a broad range of applications including marketing,
appraisal, real estate, banking, mortgage and insurance. This information is
distributed on-line and via CD-ROM, list services, and microfiche.
<PAGE>
The stockholders' equity and operations of DataQuick 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, 1995, without restating prior
years' financial statements to reflect the pooling-of-interests combination.
DataQuick's net assets as of April 1, 1995 totaled $5.8 million. The statements
of earnings for the years ended March 31, 1998, 1997 and 1996 include the
results of DataQuick for the entire periods presented. Included in the statement
of earnings for 1996 are revenues of $8.0 million and earnings before income
taxes of $79,000 for DataQuick for the period from April 1, 1995 to August 25,
1995.
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 is payable in three years, is partially
collateralized by a letter of credit (see note 4), and may, at DMI's option, be
paid in two million shares of Acxiom common stock in lieu of cash plus accrued
interest. 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 is being amortized over its estimated economic life of 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.
The purchase price for DMI has been allocated as follows (dollars in
thousands):
Trade accounts receivable $ 7,558
Property and equipment 2,010
Software 3,500
Excess of cost over fair value of net assets acquired 25,993
Other assets 840
Short-term note payable to bank (11,594)
Accounts payable and other liabilities (3,020)
Long-term debt (287)
------
$25,000
======
Effective October 1, 1997, the Company acquired 100% ownership of MultiNational
Concepts, Ltd. ("MultiNational") and Catalog Marketing Services, Inc. (d/b/a
Shop the World by Mail), entities under common control (collectively "STW").
Total consideration was $4.6 million (net of cash acquired) and other cash
consideration based on the future performance of STW. MultiNational,
headquartered in Hoboken, New Jersey, is an international mailing list and
database maintenance provider for consumer catalogers interested in developing
foreign markets. Shop the World by Mail, headquartered in Sarasota, Florida,
provides cooperative customer acquisition programs, and also produces an
international catalog of catalogs whereby end-customers in over 60 countries can
order catalogs from around the world.
Also effective October 1, 1997, the Company acquired Buckley Dement, L.P.
and its affiliated company, KM Lists, Incorporated (collectively "Buckley
Dement"). Buckley Dement, headquartered in Skokie, Illinois, provides list
brokerage, list management, promotional mailing and fulfillment, and merchandise
order processing to pharmaceutical, health care, and other commercial customers.
Total consideration was $14.2 million (net of cash acquired) and other cash
consideration based on the future performance of Buckley Dement.
<PAGE>
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, 199ZThe 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 its estimated economic life of 20 years. The
pro forma combined results of operations, assuming the acquisitions occurred at
the beginning of the fiscal year, are not materially different than the
historical results of operations reported.
(14) 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 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 is the gain on disposal related to this transaction of $855,000.
(15) 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, 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, 1998 the estimated fair value of long-term debt approximates its carrying
value.
(16) Selected Quarterly Financial
The table below sets forth selected financial information for each quarter of
the last two years (dollars in thousands, except per share amounts):
1st quarter 2nd quarter 3rd quarter 4th quarter
1998:
Revenue $100,327 $109,966 $120,692 $134,080
Income from operations 9,634 13,508 18,688 17,615
Net earnings 5,313 8,365 11,206 10,713
Basic earnings per share .11 .16 .21 .20
Diluted earnings per share .09 .14 .19 .18
1997:
Revenue $ 93,953 $ 97,547 $104,534 $105,982
Income from operations 8,618 11,754 15,238 13,717
Net earnings 4,245 6,263 8,863 8,141
Basic earnings per share .09 .12 .17 .16
Diluted earnings per share .07 .11 .15 .14
<PAGE>
(This page corresponds with page 40 of the Company's Annual Report.)
Market Information
Per share data is restated to reflect a stock split during fiscal 1997.
Stock Prices
The Company's Common Stock is traded on the national Market System of Nasdaq
under the symbol "ACXM." The following table sets forth for the periods
indicated the high and low closing sale prices of the Common Stock.
Fiscal 1998 High Low
Fourth Quarter $25 3/4 $18 3/4
Third Quarter 19 1/4 14 1/8
Second Quarter 21 1/8 17 1/8
First Quarter 20 5/8 11 1/8
Fiscal 1997 High Low
Fourth Quarter $24 $14 3/8
Third Quarter 25 18 5/8
Second Quarter 20 5/8 15 7/8
First Quarter 17 7/8 11 15/16
During the period beginning April 1, 1998, and ending May 13, 1998, the high
closing sales price per share for the Company's Common Stock as reported by
Nasdaq was $255/8 and the low closing sales price per share was $221/2.
On May 13, 1998, the closing price per share was $243/8.
Shareholders of Record
The approximate number of shareholders of record of the Company's Common Stock
as of May 13, 1998, was 1,617.
Dividends
The Company has never paid cash dividends on its Common Stock. The Company
presently intends to retain earnings to provide funds for its business
operations and for the expansion of its business. Thus, it does not anticipate
paying cash dividends in the foreseeable future.
<PAGE>
EXHIBIT 21
SUBSIDIARIES OF THE COMPANY
U.S. SUBSIDIARIES
Name Incorporated In Doing Business As
Acxiom Asia, Ltd. Arkansas Acxiom Asia, Ltd.
Acxiom CDC, Inc. Arkansas Acxiom CDC, Inc.
Acxiom Children's Center, Inc. Arkansas Acxiom Children's Center,
Inc.
Acxiom/Direct Media, Inc. Arkansas Acxiom/Direct Media, Inc.
Acxiom Great Lakes Data Center,
Inc. Arkansas Acxiom Great Lakes Data
Center, Inc.
Acxiom Leasing Corporation Arkansas Acxiom Leasing Corporation
Acxiom RM-Tools, Inc. Arkansas Acxiom RM-Tools, Inc.
Acxiom RTC, Inc. Delaware Acxiom RTC, Inc.
Acxiom SDC, Inc. Arkansas Buckley Dement, an Acxiom
Company
Acxiom Transportation Services,
Inc. Arkansas ATS; Conway Aviation, Inc.
BSA, Inc. New Jersey MultiNational Concepts,
Ltd;
KM Lists Incorporated
Catalog Marketing Services, Inc. Florida Shop the World by Mail
DQ Investment Corporation* California AccuDat
DataQuick Information Systems California Acxiom/DataQuick Products
Group
Modern Mailers, Inc.* Delaware Acxiom Mailing Services
Pro CD, Inc. Delaware Data By Acxiom
INTERNATIONAL SUBSIDIARIES
Name Incorporated In Doing Business As
Acxiom Limited United Kingdom Acxiom Limited
Generator Datamarketing
Limited United Kingdom Generator Datamarketing
Limited
Marketlead Services, Ltd. United Kingdom N/A
(Agency company of Acxiom
Limited)
Southwark Computer Services,
Ltd. (Agency company of United Kingdom N/A
Acxiom Limited)
Normadress France Normadress
* Inactive
<PAGE>
EXHIBIT 23
The Board of Directors
Acxiom Corporation
We consent to incorporation by reference in the registration statements (No.
33-17115, No. 33-37609, No. 33-37610, No. 33-42351, No. 33-72310, No. 33-72312,
No. 33-63423 and No. 333-03391 on Form S-8) of Acxiom Corporation of our report
dated May 8, 1998, relating to the consolidated balance sheets of Acxiom
Corporation and subsidiaries as of March 31, 1998 and 1997, and the related
consolidated statements of earnings, stockholders' equity and cash flows for
each of the years in the three-year period ended March 31, 1998 which is
incorporated by reference in the March 31, 1998 annual report on Form 10-K of
Acxiom Corporation. We also consent to incorporation by reference in the
above-mentioned registration statements of our report dated May 8, 1998 relating
to the consolidated financial statement schedule, which report appears in the
March 31, 1998 annual report on Form 10-K of Acxiom Corporation.
/s/ KPMG Peat Marwick LLP
Little Rock, Arkansas
June 19, 1998
<PAGE>
EXHIBIT 24
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 the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1998, 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 2, 1998
<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 the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1998, 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: May 20, 1998
<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 the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1998, 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 Dillard II
- ----------------------------------
William T. Dillard II
Date: May 18, 1998
<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 the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1998, 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: May 20, 1998
<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 the Company, to sign the Company's
Annual Report on Form 10-K for the year ended March 31, 1998, 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: May 20, 1998
<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 the Company, to sign the Company's
Annual Report on Form 10-K for the year ended March 31, 1998, 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: May 20, 1998
<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 the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1998, 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 5, 1998
<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 the
Company, to sign the Company's Annual Report on Form 10-K for the year ended
March 31, 1998, 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/ Walter V. Smiley
- ----------------------------------
Walter V. Smiley
Date: May 20, 1998
<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 the Company, to sign the Company's Annual Report on Form
10-K for the year ended March 31, 1998, 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: May 20, 1998
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
(AMENDMENT NO. 1)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission file number 0-13163
ACXIOM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 71-0581897
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 2000, 301 INDUSTRIAL BOULEVARD, CONWAY, ARKANSAS 72033-2000
(Address of principal executive offices (Zip Code)
(501) 336-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value
(Title of Class)
Preferred Stock Purchase Rights
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that
the registrant was required to file such reports), and (2) has been
subject to such filing requirements for the past 90 days. Yes X No___
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be
contained, to the best of registrant's knowledge, in definitive proxy or
information statements incorporated by reference in Part III of this Form
10-K or any amendment to this Form 10-K. [X]
<PAGE>
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of the registrant's
Common Stock, $.10 par value per share, as of June 17, 1998 as reported on
the Nasdaq National Market, was approximately $875,422,220. (For purposes
of determination of the above stated amount only, all directors, officers
and 10% or more shareholders of the registrant are presumed to be
affiliates.)
The number of shares of Common Stock, $.10 par value per share, outstanding
as of June 17, 1998 was 52,479,289.
This Amendment No. 1 amends and supplements the Annual Report for the
fiscal year ended March 31, 1998 on Form 10-K, filed with the Securities
and Exchange Commission (the "Commission") on June 23, 1998 (the "Form
10-K"), of Acxiom Corporation, a Delaware corporation (the "Company").
Capitalized terms used herein shall have the definitions set forth in the
Form 10-K unless otherwise provided herein.
<PAGE>
Part III of the Form 10-K is hereby amended and supplemented by
deleting it in its entirety and replacing it with the following:
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT
CURRENT DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table provides information as of March 31, 1998
with respect to each of the Company's directors, director nominees, and
executive officers.
DIRECTORS AND DIRECTOR NOMINEES
Served as
Officer or
Director of
the Company
Name Age Position since
NOMINEES FOR TERMS EXPIRING AT THE 2001 ANNUAL MEETING OF SHAREHOLDERS
Rodger S. Kline...... 55 Director, Operations Leader 1975
Robert A. Pritzker... 71 Director 1994
James T. Womble...... 55 Director, Division Leader 1975
TERMS EXPIRING AT THE 2000 ANNUAL MEETING OF SHAREHOLDERS
Dr. Ann H. Die....... 53 Director 1993
Charles D. Morgan.... 55 Chairman of the Board and Company 1975
Leader
TERMS EXPIRING AT THE 1999 ANNUAL MEETING OF SHAREHOLDERS
William T. Dillard II 53 Director 1988
Harry C. Gambill..... 52 Director 1993
Walter V. Smiley .... 60 Director 1983
OTHER EXECUTIVE OFFICERS
C. Alex Dietz........ 55 Division Leader 1979
Paul L. Zaffaroni.... 51 Division Leader 1990
Jerry C. D. Ellis.... 48 Division Leader 1991
Robert S. Bloom...... 42 Financial Leader 1992
<PAGE>
Rodger S. Kline, 55, joined the Company in 1973. He has been a
director since 1975, and serves as the Company's Treasurer and Chief
Operating Officer (Operations Leader). Prior to joining the Company, Mr.
Kline was employed by IBM Corporation. Mr. Kline holds an electrical
engineering degree from the University of Arkansas.
Robert A. Pritzker, 71, was appointed to fill a newly created
position on the Board of Directors in 1994 and was elected as a director in
1996. Since before 1992, Mr. Pritzker has been a director and the Chairman
of Trans Union Corporation, a company engaged in the business of providing
consumer credit reporting services ("TransUnion"), a director and the
President of each of Union Tank Car Company, a company principally engaged
in the leasing of railway tank cars and 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. See "Security Ownership of
Certain Beneficial Owners and Management" and "Certain Transactions."
James T. Womble, 55, joined the Company in 1974. He has been a
director since 1975, and serves as one of the Company's four division
leaders. Prior to joining the Company, Mr. Womble was employed by IBM
Corporation. Mr. Womble holds a degree in civil engineering from the
University of Arkansas.
Dr. Ann H. Die, 53, 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 Pritzker Foundation for Independent Higher Education, and
the American Council on Education. 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.
Charles D. Morgan, 55, joined the Company in 1972. He has been
Chairman of the Board of Directors since 1975, and serves as Company
Leader. He was employed by IBM Corporation prior to joining the Company.
Mr. Morgan is also a director of Fairfield Communities, Inc. Mr. Morgan
holds a mechanical engineering degree from the University of Arkansas.
William T. Dillard II, 53, was elected as a director in 1988.
He has served since 1968 as a member of the Board of Directors and since
1977 as President and Chief Operating Officer of Dillard's, Inc. of Little
Rock, Arkansas, a regional chain of traditional department stores with 270
retail outlets in 27 states 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 Simon Debartolo Group, 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.
Harry C. Gambill, 52, was appointed to fill a vacancy on the
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 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 Transaction, and assumed the added title of President of TransMark in
1991. 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. See "Security
Ownership of "Certain Owners and Management" and Certain Transactions."
<PAGE>
Walter V. Smiley, 60, was elected as a director in 1983. He
served from 1968 until 1989 as Chairman of the Board of Directors and from
1968 until 1985 as Chief Executive Officer of Systematics, Inc., the
predecessor of ALLTEL Information Services, Inc., an Arkansas based company
which provides data processing services to financial institutions
throughout the United States and abroad. Mr. Smiley currently owns and is
President of Smiley Investment Corporation, a consulting and venture
capital firm. Mr. Smiley is also a director of Southern Development Banc
Corp. and Computer Language Research. He holds a master's degree in
business administration and a bachelor's degree in industrial management
from the University of Arkansas. Mr. Smiley resigned as a Director of the
Company effective as of June 1, 1998; Mr. Smiley has not yet been replaced.
C. Alex Dietz, 55, joined the Company 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 the Company in 1979, Mr. Dietz served as senior level officer of
the Company and is presently one of the Company's four division leaders.
Mr. Dietz holds a degree in electrical engineering from Tulane University.
Paul L. Zaffaroni, 51, joined the Company in 1990. He serves as
one of the Company's four division leaders. Prior to joining the Company,
he was employed by IBM Corporation for 21 years, most recently serving as
regional sales manager. Mr. Zaffaroni holds a degree in marketing from
Youngstown State University.
Jerry C. D. Ellis, 48, joined the Company in 1991 as managing
director of the Company's U.K. operations. He serves as one of the
Company's four division leaders. Prior to 1991, Mr. Ellis was employed for
22 years with IBM Corporation, 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.
Robert S. Bloom, 42, joined the Company in 1992 as chief
financial officer. Prior to joining the Company, he was employed for six
years with Wilson Sporting Goods Co. as chief financial officer of its
international division. Prior to his employment with Wilson, Mr. Bloom was
employed by Arthur Andersen & Co. for nine years, serving most recently as
manager. Mr. Bloom, a Certified Public Accountant, holds a degree in
accounting from the University of Illinois.
<PAGE>
BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Board of Directors holds quarterly meetings to review
significant developments affecting the Company and to act on matters
requiring approval of the Board of Directors. The Board of Directors
currently has three standing committees to assist it in the discharge of
its responsibilities: an Audit Committee, a Compensation Committee and an
Executive Committee. The Audit Committee, composed of outside directors Dr.
Ann H. Die, William T. Dillard II, Harry C. Gambill, Robert A. Pritzker and
Walter V. Smiley, reviews the reports of the auditors and has the authority
to investigate the financial and business affairs of the Company. Messrs.
Dillard and Smiley also serve on the Compensation Committee, which
administers certain of the Company's employee benefit plans and approves
the compensation paid to the Company's senior leaders. The Executive
Committee is responsible for implementing the policy decisions of the
Board. Current members of the Executive Committee are Messrs. Kline, Morgan
and Womble.
During the past fiscal year, the Board of Directors met four
times, the Audit Committee met one time and the Compensation Committee met
two times. Action pursuant to unanimous written consent in lieu of a
meeting was taken one time by the Board of Directors, two times by the
Compensation Committee and eleven times by the Executive Committee. All of
the incumbent directors attended at least three-fourths of the aggregate
number of meetings of the Board and of the committees on which they served
during the past fiscal year except for Mr. Gambill.
Walter V. Smiley, who served on the Audit Committee and the
Compensation Committee for the fiscal year ended March 31, 1998 resigned as
a director of the Company effective as of June 1, 1998, Mr. Smiley has not
yet been replaced.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Securities Exchange Act of 1934, as
amended, requires the Company's executive officers, directors, and persons
who own more than ten percent (10%) of a registered class of the Company's
equity securities to file reports of ownership and changes in ownership
with the Commission and the National Association of Securities Dealers,
Inc. Such persons are required by Commission rules and regulations to
furnish the Company with copies of all Section 16(a) forms they file.
Additionally, Commission rules and regulations require that the
Company identify any individuals for whom one of the referenced reports was
not filed on a timely basis during the most recent fiscal year or prior
fiscal years. To the Company's knowledge, based solely on its review of the
copies of such forms received by it, or written representations from
certain reporting persons that no other forms were required for those
persons during and with respect to the fiscal year ended March 31, 1998,
the Company believes that during the past fiscal year, all filing
requirements applicable to its officers, directors, and greater than ten
percent (10%) beneficial owners were met.
<PAGE>
ITEM 11. EXECUTIVE COMPENSATION
Cash and Other Compensation. The following table sets forth,
for the fiscal years indicated, the cash and other compensation provided by
the Company and its subsidiaries to the Company Leader and each of the four
most highly compensated members of the Company's leadership team (the
"named individuals") in all capacities in which they served.
SUMMARY COMPENSATION TABLE
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
Name and Other Annual All Other
Principal Salary Compensation Options/ Compensation
Position Year ($) ($)(1) SARs(#) ($)(2)
Charles D. Morgan, 1998 375,000 267,857 0 14,813
Chairman of the 1997 325,000 63,476 33,545 8,239
Board and Company 1996 304,167 84,021 101,163 7,327
Leader
Rodger S. Kline 1998 250,000 178,571 0 9,869
Operations Leader 1997 213,000 41,601 21,985 2,817
1996 196,833 54,221 66,301 4,801
James T. Womble 1998 202,000 126,250 0 7,829
Division Leader 1997 183,500 35,340 18,900 5,329
1996 172,833 47,808 57,118 4,698
Paul L. Zaffaroni 1998 193,000 120,625 0 7,564
Division Leader 1997 172,300 33,652 17,784 2,563
1996 161,633 36,772 53,632 3,822
C. Alex Dietz 1998 191,000 119,375 0 7,328
Division Leader 1997 168,300 32,871 17,371 4,986
1996 158,467 43,831 52,387 4,562
- - --------------------------
(1) This amount represents the named individuals' at-risk pay for
each fiscal year. See discussion of At-Risk Base Pay below under
"Report of Compensation Committee."
(2) This amount represents the Company's contribution on behalf of
each named executive officer to the Company's 401(k) and SERP Plans.
<PAGE>
Stock Option Exercises and Holdings. The following table sets
forth information concerning stock options exercised during the last fiscal
year and stock options held as of the end of the last fiscal year by the
named individuals.
<TABLE>
<CAPTION>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
NUMBER OF SECURITIES
UNDERLYING VALUE OF
UNEXERCISED UNEXERCISED IN-THE-
OPTIONS/SARS AT MONEY OPTIONS/SARS
FY-END AT FY-END
-------------------- --------------------
Shares
Acquired
on Value
Name Exercise Realized EXERCISABLE UNEXERCISABE EXERCISABLE UNEXERCISABLE
(#) ($) (#) ($)
- ------------------ --------- ------- ----------- ------------ ----------- -------------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Morgan 0 0 297,654 310,929 4,994,892 3,803,473
RODGER S. KLINE 0 0 231,349 205,510 4,137,276 2,528,097
James T. Womble 0 0 174,215 181,633 2,946,118 2,271,617
Paul L. Zaffaroni 5,000 76,250 295,597 179,539 5,882,284 2,353,187
C. Alex Dietz 0 0 227,643 172,626 4,326,648 2,242,842
</TABLE>
Compensation of Directors. In January 1998, each outside
director received 1,000 shares of unregistered common stock, $.10 par
value, of the Company ("Common Stock") as an annual retainer fee. In
addition, each outside director receives a $1,500 fee for each meeting he
or she attends. Inside directors do not receive any additional compensation
for their service as directors.
Compensation Committee Interlocks and Insider Participation. The
members of the Compensation Committee are William T. Dillard II and Walter
V. Smiley. No compensation committee interlocks exist with respect to the
Board of Directors' Compensation Committee, nor do any present or past
officers of the Company serve on the Compensation Committee. Walter V.
Smiley, who served on the Compensation Committee for the fiscal year ended
March 31, 1998 resigned as a director of the Company effective as of June
1, 1998, Mr. Smiley has not yet been replaced.
<PAGE>
Report of Compensation Committee. Decisions on compensation of
the Company's leadership are made by the Compensation Committee of the
Board of Directors. The members of the Compensation Committee are
non-employee and outside directors pursuant to Commission rules and
applicable Treasury regulations. Set forth below is a report submitted by
William T. Dillard II and Walter V. Smiley, in their capacity as the Board
of Directors' Compensation Committee, addressing the compensation policies
for the Company's leadership team, for the individuals named in the tables
above, and for Mr. Morgan.
Compensation Policies. Compensation for the Company's
leadership is based upon beliefs and guiding principles designed to align
leadership compensation with business strategy, the Company's values and
management initiatives. The plan is designed to:
o Align the leaders' interests with the shareholders' and investors'
interests.
o Motivate the leaders to achieve the highest level of performance.
o Retain key leaders by linking executive compensation to the Company's
performance.
o Attract the best candidates through competitive, growth-oriented
plans.
The resulting compensation strategy is targeted to provide an
overall level of compensation opportunity that is competitive within the
markets in which the Company competes, as well as within a broader group of
companies of comparable size and complexity. Actual compensation levels may
eventually be greater than or less than the average competitive market
levels, based upon the achievement of the Company, as well as upon
individual performance. The Compensation Committee uses its discretion to
set the parameters of the leadership compensation plan when, in its
judgment, external, internal and/or individual circumstances warrant it.
Increased orientation of leadership compensation policies toward long-term
performance has been accompanied by increased utilization of objective
performance criteria. See "Executive Compensation--Report of Compensation
Committee--Components of Compensation."
The Compensation Committee also endorses the position that
stock ownership by management and stock-based performance compensation
arrangements are beneficial in aligning management's and shareholders'
interests and the enhancement of shareholder value. Thus, the Compensation
Committee has also increasingly utilized these elements in the Company's
compensation program for its leadership team.
<PAGE>
Components of Compensation. Compensation paid to the Company's
leaders in fiscal 1998, the separate elements of which are discussed below,
consisted of the following: not-at-risk base pay, at-risk base pay, and
long-term incentive ("LTI") compensation granted under the Company's stock
option plans. The Compensation Committee's increasing emphasis on tying pay
to long-term performance criteria is reflected in a recent change to the
Company's leadership compensation plan effective for fiscal 1998. The plan
contains five possible compensation levels with overlapping ranges for base
salaries, which provides flexibility in establishing appropriate
compensation packages for the Company's leadership. The plan provides for
increasingly large percentages of total compensation being weighted towards
at-risk pay and, to an even greater degree, toward LTI compensation. The
higher the compensation level, the greater the overall percentage of
at-risk and LTI. Under the plan, the compensation for the Company's senior
leaders, who participate in the top two levels of the plan, is as follows:
not-at-risk base pay (35-40%); at-risk base pay (25%); and LTI compensation
(35-40%). Under the previous plan, the maximum percentage of total compensation
assignable to LTI was 35%.
(i) Not-At-Risk Base Pay. Base pay levels are largely determined
through market comparisons. Actual salaries are based on individual
performance contributions within a salary range that has been
established through job evaluation and the use of market surveys for
comparable companies and positions. Base salaries for the Company's
senior leadership were targeted in fiscal 1998 to represent 35-40% of
total compensation, which includes the annual at-risk base pay and
LTI compensation. For other corporate, group and business unit level
leaders, base salaries were targeted at 40-70% of total compensation.
(ii) At-Risk Base Pay. The at-risk base pay for all of the
Company's leaders is funded after the Company achieves its earnings
per share target. Attainment of targeted at-risk base pay is largely
determined by using the EVA(R) (Economic Value Added) model. (EVA is
a registered trademark of Stern Stewart & Co.) In fiscal 1998,
at-risk base pay was targeted to represent 25% of total compensation
for the senior leadership team and 15-25% for other corporate, group
and business unit leaders. For fiscal 1998, the Company's diluted
earnings per share goal was $.59 per share, which was exceeded by
$.01.
<PAGE>
(iii) Long-Term Incentive Compensation. The Committee's LTI
compensation plan is composed of awards of stock options designed to
align long-term interests between the Company's leadership team and
its shareholders and to assist in the retention of key people. During
fiscal 1998, the long-term incentives were targeted to represent
35-40% of total compensation for senior leadership and 15-35% for
other corporate, group and business unit leaders. Previously, in
1996, senior leadership members were awarded the equivalent of three
years' worth of non-statutory stock options to induce them to adopt
the long-term view of shareholders. One-fourth of the options awarded
were priced at the then current market value, one-fourth were priced
at a 50% premium over the then current market value, and the
remaining one-half were priced at a 100% premium over the then
current market value. The full value of the options cannot be
realized until the price of Common Stock more than doubles from the
fair market value on the date of grant. Senior leadership members
will not be eligible for new grants of LTI options until 1999. The
1996 stock options vest incrementally over a nine-year period.
The terms of all non-statutory LTI options granted on or after
January 29, 1997 are 15 years (instead of ten, which was the standard
term for both incentive and non-statutory options prior to January
29, 1997), and the exercise prices for all options granted on or
after January 29, 1997 are: one-half at the fair market value on the
date of grant, one-fourth at a 50% premium over market, and
one-fourth at a 100% premium over market. Options will continue to
vest incrementally over nine years from the date of grant.
(iv) Supplemental Executive Retirement Plan. All members of the
Company's leadership team are eligible to participate in the
Supplemental Executive Retirement Plan ("SERP"), which was adopted in
fiscal 1996, by contributing up to 15% of their pretax income into
the plan. The Company matches at a rate of $.50 on the dollar up to
the first 6% of the leadership team members' combined contributions
under both the SERP and the Company's 401K Retirement Plan. The
Company's match is paid in Common Stock. On May 20, 1998, the Board
of Directors approved an amendment to the SERP which will allow
participants to contribute up to 100% of their pretax income into the
plan.
(v) Other Compensation Plans. The Company maintains certain
broad-based employee benefit plans in which leadership team members
are permitted to participate on the same terms as non-leadership team
associates who meet applicable eligibility criteria, subject to any
legal limitations on the amounts that may be contributed or the
benefits that may be payable under the plans.
<PAGE>
Mr. Morgan's Compensation. In fiscal 1998, the Company's
revenue and earnings increased 16% and 29% respectively, a record year in
both revenue and earnings for the Company. Additionally, the return on
shareholders' equity for fiscal 1998 was 20.4%, in line with the Company's
goal of achieving a 20% return. The Company's stock price increased 78%
over the prior year, compared to a 52% increase in the NASDAQ National
Market - U.S. Index and a 75% increase in the NASDAQ Stock Market -
Computer and Data Processing Index over the same period. In the prior year,
the Company's revenue and earnings increased 49% and 51% respectively,
return on shareholders' equity increased from 16.5% to 20.3%, and the stock
price rose 20%, compared to an 11% increase in the NASDAQ National Market -
U.S. Index and a 10% increase in the NASDAQ National Market - Computer and
Data Processing Index over the same period.
Because of the Company's performance and Mr. Morgan's
performance in fiscal 1997, Mr. Morgan's fiscal 1998 base pay was increased
by 15% over fiscal 1997. His base pay for fiscal 1999 was increased 29%
over fiscal 1998. This increase was due in part to the success of the
Company in fiscal 1998, and in part as the first of four proposed annual
increases designed to make the salaries of Mr. Morgan (and other Company
leaders) competitive with comparable market compensation (i.e., within the
75th percentile of competitive companies) by the end of the four-year
adjustment period.
In fiscal 1998, the Company's earnings per share results and
the Company's EVA attained were the primary criteria for determining the
at-risk base pay earned by Mr. Morgan. All of Mr. Morgan's at-risk payments
were made in cash. See "Executive Compensation--Cash and Other
Compensation" for discussion of Other Annual Compensation for Mr. Morgan.
In 1996, Mr. Morgan received non-statutory stock options under
the Company's LTI plan described above which consisted of a three-year
grant of non-statutory stock options, with exercise prices as follows:
one-fourth at the then current market price, one-fourth at a 50% premium
over market, and the remaining one-half at a 100% premium over market. The
purpose of the 1996 grant was to further encourage Mr. Morgan's long-term
performance while aligning his interests with those of the Company's other
shareholders with regard to the performance of Common Stock. Mr. Morgan
will not be eligible for another LTI grant until 1999.
Omnibus Budget Reconciliation Act of 1993. The Omnibus Budget
Reconciliation Act of 1993 ("OBRA") generally prevents public corporations
from deducting as a business expense that portion of the compensation paid
to the named individuals in the above Summary Compensation Table that
exceeds $1,000,000. However, this deduction limit does not apply to
"performance-based compensation" paid pursuant to plans approved by
shareholders. The Board of Directors has modified its compensation plans so
as to comply with OBRA and thereby retain the deductibility of executive
compensation, and it is the Company's intention to continue to monitor its
compensation plans to comply with OBRA in the future.
<PAGE>
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT
The following table sets forth certain information as to the
shares of Common Stock beneficially owned as of May 11, 1998, by (a) each
person who, as far as the Company has been able to ascertain, beneficially
owned more than five percent of the Common Stock, (b) each director, (c)
each of the five most highly compensated executive officers of the Company,
and (d) all directors and executive officers of the Company as a group.
NUMBER OF
SHARES OF PERCENT OF
COMMON STOCK COMMON STOCK
NAME OF BENEFICIAL OWNER OR IDENTITY OWNED OUTSTANDING
OF GROUP BENEFICIALLY
- -------------------------------------------- ---------------- --------------
William Blair & Company................... 5,310,950(1) 10.1%
222 West Adams Street
Chicago, IL 60606
Charles D. Morgan......................... 4,112,419(2) 7.8%
P.O. Box 2000
Conway, AR 72033-2000
Trans Union Corporation................... 4,002,000(3) 7.6%
555 West Adams Street
Chicago, IL 60661
The Pritzker Foundation................... 3,921,000(4) 7.5%
200 W. Madison Street
Suite 3800
Chicago, IL 60606
Brown Capital Management, Inc............. 3,800,000(5) 7.2%
809 Cathedral Street
Baltimore, MD 21201
T. Rowe Price Associates, Inc............. 3,644,220(1) 6.9%
P.O. Box 89000
Baltimore, MD 21289
Dr. Ann H. Die............................ 10,655 *
C. Alex Dietz............................. 434,488(6) *
William T. Dillard II..................... 19,000 *
Harry C. Gambill.......................... 0(7) *
Rodger S. Kline........................... 1,870,598(8) 3.6%
Robert A Pritzker......................... 3,000(9) *
Walter V. Smiley.......................... 124,000 *
James T. Womble........................... 1,544,877(10) 2.9%
Paul Zaffaroni............................ 308,466(11) *
All directors, nominees and executive
officers, 8,583,086(12) 16.4%
as a group (12 persons)................
* Denotes less than 1%.
<PAGE>
(1) Based on information contained in a Form 13G filed with the
Commission on February 17, 1994.
(2) Includes 297,654 shares subject to currently exercisable options, of
which 270,246 are in the money.
(3) Includes 4,000,000 shares of Common Stock subject to warrant (the
"Warrant") held by Trans Union and 2,000 shares of Common Stock
transferred to Trans Union by Harry C. Gambill, Chief Executive
Officer and President of Trans Union. Under the terms of the
Warrant, Trans Union has the right to purchase up to 4,000,000
shares of Common Stock, at exercise prices ranging from $2.8125 to
$3.5625 per share; however, the total number of actual shares of
Common Stock acquired by Trans Union (excluding the shares of Common
Stock acquired from Mr. Gambill and shares of Common Stock acquired
by Trans Union on the open market) may not exceed 10% of the
Company's then issued and outstanding Common Stock. Including the
shares of Common Stock which may presently be acquired by Trans
Union under the Warrant, but excluding the shares of Common Stock
transferred to Trans Union from Mr. Gambill, Trans Union
beneficially owns approximately 4,000,000 shares of Common Stock,
which would be 7.6% of the Company's then issued and outstanding
Common Stock following issuance of the Warrant shares. See "Certain
Transactions."
(4) Includes 1,921,000 shares of Common Stock acquired by the Pritzker
Foundation, an Illinois not for profit corporation, from Trans
Union, and 2,000,000 shares of Common Stock acquired by the Pritzker
Foundation from Marmon Industrial Corporation, the owner of all of
Trans Union's common stock. Each of the acquisitions was made by the
Pritzker Foundation on May 30, 1997.
(5) Based on information provided by a representative of Brown Capital
Management, Inc.
(6) Includes 1,990 shares of Common Stock held by Mr. Dietz's wife and
257,123 shares of Common Stock subject to currently exercisable
options (29,480 of which are held by Mrs. Dietz), of which 241,847
are in the money.
(7) See footnote (3) above regarding shares of the Common Stock
beneficially owned by Trans Union. Mr. Gambill, who is an officer
and director of Trans Union, disclaims beneficial ownership of such
shares of Common Stock.
<PAGE>
(8) Includes 231,349 shares subject to currently exercisable options, of
which 213,386 are in the money.
(9) See footnote (3) above regarding shares of Common Stock beneficially
owned by Trans Union. Mr. Pritzker, who is an officer and director
of Trans Union, disclaims beneficial ownership of such shares of
Common Stock. The 3,000 shares of Common Stock were issued to Mr.
Pritzker as an annual retainer for serving on the Board of
Directors. See "Executive Compensation--Compensation of Directors."
Of these, 1,000 shares of Common Stock are owned by Mr. Pritzker's
wife; however, Mr. Pritzker is deemed to beneficially own such shares
of Common Stock.
(10) Includes 174,215 shares of Common Stock subject to currently
exercisable options, of which 158,740 are in the money.
(11) Includes 295,597 shares of Common Stock subject to currently
exercisable options, of which 281,067 are in the money.
(12) Includes 1,393,409 shares of Common Stock subject to currently
exercisable options, of which 1,291,795 are in the money.
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
On January 5, 1996, the Company leased an aircraft from MorAir,
Inc., a corporation controlled by Charles D. Morgan, the Company's Chairman
and Company Leader, for $66,385 per month, plus maintenance and insurance.
The term of this aircraft lease expires January 4, 2001. The terms of the
lease have been found by the Board of Directors to be as good or better
than those which could have been obtained from an unrelated third party.
In March 1998, the Company began using the temporary staffing
services of the national staffing firm, Norrell Staffing Services, Inc.
("Norrell"), for its strategic staffing and contingency workforce needs.
Susie P. Morgan, wife of Charles D. Morgan, Chairman of the Board and
Company Leader of the Company, owns the Little Rock, Arkansas franchise
(the "Franchise") of Norrell. It is anticipated that the total annual fees
to be received by the Franchise from Norrell, based on payments to be made
by the Company to Norrell, will be approximately $150,000. The majority of
such fees will be used to offset the expenses of the Franchise.
<PAGE>
In accordance with the Data Center Management Agreement dated
July 27, 1992 (the "DCM Agreement") between the Company and Trans Union,
which became effective on August 31, 1992, the Company (through its
subsidiary, Acxiom CDC, Inc.) acquired all of Trans Union's interest in its
Chicago data center and agreed to provide Trans Union with various data
center management services. The term of the DCM Agreement, as amended,
expires in 2005.
In connection with the DCM Agreement, on August 31, 1992, the
Company issued 1,920,000 shares of Common Stock to Trans Union (the
"Initial Shares of Common Stock"), subject to certain "put" and "call"
provisions. Pursuant to a subsequent amendment, Trans Union relinquished
its right to cause the Company to repurchase the Initial Shares of Common
Stock, and the Company relinquished its right to call the shares of Common
Stock. On August 31, 1992, the Company also issued a warrant (the "Warrant")
to Trans Union to purchase up to 4,000,000 additional shares of Common
Stock prior to August 31, 2000, at exercise prices ranging from $2.9125 per
share to $3.5625 per share. In addition, effective October 26, 1994, the
Company and Trans Union's parent company, Marmon Industrial Corporation
("MIC"), entered into a stock purchase agreement pursuant to which the
Company agreed to sell, and MIC agreed to buy, 2,000,000 shares of Common
Stock from the Company (the "Additional Shares of Common Stock") for $5.98
per share. The purchase price of the Additional Shares of Common Stock was
established on August 31, 1994 pursuant to a letter agreement between the
Company and Trans Union. On May 30, 1997, Trans Union transferred the
Initial Shares of Common Stock (together with an additional 1,000 shares of
Common Stock it had previously acquired from Mr. Gambill) to the Pritzker
Foundation, an Illinois not for profit corporation. Also on that date, MIC
transferred the Additional Shares of Common Stock to the Pritzker
Foundation. As a result of such transfers, the Pritzker Foundation owns an
aggregate of 3,921,000 shares of Common Stock, or approximately 7.5% of the
Company's issued and outstanding shares of Common Stock.
Upon acquisition of the 4,000,000 shares of Common Stock which
could currently be purchased under the Warrant, Trans Union would
beneficially own approximately 7.6% of the Company's issued and outstanding
shares of Common Stock. The amount of stock which may be purchased by Trans
Union under the Warrant is limited so that the total shares of Common Stock
acquired under the Warrant and the DCM Agreement may not exceed 10% of the
Company's then issued and outstanding Common Stock. Based upon the number
of shares of Common Stock currently issued and outstanding, Trans Union
would be able to purchase approximately 3,700,000 shares of Common Stock
under the Warrant. Trans Union retains the right, however, to acquire
additional shares of Common Stock on the open market, which do not count
<PAGE>
towards the 10% limit under the Warrant. In addition, pursuant to the DCM
Agreement, Trans Union has preemptive rights whereby it may, under certain
circumstances, purchase shares of Common Stock in the event the Company
issues additional shares of Common Stock. Such preemptive rights provide
Trans Union with the ability to maintain its percentage ownership of Common
Stock acquired pursuant to the DCM Agreement. Trans Union does not have any
preemptive rights with respect to the issuance by the Company of shares of
Common Stock pursuant to the May & Speh merger.
Pursuant to a letter agreement dated July 27, 1992, which was
executed in connection with the DCM Agreement, the Company agreed to use
its best efforts to cause one person designated by Trans Union to be
elected to the Board of Directors. Trans Union designated its CEO and
President, Harry C. Gambill, who was appointed to fill a vacancy on the
Board in November 1992 and was elected at the 1993 Annual Meeting of
Shareholders to serve a three-year term. He was elected to serve a second
three-year term at the 1996 Annual Meeting. Pursuant to a second letter
agreement dated August 31, 1994, which was executed in connection with an
amendment to the DCM Agreement, which continued the term through 2002, the
Company agreed to amend the letter agreement dated July 27, 1992 and use
its best efforts to cause two persons designated by Trans Union to be
elected to the Board of Directors. In addition to Mr. Gambill, Trans Union
designated Robert A. Pritzker, an executive officer of MIC, who was
appointed to fill a newly created position on the Board of Directors on
October 26, 1994. Mr. Pritzker was elected to serve a three-year term at
the 1995 Annual Meeting of Shareholders and has been nominated for
re-election to the Board of Directors at the 1998 Annual Meeting of
Shareholders. These undertakings by the Company are in effect until the
later of the tenth anniversary of August 31, 1992 or the termination of the
DCM Agreement, the term of which has been extended to 2005.
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
ACXIOM CORPORATION
Date: July 29, 1998 By: /s/ Catherine L. Hughes
--------------------------
Catherine L. Hughes
Secretary
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and as of the dates indicated.
Signature Title Date
/s/ Robert S. Bloom* Chief Financial Officer July 29, 1998
- ---------------------------- (Principal accounting officer)
Robert S. Bloom
/s/ Dr. Ann H. Die* Director July 29, 1998
- ----------------------------
Dr. Ann H. Die
/s/ William T. Dillard II* Director July 29, 1998
- ----------------------------
William T. Dillard II
/s/ Harry C. Gambill* Director July 29, 1998
- ----------------------------
Harry C. Gambill
/s/ Rodger S. Kline* Chief Operating Officer, July 29, 1998
- ---------------------------- Treasurer and Director
Rodger S. Kline (Principal financial officer)
/s/ Charles D. Morgan* Chairman of the Board an July 29, 1998
- ---------------------------- President (Company Leader)
Charles D. Morgan (Principal executive officer)
/s/ Robert A. Pritzker* Director July 29, 1998
- ----------------------------
Robert A. Pritzker
/s/ Walter V. Smiley* Director July 29, 1998
- ----------------------------
Walter V. Smiley
/s/ James T. Womble* Division Leader and Director July 29, 1998
- ----------------------------
James T. Womble
*By: /s/ Catherine L. Hughes
----------------------------
Catherine L. Hughes
Attorney-in-Fact
<PAGE>
UNITED STATES
SECURITIES AND EXCHANGE COMMISSION
Washington, D. C. 20549
FORM 10-K/A
(AMENDMENT NO. 2)
(Mark One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the fiscal year ended March 31, 1998
OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from __________ to __________.
Commission file number 0-13163
ACXIOM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 71-0581897
(State or other jurisdiction of (I.R.S. Employer
incorporation or organization) Identification No.)
P.O. BOX 2000, 301 INDUSTRIAL BOULEVARD, CONWAY, ARKANSAS 72033-2000
(Address of principal executive offices) (Zip Code)
(501) 336-1000
(Registrant's telephone number, including area code)
Securities registered pursuant to Section 12(b) of the Act: None
Securities registered pursuant to Section 12(g) of the Act:
Common Stock, $.10 Par Value
(Title of Class)
Preferred Stock Purchase Rights
(Title of Class)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act
of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to
such filing requirements for the past 90 days. Yes X No _____
<PAGE>
Indicate by check mark if disclosure of delinquent filers pursuant to Item
405 of Regulation S-K is not contained herein, and will not be contained,
to the best of registrant's knowledge, in definitive proxy or information
statements incorporated by reference in Part III of this Form 10-K or any
amendment to this Form 10-K. [X]
The aggregate market value of the voting stock held by non-affiliates of
the registrant, based upon the closing sale price of the registrant's
Common Stock, $.10 par value per share, as of June 17, 1998 as reported on
the Nasdaq National Market, was approximately $875,422,220. (For purposes
of determination of the above stated amount only, all directors, officers
and 10% or more shareholders of the registrant are presumed to be
affiliates.)
The number of shares of Common Stock, $.10 par value per share, outstanding
as of June 17, 1998 was 52,479,289.
This Amendment No. 2 amends and supplements the Annual Report for the
fiscal year ended March 31, 1998 on Form 10-K, filed with the Securities
and Exchange Commission (the "Commission") on June 23, 1998 of Acxiom
Corporation, a Delaware corporation (the "Company"), as amended by
Amendment No. 1 thereto, filed with the Commission on July 29, 1998 (the
"Form 10-K").
The Form 10-K is hereby amended and supplemented by replacing the
Independent Auditors' Report attached thereto with the following, which has
been marked to show changes:
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Board of Directors
Acxiom Corporation
Under date of May 8, 1998, we reported on the consolidated balance sheets
of Acxiom Corporation and subsidiaries as of March 31, 1998 and 1997, and
the related consolidated statements of earnings, stockholders' equity and
cash flows for each of the years in the three-year period ended March 31,
1998, which are included in the 1998 annual report to shareholders. These
consolidated financial statements and our report thereon are incorporated
by reference in the annual report on Form 10-K for the year ended March 31,
1998. In connection with our audits of the aforementioned consolidated
financial statements, we also audited the related financial statement
schedule of valuation and qualifying accounts. This financial statement
schedule is the responsibility of the Company's management. Our
responsibility is to express an opinion on this financial statement
schedule based on our audits.
In our opinion, such financial statement schedule, when considered in
relation to the basic consolidated financial statements taken as a whole,
presents fairly, in all material respects, the information set forth
therein.
/s/ KPMG Peat Marwick LLP
Little Rock, Arkansas
May 8, 1998
<PAGE>
SIGNATURES
Pursuant to the requirements of Section 13 or 15(d) of the
Securities Exchange Act of 1934, the registrant has duly caused this report
to be signed on its behalf by the undersigned, thereunto duly authorized.
ACXIOM CORPORATION
Date: August 4, 1998 By: /s/ Catherine L. Hughes
------------------------------
Catherine L. Hughes
Secretary
Pursuant to the requirements of the Securities Exchange Act of
1934, this report has been signed below by the following persons on behalf
of the registrant and in the capacities and as of the dates indicated.
Signature Title Date
/s/ Robert S. Bloom* Chief Financial Officer August 4, 1998
--------------------- (Principal accounting
Robert S. Bloom officer)
/s/ Dr. Ann H. Die* Director August 4, 1998
---------------------
Dr. Ann H. Die
/s/ William T. Dillard II* Director August 4, 1998
---------------------
William T. Dillard II
/s/ Harry C. Gambill* Director August 4, 1998
---------------------
Harry C. Gambill
/s/ Rodger S. Kline* Chief Operating Officer, August 4, 1998
--------------------- Treasurer and Director
Rodger S. Kline (Principal financial
officer)
/s/ Charles D. Morgan* Chairman of the Board and August 4, 1998
--------------------- President (Company Leader)
Charles D. Morgan (Principal executive
officer)
/s/ Robert A. Pritzker* Director August 4, 1998
---------------------
Robert A. Pritzker
/s/ Walter V. Smiley* Director August 4, 1998
---------------------
Walter V. Smiley
/s/ James T. Womble* Division Leader and August 4, 1998
--------------------- Director
James T. Womble
*By: /s/ Catherine L. Hughes
-----------------------
Catherine L. Hughes
Attorney-in-Fact
<PAGE>
Annex D
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the quarterly period ended June 30, 1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ----- to -----
Commission file number 0-13163
Acxiom Corporation
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 71-0581897
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P.O. Box 2000, 301 Industrial Boulevard,
Conway, Arkansas 72033-2000
(Address of Principal Executive Offices) (Zip Code)
(501) 336-1000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, $ 0.10 par value per share,
outstanding as of August 10, 1998 was 52,548,698.
<PAGE>
Form 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company for which report is filed:
ACXIOM CORPORATION
The condensed consolidated financial statements included herein have been
prepared by Registrant, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of the Registrant's
management, however, all adjustments necessary for a fair statement of the
results for the periods included herein have been made and the disclosures
contained herein are adequate to make the information presented not misleading.
All such adjustments are of a normal recurring nature.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
June 30, March 31,
1998 1998
------- -------
Assets
Current assets:
Cash and cash equivalents $ 8,533 5,675
Trade accounts receivable, net 97,369 86,360
Other current assets 26,900 22,517
------- -------
Total current assets 132,802 114,552
------- -------
Property and equipment 244,633 234,470
Less - Accumulated depreciation
and amortization 110,312 103,916
------- -------
Property and equipment, net 134,321 130,554
------- -------
Software, net of accumulated
amortization 27,597 24,143
Excess of cost over fair value of
net assets acquired 56,677 54,002
Other assets 82,358 71,059
------- -------
$ 433,755 394,310
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt 3,550 3,979
Trade accounts payable 19,659 18,448
Accrued payroll and related expenses 9,921 14,950
Other accrued expenses 15,410 17,492
Deferred revenue 8,780 11,197
Income taxes 3,995 2,234
------- -------
Total current liabilities 61,315 68,300
------- -------
Long-term debt, excluding current
installments 137,161 99,917
Deferred income taxes 25,965 25,965
Stockholders' equity:
Common stock 5,328 5,321
Additional paid-in capital 70,713 68,977
Retained earnings 134,626 127,335
Foreign currency translation adjustment 750 676
Treasury stock, at cost (2,103) (2,181)
------- -------
Total stockholders' equity 209,314 200,128
------- -------
Commitments and contingencies 433,755 394,310
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF EARNINGS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the Three Months Ended
--------------------------
June 30
--------------------------
1998 1997
------- -------
Revenue $128,608 100,327
Operating costs and expenses:
Salaries and benefits 50,911 37,979
Computer, communications and other
equipment 17,355 14,929
Data costs 25,260 20,688
Other operating costs and expenses 22,245 17,097
------- -------
Total operating costs and expenses 115,771 90,693
------- -------
Income from operations 12,837 9,634
------- -------
Other income (expense): (2,210) (1,534)
Interest expense 945 401
Other, net ------- -------
(1,265) (1,133)
------- -------
Earnings before income taxes 11,572 8,501
Income taxes 4,281 3,188
------- -------
Net earnings $ 7,291 5,313
======= =======
Earnings per share:
Basic $ 0.14 0.10
====== =======
Diluted $ 0.09 0.12
====== =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Three Months Ended
--------------------------
June 30
--------------------------
1998 1997
====== ======
Cash flows from operating activities:
Net earnings $ 7,291 5,313
Non-cash operating activities:
Depreciation and amortization 12,802 9,532
Gain on disposal of assets (21) (3)
Provision for returns and doubtful
accounts 1,462 317
Changes in operating assets and
liabilities:
Accounts receivable (12,500) (11,446)
Other assets (8,911) (4,318)
Accounts payable and other
liabilities (6,397) (2,553)
------ ------
Net cash used by operating activities (6,274) (3,158)
------ ------
Cash flows from investing activities:
Disposition of assets 35 372
Development of software (5,025) (2,089)
Capital expenditures (12,446) (10,944)
Investments in joint ventures (8,034) -
Net cash paid in acquisitions (3,378) -
------ ------
Net cash used by investing activities (28,848) (12,661)
------ ------
Cash flows from financing activities:
Proceeds from debt 39,302 14,158
Payments of debt (3,137) (2,424)
Sale of common stock 1,821 1,989
------ ------
Net cash provided by financing
activities 37,986 13,723
------ ------
Effect of exchange rate changes
on cash (6) 1
------ ------
Net increase (decrease) in cash and
cash equivalents 2,858 (2,095)
Cash and cash equivalents at beginning
of period 5,675 2,721
------ ------
Cash and cash equivalents at end of period $ 8,533 626
====== ======
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 1,661 1,063
Income taxes 2,520 193
====== ======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain note information has been omitted because it has not changed
significantly from that reflected in Notes 1 through 16 of the Notes to
Consolidated Financial Statements filed as a part of Item 14 of
Registrant's 1998 Annual Report on Form 10-K as filed with the Securities
and Exchange Commission ("SEC") on June 23, 1998, as amended by Amendment
No. 1 thereto, filed with the SEC on July 29, 1998, and by Amendment No. 2
thereto, filed with the SEC on August 4, 1998.
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. Included in other assets are unamortized conversion costs in the amount of
$25.7 million and $25.0 million at June 30, 1998 and March 31, 1998,
respectively. Noncurrent receivables from software license, data, and
equipment sales are also included in other assets in the amount of $17.9
million and $20.3 million at June 30, 1998 and March 31, 1998,
respectively. The current portion of such receivables is included in other
current assets in the amount of $10.2 million and $9.5 million as of June
30, 1998 and March 31, 1998, respectively.
2. Long-term debt consists of the following (dollars in thousands):
June 30, March 31,
1998 1998
Unsecured revolving credit agreement $ 75,747 36,445
6.92% Senior notes due March 30, 2007, 30,000 30,000
payable in annual installments of $4,286
commencing March 30, 2001; interest is
payable semi-annually
3.12% Convertible note, interest and 25,000 25,000
principal due April 30, 1999; partially
collateralized by letter of credit;
convertible at maturity into two million
shares of common stock
9.75% Senior notes, due May 1, 2000, 4,286 6,429
payable in annual installments of
$2,143 each May 1; interest is payable
semi-annually
Other 5,678 6,022
------- -------
Total long-term debt 140,711 103,896
Less current installments 3,550 3,979
------- -------
Long-term debt, excluding current
installments $ 137,161 99,917
======= =======
The convertible note, although due within the next year, continues to be
classified as long-term debt because the Company intends to use available
funding under the revolving credit agreement to refinance the note on a
long-term basis in the event the holders of the note elect to receive cash at
maturity. Currently, the Company expects the holders to convert the note into
common stock, which would not require the Company to pay any cash at maturity.
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
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 between the Company and local real estate
investors. In each case, the Company is guaranteeing portions of the
construction loans for the buildings. The aggregate amount of the guarantees at
June 30, 1998 was $1.3 million.
3. The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," during the year ended March 31, 1998. Below is a
calculation and reconciliation of the numerator and denominator of basic
and diluted earnings per share (in thousands, except per share amounts):
For the Quarter Ended
----------------------------------
June 30, 1998 June 30, 1997
------------- -------------
Basic earnings per share:
Numerator (net earnings) $ 7,291 5,313
====== ======
Denominator (weighted average
shares outstanding) 52,430 51,709
====== ======
Earnings per share $ .14 .10
====== ======
Diluted earnings per share:
Numerator:
Net earnings $ 7,291 5,313
Interest expense on
convertible debt (net
of tax effect) 111 111
------ ------
$ 7,402 5,424
====== ======
Denominator:
Weighted average shares outstanding 52,430 51,709
Effect of common stock options 2,908 2,510
Effect of common stock warrant 3,210 2,974
Convertible debt 2,000 2,000
------ ------
60,548 59,193
====== ======
Earnings per share $ .12 .09
====== ======
Options to purchase shares of common stock that were outstanding during the
period but were not included in the computation of diluted earnings per
share because the option exercise price was greater than the average market
price of the common shares are shown below:
<PAGE>
For the Quarter Ended
------------------------------------
June 30, 1998 June 30, 1997
------------- -------------
Number of shares under option
(in thousands) 1,278 1,868
Range of exercise prices $ 23.55-$48.48 $ 15.69-$31.40
============ ============
4. Trade accounts receivable are presented net of allowances for doubtful
accounts, returns, and credits of $4.0 million and $3.3 million at June 30,
1998 and March 31, 1998, respectively.
5. 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. The
acquisition was accounted for as a purchase, and accordingly, the results
of operations of NormAdress are included in the consolidated statements of
earnings as of the purchase date. The purchase price exceeded the fair
value of net assets acquired by approximately $3.7 million. The resulting
excess of cost over net assets acquired is being amortized using the
straight-line method over its estimated economic life of 20 years.
The pro forma combined results of operations, assuming the acquisition
occurred at the beginning of fiscal 1997, are not materially different than
the historical results of operations reported. NormAdress had revenue of
$3.6 million and earnings before income taxes of $0.6 million for the year
ended December 31, 1997.
6. On May 26, 1998, the Company entered into a merger agreement with May &
Speh, Inc. The merger, which has been approved by the board of directors of
both companies, is intended to be accounted for as a pooling of interests
and to be a tax-free reorganization. Consummation of the transaction is
subject to regulatory approval and stockholder approval by both companies.
No effect has been given to the merger in the consolidated financial
statements.
7. The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," as of April 1, 1998. Statement No. 130
establishes standards for reporting and displaying comprehensive income and
its components in a financial statement that is displayed with the same
prominence as other financial statements. Statement No. 130 also requires
the accumulated balance of other comprehensive income to be displayed
separately in the equity section of the consolidated balance sheet. The
accumulated balance of other comprehensive income as of June 30, 1998 and
March 31, 1998 was $0.8 million and $0.7 million, respectively. The
adoption of this statement had no impact on net earnings or stockholders'
equity. Comprehensive income was $7.4 million and $5.6 million for the
quarters ended June 30, 1998 and 1997, respectively.
<PAGE>
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
Results of Operations
Consolidated revenue was a record $128.6 million for the quarter ended June 30,
1998, a 28% increase over the same quarter a year ago. Each of the four
operating divisions grew in excess of 20%. These results do not include the
results of May & Speh, Inc., since the merger which was announced May 27, 1998
is still awaiting regulatory and shareholder approval.
The following table shows the Company's revenue by division for the quarters
ended June 30, 1998 and 1997 (dollars in millions):
1998 1997 % Increase
----- ----- ----------
Services Division $ 45.8 $ 35.7 +28%
Alliances Division 37.9 28.3 +34
Data Products Division 35.5 29.0 +22
International Division 9.4 7.3 +29
----- ----- ---
$128.6 $100.3 +28%
===== ===== ===
Services Division revenue of $45.8 million reflects a 28% increase over the
prior year despite only 8% growth in Allstate Insurance Company ("Allstate")
revenue and lower revenue than last year from Citibank. However, this was more
than offset by strong results from the High Tech, Publishing, Insurance, Retail,
Telecommunications, and Utilities business units. The Services Division also
benefited from revenue of $3.7 million in the current year's quarter from the
acquisition of Buckley Dement, which was purchased effective October 1, 1997.
Alliances Division revenue of $37.9 million increased 34% over the same quarter
a year ago. The Financial Services group continued its outstanding growth rate
by more than doubling last year's revenue. Trans Union, Polk, and ADP also
reported double-digit revenue gains. Guideposts reported lower revenue as a
result of a software license in the first quarter of the previous year.
The Data Products Division revenue grew 22% compared to last year. DMI grew 21%
reflecting growth in both the brokerage business and SmartBase. Acxiom Data
Group (InfoBase) revenue grew 35% and DataQuick increased 48%. The quarterly
results for the prior year included $1.8 million of Pro CD retail revenue. This
business was sold in August of last year.
The International Division revenue of $9.4 million grew 29% reflecting 50%
growth in data processing services, partly mitigated by flat revenue from
fulfillment services.
<PAGE>
The Company's operating expenses increased 28% compared to the same quarter a
year ago. Salaries and benefits grew $12.9 million or 34% which was faster than
the 28% revenue growth as a result of higher incentive accruals in the current
quarter. Before incentive accruals, salaries and benefits grew at approximately
the same rate as revenue, resulting from acquisitions and increased headcount.
Computer, communications and other equipment costs rose $2.4 million or 16%
higher than the first quarter in the prior year. Data costs grew $4.6 million or
22% reflecting the growth in data revenue, primarily from Acxiom Data Group, and
to a lesser extent, Allstate. Other operating costs and expenses grew $5.1
million or 30% resulting from the higher sales volume and the impact of
acquisitions made in the prior year on travel, supplies, facilities, outside
services, goodwill amortization, and administrative costs. These increases were
partially mitigated by decreases due to the disposal of the Pro CD retail
business.
Income from operations for the quarter ended June 30, 1998 was $12.8 million,
compared to $9.6 million for the same quarter a year ago, an increase of 33%.
The operating margin improved from 9.6% to 10.0%.
Interest expense increased by $0.7 million compared to the previous year's first
quarter as a result of higher average debt levels, which was created primarily
by higher accounts receivable levels and increased capital and investment
spending. Other income and expense for both the current period and the
year-earlier period consists primarily of interest income from long-term
receivables related to customer contracts.
The Company's effective tax rate was 37.0% for the current quarter, compared
with 37.5% for the prior year's quarter. The rate for the full year ended March
31, 1998 was 37.0%. The Company expects the rate for fiscal 1999 to remain in
the 37-39% range. This estimate is based on current tax law and current
estimates of earnings, and is subject to change.
Net earnings were a record $7.3 million for the quarter, an increase of 37% from
the previous year. Basic and diluted earnings per share increased 40% and 33%,
respectively.
Capital Resources and Liquidity
Working capital at June 30, 1998 totaled $71.5 million compared to $46.3 million
at March 31, 1998. At June 30, 1998, the Company had available credit lines of
$119.9 million of which $75.7 million was outstanding. The Company's
debt-to-capital ratio (capital defined as long-term debt plus stockholders'
equity) was 40% at June 30, 1998 compared to 33% at March 31, 1998. The increase
in the ratio is due to the additional borrowings under the line of credit,
discussed below.
Cash used by operating activities was $6.3 million for the quarter ended June
30, 1998 compared to $3.2 million in the same period in the previous year.
Earnings before interest, taxes, depreciation, and amortization ("EBITDA")
increased by 26% compared to a year ago. The resulting operating cash flow was
reduced by $27.8 million in the current quarter and $18.3 million in the
previous year due to the net change in operating assets and liabilities,
including increases in accounts receivable for each year. EBITDA is not intended
to represent cash flows
<PAGE>
for the period, is not presented as an alternative to operating income as an
indicator of operating performance, may not be comparable to other similarly
titled measures of other companies, and should not be considered in isolation or
as a substitute for measures of performance prepared in accordance with
generally accepted accounting principles. However, EBITDA is a relevant measure
of the Company's operations and cash flows and is used internally as a surrogate
measure of cash provided by operating activities.
Investing activities used $28.8 million in the quarter ended June 30, 1998
compared to $12.7 million in the year-earlier quarter. Investing activities in
the current period included $12.4 million in capital expenditures, compared to
$10.9 million in the previous year, and $5.0 million in software development,
compared to $2.1 million in the previous year. Investing activities also
included $3.4 million paid in the acquisition of NormAdress, which is discussed
more fully in note 5 to the consolidated financial statements, and $8.0 million
invested in joint ventures, including $4.0 million of additional investment in
Bigfoot International, Inc., an emerging company that provides services and
tools for internet e-mail users, and $3.1 million invested in Ceres Integrated
Solutions, a provider of software and analytical services to large retailers.
Financing activities in the current period provided $38.0 million, consisting
primarily of additional borrowings under the revolving line of credit.
Construction has begun on the Company's new headquarters building and a new
customer service facility in Little Rock, Arkansas. Both of these buildings are
scheduled to be completed and occupied before the end of fiscal 1999. Each
building is being built pursuant to a 50/50 joint venture between the Company
and local real estate investors. The total cost of the headquarters and customer
service projects is expected to be $6.4 million and $9.6 million, respectively.
The Company expects other capital expenditures to total approximately $55-65
million in fiscal 1999.
While the Company does not have any other material contractual commitments for
capital expenditures, additional investments in facilities and computer
equipment continue to be necessary to support the growth of the business. In
addition, new outsourcing or facilities management contracts frequently require
substantial up-front capital expenditures in order to acquire or replace
existing assets. In some cases, the Company also sells software, hardware, and
data to customers under extended payment terms or notes receivable collectible
over one to eight years. These arrangements also require up-front expenditures
of cash, which are repaid over the life of the agreement. Management believes
that the combination of existing working capital, anticipated funds to be
generated from future operations, and the Company's available credit lines is
sufficient to meet the Company's current operating needs as well as to fund the
anticipated levels of expenditures. If additional funds are required, the
Company would use existing credit lines to generate cash, followed by either
additional borrowings to be secured by the Company's assets or the issuance of
additional equity securities in either public or private offerings. Management
believes that the Company has significant unused capacity to raise capital which
could be used to support future growth.
The Company, like many owners of computer software, has assessed and is in the
process of modifying, where needed, its computer applications to ensure they
will function properly in the
<PAGE>
year 2000 and beyond. The financial impact to the Company has not been and is
not expected to be material to its financial position or results of operations
in any given year. The Company is currently operating under an internal goal to
ensure all of its computer applications are "year 2000 ready" by December 31,
1998.
Other Information
On May 26, 1998, the Company entered into a merger agreement with May & Speh,
Inc. May & Speh, headquartered in Downers Grove, Illinois, provides
computer-based information management services with a focus on direct marketing
and information technology outsourcing services. The merger, which has been
approved by the board of directors of both companies, is intended to be
accounted for as a pooling of interests and to be a tax-free reorganization.
Consummation of the transaction is subject to regulatory approval and
stockholder approval by both companies. No effect has been given to the merger
in the consolidated financial statements.
The Company has had a long-term contractual relationship with Allstate. The
initial contract had a five-year term expiring in September, 1997 and was
extended until September, 1998. The Company is currently in negotiations with
Allstate to further extend the relationship.
Certain statements in this quarterly report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements, which are not statements of historical fact, may
contain estimates, assumptions, projections and/or expectations regarding the
Company's financial position, results of operations, market position, product
development, regulatory matters, growth opportunities and growth rates,
acquisition and divestiture opportunities, and other similar forecasts and
statements of expectation. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," and "should," and variations of these
words and similar expressions, are intended to identify these forward-looking
statements. Such forward-looking statements are not guarantees of future
performance. They involve known and unknown risks, uncertainties, and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Representative examples of such factors are discussed in more detail in the
Company's Annual Report on Form 10-K and include, among other things, the
possible adoption of legislation or industry regulation concerning certain
aspects of the Company's business; the removal of data sources and/or marketing
lists from the Company; the ability of the Company to retain customers who are
not under long-term contracts with the Company; technology challenges; year 2000
software issues; the risk of damage to the Company's data centers or
interruptions in the Company's telecommunications links; acquisition
integration; the effects of postal rate increases; and other market factors. See
"Additional Information Regarding Forward-looking Statements" in the Company's
Annual Report on Form 10-K.
<PAGE>
Form 10-Q
ACXIOM CORPORATION
PART II - OTHER INFORMATION
Item 5 - Other Information.
Shareholder Proposals
Proposals of shareholders intended to be presented at the Company's 1999 annual
meeting of shareholders must be received at the Company's principal executive
offices no later than February 19, 1999, which is deemed to be a reasonable
period of time prior to the Company's printing and mailing of its proxy
materials, in order to be included in the Company's proxy statement and form of
proxy relating to the 1999 annual meeting.
Pursuant to new amendments to Rule 14a-4(c) promulgated under the Securities
Exchange Act of 1934, as amended, if a shareholder intends to present a proposal
at the 1999 annual meeting of shareholders without requesting the Company to
include such proposal in the Company's proxy materials, but does not notify the
Company of such proposal on or prior to May 1, 1999, which is deemed to be a
reasonable period of time prior to the Company's mailing of its proxy materials,
then management proxies would be allowed to use their discretionary voting
authority to vote on the proposal when the proposal is raised at the annual
meeting, even though there is no discussion of the proposal in the 1999 proxy
statement.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Form 8-K.
A report was filed on June 4, 1998, which reported the
proposed merger with May & Speh, Inc.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Acxiom Corporation
Dated: August 14, 1998
By: /s/ Robert S. Bloom
---------------------
(Signature)
Robert S. Bloom
Chief Financial Officer
(Chief Accounting Officer)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended September 30, 1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ----- to -----
Commission file number 0-13163
Acxiom Corporation
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 71-0581897
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P.O. Box 2000, 301 Industrial Boulevard,
Conway, Arkansas 72033-2000
(Address of Principal Executive Offices) (Zip Code)
(501) 336-1000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all
reports required to be filed by Section 13 or 15(d) of the Securities Exchange
Act of 1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, $ 0.10 par value per share,
outstanding as of November 5, 1998 was 77,620,167.
<PAGE>
Form 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company for which report is filed:
ACXIOM CORPORATION
The condensed consolidated financial statements included herein have been
prepared by Registrant, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of the Registrant's
management, however, all adjustments necessary for a fair statement of the
results for the periods included herein have been made and the disclosures
contained herein are adequate to make the information presented not misleading.
All such adjustments are of a normal recurring nature.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
September 30, March 31,
1998 1998
------- -------
Assets
Current assets:
Cash and cash equivalents $ 11,163 127,304
Trade accounts receivable, net 157,198 118,281
Refundable income taxes 19,431 98
Other current assets 43,003 42,785
------- -------
Total current assets 230,795 288,468
------- -------
Property and equipment 333,943 301,393
Less - Accumulated depreciation and
amortization 151,365 115,709
------- -------
Property and equipment, net 182,578 185,684
------- -------
Software, net of accumulated amortization 40,541 37,017
Excess of cost over fair value of net assets
acquired 92,959 73,851
Other asset 108,122 76,819
------- -------
$654,995 661,839
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt 9,066 9,500
Trade accounts payable 25,331 21,946
Accrued payroll and related expenses 17,216 17,612
Accrued merger and integration costs 58,936 -
Other accrued expenses 16,021 20,867
Deferred revenue 5,521 11,197
------- -------
Total current liabilities 132,091 81,122
------- -------
Long-term debt, excluding current installments 218,594 244,257
Deferred income taxes 34,056 34,055
Stockholders' equity:
Common stock 7,822 7,405
Additional paid-in capital 136,380 121,129
Retained earnings 127,354 177,158
Foreign currency translation adjustment 1,357 676
Unearned ESOP compensation (594) (1,782)
Treasury stock, at cost (2,065) (2,181)
------- -------
Total stockholders' equity 270,254 302,405
------- -------
Commitments and contingencies
$654,995 661,839
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the Three Months Ended
--------------------------
September 30
--------------------------
1998 1997
------- -------
Revenue $174,358 135,876
Operating costs and expenses:
Salaries and benefits 68,998 48,864
Computer, communications and other
equipment 27,933 22,009
Data costs 27,073 21,589
Other operating costs and expenses 24,676 23,266
Special charges 109,372 -
------- -------
Total operating costs and expenses 258,052 115,728
------- -------
Income (loss) from operations (83,694) 20,148
------- -------
Other income (expense):
Interest expense (4,323) (2,166)
Other, net 2,367 1,600
------- -------
(1,956) (566)
------- -------
Earnings (loss) before income taxes (85,650) 19,582
Income taxes (24,490) 7,375
------- -------
$ (61,160) 12,207
======= =======
Earnings (loss) per share:
Basic $ (0.82) 0.17
======= =======
Diluted $ (0.82) 0.15
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the Six Months Ended
------------------------
September 30
------------------------
1998 1997
======= =======
Revenue $ 333,168 259,828
Operating costs and expenses:
Salaries and benefits 130,186 95,577
Computer, communications and other
equipment 52,549 42,628
Data costs 52,562 42,584
Other operating costs and expenses 52,482 43,976
Special charges 109,372 -
------- -------
Total operating costs and expenses 397,151 224,765
------- -------
Income (loss) from operations (63,983) 35,063
------- -------
Other income (expense):
Interest expense (8,399) (4,429)
Other, net 4,857 2,429
------- -------
(3,542) (2,000)
------- -------
Earnings (loss) before income taxes (67,525) 33,063
Income taxes (17,721) 12,456
------- -------
Net earnings (loss) $ (49,804) 20,607
======= =======
Earnings (loss) per share:
Basic $ (0.67) 0.29
======= =======
Diluted $ (0.67) 0.26
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Six Months Ended
------------------------
September 30
------------------------
1998 1997
------- -------
Cash flows from operating activities:
Net earnings (loss) $ (49,804) 20,607
Non-cash operating activities:
Depreciation and amortization 30,058 21,781
Gain on disposal of assets (13) (963)
Provision for returns and doubtful accounts 1,549 520
Deferred income taxes (1) 4,727
ESOP principal payments 1,188 1,188
Non-cash component of special charges 108,117 -
Changes in operating assets and liabilities:
Accounts receivable (37,937) (14,093)
Other assets (39,920) (18,244)
Accounts payable and other liabilities (14,600) 16,584
------- -------
Net cash provided (used) by operating
activities (1,363) 32,107
------- -------
Cash flows from investing activities:
Disposition of assets 135 27,898
Development of software (18,843) (9,176)
Capital expenditures (47,187) (41,164)
Purchases of marketable securities - (5,777)
Sales of marketable securities 7,761 10,398
Investments in joint ventures (8,145) (4,853)
Net cash paid in acquisitions (22,296) (1,841)
------- -------
Net cash used by investing activities (88,575) (24,515)
------- -------
Cash flows from financing activities:
Proceeds from debt 40,186 14,158
Payments of debt (82,205) (28,961)
Sale of common stock 15,784 5,265
------- -------
Net cash used by financing activities (26,235) (9,538)
------- -------
Effect of exchange rate changes on cash 32 (28)
------- -------
Net decrease in cash and cash equivalents (116,141) (1,974)
Cash and cash equivalents at beginning of
period 127,304 9,695
------- -------
Cash and cash equivalents at end of period $ 11,163 7,721
======= =======
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 8,210 4,125
Income taxes 3,502 2,772
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
Certain note information has been omitted because it has not change
significantly from that reflected in Notes 1 through 16 of the Notes to
Consolidated Financial Statements filed as a part of Item 14 of Registrant's
1998 Annual Report on Form 10-K as filed with the Securities and Exchange
Commission ("SEC") on June 23, 1998, as amended by Amendment No. 1 thereto,
filed with the SEC on July 29, 1998, and by Amendment No. 2 thereto, filed with
the SEC on August 4, 1998.
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
1. On September 17, 1998, the Company acquired all of the outstanding capital
stock of May & Speh, Inc. ("May & Speh") by exchanging .80 shares of the
Company's stock for each share of May & Speh stock. Accordingly, the
Company exchanged 20,858,923 shares of its common stock for all of the
outstanding shares of capital stock of May & Speh. Additionally, the
Company assumed all of the currently 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. The Company also assumed May & Speh's convertible subordinated
debt, which is now convertible into 5,783,000 shares of the Company's
common stock. The acquisition was accounted for as a pooling-of-interests
and, accordingly, the condensed consolidated financial statements have been
restated as if the combining companies had been combined for all periods
presented. Included in the statement of operations for the period ended
September 30, 1998 are revenues of $66.6 million and earnings before income
taxes of $15.1 million for May & Speh for the period from April 1, 1998 to
September 17, 1998. For the six months ended September 30, 1997, May & Speh
had revenue of $49.5 million and earnings before income taxes of $11.2
million.
In the quarter ended September 30, 1998, the Company recorded special
charges totaling $109.4 million related to merger and integration charges
associated with the May & Speh merger and the write down of other impaired
assets. The charge consisted of approximately $10.7 million of transaction
costs to be paid to investment bankers, accountants, and attorneys; $6.8
million in associate-related reserves, principally employment contract
termination costs and severance costs; $40.5 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. Approximately $100.8 million of the charge was for
duplicative assets or costs directly attributable to the May & Speh merger.
The remaining $8.6 million related to other impaired assets which were
impaired during the quarter, 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, which occurred during the
quarter.
The following table shows the balances which were accrued as of September
30, 1998 (dollars in thousands):
Transaction costs $9,163
Associate-related reserves 6,783
Contract termination costs 40,500
Other accruals 2,490
------
$58,936
======
<PAGE>
The Company expects that most of the transaction costs and
associate-related reserves will be paid in cash during the next three to
six months. The contract termination costs will be paid out over the next
18 months. The other accruals will be paid out over periods ranging up to
five years.
The Company is still negotiating with certain software vendors to
consolidate systems software contracts and as a result may incur up to an
additional $10 million in termination costs. Such negotiations are expected
to be finalized in the next fiscal quarter and the impact will be recorded
at that time.
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. The
acquisition was accounted for as a purchase and, accordingly, the results
of operations of NormAdress are included in the condensed consolidated
statements of operations as of the purchase date. The purchase price
exceeded the fair value of net assets acquired by approximately $4.1
million. The resulting excess of cost over net assets acquired is being
amortized using the straight-line method over its estimated economic life
of 20 years. The pro forma combined results of operations, assuming the
acquisition occurred at the beginning of the periods presented, are not
materially different from the historical results of operations reported.
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 pro forma effect of the acquisition is not material
to the Company's results of operations for the periods reported.
On October 1, 1998, the Company announced the execution of a letter of
intent to acquire Computer Graphics of Arizona, Inc. ("Computer Graphics")
and all of its affiliated companies in a stock-for-stock merger. The merger
is expected to be completed prior to the Company's fiscal year end, subject
to the completion of the Company's due diligence review and subject to the
absence of any material adverse changes in Computer Graphics' business
prior to closing. Computer Graphics, a privately held enterprise
headquartered in Phoenix, Arizona, is a computer service bureau principally
serving financial services direct marketers.
<PAGE>
2. Included in other assets are unamortized conversion costs in the amount of
$29.3 million and $30.9 million at September 30, 1998 and March 31, 1998,
respectively. Noncurrent receivables from software license, data, and
equipment sales are also included in other assets in the amount of $16.2
million and $20.3 million at September 30, 1998 and March 31, 1998,
respectively. The current portion of such receivables is included in other
current assets in the amount of $10.5 million and $9.5 million as of
September 30, 1998 and March 31, 1998, respectively.
3. Long-term debt consists of the following (dollars in thousands):
September 30, March 31,
1998 1998
5.25% convertible subordinated notes $ 115,000 115,000
due 2003;convertible at the option of
the holder into shares of common stock at
a conversion price of $19.89 per share;
redeemable at the option of the Company at
any time after April 3, 2001
Unsecured revolving credit agreement - 36,445
6.92% Senior notes due March 30, 2007, payable 30,000 30,000
in annual installments of $4,286 commencing
March 30, 2001; interest is payable semi-annually
3.12% Convertible note, interest and principal 25,000 25,000
due April 30, 1999; partially collateralized by
letter of credit; convertible at maturity into
two million shares of common stock
Capital leases on land, buildings and equipment 21,908 22,507
payable in monthly payments of $357 of principal
and interest; remaining terms of from five to
twenty years; interest rates at approximately 8%
8.5% unsecured term loan; quarterly principal 8,600 9,000
payments of $200 plus interest with the balance
due in 2005
9.75% Senior notes, due May 1, 2000, payable in 4,286 6,429
annual installments of $2,143 each May 1;
interest is payable semi-annually
Other capital leases, debt and long-term 22,866 9,376
liabilities ------- -------
Total long-term debt 227,660 253,757
Less current installments 9,066 9,500
------- -------
Long-term debt, excluding
current installments $ 218,594 244,257
======= =======
<PAGE>
The 3.12% convertible note, although due within the next year, continues to be
classified as long-term debt because the Company intends to use available
funding under the revolving credit agreement to refinance the note on a
long-term basis in the event the holder of the note elects to receive cash at
maturity. Currently, the Company expects the holder to convert the note into
common stock, which would not require the Company to pay any cash at maturity.
The holder of the 8.5% term loan, which was made to May & Speh, has the right to
demand payment due to a change in control. The lender has not exercised that
right, and the Company presently intends to renegotiate the loan on a long-term
basis. If the lender does demand repayment, the Company will pay off the loan
with available funds from the unsecured revolving credit agreement. Therefore,
the Company continues to classify the term loan as long-term.
Also as a result of the merger with May & Speh, the Company was required to
offer to repurchase the 5.25% convertible subordinated notes at face value. The
Company does not expect the holders to accept the offer, as the face value of
the notes is less than the value of the shares into which they are convertible.
Accordingly, these notes continue to be classified as long-term.
At September 30, 1998, due to the merger with May & Speh and the special charges
booked during the quarter, the Company was in violation of certain restrictive
covenants under the unsecured revolving credit agreement and the 9.75% senior
notes. The violations of the revolving credit agreement have been waived by the
lender. The violations under the senior notes are expected to be waived also,
although the Company has not yet received the waiver. In the event the waiver is
not received, the Company could pay off the loan with available funds under the
revolving credit agreement, and as a result this loan is still classified as
long-term.
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 between the Company and 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
September 30, 1998 was $4.2 million. The total cost of the two building projects
is expected to be approximately $19.5 million.
<PAGE>
4. The Company adopted Statement of Financial Accounting Standards No. 128,
"Earnings per Share," during the year ended March 31, 1998. Below is a
calculation and reconciliation of the numerator and denominator of basic
and diluted earnings (loss) per share (dollars in thousands, except per
share amounts):
For the Quarter Ended For the Six Months Ended
--------------------- ------------------------
September September September September
30 30 30 30
--------- --------- --------- ---------
1998 1997 1998 1997
------ ------ ------ ------
Basic earnings (loss)
per share:
Numerator - net
earnings (loss) $(61,160) 12,207 (49,804) 20,607
====== ====== ====== ======
Denominator (weighted
average shares
outstanding) 74,713 72,096 73,998 71,914
====== ====== ====== ======
Earnings (loss)
per share $ (.82) .17 (.67) .29
====== ===== ====== ======
Diluted earnings (loss)
per share:
Numerator:
Net earnings (loss) $(61,160) 12,207 (49,804) 20,607
Interest expense on
convertible debt (net
of tax effect) - 111 - 222
------ ------ ------ ------
$(61,160) 12,318 (49,804) 20,829
====== ====== ====== ======
Denominator:
Weighted average shares
out-standing 74,713 72,096 73,998 71,914
Effect of common stock
option and warrants - 6,785 - 6,556
Convertible debt - 2,000 - 2,000
------ ------ ------ ------
74,713 80,881 73,998 80,470
====== ====== ====== ======
Earnings (loss) per share $ (.82) .15 (.67) .26
====== ====== ====== ======
All potentially dilutive securities were excluded from the above calculations
for the quarter and six months ended September 30, 1998 because they were
antidilutive in accordance with Statement No. 128. Common stock options and
warrants which were excluded were 6,743,000 and 6,939,000 for the quarter and
six months, respectively. Potentially dilutive shares related to the convertible
debt which were excluded were 7,783,000 for both the quarter and six months.
Also, interest expense on the convertible debt (net of income tax effect)
excluded in computing diluted earnings (loss) per share was $1,057,000 and
$2,125,000 for the quarter and six months, respectively.
<PAGE>
Options to purchase shares of common stock that were outstanding during the
quarter and six months ended September 30, 1997 but were not included in the
computation of diluted earnings per share because the option exercise price was
greater than the average market price of the common shares are shown below:
For the Quarter Ended For the Six Months Ended
--------------------- ------------------------
September 30, 1997 September 30, 1997
--------------------- ------------------------
Number of shares under 1,287 1,663
option (in thousands)
Range $19.84 - $34.75 $15.70 - $34.75
============== ==============
5. Trade accounts receivable are presented net of allowances for doubtful
accounts, returns, and credits of $4.1 million and $3.6 million at
September 30, 1998 and March 31, 1998, respectively.
6. The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," as of April 1, 1998. Statement No. 130
establishes standards for reporting and displaying comprehensive income and
its components in a financial statement that is displayed with the same
prominence as other financial statements. Statement No. 130 also requires
the accumulated balance of other comprehensive income to be displayed
separately in the equity section of the consolidated balance sheet. The
accumulated balance of other comprehensive income, which consists solely of
foreign currency translation adjustment, as of September 30, 1998 and March
31, 1998 was $1.4 million and $0.7 million, respectively. The adoption of
this statement had no impact on operations or stockholders' equity.
Comprehensive loss was $60.6 million for the quarter ended September 30,
1998 and comprehensive income was $11.6 million for the quarter ended
September 30, 1997. Comprehensive loss was $49.1 million for the six months
ended September 30, 1998 and comprehensive income was $20.3 million for the
six months ended September 30, 1997.
<PAGE>
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
On May 26, 1998, the Company entered into a merger agreement with May & Speh,
Inc. ("May & Speh"). May & Speh, headquartered in Downers Grove, Illinois,
provides computer-based information management services with a focus on direct
marketing and information technology outsourcing services. The merger, which was
completed September 17, 1998, has been accounted for as a pooling-of-interests.
Accordingly, the condensed consolidated financial statements have been restated
as if the combining companies had been combined for all periods presented. See
note 1 to the condensed consolidated financial statements for a more detailed
discussion of the merger transaction.
Results of Operations
Consolidated revenue was a record $174.4 million for the quarter ended September
30, 1998, a 28% increase over the same quarter a year ago. Each of the Company's
operating divisions showed strong growth over the previous year. For the six
months ended September 30, 1998, revenue was $333.2 million, an increase of 28%
over revenue of $259.8 million for the same period a year ago.
The following table shows the Company's revenue by division for the quarters
ended September 30, 1998 and 1997 (dollars in millions):
1998 1997 % Increase
---- ---- ----------
Services $ 46.9 $ 34.5 +36%
Alliances 43.4 34.0 +28
Data Products 37.8 33.7 +12
May & Speh 36.4 25.9 +41
International 9.9 7.8 +27
----- ----- ---
$174.4 $135.9 +28%
===== ===== ===
Services Division revenue of $46.9 million reflects a 36% increase over the
prior year despite only 7% growth in the contract with Allstate Insurance
Company ("Allstate"). However, this was more than offset by strong results from
the Citibank, High Tech, Publishing, Insurance, Retail, Telecommunications, and
Utilities business units. The Services Division also benefited from revenue of
$3.8 million in the current year's quarter related to the acquisition of Buckley
Dement, which was purchased effective October 1, 1997.
Alliances Division revenue of $43.4 million increased 28% over the same quarter
a year ago. The Financial Services group continued to post strong gains,
increasing 28% over the same period a year ago. The Strategic Alliances business
unit was up 76% over the prior year primarily due to a server sale included in
the quarter. The Trans Union, Polk, and ADP business units also reported revenue
gains of 30%, 24%, and 7%, respectively.
<PAGE>
Data Products Division revenue grew 12% compared to last year. Included in the
prior year results was the impact of the Pro CD retail business for part of the
quarter plus the impact of the consumer file license sold to infoUSA, Inc.
(formerly American Business Information, Inc.) as part of the sale of the Pro CD
retail business in August of last year. Excluding the effect of these two items
from the year-earlier results, the Data Products Division posted a 30% gain over
the same quarter last year. DMI grew 23%, DataQuick grew 22% and the Acxiom Data
Group (InfoBase)including results from the Acxiom Data Network(SM) reflected 49%
growth after adjusting for the Pro CD items noted above.
The May & Speh Division reported $36.4 million revenue for the quarter
reflecting a 41% increase over the same quarter a year ago. May & Speh's direct
marketing services increased 17% while their outsourcing services grew 81%,
including the impact of the recently signed outsourcing contract with Waste
Management, Inc.
The International Division revenue of $9.9 million grew 27% over the
year-earlier period reflecting 58% growth in data warehouse and list processing
services, partly mitigated by slightly lower revenue from fulfillment services.
For the six months ended September 30, 1998, Services Division revenue was up
32% versus the prior year, Alliances Division was up 31%, Data Products Division
was up 17%, May & Speh was up 35%, and the International Division was up 28%.
The Company's operating expenses for the quarter included $109.4 million for
special charges, which are 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, $6.8 million in
associate-related reserves, $40.5 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 1 to the condensed
consolidated financial statements for further information about the special
charges.
Salaries and benefits for the quarter grew $20.1 million or 41% over the prior
year's second quarter, primarily as a result of increased headcount to support
growth, including the hiring of approximately 75 new associates under the new
Waste Management outsourcing contract. The remainder of the increase is due to
higher incentive accruals and the effect of the Sigma and Buckley Dement
acquisitions. For the six months ended September 30, 1998, salaries and benefits
increased 36%. Computer, communications and other equipment costs rose $5.9
million or 27% higher than the second quarter in the prior year, reflecting
higher software costs and the impact of capital expenditures. For the six
months, computer, communications and other equipment costs were up 23%. Data
costs grew $5.4 million or 25% over the prior year reflecting the growth in data
revenue, combined with the impact of migrating to fixed cost data provider
contracts, higher compilation costs at DataQuick due to the high level of
refinancing, and costs associated with incremental sources of data. For the six
month period, data costs increased 23%. Other operating costs and expenses grew
$1.4 million or 6% from the year-earlier period. Increases in these costs were
offset by costs associated with a server sale in the year-
<PAGE>
earlier period. For the six months ended September 30, 1998 the increase in
other operating costs and expenses was 19%.
Due to the special charges, the Company recorded a loss from operations for the
quarter of $83.7 million, compared to income from operations of $20.1 million in
the second quarter of the prior year. Excluding the impact of the special
charges, income from operations would have been $25.7 million for the quarter,
an increase of 27% over the same period a year ago. For the six months, the
Company recorded a loss from operations of $64.0 million compared to income from
operations of $35.1 million for the prior year. Again excluding the impact of
the special charges, income from operations would have been $45.4 million, an
increase of 29% over the same period a year ago.
Interest expense increased by $2.2 million compared to the previous year's
second quarter as a result of higher average debt levels. Approximately $1.5
million of the increase is due to the issuance of
<PAGE>
the 5.25% convertible debt, which was issued by May & Speh in March 1998. For
the six months, interest expense was up $4.0 million, and again most of the
increase was due to the convertible debt. Other income and expense for both the
quarter and six months consists primarily of interest income from long-term
receivables related to customer contracts and investment income earned by May &
Speh on cash balances and marketable securities prior to the merger.
The Company's effective tax rate, before special charges, was 37.4% for both the
quarter and the six month period, compared to 37.7% for both time periods in the
prior year. Portions of the special charges may not be deductible for tax
purposes and therefore the tax benefit recorded on the special charges was only
30.5%. Combining both the normal tax accrual with the estimated tax benefit of
the special charges results in a 28.6% tax rate for the second quarter and a
26.2% rate for the six months ended September 30, 1998. The Company continues to
expect the normal rate for fiscal 1999 to remain in the 37-39% range. This
estimate is based on current tax law and current estimates of earnings, and is
subject to change.
The Company recorded a net loss of $61.2 million for the quarter and $49.8
million for the six months, compared to net earnings of $12.2 million for the
quarter and $20.6 million for the six months in the previous year. Loss per
share on both a basic and diluted basis were $.82 and $.67 for both the quarter
and six months, respectively. Excluding the impact of the special charges,
earnings per share would have been $.20 basic and $.18 diluted for the quarter
and $.35 basic and $.32 diluted for the six month period.
Capital Resources and Liquidity
Working capital at September 30, 1998 totaled $98.7 million compared to $207.3
million at March 31, 1998. The balance at March 31, 1998 included $109.8 million
in cash and cash equivalents at May & Speh as a result of the issuance of the
$115 million convertible debt. Since the merger, the Company has used available
cash to pay down debt. At September 30, 1998, the Company had available credit
lines of $119.9 million of which none was outstanding. The
<PAGE>
Company's debt-to-capital ratio (capital defined as long-term debt plus
stockholders' equity) was 45% at September 30, 1998. Included in the debt
component of this calculation is $140 million of convertible debt, which if
excluded from the debt for the purposes of this calculation would reflect a 23%
debt-to-capital ratio.
Cash used by operating activities was $1.4 million for the six months ended
September 30, 1998 compared to cash provided by operating activities of $32.1
million in the same period in the previous year. Earnings before interest,
taxes, depreciation, and amortization ("EBITDA"), excluding the non-cash impact
of the special charges recorded in the second quarter, increased by 33% compared
to a year ago. The resulting operating cash flow was reduced by $92.5 million in
the current year and $15.8 million in the previous year due to the net change in
operating assets and liabilities, including increases in accounts receivable for
each year. EBITDA is not intended to represent cash flows for the period, is not
presented as an alternative to operating income as an indicator of operating
performance, may not be comparable to other similarly titled measures of other
companies, and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles. However, EBITDA is a relevant measure of the Company's
operations and cash flows and is used internally as a surrogate measure of cash
provided by operating activities.
Investing activities used $88.6 million in the six months ended September 30,
1998 compared to $24.5 million in the year-earlier period. Investing activities
in the current period included $47.2 million in capital expenditures, compared
to $41.2 million in the previous year, and $18.8 million in software
development, compared to $9.2 million in the previous year. Investing activities
also included $22.3 million paid in the acquisitions of NormAdress and Sigma,
and additional earn-out payments made for acquisitions recorded in previous
years. The acquisitions of NormAdress and Sigma are discussed more fully in note
1 to the condensed consolidated financial statements. Investing activities also
included $8.1 million invested in joint ventures, including $4.0 million of
additional investment in Bigfoot International, Inc., an emerging technology
company that provides services and tools for internet e-mail users, and $3.2
million invested in Ceres Integrated Solutions, a provider of software and
analytical services to large retailers. Investing activities in the current year
also include the proceeds of sales of marketable securities, which were owned by
May and Speh prior to the merger with the Company.
Financing activities in the current period used $26.2 million, consisting
primarily of the net repayment of debt under the revolving line of credit.
Financing activities also included $15.8 million in sales of stock, including
$12.2 million received from Trans Union Corporation ("Trans Union") for the
purchase of 4 million shares of stock under a warrant which was issued to Trans
Union in 1992 in conjunction with the data center management agreement between
Trans Union and the Company.
Construction has begun on the Company's new headquarters building and a new
customer service facility in Little Rock, Arkansas. Both of these buildings are
scheduled to be completed and occupied before the end of fiscal 1999. Each
building is being built pursuant to a 50/50 joint venture between the Company
and local real estate developers. The total cost of the headquarters and
customer service projects is expected to be approximately $7.5 million and $12.0
million,
<PAGE>
respectively. The Company expects other capital expenditures to total
approximately $85-90 million in fiscal 1999.
While the Company does not have any other material contractual commitments for
capital expenditures, additional investments in facilities and computer
equipment continue to be necessary to support the growth of the business. In
addition, new outsourcing or facilities management contracts frequently require
substantial up-front capital expenditures in order to acquire or replace
existing assets. In some cases, the Company also sells software, hardware, and
data to customers under extended payment terms or notes receivable collectible
over one to eight years. These arrangements also require up-front expenditures
of cash, which are repaid over the life of the agreement. Management believes
that the combination of existing working capital, anticipated funds to be
generated from future operations, and the Company's available credit lines is
sufficient to meet the Company's current operating needs as well as to fund the
anticipated levels of expenditures. If additional funds are required, the
Company would use existing credit lines to generate cash, followed by either
additional borrowings to be secured by the Company's assets or the issuance of
additional equity securities in either public or private offerings. Management
believes that the Company has significant unused capacity to raise capital which
could be used to support future growth.
Year 2000
Many computer systems ("IT Systems') and equipment and instruments with embedded
microprocessors ("non-IT systems") were designed to only recognize the last two
digits of a calendar year. With the arrival of the Year 2000, these systems and
microprocessors may encounter operating problems due to their inability to
distinguish years after 1999 from years preceding 1999. This could manifest in a
system failure or miscalculations causing disruption of operations, including,
among other things, a temporary inability to process or transmit data, or engage
in normal business activities. As a result, the Company is engaged in an
extensive project to remediate or replace its date-sensitive IT systems and
non-IT systems.
The following discussion of the implications of the Year 2000 issue for the
Company contains numerous forward-looking statements based on inherently
uncertain information. The information presented is based on the Company's best
estimates, which were derived utilizing a number of assumptions of future
events, including the continued availability of internal and external resources,
third party modifications, and other factors. However, there can be no guarantee
that these estimates will be achieved and actual results could differ. Although
the Company believes it will be able to make the necessary modifications in
advance, there can be no guarantee that failure to correctly modify the systems
would not have a material adverse effect on the Company.
Since 1996 the Company has been engaged in an enterprise-wide effort ("the
Project") to address the risks associated with the Year 2000 problem, both
internal and external. Under the Project, the Company has established a project
office comprised of representatives from each of the operating divisions of the
Company. A Company readiness champion and project leader are responsible for the
readiness process which includes deliverables such as plans, reviews, and
<PAGE>
appropriate sign offs by the appropriate business unit leaders and the Company's
Year 2000 leadership. The Project also includes the dissemination of internal
communications and status reports on a regular basis to senior leadership.
The Company believes that it has identified and evaluated its internal Year 2000
issues and that sufficient resources are being devoted to renovating IT and
non-IT systems that are not already "Year 2000 ready." The Company is operating
on an internal deadline of December 31, 1998, and expects any residual activity
to conclude before March 31, 1999. This will allow the Company to focus on
additional testing efforts and integration of the Year 2000 programs of recent
acquisitions during the remainder of 1999.
The Project involves four phases: (1) planning; (2) remediation; (3) testing;
and (4) certification. The planning phase involves developing a detailed
inventory of applications and systems, identifying the scope of necessary
remediation to each application or system, and establishing a conversion
schedule. During the remediation phase, source codes are actually converted,
date fields are expanded or windowed, and the remediated system is tested to
ensure it is functionally the same as the existing production version. In the
testing phase, test data is prepared and the application is tested using a
variety of Year 2000 scenarios. The certification phase validates that a system
can run successfully in a Year 2000 environment and appropriate internal sign
offs have been obtained.
The following chart indicates the estimated state of completion, as well as the
planned date of completion of each phase of the project. It is important to note
that each project must complete the previous phase before moving to the next
phase.
Current Planned Planned
October December December
1998 1998 1999
------- -------- --------
Planning 90% 100% 100%
Remediation 70% 90% 100%
Testing 60% 80% 100%
Certification 20% 75% 100%
With regard to the Company's operational platforms (hardware, operating systems
and vendor software) in the Company's primary data center located at the
headquarters location, mainframes are currently 95% Year 2000 ready and servers
are 89% Year 2000 ready.
The financial impact of the Year 2000 Project to the Company has not been, and
is not expected to be, material to its financial position or results of
operations in any given fiscal year. The costs to date associated with the Year
2000 effort primarily represent a reallocation of existing Company resources.
Because of the range of possible issues and the large number of variables
involved (including the Year 2000 readiness of any entities acquired by the
Company), it is impossible to accurately quantify the potential cost of problems
if the Company's remediation efforts or the efforts of those with whom it does
business are not successful. Such costs and any
<PAGE>
failure of such remediation efforts could result in a loss of business, damage
to the Company's reputation, and legal liability.
The Company currently believes that with modifications to existing software and
conversions to new software, the Year 2000 issues can be mitigated. But the
systems of vendors on which the Company's systems rely may not be converted in a
timely fashion, or a vendor or customer may fail to convert its software or may
implement a conversion that is incompatible with the Company's systems, which
could have a material adverse impact on the Company.
In order to assess the readiness status of the Company's vendors, the Company
has contacted each vendor, via written and/or telephone inquiries, regarding its
Year 2000 status and has set up an internal database of this information. The
Company is in the process of obtaining written commitments from each vendor that
the products supplied to the Company are or will be (by a date certain) Year
2000 ready. As of October 31, 1998, the Company had received responses to 78% of
its inquiries. The Company is also relying on representations made or contained
in its vendors' web sites. The Company has also identified and is communicating
with customers to determine if such customers have an effective plan in place to
address their Year 2000 issues, and to determine the extent of the Company's
vulnerability to the failure of such customers to remediate their own Year 2000
issues.
The Company believes that the most likely risks of serious Year 2000 business
disruptions are external in nature, such as disruptions in telecommunications,
electric, or transportation services. In addition, the Company places a high
degree of reliance on computer systems of third parties, such as customers and
computer hardware and software suppliers. Although the Company is assessing the
readiness of these third parties and preparing contingency plans, there can be
no guarantee that the failure of these third parties to modify their systems in
advance of December 31, 1999 would not have a material adverse effect on the
Company. Of all the external risks, the Company believes the most reasonably
likely worst case scenario would be a business disruption resulting from an
extended and/or extensive communications failure.
In an effort to reduce the risks associated with the Year 2000 problem, the
Company has established and is currently continuing to develop Year 2000
contingency plans that build upon existing disaster recovery and contingency
plans. Examples of the Company's existing contingency plans include alternative
power supplies and communication lines. Contingency planning for possible Year
2000 disruptions will continue to be defined, improved and implemented.
Notwithstanding any contingency plan of the Company, the failure to correct a
material Year 2000 problem could result in an interruption in, or a failure of,
certain normal business activities or operations. Such failures could materially
and adversely affect the Company's results of operations, liquidity and
financial condition. Due to the general uncertainty inherent in the Year 2000
problem, resulting in part from the uncertainty of the Year 2000 readiness of
third party vendors and customers, the Company is unable to determine at this
time whether the consequences of Year 2000 failures will have a material impact
on the Company's results of operations, liquidity or financial condition. The
Project is expected to significantly reduce the
<PAGE>
Company's level of uncertainty about the Year 2000 problem and, in particular,
about the Year 2000 compliance and readiness of its material third party vendors
and customers. The Company believes that the continued implementation of the
Project will reduce the possibility of significant interruptions to the
Company's normal business operations.
Other Information
The Company has had a long-term contractual relationship with Allstate. The
initial contract had a five-year term beginning in September, 1992. The contract
is automatically renewed for one-year periods if no cancellation notice is given
six months prior to an anniversary date, after the five-year term. The contract
currently extends until September, 1999. The Company is currently in
negotiations with Allstate to further extend the relationship and provide for an
additional five-year contract with a five-year renewal option.
Certain statements in this quarterly report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements, which are not statements of historical fact, may
contain estimates, assumptions, projections and/or expectations regarding the
Company's financial position, results of operations, market position, product
development, regulatory matters, growth opportunities and growth rates,
acquisition and divestiture opportunities, and other similar forecasts and
statements of expectation. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," and "should," and variations of these
words and similar expressions, are intended to identify these forward-looking
statements. Such forward-looking statements are not guarantees of future
performance. They involve known and unknown risks, uncertainties, and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Representative examples of such factors are discussed in more detail in the
Company's Annual Report on Form 10-K and include, among other things, the
possible adoption of legislation or industry regulation concerning certain
aspects of the Company's business; the removal of data sources and/or marketing
lists from the Company; the ability of the Company to retain customers who are
not under long-term contracts with the Company; technology challenges; Year 2000
issues; the risk of damage to the Company's data centers or interruptions in the
Company's telecommunications links; acquisition integration; the effects of
postal rate increases; and other market factors. See "Additional Information
Regarding Forward-looking Statements" in the Company's Annual Report on Form
10-K.
<PAGE>
Form 10-Q
ACXIOM CORPORATION
PART II - OTHER INFORMATION
Item 4. Submission of Matters to a Vote of Security Holders.
The Annual Meeting of Shareholders of the Company was held on September
17, 1998. At the meeting, the shareholders approved the election of
three directors. Voting results for each individual nominee were as
follows: Rodger S. Kline, 41,391,659 votes for and 2,625,625 votes
withheld; Robert A. Pritzker, 43,051,159 votes for and 966,125 votes
withheld; and James T. Womble, 41,388,836 votes for and 2,628,448 votes
withheld. The shareholders also approved the issuance of up to
31,100,000 shares of common stock pursuant to the Amended and Restated
Merger Agreement dated as of May 26, 1998, by and among Acxiom
Corporation, ACX Acquisition Co., Inc. and May & Speh, Inc. Voting
results for the merger proposal were as follows: 38,288,590 votes for,
118,338 votes withheld, and 76,676 votes abstaining from the vote.
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Forms 8-K.
A report was filed on September 18, 1998, which reported the
shareholders' approval of the merger with May & Speh, Inc.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Acxiom Corporation
Dated: November 16, 1998
By: /s/ Robert S. Bloom
------------------------------------
(Signature)
Robert S. Bloom
Chief Financial Officer
(Chief Accounting Officer)
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
Form 10-Q
(Mark One)
[X] QUARTERLY REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES EXCHANGE
ACT OF 1934
For the quarterly period ended December 31, 1998 OR
[ ] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(d) OF THE SECURITIES
EXCHANGE ACT OF 1934
For the transition period from ----- to -----
Commission file number 0-13163
Acxiom Corporation
(Exact Name of Registrant as Specified in Its Charter)
DELAWARE 71-0581897
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification No.)
P.O. Box 2000, 301 Industrial Boulevard,
Conway, Arkansas 72033-2000
(Address of Principal Executive Offices) (Zip Code)
(501) 336-1000
(Registrant's Telephone Number, Including Area Code)
Indicate by check mark whether the registrant: (1) has filed all reports
required to be filed by Section 13 or 15(d) of the Securities Exchange Act of
1934 during the preceding 12 months (or for such shorter period that the
registrant was required to file such reports), and (2) has been subject to such
filing requirements for the past 90 days.
Yes X No
The number of shares of Common Stock, $ 0.10 par value per share,
outstanding as of February 8, 1999 was 78,128,478.
<PAGE>
Form 10-Q
PART I - FINANCIAL INFORMATION
Item 1. Financial Statements
Company for which report is filed:
ACXIOM CORPORATION
The condensed consolidated financial statements included herein have been
prepared by Registrant, without audit, pursuant to the rules and regulations of
the Securities and Exchange Commission. In the opinion of the Registrant's
management, however, all adjustments necessary for a fair statement of the
results for the periods included herein have been made and the disclosures
contained herein are adequate to make the information presented not misleading.
All such adjustments are of a normal recurring nature.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED BALANCE SHEETS
(Unaudited)
(Dollars in thousands)
December 31, March 31,
1998 1998
------------ ------------
Assets
Current assets:
Cash and cash equivalents $ 3,208 115,510
Marketable securities - 11,794
Trade accounts receivable, net 179,553 118,281
Refundable income taxes 13,619 7,670
Other current assets 46,171 34,615
------- -------
Total current assets 242,551 287,870
------- -------
Property and equipment 319,535 301,393
Less - Accumulated depreciation and 116,841 115,709
amortization ------- -------
Property and equipment, net 202,694 185,684
------- -------
Software, net of accumulated amortization 41,866 38,673
Excess of cost over fair value of net
assets acquired 91,528 73,851
Other assets 165,689 87,072
------- -------
$ 744,328 673,150
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt 13,350 10,466
Trade accounts payable 27,990 21,946
Accrued payroll and related expenses 9,075 18,293
Accrued merger and integration costs 34,881 -
Other accrued expenses 20,753 20,846
Deferred revenue 4,373 11,197
------- -------
Total current liabilities 110,422 82,748
------- -------
Long-term debt, excluding current installments 312,582 254,240
Deferred income taxes 34,966 34,968
Stockholders' equity:
Common stock 7,861 7,405
Additional paid-in capital 139,701 121,130
Retained earnings 139,901 175,946
Foreign currency translation adjustment 901 676
Unearned ESOP compensation - (1,782)
Treasury stock, at cost (2,006) (2,181)
------- -------
Total stockholders' equity 286,358 301,194
------- -------
Commitments and contingencies $ 744,328 673,150
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the Three Months Ended
December 31
1998 1997
------- -------
Revenue $ 187,912 147,042
Operating costs and expenses:
Salaries and benefits 64,784 54,332
Computer, communications and other equipment 29,352 22,173
Data costs 25,124 21,741
Other operating costs and expenses 33,688 23,929
Special charges 9,375 4,700
------- -------
Total operating costs and expenses 162,323 126,875
------- -------
Income from operations 25,589 20,167
------- -------
Other income (expense):
Interest expense (4,518) (2,016)
Other, net 860 834
------- -------
(3,658) (1,182)
------- -------
Earnings before income taxes 21,931 18,985
Income taxes 8,172 7,124
------- -------
Net earnings $ 13,759 11,861
======= =======
Earnings per share:
Basic $ 0.18 0.16
==== ====
Diluted $ 0.17 0.15
==== ====
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS
(Unaudited)
(Dollars in thousands, except per share amounts)
For the Nine Months Ended
December 31
1998 1997
------- -------
Revenue $ 521,080 406,870
Operating costs and expenses:
Salaries and benefits 194,970 149,909
Computer, communications and other equipment 81,901 64,801
Data costs 77,686 64,325
Other operating costs and expenses 86,170 67,905
Special charges 118,747 4,700
------- -------
Total operating costs and expenses 559,474 351,640
------- -------
Income (loss) from operations (38,394) 55,230
------- -------
Other income (expense):
Interest expense (12,917) (6,445)
Other, net 5,717 3,263
------- -------
(7,200) (3,182)
------- -------
Earnings (loss) before income taxes (45,594) 52,048
Income taxes (9,549) 19,580
------- -------
Net earnings (loss) $ (36,045) 32,468
======= =======
Earnings (loss) per share:
Basic $ (0.48) 0.45
======= =======
Diluted $ (0.48) 0.41
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS
(Unaudited)
(Dollars in thousands)
For the Nine Months Ended
December 31
1998 1997
------- -------
Cash flows from operating activities:
Net earnings (loss) $ (36,045) 32,468
Non-cash operating activities:
Depreciation and amortization 45,696 33,599
Gain on disposal of assets (23) (961)
Provision for returns and doubtful accounts 2,153 696
Deferred income taxes - 4,727
ESOP principal payments 1,782 1,782
Non-cash component of special charges 92,062 -
Changes in operating assets and liabilities:
Accounts receivable (61,130) (28,752)
Other assets (22,936) (26,615)
Accounts payable and other liabilities (16,942) 10,642
------- -------
Net cash provided (used) by operating
activities 4,617 27,586
------- -------
Cash flows from investing activities:
Disposition of assets 693 27,898
Development of software (20,379) (11,271)
Capital expenditures (87,290) (59,797)
Purchases of marketable securities - (5,777
Sales of marketable securities 11,794 17,918
Investments in joint ventures (10,607) (4,942)
Net cash paid in acquisitions (22,296) (20,632)
------- -------
Net cash used by investing activities (128,085) (56,603)
------- -------
Cash flows from financing activities:
Proceeds from debt 90,758 26,605
Payments of debt (98,799) (8,412)
Sale of common stock 19,202 6,731
------- -------
Net cash provided by financing activities 11,161 24,924
------- -------
Effect of exchange rate changes on cash 5 8
------- -------
Net decrease in cash and cash equivalents (112,302) (4,085)
Cash and cash equivalents at beginning of
period 115,510 9,695
------- -------
Cash and cash equivalents at end of period $ 3,208 5,610
======= =======
Supplemental cash flow information:
Cash paid during the period for:
Interest $ 12,312 4,828
Income taxes 4,732 10,211
======= =======
See accompanying notes to condensed consolidated financial statements.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
Certain note information has been omitted because it has not changed
significantly from that reflected in Notes 1 through 16 of the Notes to
Consolidated Financial Statements filed as a part of the Registrant's
restated consolidated financial statements as a result of the Registrant's
merger with May & Speh, Inc., as filed with the Securities and Exchange
Commission on a Form 8-K dated February 8, 1999.
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS
(Unaudited)
1. On September 17, 1998, the Company acquired all of the outstanding capital
stock of May & Speh, Inc. ("May & Speh") by exchanging .80 shares of the
Company's stock for each share of May & Speh stock. Accordingly, the
Company exchanged 20,858,923 shares of its common stock for all of the
outstanding shares of capital stock of May & Speh. Additionally, the
Company assumed all of the currently 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. The Company also assumed May & Speh's convertible subordinated
debt, which is now convertible into 5,783,000 shares of the Company's
common stock. The acquisition was accounted for as a pooling-of-interests
and, accordingly, the condensed consolidated financial statements have been
restated as if the combining companies had been combined for all periods
presented. Included in the statement of operations for the nine months
ended December 31, 1998 are revenues of $66.6 million and earnings before
income taxes of $15.1 million for May & Speh for the period from April 1,
1998 to September 17, 1998. For the nine months ended December 31, 1997,
May & Speh had revenue of $75.9 million and earnings before income taxes of
$12.2 million.
In the quarter ended September 30, 1998, the Company recorded special
charges totaling $109.4 million related to merger and integration charges
associated with the May & Speh merger and the write down of other impaired
assets. During the quarter ended December 31, 1998, the Company recorded
additional merger and integration charges of $9.4 million, for a total
special charge during the nine-month period of $118.7 million. 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.
Approximately $110.1 million of the charge was for duplicative assets or
costs directly attributable to the May & Speh merger. The remaining $8.6
million related to other impaired assets which were impaired during the
second quarter, 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, which occurred during the second
quarter.
The following table shows the balances which were accrued as of September
30, 1998 and the changes in those balances during the quarter ended
December 31, 1998 (dollars in thousands):
<PAGE>
September 30 Additions Payments December 31
------------ --------- -------- -----------
1998 1998
---- ----
Transaction costs $ 9,163 - 8,938 225
Associate-related reserves 6,783 1,375 2,912 5,246
Contract termination costs 40,500 8,000 21,500 27,000
Other accruals 2,490 - 80 2,410
------ ----- ------ ------
$58,936 9,375 33,430 34,881
====== ===== ====== ======
The Company expects that the remaining transaction costs will be paid in
cash during the next three to six months. The associate-related reserves
will be paid over the next three to nine months. The contract termination
costs will be paid out over the next 15 months. The other accruals will be
paid out over periods ranging up to five years.
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. The
acquisition was accounted for as a purchase and, accordingly, the results
of operations of NormAdress are included in the condensed consolidated
statements of operations as of the purchase date. The purchase price
exceeded the fair value of net assets acquired by approximately $4.1
million. The resulting excess of cost over net assets acquired is being
amortized using the straight-line method over its estimated economic life
of 20 years. The pro forma combined results of operations, assuming the
acquisition occurred at the beginning of the periods presented, are not
materially different from the historical results of operations reported.
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 $20.2 million is being
amortized using the straight-line method over 40 years. The pro forma
effect of the acquisition is not material to the Company's results of
operations for the periods reported.
<PAGE>
On December 31, 1998, the Company entered into a definitive agreement to
acquire Computer Graphics of Arizona, Inc. ("Computer Graphics") and all of
its affiliated companies in a stock-for-stock merger. The merger is
expected to be completed prior to the Company's fiscal year end, subject to
the absence of any material adverse changes in Computer Graphics' business
prior to closing and subject to the approval of the shareholders of
Computer Graphics. Computer Graphics, a privately held enterprise
headquartered in Phoenix, Arizona, is a computer service bureau principally
serving financial services direct marketers. This merger is expected to be
accounted for as a pooling-of-interests.
2. Included in other assets are unamortized outsourcing capital expenditure
costs in the amount of $27.6 million and $25.0 million at December 31, 1998
and March 31, 1998, respectively. Noncurrent receivables from software
license, data, and equipment sales are also included in other assets in the
amount of $17.5 million and $20.3 million at December 31, 1998 and March
31, 1998, respectively. The current portion of such receivables is included
in other current assets in the amount of $11.5 million and $9.5 million as
of December 31, 1998 and March 31, 1998, respectively. Other assets also
included $71.3 million and $10.3 million in enterprise systems software
licenses at December 31, 1998 and March 31, 1998, respectively. Such
licenses are amortized over the estimated useful life of the license.
<PAGE>
3. Long-term debt consists of the following (dollars in thousands):
December 31, March 31,
1998 1998
5.25% Convertible subordinated notes $115,000 115,000
due 2003; convertible at the option of
the holder into shares of common stock
at a conversion price of $19.89 per
share; redeemable at the option of the
Company at any time after April 3, 2001
Unsecured revolving credit agreement 50,572 36,445
6.92% Senior notes due March 30, 2007, 30,000 30,000
payable in annual installments of $4,286
commencing March 30, 2001; interest is
payable semi-annually
3.12% Convertible note, interest and 25,000 25,000
principal due April 30, 1999; convertible
at maturity into two million shares of
common stock
Capital leases on land, buildings and 21,706 22,818
equipment payable in monthly payments
of $357 of principal and interest;
remaining terms of from five to twenty
years; interest rates at approximately 8%
8.5% Unsecured term loan; quarterly 9,200 9,800
principal payments of $200 plus interest
with the balance due in 2003
9.75% Senior notes, due May 1, 2000, 4,286 6,429
payable in annual installments of $2,143
each May 1; interest is payable
semi-annually
Enterprise software license liabilities 64,343 10,949
payable over terms of from five to seven
years
Other capital leases, debt and long-term 5,825 8,265
liabilities ------- -------
Total long-term debt 325,932 264,706
Less current installments 13,350 10,466
------- -------
Long-term debt, excluding current $312,582 254,240
installments ======= =======
<PAGE>
The 3.12% convertible note, although due within the next year, continues to
be classified as long-term debt because the Company intends to use
available funding under the revolving credit agreement to refinance the
note on a long-term basis in the event the holder of the note elects to
receive cash at maturity. Currently, the Company expects the holder to
convert the note into common stock, which would not require the Company to
pay any cash at maturity.
The holder of the 8.5% term loan, which was made to May & Speh, has the
right to demand payment due to a change in control. The lender has not
exercised that right, and the Company presently intends to renegotiate the
loan on a long-term basis. If the lender does demand repayment, the Company
will pay off the loan with available funds from the unsecured revolving
credit agreement. Therefore, the Company continues to classify the term
loan as long-term.
Also as a result of the merger with May & Speh, the Company was required to
offer to repurchase the 5.25% convertible subordinated notes at face value.
To date, no holders have accepted the offer. The Company does not expect
the holders to accept the offer, as the face value of the notes is less
than the value of the shares into which they are convertible. Accordingly,
these notes continue to be classified as long-term.
At December 31, 1998, 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.
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 December 31, 1998 was $6.0 million. The total cost of the two
building projects is expected to be approximately $19.5 million.
<PAGE>
4. Below is a calculation and reconciliation of the numerator and denominator
of basic and diluted earnings (loss) per share (dollars in thousands,
except per share amounts):
For the Quarter Ended For the Nine Months Ended
--------------------- -------------------------
December December December December
31 31 31 31
-------- -------- -------- --------
1998 1997 1998 1997
Basic earnings (loss)
per share:
Numerator - net
earnings (loss) $13,759 11,861 (36,045) 32,468
====== ====== ====== ======
Denominator (weighted
average shares
outstanding) 77,692 72,300 75,230 72,042
====== ====== ====== ======
Earnings (loss) per
share $ .18 .16 (.48) .45
=== === === ===
Diluted earnings (loss)
per share:
Numerator:
Net earnings (loss) $13,759 11,861 (36,045) 32,468
Interest expense on
convertible debt
(net of tax effect) 1,083 111 - 334
------ ------ ------ ------
$14,842 11,972 (36,045) 32,802
====== ====== ====== ======
Denominator:
Weighted average shares
out-standing 77,692 72,300 75,230 72,042
Effect of common stock
options and warrants 4,451 6,740 - 6,618
Convertible debt 7,783 2,000 - 2,000
------ ------ ------ ------
89,926 81,040 75,230 80,660
====== ====== ====== ======
Earnings (loss) per share $.17 .15 (.48) .41
=== === === ===
All potentially dilutive securities were excluded from the above
calculations for the nine months ended December 31, 1998 because they were
antidilutive in accordance with Statement of Financial Accounting Standards
No. 128. The effects of common stock options and warrants which were
excluded were 6,110,000. Potentially dilutive shares related to the
convertible debt which were excluded were 7,783,000. Also, interest expense
on the convertible debt (net of income tax effect) excluded in computing
diluted earnings (loss) per share for the nine months was $3,208,000.
<PAGE>
Options to purchase shares of common stock that were outstanding during the
other periods reported, but were not included in the computation of diluted
earnings per share because the option exercise price was greater than the
average market price of the common shares, are shown below:
For the Nine
For the Quarter Ended Months Ended
----------------------------- ------------
December 31 December 31 December 31
----------- ----------- -----------
1998 1997 1997
---- ---- ----
Number of shares
under option (in
thousands) 1,378 1,824 1,716
Range of exercise
prices $24.81 - $54.00 $17.03 - $35.92 $15.70 - $35.92
============== ============== ==============
5. Trade accounts receivable are presented net of allowances for doubtful
accounts, returns, and credits of $4.8 million and $3.6 million at December
31, 1998 and March 31, 1998, respectively.
6. The Company adopted Statement of Financial Accounting Standards No. 130,
"Reporting Comprehensive Income," as of April 1, 1998. Statement No. 130
establishes standards for reporting and displaying comprehensive income and
its components in a financial statement that is displayed with the same
prominence as other financial statements. Statement No. 130 also requires
the accumulated balance of other comprehensive income to be displayed
separately in the equity section of the consolidated balance sheet. The
accumulated balance of other comprehensive income, which consists solely of
foreign currency translation adjustment, as of December 31, 1998 and March
31, 1998, was $0.9 million and $0.7 million, respectively. The adoption of
this statement had no impact on operations or stockholders' equity.
Comprehensive income was $13.3 million for the quarter ended December 31,
1998 and was $12.4 million for the quarter ended December 31, 1997.
Comprehensive loss was $35.8 million for the nine months ended December 31,
1998 and comprehensive income was $32.8 million for the nine months ended
December 31, 1997.
<PAGE>
Form 10-Q
Item 2. Management's Discussion and Analysis of Financial Condition and Results
of Operations
On May 26, 1998, the Company entered into a merger agreement with May & Speh,
Inc. ("May & Speh"). May & Speh, headquartered in Downers Grove, Illinois,
provides computer-based information management services with a focus on direct
marketing and information technology outsourcing services. The merger, which was
completed September 17, 1998, has been accounted for as a pooling-of-interests.
Accordingly, the condensed consolidated financial statements have been restated
as if the combining companies had been combined for all periods presented. See
note 1 to the condensed consolidated financial statements for a more detailed
discussion of the merger transaction.
Results of Operations
Consolidated revenue was a record $187.9 million for the quarter ended December
31, 1998, a 28% increase over the same quarter a year ago. For the nine months
ended December 31, 1998, revenue was $521.1 million, an increase of 28% over
revenue of $406.9 million for the same period a year ago.
The following table shows the Company's revenue by operating division for the
quarters ended December 31, 1998 and 1997 (dollars in millions):
1998 1997 % Change
---- ---- --------
Services $51.5 $38.1 +35%
Alliances 49.7 39.3 +26
Data Products (direct view) 33.1 33.5 - 1
May & Speh 43.0 26.4 +63
International 10.6 9.7 + 9
----- ----- ---
$187.9 $147.0 +28%
===== ===== ===
Data Products (product view) $45.7 $40.2 +14%
==== ==== ===
Services Division revenue of $51.5 million for the quarter reflects a 35%
increase over the prior year. Revenue related to the Allstate Insurance Company
("Allstate") contract grew 14%. Other Services Division business units reporting
good growth included retail, up 54%; Citicorp, up 44%; pharmaceutical, up 49%;
publishing, up 11%; the technology business unit, which more than doubled; and
the telecommunications business unit, which nearly quadrupled. These increases
were partially offset, however, by the insurance business unit which was flat
compared to the prior year and utilities, which reported lower revenues than the
prior year.
Alliances Division revenue of $49.7 million increased 26% over the same quarter
a year ago. The Financial Services group continued to show strong results, with
revenue up 43% over the prior year. Also, revenue from the Trans Union
Corporation ("Trans Union") business units grew 20%
<PAGE>
and the other Alliances Division business units grew 13%, including the Polk
business unit which grew 23% combined with flat revenue from the strategic
alliances business unit.
Data Products Division revenue of $33.1 million was essentially flat compared to
last year. Within the Data Products Division, the Acxiom Data Group (InfoBase)
grew 40% while Direct Media reported a modest 3% gain over the prior year and
DataQuick fell 13%. Direct Media, which operates in a more mature industry, was
also comparing against strong results in the year ago quarter. DataQuick results
in the prior year benefited from a license of their data to the Polk Company. It
should also be noted that the discussion above presents the Data Products
Division on a direct view, that is, their results from direct sales channels.
Not included are data sales made to customers of the Services and Alliances
Divisions whose data sales are reported in those divisions. Combining these
sales with the direct sales channels (or the "product view") reflects the
primary way the Data Products Division is measured internally. On the product
view, the Data Products Division reported revenues of $45.7 million reflecting a
14% increase over the prior year.
The May & Speh Division reported $43.0 million revenue for the quarter
reflecting a 63% increase over the same quarter a year ago. May & Speh's
outsourcing business more than doubled while direct marketing services grew 17%
over the prior year. The increase in outsourcing includes the impact of the
recently signed outsourcing contract with Waste Management, Inc.
The International Division revenue of $10.6 million grew 9% over the
year-earlier period reflecting 41% growth in data warehouse and list processing
services, partly offset by a 31% decline in fulfillment services. The decline in
fulfillment services is primarily due to a significant project in the prior year
that did not recur in the current year.
For the nine months ended December 31, 1998, Services Division revenue was up
33% versus the prior year, Alliances Division was up 29%, Data Products Division
was up 11%, May & Speh was up 44%, and the International Division was up 21%. In
general, the discussion above related to the third quarter is also relevant to
the increases for the nine months.
Salaries and benefits for the quarter grew $10.5 million or 19% over the prior
year's third quarter, primarily as a result of normal merit increases and
increased headcount to support growth, including the hiring of approximately 75
new associates under the new Waste Management, Inc. outsourcing contract. For
the nine months ended December 31, 1998, salaries and benefits increased 30%,
which also reflects merit increases and increased headcount, but also includes
increases of $4.5 million due to acquisitions, primarily Buckley Dement and
Sigma. Computer, communications and other equipment costs rose $7.2 million or
32% higher than the third quarter in the prior year, reflecting higher software
costs and the impact of capital expenditures. For the nine months, computer,
communications and other equipment costs were up 26% for the same reasons. Data
costs grew $3.4 million or 16% over the prior year reflecting the growth in data
revenue. This growth, combined with the impact of migrating to fixed cost data
provider contracts, higher compilation costs at DataQuick due to the high level
of refinancings, and costs associated with incremental sources of data, caused
data costs for the nine months to increase
<PAGE>
21%. Other operating costs and expenses grew $9.8 million or 41% from the
year-earlier quarter, reflecting higher costs due to the higher revenue along
with increases in advertising, goodwill amortization, consulting, and facilities
costs. For the nine months ended December 31, 1998 the increase in other
operating costs and expenses was 27%, which is in line with the increase in
revenue.
The Company's operating expenses for the quarter included an additional $9.4
million for special charges, which are merger and integration charges associated
with the May & Speh merger and the write down of other impaired assets. Together
with the special charges recorded in the second quarter, the total special
charges for the nine-month period totaled $118.7 million. The charges consisted
of approximately $10.7 million of transaction costs, $8.1 million in
associate-related reserves, $48.5 million in contract termination costs, $11.5
million for the write down of software, $29.3 million for the write down of
property and equipment, $7.8 million for the write down of goodwill and other
assets, and $2.8 million in other accruals. See note 1 to the condensed
consolidated financial statements for further information about the special
charges. In the third quarter last year, May & Speh recorded a $4.7 million
special charge primarily for severance costs.
Income from operations for the quarter was $25.6 million, an increase of 27%
from the comparable period a year ago. Excluding the impact of the special
charges, income from operations would have been $35.0 million for the current
quarter, compared to $24.9 million in the prior year, an increase of 41%. For
the nine months ended December 31, 1998, the Company recorded a loss from
operations of $38.4 million compared to income from operations of $55.2 million
in the prior year. Again excluding the impact of the special charges, operating
income would have been $80.4 million for the nine months, an increase of 34%
compared to the previous year's total of $59.9 million.
Interest expense increased by $2.5 million compared to the previous year's third
quarter as a result of higher average debt levels. Approximately $1.5 million of
the increase is due to the issuance of the 5.25% convertible debt, which was
issued by May & Speh in March 1998. For the nine months, interest expense was up
$6.5 million for the same reasons. Other income and expense for both the quarter
and nine months consists primarily of interest income from long-term receivables
related to customer contracts and investment income earned by May & Speh on cash
balances and marketable securities prior to the merger.
The Company's effective tax rate, before special charges, was 37.2% for the
quarter and 37.3% for the nine-month period, compared to 37.4% and 37.6% for the
respective periods in the prior year. Portions of the special charges may not be
deductible for tax purposes and therefore the tax benefit recorded on the
special charges was only 31.0%. Combining both the normal tax accrual with the
estimated tax benefit of the special charges results in a 37.3% tax rate for the
third quarter and a 20.9% rate for the nine months ended December 31, 1998. The
Company continues to expect the normal rate for fiscal 1999 to remain in the
37-39% range. This estimate is based on current tax law and current estimates of
earnings, and is subject to change.
<PAGE>
The Company recorded net earnings of $13.8 million for the quarter and a net
loss of $36.0 million for the nine months, compared to net earnings of $11.9
million for the quarter and $32.5 million for the nine months in the previous
year. Earnings per share for the quarter on a basic and diluted basis were $.18
and $.17, respectively. For the nine months, loss per share on both a basic and
diluted basis was $.48. Excluding the impact of the special charges, earnings
per share would have been $.25 basic and $.23 diluted for the quarter and $.61
basic and $.55 diluted for the nine-month period.
Capital Resources and Liquidity
Working capital at December 31, 1998 totaled $132.1 million compared to $205.1
million at March 31, 1998. The balance at March 31, 1998 included $98.0 million
in cash and cash equivalents at May & Speh as a result of the issuance of the
$115 million convertible debt. Since the merger, the Company has used available
cash to pay down debt. At December 31, 1998, the Company had available credit
lines of $126.5 million of which $50.6 million was outstanding. The Company's
debt-to-capital ratio (capital defined as long-term debt plus stockholders'
equity) was 52% at December 31, 1998, compared to 46% at March 31, 1998.
Included in the debt component of this calculation is $140 million of
convertible debt which, if considered equity for the purposes of this
calculation, would reflect a 29% debt-to-capital ratio at December 31, 1998.
Cash provided by operating activities was $4.6 million for the nine months ended
December 31, 1998 compared to cash provided by operating activities of $27.6
million in the same period in the previous year. Earnings before interest,
taxes, depreciation, and amortization ("EBITDA"), excluding the impact of the
special charges recorded in the current year, increased by 36% compared to a
year ago. The resulting operating cash flow was reduced by $101.0 million in the
current year and $44.7 million in the previous year due to the net change in
operating assets and liabilities, including significant increases in accounts
receivable for each year. The Company is taking steps to emphasize collections
of accounts receivable, to mitigate any additional cash flow effects of future
increases. EBITDA is not intended to represent cash flows for the period, is not
presented as an alternative to operating income as an indicator of operating
performance, may not be comparable to other similarly titled measures of other
companies, and should not be considered in isolation or as a substitute for
measures of performance prepared in accordance with generally accepted
accounting principles. However, EBITDA is a relevant measure of the Company's
operations and cash flows and is used internally as a surrogate measure of cash
provided by operating activities.
Investing activities used $128.1 million in the nine months ended December 31,
1998 compared to $56.6 million in the year-earlier period. Investing activities
in the current period included $87.3 million in capital expenditures, compared
to $59.8 million in the previous year, and $20.4 million in software
development, compared to $11.3 million in the previous year. The Company expects
additional capital expenditures to total approximately $20 to $25 million in the
fourth quarter. Investing activities also included $22.3 million paid in the
acquisitions of NormAdress, Sigma, and additional earn-out payments made for
acquisitions recorded in previous years. The acquisitions of NormAdress and
Sigma are discussed more fully in note 1 to the condensed consolidated financial
statements. Investing activities also included $10.6 million invested in joint
ventures,
<PAGE>
including $4.0 million of additional investment in Bigfoot International, Inc.,
an emerging technology company that provides services and tools for internet
e-mail users, and $3.3 million invested in Ceres Integrated Solutions, a
provider of software and analytical services to large retailers. Investing
activities in the current year also include the proceeds of sales of marketable
securities, which were owned by May & Speh prior to the merger with the Company.
Financing activities in the current period provided $11.2 million. Financing
activities included $19.2 million in sales of stock, including $12.2 million
received from Trans Union for the purchase of 4 million shares of stock under a
warrant which was issued to Trans Union in 1992 in conjunction with the data
center management agreement between Trans Union and the Company. The remaining
financing activities consisted of net repayments of debt.
Construction is continuing on the Company's new headquarters building and a new
customer service facility in Little Rock, Arkansas. Both of these buildings are
scheduled to be completed and occupied before the end of fiscal 1999. Each
building is being built pursuant to a 50/50 joint venture between the Company
and local real estate developers. The total cost of the headquarters and
customer service projects is expected to be approximately $7.5 million and $12.0
million, respectively.
On January 4, 1999 the Company announced the acquisition of three database
marketing units from Deluxe Corporation. The purchase price was $18 million in
cash with an additional $5.6 million to be paid April 1, 1999. The units are
expected to add over $20 million in annual revenue and to have little impact on
earnings in the current fiscal year.
While the Company does not have any other material contractual commitments for
capital expenditures, additional investments in facilities and computer
equipment continue to be necessary to support the growth of the business. In
addition, new outsourcing or facilities management contracts frequently require
substantial up-front capital expenditures in order to acquire or replace
existing assets. In some cases, the Company also sells software, hardware, and
data to customers under extended payment terms or notes receivable collectible
over one to eight years. These arrangements also require up-front expenditures
of cash, which are repaid over the life of the agreement. Management believes
that the combination of existing working capital, anticipated funds to be
generated from future operations, and the Company's available credit lines is
sufficient to meet the Company's current operating needs as well as to fund the
anticipated levels of expenditures. If additional funds are required, the
Company would use existing credit lines to generate cash, followed by either
additional borrowings to be secured by the Company's assets or the issuance of
additional equity securities in either public or private offerings. Management
believes that the Company has significant unused capacity to raise capital which
could be used to support future growth.
Year 2000
Many computer systems ("IT systems") and equipment and instruments with embedded
microprocessors ("non-IT systems") were designed to only recognize the last two
digits of a
<PAGE>
calendar year. With the arrival of the Year 2000, these systems and
microprocessors may encounter operating problems due to their inability to
distinguish years after 1999 from years preceding 1999. This could manifest in a
system failure or miscalculations causing disruption of operations, including,
among other things, a temporary inability to process or transmit data, or engage
in normal business activities. As a result, the Company remains engaged in an
extensive project to remediate or replace its date-sensitive IT systems and
non-IT systems.
The following discussion of the implications of the Year 2000 issue for the
Company contains numerous forward-looking statements based on inherently
uncertain information. The information presented is based on the Company's best
estimates, which were derived utilizing a number of assumptions of future
events, including the continued availability of internal and external resources,
third party modifications, and other factors. However, there can be no guarantee
that these estimates will be achieved and actual results could differ. Although
the Company believes it is able to make the necessary modifications in advance,
there can be no guarantee that failure to correctly modify the systems would not
have a material adverse effect on the Company.
Since 1996 the Company has been engaged in an enterprise-wide effort ("the
Project") to address the risks associated with the Year 2000 problem, both
internal and external. Under the Project, the Company has established a project
office comprised of representatives from each of the operating divisions of the
Company. A Company readiness champion and project leader are responsible for the
readiness process which includes deliverables such as plans, reviews, and
appropriate sign-offs by the appropriate business unit leaders and the Company's
Year 2000 leadership. The Project also includes the dissemination of internal
communications and status reports on a regular basis to senior leadership.
The Company believes that it has identified and evaluated its internal Year 2000
issues and that sufficient resources are being devoted to renovating IT systems
and non-IT systems that are not already "Year 2000 ready." The Company set an
internal deadline of December 31, 1998 to achieve Year 2000 readiness status,
with any residual activity to conclude before March 31, 1999. This timetable was
developed to allow the Company to focus on additional testing efforts and
integration of the Year 2000 programs of recent acquisitions during the
remainder of 1999. Overall, the Company substantially met this internal
deadline, with remaining exceptions to be completed by March, 31, 1999. Such
exceptions include recent mergers and acquisitions, as well as customer and
vendor driven dependencies.
The Project involves four phases: (1) planning; (2) remediation; (3) testing;
and (4) certification. The planning phase involves developing a detailed
inventory of applications and systems, identifying the scope of necessary
remediation to each application or system, and establishing a conversion
schedule. During the remediation phase, source codes are actually converted,
date fields are expanded or windowed, and the remediated system is tested to
ensure it is functionally the same as the existing production version. In the
testing phase, test data is prepared and the application is tested using a
variety of Year 2000 scenarios. The certification phase validates that a system
can run successfully in a Year 2000 environment and appropriate internal
sign-offs have been obtained.
<PAGE>
The following chart indicates the estimated state of completion, as well as the
planned date of completion of each phase of the project. It is important to note
that each project must complete the previous phase before moving to the next
phase.
Current Planned Planned
January December December
1999 1998 1999
---- ---- ----
Planning 99% 100% 100%
Remediation 93% 90% 100%
Testing 82% 80% 100%
Certification 79% 75% 100%
With regard to the Company's operational platforms (hardware, operating systems
and vendor software) in the Company's primary data center located at the
headquarters location, mainframes and servers are both currently 95%Year 2000
ready.
The financial impact of the Year 2000 Project to the Company has not been, and
is not expected to be, material to its financial position or results of
operations in any given fiscal year. The costs to date associated with the Year
2000 effort primarily represent a reallocation of existing Company resources.
Because of the range of possible issues and the large number of variables
involved (including the Year 2000 readiness of any entities acquired by the
Company), it is impossible to accurately quantify the potential cost of problems
if the Company's remediation efforts or the efforts of those with whom it does
business are not successful. Such costs and any failure of such remediation
efforts could result in a loss of business, damage to the Company's reputation,
and legal liability.
The Company currently believes that with modifications to existing software and
conversions to new software, the Year 2000 issues can be mitigated. But the
systems of vendors on which the Company's systems rely may not be converted in a
timely fashion, or a vendor or customer may fail to convert its software or may
implement a conversion that is incompatible with the Company's systems, which
could have a material adverse impact on the Company.
In order to assess the readiness status of the Company's vendors, the Company
has contacted each vendor, via written and/or telephone inquiries, regarding its
Year 2000 status and has set up an internal database of this information. The
Company is in the process of obtaining written commitments from each vendor that
the products supplied to the Company are or will be (by a date certain) Year
2000 ready. As of February 1, 1999, the Company had received responses to 83% of
its inquiries. The Company is also relying on representations made or contained
in its vendors' web sites. In addition, the Company has identified and is
communicating with customers to determine if such customers have an effective
plan in place to address their Year 2000 issues, and to determine the extent of
the Company's vulnerability to the failure of such customers to remediate their
own Year 2000 issues.
The Company believes that the most likely risks of serious Year 2000 business
disruptions are external in nature, such as disruptions in telecommunications,
electric, or transportation services.
<PAGE>
In addition, the Company places a high degree of reliance on computer systems of
third parties, such as customers and computer hardware and software suppliers.
Although the Company is assessing the readiness of these third parties and
preparing contingency plans, there can be no guarantee that the failure of these
third parties to modify their systems in advance of December 31, 1999 would not
have a material adverse effect on the Company. Of all the external risks, the
Company believes the most reasonably likely worst case scenario would be a
business disruption resulting from an extended and/or extensive communications
failure.
In an effort to reduce the risks associated with the Year 2000 problem, the
Company has established and is currently continuing to develop Year 2000
contingency plans that build upon existing disaster recovery and contingency
plans. Examples of the Company's existing contingency plans include alternative
power supplies and communication lines. Contingency planning for possible Year
2000 disruptions will continue to be defined, improved and implemented.
Notwithstanding any contingency plan of the Company, the failure to correct a
material Year 2000 problem could result in an interruption in, or a failure of,
certain normal business activities or operations. Such failures could materially
and adversely affect the Company's results of operations, liquidity and
financial condition. Due to the general uncertainty inherent in the Year 2000
problem, resulting in part from the uncertainty of the Year 2000 readiness of
third party vendors and customers, the Company is unable to determine at this
time whether the consequences of Year 2000 failures will have a material impact
on the Company's results of operations, liquidity or financial condition. The
Project is expected to significantly reduce the Company's level of uncertainty
about the Year 2000 problem and, in particular, about the Year 2000 compliance
and readiness of its material third party vendors and customers. The Company
believes that the continued implementation of the Project will reduce the
possibility of significant interruptions to the Company's normal business
operations.
Other Information
The Company has had a long-term contractual relationship with Allstate. The
initial contract had a five-year term beginning in September, 1992. The contract
is automatically renewed for one-year periods if no cancellation notice is given
six months prior to an anniversary date, after the five-year term. The contract
currently extends until September, 1999. The Company is currently in
negotiations with Allstate to further extend the relationship and provide for an
additional five-year contract with a five-year renewal option.
Certain statements in this quarterly report may constitute "forward-looking
statements" within the meaning of the Private Securities Litigation Reform Act
of 1995. These statements, which are not statements of historical fact, may
contain estimates, assumptions, projections and/or expectations regarding the
Company's financial position, results of operations, market position, product
development, regulatory matters, growth opportunities and growth rates,
acquisition and divestiture opportunities, and other similar forecasts and
statements of expectation. Words such as "expects," "anticipates," "intends,"
"plans," "believes," "seeks," "estimates," and "should," and variations of these
words and similar expressions, are intended to identify these forward-looking
<PAGE>
statements. Such forward-looking statements are not guarantees of future
performance. They involve known and unknown risks, uncertainties, and other
factors which may cause the actual results, performance or achievements of the
Company to be materially different from any future results, performance or
achievements expressed or implied by such forward-looking statements.
Representative examples of such factors are discussed in more detail in the
Company's Annual Report on Form 10-K and include, among other things, the
possible adoption of legislation or industry regulation concerning certain
aspects of the Company's business; the removal of data sources and/or marketing
lists from the Company; the ability of the Company to retain customers who are
not under long-term contracts with the Company; technology challenges; Year 2000
issues; the risk of damage to the Company's data centers or interruptions in the
Company's telecommunications links; acquisition integration; the effects of
postal rate increases; and other market factors. See "Additional Information
Regarding Forward-looking Statements" in the Company's Annual Report on Form
10-K.
<PAGE>
Form 10-Q
ACXIOM CORPORATION
PART II - OTHER INFORMATION
Item 6. Exhibits and Reports on Form 8-K.
(a) Exhibits:
27 Financial Data Schedule
(b) Reports on Forms 8-K.
A report was filed on February 8, 1999, which reported the
Registrant's restated consolidated financial statements as a
result of the Registrant's merger with May & Speh, Inc.
<PAGE>
Form 10-Q
ACXIOM CORPORATION AND SUBSIDIARIES
SIGNATURE
Pursuant to the requirements of the Securities and Exchange Act of 1934, the
Registrant has duly caused this report to be signed on its behalf by the
undersigned thereunto duly authorized.
Acxiom Corporation
Dated: February 16, 1999
By: /s/ Robert S. Bloom
---------------------------------
(Signature)
Robert S. Bloom
Chief Financial Officer
(Chief Accounting Officer)
<PAGE>
Annex E
ACXIOM(R)
August 17, 1998
Dear Stockholder:
You are cordially invited to attend the Annual Meeting of Stockholders of
Acxiom Corporation at 10:00 A.M., local time, on September 17, 1998 at Acxiom's
headquarters at 301 Industrial Boulevard, Conway, Arkansas.
The Notice of Annual Meeting and Proxy Statement/Prospectus accompanying this
letter describe the business to be acted upon at the meeting. At the meeting, in
addition to the election of directors, you will be asked to consider and vote
upon the issuance of up to 31,100,000 shares of Acxiom Common Stock (the "Merger
Proposal") in connection with the proposed acquisition of May & Speh, Inc. ("May
& Speh"), pursuant to a merger (the "Merger") of ACX Acquisition Co., Inc., a
wholly owned subsidiary of Acxiom, with and into May & Speh. If the Merger is
consummated, May & Speh will become a wholly owned subsidiary of Acxiom, and the
stockholders of May & Speh will receive 0.8 of a share of Acxiom Common Stock
(the "Exchange Ratio") for each share of their May & Speh Common Stock.
The proposed Merger is contingent upon, among other things, the approval of
the stockholders of Acxiom and May & Speh and will be consummated shortly after
such approvals are obtained and the other conditions to the Merger are satisfied
or waived.
Stockholders of Acxiom holding an aggregate of 8,037,425 shares of Acxiom
Common Stock (representing approximately 15% of the Acxiom Common Stock
outstanding on the record date) have agreed with May & Speh to vote such shares
of Acxiom Common Stock in favor of the Merger Proposal.
The attached Proxy Statement/Prospectus describes the proposed transactions
more fully and includes other information about Acxiom and May & Speh. Please
give this information your thoughtful attention.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the proposed Merger. In addition, the Board of Directors has
received the opinion of its financial advisor, Stephens Inc., that the Exchange
Ratio is fair from a financial point of view to Acxiom and to the holders of
Acxiom Common Stock.
ACCORDINGLY, AFTER CAREFUL CONSIDERATION, YOUR BOARD OF DIRECTORS BY UNANIMOUS
VOTE OF THOSE PRESENT AT THE MEETING OF THE BOARD OF DIRECTORS CONCLUDED THAT
THE MERGER IS FAIR TO, AND IN THE BEST INTERESTS OF ACXIOM AND ITS STOCKHOLDERS
AND RECOMMENDS THAT YOU VOTE FOR THE MERGER PROPOSAL.
Whether or not you plan to attend the meeting, please promptly mark, sign,
date, and return your proxy in the envelope provided. If you plan to attend the
meeting, you may vote in person at that time if you so desire, even though you
have previously turned in your proxy.
Sincerely,
/s/ Charles D. Morgan
Charles D. Morgan
Chairman of the Board
and Company Leader
<PAGE>
ACXIOM CORPORATION
301 INDUSTRIAL BOULEVARD
CONWAY, AR 72033
----------------
NOTICE OF ANNUAL MEETING OF STOCKHOLDERS
SEPTEMBER 17, 1998
----------------
NOTICE IS HEREBY GIVEN that the annual meeting of stockholders of ACXIOM
CORPORATION, a Delaware corporation ("Acxiom"), will be held at Acxiom's
headquarters at 301 Industrial Boulevard, Conway, Arkansas on September 17,
1998, at 10:00 A.M., local time, for the following purposes:
(1) To consider and vote upon a proposal to issue up to 31,100,000 shares of
Acxiom Common Stock in connection with the merger of ACX Acquisition Co.,
Inc., a wholly owned subsidiary of Acxiom ("Sub"), with and into May & Speh,
Inc. ("May & Speh"), pursuant to the terms of the Amended and Restated
Agreement and Plan of Merger by and among Acxiom, Sub and May & Speh, dated as
of May 26, 1998 (the "Merger Agreement"). A copy of the Merger Agreement is
attached to the accompanying Proxy Statement/Prospectus as Annex A.
(2) To elect three directors as members of the Board of Directors to serve
until the 2001 annual meeting of stockholders or until their respective
successors are duly elected and qualified.
(3) To consider and act upon any other matters which may properly come
before the meeting or any adjournment thereof.
Only stockholders of record at the close of business on July 31, 1998 are
entitled to notice of and to vote at the meeting or any adjournment thereof.
By Order of the Board of Directors,
/s/ Catherine L. Hughes
Catherine L. Hughes
Secretary
Conway, Arkansas
August 17, 1998
----------------
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF ACXIOM, AND
RETURN IT TO ACXIOM IN THE PREADDRESSED ENVELOPE PROVIDED FOR THAT PURPOSE. ANY
STOCKHOLDER MAY REVOKE HIS OR HER PROXY AT ANY TIME BEFORE THE MEETING BY
WRITTEN NOTICE TO SUCH EFFECT, BY SUBMITTING A SUBSEQUENTLY DATED PROXY OR BY
ATTENDING THE MEETING AND VOTING IN PERSON. <PAGE>
[LOGO]
MAY & SPEH
August 17, 1998
Dear Stockholder:
You are cordially invited to attend a special meeting of stockholders of May &
Speh, Inc. to be held on September 17, 1998 at The Standard Club, 320 South
Plymouth Court, Chicago, Illinois, at 9:00 A.M., local time.
The Notice of the Special Meeting and Proxy Statement/Prospectus accompanying
this letter describe the business to be acted upon at this meeting. At this
meeting, you will be asked to consider and to vote upon a proposal to approve
and adopt the Amended and Restated Agreement and Plan of Merger, dated as of May
26, 1998 (the "Merger Agreement"), among Acxiom Corporation ("Acxiom"), ACX
Acquisition Co., Inc., a wholly owned subsidiary of Acxiom ("Sub"), and May &
Speh, pursuant to which (i) Sub will be merged with and into May & Speh (the
"Merger") and (ii) each outstanding share of May & Speh Common Stock will be
converted into the right to receive 0.8 of a share of common stock of Acxiom
("Exchange Ratio").
Stockholders of May & Speh holding an aggregate of 2,892,895 shares of May &
Speh Common Stock (representing approximately 11% of the May & Speh Common Stock
outstanding on the record date) have agreed with Acxiom to vote such shares of
May & Speh Common Stock in favor of approval and adoption of the Merger
Agreement.
The attached Proxy Statement/Prospectus describes the proposed transactions
more fully and includes other information about Acxiom and May & Speh. Please
give this information your thoughtful attention.
Your Board of Directors has carefully reviewed and considered the terms and
conditions of the proposed Merger. In addition, the Board of Directors has
received the opinion of its financial advisor, Donaldson, Lufkin & Jenrette
Securities Corporation, that as of the date of such opinion and based upon and
subject to the assumptions, limitations and qualifications set forth in such
opinion, the Exchange Ratio was fair from a financial point of view to the
holders of May & Speh Common Stock.
YOUR BOARD OF DIRECTORS HAS UNANIMOUSLY APPROVED THE MERGER AND RECOMMENDS
THAT YOU VOTE FOR APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
Whether or not you plan to attend the Special Meeting, please promptly mark,
sign, date and return your proxy in the envelope provided. If you plan to attend
the Special Meeting, you may vote in person at that time even though you have
previously turned in your proxy card.
Sincerely,
/s/ Peter I. Mason
Peter I. Mason
Chairman, President & CEO
<PAGE>
MAY & SPEH, INC.
1501 OPUS PLACE
DOWNERS GROVE, IL 60615
NOTICE OF SPECIAL MEETING OF STOCKHOLDERS
SEPTEMBER 17, 1998
----------------
NOTICE IS HEREBY GIVEN that a special meeting of stockholders of MAY & SPEH,
INC., a Delaware corporation ("May & Speh"), will be held at The Standard Club,
320 South Plymouth Court, Chicago, Illinois, on September 17, 1998 at
9:00 A.M. (local time), for the following purposes:
(1) To consider and vote upon a proposal to approve and adopt an Amended and
Restated Agreement and Plan of Merger dated as of May 26, 1998 (the "Merger
Agreement") among Acxiom Corporation ("Acxiom"), ACX Acquisition Co., Inc., a
wholly owned subsidiary of Acxiom ("Sub"), and May & Speh, pursuant to which
(i) Sub will be merged with and into May & Speh and (ii) each outstanding
share of common stock, par value $.01 per share (other than shares held by
Acxiom or any subsidiary of Acxiom), of May & Speh will be converted into the
right to receive 0.8 of a share of common stock, par value $.10 per share, of
Acxiom.
(2) To transact such other and further business as may properly come before
the meeting or any postponement or adjournment thereof.
Only stockholders of record of May & Speh Common Stock at the close of
business on July 31, 1998 are entitled to notice of and to vote at the meeting
or any adjournment thereof.
By Order of the Board of Directors,
/s/ Andy V. Jonusaitis
Andy V. Jonusaitis
Vice President, General Counsel and
Secretary
Downers Grove, Illinois
August 17, 1998
WHETHER OR NOT YOU PLAN TO ATTEND THE MEETING, PLEASE SIGN AND DATE THE
ENCLOSED PROXY, WHICH IS SOLICITED BY THE BOARD OF DIRECTORS OF MAY & SPEH, AND
RETURN IT TO MAY & SPEH IN THE PREADDRESSED ENVELOPE PROVIDED FOR THAT PURPOSE.
ANY STOCKHOLDER MAY REVOKE HIS OR HER PROXY AT ANY TIME BEFORE THE MEETING BY
WRITTEN NOTICE TO SUCH EFFECT, BY SUBMITTING A SUBSEQUENTLY DATED PROXY OR BY
ATTENDING THE MEETING AND VOTING IN PERSON.
<PAGE>
ACXIOM CORPORATION MAY & SPEH, INC.
301 INDUSTRIAL BOULEVARD 1501 OPUS PLACE
CONWAY, AR 72033 DOWNERS GROVE, IL 60515
----------------
ACXIOM CORPORATION
AND
MAY & SPEH, INC.
JOINT PROXY STATEMENT/PROSPECTUS
----------------
ANNUAL MEETING OF STOCKHOLDERS OF
ACXIOM CORPORATION
TO BE HELD ON SEPTEMBER 17, 1998
----------------
SPECIAL MEETING OF STOCKHOLDERS OF
MAY & SPEH, INC.
TO BE HELD ON SEPTEMBER 17, 1998
----------------
ACXIOM CORPORATION PROSPECTUS
----------------
This Joint Proxy Statement/Prospectus (the "Proxy Statement/Prospectus")
constitutes the Proxy Statement of Acxiom Corporation ("Acxiom") and the Proxy
Statement of May & Speh, Inc. ("May & Speh") to be used in connection with the
solicitation of proxies from their respective stockholders in connection with
the proposed merger of ACX Acquisition Co., a wholly owned subsidiary of Acxiom,
with and into May & Speh (the "Merger"). Pursuant to the Merger, each
outstanding share of common stock, par value $.01 per share (other than shares
held by Acxiom or any subsidiary of Acxiom), of May & Speh (the "May & Speh
Common Stock") will be converted into the right to receive 0.8 of a share of
common stock, par value $.10 per share, of Acxiom (the "Acxiom Common Stock").
On August 14, 1998 the high sale prices of Acxiom Common Stock and May & Speh
Common Stock on the NASDAQ National Market System were $24.00 per share and
$18.625 per share, respectively, and the low sale prices were $23.375 per share
and $18.25 per share, respectively. This Proxy Statement/Prospectus also
constitutes the Prospectus of Acxiom with respect to the Acxiom Common Stock to
be issued in connection with the Merger. Acxiom has filed a Registration
Statement on Form S-4 (the "Registration Statement") under the Securities Act of
1933, as amended, with the Securities and Exchange Commission (the "Commission")
covering a maximum of 31,100,000 shares of Acxiom Common Stock to be issued in
connection with the Merger.
This Proxy Statement/Prospectus is first being mailed to the stockholders of
Acxiom and May & Speh on or about August 19, 1998.
SEE "RISK FACTORS" BEGINNING ON PAGE 17 FOR A DISCUSSION OF CERTAIN MATTERS
WHICH SHOULD BE CONSIDERED BY THE STOCKHOLDERS OF ACXIOM AND MAY & SPEH WITH
RESPECT TO THE MERGER.
----------------
THE SHARES OF ACXIOM COMMON STOCK TO BE ISSUED IN CONNECTION WITH THE MERGER
HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND EXCHANGE COMMISSION
OR ANY STATE SECURITIES COMMISSION NOR HAS THE SECURITIES AND EXCHANGE
COMMISSION OR ANY STATE SECURITIES COMMISSION PASSED UPON THE ACCURACY OR
ADEQUACY OF THIS PROXY STATEMENT/PROSPECTUS. ANY REPRESENTATION TO THE CONTRARY
IS A CRIMINAL OFFENSE.
The date of this Proxy Statement/Prospectus is August 17, 1998.
<PAGE>
AVAILABLE INFORMATION
Acxiom has filed a Registration Statement on Form S-4 (the "Registration
Statement") with the Commission under the Securities Act of 1933, as amended
(the "Securities Act"). This Proxy Statement/Prospectus does not contain all the
information set forth in the Registration Statement, certain portions of which
are omitted in accordance with the Rules and Regulations of the Commission. For
further information pertaining to Acxiom and the Acxiom Common Stock offered
hereby, reference is made to the Registration Statement and the exhibits
thereto, which may be inspected without charge at the offices of the Commission
at 450 Fifth Street, N.W., Washington, D.C. 20549, and copies of which may be
obtained from the Commission at prescribed rates.
In addition, each of Acxiom and May & Speh is subject to the information
requirements of the Securities Exchange Act of 1934, as amended (the "Exchange
Act") and, in accordance therewith, file reports, proxy statements and other
information with the Commission. Such reports, proxy statements and other
information can be inspected and copies made at the public reference facilities
of the Commission, Room 1024, 450 Fifth Street, N.W., Washington, D.C. 20549;
and at its regional offices located at 7 World Trade Center, New York, New York
10048 and 500 W. Madison, Suite 1400, Chicago, Illinois 60661. Copies of such
materials can be obtained from the public reference section of the Commission at
450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed rates. In addition,
material filed by Acxiom and May & Speh can be inspected at the offices of the
National Association of Securities Dealers, Inc. at 1735 K Street, Washington,
D.C. 20006. The filings with the Commission of each of Acxiom and May & Speh are
also available to the public from commercial document retrieval services and at
the web site maintained by the Commission at "http://www.sec.gov."
INCORPORATION OF DOCUMENTS BY REFERENCE
THIS PROXY STATEMENT/PROSPECTUS INCORPORATES DOCUMENTS BY REFERENCE WHICH ARE
NOT PRESENTED HEREIN OR DELIVERED HEREWITH. COPIES OF THESE DOCUMENTS (EXCLUDING
EXHIBITS UNLESS EXHIBITS ARE SPECIFICALLY INCORPORATED BY REFERENCE INTO THE
INFORMATION INCORPORATED HEREIN) WILL BE PROVIDED WITHOUT CHARGE, ON ORAL OR
WRITTEN REQUEST BY ANY PERSON TO WHOM THIS PROXY STATEMENT/PROSPECTUS IS
DELIVERED, FROM (I) ACXIOM, 301 INDUSTRIAL BOULEVARD, CONWAY, AR 72033,
TELEPHONE NUMBER (501) 336-1000, ATTENTION: CATHERINE L. HUGHES, IN THE CASE OF
DOCUMENTS RELATING TO ACXIOM OR (II) MAY & SPEH, 1501 OPUS PLACE, DOWNERS GROVE,
IL 60515, TELEPHONE NUMBER (630) 964-1501, ATTENTION: ANDY V. JONUSAITIS, IN THE
CASE OF DOCUMENTS RELATING TO MAY & SPEH. IN ORDER TO ENSURE TIMELY DELIVERY OF
THE DOCUMENTS, ANY REQUEST SHOULD BE MADE BY SEPTEMBER 9, 1998.
The following documents filed with the Commission by Acxiom (File No. 0-
13163) pursuant to the Exchange Act are incorporated by reference herein:
1. Annual Report on Form 10-K for the fiscal year ended March 31, 1998 (the
"Acxiom 10-K"), as amended by the Annual Report on Form 10-K/A dated July 29,
1998 and the Annual Report on Form 10-K/A dated August 4, 1998.
2. Quarterly Report on Form 10-Q for the fiscal quarter ended June 30, 1998.
3. Current Report on Form 8-K dated June 4, 1998.
4. The description of Acxiom capital stock contained in the Registration
Statement on Form 8-A of CCX Network, Inc. (now known as Acxiom) dated
February 4, 1985, and any amendments or updates filed thereto.
5. The description of Acxiom Preferred Stock Purchase Rights contained in
the Registration Statement on Form 8-A dated January 28, 1998, as amended by
Form 8-A/A dated June 4, 1998.
The following documents filed with the Commission by May & Speh (File No. 0-
27872) pursuant to the Exchange Act are incorporated by reference herein:
1. Annual Report on Form 10-K for the fiscal year ended September 30, 1997
(the "May & Speh 10-K").
ii
<PAGE>
2. Quarterly Reports on Form 10-Q for the fiscal quarters ended December 31,
1997, March 31, 1998 and June 30, 1998.
3. Current Report on Form 8-K dated June 4, 1998.
4. Definitive Proxy Statement on Schedule 14A dated as of January 28, 1998
and amended as of February 6, 1998.
5. The description of May & Speh capital stock and preferred share purchase
rights contained in the Registration Statement on Form 8-A dated March 1,
1996.
The following document filed with the Commission by May & Speh (Registration
No. 333-46547) pursuant to the Securities Act is incorporated by reference
herein:
1. The financial statements of May & Speh contained in pages F-1 through
F-17 of May & Speh's Prospectus, dated March 20, 1998, filed with the
Commission pursuant to Rule 424(b) of the Securities Act.
All documents and reports subsequently filed by Acxiom or May & Speh pursuant
to Sections 13(a), 13(c), 14 or 15(d) of the Exchange Act after the date hereof
and prior to the date of the 1998 Acxiom annual meeting and the May & Speh
special meeting shall be deemed to be incorporated by reference herein, and
shall be a part hereof from the date of filing of such documents. Any statement
contained in a document incorporated or deemed to be incorporated by reference
herein, or contained in this Proxy Statement/Prospectus, shall be deemed to be
modified or superseded for purposes of this Proxy Statement/Prospectus to the
extent that a statement contained herein or in any subsequently filed document
which also is deemed to be incorporated herein modifies or supersedes such
statement. Any statement so modified or superseded shall not be deemed to
constitute a part of this Proxy Statement/Prospectus, except as so modified or
superseded.
NO PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR MAKE ANY
REPRESENTATION NOT CONTAINED IN THIS PROXY STATEMENT/PROSPECTUS AND, IF SO GIVEN
OR MADE, SUCH INFORMATION OR REPRESENTATION MUST NOT BE RELIED UPON AS HAVING
BEEN AUTHORIZED. THIS PROXY STATEMENT/PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO
SELL OR A SOLICITATION OF AN OFFER TO BUY ANY SECURITIES OTHER THAN THOSE TO
WHICH IT RELATES OR AN OFFER TO SELL OR A SOLICITATION OF AN OFFER TO BUY ANY
SECURITIES IN ANY JURISDICTION IN WHICH, OR TO ANY PERSON TO WHOM, IT IS
UNLAWFUL TO MAKE SUCH OFFER OR SOLICITATION. NEITHER THE DELIVERY OF THIS PROXY
STATEMENT/PROSPECTUS NOR THE SALE OF ANY SECURITIES HEREUNDER SHALL IMPLY THAT
THE INFORMATION CONTAINED HEREIN OR IN THE DOCUMENTS INCORPORATED BY REFERENCE
HEREIN IS CORRECT AT ANY TIME SUBSEQUENT TO THE DATE HEREOF OR THEREOF.
CAUTIONARY STATEMENT
When used in this Proxy Statement/Prospectus with respect to Acxiom and May &
Speh, the words "estimate," "project," "intend," "expect" and similar
expressions are intended to identify forward-looking statements. Readers are
cautioned not to place undue reliance on these forward-looking statements, which
speak only as of the date of this Proxy Statement/Prospectus. Such statements
are subject to risks and uncertainties that could cause actual results to differ
materially from those contemplated in such forward-looking statements. Acxiom
and May & Speh do not undertake any obligation to publicly release any revisions
to these forward-looking statements to reflect events or circumstances after the
date hereof or to reflect the occurrence of unanticipated events.
iii
<PAGE>
ACXIOM CORPORATION
MAY & SPEH, INC.
PROXY STATEMENT/PROSPECTUS
TABLE OF CONTENTS
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
AVAILABLE INFORMATION..................................................... ii
INCORPORATION OF DOCUMENTS BY REFERENCE................................... ii
CAUTIONARY STATEMENT...................................................... iii
TABLE OF CONTENTS......................................................... iv
SUMMARY................................................................... 1
General................................................................... 1
The Companies............................................................. 1
Acxiom.................................................................. 1
May & Speh.............................................................. 2
The Meetings.............................................................. 2
The Acxiom Meeting...................................................... 2
The May & Speh Meeting.................................................. 2
The Merger................................................................ 3
General................................................................. 3
Effective Time of the Merger............................................ 3
Exchange of May & Speh Stock Certificates............................... 3
Conditions to the Merger................................................ 4
Antitrust Matters....................................................... 4
Interests of Certain Persons in the Merger.............................. 4
Termination............................................................. 4
Reciprocal Stock Option Agreements; Termination Fees.................... 4
Certain United States Federal Income Tax Consequences of the Merger..... 5
Accounting Treatment.................................................... 5
Appraisal Rights........................................................ 5
Recommendation of the Boards of Directors............................... 6
Opinions of Financial Advisors.......................................... 6
Comparative Stock Prices and Dividends.................................... 7
Risk Factors.............................................................. 8
Acxiom Corporation Selected Historical Financial Data..................... 9
May & Speh, Inc. Selected Historical Financial Data....................... 10
Acxiom Corporation and May & Speh, Inc. Selected Unaudited Pro Forma
Financial Information.................................................... 11
Comparative Per Share Data................................................ 12
INTRODUCTION.............................................................. 14
The Acxiom Meeting........................................................ 14
The May & Speh Meeting.................................................... 15
VOTING RIGHTS AND PROXIES................................................. 15
RISK FACTORS.............................................................. 17
Additional Information Regarding Forward-Looking Statements............... 17
Integration of the Business of Acxiom and May & Speh...................... 17
Fixed Exchange Ratio...................................................... 17
Competition............................................................... 18
Risk of Data Center Failure............................................... 18
Reliance on Significant Customers; Absence of Long-Term Contracts......... 18
</TABLE>
iv
<PAGE>
<TABLE>
<CAPTION>
PAGE
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<S> <C>
Rapid Technological Change................................................ 19
Government Regulation; Privacy Issues..................................... 19
Loss of Data and/or Customer Lists........................................ 19
Postal Rate Increases..................................................... 19
Risk of Acquisition Strategy.............................................. 20
Intellectual Property Rights.............................................. 20
The Year 2000 Issue....................................................... 21
THE MERGER................................................................ 22
Background of the Merger.................................................. 22
Recommendation of the Acxiom Board of Directors; Acxiom's Reasons for the
Merger................................................................... 24
Opinion of Acxiom's Financial Advisor..................................... 25
Opinion of Stephens..................................................... 25
Historical Stock Price Analysis......................................... 27
Selected Comparable Company Trading Analysis............................ 27
Selected Comparable Transaction Analysis................................ 28
Discounted Cash Flow Analysis........................................... 28
Relative Valuation Analysis............................................. 28
Merger Consequences Analysis............................................ 29
Recommendation of the May & Speh Board of Directors; May & Speh's Reasons
for the Merger........................................................... 29
Opinion of May & Speh's Financial Advisor................................. 31
Stock Price History..................................................... 32
Comparable Publicly Traded Company Analysis............................. 32
Comparable M&A Transaction Analysis..................................... 33
Comparable Premiums Paid Analysis....................................... 33
Contribution Analysis................................................... 34
Discounted Cash Flow Analysis........................................... 34
Terms of the Merger....................................................... 35
Structure; Effective Time; Stockholder Approvals........................ 35
Conversion of Shares.................................................... 36
Exchange of Certificates................................................ 36
No Fractional Securities................................................ 36
Conversion of Employee Stock Options.................................... 36
Certain Representations and Warranties.................................. 37
Irrevocable Proxies..................................................... 37
Conduct of Business Pending the Merger.................................. 38
Conditions to Consummation of the Merger................................ 39
Acquisition Proposals................................................... 39
Termination............................................................. 40
Expenses; Termination Fees.............................................. 41
General Provisions...................................................... 41
Amendment and Waiver.................................................... 41
By-Law Indemnification and Insurance.................................... 42
Regulatory Approval..................................................... 42
Reciprocal Stock Option Agreements...................................... 42
Interests of Certain Persons in the Merger................................ 42
Acxiom.................................................................. 42
May & Speh.............................................................. 43
May & Speh Options; Acceleration of Vesting........................... 43
Employment Agreements................................................. 44
Employee Benefits..................................................... 44
Indemnification; Insurance............................................ 45
</TABLE>
v
<PAGE>
<TABLE>
<CAPTION>
PAGE
----
<S> <C>
Certain United States Federal Income Tax Consequences of the Merger....... 45
Accounting Treatment of the Merger........................................ 46
Percentage Ownership Interest of May & Speh Stockholders after the Merger. 46
Appraisal Rights.......................................................... 46
Pro Forma Financial Information........................................... 47
Comparative Rights of Stockholders........................................ 55
Board of Directors...................................................... 55
Removal of Directors.................................................... 55
Vacancies............................................................... 55
Stockholder Action Without a Meeting.................................... 55
Special Meetings of Stockholders........................................ 56
Committees of Directors................................................. 56
Amendments to Charter................................................... 56
Amendments to By-Laws................................................... 57
Mergers and Other Fundamental Transactions.............................. 57
CERTAIN RELATED TRANSACTIONS BETWEEN ACXIOM AND MAY & SPEH................ 58
Reciprocal Option Agreements.............................................. 58
ELECTION OF ACXIOM DIRECTORS.............................................. 61
MANAGEMENT................................................................ 62
Directors and Director Nominees........................................... 62
Acxiom Board of Directors' Meetings and Committees........................ 64
Executive Compensation.................................................... 65
Cash and Other Compensation............................................. 65
Stock Option Exercises and Holdings..................................... 65
Compensation of Directors............................................... 66
Compensation Committee Interlocks and Insider Participation............. 66
Report of Compensation Committee........................................ 66
Compensation Policies................................................. 66
Components of Compensation............................................ 67
Mr. Morgan's Compensation............................................. 68
Omnibus Budget Reconciliation Act of 1993............................. 68
ACXIOM'S PERFORMANCE...................................................... 69
SECTION 16(a) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE................... 69
CERTAIN TRANSACTIONS...................................................... 70
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ACXIOM.. 72
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF MAY &
SPEH..................................................................... 74
LEGAL MATTERS............................................................. 75
EXPERTS................................................................... 75
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS.......................... 75
STOCKHOLDER PROPOSALS FOR THE 1999 ANNUAL STOCKHOLDERS' MEETINGS.......... 76
Acxiom.................................................................... 76
May & Speh................................................................ 76
</TABLE>
<TABLE>
<C> <C> <S> <C>
Annex A -- Amended and Restated Agreement and Plan of Merger, dated as
of May 26, 1998, by and among Acxiom Corporation, ACX
Acquisition Co., Inc., and May & Speh, Inc.................. A-1
Annex B -- Stock Option Agreement, dated as of May 26, 1998, between
May & Speh, Inc., as Issuer and Acxiom Corporation, as
Grantee..................................................... B-1
Annex C -- Stock Option Agreement, dated as of May 26, 1998, between
Acxiom Corporation, as Issuer and May & Speh, Inc., as
Grantee..................................................... C-1
Annex D -- Opinion of Stephens Inc..................................... D-1
Annex E -- Opinion of Donaldson, Lufkin & Jenrette Securities
Corporation................................................. E-1
</TABLE>
vi
<PAGE>
SUMMARY
The following is a brief summary of certain information contained, or
incorporated by reference, elsewhere in this Proxy Statement/Prospectus. This
summary is not intended to be complete and is qualified by reference to the more
detailed information appearing, or incorporated by reference, elsewhere herein.
Stockholders are urged to review the entire Proxy Statement/Prospectus, the
Annexes hereto and the documents incorporated herein by reference.
GENERAL
This Proxy Statement/Prospectus relates to the solicitation of proxies in
connection with the proposed merger (the "Merger") of ACX Acquisition Co., Inc.
("Sub"), a newly formed, wholly owned subsidiary of Acxiom Corporation, a
Delaware corporation ("Acxiom"), with and into May & Speh, Inc., a Delaware
corporation ("May & Speh"). In addition, this Proxy Statement/Prospectus is
furnished in connection with the solicitation by the Board of Directors of
Acxiom of proxies to be voted at the annual meeting of stockholders of Acxiom
(the "Acxiom Meeting"). Upon effectiveness of the Merger, each outstanding share
of common stock, $0.01 par value per share, of May & Speh (the "May & Speh
Common Stock") will be converted into the right to receive 0.8 of a share of
common stock, $0.10 par value per share, of Acxiom (the "Acxiom Common Stock").
The shares of Acxiom Common Stock to be issued in the Merger will be issued with
attached rights issued pursuant to the Rights Agreement, between Acxiom and
First Chicago Trust Company of New York, dated as of January 28, 1998, as
amended by Amendment No. 1 thereto dated as of May 26, 1998 (the "Rights
Agreement"). As a result of the Merger, May & Speh will become a wholly owned
subsidiary of Acxiom.
The Merger will be effected pursuant to the Amended and Restated Agreement and
Plan of Merger, dated as of May 26, 1998 (the "Merger Agreement"), by and among
Acxiom, Sub and May & Speh, a copy of which is attached hereto as Annex A. See
"THE MERGER."
THE COMPANIES
Acxiom. Acxiom is in the business of data delivery and information integration
and management for customers in the United States and the United Kingdom, and,
to a smaller extent, Europe, Canada and Malaysia. While in the past Acxiom's
business was focused upon the provision of data processing and related
computer-based services, mainly to direct marketing organizations, Acxiom's
business has expanded in recent years beyond the direct marketing industry. For
some of its major customers Acxiom provides assistance in the form of
information/database management, data center management and/or the provision of
data, the primary purpose of which may be for activities other than direct
marketing. For example, Acxiom's largest customer, Allstate Insurance Company,
uses Acxiom's information management services and data for the purpose of
underwriting insurance. Acxiom's second largest customer, Trans Union
Corporation, one of the three major credit bureaus in the U.S., has, among other
things, outsourced the operation of its data center to Acxiom.
In the direct marketing area Acxiom is one of the leading providers of
computer-based marketing information services and marketing data. Acxiom offers
a broad range of services and data to direct marketers and to other businesses
which utilize direct marketing techniques such as direct mail advertising,
database marketing and the mining of data warehouses. Acxiom assists its
customers with the marketing process, including project design, list brokering
and management, list cleaning, list enhancement, list production, database
creation and management, and fulfillment and consumer response analysis.
Acxiom was originally incorporated in 1969 as Demographics, Inc., an Arkansas
corporation which later became known as Conway Communication Exchange, Inc. In
connection with its initial public offering in 1983, Acxiom was reincorporated
in Delaware as CCX Network, Inc. In 1988, the name Acxiom Corporation was
adopted. Acxiom is headquartered in Conway, Arkansas, and has additional
operations in twenty-four states, the District of Columbia, Canada, the United
Kingdom, the Netherlands, France and Malaysia. Acxiom employs approximately
3,600 employees worldwide. <PAGE>
Acxiom's principal executive offices are located at 301 Industrial Boulevard,
Conway, Arkansas, 72033, and its telephone number is (501) 336-1000. Acxiom's
internet address is http://www.acxiom.com.
May & Speh. May & Speh provides computer-based information management services
with a focus on direct marketing and information technology outsourcing
services. May & Speh's direct marketing services help companies execute more
profitable direct marketing and customer management programs. May & Speh's
services include strategic analysis and strategy management; systems consulting,
custom data warehouse and datamart design, build, implementation and management;
statistical (predictive) modeling and analysis; and list processing. May &
Speh's information technology outsourcing services support multi-platform
processing and network management for clients seeking to outsource their
information technology operations. May & Speh's direct marketing and information
technology outsourcing services are synergistic and allow May & Speh to leverage
its investment in technical personnel and its state-of-the-art data processing
facilities as well as its core competencies in customized software systems
development, large database management, high speed data processing and data
center management. May & Speh's open architecture and multiple platform data
facilities provide its clients with superior processing flexibility and speed.
May & Speh's principal executive offices are located at 1501 Opus Place,
Downers Grove, Illinois, 60515, and its telephone number is (630) 964-1501.
THE MEETINGS
The Acxiom Meeting. The Acxiom Meeting will be held on September 17, 1998, at
10:00 A.M. (local time) at Acxiom's headquarters at 301 Industrial Boulevard,
Conway, Arkansas. At the Acxiom Meeting, holders of Acxiom Common Stock will be
asked to consider and vote upon (i) the issuance of up to 31,100,000 shares of
Acxiom Common Stock pursuant to the Merger Agreement (the "Merger Proposal");
and (ii) the election of three directors (the "Directors") as members of the
Board of Directors to serve until the 2001 annual meeting of stockholders or
until their respective successors are duly elected and qualified.
Only holders of record of Acxiom Common Stock at the close of business on July
31, 1998 (the "Acxiom Record Date") are entitled to notice of and to vote at the
Acxiom Meeting. Holders of record of Acxiom Common Stock are entitled to one
vote per share on any matter that may properly come before the Acxiom Meeting.
The presence, in person or by proxy, of the holders of at least a majority of
the voting power entitled to vote at the Acxiom Meeting is necessary to
constitute a quorum. The affirmative vote of a majority of the voting power of
the shares of Acxiom Common Stock present in person or by proxy at the Acxiom
Meeting is required to approve the Merger Proposal. See "INTRODUCTION--The
Acxiom Meeting" and "VOTING RIGHTS AND PROXIES."
Stockholders of Acxiom holding an aggregate of 8,037,425 shares of Acxiom
Common Stock (representing approximately 15% of the Acxiom Common Stock
outstanding as of the Acxiom Record Date) have granted irrevocable proxies to
May & Speh pursuant to which such stockholders have agreed to vote in favor of
the Merger Proposal. See "THE MERGER--Terms of the Merger--Irrevocable Proxies."
As of the Acxiom Record Date, directors and executive officers of Acxiom and
their affiliates owned an aggregate of 8,465,107 shares of Acxiom Common Stock
(approximately 16% of the shares of Acxiom Common Stock then outstanding). Such
individuals have advised Acxiom that they intend to vote such shares in favor of
the Merger Proposal and the election of the Directors.
The May & Speh Meeting. A special meeting of stockholders of May & Speh (the
"May & Speh Meeting," together with the Acxiom Meeting, the "Stockholders'
Meetings"), will be held on September 17, 1998, at 9:00 A.M. (local time), at
The Standard Club, 320 South Plymouth Court, Chicago, Illinois. At the May &
Speh Meeting, holders of May & Speh Common Stock will be asked to consider and
vote upon a proposal to approve and adopt the Merger Agreement.
2
<PAGE>
Only holders of record of May & Speh Common Stock at the close of business on
July 31, 1998 (the "May & Speh Record Date") are entitled to notice of and to
vote at the May & Speh Meeting. Holders of record on the May & Speh Record Date
are entitled to one vote per share on any matter that may properly come before
the May & Speh Meeting. The presence, in person or by proxy, of the holders of a
majority of the May & Speh Common Stock entitled to vote at the May & Speh
Meeting is necessary to constitute a quorum. The affirmative vote of the holders
of a majority of the outstanding shares of May & Speh Common Stock is necessary
to approve and adopt the Merger Agreement. See "INTRODUCTION--The May & Speh
Meeting."
Lawrence J. Speh, Albert J. Speh, Jr., and certain trusts of which Messrs.
Speh and Speh are trustees, that hold in the aggregate 2,892,895 shares of May &
Speh Common Stock, representing approximately 11% of the May & Speh Common Stock
outstanding as of the May & Speh Record Date, have granted irrevocable proxies
to Acxiom pursuant to which such stockholders have agreed to vote in favor of
the approval and adoption of the Merger Agreement. See "THE MERGER-- Terms of
the Merger--Irrevocable Proxies."
In addition, as of the May & Speh Record Date, directors (other than Lawrence
T. Speh and Albert J. Speh, Jr.) and executive officers of May & Speh
collectively, owned an aggregate of 617,084 shares of May & Speh Common Stock
(representing approximately 2.4% of the shares of May & Speh Common Stock then
outstanding). Each of such directors and executive officers of May & Speh has
advised May & Speh that he or she intends to vote such shares in favor of the
approval and adoption of the Merger Agreement.
THE MERGER
General. Pursuant to the Merger Agreement, Sub will be merged with and into
May & Speh. As a result of the Merger, May & Speh will become a wholly owned
subsidiary of Acxiom and each outstanding share of May & Speh Common Stock will
be converted into the right to receive 0.8 of a share of Acxiom Common Stock
(the "Exchange Ratio"). The Exchange Ratio is fixed in the Merger Agreement and
will not be adjusted as a result of any fluctuation in the price of either
Acxiom Common Stock or May & Speh Common Stock. The price of Acxiom Common Stock
may be different at the Effective Time from its price at the date of this Proxy
Statement/Prospectus and at the date of the May & Speh Meeting. There can be no
assurance that the price of Acxiom Common Stock on the date of the May & Speh
Meeting will be indicative of its price at the Effective Time. Cash will be paid
in lieu of any fractional share of Acxiom Common Stock in an amount determined
by multiplying any such fraction by the closing sale price of Acxiom Common
Stock on the NASDAQ National Market on the day of the Effective Time. See "THE
MERGER--Terms of the Merger--No Fractional Securities." The terms of the Merger
Agreement are more fully described in "THE MERGER--Terms of the Merger."
Effective Time of the Merger. The Merger will be consummated at the time and
on the date that a certificate of merger (the "Certificate of Merger") is filed
with the Delaware Secretary of State or such later time as is specified in the
Certificate of Merger (the "Effective Time"). It is presently contemplated that
the Effective Time will occur as soon as practicable after the requisite
approvals of the stockholders of Acxiom and May & Speh have been obtained and
other conditions specified in the Merger Agreement are satisfied. See "THE
MERGER--Terms of the Merger--Structure; Effective Time; Stockholder Approvals."
Exchange of May & Speh Stock Certificates. As soon as practicable after the
Effective Time, instructions with regard to the surrender of stock certificates,
together with a letter of transmittal to be used for this purpose, will be
furnished to all May & Speh stockholders for use in exchanging their stock
certificates for the Acxiom Common Stock they will be entitled to receive as a
result of the Merger. STOCKHOLDERS OF MAY & SPEH SHOULD NOT SUBMIT THEIR STOCK
CERTIFICATES FOR EXCHANGE UNTIL SUCH INSTRUCTIONS AND LETTER OF TRANSMITTAL ARE
RECEIVED. See "THE MERGER--Terms of the Merger--Conversion of Shares" and
"--Exchange of Certificates."
3
<PAGE>
Conditions to the Merger. In addition to the approval by the stockholders of
May & Speh and Acxiom, the obligations of the parties to consummate the Merger
are subject to the satisfaction of certain conditions, including, among other
things, the Registration Statement having become effective under the Securities
Act; the applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvement Act of 1976, as amended, and the rules and regulations thereunder
(the "HSR Act"), having expired or been terminated; the receipt by each of May &
Speh and Acxiom of certain required consents from third parties and governmental
instrumentalities in addition to pursuant to the HSR Act; the receipt by each of
May & Speh and Acxiom of legal opinions to the effect that the Merger will
qualify as a tax-free reorganization; the receipt by each of Acxiom, Sub and May
& Speh of a letter from KPMG Peat Marwick LLP stating that the Merger will
qualify as a pooling of interests transaction; and the requirement that no
injunction or other order has been issued and is in effect that prohibits the
consummation of the Merger. See "THE MERGER--Terms of the Merger--Conditions to
Consummation of the Merger."
Antitrust Matters. The Merger is subject to the requirements of the HSR Act,
which provides that certain acquisition transactions (including the Merger) may
not be consummated until certain information has been furnished to the Antitrust
Division of the Department of Justice (the "Antitrust Division") and the Federal
Trade Commission (the "FTC") and unless certain waiting period requirements are
met. On June 30, 1998, the Notification and Report Forms for the Merger required
pursuant to the HSR Act were filed by both Acxiom and May & Speh. The HSR Act
waiting period expired with respect to the Merger on July 30, 1998 without
Acxiom or May & Speh receiving a request for additional information or
documentary material from the Antitrust Division or the FTC prior to such
expiration. See "THE MERGER--Terms of the Merger--Regulatory Approval" and "THE
MERGER--Terms of the Merger--Conditions to Consummation of the Merger."
Interests of Certain Persons in the Merger. In considering the recommendation
of the May & Speh Board of Directors with respect to the Merger Agreement and
the transactions contemplated thereby, stockholders of May & Speh should be
aware that certain members of the management of May & Speh and the Board of
Directors of May & Speh have certain interests in the Merger that are in
addition to the interests of stockholders of May & Speh generally. See "THE
MERGER--Interests of Certain Persons in the Merger."
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time by the mutual consent of Acxiom and May & Speh and by either of
them individually under certain specified circumstances, including if the Merger
has not been consummated on or before December 31, 1998. See "THE MERGER--Terms
of the Merger--Termination."
Reciprocal Stock Option Agreements; Termination Fees. As an inducement to
Acxiom to enter into the Merger Agreement, pursuant to the stock option
agreement, dated as of May 26, 1998, between May & Speh and Acxiom (the "Acxiom
Option Agreement"), May & Speh granted Acxiom an option (the "Acxiom Option") to
purchase from May & Speh at any one time up to 19.9% of the total number of
shares of May & Speh Common Stock issued and outstanding immediately prior to
the grant of the Acxiom Option, subject to certain adjustments, at an exercise
price of $14.96 per share, subject to the terms and conditions set forth therein
(the "Acxiom Option Purchase Price"). The closing sale price of May & Speh
Common Stock on the last trading day preceding the announcement of the execution
of the Merger Agreement was $17.00 per share. Acxiom may exercise the Acxiom
Option only upon the occurrence of certain events (none of which has occurred)
generally relating to an attempt by a third party to acquire all of or a
significant interest in May & Speh. The Acxiom Option Agreement gives Acxiom a
right to receive cash upon exercise of the Acxiom Option in an amount equal to
the difference between (i) the average closing price of the shares subject to
the Acxiom Option during a ten day period prior to the closing of the exercise
and (ii) the Acxiom Option Purchase Price, except that May & Speh's obligation
to pay such cash amount is limited to a maximum of $2.00 per share for each
share exercised subject to the Acxiom Option. The Acxiom Option Agreement also
provides May & Speh with an option to repurchase any shares acquired by Acxiom
pursuant to an exercise of the Acxiom Option at a purchase per share equal to
the Acxiom Option Purchase Price plus $2.00.
4
<PAGE>
As an inducement to May & Speh to enter into the Merger Agreement, pursuant to
the stock option agreement, dated as of May 26, 1998, between May & Speh and
Acxiom (the "May & Speh Option Agreement" and together with the Acxiom Option
Agreement, the "Option Agreements"), Acxiom granted May & Speh an option (the
"May & Speh Option") to purchase from Acxiom at any one time up to 19.9% of the
total number of shares of Acxiom Common Stock issued and outstanding immediately
prior to the grant of the May & Speh Option, subject to certain adjustments, at
an exercise price of $23.55 per share, subject to the terms and conditions set
forth therein (the "May & Speh Option Purchase Price"). The closing sale price
of Acxiom Common Stock on the last trading day preceding the announcement of the
execution of the Merger Agreement was $21.8125 per share. May & Speh may
exercise the May & Speh Option only upon the occurrence of certain events (none
of which has occurred) generally relating to an attempt by a third party to
acquire all of or a significant interest in Acxiom. The May & Speh Option
Agreement gives May & Speh a right to receive cash upon exercise of the May &
Speh Option in an amount equal to the difference between (i) the average closing
price of the shares subject to the May & Speh Option during a ten day period
prior to the closing of the exercise and (ii) the May & Speh Option Purchase
Price, except that Acxiom's obligation to pay such cash amount is limited to a
maximum of $1.00 per share for each share exercised subject to the May & Speh
Option. The May & Speh Option Agreement also provides Acxiom with an option to
repurchase any shares acquired by May & Speh pursuant to an exercise of the May
& Speh Option at a purchase per share equal to the May & Speh Option Purchase
Price plus $1.00. See "CERTAIN RELATED TRANSACTIONS-- Reciprocal Option
Agreements."
The Acxiom Option Agreement and the May & Speh Option Agreement are attached
as Annex B and Annex C, respectively, to this Proxy Statement/Prospectus and are
incorporated herein by reference.
The Merger Agreement provides for the payment of fees (the "Termination Fees")
in the amount of $20 million and reimbursement of expenses up to $2.5 million
following a termination of the Merger Agreement under certain circumstances. See
"THE MERGER--Terms of the Merger--Expenses; Termination Fees."
Certain United States Federal Income Tax Consequences of the Merger. It is a
condition to the consummation of the Merger that May & Speh receive an opinion
from its tax counsel, Winston & Strawn, and that Acxiom receive an opinion from
its tax counsel, Skadden, Arps, Slate, Meagher & Flom LLP, to the effect that,
based upon certain facts, representations and assumptions, the Merger will
constitute a reorganization within the meaning of Section 368(a) of the Internal
Revenue Code of 1986, as amended (the "Code"). The issuance of such opinions is
conditioned on, among other things, such tax counsel's receipt of representation
letters from each of May & Speh, Acxiom and Sub, in each case, in form and
substance reasonably satisfactory to each such tax counsel. No ruling has been
(or will be) sought from the Internal Revenue Service (the "IRS") with respect
to the Merger. Assuming the Merger constitutes a reorganization within the
meaning of Section 368(a) of the Code, no gain or loss will be recognized for
United States federal income tax purposes by holders of May & Speh Common Stock
who exchange their common stock for Acxiom Common Stock pursuant to the Merger
(except with respect to cash received by holders of May & Speh Common Stock in
lieu of fractional shares of Acxiom Common Stock). See "THE MERGER--Certain
United States Federal Income Tax Consequences of the Merger." Holders of May &
Speh Common Stock are urged to consult their tax advisors as to the specific tax
consequences to them of the Merger.
Accounting Treatment. Both Acxiom and May & Speh believe that the Merger will
qualify as a pooling of interests for accounting and financial reporting
purposes and have been so advised by their respective independent public
accountants. Consummation of the Merger is conditioned upon the receipt by each
of Acxiom, Sub and May & Speh of a letter from KPMG Peat Marwick LLP, Acxiom's
independent public accountants, stating that the Merger will qualify for pooling
of interests accounting treatment. See "THE MERGER--Accounting Treatment of the
Merger" and "THE MERGER--Terms of the Merger--Conditions to Consummation of the
Merger."
Appraisal Rights. Under the Delaware General Corporation law (the "DGCL"),
the holders of May & Speh Common Stock are not entitled to appraisal or
dissenter's rights in connection with the approval of
5
<PAGE>
the Merger Agreement and the transactions contemplated thereby. The transactions
contemplated by the Merger Agreement and the issuance of the Acxiom Common Stock
contemplated thereby do not give rise to any appraisal or dissenters' rights to
holders of Acxiom Common Stock.
Recommendation of the Boards of Directors. The Board of Directors of Acxiom by
unanimous vote of those present at the meeting of the Board of Directors
approved the Merger Agreement and recommends that Acxiom stockholders vote FOR
the Merger Proposal. The Board of Directors of May & Speh has unanimously
approved the Merger Agreement and unanimously recommends a vote FOR approval and
adoption of the Merger Agreement by the stockholders of May & Speh.
For a discussion of the factors considered by the respective Boards of
Directors in reaching their decisions, see "THE MERGER--Recommendation of the
Acxiom Board of Directors; Reasons for the Merger" and "THE MERGER--
Recommendation of May & Speh Board of Directors; Reasons for the Merger."
Opinions of Financial Advisors. Stephens Inc. ("Stephens") delivered its oral
and written opinion to the Acxiom Board of Directors on May 26, 1998, to the
effect that as of such date and subject to the assumptions made and limits in
review specified therein, the Exchange Ratio was fair from a financial point of
view to Acxiom. Stephens subsequently confirmed such opinion by delivering to
the Acxiom Board of Directors a written opinion dated the date of this Proxy
Statement/Prospectus to the effect that, subject to the assumptions made and
limits in review specified therein, the Exchange Ratio is fair from a financial
point of view to Acxiom and to the holders of Acxiom Common Stock. Donaldson,
Lufkin & Jenrette Securities Corporation ("DLJ") has rendered a written opinion
to the May & Speh Board of Directors dated May 26, 1998 (the "DLJ Opinion"), to
the effect that, as of such date and based upon and subject to the assumptions,
limitations and qualifications set forth therein, the Exchange Ratio was fair
from a financial point of view to the holders of May & Speh Common Stock.
Copies of the full texts of the written opinions of Stephens and DLJ which set
forth the assumptions made, procedures followed, matters considered and limits
of their respective reviews are attached to this Proxy Statement/Prospectus as
Annex D and Annex E, respectively and should be read in their entirety. See "THE
MERGER--Opinion of Acxiom's Financial Advisor" and "THE MERGER--Opinion of May &
Speh's Financial Advisor."
6
<PAGE>
COMPARATIVE STOCK PRICES AND DIVIDENDS
Acxiom Common Stock is traded on the NASDAQ National Market System under the
symbol "ACXM." May & Speh Common Stock is traded on the NASDAQ National Market
System under the symbol "SPEH."
The following table sets forth, for the calendar quarters indicated, the high
and low sale prices per share of Acxiom Common Stock and May & Speh Common Stock
as reported by the NASDAQ National Market System. Acxiom data are restated to
reflect 2 for 1 stock splits in fiscal 1995 and 1997. May & Speh data are
presented for periods following its initial public offering in March 1996.
<TABLE>
<CAPTION>
ACXIOM MAY & SPEH
COMMON STOCK ($) COMMON STOCK ($)
----------------- ----------------
HIGH LOW HIGH LOW
-------- -------- ------- --------
<S> <C> <C> <C> <C>
1995
First Quarter........................... 9 6 13/16 -- --
Second Quarter.......................... 12 5/8 8 1/8 -- --
Third Quarter........................... 14 1/8 11 3/8 -- --
Fourth Quarter.......................... 15 7/8 13 -- --
1996
First Quarter........................... 14 11 1/4 12 10 15/16
Second Quarter.......................... 17 5/8 11 15/16 16 1/2 13 3/4
Third Quarter........................... 20 5/8 15 7/8 21 1/2 13 3/4
Fourth Quarter.......................... 25 18 5/8 20 1/2 11 1/4
1997
First Quarter........................... 24 14 3/8 14 1/4 7 1/2
Second Quarter.......................... 20 5/8 11 1/8 13 5/8 7 3/8
Third Quarter........................... 21 1/8 17 1/8 15 1/8 11 3/4
Fourth Quarter.......................... 19 1/4 14 1/8 16 11 1/4
1998
First Quarter........................... 25 15/16 16 7/8 15 1/8 10 3/4
Second Quarter.......................... 25 15/16 19 5/8 19 7/8 13 1/2
Third Quarter
(through August 14, 1998)............... 28 1/4 22 22 7/16 17 7/16
</TABLE>
Acxiom has never paid dividends on Acxiom Common Stock. Acxiom's Board of
Directors currently intends to retain earnings for the further development of
Acxiom's business and, therefore, does not intend to pay cash dividends on
Acxiom Common Stock in the foreseeable future. May & Speh has not paid cash
dividends on May & Speh Common Stock since its initial public offering in March
1996.
Pursuant to the Merger Agreement, each of Acxiom and May & Speh and their
respective subsidiaries have agreed not to declare, set aside or pay any
dividend or other distribution in cash, stock or other property prior to the
Effective Time.
On May 26, 1998 the high sale prices of Acxiom Common Stock and May & Speh
Common Stock on the NASDAQ National Market System were $22.50 per share and
$17.375 per share, respectively, and the low sale prices were $21.625 per share
and $15.125 per share, respectively. The reported closing sale price of Acxiom
Common Stock on the NASDAQ National Market System on May 26, 1998, the last full
day of trading for Acxiom Common Stock prior to the announcement of the
execution of the Merger Agreement, was $21.8125 per share. The reported closing
sale price of May & Speh Common Stock on the NASDAQ National Market
7
<PAGE>
System on such date was $17.00 per share. On an equivalent per share basis
calculated by multiplying the closing sale price in Acxiom Common Stock on that
day by 0.8, the exchange ratio set forth in the Merger Agreement, the value of
Acxiom Common Stock to be received by holders of May & Speh Common Stock was
$17.45 per share of May & Speh Common Stock.
On August 14, 1998, the last full day of trading prior to the printing of this
Joint Proxy Statement/Prospectus, the reported closing sale prices of Acxiom
Common Stock and May & Speh Common Stock in the NASDAQ National Market System
were $23.375 per share and $18.50 per share respectively. On an equivalent per
share basis calculated by multiplying the closing sale price of Acxiom Common
Stock on that day by 0.8, the Exchange Ratio, the value of Acxiom Common Stock
to be received by holders of May & Speh Common Stock was $18.70 per share of May
& Speh Common Stock.
No assurance can be given as to the market price of Acxiom Common Stock at the
Effective Time. Because the Exchange Ratio is fixed, and because the market
price of Acxiom Common Stock is subject to fluctuation, the market value of the
shares of Acxiom Common Stock that holders of May & Speh Common Stock will
receive at the Effective Time may vary significantly from the market value of
the shares of Acxiom Common Stock that holders of May & Speh Common Stock would
have received if the Merger were consummated on the date of the Merger Agreement
or the date of this Proxy Statement/Prospectus. STOCKHOLDERS ARE URGED TO OBTAIN
CURRENT MARKET QUOTATIONS.
Holders of May & Speh Common Stock may obtain information regarding the
current trading price per share of the Acxiom Common Stock by calling D.F. King
& Co., Inc., the proxy solicitor, at the following toll-free number: 1-800-549-
6697.
RISK FACTORS
Certain factors should be considered in evaluating the Merger and the
ownership of the Acxiom Common Stock to be issued in the Merger. See "RISK
FACTORS."
8
<PAGE>
ACXIOM CORPORATION
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of Acxiom.
The selected historical financial data for the five years ended March 31, 1998
are derived from the audited consolidated financial statements of Acxiom. The
historical financial data for the three months ended June 30, 1998 and 1997 are
derived from unaudited condensed consolidated financial statements of Acxiom and
have been prepared on the same basis as the historical information derived from
audited consolidated financial statements and, in the opinion of management,
contain all adjustments consisting only of normal recurring accruals, necessary
for the fair presentation of the results of operations for such periods. The
data should be read in conjunction with the consolidated financial statements
and related notes of Acxiom incorporated by reference in this Proxy
Statement/Prospectus.
<TABLE>
<CAPTION>
THREE MONTHS
FOR THE FISCAL YEARS ENDED MARCH 31, ENDED JUNE 30,
-------------------------------------------- -----------------
1994 1995 1996 1997 1998 1997 1998
-------- -------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
EARNINGS DATA (1)
Revenue......... $151,669 $202,448 $269,902 $402,016 $465,065 $100,327 $128,608
Net earnings.... 8,397 12,405 18,223 27,512 35,597 5,313 7,291
Basic earnings
per share (2).. .20 .29 .39 .54 .68 .10 .14
Diluted earnings
per share
(2)(3)......... .19 .27 .35 .47 .60 .09 .12
Shares used in
computing
earnings per
share (4):
Basic........... 41,914 43,337 47,057 51,172 52,044 51,709 52,430
Diluted......... 43,680 45,886 52,078 59,143 59,687 59,193 60,548
</TABLE>
<TABLE>
<CAPTION>
MARCH 31,
-------------------------------------------- JUNE 30,
1994 1995 1996 1997 1998 1998
-------- -------- -------- -------- -------- --------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET DATA (1)
Total assets............. $123,378 $148,170 $194,049 $299,668 $394,310 $433,755
Long-term debt, excluding
current installments.... 34,992 18,219 26,885 87,120 99,917 137,161
Redeemable common stock.. 7,692 -- -- -- -- --
Stockholders' equity..... 61,896 97,177 122,741 156,097 200,128 209,314
</TABLE>
- - --------
(1) On April 1, 1996, Acxiom acquired all of the assets of Direct Media/DMI,
Inc. ("DMI") for $25 million and the assumption of certain liabilities of DMI.
The results of operations of DMI are included in the consolidated results of
operations from the date of its acquisition.
(2) Per share data are restated to reflect 2 for 1 stock splits in fiscal 1995
and 1997.
(3) Includes the impact of the addition of $445 to net earnings relating to
interest expense, net of tax, and the related share effect, relating to
Acxiom's convertible debt in fiscal 1997 and 1998 ($111 for the three months
ended June 30, 1997 and 1998).
(4) Acxiom adopted Statement of Financial Accounting Standards No. 128 ("FAS
128"), Earnings Per Share during the quarter ended December 31, 1997. All
prior period earnings per share data have been restated to conform with the
provisions of this statement.
9
<PAGE>
MAY & SPEH, INC.
SELECTED HISTORICAL FINANCIAL DATA
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth selected historical financial data of May &
Speh. The selected historical financial data for the five years ended September
30, 1997 are derived from the audited consolidated financial statements of May &
Speh. The historical financial data for the nine months ended June 30, 1998 and
1997 are derived from unaudited financial statements of May & Speh and have been
prepared on the same basis as the historical information derived from audited
financial statements and, in the opinion of management, contain all adjustments,
consisting only of normal recurring accruals, necessary for the fair
presentation of the results of operations for such periods. The data should be
read in conjunction with the consolidated financial statements and related notes
of May & Speh incorporated by reference in this Proxy Statement/Prospectus.
<TABLE>
<CAPTION>
NINE MONTHS ENDED
FOR THE FISCAL YEARS ENDED SEPTEMBER 30, JUNE 30,
---------------------------------------------- ------------------
1993 1994 1995 1996 1997 1997 1998
-------- -------- -------- --------- --------- -------- ---------
<S> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF
EARNINGS DATA
Revenue....... $ 41,792 $ 51,667 $ 61,641 $ 77,223 $ 92,457 $ 66,547 $ 84,620
Net earnings... 3,406 5,838 7,861 10,224 11,716 7,873 8,314(2)
Basic earnings
per share (1).. .15 .26 .38 .45 .47 .31 .33
Diluted earnings
per share (1).. .15 .26 .38 .43 .45 .30 .31
Shares used in
computing
earnings per
share (3):
Basic.......... 22,917 22,110 20,426 22,634 25,029 25,001 25,568
Diluted........ 22,917 22,110 20,611 23,653 26,179 26,042 26,801
<CAPTION>
SEPTEMBER 30,
------------------------------------------------- JUNE 30,
1993 1994 1995 1996 1997 1998
-------- -------- -------- --------- --------- ----------
<S> <C> <C> <C> <C> <C> <C>
BALANCE SHEET
DATA
Total assets... $ 29,971 $ 33,978 $ 46,804 $ 115,218 $ 148,796 $ 283,132
Long-term debt,
excluding
current
installments.. 17,697 15,051 16,860 22,251 31,546 144,304(4)
Stockholders'
equity........ 3,989 8,701 17,644 75,731(6) 91,135 107,063(5)
</TABLE>
- - --------
(1) Per share data are restated to reflect a 12-for-one stock split in 1996. (2)
Net earnings for the nine months ended June 30, 1998 include a one-time
charge of approximately $4.7 million ($2.9 million after-tax) which
represents the present value of payments under existing contracts with prior
members of management.
(3) May & Speh adopted FAS 128, during the quarter ended December 31, 1997. All
prior period earnings per share data have been restated to conform with the
provisions of this statement.
(4) In March 1998, May & Speh completed an offering of $115 million, 5.25%
convertible subordinated notes due 2003. The total net proceeds to May &
Speh were approximately $110.8 million after deducting underwriting
discounts and commissions and offering expenses.
(5) In March 1998, May & Speh completed an offering of 325,000 shares of its
common stock. The total net proceeds to May & Speh after deducting
underwriting discounts and commissions were approximately $3.5 million.
(6) In March 1996, May & Speh sold 4,355,000 shares of May & Speh Common Stock
with aggregate offering proceeds of $47.9 million, and certain selling
stockholders sold an additional 3,350,000 shares with aggregate offering
proceeds of $36.9 million in an initial public offering of May & Speh Common
Stock. The net proceeds to May & Speh from the offering were approximately
$43.5 million, after deducting underwriting discounts, commissions and
offering expenses.
10
<PAGE>
ACXIOM CORPORATION AND MAY & SPEH, INC.
SELECTED UNAUDITED PRO FORMA FINANCIAL INFORMATION
(IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth certain selected unaudited pro forma financial
data for Acxiom after giving effect to the Merger for the periods indicated
applying the pooling of interests method of financial accounting. The following
table should be read together with the consolidated financial statements and
accompanying notes of Acxiom and of May & Speh included in the documents
described under "INCORPORATION OF DOCUMENTS BY REFERENCE" and the unaudited pro
forma condensed combined financial statements and accompanying discussion and
notes set forth under "THE MERGER--Pro Forma Financial Information" included
herein. The selected pro forma statement of earnings data includes Acxiom's
results of operations for the three months ended June 30, 1998 and the three
fiscal years ended March 31, 1996, 1997 and 1998, respectively, and May & Speh's
historical results of operations for the three months ended June 30, 1998 and
the twelve months ended March 31, 1996, 1997 and 1998, respectively. The
unaudited pro forma combined condensed balance sheet data presents the
historical balance sheet of Acxiom as of March 31, 1998 and the historical
balance sheet of May & Speh as of June 30, 1998. The fiscal year end of Acxiom
is March 31; the unaudited statement of earnings of Acxiom for the three months
ended June 30, 1998 and the balance sheet of Acxiom as of June 30, 1998 used in
the selected unaudited pro forma financial information have been prepared on the
same basis as the historical information derived from audited financial
statements and, in the opinion of management, contain all adjustments,
consisting only of normal recurring accruals, necessary for the fair
presentation of the results of operations for such periods. The fiscal year end
of May & Speh is September 30; the unaudited statements of earnings of May &
Speh for the three months ended June 30, 1998 and the twelve months ended March
31, 1996, 1997 and 1998 and the balance sheet of May & Speh as of June 30, 1998
used in the selected unaudited pro forma financial information have been
prepared on the same basis as the historical information derived from audited
financial statements and, in the opinion of management, contain all adjustments,
consisting only of normal recurring accruals, necessary for the fair
presentation of the results of operations for such periods. The pro forma
financial data in the table below are presented for information and do not
indicate what the financial position or the results of operations of Acxiom
would have been had the Merger occurred as of the dates or for the periods
presented or what the financial position or future results of operations of
Acxiom will be. No adjustment has been included in the pro forma financial data
for cost savings, if any, which may be realized by Acxiom following the Merger.
See "THE MERGER--Pro Forma Financial Information."
<TABLE>
<CAPTION>
FISCAL YEAR ENDED MARCH
31, THREE MONTHS
-------------------------- ENDED JUNE 30,
1996 1997 1998 1998
-------- -------- -------- --------------
<S> <C> <C> <C> <C>
STATEMENT OF EARNINGS DATA
Revenue............................... $337,139 $486,984 $569,020 $158,809
Net earnings.......................... 26,278 38,491 46,774 11,358
Basic earnings per share.............. .41 .54 .65 .15
Diluted earnings per share............ .38 .48 .58 .13
</TABLE>
<TABLE>
<CAPTION>
JUNE 30,
1998
--------
<S> <C> <C> <C>
BALANCE SHEET DATA
Total assets............................................... $716,887
Long-term debt, excluding current installments............. 281,465
Stockholders' equity....................................... 302,577(1)
</TABLE>
- - --------
(1) Acxiom expects to incur certain non-recurring expenses related to the
Merger, presently estimated to be $15.1 million ($13.8 million after tax).
These expenses would include, but would not be limited to, professional
fees, fees of financial advisors, certain compensation-related expenses and
similar expenses. Although Acxiom believes this estimate of non-recurring
expenses is accurate, certain material additional costs may be incurred in
connection with the Merger. Merger-related expenses will be charged to
operations in the quarter in which the Merger is concluded, which is
currently estimated to occur in the second quarter of fiscal 1999. These
non-recurring merger-related expenses have been charged to stockholders'
equity for purposes of the unaudited pro forma balance sheet. In addition,
Acxiom is developing a plan to integrate the operations of May & Speh after
the Merger. In connection with that plan, Acxiom will determine to what
extent Acxiom and May & Speh facilities, software, equipment and vendor
contracts are duplicative and anticipates that certain non-recurring charges
will be incurred in connection with such integration. Pending completion of
the plan, which will include discussions with customers and vendors, Acxiom
cannot identify the timing, nature and amount of such charges as of the date
of this Proxy Statement/Prospectus. However, it is expected that such
charges could be as much as $50-100 million. Any such charges could affect
Axciom's results of operations in the period in which such charges are
recorded. Because the foregoing charges are non-recurring in nature, they
have not been reflected in the accompanying unaudited pro forma combined
statements of earnings.
11
<PAGE>
COMPARATIVE PER SHARE DATA
(UNAUDITED)
The following table sets forth actual ("historical") earnings and book value
per common share information for Acxiom and May & Speh and unaudited information
on a pro forma combined basis and per share equivalent pro forma basis for May &
Speh. No cash dividends have ever been paid on the Acxiom or May & Speh Common
Stock. Pro forma combined information is derived from the pro forma combined
information presented elsewhere herein, which gives effect to the Merger under
the pooling-of-interests accounting method as if the Merger had occurred at June
30, 1998. The historical data are based on the historical consolidated financial
statements and related notes of each of Acxiom and May & Speh incorporated by
reference in this Proxy Statement/Prospectus. This table should be read together
with the historical audited and unaudited consolidated financial statements of
Acxiom and May & Speh and related notes thereto. The data presented do not
indicate Acxiom's future results of operations or actual results that would have
occurred if the Merger had occurred at the beginning of the periods indicated.
No adjustments have been included for cost savings, if any, which may be
realized by Acxiom following the Merger.
<TABLE>
<CAPTION>
FOR THE FISCAL YEARS ENDED AND
AS OF MARCH 31, THREE MONTHS
------------------------------ ENDED JUNE 30,
1996 1997 1998 1998
---------- ---------- ---------- --------------
<S> <C> <C> <C> <C>
ACXIOM HISTORICAL
Basic earnings per share..... $ .39 $ .54 $ .68 $.14
Diluted earnings per share... .35 .47 .60 .12
Book value per share (1)..... 2.59 3.02 3.82 3.99
<CAPTION>
FOR THE FISCAL YEARS ENDED AND
AS OF SEPTEMBER 30, THREE MONTHS
-------------------------------- ENDED JUNE 30,
1995 1996 1997 1998
---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
MAY & SPEH HISTORICAL
Basic earnings per share..... $ .38 $ .45 $ .47 $.16
Diluted earnings per share... .38 .43 .45 .15
Book value per share (1)..... 0.87 3.04 3.62 4.11
<CAPTION>
FOR THE FISCAL YEARS ENDED AND
AS OF MARCH 31, THREE MONTHS
-------------------------------- ENDED JUNE 30,
1996 1997 1998 1998
---------- ---------- ---------- ---------------
<S> <C> <C> <C> <C>
PRO FORMA COMBINED (2)(3)
Basic earnings per share..... $ .41 $ .54 $ .65 $.15
Diluted earnings per share... .38 .48 .58 .13
Book value per share (4)..... 4.13
MAY & SPEH PRO FORMA PER
SHARE EQUIVALENTS (5)
Basic earnings per share..... $ .33 $ .43 $ .52 $.12
Diluted earnings per share... .30 .38 .46 .10
Book value per share......... 3.30
</TABLE>
- - --------
(1) The historical book value per share is computed by dividing stockholders'
equity by the number of shares of common stock outstanding at the end of each
period.
(2) Acxiom expects to incur certain non-recurring expenses related to the
Merger, presently estimated to be $15.1 million ($13.8 million after tax).
These expenses would include, but would not be limited to, professional fees,
fees of financial advisors, certain compensation-related expenses and similar
expenses. Although Acxiom believes this estimate of non-recurring expenses is
accurate, certain material additional costs may be incurred in connection with
the Merger. Merger-related expenses will be charged to operations in the
quarter in which the Merger is concluded, which is currently estimated to
occur in the second quarter of fiscal 1999. These non-recurring merger-
related expenses have been charged to stockholders' equity for purposes of the
unaudited pro forma balance sheet. In addition, Acxiom
12
<PAGE>
is developing a plan to integrate the operations of May & Speh after the
Merger. In connection with that plan, Acxiom will determine to what extent
Acxiom and May & Speh facilities, software, equipment and vendor contracts are
duplicative and anticipates that certain non-recurring charges will be
incurred in connection with such integration. Pending completion of the plan,
which will include discussions with customers and vendors, Acxiom cannot
identify the timing, nature and amount of such charges as of the date of this
Proxy Statement/Prospectus. However, it is expected that such charges could be
as much as $50-100 million. Any such charges could affect Axciom's results of
operations in the period in which such charges are recorded. Because the
foregoing charges are non-recurring in nature, they have not been reflected in
the accompanying unaudited pro forma combined statements of earnings.
(3) The pro forma combined basic and diluted earnings per share are based on the
combined weighted average number of common and dilutive shares of Acxiom
Common Stock and May & Speh Common Stock for each period based on the exchange
ratio of 0.8 shares of Acxiom Common Stock for each share of May & Speh Common
Stock.
(4) Book value per share for the pro forma combined presentation is based upon
outstanding Acxiom common shares, adjusted to include the shares of Acxiom
Common Stock to be issued in the Merger.
(5) The May & Speh pro forma per share equivalent data is based upon the
exchange ratio of 0.8 shares of Acxiom Common Stock for each share of May &
Speh Common Stock pursuant to the Merger Agreement.
13
<PAGE>
INTRODUCTION
This Proxy Statement/Prospectus is being furnished to the stockholders of
Acxiom Corporation ("Acxiom") and May & Speh, Inc. ("May & Speh") in connection
with the proposed merger (the "Merger") of ACX Acquisition Co., Inc., a newly
formed, wholly owned subsidiary ("Sub") of Acxiom, with and into May & Speh, and
for the purposes set forth below. The Merger will be effected on the terms and
conditions described elsewhere in this Proxy Statement/Prospectus pursuant to
the Amended and Restated Agreement and Plan of Merger, dated as of May 26, 1998
(the "Merger Agreement"), by and among Acxiom, Sub and May & Speh, a copy of
which is attached hereto as Annex A and incorporated herein by reference. See
"THE MERGER."
The information herein concerning Acxiom has been supplied by Acxiom. The
information herein concerning May & Speh has been supplied by May & Speh.
This Proxy Statement/Prospectus and the enclosed form of proxy will first be
mailed to stockholders of Acxiom and May & Speh on or about August 19, 1998.
THE ACXIOM MEETING
This Proxy Statement/Prospectus is being furnished to the stockholders of
Acxiom in connection with the solicitation of proxies by the Board of Directors
of Acxiom from the holders of common stock, par value $0.10 per share, of Acxiom
(the "Acxiom Common Stock"), for use at the annual meeting of stockholders of
Acxiom (the "Acxiom Meeting"), to be held on September 17, 1998, at 10:00 A.M.
(local time), at Acxiom's headquarters at 301 Industrial Boulevard, Conway,
Arkansas and at any meeting held upon adjournment or postponement thereof.
At the Acxiom Meeting, the stockholders of Acxiom will be asked to consider
and vote upon (i) the issuance of up to 31,100,000 shares of Acxiom Common Stock
pursuant to the Merger Agreement (the "Merger Proposal"); and (ii) the election
of three directors (the "Directors") as members of the Board of Directors to
serve until the 2001 annual meeting of stockholders or until their respective
successors are duly elected and qualified.
Representatives of KPMG Peat Marwick LLP, Acxiom's independent public
accountants, are expected to be present at the Acxiom Meeting and will have the
opportunity to make a statement if they so desire and will be available to
respond to questions. A representative of PricewaterhouseCoopers LLP, May &
Speh's independent public accountants, is expected to be present at the Acxiom
Meeting and will be available to respond to questions.
Holders of record of Acxiom Common Stock at the close of business on July 31,
1998 (the "Acxiom Record Date") will be entitled to notice of and to vote at the
Acxiom Meeting. As of the Acxiom Record Date, there were outstanding 52,521,326
shares of Acxiom Common Stock held of record by approximately 1,605 holders.
Each share of Acxiom Common Stock is entitled to one vote at the Acxiom Meeting.
The presence, in person or by proxy, of holders of record of a majority of the
shares of Acxiom Common Stock entitled to vote constitutes a quorum for action
at the Acxiom Meeting.
Approval of the Merger Proposal will require the affirmative vote of a
majority of the voting power of the shares of Acxiom Common Stock present in
person or by proxy at the Acxiom Meeting. The Directors will be elected at the
Acxiom Meeting by a majority of the votes cast in the election of directors.
THE BOARD OF DIRECTORS OF ACXIOM BELIEVES THAT THE MERGER IS FAIR TO AND IN
THE BEST INTERESTS OF ACXIOM AND ITS STOCKHOLDERS, HAS APPROVED THE MERGER AND
RECOMMENDS THAT THE STOCKHOLDERS OF ACXIOM VOTE IN FAVOR OF THE MERGER PROPOSAL.
14
<PAGE>
THE MAY & SPEH MEETING
This Proxy Statement/Prospectus is being furnished to stockholders of May &
Speh in connection with the solicitation of proxies by the Board of Directors of
May & Speh from the holders of common stock, par value $.01 per share, of May &
Speh (the "May & Speh Common Stock"), for use at the May & Speh Meeting to be
held on September 17, 1998, at 9:00 A.M. (local time), at The Standard Club, 320
South Plymouth Court, Chicago, Illinois, and at any meeting held upon
adjournment or postponement thereof.
At the May & Speh Meeting, the stockholders of May & Speh will be asked to
approve and adopt the Merger Agreement. In the Merger, each outstanding share of
May & Speh Common Stock will be converted into the right to receive 0.8 of a
share of Acxiom Common Stock (the "Exchange Ratio"). As a result of the Merger,
May & Speh will become a wholly owned subsidiary of Acxiom.
Representatives of PricewaterhouseCoopers LLP, May & Speh's independent public
accountants, are expected to be present at the May & Speh Meeting and will have
the opportunity to make a statement if they so desire and will be available to
respond to questions. A representative of KPMG Peat Marwick LLP, Acxiom's
independent public accountants, is expected to be present at the May & Speh
Meeting and will be available to respond to questions.
Holders of record of May & Speh Common Stock at the close of business on July
31, 1998 (the "May & Speh Record Date") will be entitled to notice of, and to
vote at, the May & Speh Meeting. As of the May & Speh Record Date, there were
outstanding 26,073,654 shares of May & Speh Common Stock held of record by
approximately 93 holders. Each share of May & Speh Common Stock is entitled to
one vote at the May & Speh Meeting.
The presence, in person or by proxy, of holders of record of a majority of the
May & Speh Common Stock entitled to vote constitutes a quorum for action at the
May & Speh Meeting.
Approval of the Merger at the May & Speh Meeting will require the affirmative
vote of the holders of a majority of the shares of May & Speh Common Stock
outstanding on the May & Speh Record Date.
THE BOARD OF DIRECTORS OF MAY & SPEH BELIEVES THAT THE MERGER IS FAIR TO AND
IN THE BEST INTERESTS OF MAY & SPEH AND ITS STOCKHOLDERS, HAS UNANIMOUSLY
APPROVED THE MERGER AND UNANIMOUSLY RECOMMENDS THAT THE STOCKHOLDERS OF MAY &
SPEH VOTE IN FAVOR OF APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
VOTING RIGHTS AND PROXIES
Holders of record of Acxiom Common Stock at the close of business on the
Acxiom Record Date will be entitled to notice of and to vote at the Acxiom
Meeting. As of the Acxiom Record Date, there were outstanding 52,521,326 shares
of Acxiom Common Stock held of record by approximately 1,605 holders. Each share
of Acxiom Common Stock is entitled to one vote at the Acxiom Meeting. The stock
transfer books of Acxiom will not be closed. As of the Acxiom Record Date, the
directors and officers of Acxiom collectively owned 8,465,107 shares of Acxiom
Common Stock. Each of the directors and executive officers of Acxiom has advised
Acxiom that he or she intends to vote all of such shares in favor of the Merger
Proposal and election of the Directors.
Charles D. Morgan, the Chairman of the Board and Company Leader of Acxiom,
Robert A. Pritzker, a director of Acxiom, The Pritzker Foundation, a
not-for-profit foundation of which Mr. Pritzker is a trustee, and Trans Union
Corporation, have granted irrevocable proxies to May & Speh with respect to an
aggregate of 8,037,425 shares of Acxiom Common Stock (representing approximately
15% of the Acxiom Common Stock outstanding as of the Acxiom Record Date),
pursuant to which May & Speh has the power to vote such shares in favor of the
Merger Proposal. See "THE MERGER--Terms of the Merger-- Irrevocable Proxies."
15
<PAGE>
Holders of record of May & Speh Common Stock at the close of business on the
May & Speh Record Date will be entitled to notice of, and to vote at, the May &
Speh Meeting. As of the May & Speh Record Date, there were outstanding
26,073,654 shares of May & Speh Common Stock held of record by approximately 93
holders. Each share of May & Speh Common Stock is entitled to one vote at the
May & Speh Meeting. As of the May & Speh Record Date, directors (other than
Lawrence J. Speh and Albert J. Speh, Jr.) and executive officers of May & Speh
collectively owned 617,084 shares of May & Speh Common Stock (representing
approximately 2.4% of the May & Speh Common Stock outstanding as of the May &
Speh Record Date). Each of such directors and executive officers of May & Speh
has advised May & Speh that he or she intends to vote all of such shares in
favor of the approval and adoption of the Merger Agreement.
In addition, Lawrence J. Speh, Albert J. Speh, Jr., and certain trusts of
which Messrs. Speh and Speh are the trustees, have granted irrevocable proxies
to Acxiom pursuant to which Acxiom has the power to vote an aggregate of
2,892,895 shares of May & Speh Common Stock (representing approximately 11% of
the May & Speh Common Stock outstanding as of the May & Speh Record Date), in
favor of approval and adoption of the Merger Agreement. See "THE MERGER--Terms
of the Merger--Irrevocable Proxies."
All proxies in the enclosed form that are properly executed and returned to
Acxiom or May & Speh, as the case may be, will be voted at the applicable
Stockholders' Meeting or any adjournments or postponements thereof, in
accordance with any specifications thereon, or, if no specifications are made,
will be voted FOR approval of the Merger Proposal and the election of three
directors as members of the Board of Directors in the case of Acxiom, and FOR
approval and adoption of the Merger Agreement in the case of May & Speh. Any
proxy may be revoked by any stockholder who attends his or her respective
Stockholders' Meeting and gives oral notice of his or her intention to vote in
person without compliance with any other formalities. In addition, any Acxiom or
May & Speh stockholder may revoke a proxy at any time before it is voted by
executing a subsequent proxy or by delivering a written notice to the Secretary
of Acxiom or the Secretary of May & Speh, as applicable, stating that the proxy
is revoked.
The Boards of Directors of each of Acxiom and May & Speh do not know of any
matters other than those set forth herein which may come before the respective
Stockholders' Meetings. If any other matters are properly presented to either
Stockholders' Meeting for action, it is intended that the persons named in the
applicable form of proxy and acting thereunder will vote in accordance with
their best judgment on such matters.
The cost of solicitation of the stockholders of Acxiom and May & Speh will be
paid by the party incurring such cost. In addition to the use of the mails,
proxies may be solicited by directors and officers and regular employees of
Acxiom and May & Speh and such companies may also request brokerage firms,
nominees, custodians and fiduciaries to forward proxy materials to beneficial
owners of shares of Acxiom Common Stock or May & Speh Common Stock held of
record and will provide reimbursement for their reasonable expenses in so doing.
Acxiom and May & Speh have retained D.F. King & Co., Inc. to assist in the
solicitation of proxies from stockholders of Acxiom and May & Speh for a fee
estimated not to exceed $10,000, plus expenses.
The Directors will be elected at the Acxiom Meeting by a majority of the votes
cast in the election of directors. Under applicable Delaware law, in tabulating
the vote for the election of directors, abstentions will be counted and have the
same effect as a vote against a particular director; and broker non-votes will
be disregarded and will have no effect on the outcome of the vote.
Approval of the Merger Proposal at the Acxiom Meeting requires the affirmative
vote of a majority of stockholders of Acxiom Common Stock present, in person or
by proxy, at the Acxiom Meeting at which there is a quorum. Under applicable
Delaware law, in determining whether the Merger Proposal has received the
requisite number of affirmative votes, abstentions and broker non-votes will
have the same effect as a vote against the Merger Proposal.
Approval of the Merger Agreement at the May & Speh Meeting requires the
affirmative vote of a majority of the outstanding shares of May & Speh Common
Stock entitled to vote thereon. Under applicable Delaware law, in determining
whether the Merger Agreement has received the requisite number of affirmative
votes, abstentions and broker non-votes will have the same effect as a vote
against the Merger Agreement.
16
<PAGE>
RISK FACTORS
The following are certain factors which should be considered by the
stockholders of Acxiom and May & Speh in evaluating the Merger as well as an
investment in Acxiom Common Stock after the Merger.
ADDITIONAL INFORMATION REGARDING FORWARD-LOOKING STATEMENTS
This Proxy Statement/Prospectus includes, and future filings by Acxiom with
the Commission and future oral and written statements by Acxiom and its
management, may include certain forward-looking statements. Such statements may
include, among other things, statements regarding Acxiom's financial position,
results of operations, market position, product development, software
replacement and/or remediation efforts, regulatory matters, growth opportunities
and growth rates, acquisition and divestiture opportunities, and other similar
forecasts and statements of expectation. Words such as "expects," "anticipates,"
"intends," "plans," "believes," "seeks," "estimates" and "should," and
variations of these words and similar expressions, are intended to identify
these forward-looking statements. Such statements are not statements of
historical fact. Rather, they are based on Acxiom's estimates, assumptions,
projections and current expectations, and are not guarantees of future
performance. Acxiom disclaims any obligation to update or revise any
forward-looking statement based upon the occurrence of future events, the
receipt of new information, or otherwise. Some of the more significant factors
that could cause Acxiom's actual results and other matters to differ materially
from the results, projections and expectations expressed in the forward-looking
statements are set forth below. There may be additional factors which could also
affect actual results.
INTEGRATION OF THE BUSINESS OF ACXIOM AND MAY & SPEH
The Merger involves the integration of two companies that have previously
operated independently. As soon as practicable following the Merger, Acxiom
intends to integrate the operations of May & Speh into its operations. However,
there can be no assurance that Acxiom will successfully integrate the operations
of May & Speh with those of Acxiom or that all of the benefits expected from
such integration will be realized. Acxiom believes that the potential obstacles
to successful integration will be: the consolidation of the data center
operations; the integration and combination of the business units supporting the
various industry segments; and the necessary support staffing required to meet
the combined entity's business growth opportunities. It is not possible at the
present time to determine the costs associated with these integration efforts
until certain strategic decisions have been reached through significant analysis
and planning. Acxiom believes that the costs associated with the integration and
restructuring of the combined enterprise will be material. Furthermore, any
delays or unexpected costs incurred in connection with such integration could
have an adverse effect on Acxiom's business, operating results or financial
position. Additionally, there can be no assurance that the operations,
management and personnel of the two companies will be compatible or that Acxiom
or May & Speh will not experience the loss of key personnel.
FIXED EXCHANGE RATIO
The ratio at which Acxiom Common Stock will be exchanged for shares of May &
Speh Common Stock pursuant to the Merger Agreement was determined in arms-length
negotiations between Acxiom and May & Speh. On May 26, 1998, the last full
trading day prior to the announcement of the execution of the Merger Agreement,
the last reported sale price per share for Acxiom Common Stock was $21.8125, and
the last reported sale price per share for May & Speh Common Stock was $17.00.
On August 14, 1998, the last trading day prior to the date of the filing of the
Registration Statement of which this Proxy Statement/Prospectus forms a part,
the last reported sale price per share of the Acxiom Common Stock was $23.375
and the last reported sale price for May & Speh Common Stock was $18.50. The
market price of shares of Acxiom Common Stock is subject to fluctuation. The
Merger Agreement does not contain any provisions for adjustment of the Exchange
Ratio based upon fluctuations in the price of Acxiom Common Stock or May & Speh
Common Stock. Accordingly, the value of the stock consideration to be received
by the holders of May & Speh Common Stock upon the consummation of the Merger is
not presently ascertainable and will depend upon the market price of Acxiom
Common Stock at
17
<PAGE>
the Effective Time. HOLDERS OF ACXIOM COMMON STOCK AND MAY & SPEH COMMON STOCK
ARE URGED TO OBTAIN CURRENT MARKET QUOTATIONS PRIOR TO MAKING ANY DECISIONS WITH
RESPECT TO THE MERGER. The Merger Agreement does not provide Acxiom or May &
Speh the right to terminate the agreement based upon fluctuations in the price
of Acxiom Common Stock or May & Speh Common Stock.
COMPETITION
The information management services industry is extremely competitive, and
Acxiom faces intense competition in all of its customer markets. Acxiom may also
encounter new entrants, including well-capitalized information services
companies and other companies, as the markets for Acxiom's services develop.
Certain of Acxiom's competitors may have more extensive financial, technical,
marketing and other resources than Acxiom and may have a greater ability to
obtain client contracts where sizable up-front asset purchases or investments
are required and to respond more quickly than Acxiom to new or emerging
technologies and other competitive pressures. There can be no assurances that
Acxiom will be able to compete successfully against its present or future
competitors or that competitive pressures will not have a material adverse
effect on Acxiom's business, operating results or financial condition.
RISK OF DATA CENTER FAILURE
Acxiom's operations are dependent upon its ability to protect its various data
centers against damage from fire, power loss, telecommunications failure,
natural disaster or a similar event. The on-line services provided by Acxiom are
dependent on links to telecommunications servers. Management has taken
reasonable precautions to protect its data centers and telecommunications links
from events that could interrupt Acxiom's operations. Any damage to Acxiom's
data centers or any failure of Acxiom's telecommunications links that causes
interruptions in Acxiom's operations could have a material adverse effect on
Acxiom's business. Acxiom has "Blanket Business Interruption" insurance coverage
which includes "Blanket Business Income" written as part of its "all risk" form.
However, there can be no assurance that such insurance will continue to be
available at a reasonable cost or, if available, will be adequate to cover
potential losses.
RELIANCE ON SIGNIFICANT CUSTOMERS; ABSENCE OF LONG-TERM CONTRACTS
A significant portion of Acxiom's revenue is derived from relatively few
customers. In fiscal 1997, Allstate Insurance Company and Trans Union
Corporation accounted for 16.8% and 14.1%, respectively, of Acxiom's total
revenue; in fiscal 1998, Allstate Insurance Company and Trans Union Corporation
accounted for 16.1% and 11.8%, respectively, of Acxiom's total revenue. In
fiscal 1997, Allstate Insurance Company and Trans Union Corporation accounted
for $67.7 million and $56.6 million (16.8% and 14.1%), respectively, of Acxiom's
total revenue; in fiscal 1998, Allstate Insurance Company and Trans Union
Corporation accounted for $74.7 million and $54.9 million (16.1% and 11.8%)
respectively of Acxiom's total revenue. Collectively, Acxiom's 20 largest
customers accounted for 54.6% and 55.8%,of such revenues in fiscal 1997 and
fiscal 1998, respectively.
Acxiom's revenue from many of its direct marketing customers is not derived
from long-term (over three-year) contracts. While approximately 54% of Acxiom's
total revenue is currently derived from long-term customer contracts, the
remainder is not. With respect to that portion of the business which is not
under long-term contract, revenues are less predictable, and Acxiom consequently
must engage in continual sales efforts to maintain its revenue stability and
future growth, and there is no assurance that Acxiom will continue to be
successful in generating future sales. In addition, certain of Acxiom's long
term contracts include provisions for early termination by the customer. In most
cases, there are clauses that specify certain customer payments to Acxiom upon
early termination. However, there can be no assurance that Acxiom will
successfully collect such payments even when it is contractually entitled to
receive them. Further, in a competitive situation, Acxiom may, as it has in the
past, renegotiate prices and terms for an existing contract. Such situations can
occur at any time and such renegotiations generally result in an erosion of
Acxiom's profitability.
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<PAGE>
RAPID TECHNOLOGICAL CHANGE
Acxiom believes that its future success will be dependent on, among other
things, maintaining technological competitiveness in its data products,
processing functionality, and software systems and services. Acxiom must
continually improve its current processes and develop and introduce new products
and services in order to match its competitors' technological developments and
the increasingly sophisticated requirements of its customers. There can be no
assurance that Acxiom can successfully identify, develop and bring new and
enhanced services and products to market in a timely manner, that such services
or products will be commercially successful or that services, products or
technologies developed by others will not render Acxiom's services and products
noncompetitive or obsolete.
GOVERNMENT REGULATION; PRIVACY ISSUES
The direct marketing industry has recently been subject to increased
legislative attention. In addition consumers are growing increasingly aware of
privacy issues related to direct marketing. In 1996, the Fair Credit Reporting
Act ("FCRA") was amended to provide consumers with easier access to their credit
reports and to facilitate the correction of errors in such reports. New
regulations interpreting the amendments were issued by the Federal Trade
Commission ("FTC") in 1997. The amendment and regulations addressed, among other
things, the issue of "prescreening," a procedure utilized by many bankcard
issuers and insurance companies in their direct marketing programs. This
legislation regulates the use of credit reports in the preparation and
generation of lists used by companies in offering credit and provides for
significant fines for the misuse of credit reports. Although Acxiom believes its
list processing activities for credit grantors are in compliance with the recent
amendments to the FCRA, there is uncertainty as to the interpretation and
application of the recent amendments to such legislation. Therefore, there can
be no assurances that significant fines will not be levied against Acxiom or
that this portion of its list processing services will not be adversely
affected. In addition to the FCRA, bills intended to give consumers more control
over how personal information is utilized in the marketplace are pending in
various state legislatures. There can be no assurance that this legislation or
additional federal or state consumer-oriented legislation will not significantly
limit, or increase the costs of, the collection or dissemination of certain
types of data, which could adversely affect Acxiom=s direct marketing
activities.
Recently, the U.S. House of Representatives passed the Collections of
Information Antipiracy Act ("CIAA"), which is now pending before the U.S.
Senate. The intent of this proposed legislation is to protect collections of
information from unauthorized copying and use in the marketplace. However, as
currently proposed, a portion of this bill may have a material adverse effect on
Acxiom as it will prevent Acxiom, as well as some of Acxiom's competitors, from
compiling marketing databases from certain sources (e.g., telephone
directories). Consistent with the U.S. Supreme Court's decision in Feist
Publications v. Rural Telephone Service Co., Inc., 499 U.S. 340 (1991),
publishers of telephone directories have traditionally been deemed not to be
entitled to copyright protection. In its current form, the CIAA would confer a
new intellectual property right upon such publishers and, as a result, prohibit
Acxiom from its traditional compilation endeavors. Acxiom's management will
continue to actively monitor this proposed legislation and lobby against passage
of the CIAA in its current form.
LOSS OF DATA AND/OR CUSTOMER LISTS
Acxiom could suffer a material adverse effect if owners of the data used by
Acxiom were to withdraw the data from Acxiom's use. The owners of the marketing
lists maintained by Acxiom could decide to remove their lists from Acxiom's
possession, and if a substantial number of lists were removed, a material
adverse impact upon Acxiom's operations could result.
POSTAL RATE INCREASES
The direct marketing industry has been negatively impacted from time to time
during past years by postal rate increases. The most recent postal rate
increase, which became effective in January 1995, and any future
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increases (including the increase proposed by the Postal Rate Commission on May
11, 1998) may force direct mailers to mail fewer pieces and to target their
prospects more carefully. Acxiom experienced no significant negative financial
impact as a result of the most recent postal rate increase, but there is no
assurance that future postal increases will not have an adverse impact upon
Acxiom.
RISK OF ACQUISITION STRATEGY
Acxiom intends to pursue growth through the opportunistic acquisition of
companies, or other assets that Acxiom believes are best suited to the purpose
of assisting its customers in marketing their products and services. Acxiom
routinely reviews potential acquisitions. It is likely that Acxiom will continue
to experience significant expansion in the future. Acxiom's acquisition strategy
involves certain risks, including difficulties in the integration of operations
and systems, the diversion of management's attention from other business
concerns and the potential loss of key employees of acquired companies. While
management believes that Acxiom has been reasonably successful implementing its
acquisition strategy during the past three years, there can be no assurance that
Acxiom will be able to successfully integrate any acquired businesses into
Acxiom=s operations.
On June 3, 1998, Acxiom acquired a twenty-five percent interest in Ceres
Integrated Solutions, LLC ("Ceres"), a manufacturer of retail marketing and
merchandising software, for $3,125,000. The purpose of this transaction was to
leverage Ceres' proprietary targeted marketing database software applications
and its capacity for providing analytical services within Acxiom's industry-
specific solutions. The initial industry which will be solicited for business is
the retail industry. The primary risks involved in this venture relate to the
possibility that the first customer installations will not be successful,
thereby creating a negative reputation in the marketplace as well as devaluing
Acxiom's investment in Ceres. Generally, however, Acxiom does not believe that
the acquisition is material to Acxiom's consolidated financial statements and as
such, does not believe that the performance of this investment presents any
material risks to Acxiom's business, operating results or financial condition.
INTELLECTUAL PROPERTY RIGHTS
Both Acxiom's and May & Speh's success depends in part upon their
technological expertise and proprietary technologies. Both Acxiom and May & Speh
generally rely upon their trade secret protection and non-disclosure safeguards
to protect their proprietary information and technologies. May & Speh holds no
patents or registered copyrights. Acxiom and its subsidiaries have 35 federally
registered trademarks and service marks and 11 pending applications for
trademarks and service marks. Acxiom also has one patent application pending
with the Patent Trademark Office for certain components of the Acxiom Data
Network SM and is in the process of filing an extensive international patent
application for the same. In addition, Acxiom is in the process of preparing an
application for additional patents on data models and data integrators which are
components of its proprietary marketing system known as "Solvitur(TM)". Prior to
1998, most of Acxiom's proprietary systems were operated within the confines of
Acxiom's facilities in a computer mainframe environment. Customers typically did
not have access to these systems. Recently, however, customers have begun to
request marketing systems which are either installed or capable of being
installed at the customers' facilities. In addition, in 1998 Acxiom introduced
the Acxiom Data Network, a new service whereby certain of Acxiom's products will
be delivered to its customers via the Internet. In both of the circumstances
mentioned above, certain of Acxiom's proprietary systems are subject to being
copied or otherwise misappropriated, and therefore efforts have been undertaken
to protect such systems.
While both Acxiom and May & Speh (i) enter into license or other agreements
with their customers in the ordinary course of business which contain terms
and conditions prohibiting unauthorized reproduction or use of their and,
where applicable, their vendors', products and/or services, (ii) enter into
confidentiality agreements with their associates, contractors, customers,
potential customers, suppliers and vendors who have access to sensitive
information, and (iii) limit access to, and distribution of, their proprietary
information, there can be no assurance that these steps will be adequate to
deter misappropriation or infringement of their proprietary technologies or
independent third party development of substantially similar products and
technology. Both
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Acxiom and May & Speh believe that legal protection of their proprietary
information is less significant than the knowledge and experience of their
management and personnel, and their ability to develop, enhance and market
existing and new products and services.
Further, given the rapid evolution of technology and the associated
uncertainties in intellectual property law, there can be no assurance that
Acxiom's current or future products will not at some point be found to infringe
the proprietary rights of others. If such an infringement occurs Acxiom may not
be able to obtain the requisite license or rights to use such technology upon
reasonable terms.
THE YEAR 2000 ISSUE
The "Year 2000 Issue" is the result of computer programs being written using
two digits, rather than four, to define an applicable year. Any of Acxiom's
computer programs that have date-sensitive software may recognize a date using
"00" as the year 1900, rather than the year 2000. This could result in a system
failure or miscalculations causing disruptions of operations, including, among
other things, a temporary inability to process or transmit data, or engage in
normal business activities. Acxiom, like most owners of computer software, has
assessed and is in the process of modifying, where needed, its computer
applications to ensure they will function properly in the year 2000 and beyond.
Acxiom has been replacing or renovating the systems and applications where
necessary, using both internal staff and external consultants. In addition,
Acxiom has initiated formal communications with all of its significant suppliers
and large customers to determine the extent to which Acxiom is vulnerable to a
failure by such a third party to adequately address its own Year 2000 Issue.
Acxiom is currently operating under an internal deadline to ensure all of its
computer applications are "year 2000 ready" by December 31, 1998. Acxiom
currently believes that with modifications to existing software and conversions
to new software, the Year 2000 Issue can be mitigated. However, the systems of
vendors on which Acxiom's systems rely may not be converted in a timely fashion,
or a vendor may fail to convert its software or may implement a conversion that
is incompatible with Acxiom's systems, which failures could have a material
adverse impact on Acxiom.
The cost of the Year 2000 project is estimated to be between $3 million and
$5.5 million. These costs are based on Acxiom's management's best estimates,
which are derived utilizing numerous assumptions of future events. There can be
no guarantee that these estimates will be achieved and the actual results could
differ materially from the above outlined plans.
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THE MERGER
BACKGROUND OF THE MERGER
The terms of the Merger Agreement are the result of arm's length negotiations
between representatives of Acxiom and May & Speh. The following is a brief
discussion of the background of these negotiations, the Merger and related
transactions.
Having reviewed over the course of several years the ongoing prospects for
Acxiom's businesses, Acxiom management and the Acxiom Board of Directors
concluded that its growth strategy would include the following components: the
updating of its core technology, the enhanced utilization of Acxiom's
proprietary data, the expansion of current customer relationships and the
extension of its existing customer base, the offering of new services and
products, and selective acquisitions and strategic alliances.
In April 1998, senior management of May & Speh and senior management of Acxiom
were engaged in on-going discussions regarding a potential business relationship
relating to the sale of Acxiom data to May & Speh customers and a separate
initiative relating to potential joint ventures between the companies focusing
on specifically targeted industries. On April 20, 1998, the Company Leader of
Acxiom called the Chief Executive Officer of May & Speh to discuss a potential
strategic combination with Acxiom and agreed to proceed with preliminary
exploratory discussions at the senior management level of both companies. During
the week of April 20, 1998, the Chief Executive Officer of May & Speh contacted
a majority of the May & Speh directors to inform them that Acxiom had indicated
an interest in pursuing discussions with May & Speh regarding a potential
business combination and to discuss with such directors the possibility of a
strategic combination with Acxiom.
On May 1, 1998, members of May & Speh senior management met with members of
Acxiom senior management in Conway, Arkansas to discuss each other's businesses
and to review the potential business impact of a strategic combination and the
integration issues such a combination would present. There was, however, no
discussion as to the terms or conditions upon which a transaction might take
place. These discussions continued at the senior management level into the month
of May. On May 6, 1998, the May & Speh Board of Directors held a regularly
scheduled meeting during which the Chief Executive Officer of May & Speh advised
the May & Speh Board of Directors as to recent business developments and
strategic opportunities, including the status of the exploratory conversations
with Acxiom. Following inquiries by the directors and discussion regarding a
possible combination, the May & Speh Board of Directors directed May & Speh's
management to proceed with discussions concerning a possible combination with
Acxiom. On May 11, 1998, members of senior management of both Acxiom and May &
Speh met to further discuss various strategic and integration issues raised by a
potential merger and to prepare an outline of the various points of discussion.
On or about May 11, 1998, May & Speh retained Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ") to act as its financial advisor for a twelve
month period (effective as of May 1, 1998) to advise May & Speh with respect to
any potential merger or business combination.
On May 18, 1998, the Company Leader and other members of senior management of
Acxiom and the Chief Executive Officer and other members of senior management of
May & Speh met to discuss the timing and structure of a potential transaction.
On May 19, 1998 Acxiom engaged Stephens Inc. ("Stephens") as its financial
advisor to advise Acxiom with respect to a potential transaction involving
Acxiom and May & Speh. On May 20, 1998, the Board of Directors of Acxiom met at
length and discussed a possible transaction with May & Speh and its benefits for
Acxiom stockholders. At this meeting, Stephens provided the Acxiom Board of
Directors with certain information pertaining to May & Speh, including its
trading history, its various businesses, the type of consideration proposed by
Acxiom and the potential financial issues that might arise if Acxiom were to
proceed with a transaction. The Acxiom Board of Directors authorized members of
Acxiom senior management to proceed with discussions and to report back to the
Acxiom Board of Directors.
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Between May 20, 1998 and May 25, 1998, the Company Leader of Acxiom and the
Chief Executive Officer of May & Speh continued their discussions regarding the
various terms of a possible transaction, including the tax and accounting
treatment of a potential transaction and other fundamental aspects of a possible
combination. Over this same period, the parties, together with their legal and
financial advisors, finalized their due diligence reviews and negotiated the
terms and conditions of the proposed merger. Also, over the same period, certain
members of May & Speh management visited Acxiom's headquarters to continue each
company's due diligence review of the other and to discuss the basis for the
integration of the two businesses. The parties exchanged certain operational,
financial and personnel information relating to their respective businesses. The
two companies and their advisors also engaged in a business review including
preliminary analysis of cost and revenue benefits that could be achieved by a
merger. During this period, the Company Leader of Acxiom continued to be in
contact with members of the Acxiom Board of Directors, briefing them on the
negotiations with May & Speh, the status of the transaction and the major
outstanding issues. The Chief Executive Officer and other May & Speh
representatives involved in the negotiations were, over this period, in contact
with the members of the May & Speh Board of Directors, briefing them on the
negotiations with Acxiom, the status of the transaction and the major remaining
issues.
On May 22, 1998, the May & Speh Board of Directors met to review the proposed
combination with Acxiom. At the meeting, management of May & Speh reported on
the status of the merger negotiations, DLJ made a preliminary presentation on
the financial elements of the proposed transaction, and May & Speh's legal
counsel advised the directors of their fiduciary duties in connection with the
proposed combination with Acxiom. At the meeting, senior management of May &
Speh made a report to the May & Speh Board of Directors regarding the status and
scope of the on- and off-site due diligence investigations of Acxiom.
On May 25, 1998, representatives of Acxiom and May & Speh, and their
respective advisors, met in Chicago to continue negotiating the terms of a
proposed Merger Agreement. Drafts of the Merger Agreement were delivered to the
Acxiom and May & Speh Boards of Directors on May 26, 1998.
The Exchange Ratio was determined through arm's length negotiations between
Charles D. Morgan, the Chairman and Company Leader of Acxiom and Peter Mason,
the Chairman, Chief Executive Officer and President of May & Speh over the
course of the time that the Merger was being negotiated. Messrs. Morgan and
Mason discussed a range of exchange ratios based on a variety of factors,
including the following: (i) the relative contribution of each of Acxiom and May
& Speh to the combined entity's revenues, EBITDA (earnings before interest,
taxes, depreciation and amortization), pre-tax earnings, net earnings and profit
margins, (ii) each company's internal estimates of projected financial
performance (with and without anticipated cost savings), and (iii) the trading
price of each company's stock on both a current and historical basis.
The Acxiom Board of Directors held a special meeting on May 26, 1998 to
discuss the terms of the proposed merger and Merger Agreement. At the meeting,
the Company Leader of Acxiom presented the terms of the Merger, the proposed
corporate structure and organization, identified potential synergies from the
combination, and the need for regulatory approvals. Representatives of Stephens
presented an analysis of the financial terms of the proposed transaction and
provided its opinion to the effect that as of such date the Exchange Ratio to be
paid to the holders of May & Speh Common Stock was fair to Acxiom and its
stockholders from a financial point of view. See "THE MERGER--Opinion of
Acxiom's Financial Advisor." The Acxiom Board discussed the proposed transaction
along with potential synergies, strategic fit, the results of due diligence,
financial results and projections, accounting issues, personnel issues, timing
and pricing considerations related to the proposed Merger and other terms of the
Merger and the Merger Agreement as well as the reasons for the proposed Merger.
See "THE MERGER--Recommendation of the Acxiom Board of Directors; Reasons for
the Merger." Following these presentations, the Acxiom Board of Directors, by
unanimous vote of those members present, approved the Merger, the Merger
Agreement and the related stock option agreement and thereby recommended that
the Merger Proposal be presented to and approved by the holders of Acxiom Common
Stock.
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The May & Speh Board of Directors held a special meeting on May 26, 1998 to
discuss the terms of the proposed Merger and the Merger Agreement. At the
meeting, the Chief Executive Officer of May & Speh presented the terms of the
Merger, the results of due diligence, potential synergies, strategic fit,
financial results and projections, accounting issues, personnel issues, timing
and pricing considerations related to the proposed Merger and other terms of the
Merger and the Merger Agreement as well as the reasons for the proposed Merger.
See "THE MERGER--Recommendation of the May & Speh Board of Directors; Reasons
for the Merger." DLJ presented its updated analysis of the financial elements of
the proposed transaction and delivered its opinion to the effect that as of such
date the Exchange Ratio was fair from a financial point of view to the holders
of May & Speh Common Stock. See "THE MERGER--Opinion of May & Speh's Financial
Advisor." Following these presentations, the May & Speh Board, by unanimous vote
of those members present, approved the Merger, the Merger Agreement and the
related stock option agreement and thereby recommended that the Merger Agreement
be presented to and approved by the holders of May & Speh Common Stock.
Following the meetings of their respective Boards of Directors, May & Speh and
Acxiom executed the Merger Agreement on May 26, 1998 and issued a press release
announcing the Merger on May 27, 1998.
On July 29, 1998, Acxiom and May & Speh executed an Amended and Restated
Merger Agreement which provided for certain technical clarifications of the
Merger Agreement.
RECOMMENDATION OF THE ACXIOM BOARD OF DIRECTORS; ACXIOM'S REASONS FOR THE
MERGER
THE BOARD OF DIRECTORS OF ACXIOM HAS APPROVED THE MERGER AND RECOMMENDS THAT
STOCKHOLDERS OF ACXIOM VOTE FOR APPROVAL OF THE MERGER PROPOSAL. THE BOARD OF
DIRECTORS OF ACXIOM BELIEVES THAT THE MERGER WILL RESULT IN AN ORGANIZATION WITH
THE COMPETITIVE STRENGTH, FINANCIAL RESOURCES, AND TECHNOLOGY AND CUSTOMER BASE
REQUIRED BY THE INCREASING CONSOLIDATION AFFECTING THE GROWING MARKETS FOR
INFORMATION MANAGEMENT, DATA PRODUCTS AND SERVICES AND OUTSOURCING SERVICES.
In reaching its determination, the Acxiom Board of Directors consulted with
Acxiom management as well as its financial and legal advisors, and considered a
number of factors, including, without limitation, the following:
(i) the combination with May & Speh would provide diversification of Acxiom
into different direct marketing and data processing markets and increase its
client base;
(ii) based on the relative earnings of both companies and the Exchange
Ratio, the Merger should be accretive to earnings to Acxiom's current
stockholders;
(iii) the market capitalization of the combined company will provide
enhanced liquidity for Acxiom's stockholders;
(iv) the increased market presence, economies of scale, cost savings
opportunities and enhanced opportunities for growth made possible by the
Merger, including the opportunity for the combined entity to, among other
things:
. combine the strength and breadth of May & Speh's direct marketing
customers, including Fortune 500 companies and other medium-sized companies
that have significant direct marketing requirements, particularly in the
financial services, consumer products, insurance and retail industries, with
the range of products and services Acxiom offers to direct marketers.
. cross-market opportunities through the sale of May & Speh's
products, including Quiddity and its modeling and analysis products, to
Acxiom's customers.
. access May & Speh's customer base to provide opportunities for the sale
of Acxiom data products, including the Acxiom Data Network SM, into new
channels.
. integrate the data processing and direct marketing products and
services of the two companies and thereby enhance and strengthen such
products and services and enable the combined company to
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position itself to potential customers as a fully-integrated, large-
capability data processing and direct marketing services company;
(v) the information with respect to the business, operations, financial
condition, earnings and prospects of May & Speh, on both a historical and a
prospective basis, including certain information reflecting the two companies
on a pro forma combined basis;
(vi) the belief that the combined company would be better able to respond to
the needs of consumers and customers, the increased competitiveness of the
data processing and direct marketing industries, and the opportunities that
changes in the data processing and direct marketing industries might bring;
(vii) the treatment of the Merger as a pooling of interests transaction
for accounting purposes;
(viii) the likelihood that the Merger will be consummated, including the
fact that the obligations of Acxiom and May & Speh to consummate the Merger
are not conditioned upon obtaining any financing;
(ix) the terms of the Merger Agreement and the Stock Option Agreements (See
"THE MERGER--Terms of the Merger"); and
(x) the opinion by Stephens to the effect that the Exchange Ratio was fair,
from a financial point of view, to Acxiom and to the holders of Acxiom Common
Stock. The full text of the written opinion of Stephens, which sets forth the
procedures followed, the factors considered and the assumptions made, is
attached as Annex D to this Proxy Statement/Prospectus and is incorporated
herein by reference. Stockholders of Acxiom are urged to read the opinion of
Stephens carefully and in its entirety. See "THE MERGER--Opinion of Acxiom's
Financial Advisor."
In view of the wide variety of factors considered by the Acxiom Board of
Directors in connection with its evaluation of the Merger Agreement, the Acxiom
Board of Directors did not find it practicable to, and did not quantify or
otherwise attempt to, assign relative weights to the above factors or determine
that any factor was of particular importance. Rather, in connection with its
evaluation of the Merger and Merger Agreement, the Acxiom Board of Directors
based its decision to approve the Merger and the Merger Agreement and to
recommend that the Acxiom stockholders vote for the Merger Proposal on the
totality of the information presented to, and considered by, it.
OPINION OF ACXIOM'S FINANCIAL ADVISOR
Opinion of Stephens. Stephens delivered its oral and written opinion on May
26, 1998 to the Acxiom Board of Directors that, on the basis of and subject to
the matters set forth therein, as of the date thereof, the Exchange Ratio was
fair from a financial point of view to Acxiom and to the holders of Acxiom
Common Stock. Stephens subsequently confirmed its opinion by delivering to the
Acxiom Board of Directors a written opinion, dated as of the date of the Proxy
Statement/Prospectus, that, on the basis of and subject to the matters set forth
therein, as of the date thereof, the Exchange Ratio is fair from a financial
point of view to Acxiom and to the holders of Acxiom Common Stock. Although
subsequent developments may affect the opinions delivered by Stephens, Stephens
does not have any obligation to update, revise or reaffirm its opinion after the
date of this Proxy Statement/Prospectus and Acxiom's obligation to consummate
the Merger is not conditioned upon such an update. Acxiom presently does not
intend to obtain an update of the opinion of Stephens prior to the Acxiom
meeting.
THE FULL TEXT OF THE OPINION OF STEPHENS, DATED AS OF THE DATE OF THIS PROXY
STATEMENT/PROSPECTUS, WHICH SETS FORTH THE ASSUMPTIONS MADE, MATTERS CONSIDERED
AND LIMITS ON THE REVIEW UNDERTAKEN, IS ATTACHED TO THIS PROXY
STATEMENT/PROSPECTUS AS ANNEX D AND IS INCORPORATED HEREIN BY REFERENCE.
STEPHENS' OPINION IS NECESSARILY BASED ON ECONOMIC, MARKET AND OTHER CONDITIONS
IN EFFECT ON, AND THE INFORMATION MADE AVAILABLE TO IT AS OF, THE DATE THEREOF.
SUBSEQUENT DEVELOPMENTS MAY AFFECT SUCH OPINION.
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HOLDERS OF ACXIOM COMMON STOCK SHOULD READ THE STEPHENS OPINION IN ITS ENTIRETY.
THE FOLLOWING SUMMARY IS QUALIFIED BY REFERENCE TO THE FULL TEXT OF SUCH
OPINION. THE OPINION OF STEPHENS WAS PROVIDED TO THE ACXIOM BOARD OF DIRECTORS
FOR ITS INFORMATION AND IS DIRECTED ONLY TO THE FAIRNESS FROM A FINANCIAL POINT
OF VIEW OF THE EXCHANGE RATIO TO ACXIOM AND TO THE HOLDERS OF ACXIOM COMMON
STOCK. THE OPINION OF STEPHENS DOES NOT ADDRESS THE MERITS OF THE UNDERLYING
DECISION BY ACXIOM TO ENGAGE IN THE MERGER AND DOES NOT CONSTITUTE A
RECOMMENDATION TO ANY STOCKHOLDER OF ACXIOM AS TO HOW SUCH STOCKHOLDER SHOULD
VOTE ON THE MERGER PROPOSAL OR ANY MATTER RELATED THERETO.
In connection with rendering its opinion dated as of May 26, 1998, Stephens:
(1) analyzed certain publicly available financial statements and reports
regarding Acxiom and May & Speh; (2) analyzed certain internal financial
statements and other financial and operating data (including financial
projections) concerning Acxiom and May & Speh prepared and provided by their
respective managements; (3) analyzed, on a pro forma basis, the financial effect
of the Merger; (4) reviewed the reported prices and trading activity for Acxiom
Common Stock and May & Speh Common Stock; (5) compared the financial performance
of Acxiom and May & Speh and the prices and trading activity of Acxiom Common
Stock and May & Speh Common Stock with that of certain other comparable
publicly-traded companies and their securities; (6) reviewed the financial
terms, to the extent publicly available, of certain transactions in the direct
marketing database industry; (7) reviewed the Merger Agreement and related
documents; (8) discussed with the management of each of Acxiom and May & Speh
the operations of and future business prospects for Acxiom and May & Speh and
the anticipated financial consequences of the Merger; and (9) performed such
other analyses and provided such other services as Stephens deemed appropriate.
Stephens relied on the accuracy and completeness of the information and
financial data prepared and provided by Acxiom and May & Speh, and Stephens'
opinion is based upon such information. Stephens inquired into the reliability
of such information and financial data only to the limited extent necessary to
provide a reasonable basis for its opinion, recognizing that Stephens rendered
only an informed opinion and not an appraisal or certification of value. With
respect to the financial projections prepared by the managements of Acxiom and
May & Speh, Stephens assumed that the financial projections were reasonably
prepared on bases reflecting the best currently available estimates and
judgments of the managements of Acxiom and May & Speh as to the expected future
financial performance of Acxiom and May & Speh. Stephens also relied on
assurances from Acxiom and May & Speh that neither Acxiom nor May & Speh is
aware of any information or facts regarding their respective companies that
would cause the information supplied to Stephens to be incomplete or misleading
in any material respect. Stephens further assumed that the Merger will be
accounted for as a pooling of interests under generally accepted accounting
principles and that it will qualify as a tax-free reorganization for United
States federal income tax purposes. Stephens did not express any opinion as to
the prices at which the Acxiom Common Stock will trade following the
consummation of the Merger.
In arriving at its opinion, Stephens performed a variety of financial
analyses, the material portions of which are summarized below. The summary set
forth below does not purport to be a complete description of the analyses
performed by Stephens. In addition, Stephens believes that its analyses must be
considered as a whole and that selecting portions of its analyses and of the
factors considered by it, without considering all such factors and analyses,
could create a misleading view of the process underlying its analyses. Although
Stephens did not draw any specific conclusions from or with regard to any one
method of analysis, all of the analyses performed by Stephens supported the
fairness of the Exchange Ratio from a financial point of view to Acxiom and its
stockholders, with the exception of the analysis of the ratio of the Merger
Total Transaction Value (as defined below) to the latest twelve months EBITDA
which Stephens found to be neutral. Stephens concluded that as a whole the
analyses performed indicated that the Exchange Ratio was fair from a financial
point of view to Acxiom and its stockholders. The matters considered by Stephens
in arriving at its opinion are based on numerous macroeconomic, operating and
financial assumptions with respect to industry performance, general
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business and economic conditions and other matters, many of which are beyond
Acxiom's and May & Speh's control. Any estimates incorporated in the analyses
performed by Stephens are not necessarily indicative of future results or
values, which may be significantly more or less favorable than such estimates.
Estimated values do not purport to be appraisals and do not necessarily reflect
the prices at which businesses or companies may be sold in the future, and such
estimates are inherently subject to uncertainty. Arriving at a fairness opinion
is a complex process not necessarily susceptible to partial or summary
description. No public company or transaction involving public companies
utilized as a comparison is identical to Acxiom and May & Speh. Accordingly, an
analysis of publicly traded comparable companies and comparable business
combinations is not mathematical; rather it involves complex considerations and
judgments concerning differences in financial and operating characteristics of
the comparable companies analyzed and other factors that could affect the public
trading value of the comparable companies or company utilized in Stephens'
analysis.
The Stephens opinion is necessarily based upon market, economic and other
conditions as they existed and could be evaluated on, and on the information
made available to Stephens as of, the date of such opinion. Stephens assumed
that in the course of obtaining the necessary regulatory or other consents or
approvals (contractual or otherwise) for the Merger, no restrictions, including
any divestiture requirements or amendments or modifications, would be imposed
that would have a material adverse effect on the contemplated benefits of the
Merger. The advisory services and the opinion provided by Stephens were for the
information and assistance of the Acxiom Board of Directors and do not
constitute a recommendation as to how any Acxiom stockholder should vote with
respect to the Merger.
The following is a summary of the material financial analyses used by Stephens
in connection with its presentation to the Acxiom Board of Directors on May 26,
1998, and the preparation of its opinion delivered to the Acxiom Board of
Directors. The following summary does not purport to be a complete description
of the analyses performed by Stephens. The preparation of a fairness opinion is
a complex process and is not necessarily susceptible to partial analysis or a
summary description.
Historical Stock Price Analysis. Stephens reviewed the performance of the per
share market prices of May & Speh Common Stock over the period from March 26,
1996 through May 22, 1998, and the performance of Acxiom Common Stock over the
period from March 26, 1996 through May 22, 1998. Stephens then compared the
movement of such closing prices for Acxiom Common Stock and for May & Speh
Common Stock with the movements of composite indices of certain direct marketing
database companies.
Stephens also reviewed the historical ratios of the market prices of May &
Speh Common Stock to Acxiom Common Stock over the period from March 26, 1996
through May 22, 1998 and compared such ratios with the Exchange Ratio of 0.800x.
Stephens noted that the ratio of the market prices of May & Speh Common Stock to
Acxiom Common Stock over that period ranged from a high of 1.086x on September
24, 1996, to a low of 0.438x on February 7, 1997. Stephens also noted that the
current ratio of the market prices of May & Speh Common Stock to Acxiom Common
Stock was 0.691x as of May 22, 1998 and that, as of that date, the ratios one
month, three months, six months and twelve months prior were 0.593x, 0.617x,
0.755x, 0.717x, respectively.
Selected Comparable Company Trading Analysis. Stephens compared certain
publicly available financial and operating data and projected financial
performance (based on Wall Street consensus estimates) of five publicly traded
corporations that Stephens deemed to be reasonably similar. The companies were
Abacus Direct Corp., Acxiom Corporation, American Business Information, Inc.,
Harte-Hanks Communications, Inc. and May & Speh, Inc. (collectively, "Selected
Comparable Companies"). Stephens calculated the trading multiples of the
Selected Comparable Companies with corresponding financial and operating data
and projected financial performance of May & Speh. Such analysis indicated,
among other things, (a) the ratio of the closing stock price as of May 22, 1998
to the 1998 estimated earnings per share was 25.6x for May & Speh compared to
maximum, mean and minimum values for the Selected Comparable Companies of 46.3x,
29.2x and 19.3x, respectively, (b) the ratio of closing stock price as of May
22, 1998 to the 1999 estimated earnings per share was 21.1x for May & Speh
compared to maximum, mean and minimum values for the Selected Comparable
Companies of 33.6x, 23.1x and 15.7x, respectively, (c) the ratio of the total
market capitalization as of May 22, 1998 (i.e., market
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value of common equity plus total debt less cash and cash equivalents or the
"Total Market Capitalization") to the March year-end 1999 estimated earnings
before interest, taxes, depreciation and amortization ("EBITDA") was 10.8x for
May & Speh compared to maximum, mean and minimum values for the Selected
Comparable Companies of 26.7x, 13.7x and 9.7x, respectively.
Selected Comparable Transaction Analysis. Stephens analyzed the financial
terms, to the extent publicly available, of seven transactions deemed to be
relevant involving direct marketing database companies which were announced
between September 11, 1995 and March 12, 1998 (the "Selected Comparable
Transactions"). The Selected Comparable Transactions included The Great
Universal Stores P.L.C./Metromail Corporation, The News Corp. Ltd./Heritage
Media Corporation, Snyder Communications, Inc./American List Corporation, The
Great Universal Stores P.L.C./Experian Corporation, Bain Capital Inc. and Thomas
H. Lee Co./TRW Information Systems and Services (Experian), Harte-Hanks
Communications, Inc./DiMark, Inc., and Heritage Media Corp./DIMAC Marketing
Company. Stephens compared the price paid for direct marketing database
companies in such transactions (the "Total Transaction Value"), as a multiple of
the latest twelve months' EBITDA and earnings before interest and taxes
("EBIT"). Total Transaction Value is defined as shares outstanding for the
target company multiplied by the offer price per share plus net debt. Such
analysis indicated, among other things, (a) the ratio of the total transaction
value of the Merger, based on the market price of Acxiom Common Stock as of May
22, 1998 (the "Merger Total Transaction Value") to the latest twelve months'
EBIT is 20.5x, compared to maximum, mean and minimum values of the ratio of the
Total Transaction Value to the last twelve months' EBIT for the Selected
Comparable Transactions of 39.6x, 19.0x and 11.4x, respectively and (b) the
ratio of the Merger Total Transaction Value to the latest twelve months' EBITDA
is 16.4x, compared to maximum, mean and minimum values of the ratio of the Total
Transaction Value to the last twelve months' EBITDA for the Selected Comparable
Transactions of 14.4x, 11.0x and 7.0x, respectively. Stephens also determined
the percentage premium of the offer price over the trading prices one day, one
week and four weeks prior to the announcement date of five Selected Comparable
Transactions involving public companies. The mean for the Selected Comparable
Transactions over the trading prices one day, one week and four weeks prior to
the announcement date were 39.2%, 40.6% and 36.5%, respectively. Stephens
derived premiums based on the implied purchase price of May & Speh's stock price
one day, one week and four weeks prior to May 22, 1998. The implied premiums for
the proposed transaction over the trading prices one day, one week and four
weeks prior to May 22, 1998 were 15.8%, 21.7% and 23.8%, respectively.
Discounted Cash Flow Analysis. Stephens performed a discounted cash flow
analysis on May & Speh based upon estimates of projected financial performance
prepared by the management of May & Speh. Utilizing these projections, Stephens
calculated a range of implied per share equity values based upon the discounted
net present value of the sum of the projected stream of unlevered free cash
flows from 1999 to the year 2002 and the projected terminal value at 2002 based
upon a range of multiples of projected EBITDA less net debt at March 31, 1998
for May & Speh divided by the number of shares outstanding including the shares
from the conversion of the convertible subordinated notes. Stephens applied
several discount rates (ranging from 12.0% to 14.0%) and multiples of EBITDA
(ranging from 9.5x to 11.5x). Utilizing this methodology, the implied present
value per share of May & Speh Common Stock ranged from $16.79 to $20.83.
Relative Valuation Analysis. Stephens reviewed the relative valuations of May
& Speh and Acxiom using relative comparable public companies analysis, relative
contribution analysis and relative discounted cash flow analysis, with and
without expected cost savings (assumed to be $10 million in year 2000 and
thereafter), and compared such ratios with the Exchange Ratio of 0.800x. Such
analysis indicated, among other things, (a) the range of implied exchange ratios
based on the relative comparable public companies analysis (i.e. the ratios of
the equity values per shares outstanding including the shares from the
conversion of the convertible subordinated notes of May & Speh Common Stock,
implied by the estimated 1999 and 2000 EBITDA, divided by the share price of
Acxiom Common Stock as of May 22, 1998) was 0.640x to 0.826x without expected
cost savings and 0.733x to 0.942x with expected cost savings, and (b) the range
of implied exchange ratios based on the relative contribution analysis (i.e. the
ratio of the estimated 1999, 2000 and 2001 net income of May & Speh per May &
Speh shares outstanding including the shares from the conversion of the
convertible subordinated notes divided
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by the estimated 1999, 2000 and 2001 net income of Acxiom per Acxiom shares
outstanding) was 0.835x to 0.853x without expected cost savings and 0.853x to
1.034x with expected cost savings. Stephens also observed that the 0.800x
Exchange Ratio was within the range implied by the relative discounted cash flow
analysis without and with expected cost savings of 0.554x to 0.901x and 0.623x
to 1.014x, respectively. Stephens did not play a role in establishing the
Exchange Ratio.
Merger Consequences Analysis. Stephens examined the pro forma impact, for
fiscal years 1999 and 2000, of the Merger on estimates of May & Speh's earnings
per share derived from estimates of May & Speh financial performance prepared by
the management of May & Speh and estimates of Acxiom's projected financial
performance prepared by the management of Acxiom. The projected impact arrived
at through Stephens' analysis was compared to management's earnings estimate for
Acxiom which did not take into account the impact of the Merger. Compared to
this earnings estimate, excluding certain non-recurring expenses related to the
Merger, Stephens concluded that the Merger would be neutral in fiscal year 1999
and accretive to the earnings of Acxiom in fiscal year 2000 due to merger
integration and expected cost savings. Additionally, Stephens compared these
estimates to the average earnings per share of $0.75 projected by analysts
covering Acxiom for fiscal year 1999, and found these average projections to be
in line with the above described analysis.
The Acxiom Board of Directors retained Stephens as an independent contractor
to act as financial advisor for the purpose of providing a fairness opinion on
the Merger. Stephens is a nationally recognized investment banking and advisory
firm. Stephens, as part of its investment banking business, is continually
engaged in the valuation of companies and their securities in connection with
business reorganizations, private placements, negotiated underwritings, mergers
and acquisitions and valuations for estate, corporate and other purposes.
Stephens is familiar with Acxiom and regularly provides investment banking
services to Acxiom and through its research department regularly follows
Acxiom's business activities and prospects. In the ordinary course of business,
Stephens and its affiliates may at any time hold long or short positions, and
may trade or otherwise effect transactions as principal or for the accounts of
customers, in debt or equity securities or options on securities of Acxiom
and/or May & Speh.
In consideration for Stephens' services as financial advisor to Acxiom, Acxiom
has agreed to pay to Stephens a fee equal to $1,925,000, a significant portion
of which is payable upon consummation of the Merger. Acxiom has also agreed to
reimburse Stephens for its reasonable out-of-pocket expenses, including fees and
disbursements of its legal counsel, plus any sales or use taxes incurred in
connection with its activities as financial advisor in providing a fairness
opinion to Acxiom, and to indemnify Stephens and certain related persons against
certain liabilities in connection with its engagement, including certain
liabilities under the federal securities laws. Acxiom has paid Stephens
approximately $1,001,000 in compensation for investment banking and other
services over the past two years, $775,000 of which related to the opinion
delivered by Stephens in connection with the Merger.
RECOMMENDATION OF THE MAY & SPEH BOARD OF DIRECTORS; MAY & SPEH'S REASONS FOR
THE MERGER
FOR THE REASONS DISCUSSED BELOW, THE BOARD OF DIRECTORS OF MAY & SPEH HAS
UNANIMOUSLY DETERMINED THAT THE TERMS OF THE MERGER AGREEMENT AND THE
TRANSACTIONS CONTEMPLATED THEREBY ARE FAIR TO, AND IN THE BEST INTERESTS OF, MAY
& SPEH AND THE MAY & SPEH STOCKHOLDERS. ACCORDINGLY, THE MAY & SPEH BOARD OF
DIRECTORS UNANIMOUSLY RECOMMENDS THAT MAY & SPEH STOCKHOLDERS VOTE FOR THE
APPROVAL AND ADOPTION OF THE MERGER AGREEMENT.
The May & Speh Board of Directors, in the course of reaching its decision to
approve the Merger Agreement and the transactions contemplated thereby,
consulted with May & Speh's financial advisor and special counsel as well as
with May & Speh's management, and directors either participated in or were kept
informed of the progress of due diligence and negotiating sessions with Acxiom.
The May & Speh Board of Directors considered a number of factors, including the
following material factors (the order does not necessarily reflect the relative
significance):
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(i) the opportunity of May & Speh stockholders to continue as stockholders
of a combined organization with greater strength and enhanced competitive
position than May & Speh would enjoy on a stand-alone basis;
(ii) current industry, economic and market conditions which have encouraged
consolidation in the direct marketing services industry, together with
Acxiom's growth strategy;
(iii) the enhanced opportunities for growth made possible by the integration
and combination of the complementary strengths of Acxiom and May & Speh,
including the opportunity to integrate, improve and enhance the direct
marketing products and services, as well as the technologies capabilities, of
the two companies to provide a broader and more fully- integrated range of
services;
(iv) the potential enhancement in earnings that could be achieved through
the cross-selling of existing products and services to each other's clients;
(v) the potential cost saving that could be achieved from combining the
operations of May & Speh and Acxiom;
(vi) the DLJ Opinion to the effect that, as of the date of the DLJ Opinion
and based upon and subject to the assumptions, limitations and qualifications
set forth therein, the Exchange Ratio was fair from a financial point of view
to the holders of May & Speh Common Stock. See "THE MERGER--Opinion of May &
Speh's Financial Advisor." (The DLJ Opinion is included as Annex E to this
Joint Proxy Statement/Prospectus and should be read in its entirety);
(vii) the assessment of May & Speh's strategic alternatives to the Merger,
including remaining an independent public company, continuing its pursuit of
acquisitions or merging or consolidating with a party or parties other than
Acxiom (such acquisitions or mergers and consolidations with parties other
than Acxiom were considered on a hypothetical basis only and the May & Speh
Board did not consider any specific transaction with any party other than
Acxiom during its consideration of the Merger);
(viii) the terms and conditions of the Merger Agreement, including the
"no-solicitation" and fiduciary responsibility provisions of the Merger
Agreement which permit May & Speh to provide information and enter into
discussions with third parties under certain circumstances and to terminate
the Merger Agreement to enter into a transaction with a third party under
certain specified circumstances, the fees and expenses payable, in certain
circumstances, to May & Speh, and in other circumstances, by May & Speh, the
termination sections of the Merger Agreement, the provisions relating to May &
Speh's ability to continue to operate its business in the ordinary course
during the period between the execution of the Merger Agreement and the
Effective Time (see "THE MERGER--Terms of the Merger--Termination;" "--
Expenses; Termination Fees;" and "--Amendment and Waiver"), the conditions to
closing and the representations and warranties of each of the parties in the
Merger Agreement; and
(ix) the fact that the Merger is expected to be a tax-free transaction for
U.S. federal income tax purposes to May & Speh stockholders and that it is
expected to qualify as a pooling of interests transaction for accounting and
financial reporting purposes.
The May & Speh Board of Directors also considered a number of potential risks
and disadvantages relating to the Merger, including the following material risks
and disadvantages (the order does not necessarily reflect the relative
significance): (i) the difficulty and management distraction inherent in
integrating two large and geographically dispersed operations and the risk that
the synergies and benefits sought in the Merger might not be fully achieved;
(ii) the risk that the Merger would not be consummated and the potential effects
that the failure to consummate might have on the business, employees and
customers of May & Speh; (iii) the expenses expected to be incurred by May &
Speh in connection with the Merger; and (iv) the substantial acquisition history
of Acxiom and the inherent uncertainty this creates with respect to analyzing
the historical and projecting the future performance of Acxiom. The May & Speh
Board of Directors believed that these potential risks and disadvantages were
outweighed by the potential benefits anticipated to be realized from the Merger.
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The foregoing discussion of the material factors and potential material risks
and disadvantages considered by the May & Speh Board is not intended to be
exhaustive. In view of the wide variety of factors, risks and disadvantages
considered in connection with its evaluation of the Merger, the May & Speh Board
did not find it practicable to, and did not, quantify or assign any relative or
specific weights to the foregoing matters, and individual directors may have
deemed different matters more significant than others.
OPINION OF MAY & SPEH'S FINANCIAL ADVISOR
May & Speh asked DLJ, in its role as financial advisor to May & Speh, to
render an opinion to the May & Speh Board of Directors as to the fairness of the
Exchange Ratio from a financial point of view to the holders of May & Speh
Common Stock. On May 26, 1998, DLJ delivered its written opinion to the May &
Speh Board of Directors that, as of such date and based upon and subject to the
assumptions, limitations and qualifications set forth in such opinion, the
Exchange Ratio was fair from a financial point of view to the holders of May &
Speh Common Stock.
THE FULL TEXT OF THE DLJ OPINION IS ATTACHED HERETO AS ANNEX E. THE SUMMARY OF
THE DLJ OPINION SET FORTH IN THIS PROXY STATEMENT/PROSPECTUS IS QUALIFIED BY
REFERENCE TO THE FULL TEXT OF THE DLJ OPINION. MAY & SPEH STOCKHOLDERS ARE URGED
TO READ THE DLJ OPINION CAREFULLY AND IN ITS ENTIRETY FOR THE PROCEDURES
FOLLOWED, ASSUMPTIONS MADE, OTHER MATTERS CONSIDERED AND LIMITS OF THE REVIEW BY
DLJ IN CONNECTION WITH SUCH OPINION.
The DLJ Opinion was prepared for the May & Speh Board of Directors and was
directed only to the fairness from a financial point of view, as of the date
thereof, of the Exchange Ratio to the holders of May & Speh Common Stock. DLJ
expressed no opinion in the DLJ Opinion as to the prices at which the Acxiom
Common Stock would actually trade at any time. The type and amount of
consideration was determined in arm's length negotiations between Acxiom and May
& Speh, in which negotiations DLJ advised May & Speh. The DLJ Opinion does not
address the relative merits of the Merger and the other business strategies
considered by the May & Speh Board of Directors nor does it address the May &
Speh Board's decision to proceed with the Merger. The DLJ Opinion does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the Merger.
May & Speh selected DLJ as its financial advisor because it is an
internationally recognized investment banking firm that has substantial
experience in the businesses in which May & Speh competes and is familiar with
May & Speh and its businesses. As part of its investment banking business, DLJ
is regularly engaged in the valuation of businesses and securities in connection
with mergers, acquisitions, underwritings, sales and distributions of listed and
unlisted securities, private placements and valuations for corporate and other
purposes.
In arriving at the DLJ Opinion, DLJ reviewed the Merger Agreement and the
exhibits thereto, the May & Speh Option Agreement and the Acxiom Option
Agreement. DLJ also reviewed financial and other information that was publicly
available or furnished to DLJ by May & Speh and Acxiom, including information
provided during discussions with their respective managements. Included in the
information provided during such discussions were certain financial projections
of May & Speh prepared by the management of May & Speh and certain financial
projections of Acxiom prepared by the management of Acxiom. In addition, DLJ
compared certain financial and securities data of May & Speh and Acxiom with
publicly available information concerning various other companies whose
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of the May & Speh Common Stock and the Acxiom Common Stock,
reviewed prices and premiums paid in certain other business combinations and
conducted such other financial studies, analyses and investigations as DLJ
deemed appropriate for purposes of rendering the DLJ Opinion.
In rendering the DLJ Opinion, DLJ relied upon and assumed the accuracy and
completeness of all of the financial and other information that was available to
it from public sources, that was provided to it by May & Speh and Acxiom or
their respective representatives, or that was otherwise reviewed by DLJ. DLJ
relied upon the estimates of the management of May & Speh as to the amount and
timing of certain operating cost savings
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synergies estimated by such management to be potentially achievable as a result
of the Merger and upon DLJ's discussions of such synergies and the timing
thereof with the management of Acxiom. With respect to the financial projections
supplied to DLJ, DLJ assumed that they were reasonably prepared on a basis
reflecting the best currently available estimates and judgments of the
managements of May & Speh and Acxiom as to the future operating and financial
performance of May & Speh and Acxiom, respectively. DLJ did not assume
responsibility for making any independent evaluation of the assets or
liabilities of May & Speh or Acxiom, or for making any independent verification
of the information reviewed by DLJ. DLJ further assumed that the Merger will be
accounted for as a pooling of interests under U.S. generally accepted accounting
principles and that it will qualify as a tax-free reorganization for U.S.
federal income tax purposes. DLJ also relied as to certain legal matters on
advice of counsel to May & Speh.
The DLJ Opinion was necessarily based on economic, market, financial and other
conditions as they existed on, and on the information made available to DLJ as
of, the date of the DLJ Opinion. Although subsequent developments may affect the
DLJ Opinion, DLJ does not have any obligation to update, revise or reaffirm its
opinion, and May & Speh's obligation to consummate the Merger is not conditioned
upon an update of the DLJ Opinion. May & Speh presently does not intend to
obtain an update of the DLJ Opinion prior to the May & Speh Meeting.
The following is a summary of the presentation made by DLJ to the May & Speh
Board of Directors at its May 22, 1998 meeting, as updated by DLJ's presentation
to the May & Speh Board at its May 26, 1998 meeting, in connection with
rendering the DLJ Opinion. For purposes of the following analyses, the Exchange
Ratio was calculated based upon the closing stock price of Acxiom Common Stock
on May 22, 1998.
Stock Price History. To provide contextual data and comparative market data,
DLJ examined the history of the trading prices and their relative relationships
for both May & Speh Common Stock and Acxiom Common Stock for the twelve-month
period ended May 20, 1998. DLJ also reviewed the daily closing prices of May &
Speh Common Stock and Acxiom Common Stock and compared such closing stock prices
with the closing stock prices of the Direct Marketing Companies, the Outsourcing
Companies (each as defined herein) and the S&P 400 Index. This information was
presented solely to provide the May & Speh Board with background information
regarding the stock prices of May & Speh Common Stock and Acxiom Common Stock
over the periods indicated.
Comparable Publicly Traded Company Analysis. DLJ analyzed selected historical
and projected operating information, stock market data and financial ratios for
certain publicly traded direct marketing and database service companies (the
"Direct Marketing Companies") and certain publicly traded outsourcing and other
business service companies (the "Outsourcing Companies", and collectively with
the Direct Marketing Companies, the "Comparable Companies"). The Direct
Marketing Companies consisted of Acxiom, American Business Information, Inc.,
Equifax Inc., Fair, Isaac and Company, Inc. and Harte-Hanks Communications, Inc.
The Outsourcing Companies consisted of Affiliated Computer Services, Inc.,
Automatic Data Processing, Inc., BISYS Group, Inc., Electronic Data Systems
Corporation, First Data Corporation and Fiserv, Inc.
DLJ compared the enterprise value (defined as common equity value plus
long-term debt plus the liquidation value of the preferred stock, if any, plus
the value of minority interests, if any, minus cash and short-term investments)
and the common equity value (as of May 22, 1998) of each of the Comparable
Companies to certain selected financial data. In examining these Comparable
Companies, DLJ analyzed the enterprise value of the companies as a multiple of
each company's respective latest twelve-month ("LTM") revenue, LTM earnings
before interest, taxes, depreciation and amortization ("EBITDA") and LTM
earnings before interest and taxes ("EBIT"), and the common equity value of the
companies as a multiple of each company's respective LTM earnings per share
("EPS"), projected calendar 1998 EPS ("1998 EPS") and projected calendar 1999
EPS ("1999 EPS"). DLJ's analysis of the Direct Marketing Companies yielded the
following: LTM revenue multiples ranged from 2.1x to 4.1x with a median of 3.1x,
LTM EBITDA multiples ranged from 10.7x to 14.4x with a median of 13.4x, LTM EBIT
multiples ranged from 14.7x to 27.4x with a median of 17.3x, LTM EPS multiples
ranged from 22.9x to 37.1x with a median of 27.8x, 1998 EPS multiples ranged
from 19.3x to 31.3x
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with a median of 24.4x, and 1999 EPS multiples ranged from 15.7x to 25.6x with a
median of 20.4x. DLJ's analysis of the Outsourcing Companies yielded the
following: LTM revenue multiples ranged from 1.3x to 4.1x with a median of 2.9x,
LTM EBITDA multiples ranged from 7.2x to 17.0x with a median of 11.6x, LTM EBIT
multiples ranged from 13.0x to 21.5x with a median of 16.0x, LTM EPS multiples
ranged from 19.7x to 33.7x with a median of 25.0x, 1998 EPS multiples ranged
from 19.1x to 30.3x with a median of 21.9x, and 1999 EPS multiples ranged from
16.8x to 26.7x with a median of 18.7x.
DLJ then calculated implied values per share of May & Speh Common Stock by
applying May & Speh's actual and certain forecasted financial results to the
weighted average of the high and low multiples derived from its analysis of the
public company comparables described above (assigning a 60% weight to the Direct
Marketing Companies and a 40% weight to the Outsourcing Companies). DLJ
calculated ranges of per share implied values of May & Speh Common Stock as
follows: $7.67 to $14.47 (based on enterprise value as a multiple of LTM
revenues); $10.51 to $15.82 (based on enterprise value as a multiple of LTM
EBITDA); $12.13 to $19.79 (based on enterprise value as a multiple of LTM EBIT);
$11.46 to $18.94 (based on common equity value as a multiple of LTM EPS); $12.30
to $19.79 (based on common equity value as a multiple of 1998 EPS); and $12.27
to $19.76 (based on common equity value as a multiple of 1999 EPS), in each
case, as compared to the $17.80 implied value per share of May & Speh Common
Stock (based on the Exchange Ratio multiplied by the $22.25 per share closing
stock price of Acxiom Common Stock on May 22, 1998).
Comparable M&A Transaction Analysis. DLJ reviewed ten selected acquisitions
involving companies which DLJ deemed to be comparable to May & Speh (the "M&A
Transactions"): (i) Metromail Corporation / The Great Universal Stores P.L.C.;
(ii) Neodata Services, Inc. / Electronic Data Systems Corporation; (iii) Direct
Marketing Technology, Inc. / Experian Corporation (The Great Universal Stores
P.L.C.); (iv) Database America Companies/ American Business Information, Inc.;
(v) Experian Corporation / The Great Universal Stores P.L.C.; (vi) Donnelley
Marketing Inc. / First Data Corporation; (vii) TRW Information Systems &
Services (Experian) / The Thomas H. Lee Co. and Bain Capital Inc.; (viii)
DiMark, Inc. / Harte-Hanks Communications, Inc.; (ix) DIMAC Marketing Company/
Heritage Media Corporation; and (x) SHL Systemhouse Inc. / MCI Communications
Corporation. In examining these acquisitions, DLJ compared the enterprise value
of the acquired company implied by each of these transactions as a multiple of
LTM revenue and LTM EBITDA to certain selected financial data. DLJ's analysis of
enterprise value as a multiple of (i) LTM revenue yielded a range of multiples
of 0.9x to 3.8x with a median of 2.1x, as compared to 5.3x for May & Speh in the
Merger, and (ii) LTM EBITDA yielded a range of multiples of 7.4x to 14.2x with a
median of 10.6x, as compared to 17.7x for May & Speh in the Merger. DLJ also
compared the common equity value of the acquired company implied by each of
these transactions as a multiple of LTM EPS to certain selected financial data.
DLJ's analysis of such common equity values yielded a median multiple of 23.9x,
as compared to 33.6x for May & Speh in the Merger. Although DLJ also examined
the high and low ranges of multiples of such common equity value, DLJ did not
rely on such multiples in its analysis due to the absence of any meaningful data
for certain of the M&A Transactions.
DLJ then calculated implied values per share of May & Speh Common Stock by
applying May & Speh's actual financial results to the high and low multiples
derived from its analysis of the acquisition comparables described above. DLJ
calculated ranges of per share implied values of May & Speh Common Stock as
follows: $5.06 to $13.52 (based on enterprise value as a multiple of LTM
revenues); and $8.85 to $14.74 (based on enterprise value as a multiple of LTM
EBITDA) , in each case, as compared to the $17.80 implied value per share of May
& Speh Common Stock (based on the Exchange Ratio multiplied by the $22.25 per
share closing stock price of Acxiom Common Stock on May 22, 1998). DLJ also
calculated a per share implied value of May & Speh Common Stock of $12.67, based
on common equity value as a multiple of median LTM EPS, as compared to the per
share implied value of $17.80.
Comparable Premiums Paid Analysis. DLJ determined the implied premium over
the common stock trading prices for one day, one week and four weeks prior to
the announcement date of 38 selected domestic merger or acquisition
transactions involving companies not necessarily comparable to May & Speh,
ranging from $500 million to $700 million in transaction value and completed
from May 23, 1996 through May 4, 1998. The
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high, low and median premiums for the selected transactions over the common
stock trading prices for: (i) one day prior to the announcement date were
173.7%, (5.5%) and 24.6%, respectively, as compared to the implied premium in
the Merger for the May & Speh Common Stock one day prior to May 22, 1998 of
15.8%, (ii) one week prior to the announcement date were 106.9%, (6.1%) and
28.7%, respectively, as compared to the implied premium in the Merger for the
May & Speh Common Stock one week prior to May 22, 1998 of 21.7% and (iii) four
weeks prior to the announcement date were 163.7%, (5.5%) and 36.1%,
respectively, as compared to the implied premium in the Merger for the May &
Speh Common Stock four weeks prior to May 22, 1998 of 23.8%. Applying the above
median comparable premiums to the closing price of the May & Speh Common Stock
on one day, one week and four weeks prior to May 22, 1998 implies a valuation
per share of May & Speh Common Stock of $19.16, $18.82 and $19.56, respectively,
as compared to the $17.80 implied value per share of the May & Speh Common Stock
(based on the Exchange Ratio multiplied by the $22.25 per share closing stock
price of Acxiom Common Stock on May 22, 1998) and the closing prices of the May
& Speh Common Stock one day, one week and four weeks prior to May 22, 1998 of
$15.38, $14.63 and $14.38, respectively.
Contribution Analysis. DLJ analyzed the relative contributions of May & Speh
and Acxiom to the pro forma combined entity based on selected financial data,
assuming no Synergies. In this analysis, DLJ compared the 31.7% ownership
interest that holders of May & Speh Common Stock will have in the pro forma
combined entity with the relative contribution of May & Speh to certain
financial data for the pro forma combined entity, including sales, EBITDA and
EBIT for Acxiom's fiscal year ending March 31, 1998 ("Fiscal Year 1998") and
Acxiom's projected fiscal year ending March 31, 1999 ("Fiscal Year 1999"). In
each case, the financial data for the pro forma combined entity was determined
by adding the financial data for May & Speh and Acxiom. This analysis indicated
that May & Speh would contribute (i) 18.3% and 19.5% of the pro forma combined
entity's sales for Fiscal Year 1998 and Fiscal Year 1999, respectively; (ii)
23.6% and 24.6% of the pro forma combined entity's EBITDA for Fiscal Year 1998
and Fiscal Year 1999, respectively; and (iii) 29.4% and 29.5% of the pro forma
combined entity's EBIT for Fiscal Year 1998 and Fiscal Year 1999, respectively.
DLJ also compared the 31.7% ownership interest that holders of May & Speh
Common Stock will have in the pro forma combined entity with the relative
contribution of May & Speh to the estimated net income of the pro forma combined
entity (determined by adding the net income of May & Speh and Acxiom for Fiscal
Year 1998 and Fiscal Year 1999). This analysis indicated that May & Speh would
contribute 28.4% and 28.8% of the net income of the pro forma combined entity
for Fiscal Year 1998 and Fiscal Year 1999, respectively.
DLJ then calculated the implied values per share of May & Speh Common Stock by
applying the financial data percentage contributions described above to the pro
forma equity value of the combined entity and dividing such data by May & Speh's
diluted shares. DLJ calculated per-share implied values of May & Speh Common
Stock as follows: $10.27 and $10.95 for Fiscal Year 1998 and Fiscal Year 1999,
respectively (based on contribution to the pro forma combined entity's sales);
$13.25 and $13.86 for Fiscal Year 1998 and Fiscal Year 1999, respectively (based
on contribution to the pro forma combined entity's EBITDA); $16.51 and $16.59
for Fiscal Year 1998 and Fiscal Year 1999, respectively (based on contribution
to the pro forma combined entity's EBIT); and $15.95 and $16.17 for Fiscal Year
1998 and Fiscal Year 1999, respectively (based on contribution to the pro forma
combined entity's net income), in each case, as compared to the $17.80 implied
value per share of May & Speh Common Stock (based on the Exchange Ratio
multiplied by the $22.25 per share closing stock price of Acxiom Common Stock on
May 22, 1998).
Discounted Cash Flow Analysis. DLJ performed a discounted cash flow ("DCF")
analysis (i.e., an analysis of the present value of projected cash flows using
the discount rates and terminal year EBITDA multiples indicated below) of May &
Speh using projections and assumptions provided by the management of May & Speh.
The DCF for May & Speh was estimated using discount rates ranging from 11% to
14% and terminal multiples of estimated EBITDA for May & Speh's fiscal year
ending September 30, 2003 ranging from 10.0x to 14.0x. This analysis yielded an
implied common equity value range of $17.22 to $25.26 per fully diluted share of
May & Speh Common Stock, as compared to the $17.80 implied value per share of
May & Speh Common Stock (based on the Exchange Ratio multiplied by the $22.25
per share closing stock price of Acxiom Common Stock on May 22, 1998).
The summary set forth above does not purport to be a complete description of
the analyses performed by DLJ but describes, in summary form, the principal
elements of the presentations made by DLJ to the May &
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Speh Board of Directors on May 22 and May 26, 1998. The preparation of a
fairness opinion involves various determinations as to the most appropriate and
relevant methods of financial analysis and the application of these methods to
the particular circumstances and, therefore, such an opinion is not readily
susceptible to summary description. Each of the analyses conducted by DLJ was
carried out in order to provide a different perspective on the transaction and
to add to the total mix of information available. DLJ did not form a conclusion
as to whether any individual analysis, considered in isolation, supported or
failed to support an opinion as to fairness from a financial point of view.
Rather, in reaching its conclusion, DLJ considered the results of the analyses
in light of each other and ultimately reached its opinion based on the results
of all analyses taken as a whole. Accordingly, notwithstanding the separate
factors summarized above, DLJ has indicated to May & Speh that it believes that
its analyses must be considered as a whole and that selecting portions of its
analyses and the factors considered by it, without considering all analyses and
factors, could create an incomplete view of the evaluation process underlying
its opinion. The analyses performed by DLJ are not necessarily indicative of
actual values or future results, which may be significantly more or less
favorable than suggested by such analyses.
Pursuant to the terms of an engagement agreement dated May 1, 1998, May & Speh
has agreed to pay DLJ (i) a fee of $750,000 upon delivery of the DLJ Opinion,
(ii) an additional fee of $50,000 for each additional or updated opinion
delivered by DLJ and (iii) an additional fee upon consummation of the Merger.
Upon consummation of the Merger, DLJ will receive a fee equal to (a) one half of
one percent (0.5%) of the aggregate amount of consideration received by May &
Speh stockholders (based on the fair market value of Acxiom Common Stock as
determined by the last sales price for such securities on the last trading day
thereof prior to the consummation of the Merger, and treating any shares
issuable upon exercise of options, warrants or other rights of conversion as
outstanding) (the "Consideration") up to and including $400 million; plus one
and one half percent (1.5%) of the Consideration in excess of $400 million up to
and including $665 million; plus two and one half percent (2.5%) of the
Consideration in excess of $665 million; provided, however, that the maximum
fees to be received by DLJ under the engagement agreement will in no event
exceed in the aggregate one percent (1%) of the Consideration. Any fees
previously paid to DLJ pursuant to clauses (i) or (ii) of the first sentence of
this paragraph will be deducted from any fee to which DLJ is entitled pursuant
to the preceding sentence. In addition, May & Speh has agreed to reimburse DLJ,
upon request by DLJ from time to time, for reasonable out-of-pocket expenses
(including the reasonable fees and expenses of counsel) incurred by DLJ in
connection with its engagement thereunder, and to indemnify DLJ and certain
related persons against certain liabilities in connection with its engagement,
including liabilities under U.S. federal securities laws. DLJ and May & Speh
negotiated the terms of the fee arrangement at arm's length, and the May & Speh
Board of Directors was aware of such arrangement, including the fact that a
significant portion of the aggregate fee payable to DLJ is contingent upon
consummation of the Merger.
In the ordinary course of business, DLJ and its affiliates may own or actively
trade the securities of May & Speh and Acxiom for their own accounts and for the
accounts of their customers and, accordingly, may at any time hold a long or
short position in May & Speh or Acxiom securities. DLJ has performed investment
banking and other services for May & Speh in the past, including serving as the
lead managing underwriter in the March 1996 initial public offering of May &
Speh Common Stock and as the lead managing underwriter in the March 1998
concurrent offering of May & Speh's 53% convertible subordinated notes and
common stock. In the past two years, May & Speh and its affiliates have paid an
aggregate of approximately $4.0 million to DLJ in connection with investment
banking services provided by DLJ.
TERMS OF THE MERGER
Set forth below is a brief description of certain terms of the Merger
Agreement. This description does not purport to be complete and is qualified by
reference to the Merger Agreement, a copy of which is attached hereto as Annex A
and is incorporated herein by reference.
Structure; Effective Time; Stockholder Approvals. Upon the satisfaction or
waiver of certain conditions set forth in the Merger Agreement, Sub shall be
merged with and into May & Speh, and the separate existence of Sub will
thereupon cease and May & Speh will survive the Merger (the "Surviving
Corporation") as a wholly
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owned subsidiary of Acxiom. The Merger will become effective when a properly
executed certificate of Merger (the "Certificate of Merger") is duly filed with
the Secretary of State of the State of Delaware or at such subsequent time as
Acxiom and May & Speh agree and is specified in the Certificate of Merger (the
"Effective Time"). The filing of the Certificate of Merger will occur as soon as
practicable after the date on which the transactions contemplated by the Merger
Agreement will have occurred.
The Merger Agreement provides that (i) the Certificate of Incorporation and
By-Laws of Sub will be the Certificate of Incorporation and By-Laws of the
Surviving Corporation, (ii) the directors of Sub at the Effective Time will be
the initial directors of the Surviving Corporation, and (iii) the officers of
May & Speh will be the initial officers of the Surviving Corporation.
Conversion of Shares. At the Effective Time, without any action on the part of
the holders of any of the capital stock of Sub or May & Speh, pursuant to the
Merger Agreement: (i) each share of May & Speh Common Stock issued and
outstanding immediately prior to the Effective Time (other than shares held by
Acxiom or any subsidiary of Acxiom) will be converted into the right to receive
0.8 of a share of Acxiom Common Stock; (ii) each share held in the treasury of
May & Speh and each share held by Acxiom or any subsidiary of Acxiom immediately
prior to the Effective Time will be cancelled and retired and cease to exist;
and (iii) each share of Common Stock, par value $.01 per share, of Sub issued
and outstanding immediately prior to the Effective Time will be converted into
and exchangeable for one share of common stock of the Surviving Corporation.
Exchange of Certificates. As soon as practicable after the Effective Time, The
First National Bank of Chicago, or such other bank or trust company which may be
designated in accordance with the Merger Agreement (the "Exchange Agent"), will
send transmittal forms to the former May & Speh stockholders, to be used in
forwarding their certificates representing May & Speh Common Stock for surrender
and exchange for (i) certificates representing the number of shares of Acxiom
Common Stock into which their May & Speh Common Stock was converted in the
Merger and (ii) cash for any fractional share interests in such Acxiom Common
Stock to which such holders otherwise would be entitled. Until such surrender,
certificates representing shares of May & Speh Common Stock will be deemed to
represent the number of shares of Acxiom Common Stock into which such Common
Stock was converted in the Merger, except that holders of May & Speh
certificates will not be entitled to receive dividends or any other distribution
from Acxiom until such certificates are so surrendered. When such certificates
are surrendered, the holders of the Acxiom certificates issued in exchange
therefor will be paid, without interest, any dividends or other distributions
which may have become payable with respect to such Acxiom Common Stock since the
Effective Time.
No Fractional Securities. No certificates or scrip representing fractional
shares of Acxiom Common Stock will be issued, and no dividend, stock split or
other change in the capital structure of Acxiom will relate to any fractional
share interest. A fractional share interest shall not entitle the owner thereof
to vote or to any rights of a Acxiom stockholder. In lieu of any such fractional
share interest, each holder of May & Speh Common Stock who otherwise would be
entitled to receive a fraction of a share of Acxiom Common Stock in the Merger
will be paid cash upon surrender of stock certificates for exchange in an amount
equal to the product of such fraction multiplied by the closing sale price of
Acxiom Common Stock on the NASDAQ National Market on the day of the Effective
Time, or if shares of Acxiom Common Stock are not so traded on such day, the
closing sale price on the next preceding day on which such stock was traded on
the NASDAQ National Market.
Conversion of Employee Stock Options. At the Effective Time, each outstanding
Employee Stock Option (as defined in the Merger Agreement) granted under any
employee stock option plan or program of May & Speh, whether or not exercisable,
shall be converted into an option to purchase the number of shares of Acxiom
Common Stock equal to the number of shares of May & Speh Common Stock subject to
such Employee Stock Option immediately prior to the Effective Time multiplied by
the Exchange Ratio (rounded to the nearest whole number of shares of Acxiom
Common Stock), at an exercise price per share equal to the exercise price for
each such share of May & Speh Common Stock subject to such option divided by the
Exchange Ratio (rounded down to the nearest whole cent), and all references in
each such Employee Stock Option to May & Speh shall be deemed to refer to
Acxiom, where appropriate.
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Certain Representations and Warranties. The Merger Agreement contains various
customary representations and warranties relating to, among other things: (i)
each of May & Speh's and Acxiom's and certain of their respective subsidiaries',
organization, existence, good standing and authority and qualification to do
business; (ii) each of May & Speh's and Acxiom's capital structure and the
ownership of Sub by Acxiom; (iii) each of May & Speh's and Acxiom's
subsidiaries; (iv) authorization, execution, delivery, performance and
enforceability of the Merger Agreement and related matters; (v) compliance with
applicable law; (vi) the absence of conflicts, violations or defaults under each
of May & Speh's and Acxiom's certificates of incorporation and by-laws and
certain other agreements and documents; (vii) government approvals and required
consents; (viii) the documents and reports filed with the Commission and the
accuracy of the information contained therein; (ix) subject to certain
exceptions, absence of certain specified material changes or events and
undisclosed liabilities; (x) litigation; (xi) employee plans; (xii) patents,
trademarks and other proprietary rights and information; (xiii) certain tax
matters; (xiv) material contracts and title to properties; (xv) the
inapplicability of May & Speh's Rights Agreement or Delaware's anti-takeover
statute to the Merger; (xvi) labor matters; (xvii) the lack of ownership of
Acxiom Common Stock by May & Speh or its subsidiaries and the lack of ownership
of May & Speh Common Stock by Acxiom; (xviii) the vote required for approval of
the Merger by the stockholders of May & Speh and Acxiom; (xix) the receipt of
opinions of DLJ in the case of May & Speh, and Stephens, in the case of Acxiom
regarding the fairness of the transaction from a financial point of view; (xx)
the absence of actions adversely affecting pooling of interests accounting
treatment; and (xxi) the accuracy of certain information supplied by each of May
& Speh and Acxiom in connection with the Registration Statement and this Proxy
Statement/Prospectus.
Irrevocable Proxies. As an inducement and a condition to entering into the
Merger Agreement, each of Lawrence J. Speh, Albert J. Speh, Jr. and certain
trusts of which Messrs. Speh and Speh are the trustees (the "May & Speh Proxy
Stockholders") granted irrevocable proxies (the "May & Speh Proxies") to
Acxiom.
Pursuant to the May & Speh Proxies, each of the May & Speh Proxy Stockholders
granted to Acxiom an irrevocable proxy to vote an aggregate of 2,892,895 shares
of May & Speh Common Stock (representing approximately 11% of the May & Speh
Common Stock entitled to vote at the May & Speh Meeting as of the May & Speh
Record Date) owned of record by such stockholders in favor of any proposal to
approve and adopt the Merger Agreement and the transactions contemplated
thereby. If the power granted under the May & Speh Proxies is unexercisable for
any reason, each of the May & Speh Proxy Stockholders has agreed to vote the
shares of May & Speh Common Stock subject to the May & Speh Proxies in favor of
any proposal to approve and adopt the Merger Agreement and the transactions
contemplated thereby. Each of the May & Speh Proxies provides that any shares of
May & Speh Common Stock granted upon the exercise of any Employee Stock Options
by the May & Speh Proxy Stockholders during the term of the May & Speh Proxies
shall be subject to the proxy granted thereunder.
As an inducement and a condition to entering into the Merger Agreement,
Charles D. Morgan, the Chairman of the Board and Company Leader of Acxiom,
Robert A. Pritzker, a director of Acxiom, The Pritzker Foundation, a
not-for-profit foundation, one of the trustees of which is Mr. Pritzker, and
Trans Union Corporation ("Trans Union" and together with Messrs. Morgan and
Pritzker and The Pritzker Foundation, the "Acxiom Proxy Stockholders"), granted
to May & Speh irrevocable proxies (the "Acxiom Proxies") with respect to an
aggregate of 8,037,425 shares of Acxiom Common Stock (representing approximately
15% of the Acxiom Common Stock entitled to vote at the Acxiom Meeting as of the
Acxiom Record Date) pursuant to which May & Speh has the power to vote such
shares in favor of any proposal to approve the issuance of the shares of Acxiom
Common Stock pursuant to the Merger Agreement and the transactions contemplated
thereby. If the power granted under the Acxiom Proxies is unexercisable for any
reason, each of the Acxiom Proxy Stockholders has agreed to vote the shares of
Acxiom Common Stock subject to the Acxiom Proxies in favor of the Merger
Proposal and the transactions contemplated thereby.
The May & Speh Proxy Stockholders and the Acxiom Proxy Stockholders have
agreed not to, directly or indirectly, sell, transfer, further pledge or
otherwise dispose of their shares, grant any subsequent proxies or enter into
any voting agreement or arrangement or voting trust with respect to their
shares. In addition, the May &
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Speh Proxy Stockholders have agreed not to initiate or solicit any inquiries or
proposals with respect to, or, subject to fiduciary duties, engage in
negotiations concerning or provide any confidential information relating to, any
acquisition, business combination or purchase of all or any significant portion
of the assets of, or any equity interest in (other than their shares), May &
Speh or any of their subsidiaries.
Each of the May & Speh Proxies and the proxy granted by Mr. Morgan will
terminate upon the earlier of (i) the effectiveness of the Merger, (ii) the
termination of the Merger Agreement, or (iii) notice of termination by Acxiom.
The proxies granted by The Pritzker Foundation, Trans Union and Mr. Pritzker
will terminate upon the earlier of (i) the effectiveness of the Merger, (ii) the
termination of the Merger Agreement, or (iii) October 31, 1998.
Copies of the Acxiom Proxies and the May & Speh Proxies are filed as exhibits
to the Merger Agreement which is attached hereto as Annex A.
Conduct of Business Pending the Merger. May & Speh has agreed that, among
other things, prior to consummation of the Merger, unless Acxiom shall otherwise
agree in writing or unless otherwise contemplated by the Merger Agreement, (i)
it will conduct its business and the businesses of its subsidiaries only in the
ordinary and usual course of business and consistent with past practices, (ii)
there will be no material changes in the conduct of its operations, (iii) it
will not: sell, pledge or agree to sell or pledge any stock owned by it in any
of its subsidiaries; amend its certificate of incorporation or by-laws; or
split, combine or reclassify any shares of its outstanding capital stock or
declare, set aside or pay any dividends or other distributions payable in cash,
stock or property, or redeem or otherwise acquire any shares of its capital
stock or shares of the capital stock of any of its subsidiaries, (iv) neither it
nor any of its subsidiaries will (a) subject to certain exceptions authorize for
issuance, issue or sell or agree to issue or sell any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any class
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise; (b) acquire, dispose of or
encumber any fixed assets or any other substantial assets other than in the
ordinary course of business and consistent with past practices; (c) except for
certain indebtedness not in excess of $15,000,000, incur, assume, or prepay any
indebtedness or any other material liabilities other than in the ordinary course
of business and consistent with past practices; (d) assume or otherwise become
directly, contingently or otherwise liable or responsible for the obligations of
any person other than a May & Speh subsidiary in the ordinary course of business
and consistent with past practices; (e) make any loans, advances or capital
contributions to, or investments in, any other person, other than to its
subsidiaries; (f) authorize capital expenditures in excess of $1,000,000; (g)
make any tax (as hereinafter defined) election or settle or compromise any tax
liability; (h) change its fiscal year; (i) except as disclosed in Commission
reports filed prior to May 26, 1998, or as required by a governmental body or
agency; change its methods of accounting in effect at September 30, 1997, except
as required by changes in GAAP as concurred by May & Speh's independent
auditors; or (j) enter into any contract, agreement, commitment or arrangement
with respect to any of the foregoing, (v) neither it nor its Subsidiaries will
enter into any new employment agreements with any of their respective officers
or employees or grant any increases in the compensation of their respective
officers and employees other than increases in the ordinary course of the
business and consistent with past practice, or enter into, adopt or amend any
employee benefit plan, (vi) it will use its reasonable best efforts to preserve
the business organization of May & Speh and its subsidiaries, keep available the
services of its and their present officers and key employees, and preserve the
goodwill of those having business relationships with it and its subsidiaries,
and (vii) will not take, or allow to be taken by any of its subsidiaries, any
action which would jeopardize the treatment of Acxiom's acquisition of May &
Speh as a pooling of interests for accounting purposes or jeopardize
qualification of the Merger as a reorganization within the meaning of Section
368(a) of the Code.
Acxiom has agreed that prior to the Effective Time, unless May & Speh shall
otherwise agree in writing, (i) it will conduct its businesses and the
businesses of its subsidiaries only in the ordinary and usual course of business
and consistent with past practices, (ii) there will be no material changes in
the conduct of Acxiom's operations, (iii) it will not: sell or pledge or agree
to sell or pledge any stock owned by it in any of its subsidiaries, amend its
certificate of incorporation or by-laws; split, combine or reclassify any shares
of its
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outstanding capital stock; declare, set aside or pay any dividend or other
distribution payable in cash, stock or property; redeem or otherwise acquire any
shares of its capital stock or shares of the capital stock of any of its
subsidiaries; or consolidate or merge with or into another company unless at
least 50% of the Board of Directors of the surviving entity are members of the
Board of Directors of Acxiom immediately prior to such merger or consolidation
or are otherwise designated by Acxiom, (iv) neither it nor any of it
subsidiaries will, authorize for issuance, issue or sell or agree to issue or
sell any additional shares of, or rights of any kind to acquire any shares of,
its capital stock of any class (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or otherwise),
or enter into any contract agreement, commitment or arrangement with respect to
the matters in this clause (iv); (v) it will use its reasonable best efforts to
preserve the business organization of Acxiom and its subsidiaries, keep
available the services of its and its subsidiaries' present officers and key
employees, and preserve the goodwill of those having business relationships with
it and its subsidiaries; and (vi) it will not take, or allow any of its
subsidiaries to take, any action which would jeopardize the treatment of
Acxiom's acquisition of May & Speh as a pooling of interests for accounting
purposes or jeopardize qualification of the Merger as a reorganization within
the meaning of Section 368(a) of the Code.
Pursuant to the Merger Agreement, from the date of the Merger Agreement to the
Effective Time, Sub will not engage in any activities of any nature except as
provided in or contemplated by the Merger Agreement.
Conditions to Consummation of the Merger. The respective obligations of Acxiom
and May & Speh to effect the Merger are subject to the following conditions: (a)
the approval and adoption of the Merger Agreement by May & Speh and the Merger
Proposal by Acxiom at each of their respective Stockholders' Meetings, (b) the
effectiveness of the Registration Statement, (c) the receipt by Acxiom and May &
Speh of the requisite consents from governmental entities, including the
expiration or termination of any applicable waiting period under the HSR Act,
(d) the absence of a preliminary or permanent injunction or other order by any
federal or state court in the United States prohibiting consummation of the
Merger, and (e) the receipt by each of Acxiom and May & Speh of a letter from
KPMG Peat Marwick LLP stating that the May & Speh Merger will qualify as a
pooling of interests transaction.
In addition, the obligation of May & Speh to effect the Merger is subject to
the satisfaction at or prior to the Effective Time of the conditions that: (a)
each of Acxiom and Sub has performed in all material respects its obligations
under the Merger Agreement required to be performed by it at or prior to the
Effective Time and the representations and warranties of Acxiom and Sub
contained in the Merger Agreement are true and correct in all material respects
at and as of the Effective Time as if made at and as of such time, except as
contemplated by the Merger Agreement, and (b) May & Speh receives an opinion of
Winston & Strawn regarding tax matters.
In addition, the obligation of Acxiom and Sub to effect the Merger is subject
to the satisfaction at or prior to the Effective Time of the conditions that:
(a) May & Speh has performed in all material respects its obligations under the
Merger Agreement required to be performed by it at or prior to the Effective
Time and the representations and warranties of May & Speh contained in the
Merger Agreement are true and correct in all material respects at and as of the
Effective Time as if made at and as of such time, except as contemplated by the
Merger Agreement, and (b) Acxiom receives an opinion of Skadden, Arps, Slate,
Meagher & Flom LLP regarding tax matters.
Acquisition Proposals. The Merger Agreement provides that, from and after the
date thereof, May & Speh will not and May & Speh and the May & Speh Subsidiaries
(as defined in the Merger Agreement) will use their best efforts to cause their
respective directors, officers, employees, financial advisors, legal counsel,
accountants and other agents and representatives not to initiate or solicit,
directly or indirectly, any inquiries or the making of any proposal or offer
with respect to, engage in negotiations concerning, provide any information or
data to, any person relating to any acquisition, business combination or
purchase (including by way of a tender or exchange offer) of (i) all or any
significant portion of the assets of May & Speh and the May & Speh Subsidiaries,
(ii) 15% or more of the outstanding shares of May & Speh Common Stock, or (iii)
15% or more of the outstanding shares of capital stock of any May & Speh
Subsidiary (a "Takeover Proposal"), other than the
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Merger; provided, however, that nothing contained in Section 7.2 of the Merger
Agreement will prohibit the May & Speh Board of Directors from (i) furnishing
information to (but only pursuant to a confidentiality agreement in customary
form) or entering into discussions or negotiations with any person or group that
makes a Superior Proposal (as defined below) that was not solicited by May &
Speh or which did not otherwise result from a breach of Section 7.2 of the
Merger Agreement if, and only to the extent that, (x) the May & Speh Board of
Directors, based upon the advice of outside legal counsel, determines in good
faith that such action is reasonably necessary for the May & Speh Board of
Directors to comply with its fiduciary duties to stockholders imposed by law,
(y) concurrently with furnishing such information to, or entering into
discussions or negotiations with, such person or group making this Superior
Proposal, May & Speh provides written notice to Acxiom to the effect that it is
furnishing information to, or entering into discussions or negotiations with,
such person or group, and (z) May & Speh keeps Acxiom informed of the status and
all material information including the identity of such person or group with
respect to any such discussions or negotiations to the extent such disclosure
would not constitute a violation of any applicable law. A "Superior Proposal"
means any Takeover Proposal which the May & Speh Board of Directors concludes in
its good faith judgment (based on the advice of outside legal counsel and a
financial advisor of a nationally recognized reputation) to be more favorable to
May & Speh's stockholders than the Merger and for which financing, to the extent
required, is fully committed, subject to customary conditions; provided,
however, that the reference to "15%" in clauses (ii) and (iii) of the definition
of Takeover Proposal above will be deemed to be references to "51%."
In addition, the Merger Agreement provides that May & Speh will, on the date
thereof, immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person conducted theretofore with respect
to any of the foregoing and will notify Acxiom immediately in writing if any
such inquiries or proposals (including the material terms and conditions
thereof) are received by, any such information is requested from, or any such
negotiations or discussions are sought to be initiated or continued with, May &
Speh. Nothing contained in the Merger Agreement will prohibit May & Speh from
taking and disclosing to its stockholders a position contemplated by Rule
14e-2(a) promulgated under the Exchange Act or from making any disclosure to its
stockholders if, in the good faith judgment of the May & Speh Board of
Directors, after consultation with outside legal counsel, failure so to disclose
may be inconsistent with its obligations under applicable law.
Termination. The Merger Agreement may be terminated at any time prior to the
Effective Time, whether before or after approval of the Merger Agreement by the
stockholders of Acxiom or May & Speh, (i) by mutual consent of Acxiom, May &
Speh and Sub; (ii) by either Acxiom and Sub or May & Speh if the Merger has not
been consummated on or before December 31, 1998; (iii) by either Acxiom and Sub
or May & Speh if any one of the conditions to their respective obligations to
effect the Merger has not been met or waived prior to or at such time as such
condition can no longer be satisfied; (iv) by Acxiom and Sub if a tender offer
or exchange offer for 50% or more of the outstanding shares of capital stock of
May & Speh is commenced prior to the May & Speh Meeting and the May & Speh Board
of Directors fails to recommend against acceptance of such tender offer or
exchange offer by the May & Speh stockholders (including by taking no position
with respect to the acceptance of such tender offer or exchange offer by its
stockholders) within the time period specified by Rule 14e-2 of the Exchange
Act; (v) by either Acxiom and Sub or May & Speh if the approvals of the
stockholders of either Acxiom or May & Speh contemplated by the Merger Agreement
have not been obtained by reason of the failure to obtain the required vote at
either of the Stockholders' Meetings or any adjournment thereof; (vi) by Acxiom
and Sub if the Board of Directors of May & Speh has withdrawn or modified in a
manner adverse to Acxiom its approval or recommendation of the Merger Agreement
and the transactions contemplated thereby; (vii) by either May & Speh or Acxiom
and Sub if the Board of Directors of May & Speh reasonably determines that a
Takeover Proposal constitutes a Superior Proposal, except that May & Speh may
not terminate the Merger Agreement pursuant to this clause (vii) unless and
until (a) three business days have elapsed following delivery to Acxiom of a
written notice of such determination by the Board of Directors of May & Speh and
during such three business day period May & Speh (x) informs Acxiom of the terms
and conditions of the Takeover Proposal and the identity of the person making
the Takeover Proposal, and (y) otherwise reasonably cooperates with Acxiom with
respect thereto (subject to the condition that the May & Speh Board of Directors
shall not be
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required to take any action that it believes, after consultation with outside
legal counsel, would present a reasonable possibility of violating its
obligations to May & Speh or May & Speh's stockholders under applicable law)
with the intent of providing Acxiom with the opportunity to offer to modify the
terms and conditions of the Merger Agreement so that the transactions
contemplated thereby may be effected, (b) at the end of such three business day
period the May & Speh Board of Directors continues reasonably to believe that
the Takeover Proposal constitutes a Superior Proposal, (c) simultaneously with
such termination May & Speh enters into a definitive acquisition, merger or
similar agreement to effect the Superior Proposal and (d) simultaneously with
such termination, May & Speh pays to Acxiom the Acxiom Termination Fee and fees
and expenses as set forth below, under "Expenses; Termination Fees;" (viii) by
May & Speh if the Board of Directors of Acxiom has withdrawn or modified in a
manner adverse to May & Speh its approval or recommendation of the Merger
Agreement and the transactions contemplated thereby; or (ix) by either May &
Speh or Acxiom and Sub if there has been a material breach by the other of any
of its representations, warranties, covenants or agreements contained in the
Merger Agreement or the Option Agreements, which if not cured would cause the
conditions to consummation of the Merger discussed in clauses (a) of the second
and third paragraphs under "THE MERGER--Terms of the Merger--Conditions to
Consummation of the Merger" not to be satisfied, and such breach has not been
cured within 30 days after notice thereof has been received by the party alleged
to be in breach.
Expenses; Termination Fees. Except as set forth below, whether or not the
Merger is consummated, all costs and expenses incurred in connection with the
Merger Agreement and the transactions contemplated thereby will be paid by the
party incurring such expenses, except that expenses incurred in connection with
printing the Registration Statement and the Proxy Statement/Prospectus as well
as the filing fee relating to the Registration Statement will be shared equally
by Acxiom and May & Speh. May & Speh must pay Acxiom a fee of $20 million in
immediately available funds and reimburse Acxiom and Sub for up to $2.5 million
in out-of-pocket fees and expenses (i) if the Merger Agreement is terminated by
(x) Acxiom and Sub pursuant to clauses (iv) or (vi) under "Termination" above or
(y) Acxiom and Sub or by May & Speh pursuant to clause (vii) under "Termination"
above, or (ii) (x) prior to the termination of the Merger Agreement, a Takeover
Proposal is commenced, publicly proposed or publicly disclosed and not
withdrawn, (y) the Merger Agreement is terminated by Acxiom and Sub or May &
Speh pursuant to clause (v) under "Termination" above (but only due to the
failure by May & Speh's stockholders to approve the Merger) and (z) concurrently
with or within twelve months after such termination a Takeover Proposal has been
consummated. Acxiom must pay May & Speh a fee of $20 million in immediately
available funds and reimburse May & Speh for up to $2.5 million in out-of-pocket
fees and expenses if (i) the Merger Agreement is terminated by May & Speh
pursuant to clause (viii) under "Termination" above or (ii) (x) prior to the
termination the Merger Agreement, a proposal or offer with respect to any
acquisition or purchase of all or any significant portion of the assets of, or
15% or more of the outstanding shares of capital stock of Acxiom is commenced,
publicly proposed or publicly disclosed and not withdrawn, (y) the Merger
Agreement is terminated by May & Speh pursuant to clause (v) under "Termination"
above (but only due to the failure by Acxiom's stockholders to approve the
issuance of Acxiom Common Stock pursuant to the Merger) and (z) concurrently
with or within twelve months after such termination such takeover proposal has
been consummated.
General Provisions. The Merger Agreement contains various customary general
provisions relating to, among other things, the survival of representations and
warranties and agreements, brokers, notices, governing law, and certain
definitions.
Amendment and Waiver. The Merger Agreement may be amended by action of Acxiom,
Sub and May & Speh at any time before or after the approval of the Merger
Agreement; provided however, that after any such approval, no amendment will be
made which alters the Exchange Ratio. The Merger Agreement may not be amended
except by an instrument in writing signed by each of the parties thereto. Prior
to the Effective Time, Acxiom, Sub and May & Speh may extend the time for
performance of any of the obligations of the other parties to the Merger
Agreement and may waive any inaccuracies in the representations and warranties
contained therein or compliance with any agreements or conditions contained
therein. Any agreement to any extension or waiver
41
<PAGE>
on the part of a party to the Merger Agreement will be valid only if set forth
in an instrument in writing signed on behalf of each party to the Merger
Agreement.
By-Law Indemnification and Insurance. The Merger Agreement provides that
Acxiom will cause the Surviving Corporation to keep in effect in its by-laws a
provision for a period of not less than six years from the Effective Time (or,
in the case of matters occurring prior to the Effective Time which have not been
resolved prior to the sixth anniversary of the Effective Time, until such
matters are finally resolved) providing for indemnification of the past and
present officers and directors (the "Indemnified Parties") of May & Speh to the
fullest extent permitted by the DGCL. For six years from the Effective Time,
Acxiom will indemnify the Indemnified Parties to the same extent as such
Indemnified Parties are entitled to indemnification as discussed in the
preceding sentence. In addition, for a period of six years from the Effective
Time, Acxiom will either cause to be maintained in effect the current policies
of directors' and officers' liability insurance maintained by May & Speh or
provide substitute policies of at least the same coverage and amounts containing
terms and conditions which are, in the aggregate, no less advantageous to the
insured with respect to claims arising from facts or events that occurred on or
before the Effective Time, except that in no event will Acxiom be required to
pay with respect to such insurance policies in any one year more than $200,000.
Regulatory Approval. Under the HSR Act, and the rules promulgated thereunder
by the FTC, the Merger cannot be consummated until notification has been given
and certain information has been furnished to the FTC and the Antitrust Division
and specified waiting period requirements have been satisfied. Acxiom and May &
Speh each filed notification and report forms under the HSR Act with the FTC and
the Antitrust Division on June 30, 1998 with respect to the Merger. The required
waiting period expired on July 30, 1998 with respect to the Merger without
Acxiom or May & Speh receiving a request for additional information or
documentary material. At any time before or after consummation of the Merger,
the Antitrust Division or the FTC could take such action under the antitrust
laws as it deems necessary or desirable in the public interest, including
seeking to enjoin the consummation of the Merger, or seeking divestiture of
substantial assets of Acxiom or May & Speh. At any time before or after the
Effective Time, and notwithstanding that the HSR Act waiting period has expired,
any State could take such action under the antitrust laws as it deems necessary
or desirable. Such action could include seeking to enjoin the consummation of
the Merger, or seeking divestiture of substantial assets of Acxiom or May &
Speh. Private parties may also seek to take legal action under the antitrust
laws under certain circumstances.
Reciprocal Stock Option Agreements. As an inducement to enter into the Merger
Agreement, each of Acxiom and May & Speh granted a stock option to the other
party. Pursuant to the Option Agreements, each party granted the other an option
to purchase shares of the other party's common stock representing approximately
19.9% of the shares of such common stock issued and outstanding at such time.
The options may only be exercised upon the occurrence of certain Purchase Events
(none of which has occurred as of the date hereof). Pursuant to the Acxiom
Option Agreement, May & Speh granted Acxiom the Acxiom Option to purchase
5,188,657.146 shares of May & Speh Common Stock at the Acxiom Option Purchase
Price, subject to the terms and conditions set forth therein. Pursuant to the
May & Speh Option Agreement, Acxiom granted May & Speh the May & Speh Option to
purchase 10,436,929.72 shares of Acxiom Common Stock at the May & Speh Option
Purchase Price, subject to the terms and conditions set forth therein.
The Acxiom Option Agreement and the May & Speh Option Agreement are attached
as Annex B and Annex C, respectively, to this Proxy Statement/Prospectus and are
incorporated herein by reference. See "CERTAIN RELATED TRANSACTIONS BETWEEN
ACXIOM AND MAY & SPEH--Reciprocal Option Agreements."
INTERESTS OF CERTAIN PERSONS IN THE MERGER
Acxiom. Other than 500 shares of May & Speh Common Stock owned by Harry C.
Gambill, a director of Acxiom, no director or executive officer of Acxiom or Sub
owns any shares of May & Speh Common Stock.
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<PAGE>
May & Speh. In considering the unanimous recommendation of the May & Speh
Board with respect to the Merger Agreement, May & Speh stockholders should be
aware that certain officers and directors of May & Speh (or their affiliates)
have interests in the Merger that are different from and in addition to the
interests of May & Speh stockholders and the Acxiom stockholders generally. The
May & Speh Board and the Acxiom Board were aware of these interests and took
these interests into account in approving the Merger Agreement and the
transactions contemplated thereby.
May & Speh Options; Acceleration of Vesting. At the Effective Time, each
outstanding May & Speh Employee Stock Option, whether or not exercisable, will
be converted into an option (an "Acxiom Exchange Option") to purchase the number
of shares of Acxiom Common Stock equal to the number of shares of May & Speh
Common Stock subject to such Employee Stock Option immediately prior to the
Effective Time multiplied by the Exchange Ratio, at an exercise price per share
equal to the exercise price for each such share of May & Speh Common Stock
subject to such Employee Stock Option divided by the Exchange Ratio, and all
references in each such Employee Stock Option to May & Speh shall be deemed to
refer to Acxiom, where appropriate. Substantially all of the executive officers
and directors of May & Speh currently hold May & Speh Employee Stock Options
which will become Acxiom Exchange Options.
Substantially all of the options granted under the May & Speh stock option
plans and programs (the "Option Plans") vest in equal annual installments over a
five-year period. As of the May & Speh Record Date, 4,977,503 shares of May &
Speh Common Stock were subject to outstanding options under the Option Plans, of
which options to purchase 3,976,900 shares were not yet exercisable. The Option
Plans provide that, subject to certain exceptions, all unexercisable options
will become immediately exercisable upon a "Change in Control" of May & Speh,
which such plans define to include, among other things, the acquisition by any
person of 51% or more of the May & Speh Common Stock within a six-month period.
Since Acxiom will acquire 100% of the voting stock of May & Speh in the Merger,
substantially all options held by May & Speh employees to acquire May & Speh
Common Stock will become exercisable upon the consummation of the Merger. As of
the May & Speh Record Date, Messrs. Mason, Loeffler, Early, Loughmiller,
Terrance C. Cieslak and Lawrence J. Speh (former Chief Executive Officer of May
& Speh and currently a director), and all other May & Speh directors and other
current and certain former executive officers as a group, held options to
purchase 916,600, 383,100, 460,803, 175,000, 200,600, 360,000 and 633,100 shares
of May & Speh Common Stock, respectively, of which options to purchase 723,200,
292,000, 340,000, 175,000, 132,800, 360,000 and 447,200 shares, with average
exercise prices of $10.57, $9.66, $4.32, $8.50, $8.34, $2.08 and $9.65,
respectively, were unexercisable as of that date. All of such options will
become exercisable upon the consummation of the Merger. Mr. Mason is also party
to an agreement with May & Speh as of October 1, 1997 which entitles him to
receive up to an additional $525,000 cash payment from May & Speh upon the
exercise of certain options granted to him on October 1, 1997, which options
will become exercisable upon consummation of the Merger.
Four of the current outside directors of May & Speh will enter into a
three-year consulting agreement with Acxiom pursuant to which each such director
will make himself or herself available for certain consulting services to Acxiom
for an annual fee of $100 plus an hourly consulting fee. All May & Speh Employee
Stock Options (which options will be converted into Acxiom Exchange Options as
described above) held by such directors will remain exercisable for a period of
three years following the Effective Time. Each employee of May & Speh who has
executed an affiliate agreement will enter into an agreement with Acxiom
pursuant to which Acxiom will agree that in the event that such employee is
terminated by Acxiom, Acxiom will enter into a consulting agreement with such
employee that will provide for such employee to make himself or herself
available for certain consulting services to Acxiom for a period ending six
months following the Effective Time of the Merger. All May & Speh Employee Stock
Options (which options will be converted into Acxiom Exchange Options as
described above) held by such employees who have been terminated by Acxiom will
remain exercisable for a period ending six months following the Effective Time
of the Merger. In the event that following the Merger any employee of May & Speh
who has executed an affiliate agreement terminates his or her employment with
Acxiom, such employee will have a period of 30 days following such termination
to exercise all exercisable May & Speh Employee Stock Options (which options
will be converted into Acxiom Exchange Options as described above).
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<PAGE>
Acxiom has agreed under the Merger Agreement to file with the Commission no
later than the Effective Time a registration statement on Form S-8 (or other
appropriate form under the Securities Act) to register the Acxiom Common Stock
issuable upon exercise of the Acxiom Exchange Options and to keep such
registration statement effective at least as long as the Acxiom Exchange Options
are outstanding.
Employment Agreements. Each of Messrs. Mason, Loeffler, Early and Loughmiller
are party to an employment agreement with May & Speh. Their current employment
agreements, which expire April 2002, October 2002, October 2002 and January
2002, respectively, provide for minimum annual base salaries of $400,000,
$300,000, $300,000 and $200,000, respectively. Each of these employment
agreements contemplates participation by the executive officer in May & Speh's
executive bonus plan and other fringe benefits. The agreements of Messrs. Mason,
Loeffler and Early also provide for severance compensation payable as a lump sum
if termination occurs, for among other reasons, by May & Speh following a
"Change in Control" of May & Speh, as defined in such agreements, or voluntarily
by the individual executive for "Good Reason," as defined in such agreements.
The change in control that will be deemed to result from the consummation of the
Merger is within such definition of "Change in Control," and a voluntary
termination following such a "Change in Control" is within the definition of
Good Reason, as defined in such agreements. Mr. Mason's agreement entitles him
to severance equal to three times his base salary and certain benefits if he is
terminated by May & Speh or if he terminates his employment voluntarily
following the Merger. Messrs. Loeffler and Early are entitled to severance equal
to three times their base salary if either such executive is terminated by May &
Speh following the Merger. If either such executive terminates his employment
voluntarily following the Merger, Mr. Loeffler would be entitled to severance
equal to two times his base salary and Mr. Early would be entitled to severance
equal to one and one-half times his base salary. Additionally, Messrs. Mason,
Loeffler and Early are entitled under their employment agreements to tax
gross-up payments if any payments received by such executives pursuant to the
employment agreements or pursuant to any other company plans or arrangements
become subject to the excise tax imposed by Section 4999 of the Code.
Under Mr. Loughmiller's employment agreement, if such executive's employment
is terminated without "Cause" in contemplation of or following a "Change in
Control," such executive will be entitled to severance equal to his
then-existing salary through July 15, 1999 less any profits on vested but
unexercised stock options, but in no event less than three months severance pay.
The Merger will constitute a "Change in Control" as defined in such agreement.
No firm commitments have been made to May & Speh's current executive officers
in respect of their positions with Acxiom following the Effective Date of the
Merger. In the event of the termination of employment of such executive officers
by Acxiom immediately following the Merger or, in the case of Mr. Mason, if Mr.
Mason terminates his employment voluntarily, the amount of such severance
compensation (in addition to the economic value received from unexercisable
options becoming exercisable upon consummation of the Merger as discussed above)
payable to Messrs. Mason, Loeffler, Early and Loughmiller based upon the Acxiom
Common Stock closing price per share of $24.25 on July 27, 1998, would be
approximately $3,412,438 (including $2,112,438 in tax gross-up payments, which
payments would increase with an increase in the assumed price per share of
Acxiom Common Stock), $900,000, $900,000 and $52,500, respectively.
Employee Benefits. From and after the Effective Time, Acxiom has agreed to
give May & Speh employees as of the Effective Time full credit, for purposes of
eligibility, vesting and determination of the level of benefits (but not for the
purpose of benefit accrual under any defined benefit plan) under any employee
benefit plans or arrangements maintained by Acxiom, for such employees' service
with May & Speh to the same extent recognized by May & Speh prior to the
Effective Time. Acxiom has also agreed to (i) waive all limitations as to
preexisting conditions exclusions and waiting periods with respect to
participation and coverage requirements applicable to May & Speh employees under
Acxiom welfare benefit plans that such employees may be eligible to participate
in after the Effective Time (other than limitations or waiting periods that are
already in effect with respect to such employees that have not been satisfied as
of the Effective Time under any welfare plan maintained for such employees
immediately prior to the Effective Time), and (ii) provide May & Speh employees
with credit for any co-payments and deductibles paid prior to the Effective Time
in satisfying any applicable deductible or
44
<PAGE>
out-of-pocket requirements under any Acxiom welfare plans that such employees
are eligible to participate in after the Effective Time.
Indemnification; Insurance. In the Merger Agreement, Acxiom has agreed, for a
period of six years following the Effective Time, to (i) cause May & Speh to
keep in effect a by-law provision providing for indemnification of past and
present officers and directors of May & Speh to the fullest extent permitted by
the DGCL, and (ii) indemnify such officers and directors to the same extent as
they are entitled to indemnification pursuant to such by-law provision. Acxiom
has also agreed to maintain in effect, for a period of six years after the
Effective Time, May & Speh's current policies of directors' and officers'
liability insurance, or to provide substitute policies of at least the same
coverage and amounts containing terms and conditions which, in the aggregate,
are no less advantageous to the insured with respect to claims arising from
facts or events that occurred on or prior to the Effective Time; provided,
however, that in no event will Acxiom be required to pay in any one year more
than $200,000 with respect to such insurance policies. See "VOTING RIGHTS AND
PROXIES" and "THE MERGER--Terms of the Merger--Irrevocable Proxies."
CERTAIN UNITED STATES FEDERAL INCOME TAX CONSEQUENCES OF THE MERGER
In the opinions of Winston & Strawn, tax counsel to May & Speh, and Skadden,
Arps, Slate, Meagher & Flom LLP, tax counsel to Acxiom, subject to the
qualifications set forth below and contained herein, the following is a summary
of the material United States federal income tax consequences of the Merger to
holders of May & Speh Common Stock who exchange such stock for Acxiom Common
Stock pursuant to the Merger Agreement. The following summary addresses only
such stockholders who hold their May & Speh Common Stock as a capital asset and
does not address all of the United States federal income tax consequences that
may be relevant to particular stockholders in light of their individual
circumstances or to stockholders who are subject to special rules (including,
without limitation, financial institutions, tax-exempt organizations, insurance
companies, dealers in securities or foreign currencies, foreign holders, persons
who hold such shares as a hedge against currency risk, or a constructive sale or
conversion transaction, or holders who acquired their shares pursuant to the
exercise of employee stock options or otherwise as compensation). The following
summary is not binding on the IRS. It is based upon the Code, laws, regulations,
rulings and decisions in effect as of the date hereof, all of which are subject
to change, possibly with retroactive effect. Tax consequences under state,
local, and other foreign laws are not addressed herein. HOLDERS OF MAY & SPEH
COMMON STOCK ARE STRONGLY URGED TO CONSULT THEIR TAX ADVISORS AS TO THE SPECIFIC
TAX CONSEQUENCES TO THEM OF THE MERGER, INCLUDING THE APPLICABILITY AND EFFECT
OF FEDERAL, STATE, LOCAL AND FOREIGN INCOME AND OTHER TAX LAWS IN THEIR
PARTICULAR CIRCUMSTANCES.
No ruling has been (or will be) sought from the IRS as to the United States
federal income tax consequences of the Merger. It is a condition to the
consummation of the Merger that May & Speh receive an opinion from its tax
counsel, Winston & Strawn, and that Acxiom receive an opinion from its tax
counsel, Skadden, Arps, Slate, Meagher & Flom LLP, to the effect that, based
upon certain facts, representations and assumptions, the Merger will constitute
a reorganization within the meaning of Section 368(a) of the Code. The issuance
of such opinions is conditioned on, among other things, such tax counsels'
receipt of representation letters from each of Acxiom, Sub and May & Speh, in
each case, in form and substance reasonably satisfactory to each such tax
counsel. The following discussion assumes that the Merger constitutes a
reorganization within the meaning of Section 368(a) of the Code.
Based on the above assumptions and qualifications, holders of May & Speh
Common Stock who exchange their May & Speh Common Stock for Acxiom Common Stock
pursuant to the Merger Agreement will not recognize gain or loss for United
States federal income tax purposes, except with respect to cash, if any, they
receive in lieu of fractional shares of Acxiom Common Stock. Holders of May &
Speh Common Stock who receive cash in lieu of fractional shares of Acxiom Common
Stock in the Merger generally will be treated as if the fractional shares of
Acxiom Common Stock had been distributed to them as part of the Merger and then
redeemed by Acxiom in exchange for the cash actually distributed in lieu of the
fractional shares, with such
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<PAGE>
redemption qualifying as an exchange under Section 302 of the Code.
Consequently, such holders generally will recognize capital gain or loss with
respect to cash payments they receive in lieu of fractional shares. In the case
of an individual stockholder, any such capital gain will be subject to a maximum
federal income tax rate of 20% if the individual held his or her May & Speh
Common Stock for more than 12 months at the Effective Time. The deductibility of
capital losses is subject to limitations for both individuals and corporations.
Each holder's aggregate tax basis in the Acxiom Common Stock received in the
Merger will be the same as his or her aggregate tax basis in the May & Speh
Common Stock exchanged therefor, decreased by the amount of any tax basis
allocable to any fractional share interest for which cash is received. The
holding period of the Acxiom Common Stock received by a May & Speh stockholder
pursuant to the Merger Agreement will include the holding period of the May &
Speh Common Stock surrendered in exchange therefor.
ACCOUNTING TREATMENT OF THE MERGER
Consummation of the Merger is conditioned upon qualification of the Merger
under the pooling of interests method of accounting and the receipt by each of
Acxiom, Sub and May & Speh of an opinion from KPMG Peat Marwick LLP, independent
certified public accountants, to the effect that the Merger qualifies for the
pooling of interests method of accounting treatment if consummated in accordance
with the terms of the Merger Agreement. Under the pooling of interests method of
accounting, the historical cost basis of the assets and liabilities of Acxiom
and May & Speh will be combined and carried forward at their previously recorded
amounts, and the stockholders' equity accounts of Acxiom and May & Speh will be
combined on Acxiom's consolidated balance sheet. Income and other financial
statements of Acxiom issued after consummation of the Merger will be restated
retroactively to reflect the consolidated operations of Acxiom and May & Speh as
if the Merger had taken place prior to the periods covered by such financial
statements.
The unaudited pro forma combined information contained in this Proxy
Statement/Prospectus has been prepared using the pooling of interests
accounting method. See "THE MERGER--Pro Forma Financial Information."
PERCENTAGE OWNERSHIP INTEREST OF MAY & SPEH STOCKHOLDERS AFTER THE MERGER
Assuming that there will be 52,521,326 shares of Acxiom Common Stock and
26,073,654 shares of May & Speh Common Stock outstanding immediately prior to
the Effective Time, the number of shares of Acxiom Common Stock to be issued in
the Merger would be approximately 20,858,923 (not including any shares of Acxiom
Common Stock issued upon the exercise of May & Speh warrants or the conversion
of May & Speh's 5.25% convertible subordinated notes or shares of Acxiom Common
Stock issued after the Effective Time of the Merger under May & Speh Option
Plans assumed by Acxiom) which would represent approximately 28.43% of the
outstanding Acxiom Common Stock immediately after the Effective Time.
APPRAISAL RIGHTS
Under the DGCL, the transactions contemplated by the Merger Agreement and the
issuance of Acxiom Common Stock pursuant to the Merger Agreement do not give
rise to any appraisal or dissenters' rights to holders of Acxiom Common Stock.
Under the DGCL, May & Speh stockholders are not entitled to any appraisal or
dissenters' rights in connection with the Merger because the May & Speh Common
Stock is listed on the NASDAQ National Market System and the consideration which
such stockholders will be entitled to receive in the Merger will consist solely
of Acxiom Common Stock, which will also be listed on the NASDAQ National Market
System, and cash in lieu of fractional shares.
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PRO FORMA FINANCIAL INFORMATION
ACXIOM CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA CONDENSED COMBINED FINANCIAL INFORMATION
The following unaudited pro forma combined condensed balance sheet as of June
30, 1998, and unaudited pro forma combined condensed statements of earnings for
the three months ended June 30, 1998 and the years ended March 31, 1998, 1997
and 1996 give effect to the Merger using the pooling of interests method of
accounting. For a description of pooling of interests accounting with respect to
the Merger and certain other accounting matters, see "THE MERGER--Anticipated
Accounting Treatment."
The unaudited pro forma combined condensed statements of earnings give effect
to the Merger as if it had been consummated at the beginning of the periods
presented by combining the results of operations of Acxiom for the three months
ended June 30, 1998 and the fiscal years ended March 31, and the results of
operations of May & Speh for the three months ended June 30, 1998 and the twelve
months ended March 31. The unaudited pro forma combined balance sheet gives
effect to the Merger as if it had been consummated as of the date presented by
combining the balance sheet of Acxiom at June 30 and the balance sheet of May &
Speh at June 30. The unaudited pro forma combined condensed financial
information has been included for illustrative purposes only and is not
necessarily indicative of the results of operations or financial position that
would have occurred had the Merger been consummated at the dates indicated, nor
is it necessarily indicative of future results of operations or financial
position of the merged companies. The unaudited pro forma combined condensed
financial statements have been derived from, should be read in conjunction with
and are qualified in their entirety by reference to the historical consolidated
financial statements and notes thereto of Acxiom and May & Speh, which are
incorporated by reference in this Proxy Statement/Prospectus. See "INCORPORATION
OF DOCUMENTS BY REFERENCE."
Acxiom expects to incur certain non-recurring expenses related to the Merger,
presently estimated to be $15.1 million ($13.8 million after tax). These
expenses would include, but would not be limited to, professional fees, fees of
financial advisors, certain compensation-related expenses and similar expenses.
Although Acxiom believes this estimate of non-recurring expenses is accurate,
certain material additional costs may be incurred in connection with the Merger.
Merger-related expenses will be charged to operations in the quarter in which
the Merger is concluded, which is currently estimated to occur in the second
quarter of fiscal 1999. These non-recurring merger-related expenses have been
charged to stockholders' equity for purposes of the unaudited pro forma balance
sheet. In addition, Acxiom is developing a plan to integrate the operations of
May & Speh after the Merger. In connection with that plan, Acxiom will determine
to what extent Acxiom and May & Speh facilities, software, equipment and vendor
contracts are duplicative and anticipates that certain non-recurring charges
will be incurred in connection with such integration. Pending completion of the
plan, which will include discussions with customers and vendors, Acxiom cannot
identify the timing, nature and amount of such charges as of the date of this
Proxy Statement/Prospectus. However, it is expected that such charges could be
as much as $50-100 million. Any such charges could affect Axciom's results of
operations in the period in which such charges are recorded. Because the
foregoing charges are non-recurring in nature, they have not been reflected in
the accompanying unaudited pro forma combined statements of earnings.
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ACXIOM CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED BALANCE SHEET
(IN THOUSANDS)
<TABLE>
<CAPTION>
HISTORICAL PRO FORMA
-------------------- -----------------------
JUNE 30, 1998
-------------------- ADD (DEDUCT)
ACXIOM MAY & SPEH ADJUSTMENTS COMBINED
-------- ---------- ------------ --------
<S> <C> <C> <C> <C>
ASSETS
CURRENT ASSETS.................... $132,802 $146,939 -- $279,741
PROPERTY AND EQUIPMENT, NET....... 134,321 69,276 -- 203,597
SOFTWARE, NET..................... 27,597 4,837 -- 32,434
EXCESS OF COST OVER FAIR VALUE OF
NET ASSETS ACQUIRED, NET......... 56,677 40,220 -- 96,897
OTHER ASSETS ..................... 82,358 21,860 104,218
-------- -------- ------- --------
Total assets.................. $433,755 $283,132 -- $716,887
======== ======== ======= ========
LIABILITIES
AND STOCKHOLDERS' EQUITY
CURRENT LIABILITIES............... $ 61,315 $ 23,675 $15,100 (2) $100,090
LONG-TERM DEBT.................... 137,161 144,304 -- 281,465
DEFERRED INCOME TAXES............. 25,965 8,090 (1,300)(2) 32,755
STOCKHOLDERS' EQUITY..............
Common stock.................... 5,328 261 1,816 (3) 7,405
Additional paid-in capital...... 70,713 54,101 (1,816)(3) 122,998
Retained earnings............... 134,626 53,889 (13,800)(2) 174,715
Foreign currency translation ad-
justment....................... 750 -- -- 750
Unearned ESOP compensation...... -- (1,188) -- (1,188)
Treasury stock ................. (2,103) -- -- (2,103)
-------- -------- ------- --------
Total stockholders' equity ... 209,314 107,063 (13,800) 302,577
-------- -------- ------- --------
Total liabilities and
stockholders' equity......... $433,755 $283,132 -- $716,887
======== ======== ======= ========
</TABLE>
See accompanying notes to unaudited pro forma
combined condensed financial statements.
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ACXIOM CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE THREE MONTHS ENDED
JUNE 30, 1998
------------------------------
HISTORICAL
-------------------- PRO FORMA
ACXIOM MAY & SPEH COMBINED
-------- ---------- ---------
<S> <C> <C> <C>
REVENUE......................................... $128,608 $30,201 $158,809
-------- ------- --------
OPERATING COSTS AND EXPENSES
Salaries and benefits......................... 50,911 10,277 61,188
Computer, communication and other equipment... 17,355 7,261 24,616
Data costs.................................... 25,260 230 25,490
Other operating costs and expenses............ 22,245 5,560 27,805
-------- ------- --------
Total operating costs and expenses.......... 115,771 23,328 139,099
-------- ------- --------
Operating income................................ 12,837 6,873 19,710
Other income, net............................... 945 1,546 2,491
Interest expense................................ (2,210) (1,866) (4,076)
-------- ------- --------
Earnings before taxes........................... 11,572 6,553 18,125
Income taxes.................................... 4,281 2,486 6,767
-------- ------- --------
Net earnings.................................... $ 7,291 $ 4,067 $ 11,358
======== ======= ========
Earnings per share
Basic......................................... .14 .16 .15
Diluted....................................... .12 .15 .13
Average number of common shares outstanding.....
Basic......................................... 52,430 26,067 73,284
Diluted....................................... 60,548 34,566 88,201
</TABLE>
See accompanying notes to unaudited pro forma
combined condensed financial statements.
49
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
MARCH 31, 1998
------------------------------
HISTORICAL
-------------------- PRO FORMA
ACXIOM MAY & SPEH COMBINED
-------- ---------- ---------
<S> <C> <C> <C>
REVENUE......................................... $465,065 $103,955 $569,020
-------- -------- --------
OPERATING COSTS AND EXPENSES
Salaries and benefits......................... 173,925 35,742 209,667
Computer, communication and other equipment... 60,858 26,014 86,872
Data costs.................................... 86,483 1,763 88,246
Other operating costs and expenses............ 84,354 15,919 100,273
Severance costs............................... -- 4,700 4,700
-------- -------- --------
Total operating costs and expenses.......... 405,620 84,138 489,758
-------- -------- --------
Operating income................................ 59,445 19,817 79,262
Other income, net............................... 3,014 1,281 4,295
Interest expense................................ (5,956) (3,073) (9,029)
-------- -------- --------
Earnings before taxes........................... 56,503 18,025 74,528
Income taxes.................................... 20,906 6,848 27,754
-------- -------- --------
Net earnings.................................... $35,597 $11,177 $46,774
======== ======== ========
Earnings per share
Basic......................................... .68 .44 .65
Diluted....................................... .60 .42 .58
Average number of common shares outstanding
Basic......................................... 52,043 25,194 72,199
Diluted....................................... 59,687 26,400 80,807
</TABLE>
See accompanying notes to unaudited pro forma
combined condensed financial statements.
50
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
MARCH 31, 1997
------------------------------
HISTORICAL
-------------------- PRO FORMA
ACXIOM MAY & SPEH COMBINED
--------- ---------- ---------
<S> <C> <C> <C>
REVENUE.......................................... $ 402,016 $ 84,968 $ 486,984
--------- -------- ---------
OPERATING COSTS AND EXPENSES
Salaries and benefits.......................... 145,038 29,230 174,268
Computer, communication and other equipment.... 58,552 19,816 78,368
Data costs..................................... 76,282 1,612 77,894
Other operating costs and expenses............. 72,817 16,154 88,971
--------- -------- ---------
Total operating costs and expenses........... 352,689 66,812 419,501
--------- -------- ---------
Operating income................................. 49,327 18,156 67,483
Other income (expense), net...................... (1,386) 1,565 179
Interest expense................................. (3,903) (2,184) (6,087)
--------- -------- ---------
Earnings before taxes............................ 44,038 17,537 61,575
Income taxes..................................... 16,526 6,558 23,084
--------- -------- ---------
Net earnings..................................... $ 27,512 $ 10,979 $ 38,491
========= ======== =========
Earnings per share
Basic.......................................... .54 .44 .54
Diluted........................................ .47 .42 .48
Average number of common shares outstanding
Basic.......................................... 51,172 24,897 71,090
Diluted........................................ 59,143 26,093 80,017
</TABLE>
See accompanying notes to unaudited pro forma
combined condensed financial statements.
51
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
UNAUDITED PRO FORMA COMBINED CONDENSED STATEMENT OF EARNINGS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
FOR THE FISCAL YEAR ENDED
MARCH 31, 1996
------------------------------
HISTORICAL
-------------------- PRO FORMA
ACXIOM MAY & SPEH COMBINED
--------- ---------- ---------
<S> <C> <C> <C>
REVENUE.......................................... $ 269,902 $ 67,237 $ 337,139
--------- -------- ---------
OPERATING COSTS AND EXPENSES
Salaries and benefits.......................... 98,075 24,716 122,791
Computer, communication and other equipment.... 40,972 15,013 55,985
Data costs..................................... 63,442 1,297 64,739
Other operating costs and expenses............. 36,696 11,999 48,695
--------- -------- ---------
Total operating costs and expenses........... 239,185 53,025 292,210
--------- -------- ---------
Operating income................................. 30,717 14,212 44,929
Other income, net................................ 542 401 943
Interest expense................................. (1,863) (1,528) (3,391)
--------- -------- ---------
Earnings before taxes............................ 29,396 13,085 42,481
Income taxes..................................... 11,173 5,030 16,203
--------- -------- ---------
Net earnings..................................... $ 18,223 $ 8,055 $ 26,278
========= ======== =========
Earnings per share
Basic.......................................... .39 .39 .41
Diluted........................................ .35 .39 .38
Average number of common shares outstanding
Basic.......................................... 47,057 20,421 63,394
Diluted........................................ 52,078 20,911 68,807
</TABLE>
See accompanying notes to unaudited pro forma
combined condensed financial statements.
52
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
NOTES TO UNAUDITED PRO FORMA
COMBINED CONDENSED FINANCIAL STATEMENTS
1. PRO FORMA FINANCIAL STATEMENT PRESENTATION
The unaudited pro forma combined condensed statement of earnings includes
Acxiom's results of operations for the three months ended June 30, 1998 and the
three fiscal years ended March 31, 1996, 1997 and 1998, respectively, and May &
Speh's historical results of operations for the three months ended June 30, 1998
and the twelve months ended March 31, 1996, 1997 and 1998, respectively. The
unaudited pro forma combined condensed balance sheet presents the historical
balance sheet of Acxiom as of June 30, 1998 and the historical balance sheet of
May & Speh as of June 30, 1998. The fiscal year end of Acxiom is March 31; the
unaudited statement of earnings of Acxiom for the three months ended June 30,
1998 and the balance sheet of Acxiom as of June 30, 1998 used in the selected
unaudited pro forma financial information have been prepared on the same basis
as the historical information derived from audited financial statements and, in
the opinion of management, contain all adjustments, consisting only of normal
recurring accruals, necessary for the fair presentation of the results of
operations for such periods. The fiscal year end of May & Speh is September 30;
the unaudited statements of earnings of May & Speh for the three months ended
June 30, 1998 and the twelve months ended March 31, 1996, 1997 and 1998 and the
balance sheet of May & Speh as of June 30, 1998 used in the selected unaudited
pro forma financial information have been prepared on the same basis as the
historical information derived from audited financial statements and, in the
opinion of management, contain all adjustments, consisting only of normal
recurring accruals, necessary for the fair presentation of the results of
operations for such periods. Certain amounts in the historical balance sheet of
May & Speh, as reported in Form 10-Q for the quarter ended June 30, 1998, were
reclassified to conform such amounts to Acxiom's classifications. The pro forma
financial data are presented for information and do not indicate what the
financial position or the results of operations of Acxiom would have been had
the Merger occurred as of the dates or for the periods presented or what the
financial position or future results of operations of Acxiom will be. No
adjustment has been included in the pro forma financial data for cost savings,
if any, which may be realized by Acxiom following the Merger.
2. MERGER AND INTEGRATION EXPENSES
Acxiom expects to incur certain non-recurring expenses related to the Merger,
presently estimated to be $15.1 million ($13.8 million after tax). These
expenses would include, but would not be limited to, professional fees, fees of
financial advisors, certain compensation-related expenses and similar expenses.
Although Acxiom believes this estimate of non-recurring expenses is accurate,
certain material additional costs may be incurred in connection with the Merger.
Merger-related expenses will be charged to operations in the quarter in which
the Merger is concluded, which is currently estimated to occur in the second
quarter of fiscal 1999. These non-recurring merger-related expenses have been
charged to stockholders' equity for purposes of the unaudited pro forma balance
sheet. In addition, Acxiom is developing a plan to integrate the operations of
May & Speh after the Merger. In connection with that plan, Acxiom will determine
to what extent Acxiom and May & Speh facilities, software, equipment and vendor
contracts are duplicative and anticipates that certain non-recurring charges
will be incurred in connection with such integration. Pending completion of the
plan, which will include discussions with customers and vendors, Acxiom cannot
identify the timing, nature and amount of such charges as of the date of this
Proxy Statement/Prospectus. However, it is expected that such charges could be
as much as $50-100 million. Any such charges could affect Axciom's results of
operations in the period in which such charges are recorded. Because the
foregoing charges are non-recurring in nature, they have not been reflected in
the accompanying unaudited pro forma combined statements of earnings.
3. OTHER PRO FORMA ADJUSTMENTS
The excess of par value of the Acxiom Common Stock issued in this transaction
over the par value of the May & Speh's Common Stock outstanding on the Effective
Date will be transferred from Additional Paid-in Capital. There have been no
adjustments required to conform the accounting policies of the combined company.
53
<PAGE>
Certain amounts for May & Speh have been reclassified to conform with Acxiom's
financial statement presentation. There have been no significant intercompany
transactions.
4. EARNINGS PER SHARE
Pro forma combined earnings per share amounts as presented in the accompanying
Unaudited Pro Forma Combined Condensed Statements of Earnings are based upon the
combined average number of shares outstanding of Acxiom Common Stock and May &
Speh's Common Stock for each period, adjusted, in the case of May & Speh's
Common Stock, to reflect the conversion of each share of May & Speh's Common
Stock into .80 of a share of Acxiom Common Stock.
54
<PAGE>
COMPARATIVE RIGHTS OF STOCKHOLDERS
Acxiom and May & Speh both are incorporated under the laws of the State of
Delaware. If the Merger is consummated in accordance with the terms of the
Merger Agreement, the holders of May & Speh Common Stock will become
stockholders of Acxiom and their rights following the Merger will be governed by
the amended and restated certificate of incorporation of Acxiom (the "Acxiom
Charter"), the by-laws of Acxiom (the "Acxiom By-Laws"), each as in effect at
the Effective Time and the DGCL, rather than the certificate of incorporation of
May & Speh (the "May & Speh Charter") and the by-laws of May & Speh (the "May &
Speh By-Laws").
The following is a comparison of certain of the material rights of holders of
May & Speh Common Stock and Acxiom Common Stock. The following summary does not
purport to be complete and is qualified by reference to the May & Speh Charter,
the May & Speh By-Laws, the Acxiom Charter, the Acxiom By-Laws and the DGCL,
respectively. Copies of the Acxiom Charter, the Acxiom By-Laws, the May & Speh
Charter and the May & Speh By-Laws may be obtained as described under "AVAILABLE
INFORMATION."
Board of Directors. The Acxiom Charter and the Acxiom By-Laws provide that the
Acxiom Board of Directors shall consist of not less than three (3) and not more
than fifteen (15) directors, with the exact number to be determined from time to
time by resolution of the Acxiom Board of Directors. The Acxiom Charter and the
Acxiom By-Laws provide for the classification of the Acxiom Board of Directors
into three classes of directors as nearly equal in number as possible, with each
director elected for a three-year term.
The May & Speh By-Laws provide that the number of directors which shall
constitute the whole May & Speh Board of Directors shall be no fewer than five
(5) nor more than fifteen (15) with the exact number to be fixed from time to
time by the amendment of the relevant section of the May & Speh By-Laws. The May
& Speh Charter and the May & Speh By-Laws also provide for the classification of
the May & Speh Board of Directors into three classes of directors with each
class to be as nearly equal in number of directors as reasonably possible, with
each director elected for a three-year term.
Removal of Directors. Under the DGCL, a director of a corporation with a
classified board may be removed only for cause, unless the certificate of
incorporation provides otherwise. The Acxiom Charter provides that no director
shall be removed from the Acxiom Board of Directors by the action of the
stockholders of the corporation during his or her appointed term other than for
cause. The Acxiom Charter defines "cause" as final conviction of a felony,
unsound mind, adjudication of bankruptcy, the nonacceptance of office or conduct
prejudicial to the interests of Acxiom.
The May & Speh By-Laws provide that any director, or the entire Board of
Directors, may be removed from office at any time, but only for cause, by the
affirmative vote of the holders of record of outstanding shares representing
eighty (80)% of the voting power of all the shares of capital stock of May &
Speh then entitled to vote generally in the election of directors, voting
together as a single class. Any director may also be removed from office at any
time, but only for cause, by the affirmative vote of a majority of the entire
May & Speh Board of Directors. The term "entire May & Speh Board of Directors"
means the total authorized number of directors that the corporation would have
if there were no vacancies.
Vacancies. The Acxiom Charter, the Acxiom By-Laws and the May & Speh By-Laws
provide that vacancies and newly created directorships may be filled by the
affirmative vote of a majority of the directors then in office, even if less
than a quorum. Additionally, the May & Speh By-Laws provide that if, at the time
of filling any vacancy or newly created directorship, the directors then in
office constitute less than a majority of the whole May & Speh Board of
Directors, the Court of Chancery may, upon application of any stockholder or
stockholders holding at least 10% of the total number of shares at the time
outstanding entitled to vote for directors, order an election of directors to be
held.
Stockholder Action Without a Meeting. The Acxiom Charter and the Acxiom By-
Laws provide that any action that may be taken at any annual or special
meeting may be taken without a meeting, if one or more written
55
<PAGE>
consents, setting forth the action to be taken, are signed by all of the holders
of Acxiom Common Stock entitled to vote with respect to the subject matter
thereof.
The May & Speh Charter provides that no action required or permitted to be
taken at any meeting of May & Speh stockholders may be taken without such
meeting, the giving of prior notice and the taking of a vote, and the power of
the May & Speh stockholders to consent in writing or otherwise, without such
meeting, notice and vote, to the taking of any action is specifically denied.
Special Meetings of Stockholders. The Acxiom By-Laws provide that special
meetings of the stockholders may be called, for any purpose, by the President,
the Chief Executive Officer, the Acxiom Board of Directors, or by a committee of
the Acxiom Board of Directors that has been duly designated by the Acxiom Board
of Directors and whose power and authority include the power to call such
meetings. A special meeting shall be called by the President at the request of
the holders of a majority of all the votes entitled to be cast on any issue
proposed to be considered at a special meeting if such holders have signed,
dated and delivered to the Secretary of Acxiom one or more written demands for
the meeting describing the purpose for which it is to be held.
The May & Speh By-Laws provide that a special meeting of the stockholders may
be called by the Chairman of the May & Speh Board of Directors or the President,
and shall be called by the President or Secretary at the request in writing of a
majority of the May & Speh Board of Directors.
Committees of Directors. The Acxiom By-Laws provide, that to the extent
provided by resolution of the Acxiom Board of Directors and to the extent not
otherwise prohibited by applicable law, committees of directors shall have and
may exercise all the powers of authority of the Acxiom Board of Directors in the
management of the business and affairs of Acxiom.
The May & Speh By-Laws provide that to the extent provided by resolution of
the May & Speh Board of Directors and to the extent not otherwise prohibited by
applicable law, committees of directors shall have and may exercise all the
powers of authority of the May & Speh Board of Directors in the management of
the business and affairs of May & Speh; provided that, no committee shall have
the power or authority to amend the May & Speh Charter, adopt an agreement of
merger or consolidation, recommend to the stockholders the sale of substantially
all of May & Speh's assets, recommend a dissolution, amend the May & Speh
By-Laws, or, unless such a Charter provision is created, declare a dividend or
authorize the issuance of stock.
Amendments to Charter. The Acxiom Charter provides that the Acxiom Charter may
be altered, amended, or repealed and other provisions may be added by the
affirmative vote of a majority of the votes entitled to be cast; provided,
however, that the affirmative vote of the holders of at least eighty percent
(80%) of the votes entitled to be cast is required to amend or adopt any
provision inconsistent with the articles of the Acxiom Charter concerning:
Directors; Meetings of Holders of Common Stock and Action By Holders of Common
Stock without a Meeting; By-Laws; Fair Price Provision; and Amendments.
The May & Speh Charter provides that the affirmative vote of eighty percent
(80%) of the voting power of the shares of capital stock of May & Speh then
entitled to vote in the election of directors, voting as a single class, shall
be required to amend (i) the provisions of the May & Speh Charter concerning the
May & Speh Board of Directors, stockholder meetings and amendments, or (ii)
those provisions of the May & Speh By-Laws concerning special meetings of
stockholders, the structure and composition of the May & Speh Board of
Directors, vacancies on the May & Speh Board of Directors, removal of directors
and nomination of directors. In addition, the May & Speh Charter states that the
aforementioned provision applies unless such amendment, alteration, repeal or
adoption of any inconsistent provision(s) is declared advisable by the Board of
Directors by the affirmative vote of at least seventy-five percent (75%) of the
entire May & Speh Board of Directors, notwithstanding the fact that a lesser
percentage may be specified by the DGCL. The May & Speh Charter also provides
that no amendment to or repeal of the May & Speh Charter provisions relating to
director liability and indemnification shall have any effect on the rights of
any individual referred to thereunder.
56
<PAGE>
Amendments to By-Laws. The Acxiom By-Laws provide the Acxiom By-Laws may be
amended, altered, or repealed, at any regular meeting of stockholders, or at any
special meeting duly called for that purpose, by a vote of stockholders provided
that in the notice of such meeting notice of such purpose is given. The Acxiom
Board of Directors may, by a majority vote of the entire Board of Directors,
amend the Acxiom By-Laws, waive any provisions thereof or enact new By-Laws as
in their judgment may be advisable to conduct the affairs of Acxiom.
The May & Speh By-Laws provide that the power to adopt, alter and repeal the
By-Laws is vested in the stockholders or the May & Speh Board of Directors, at
any regular meeting of the stockholders or of the Board of Directors or at any
special meeting of the stockholders or the Board of Directors if notice of such
amendment is contained in the notice of such special meeting. In addition, the
May & Speh Charter provides that the May & Speh By-Laws may be amended as
described under "Amendments to Charter" above.
Mergers and Other Fundamental Transactions. The Acxiom Charter requires the
affirmative vote of the holders of not less than eighty percent (80%) of the
votes entitled to be cast for the approval of certain business combinations
(including any merger, consolidation, interested stockholder transactions, plan
of liquidation or dissolution or recapitalization) with interested stockholders
or affiliates thereof. However, such "interested stockholder" business
combinations require only such vote as is required by law and other Acxiom
Charter provisions, if there is approval by a majority of the disinterested
directors on the Acxiom Board of Directors or certain price and procedural
requirements are met.
The Acxiom Charter also provides that any merger or consolidation of Acxiom
with any other person, any sale, lease, mortgage, pledge, or other disposition
by Acxiom of its property or assets, any dissolution or liquidation of Acxiom or
revocation thereof that the DGCL requires be approved by holders of Acxiom
Common Stock, must be approved by the holders of at least sixty-six and
two-thirds percent (66 2/3%) of the votes entitled to be cast by the holders of
Acxiom Common Stock.
The May & Speh Charter and By-Laws do not address the question of the required
stockholder vote for mergers and other business combinations. In such cases, the
DGCL requires that transactions such as the Merger be approved by a majority of
the outstanding stock of the corporation entitled to vote thereon.
57
<PAGE>
CERTAIN RELATED TRANSACTIONS BETWEEN ACXIOM AND MAY & SPEH
RECIPROCAL OPTION AGREEMENTS
Set forth below are brief descriptions of certain terms of the Option
Agreements. These descriptions do not purport to be complete and are qualified
by reference to the Acxiom Option Agreement and the May & Speh Option Agreement,
which are attached hereto as Annex B and Annex C, respectively.
As a condition and inducement to Acxiom's willingness to enter into the Merger
Agreement, May & Speh (as issuer) and Acxiom (as grantee) entered into an Option
Agreement (the "Acxiom Option Agreement"), pursuant to which May & Speh granted
Acxiom an irrevocable option (the "Acxiom Option") to purchase from May & Speh
at any one time up to 19.9% of the total number of shares of May & Speh Common
Stock issued and outstanding immediately prior to the grant of the Option, at an
exercise price of $14.96 per share of May & Speh Common Stock, subject to
certain adjustments (the "Acxiom Purchase Price"). The closing sale price of May
& Speh Common Stock on the last trading day preceding the announcement by Acxiom
and May & Speh of the execution of the Merger Agreement was $17.00 per share.
Acxiom may exercise the Acxiom Option only upon the occurrence of an event (an
"Acxiom Purchase Event") as a result of which Acxiom becomes entitled under the
Merger Agreement to a Termination Fee (none of which has occurred as of the date
hereof).
The Acxiom Option will terminate and be of no further force and effect upon
the earliest to occur of (a) the Effective Time, (b) six months after the date
on which an Acxiom Purchase Event occurs, and (c) termination of the Merger
Agreement in accordance with its terms prior to the occurrence of an Acxiom
Purchase Event; provided that, in the case of clause (c), if Acxiom has the
right to receive a Termination Fee following such termination upon the
occurrence of certain events, the Acxiom Option does not terminate until the
later of (x) six months following the time such Termination Fee becomes payable,
and (y) the expiration of the period in which Acxiom has such right to receive a
Termination Fee. Notwithstanding the termination of the Acxiom Option, Acxiom
will remain entitled to purchase May & Speh Common Stock if it has properly
exercised the Acxiom Option prior to the termination of the Acxiom Option.
The Acxiom Option Agreement provides Acxiom with a cash-out-right (the "Acxiom
Cash-Out-Right") which would allow Acxiom to receive cash upon exercise of the
Acxiom Option in an amount equal to the number of shares of May & Speh Common
Stock specified in Acxiom's exercise notice of the Acxiom Cash-Out-Right,
multiplied by the difference between (i) the average closing price per share of
May & Speh Common Stock as reported on the NASDAQ National Market for the ten
trading days commencing on the 12th NASDAQ National Market trading day
immediately preceding the date of Acxiom's election to exercise the Acxiom
Option (the "Acxiom Notice Date") and (ii) the Acxiom Purchase Price. May &
Speh's obligation, however, to pay cash to Acxiom under the Acxiom
Cash-Out-Right is limited to an amount equal to the product of (a) $2.00 and (b)
the number of shares of May & Speh Common Stock subject to such exercise.
The Acxiom Option Agreement also provides May & Speh with a repurchase option
that would allow May & Speh to purchase from Acxiom any May & Speh Common Stock
acquired by Acxiom pursuant to an exercise of the Acxiom Option at a purchase
price per share equal to the Acxiom Purchase Price plus $1.00. May & Speh must
exercise this repurchase option by delivering written notice to Acxiom during
the period beginning on the Acxiom Notice Date and ending two days prior to the
closing of an exercise of the Acxiom Option, and the repurchase must take place
immediately following the consummation of the sale of May & Speh Common Stock to
Acxiom pursuant to an exercise of the Acxiom Option.
As a condition and inducement to May & Speh's willingness to enter into the
Merger Agreement, Acxiom (as issuer) and May & Speh (as grantee) entered into
that certain Option Agreement (the "May & Speh Option Agreement and together
with the Acxiom Option Agreement, the "Option Agreements") pursuant to which
Acxiom granted May & Speh an irrevocable option (the "May & Speh Option") to
purchase from Acxiom at any one time up to 19.9% of the total number of shares
of Acxiom Common Stock issued and outstanding immediately prior to the grant of
the Option, at an exercise price of $23.55 per share of Acxiom Common Stock,
58
<PAGE>
subject to certain adjustments (the "May & Speh Purchase Price"). The closing
sale price of Acxiom Common Stock on the last trading day preceding the
announcement of the execution of the Merger Agreement was $21.8125 per share.
May & Speh may exercise the May & Speh Option only upon the occurrence of an
event (a "May & Speh Purchase Event") as a result of which May & Speh becomes
entitled under the Merger Agreement to a Termination Fee (none of which has
occurred as of the date hereof).
The May & Speh Option will terminate and be of no further force and effect
upon the earliest to occur of (a) the Effective Time, (b) six months after the
date on which a May & Speh Purchase Event occurs, and (c) termination of the
Merger Agreement in accordance with its terms prior to the occurrence of a May &
Speh Purchase Event; provided that, in the case of clause (c), if May & Speh has
the right to receive a Termination Fee following such termination upon the
occurrence of certain events, the May & Speh Option does not terminate until the
later of (x) six months following the time such Termination Fee becomes payable
and (y) the expiration of the period in which May & Speh has such right to
receive a Termination Fee. Notwithstanding the termination of the May & Speh
Option, May & Speh will remain entitled to purchase Acxiom Common Stock if it
has properly exercised the May & Speh Option prior to the termination of the May
& Speh Option.
The May & Speh Option Agreement provides May & Speh with a cash-out-right (the
"May & Speh Cash-Out-Right") which would allow May & Speh to receive cash upon
exercise of the Option in an amount equal to the number of shares of Acxiom
Common Stock specified in May & Speh's exercise notice of the May & Speh
Cash-Out-Right, multiplied by the difference between (i) the average closing
price per share of Acxiom Common Stock as reported on the NASDAQ National Market
for the ten trading days commencing on the 12th NASDAQ trading day immediately
preceding the date of May & Speh's election to exercise the May & Speh Option
(the "May & Speh Notice Date") and (ii) the May & Speh Purchase Price. Acxiom's
obligation, however, to pay cash to May & Speh under the May & Speh
Cash-Out-Right is limited to an amount equal to the product of (a) $1.00 and (b)
the number of shares of Acxiom Common Stock subject to such exercise.
The May & Speh Option Agreement also provides Acxiom with a repurchase option
that would allow Acxiom to purchase from May & Speh any Acxiom Common Stock
acquired by May & Speh pursuant to an exercise of the May & Speh Option at a
purchase price per share equal to the May & Speh Purchase Price plus $1.00.
Acxiom must exercise this repurchase option by delivering written notice to May
& Speh during the period beginning on the May & Speh Notice Date and ending two
days prior to the closing of an exercise of the May & Speh Option, and the
repurchase must take place immediately following the consummation of the sale of
Acxiom Common Stock to May & Speh pursuant to an exercise of the May & Speh
Option.
The Option Agreements contain provisions governing the procedure for exercise
of the Acxiom Option and payment for the May & Speh Common Stock or the May &
Speh Option and payment for the Acxiom Common Stock, as the case may be,
purchased upon such exercise, and other provisions that adjust the number of
shares of May & Speh Common Stock and the Acxiom Purchase Price therefor, or the
number of shares of Acxiom Common Stock and the May & Speh Purchase Price, as
the case may be, upon the occurrence of (i) certain changes in the Common Stock
of the issuers of the option by reason of a stock dividend, reverse stock split,
merger, recapitalization, combination, exchange of Common Stock of the issuers
of the option or similar transaction, or (ii) certain consolidations or mergers
that do not involve Acxiom or May & Speh or its respective subsidiaries, as the
case may be, or the sale or transfer of substantially all of the assets of May &
Speh or Acxiom, as the case may be to any person or entity other than Acxiom or
its subsidiaries or May & Speh and its subsidiaries.
Finally, the Option Agreements contain provisions obligating the issuer of the
option, if requested by the grantee of the option and subject to certain
limitations and conditions, to prepare, file and cause to be made effective up
to two registration statements ("Demand Registration Statements") for the
purpose of registering under the Securities Act the sale or other disposition
pursuant to a bona fide, firm commitment underwritten public offering of the
Common Stock acquired by the grantee upon exercise of the Option. In addition,
if the issuer of the respective option effects a registration statement under
the Securities Act of its Common Stock for
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<PAGE>
its own account or for any other stockholders (other than on Form S-4, S-8 or
successor forms), the Option Agreements provide the grantee of the option with
the right to participate in such registration subject to certain limitations
that may be imposed by the managing underwriter with respect to such offering,
and such participation will not affect the obligation of the issuer of the
respective option to effect any Demand Registration Statement. A registration
effected under the foregoing provisions would be at the issuer's expense, except
for any underwriting discounts and commissions and expenses of the grantee's
counsel.
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ELECTION OF ACXIOM DIRECTORS
Three persons have been nominated for election as Directors at the Acxiom
Meeting. Rodger S. Kline, Robert A. Pritzker and James T. Womble currently are
members of the Acxiom Board of Directors with terms that expire at the Acxiom
Meeting. Messrs. Kline, Pritzker and Womble are nominated to serve for terms
expiring at the 2001 Acxiom annual meeting. If elected, Messrs. Kline, Pritzker
and Womble will serve with the other five members of the Acxiom Board of
Directors: William T. Dillard II, Harry C. Gambill, and Walter V. Smiley, whose
terms expire at the 1999 Acxiom annual meeting, and Dr. Ann H. Die and Charles
D. Morgan, whose terms will expire at the 2000 Acxiom annual meeting.
Directors will be elected by a majority of the votes cast at the Acxiom
Meeting. Stockholders of Acxiom do not have cumulative voting rights with
respect to the election of directors. Unless authority is withheld, it is the
intention of the persons named on the Acxiom proxy to vote the shares of Acxiom
Common Stock represented thereby for the nominees. While it is not anticipated
that any of the nominees will be unable to serve, the persons named on the
Acxiom proxy may, unless authority is withheld, vote for any substitute nominee
proposed by the Acxiom Board of Directors. In the event of any director's death,
disqualification or inability to serve, the vacancy so arising will be filled by
the Acxiom Board of Directors.
THE ACXIOM BOARD OF DIRECTORS RECOMMENDS THAT ACXIOM STOCKHOLDERS VOTE "FOR"
THE ELECTION AS DIRECTORS OF THE THREE INDIVIDUALS NAMED ABOVE AS NOMINEES AT
THE ACXIOM MEETING.
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MANAGEMENT
CURRENT DIRECTORS, NOMINEES AND EXECUTIVE OFFICERS
The following table provides information as of March 31, 1998 with respect to
each of Acxiom's directors, director nominees, and executive officers.
DIRECTORS AND DIRECTOR NOMINEES
<TABLE>
<CAPTION>
SERVED AS
OFFICER OR
DIRECTOR OF
ACXIOM
NAME AGE POSITION SINCE
---- --- -------- -----------
NOMINEES FOR TERMS EXPIRING AT THE 2001 ANNUAL MEETING OF ACXIOM STOCKHOLDERS
<C> <C> <S> <C>
Director, Operations
Rodger S. Kline...................... 55 Leader 1975
Robert A. Pritzker................... 71 Director 1994
Director, Division
James T. Womble...................... 55 Leader 1975
TERMS EXPIRING AT THE 2000 ANNUAL MEETING OF ACXIOM STOCKHOLDERS
Dr. Ann H. Die....................... 53 Director 1993
Charles D. Morgan.................... 55 Chairman of the Board
and Company Leader 1975
TERMS EXPIRING AT THE 1999 ANNUAL MEETING OF ACXIOM STOCKHOLDERS
William T. Dillard II................ 53 Director 1988
Harry C. Gambill..................... 52 Director 1993
Walter V. Smiley..................... 60 Director 1983
OTHER EXECUTIVE OFFICERS
C. Alex Dietz........................ 55 Division Leader 1979
Paul L. Zaffaroni.................... 51 Division Leader 1990
Jerry C. D. Ellis.................... 48 Division Leader 1991
Robert S. Bloom...................... 42 Financial Leader 1992
</TABLE>
Rodger S. Kline, 55, joined Acxiom in 1973. He has been a director since
1975, and serves as Acxiom's Treasurer and Chief Operating Officer (Operations
Leader). Prior to joining Acxiom, Mr. Kline was employed by IBM Corporation.
Mr. Kline holds an electrical engineering degree from the University of
Arkansas.
Robert A. Pritzker, 71, was appointed to fill a newly created position on the
Acxiom 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
Corporation, a company engaged in the business of providing consumer credit
reporting services, a director and the President of each of Union Tank Car
Company, a company principally engaged in the leasing of railway tank cars and
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. See "SECURITY
OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT OF ACXIOM" and "CERTAIN
TRANSACTIONS."
James T. Womble, 55, joined Acxiom in 1974. He has been a director since
1975, and serves as one of Acxiom's four division leaders. Prior to joining
Acxiom, Mr. Womble was employed by IBM Corporation. Mr. Womble holds a degree
in civil engineering from the University of Arkansas.
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<PAGE>
Dr. Ann H. Die, 53, 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
Pritzker Foundation for Independent Higher Education, and the American Council
on Education. 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.
Charles D. Morgan, 55, joined Acxiom in 1972. He has been Chairman of the
Acxiom Board of Directors since 1975, and serves as Acxiom's Company Leader.
He was employed by IBM Corporation prior to joining Acxiom. Mr. Morgan is also
a director of Fairfield Communities, Inc. Mr. Morgan holds a mechanical
engineering degree from the University of Arkansas.
William T. Dillard II, 53, was elected as a director in 1988. He has served
since 1968 as a member of the Board of Directors and since 1977 as President and
Chief Operating Officer of Dillard's, Inc. of Little Rock, Arkansas, a regional
chain of traditional department stores with 270 retail outlets in 27 states 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
Simon Debartolo Group, 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.
Harry C. Gambill, 52, was appointed to fill a vacancy on Acxiom's 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
Corporation, 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 Transaction,
and assumed the added title of President of TransMark in 1991. 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. See "SECURITY OWNERSHIP OF CERTAIN OWNERS AND
MANAGEMENT OF ACXIOM" and "CERTAIN TRANSACTIONS."
Walter V. Smiley, 60, was elected as a director in 1983. He served from 1968
until 1989 as Chairman of the Board of Directors and from 1968 until 1985 as
Chief Executive Officer of Systematics, Inc., the predecessor of ALLTEL
Information Services, Inc., an Arkansas based company which provides data
processing services to financial institutions throughout the United States and
abroad. Mr. Smiley currently owns and is President of Smiley Investment
Corporation, a consulting and venture capital firm. Mr. Smiley is also a
director of Southern Development Banc Corp. and Computer Language Research. He
holds a master's degree in business administration and a bachelor's degree in
industrial management from the University of Arkansas. Mr. Smiley resigned as
a Director of Acxiom effective as of June 1, 1998; Mr. Smiley has not yet been
replaced.
C. Alex Dietz, 55, joined Acxiom in 1970 and served as a vice president until
1975. Between 1975 and 1979 he was an officer of a commercial bank responsible
for data processing matters. Following his return to Acxiom in 1979, Mr. Dietz
served as senior level officer of Acxiom and is presently one of Acxiom's four
division leaders. Mr. Dietz holds a degree in electrical engineering from Tulane
University.
Paul L. Zaffaroni, 51, joined Acxiom in 1990. He serves as one of Acxiom's
four division leaders. Prior to joining Acxiom, he was employed by IBM
Corporation for 21 years, most recently serving as regional sales manager. Mr.
Zaffaroni holds a degree in marketing from Youngstown State University.
Jerry C. D. Ellis, 48, joined Acxiom in 1991 as managing director of
Acxiom's U.K. operations. He serves as one of Acxiom's four division leaders.
Prior to 1991, Mr. Ellis was employed for 22 years with IBM Corporation,
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.
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<PAGE>
Robert S. Bloom, 42, joined Acxiom in 1992 as chief financial officer. Prior
to joining Acxiom, he was employed for six years with Wilson Sporting Goods
Co. as chief financial officer of its international division. Prior to his
employment with Wilson, Mr. Bloom was employed by Arthur Andersen & Co. for
nine years, serving most recently as manager. Mr. Bloom, a Certified Public
Accountant, holds a degree in accounting from the University of Illinois.
ACXIOM BOARD OF DIRECTORS' MEETINGS AND COMMITTEES
The Acxiom Board of Directors holds quarterly meetings to review significant
developments affecting Acxiom and to act on matters requiring approval of the
Acxiom Board of Directors. The Acxiom Board of Directors currently has three
standing committees to assist it in the discharge of its responsibilities: an
Audit Committee, a Compensation Committee and an Executive Committee. The Audit
Committee, composed of outside directors Dr. Ann H. Die, William T. Dillard II,
Harry C. Gambill, Robert A. Pritzker and Walter V. Smiley, reviews the reports
of the auditors and has the authority to investigate the financial and business
affairs of Acxiom. Messrs. Dillard and Smiley also serve on the Compensation
Committee, which administers certain of Acxiom's employee benefit plans and
approves the compensation paid to Acxiom's senior leaders. The Executive
Committee is responsible for implementing the policy decisions of the Board.
Current members of the Executive Committee are Messrs. Kline, Morgan and Womble.
During the past fiscal year, the Acxiom Board of Directors met four times, the
Audit Committee met one time and the Compensation Committee met two times.
Action pursuant to unanimous written consent in lieu of a meeting was taken one
time by the Acxiom Board of Directors, two times by the Compensation Committee
and eleven times by the Executive Committee. All of the incumbent directors
attended at least three-fourths of the aggregate number of meetings of the Board
and of the committees on which they served during the past fiscal year except
for Mr. Gambill.
Walter V. Smiley, who served on the Audit Committee and the Compensation
Committee for the fiscal year ended March 31, 1998, resigned as a director of
Acxiom effective as of June 1, 1998. Mr. Smiley has not yet been replaced.
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<PAGE>
EXECUTIVE COMPENSATION
Cash and Other Compensation. The following table sets forth, for the fiscal
years indicated, the cash and other compensation provided by Acxiom and its
subsidiaries to Acxiom's Company Leader and each of the four most highly
compensated members of Acxiom's leadership team (the "named individuals") in all
capacities in which they served.
SUMMARY COMPENSATION TABLE
<TABLE>
<CAPTION>
LONG TERM
ANNUAL COMPENSATION COMPENSATION AWARDS
-------------------- ---------------------
OTHER ANNUAL ALL OTHER
NAME AND PRINCIPAL SALARY COMPENSATION OPTIONS/ COMPENSATION
POSITION YEAR ($) ($)(1) SARS(#) ($)(2)
------------------ ---- ------- ------------ -------- ------------
<S> <C> <C> <C> <C> <C>
Charles D. Morgan, 1998 375,000 267,857 0 14,813
Chairman of the Board 1997 325,000 63,476 33,545 8,239
and Company Leader 1996 304,167 84,021 101,163 7,327
Rodger S. Kline 1998 250,000 178,571 0 9,869
Operations Leader 1997 213,000 41,601 21,985 2,817
1996 196,833 54,221 66,301 4,801
James T. Womble 1998 202,000 126,250 0 7,829
Division Leader 1997 183,500 35,340 18,900 5,329
1996 172,833 47,808 57,118 4,698
Paul L. Zaffaroni 1998 193,000 120,625 0 7,564
Division Leader 1997 172,300 33,652 17,784 2,563
1996 161,633 36,772 53,632 3,822
C. Alex Dietz 1998 191,000 119,375 0 7,328
Division Leader 1997 168,300 32,871 17,371 4,986
1996 158,467 43,831 52,387 4,562
</TABLE>
- - --------
(1) This amount represents the named individuals' at-risk pay for each fiscal
year. See discussion of At-Risk Base Pay below under "Report of Compensation
Committee."
(2) This amount represents Acxiom's contribution on behalf of each named
executive officer to Acxiom's 401(k) and SERP Plans.
Stock Option Exercises and Holdings. The following table sets forth
information concerning stock options exercised during the last fiscal year and
stock options held as of the end of the last fiscal year by the named
individuals.
65
<PAGE>
AGGREGATED OPTION/SAR EXERCISES IN LAST FISCAL YEAR AND
FY-END OPTION/SAR VALUES
<TABLE>
<CAPTION>
NUMBER OF
SECURITIES VALUE OF
UNDERLYING UNEXERCISED
UNEXERCISED IN-THE-MONEY
SHARES OPTION/SARS OPTIONS/SARSAT
ACQUIRED AT FY-END FY-END
ON VALUE --------------------- ---------------------
EXERCISE REALIZED EXERCIS- UNEXERCIS- EXERCIS- UNEXERCISE-
NAME (#) ($) ABLE (#) ABLE ABLE ($) ABLE
---- -------- ------ --------- ---------- --------- -----------
<S> <C> <C> <C> <C> <C> <C>
Charles D. Morgan. 0 0 297,654 310,929 4,994,892 3,803,473
Rodger S. Kline... 0 0 231,349 205,510 4,137,276 2,528,097
James T. Womble... 0 0 174,215 181,633 2,946,118 2,271,617
Paul L. Zaffaroni. 5,000 76,250 295,597 179,539 5,882,284 2,353,187
C. Alex Dietz..... 0 0 227,643 172,626 4,326,648 2,242,842
</TABLE>
Compensation of Directors. In January 1998, each outside director received
1,000 shares of unregistered Acxiom Common Stock as an annual retainer fee. In
addition, each outside director receives a $1,500 fee for each meeting he or she
attends. Inside directors do not receive any additional compensation for their
service as directors.
Compensation Committee Interlocks and Insider Participation. The members of
the Compensation Committee are William T. Dillard II and Walter V. Smiley. No
compensation committee interlocks exist with respect to the Acxiom Board of
Directors' Compensation Committee, nor do any present or past officers of
Acxiom serve on the Compensation Committee. Walter V. Smiley, who served on
the Compensation Committee for the fiscal year ended March 31, 1998, resigned
as a director of Acxiom effective as of June 1, 1998. Mr. Smiley has not yet
been replaced.
Report of Compensation Committee. Decisions on compensation of Acxiom's
leadership are made by the Compensation Committee of the Acxiom Board of
Directors. The members of the Compensation Committee are non-employee and
outside directors pursuant to Commission rules and applicable Treasury
regulations. Set forth below is a report submitted by William T. Dillard II and
Walter V. Smiley, in their capacity as the Acxiom Board of Directors'
Compensation Committee, addressing the compensation policies for Acxiom's
leadership team, for the individuals named in the tables above, and for Mr.
Morgan.
Compensation Policies. Compensation for Acxiom's leadership is based upon
beliefs and guiding principles designed to align leadership compensation with
business strategy, Acxiom's values and management initiatives. The plan is
designed to:
. Align the leaders' interests with the stockholders' and investors'
interests.
. Motivate the leaders to achieve the highest level of performance.
. Retain key leaders by linking executive compensation to Acxiom's
performance.
. Attract the best candidates through competitive, growth-oriented plans.
The resulting compensation strategy is targeted to provide an overall level of
compensation opportunity that is competitive within the markets in which Acxiom
competes, as well as within a broader group of companies of comparable size and
complexity. Actual compensation levels may eventually be greater than or less
than the average competitive market levels, based upon the achievement of
Acxiom, as well as upon individual performance. The Compensation Committee uses
its discretion to set the parameters of the leadership compensation plan when,
in its judgment, external, internal and/or individual circumstances warrant it.
Increased orientation of leadership compensation policies toward long-term
performance has been accompanied by increased utilization of objective
performance criteria. See "MANAGEMENT--Executive Compensation-- Report of
Compensation Committee--Components of Compensation".
The Compensation Committee also endorses the position that stock ownership by
management and stock-based performance compensation arrangements are beneficial
in aligning management's and Stockholders'
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<PAGE>
interests and the enhancement of shareholder value. Thus, the Committee has also
increasingly utilized these elements in Acxiom's compensation program for its
leadership team.
Components of Compensation. Compensation paid to Acxiom's leaders in fiscal
1998, the separate elements of which are discussed below, consisted of the
following: not-at-risk base pay, at-risk base pay, and long-term incentive
("ALTI") compensation granted under Acxiom's stock option plans. The
Compensation Committee's increasing emphasis on tying pay to long-term
performance criteria is reflected in a recent change to Acxiom's leadership
compensation plan effective for fiscal 1998. The plan contains five possible
compensation levels with overlapping ranges for base salaries, which provides
flexibility in establishing appropriate compensation packages for Acxiom's
leadership. The plan provides for increasingly large percentages of total
compensation being weighted towards at-risk pay and, to an even greater degree,
toward LTI compensation. The higher the compensation level, the greater the
overall percentage of at-risk and LTI. Under the plan, the compensation for
Acxiom's senior leaders, who participate in the top two levels of the plan, is
as follows: not-at-risk base pay (35-40%); at-risk base pay (25%); and LTI
compensation (35-40%). Under the previous plan, the maximum percentage of total
comp assignable to LTI was 35%.
(i) Not-At-Risk Base Pay. Base pay levels are largely determined through
market comparisons. Actual salaries are based on individual performance
contributions within a salary range that has been established through job
evaluation and the use of market surveys for comparable companies and
positions. Base salaries for Acxiom's senior leadership were targeted in
fiscal 1998 to represent 35-40% of total compensation, which includes the
annual at-risk base pay and LTI compensation. For other corporate, group and
business unit level leaders, base salaries were targeted at 40-70% of total
compensation.
(ii) At-Risk Base Pay. The at-risk base pay for all of Acxiom's leaders is
funded after Acxiom achieves its earnings per share target. Attainment of
targeted at-risk base pay is largely determined by using the EVA7 (Economic
Value Added) model. (EVA is a registered trademark of Stern Stewart & Co.) In
fiscal 1998, at-risk base pay was targeted to represent 25% of total
compensation for the senior leadership team and 15-25% for other corporate,
group and business unit leaders. For fiscal 1998, Acxiom's diluted earnings
per share goal was $.59 per share, which was exceeded by $.01.
(iii) Long-Term Incentive Compensation. The Committee's LTI compensation
plan is composed of awards of stock options designed to align long-term
interests between Acxiom's leadership team and its stockholders and to assist
in the retention of key people. During fiscal 1998, the long-term incentives
were targeted to represent 35-40% of total compensation for senior leadership
and 15-35% for other corporate, group and business unit leaders. Previously,
in 1996, senior leadership members were awarded the equivalent of three years'
worth of non-statutory stock options to induce them to adopt the long-term
view of stockholders. One-fourth of the options awarded were priced at the
then current market value, one-fourth were priced at a 50% premium over the
then current market value, and the remaining one-half were priced at a 100%
premium over the then current market value. The full value of the options
cannot be realized until the price of Acxiom Common Stock more than doubles
from the fair market value on the date of grant. Senior leadership members
will not be eligible for new grants of LTI options until 1999. The 1996 stock
options vest incrementally over a nine-year period.
The terms of all non-statutory LTI options granted on or after January 29,
1997 are 15 years (instead of ten, which was the standard term for both
incentive and non-statutory options prior to January 29, 1997), and the
exercise prices for all options granted on or after January 29, 1997 are:
one-half at the fair market value on the date of grant, one-fourth at a 50%
premium over market, and one-fourth at a 100% premium over market. Options
will continue to vest incrementally over nine years from the date of grant.
(iv) Supplemental Executive Retirement Plan. All members of Acxiom's
leadership team are eligible to participate in the Supplemental Executive
Retirement Plan ("SERP"), which was adopted in fiscal 1996, by contributing up
to 15% of their pretax income into the plan. Acxiom matches at a rate of $.50
on the dollar up to the first 6% of the leadership team members' combined
contributions under both the SERP and
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<PAGE>
Acxiom's 401K Retirement Plan. Acxiom's match is paid in Common Stock. On May
20, 1998, the Acxiom Board of Directors approved an amendment to the SERP
which will allow participants to contribute up to 100% of their pretax income
into the plan.
(v) Other Compensation Plans. Acxiom maintains certain broad-based employee
benefit plans in which leadership team members are permitted to participate on
the same terms as non-leadership team associates who meet applicable
eligibility criteria, subject to any legal limitations on the amounts that may
be contributed or the benefits that may be payable under the plans.
Mr. Morgan's Compensation. In fiscal 1998, Acxiom's revenue and earnings
increased 16% and 29% respectively, a record year in both revenue and earnings
for Acxiom. Additionally, the return on stockholders' equity for fiscal 1998 was
20.4%, in line with Acxiom's goal of achieving a 20% return. Acxiom's stock
price increased 78% over the prior year, compared to a 52% increase in the
NASDAQ National Market B U.S. Index and a 75% increase in the NASDAQ Stock
Market B Computer and Data Processing Index over the same period. In the prior
year, Acxiom's revenue and earnings increased 49% and 51% respectively, return
on stockholders' equity increased from 16.5% to 20.3%, and the stock price rose
20%, compared to an 11% increase in the NASDAQ National Market B U.S. Index and
a 10% increase in the NASDAQ National Market B Computer and Data Processing
Index over the same period.
Because of Acxiom's performance and Mr. Morgan's performance in fiscal 1997,
Mr. Morgan's fiscal 1998 base pay was increased by 15% over fiscal 1997. His
base pay for fiscal 1999 was increased 29% over fiscal 1998. This increase was
due in part to the success of Acxiom in fiscal 1998, and in part as the first of
four proposed annual increases designed to make the salaries of Mr. Morgan (and
other Acxiom leaders) competitive with comparable market compensation (i.e.,
within the 75th percentile of competitive companies) by the end of the four-year
adjustment period.
In fiscal 1998, Acxiom's earnings per share results and Acxiom's EVA
attained were the primary criteria for determining the at-risk base pay earned
by Mr. Morgan. All of Mr. Morgan's at-risk payments were made in cash. See
"MANAGEMENT--Executive Compensation--Cash and Other Compensation" for
discussion of Other Annual Compensation for Mr. Morgan.
In 1996, Mr. Morgan received non-statutory stock options under Acxiom's LTI
plan described above which consisted of a three-year grant of non-statutory
stock options, with exercise prices as follows: one-fourth at the then current
market price, one-fourth at a 50% premium over market, and the remaining
one-half at a 100% premium over market. The purpose of the 1996 grant was to
further encourage Mr. Morgan's long-term performance while aligning his
interests with those of Acxiom's other stockholders with regard to the
performance of Acxiom Common Stock. Mr. Morgan will not be eligible for another
LTI grant until 1999.
Omnibus Budget Reconciliation Act of 1993. The Omnibus Budget Reconciliation
Act of 1993 ("OBRA") generally prevents public corporations from deducting as a
business expense that portion of the compensation paid to the named individuals
in the above Summary Compensation Table that exceeds $1,000,000. However, this
deduction limit does not apply to "performance-based compensation" paid pursuant
to plans approved by Stockholders. The Acxiom Board of Directors has modified
its compensation plans so as to comply with OBRA and thereby retain the
deductibility of executive compensation, and it is Acxiom's intention to
continue to monitor its compensation plans to comply with OBRA in the future.
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<PAGE>
ACXIOM'S PERFORMANCE
The graph below compares for each of the last six fiscal years the cumulative
total return on Acxiom's Common Stock, the NASDAQ National Market--U.S. Index,
and the NASDAQ National Market--Computer and Data Processing Index. The
cumulative total return on Acxiom's Common Stock assumes $100 invested on March
31, 1992 in Acxiom Common Stock.
COMPARISON OF SIX YEAR CUMULATIVE TOTAL RETURN*
AMONG ACXIOM CORPORATION, THE NASDAQ STOCK MARKET (U.S.) INDEX
AND THE NASDAQ COMPUTER & DATA PROCESSING INDEX
[LINE GRAPH APPEARS HERE]
* $100 invested on 3/31/92 in stock or index--including reinvestment of
dividends. Fiscal year ending March 31.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires Acxiom's executive officers,
directors, and persons who own more than ten percent (10%) of a registered class
of Acxiom's equity securities to file reports of ownership and changes in
ownership with the Commission and the National Association of Securities
Dealers, Inc. Such persons are required by Commission rules and regulations to
furnish Acxiom with copies of all Section 16(a) forms they file.
Additionally, Commission rules and regulations require that Acxiom identify
any individuals for whom one of the referenced reports was not filed on a timely
basis during the most recent fiscal year or prior fiscal years. To Acxiom's
knowledge, based solely on its review of the copies of such forms received by
it, or written representations from certain reporting persons that no other
forms were required for those persons during and with respect to the fiscal year
ended March 31, 1998, Acxiom believes that during the past fiscal year, all
filing requirements applicable to its officers, directors, and greater than ten
percent (10%) beneficial owners were met.
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CERTAIN TRANSACTIONS
On January 5, 1996, Acxiom leased an aircraft from MorAir, Inc., a corporation
controlled by Charles D. Morgan, Acxiom's Chairman and Company Leader, for
$66,385 per month, plus maintenance and insurance. The term of this aircraft
lease expires January 4, 2001. The terms of the lease have been found by the
Acxiom Board of Directors to be as good or better than those which could have
been obtained from an unrelated third party.
In March 1998, Acxiom began using the temporary staffing services of the
national staffing firm, Norrell Staffing Services, Inc. ("Norrell"), for its
strategic staffing and contingency workforce needs. Susie P. Morgan, wife of
Charles D. Morgan, Chairman of the Board and Company Leader of Acxiom, owns the
Little Rock, Arkansas franchise (the "Franchise") of Norrell. It is anticipated
that the total annual fees to be received by the Franchise from Norrell, based
on payments to be made by Acxiom to Norrell, will be approximately $150,000. The
majority of such fees will be used to offset the expenses of the Franchise.
In accordance with the Data Center Management Agreement dated July 27, 1992
(the "DCM Agreement") between Acxiom and Trans Union, which became effective on
August 31, 1992, Acxiom (through its subsidiary, Acxiom CDC, Inc.) acquired all
of Trans Union's interest in its Chicago data center and agreed to provide Trans
Union with various data center management services. The term of the DCM
Agreement, as amended, expires in 2005.
In connection with the DCM Agreement, on August 31, 1992 Acxiom issued
1,920,000 shares of Acxiom Common Stock to Trans Union (the "Initial Shares of
Acxiom Common Stock"), subject to certain "put" and "call" provisions. Pursuant
to a subsequent amendment, Trans Union relinquished its right to cause Acxiom to
repurchase the Initial Shares of Acxiom Common Stock, and Acxiom relinquished
its right to call the shares of Acxiom Common Stock. On August 31, 1992, Acxiom
also issued a warrant (the "Warrant") to Trans Union to purchase up to 4,000,000
additional shares of Acxiom Common Stock prior to August 31, 2000, at exercise
prices ranging from $2.9125 per share to $3.5625 per share. In addition,
effective October 26, 1994, Acxiom and Trans Union's parent company, Marmon
Industrial Corporation ("MIC"), entered into a stock purchase agreement pursuant
to which Acxiom agreed to sell, and MIC agreed to buy, 2,000,000 shares of
Acxiom Common Stock from Acxiom (the "Additional Shares of Acxiom Common Stock")
for $5.98 per share. The purchase price of the Additional Shares of Acxiom
Common Stock was established on August 31, 1994 pursuant to a letter agreement
between Acxiom and Trans Union. On May 30, 1997, Trans Union transferred the
Initial Shares of Acxiom Common Stock (together with an additional 1,000 shares
of Acxiom Common Stock it had previously acquired from Mr. Gambill) to The
Pritzker Foundation, an Illinois not for profit corporation. Also on that date,
MIC transferred the Additional Shares of Acxiom Common Stock to The Pritzker
Foundation. As a result of such transfers, The Pritzker Foundation owns an
aggregate of 3,921,000 shares of Acxiom Common Stock, or approximately 7.5% of
Acxiom's issued and outstanding shares of Acxiom Common Stock. See "THE
MERGER--Terms of the Merger-- Irrevocable Proxies."
Upon acquisition of the 4,000,000 shares of Acxiom Common Stock which could
currently be purchased under the Warrant, Trans Union would beneficially own
approximately 7.6% of Acxiom's issued and outstanding shares of Acxiom Common
Stock. The amount of stock which may be purchased by Trans Union under the
Warrant is limited so that the total shares of Acxiom Common Stock acquired
under the Warrant and the DCM Agreement may not exceed 10% of Acxiom's then
issued and outstanding Common Stock. Based upon the number of shares of Acxiom
Common Stock currently issued and outstanding, Trans Union would be able to
purchase approximately 3,700,000 shares of Acxiom Common Stock under the
Warrant. Trans Union retains the right, however, to acquire additional shares of
Acxiom Common Stock on the open market, which do not count towards the 10% limit
under the Warrant. In addition, pursuant to the DCM Agreement, Trans Union has
preemptive rights whereby it may, under certain circumstances, purchase shares
of Acxiom Common Stock in the event Acxiom issues additional shares of Acxiom
Common Stock. Such preemptive rights provide Trans Union with the ability to
maintain its percentage ownership of Acxiom Common Stock acquired pursuant to
the DCM Agreement. Trans Union does not have any preemptive rights with respect
to the issuance by Acxiom of shares of Acxiom Common Stock pursuant to the
Merger.
70
<PAGE>
Pursuant to a letter agreement dated July 27, 1992, which was executed in
connection with the DCM Agreement, Acxiom agreed to use its best efforts to
cause one person designated by Trans Union to be elected to the Acxiom Board of
Directors. Trans Union designated its CEO and President, Harry C. Gambill, who
was appointed to fill a vacancy on the Board in November 1992 and was elected at
the 1993 Annual Meeting of the Acxiom Stockholders to serve a three-year term.
He was elected to serve a second three-year term at the 1996 Annual Meeting.
Pursuant to a second letter agreement dated August 31, 1994, which was executed
in connection with an amendment to the DCM Agreement, which continued the term
through 2002, Acxiom agreed to amend the letter agreement dated July 27, 1992
and use its best efforts to cause two persons designated by Trans Union to be
elected to Acxiom Board of Directors. In addition to Mr. Gambill, Trans Union
designated Robert A. Pritzker, an executive officer of MIC, who was appointed to
fill a newly created position on the Acxiom's Board of Directors on October 26,
1994. Mr. Pritzker was elected to serve a three-year term at the 1995 Annual
Meeting of Stockholders and has been nominated for re-election to the Board of
Directors at the Acxiom Meeting. These undertakings by Acxiom are in effect
until the later of the tenth anniversary of August 31, 1992 or the termination
of the DCM Agreement, the term of which has been extended to 2005.
71
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF ACXIOM
The following table sets forth certain information as to the shares of Acxiom
Common Stock beneficially owned as of July 28, 1998, by (a) each person who, as
far as Acxiom has been able to ascertain, beneficially owned more than five
percent of the Acxiom Common Stock, (b) each director, (c) each of the five most
highly compensated executive officers of Acxiom, and (d) all directors and
executive officers of Acxiom as a group.
<TABLE>
<CAPTION>
NUMBER OF SHARES OF PERCENT OF PERCENT OF ACXIOM
ACXIOM COMMON ACXIOM COMMON STOCK
NAME OF BENEFICIAL OWNER STOCK OWNED COMMON STOCK OUTSTANDING AFTER THE
OR IDENTITY OF GROUP BENEFICIALLY OUTSTANDING MERGER(1)
- - ------------------------ ------------------- ------------ -------------------
<S> <C> <C> <C>
William Blair & Company,
L.L.C. ................ 5,310,950(2) 10.1% 8.7%(3)
222 West Adams Street
Chicago, IL 60606
Charles D. Morgan....... 4,121,545(4) 7.8% 5.2%
P.O. Box 2000
Conway, AR 72033-2000
Trans Union Corporation. 4,002,000(5) 7.7% 4.8%
555 West Adams Street
Chicago, IL 60661
The Pritzker Foundation. 3,921,000(6) 7.5% 4.7%
200 W. Madison Street
Suite 3800
Chicago, IL 60606
Brown Capital
Management, Inc. ...... 3,800,000(7) 7.2% 4.6%
809 Cathedral Street
Baltimore, MD 21201
T. Rowe Price
Associates, Inc........ 3,644,220(2) 6.9% 4.4%
P.O. Box 89000
Baltimore, MD 21289
Dr. Ann H. Die.......... 10,655 * *
C. Alex Dietz........... 435,112(8) * *
William T. Dillard II... 19,000 * *
Harry C. Gambill........ 0(9) * *
Rodger S. Kline......... 1,871,694(10) 3.6% 2.4%
Robert A Pritzker....... 3,000(11) * *
James T. Womble......... 1,545,046(12) 2.9% 1.9%
Paul Zaffaroni.......... 308,932(13) * *
All directors, nominees
and executive officers,
as a group (11
persons)............... 8,465,107(14) 15.9% 10.5%
</TABLE>
72
<PAGE>
- - --------
*Denotes less than 1%.
(1) Assumes the conversion of the 5% Convertible Subordinated Notes due 2003 of
May & Speh (the "Notes") into shares of May & Speh Common Stock upon
consummation of the Merger. Includes: (i) 52,521,326 shares of Acxiom Common
Stock outstanding as of the Acxiom Record Date, (ii) 20,858,923 shares of
Acxiom Common Stock to be issued in exchange for the 26,073,654 shares of
May & Speh Common Stock outstanding as of the May & Speh Record Date at the
Exchange Ratio and (iii) 5,782,524 shares of Acxiom Common Stock to be
issued in exchange for the 7,228,155 shares of May & Speh Common Stock
issuable upon conversion of the Notes at the Exchange Ratio.
(2) Based on information contained in a Schedule 13G filed with the Commission
on February 17, 1994.
(3) Includes 1,584,240 shares of Acxiom Common Stock issuable upon consummation
of the Merger in exchange for the 1,980,300 shares of May & Speh Common
Stock held by William Blair & Company, L.L.C. at the Exchange Ratio. See
"Security Ownership of Certain Beneficial Owners and Management of May &
Speh."
(4) Includes 297,654 shares subject to currently exercisable options, of which
270,246 are in the money.
(5) Includes 4,000,000 shares of Acxiom Common Stock subject to warrant (the
"Warrant") held by Trans Union and 2,000 shares of Acxiom Common Stock
transferred to Trans Union by Harry C. Gambill, Chief Executive Officer and
President of Trans Union. Under the terms of the Warrant, Trans Union has
the right to purchase up to 4,000,000 shares of Acxiom Common Stock, at
exercise prices ranging from $2.8125 to $3.5625 per share; however, the
total number of actual shares of Acxiom Common Stock acquired by Trans Union
(excluding the shares of Acxiom Common Stock acquired from Mr. Gambill and
shares of Acxiom Common Stock acquired by Trans Union on the open market)
may not exceed 10% of Acxiom's then issued and outstanding Common Stock.
Including the shares of Acxiom Common Stock which may presently be acquired
by Trans Union under the Warrant, but excluding the shares of Acxiom Common
Stock transferred to Trans Union from Mr. Gambill, Trans Union beneficially
owns approximately 4,000,000 shares of Acxiom Common Stock, which would be
7.6% of Acxiom's then issued and outstanding Common Stock following issuance
of the Warrant shares. See "THE MERGER-- Terms of the Merger--Irrevocable
Proxies" and "CERTAIN TRANSACTIONS."
(6) Includes 1,921,000 shares of Acxiom Common Stock acquired by The Pritzker
Foundation, an Illinois not for profit corporation, from Trans Union, and
2,000,000 shares of Acxiom Common Stock acquired by The Pritzker Foundation
from Marmon Industrial Corporation, the owner of all of Trans Union's common
stock. Each of the acquisitions was made by The Pritzker Foundation on May
30, 1997.
(7) Based on information provided by a representative of Brown Capital
Management, Inc.
(8) Includes 1,990 shares of Acxiom Common Stock held by Mr. Dietz's wife and
257,123 shares of Acxiom Common Stock subject to currently exercisable
options (29,480 of which are held by Mrs. Dietz), of which 241,847 are in
the money.
(9) See footnote (3) above regarding shares of the Acxiom Common Stock
beneficially owned by Trans Union. Mr. Gambill, who is an officer and
director of Trans Union, disclaims beneficial ownership of such shares of
Acxiom Common Stock.
(10) Includes 231,349 shares subject to currently exercisable options, of which
213,386 are in the money.
(11) See footnote (3) above regarding shares of Acxiom's Common Stock
beneficially owned by Trans Union. Mr. Pritzker, who is an officer and
director of Trans Union, disclaims beneficial ownership of such shares of
Acxiom Common Stock. The 3,000 shares of Acxiom Common Stock were issued to
Mr. Pritzker as an annual retainer for serving on Acxiom's Board of
Directors. See "MANAGEMENT--Executive Compensation--Compensation of
Directors." Of these, 1,000 shares of Acxiom Common Stock are owned by Mr.
Pritzker's wife; however, Mr. Pritzker is deemed to beneficially own such
shares of Acxiom Common Stock.
(12) Includes 174,215 shares of Acxiom Common Stock subject to currently
exercisable options, of which 158,740 are in the money.
(13) Includes 295,597 shares of Acxiom Common Stock subject to currently
exercisable options, of which 281,067 are in the money.
(14) Includes 1,397,849 shares of Acxiom Common Stock subject to currently
exercisable options, of which 1,296,235 are in the money.
73
<PAGE>
SECURITY OWNERSHIP OF CERTAIN BENEFICIAL
OWNERS AND MANAGEMENT OF MAY & SPEH
The following table sets forth, (i) as of the May & Speh Record Date, the
number of shares of May & Speh Common Stock beneficially owned by all persons
known by May & Speh to beneficially own more than five percent of the
outstanding May & Speh Common Stock, each director of May & Speh, certain
executive officers and all directors and executive officers as a group and (ii)
upon consummation of the Merger, the number of shares of Acxiom Common Stock
that will be beneficially owned by each of such persons (including shares of
Acxiom Common Stock issuable pursuant to Acxiom Exchange Options which become
exercisable upon consummation of the Merger). Unless otherwise indicated, the
persons named below have sole voting and investment power with respect to all
shares shown as beneficially owned by them.
<TABLE>
<CAPTION>
PERCENT OF
SHARES OF ACXIOM
ACXIOM COMMON COMMON
SHARES OF STOCK STOCK
MAY & SPEH PERCENT OF BENEFICIALLY OUTSTANDING
COMMON STOCK MAY & SPEH OWNED FOLLOWING
BENEFICIALLY COMMON STOCK FOLLOWING THE
BENEFICIAL OWNER OWNED OUTSTANDING THE MERGER MERGER(1)
---------------- ------------ ------------ ----------- -----------
<S> <C> <C> <C> <C>
May & Speh, Inc.
Employee Stock
Ownership Plan......... 6,586,336(2) 25.3% 5,269,068 6.9%
Lawrence J. Speh........ 1,830,373(3) 7.0% 1,752,298 2.2%
William Blair & Company,
L.L.C.................. 1,980,300(4) 7.6% 6,895,190(5) 2.0%
Albert J. Speh.......... 1,074,732(6) 4.1% 859,785 1.1%
Robert C. Early......... 175,615(7) * 412,492 *
Michael J. Loeffler..... 158,122(8) * 360,097 *
Terrance C. Cieslak..... 142,227(9) * 220,021 *
Casey Cowell............ 107,204 * 97,283 *
Peter I. Mason.......... 270,200(10) 1.0% 794,720 *
Jonathan Zakin.......... 68,003(11) * 71,682 *
Deborah A. Bricker...... 14,400(12) * 17,280 *
Paul G. Yovovich........ 12,200(13) * 21,280 *
All directors and
executive officers as a
group (13) persons..... 4,087,901(14) 15.4 5,000,551 8.2%
</TABLE>
- - --------
* Less than one percent
(1) Assumes the conversion of the 5% Convertible Subordinated Notes due 2003 of
May & Speh (the "Notes") into shares of May & Speh Common Stock upon
consummation of the Merger. Includes: (i) 52,521,326 shares of Acxiom Common
Stock outstanding as of the Acxiom Record Date, (ii) 20,858,923 shares of
Acxiom Common Stock to be issued in exchange for the 26,073,654 shares of May
& Speh Common Stock outstanding as of the May & Speh Record Date at the
Exchange Ratio and (iii) 5,782,524 shares of Acxiom Common Stock to be issued
in exchange for the 7,228,155 shares of May & Speh Common Stock issuable upon
conversion of the Notes at the Exchange Ratio.
(2) The address of the May & Speh, Inc. Employee Stock Ownership Plan (the
"ESOP") is c/o Cole Taylor Bank. 850 W. Jackson Blvd., Chicago, Illinois
60607. Includes 5,281,250 shares that have been allocated or are available
for allocation to the accounts of certain employees or former employees of
May & Speh. ESOP participants have shared voting and investment power with
respect to the shares allocated to their individual accounts.
(3) Includes 2,927 shares allocated to Mr. Speh's ESOP account. Excludes 22,490
shares held by Mr. Speh's wife, as to which he disclaims beneficial
ownership. Mr. Speh's address is c/o May & Speh, Inc., 1501 Opus Place,
Downers Grove, Illinois 60515.
(4) Based on a Schedule 13G dated February 14, 1998 filed by William Blair &
Company, L.L.C. ("WBC") in which WBC reported sole voting power with respect
to 821,500 shares and sole dispositive power with respect to 1,980,300
shares. The address of WBC is 222 West Adams Street, Chicago, Illinois 60606.
(5) Includes 5,310,950 shares of Acxiom Common Stock beneficially owned by
WBC prior to the Merger. See "Security Ownership of Certain Beneficial
Owners and Management of Acxiom."
74
<PAGE>
(6) Includes 2,927 shares allocated to Mr. Speh's ESOP account. Mr. Speh's
address is c/o May & Speh, Inc., 1501 Opus Place, Downers Grove, Illinois
60515.
(7) Includes 120,803 shares issuable pursuant to currently exercisable options,
and 33,500 shares allocated to Mr. Early's ESOP account.
(8) Includes 91,100 shares issuable pursuant to options that are currently
exercisable or that will become exercisable within 60 days, and 67,022 shares
allocated to Mr. Loeffler's ESOP account.
(9) Includes 67,800 shares issuable pursuant to options that are currently
exercisable or that will become exercisable within 60 days, and 74,427 shares
allocated to Mr. Cieslak's ESOP account.
(10) Includes 193,400 shares issuable pursuant to options that are currently
exercisable or will become exercisable within 60 days.
(11) Represents shares held by a family foundation with respect to which Mr.
Zakin has shared voting and investment power.
(12) Represents shares issuable pursuant to options that are currently
exercisable or will become exercisable within 60 days.
(13) Includes 7,200 shares issuable pursuant to options that are currently
exercisable or that will become exercisable within 60 days.
(14) Includes 525,903 shares issuable pursuant to options that are currently
exercisable or that will become exercisable within 60 days, and 250,443
shares allocated to the ESOP accounts of the executive officers.
LEGAL MATTERS
The validity of the issuance of the shares of Acxiom Common Stock being
offered hereby will be passed upon for Acxiom by Catherine L. Hughes, Esq.,
General Counsel of Acxiom. Certain United States federal income tax matters with
respect to the Merger will be passed upon for Acxiom by Skadden, Arps, Slate,
Meagher & Flom LLP. Certain United States federal income tax matters with
respect to the Merger will passed upon for May & Speh by Winston & Strawn.
EXPERTS
The consolidated financial statements and related financial statement schedule
of Acxiom as of March 31, 1998 and 1997, and for each of the years in the
three-year period ended March 31, 1998 incorporated by reference in this Proxy
Statement/Prospectus and the Registration Statement, have been incorporated by
reference herein and in the Registration Statement in reliance upon the report
of KPMG Peat Marwick LLP, independent certified public accountants, incorporated
by reference herein, and upon the authority of said firm as experts in
accounting and auditing.
The May & Speh financial statements as of September 30, 1997 and 1996 and for
each of the three fiscal years in the period ended September 30, 1997
incorporated in this Proxy Statement/Prospectus by reference to pages F-1
through F-17 of the prospectus which constitutes a part of the May & Speh
registration statement on Form S-3 (333-46547) have been so incorporated in
reliance on the report of Price Waterhouse LLP, independent accountants, given
on the authority of said firm as experts in auditing and accounting.
RELATIONSHIP WITH INDEPENDENT PUBLIC ACCOUNTANTS
It is expected that representatives of KPMG Peat Marwick LLP, the independent
auditors of Acxiom, will be present at the Acxiom Meeting, where they will have
an opportunity to respond to appropriate questions and to make a statement if
they so desire. It is expected that representatives of PricewaterhouseCoopers
LLP, the independent auditors of May & Speh, will be present at the May & Speh
Meeting, where they will have an opportunity to respond to appropriate questions
and to make a statement if they so desire.
75
<PAGE>
STOCKHOLDER PROPOSALS FOR THE
1999 ANNUAL STOCKHOLDERS' MEETINGS
ACXIOM
Any stockholder proposal to be presented at the 1999 annual meeting of Acxiom
stockholders should be directed to the Secretary of Acxiom, P.O. Box 2000, 301
Industrial Boulevard, Conway, Arkansas 72033-2000, and must be received by
Acxiom on or before March 31, 1999. Any such proposal must comply with the
requirements of Rule 14a-8 under the Exchange Act.
MAY & SPEH
In the event that the Merger is not consummated for any reason, May & Speh
will hold a 1999 annual meeting. If such a meeting is held, any stockholder
proposal to be presented at such 1999 annual meeting of May & Speh stockholders
must be received by the Corporate Secretary of May & Speh, in writing, on or
before October 9, 1998 to be considered for inclusion in the proxy materials
relating to such meeting.
76
<PAGE>
ANNEX A
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
AMENDED AND RESTATED
AGREEMENT AND PLAN OF MERGER
BY AND AMONG
ACXIOM CORPORATION,
ACX ACQUISITION CO., INC.
AND
MAY & SPEH, INC.
DATED AS OF MAY 26, 1998
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
TABLE OF CONTENTS
<TABLE>
<C> <S> <C>
ARTICLE I
THE MERGER................................................................ 2
Section 1.1 The Merger.................................................. 2
Section 1.2 Effective Time of the Merger................................ 2
ARTICLE II
THE SURVIVING CORPORATION................................................. 2
Section 2.1 Certificate of Incorporation................................ 2
Section 2.2 By-Laws..................................................... 2
Section 2.3 Directors and Officers of Surviving Corporation............. 2
ARTICLE III
CONVERSION OF SHARES...................................................... 2
Section 3.1 Exchange Ratio.............................................. 2
Section 3.2 Exchange of Shares.......................................... 3
Section 3.3 Dividends; Transfer Taxes................................... 3
Section 3.4 No Fractional Securities.................................... 3
Section 3.5 Certain Adjustments......................................... 3
Section 3.6 Closing of Company Transfer Books........................... 4
Section 3.7 Closing..................................................... 4
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT.................................. 4
Section 4.1 Organization................................................ 4
Section 4.2 Capitalization.............................................. 4
Section 4.3 Subsidiaries................................................ 4
Section 4.4 Authority Relative to this Agreement........................ 5
Section 4.5 Consents and Approvals; No Violations....................... 5
Section 4.6 Reports and Financial Statements............................ 6
Section 4.7 Absence of Certain Changes or Events........................ 6
Section 4.8 Litigation.................................................. 6
Section 4.9 Patents, Trademarks, Etc.................................... 6
Information in Disclosure Documents and Registration
Section 4.10 Statement................................................... 6
Section 4.11 Absence of Undisclosed Liabilities.......................... 7
Section 4.12 No Default.................................................. 7
Section 4.13 Title to Properties; Encumbrances........................... 7
Section 4.14 Compliance with Applicable Law.............................. 7
Section 4.15 Labor Matters............................................... 7
Section 4.16 Employee Benefit Plans; ERISA............................... 7
Section 4.17 Vote Required............................................... 9
Section 4.18 Opinion of Financial Advisor................................ 9
Section 4.19 Ownership of Company Common Stock........................... 9
Section 4.20 Pooling..................................................... 10
Section 4.21 Taxes....................................................... 10
Section 4.22 Contracts................................................... 11
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY............................. 11
Section 5.1 Organization................................................ 11
</TABLE>
i
<PAGE>
<TABLE>
<C> <S> <C>
Section 5.2 Capitalization.............................................. 11
Section 5.3 Subsidiaries................................................ 12
Section 5.4 Authority Relative to this Agreement........................ 12
Section 5.5 Consents and Approvals; No Violations....................... 12
Section 5.6 Reports and Financial Statements............................ 13
Section 5.7 Absence of Certain Changes or Events........................ 13
Section 5.8 Litigation.................................................. 13
Section 5.9 Patents, Trademarks, Etc.................................... 13
Information in Disclosure Documents and Registration
Section 5.10 Statement................................................... 13
Section 5.11 Absence of Undisclosed Liabilities.......................... 14
Section 5.12 No Default.................................................. 14
Section 5.13 Taxes....................................................... 14
Section 5.14 Title to Properties; Encumbrances........................... 15
Section 5.15 Compliance with Applicable Law.............................. 15
Section 5.16 Labor Matters............................................... 15
Section 5.17 Employee Benefit Plans; ERISA............................... 15
Section 5.18 Contracts................................................... 17
Section 5.19 Vote Required............................................... 17
Section 5.20 Opinion of Financial Advisor................................ 17
Section 5.21 Takeover Statute............................................ 17
Section 5.22 The Company Rights Agreement................................ 17
Section 5.23 Ownership of Parent Common Stock............................ 18
Section 5.24 Pooling..................................................... 18
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER.................................... 18
Section 6.1 Conduct of Business by the Company Pending the Merger....... 18
Section 6.2 Conduct of Business by Parent Pending the Merger............ 19
Section 6.3 Conduct of Business of Sub.................................. 20
ARTICLE VII
ADDITIONAL AGREEMENTS..................................................... 20
Section 7.1 Access and Information...................................... 20
Section 7.2 Acquisition Proposals....................................... 20
Section 7.3 Registration Statement...................................... 21
Section 7.4 Proxy Statements; Stockholder Approvals..................... 21
Section 7.5 Affiliate Agreements........................................ 21
Section 7.6 Antitrust Laws.............................................. 22
Section 7.7 Proxies..................................................... 22
Section 7.8 Employees, Employee Benefits................................ 22
Section 7.9 Stock Options............................................... 23
Section 7.10 Public Announcements........................................ 23
Section 7.11 By-Law Indemnification and Insurance........................ 23
Section 7.12 Expenses.................................................... 23
Section 7.13 Additional Agreements....................................... 24
Section 7.14 Control of the Company's and Parent's Operations............ 24
Section 7.15 Company Rights Plan......................................... 24
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER.................................. 25
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger.. 25
</TABLE>
ii
<PAGE>
<TABLE>
<C> <S> <C>
Conditions to Obligation of the Company to Effect the
Section 8.2 Merger...................................................... 25
Conditions to Obligations of Parent and Sub to Effect the
Section 8.3 Merger...................................................... 25
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER......................................... 26
Section 9.1 Termination................................................. 26
Section 9.2 Effect of Termination....................................... 27
Section 9.3 Amendment................................................... 27
Section 9.4 Waiver...................................................... 27
ARTICLE X
GENERAL PROVISIONS........................................................ 27
Section 10.1 Survival of Representations, Warranties and Agreements...... 27
Section 10.2 Brokers..................................................... 27
Section 10.3 Notices..................................................... 28
Section 10.4 Descriptive Headings........................................ 28
Section 10.5 Entire Agreement; Assignment................................ 28
Section 10.6 Governing Law............................................... 28
Section 10.7 Specific Performance........................................ 28
Section 10.8 Counterparts................................................ 29
Exhibit A-1 Irrevocable Proxy........................................... 30
Exhibit A-2 Irrevocable Proxy........................................... 32
Exhibit A-3 Irrevocable Proxy........................................... 35
Exhibit B Form of Company Rights Plan Amendment....................... 37
Exhibit C Form of Affiliate Letter for Affiliates of the Company...... 40
Exhibit D Form of Affiliate Letter for Affiliates of Parent........... 43
</TABLE>
iii
<PAGE>
AMENDED AND RESTATED AGREEMENT
AND PLAN OF MERGER
AMENDED AND RESTATED AGREEMENT AND PLAN OF MERGER, dated as of May 26, 1998
(the "Agreement"), by and among Acxiom Corporation, a Delaware corporation
("Parent"), ACX Acquisition Co., Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and May & Speh, Inc., a Delaware corporation (the
"Company").
WHEREAS, Parent, Sub and the Company entered into an Agreement and Plan of
Merger dated as of May 26, 1998 (the "Original Agreement"); and
WHEREAS, the Boards of Directors of Parent, Sub and the Company have approved
and authorized this Amended and Restated Merger Agreement providing for certain
clarifications of the Original Agreement and on July 29, 1998, Parent, Sub and
the Company entered into this Amended and Restated Merger Agreement; and
WHEREAS, the Boards of Directors of Parent and Sub and the Company deem it
advisable and in the best interests of their respective stockholders that Parent
combine with the Company, and such Boards of Directors have approved the merger
(the "Merger") of Sub with and into the Company upon the terms and subject to
the conditions set forth herein; and
WHEREAS, concurrently with the execution and delivery of this Agreement, and
as a condition and inducement to the Company's willingness to enter into this
Agreement, a holder of shares of Parent's common stock, par value $.10 per share
(the "Parent Common Stock") is granting the Company an irrevocable proxy in the
form attached hereto as Exhibit A-1 (the "Parent Stock Proxy"), to vote such
shares of Parent Common Stock; and
WHEREAS, concurrently with the execution and delivery of this Agreement and as
a condition and inducement to Parent's and Sub's willingness to enter into this
Agreement, certain holders of shares of the Company's Common Stock, par value
$.01 per share (the "Company Common Stock"), are granting Parent irrevocable
proxies, in the forms attached hereto as Exhibits A-2 and A-3 (the "Company
Stock Proxies" and, together with the Parent Stock Proxy, the "Proxies"), to
vote such shares of Company Common Stock; and
WHEREAS, immediately following the execution and delivery of this Agreement,
the Company and Parent will enter into a stock option agreement (the "Company
Option Agreement"), pursuant to which the Company will grant Parent the option
to purchase shares of Company Common Stock, upon the terms and subject to the
conditions set forth therein; and
WHEREAS, immediately following the execution and delivery of this Agreement,
the Company and Parent will enter into a stock option agreement (the "Parent
Option Agreement"), pursuant to which Parent will grant the Company the option
to purchase shares of Parent Common Stock, upon the terms and subject to the
conditions set forth therein; and
WHEREAS, for U.S. federal income tax purposes, it is intended that the Merger
shall qualify as a reorganization within the meaning of Section 368(a) of the
Internal Revenue Code of 1986, as amended (the "Code") and this Agreement is
hereby adopted as a plan of reorganization for purposes of Section 368 of the
Code; and
WHEREAS, for financial accounting purposes, it is intended that the Merger
shall be accounted for as a pooling of interests under United States generally
accepted accounting principles.
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein and in
the Proxies, the parties hereto agree as follows:
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ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the conditions set forth
herein, at the Effective Time (as defined in Section 1.2 hereof), Sub shall be
merged with and into the Company and the separate existence of Sub shall
thereupon cease, and the name of the Company, as the surviving corporation in
the Merger (the "Surviving Corporation"), shall by virtue of the Merger be "May
& Speh, Inc." The Merger shall have the effects set forth in Section 259 of the
General Corporation Law of the State of Delaware (the "GCL").
Section 1.2 Effective Time of the Merger. The Merger shall become effective
when a properly executed certificate of merger (the "Certificate of Merger") is
duly filed with the Secretary of State of the State of Delaware, which filing
shall be made as soon as practicable after the closing of the transactions
contemplated by this Agreement in accordance with Section 3.6 hereof. When used
in this Agreement, the term "Effective Time" shall mean the date and time at
which the Certificate of Merger is so filed.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The Certificate of Incorporation of
Sub in effect immediately prior to the Effective Time shall be the Certificate
of Incorporation of the Surviving Corporation (except that Article I of the
Certificate of Incorporation shall be amended as of the Effective Time to read
as follows "The name of the Corporation is May & Speh, Inc.").
Section 2.2 By-Laws. Subject to Section 7.11 hereof, the By-Laws of Sub as in
effect immediately prior to the Effective Time shall be the By-Laws of the
Surviving Corporation.
Section 2.3 Directors and Officers of Surviving Corporation. (a) The directors
of Sub immediately prior to the Effective Time shall be the initial directors of
the Surviving Corporation and shall hold office from the Effective Time until
their respective successors are duly elected or appointed and qualify in the
manner provided in the Certificate of Incorporation and ByLaws of the Surviving
Corporation or as otherwise provided by law.
(b) The officers of the Company immediately prior to the Effective Time shall
be the initial officers of the Surviving Corporation and shall hold office from
the Effective Time until their respective successors are duly elected or
appointed and qualify in the manner provided in the Certificate of Incorporation
and By-Laws of the Surviving Corporation, or as otherwise provided by law.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio. At the Effective Time, by virtue of the Merger and
without any action on the part of the holders of any of the capital stock of Sub
or the Company:
(a) Each share of Company Common Stock (the "Shares") issued and outstanding
immediately prior to the Effective Time (other than Shares held by Parent or
any direct or indirect wholly owned subsidiary of Parent or Shares to be
cancelled pursuant to Section 3.1(b)) shall be converted into the right to
receive .80 (the "Exchange Ratio") of a validly issued, fully paid and
non-assessable share of common stock, par value $.10 per share, of Parent
("Parent Shares"), payable upon the surrender of the certificate formerly
representing such Share. Holders of Shares shall also have the right to
receive together with each Parent Share issued in the Merger, one associated
preferred stock purchase right (a "Parent Right") in accordance
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with the Rights Agreement dated as of January 28, 1998 (the "Parent Rights
Agreement"), between Parent and First Chicago Trust Company of New York.
References herein to the Parent Shares issuable in the Merger shall be deemed
to include the associated Parent Rights.
(b) Each Share held in the treasury of the Company and each Share held by
Parent or any direct or indirect wholly owned subsidiary of Parent immediately
prior to the Effective Time shall be cancelled and retired and cease to exist
and no consideration shall be delivered in exchange therewith.
(c) Each share of Common Stock, par value $.01 per share, of Sub issued and
outstanding immediately prior to the Effective Time shall be converted into
and become one validly issued, fully paid and non-assessable share of common
stock, par value $.01 per share, of the Surviving Corporation, and the
Surviving Corporation shall be a wholly owned subsidiary of Parent.
Section 3.2 Exchange of Shares. Parent shall authorize one or more persons
(reasonably satisfactory to the Company) to act as exchange agent hereunder (the
"Exchange Agent"). As soon as practicable after the Effective Time, Parent shall
make available, and each holder of Shares will be entitled to receive, upon
surrender to the Exchange Agent of one or more certificates representing such
Shares for cancellation, certificates representing the number of Parent Shares
into which such Shares are converted in the Merger. The Parent Shares into which
the Shares shall be converted in the Merger shall be deemed to have been issued
at the Effective Time.
Section 3.3 Dividends; Transfer Taxes. No dividends that are declared on
Parent Shares will be paid to persons entitled to receive certificates
representing Parent Shares until such persons surrender their certificates
representing Shares. Upon such surrender, there shall be paid to the person in
whose name the certificates representing such Parent Shares shall be issued, any
dividends which shall have become payable with respect to such Parent Shares
between the Effective Time and the time of such surrender. In no event shall the
person entitled to receive such dividends be entitled to receive interest on
such dividends. If any certificates for any Parent Shares are to be issued in a
name other than that in which the certificate representing Shares surrendered in
exchange therefor is registered it shall be a condition of such exchange that
the person requesting such exchange shall pay to the Exchange Agent any transfer
or other taxes required by reason of the issuance of certificates for such
Parent Shares in a name other than that of the registered holder of the
certificate surrendered or shall establish to the satisfaction of the Exchange
Agent that such tax has been paid or is not applicable. Notwithstanding the
foregoing, neither the Exchange Agent nor any party hereto shall be liable to a
holder of Shares for any Parent Shares or dividends thereon or, in accordance
with Section 3.4 hereof, proceeds of the sale of fractional interests, delivered
to a public official pursuant to applicable escheat laws.
Section 3.4 No Fractional Securities. No certificates or scrip representing
fractional Parent Shares shall be issued upon the surrender for exchange of
certificates representing Shares pursuant to this Article III and no dividend,
stock split-up or other change in the capital structure of Parent shall relate
to any fractional security, and such fractional interests shall not entitle the
owner thereof to vote or to any rights of a security holder. In lieu of any such
fractional securities, each holder of Shares who would otherwise have been
entitled to a fraction of a Parent Share upon surrender of stock certificates
for exchange pursuant to this Article III will be paid cash upon such surrender
in an amount equal to the product of such fraction multiplied by the closing
sale price of Parent Shares on the National Association of Securities Dealers
Automated Quotations National Market System (the "NASDAQ") on the day of the
Effective Time, or, if the Parent Shares are not so traded on such day, the
closing sale price on the next preceding day on which such stock was traded on
the NASDAQ.
Section 3.5 Certain Adjustments. If between the date hereof and the Effective
Time, the outstanding shares of Parent Common Stock or of Company Common Stock
shall be changed into a different number of shares by reason or
reclassification, recapitalization, split-up, combination or exchange of shares,
or any dividend payable in stock or other securities shall be declared thereon
with a record date within such period, the Exchange Ratio shall be adjusted
accordingly to provide the holders of Company Common Stock, the same economic
effect as contemplated by this Agreement prior to such reclassification,
recapitalization, split-up, combination, exchange or dividend.
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Section 3.6 Closing of Company Transfer Books. At the Effective Time, the
stock transfer books of the Company shall be closed and no transfer of Shares
shall thereafter be made. From and after the Effective Time, the holders of the
Shares issued and outstanding immediately prior to the Effective Time shall
cease to have any rights with respect to such Shares, except as otherwise
provided herein. If, after the Effective Time, certificates representing Shares
are presented to the Surviving Corporation, they shall be cancelled and
exchanged for certificates representing Parent Shares and cash in lieu of any
fractional shares in accordance with Section 3.4 hereof.
Section 3.7 Closing. The closing of the transactions contemplated by this
Agreement (the "Closing") shall take place at the offices of Skadden, Arps,
Slate, Meagher & Flom LLP, 919 Third Avenue, New York, New York, at 10:00 a.m.,
local time, on the later of (a) the date of the stockholders' meetings referred
to in Section 7.4 hereof or (b) the day on which all of the conditions set forth
in Article VIII hereof are satisfied or waived, or at such other date, time and
place as Parent and the Company shall agree.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 4.1 Organization. Parent is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to carry on its business as it is now being conducted or
presently proposed to be conducted. Parent is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities make such qualification necessary, except where such failures to be
so qualified would not in the aggregate have a material adverse effect on the
business, assets, liabilities, condition (financial or otherwise) or results of
operations of Parent and its subsidiaries, taken as a whole (a "Parent Material
Adverse Effect"). Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Sub has not engaged in
any business since the date of its incorporation.
Section 4.2 Capitalization. The authorized capital stock of Parent consists of
200,000,000 shares of Common Stock, par value $.10 per share, and 1,000,000
shares of Preferred Stock, par value $.01 per share ("Parent Preferred Stock"),
of which 200,000 shares have been designated as Participating Preferred Stock
(the "Participating Preferred Stock"). As of the date hereof, (i) 52,446,883
Parent Shares were issued and outstanding and (ii) no shares of Parent Preferred
Stock were issued and outstanding. Except as set forth on Schedule 4.2 hereto,
all of the issued and outstanding Parent Shares are validly issued, fully paid
and nonassessable and free of preemptive rights. All of the Parent Shares
issuable in exchange for Shares at the Effective Time in accordance with this
Agreement will be, when so issued, duly authorized, validly issued, fully paid
and nonassessable. The authorized capital stock of Sub consists of 1,000 shares
of Common Stock, par value $.01 per share, 100 shares of which are validly
issued and outstanding, fully paid and nonassessable and are owned by Parent.
Except as set forth in Schedule 4.2 hereto, there are no outstanding options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating Parent to issue, transfer or sell any of
its securities other than: (i) rights to acquire shares of Participating
Preferred Stock pursuant to the Parent Rights Agreement, and (ii) options to
receive or acquire 7,725,516 Parent Shares pursuant to employee incentive or
benefit plans, programs and arrangements ("Parent Employee Stock Options") and
(iii) the Parent Option Agreement.
Section 4.3 Subsidiaries. Schedule 4.3 hereto sets forth each direct or
indirect interest owned by Parent in any other corporation, partnership, joint
venture or other business association or entity, foreign or domestic, of which
Parent or any of its other Parent Subsidiaries owns, directly or indirectly,
greater than fifty percent of the shares of capital stock or other equity
interests (including partnership interests) entitled to cast at least a majority
of the votes that may be cast by all shares or equity interests having ordinary
voting power for the
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election of directors or other governing body of such entity (each such entity
is hereinafter referred to as a "Parent Subsidiary" and are hereinafter
collectively referred to as the "Parent Subsidiaries"). Each Parent Subsidiary
is a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each Parent Subsidiary is duly
qualified as a foreign corporation to do business, and is in good standing, in
each jurisdiction where the character of its properties owned or held under
lease or the nature of its activities makes such qualification necessary except
where the failure to be so qualified will not have a Parent Material Adverse
Effect. Each Parent Subsidiary has the corporate power to carry on its business
as it is now being conducted or presently proposed to be conducted. All of the
outstanding shares of capital stock of the Parent Subsidiaries are validly
issued, fully paid and nonassessable. Except as set forth on Schedule 4.3, all
of the outstanding shares of capital stock of, or other ownership interests in,
each of the Parent Subsidiaries are owned by Parent or by a Parent Subsidiary
free and clear of any liens, claims, charges or encumbrances. There are not now,
and at the Effective Time there will not be, any outstanding options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating Parent or any Parent Subsidiary to issue, transfer or
sell any securities of any Parent Subsidiary. There are not now, and at the
Effective Time there will not be, any voting trusts or other agreements or
understandings to which Parent or any of the Parent Subsidiaries is a party or
is bound with respect to the voting of the capital stock of Parent or any of the
Parent Subsidiaries.
Section 4.4 Authority Relative to this Agreement. Each of Parent and Sub has
the corporate power to enter into this Agreement, the Parent Option Agreement
and the Company Option Agreement, to carry out its obligations hereunder and
thereunder and to consummate the Merger. The execution and delivery of this
Agreement, the Parent Option Agreement and the Company Option Agreement by
Parent and Sub, the consummation by Parent and Sub of the transactions
contemplated hereby and thereby and the consummation of the Merger have been
duly authorized by the Boards of Directors of Parent and Sub, and by the
Disinterested Directors (pursuant to Article Tenth, Section (b) of Parent's
Certificate of Incorporation) and by Parent as the sole stockholder of Sub, and,
except for the approvals of Parent's stockholders to be sought at the
stockholders' meeting contemplated by Section 7.4(b) hereof no other corporate
proceedings on the part of Parent or Sub are necessary to authorize this
Agreement or the transactions contemplated hereby. This Agreement, the Parent
Option Agreement and the Company Option Agreement have been duly and validly
executed and delivered by each of Parent and Sub and, assuming the due
authorization, execution and delivery by the other party hereto and thereto,
this Agreement, the Parent Option Agreement and the Company Option Agreement
constitute valid and binding agreements of each of Parent and Sub, enforceable
against Parent and Sub in accordance with their respective terms, except insofar
as enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors' rights
generally, or principles governing the availability of equitable remedies.
Section 4.5 Consents and Approvals; No Violations. Except for applicable
requirements of the Hart-Scott-Rodino Antitrust Improvements Act of 1976 (the
"HSR Act"), the Securities Act of 1933, as amended (the "Securities Act"), the
Securities Exchange Act of 1934, as amended (the "Exchange Act"), the rules and
regulations of NASDAQ, state securities or blue sky laws, and the filing and
recordation of a Certificate of Merger as required by the GCL, no filing with,
and no permit, authorization, consent or approval of, any public body or
authority is necessary for the consummation by Parent and Sub of the
transactions contemplated by this Agreement, the Parent Option Agreement and the
Company Option Agreement. Except as set forth on Schedule 4.5, neither the
execution and delivery of this Agreement, the Parent Option Agreement or the
Company Option Agreement by Parent or Sub nor the consummation by Parent or Sub
of the transactions contemplated hereby or thereby, nor compliance by Parent or
Sub with any of the provisions hereof or thereof will (a) conflict with or
result in any breach of any provisions of the Certificate of Incorporation or
By-Laws of Parent or of Sub, (b) result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation to which Parent
or any of its subsidiaries is a party or by which any of them or any of their
properties or assets
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may be bound or (c) violate any order, writ, injunction, decree, statute, rule
or regulation applicable to Parent, any of its subsidiaries or any of their
properties or assets, except in the case of clauses (b) and (c) for violations,
breaches or defaults which would not individually or in the aggregate have a
Parent Material Adverse Effect.
Section 4.6 Reports and Financial Statements. Parent has filed all reports
required to be filed with the Securities and Exchange Commission (the "SEC")
pursuant to the Exchange Act since March 31, 1996 (such reports together with
all registration statements, prospectuses and information statements filed by
the Company since March 31, 1996 being hereinafter collectively referred to as
the "Parent SEC Reports"), and has previously furnished the Company with true
and complete copies of all such Parent SEC Reports. None of such Parent SEC
Reports, as of their respective dates, contained any 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, in light of the circumstances under
which they were made, not misleading. As of their respective dates, all such
Parent SEC Reports complied as to form in all material respects with the
applicable requirements of the Securities Act. Each of the balance sheets
(including the related notes) included in the Parent SEC Reports fairly presents
the consolidated financial position of Parent and its subsidiaries as of the
respective dates thereof, and the other related statements (including the
related notes) included therein fairly present the results of operations and the
changes in financial position of Parent and its subsidiaries for the respective
periods or as of the respective dates set forth therein (subject, where
appropriate, to normal year-end adjustments), all in conformity with generally
accepted accounting principles consistently applied during the periods involved
except as otherwise noted therein.
Section 4.7 Absence of Certain Changes or Events. Except as set forth in the
Parent SEC Reports, since December 31, 1997, neither Parent nor any of the
Parent Subsidiaries has: (a) suffered any change which had or would have a
Parent Material Adverse Effect or (b) subsequent to the date hereof, except as
permitted by Section 6.2 hereof, conducted its business and operations other
than in the ordinary course of business and consistent with past practices.
Section 4.8 Litigation. Except for litigation disclosed in the Parent SEC
Reports and except as set forth on Schedule 4.8, there is no suit, action or
proceeding pending or, to the knowledge of Parent, threatened against or
affecting Parent or any of its subsidiaries, the outcome of which, is reasonably
likely to have a Parent Material Adverse Effect; nor is there any judgment,
decree, injunction, rule or order of any court, governmental department,
commission, agency, instrumentality or arbitrator outstanding against Parent or
any of the Parent Subsidiaries having, or which has or would have, a Parent
Material Adverse Effect.
Section 4.9 Patents, Trademarks, Etc. Except as set forth on Schedule 4.9, to
the knowledge of Parent, Parent and the Parent Subsidiaries own or possess
adequate licenses or other valid rights to use all material patents, patent
rights, trademarks, trademark rights, trade names, trade name rights,
copyrights, service marks, licenses, trade secrets, applications for trademarks
and for service marks, computer software, software programs, know-how and other
proprietary rights and information (collectively,"Proprietary Rights") used or
held for use in connection with the business of Parent and the Parent
Subsidiaries as currently conducted or as contemplated to be conducted, free and
clear of any liens, claims or encumbrances. Except as set forth on Schedule 4.9
hereto, to the knowledge of Parent, the conduct of the business of Parent and
the Parent Subsidiaries as currently conducted does not conflict in any way with
any Proprietary Right of any third party. Except as set forth in Schedule 4.9
hereto, to the knowledge of Parent there are no infringements of any of the
Proprietary Rights owned by or licensed to Parent or any of the Parent
Subsidiaries.
Section 4.10 Information in Disclosure Documents and Registration Statement.
None of the information to be supplied by Parent or Sub for inclusion in (a) the
Registration Statement to be filed with the SEC by Parent on Form S-4 under the
Securities Act for the purpose of registering the Parent Shares to be issued in
the Merger (the "Registration Statement") and (b) the joint proxy statement to
be distributed in connection with the Parent's and the Company's meeting of
stockholders to vote upon this Agreement (the "Proxy Statement") will in the
case of the Registration Statement, at the time it becomes effective and at the
Effective Time, or, in the case of the Proxy Statement or any amendments thereof
or supplements thereto, at the time of
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the mailing of the Proxy Statement and any amendments or supplements thereto,
and at the time of the meeting of stockholders to be held in connection with the
Merger, contain any untrue statement of a material fact or omit to state any
material fact required to be stated therein or necessary in order to make the
statements therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply as to form in all material
respects with the provisions of the Securities Act, and the rules and
regulations promulgated thereunder.
Section 4.11 Absence of Undisclosed Liabilities.
Other than obligations incurred in the ordinary course of business, neither
Parent nor any of the Parent Subsidiaries has any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, and there is no
existing condition, situation or set of circumstances which would reasonably be
expected to result in such a liability or obligation which would be required to
be disclosed on a consolidated balance sheet under GAAP, except (a) liabilities
or obligations reflected in the Parent SEC Reports and (b) liabilities or
obligations which would not, individually or in the aggregate, have a Parent
Material Adverse Effect.
Section 4.12 No Default. Neither Parent nor any of the Parent Subsidiaries is
in default or violation (and no event has occurred which with notice or the
lapse of time or both would constitute a default or violation) of any term,
condition or provision of (a) its Certificate of Incorporation or By-Laws, (b)
any note, bond, mortgage, indenture, license, agreement, contract, lease,
commitment or other obligation to which Parent or any of the Parent Subsidiaries
is a party or by which they or any of their properties or assets may be bound,
or (c) any order, writ, injunction, decree, statute, rule or regulation
applicable to Parent or any of the Parent Subsidiaries, except in the case of
clauses (b) and (c) above for defaults or violations which would not have a
Parent Material Adverse Effect.
Section 4.13 Title to Properties; Encumbrances.
Except as described in the following sentence, each of Parent and the Parent
Subsidiaries has good and valid and marketable title to, or a valid leasehold
interest in, all of its properties and assets (real, personal and mixed,
tangible and intangible) material to the operation of Parent's business and
operations, including, without limitation, all such properties and assets
reflected in the consolidated balance sheet of Parent and the Parent
Subsidiaries as of December 31, 1997 included in Parent's Quarterly Report on
Form l0-Q for the period ended on such date (except for properties and assets
disposed of in the ordinary course of business and consistent with past
practices since December 31, 1997). None of such properties or assets are
subject to any liability, obligation, claim, lien, mortgage, pledge, security
interest, conditional sale agreement, charge or encumbrance of any kind (whether
absolute, accrued, contingent or otherwise), except (i) as set forth in the
Parent SEC Reports, and (ii) such encumbrances that do not individually or in
the aggregate have a Parent Material Adverse Effect.
Section 4.14 Compliance with Applicable Law. Each of Parent and the Parent
Subsidiaries is in compliance with all applicable laws (whether statutory or
otherwise), rules, regulations, orders, ordinances, judgments or decrees of all
governmental authorities (federal, state, local, foreign or otherwise)
(collectively "Laws") except where the failure to be in such compliance would
not, individually or in the aggregate, have a Parent Material Adverse Effect.
Section 4.15 Labor Matters. Except as set forth in Schedule 4.15 hereto,
neither Parent nor any of the Parent Subsidiaries is a party to, or bound by,
any collective bargaining agreement, contract or other agreement or
understanding with a labor union or labor organization. There is no unfair labor
practice or labor arbitration proceeding pending or, to the knowledge of Parent,
threatened against Parent or the Parent Subsidiaries relating to their business,
except for any such preceding which would not have a Parent Material Adverse
Effect. To the knowledge of Parent, there are no organizational efforts with
respect to the formation of a collective bargaining unit presently being made or
threatened involving employees of Parent or any of the Parent Subsidiaries.
Section 4.16 Employee Benefit Plans; ERISA. (a) Schedule 4.16 hereto
contains a true and complete list of each bonus, deferred compensation,
incentive compensation, stock purchase, stock option, severance or
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termination pay, hospitalization or other medical, life or other insurance,
supplemental unemployment benefits, profit-sharing, pension, or retirement plan,
program, agreement or arrangement, and each other employee benefit plan,
program, agreement or arrangement (the "Parent Plans"), maintained or
contributed to or required to be contributed to by (i) Parent, (ii) any Parent
Subsidiary or (iii) any trade or business, whether or not incorporated (an
"ERISA Affiliate"), that together with Parent would be deemed a "single
employer" within the meaning of Section 4001 of the Employee Retirement Income
Security Act of 1974, as amended, and the rules and regulations promulgated
thereunder ("ERISA"), for the benefit of any employee or former employee of
Parent, any Parent Subsidiary or any ERISA Affiliate. Schedule 4.16 hereto
identifies each of the Parent Plans that is an "employee benefit plan," as that
term is defined in Section 3(3) of ERISA (such plans being hereinafter referred
to collectively as the "Parent ERISA Plans").
(b) With respect to each of the Parent Plans, Parent has heretofore made
available to the Company true and complete copies of each of the following
documents:
(i) a copy of the Parent Plan (including all amendments thereto);
(ii) a copy of the annual report and actuarial report, if required under
ERISA, with respect to each such Parent Plan for the last two years;
(iii) a copy of the most recent Summary Plan Description, together with each
Summary of Material Modifications, required under ERISA with respect to such
Parent Plan;
(iv) if the Parent Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof; and
(v) the most recent determination letter received from the Internal Revenue
Service with respect to each Parent Plan intended to qualify under Section 401
of the Code.
(c) No liability under Title IV of ERISA has been incurred by Parent, any
Parent Subsidiary or any ERISA Affiliate since the effective date of ERISA that
has not been satisfied in full, and no condition exists that presents a material
risk to Parent, any Parent Subsidiary or any ERISA Affiliate of incurring a
liability under such Title. To the extent this representation applies to
Sections 4064, 4069 or 4204 of Title IV of ERISA, it is made not only with
respect to the ERISA Plans but also with respect to any employee benefit plan,
program, agreement or arrangement subject to Title IV of ERISA to which Parent,
a Parent Subsidiary or an ERISA Affiliate made, or was required to make,
contributions during the five-year period ending on the Effective Time.
(d) With respect to each Parent ERISA Plan which is subject to Title IV of
ERISA, the present value of accrued benefits under such plan, based upon the
actuarial assumptions used for funding purposes in the most recent actuarial
report prepared by such plan's actuary with respect to such plan did not exceed,
as of its latest valuation date, the then current value of the assets of such
plan allocable to such accrued benefits.
(e) No Parent ERISA Plan or any trust established thereunder has incurred any
"accumulated funding deficiency" (as defined in Section 302 of ERISA and Section
412 of the Code), whether or not waived, as of the last day of the most recent
fiscal year of each Parent ERISA Plan ended prior to the Effective Time; and all
contributions required to be made with respect thereto (whether pursuant to the
term of any Parent ERISA Plan or otherwise) on or prior to the Effective Time
have been timely made.
(f) No Parent ERISA Plan is a "multiemployer pension plan," as defined in
Section 3(37) of ERISA, nor is any Parent ERISA Plan a plan described in Section
4063(a) of ERISA.
(g) Each Parent ERISA Plan intended to be "qualified" within the meaning of
Section 401(a) of the Code is so qualified and the trusts maintained thereunder
are exempt from taxation under Section 501(a) of the Code.
(h) Each of the Parent Plans has been operated and administered in all
material respects in accordance with applicable laws, including, but not limited
to, ERISA and the Code.
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(i) No amounts payable under the Parent Plans will fail to be deductible for
federal income tax purposes by virtue of Section 280G of the Code.
(j) No Parent Plan provides benefits, including without limitation death or
medical benefits (whether or not insured), with respect to current or former
employees of Parent, any Parent Subsidiary or any ERISA Affiliate beyond their
retirement or other termination of service, other than (i) coverage mandated by
applicable law, (ii) death benefits or retirement benefits under any "employee
pension plan", as that term is defined in Section 3(2) of ERISA, (iii) deferred
compensation benefits accrued as liabilities on the books of Parent, any Parent
Subsidiary or any ERISA Affiliate or (iv) benefits the full cost of which is
borne by the current or former employee (or his beneficiary).
(k) The consummation of the transactions contemplated by this Agreement will
not:
(i) entitle any current or former employee or officer of Parent, any Parent
Subsidiary or any ERISA Affiliate to severance pay, unemployment compensation
or any other payment, except as expressly provided in this Agreement,
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer, or
(iii) result in any prohibited transaction described in Section 406 of ERISA
or Section 4975 of the Code for which an exemption is not available.
(l) With respect to each Parent Plan that is funded wholly or partially
through an insurance policy, there will be no material liability of Parent, any
Parent Subsidiary or any ERISA Affiliate, as of the Effective Time, under any
such insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing arrangement
or other actual or contingent liability arising wholly or partially out of
events occurring prior to the closing.
(m) There are no pending, threatened or anticipated claims by or on behalf of
any of the Parent Plans, by any employee or beneficiary covered under any such
Parent Plan, or otherwise involving any such Parent Plan (other than routine
claims for benefits).
(n) Neither Parent, any Parent Subsidiary or any ERISA Affiliate, nor any of
the Parent ERISA Plans, nor any trust created thereunder, nor any trustee or
administrator thereof has engaged in a transaction in connection with which
Parent, any Parent Subsidiary or any ERISA Affiliate, any of the Parent ERISA
Plans, any such trust, or any trustee or administrator thereof, or any party
dealing with the Parent ERISA Plans or any such trust could be subject to either
a material civil liability under Section 409 of ERISA or Section 502(i) of
ERISA, or a material tax imposed pursuant to Section 4975 or 4976 of the Code.
Section 4.17 Vote Required. Approval of the Merger by the stockholders of
Parent will require the approval of a majority of the total votes cast in person
or by proxy at the stockholders' meeting referred to in Section 7.4. No other
vote of the stockholders of Parent, or of the holders of any other securities of
Parent (equity or otherwise), is required by law, the Certificate of
Incorporation or By-laws of Parent or otherwise in order for Parent to
consummate the Merger, the Parent Option Agreement and the transactions
contemplated hereby and thereby.
Section 4.18 Opinion of Financial Advisor. The Board of Directors of Parent
(at a meeting duly called and held) has unanimously determined that the
transactions contemplated hereby are fair to and in the best interests of the
holders of the Parent Shares. Parent has received the opinion of Stephens Inc.,
Parent's financial advisor, substantially to the effect that the Exchange Ratio
is fair to Parent from a financial point of view.
Section 4.19 Ownership of Company Common Stock. Except as contemplated by this
Agreement, the Proxies and the Company Option Agreement, as of the date hereof,
neither Parent nor, to its knowledge without independent investigation, any of
its affiliates, (i) beneficially owns (as defined in Rule 13d-3 under the
Exchange Act), directly or indirectly, or (ii) is party to any agreement,
arrangement or understanding for the purpose of acquiring, holding, voting or
disposing of, in each case, shares of capital stock of the Company.
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Section 4.20 Pooling. Neither Parent nor any Parent Subsidiary has knowledge
of any fact or information which causes, or should reasonably cause, Parent or
Subsidiary to believe that the transactions contemplated by this Agreement could
not be accounted for as a pooling of interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations.
Section 4.21 Taxes. (a) All federal, state, local and foreign Tax Returns
required to be filed by or on behalf of Parent, each of the Parent Subsidiaries,
and each affiliated, combined, consolidated or unitary group of which Parent or
any of its Subsidiaries (i) is a member (a "Current Parent Group") or (ii) has
been a member within six years prior to the date hereof but is not currently a
member, but only insofar as any such Tax Return relates to a taxable period
ending on a date within the last six years (a "Past Parent Group," together with
Current Parent Groups, a "Parent Affiliated Group") have been timely filed, and
all such Tax Returns are complete and accurate except to the extent any failure
to file or any inaccuracies in filed returns would not, individually or in the
aggregate, have a Parent Material Adverse Effect (it being understood that the
representations made in this Section, to the extent that they relate to Past
Parent Groups, are made to the knowledge of Parent). All Taxes due and owing by
Parent, any Parent Subsidiary or any Parent Affiliated Group have been timely
paid, or adequately reserved for, except to the extent any failure to pay or
reserve would not, individually or in the aggregate, have a Parent Material
Adverse Effect. There is no audit examination, deficiency, refund litigation,
proposed adjustment or matter in controversy with respect to any Taxes due and
owing by Parent, any Parent Subsidiary or any Affiliated Group which would,
individually or in the aggregate, have a Parent Material Adverse Effect. All
assessments for Taxes due and owing by Parent, any Parent Subsidiary or any
Parent Affiliated Group with respect to completed and settled examinations or
concluded litigation have been paid. Prior to the date of this Agreement, Parent
has provided the Company with written schedules of (i) the taxable years of
Parent for which the statutes of limitations with respect to U.S. federal income
Taxes have not expired, and (ii) with respect to U.S. federal income Taxes, for
all taxable years for which the statute of limitations has not yet expired,
those years for which examinations have been completed, those years for which
examinations are presently being conducted, and those years for which
examinations have not yet been initiated. Parent and each of the Parent
Subsidiaries have complied in all material respects with all rules and
regulations relating to the payment and withholding of Taxes, except to the
extent any such failure to comply would not, individually or in the aggregate,
have a Parent Material Adverse Effect.
(b) Neither Parent nor any of the Parent Subsidiaries is a party to, bound by,
or has any obligation under any Tax sharing, allocation, indemnity, or similar
contract or arrangement.
(c) Neither Parent nor any of the Parent Subsidiaries knows of any fact or has
taken any action that could reasonably be expected to prevent the Merger from
qualifying as a reorganization with the meaning of Section 368(a) of the Code.
(d) Schedule 4.21 sets forth (i) the taxable years of Parent for which the
statute of limitations with respect to Material State income Taxes have not
expired, and (ii) with respect to Material State income Taxes, for all taxable
years for which the statute of limitations has not expired, those years for
which examinations have been completed, those years for which examinations are
presently being conducted, and those years for which examinations have not yet
been initiated.
(e) For purposes of this Agreement: (i) "Taxes" means any and all federal,
state, local, foreign, provincial, territorial or other taxes, imposts, rates,
levies, assessments and other charges of any kind whatsoever whether imposed
directly or through withholding (together with any and all interest, penalties,
additions to tax and additional amounts applicable with respect thereto),
including, without limitation, income, franchise, windfall or other profits,
gross receipts, property, sales, use, capital stock, payroll, employment, social
security, workers' compensation, unemployment compensation, net worth, excise,
withholding, ad valorem and value added taxes, and (ii) "Tax Return" means any
declaration, return, report, schedule, certificate, statement or other similar
document (including relating or supporting information) required to be filed or,
where none is required to be filed with a taxing authority, the statement or
other document issued by a taxing authority in connection with
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any Tax, including, without limitation, any information return, claim for
refund, amended return or declaration of estimated Tax. For purposes of this
Section 4.21 "Material State" means any state for which the average allocation
percentage of Parent and the Parent Subsidiaries for the past three years
exceeds ten percent (10%).
Section 4.22 Contracts. Except as set forth on Schedule 4.22 hereto, neither
Parent nor any of the Parent Subsidiaries is party to any agreement (whether
written or oral) that (a) involves performance of services or delivery of goods
or materials of an amount or value in excess of $3 million per year; or (b) is a
software licensing agreement involving an amount or value in excess of
$2,000,000 (the "Parent Contracts"). Each Parent Contract is valid and binding
on Parent and is in full force and effect, and Parent and each of the Parent
Subsidiaries have in all material respects performed all obligations required to
be performed by them to date under each Parent Contract, except where such
noncompliance, individually or in the aggregate, would not have a Parent
Material Adverse Effect. Neither Parent nor any of the Parent Subsidiaries knows
of, or has received notice of, any violation or default under any Parent
Contract except for such violations or defaults as would not in the aggregate
have a Parent Material Adverse Effect.
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 5.1 Organization. The Company is a corporation duly organized, validly
existing and in good standing under the laws of the State of Delaware and has
the corporate power to carry on its business as it is now being conducted or
presently proposed to be conducted. The Company is duly qualified as a foreign
corporation to do business, and is in good standing, in each jurisdiction where
the character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary, except such failures to be so
qualified which would not in the aggregate have a material adverse effect on the
business, assets, liabilities, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries taken as a whole (a "Company
Material Adverse Effect").
Section 5.2 Capitalization. The authorized capital stock of the Company
consists of 50,000,000 shares of Common Stock, par value $.01 per share and
2,000,000 shares of Preferred Stock, no par value ("Company Preferred Stock"),
of which 300,000 shares have been designated as Series A Participating Preferred
Stock. As of the date hereof, 26,073,654 shares of Company Common Stock were
issued and outstanding and no shares of Company Preferred Stock were issued and
outstanding. All of the issued and outstanding Shares are validly issued, fully
paid and nonassessable and free of preemptive rights. Except for (i) the
7,228,153 shares of Company Common Stock issuable upon the conversion of the 5
1/4% Convertible Subordinated Notes due 2003, (ii) options to receive or acquire
4,643,503 shares of Company Common Stock granted (or to be granted pursuant to
Section 6.1(c)) pursuant to employee incentive or benefit plans, programs and
arrangements of the Company ("Employee Stock Options"), which options are listed
by optionee, price per share, date of grant and number of shares covered thereby
on Schedule 5.2 hereto, (iii) warrants to purchase 180,000 shares of Company
Common Stock and (iv) the rights (the "Company Rights") to acquire shares of
Series A Participating Preferred Stock pursuant to the Rights Agreement between
the Company and Harris Trust and Savings Bank dated March 1, 1996 (the "Company
Rights Agreement"), and as otherwise provided for in this Agreement and the
Company Option Agreement, there are not now, and at the Effective Time there
will not be, any shares of capital stock of the Company issued or outstanding or
any options, warrants, subscriptions, calls, rights, convertible securities or
other agreements or commitments obligating the Company to issue, transfer or
sell any shares of its capital stock. Except as provided in this Agreement or in
the Schedules hereto, after the Effective Time, the Company will have no
obligation to issue, transfer or sell any shares of its capital stock pursuant
to any employee benefit plan or otherwise.
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Section 5.3 Subsidiaries. Schedule 5.3 hereto sets forth each direct or
indirect interest owned by the Company in any other corporation, partnership,
joint venture or other business association or entity, foreign or domestic, of
which the Company or any of its other Subsidiaries owns, directly or indirectly,
greater than fifty percent of the shares of capital stock or other equity
interests (including partnership interests) entitled to cast at least a majority
of the votes that may be cast by all shares or equity interests having ordinary
voting power for the election of directors or other governing body of such
entity (each such entity is hereinafter referred to as a Subsidiary and are
hereinafter collectively referred to as the "Subsidiaries".) Each Subsidiary is
a corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each Subsidiary is duly qualified as
a foreign corporation to do business, and is in good standing, in each
jurisdiction where the character of its properties owned or held under lease or
the nature of its activities makes such qualification necessary except where the
failure to be so qualified will not have a Company Material Adverse Effect. Each
Subsidiary has the corporate power to carry on its business as it is now being
conducted or presently proposed to be conducted. All of the outstanding shares
of capital stock of the Subsidiaries are validly issued, fully paid and
nonassessable and are owned by the Company or by a Subsidiary free and clear of
any liens, claims, charges or encumbrances. There are not now, and at the
Effective Time there will not be, any outstanding options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating the Company or any Subsidiary to issue, transfer or sell
any securities of any Subsidiary. There are not now, and at the Effective Time
there will not be, any voting trusts or other agreements or understandings to
which the Company or any of the Subsidiaries is a party or is bound with respect
to the voting of the capital stock of the Company or any of the Subsidiaries.
Section 5.4 Authority Relative to this Agreement. The Company has the
corporate power to enter into this Agreement, the Parent Option Agreement and
the Company Option Agreement, to carry out its obligations hereunder and
thereunder and to consummate the Merger. The execution and delivery of this
Agreement, the Parent Option Agreement and the Company Option Agreement by the
Company, the consummation by the Company of the transactions contemplated hereby
and thereby and the consummation of the Merger have been duly authorized by the
Company's Board of Directors and, except for the approval of its stockholders to
be sought at the stockholders meeting contemplated by Section 7.4 hereof and the
filing of the Certificate of Merger as required by the GCL, no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement, the Parent Option Agreement and the Company Option Agreement, the
transactions contemplated hereby and thereby or the consummation of the Merger.
This Agreement, the Parent Option Agreement and the Company Option Agreement
have been duly and validly executed and delivered by the Company and, assuming
due authorization, execution and delivery by the other parties hereto, this
Agreement, the Parent Option Agreement and the Company Option Agreement
constitute valid and binding agreements of the Company, enforceable against the
Company in accordance with their terms, except insofar as enforceability may be
limited by applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or principles governing the
availability of equitable remedies.
Section 5.5 Consents and Approvals; No Violations. Except for applicable
requirements of the HSR Act, the Securities Act, the Exchange Act, state
securities or blue sky laws, the rules and regulations of NASDAQ and the filing
and recordation of a Certificate of Merger as required by the GCL, no filing
with, and no permit, authorization, consent or approval of, any public body or
authority is necessary for the consummation by the Company of the transactions
contemplated by this Agreement, the Parent Option Agreement and the Company
Option Agreement. Neither the execution and delivery of this Agreement, the
Parent Option Agreement or the Company Option Agreement by the Company, nor the
consummation by the Company of the transactions contemplated hereby or thereby,
nor compliance by the Company with any of the provisions hereof or thereof, will
(a) conflict with or result in any breach of any provisions of the Certificate
of Incorporation or By-Laws of the Company or any of the Subsidiaries, (b)
except as set forth on Schedule 5.5(b), result in a violation or breach of, or
constitute (with or without due notice or lapse of time or both) a default (or
give rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage, indenture,
license, contract, agreement or other instrument or obligation to which the
Company or any of the Subsidiaries is a party or by which any of them or any of
their properties or assets may
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be bound or (c) violate any order, writ, injunction, decree, statute, rule or
regulation applicable to the Company, any of the Subsidiaries or any of their
properties or assets, except in the case of clauses (b) and (c) for violations,
breaches or defaults which would not individually or in the aggregate have a
Company Material Adverse Effect.
Section 5.6 Reports and Financial Statements. The Company has filed all
reports required to be filed with the SEC pursuant to the Exchange Act since
March 26, 1996 (such reports, together with all registration statements,
prospectuses and information statements filed by the Company since March 26,
1996, being hereinafter collectively referred to as the "Company SEC Reports"),
and has previously furnished Parent with true and complete copies of all such
Company SEC Reports. None of such Company SEC Reports, as of their respective
dates, contained any 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, in light of the circumstances under which they were made, not
misleading. As of their respective dates, all such Company SEC Reports complied
as to form in all material respects with the applicable requirements of the
Securities Act. Each of the balance sheets (including the related notes)
included in the Company SEC Reports fairly presents the consolidated financial
position of the Company and the Subsidiaries as of the respective dates thereof,
and the other related statements (including the related notes) included therein
fairly present the results of operations and the changes in financial position
of the Company and the Subsidiaries for the respective periods or as of the
respective dates set forth therein (subject, where appropriate, to normal
year-end adjustments), all in conformity with generally accepted accounting
principles consistently applied during the periods involved, except as otherwise
noted therein.
Section 5.7 Absence of Certain Changes or Events. Except as set forth in
Schedule 5.7 hereto or in the Company SEC Reports, since September 30, 1997,
neither the Company nor any of the Subsidiaries has: (a) suffered any change
which had or would have a Company Material Adverse Effect or (b) subsequent to
the date hereof, except as permitted by Section 6.1 hereof, conducted its
business and operations other than in the ordinary course of business and
consistent with past practices.
Section 5.8 Litigation. Except for litigation disclosed in the Company SEC
Reports there is no suit, action or proceeding pending or, to the knowledge of
the Company, threatened against or affecting the Company or any of its
Subsidiaries the outcome of which is reasonably likely to have a Company
Material Adverse Effect; nor is there any judgment, decree, injunction, rule or
order of any court, governmental department, commission, agency, instrumentality
or arbitrator outstanding against the Company or any of its Subsidiaries, which
has or would have a Company Material Adverse Effect.
Section 5.9 Patents, Trademarks, Etc. Except as set forth in Schedule 5.9, to
the knowledge of the Company, the Company and its Subsidiaries own or possess
adequate licenses or other valid rights to use all Proprietary Rights used or
held for use in connection with the business of the Company and its Subsidiaries
as currently conducted or as contemplated to be conducted, free and clear of any
liens, claims or encumbrances. Except as set forth in Schedule 5.9, to the
knowledge of the Company, the conduct of the business of the Company and its
Subsidiaries as currently conducted does not conflict in any way with any
Proprietary Right of any third party. To the knowledge of the Company there are
no infringements of any of the Proprietary Rights owned by or licensed to the
Company or any of its Subsidiaries.
Section 5.10 Information in Disclosure Documents and Registration Statement.
None of the information to be supplied by the Company for inclusion in the Proxy
Statement or the Registration Statement, other than the information to be
supplied by Parent or Sub, will, in the case of the Registration Statement, at
the time it becomes effective and at the Effective Time, or, in the case of the
Proxy Statement or any amendments thereof or supplements thereto, at the time of
the mailing of the Proxy Statement and any amendments or supplements thereto,
and at the time of the meeting of stockholders of the Company to be held in
connection with the Merger, contain any untrue statement of a material fact or
omit to state any material fact required to be stated therein or necessary in
order to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as to form in all
material respects with the provisions of the Exchange Act, and the rules and
regulations promulgated thereunder.
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Section 5.11 Absence of Undisclosed Liabilities. Other than obligations
incurred in the ordinary course of business, neither the Company nor any of its
Subsidiaries has any liabilities or obligations of any nature, whether or not
accrued, contingent or otherwise, and there is no existing condition, situation
or set of circumstances which would reasonably be expected to result in such a
liability or obligation which would be required to be disclosed on a
consolidated balance sheet under GAAP, except (a) liabilities or obligations
reflected in the Company SEC Reports and (b) liabilities or obligations which
would not, individually or in the aggregate, have a Company Material Adverse
Effect.
Section 5.12 No Default. Neither the Company nor any of the Subsidiaries is in
default or violation (and no event has occurred which with notice or the lapse
of time or both would constitute a default or violation) of any term, condition
or provision of (a) its Certificate of Incorporation or By-Laws, (b) any note,
bond, mortgage, indenture, license, agreement, contract, lease, commitment or
other obligation to which the Company or any of the Subsidiaries is a party or
by which they or any of their properties or assets may be bound, or (c) any
order, writ, injunction, decree, statute, rule or regulation applicable to the
Company or any of the Subsidiaries, except in the case of clauses (b) and (c)
above for defaults or violations which would not individually or in the
aggregate have a Company Material Adverse Effect.
Section 5.13 Taxes. (a) All federal, state, local and foreign Tax Returns
required to be filed by or on behalf of the Company, each of its Subsidiaries,
and each affiliated, combined, consolidated or unitary group of which the
Company or any of its Subsidiaries (i) is a member (a "Current Company Group")
or (ii) has been a member within six years prior to the date hereof but is not
currently a member, but only insofar as any such Tax Return relates to a taxable
period ending on a date within the last six years (a "Past Company Group,"
together with Current Company Groups, a "Company Affiliated Group") have been
timely filed, and all such Tax Returns are complete and accurate except to the
extent any failure to file or any inaccuracies in filed returns would not,
individually or in the aggregate, have a Company Material Adverse Effect (it
being understood that the representations made in this Section, to the extent
that they relate to Past Company Groups, are made to the knowledge of the
Company). All Taxes due and owing by the Company, any Subsidiary of the Company
or any Company Affiliated Group have been timely paid, or adequately reserved
for, except to the extent any failure to pay or reserve would not, individually
or in the aggregate, have a Company Material Adverse Effect. There is no audit
examination, deficiency, refund litigation, proposed adjustment or matter in
controversy with respect to any Taxes due and owing by the Company, any
Subsidiary or any Affiliated Group which would, individually or in the
aggregate, have a Company Material Adverse Effect. All assessments for Taxes due
and owing by the Company, any Subsidiary or any Company Affiliated Group with
respect to completed and settled examinations or concluded litigation have been
paid. Schedule 5.13 sets forth (i) the taxable years of the Company for which
the statutes of limitations with respect to U.S. federal income Taxes have not
expired, and (ii) with respect to U.S. federal income Taxes, for all taxable
years for which the statute of limitations has not yet expired, those years for
which examinations have been completed, those years for which examinations are
presently being conducted, and those years for which examinations have not yet
been initiated. The Company and each of its Subsidiaries have complied in all
material respects with all rules and regulations relating to the payment and
withholding of Taxes, except to the extent any such failure to comply would not,
individually or in the aggregate, have a Company Material Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries is a party to, bound by,
or has any obligation under any Tax sharing, allocation, indemnity, or similar
contract or arrangement.
(c) Neither the Company nor any of its Subsidiaries knows of any fact or has
taken any action that could reasonably be expected to prevent the Merger from
qualifying as a reorganization within the meaning of Section 368(a) of the Code.
(d) Schedule 5.13 sets forth (i) the taxable years of the Company for which
the statute of limitations with respect to Material State income Taxes have not
expired, and (ii) with respect to Material State income Taxes, for all taxable
years for which the statute of limitations has not expired, those years for
which examinations have been completed, those years for which examinations are
presently being conducted, and those years for which examinations have not yet
been initiated.
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(e) For purposes of this Section 5.13: "Material State" means any state for
which the average allocation percentage of the Company and its Subsidiaries for
the past three years exceeds ten percent (10%).
Section 5.14 Title to Properties; Encumbrances. Except as described in the
following sentence, each of the Company and the Subsidiaries has good and
marketable title to, or a valid leasehold interest in, all of its properties and
assets (real, personal and mixed, tangible and intangible material to the
operations and business of the Company), including, without limitation, all such
properties and assets reflected in the consolidated balance sheet of the Company
and the Subsidiaries as of March 31, 1998 included in the Company's Quarterly
Report on Form 10-Q for the period ended on such date (except for properties and
assets disposed of in the ordinary course of business and consistent with past
practices since March 31, 1998). None of such properties or assets are subject
to any liability, obligation, claim, lien, mortgage, pledge, security interest,
conditional sale agreement, charge or encumbrance of any kind (whether absolute,
accrued, contingent or otherwise), except (i) as set forth in the Company SEC
Reports or in Schedule 5.14 hereto, and (ii) such encumbrances that do not
individually or in the aggregate have a Company Material Adverse Effect.
Section 5.15 Compliance with Applicable Law. Each of the Company and the
Subsidiaries is in compliance with all applicable Laws (whether statutory or
otherwise), except where the failure to be in such compliance would not,
individually or in the aggregate, have a Company Material Adverse Effect.
Section 5.16 Labor Matters. Except as set forth on Schedule 5.16, neither the
Company nor any of the Subsidiaries is a party to, or bound by, any collective
bargaining agreement, contract or other agreement or understanding with a labor
union or labor organization. There is no unfair labor practice or labor
arbitration proceeding pending or, to the knowledge of the Company, threatened
against the Company or the Subsidiaries relating to their business, except for
any such preceding which would not have a Company Material Adverse Effect. To
the knowledge of the Company, there are no organizational efforts with respect
to the formation of a collective bargaining unit presently being made or
threatened involving employees of the Company or any of the Subsidiaries.
Section 5.17 Employee Benefit Plans; ERISA. (a) Schedule 5.17 hereto contains
a true and complete list of each bonus, deferred compensation, incentive
compensation, stock purchase, stock option, severance or termination pay,
hospitalization or other medical, life or other insurance, supplemental
unemployment benefits, profit-sharing, pension, or retirement plan, program,
agreement or arrangement, and each other employee benefit plan, program,
agreement or arrangement (the "Plans"), maintained or contributed to or required
to be contributed to by (i) the Company, (ii) any Subsidiary or (iii) any ERISA
Affiliate, that together with the Company would be deemed a "single employer"
within the meaning of Section 4001 of ERISA, for the benefit of any employee or
former employee of the Company, any Subsidiary or any ERISA Affiliate. Schedule
5.17(a) hereto identifies each of the Plans that is an "employee benefit plan,"
as that term is defined in Section 3(3) of ERISA (such plans being hereinafter
referred to collectively as the "ERISA Plans").
(b) With respect to each of the Plans, the Company has heretofore delivered or
will deliver to Parent true and complete copies of each of the following
documents:
(i) a copy of the Plan (including all amendments thereto);
(ii) a copy of the annual report and actuarial report, if required under
ERISA, with respect to each such Plan for the last two years;
(iii) a copy of the most recent Summary Plan Description, together with each
Summary of Material Modifications, required under ERISA with respect to such
Plan;
(iv) if the Plan is funded through a trust or any third party funding
vehicle, a copy of the trust or other funding agreement (including all
amendments thereto) and the latest financial statements thereof; and
(v) the most recent determination letter received from the Internal Revenue
Service with respect to each Plan intended to qualify under Section 401 of the
Code.
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(c) No liability under Title IV of ERISA has been incurred by the Company, any
Subsidiary or any ERISA Affiliate since the effective date of ERISA that has not
been satisfied in full, and no condition exists that presents a material risk to
the Company, any Subsidiary or any ERISA Affiliate of incurring a liability
under such Title. To the extent this representation applies to Sections 4064,
4069 or 4204 of Title IV of ERISA, it is made not only with respect to the ERISA
Plans but also with respect to any employee benefit plan, program, agreement or
arrangement subject to Title IV of ERISA to which the Company, a Subsidiary or
an ERISA Affiliate made, or was required to make, contributions during the
five-year period ending on the Effective Time.
(d) Except as disclosed in Schedule 5.17, with respect to each ERISA Plan
which is subject to Title IV of ERISA, the present value of accrued benefits
under such plan, based upon the actuarial assumptions used for funding purposes
in the most recent actuarial report prepared by such plan's actuary with respect
to such plan did not exceed, as of its latest valuation date, the then current
value of the assets of such plan allocable to such accrued benefits.
(e) Except as disclosed in Schedule 5.17, no ERISA Plan or any trust
established thereunder has incurred any "accumulated funding deficiency" (as
defined in Section 302 of ERISA and Section 412 of the Code), whether or not
waived, as of the last day of the most recent fiscal year of each ERISA Plan
ended prior to the Effective Time; and all contributions required to be made
with respect thereto (whether pursuant to the term of any ERISA Plan or
otherwise) on or prior to the Effective Time have been timely made.
(f) No ERISA Plan is a "multiemployer pension plan," as defined in Section
3(37) of ERISA, nor is any ERISA Plan a plan described in Section 4063(a) of
ERISA.
(g) Each ERISA Plan intended to be "qualified" within the meaning of Section
401(a) of the Code is so qualified and the trusts maintained thereunder are
exempt from taxation under Section 501(a) of the Code.
(h) Each of the Plans has been operated and administered in all material
respects in accordance with applicable laws, including, but not limited to,
ERISA and the Code.
(i) Except as disclosed in Schedule 5.17, no amounts payable under the Plans
will fail to be deductible for federal income tax purposes by virtue of Section
280G of the Code. Schedule 5.17 sets forth the aggregate amount of entitlements
and other amounts that could be (i) received (whether in cash or property or the
vesting of property) under any of the Plans as a result of any of the
transactions contemplated by this Agreement by any person which is a
"disqualified individual" (as such term is defined in Section 280G(c) of the
Code) and (ii) characterized as an "excess parachute payment" (as such term is
defined in Section 280G(b)(1) of the Code), plus the amount of any excise taxes
that may be imposed with respect thereto and any additional amounts or gross-ups
that may be paid with respect to such amounts.
(j) Except as disclosed in Schedule 5.17, no Plan provides benefits, including
without limitation death or medical benefits (whether or not insured), with
respect to current or former employees of the Company, any Subsidiary or any
ERISA Affiliate beyond their retirement or other termination of service, other
than (i) coverage mandated by applicable law, (ii) death benefits or retirement
benefits under any "employee pension plan", as that term is defined in Section
3(2) of ERISA, (iii) deferred compensation benefits accrued as liabilities on
the books of the Company, any Subsidiary or any ERISA Affiliate or (iv) benefits
the full cost of which is borne by the current or former employee (or his
beneficiary).
(k) Except as disclosed on Schedule 5.17, the consummation of the transactions
contemplated by this Agreement will not
(i) entitle any current or former employee or officer of the Company, any
Subsidiary or any ERISA Affiliate to severance pay, unemployment compensation
or any other payment, except as expressly provided in this Agreement,
(ii) accelerate the time of payment or vesting, or increase the amount of
compensation due any such employee or officer, or
(iii) result in any prohibited transaction described in Section 406 of ERISA
or Section 4975 of the Code for which an exemption is not available.
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(l) With respect to each Plan that is funded wholly or partially through an
insurance policy, there will be no liability of the Company, any Subsidiary or
any ERISA Affiliate, as of the Effective Time, under any such insurance policy
or ancillary agreement with respect to such insurance policy in the nature of a
retroactive rate adjustment, loss sharing arrangement or other actual or
contingent liability arising wholly or partially out of events occurring prior
to the closing.
(m) There are no pending, threatened or anticipated claims by or on behalf of
any of the Plans, by any employee or beneficiary covered under any such Plan, or
otherwise involving any such Plan (other than routine claims for benefits).
(n) Neither the Company, any Subsidiary or any ERISA Affiliate, nor any of the
ERISA Plans, nor any trust created thereunder, nor any trustee or administrator
thereof has engaged in a transaction in connection with which the Company, any
Subsidiary or any ERISA Affiliate, any of the ERISA Plans, any such trust, or
any trustee or administrator thereof, or any party dealing with the ERISA Plans
or any such trust could be subject to either a material civil liability under
Section 409 of ERISA or Section 502(i) of ERISA, or a material tax imposed
pursuant to Section 4975 or 4976 of the Code.
Section 5.18 Contracts. Except as set forth on Schedule 5.18 hereto, neither
the Company nor any of its Subsidiaries is party to any agreement (whether
written or oral) that (a) involves performance of services or delivery of goods
or materials of an amount or value in excess of $1 million per year; or (b) is a
software licensing agreement involving an amount or value in excess of $500,000
(the "Company Contracts"). Each Company Contract is valid and binding on the
Company and is in full force and effect, and the Company and each of its
Subsidiaries have in all material respects performed all obligations required to
be performed by them to date under each Company Contract, except where such
noncompliance, individually or in the aggregate, would not have a Company
Material Adverse Effect. Neither the Company nor any of its Subsidiaries knows
of, or has received notice of, any violation or default under any Company
Contract except for such violations or defaults as would not in the aggregate
have a Company Material Adverse Effect.
Section 5.19 Vote Required. Approval of the Merger by the stockholders of the
Company will require the affirmative vote of the holders of a majority of the
outstanding Shares. No other vote of the stockholders of the Company, or of the
holders of any other securities of the Company (equity or otherwise), is
required by law, the certificate of incorporation or by-laws of the Company or
otherwise in order for the Company to consummate the Merger and the transactions
contemplated hereby and by the Company Option Agreement.
Section 5.20 Opinion of Financial Advisor. The Board of Directors of the
Company (at meetings duly called and held) has unanimously determined that the
transactions contemplated hereby are fair to and in the best interests of the
Company's stockholders. The Company has received the opinion of Donaldson,
Lufkin & Jenrette Securities Corporation, the Company's financial advisor,
substantially to the effect that the Exchange Ratio is fair to the holders of
the Company Common Stock from a financial point of view.
Section 5.21 Takeover Statute. The Board of Directors of the Company has
approved this Agreement, the Parent Option Agreement and the Company Option
Agreement and the transactions contemplated hereby and thereby and, assuming the
accuracy of Parent's and Sub's representation and warranty contained in Section
4.19, such approval constitutes approval of the Merger and the other
transactions contemplated hereby by such Board of Directors under the provisions
of Section 203 of the GCL such that Section 203 of the GCL does not apply to
this Agreement and the transactions contemplated hereby.
Section 5.22 The Company Rights Agreement. The Board of Directors of the
Company has approved the amendment of the Company Rights Plan in the form
attached hereto as Exhibit B and as a result thereof, none of the execution or
delivery of this Agreement, the Proxies or the Company Option Agreement or the
consummation of the transactions contemplated hereby or thereby will (a) cause
the Company Rights to become exercisable or to separate from the stock
certificates to which they are attached, (b) cause Parent to become an
"Acquiring Person" (as such term is defined in the Company Rights Agreement), or
(c) trigger any other provisions of the Company Rights Agreement.
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Section 5.23 Ownership of Parent Common Stock. Except as contemplated by this
Agreement, the Parent Option Agreement and the Parent Stock Proxy, as of the
date hereof, neither the Company nor, to its knowledge without independent
investigation, any of its affiliates, (i) beneficially owns (as defined in Rule
13d-3 under the Exchange Act, directly or indirectly, or (ii) is party to any
agreement, arrangement or understanding for the purpose of acquiring, holding,
voting or disposing of, in each case, shares of capital stock of Parent.
Section 5.24 Pooling. Neither the Company nor any Subsidiary has knowledge of
any fact or information which causes, or should reasonably cause, the Company or
any Subsidiary to believe that the transactions contemplated by this Agreement
could not be accounted for as a pooling of interests under Opinion 16 of the
Accounting Principles Board and applicable SEC rules and regulations.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the Merger. Prior to
the Effective Time, unless Parent shall otherwise agree in writing, or as set
forth in Schedule 6.1 or may be expressly permitted pursuant to this Agreement:
(a) the respective businesses of the Company and the Subsidiaries shall be
conducted only in the ordinary and usual course of business and consistent
with past practices, and there shall be no material changes in the conduct of
the Company's operations;
(b) the Company shall not (i) sell or pledge or agree to sell or pledge any
stock owned by it in any of the Subsidiaries; (ii) amend its Certificate of
Incorporation or By-Laws; or (iii) split, combine or reclassify any shares of
its outstanding capital stock or declare, set aside or pay any dividend or
other distribution payable in cash, stock or property, or redeem or otherwise
acquire any shares of its capital stock or shares of the capital stock of any
of the Subsidiaries;
(c) neither the Company nor any of the Subsidiaries shall (i) authorize for
issuance, issue or sell or agree to issue or sell any additional shares of, or
rights of any kind to acquire any shares of, its capital stock of any class
(whether through the issuance or granting of options, warrants, commitments,
subscriptions, rights to purchase or otherwise), except for the 4,593,503
unissued Shares reserved for issuance upon the exercise of currently
outstanding employee stock options and except for employee options to purchase
not more than 50,000 shares, the 7,228,153 Shares reserved for issuance upon
conversion of the Company's 5 1/4% Convertible Subordinated Notes due 2003, or
the 180,000 Shares reserved for issuance upon exercise of warrants; (ii)
acquire, dispose of, transfer, lease, license, mortgage, pledge or encumber
any fixed or other assets other than in the ordinary course of business and
consistent with past practices; (iii) except for certain indebtedness not in
excess of $15,000,000, incur, assume or prepay any indebtedness or any other
material liabilities other than in the ordinary course of business and
consistent with past practices; (iv) assume, guarantee, endorse or otherwise
become liable or responsible (whether directly, contingently or otherwise) for
the obligations of any other person other than a Subsidiary in the ordinary
course of business and consistent with past practices; (v) make any loans,
advances or capital contributions to, or investments in, any other person,
other than to Subsidiaries; (vi) authorize capital expenditures not in the
ordinary course of business in excess of $1,000,000; (vii) make any Tax
election or settle or compromise any Tax liability; (viii) change its fiscal
year; (ix) except as disclosed in the Company SEC Reports filed prior to the
date of this Agreement, or as required by a governmental body or authority,
change its methods of accounting (including, without limitation, make any
material write-off or reduction in the carrying value of any assets) in effect
at September 30, 1997, except as required by changes in GAAP as concurred in
by the Company's independent auditors; or (x) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing;
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(d) the Company shall use its reasonable best efforts to preserve intact the
business organization of the Company and the Subsidiaries, to keep available
the services of its and their present officers and key employees, and to
preserve the goodwill of those having business relationships with it and the
Subsidiaries;
(e) neither the Company nor any of the Subsidiaries will enter into any
employment agreements with any officers or employees or grant any increases in
the compensation of their respective officers and employees other than
increases in the ordinary course of business and consistent with past
practice, or enter into, adopt or amend any Plan (as that term is defined in
Schedule 5.17 hereto); and
(f) neither the Company nor any of the Subsidiaries shall (i) take or allow
to be taken any action which would jeopardize the treatment of Parent's
acquisition of the Company as a pooling of interests for accounting purposes;
or (ii) take any action which would jeopardize qualification of the Merger as
a reorganization within the meaning of Section 368(a) of the Code.
Section 6.2 Conduct of Business by Parent Pending the Merger. Prior to the
Effective Time, unless the Company shall otherwise agree in writing, or as
otherwise expressly permitted by this Agreement:
(a) the respective businesses of Parent and the Parent Subsidiaries shall be
conducted only in the ordinary and usual course of business and consistent
with past practices, and there shall be no material changes in the conduct of
Parent's operations;
(b) Parent shall not (i) sell or pledge or agree to sell or pledge any stock
owned by it in any of the Parent Subsidiaries; (ii) amend its Certificate of
Incorporation or By-Laws; (iii) split, combine or reclassify any shares of its
outstanding capital stock or declare, set aside or pay any dividend or other
distribution payable in cash, stock or property, or redeem or otherwise
acquire any shares of its capital stock or shares of the capital stock of any
of the Parent Subsidiaries or (iv) consolidate with or merge with or into
another company unless at least 50% of the members of the Board of Directors
of the surviving entity are members of the Board of Directors of Parent
immediately prior to such merger or consolidation or are otherwise designated
by Parent.
(c) neither Parent nor any of the Parent Subsidiaries shall (i) authorize
for issuance, issue or sell or agree to issue or sell any additional shares
of, or rights of any kind to acquire any shares of, its capital stock of any
class (whether through the issuance or granting of options, warrants,
commitments, subscriptions, rights to purchase or otherwise), except for (a)
unissued shares of Parent Common Stock reserved for issuance upon the exercise
of Parent Employee Stock Options, (b) the shares of Parent Common Stock to be
granted pursuant to Parent's Employee Stock Benefit and Recognition Program,
and (c) the shares of Parent Common Stock reserved for issuance upon the
exercise of certain rights by Trans Union Corporation ("Trans Union") pursuant
to the Data Center Management Agreement between Trans Union and Parent, or
(ii) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(d) Parent shall use its reasonable best efforts to preserve intact the
business organization of Parent and the Parent Subsidiaries, to keep available
the services of its and their present officers and key employees, and to
preserve the goodwill of those having business relationships with it and the
Parent Subsidiaries;
(e) neither Parent nor any of the Parent Subsidiaries shall (i) take or
allow to be taken any action which would jeopardize the treatment of the
transaction as a pooling of interests for accounting purposes or (ii) take any
action which would jeopardize qualification of the Merger as a reorganization
within the meaning of Section 368(a) of the Code.
(f) Nothing set forth in Section 6.2(a), (b), (c) or (d) above shall limit
Parent's ability to authorize or propose, enter into, or consummate agreements
relating to acquisitions, mergers or other business combinations, including
any such transaction pursuant to which Parent issues shares of its capital
stock; provided that in connection with any such transaction Parent will not
consolidate or merge with or into another company unless at least 50% of the
members of the Board of Directors of the surviving entity are members of the
Board of Directors of Parent immediately prior to such merger or consolidation
or otherwise designated by Parent.
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Section 6.3 Conduct of Business of Sub. During the period from the date of
this Agreement to the Effective Time, Sub shall not engage in any activities of
any nature except as provided in or contemplated by this Agreement.
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. The Company and Parent shall each afford
to the other and to the other's financial advisors, legal counsel, accountants
consultants and other representatives full access upon reasonable notice and
during normal business hours throughout the period prior to the Effective Time
to all of its books, records, properties, plants and personnel and, during such
period, each shall furnish promptly to the other (a) a copy of each report,
schedule and other document filed or received by it pursuant to the requirements
of federal or state securities laws, and (b) all other information as such other
party may reasonably request, provided that no investigation pursuant to this
Section 7.1 shall affect any representations or warranties made herein or the
conditions to the obligations of the respective parties to consummate the
Merger. Each party shall hold in confidence all nonpublic information until such
time as such information is otherwise publicly available and, if this Agreement
is terminated, each party will deliver to the other all documents, work papers
and other material (including copies) obtained by such party or on its behalf
from the other party as a result of this Agreement or in connection herewith,
whether so obtained before or after the execution hereof.
Section 7.2 Acquisition Proposals. From and after the date hereof, the Company
will not and the Company and the Subsidiaries will use their best efforts to
cause their respective directors, officers, employees, financial advisors, legal
counsel, accountants and other agents and representatives not to initiate or
solicit, directly or indirectly, any inquiries or the making of any proposal or
offer with respect to, engage in negotiations concerning, provide any
information or data to, any person relating to any acquisition, business
combination or purchase (including by way of a tender or exchange offer) of (i)
all or any significant portion of the assets of the Company and the
Subsidiaries, (ii) 15% or more of the outstanding shares of Company Common Stock
or (iii) 15% or more of the outstanding shares of capital stock of any
Subsidiary of the Company (a "Takeover Proposal"), other than the Merger;
provided, however, that nothing contained in this Section 7.2 shall prohibit the
Board of Directors of the Company from (i) furnishing information to (but only
pursuant to a confidentiality agreement in customary form) or entering into
discussions or negotiations with any person or group that makes a Superior
Proposal that was not solicited by the Company or which did not otherwise result
from a breach of this Section 7.2, if, and only to the extent that, (A) the
Board of Directors of the Company, based upon the advice of outside legal
counsel, determines in good faith that such action is reasonably necessary for
the Board of Directors to comply with its fiduciary duties to stockholders
imposed by law, (B) concurrently with furnishing such information to, or
entering into discussions or negotiations with, such person or group making this
Superior Proposal, the Company provides written notice to Parent to the effect
that it is furnishing information to, or entering into discussions or
negotiations with, such person or group, and (C) the Company keeps Parent
informed of the status and all material information including the identity of
such person or group with respect to any such discussions or negotiations to the
extent such disclosure would not constitute a violation of any applicable law.
For purposes of this Agreement "Superior Proposal" means any Takeover Proposal
which the Board of Directors of the Company concludes in its good faith judgment
(based on the advice of outside legal counsel and a financial advisor of a
nationally recognized reputation) to be more favorable to the Company's
stockholders than the Merger and for which financing, to the extent required, is
fully committed, subject to customary conditions; provided, however, that the
reference to "15%" in clauses (ii) and (iii) of the definition of Takeover
Proposal shall be deemed to be references to "51%". The Company will immediately
cease and cause to be terminated any existing activities, discussions or
negotiations with any person conducted heretofore with respect to any of the
foregoing and will notify Parent immediately in writing if any such inquiries or
proposals (including the material terms and conditions thereof) are received by,
any such information is requested from, or any such negotiations or discussions
are sought to be initiated or continued with, the Company. Nothing contained in
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this Section 7.2 shall prohibit the Company from taking and disclosing to its
stockholders a position contemplated by Rule 14e-2(a) promulgated under the
Exchange Act or from making any disclosure to its stockholders if, in the good
faith judgment of the Board of Directors of the Company, after consultation with
outside legal counsel, failure so to disclose may be inconsistent with its
obligations under applicable law.
Section 7.3 Registration Statement. As promptly as practicable, Parent and the
Company shall prepare and file with the SEC the Proxy Statement and Parent shall
prepare and file with the SEC the Registration Statement. Each of Parent and the
Company shall use its best efforts to have the Registration Statement declared
effective. Parent shall also use its best efforts to take any action required to
be taken under state securities or blue sky laws in connection with the issuance
of the Parent Shares pursuant hereto. Parent and the Company shall furnish each
other with all information concerning Parent and the Company, as the case may
be, and the holders of their capital stock and shall take such other action as
each party may reasonably request in connection with the preparation of the
Proxy Statement and the Registration Statement and issuance of Parent Shares.
Each such party agrees promptly to advise the other if at any time prior to the
Effective Time any information provided by any party hereto in the Proxy
Statement becomes incorrect or incomplete in any material respect, and to
provide the information needed to correct such inaccuracy or omission. To the
extent the issuance of Parent Shares pursuant to the Merger to Lawrence J. Speh
or Albert J. Speh, Jr., (or to any other stockholder of the Company granting
proxies pursuant to Section 7.7) are not permitted by the rules and regulations
of the SEC to be registered on the Registration Statement, Parent will use its
best efforts to register such issuance of Parent Shares to such stockholders of
the Company on a Form S-3 or other appropriate form.
Section 7.4 Proxy Statements; Stockholder Approvals. (a) The Company, acting
through its Board of Directors, shall, in accordance with applicable law and
its Certificate of Incorporation and By-Laws:
(i) promptly and duly call, give notice of, convene and hold as soon as
practicable following the date upon which the Registration Statement becomes
effective a meeting of its stockholders for the purpose of voting to approve
and adopt this Agreement and shall use its reasonable best efforts to obtain
such stockholder approval; and
(ii) recommend approval and adoption of this Agreement by the stockholders
of the Company and include in the Proxy Statement such recommendation, and
take all lawful action to solicit such approval.
(b) Parent, acting through its Board of Directors, shall, in accordance with
applicable law and its Certificate of Incorporation and By-Laws:
(i) promptly and duly call, give notice of, convene and hold as soon as
practicable following the date upon which the Registration Statement becomes
effective a meeting of its stockholders for the purpose of voting to approve
the issuance of the Parent Shares pursuant to the Merger and shall use its
reasonable best efforts to obtain such stockholder approval; and
(ii) recommend approval and adoption of the issuance of the Parent Shares
pursuant to the Merger by the stockholders of Parent and include in the Proxy
Statement such recommendation, and take all lawful action to solicit such
approval.
(c) Parent and the Company shall cause the definitive Proxy Statement to be
mailed to their stockholders as promptly as practicable after the Registration
Statement is declared effective under the Securities Act. At the stockholders'
meetings, each of Parent and the Company shall vote or cause to be voted in
favor of approval and adoption of this Agreement all Shares as to which it holds
proxies at such time.
Section 7.5 Affiliate Agreements. (a) Prior to the mailing of the Proxy
Statement to the stockholders of the Company the Company shall cause to be
delivered to Parent a list in form and substance reasonably satisfactory to
Parent identifying all persons who are at the time of the Company stockholders'
meeting convened in accordance with Section 7.4 hereof, "affiliates" of the
Company as that term is used in Rule 145 under the Securities Act or under
applicable SEC accounting releases with respect to pooling of interests
accounting treatment. The Company shall use its reasonable best efforts to cause
each person who is identified as a possible "affiliate" in the list furnished
pursuant to this Section 7.5 to deliver to Parent at or prior to the mailing of
the Proxy Statement a written agreement, in substantially the form attached
hereto as Exhibit C.
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(b) Prior to the mailing of the Proxy Statement to the stockholders of Parent,
Parent shall deliver to the Company a list, in form and substance reasonably
satisfactory to the Company, identifying all persons who are, at the time of the
Parent stockholders' meeting convened in accordance with Section 7.4 hereof,
"affiliates" of Parent under applicable SEC accounting releases with respect to
pooling of interests accounting treatment. Parent shall use its reasonable best
efforts to cause each person who is identified as a possible "affiliate" in the
list furnished pursuant to this Section 7.5 to deliver to Parent at or prior to
the mailing of the Proxy Statement, a written agreement substantially in the
form of Exhibit D hereto.
Section 7.6 Antitrust Laws. As promptly as practicable, the Company, Parent
and Sub shall make all filings and submissions under the HSR Act as may be
reasonably required to be made in connection with this Agreement and the
transactions contemplated hereby. Subject to Section 7.1 hereof, the Company
will furnish to Parent and Sub, and Parent and Sub will furnish to the Company,
such information and assistance as the other may reasonably request in
connection with the preparation of any such filings or submissions. Subject to
Section 7.1 hereof, the Company will provide Parent and Sub, and Parent and Sub
will provide the Company, with copies of all correspondence, filings or
communications (or memoranda setting forth the substance thereof) between such
party or any of its representatives, on the one hand, and any governmental
agency or authority or members of their respective staffs, on the other hand,
with respect to this Agreement and the transactions contemplated hereby.
Section 7.7 Proxies. Concurrently herewith, the Parent is entering into the
Company Stock Proxies with each of Lawrence J. Speh and Albert J. Speh, Jr. in
the form attached hereto as Exhibits A-2 and A-3, respectively. Concurrently
herewith, the Company is entering into the Parent Stock Proxy with Charles D.
Morgan in the form attached hereto as Exhibit A-1. Parent will use its
reasonable best efforts to obtain proxies within ten business days following the
date hereof from the stockholders listed on Schedule 7.7(a) hereto, such proxies
to be substantially in the form of Exhibit A-1. The Company will use its
reasonable best efforts to obtain proxies within ten business days following the
date hereof from the record holders of all shares of Company Common Stock
reflected as being beneficially owned by each of Lawrence J. Speh and Albert J.
Speh, Jr., as set forth on Schedule 7.7(b), such proxies to be substantially in
the form of Exhibits A-2 and A-3.
Section 7.8 Employees, Employee Benefits. (a) Parent agrees that individuals
who are employed by the Company as of the Effective Time shall become employees
of the Surviving Corporation following the Effective Time (each such employee,
an "Affected Employee"); provided, however, that nothing contained in this
Section 7.8 shall require the Surviving Corporation to continue the employment
of any Affected Employee for any period of time following the Effective Time.
(b) Parent shall, or shall cause the Surviving Corporation to, give Affected
Employees full credit for purposes of eligibility, vesting and determination of
the level of benefits (but not for the purpose of benefit accrual under any
defined benefit plan) under any employee benefit plans or arrangements
maintained by the Parent, the Surviving Corporation or any Subsidiary of the
Parent for such Affected Employees' service with the Company or any Subsidiary
of the Company to the same extent recognized by the Company immediately prior to
the Effective Time.
(c) Parent shall, or shall cause the Surviving Corporation to, (i) waive all
limitations as to preexisting conditions exclusions and waiting periods with
respect to participation and coverage requirements applicable to the Affected
Employees under any welfare benefit plans that such Affected Employees may be
eligible to participate in after the Effective Time, other than limitations or
waiting periods that are already in effect with respect to such Affected
Employees and that have not been satisfied as of the Effective Time under any
welfare plan maintained for the Affected Employees immediately prior to the
Effective Time, and (ii) provide each Affected Employee with credit for any
co-payments and deductibles paid prior to the Effective Time in satisfying any
applicable deductible or out-of-pocket requirements under any welfare plans that
such Affected Employees are eligible to participate in after the Effective Time.
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Section 7.9 Stock Options. (a) As of the Effective Time, (i) each outstanding
Employee Stock Option shall be converted into an option (an "Adjusted Option")
to purchase the number of Parent Shares equal to the number of Shares subject to
such Employee Stock Option immediately prior to the Effective Time multiplied by
the Exchange Ratio (rounded to the nearest whole number of Parent Shares), at an
exercise price per share equal to the exercise price for each such Share subject
to such option divided by the Exchange Ratio (rounded down to the nearest whole
cent), and all references in each such Employee Stock Option to the Company
shall be deemed to refer to Parent, where appropriate; provided, however, that
the adjustments provided in this clause (i) with respect to any Employee Stock
Options which are "incentive stock options" (as defined in Section 422 of the
Code) or which are described in Section 423 of the Code, shall be affected in a
manner consistent with the requirements of Section 424(a) of the Code, and (ii)
Parent shall assume the obligations of the Company under the Company's stock
option plans pursuant to which such Employee Stock Options were issued. The
other terms of each Adjusted Option, and the plans or agreements under which
they were issued, shall continue to apply in accordance with their terms. The
date of grant of each Adjusted Option shall be the date on which the
corresponding Employee Stock Option was granted.
(b) Parent shall (i) reserve for issuance the number of Parent Shares that
will become subject to the benefit plans, programs and arrangements referred to
in this Section 7.9 and (ii) issue or cause to be issued the appropriate number
of Parent Shares pursuant to applicable plans, programs and arrangements, upon
the exercise or maturation of rights existing thereunder on the Effective Time
or thereafter granted or awarded. No later than the Effective Time, Parent shall
prepare and file with the SEC a registration statement on Form S-8 (or other
appropriate form) registering a number of Parent Shares necessary to fulfill
Parent's obligations under this Section 7.9. Such registration statement shall
be kept effective (and the current status of the prospectus required thereby
shall be maintained) for at least as long as Adjusted Options remain
outstanding.
(c) As soon as practicable after the Effective Time, Parent shall deliver to
the holders of Employee Stock Options appropriate notices setting forth such
holders' rights pursuant to the respective Company stock option plans and the
agreements evidencing the grants of such Employee Stock Options and that such
Employee Stock Options and the related agreements shall be assumed by Parent and
shall continue in effect on the same terms and conditions (subject to the
adjustments required by this Section 7.9 after giving effect to the Merger).
Section 7.10 Public Announcements. Parent and Sub, on the one hand, and the
Company, on the other hand, agree that they will not issue any press release or
otherwise make any public statement or respond to any press inquiry with respect
to this Agreement or the transactions contemplated hereby without the prior
approval of the other party, except as may be required by Law.
Section 7.11 By-Law Indemnification and Insurance. Parent shall cause the
Surviving Corporation to keep in effect in its By-Laws a provision for a period
of not less than six years from the Effective Time (or, in the case of matters
occurring prior to the Effective Time which have not been resolved prior to the
sixth anniversary of the Effective Time, until such matters are finally
resolved) which provides for indemnification of the past and present officers
and directors (the "Indemnified Parties") of the Company to the fullest extent
permitted by the GCL. For six years from the Effective Time, Parent shall
indemnify the Indemnified Parties to the same extent as such Indemnified Parties
are entitled to indemnification pursuant to the preceding sentence. For a period
of six years from the Effective Time, Parent shall either cause to be maintained
in effect the current policies of directors' and officers' liability insurance
maintained by the Company or provide substitute policies of at least the same
coverage and amounts containing terms and conditions which are, in the
aggregate, no less advantageous to the insured with respect to claims arising
from facts or events that occurred on or before the Effective Time, except that
in no event shall Parent be required to pay with respect to such insurance
policies in any one year more than $200,000.
Section 7.12 Expenses. (a) Except as set forth in this Section 7.12, whether
or not the Merger is consummated all costs and expenses incurred in connection
with this Agreement and the transactions contemplated hereby and thereby shall
be paid by the party incurring such expenses; provided that those expenses
incurred in connection with printing the Registration Statement and the related
Proxy Statement, as well as the filing fee relating to the Registration
Statement will be shared equally by Parent and the Company.
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(b) As a condition and inducement to Parent's and Sub's willingness to enter
this Agreement, (i) if this Agreement is terminated by Parent and Sub pursuant
to Section 9.1(e) or 9.1(g), (ii) if this Agreement is terminated by Parent and
Sub or by the Company pursuant to 9.1(h) or (iii)(x) prior to the termination of
this Agreement, a bona fide Takeover Proposal is commenced, publicly proposed or
publicly disclosed and not withdrawn, (y) this Agreement is terminated by the
Parent and Sub or the Company pursuant to Section 9.1(f) (but only due to the
failure of the Company stockholders to approve the Merger) and (z) concurrently
with or within twelve months after such termination a Takeover Proposal shall
have been consummated, then, in each case, the Company shall (i) pay to Parent a
fee (the "Company Termination Fee") of $20,000,000 in immediately available
funds and (ii) reimburse Parent and Sub for all out-of-pocket expenses and fees
(including, without limitation, the fees and expenses of their counsel and
investment banking firms) incurred by them or on their behalf in connection with
the Merger, this Agreement or the transactions contemplated hereby; provided,
however, that such fees and expenses shall not exceed $2,500,000. The Company
will pay the Company Termination Fee promptly, but in no event later than (a)
the second business day following termination by Parent and Sub pursuant to
clause (i) or (ii) above, or (b) in the case of termination by Parent and Sub
pursuant to clause (iii) above upon the consummation of the Takeover Proposal
referred to in clause (iii)(z) above. The Company will reimburse Parent and Sub
for the foregoing fees and expenses promptly, but in no event later than the
second business day following submission of statements therefor.
(c) As a condition and inducement to the Company's willingness to enter this
Agreement, if (i) this Agreement is terminated by the Company pursuant to
Section 9.1(i) or (ii) (x) prior to the termination of this Agreement, a bona
fide proposal or offer with respect to any acquisition, business combination or
purchase (including by way of a tender or exchange offer) of all or any
significant portion of the assets of, or 15% or more of the outstanding shares
of capital stock of Parent (a "Parent Takeover Proposal") is commenced, publicly
proposed or publicly disclosed and not withdrawn, (y) this Agreement is
terminated by the Company pursuant to Section 9.1(f) (but only due to the
failure of the Parent stockholders to approve the issuance of Parent Shares
pursuant to the Merger) and (z) concurrently with or within twelve months after
such termination a Parent Takeover Proposal shall have been consummated, then
Parent shall (i) pay to the Company a fee (the "Parent Termination Fee") of
$20,000,000 in immediately available funds, and (ii) reimburse the Company for
all out-of-pocket expenses and fees (including, without limitation, the fees and
expenses of its counsel and investment banking firms) incurred by it or on its
behalf in connection with the Merger, this Agreement or the transactions
contemplated hereby; provided, however, that such fees and expenses shall not
exceed $2,500,000. Parent will pay the Parent Termination Fee promptly, but in
no event later than (a) the second business day following termination by the
Company pursuant to clause (i) above, or (b) in the case of termination by the
Company pursuant to clause (ii) above, upon the consummation of the Takeover
Proposal referred to in clause (ii)(z) above. Parent will reimburse the Company
for the foregoing fees and expenses promptly, but in no event later than the
second business day following submission of statements therefor.
Section 7.13 Additional Agreements. Subject to the terms and conditions herein
provided, each of the parties hereto agrees to use all reasonable efforts to
take, or cause to be taken, all action and to do, or cause to be done, all
things necessary, proper or advisable under applicable laws and regulations to
consummate and make effective the transactions contemplated by this Agreement,
including using all reasonable efforts to obtain all necessary waivers, consents
and approvals and to effect all necessary registrations and filings. In case at
any time after the Effective Time any further action is necessary or desirable
to carry out the purposes of this Agreement, the proper officers and/or
directors of Parent, Sub and the Company shall take all such necessary action.
Section 7.14 Control of the Company's and Parent's Operations. Nothing
contained in this Agreement shall give Parent or the Company, directly or
indirectly, rights to control or direct the operations of the other prior to the
Effective Time. Prior to the Effective Time, each of Parent and the Company
shall exercise, consistent with the terms and conditions of this Agreement,
complete control and supervision of its operations.
Section 7.15 Company Rights Plan. No later than the date hereof, the Company
shall amend the Company Rights Plan to effect the changes thereto contemplated
by the form of amendment attached hereto as Exhibit B. Except as set forth in
Exhibit B, the Company shall not amend, modify or supplement the Company Rights
Plan without the prior written consent of Parent.
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ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect the Merger. The
respective obligations of each party to effect the Merger shall be subject to
the satisfaction at or prior to the Effective Time of the following conditions:
(a) Any waiting period applicable to the consummation of the Merger under
the HSR Act shall have expired or been terminated, and no action shall have
been instituted by the Department of Justice or Federal Trade Commission
challenging or seeking to enjoin the consummation of this transaction, which
action shall have not been withdrawn or terminated.
(b) The Registration Statement shall have become effective in accordance
with the provisions of the Securities Act.
(c) This Agreement and the transactions contemplated hereby shall have been
approved and adopted by the requisite vote of the stockholders of each of the
Company and Parent in accordance with applicable law.
(d) No preliminary or permanent injunction or other order by any federal or
state court in the United States which prohibits the consummation of the
Merger shall have been issued and remain in effect.
(e) Each of the Company and Parent shall have obtained such consents from
third parties and government instrumentalities in addition to pursuant to the
HSR Act as shall be required and which are material to Parent and the Company
and to consummation of the transactions contemplated hereby.
(f) Parent and Sub and the Company shall have each received a letter of KPMG
Peat Marwick LLP, dated the Effective Time, in form and substance satisfactory
to Parent addressed to Parent and Sub and the Company stating that the Merger
will qualify as a pooling of interests transaction under Opinion No. 16 of the
Accounting Principles Board.
Section 8.2 Conditions to Obligation of the Company to Effect the Merger. The
obligation of the Company to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) Each of Parent and Sub shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time and the representations and warranties of Parent and Sub
contained in this Agreement shall be true and correct in all material respects
at and as of the Effective Time as if made at and as of such time, except as
contemplated by this Agreement, and the Company shall have received a
certificate of the Chief Executive Officer or the President of Parent as to
the satisfaction of this condition.
(b) The Company shall have received an opinion of Winston & Strawn, in form
and substance reasonably satisfactory to the Company, dated as of the
Effective Time, substantially to the effect that the Merger will constitute a
reorganization for U.S. federal income tax purposes within the meaning of
Section 368(a) of the Code. The issuance of such opinion shall be conditioned
upon the receipt by Winston & Strawn of representation letters from each of
Parent, Sub and the Company, in each case, in form and substance reasonably
satisfactory to Winston & Strawn. The specific provisions of each such
representation letter shall be in form and substance reasonably satisfactory
to Winston & Strawn, and each such representation letter shall be dated on or
before the date of such opinion and shall not have been withdrawn or modified
in any material respect.
Section 8.3 Conditions to Obligations of Parent and Sub to Effect the Merger.
The obligations of Parent and Sub to effect the Merger shall be subject to the
satisfaction at or prior to the Effective Time of the following additional
conditions:
(a) The Company shall have performed in all material respects its
obligations under this Agreement required to be performed by it at or prior to
the Effective Time and the representations and warranties of
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the Company contained in this Agreement shall be true and correct in all
material respects at and as of the Effective Time as if made at and as of such
time except as contemplated by this Agreement, and Parent and Sub shall have
received a Certificate of the Chief Executive Officer or the President of the
Company as to the satisfaction of this condition.
(b) Parent shall have received an opinion of Skadden, Arps, Slate, Meagher &
Flom LLP, in form and substance reasonably satisfactory to Parent, dated as of
the Effective Time, substantially to the effect that the Merger will
constitute a reorganization for U.S. federal income tax purposes within the
meaning of Section 368(a) of the Code. The issuance of such opinion shall be
conditioned upon the receipt by such tax counsel of representation letters
from each of Parent, Sub and the Company, in each case, in form and substance
reasonably satisfactory to such tax counsel. The specific provisions of each
such representation letter shall be in form and substance reasonably
satisfactory to such tax counsel, and each such representation letter shall be
dated on or before the date of such opinion and shall not have been withdrawn
or modified in any material respect.
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at any time prior to
the Effective Time, whether before or after approval by the stockholders of the
Company:
(a) by mutual consent of Parent, Sub and the Company;
(b) by either Parent and Sub, on the one hand, or the Company, on the other
hand, if the Merger shall not have been consummated on or before December 31,
1998;
(c) by the Company if any of the conditions specified in Sections 8.1 and
8.2 hereof has not been met or waived by the Company prior to or at such time
as such condition can no longer be satisfied;
(d) by Parent and Sub if any of the conditions specified in Sections 8.1 and
8.3 hereof has not been met or waived by Parent and Sub prior to or at such
time as such condition can no longer be satisfied;
(e) by Parent and Sub if a tender offer or exchange offer for 50% or more of
the outstanding shares of capital stock of the Company is commenced prior to
the meeting of Company stockholders contemplated by Section 7.4(a), and the
Board of Directors of the Company fails to recommend against acceptance of
such tender offer or exchange offer by its stockholders (including by taking
no position with respect to the acceptance of such tender offer or exchange
offer by its stockholders) within the time period specified by Rule 14e-2 of
the Exchange Act;
(f) by either Parent and Sub or the Company if the approvals of the
stockholders of either Parent or the Company contemplated by this Agreement
shall not have been obtained by reason of the failure to obtain the required
vote at a duly held meeting of stockholders or of any adjournment thereof;
(g) by Parent and Sub if the Board of Directors of the Company shall have
withdrawn or modified in a manner adverse to Parent its approval or
recommendation of this Agreement and the transactions contemplated hereby;
(h) by either the Company or Parent and Sub if the Board of Directors of the
Company reasonably determines that a Takeover Proposal constitutes a Superior
Proposal, except that the Company may not terminate this Agreement pursuant to
this clause 7.1(h) unless and until (i) three business days have elapsed
following delivery to Parent of a written notice of such determination by the
Board of Directors of the Company and during such three business day period
the Company (x) informs Parent of the terms and conditions of the Takeover
Proposal and the identity of the person making the Takeover Proposal and (y)
otherwise reasonably cooperates with Parent with respect thereto (subject, in
the case of this clause (y), to the condition that the Board of Directors of
the Company shall not be required to take any action that it believes, after
consultation with outside legal counsel, would present a reasonable
possibility of violating
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its obligations to the Company or the Company's stockholders under applicable
law) with the intent of providing Parent with the opportunity to offer to
modify the terms and conditions of this Agreement so that the transactions
contemplated hereby may be effected, (ii) at the end of such three business
day period the Board of Directors of the Company continues reasonably to
believe that the Takeover Proposal constitutes a Superior Proposal, (iii)
simultaneously with such termination the Company enters into a definitive
acquisition, merger or similar agreement to effect the Superior Proposal and
(iv) simultaneously with such termination, the Company pays to Parent the
amounts specified and within the time periods specified in Section 7.12(b);
(i) by the Company if the Board of Directors of Parent shall have withdrawn
or modified in a manner adverse to the Company its approval or recommendation
of this Agreement and the transactions contemplated hereby; or
(j) by either the Company or Parent and Sub if there shall have been a
material breach by the other of any of its representations, warranties,
covenants or agreements contained in this Agreement or the Option Agreement,
which if not cured would cause the conditions set forth in Sections 8.2(a) or
8.3(a), as the case may be, not to be satisfied, and such breach shall not
have been cured within 30 days after notice thereof shall have been received
by the party alleged to be in breach.
Section 9.2 Effect of Termination. In the event of termination of this
Agreement as provided above, this Agreement shall forthwith become void and
there shall be no liability on the part of either Parent, Sub or the Company or
their respective officers or directors (i) except as set forth in Section 7.1
hereof and except for Section 7.12 hereof which shall survive the termination
and (ii) no such termination shall release any party of any liabilities or
damages resulting from any wilful breach by that party of any provision of this
Agreement.
Section 9.3 Amendment. This Agreement may be amended by action taken by
Parent, Sub and the Company at any time before or after approval hereof by the
stockholders of the Company, but, after any such approval, no amendment shall be
made which alters the Exchange Ratio or which in any way materially adversely
affects the rights of such stockholders, without the further approval of such
stockholders. This Agreement may not be amended except by an instrument in
writing signed on behalf of each of the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Time, the parties
hereto may (a) extend the time for the performance of any of the obligations or
other acts of the other parties hereto, (b) waive any inaccuracies in the
representations and warranties contained herein or in any document delivered
pursuant hereto and (c) waive compliance with any of the agreements or
conditions contained herein. Any agreement on the part of a party hereto to any
such extension or waiver shall be valid only if set forth in an instrument in
writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Survival of Representations, Warranties and Agreements. No
representations, warranties or agreements contained herein shall survive beyond
the Effective Time except that the agreements contained in Sections 3.1, 3.2,
3.3, 3.4, 3.5, 3.6, 7.9, 7.11 and 7.12 hereof shall survive beyond the Effective
Time.
Section 10.2 Brokers. The Company represents and warrants that, (i) except for
its financial advisors, Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ"), no broker, finder or financial advisor is entitled to any brokerage,
finder's or other fee or commission in connection with the Merger or the
transactions contemplated by this Agreement based upon arrangements made by or
on behalf of the Company and (ii) the Company's fee arrangements with DLJ have
been disclosed to Parent. Parent represents and warrants that, except for its
financial advisor, Stephens Inc. ("Stephens"), (i) no broker, finder or
financial advisor is entitled to any brokerage finder's or other fee or
commission in connection with the Merger or the transactions contemplated by
this Agreement based upon arrangements made by or on behalf of Parent or Sub and
(ii) Parent's fee arrangements with Stephens have been disclosed to the Company.
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Section 10.3 Notices. All notices, claims, demands and other communications
hereunder shall be in writing and shall be deemed given if delivered personally
or by telex or telegram or mailed by registered or certified mail (postage
prepaid, return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified by like
notice):
(a) If to Parent or Sub, to:
ACXIOM CORPORATION
P.O. Box 2000
301 Industrial Boulevard
Conway, AR 72033-2000
fax: (501) 336-3913
Attention: Charles D. Morgan
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
fax: (212) 735-2000
Attention: J. Michael Schell
(b) if to the Company, to:
MAY & SPEH, INC.
1501 Opus Place
Downers Grove, IL 60515
fax: (630) 719-0525
Attention: Chief Executive Officer
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
fax: (312) 558-5700
Attention: Bruce A. Toth
Section 10.4 Descriptive Headings. The headings contained in this Agreement
are for reference purposes only and shall not affect in any way the meaning or
interpretation of this Agreement.
Section 10.5 Entire Agreement; Assignment. This Agreement (including the
Exhibits, Schedules and other documents and instruments referred to herein) (a)
constitutes the entire agreement and supersedes all other prior agreements and
understandings, both written and oral among the parties or any of them, with
respect to the subject matter hereof; (b) is not intended to confer upon any
other person any rights or remedies hereunder; and (c) shall not be assigned by
operation of law or otherwise, provided that Parent or Sub may assign its rights
and obligations hereunder to a direct or indirect subsidiary of Parent, but no
such assignment shall relieve Parent or Sub, as the case may be, of its
obligations hereunder.
Section 10.6 Governing Law. This Agreement shall be governed by and construed
in accordance with the laws of the State of Delaware without giving effect to
the provisions thereof relating to conflicts of law.
Section 10.7 Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any of the provisions of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any other
remedy at law or equity.
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Section 10.8 Counterparts. This Agreement may be executed in two or more
counterparts, each of which shall be deemed to be an original but all of which
shall constitute one and the same agreement.
IN WITNESS WHEREFORE, each of Parent, Sub and the Company has caused this
Agreement to be executed on its behalf by its officers thereunto duly
authorized, all as of the date first above written.
ACXIOM CORPORATION
/s/ Charles D. Morgan
By: __________________________
Name: Charles D. Morgan
Title: President
ACX ACQUISITION CO., INC.
/s/ Catherine L. Hughes
By: ___________________________
Name: Catherine L. Hughes
Title: Secretary
MAY & SPEH, INC.
By: /s/ Peter I. Mason
By: ___________________________
Name: Peter I. Mason
Title: Chairman, President and CEO
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<PAGE>
EXHIBIT A-1
IRREVOCABLE PROXY
IRREVOCABLE PROXY, dated as of May 26, 1998, by and between May & Speh, Inc.,
a Delaware corporation (the "Company "), and Charles D. Morgan (the
"Stockholder").
WHEREAS, concurrently with the execution and delivery of this Agreement,
Acxiom Corporation, a Delaware Corporation ("Parent"), ACX Acquisition Co., Inc.
a Delaware corporation and a wholly owned subsidiary of Parent ("Sub"), and the
Company are entering into an Agreement and Plan of Merger, dated as of May 26,
1998 (the "Merger Agreement"), providing, among other things, for the merger
(the "Merger") of Sub with and into the Company, as a result of which each of
the outstanding shares of Common Stock, par value $.01 per share, of the Company
(the "Company Common Stock") will be converted into the right to receive .80 of
a share of the Common Stock, par value $.10 per share, of Parent (the "Parent
Common Stock"), and the Company will become a wholly owned subsidiary of Parent;
and
WHEREAS, the Stockholder is the owner beneficially and of record of an
aggregate of 4,112,425 shares (the "Parent Shares") of the Parent Common Stock,
of which 297,654 shares are in respect of options exercisable within 60 days of
the date hereof; and
WHEREAS, as a condition to its willingness to enter into the Merger Agreement,
the Company has requested that the Stockholder agree, and the Stockholder has
agreed, to grant the Company an irrevocable proxy (the "Proxy") with respect to
the Parent Shares, upon the terms and subject to the conditions hereof;
NOW, THEREFORE, to induce the Company to enter into the Merger Agreement and
in consideration of the aforesaid and the mutual representations, warranties,
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. The Stockholder hereby constitutes and appoints the Company, during the
term of this Agreement as the Stockholder's true and lawful proxy and
attorney-in-fact, with full power of substitution, to vote all of the Parent
Shares (and any and all securities issued or issuable in respect thereof) which
Stockholder is entitled to vote, for and in the name, place and stead of the
Stockholder, at any annual, special or other meeting of the stockholders of the
Parent, and at any adjournment or adjournments thereof, or pursuant to any
consent in lieu of a meeting or otherwise, in favor of any proposal to approve
the issuance of the shares of Common Stock pursuant to the Merger Agreement and
any transactions contemplated thereby. All power and authority hereby conferred
is coupled with an interest and is irrevocable. In the event that the Company is
unable to exercise such power and authority for any reason, the Stockholder
agrees that he will vote all the Parent Shares in favor of approval of the
issuance of the shares of Common Stock pursuant to the Merger Agreement and the
transactions contemplated thereby, at any such meeting or adjournment thereof,
or provide his written consent thereto.
2. The Stockholder hereby covenants and agrees that the Stockholder will not,
and will not agree to, directly or indirectly, sell, transfer, assign, pledge,
hypothecate, cause to be redeemed or otherwise dispose of any of the Parent
Shares or grant any proxy or interest in or with respect to such Parent Shares
or deposit such Shares into a voting trust or enter into a voting agreement or
arrangement with respect to such Parent Shares other than in respect of
transactions not prohibited by the terms of the Merger Agreement.
3. The Stockholder represents and warrants to the Company, that the Parent
Shares consist of 3,814,771 shares of Parent Common Stock owned beneficially and
of record by the Stockholder on the date hereof; such Parent Shares are all of
the securities of the Parent owned of record or beneficially by the Stockholder
on the date hereof, except for 297,654 shares of Parent Common Stock as to which
the Stockholder holds stock options exercisable within 60 days of the date
hereof; the Stockholder owns the Parent Shares free and clear of all liens,
charges, claims, encumbrances and security interests of any nature whatsoever;
and except as provided herein, the Stockholder has not granted any proxy with
respect to the Parent Shares, deposited such Parent Shares into a voting trust
or entered into any voting agreement or other arrangement with respect to such
Parent Shares.
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4. Any shares of Parent Common Stock issued to the Stockholder upon the
exercise of any stock options that are currently exercisable or become
exercisable during the term of this Agreement shall be deemed Parent Shares for
purposes of this Agreement.
5. This Proxy shall be governed by and construed in accordance with the laws
of the State of Delaware without giving effect to the provisions thereof
relating to conflicts of law.
6. This Proxy shall be binding upon, inure to the benefit of, and be
enforceable by the successors and permitted assigns of the parties hereto. This
Proxy and the rights hereunder may not be assigned or transferred by the
Company, except that the Company may assign its rights hereunder to any direct
or indirect subsidiary.
7. This Proxy shall terminate at the earlier of (i) the effectiveness of the
Merger, or (ii) the termination of the Merger Agreement in accordance with its
terms, or (iii) upon notice of termination given by the Company to the
Stockholder.
8. This Proxy is granted in consideration of the execution and delivery of the
Merger Agreement by the Company. The Stockholder agrees that such Proxy is
coupled with an interest sufficient in law to support an irrevocable power and
shall not be terminated by any act of the Stockholder, by lack of appropriate
power or authority or by the occurrence of any other event or events.
9. The parties acknowledge and agree that performance of their respective
obligations hereunder will confer a unique benefit on the other and that a
failure of performance will not be compensable by money damages. The parties
therefore agree that this Proxy shall be specifically enforceable and that
specific enforcement and injunctive relief shall be available to the Company and
the Stockholder for any breach of any agreement, covenant or representation
hereunder. This Proxy shall revoke all prior proxies given by the Stockholder at
any time with respect to the Parent Shares.
10. The Stockholder will, upon request, execute and deliver any additional
documents and take such actions as may reasonably be deemed by the Company to be
necessary or desirable to complete the Proxy granted herein or to carry out the
provisions hereof.
11. If any term, provision, covenant, or restriction of this Proxy is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Proxy
shall remain in full force and effect and shall not in any way be affected,
impaired or invalidated.
12. This Proxy may be executed in two counterparts, each of which shall be
deemed to be an original but both of which together shall constitute one and the
same document.
IN WITNESS WHEREOF, the Company and the Stockholder have caused this Proxy to
be duly executed on the date first above written.
-------------------------------------
Charles D. Morgan, Jr.
May & Speh, INC.
By __________________________________
Name: Peter I. Mason
Title: Chairman, President and CEO
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EXHIBIT A-2
IRREVOCABLE PROXY
IRREVOCABLE PROXY, dated as of May 26, 1998, by and between Acxiom
Corporation, a Delaware corporation (the "Parent"), and Lawrence J. Speh (the
"Stockholder").
WHEREAS, concurrently with the execution and delivery of this Agreement, the
Parent, ACX Acquisition Co., Inc. a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and May & Speh, Inc. (the "Company") are entering
into an Agreement and Plan of Merger, dated as of May 26, 1998 (the "Merger
Agreement"), providing, among other things, for the merger (the "Merger") of Sub
with and into the Company, as a result of which each of the outstanding shares
of Common Stock, par value $.01 per share, of the Company (the "Company Common
Stock") will be converted into the right to receive .80 of a share of the Common
Stock, par value $.10 per share, of Parent (the "Parent Common Stock"), and the
Company will become a wholly owned subsidiary of Parent; and
WHEREAS, the Stockholder is the owner of record of an aggregate of 70,000
shares (the "Shares") of the Company Common Stock and the Stockholder is the
owner beneficially of an additional 1,759,224 shares of Company Common Stock;
and
WHEREAS, as a condition to its willingness to enter into the Merger Agreement,
Parent has requested that the Stockholder agree, and the Stockholder has agreed,
to grant Parent an irrevocable proxy (the "Proxy") with respect to the Shares,
upon the terms and subject to the conditions hereof;
NOW, THEREFORE, to induce Parent to enter into the Merger Agreement and in
consideration of the aforesaid and the mutual representations, warranties,
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. The Stockholder hereby constitutes and appoints Parent, during the term of
this Agreement as the Stockholder's true and lawful proxy and attorney-in-fact,
with full power of substitution, to vote all of the Shares (and any and all
securities issued or issuable in respect thereof) which Stockholder is entitled
to vote, for and in the name, place and stead of the Stockholder, at any annual,
special or other meeting of the stockholders of the Company, and at any
adjournment or adjournments thereof, or pursuant to any consent in lieu of a
meeting or otherwise, in favor of any proposal to approve and adopt the Merger
Agreement and any transactions contemplated thereby. All power and authority
hereby conferred is coupled with an interest and is irrevocable. In the event
that Parent is unable to exercise such power and authority for any reason, the
Stockholder agrees that he will vote all the Shares in favor of approval and
adoption of the Merger Agreement and the transactions contemplated thereby, at
any such meeting or adjournment thereof, or provide his written consent thereto.
2. The Stockholder hereby covenants and agrees that the Stockholder will not,
and will not agree to, directly or indirectly, sell, transfer, assign, pledge,
hypothecate, cause to be redeemed or otherwise dispose of any of the Shares or
grant any proxy or interest in or with respect to such Shares or deposit such
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares. The Stockholder further covenants and agrees that the
Stockholder will not initiate or solicit, directly or indirectly, any inquiries
or the making of any proposal with respect to engage in negotiations concerning,
provide any confidential information or data to, or have any discussions with,
any person relating to, any acquisition, business combination or purchase of all
or any significant portion of the assets of, or any equity interest in (other
than the Shares), the Company or any subsidiary thereof; provided, however,
nothing contained herein shall be deemed to prohibit the Stockholder from
exercising his fiduciary duties as a director of the Company pursuant to
applicable law.
3. The Stockholder represents and warrants to Parent, that the Shares consist
of 70,000 shares of Company Common Stock owned beneficially and of record by the
Stockholder on the date hereof; such Shares together with the additional
1,759,224 shares of Company Common Stock owned beneficially by the Stockholder
are all
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of the securities of the Company owned of record or beneficially by the
Stockholder on the date hereof, the Stockholder owns the Shares free and clear
of all liens, charges, claims, encumbrances and security interests of any nature
whatsoever; and except as provided herein, the Stockholder has not granted any
proxy with respect to the Shares, deposited such Shares into a voting trust or
entered into any voting agreement or other arrangement with respect to such
Shares.
4. Any shares of Company Common Stock issued to the Stockholder upon the
exercise of any stock options that are currently exercisable or become
exercisable during the term of this Agreement shall be deemed Shares for
purposes of this Agreement.
5. This Proxy shall be governed by and construed in accordance with the laws
of the State of Delaware without giving effect to the provisions thereof
relating to conflicts of law.
6. This Proxy shall be binding upon, inure to the benefit of, and be
enforceable by the successors and permitted assigns of the parties hereto. This
Proxy and the rights hereunder may not be assigned or transferred by Parent,
except that Parent may assign its rights hereunder to any direct or indirect
subsidiary.
7. This Proxy shall terminate at the earlier of (i) the effectiveness of the
Merger, or (ii) the termination of the Merger Agreement in accordance with its
terms, or (iii) upon notice of termination given by Parent to the Stockholder.
8. This Proxy is granted in consideration of the execution and delivery of the
Merger Agreement by Parent. The Stockholder agrees that such Proxy is coupled
with an interest sufficient in law to support an irrevocable power and shall not
be terminated by any act of the Stockholder, by lack of appropriate power or
authority or by the occurrence of any other event or events.
9. The parties acknowledge and agree that performance of their respective
obligations hereunder will confer a unique benefit on the other and that a
failure of performance will not be compensable by money damages. The parties
therefore agree that this Proxy shall be specifically enforceable and that
specific enforcement and injunctive relief shall be available to Parent and the
Stockholder for any breach of any agreement, covenant or representation
hereunder. This Proxy shall revoke all prior proxies given by the Stockholder at
any time with respect to the Shares.
10. The Stockholder will, upon request, execute and deliver any additional
documents and take such actions as may reasonably be deemed by Parent to be
necessary or desirable to complete the Proxy granted herein or to carry out the
provisions hereof.
11. If any term, provision, covenant, or restriction of this Proxy is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Proxy
shall remain in full force and effect and shall not in any way be affected,
impaired or invalidated.
12. This Proxy may be executed in two counterparts, each of which shall be
deemed to be an original but both of which together shall constitute one and the
same document.
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<PAGE>
IN WITNESS WHEREOF, Parent and the Stockholder have caused this Proxy to be
duly executed on the date first above written.
-------------------------------------
Lawrence J. Speh
Acxiom Corporation
By __________________________________
Name: Charles. D. Morgan, Jr.
Title: President
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<PAGE>
EXHIBIT A-3
IRREVOCABLE PROXY
IRREVOCABLE PROXY, dated as of May 26, 1998, by and between Acxiom
Corporation, a Delaware corporation (the "Parent"), and Albert J. Speh, Jr.
(the "Stockholder").
WHEREAS, concurrently with the execution and delivery of this Agreement, the
Parent, ACX Acquisition Co., Inc. a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and May & Speh, Inc. (the "Company") are entering
into an Agreement and Plan of Merger, dated as of May 26, 1998 (the "Merger
Agreement"), providing, among other things, for the merger (the "Merger") of Sub
with and into the Company, as a result of which each of the outstanding shares
of Common Stock, par value $.01 per share, of the Company (the "Company Common
Stock") will be converted into the right to receive .80 of a share of the Common
Stock, par value $.10 per share, of Parent (the "Parent Common Stock"), and the
Company will become a wholly owned subsidiary of Parent; and
WHEREAS, the Stockholder is the owner of record of an aggregate of 808,801
shares (the "Shares") of the Company Common Stock and the Stockholder is the
owner beneficially of an additional 262,994 shares of Company Common Stock; and
WHEREAS, as a condition to its willingness to enter into the Merger Agreement,
Parent has requested that the Stockholder agree, and the Stockholder has agreed,
to grant Parent an irrevocable proxy (the "Proxy") with respect to the Shares,
upon the terms and subject to the conditions hereof;
NOW, THEREFORE, to induce Parent to enter into the Merger Agreement and in
consideration of the aforesaid and the mutual representations, warranties,
covenants and agreements set forth herein and in the Merger Agreement, the
parties hereto agree as follows:
1. The Stockholder hereby constitutes and appoints Parent, during the term of
this Agreement as the Stockholder's true and lawful proxy and attorney-in-fact,
with full power of substitution, to vote all of the Shares (and any and all
securities issued or issuable in respect thereof) which Stockholder is entitled
to vote, for and in the name, place and stead of the Stockholder, at any annual,
special or other meeting of the stockholders of the Company, and at any
adjournment or adjournments thereof, or pursuant to any consent in lieu of a
meeting or otherwise, in favor of any proposal to approve and adopt the Merger
Agreement and any transactions contemplated thereby. All power and authority
hereby conferred is coupled with an interest and is irrevocable. In the event
that Parent is unable to exercise such power and authority for any reason, the
Stockholder agrees that he will vote all the Shares in favor of approval and
adoption of the Merger Agreement and the transactions contemplated thereby, at
any such meeting or adjournment thereof, or provide his written consent thereto.
2. The Stockholder hereby covenants and agrees that the Stockholder will not,
and will not agree to, directly or indirectly, sell, transfer, assign, pledge,
hypothecate, cause to be redeemed or otherwise dispose of any of the Shares or
grant any proxy or interest in or with respect to such Shares or deposit such
Shares into a voting trust or enter into a voting agreement or arrangement with
respect to such Shares. The Stockholder further covenants and agrees that the
Stockholder will not initiate or solicit, directly or indirectly, any inquiries
or the making of any proposal with respect to engage in negotiations concerning,
provide any confidential information or data to, or have any discussions with,
any person relating to, any acquisition, business combination or purchase of all
or any significant portion of the assets of, or any equity interest in (other
than the Shares), the Company or any subsidiary thereof; provided, however,
nothing contained herein shall be deemed to prohibit the Stockholder from
exercising his fiduciary duties as a director of the Company pursuant to
applicable law.
3. The Stockholder represents and warrants to Parent, that the Shares consist
of 808,801 shares of Company Common Stock owned beneficially and of record by
the Stockholder on the date hereof; such Shares together with the additional
262,994 shares of Company Common Stock owned beneficially by the Stockholder are
all of
A-35
<PAGE>
the securities of the Company owned of record or beneficially by the Stockholder
on the date hereof, the Stockholder owns the Shares free and clear of all liens,
charges, claims, encumbrances and security interests of any nature whatsoever;
and except as provided herein, the Stockholder has not granted any proxy with
respect to the Shares, deposited such Shares into a voting trust or entered into
any voting agreement or other arrangement with respect to such Shares.
4. Any shares of Company Common Stock issued to the Stockholder upon the
exercise of any stock options that are currently exercisable or become
exercisable during the term of this Agreement shall be deemed Shares for
purposes of this Agreement.
5. This Proxy shall be governed by and construed in accordance with the laws
of the State of Delaware without giving effect to the provisions thereof
relating to conflicts of law.
6. This Proxy shall be binding upon, inure to the benefit of, and be
enforceable by the successors and permitted assigns of the parties hereto. This
Proxy and the rights hereunder may not be assigned or transferred by Parent,
except that Parent may assign its rights hereunder to any direct or indirect
subsidiary.
7. This Proxy shall terminate at the earlier of (i) the effectiveness of the
Merger, or (ii) the termination of the Merger Agreement in accordance with its
terms, or (iii) upon notice of termination given by Parent to the Stockholder.
8. This Proxy is granted in consideration of the execution and delivery of the
Merger Agreement by Parent. The Stockholder agrees that such Proxy is coupled
with an interest sufficient in law to support an irrevocable power and shall not
be terminated by any act of the Stockholder, by lack of appropriate power or
authority or by the occurrence of any other event or events.
9. The parties acknowledge and agree that performance of their respective
obligations hereunder will confer a unique benefit on the other and that a
failure of performance will not be compensable by money damages. The parties
therefore agree that this Proxy shall be specifically enforceable and that
specific enforcement and injunctive relief shall be available to Parent and the
Stockholder for any breach of any agreement, covenant or representation
hereunder. This Proxy shall revoke all prior proxies given by the Stockholder at
any time with respect to the Shares.
10. The Stockholder will, upon request, execute and deliver any additional
documents and take such actions as may reasonably be deemed by Parent to be
necessary or desirable to complete the Proxy granted herein or to carry out the
provisions hereof.
11. If any term, provision, covenant, or restriction of this Proxy is held by
a court of competent jurisdiction to be invalid, void or unenforceable, the
remainder of the terms, provisions, covenants and restrictions of this Proxy
shall remain in full force and effect and shall not in any way be affected,
impaired or invalidated.
12. This Proxy may be executed in two counterparts, each of which shall be
deemed to be an original but both of which together shall constitute one and the
same document.
IN WITNESS WHEREOF, Parent and the Stockholder have caused this Proxy to be
duly executed on the date first above written.
-------------------------------------
Albert J. Speh, Jr.
Acxiom Corporation
By __________________________________
Name: Charles D. Morgan, Jr.
Title: President
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<PAGE>
EXHIBIT B
AMENDMENT TO RIGHTS AGREEMENT
Amendment Number One, dated as of May 26, 1998, to the Rights Agreement, dated
as of March 1, 1996 (the "Rights Agreement"), between MAY & SPEH, INC., a
Delaware corporation (the "Company"), and HARRIS TRUST AND SAVINGS BANK, an
Illinois banking corporation, as Rights Agent (the "Rights Agent").
WHEREAS, the Company and the Rights Agent entered into the Rights Agreement
specifying the terms of the Rights (as defined therein);
WHEREAS, the Company desires to amend the Rights Agreement in accordance with
Section 27 of the Rights Agreement;
WHEREAS, the Company proposes to enter into an Agreement and Plan of Merger,
dated as of May 26, 1998 (the "Merger Agreement"), among the Company, Acxiom
Corporation ("Parent") and ACX Acquisition Co., Inc. ("Sub").
WHEREAS, as a condition to the Merger Agreement and in order to induce Parent
to enter into the Merger Agreement, the Company proposes to enter into a Stock
Option Agreement, dated as of May 26, 1998, between the Company and Parent (the
"Stock Option Agreement"), pursuant to which the Company will grant Parent an
irrevocable option (the "Option") to purchase up to 19.9% of the number of
shares (the "Option Shares") of common stock, par value $.01 per share ("Common
Stock"), of the Company issued and outstanding immediately prior to the grant of
the Option;
WHEREAS, as a condition to the Merger Agreement and in order to induce Parent
to enter into the Merger Agreement, certain holders of shares of Common Stock
(each, a "Stockholder" and collectively, the "Stockholders"), each propose to
enter into an irrevocable proxy, dated as of May 26, 1998, between such
Stockholder and Parent, pursuant to which such Stockholder will grant Parent an
irrevocable proxy (each, a "Proxy" and collectively, the "Proxies") to vote such
Stockholder's shares of Common Stock; and
WHEREAS, the Board of Directors of the Company has determined it advisable and
in the best interest of the stockholders of the Company to amend the Rights
Agreement to enable the Company to enter into the Merger Agreement and the Stock
Option Agreement and consummate the transactions contemplated thereby without
causing Parent to become an "Acquiring Person" (as defined in the Rights
Agreement).
NOW, THEREFORE, in consideration of the premises and mutual agreements set
forth herein and in the Rights Agreement, the parties hereby agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein shall
have the meaning assigned to such terms in the Rights Agreement.
2. Amendments to the Rights Agreement. The Rights Agreement is hereby amended
as set forth in this Section 2.
a. Section 1 of the Rights Agreement, "Certain Definitions", is hereby amended
and restated by deleting the definition of "Acquiring Person" thereof and
inserting in lieu thereof the following:
"Acquiring Person" shall mean any Person (as such term is hereinafter defined)
who or which, together with all Affiliates and Associates (as such terms are
hereinafter defined) of such Person, shall be the Beneficial Owner (as such term
is hereinafter defined) of 15% or more of the Common Shares of the Company then
outstanding, but shall not include the Company, any Subsidiary (as such term is
hereinafter defined) of the Company, any employee benefit plan of the Company or
any Subsidiary of the Company, any Person holding
A-37
<PAGE>
Common Shares for or pursuant to the terms of any such plan, or any
Grandfathered Person. Notwithstanding the foregoing, no Person (including,
without limitation, any Grandfathered Person) shall become an "Acquiring Person"
as the result of (a) an acquisition of Common Shares by the Company which, by
reducing the number of shares outstanding, increases the proportionate number of
shares beneficially owned by such Person to 15% or more of the Common Shares of
the Company then outstanding; (b) the acquisition by such Person of newly issued
Common shares directly from the Company (it being understood that a purchase
from an underwriter or other intermediary is not directly from the Company); or
(c) that the Parent, and its Affiliates and Associates shall not be deemed to be
an Acquiring Person as a result of either (i) the grant of the Option (as such
term is defined in the Stock Option Agreement) pursuant to the Stock Option
Agreement, or at any time following the exercise thereof and the issuance of
shares of Common Shares in accordance with the terms of the Stock Option
Agreement or (ii) the grant of the Proxies by and between the Stockholders and
Parent, or at any time following the delivery and execution thereof; provided,
however, that if a Person shall become the Beneficial Owner of 15% or more of
the Common Shares of the Company then outstanding by reason of share purchases
by the Company or the receipt of newly issued Common Shares directly from the
Company and shall, after such share purchases or direct issuance by the Company,
become the Beneficial Owner of any additional Common Shares of the Company, then
such Person shall be deemed to be an "Acquiring Person;" provided further,
however, that any transferee from such Person who becomes the Beneficial Owner
of 15% or more of the Common Shares of the Company then outstanding shall
nevertheless be deemed to be an "Acquiring Person." Notwithstanding the
foregoing, if the Board of Directors of the Company determines in good faith
that a Person who would otherwise be an "Acquiring Person," as defined pursuant
to the foregoing provisions of this paragraph, has become such inadvertently,
and such Person divests as promptly as practicable (and in any event within ten
business days after notification by the Company) a sufficient number of Common
Shares so that such Person would no longer be an Acquiring Person, as defined
pursuant to the foregoing provisions of this paragraph, then such Person shall
not be deemed to be an "Acquiring Person" for any purposes of this Agreement.
b. Section 7(a) of the Rights Agreement is hereby amended by deleting
subsections 7(a)(i), 7(a)(ii), and 7(a)(iii) and inserting in lieu thereof
the following:
(i) the close of business on the tenth anniversary of the effective date of
this Agreement (the "Final Expiration Date"), (ii) the time at which the
Rights are redeemed as provided in Section 23 hereof (the "Redemption Date"),
(iii) the time immediately prior to the Effective Time (as such term is
defined in that certain Agreement and Plan of Merger dated as of May 26, 1998,
among the Company, Acxiom Corporation and ACX Acquisition Co., Inc. (the
earliest to occur of (i), (ii) and (iii) being herein referred to as the
"Expiration Date"), and (iv) the time at which such Rights are exchanged as
provided in Section 24 hereof.
3. Miscellaneous.
a. The term "Agreement" as used in the Rights Agreement shall be deemed to
refer to the Rights Agreement as amended hereby.
b. The foregoing amendment shall be effective as of the date first above
written, and, except as set forth herein, the Rights Agreement shall remain
in full force and effect and shall be otherwise unaffected hereby.
c. This Amendment may be executed in two or more counterparts, each of which
shall be deemed to be an original, but all for which together shall
constitute one and the same instrument.
d. This Amendment shall be deemed to be a contract made under the laws of the
State of Delaware and for all purposes shall be governed by and construed
in accordance with the laws of such State applicable to contracts to be
made and performed entirely within such State.
A-38
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment Number One
to be duly executed and attested, all as of the day and year first above
written.
Attest: MAY & SPEH, INC.
By: _________________________________ By: _________________________________
Name: Andy V. Jonusaitis Name: Peter I. Mason
Title: Secretary Title: Chairman, President and CEO
Attest: HARRIS TRUST AND SAVINGS BANK
By: _________________________________ By: _________________________________
Name: Susan M. Schadel Name: Palmer Haffner
Title: Assistant Vice President Title: Vice President
A-39
<PAGE>
EXHIBIT C
FORM OF AFFILIATE LETTER FOR AFFILIATES OF THE COMPANY
Acxiom Corporation
301 Industrial Boulevard
Conway, AR 72032
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of May & Speh, Inc., a Delaware corporation (the "Company"), as
the term "affiliate" is (i) defined for purposes of paragraphs (c) and (d) of
Rule 145 of the rules and regulations (the "Rules and Regulations") of the
Securities and Exchange Commission (the "SEC") under the Securities Act of 1933,
as amended (the "Securities Act"), and/or (ii) used in and for purposes of
Accounting Series Releases No. 130 and No. 135, as amended, of the SEC. Pursuant
to the terms of the Agreement and Plan of Merger, dated as of May 26, 1998 (the
"Merger Agreement"), among Acxiom Corporation, a Delaware corporation
("Parent"), ACX Acquisition Co., a Delaware corporation ("Sub"), and the
Company, (i) Sub will be merged with and into the Company, with the Company
continuing as the surviving corporation (the "Merger"), (ii) the Company will
become a subsidiary of Parent, and (iii) stockholders of the Company will become
stockholders of Parent. Capitalized terms used in this letter without definition
shall have the meanings assigned to them in the Merger Agreement.
As a result of the Merger, I may receive shares of common stock, par value
$.10 per share, of Parent (the "Parent Common Stock"). I would receive such
Parent Common Stock in exchange for shares (or upon exercise of options for
shares) owned by me of common stock, par value $0.01 per share, of the Company
(the "Company Common Stock").
1. I hereby represent and warrant to, and covenant with Parent that in the
event I receive any shares of Parent Common Stock as a result of the Merger:
A. I shall not make any offer, sale, pledge, transfer or other disposition
of shares of Parent Common Stock in violation of the Securities Act or the
Rules and Regulations.
B. I have carefully read this letter and the Merger Agreement and discussed
the requirements of such documents and other applicable limitations upon my
ability to sell, transfer or otherwise dispose of shares of Parent Common
Stock, to the extent I felt necessary, with my counsel or counsel for the
Company.
C. I have been advised that the issuance of shares of Parent Common Stock to
me pursuant to the Merger has been registered with the SEC under the
Securities Act on a Registration Statement on Form S-4. However, I have also
been advised that, because at the time the Merger is submitted for a vote of
the stockholders of the Company, (a) I may be deemed to be an affiliate of the
Company and (b) the distribution by me of shares of Parent Common Stock has
not been registered under the Act, I may not sell, transfer or otherwise
dispose of the shares of Parent Common Stock issued to me in the Merger unless
(i) such sale, transfer or other disposition is made in conformity with the
volume and other limitations of Rule 145 promulgated by the SEC under the
Securities Act, (ii) such sale, transfer or other disposition has been
registered under the Securities Act or (iii) in the opinion of counsel
reasonably acceptable to Parent, or a "no action" letter obtained by the
undersigned from the staff of the SEC such sale, transfer or other disposition
is otherwise exempt from registration under the Securities Act.
D. I understand that Parent is under no obligation to register the sale,
transfer or other disposition of Parent Common Stock by me or on my behalf
under the Act or, except as provided in paragraph 2(A) below, to take any
other action necessary in order to make compliance with an exemption from such
registration available.
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<PAGE>
E. I also understand that stop transfer instructions will be given to the
Company's transfer Agent with respect to shares of Company Common Stock
currently held by me and to Parent's transfer Agent with respect to shares of
Parent Common Stock issued to me in the Merger, and there will be placed on
the certificates for such shares of Parent Common Stock, a legend stating in
substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE ISSUED IN A TRANSACTION
TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES ACT OF 1933 APPLIES. THE
SHARES REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED IN ACCORDANCE
WITH THE TERMS OF AN AGREEMENT DATED MAY , 1998 BETWEEN THE REGISTERED
HOLDER HEREOF AND ACXIOM CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE
AT THE PRINCIPAL OFFICES OF ACXIOM CORPORATION."
F. I also understand that unless a sale or transfer is made in conformity
with the provisions of Rule 145, or pursuant to a registration statement,
Parent reserves the right to put the following legend on the certificates
issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED UNDER
THE SECURITIES ACT OF 1933 AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH
SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED UNDER THE SECURITIES
ACT OF 1933 APPLIES. THE SHARES HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A
VIEW TO, OR FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF WITHIN
THE MEANING OF THE SECURITIES ACT OF 1933 AND MAY NOT BE SOLD, PLEDGED OR
OTHERWISE TRANSFERRED EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF 1933."
G. I further represent to, and covenant with Parent that I will not sell,
transfer or otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to shares of Company Common
Stock that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent Common Stock
received by me in the Merger or any other shares of the capital stock of
Parent during the 30 days prior to the Effective Time until after such time as
results covering at least 30 days of continued operations of Parent and the
Company have been published by Parent, in the form of a quarterly earnings
report, an effective registration statement filed with the SEC, a report to
the SEC on Form 10-K, 10-Q or 8-K, or any other public filing or announcement
which includes the combined results of operations of Parent and the Company
(the period commencing 30 days prior to the Effective Time and ending on the
date of the publication of the post-Merger financial results is referred to
herein as the "Pooling Period"). Parent shall notify the "affiliates" of the
publication of such results. Notwithstanding the foregoing, I understand that
during the Pooling Period I will be permitted to sell, transfer or otherwise
dispose of or reduce my risk with respect to an amount of Parent Common Stock
and Company Common Stock not more than the de minimus amount permitted by the
SEC in its rules and releases relating to pooling of interests accounting
treatment and in accordance with Rule 145(d)(i) under the Securities Act,
subject to providing advance written notice to Parent.
H. Execution of this letter should not be considered an admission on my part
that I am an "affiliate" of the Company as described in the first paragraph of
this letter, nor as a waiver of any rights I may have to object to any claim
that I am such an affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees with me as
follows:
A. For so long as and to the extent necessary to permit me to sell the
shares of Parent Common Stock pursuant to Rule 145 and, to the extent
applicable, Rule 144 under the Act, Parent shall (a) use its reasonable best
efforts to (i) file, on a timely basis, all reports and data required to be
filed with the SEC by it pursuant to Section 13 of the Securities Exchange Act
of 1934, as amended and (ii) furnish to me upon request a written statement as
to whether Parent has complied with such reporting requirements during the 12
months
A-41
<PAGE>
preceding any proposed sale of the shares of Parent Common Stock by me under
Rule 145, and (b) otherwise use its reasonable efforts to permit such sales
pursuant to Rule 145 and Rule 144.
B. It is understood and agreed that certificates with the legends set forth
in paragraphs E and F above will be substituted by delivery of certificates
without such legend if (i) one year shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received in the Merger
and the provisions of Rule 145(d)(2) are then available to the undersigned,
(ii) two years shall have elapsed from the date the undersigned acquired the
shares of Parent Common Stock received in the Merger and the provisions of
Rule 145(d)(3) are then applicable to the undersigned, or (iii) Parent has
received either an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to Parent, or a "no-action" letter obtained by the
undersigned from the staff of the SEC, to the effect that the restrictions
imposed by Rule 144 and Rule 145 under the Act no longer apply to the
undersigned.
Very truly yours,
-------------------------------------
Name:
Agreed and accepted this day of
, 1998, by
ACXIOM CORPORATION
By: _________________________________
Name:
Title:
A-42
<PAGE>
EXHIBIT D
FORM OF AFFILIATE LETTER FOR AFFILIATES OF PARENT
Acxiom Corporation
301 Industrial Boulevard
Conway, AR 72032
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be deemed to be
an "affiliate" of Acxiom Corporation, a Delaware corporation ("Parent"), as the
term "affiliate" is defined for purposes of Accounting Series Releases No. 130
and No. 135, as amended, of the Securities and Exchange Commission (the "SEC").
Pursuant to the terms of the Agreement and Plan of Merger, dated as of May 26,
1998 (the "Merger Agreement"), among May & Speh, Inc., a Delaware corporation
(the "Company"), ACX Acquisition Co., a Delaware corporation ("Sub"), and
Parent, (i) Sub will be merged with and into the Company, with the Company
continuing as the Surviving Corporation (the "Merger"), (ii) the Company will
become a subsidiary of Parent, and (iii) stockholders of the Company will become
stockholders of Parent.
I hereby represent to, and covenant with Parent that I will not sell, transfer
or otherwise dispose of or reduce my risk (as contemplated by the SEC Accounting
Series Release No. 135) with respect to any shares of common stock, par value
$.10 per share, of Parent (the "Parent Common Stock") that I may hold and,
furthermore, that I will not sell, transfer or otherwise dispose of or reduce my
risk (as contemplated by the SEC Accounting Series Release No. 135) with respect
to any shares of common stock, par value $0.01 per share, of the Company
("Company Common Stock") that I may hold during the 30 days prior to the
Effective Time (as defined in the Merger Agreement) until after such time as
results covering at least 30 days of combined operations of Parent and the
Company have been published by Parent, in the form of a quarterly earnings
report, an effective registration statement filed with the SEC, a report to the
SEC on Form 10-K, 10-Q or 8-K, or any other public filing or announcement which
includes the combined results of operations of Parent and the Company (the
period commencing 30 days prior to the Effective Time and ending on the date of
the publication of the post-Merger financial results is referred to herein as
the "Pooling Period"). Parent shall notify the "affiliates"of the publication of
such results. Notwithstanding the foregoing, I understand that during the
Pooling Period I will be permitted to sell, transfer or otherwise dispose of or
reduce my risk with respect to an amount of Parent Common Stock and Company
Common Stock not more than the de minimus amount permitted by the SEC in its
rules and releases relating to pooling of interests accounting treatment,
subject to providing advance written notice to Parent.
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<PAGE>
Execution of this letter should not be considered an admission on my part that
I am an "affiliate" of Parent as described in the first paragraph of this
letter, nor as a waiver of any rights I may have to object to any claim that I
am such an affiliate on or after the date of this letter.
Very truly yours,
-------------------------------------
Name:
Agreed and accepted this day of
, 1998, by
ACXIOM CORPORATION
By: _________________________________
Name:
Title:
A-44
<PAGE>
ANNEX B
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 26, 1998 (the "Agreement"), between
MAY & SPEH, INC., a Delaware corporation ("Issuer"), and Acxiom Corporation, a
Delaware corporation ("Grantee").
RECITALS
A. Issuer and Grantee have entered into an Agreement and Plan of Merger, dated
as of the date hereof (the "Merger Agreement"; defined terms used but not
defined herein have the meanings set forth in the Merger Agreement), providing
for, among other things, the merger of Sub with and into Issuer pursuant to the
terms of the Merger; and
B. As a condition and inducement to Grantee's willingness to enter into the
Merger Agreement, Grantee has requested that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 19.9% of the number of shares (the "Option Shares") of common stock, par
value $0.01 per share ("Issuer Common Stock"), of Issuer issued and outstanding
immediately prior to the grant of the Option at a purchase price of $14.96 (as
adjusted as set forth herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, with respect to
any or all of the Option Shares at any one time, subject to the provisions of
Section 2(c), upon the occurrence of a Purchase Event (as defined in Section
7(c)), except that (i) subject to the last sentence of this Section 2(a), the
Option will terminate and be of no further force and effect upon the earliest to
occur of (A) the Effective Time, (B) six months after the date on which a
Purchase Event (as defined herein) occurs, and (C) termination of the Merger
Agreement in accordance with its terms prior to the occurrence of a Purchase
Event, unless, in the case of clause (C), the Grantee has the right to receive
the Company Termination Fee following such termination upon the occurrence of
certain events, in which case the Option will not terminate until the later of
(x) six months following the time such Company Termination Fee becomes payable
and (y) the expiration of the period in which the Grantee has such right to
receive the Company Termination Fee, and (ii) any purchase of Option Shares upon
exercise of the Option will be subject to compliance with the HSR Act and the
obtaining or making of any consents, approvals, orders, notifications or
authorizations, the failure of which to have obtained or made would have the
effect of making the issuance of Option Shares illegal (the "Regulatory
Approvals") and no preliminary or permanent injunction or other order by any
court of competent jurisdiction prohibiting or otherwise restraining such
issuance shall be in effect. Notwithstanding the termination of the Option,
Grantee will be entitled to purchase the Option Shares if it has exercised the
Option in accordance with the terms hereof prior to the termination of the
Option, and the termination of the Option will not affect any rights hereunder
which by their terms do not terminate or expire prior to or as of such
termination.
(b) In the event that Grantee wishes to exercise the Option, it will send to
Issuer a written notice (an "Exercise Notice"; the date of which being herein
referred to as the "Notice Date") to that effect which Exercise Notice also
specifies the number of Option Shares, if any, Grantee wishes to purchase
pursuant to this Section 2(b), the number of Option Shares, if any, with
respect to which Grantee wishes to exercise its Cash-Out Right (as defined
herein) pursuant to Section 7(c), the denominations of the certificate or
certificates evidencing the Option Shares which Grantee wishes to purchase
pursuant to this Section 2(b) and a date not earlier than 20 business days nor
later than 30 business days from the Notice Date for the closing (an "Option
Closing") of such purchase (an "Option Closing Date"). Any Option Closing will
be at an agreed location and time in New York, New York on the applicable
Option Closing Date or at such later date as may be necessary so as to comply
with clause (ii) of Section 2(a).
<PAGE>
(c) Notwithstanding anything to the contrary contained herein, any exercise
of the Option and purchase of Option Shares shall be subject to compliance
with applicable laws and regulations, which may prohibit the purchase of all
the Option Shares specified in the Exercise Notice without first obtaining or
making certain Regulatory Approvals. In such event, if the Option is otherwise
exercisable and Grantee wishes to exercise the Option, the Option may be
exercised in accordance with Section 2(b) and Grantee shall acquire the
maximum number of Option Shares specified in the Exercise Notice that Grantee
is then permitted to acquire under the applicable laws and regulations, and if
Grantee thereafter obtains the Regulatory Approvals to acquire the remaining
balance of the Option Shares specified in the Exercise Notice, then Grantee
shall be entitled to acquire such remaining balance. Issuer agrees to use its
reasonable best efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory Approval
required for the purchase of any Option Shares will not be issued or granted or
(ii) such Regulatory Approval has not been issued or granted within six months
of the date of the Exercise Notice, Grantee shall have the right to exercise its
Cash-Out Right (as defined herein) pursuant to Section 7(c) with respect to the
Option Shares for which such Regulatory Approval will not be issued or granted
or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option Closing, Grantee
will pay to Issuer in same day funds by wire transfer to a bank account
designated in writing by Issuer an amount equal to the Purchase Price multiplied
by the number of Option Shares to be purchased at such Option Closing.
(b) At any Option Closing, simultaneously with the delivery of same day
funds as provided in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such Option Closing, which Option Shares will be free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever. If at the time of
issuance of Option Shares pursuant to an exercise of the Option hereunder,
Issuer shall not have issued any securities similar to rights under a
shareholder rights plan, then each Option Share issued pursuant to such
exercise will also represent such a corresponding right with terms
substantially the same as and at least as favorable to Grantee as are provided
under any Issuer shareholder rights agreement or any similar agreement then in
effect.
(c) Certificates for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1993, AND MAY BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR IF ANY EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED
AS OF MAY 26, 1998, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF
MAY & SPEH, INC. AT ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have
been sold in compliance with the registration and prospectus delivery
requirements of the Securities Act, such Option Shares have been sold in
reliance on and in accordance with Rule 144 under the Securities Act or
Grantee has delivered to Issuer a copy of a letter from the staff of the SEC,
or an opinion of counsel in form and substance reasonably satisfactory to
Issuer and its counsel, to the effect that such legend is not required for
purposes of the Securities Act and (ii) the reference to restrictions pursuant
to this Agreement in the above legend will be removed by delivery of
substitute certificate(s) without such reference if the Option Shares
evidenced by certificate(s) containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
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<PAGE>
4. Incorporation of Representations and Warranties of Issuer. The
representations and warranties of Issuer contained in Article V of the Merger
Agreement are hereby incorporated by reference herein with the same force and
effect as though made pursuant to this Agreement.
5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Corporate Authorization. Issuer has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer, and no other corporate proceedings on the part
of Issuer are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Issuer, and assuming this Agreement constitutes a valid and
binding agreement of Grantee, this Agreement constitutes a valid and binding
agreement of Issuer, enforceable against Issuer in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
(b) Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and, subject to the expiration or termination
of any required waiting period under the HSR Act, to permit it to issue, and,
at all times from the date hereof until the obligation to deliver Option
Shares upon the exercise of the Option terminates, shall have reserved for
issuance, upon exercise of the Option, shares of Issuer Common Stock necessary
for Grantee to exercise the Option, and Issuer will take all necessary
corporate action to authorize and reserve for issuance all additional shares
of Issuer Common Stock or other securities which may be issued pursuant to
Section 7 upon exercise of the Option. The shares of Issuer Common Stock to be
issued upon due exercise of the Option, including all additional shares of
Issuer Common Stock or other securities which may be issuable upon exercise of
the Option or any other securities which may be issued pursuant to Section 7,
upon issuance pursuant hereto, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever, including without
limitation any preemptive rights of any stockholder of Issuer.
6. Representations and Warranties of Grantee. Grantee hereby represents and
warrants to Issuer that:
(a) Corporate Authorization. Grantee has the corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Grantee, and no other corporate proceedings on the part
of Grantee are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Grantee, and assuming this Agreement constitutes a valid and
binding agreement of Issuer, this Agreement constitutes a valid and binding
agreement of Grantee, enforceable against Grantee in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
(b) Purchase Not For Distribution. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, and the Option is
not being, acquired by Grantee with a view to the public distribution thereof.
Neither the Option nor any of the Option Shares will be offered, sold, pledged
or otherwise transferred except in compliance with, or pursuant to an
exemption from, the registration requirements of the Securities Act.
7. Adjustment upon Changes in Capitalization, Etc. (a) In the event of any
changes in Issuer Common Stock by reason of a stock dividend, reverse stock
split, merger, recapitalization, combination, exchange of shares, or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, will be adjusted appropriately, and proper
provision will be made in the agreements governing such transaction, so that
Grantee will receive upon exercise of the Option the number and class of shares
or
B-3
<PAGE>
other securities or property that Grantee would have received with respect to
Issuer Common Stock if the Option had been exercised immediately prior to such
event or the record date therefor, as applicable.
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that the Issuer enters into an agreement (i) to
consolidate with or merge into any person, other than Grantee or one of its
subsidiaries, and Issuer will not be the continuing or surviving corporation
in such consolidation or merger, (ii) to permit any person, other than Grantee
or one of its subsidiaries, to merge into Issuer and Issuer will be the
continuing or surviving corporation, but in connection with such merger, the
shares of Issuer Common Stock outstanding immediately prior to the
consummation of such merger will be changed into or exchanged for stock or
other securities of Issuer or any other person or cash or any other property,
or the shares of Issuer Common Stock outstanding immediately prior to the
consummation of such merger will, after such merger represent less than 50% of
the outstanding voting securities of the merged company, or (iii) to sell or
otherwise transfer all or substantially all of its assets to any person, other
than Grantee or one of its subsidiaries, then, and in each such case, the
agreement governing such transaction will make proper provision so that the
Option will, upon the consummation of any such transaction and upon the terms
and condition set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class of
shares or other securities or property that Grantee would have received in
respect of Issuer Common Stock if the Option had been exercised immediately
prior to such consolidation, merger, sale, or transfer, or the record date
therefor, as applicable and make any other necessary adjustments.
(c) If, at any time during the period commencing on the occurrence of an
event as a result of which Grantee is entitled to receive the Company
Termination Fee pursuant to Section 7.12 of the Merger Agreement (the
"Purchase Event") and ending on the termination of the Option in accordance
with Section 2, Grantee sends to Issuer an Exercise Notice indicating
Grantee's election to exercise its right (the "Cash-Out-Right") pursuant to
this Section 7(c), then Issuer shall pay to Grantee, on the Option Closing
Date, in exchange for the cancellation of the Option with respect to such
number of Option Shares as Grantee specifies in the Exercise Notice, an amount
in cash equal to such number of Option Shares multiplied by the difference
between (i) the average closing price for the 10 trading days commencing on
the 12th Nasdaq trading day immediately preceding the Notice Date, per share
of Issuer Common Stock as reported on the Nasdaq National Market (or, if not
listed on the Nasdaq, as reported on any other national securities exchange or
national securities quotation system on which the Issuer Common Stock is
listed or quoted, as reported in The Wall Street Journal (Northeast edition),
or, if not reported thereby, any other authoritative source) (the "Closing
Price") and (ii) the Purchase Price, except that in no event shall the Issuer
be required to pay to the Grantee pursuant to this Section 7(c) an amount
exceeding the product of (x) $2.00 and (y) such number of Option Shares.
Notwithstanding the termination of the Option, Grantee will be entitled to
exercise its rights under this Section 7(c) if it has exercised such rights in
accordance with the terms hereof prior to the termination of the Option.
8. Repurchase Option. In the event that Grantee notifies Issuer of its
intention to exercise the Option pursuant to Section 2(a), Issuer may require
Grantee upon the delivery to Grantee of written notice during the period
beginning on the Notice Date and ending two days prior to the Option Closing
Date, to sell to Issuer the Option Shares acquired by Grantee pursuant to such
exercise of the Option at a purchase price per share for such sale equal to the
Purchase Price plus $2.00. The Closing of any repurchase of Option Shares
pursuant to this Section 8 shall take place immediately following consummation
of the sale of the Option Shares to Grantee on the Option Closing Date at the
location and time agreed upon with respect to such Option Closing Date.
9. Registration Rights.
(a) Grantee may by written notice (a "Registration Notice") to Issuer request
Issuer to register under the Securities Act all or any part of the Option Shares
or other securities acquired by Grantee pursuant to this Agreement
(collectively, the "Registrable Securities") in order to permit the sale or
other disposition of such securities pursuant to a bona fide, firm commitment
underwritten public offering in which Grantee and the underwriters shall effect
as wide a distribution of such Registrable Securities as is reasonably
practicable and
B-4
<PAGE>
shall use reasonable efforts to prevent any person or group from purchasing
through such offering shares representing more than 3% of the shares of Issuer
Common Stock then outstanding on a fully-diluted basis; provided, however, that
any such Registration Notice must relate to a number of shares equal to at least
2% of the shares of Issuer Common Stock then outstanding on a fully-diluted
basis and that any rights to require registration hereunder shall terminate with
respect to any shares that may be sold pursuant to Rule 144(k) under the
Securities Act.
(b) Issuer shall use reasonable best efforts to effect, as promptly as
practicable, the registration under the Securities Act of the Registrable
Securities requested to be registered in the Registration Notice; provided,
however, that (i) Grantee shall not be entitled to more than an aggregate of two
effective registration statements hereunder and (ii) Issuer will not be required
to file any such registration statement during any period of time (not to exceed
40 days after a Registration Notice in the case of clause (A) below or 90 days
after a Registration Notice in the case of clauses (B) and (C) below) when (A)
Issuer is in possession of material non-public information which it reasonably
believes would be detrimental to be disclosed at such time and, based upon the
advice of outside securities counsel to Issuer, such information would have to
be disclosed if a registration statement were filed at that time; (B) Issuer
would be required under the Securities Act to include audited financial
statements for any period in such registration statement and such financial
statements are not yet available for inclusion in such registration statement;
or (C) Issuer determines, in its reasonable judgment, that such registration
would interfere with any financing, acquisition or other material transaction
involving Issuer. If the consummation of the sale of any Registrable Securities
pursuant to a registration hereunder does not occur within 180 days after the
filing with the SEC of the initial registration statement therefor, the
provisions of this Section shall again be applicable to any proposed
registration, it being understood that Grantee shall not be entitled to more
than an aggregate of two effective registration statements hereunder. Issuer
will use reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are required
therefor, and to keep such registration statement effective for such period not
in excess of 180 calendar days from the day such registration statement first
becomes effective as may be reasonably necessary to effect such sale or other
disposition. Issuer shall use reasonable best efforts to cause any Registrable
Securities registered pursuant to this Section to be qualified for sale under
the securities or blue sky laws of such jurisdictions as Grantee may reasonably
request and shall continue such registration or qualification in effect in such
jurisdictions; provided, however, that Issuer shall not be required to qualify
to do business in, or consent to general service of process in, any
jurisdiction.
(c) If Issuer effects a registration under the Securities Act of Issuer Common
Stock for its own account or for any other stockholders of Issuer (other than on
Form S-4 or Form S-8, or any successor form), it will allow Grantee the right to
participate in such registration, and such participation will not affect the
obligation of Issuer to effect demand registration statements for Grantee under
this Section 9, except that, if the managing underwriters of such offering
advise Issuer in writing that in their opinion the number of shares of Issuer
Common Stock requested to be included in such registration exceeds the number
which can be sold in such offering, Issuer will include the shares requested to
be included therein by Grantee pro rata with the shares intended to be included
therein by Issuer.
(d) The registration rights set forth in this Section are subject to the
condition that Grantee shall provide Issuer with such information with respect
to Grantee Registrable Securities, the plan for distribution thereof, and such
other information with respect to Grantee as, in the reasonable judgment of
counsel for Issuer, is necessary to enable Issuer to include in a registration
statement all material facts required to be disclosed with respect to a
registration hereunder.
(e) A registration effected under this Section shall be effected at Issuer's
expense, except for underwriting discounts and commissions and the fees and
expenses of Grantee's counsel, and Issuer shall provide to the underwriters such
documentation (including certificates, opinions of counsel and "comfort" letters
from auditors) as are customary in connection with underwritten public offerings
and as such underwriters may reasonably require. In connection with any
registration, Grantee and Issuer agree to enter into an underwriting agreement
reasonably acceptable to each such party, in form and substance customary for
transactions of this type.
B-5
<PAGE>
10. Transfers. The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of except (i) pursuant to Section 8 hereof, (ii) in an
underwritten public offering as provided in Section 9 or (iii) to any purchaser
or transferee who would not, to the knowledge of the Grantee after reasonable
inquiry, immediately following such sale, assignment, transfer or disposal
beneficially own more than 4.9% of the then-outstanding voting power of the
Issuer, except that Grantee shall be permitted to sell any Option Shares if such
sale is made pursuant to a tender or exchange offer that has been approved or
recommended by a majority of the members of the Board of Directors of Issuer
(which majority shall include a majority of directors who were directors as of
the date hereof).
11. Listing. If Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on the Nasdaq (or any other national
securities exchange or national securities quotation system), Issuer, upon the
request of Grantee, will promptly file an application to list the shares of
Issuer Common Stock or other securities to be acquired upon exercise of the
Option on the Nasdaq (and any such other national securities exchange or
national securities quotation system) and will use reasonable efforts to obtain
approval of such listing as promptly as practicable.
12. Miscellaneous. (a) Expenses. Except as otherwise provided in the Merger
Agreement, each of the parties hereto will pay all costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Amendment. This Agreement may not be amended, except by an instrument in
writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement, the Merger
Agreement (including the documents and instruments attached thereto as exhibits
or schedules or delivered in connection therewith) and the Confidentiality
Agreement (i) constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement, and (ii) are not intended to
confer upon any person other than the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
(f) Notices. All notices, requests, claims, demands, and other communications
under this Agreement must be in writing and will be deemed given if delivered
personally, telecopied (which is confirmed), or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
If to Issuer to:
May & Speh, Inc.
1501 Opus Place
Downers Grove, IL 60515
Fax: (630) 719-0525
Attention: Chief Executive Officer
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
Fax: (312) 558-5700
Attention: Bruce A. Toth
B-6
<PAGE>
If to Grantee to:
Acxiom Corporation
P.O. Box 2000
301 Industrial Boulevard
Conway, AR 72033-2000
Fax: (501) 336-3913
Attention: President
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell
Telecopy: (212) 735-2000
(g) Assignment. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned, transferred or
delegated, in whole or in part, by operation of law or otherwise, by Issuer or
Grantee without the prior written consent of the other. Any assignment, transfer
or delegation in violation of the preceding sentence will be void. Subject to
the first and second sentences of this Section 12(g), this Agreement will be
binding upon, inure to the benefit of, and be enforceable by, the parties and
their respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the Option by Grantee,
Issuer and Grantee will execute and deliver all other documents and instruments
and take all other action that may be reasonably necessary in order to
consummate the transactions provided for by such exercise.
(i) Enforcement. The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that any
of the provisions of this Agreement were not performed in accordance with their
specific terms or were otherwise breached. It is accordingly agreed that the
parties will be entitled to an injunction or injunctions to prevent breaches of
this Agreement and to enforce specifically the terms and provisions of this
Agreement in any Federal court located in the State of Delaware or in Delaware
state court, the foregoing being in addition to any other remedy to which they
are entitled at law or in equity. In addition, each of the parties hereto (i)
consents to submit itself to the personal jurisdiction of any Federal court
located in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions contemplated by
this Agreement, (ii) agrees that it will not attempt to deny or defeat such
personal jurisdiction by motion or other request for leave from any such court,
and (iii) agrees that it will not bring any action relating to this Agreement or
any of the transactions contemplated by this Agreement in any court other than a
Federal court sitting in the State of Delaware or a Delaware state court.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be signed
by their respective officers thereunto duly authorized as of the day and year
first written above.
May & Speh, Inc.
/s/ Peter I. Mason
By: _________________________________
Name: Peter I. Mason
Title: Chairman, President and CEO
Acxiom Corporation
/s/ Charles D. Morgan
By: _________________________________
Name: Charles D. Morgan
Title: President
B-7
<PAGE>
ANNEX C
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 26, 1998 (the "Agreement"), between
Acxiom Corporation, a Delaware corporation ("Issuer"), and May & Speh, Inc., a
Delaware corporation ("Grantee").
RECITALS
A. Issuer and Grantee have entered into an Agreement and Plan of Merger, dated
as of the date hereof (the "Merger Agreement"; defined terms used but not
defined herein have the meanings set forth in the Merger Agreement), providing
for, among other things, the merger of Sub with and into Grantee pursuant to the
terms of the Merger; and
B. As a condition and inducement to Grantee's willingness to enter into the
Merger Agreement, Grantee has requested that Issuer agree, and Issuer has
agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein, Issuer
and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth herein,
Issuer hereby grants to Grantee an irrevocable option (the "Option") to purchase
up to 19.9% of the number of shares (the "Option Shares") of common stock, par
value $0.10 per share ("Issuer Common Stock"), of Issuer issued and outstanding
immediately prior to the grant of the Option at a purchase price of $23.55 (as
adjusted as set forth herein) per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, with respect to
any or all of the Option Shares at any one time, subject to the provisions of
Section 2(c), upon the occurrence of a Purchase Event (as defined in Section
7(c)), except that (i) subject to the last sentence of this Section 2(a), the
Option will terminate and be of no further force and effect upon the earliest to
occur of (A) the Effective Time, (B) six months after the date on which a
Purchase Event (as defined herein) occurs, and (C) termination of the Merger
Agreement in accordance with its terms prior to the occurrence of a Purchase
Event, unless, in the case of clause (C), the Grantee has the right to receive
the Parent Termination Fee following such termination upon the occurrence of
certain events, in which case the Option will not terminate until the later of
(x) six months following the time such Parent Termination Fee becomes payable
and (y) the expiration of the period in which the Grantee has such right to
receive a Parent Termination Fee, and (ii) any purchase of Option Shares upon
exercise of the Option will be subject to compliance with the HSR Act and the
obtaining or making of any consents, approvals, orders, notifications or
authorizations, the failure of which to have obtained or made would have the
effect of making the issuance of Option Shares illegal (the "Regulatory
Approvals") and no preliminary or permanent injunction or other order by any
court of competent jurisdiction prohibiting or otherwise restraining such
issuance shall be in effect. Notwithstanding the termination of the Option,
Grantee will be entitled to purchase the Option Shares if it has exercised the
Option in accordance with the terms hereof prior to the termination of the
Option, and the termination of the Option will not affect any rights hereunder
which by their terms do not terminate or expire prior to or as of such
termination.
(b) In the event that Grantee wishes to exercise the Option, it will send to
Issuer a written notice (an "Exercise Notice"; the date of which being herein
referred to as the "Notice Date") to that effect which Exercise Notice also
specifies the number of Option Shares, if any, Grantee wishes to purchase
pursuant to this Section 2(b), the number of Option Shares, if any, with
respect to which Grantee wishes to exercise its Cash-Out Right (as defined
herein) pursuant to Section 7(c), the denominations of the certificate or
certificates evidencing the Option Shares which Grantee wishes to purchase
pursuant to this Section 2(b) and a date not earlier than 20 business days nor
later than 30 business days from the Notice Date for the closing (an "Option
Closing") of such purchase (an "Option Closing Date"). Any Option Closing will
be at an agreed location and time in New York, New York on the applicable
Option Closing Date or at such later date as may be necessary so as to comply
with clause (ii) of Section 2(a).
<PAGE>
(c) Notwithstanding anything to the contrary contained herein, any exercise
of the Option and purchase of Option Shares shall be subject to compliance
with applicable laws and regulations, which may prohibit the purchase of all
the Option Shares specified in the Exercise Notice without first obtaining or
making certain Regulatory Approvals. In such event, if the Option is otherwise
exercisable and Grantee wishes to exercise the Option, the Option may be
exercised in accordance with Section 2(b) and Grantee shall acquire the
maximum number of Option Shares specified in the Exercise Notice that Grantee
is then permitted to acquire under the applicable laws and regulations, and if
Grantee thereafter obtains the Regulatory Approvals to acquire the remaining
balance of the Option Shares specified in the Exercise Notice, then Grantee
shall be entitled to acquire such remaining balance. Issuer agrees to use its
reasonable best efforts to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory Approval
required for the purchase of any Option Shares will not be issued or granted or
(ii) such Regulatory Approval has not been issued or granted within six months
of the date of the Exercise Notice, Grantee shall have the right to exercise its
Cash-Out Right (as defined herein) pursuant to Section 7(c) with respect to the
Option Shares for which such Regulatory Approval will not be issued or granted
or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option Closing, Grantee
will pay to Issuer in same day funds by wire transfer to a bank account
designated in writing by Issuer an amount equal to the Purchase Price multiplied
by the number of Option Shares to be purchased at such Option Closing.
(b) At any Option Closing, simultaneously with the delivery of same day
funds as provided in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased at
such Option Closing, which Option Shares will be free and clear of all liens,
claims, charges and encumbrances of any kind whatsoever. If at the time of
issuance of Option Shares pursuant to an exercise of the Option hereunder,
Issuer shall not have issued any securities similar to rights under a
shareholder rights plan, then each Option Share issued pursuant to such
exercise will also represent such a corresponding right with terms
substantially the same as and at least as favorable to Grantee as are provided
under any Issuer shareholder rights agreement or any similar agreement then in
effect.
(c) Certificates for the Option Shares delivered at an Option Closing will
have typed or printed thereon a restrictive legend which will read
substantially as follows:
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN REGISTERED
UNDER THE SECURITIES ACT OF 1933, AND MAY BE OFFERED, SOLD, PLEDGED OR
OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR IF ANY EXEMPTION FROM SUCH
REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE ALSO SUBJECT TO ADDITIONAL
RESTRICTIONS ON TRANSFER AS SET FORTH IN THE STOCK OPTION AGREEMENT, DATED AS
OF MAY 26, 1998, A COPY OF WHICH MAY BE OBTAINED FROM THE SECRETARY OF AXCIOM
CORPORATION AT ITS PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have been
sold in compliance with the registration and prospectus delivery requirements of
the Securities Act, such Option Shares have been sold in reliance on and in
accordance with Rule 144 under the Securities Act or Grantee has delivered to
Issuer a copy of a letter from the staff of the SEC, or an opinion of counsel in
form and substance reasonably satisfactory to Issuer and its counsel, to the
effect that such legend is not required for purposes of the Securities Act and
(ii) the reference to restrictions pursuant to this Agreement in the above
legend will be removed by delivery of substitute certificate(s) without such
reference if the Option Shares evidenced by certificate(s) containing such
reference have been sold or transferred in compliance with the provisions of
this Agreement under circumstances that do not require the retention of such
reference.
4. Incorporation of Representations and Warranties of Issuer. The
representations and warranties of Issuer contained in Article V of the Merger
Agreement are hereby incorporated by reference herein with the same force and
effect as though made pursuant to this Agreement.
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5. Representations and Warranties of Issuer. Issuer hereby represents and
warrants to Grantee as follows:
(a) Corporate Authorization. Issuer has the corporate power and authority to
enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Issuer, and no other corporate proceedings on the part
of Issuer are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Issuer, and assuming this Agreement constitutes a valid and
binding agreement of Grantee, this Agreement constitutes a valid and binding
agreement of Issuer, enforceable against Issuer in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
(b) Authorized Stock. Issuer has taken all necessary corporate and other
action to authorize and reserve and, subject to the expiration or termination
of any required waiting period under the HSR Act, to permit it to issue, and,
at all times from the date hereof until the obligation to deliver Option
Shares upon the exercise of the Option terminates, shall have reserved for
issuance, upon exercise of the Option, shares of Issuer Common Stock necessary
for Grantee to exercise the Option, and Issuer will take all necessary
corporate action to authorize and reserve for issuance all additional shares
of Issuer Common Stock or other securities which may be issued pursuant to
Section 7 upon exercise of the Option. The shares of Issuer Common Stock to be
issued upon due exercise of the Option, including all additional shares of
Issuer Common Stock or other securities which may be issuable upon exercise of
the Option or any other securities which may be issued pursuant to Section 7,
upon issuance pursuant hereto, will be duly and validly issued, fully paid and
nonassessable, and will be delivered free and clear of all liens, claims,
charges and encumbrances of any kind or nature whatsoever, including without
limitation any preemptive rights of any stockholder of Issuer.
6. Representations and Warranties of Grantee. Grantee hereby represents and
warrants to Issuer that:
(a) Corporate Authorization. Grantee has the corporate power and authority
to enter into this Agreement and to carry out its obligations hereunder. The
execution and delivery of this Agreement and the consummation of the
transactions contemplated hereby have been duly and validly authorized by the
Board of Directors of Grantee, and no other corporate proceedings on the part
of Grantee are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Grantee, and assuming this Agreement constitutes a valid and
binding agreement of Issuer, this Agreement constitutes a valid and binding
agreement of Grantee, enforceable against Grantee in accordance with its terms
(except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of equitable
remedies).
(b) Purchase Not For Distribution. Any Option Shares or other securities
acquired by Grantee upon exercise of the Option will not be, and the Option is
not being, acquired by Grantee with a view to the public distribution thereof.
Neither the Option nor any of the Option Shares will be offered, sold, pledged
or otherwise transferred except in compliance with, or pursuant to an
exemption from, the registration requirements of the Securities Act.
7. Adjustment upon Changes in Capitalization, Etc. (a) In the event of any
changes in Issuer Common Stock by reason of a stock dividend, reverse stock
split, merger, recapitalization, combination, exchange of shares, or similar
transaction, the type and number of shares or securities subject to the Option,
and the Purchase Price therefor, will be adjusted appropriately, and proper
provision will be made in the agreements governing such transaction, so that
Grantee will receive upon exercise of the Option the number and class of shares
or other securities or property that Grantee would have received with respect to
Issuer Common Stock if the Option had been exercised immediately prior to such
event or the record date therefor, as applicable.
(b) Without limiting the parties' relative rights and obligations under the
Merger Agreement, in the event that the Issuer enters into an agreement (i) to
consolidate with or merge into any person, other than
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Grantee or one of its subsidiaries, and Issuer will not be the continuing or
surviving corporation in such consolidation or merger, (ii) to permit any
person, other than Grantee or one of its subsidiaries, to merge into Issuer
and Issuer will be the continuing or surviving corporation, but in connection
with such merger, the shares of Issuer Common Stock outstanding immediately
prior to the consummation of such merger will be changed into or exchanged for
stock or other securities of Issuer or any other person or cash or any other
property, or the shares of Issuer Common Stock outstanding immediately prior
to the consummation of such merger will, after such merger represent less than
50% of the outstanding voting securities of the merged company, or (iii) to
sell or otherwise transfer all or substantially all of its assets to any
person, other than Grantee or one of its subsidiaries, then, and in each such
case, the agreement governing such transaction will make proper provision so
that the Option will, upon the consummation of any such transaction and upon
the terms and condition set forth herein, be converted into, or exchanged for,
an option with identical terms appropriately adjusted to acquire the number
and class of shares or other securities or property that Grantee would have
received in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such consolidation, merger, sale, or transfer, or the
record date therefor, as applicable and make any other necessary adjustments.
(c) If, at any time during the period commencing on the occurrence of an
event as a result of which Grantee is entitled to receive the Parent
Termination Fee pursuant to Section 7.12 of the Merger Agreement (the
"Purchase Event") and ending on the termination of the Option in accordance
with Section 2, Grantee sends to Issuer an Exercise Notice indicating
Grantee's election to exercise its right (the "Cash-Out-Right") pursuant to
this Section 7(c), then Issuer shall pay to Grantee, on the Option Closing
Date, in exchange for the cancellation of the Option with respect to such
number of Option Shares as Grantee specifies in the Exercise Notice, an amount
in cash equal to such number of Option Shares multiplied by the difference
between (i) the average closing price for the 10 trading days commencing on
the 12th Nasdaq trading day immediately preceding the Notice Date, per share
of Issuer Common Stock as reported on the Nasdaq National Market (or, if not
listed on the Nasdaq, as reported on any other national securities exchange or
national securities quotation system on which the Issuer Common Stock is
listed or quoted, as reported in The Wall Street Journal (Northeast edition),
or, if not reported thereby, any other authoritative source) (the "Closing
Price") and (ii) the Purchase Price, except that in no event shall the Issuer
be required to pay to the Grantee pursuant to this Section 7(c) an amount
exceeding the product of (x) $1.00 and (y) such number of Option Shares.
Notwithstanding the termination of the Option, Grantee will be entitled to
exercise its rights under this Section 7(c) if it has exercised such rights in
accordance with the terms hereof prior to the termination of the Option.
8. Repurchase Option. In the event that Grantee notifies Issuer of its
intention to exercise the Option pursuant to Section 2(a), Issuer may require
Grantee upon the delivery to Grantee of written notice during the period
beginning on the Notice Date and ending two days prior to the Option Closing
Date, to sell to Issuer the Option Shares acquired by Grantee pursuant to such
exercise of the Option at a purchase price per share for such sale equal to the
Purchase Price plus $1.00. The Closing of any repurchase of Option Shares
pursuant to this Section 8 shall take place immediately following consummation
of the sale of the Option Shares to Grantee on the Option Closing Date at the
location and time agreed upon with respect to such Option Closing Date.
9. Registration Rights.
(a) Grantee may by written notice (a "Registration Notice") to Issuer
request Issuer to register under the Securities Act all or any part of the
Option Shares or other securities acquired by Grantee pursuant to this
Agreement (collectively, the "Registrable Securities") in order to permit the
sale or other disposition of such securities pursuant to a bona fide, firm
commitment underwritten public offering in which Grantee and the underwriters
shall effect as wide a distribution of such Registrable Securities as is
reasonably practicable and shall use reasonable efforts to prevent any person
or group from purchasing through such offering shares representing more than
3% of the shares of Issuer Common Stock then outstanding on a fully-diluted
basis; provided, however, that any such Registration Notice must relate to a
number of shares equal to at least 2% of the shares of Issuer Common Stock
then outstanding on a fully-diluted basis and
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<PAGE>
that any rights to require registration hereunder shall terminate with respect
to any shares that may be sold pursuant to Rule 144(k) under the Securities
Act.
(b) Issuer shall use reasonable best efforts to effect, as promptly as
practicable, the registration under the Securities Act of the Registrable
Securities requested to be registered in the Registration Notice; provided,
however, that (i) Grantee shall not be entitled to more than an aggregate of
two effective registration statements hereunder and (ii) Issuer will not be
required to file any such registration statement during any period of time
(not to exceed 40 days after a Registration Notice in the case of clause (A)
below or 90 days after a Registration Notice in the case of clauses (B) and
(C) below) when (A) Issuer is in possession of material non-public information
which it reasonably believes would be detrimental to be disclosed at such time
and, based upon the advice of outside securities counsel to Issuer, such
information would have to be disclosed if a registration statement were filed
at that time; (B) Issuer would be required under the Securities Act to include
audited financial statements for any period in such registration statement and
such financial statements are not yet available for inclusion in such
registration statement; or (C) Issuer determines, in its reasonable judgment,
that such registration would interfere with any financing, acquisition or
other material transaction involving Issuer. If the consummation of the sale
of any Registrable Securities pursuant to a registration hereunder does not
occur within 180 days after the filing with the SEC of the initial
registration statement therefor, the provisions of this Section shall again be
applicable to any proposed registration, it being understood that Grantee
shall not be entitled to more than an aggregate of two effective registration
statements hereunder. Issuer will use reasonable efforts to cause each such
registration statement to become effective, to obtain all consents or waivers
of other parties which are required therefor, and to keep such registration
statement effective for such period not in excess of 180 calendar days from
the day such registration statement first becomes effective as may be
reasonably necessary to effect such sale or other disposition. Issuer shall
use reasonable best efforts to cause any Registrable Securities registered
pursuant to this Section to be qualified for sale under the securities or blue
sky laws of such jurisdictions as Grantee may reasonably request and shall
continue such registration or qualification in effect in such jurisdictions;
provided, however, that Issuer shall not be required to qualify to do business
in, or consent to general service of process in, any jurisdiction.
(c) If Issuer effects a registration under the Securities Act of Issuer
Common Stock for its own account or for any other stockholders of Issuer
(other than on Form S-4 or Form S-8, or any successor form), it will allow
Grantee the right to participate in such registration, and such participation
will not affect the obligation of Issuer to effect demand registration
statements for Grantee under this Section 9, except that, if the managing
underwriters of such offering advise Issuer in writing that in their opinion
the number of shares of Issuer Common Stock requested to be included in such
registration exceeds the number which can be sold in such offering, Issuer
will include the shares requested to be included therein by Grantee pro rata
with the shares intended to be included therein by Issuer.
(d) The registration rights set forth in this Section are subject to the
condition that Grantee shall provide Issuer with such information with respect
to Grantee Registrable Securities, the plan for distribution thereof, and such
other information with respect to Grantee as, in the reasonable judgment of
counsel for Issuer, is necessary to enable Issuer to include in a registration
statement all material facts required to be disclosed with respect to a
registration hereunder.
(e) A registration effected under this Section shall be effected at Issuer's
expense, except for underwriting discounts and commissions and the fees and
expenses of Grantee's counsel, and Issuer shall provide to the underwriters
such documentation (including certificates, opinions of counsel and "comfort"
letters from auditors) as are customary in connection with underwritten public
offerings and as such underwriters may reasonably require. In connection with
any registration, Grantee and Issuer agree to enter into an underwriting
agreement reasonably acceptable to each such party, in form and substance
customary for transactions of this type.
10. Transfers. The Option Shares may not be sold, assigned, transferred, or
otherwise disposed of except (i) pursuant to Section 8 hereof, (ii) in an
underwritten public offering as provided in Section 9 or (iii) to any purchaser
or transferee who would not, to the knowledge of the Grantee after reasonable
inquiry, immediately
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<PAGE>
following such sale, assignment, transfer or disposal beneficially own more than
4.9% of the then-outstanding voting power of the Issuer, except that Grantee
shall be permitted to sell any Option Shares if such sale is made pursuant to a
tender or exchange offer that has been approved or recommended by a majority of
the members of the Board of Directors of Issuer (which majority shall include a
majority of directors who were directors as of the date hereof).
11. Listing. If Issuer Common Stock or any other securities to be acquired
upon exercise of the Option are then listed on the Nasdaq (or any other national
securities exchange or national securities quotation system), Issuer, upon the
request of Grantee, will promptly file an application to list the shares of
Issuer Common Stock or other securities to be acquired upon exercise of the
Option on the Nasdaq (and any such other national securities exchange or
national securities quotation system) and will use reasonable efforts to obtain
approval of such listing as promptly as practicable.
12. Miscellaneous. (a) Expenses. Except as otherwise provided in the Merger
Agreement, each of the parties hereto will pay all costs and expenses incurred
by it or on its behalf in connection with the transactions contemplated
hereunder, including fees and expenses of its own financial consultants,
investment bankers, accountants and counsel.
(b) Amendment. This Agreement may not be amended, except by an instrument in
writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to waive any
provision of this Agreement, or to extend the time for performance, will be
valid only if set forth in an instrument in writing signed on behalf of such
party. The failure of any party to this Agreement to assert any of its rights
under this Agreement or otherwise will not constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement, the Merger
Agreement (including the documents and instruments attached thereto as exhibits
or schedules or delivered in connection therewith) and the Confidentiality
Agreement (i) constitute the entire agreement, and supersede all prior
agreements and understandings, both written and oral, between the parties with
respect to the subject matter of this Agreement, and (ii) are not intended to
confer upon any person other than the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and construed in
accordance with, the laws of the State of Delaware, regardless of the laws that
might otherwise govern under applicable principles of conflict of laws thereof.
(f) Notices. All notices, requests, claims, demands, and other communications
under this Agreement must be in writing and will be deemed given if delivered
personally, telecopied (which is confirmed), or sent by overnight courier
(providing proof of delivery) to the parties at the following addresses (or at
such other address for a party as shall be specified by like notice):
If to Issuer to:
Acxiom Corporation
P.O. Box 2000
301 Industrial Boulevard
Conway, AR 72033-2000
Fax: (501) 336-3913
Attention: President
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell
Telecopy: (212) 735-2000
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<PAGE>
If to Grantee to:
May & Speh, Inc.
1501 Opus Place
Downes Grove, IL 60515
Fax: (630) 719-0525
Attention: Chief Executive Officer
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
Fax: (312) 558-5700
Attention: Bruce A. Toth
(g) Assignment. Neither this Agreement, the Option nor any of the rights,
interests, or obligations under this Agreement may be assigned, transferred or
delegated, in whole or in part, by operation of law or otherwise, by Issuer or
Grantee without the prior written consent of the other. Any assignment,
transfer or delegation in violation of the preceding sentence will be void.
Subject to the first and second sentences of this Section 12(g), this
Agreement will be binding upon, inure to the benefit of, and be enforceable
by, the parties and their respective successors and assigns.
(h) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee will execute and deliver all other documents and
instruments and take all other action that may be reasonably necessary in
order to consummate the transactions provided for by such exercise.
(i) Enforcement. The parties agree that irreparable damage would occur and
that the parties would not have any adequate remedy at law in the event that
any of the provisions of this Agreement were not performed in accordance with
their specific terms or were otherwise breached. It is accordingly agreed that
the parties will be entitled to an injunction or injunctions to prevent
breaches of this Agreement and to enforce specifically the terms and
provisions of this Agreement in any Federal court located in the State of
Delaware or in Delaware state court, the foregoing being in addition to any
other remedy to which they are entitled at law or in equity. In addition, each
of the parties hereto (i) consents to submit itself to the personal
jurisdiction of any Federal court located in the State of Delaware or any
Delaware state court in the event any dispute arises out of this Agreement or
any of the transactions contemplated by this Agreement, (ii) agrees that it
will not attempt to deny or defeat such personal jurisdiction by motion or
other request for leave from any such court, and (iii) agrees that it will not
bring any action relating to this Agreement or any of the transactions
contemplated by this Agreement in any court other than a Federal court sitting
in the State of Delaware or a Delaware state court.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to be signed
by their respective officers thereunto duly authorized as of the day and year
first written above.
ACXIOM CORPORATION
/s/ Charles D. Morgan
By: _________________________________
Name: Charles D. Morgan
Title: President
MAY & SPEH, INC.
/s/ Peter I. Mason
By: _________________________________
Name: Peter I. Mason
Title: Chairman, President, CEO
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<PAGE>
ANNEX D
STEPHENS INC.
August 17, 1998
Board of Directors
Acxiom Corporation
301 Industrial Boulevard
Conway, AR 72003
Members of the Board:
We have acted as your financial advisor in connection with the proposed merger
(the "Transaction") of Acxiom Corporation ("Acxiom") and May and Speh, Inc.
("May and Speh"). The Transaction is expected to take the form of a tax free
exchange of shares pursuant to which each outstanding share of May and Speh will
be converted into the right to receive .800 shares (the "Exchange Ratio") of
common stock of Acxiom. The terms and conditions of the Transaction are more
fully set forth in the merger agreement.
You have requested our opinion as to the fairness from a financial point of
view of the Exchange Ratio utilized in the Transaction.
In connection with rendering our opinion we have:
(i) analyzed certain publicly available financial statements and reports
regarding Acxiom and May and Speh;
(ii) analyzed certain internal financial statements and other financial and
operating data (including financial projections) concerning Acxiom and
May and Speh prepared by their respective managements;
(iii) analyzed, on a pro forma basis, the effect of the Transaction on
Acxiom's balance sheet, capitalization ratios, earnings and book value
both in the aggregate and, where applicable, on a per share basis;
(iv) reviewed the reported prices and trading activity for the common stock of
Acxiom and May and Speh;
(v) compared the financial performance of Acxiom and May and Speh and the
prices and trading activity of its common stock with that of certain other
comparable publicly-traded companies and their securities;
(vi) reviewed the financial terms, to the extent publicly available, of
certain comparable transactions;
(vii) reviewed the merger agreement and related documents;
(viii) discussed with management of Acxiom and May and Speh the operations of
and future business prospects of such companies and the anticipated
financial consequences of the Transaction;
(ix) consulted with you regarding certain material terms of the
Transaction;
(x) performed such other analyses and provided such other services as we have
deemed appropriate.
We have relied on the accuracy and completeness of the information and
financial data provided to us by Acxiom and May and Speh, and our opinion is
based upon such information. We have inquired into the reliability of such
information and financial data only to the limited extent necessary to provide a
reasonable basis for our opinion, recognizing that we are rendering only an
informed opinion and not an appraisal or certification of value. With respect to
the financial projections prepared by the managements of Acxiom and May and
Speh, we have assumed that they have been reasonably prepared on bases
reflecting the best currently available estimates and judgments of future
financial performance.
INVESTMENT BANKERS
111 Center Street Post Office Box 3507 Little Rock, Arkansas 72203-3507 501-
374-4361 Fax 501-377-2674
<PAGE>
As part of our investment banking business, we regularly issue fairness
opinions and are continually engaged in the valuation of companies and their
securities in connection with business reorganizations, private placements,
negotiated underwritings, mergers and acquisitions and valuations for estate,
corporate and other purposes. We regularly provide investment banking services
to Acxiom and make a market in its common stock. In the ordinary course of
business, Stephens Inc. and its affiliates at any time may hold long or short
positions, and may trade or otherwise effect transactions as principal or for
the accounts of customers, in debt or equity securities or options of securities
of Acxiom and May and Speh. Stephens Inc. is receiving a fee, and reimbursement
of its expenses, in connection with the issuance of this fairness opinion. In
addition, Acxiom has agreed to indemnify Stephens Inc. for certain potential
liabilities arising out of the rendering of this opinion.
Our opinion is necessarily based upon market, economic and other conditions as
they exist and can be evaluated on, and on the information made available to us
as of, the date hereof. The financial markets in general and the markets for
securities of Acxiom and May and Speh, in particular, are subject to volatility,
and this opinion does not purport to address potential developments in the
financial markets or the markets for the securities of Acxiom and May and Speh
after the date hereof. We have assumed that in the course of obtaining the
necessary regulatory or other consents or approvals (contractual or otherwise)
for the Transaction, no restrictions, including any divestiture requirements or
amendments or modifications, will be imposed that will have a material adverse
effect on the contemplated benefits of the Transaction.
This opinion is being delivered for the use and benefit of the Board of
Directors of Acxiom, and neither this opinion nor any other advice or materials
provided by Stephens Inc. in connection with its engagement may be used for any
other purpose or be reproduced, disseminated, quoted or referred to at any time,
in any manner or for any purpose, nor may references to Stephens Inc. be made by
or on behalf of Acxiom without the prior written consent of Stephens Inc.;
provided, however, that the opinion and its substance may be disclosed to
Acxiom's other advisors.
This opinion and a summary discussion of our underlying analyses and role as
your financial advisor may be included in communications to Acxiom's
shareholders provided that we approve of such disclosure prior to publication.
This opinion does not address the merits of the underlying decision by Acxiom to
engage in the Transaction and does not constitute a recommendation to any Acxiom
shareholder as to how such shareholder should vote on the proposed Transaction.
Based on the foregoing and our general experience as investment bankers, and
subject to the qualifications stated herein, we are of the opinion that as of
the date hereof that the Exchange Ratio utilized in the Transaction is fair from
a financial point of view.
Very truly yours,
Stephens Inc.
/s/ Stephens Inc.
-------------------------------------
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<PAGE>
ANNEX E
DONALDSON, LUFKIN & JENRETTE
Donaldson, Lufkin & Jenrette Securities Corporation
277 Park Avenue, New York, New York 10172 - (212)892-3000
May 26, 1998
Board of Directors
May & Speh, Inc.
1501 Opus Place
Downers Grove, IL 60515
Dear Sirs and Madam:
You have requested our opinion as to the fairness from a financial point of
view to the holders of common stock, par value $0.01 per share ("Company Common
Stock"), of May & Speh, Inc. (the "Company") of the Exchange Ratio (as defined
below) contemplated by the Agreement and Plan of Merger, dated May 26, 1998 (the
"Agreement"), by and among Acxiom Corporation ("Acxiom"), ACX Acquisition Co.,
Inc. ("Merger Sub"), a wholly owned subsidiary of Acxiom, and the Company
pursuant to which Merger Sub will be merged (the "Merger") with and into the
Company.
Pursuant to the Agreement, each share of Company Common Stock will be
converted, subject to certain exceptions, into the right to receive 0.80 shares
(the "Exchange Ratio") of common stock, $0.10 par value per share, of Acxiom
("Acxiom Common Stock").
In arriving at our opinion, we have reviewed the Agreement and the exhibits
thereto and the Company Option Agreement and the Parent Option Agreement (each
as defined in the Agreement). We also have reviewed financial and other
information that was publicly available or furnished to us by the Company and
Acxiom including information provided during discussions with their respective
managements. Included in the information provided during discussions with the
respective managements were certain financial projections of the Company for the
period beginning October 1, 1998 and ending September 30, 2003 prepared by the
management of the Company and certain financial projections of Acxiom for the
period beginning April 1, 1998 and ending March 31, 2000 prepared by the
management of Acxiom. In addition, we have compared certain financial and
securities data of the Company and Acxiom with various other companies whose
securities are traded in public markets, reviewed the historical stock prices
and trading volumes of Company Common Stock and Acxiom Common Stock, reviewed
prices and premiums paid in certain other business combinations and conducted
such other financial studies, analyses and investigations as we deemed
appropriate for purposes of this opinion.
In rendering our opinion, we have relied upon and assumed the accuracy and
completeness of all the financial and other information that was available to us
from public sources, that was provided to us by the Company and Acxiom or their
respective representatives, or that was otherwise reviewed by us. In particular,
we have relied upon the estimates of the management of the Company of the
operating synergies achievable as a result of the Merger and upon our discussion
of such synergies with the management of Acxiom. With respect to the financial
projections supplied to us, we have assumed that they have been reasonably
prepared on the basis reflecting the best currently available estimates and
judgments of the management of the Company and Acxiom as to the future operating
and financial performance of the Company and Acxiom, respectively. We have not
assumed any responsibility for making an independent evaluation of any assets or
liabilities or for making any independent verification of any of the information
reviewed by us. We have further assumed that the Merger will be accounted for as
a pooling of interests under generally accepted accounting principles and that
it will qualify as a tax-free reorganization for U.S. federal income tax
purposes. We have relied as to certain legal matters on advice of counsel to the
Company.
<PAGE>
Our opinion is necessarily based on economic, market, financial and other
conditions as they exist on, and on the information made available to us as of,
the date of this letter. It should be understood that, although subsequent
developments may affect this opinion, we do not have any obligation to update,
revise or reaffirm this opinion. We are expressing no opinion herein as to the
price at which Aexiom Common Stock will actually trade at any time. Our opinion
does not address the relative merits of the Merger and the other business
strategies being considered by the Company's Board of Directors, nor does it
address the Board's decision to proceed with the Merger. Our opinion does not
constitute a recommendation to any stockholder as to how such stockholder should
vote on the proposed transaction.
Donaldson, Lufkin & Jenrette Securities Corporation ("DLJ"), as part of its
investment banking services, is regularly engaged in the valuation of businesses
and securities in connection with mergers, acquisitions, underwritings, sales
and distributions of listed and unlisted securities, private placements and
valuations for corporate and other purposes. DLJ has performed investment
banking and other services for the Company in the past and has been compensated
for such services.
Based upon the foregoing and such other factors as we deem relevant, we are of
the opinion that the Exchange Ratio is fair to the holders of the Company Common
Stock from a financial point of view.
Very truly yours,
Donaldson, Lufkin & Jenrette
Securities Corporation
By: /s/ Lawrence N. Lavine
Lawrence N. Lavine
Managing Director
E-2
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
Exculpation. Section 102(b)(7) of the DGCL 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 Charter provides that, to the fullest extent permitted by the
DGCL, 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 DGCL 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 Charter provides for indemnification of directors and officers
of Acxiom against liability they may incur in their capacities as and to the
extent authorized by the DGCL.
Insurance. Acxiom has in effect directors' and officers' liability
insurance with a limit of $20 million and fiduciary liability insurance with a
limit of $10 million. The fiduciary liability insurance covers actions of
directors and officers as well as other employees with fiduciary
responsibilities under ERISA.
Directors and Officers. The Merger Agreement provides that Acxiom shall
cause the Surviving Corporation to keep in effect in its ByLaws a provision for
a period of not less than six years from the Effective Time (or, in the case of
matters occurring prior to the Effective Time which have not been resolved prior
to the sixth anniversary of the Effective Time, until such matters are finally
resolved) which provides
1
<PAGE>
for indemnification of the past and present officers and directors (the
"Indemnified Parties") of May & Speh to the fullest extent permitted by the
DGCL. For six years from the Effective Time, Acxiom shall indemnify the
Indemnified Parties to the same extent as such Indemnified Parties are entitled
to indemnification pursuant to the preceding sentence. For a period of six years
from the Effective Time, Acxiom shall either cause to be maintained in effect
the current policies of directors' and officers' liability insurance maintained
by May & Speh or provide substitute policies of at least the same coverage and
amounts containing terms and conditions which are, in the aggregate, no less
advantageous to the insured with respect to claims arising from facts or events
that occurred on or before the Effective Time, except that in no event shall
Acxiom be required to pay with respect to such insurance policies in any one
year more than $200,000.
ITEM 21(A). EXHIBITS
See Exhibit Index.
(B) FINANCIAL STATEMENT SCHEDULES
All financial statement schedules of Acxiom and May & Speh which are
required to be included herein are included in the Annual Report of Acxiom on
Form 10-K for the fiscal year ended March 31, 1998 (File No. 0-13163) or the
Annual Report of May & Speh on Form 10-K for the fiscal year ended September 31,
1997 (File No. 0-27872), respectively, which are incorporated herein by
reference.
(C) The opinions of Stephens Inc. and Donaldson, Lufkin & Jenrette
Securities Corporation are attached as Annex D and Annex E, respectively, to the
Proxy Statement/Prospectus.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------ -----------
<S> <C>
2.1 Amended and Restated Agreement and Plan of Merger, dated as of May
26, 1998, by and among Acxiom Corporation, ACX Acquisition Co.,
Inc. and May & Speh, Inc. (attached as Annex A to the Joint Proxy
Statement/Prospectus included in this Registration Statement).*
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).
</TABLE>
2
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------ -----------
<S> <C>
4.1 Specimen Common Stock Certificate. *
4.2 Rights Agreement, dated January 28, 1998 between Acxiom and First
Chicago Trust Company of New York, 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).
5.1 Opinion of Catherine L. Hughes, Esq., General Counsel of Acxiom,
regarding the validity of the securities being registered.*
8.1 Opinion of Skadden, Arps, Slate, Meager & Flom LLP, counsel to
Acxiom, concerning certain federal income tax consequences of the
Merger. *
8.2 Opinion of Winston & Strawn, counsel to May & Speh, concerning
certain federal income tax consequences of the Merger. *
10.1 Data Center Management Agreement dated July 27, 1992 between Acxiom
and Trans Union Corporation (previously filed as Exhibit A to
Schedule 13-D of Trans Union Corporation dated August 31, 1992,
Commission File No. 5-36226, and incorporated herein by reference).
10.2 Agreement to Extend and Amend Data Center Management Agreement and
to Amend Registration Rights Agreement dated August 31, 1994
(previously filed as Exhibit 10(b) to Form 10-K for the fiscal year
ended March 31, 1995, as amended, Commission File No. 0-13163, and
incorporated herein by reference).
</TABLE>
3
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------ -----------
<S> <C>
10.3 Agreement for Professional Services dated November 23, 1992 between
the Registrant and Allstate Insurance Company (previously filed as
Exhibit 28 to Amendment No. 1 to Registrant's Current Report on
Form 8-K dated December 9, 1992, Commission File No.
0-13613, and incorporated herein by reference).
10.4 Acxiom Corporation Deferred Compensation Plan (previously filed as
Exhibit 10(b) to Acxiom's Annual Report on Form 10-K for the fiscal
year ended March 31, 1990, Commission File No. 0-13163, and
incorporated herein by reference).
10.5 Amended and Restated Key Associate Stock Option Plan of Acxiom
(previously filed as Exhibit 10(e) to Acxiom's Annual Report on
Form 10-K for the fiscal year ended March 31, 1997, Commission File
No. 0-13163, and incorporated herein by reference).
10.6 Acxiom Corporation U.K. Share Option Scheme (previously filed as
Exhibit 10(f) to Acxiom's Annual Report on Form 10-K for the fiscal
year ended March 31, 1997, Commission File No. 0-13163, and
incorporated herein by reference).
10.7 Leadership Compensation Plan (previously filed as Exhibit 10(g) to
Acxiom's Annual Report on Form 10-K for the fiscal year ended March
31, 1998, Commission File No. 0-, and incorporated herein by
reference).
10.8 Acxiom Corporation Non-Qualified Deferred Compensation Plan
(previously filed as Exhibit 10(i) to Acxiom's Annual Report on
Form 10-K for the fiscal year ended March 31, 1996, Commission File
No. 0-13163, and incorporated herein by reference).
10.9 Asset Purchase Agreement dated April 1, 1996 between Acxiom and
Direct Media/DMI, Inc. (previously filed as Exhibit 2 to Acxiom's
Current Report on Form 8-K dated April 30, 1996, Commission File
No. 0-13613, and incorporated herein by reference).
21 Subsidiaries of Acxiom, incorporated by reference to Exhibit 21 to
Acxiom's annual report on Form 10-K for the fiscal year ended March
31, 1998.
23.1 Consent of Stephens Inc..*
23.2 Consent of Donaldson, Lufkin & Jenrette Securities Corporation.*
23.3 Consent of KPMG Peat Marwick LLP.*
</TABLE>
4
<PAGE>
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION
- - ------ -----------
<S> <C>
23.4 Consent of Catherine L. Hughes, Esq., General Counsel of Acxiom
(included in the opinion filed as Exhibit 5.1 to this Registration
Statement and incorporated herein by reference).*
23.5 Consent of Skadden, Arps, Slate, Meagher & Flom LLP (included in
the opinion filed as Exhibit 8.1 to this Registration Statement and
incorporated herein by reference).*
23.6 Consent of Winston & Strawn (included in the opinion filed as
Exhibit 8.2 to this Registration Statement and incorporated herein
by reference).*
23.7 Consent of PricewaterhouseCoopers LLP. *
24 Powers of Attorney (set forth on signature page of this Registration
Statement).* </TABLE>
- - --------------------------
* Filed herewith.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of
the Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most recent
post-effective amendment thereof) which individually or in the aggregate,
represent a fundamental change in the information set forth in the
registration statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration Statement
or any material change to such information in the Registration Statement.
5
<PAGE>
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph (4)
immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment 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.
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Proxy
Statement/Prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, 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
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses 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
6
<PAGE>
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 Securities Act of 1933 and will be
governed by the final adjudication of such issue.
7
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in the City of Conway, State of
Arkansas, on August 17, 1998.
ACXIOM CORPORATION
By: /s/ Charles D. Morgan
---------------------------------
Charles D. Morgan
Chairman of the Board of Directors
and Company Leader
POWER OF ATTORNEY
Each person whose signature appears below hereby constitutes and appoints
Catherine L. Hughes as his or her true and lawful attorney-in-fact and agent,
with full power of substitution and resubstitution, for him or her and in his or
her name, place and stead, in any and all capacities, to sign any and all
amendments (including post-effective amendments) and supplements to this
Registration Statement, and to file the same, with all exhibits thereto, and
other documents in connection therewith, with the Securities and Exchange
Commission, and hereby grants to such attorney-in-fact and agent, full power and
authority to do and perform each and every act and thing requisite and necessary
to be done, as fully to all intents and purposes as he or she might or could do
in person, hereby ratifying and confirming all that such attorney-in-fact and
agent, or either of them, or his or their substitute or substitutes, may
lawfully do or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, the
Registration Statement has been signed below by the following persons on behalf
of the Registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Charles D. Morgan Chairman of the Board and August 17, 1998
- - --------------------------- Company Leader
(Charles D. Morgan) (principal executive officer)
8
<PAGE>
SIGNATURE TITLE DATE
--------- ----- ----
/s/ Robert S. Bloom Financial Leader August 17, 1998
- - --------------------------- (principal financial officer and
(Robert S. Bloom) principal accounting officer)
/s/ Ann H. Die Director August 17, 1998
- - ---------------------------
(Dr. Ann H. Die)
/s/ William T. Dillard II Director August 17, 1998
- - ---------------------------
(William T. Dillard II)
/s/ Harry C. Gambill Director August 17, 1998
- - ---------------------------
Harry C. Gambill
/s/ Rodger S. Kline Director August 17, 1998
- - ---------------------------
(Rodger S. Kline)
/s/ Robert A. Pritzker Director August 17, 1998
- - ---------------------------
(Robert A. Pritzker)
/s/ James T. Womble Director August 17, 1998
- - ---------------------------
(James T. Womble)
9
<PAGE>
PLEASE MARK VOTE IN OVAL IN THE FOLLOWING MANNER USING DARK INK ONLY. LOGO
THIS PROXY WHEN PROPERLY EXECUTED WILL BE VOTED AS SPECIFIED BY THE STOCKHOLDER.
IF NO SPECIFICATIONS ARE MADE, THE PROXY WILL BE VOTED FOR EACH OF THE FOLLOWING
PROPOSALS, AND WITH DISCRETIONARY AUTHORITY ON ALL OTHER MATTERS THAT MAY
PROPERLY COME BEFORE THE SPECIAL MEETING OR ANY POSTPONEMENTS OR ADJOURNMENTS
THEREOF.
1. Proposal to approve, authorize and adopt the Amended and Restated Agreement
and Plan of Merger, dated as of May 26, 1998, among Acxiom Corporation, ACX
Acquisition Co., Inc. and May & Speh, Inc.
- - -------
Nominee Exception
For Against Abstain
LOGO
2. In their discretion, to vote upon such other business as may properly come
before the meeting.
For Against Abstain
LOGO
Receipt of Notice of Special Meeting of Stockholders and the related Joint Proxy
Statement/Prospectus is hereby acknowledged.
- --------------------------------------------------------------------------------
-------------------------------------------------------------------------------
Signature(s)
Date
--------------------------
Please sign as your name appears herein. If shares are held jointly, all holders
must sign. When signing as an attorney, executor, administrator, trustee or
guardian, please give your full title. If a corporation, please sign in full
corporate name by president or other authorized officer. If a partnership,
please sign in partnership name by authorized person, indicating where
appropriate official position or representative capacity.
^ FOLD AND DETACH HERE ^^
PLEASE VOTE, SIGN, DATE AND RETURN THIS PROXY FORM
PROMPTLY USING THE ENCLOSED ENVELOPE.
<PAGE>
PRELIMINARY COPY--CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
PROXY
MAY & SPEH, INC.
1501 OPUS PLACE
DOWNERS GROVE, IL 60615
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
The undersigned hereby appoints Peter I. Mason and Eric M. Loughmiller, and each
of them, the attorneys and proxies of the undersigned with full power of
substitution to vote as indicated herein, all the common stock ("May & Speh
Common Stock"), par value $.01 per share, of May & Speh, Inc. ("May & Speh")
held of record by the undersigned at the close of business on July 31, 1998, at
the Special Meeting of May & Speh Stockholders to be held on September 17, 1998
at 9:00 A.M., local time, at The Standard Club, 320 South Plymouth Court,
Chicago, Illinois, or any postponements or adjournments thereof, with all the
powers the undersigned would possess if then and there personally present.
SIGN, DATE AND RETURN THE PROXY CARD PROMPTLY USING THE ENCLOSED ENVELOPE.
(CONTINUED ON REVERSE SIDE)
<PAGE>
PRELIMINARY COPY--CONFIDENTIAL, FOR USE OF THE COMMISSION ONLY
ACXIOM CORPORATION
PROXY SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS
FOR ANNUAL MEETING TO BE HELD ON SEPTEMBER 17, 1998
The undersigned hereby appoints Catherine L. Hughes and Shayne D. Smith, and
each of them, proxies for the undersigned, each with full power of substitution,
to vote all shares of Common Stock of Acxiom Corporation ("Acxiom") that the
undersigned may be entitled to vote at the Annual Meeting of Stockholders of
Acxiom to be held on September 17, 1998 at 10:00 A.M., local time, at Acxiom's
headquarters, 301 Industrial Boulevard, Conway, Arkansas, or at any adjournment
thereof, upon the matters set forth on the reverse side hereof and described in
the accompanying Proxy Statement/Prospectus and on such other matters as may
properly come before the meeting or any adjournments or postponements thereof.
PLEASE MARK THIS PROXY AS INDICATED ON THE REVERSE SIDE TO VOTE ON ANY ITEM, IF
YOU WISH TO VOTE IN ACCORDANCE WITH THE BOARD OF DIRECTORS' RECOMMENDATIONS,
PLEASE SIGN THE REVERSE SIDE; NO BOXES NEED BE CHECKED.
Comments/Address change: Please mark comment/address box on reverse side
P R O X Y
SEE REVERSE
SIDE
Please mark your votes as in this sample.
4988
X
THE BOARD OF DIRECTORS RECOMMENDS A VOTE FOR ITEMS 1 AND 2.
FOR all nominees
WITHHOLD AUTHORITY to Vote for all Nominees
FOR
AGAINST
ABSTAIN
Item 1.
Item 2.
Election of Rodger S. Kline, Robert A. Pritzker and James T. Womble as
directors of Acxiom for terms expiring at the 2001 Annual Meeting.
WITHHOLD for the following only: (Write the name of the nominee(s) in the space
below)
- --------------------------
To approve the Merger Proposal as described in the accompanying Proxy
Statement/Prospectus.
COMMENTS/ADDRESS CHANGE. Please mark the box if you have written
comments/address change on your reverse side.
SIGNATURE(S) DATED:
----------------------------- -------------------------------
Receipt is hereby acknowledged of the Acxiom Corporation Notice of Meeting and
Proxy Statement/Prospectus
SIGNATURE(S) DATED:
----------------------------- -------------------------------
NOTE: Please sign exactly as name appears hereon. If a joint account, each
joint owner must sign. When signing as agent, attorney, fiduciary executor,
administrator, trustee or guardian, please give full title as such.
THIS PROXY IS SOLICITED ON BEHALF OF THE BOARD OF DIRECTORS OF ACXIOM
CORPORATION
<PAGE>
Annex F
SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the
Securities Exchange Act of 1934
May 26, 1998
---------------------------------
(Date of earliest event reported)
ACXIOM CORPORATION
------------------------------------------------------
(Exact name of Registrant as specified in its charter)
Delaware 0-13163 71-0581897
------------------------------------------------------------------
(State of (Commission File No.) (IRS Employer
Incorporation) Identification No.)
P.O. Box 2000, 301 Industrial Blvd., Conway, Arkansas 72033-2000
----------------------------------------------------------------
(Address of principal executive offices, including zip code)
(501) 336-1000
----------------------------------------------------
(Registrant's telephone number, including area code)
Not Applicable
-------------------------------------------------------------
(Former name or former address, if changed since last report)
<PAGE>
Item 5. Other Events
On May 26, 1998, Acxiom Corporation (the "Company") entered into
an Agreement and Plan of Merger (the "Merger Agreement"), among the
Company, ACX Acquisition Co., Inc. and May & Speh, Inc. ("May & Speh"),
dated as of May 26, 1998. A copy of the Merger Agreement is attached
hereto as Exhibit 1 and is hereby incorporated by reference. On May 26,
1998, in connection with the execution of the Merger Agreement, the Company
and May & Speh entered into (i) a Stock Option Agreement, between May &
Speh, as issuer, and the Company, as grantee, and (ii) a Stock Option
Agreement, between the Company, as issuer, and May & Speh, as grantee,
copies of each of which are attached hereto as Exhibits 2 and 3,
respectively, and are hereby incorporated by reference. On May 26, 1998, in
connection with the execution of the Merger Agreement, the Company entered
into Amendment Number One to the Rights Agreement, dated as of January 28,
1998, between the Company and First Chicago Trust Company of New York, as
Rights Agent, a copy of which is attached hereto as Exhibit 4 and is hereby
incorporated by reference.
The transaction contemplated by the Merger Agreement, which has
been approved by the board of directors of each company, is intended to be
accounted for as a pooling of interests and to be a tax-free
reorganization. Consummation of the transactions contemplated in the
Merger Agreement is subject to the expiration or earlier termination of any
applicable waiting period under the Hart-Scott-Rodino Antitrust
Improvements Act of 1976, approval of the transactions by the shareholders
of the Company and May & Speh, and other customary closing conditions.
Item 7. Financial Statements and Exhibits
(c) Exhibits
(1) Agreement and Plan of Merger, dated as of May 26, 1998,
among Acxiom Corporation, ACX Acquisition Co., Inc. and
May & Speh, Inc.
(2) Stock Option Agreement dated as of May 26, 1998,
between May & Speh, Inc., as issuer, and Acxiom
Corporation, as grantee.
(3) Stock Option Agreement dated as of May 26, 1998,
between Acxiom Corporation, as issuer, and May & Speh,
Inc., as grantee.
(4) Amendment Number One, dated as of May 26, 1998, to
Rights Agreement, dated as of January 28, 1998, between
Acxiom Corporation and First Chicago Trust Company of
New York, as Rights Agent.
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of
1934, the registrant has duly caused this report to be signed on its behalf
by the undersigned hereunto duly authorized.
ACXIOM CORPORATION
By: /s/ Catherine L. Hughes
-------------------------------
Name: Catherine L. Hughes
Title: Secretary and General Counsel
Date: June 4, 1998
<PAGE>
EXHIBIT INDEX
Page in
Sequential
Exhibit Numbering
No. System
------- ----------
1 Agreement and Plan of Merger, dated as of
May 26, 1998, among Acxiom Corporation,
ACX Acquisition Co., Inc. and May & Speh, Inc.
2 Stock Option Agreement dated as of May 26, 1998,
between May & Speh, Inc. as issuer, and Acxiom
Corporation, as grantee.
3 Stock Option Agreement dated as of May 26, 1998,
between Acxiom Corporation, as issuer, and
May & Speh, Inc., as grantee.
4 Amendment Number One, dated as of May 26, 1998,
to Rights Agreement, dated as of January 28, 1998,
between Acxiom Corporation and First Chicago
Trust Company of New York, as Rights Agent.
<PAGE>
AGREEMENT AND PLAN OF MERGER
By and Among
Acxiom Corporation,
ACX Acquisition Co., Inc.
and
May & Speh, Inc.
Dated as of May 26, 1998
<PAGE>
TABLE OF CONTENTS
ARTICLE I
THE MERGER . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.1 The Merger . . . . . . . . . . . . . . . . . . . . . . . 3
Section 1.2 Effective Time of the Merger . . . . . . . . . . . . . . 3
ARTICLE II
THE SURVIVING CORPORATION . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.1 Certificate of Incorporation . . . . . . . . . . . . . . 4
Section 2.2 By-Laws . . . . . . . . . . . . . . . . . . . . . . . . 4
Section 2.3 Directors and Officers of Surviving Corporation . . . . 4
ARTICLE III
CONVERSION OF SHARES . . . . . . . . . . . . . . . . . . . . . . . . . 5
Section 3.1 Exchange Ratio . . . . . . . . . . . . . . . . . . . . . 5
Section 3.2 Exchange of Shares . . . . . . . . . . . . . . . . . . . 6
Section 3.3 Dividends; Transfer Taxes . . . . . . . . . . . . . . . 6
Section 3.4 No Fractional Securities . . . . . . . . . . . . . . . . 7
Section 3.5 Certain Adjustments. . . . . . . . . . . . . . . . . . . 8
Section 3.6 Closing of Company Transfer Books . . . . . . . . . . . 8
Section 3.7 Closing . . . . . . . . . . . . . . . . . . . . . . . . 9
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT . . . . . . . . . . . . . . . 9
Section 4.1 Organization . . . . . . . . . . . . . . . . . . . . . . 9
Section 4.2 Capitalization . . . . . . . . . . . . . . . . . . . . . 10
Section 4.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 11
Section 4.4 Authority Relative to this Agreement . . . . . . . . . . 12
Section 4.5 Consents and Approvals; No Violations . . . . . . . . . 13
Section 4.6 Reports and Financial Statements . . . . . . . . . . . . 14
Section 4.7 Absence of Certain Changes or Events . . . . . . . . . . 15
Section 4.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . 15
Section 4.9 Patents, Trademarks, Etc . . . . . . . . . . . . . . . . 16
Section 4.10 Information in Disclosure Documents and Registration
Statement . . . . . . . . . . . . . . . . . . . . . . 16
Section 4.11 Absence of Undisclosed Liabilities . . . . . . . . . . . 17
Section 4.12 No Default . . . . . . . . . . . . . . . . . . . . . . . 18
Section 4.13 Title to Properties; Encumbrances . . . . . . . . . . . 18
Section 4.14 Compliance with Applicable Law . . . . . . . . . . . . . 19
Section 4.15 Labor Matters . . . . . . . . . . . . . . . . . . . . . 19
Section 4.16 Employee Benefit Plans; ERISA . . . . . . . . . . . . . 20
Section 4.17 Vote Required . . . . . . . . . . . . . . . . . . . . . 24
Section 4.18 Opinion of Financial Advisor . . . . . . . . . . . . . . 25
Section 4.19 Ownership of Company Common Stock . . . . . . . . . . . 25
Section 4.20 Pooling . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.21 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 25
Section 4.22 Contracts . . . . . . . . . . . . . . . . . . . . . . . 28
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY . . . . . . . . . . . . . 29
Section 5.1 Organization . . . . . . . . . . . . . . . . . . . . . . 29
Section 5.2 Capitalization . . . . . . . . . . . . . . . . . . . . . 30
Section 5.3 Subsidiaries . . . . . . . . . . . . . . . . . . . . . . 31
Section 5.4 Authority Relative to this Agreement . . . . . . . . . . 32
Section 5.5 Consents and Approvals; No Violations . . . . . . . . . 33
Section 5.6 Reports and Financial Statements . . . . . . . . . . . . 34
Section 5.7 Absence of Certain Changes or Events . . . . . . . . . . 35
Section 5.8 Litigation . . . . . . . . . . . . . . . . . . . . . . . 35
Section 5.9 Patents, Trademarks, Etc . . . . . . . . . . . . . . . . 36
Section 5.10 Information in Disclosure Documents and Registration
Statement . . . . . . . . . . . . . . . . . . . . . . 36
Section 5.11 Absence of Undisclosed Liabilities . . . . . . . . . . . 37
Section 5.12 No Default . . . . . . . . . . . . . . . . . . . . . . . 37
Section 5.13 Taxes . . . . . . . . . . . . . . . . . . . . . . . . . 38
Section 5.14 Title to Properties; Encumbrances . . . . . . . . . . . 40
Section 5.15 Compliance with Applicable Law . . . . . . . . . . . . . 41
Section 5.16 Labor Matters . . . . . . . . . . . . . . . . . . . . . 41
Section 5.17 Employee Benefit Plans; ERISA . . . . . . . . . . . . . 41
Section 5.18 Contracts . . . . . . . . . . . . . . . . . . . . . . . 46
Section 5.19 Vote Required . . . . . . . . . . . . . . . . . . . . . 47
Section 5.20 Opinion of Financial Advisor . . . . . . . . . . . . . . 47
Section 5.21 Takeover Statute . . . . . . . . . . . . . . . . . . . . 48
Section 5.22 The Company Rights Agreement . . . . . . . . . . . . . . 48
Section 5.23 Ownership of Parent Common Stock . . . . . . . . . . . . 49
Section 5.24 Pooling . . . . . . . . . . . . . . . . . . . . . . . . 49
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER . . . . . . . . . . . . . . . . 49
Section 6.1 Conduct of Business by the Company Pending the Merger . 49
Section 6.2 Conduct of Business by Parent Pending the Merger . . . . 52
Section 6.3 Conduct of Business of Sub . . . . . . . . . . . . . . . 54
ARTICLE VII
ADDITIONAL AGREEMENTS . . . . . . . . . . . . . . . . . . . . . . . . . 54
Section 7.1 Access and Information . . . . . . . . . . . . . . . . . 54
Section 7.2 Acquisition Proposals . . . . . . . . . . . . . . . . . 55
Section 7.3 Registration Statement . . . . . . . . . . . . . . . . . 57
Section 7.4 Proxy Statements; Stockholder Approvals . . . . . . . . 58
Section 7.5 Affiliate Agreements . . . . . . . . . . . . . . . . . . 60
Section 7.6 Antitrust Laws . . . . . . . . . . . . . . . . . . . . . 61
Section 7.7 Proxies . . . . . . . . . . . . . . . . . . . . . . . . 61
Section 7.8 Employees, Employee Benefits . . . . . . . . . . . . . . 62
Section 7.9 Stock Options . . . . . . . . . . . . . . . . . . . . . 63
Section 7.10 Public Announcements . . . . . . . . . . . . . . . . . . 65
Section 7.11 By-Law Indemnification and Insurance . . . . . . . . . 65
Section 7.12 Expenses . . . . . . . . . . . . . . . . . . . . . . . . 66
Section 7.13 Additional Agreements . . . . . . . . . . . . . . . . . 68
Section 7.14 Control of the Company's and Parent's Operations . . . . 68
Section 7.15 Company Rights Plan . . . . . . . . . . . . . . . . . . 69
<PAGE>
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER . . . . . . . . . . . . . . . 69
Section 8.1 Conditions to Each Party's Obligation to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . 69
Section 8.2 Conditions to Obligation of the Company to Effect
the Merger . . . . . . . . . . . . . . . . . . . . . 70
Section 8.3 Conditions to Obligations of Parent and Sub to
Effect the Merger . . . . . . . . . . . . . . . . . 71
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER . . . . . . . . . . . . . . . . . . . 72
Section 9.1 Termination . . . . . . . . . . . . . . . . . . . . . . 72
Section 9.2 Effect of Termination . . . . . . . . . . . . . . . . . 75
Section 9.3 Amendment . . . . . . . . . . . . . . . . . . . . . . . 76
Section 9.4 Waiver . . . . . . . . . . . . . . . . . . . . . . . . . 76
ARTICLE X
GENERAL PROVISIONS . . . . . . . . . . . . . . . . . . . . . . . . . . 76
Section 10.1 Survival of Representations, Warranties and
Agreements . . . . . . . . . . . . . . . . . . . . . 76
Section 10.2 Brokers . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.3 Notices . . . . . . . . . . . . . . . . . . . . . . . . 77
Section 10.4 Descriptive Headings . . . . . . . . . . . . . . . . . . 78
Section 10.5 Entire Agreement; Assignment . . . . . . . . . . . . . . 79
Section 10.6 Governing Law . . . . . . . . . . . . . . . . . . . . . 79
Section 10.7 Specific Performance . . . . . . . . . . . . . . . . . . 79
Section 10.8 Counterparts . . . . . . . . . . . . . . . . . . . . . . 79
Exhibit A-1 Irrevocable Proxy
Exhibit A-2 Irrevocable Proxy
Exhibit A-3 Irrevocable Proxy
Exhibit B Form of Company Rights Plan Amendment
Exhibit C Form of Affiliate Letter for Affiliates of the Company
Exhibit D Form of Affiliate Letter for Affiliates of Parent
<PAGE>
AGREEMENT AND PLAN OF MERGER
AGREEMENT AND PLAN OF MERGER, dated as of May 26, 1998, by and
among Acxiom Corporation, a Delaware corporation ("Parent"), ACX
Acquisition Co., Inc., a Delaware corporation and a wholly owned
subsidiary of Parent ("Sub"), and May & Speh, Inc., a Delaware corporation
(the "Company").
WHEREAS, the Boards of Directors of Parent and Sub and the
Company deem it advisable and in the best interests of their respective
stockholders that Parent combine with the Company, and such Boards of
Directors have approved the merger (the "Merger") of Sub with and into the
Company upon the terms and subject to the conditions set forth herein; and
WHEREAS, concurrently with the execution and delivery of this
Agreement, and as a condition and inducement to the Company's willingness
to enter into this Agreement, a holder of shares of Parent's common stock,
par value $.10 per share (the "Parent Common Stock") is granting the
Company an irrevocable proxy in the form attached hereto as Exhibit A-1
(the "Parent Stock Proxy"), to vote such shares of Parent Common Stock; and
WHEREAS, concurrently with the execution and delivery of this
Agreement and as a condition and inducement to Parent's and Sub's
willingness to enter into this Agreement, certain holders of shares of the
Company's Common Stock, par value $.01 per share (the "Company Common
Stock"), are granting Parent irrevocable proxies, in the forms attached
hereto as Exhibits A-2 and A-3 (the "Company Stock Proxies" and, together
with the Parent Stock Proxy, the "Proxies"), to vote such shares of Company
Common Stock; and
WHEREAS, immediately following the execution and delivery of this
Agreement, the Company and Parent will enter into a stock option agreement
(the "Company Option Agreement"), pursuant to which the Company will grant
Parent the option to purchase shares of Company Common Stock, upon the
terms and subject to the conditions set forth therein; and
WHEREAS, immediately following the execution and delivery of this
Agreement, the Company and Parent will enter into a stock option agreement
(the "Parent Option Agreement"), pursuant to which Parent will grant the
Company the option to purchase shares of Parent Common Stock, upon the
terms and subject to the conditions set forth therein; and
WHEREAS, for U.S. federal income tax purposes, it is intended
that the Merger shall qualify as a reorganization within the meaning of
Section 368(a) of the Internal Revenue Code of 1986, as amended (the
"Code") and this Agreement is hereby adopted as a plan of reorganization
for purposes of Section 368 of the Code; and
<PAGE>
WHEREAS, for financial accounting purposes, it is intended that
the Merger shall be accounted for as a pooling of interests under United
States generally accepted accounting principles.
NOW, THEREFORE, in consideration of the foregoing and the
respective representations, warranties, covenants and agreements set forth
herein and in the Proxies, the parties hereto agree as follows:
ARTICLE I
THE MERGER
Section 1.1 The Merger. Upon the terms and subject to the
conditions set forth herein, at the Effective Time (as defined in Section
1.2 hereof), Sub shall be merged with and into the Company and the separate
existence of Sub shall thereupon cease, and the name of the Company, as the
surviving corporation in the Merger (the "Surviving Corporation"), shall by
virtue of the Merger be "May & Speh, Inc." The Merger shall have the
effects set forth in Section 259 of the General Corporation Law of the
State of Delaware (the "GCL").
Section 1.2 Effective Time of the Merger. The Merger shall
become effective when a properly executed certificate of merger (the
"Certificate of Merger") is duly filed with the Secretary of State of the
State of Delaware, which filing shall be made as soon as practicable after
the closing of the transactions contemplated by this Agreement in
accordance with Section 3.6 hereof. When used in this Agreement, the term
"Effective Time" shall mean the date and time at which the Certificate of
Merger is so filed.
ARTICLE II
THE SURVIVING CORPORATION
Section 2.1 Certificate of Incorporation. The Certificate of
Incorporation of Sub in effect immediately prior to the Effective Time
shall be the Certificate of Incorporation of the Surviving Corporation
(except that Article I of the Certificate of Incorporation shall be amended
as of the Effective Time to read as follows "The name of the Corporation is
May & Speh, Inc.").
Section 2.2 By-Laws. Subject to Section 7.11 hereof, the By-
Laws of Sub as in effect immediately prior to the Effective Time shall be
the By-Laws of the Surviving Corporation.
Section 2.3 Directors and Officers of Surviving Corporation.
(a) The directors of Sub immediately prior to the Effective Time shall be
the initial directors of the Surviving Corporation and shall hold office
from the Effective Time until their respective successors are duly elected
or appointed and qualify in the manner provided in the Certificate of
Incorporation and By-Laws of the Surviving Corporation or as otherwise
provided by law.
<PAGE>
(b) The officers of the Company immediately prior to the
Effective Time shall be the initial officers of the Surviving Corporation
and shall hold office from the Effective Time until their respective
successors are duly elected or appointed and qualify in the manner provided
in the Certificate of Incorporation and By-Laws of the Surviving
Corporation, or as otherwise provided by law.
ARTICLE III
CONVERSION OF SHARES
Section 3.1 Exchange Ratio. At the Effective Time, by virtue
of the Merger and without any action on the part of the holders of any of
the capital stock of Sub or the Company:
(a) Each share of Company Common Stock (the "Shares") issued and
outstanding immediately prior to the Effective Time (other than Shares held
by Parent or any direct or indirect wholly owned subsidiary of Parent or
Shares to be cancelled pursuant to Section 3.1(b)) shall be converted into
the right to receive .80 (the "Exchange Ratio") of a validly issued, fully
paid and non-assessable share of common stock, par value $.10 per share, of
Parent ("Parent Shares"), payable upon the surrender of the certificate
formerly representing such Share. Holders of Shares shall also have the
right to receive together with each Parent Share issued in the Merger, one
associated preferred stock purchase right (a "Parent Right") in accordance
with the Rights Agreement dated as of January 28, 1998 (the "Parent Rights
Agreement"), between Parent and First Chicago Trust Company of New York.
References herein to the Parent Shares issuable in the Merger shall be
deemed to include the associated Parent Rights.
(b) Each Share held in the treasury of the Company and each
Share held by Parent or any direct or indirect wholly owned subsidiary of
Parent immediately prior to the Effective Time shall be cancelled and
retired and cease to exist and no consideration shall be delivered in
exchange therewith.
(c) Each share of Common Stock, par value $.01 per share, of Sub
issued and outstanding immediately prior to the Effective Time shall be
converted into and become one validly issued, fully paid and non-assessable
share of common stock, par value $.01 per share, of the Surviving
Corporation, and the Surviving Corporation shall be a wholly owned
subsidiary of Parent.
Section 3.2 Exchange of Shares. Parent shall authorize one or
more persons (reasonably satisfactory to the Company) to act as exchange
agent hereunder (the "Exchange Agent"). As soon as practicable after the
Effective Time, Parent shall make available, and each holder of Shares will
be entitled to receive, upon surrender to the Exchange Agent of one or more
certificates representing such Shares for cancellation, certificates
representing the number of Parent Shares into which such Shares are
converted in the Merger. The Parent Shares into which the Shares shall be
converted in the Merger shall be deemed to have been issued at the
Effective Time.
<PAGE>
Section 3.3 Dividends; Transfer Taxes. No dividends that are
declared on Parent Shares will be paid to persons entitled to receive
certificates representing Parent Shares until such persons surrender their
certificates representing Shares. Upon such surrender, there shall be paid
to the person in whose name the certificates representing such Parent
Shares shall be issued, any dividends which shall have become payable with
respect to such Parent Shares between the Effective Time and the time of
such surrender. In no event shall the person entitled to receive such
dividends be entitled to receive interest on such dividends. If any
certificates for any Parent Shares are to be issued in a name other than
that in which the certificate representing Shares surrendered in exchange
therefor is registered it shall be a condition of such exchange that the
person requesting such exchange shall pay to the Exchange Agent any
transfer or other taxes required by reason of the issuance of certificates
for such Parent Shares in a name other than that of the registered holder
of the certificate surrendered or shall establish to the satisfaction of
the Exchange Agent that such tax has been paid or is not applicable.
Notwithstanding the foregoing, neither the Exchange Agent nor any party
hereto shall be liable to a holder of Shares for any Parent Shares or
dividends thereon or, in accordance with Section 3.4 hereof, proceeds of
the sale of fractional interests, delivered to a public official pursuant
to applicable escheat laws.
Section 3.4 No Fractional Securities. No certificates or
scrip representing fractional Parent Shares shall be issued upon the
surrender for exchange of certificates representing Shares pursuant to this
Article III and no dividend, stock split-up or other change in the capital
structure of the Company shall relate to any fractional security, and such
fractional interests shall not entitle the owner thereof to vote or to any
rights of a security holder. In lieu of any such fractional securities,
each holder of Shares who would otherwise have been entitled to a fraction
of a Parent Share upon surrender of stock certificates for exchange
pursuant to this Article III will be paid cash upon such surrender in an
amount equal to the product of such fraction multiplied by the closing sale
price of Parent Shares on the National Association of Securities Dealers
Automated Quotations National Market System (the "NASDAQ") on the day of
the Effective Time, or, if the Parent Shares are not so traded on such day,
the closing sale price on the next preceding day on which such stock was
traded on the NASDAQ.
Section 3.5 Certain Adjustments. If between the date hereof
and the Effective Time, the outstanding shares of Parent Common Stock or of
Company Common Stock shall be changed into a different number of shares by
reason or reclassification, recapitalization, split-up, combination or
exchange of shares, or any dividend payable in stock or other securities
shall be declared thereon with a record date within such period, the
Exchange Ratio shall be adjusted accordingly to provide the holders of
Company Common Stock, the same economic effect as contemplated by this
Agreement prior to such reclassification, recapitalization, split-up,
combination, exchange or dividend.
<PAGE>
Section 3.6 Closing of Company Transfer Books. At the
Effective Time, the stock transfer books of the Company shall be closed and
no transfer of Shares shall thereafter be made. From and after the
Effective Time, the holders of the Shares issued and outstanding
immediately prior to the Effective Time shall cease to have any rights with
respect to such Shares, except as otherwise provided herein. If, after the
Effective Time, certificates representing Shares are presented to the
Surviving Corporation, they shall be cancelled and exchanged for
certificates representing Parent Shares and cash in lieu of any fractional
shares in accordance with Section 3.4 hereof.
Section 3.7 Closing. The closing of the transactions
contemplated by this Agreement (the "Closing") shall take place at the
offices of Skadden, Arps, Slate, Meagher & Flom LLP, 919 Third Avenue, New
York, New York, at 10:00 a.m., local time, on the later of (a) the date of
the stockholders' meetings referred to in Section 7.4 hereof or (b) the day
on which all of the conditions set forth in Article VIII hereof are
satisfied or waived, or at such other date, time and place as Parent and
the Company shall agree.
ARTICLE IV
REPRESENTATIONS AND WARRANTIES OF PARENT
Parent represents and warrants to the Company as follows:
Section 4.1 Organization. Parent is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to carry on its business as
it is now being conducted or presently proposed to be conducted. Parent is
duly qualified as a foreign corporation to do business, and is in good
standing, in each jurisdiction where the character of its properties owned
or held under lease or the nature of its activities make such qualification
necessary, except where such failures to be so qualified would not in the
aggregate have a material adverse effect on the business, assets,
liabilities, condition (financial or otherwise) or results of operations of
Parent and its subsidiaries, taken as a whole (a "Parent Material Adverse
Effect"). Sub is a corporation duly organized, validly existing and in
good standing under the laws of the State of Delaware. Sub has not engaged
in any business since the date of its incorporation.
Section 4.2 Capitalization. The authorized capital stock of
Parent consists of 200,000,000 shares of Common Stock, par value $.10 per
share, and 1,000,000 shares of Preferred Stock, par value $.01 per share
("Parent Preferred Stock"), of which 200,000 shares have been designated as
Participating Preferred Stock (the "Participating Preferred Stock"). As of
the date hereof, (i) 52,446,883 Parent Shares were issued and outstanding
and (ii) no shares of Parent Preferred Stock were issued and outstanding.
Except as set forth on Schedule 4.2 hereto, all of the issued and
outstanding Parent Shares are validly issued, fully paid and nonassessable
and free of preemptive rights. All of the Parent Shares issuable in
exchange for Shares at the Effective Time in accordance with this Agreement
will be, when so issued, duly authorized, validly issued, fully paid and
nonassessable. The authorized capital stock of Sub consists of 1,000
shares of Common Stock, par value $.01 per share, 100 shares of which are
validly issued and outstanding, fully paid and nonassessable and are owned
by Parent. Except as set forth in Schedule 4.2 hereto, there are no
outstanding options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating Parent to issue,
transfer or sell any of its securities other than: (i) rights to acquire
shares of Participating Preferred Stock pursuant to the Parent Rights
Agreement, and (ii) options to receive or acquire 7,725,516 Parent Shares
pursuant to employee incentive or benefit plans, programs and arrangements
("Parent Employee Stock Options") and (iii) the Parent Option Agreement.
<PAGE>
Section 4.3 Subsidiaries. Schedule 4.3 hereto sets forth each
direct or indirect interest owned by Parent in any other corporation,
partnership, joint venture or other business association or entity, foreign
or domestic, of which Parent or any of its other Parent Subsidiaries owns,
directly or indirectly, greater than fifty percent of the shares of capital
stock or other equity interests (including partnership interests) entitled
to cast at least a majority of the votes that may be cast by all shares or
equity interests having ordinary voting power for the election of directors
or other governing body of such entity (each such entity is hereinafter
referred to as a "Parent Subsidiary" and are hereinafter collectively
referred to as the "Parent Subsidiaries"). Each Parent Subsidiary is a
corporation duly organized, validly existing and in good standing under the
laws of its jurisdiction of incorporation. Each Parent Subsidiary is duly
qualified as a foreign corporation to do business, and is in good standing,
in each jurisdiction where the character of its properties owned or held
under lease or the nature of its activities makes such qualification
necessary except where the failure to be so qualified will not have a
Parent Material Adverse Effect. Each Parent Subsidiary has the corporate
power to carry on its business as it is now being conducted or presently
proposed to be conducted. All of the outstanding shares of capital stock
of the Parent Subsidiaries are validly issued, fully paid and
nonassessable. Except as set forth on Schedule 4.3, all of the outstanding
shares of capital stock of, or other ownership interests in, each of the
Parent Subsidiaries are owned by Parent or by a Parent Subsidiary free and
clear of any liens, claims, charges or encumbrances. There are not now,
and at the Effective Time there will not be, any outstanding options,
warrants, subscriptions, calls, rights, convertible securities or other
agreements or commitments obligating Parent or any Parent Subsidiary to
issue, transfer or sell any securities of any Parent Subsidiary. There are
not now, and at the Effective Time there will not be, any voting trusts or
other agreements or understandings to which Parent or any of the Parent
Subsidiaries is a party or is bound with respect to the voting of the
capital stock of Parent or any of the Parent Subsidiaries.
Section 4.4 Authority Relative to this Agreement. Each of
Parent and Sub has the corporate power to enter into this Agreement, the
Parent Option Agreement and the Company Option Agreement, to carry out its
obligations hereunder and thereunder and to consummate the Merger. The
execution and delivery of this Agreement, the Parent Option Agreement and
the Company Option Agreement by Parent and Sub, the consummation by Parent
and Sub of the transactions contemplated hereby and thereby and the
consummation of the Merger have been duly authorized by the Boards of
Directors of Parent and Sub, and by the Disinterested Directors (pursuant
to Article Tenth, Section (b) of Parent's Certificate of Incorporation) and
by Parent as the sole stockholder of Sub, and, except for the approvals of
Parent's stockholders to be sought at the stockholders' meeting
contemplated by Section 7.4(b) hereof no other corporate proceedings on the
part of Parent or Sub are necessary to authorize this Agreement or the
transactions contemplated hereby. This Agreement, the Parent Option
Agreement and the Company Option Agreement have been duly and validly
executed and delivered by each of Parent and Sub and, assuming the due
authorization, execution and delivery by the other party hereto and
thereto, this Agreement, the Parent Option Agreement and the Company Option
Agreement constitute valid and binding agreements of each of Parent and
Sub, enforceable against Parent and Sub in accordance with their respective
terms, except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or principles governing the
availability of equitable remedies.
<PAGE>
Section 4.5 Consents and Approvals; No Violations. Except for
applicable requirements of the Hart-Scott-Rodino Antitrust Improvements Act
of 1976 (the "HSR Act"), the Securities Act of 1933, as amended (the
"Securities Act"), the Securities Exchange Act of 1934, as amended (the
"Exchange Act"), the rules and regulations of NASDAQ, state securities or
blue sky laws, and the filing and recordation of a Certificate of Merger as
required by the GCL, no filing with, and no permit, authorization, consent
or approval of, any public body or authority is necessary for the
consummation by Parent and Sub of the transactions contemplated by this
Agreement, the Parent Option Agreement and the Company Option Agreement.
Except as set forth on Schedule 4.5, neither the execution and delivery of
this Agreement, the Parent Option Agreement or the Company Option Agreement
by Parent or Sub nor the consummation by Parent or Sub of the transactions
contemplated hereby or thereby, nor compliance by Parent or Sub with any of
the provisions hereof or thereof will (a) conflict with or result in any
breach of any provisions of the Certificate of Incorporation or By-Laws of
Parent or of Sub, (b) result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
to which Parent or any of its subsidiaries is a party or by which any of
them or any of their properties or assets may be bound or (c) violate any
order, writ, injunction, decree, statute, rule or regulation applicable to
Parent, any of its subsidiaries or any of their properties or assets,
except in the case of clauses (b) and (c) for violations, breaches or
defaults which would not individually or in the aggregate have a Parent
Material Adverse Effect.
Section 4.6 Reports and Financial Statements. Parent has
filed all reports required to be filed with the Securities and Exchange
Commission (the "SEC") pursuant to the Exchange Act since March 31, 1996
(such reports together with all registration statements, prospectuses and
information statements filed by the Company since March 31, 1996 being
hereinafter collectively referred to as the "Parent SEC Reports"), and has
previously furnished the Company with true and complete copies of all such
Parent SEC Reports. None of such Parent SEC Reports, as of their
respective dates, contained any 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, in light of the circumstances under which
they were made, not misleading. As of their respective dates, all such
Parent SEC Reports complied as to form in all material respects with the
applicable requirements of the Securities Act. Each of the balance sheets
(including the related notes) included in the Parent SEC Reports fairly
presents the consolidated financial position of Parent and its subsidiaries
as of the respective dates thereof, and the other related statements
(including the related notes) included therein fairly present the results
of operations and the changes in financial position of Parent and its
subsidiaries for the respective periods or as of the respective dates set
forth therein (subject, where appropriate, to normal year-end adjustments),
all in conformity with generally accepted accounting principles
consistently applied during the periods involved except as otherwise noted
therein.
Section 4.7 Absence of Certain Changes or Events. Except as
set forth in the Parent SEC Reports, since December 31, 1997, neither
Parent nor any of the Parent Subsidiaries has: (a) suffered any change
which had or would have a Parent Material Adverse Effect or (b) subsequent
to the date hereof, except as permitted by Section 6.2 hereof, conducted
its business and operations other than in the ordinary course of business
and consistent with past practices.
<PAGE>
Section 4.8 Litigation. Except for litigation disclosed in
the Parent SEC Reports and except as set forth on Schedule 4.8, there is no
suit, action or proceeding pending or, to the knowledge of Parent,
threatened against or affecting Parent or any of its subsidiaries, the
outcome of which, is reasonably likely to have a Parent Material Adverse
Effect; nor is there any judgment, decree, injunction, rule or order of any
court, governmental department, commission, agency, instrumentality or
arbitrator outstanding against Parent or any of the Parent Subsidiaries
having, or which has or would have, a Parent Material Adverse Effect.
Section 4.9 Patents, Trademarks, Etc. Except as set forth on
Schedule 4.9, to the knowledge of Parent, Parent and the Parent
Subsidiaries own or possess adequate licenses or other valid rights to use
all material patents, patent rights, trademarks, trademark rights, trade
names, trade name rights, copyrights, service marks, licenses, trade
secrets, applications for trademarks and for service marks, computer
software, software programs, know-how and other proprietary rights and
information (collectively,"Proprietary Rights") used or held for use in
connection with the business of Parent and the Parent Subsidiaries as
currently conducted or as contemplated to be conducted, free and clear of
any liens, claims or encumbrances. Except as set forth on Schedule 4.9
hereto, to the knowledge of Parent, the conduct of the business of Parent
and the Parent Subsidiaries as currently conducted does not conflict in any
way with any Proprietary Right of any third party. Except as set forth in
Schedule 4.9 hereto, to the knowledge of Parent there are no infringements
of any of the Proprietary Rights owned by or licensed to Parent or any of
the Parent Subsidiaries.
Section 4.10 Information in Disclosure Documents and
Registration Statement. None of the information to be supplied by Parent
or Sub for inclusion in (a) the Registration Statement to be filed with the
SEC by Parent on Form S-4 under the Securities Act for the purpose of
registering the Parent Shares to be issued in the Merger (the "Registration
Statement") and (b) the joint proxy statement to be distributed in
connection with the Parent's and the Company's meeting of stockholders to
vote upon this Agreement (the "Proxy Statement") will in the case of the
Registration Statement, at the time it becomes effective and at the
Effective Time, or, in the case of the Proxy Statement or any amendments
thereof or supplements thereto, at the time of the mailing of the Proxy
Statement and any amendments or supplements thereto, and at the time of the
meeting of stockholders to be held in connection with the Merger, contain
any untrue statement of a material fact or omit to state any material fact
required to be stated therein or necessary in order to make the statements
therein, in light of the circumstances under which they are made, not
misleading. The Registration Statement will comply as to form in all
material respects with the provisions of the Securities Act, and the rules
and regulations promulgated thereunder.
Section 4.11 Absence of Undisclosed Liabilities
Other than obligations incurred in the ordinary course of
business, neither Parent nor any of the Parent Subsidiaries has any
liabilities or obligations of any nature, whether or not accrued,
contingent or otherwise, and there is no existing condition, situation or
set of circumstances which would reasonably be expected to result in such a
liability or obligation which would be required to be disclosed on a
consolidated balance sheet under GAAP, except (a) liabilities or
obligations reflected in the Parent SEC Reports and (b) liabilities or
obligations which would not, individually or in the aggregate, have a
Parent Material Adverse Effect.
<PAGE>
Section 4.12 No Default. Neither Parent nor any of the Parent
Subsidiaries is in default or violation (and no event has occurred which
with notice or the lapse of time or both would constitute a default or
violation) of any term, condition or provision of (a) its Certificate of
Incorporation or By-Laws, (b) any note, bond, mortgage, indenture, license,
agreement, contract, lease, commitment or other obligation to which Parent
or any of the Parent Subsidiaries is a party or by which they or any of
their properties or assets may be bound, or (c) any order, writ,
injunction, decree, statute, rule or regulation applicable to Parent or any
of the Parent Subsidiaries, except in the case of clauses (b) and (c) above
for defaults or violations which would not have a Parent Material Adverse
Effect.
Section 4.13 Title to Properties; Encumbrances.
Except as described in the following sentence, each of Parent and
the Parent Subsidiaries has good and valid and marketable title to, or a
valid leasehold interest in, all of its properties and assets (real,
personal and mixed, tangible and intangible) material to the operation of
Parent's business and operations, including, without limitation, all such
properties and assets reflected in the consolidated balance sheet of Parent
and the Parent Subsidiaries as of December 31, 1997 included in Parent's
Quarterly Report on Form l0-Q for the period ended on such date (except for
properties and assets disposed of in the ordinary course of business and
consistent with past practices since December 31, 1997). None of such
properties or assets are subject to any liability, obligation, claim, lien,
mortgage, pledge, security interest, conditional sale agreement, charge or
encumbrance of any kind (whether absolute, accrued, contingent or
otherwise), except (i) as set forth in the Parent SEC Reports, and (ii)
such encumbrances that do not individually or in the aggregate have a
Parent Material Adverse Effect.
Section 4.14 Compliance with Applicable Law. Each of Parent
and the Parent Subsidiaries is in compliance with all applicable laws
(whether statutory or otherwise), rules, regulations, orders, ordinances,
judgments or decrees of all governmental authorities (federal, state,
local, foreign or otherwise) (collectively "Laws") except where the failure
to be in such compliance would not, individually or in the aggregate, have
a Parent Material Adverse Effect.
Section 4.15 Labor Matters. Except as set forth in Schedule
4.15 hereto, neither Parent nor any of the Parent Subsidiaries is a party
to, or bound by, any collective bargaining agreement, contract or other
agreement or understanding with a labor union or labor organization. There
is no unfair labor practice or labor arbitration proceeding pending or, to
the knowledge of Parent, threatened against Parent or the Parent
Subsidiaries relating to their business, except for any such preceding
which would not have a Parent Material Adverse Effect. To the knowledge of
Parent, there are no organizational efforts with respect to the formation
of a collective bargaining unit presently being made or threatened
involving employees of Parent or any of the Parent Subsidiaries.
<PAGE>
Section 4.16 Employee Benefit Plans; ERISA. (a) Schedule 4.16
hereto contains a true and complete list of each bonus, deferred
compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing,
pension, or retirement plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement (the "Parent
Plans"), maintained or contributed to or required to be contributed to by
(i) Parent, (ii) any Parent Subsidiary or (iii) any trade or business,
whether or not incorporated (an "ERISA Affiliate"), that together with
Parent would be deemed a "single employer" within the meaning of Section
4001 of the Employee Retirement Income Security Act of 1974, as amended,
and the rules and regulations promulgated thereunder ("ERISA"), for the
benefit of any employee or former employee of Parent, any Parent Subsidiary
or any ERISA Affiliate. Schedule 4.16 hereto identifies each of the Parent
Plans that is an "employee benefit plan," as that term is defined in
Section 3(3) of ERISA (such plans being hereinafter referred to
collectively as the "Parent ERISA Plans").
(b) With respect to each of the Parent Plans, Parent has
heretofore made available to the Company true and complete copies of each
of the following documents:
(i) a copy of the Parent Plan (including all amendments
thereto);
(ii) a copy of the annual report and actuarial report, if
required under ERISA, with respect to each such Parent Plan for the
last two years;
(iii) a copy of the most recent Summary Plan
Description, together with each Summary of Material Modifications,
required under ERISA with respect to such Parent Plan;
(iv) if the Parent Plan is funded through a trust or any
third party funding vehicle, a copy of the trust or other funding
agreement (including all amendments thereto) and the latest financial
statements thereof; and
(v) the most recent determination letter received from the
Internal Revenue Service with respect to each Parent Plan intended to
qualify under Section 401 of the Code.
<PAGE>
(c) No liability under Title IV of ERISA has been incurred by
Parent, any Parent Subsidiary or any ERISA Affiliate since the effective
date of ERISA that has not been satisfied in full, and no condition exists
that presents a material risk to Parent, any Parent Subsidiary or any ERISA
Affiliate of incurring a liability under such Title. To the extent this
representation applies to Sections 4064, 4069 or 4204 of Title IV of ERISA,
it is made not only with respect to the ERISA Plans but also with respect
to any employee benefit plan, program, agreement or arrangement subject to
Title IV of ERISA to which Parent, a Parent Subsidiary or an ERISA
Affiliate made, or was required to make, contributions during the five-year
period ending on the Effective Time.
(d) With respect to each Parent ERISA Plan which is subject to
Title IV of ERISA, the present value of accrued benefits under such plan,
based upon the actuarial assumptions used for funding purposes in the most
recent actuarial report prepared by such plan's actuary with respect to
such plan did not exceed, as of its latest valuation date, the then current
value of the assets of such plan allocable to such accrued benefits.
(e) No Parent ERISA Plan or any trust established thereunder has
incurred any "accumulated funding deficiency" (as defined in Section 302 of
ERISA and Section 412 of the Code), whether or not waived, as of the last
day of the most recent fiscal year of each Parent ERISA Plan ended prior to
the Effective Time; and all contributions required to be made with respect
thereto (whether pursuant to the term of any Parent ERISA Plan or
otherwise) on or prior to the Effective Time have been timely made.
(f) No Parent ERISA Plan is a "multiemployer pension plan," as
defined in Section 3(37) of ERISA, nor is any Parent ERISA Plan a plan
described in Section 4063(a) of ERISA.
(g) Each Parent ERISA Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the
Code.
(h) Each of the Parent Plans has been operated and administered
in all material respects in accordance with applicable laws, including, but
not limited to, ERISA and the Code.
(i) No amounts payable under the Parent Plans will fail to be
deductible for federal income tax purposes by virtue of Section 280G of the
Code.
(j) No Parent Plan provides benefits, including without
limitation death or medical benefits (whether or not insured), with respect
to current or former employees of Parent, any Parent Subsidiary or any
ERISA Affiliate beyond their retirement or other termination of service,
other than (i) coverage mandated by applicable law, (ii) death benefits or
retirement benefits under any "employee pension plan", as that term is
defined in Section 3(2) of ERISA, (iii) deferred compensation benefits
accrued as liabilities on the books of Parent, any Parent Subsidiary or any
ERISA Affiliate or (iv) benefits the full cost of which is borne by the
current or former employee (or his beneficiary).
<PAGE>
(k) The consummation of the transactions contemplated by this
Agreement will not:
(i) entitle any current or former employee or officer of
Parent, any Parent Subsidiary or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment, except as expressly
provided in this Agreement,
(ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer, or
(iii) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
(l) With respect to each Parent Plan that is funded wholly or
partially through an insurance policy, there will be no material liability
of Parent, any Parent Subsidiary or any ERISA Affiliate, as of the
Effective Time, under any such insurance policy or ancillary agreement with
respect to such insurance policy in the nature of a retroactive rate
adjustment, loss sharing arrangement or other actual or contingent
liability arising wholly or partially out of events occurring prior to the
closing.
(m) There are no pending, threatened or anticipated claims by or
on behalf of any of the Parent Plans, by any employee or beneficiary
covered under any such Parent Plan, or otherwise involving any such Parent
Plan (other than routine claims for benefits).
(n) Neither Parent, any Parent Subsidiary or any ERISA
Affiliate, nor any of the Parent ERISA Plans, nor any trust created
thereunder, nor any trustee or administrator thereof has engaged in a
transaction in connection with which Parent, any Parent Subsidiary or any
ERISA Affiliate, any of the Parent ERISA Plans, any such trust, or any
trustee or administrator thereof, or any party dealing with the Parent
ERISA Plans or any such trust could be subject to either a material civil
liability under Section 409 of ERISA or Section 502(i) of ERISA, or a
material tax imposed pursuant to Section 4975 or 4976 of the Code.
Section 4.17 Vote Required. Approval of the Merger by the
stockholders of Parent will require the approval of a majority of the total
votes cast in person or by proxy at the stockholders' meeting referred to
in Section 7.4. No other vote of the stockholders of Parent, or of the
holders of any other securities of Parent (equity or otherwise), is
required by law, the Certificate of Incorporation or By-laws of Parent or
otherwise in order for Parent to consummate the Merger, the Parent Option
Agreement and the transactions contemplated hereby and thereby.
Section 4.18 Opinion of Financial Advisor. The Board of
Directors of Parent (at a meeting duly called and held) has unanimously
determined that the transactions contemplated hereby are fair to and in the
best interests of the holders of the Parent Shares. Parent has received
the opinion of Stephens Inc., Parent's financial advisor, substantially to
the effect that the Exchange Ratio is fair to Parent from a financial point
of view.
<PAGE>
Section 4.19 Ownership of Company Common Stock. Except as
contemplated by this Agreement, the Proxies and the Company Option
Agreement, as of the date hereof, neither Parent nor, to its knowledge
without independent investigation, any of its affiliates, (i) beneficially
owns (as defined in Rule 13d-3 under the Exchange Act), directly or
indirectly, or (ii) is party to any agreement, arrangement or understanding
for the purpose of acquiring, holding, voting or disposing of, in each
case, shares of capital stock of the Company.
Section 4.20 Pooling. Neither Parent nor any Parent Subsidiary
has knowledge of any fact or information which causes, or should reasonably
cause, Parent or Subsidiary to believe that the transactions contemplated
by this Agreement could not be accounted for as a pooling of interests
under Opinion 16 of the Accounting Principles Board and applicable SEC
rules and regulations.
Section 4.21 Taxes. (a) All federal, state, local and foreign
Tax Returns required to be filed by or on behalf of Parent, each of the
Parent Subsidiaries, and each affiliated, combined, consolidated or unitary
group of which Parent or any of its Subsidiaries (i) is a member (a
"Current Parent Group") or (ii) has been a member within six years prior to
the date hereof but is not currently a member, but only insofar as any such
Tax Return relates to a taxable period ending on a date within the last six
years (a "Past Parent Group," together with Current Parent Groups, a
"Parent Affiliated Group") have been timely filed, and all such Tax Returns
are complete and accurate except to the extent any failure to file or any
inaccuracies in filed returns would not, individually or in the aggregate,
have a Parent Material Adverse Effect (it being understood that the
representations made in this Section, to the extent that they relate to
Past Parent Groups, are made to the knowledge of Parent). All Taxes due
and owing by Parent, any Parent Subsidiary or any Parent Affiliated Group
have been timely paid, or adequately reserved for, except to the extent any
failure to pay or reserve would not, individually or in the aggregate, have
a Parent Material Adverse Effect. There is no audit examination,
deficiency, refund litigation, proposed adjustment or matter in controversy
with respect to any Taxes due and owing by Parent, any Parent Subsidiary or
any Affiliated Group which would, individually or in the aggregate, have a
Parent Material Adverse Effect. All assessments for Taxes due and owing by
Parent, any Parent Subsidiary or any Parent Affiliated Group with respect
to completed and settled examinations or concluded litigation have been
paid. Prior to the date of this Agreement, Parent has provided the Company
with written schedules of (i) the taxable years of Parent for which the
statutes of limitations with respect to U.S. federal income Taxes have not
expired, and (ii) with respect to U.S. federal income Taxes, for all
taxable years for which the statute of limitations has not yet expired,
those years for which examinations have been completed, those years for
which examinations are presently being conducted, and those years for which
examinations have not yet been initiated. Parent and each of the Parent
Subsidiaries have complied in all material respects with all rules and
regulations relating to the payment and withholding of Taxes, except to the
extent any such failure to comply would not, individually or in the
aggregate, have a Parent Material Adverse Effect.
<PAGE>
(b) Neither Parent nor any of the Parent Subsidiaries is a party
to, bound by, or has any obligation under any Tax sharing, allocation,
indemnity, or similar contract or arrangement.
(c) Neither Parent nor any of the Parent Subsidiaries knows of
any fact or has taken any action that could reasonably be expected to
prevent the Merger from qualifying as a reorganization with the meaning of
Section 368(a) of the Code.
(d) Schedule 4.21 sets forth (i) the taxable years of Parent for
which the statute of limitations with respect to Material State income
Taxes have not expired, and (ii) with respect to Material State income
Taxes, for all taxable years for which the statute of limitations has not
expired, those years for which examinations have been completed, those
years for which examinations are presently being conducted, and those years
for which examinations have not yet been initiated.
(e) For purposes of this Agreement: (i) "Taxes" means any and
all federal, state, local, foreign, provincial, territorial or other taxes,
imposts, rates, levies, assessments and other charges of any kind
whatsoever whether imposed directly or through withholding (together with
any and all interest, penalties, additions to tax and additional amounts
applicable with respect thereto), including, without limitation, income,
franchise, windfall or other profits, gross receipts, property, sales, use,
capital stock, payroll, employment, social security, workers' compensation,
unemployment compensation, net worth, excise, withholding, ad valorem and
value added taxes, and (ii) "Tax Return" means any declaration, return,
report, schedule, certificate, statement or other similar document
(including relating or supporting information) required to be filed or,
where none is required to be filed with a taxing authority, the statement
or other document issued by a taxing authority in connection with any Tax,
including, without limitation, any information return, claim for refund,
amended return or declaration of estimated Tax. For purposes of this
Section 4.21 "Material State" means any state for which the average
allocation percentage of Parent and the Parent Subsidiaries for the past
three years exceeds ten percent (10%).
Section 4.22 Contracts. Except as set forth on Schedule 4.22
hereto, neither Parent nor any of the Parent Subsidiaries is party to any
agreement (whether written or oral) that (a) involves performance of
services or delivery of goods or materials of an amount or value in excess
of $3 million per year; or (b) is a software licensing agreement involving
an amount or value in excess of $2,000,000 (the "Parent Contracts"). Each
Parent Contract is valid and binding on Parent and is in full force and
effect, and Parent and each of the Parent Subsidiaries have in all material
respects performed all obligations required to be performed by them to date
under each Parent Contract, except where such noncompliance, individually
or in the aggregate, would not have a Parent Material Adverse Effect.
Neither Parent nor any of the Parent Subsidiaries knows of, or has received
notice of, any violation or default under any Parent Contract except for
such violations or defaults as would not in the aggregate have a Parent
Material Adverse Effect.
<PAGE>
ARTICLE V
REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company represents and warrants to Parent and Sub as follows:
Section 5.1 Organization. The Company is a corporation duly
organized, validly existing and in good standing under the laws of the
State of Delaware and has the corporate power to carry on its business as
it is now being conducted or presently proposed to be conducted. The
Company is duly qualified as a foreign corporation to do business, and is
in good standing, in each jurisdiction where the character of its
properties owned or held under lease or the nature of its activities makes
such qualification necessary, except such failures to be so qualified which
would not in the aggregate have a material adverse effect on the business,
assets, liabilities, condition (financial or otherwise) or results of
operations of the Company and its subsidiaries taken as a whole (a "Company
Material Adverse Effect").
Section 5.2 Capitalization. The authorized capital stock of
the Company consists of 50,000,000 shares of Common Stock, par value $.01
per share and 2,000,000 shares of Preferred Stock, no par value ("Company
Preferred Stock"), of which 300,000 shares have been designated as Series A
Participating Preferred Stock. As of the date hereof, 26,073,654 shares of
Company Common Stock were issued and outstanding and no shares of Company
Preferred Stock were issued and outstanding. All of the issued and
outstanding Shares are validly issued, fully paid and nonassessable and
free of preemptive rights. Except for (i) the 7,228,153 shares of Company
Common Stock issuable upon the conversion of the 5-1/4% Convertible
Subordinated Notes due 2003, (ii) options to receive or acquire 4,630,003
shares of Company Common Stock granted (or to be granted pursuant to
Section 6.1(c)) pursuant to employee incentive or benefit plans, programs
and arrangements of the Company ("Employee Stock Options"), which options
are listed by optionee, price per share, date of grant and number of shares
covered thereby on Schedule 5.2 hereto, (iii) warrants to purchase 180,000
shares of Company Common Stock and (iv) the rights (the "Company Rights")
to acquire shares of Series A Participating Preferred Stock pursuant to the
Rights Agreement between the Company and Harris Trust and Savings Bank
dated March 1, 1996 (the "Company Rights Agreement"), and as otherwise
provided for in this Agreement and the Company Option Agreement, there are
not now, and at the Effective Time there will not be, any shares of capital
stock of the Company issued or outstanding or any options, warrants,
subscriptions, calls, rights, convertible securities or other agreements or
commitments obligating the Company to issue, transfer or sell any shares of
its capital stock. Except as provided in this Agreement or in the
Schedules hereto, after the Effective Time, the Company will have no
obligation to issue, transfer or sell any shares of its capital stock
pursuant to any employee benefit plan or otherwise.
<PAGE>
Section 5.3 Subsidiaries. Schedule 5.3 hereto sets forth each
direct or indirect interest owned by the Company in any other corporation,
partnership, joint venture or other business association or entity, foreign
or domestic, of which the Company or any of its other Subsidiaries owns,
directly or indirectly, greater than fifty percent of the shares of capital
stock or other equity interests (including partnership interests) entitled
to cast at least a majority of the votes that may be cast by all shares or
equity interests having ordinary voting power for the election of directors
or other governing body of such entity (each such entity is hereinafter
referred to as a Subsidiary and are hereinafter collectively referred to as
the "Subsidiaries".) Each Subsidiary is a corporation duly organized,
validly existing and in good standing under the laws of its jurisdiction of
incorporation. Each Subsidiary is duly qualified as a foreign corporation
to do business, and is in good standing, in each jurisdiction where the
character of its properties owned or held under lease or the nature of its
activities makes such qualification necessary except where the failure to
be so qualified will not have a Company Material Adverse Effect. Each
Subsidiary has the corporate power to carry on its business as it is now
being conducted or presently proposed to be conducted. All of the
outstanding shares of capital stock of the Subsidiaries are validly issued,
fully paid and nonassessable and are owned by the Company or by a
Subsidiary free and clear of any liens, claims, charges or encumbrances.
There are not now, and at the Effective Time there will not be, any
outstanding options, warrants, subscriptions, calls, rights, convertible
securities or other agreements or commitments obligating the Company or any
Subsidiary to issue, transfer or sell any securities of any Subsidiary.
There are not now, and at the Effective Time there will not be, any voting
trusts or other agreements or understandings to which the Company or any of
the Subsidiaries is a party or is bound with respect to the voting of the
capital stock of the Company or any of the Subsidiaries.
Section 5.4 Authority Relative to this Agreement. The Company
has the corporate power to enter into this Agreement, the Parent Option
Agreement and the Company Option Agreement, to carry out its obligations
hereunder and thereunder and to consummate the Merger. The execution and
delivery of this Agreement, the Parent Option Agreement and the Company
Option Agreement by the Company, the consummation by the Company of the
transactions contemplated hereby and thereby and the consummation of the
Merger have been duly authorized by the Company's Board of Directors and,
except for the approval of its stockholders to be sought at the
stockholders meeting contemplated by Section 7.4 hereof and the filing of
the Certificate of Merger as required by the GCL, no other corporate
proceedings on the part of the Company are necessary to authorize this
Agreement, the Parent Option Agreement and the Company Option Agreement,
the transactions contemplated hereby and thereby or the consummation of the
Merger. This Agreement, the Parent Option Agreement and the Company
Option Agreement have been duly and validly executed and delivered by the
Company and, assuming due authorization, execution and delivery by the
other parties hereto, this Agreement, the Parent Option Agreement and the
Company Option Agreement constitute valid and binding agreements of the
Company, enforceable against the Company in accordance with their terms,
except insofar as enforceability may be limited by applicable bankruptcy,
insolvency, reorganization, moratorium or similar laws affecting creditors'
rights generally, or principles governing the availability of equitable
remedies.
<PAGE>
Section 5.5 Consents and Approvals; No Violations. Except for
applicable requirements of the HSR Act, the Securities Act, the Exchange
Act, state securities or blue sky laws, the rules and regulations of NASDAQ
and the filing and recordation of a Certificate of Merger as required by
the GCL, no filing with, and no permit, authorization, consent or approval
of, any public body or authority is necessary for the consummation by the
Company of the transactions contemplated by this Agreement, the Parent
Option Agreement and the Company Option Agreement. Neither the execution
and delivery of this Agreement, the Parent Option Agreement or the Company
Option Agreement by the Company, nor the consummation by the Company of the
transactions contemplated hereby or thereby, nor compliance by the Company
with any of the provisions hereof or thereof, will (a) conflict with or
result in any breach of any provisions of the Certificate of Incorporation
or By-Laws of the Company or any of the Subsidiaries, (b) except as set
forth on Schedule 5.5(b), result in a violation or breach of, or constitute
(with or without due notice or lapse of time or both) a default (or give
rise to any right of termination, cancellation or acceleration) under, any
of the terms, conditions or provisions of any note, bond, mortgage,
indenture, license, contract, agreement or other instrument or obligation
to which the Company or any of the Subsidiaries is a party or by which any
of them or any of their properties or assets may be bound or (c) violate
any order, writ, injunction, decree, statute, rule or regulation applicable
to the Company, any of the Subsidiaries or any of their properties or
assets, except in the case of clauses (b) and (c) for violations, breaches
or defaults which would not individually or in the aggregate have a Company
Material Adverse Effect.
Section 5.6 Reports and Financial Statements. The Company has
filed all reports required to be filed with the SEC pursuant to the
Exchange Act since March 26, 1996 (such reports, together with all
registration statements, prospectuses and information statements filed by
the Company since March 26, 1996, being hereinafter collectively referred
to as the "Company SEC Reports"), and has previously furnished Parent with
true and complete copies of all such Company SEC Reports. None of such
Company SEC Reports, as of their respective dates, contained any 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, in light
of the circumstances under which they were made, not misleading. As of
their respective dates, all such Company SEC Reports complied as to form in
all material respects with the applicable requirements of the Securities
Act. Each of the balance sheets (including the related notes) included in
the Company SEC Reports fairly presents the consolidated financial position
of the Company and the Subsidiaries as of the respective dates thereof, and
the other related statements (including the related notes) included therein
fairly present the results of operations and the changes in financial
position of the Company and the Subsidiaries for the respective periods or
as of the respective dates set forth therein (subject, where appropriate,
to normal year-end adjustments), all in conformity with generally accepted
accounting principles consistently applied during the periods involved,
except as otherwise noted therein.
<PAGE>
Section 5.7 Absence of Certain Changes or Events. Except as
set forth in Schedule 5.7 hereto or in the Company SEC Reports, since
September 30, 1997, neither the Company nor any of the Subsidiaries has:
(a) suffered any change which had or would have a Company Material Adverse
Effect or (b) subsequent to the date hereof, except as permitted by Section
6.1 hereof, conducted its business and operations other than in the
ordinary course of business and consistent with past practices.
Section 5.8 Litigation. Except for litigation disclosed in
the Company SEC Reports there is no suit, action or proceeding pending or,
to the knowledge of the Company, threatened against or affecting the
Company or any of its Subsidiaries the outcome of which is reasonably
likely to have a Company Material Adverse Effect; nor is there any
judgment, decree, injunction, rule or order of any court, governmental
department, commission, agency, instrumentality or arbitrator outstanding
against the Company or any of its Subsidiaries, which has or would have a
Company Material Adverse Effect.
Section 5.9 Patents, Trademarks, Etc. Except as set forth in
Schedule 5.9, to the knowledge of the Company, the Company and its
Subsidiaries own or possess adequate licenses or other valid rights to use
all Proprietary Rights used or held for use in connection with the business
of the Company and its Subsidiaries as currently conducted or as
contemplated to be conducted, free and clear of any liens, clams or
encumbrances. Except as set forth in Schedule 5.9, to the knowledge of the
Company, the conduct of the business of the Company and its Subsidiaries as
currently conducted does not conflict in any way with any Proprietary Right
of any third party. To the knowledge of the Company there are no
infringements of any of the Proprietary Rights owned by or licensed to the
Company or any of its Subsidiaries.
Section 5.10 Information in Disclosure Documents and
Registration Statement. None of the information to be supplied by the
Company for inclusion in the Proxy Statement or the Registration Statement,
other than the information to be supplied by Parent or Sub, will, in the
case of the Registration Statement, at the time it becomes effective and at
the Effective Time, or, in the case of the Proxy Statement or any
amendments thereof or supplements thereto, at the time of the mailing of
the Proxy Statement and any amendments or supplements thereto, and at the
time of the meeting of stockholders of the Company to be held in connection
with the Merger, contain any untrue statement of a material fact or omit to
state any material fact required to be stated therein or necessary in order
to make the statements therein, in light of the circumstances under which
they are made, not misleading. The Proxy Statement will comply as to form
in all material respects with the provisions of the Exchange Act, and the
rules and regulations promulgated thereunder.
Section 5.11 Absence of Undisclosed Liabilities. Other than
obligations incurred in the ordinary course of business, neither the
Company nor any of its Subsidiaries has any liabilities or obligations of
any nature, whether or not accrued, contingent or otherwise, and there is
no existing condition, situation or set of circumstances which would
reasonably be expected to result in such a liability or obligation which
would be required to be disclosed on a consolidated balance sheet under
GAAP, except (a) liabilities or obligations reflected in the Company SEC
Reports and (b) liabilities or obligations which would not, individually or
in the aggregate, have a Company Material Adverse Effect.
Section 5.12 No Default. Neither the Company nor any of the
Subsidiaries is in default or violation (and no event has occurred which
with notice or the lapse of time or both would constitute a default or
violation) of any term, condition or provision of (a) its Certificate of
Incorporation or By-Laws, (b) any note, bond, mortgage, indenture, license,
agreement, contract, lease, commitment or other obligation to which the
Company or any of the Subsidiaries is a party or by which they or any of
their properties or assets may be bound, or (c) any order, writ,
injunction, decree, statute, rule or regulation applicable to the Company
or any of the Subsidiaries, except in the case of clauses (b) and (c) above
for defaults or violations which would not individually or in the aggregate
have a Company Material Adverse Effect.
<PAGE>
Section 5.13 Taxes. (a) All federal, state, local and foreign
Tax Returns required to be filed by or on behalf of the Company, each of
its Subsidiaries, and each affiliated, combined, consolidated or unitary
group of which the Company or any of its Subsidiaries (i) is a member (a
"Current Company Group") or (ii) has been a member within six years prior
to the date hereof but is not currently a member, but only insofar as any
such Tax Return relates to a taxable period ending on a date within the
last six years (a "Past Company Group," together with Current Company
Groups, a "Company Affiliated Group") have been timely filed, and all such
Tax Returns are complete and accurate except to the extent any failure to
file or any inaccuracies in filed returns would not, individually or in the
aggregate, have a Company Material Adverse Effect (it being understood that
the representations made in this Section, to the extent that they relate to
Past Company Groups, are made to the knowledge of the Company). All Taxes
due and owing by the Company, any Subsidiary of the Company or any Company
Affiliated Group have been timely paid, or adequately reserved for, except
to the extent any failure to pay or reserve would not, individually or in
the aggregate, have a Company Material Adverse Effect. There is no audit
examination, deficiency, refund litigation, proposed adjustment or matter
in controversy with respect to any Taxes due and owing by the Company, any
Subsidiary or any Affiliated Group which would, individually or in the
aggregate, have a Company Material Adverse Effect. All assessments for
Taxes due and owing by the Company, any Subsidiary or any Company
Affiliated Group with respect to completed and settled examinations or
concluded litigation have been paid. Schedule 5.13 sets forth (i) the
taxable years of the Company for which the statutes of limitations with
respect to U.S. federal income Taxes have not expired, and (ii) with
respect to U.S. federal income Taxes, for all taxable years for which the
statute of limitations has not yet expired, those years for which
examinations have been completed, those years for which examinations are
presently being conducted, and those years for which examinations have not
yet been initiated. The Company and each of its Subsidiaries have complied
in all material respects with all rules and regulations relating to the
payment and withholding of Taxes, except to the extent any such failure to
comply would not, individually or in the aggregate, have a Company Material
Adverse Effect.
(b) Neither the Company nor any of its Subsidiaries is a party
to, bound by, or has any obligation under any Tax sharing, allocation,
indemnity, or similar contract or arrangement.
(c) Neither the Company nor any of its Subsidiaries knows of any
fact or has taken any action that could reasonably be expected to prevent
the Merger from qualifying as a reorganization within the meaning of
Section 368(a) of the Code.
(d) Schedule 5.13 sets forth (i) the taxable years of the
Company for which the statute of limitations with respect to Material State
income Taxes have not expired, and (ii) with respect to Material State
income Taxes, for all taxable years for which the statute of limitations
has not expired, those years for which examinations have been completed,
those years for which examinations are presently being conducted, and those
years for which examinations have not yet been initiated.
(e) For purposes of this Section 5.13: "Material State" means
any state for which the average allocation percentage of the Company and
its Subsidiaries for the past three years exceeds ten percent (10%).
<PAGE>
Section 5.14 Title to Properties; Encumbrances. Except as
described in the following sentence, each of the Company and the
Subsidiaries has good and marketable title to, or a valid leasehold
interest in, all of its properties and assets (real, personal and mixed,
tangible and intangible material to the operations and business of the
Company), including, without limitation, all such properties and assets
reflected in the consolidated balance sheet of the Company and the
Subsidiaries as of March 31, 1998 included in the Company's Quarterly
Report on Form 10-Q for the period ended on such date (except for
properties and assets disposed of in the ordinary course of business and
consistent with past practices since March 31, 1998). None of such
properties or assets are subject to any liability, obligation, claim, lien,
mortgage, pledge, security interest, conditional sale agreement, charge or
encumbrance of any kind (whether absolute, accrued, contingent or
otherwise), except (i) as set forth in the Company SEC Reports or in
Schedule 5.14 hereto, and (ii) such encumbrances that do not individually
or in the aggregate have a Company Material Adverse Effect.
Section 5.15 Compliance with Applicable Law. Each of the
Company and the Subsidiaries is in compliance with all applicable Laws
(whether statutory or otherwise), except where the failure to be in such
compliance would not, individually or in the aggregate, have a Company
Material Adverse Effect.
Section 5.16 Labor Matters. Except as set forth on Schedule
5.16, neither the Company nor any of the Subsidiaries is a party to, or
bound by, any collective bargaining agreement, contract or other agreement
or understanding with a labor union or labor organization. There is no
unfair labor practice or labor arbitration proceeding pending or, to the
knowledge of the Company, threatened against the Company or the
Subsidiaries relating to their business, except for any such preceding
which would not have a Company Material Adverse Effect. To the knowledge
of the Company, there are no organizational efforts with respect to the
formation of a collective bargaining unit presently being made or
threatened involving employees of the Company or any of the Subsidiaries.
Section 5.17 Employee Benefit Plans; ERISA. (a) Schedule 5.17
hereto contains a true and complete list of each bonus, deferred
compensation, incentive compensation, stock purchase, stock option,
severance or termination pay, hospitalization or other medical, life or
other insurance, supplemental unemployment benefits, profit-sharing,
pension, or retirement plan, program, agreement or arrangement, and each
other employee benefit plan, program, agreement or arrangement (the
"Plans"), maintained or contributed to or required to be contributed to by
(i) the Company, (ii) any Subsidiary or (iii) any ERISA Affiliate, that
together with the Company would be deemed a "single employer" within the
meaning of Section 4001 of ERISA, for the benefit of any employee or former
employee of the Company, any Subsidiary or any ERISA Affiliate. Schedule
5.17(a) hereto identifies each of the Plans that is an "employee benefit
plan," as that term is defined in Section 3(3) of ERISA (such plans being
hereinafter referred to collectively as the "ERISA Plans").
(b) With respect to each of the Plans, the Company has
heretofore delivered or will deliver to Parent true and complete copies of
each of the following documents:
(i) a copy of the Plan (including all amendments thereto);
(ii) a copy of the annual report and actuarial report, if
required under ERISA, with respect to each such Plan for the last two
years;
(iii) a copy of the most recent Summary Plan
Description, together with each Summary of Material Modifications,
required under ERISA with respect to such Plan;
(iv) if the Plan is funded through a trust or any third
party funding vehicle, a copy of the trust or other funding agreement
(including all amendments thereto) and the latest financial statements
thereof; and
<PAGE>
(v) the most recent determination letter received from the
Internal Revenue Service with respect to each Plan intended to qualify
under Section 401 of the Code.
(c) No liability under Title IV of ERISA has been incurred by
the Company, any Subsidiary or any ERISA Affiliate since the effective date
of ERISA that has not been satisfied in full, and no condition exists that
presents a material risk to the Company, any Subsidiary or any ERISA
Affiliate of incurring a liability under such Title. To the extent this
representation applies to Sections 4064, 4069 or 4204 of Title IV of ERISA,
it is made not only with respect to the ERISA Plans but also with respect
to any employee benefit plan, program, agreement or arrangement subject to
Title IV of ERISA to which the Company, a Subsidiary or an ERISA Affiliate
made, or was required to make, contributions during the five-year period
ending on the Effective Time.
(d) Except as disclosed in Schedule 5.17, with respect to each
ERISA Plan which is subject to Title IV of ERISA, the present value of
accrued benefits under such plan, based upon the actuarial assumptions used
for funding purposes in the most recent actuarial report prepared by such
plan's actuary with respect to such plan did not exceed, as of its latest
valuation date, the then current value of the assets of such plan allocable
to such accrued benefits.
(e) Except as disclosed in Schedule 5.17, no ERISA Plan or any
trust established thereunder has incurred any "accumulated funding
deficiency" (as defined in Section 302 of ERISA and Section 412 of the
Code), whether or not waived, as of the last day of the most recent fiscal
year of each ERISA Plan ended prior to the Effective Time; and all
contributions required to be made with respect thereto (whether pursuant to
the term of any ERISA Plan or otherwise) on or prior to the Effective Time
have been timely made.
(f) No ERISA Plan is a "multiemployer pension plan," as defined
in Section 3(37) of ERISA, nor is any ERISA Plan a plan described in
Section 4063(a) of ERISA.
(g) Each ERISA Plan intended to be "qualified" within the
meaning of Section 401(a) of the Code is so qualified and the trusts
maintained thereunder are exempt from taxation under Section 501(a) of the
Code.
(h) Each of the Plans has been operated and administered in all
material respects in accordance with applicable laws, including, but not
limited to, ERISA and the Code.
(i) Except as disclosed in Schedule 5.17, no amounts payable
under the Plans will fail to be deductible for federal income tax purposes
by virtue of Section 280G of the Code. Schedule 5.17 sets forth the
aggregate amount of entitlements and other amounts that could be (i)
received (whether in cash or property or the vesting of property) under any
of the Plans as a result of any of the transactions contemplated by this
Agreement by any person which is a "disqualified individual" (as such term
is defined in Section 280G(c) of the Code) and (ii) characterized as an
"excess parachute payment" (as such term is defined in Section 280G(b)(1)
of the Code), plus the amount of any excise taxes that may be imposed with
respect thereto and any additional amounts or gross-ups that may be paid
with respect to such amounts.
<PAGE>
(j) Except as disclosed in Schedule 5.17, no Plan provides
benefits, including without limitation death or medical benefits (whether
or not insured), with respect to current or former employees of the
Company, any Subsidiary or any ERISA Affiliate beyond their retirement or
other termination of service, other than (i) coverage mandated by
applicable law, (ii) death benefits or retirement benefits under any
"employee pension plan", as that term is defined in Section 3(2) of ERISA,
(iii) deferred compensation benefits accrued as liabilities on the books of
the Company, any Subsidiary or any ERISA Affiliate or (iv) benefits the
full cost of which is borne by the current or former employee (or his
beneficiary).
(k) Except as disclosed on Schedule 5.17, the consummation of
the transactions contemplated by this Agreement will not
(i) entitle any current or former employee or officer of
the Company, any Subsidiary or any ERISA Affiliate to severance pay,
unemployment compensation or any other payment, except as expressly
provided in this Agreement,
(ii) accelerate the time of payment or vesting, or increase
the amount of compensation due any such employee or officer, or
(iii) result in any prohibited transaction described in
Section 406 of ERISA or Section 4975 of the Code for which an
exemption is not available.
(l) With respect to each Plan that is funded wholly or partially
through an insurance policy, there will be no liability of the Company, any
Subsidiary or any ERISA Affiliate, as of the Effective Time, under any such
insurance policy or ancillary agreement with respect to such insurance
policy in the nature of a retroactive rate adjustment, loss sharing
arrangement or other actual or contingent liability arising wholly or
partially out of events occurring prior to the closing.
(m) There are no pending, threatened or anticipated claims by or
on behalf of any of the Plans, by any employee or beneficiary covered under
any such Plan, or otherwise involving any such Plan (other than routine
claims for benefits).
(n) Neither the Company, any Subsidiary or any ERISA Affiliate,
nor any of the ERISA Plans, nor any trust created thereunder, nor any
trustee or administrator thereof has engaged in a transaction in connection
with which the Company, any Subsidiary or any ERISA Affiliate, any of the
ERISA Plans, any such trust, or any trustee or administrator thereof, or
any party dealing with the ERISA Plans or any such trust could be subject
to either a material civil liability under Section 409 of ERISA or Section
502(i) of ERISA, or a material tax imposed pursuant to Section 4975 or 4976
of the Code.
<PAGE>
Section 5.18 Contracts. Except as set forth on Schedule 5.18
hereto, neither the Company nor any of its Subsidiaries is party to any
agreement (whether written or oral) that (a) involves performance of
services or delivery of goods or materials of an amount or value in excess
of $1 million per year; or (b) is a software licensing agreement involving
an amount or value in excess of $500,000 (the "Company Contracts"). Each
Company Contract is valid and binding on the Company and is in full force
and effect, and the Company and each of its Subsidiaries have in all
material respects performed all obligations required to be performed by
them to date under each Company Contract, except where such noncompliance,
individually or in the aggregate, would not have a Company Material Adverse
Effect. Neither the Company nor any of its Subsidiaries knows of, or has
received notice of, any violation or default under any Company Contract
except for such violations or defaults as would not in the aggregate have a
Company Material Adverse Effect.
Section 5.19 Vote Required. Approval of the Merger by the
stockholders of the Company will require the affirmative vote of the
holders of a majority of the outstanding Shares. No other vote of the
stockholders of the Company, or of the holders of any other securities of
the Company (equity or otherwise), is required by law, the certificate of
incorporation or by-laws of the Company or otherwise in order for the
Company to consummate the Merger and the transactions contemplated hereby
and by the Company Option Agreement.
Section 5.20 Opinion of Financial Advisor. The Board of
Directors of the Company (at meetings duly called and held) has unanimously
determined that the transactions contemplated hereby are fair to and in the
best interests of the Company's stockholders. The Company has received the
opinion of Donaldson, Lufkin & Jenrette Securities Corporation, the
Company's financial advisor, substantially to the effect that the Exchange
Ratio is fair to the holders of the Company Common Stock from a financial
point of view.
Section 5.21 Takeover Statute. The Board of Directors of the
Company has approved this Agreement, the Parent Option Agreement and the
Company Option Agreement and the transactions contemplated hereby and
thereby and, assuming the accuracy of Parent's and Sub's representation and
warranty contained in Section 4.19, such approval constitutes approval of
the Merger and the other transactions contemplated hereby by such Board of
Directors under the provisions of Section 203 of the GCL such that Section
203 of the GCL does not apply to this Agreement and the transactions
contemplated hereby.
Section 5.22 The Company Rights Agreement. The Board of
Directors of the Company has approved the amendment of the Company Rights
Plan in the form attached hereto as Exhibit B and as a result thereof, none
of the execution or delivery of this Agreement, the Proxies or the Company
Option Agreement or the consummation of the transactions contemplated
hereby or thereby will (a) cause the Company Rights to become exercisable
or to separate from the stock certificates to which they are attached, (b)
cause Parent to become an "Acquiring Person" (as such term is defined in
the Company Rights Agreement), or (c) trigger any other provisions of the
Company Rights Agreement.
<PAGE>
Section 5.23 Ownership of Parent Common Stock. Except as
contemplated by this Agreement, the Parent Option Agreement and the Parent
Stock Proxy, as of the date hereof, neither the Company nor, to its
knowledge without independent investigation, any of its affiliates, (i)
beneficially owns (as defined in Rule 13d-3 under the Exchange Act,
directly or indirectly, or (ii) is party to any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing
of, in each case, shares of capital stock of Parent.
Section 5.24 Pooling. Neither the Company nor any Subsidiary
has knowledge of any fact or information which causes, or should reasonably
cause, the Company or any Subsidiary to believe that the transactions
contemplated by this Agreement could not be accounted for as a pooling of
interests under Opinion 16 of the Accounting Principles Board and
applicable SEC rules and regulations.
ARTICLE VI
CONDUCT OF BUSINESS PENDING THE MERGER
Section 6.1 Conduct of Business by the Company Pending the
Merger. Prior to the Effective Time, unless Parent shall otherwise agree
in writing, or as set forth in Schedule 6.1 or may be expressly permitted
pursuant to this Agreement:
(a) the respective businesses of the Company and the
Subsidiaries shall be conducted only in the ordinary and usual course of
business and consistent with past practices, and there shall be no material
changes in the conduct of the Company's operations;
(b) the Company shall not (i) sell or pledge or agree to sell or
pledge any stock owned by it in any of the Subsidiaries; (ii) amend its
Certificate of Incorporation or By-Laws; or (iii) split, combine or
reclassify any shares of its outstanding capital stock or declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property, or redeem or otherwise acquire any shares of its capital stock or
shares of the capital stock of any of the Subsidiaries;
<PAGE>
(c) neither the Company nor any of the Subsidiaries shall
(i) authorize for issuance, issue or sell or agree to issue or sell any
additional shares of, or rights of any kind to acquire any shares of, its
capital stock of any class (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise), except for the 4,580,003 unissued Shares reserved for issuance
upon the exercise of currently outstanding employee stock options and
except for employee options to purchase not more than 50,000 shares, the
7,228,153 Shares reserved for issuance upon conversion of the Company's
51/4% Convertible Subordinated Notes due 2003, or the 180,000 Shares
reserved for issuance upon exercise of warrants; (ii) acquire, dispose of,
transfer, lease, license, mortgage, pledge or encumber any fixed or other
assets other than in the ordinary course of business and consistent with
past practices; (iii) except for certain indebtedness not in excess of
$15,000,000, incur, assume or prepay any indebtedness or any other material
liabilities other than in the ordinary course of business and consistent
with past practices; (iv) assume, guarantee, endorse or otherwise become
liable or responsible (whether directly, contingently or otherwise) for the
obligations of any other person other than a Subsidiary in the ordinary
course of business and consistent with past practices; (v) make any loans,
advances or capital contributions to, or investments in, any other person,
other than to Subsidiaries; (vi) authorize capital expenditures not in the
ordinary course of business in excess of $1,000,000; (vii) make any Tax
election or settle or compromise any Tax liability; (viii) change its
fiscal year; (ix) except as disclosed in the Company SEC Reports filed
prior to the date of this Agreement, or as required by a governmental body
or authority, change its methods of accounting (including, without
limitation, make any material write-off or reduction in the carrying value
of any assets) in effect at September 30, 1997, except as required by
changes in GAAP as concurred in by the Company's independent auditors; or
(x) enter into any contract, agreement, commitment or arrangement with
respect to any of the foregoing;
(d) the Company shall use its reasonable best efforts to
preserve intact the business organization of the Company and the
Subsidiaries, to keep available the services of its and their present
officers and key employees, and to preserve the goodwill of those having
business relationships with it and the Subsidiaries;
(e) neither the Company nor any of the Subsidiaries will enter
into any employment agreements with any officers or employees or grant any
increases in the compensation of their respective officers and employees
other than increases in the ordinary course of business and consistent with
past practice, or enter into, adopt or amend any Plan (as that term is
defined in Schedule 5.17 hereto); and
(f) neither the Company nor any of the Subsidiaries shall (i)
take or allow to be taken any action which would jeopardize the treatment
of Parent's acquisition of the Company as a pooling of interests for
accounting purposes; or (ii) take any action which would jeopardize
qualification of the Merger as a reorganization within the meaning of
Section 368(a) of the Code.
Section 6.2 Conduct of Business by Parent Pending the Merger.
Prior to the Effective Time, unless the Company shall otherwise agree in
writing, or as otherwise expressly permitted by this Agreement:
<PAGE>
(a) the respective businesses of Parent and the Parent
Subsidiaries shall be conducted only in the ordinary and usual course of
business and consistent with past practices, and there shall be no material
changes in the conduct of Parent's operations;
(b) Parent shall not (i) sell or pledge or agree to sell or
pledge any stock owned by it in any of the Parent Subsidiaries; (ii) amend
its Certificate of Incorporation or By-Laws; (iii) split, combine or
reclassify any shares of its outstanding capital stock or declare, set
aside or pay any dividend or other distribution payable in cash, stock or
property, or redeem or otherwise acquire any shares of its capital stock or
shares of the capital stock of any of the Parent Subsidiaries or (iv)
consolidate with or merge with or into another company unless at least 50%
of the members of the Board of Directors of the surviving entity are
members of the Board of Directors of Parent immediately prior to such
merger or consolidation or are otherwise designated by Parent.
(c) neither Parent nor any of the Parent Subsidiaries shall
(i) authorize for issuance, issue or sell or agree to issue or sell any
additional shares of, or rights of any kind to acquire any shares of, its
capital stock of any class (whether through the issuance or granting of
options, warrants, commitments, subscriptions, rights to purchase or
otherwise), except for (a) unissued shares of Parent Common Stock reserved
for issuance upon the exercise of Parent Employee Stock Options, (b) the
shares of Parent Common Stock to be granted pursuant to Parent's Employee
Stock Benefit and Recognition Program, and (c) the shares of Parent Common
Stock reserved for issuance upon the exercise of certain rights by Trans
Union Corporation ("Trans Union") pursuant to the Data Center Management
Agreement between Trans Union and Parent, or (ii) enter into any contract,
agreement, commitment or arrangement with respect to any of the foregoing;
(d) Parent shall use its reasonable best efforts to preserve
intact the business organization of Parent and the Parent Subsidiaries, to
keep available the services of its and their present officers and key
employees, and to preserve the goodwill of those having business
relationships with it and the Parent Subsidiaries;
(e) neither Parent nor any of the Parent Subsidiaries shall (i)
take or allow to be taken any action which would jeopardize the treatment
of the transaction as a pooling of interests for accounting purposes or
(ii) take any action which would jeopardize qualification of the Merger as
a reorganization within the meaning of Section 368(a) of the Code.
(f) Nothing set forth in Section 6.2(a), (b), (c) or (d) above
shall limit Parent's ability to authorize or propose, enter into, or
consummate agreements relating to acquisitions, mergers or other business
combinations, including any such transaction pursuant to which Parent
issues shares of its capital stock; provided that in connection with any
such transaction Parent will not consolidate or merge with or into another
company unless at least 50% of the members of the Board of Directors of the
surviving entity are members of the Board of Directors of Parent
immediately prior to such merger or consolidation or otherwise designated
by Parent.
Section 6.3 Conduct of Business of Sub. During the period
from the date of this Agreement to the Effective Time, Sub shall not engage
in any activities of any nature except as provided in or contemplated by
this Agreement.
<PAGE>
ARTICLE VII
ADDITIONAL AGREEMENTS
Section 7.1 Access and Information. The Company and Parent
shall each afford to the other and to the other's financial advisors, legal
counsel, accountants consultants and other representatives full access upon
reasonable notice and during normal business hours throughout the period
prior to the Effective Time to all of its books, records, properties,
plants and personnel and, during such period, each shall furnish promptly
to the other (a) a copy of each report, schedule and other document filed
or received by it pursuant to the requirements of federal or state
securities laws, and (b) all other information as such other party may
reasonably request, provided that no investigation pursuant to this Section
7.1 shall affect any representations or warranties made herein or the
conditions to the obligations of the respective parties to consummate the
Merger. Each party shall hold in confidence all nonpublic information
until such time as such information is otherwise publicly available and, if
this Agreement is terminated, each party will deliver to the other all
documents, work papers and other material (including copies) obtained by
such party or on its behalf from the other party as a result of this
Agreement or in connection herewith, whether so obtained before or after
the execution hereof.
Section 7.2 Acquisition Proposals. From and after the date
hereof, the Company will not and the Company and the Subsidiaries will use
their best efforts to cause their respective directors, officers,
employees, financial advisors, legal counsel, accountants and other agents
and representatives not to initiate or solicit, directly or indirectly, any
inquiries or the making of any proposal or offer with respect to, engage in
negotiations concerning, provide any information or data to, any person
relating to any acquisition, business combination or purchase (including by
way of a tender or exchange offer) of (i) all or any significant portion of
the assets of the Company and the Subsidiaries, (ii) 15% or more of the
outstanding shares of Company Common Stock or (iii) 15% or more of the
outstanding shares of capital stock of any Subsidiary of the Company (a
"Takeover Proposal"), other than the Merger; provided, however, that
nothing contained in this Section 7.2 shall prohibit the Board of Directors
of the Company from (i) furnishing information to (but only pursuant to a
confidentiality agreement in customary form) or entering into discussions
or negotiations with any person or group that makes a Superior Proposal
that was not solicited by the Company or which did not otherwise result
from a breach of this Section 7.2, if, and only to the extent that, (A) the
Board of Directors of the Company, based upon the advice of outside legal
counsel, determines in good faith that such action is reasonably necessary
for the Board of Directors to comply with its fiduciary duties to
stockholders imposed by law, (B) concurrently with furnishing such
information to, or entering into discussions or negotiations with, such
person or group making this Superior Proposal, the Company provides written
notice to Parent to the effect that it is furnishing information to, or
entering into discussions or negotiations with, such person or group, and
(C) the Company keeps Parent informed of the status and all material
information including the identity of such person or group with respect to
any such discussions or negotiations to the extent such disclosure would
not constitute a violation of any applicable law. For purposes of this
Agreement "Superior Proposal" means any Takeover Proposal which the Board
of Directors of the Company concludes in its good faith judgment (based on
the advice of outside legal counsel and a financial advisor of a nationally
recognized reputation) to be more favorable to the Company's stockholders
than the Merger and for which financing, to the extent required, is fully
committed, subject to customary conditions; provided, however, that the
<PAGE>
reference to "15%" in clauses (ii) and (iii) of the definition of Takeover
Proposal shall be deemed to be references to "51%". The Company will
immediately cease and cause to be terminated any existing activities,
discussions or negotiations with any person conducted heretofore with
respect to any of the foregoing and will notify Parent immediately in
writing if any such inquiries or proposals (including the material terms
and conditions thereof) are received by, any such information is requested
from, or any such negotiations or discussions are sought to be initiated or
continued with, the Company. Nothing contained in this Section 7.2 shall
prohibit the Company from taking and disclosing to its stockholders a
position contemplated by Rule 14e-2(a) promulgated under the Exchange Act
or from making any disclosure to its stockholders if, in the good faith
judgment of the Board of Directors of the Company, after consultation with
outside legal counsel, failure so to disclose may be inconsistent with its
obligations under applicable law.
Section 7.3 Registration Statement. As promptly as
practicable, Parent and the Company shall prepare and file with the SEC the
Proxy Statement and Parent shall prepare and file with the SEC the
Registration Statement. Each of Parent and the Company shall use its best
efforts to have the Registration Statement declared effective. Parent
shall also use its best efforts to take any action required to be taken
under state securities or blue sky laws in connection with the issuance of
the Parent Shares pursuant hereto. Parent and the Company shall furnish
each other with all information concerning Parent and the Company, as the
case may be, and the holders of their capital stock and shall take such
other action as each party may reasonably request in connection with the
preparation of the Proxy Statement and the Registration Statement and
issuance of Parent Shares. Each such party agrees promptly to advise the
other if at any time prior to the Effective Time any information provided
by any party hereto in the Proxy Statement becomes incorrect or incomplete
in any material respect, and to provide the information needed to correct
such inaccuracy or omission. To the extent the issuance of Parent Shares
pursuant to the Merger to Lawrence J. Speh or Albert J. Speh, Jr., (or to
any other stockholder of the Company granting proxies pursuant to Section
7.7) are not permitted by the rules and regulations of the SEC to be
registered on the Registration Statement, Parent will use its best efforts
to register such issuance of Parent Shares to such stockholders of the
Company on a Form S-3 or other appropriate form.
Section 7.4 Proxy Statements; Stockholder Approvals. (a) The
Company, acting through its Board of Directors, shall, in accordance with
applicable law and its Certificate of Incorporation and By-Laws:
(i) promptly and duly call, give notice of, convene and
hold as soon as practicable following the date upon which the
Registration Statement becomes effective a meeting of its stockholders
for the purpose of voting to approve and adopt this Agreement and
shall use its reasonable best efforts to obtain such stockholder
approval; and
(ii) recommend approval and adoption of this Agreement by
the stockholders of the Company and include in the Proxy Statement
such recommendation, and take all lawful action to solicit such
approval.
(b) Parent, acting through its Board of Directors, shall, in
accordance with applicable law and its Certificate of Incorporation and By-
Laws:
<PAGE>
(i) promptly and duly call, give notice of, convene and
hold as soon as practicable following the date upon which the
Registration Statement becomes effective a meeting of its stockholders
for the purpose of voting to approve the issuance of the Parent Shares
pursuant to the Merger and shall use its reasonable best efforts to
obtain such stockholder approval; and
(ii) recommend approval and adoption of the issuance of the
Parent Shares pursuant to the Merger by the stockholders of Parent and
include in the Proxy Statement such recommendation, and take all
lawful action to solicit such approval.
(c) Parent and the Company shall cause the definitive Proxy
Statement to be mailed to their stockholders as promptly as practicable
after the Registration Statement is declared effective under the Securities
Act. At the stockholders' meetings, each of Parent and the Company shall
vote or cause to be voted in favor of approval and adoption of this
Agreement all Shares as to which it holds proxies at such time.
Section 7.5 Affiliate Agreements. (a) Prior to the mailing
of the Proxy Statement to the stockholders of the Company the Company shall
cause to be delivered to Parent a list in form and substance reasonably
satisfactory to Parent identifying all persons who are at the time of the
Company stockholders' meeting convened in accordance with Section 7.4
hereof, "affiliates" of the Company as that term is used in Rule 145 under
the Securities Act or under applicable SEC accounting releases with respect
to pooling of interests accounting treatment. The Company shall use its
reasonable best efforts to cause each person who is identified as a
possible "affiliate" in the list furnished pursuant to this Section 7.5 to
deliver to Parent at or prior to the mailing of the Proxy Statement a
written agreement, in substantially the form attached hereto as Exhibit C.
(b) Prior to the mailing of the Proxy Statement to the
stockholders of Parent, Parent shall deliver to the Company a list, in form
and substance reasonably satisfactory to the Company, identifying all
persons who are, at the time of the Parent stockholders' meeting convened
in accordance with Section 7.4 hereof, "affiliates" of Parent under
applicable SEC accounting releases with respect to pooling of interests
accounting treatment. Parent shall use its reasonable best efforts to
cause each person who is identified as a possible "affiliate" in the list
furnished pursuant to this Section 7.5 to deliver to Parent at or prior to
the mailing of the Proxy Statement, a written agreement substantially in
the form of Exhibit D hereto.
Section 7.6 Antitrust Laws. As promptly as practicable, the
Company, Parent and Sub shall make all filings and submissions under the
HSR Act as may be reasonably required to be made in connection with this
Agreement and the transactions contemplated hereby. Subject to Section 7.1
hereof, the Company will furnish to Parent and Sub, and Parent and Sub will
furnish to the Company, such information and assistance as the other may
reasonably request in connection with the preparation of any such filings
or submissions. Subject to Section 7.1 hereof, the Company will provide
Parent and Sub, and Parent and Sub will provide the Company, with copies of
all correspondence, filings or communications (or memoranda setting forth
the substance thereof) between such party or any of its representatives, on
the one hand, and any governmental agency or authority or members of their
respective staffs, on the other hand, with respect to this Agreement and
the transactions contemplated hereby.
<PAGE>
Section 7.7 Proxies. Concurrently herewith, the Parent is
entering into the Company Stock Proxies with each of Lawrence J. Speh and
Albert J. Speh, Jr. in the form attached hereto as Exhibits A-2 and A-3,
respectively. Concurrently herewith, the Company is entering into the
Parent Stock Proxy with Charles D. Morgan in the form attached hereto as
Exhibit A-1. Parent will use its reasonable best efforts to obtain proxies
within ten business days following the date hereof from the stockholders
listed on Schedule 7.7(a) hereto, such proxies to be substantially in the
form of Exhibit A-1. The Company will use its reasonable best efforts to
obtain proxies within ten business days following the date hereof from the
record holders of all shares of Company Common Stock reflected as being
beneficially owned by each of Lawrence J. Speh and Albert J. Speh, Jr., as
set forth on Schedule 7.7(b), such proxies to be substantially in the form
of Exhibits A-2 and A-3.
Section 7.8 Employees, Employee Benefits. (a) Parent agrees
that individuals who are employed by the Company as of the Effective Time
shall become employees of the Surviving Corporation following the Effective
Time (each such employee, an "Affected Employee"); provided, however, that
nothing contained in this Section 7.8 shall require the Surviving
Corporation to continue the employment of any Affected Employee for any
period of time following the Effective Time.
(b) Parent shall, or shall cause the Surviving Corporation to,
give Affected Employees full credit for purposes of eligibility, vesting
and determination of the level of benefits (but not for the purpose of
benefit accrual under any defined benefit plan) under any employee benefit
plans or arrangements maintained by the Parent, the Surviving Corporation
or any Subsidiary of the Parent for such Affected Employees' service with
the Company or any Subsidiary of the Company to the same extent recognized
by the Company immediately prior to the Effective Time.
(c) Parent shall, or shall cause the Surviving Corporation to,
(i) waive all limitations as to preexisting conditions exclusions and
waiting periods with respect to participation and coverage requirements
applicable to the Affected Employees under any welfare benefit plans that
such Affected Employees may be eligible to participate in after the
Effective Time, other than limitations or waiting periods that are already
in effect with respect to such Affected Employees and that have not been
satisfied as of the Effective Time under any welfare plan maintained for
the Affected Employees immediately prior to the Effective Time, and (ii)
provide each Affected Employee with credit for any co-payments and
deductibles paid prior to the Effective Time in satisfying any applicable
deductible or out-of-pocket requirements under any welfare plans that such
Affected Employees are eligible to participate in after the Effective Time.
Section 7.9 Stock Options. (a) As of the Effective Time, (i)
each outstanding Employee Stock Option shall be converted into an option
(an "Adjusted Option") to purchase the number of Parent Shares equal to the
number of Shares subject to such Employee Stock Option immediately prior to
the Effective Time multiplied by the Exchange Ratio (rounded to the nearest
whole number of Parent Shares), at an exercise price per share equal to the
exercise price for each such Share subject to such option divided by the
Exchange Ratio (rounded down to the nearest whole cent), and all references
in each such Employee Stock Option to the Company shall be deemed to refer
to Parent, where appropriate; provided, however, that the adjustments
provided in this clause (i) with respect to any Employee Stock Options
which are "incentive stock options" (as defined in Section 422 of the Code)
or which are described in Section 423 of the Code, shall be affected in a
manner consistent with the requirements of Section 424(a) of the Code, and
(ii) Parent shall assume the obligations of the Company under the Company's
<PAGE>
stock option plans pursuant to which such Employee Stock Options were
issued. The other terms of each Adjusted Option, and the plans or
agreements under which they were issued, shall continue to apply in
accordance with their terms. The date of grant of each Adjusted Option
shall be the date on which the corresponding Employee Stock Option was
granted.
(b) Parent shall (i) reserve for issuance the number of Parent
Shares that will become subject to the benefit plans, programs and
arrangements referred to in this Section 7.9 and (ii) issue or cause to be
issued the appropriate number of Parent Shares pursuant to applicable
plans, programs and arrangements, upon the exercise or maturation of rights
existing thereunder on the Effective Time or thereafter granted or awarded.
No later than the Effective Time, Parent shall prepare and file with the
SEC a registration statement on Form S-8 (or other appropriate form)
registering a number of Parent Shares necessary to fulfill Parent's
obligations under this Section 7.9. Such registration statement shall be
kept effective (and the current status of the prospectus required thereby
shall be maintained) for at least as long as Adjusted Options remain
outstanding.
(c) As soon as practicable after the Effective Time, Parent
shall deliver to the holders of Employee Stock Options appropriate notices
setting forth such holders' rights pursuant to the respective Company stock
option plans and the agreements evidencing the grants of such Employee
Stock Options and that such Employee Stock Options and the related
agreements shall be assumed by Parent and shall continue in effect on the
same terms and conditions (subject to the adjustments required by this
Section 7.9 after giving effect to the Merger).
Section 7.10 Public Announcements. Parent and Sub, on the one
hand, and the Company, on the other hand, agree that they will not issue
any press release or otherwise make any public statement or respond to any
press inquiry with respect to this Agreement or the transactions
contemplated hereby without the prior approval of the other party, except
as may be required by Law.
Section 7.11 By-Law Indemnification and Insurance. Parent
shall cause the Surviving Corporation to keep in effect in its By-Laws a
provision for a period of not less than six years from the Effective Time
(or, in the case of matters occurring prior to the Effective Time which
have not been resolved prior to the sixth anniversary of the Effective
Time, until such matters are finally resolved) which provides for
indemnification of the past and present officers and directors (the
"Indemnified Parties") of the Company to the fullest extent permitted by
the GCL. For six years from the Effective Time, Parent shall indemnify the
Indemnified Parties to the same extent as such Indemnified Parties are
entitled to indemnification pursuant to the preceding sentence. For a
period of six years from the Effective Time, Parent shall either cause to
be maintained in effect the current policies of directors' and officers'
liability insurance maintained by the Company or provide substitute
policies of at least the same coverage and amounts containing terms and
conditions which are, in the aggregate, no less advantageous to the insured
with respect to claims arising from facts or events that occurred on or
before the Effective Time, except that in no event shall Parent be required
to pay with respect to such insurance policies in any one year more than
$200,000.
<PAGE>
Section 7.12 Expenses. (a) Except as set forth in this
Section 7.12, whether or not the Merger is consummated all costs and
expenses incurred in connection with this Agreement and the transactions
contemplated hereby and thereby shall be paid by the party incurring such
expenses; provided that those expenses incurred in connection with printing
the Registration Statement and the related Proxy Statement, as well as the
filing fee relating to the Registration Statement will be shared equally by
Parent and the Company.
(b) As a condition and inducement to Parent's and Sub's
willingness to enter this Agreement, (i) if this Agreement is terminated by
Parent and Sub pursuant to Section 9.1(e) or 9.1(g), (ii) if this Agreement
is terminated by Parent and Sub or by the Company pursuant to 9.1(h) or
(iii)(x) prior to the termination of this Agreement, a bona fide Takeover
Proposal is commenced, publicly proposed or publicly disclosed and not
withdrawn, (y) this Agreement is terminated by the Parent and Sub or the
Company pursuant to Section 9.1(f) (but only due to the failure of the
Company stockholders to approve the Merger) and (z) concurrently with or
within twelve months after such termination a Takeover Proposal shall have
been consummated, then, in each case, the Company shall (i) pay to Parent a
fee (the "Company Termination Fee") of $20,000,000 in immediately available
funds and (ii) reimburse Parent and Sub for all out-of-pocket expenses and
fees (including, without limitation, the fees and expenses of their counsel
and investment banking firms) incurred by them or on their behalf in
connection with the Merger, this Agreement or the transactions contemplated
hereby; provided, however, that such fees and expenses shall not exceed
$2,500,000. The Company will pay the Company Termination Fee promptly, but
in no event later than the second business day following any such
termination by Parent and Sub and will reimburse Parent and Sub for the
foregoing fees and expenses promptly, but in no event later than the second
business day following submission of statements therefor.
(c) As a condition and inducement to the Company's willingness
to enter this Agreement, if (i) this Agreement is terminated by the Company
pursuant to Section 9.1(i) or (ii) (x) prior to the termination of this
Agreement, a bona fide proposal or offer with respect to any acquisition,
business combination or purchase (including by way of a tender or exchange
offer) of all or any significant portion of the assets of, or 15% or more
of the outstanding shares of capital stock of Parent (a "Parent Takeover
Proposal") is commenced, publicly proposed or publicly disclosed and not
withdrawn, (y) this Agreement is terminated by the Company pursuant to
Section 9.1(f) (but only due to the failure of the Parent stockholders to
approve the issuance of Parent Shares pursuant to the Merger) and (z)
concurrently with or within twelve months after such termination a Parent
Takeover Proposal shall have been consummated, then Parent shall (i) pay
to the Company a fee (the "Parent Termination Fee") of $20,000,000 in
immediately available funds, and (ii) reimburse the Company for all out-of-
pocket expenses and fees (including, without limitation, the fees and
expenses of its counsel and investment banking firms) incurred by it or on
its behalf in connection with the Merger, this Agreement or the
transactions contemplated hereby; provided, however, that such fees and
expenses shall not exceed $2,500,000. Parent will pay the Parent
Termination Fee promptly, but in no event later than the second business
day following any such termination by the Company and will reimburse the
Company for the foregoing fees and expenses promptly, but in no event later
than the second business day following submission of statements therefor.
<PAGE>
Section 7.13 Additional Agreements. Subject to the terms and
conditions herein provided, each of the parties hereto agrees to use all
reasonable efforts to take, or cause to be taken, all action and to do, or
cause to be done, all things necessary, proper or advisable under
applicable laws and regulations to consummate and make effective the
transactions contemplated by this Agreement, including using all reasonable
efforts to obtain all necessary waivers, consents and approvals and to
effect all necessary registrations and filings. In case at any time after
the Effective Time any further action is necessary or desirable to carry
out the purposes of this Agreement, the proper officers and/or directors of
Parent, Sub and the Company shall take all such necessary action.
Section 7.14 Control of the Company's and Parent's Operations.
Nothing contained in this Agreement shall give Parent or the Company,
directly or indirectly, rights to control or direct the operations of the
other prior to the Effective Time. Prior to the Effective Time, each of
Parent and the Company shall exercise, consistent with the terms and
conditions of this Agreement, complete control and supervision of its
operations.
Section 7.15 Company Rights Plan. No later than the date
hereof, the Company shall amend the Company Rights Plan to effect the
changes thereto contemplated by the form of amendment attached hereto as
Exhibit B. Except as set forth in Exhibit B, the Company shall not amend,
modify or supplement the Company Rights Plan without the prior written
consent of Parent.
ARTICLE VIII
CONDITIONS TO CONSUMMATION OF THE MERGER
Section 8.1 Conditions to Each Party's Obligation to Effect
the Merger. The respective obligations of each party to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of
the following conditions:
(a) Any waiting period applicable to the consummation of the
Merger under the HSR Act shall have expired or been terminated, and no
action shall have been instituted by the Department of Justice or Federal
Trade Commission challenging or seeking to enjoin the consummation of this
transaction, which action shall have not been withdrawn or terminated.
(b) The Registration Statement shall have become effective in
accordance with the provisions of the Securities Act.
(c) This Agreement and the transactions contemplated hereby
shall have been approved and adopted by the requisite vote of the
stockholders of each of the Company and Parent in accordance with
applicable law.
(d) No preliminary or permanent injunction or other order by any
federal or state court in the United States which prohibits the
consummation of the Merger shall have been issued and remain in effect.
(e) Each of the Company and Parent shall have obtained such
consents from third parties and government instrumentalities in addition to
pursuant to the HSR Act as shall be required and which are material to
Parent and the Company and to consummation of the transactions contemplated
hereby.
<PAGE>
(f) Parent and Sub and the Company shall have each received a
letter of KPMG Peat Marwick LLP, dated the Effective Time, in form and
substance satisfactory to Parent addressed to Parent and Sub and the
Company stating that the Merger will qualify as a pooling of interests
transaction under Opinion No. 16 of the Accounting Principles Board.
Section 8.2 Conditions to Obligation of the Company to Effect
the Merger. The obligation of the Company to effect the Merger shall be
subject to the satisfaction at or prior to the Effective Time of the
following additional conditions:
(a) Each of Parent and Sub shall have performed in all material
respects its obligations under this Agreement required to be performed by
it at or prior to the Effective Time and the representations and warranties
of Parent and Sub contained in this Agreement shall be true and correct in
all material respects at and as of the Effective Time as if made at and as
of such time, except as contemplated by this Agreement, and the Company
shall have received a certificate of the Chief Executive Officer or the
President of Parent as to the satisfaction of this condition.
(b) The Company shall have received an opinion of Winston &
Strawn, in form and substance reasonably satisfactory to the Company, dated
as of the Effective Time, substantially to the effect that the Merger will
constitute a reorganization for U.S. federal income tax purposes within the
meaning of Section 368(a) of the Code. The issuance of such opinion shall
be conditioned upon the receipt by Winston & Strawn of representation
letters from each of Parent, Sub and the Company, in each case, in form and
substance reasonably satisfactory to Winston & Strawn. The specific
provisions of each such representation letter shall be in form and
substance reasonably satisfactory to Winston & Strawn, and each such
representation letter shall be dated on or before the date of such opinion
and shall not have been withdrawn or modified in any material respect.
Section 8.3 Conditions to Obligations of Parent and Sub to
Effect the Merger. The obligations of Parent and Sub to effect the Merger
shall be subject to the satisfaction at or prior to the Effective Time of
the following additional conditions:
(a) The Company shall have performed in all material respects
its obligations under this Agreement required to be performed by it at or
prior to the Effective Time and the representations and warranties of the
Company contained in this Agreement shall be true and correct in all
material respects at and as of the Effective Time as if made at and as of
such time except as contemplated by this Agreement, and Parent and Sub
shall have received a Certificate of the Chief Executive Officer or the
President of the Company as to the satisfaction of this condition.
(b) Parent shall have received an opinion of Skadden, Arps,
Slate, Meagher & Flom LLP, in form and substance reasonably satisfactory to
Parent, dated as of the Effective Time, substantially to the effect that
the Merger will constitute a reorganization for U.S. federal income tax
purposes within the meaning of Section 368(a) of the Code. The issuance of
such opinion shall be conditioned upon the receipt by such tax counsel of
representation letters from each of Parent, Sub and the Company, in each
case, in form and substance reasonably satisfactory to such tax counsel.
The specific provisions of each such representation letter shall be in form
and substance reasonably satisfactory to such tax counsel, and each such
representation letter shall be dated on or before the date of such opinion
and shall not have been withdrawn or modified in any material respect.
<PAGE>
ARTICLE IX
TERMINATION, AMENDMENT AND WAIVER
Section 9.1 Termination. This Agreement may be terminated at
any time prior to the Effective Time, whether before or after approval by
the stockholders of the Company:
(a) by mutual consent of Parent, Sub and the Company;
(b) by either Parent and Sub, on the one hand, or the Company,
on the other hand, if the Merger shall not have been consummated on or
before December 31, 1998;
(c) by the Company if any of the conditions specified in
Sections 8.1 and 8.2 hereof has not been met or waived by the Company prior
to or at such time as such condition can no longer be satisfied;
(d) by Parent and Sub if any of the conditions specified in
Sections 8.1 and 8.3 hereof has not been met or waived by Parent and Sub
prior to or at such time as such condition can no longer be satisfied;
(e) by Parent and Sub if a tender offer or exchange offer for
50% or more of the outstanding shares of capital stock of the Company is
commenced prior to the meeting of Company stockholders contemplated by
Section 7.4(a), and the Board of Directors of the Company fails to
recommend against acceptance of such tender offer or exchange offer by its
stockholders (including by taking no position with respect to the
acceptance of such tender offer or exchange offer by its stockholders)
within the time period specified by Rule 14e-2 of the Exchange Act;
(f) by either Parent and Sub or the Company if the approvals of
the stockholders of either Parent or the Company contemplated by this
Agreement shall not have been obtained by reason of the failure to obtain
the required vote at a duly held meeting of stockholders or of any
adjournment thereof;
(g) by Parent and Sub if the Board of Directors of the Company
shall have withdrawn or modified in a manner adverse to Parent its
approval or recommendation of this Agreement and the transactions
contemplated hereby;
(h) by either the Company or Parent and Sub if the Board of
Directors of the Company reasonably determines that a Takeover Proposal
constitutes a Superior Proposal, except that the Company may not terminate
this Agreement pursuant to this clause 7.1(h) unless and until (i) three
business days have elapsed following delivery to Parent of a written notice
of such determination by the Board of Directors of the Company and during
such three business day period the Company (x) informs Parent of the terms
and conditions of the Takeover Proposal and the identity of the person
making the Takeover Proposal and (y) otherwise reasonably cooperates with
Parent with respect thereto (subject, in the case of this clause (y), to
the condition that the Board of Directors of the Company shall not be
required to take any action that it believes, after consultation with
outside legal counsel, would present a reasonable possibility of violating
its obligations to the Company or the Company's stockholders under
applicable law) with the intent of providing Parent with the opportunity to
offer to modify the terms and conditions of this Agreement so that the
transactions contemplated hereby may be effected, (ii) at the end of such
three business day period the Board of Directors of the Company continues
reasonably to believe that the Takeover Proposal constitutes a Superior
Proposal, (iii) simultaneously with such termination the Company enters
into a definitive acquisition, merger or similar agreement to effect the
Superior Proposal and (iv) simultaneously with such termination, the
Company pays to Parent the amounts specified and within the time periods
specified in Section 7.12(b);
<PAGE>
(i) by the Company if the Board of Directors of Parent shall
have withdrawn or modified in a manner adverse to the Company its approval
or recommendation of this Agreement and the transactions contemplated
hereby; or
(j) by either the Company or Parent and Sub if there shall have
been a material breach by the other of any of its representations,
warranties, covenants or agreements contained in this Agreement or the
Option Agreement, which if not cured would cause the conditions set forth
in Sections 8.2(a) or 8.3(a), as the case may be, not to be satisfied, and
such breach shall not have been cured within 30 days after notice thereof
shall have been received by the party alleged to be in breach.
Section 9.2 Effect of Termination. In the event of
termination of this Agreement as provided above, this Agreement shall
forthwith become void and there shall be no liability on the part of either
Parent, Sub or the Company or their respective officers or directors
(i) except as set forth in Section 7.1 hereof and except for Section 7.12
hereof which shall survive the termination and (ii) no such termination
shall release any party of any liabilities or damages resulting from any
wilful breach by that party of any provision of this Agreement.
Section 9.3 Amendment. This Agreement may be amended by
action taken by Parent, Sub and the Company at any time before or after
approval hereof by the stockholders of the Company, but, after any such
approval, no amendment shall be made which alters the Exchange Ratio or
which in any way materially adversely affects the rights of such
stockholders, without the further approval of such stockholders. This
Agreement may not be amended except by an instrument in writing signed on
behalf of each of the parties hereto.
Section 9.4 Waiver. At any time prior to the Effective Time,
the parties hereto may (a) extend the time for the performance of any of
the obligations or other acts of the other parties hereto, (b) waive any
inaccuracies in the representations and warranties contained herein or in
any document delivered pursuant hereto and (c) waive compliance with any of
the agreements or conditions contained herein. Any agreement on the part
of a party hereto to any such extension or waiver shall be valid only if
set forth in an instrument in writing signed on behalf of such party.
ARTICLE X
GENERAL PROVISIONS
Section 10.1 Survival of Representations, Warranties and
Agreements. No representations, warranties or agreements contained herein
shall survive beyond the Effective Time except that the agreements
contained in Sections 3.1, 3.2, 3.3, 3.4, 3.5, 3.6, 7.9, 7.11 and 7.12
hereof shall survive beyond the Effective Time.
Section 10.2 Brokers. The Company represents and warrants
that, (i) except for its financial advisors, Donaldson, Lufkin & Jenrette
Securities Corporation ("DLJ"), no broker, finder or financial advisor is
entitled to any brokerage, finder's or other fee or commission in
connection with the Merger or the transactions contemplated by this
Agreement based upon arrangements made by or on behalf of the Company and
(ii) the Company's fee arrangements with DLJ have been disclosed to Parent.
Parent represents and warrants that, except for its financial advisor,
Stephens Inc. ("Stephens"), (i) no broker, finder or financial advisor is
entitled to any brokerage finder's or other fee or commission in connection
with the Merger or the transactions contemplated by this Agreement based
upon arrangements made by or on behalf of Parent or Sub and (ii) Parent's
fee arrangements with Stephens have been disclosed to the Company.
<PAGE>
Section 10.3 Notices. All notices, claims, demands and other
communications hereunder shall be in writing and shall be deemed given if
delivered personally or by telex or telegram or mailed by registered or
certified mail (postage prepaid, return receipt requested) to the
respective parties at the following addresses (or at such other address for
a party as shall be specified by like notice):
(a) If to Parent or Sub, to:
ACXIOM CORPORATION
P.O. Box 2000
301 Industrial Boulevard
Conway, AR 72033-2000
fax: (501) 336-3913
Attention: Charles D. Morgan
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, NY 10022
fax: (212) 735-2000
Attention: J. Michael Schell
(b) if to the Company, to:
MAY & SPEH, INC.
1501 Opus Place
Downers Grove, IL 60515
fax: (630) 719-0525
Attention: Chief Executive Officer
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
fax: (312) 558-5700
Attention: Bruce A. Toth
Section 10.4 Descriptive Headings. The headings contained in
this Agreement are for reference purposes only and shall not affect in any
way the meaning or interpretation of this Agreement.
Section 10.5 Entire Agreement; Assignment. This Agreement
(including the Exhibits, Schedules and other documents and instruments
referred to herein) (a) constitutes the entire agreement and supersedes all
other prior agreements and understandings, both written and oral among the
parties or any of them, with respect to the subject matter hereof; (b) is
not intended to confer upon any other person any rights or remedies
hereunder; and (c) shall not be assigned by operation of law or otherwise,
provided that Parent or Sub may assign its rights and obligations hereunder
to a direct or indirect subsidiary of Parent, but no such assignment shall
relieve Parent or Sub, as the case may be, of its obligations hereunder.
Section 10.6 Governing Law. This Agreement shall be governed
by and construed in accordance with the laws of the State of Delaware
without giving effect to the provisions thereof relating to conflicts of
law.
<PAGE>
Section 10.7 Specific Performance. The parties hereto agree
that irreparable damage would occur in the event any of the provisions of
this Agreement were not performed in accordance with the terms hereof and
that the parties shall be entitled to specific performance of the terms
hereof, in addition to any other remedy at law or equity.
Section 10.8 Counterparts. This Agreement may be executed in
two or more counterparts, each of which shall be deemed to be an original
but all of which shall constitute one and the same agreement.
IN WITNESS WHEREFORE, each of Parent, Sub and the Company has
caused this Agreement to be executed on its behalf by its officers
thereunto duly authorized, all as of the date first above written.
ACXIOM CORPORATION
By: /s/ Charles D. Morgan
------------------------------------
Name: Charles D. Morgan
Title: President
ACX ACQUISITION CO., INC.
By: /s/ Catherine L. Hughes
------------------------------------
Name: Catherine L. Hughes
Title: General Counsel and Secretary
MAY & SPEH, INC.
By: /s/ Peter I. Mason
-----------------------------------
Name: Peter I. Mason
Title: Chairman, President and CEO
<PAGE>
EXHIBIT A-1
IRREVOCABLE PROXY
IRREVOCABLE PROXY, dated as of May 26, 1998, by and between May &
Speh, Inc., a Delaware corporation (the "Company "), and Charles D. Morgan
(the "Stockholder").
WHEREAS, concurrently with the execution and delivery of this
Agreement, Acxiom Corporation, a Delaware Corporation ("Parent"), ACX
Acquisition Co., Inc. a Delaware corporation and a wholly owned subsidiary
of Parent ("Sub"), and the Company are entering into an Agreement and Plan
of Merger, dated as of May 26, 1998 (the "Merger Agreement"), providing,
among other things, for the merger (the "Merger") of Sub with and into the
Company, as a result of which each of the outstanding shares of Common
Stock, par value $.01 per share, of the Company (the "Company Common
Stock") will be converted into the right to receive .80 of a share of the
Common Stock, par value $.10 per share, of Parent (the "Parent Common
Stock"), and the Company will become a wholly owned subsidiary of Parent;
and
WHEREAS, the Stockholder is the owner beneficially and of record
of an aggregate of 4,112,425 shares (the "Parent Shares") of the Parent
Common Stock, of which 297,654 shares are in respect of options exercisable
within 60 days of the date hereof; and
WHEREAS, as a condition to its willingness to enter into the
Merger Agreement, the Company has requested that the Stockholder agree, and
the Stockholder has agreed, to grant the Company an irrevocable proxy (the
"Proxy") with respect to the Parent Shares, upon the terms and subject to
the conditions hereof;
NOW, THEREFORE, to induce the Company to enter into the Merger
Agreement and in consideration of the aforesaid and the mutual
representations, warranties, covenants and agreements set forth herein and
in the Merger Agreement, the parties hereto agree as follows:
1. The Stockholder hereby constitutes and appoints the Company,
during the term of this Agreement as the Stockholder's true and lawful
proxy and attorney-in-fact, with full power of substitution, to vote all of
the Parent Shares (and any and all securities issued or issuable in respect
thereof) which Stockholder is entitled to vote, for and in the name, place
and stead of the Stockholder, at any annual, special or other meeting of
the stockholders of the Parent, and at any adjournment or adjournments
thereof, or pursuant to any consent in lieu of a meeting or otherwise, in
favor of any proposal to approve the issuance of the shares of Common Stock
pursuant to the Merger Agreement and any transactions contemplated thereby.
All power and authority hereby conferred is coupled with an interest and is
irrevocable. In the event that the Company is unable to exercise such power
and authority for any reason, the Stockholder agrees that he will vote all
the Parent Shares in favor of approval of the issuance of the shares of
Common Stock pursuant to the Merger Agreement and the transactions
contemplated thereby, at any such meeting or adjournment thereof, or
provide his written consent thereto.
<PAGE>
2. The Stockholder hereby covenants and agrees that the
Stockholder will not, and will not agree to, directly or indirectly, sell,
transfer, assign, pledge, hypothecate, cause to be redeemed or otherwise
dispose of any of the Parent Shares or grant any proxy or interest in or
with respect to such Parent Shares or deposit such Shares into a voting
trust or enter into a voting agreement or arrangement with respect to such
Parent Shares other than in respect of transactions not prohibited by the
terms of the Merger Agreement.
3. The Stockholder represents and warrants to the Company, that
the Parent Shares consist of 3,814,771 shares of Parent Common Stock owned
beneficially and of record by the Stockholder on the date hereof; such
Parent Shares are all of the securities of the Parent owned of record or
beneficially by the Stockholder on the date hereof, except for 297,654
shares of Parent Common Stock as to which the Stockholder holds stock
options exercisable within 60 days of the date hereof; the Stockholder owns
the Parent Shares free and clear of all liens, charges, claims,
encumbrances and security interests of any nature whatsoever; and except as
provided herein, the Stockholder has not granted any proxy with respect to
the Parent Shares, deposited such Parent Shares into a voting trust or
entered into any voting agreement or other arrangement with respect to such
Parent Shares.
4. Any shares of Parent Common Stock issued to the Stockholder
upon the exercise of any stock options that are currently exercisable or
become exercisable during the term of this Agreement shall be deemed Parent
Shares for purposes of this Agreement.
5. This Proxy shall be governed by and construed in accordance
with the laws of the State of Delaware without giving effect to the
provisions thereof relating to conflicts of law.
6. This Proxy shall be binding upon, inure to the benefit of,
and be enforceable by the successors and permitted assigns of the parties
hereto. This Proxy and the rights hereunder may not be assigned or
transferred by the Company, except that the Company may assign its rights
hereunder to any direct or indirect subsidiary.
7. This Proxy shall terminate at the earlier of (i) the
effectiveness of the Merger, or (ii) the termination of the Merger
Agreement in accordance with its terms, or (iii) upon notice of termination
given by the Company to the Stockholder.
8. This Proxy is granted in consideration of the execution and
delivery of the Merger Agreement by the Company. The Stockholder agrees
that such Proxy is coupled with an interest sufficient in law to support an
irrevocable power and shall not be terminated by any act of the
Stockholder, by lack of appropriate power or authority or by the occurrence
of any other event or events.
9. The parties acknowledge and agree that performance of their
respective obligations hereunder will confer a unique benefit on the other
and that a failure of performance will not be compensable by money damages.
The parties therefore agree that this Proxy shall be specifically
enforceable and that specific enforcement and injunctive relief shall be
available to the Company and the Stockholder for any breach of any
agreement, covenant or representation hereunder. This Proxy shall revoke
all prior proxies given by the Stockholder at any time with respect to the
Parent Shares.
<PAGE>
10. The Stockholder will, upon request, execute and deliver any
additional documents and take such actions as may reasonably be deemed by
the Company to be necessary or desirable to complete the Proxy granted
herein or to carry out the provisions hereof.
11. If any term, provision, covenant, or restriction of this
Proxy is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Proxy shall remain in full force and effect and shall
not in any way be affected, impaired or invalidated.
12. This Proxy may be executed in two counterparts, each of
which shall be deemed to be an original but both of which together shall
constitute one and the same document.
IN WITNESS WHEREOF, the Company and the Stockholder have caused
this Proxy to be duly executed on the date first above written.
----------------------------------------
Charles D. Morgan
MAY & SPEH, INC.
By:
------------------------------------
Name:
Title:
<PAGE>
EXHIBIT A-2
IRREVOCABLE PROXY
IRREVOCABLE PROXY, dated as of May 26, 1998, by and between
Acxiom Corporation, a Delaware corporation (the "Parent"), and Lawrence J.
Speh (the "Stockholder").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Parent, ACX Acquisition Co., Inc. a Delaware corporation and
a wholly owned subsidiary of Parent ("Sub"), and May & Speh, Inc. (the
"Company") are entering into an Agreement and Plan of Merger, dated as of
May 26, 1998 (the "Merger Agreement"), providing, among other things, for
the merger (the "Merger") of Sub with and into the Company, as a result of
which each of the outstanding shares of Common Stock, par value $.01 per
share, of the Company (the "Company Common Stock") will be converted into
the right to receive .80 of a share of the Common Stock, par value $.10 per
share, of Parent (the "Parent Common Stock"), and the Company will become a
wholly owned subsidiary of Parent; and
WHEREAS, the Stockholder is the owner of record of an aggregate
of 70,000 shares (the "Shares") of the Company Common Stock and the
Stockholder is the owner beneficially of an additional 1,759,224 shares of
Company Common Stock; and
WHEREAS, as a condition to its willingness to enter into the
Merger Agreement, Parent has requested that the Stockholder agree, and the
Stockholder has agreed, to grant Parent an irrevocable proxy (the "Proxy")
with respect to the Shares, upon the terms and subject to the conditions
hereof;
NOW, THEREFORE, to induce Parent to enter into the Merger
Agreement and in consideration of the aforesaid and the mutual
representations, warranties, covenants and agreements set forth herein and
in the Merger Agreement, the parties hereto agree as follows:
1. The Stockholder hereby constitutes and appoints Parent,
during the term of this Agreement as the Stockholder's true and lawful
proxy and attorney-in-fact, with full power of substitution, to vote all of
the Shares (and any and all securities issued or issuable in respect
thereof) which Stockholder is entitled to vote, for and in the name, place
and stead of the Stockholder, at any annual, special or other meeting of
the stockholders of the Company, and at any adjournment or adjournments
thereof, or pursuant to any consent in lieu of a meeting or otherwise, in
favor of any proposal to approve and adopt the Merger Agreement and any
transactions contemplated thereby. All power and authority hereby
conferred is coupled with an interest and is irrevocable. In the event that
Parent is unable to exercise such power and authority for any reason, the
Stockholder agrees that he will vote all the Shares in favor of approval
and adoption of the Merger Agreement and the transactions contemplated
thereby, at any such meeting or adjournment thereof, or provide his written
consent thereto.
<PAGE>
2. The Stockholder hereby covenants and agrees that the
Stockholder will not, and will not agree to, directly or indirectly, sell,
transfer, assign, pledge, hypothecate, cause to be redeemed or otherwise
dispose of any of the Shares or grant any proxy or interest in or with
respect to such Shares or deposit such Shares into a voting trust or enter
into a voting agreement or arrangement with respect to such Shares. The
Stockholder further covenants and agrees that the Stockholder will not
initiate or solicit, directly or indirectly, any inquiries or the making of
any proposal with respect to engage in negotiations concerning, provide any
confidential information or data to, or have any discussions with, any
person relating to, any acquisition, business combination or purchase of
all or any significant portion of the assets of, or any equity interest in
(other than the Shares), the Company or any subsidiary thereof; provided,
however, nothing contained herein shall be deemed to prohibit the
Stockholder from exercising his fiduciary duties as a director of the
Company pursuant to applicable law.
3. The Stockholder represents and warrants to Parent, that the
Shares consist of 70,000 shares of Company Common Stock owned beneficially
and of record by the Stockholder on the date hereof; such Shares together
with the additional 1,759,224 shares of Company Common Stock owned
beneficially by the Stockholder are all of the securities of the Company
owned of record or beneficially by the Stockholder on the date hereof, the
Stockholder owns the Shares free and clear of all liens, charges, claims,
encumbrances and security interests of any nature whatsoever; and except as
provided herein, the Stockholder has not granted any proxy with respect to
the Shares, deposited such Shares into a voting trust or entered into any
voting agreement or other arrangement with respect to such Shares.
4. Any shares of Company Common Stock issued to the Stockholder
upon the exercise of any stock options that are currently exercisable or
become exercisable during the term of this Agreement shall be deemed Shares
for purposes of this Agreement.
5. This Proxy shall be governed by and construed in accordance
with the laws of the State of Delaware without giving effect to the
provisions thereof relating to conflicts of law.
6. This Proxy shall be binding upon, inure to the benefit of,
and be enforceable by the successors and permitted assigns of the parties
hereto. This Proxy and the rights hereunder may not be assigned or
transferred by Parent, except that Parent may assign its rights hereunder
to any direct or indirect subsidiary.
7. This Proxy shall terminate at the earlier of (i) the
effectiveness of the Merger, or (ii) the termination of the Merger
Agreement in accordance with its terms, or (iii) upon notice of termination
given by Parent to the Stockholder.
8. This Proxy is granted in consideration of the execution and
delivery of the Merger Agreement by Parent. The Stockholder agrees that
such Proxy is coupled with an interest sufficient in law to support an
irrevocable power and shall not be terminated by any act of the
Stockholder, by lack of appropriate power or authority or by the occurrence
of any other event or events.
9. The parties acknowledge and agree that performance of their
respective obligations hereunder will confer a unique benefit on the other
and that a failure of performance will not be compensable by money damages.
The parties therefore agree that this Proxy shall be specifically
enforceable and that specific enforcement and injunctive relief shall be
available to Parent and the Stockholder for any breach of any agreement,
covenant or representation hereunder. This Proxy shall revoke all prior
proxies given by the Stockholder at any time with respect to the Shares.
<PAGE>
10. The Stockholder will, upon request, execute and deliver any
additional documents and take such actions as may reasonably be deemed by
Parent to be necessary or desirable to complete the Proxy granted herein or
to carry out the provisions hereof.
11. If any term, provision, covenant, or restriction of this
Proxy is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Proxy shall remain in full force and effect and shall
not in any way be affected, impaired or invalidated.
12. This Proxy may be executed in two counterparts, each of
which shall be deemed to be an original but both of which together shall
constitute one and the same document.
IN WITNESS WHEREOF, Parent and the Stockholder have caused this
Proxy to be duly executed on the date first above written.
-----------------------------------
LAWRENCE J. SPEH
ACXIOM CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT A-3
IRREVOCABLE PROXY
IRREVOCABLE PROXY, dated as of May 26, 1998, by and between
Acxiom Corporation, a Delaware corporation (the "Parent"), and Albert J.
Speh, Jr. (the "Stockholder").
WHEREAS, concurrently with the execution and delivery of this
Agreement, the Parent, ACX Acquisition Co., Inc. a Delaware corporation and
a wholly owned subsidiary of Parent ("Sub"), and May & Speh, Inc. (the
"Company") are entering into an Agreement and Plan of Merger, dated as of
May 26, 1998 (the "Merger Agreement"), providing, among other things, for
the merger (the "Merger") of Sub with and into the Company, as a result of
which each of the outstanding shares of Common Stock, par value $.01 per
share, of the Company (the "Company Common Stock") will be converted into
the right to receive .80 of a share of the Common Stock, par value $.10 per
share, of Parent (the "Parent Common Stock"), and the Company will become a
wholly owned subsidiary of Parent; and
WHEREAS, the Stockholder is the owner of record of an aggregate
of 808,801 shares (the "Shares") of the Company Common Stock and the
Stockholder is the owner beneficially of an additional 262,994 shares of
Company Common Stock; and
WHEREAS, as a condition to its willingness to enter into the
Merger Agreement, Parent has requested that the Stockholder agree, and the
Stockholder has agreed, to grant Parent an irrevocable proxy (the "Proxy")
with respect to the Shares, upon the terms and subject to the conditions
hereof;
NOW, THEREFORE, to induce Parent to enter into the Merger
Agreement and in consideration of the aforesaid and the mutual
representations, warranties, covenants and agreements set forth herein and
in the Merger Agreement, the parties hereto agree as follows:
1. The Stockholder hereby constitutes and appoints Parent,
during the term of this Agreement as the Stockholder's true and lawful
proxy and attorney-in-fact, with full power of substitution, to vote all of
the Shares (and any and all securities issued or issuable in respect
thereof) which Stockholder is entitled to vote, for and in the name, place
and stead of the Stockholder, at any annual, special or other meeting of
the stockholders of the Company, and at any adjournment or adjournments
thereof, or pursuant to any consent in lieu of a meeting or otherwise, in
favor of any proposal to approve and adopt the Merger Agreement and any
transactions contemplated thereby. All power and authority hereby
conferred is coupled with an interest and is irrevocable. In the event that
Parent is unable to exercise such power and authority for any reason, the
Stockholder agrees that he will vote all the Shares in favor of approval
and adoption of the Merger Agreement and the transactions contemplated
thereby, at any such meeting or adjournment thereof, or provide his written
consent thereto.
<PAGE>
2. The Stockholder hereby covenants and agrees that the
Stockholder will not, and will not agree to, directly or indirectly, sell,
transfer, assign, pledge, hypothecate, cause to be redeemed or otherwise
dispose of any of the Shares or grant any proxy or interest in or with
respect to such Shares or deposit such Shares into a voting trust or enter
into a voting agreement or arrangement with respect to such Shares. The
Stockholder further covenants and agrees that the Stockholder will not
initiate or solicit, directly or indirectly, any inquiries or the making of
any proposal with respect to engage in negotiations concerning, provide any
confidential information or data to, or have any discussions with, any
person relating to, any acquisition, business combination or purchase of
all or any significant portion of the assets of, or any equity interest in
(other than the Shares), the Company or any subsidiary thereof; provided,
however, nothing contained herein shall be deemed to prohibit the
Stockholder from exercising his fiduciary duties as a director of the
Company pursuant to applicable law.
3. The Stockholder represents and warrants to Parent, that the
Shares consist of 808,801 shares of Company Common Stock owned beneficially
and of record by the Stockholder on the date hereof; such Shares together
with the additional 262,994 shares of Company Common Stock owned
beneficially by the Stockholder are all of the securities of the Company
owned of record or beneficially by the Stockholder on the date hereof, the
Stockholder owns the Shares free and clear of all liens, charges, claims,
encumbrances and security interests of any nature whatsoever; and except as
provided herein, the Stockholder has not granted any proxy with respect to
the Shares, deposited such Shares into a voting trust or entered into any
voting agreement or other arrangement with respect to such Shares.
4. Any shares of Company Common Stock issued to the Stockholder
upon the exercise of any stock options that are currently exercisable or
become exercisable during the term of this Agreement shall be deemed Shares
for purposes of this Agreement.
5. This Proxy shall be governed by and construed in accordance
with the laws of the State of Delaware without giving effect to the
provisions thereof relating to conflicts of law.
6. This Proxy shall be binding upon, inure to the benefit of,
and be enforceable by the successors and permitted assigns of the parties
hereto. This Proxy and the rights hereunder may not be assigned or
transferred by Parent, except that Parent may assign its rights hereunder
to any direct or indirect subsidiary.
7. This Proxy shall terminate at the earlier of (i) the
effectiveness of the Merger, or (ii) the termination of the Merger
Agreement in accordance with its terms, or (iii) upon notice of termination
given by Parent to the Stockholder.
8. This Proxy is granted in consideration of the execution and
delivery of the Merger Agreement by Parent. The Stockholder agrees that
such Proxy is coupled with an interest sufficient in law to support an
irrevocable power and shall not be terminated by any act of the
Stockholder, by lack of appropriate power or authority or by the occurrence
of any other event or events.
<PAGE>
9. The parties acknowledge and agree that performance of their
respective obligations hereunder will confer a unique benefit on the other
and that a failure of performance will not be compensable by money damages.
The parties therefore agree that this Proxy shall be specifically
enforceable and that specific enforcement and injunctive relief shall be
available to Parent and the Stockholder for any breach of any agreement,
covenant or representation hereunder. This Proxy shall revoke all prior
proxies given by the Stockholder at any time with respect to the Shares.
10. The Stockholder will, upon request, execute and deliver any
additional documents and take such actions as may reasonably be deemed by
Parent to be necessary or desirable to complete the Proxy granted herein or
to carry out the provisions hereof.
11. If any term, provision, covenant, or restriction of this
Proxy is held by a court of competent jurisdiction to be invalid, void or
unenforceable, the remainder of the terms, provisions, covenants and
restrictions of this Proxy shall remain in full force and effect and shall
not in any way be affected, impaired or invalidated.
12. This Proxy may be executed in two counterparts, each of
which shall be deemed to be an original but both of which together shall
constitute one and the same document.
IN WITNESS WHEREOF, Parent and the Stockholder have caused this
Proxy to be duly executed on the date first above written.
-----------------------------------
ALBERT J. SPEH, JR.
ACXIOM CORPORATION
By:
--------------------------------
Name:
Title:
<PAGE>
EXHIBIT B
AMENDMENT TO RIGHTS AGREEMENT
Amendment Number One, dated as of May 26, 1998, to the Rights
Agreement, dated as of March 1, 1996 (the "Rights Agreement"), between MAY
& SPEH, INC., a Delaware corporation (the "Company"), and HARRIS TRUST AND
SAVINGS BANK, an Illinois banking corporation, as Rights Agent (the "Rights
Agent").
WHEREAS, the Company and the Rights Agent entered into the Rights
Agreement specifying the terms of the Rights (as defined therein);
WHEREAS, the Company desires to amend the Rights Agreement in
accordance with Section 27 of the Rights Agreement;
WHEREAS, the Company proposes to enter into an Agreement and Plan
of Merger, dated as of May 26, 1998 (the "Merger Agreement"), among the
Company, Acxiom Corporation ("Parent") and ACX Acquisition Co., Inc.
("Sub").
WHEREAS, as a condition to the Merger Agreement and in order to
induce Parent to enter into the Merger Agreement, the Company proposes to
enter into a Stock Option Agreement, dated as of May 26, 1998, between the
Company and Parent (the "Stock Option Agreement"), pursuant to which the
Company will grant Parent an irrevocable option (the "Option") to purchase
up to 19.9% of the number of shares (the "Option Shares") of common stock,
par value $.01 per share ("Common Stock"), of the Company issued and
outstanding immediately prior to the grant of the Option;
WHEREAS, as a condition to the Merger Agreement and in order to
induce Parent to enter into the Merger Agreement, cetain, holders of shares
of Common Stock (each, a "Stockholder" and collectively, the
"Stockholders"), each propose to enter into an irrevocable proxy, dated as
of May 26, 1998, between such Stockholder and Parent, pursuant to which
such Stockholder will grant Parent an irrevocable proxy (each, a "Proxy"
and collectively, the "Proxies") to vote such Stockholder's shares of
Common Stock; and
WHEREAS, the Board of Directors of the Company has determined it
advisable and in the best interest of the stockholders of the Company to
amend the Rights Agreement to enable the Company to enter into the Merger
Agreement and the Stock Option Agreement and consummate the transactions
contemplated thereby without causing Parent to become an "Acquiring Person"
(as defined in the Rights Agreement).
NOW, THEREFORE, in consideration of the premises and mutual
agreements set forth herein and in the Rights Agreement, the parties hereby
agree as follows:
1. Definitions. Capitalized terms used and not otherwise defined herein
shall have the meaning assigned to such terms in the Rights Agreement.
2. Amendments to the Rights Agreement. The Rights Agreement is hereby
amended as set forth in this Section 2.
a. Section 1 of the Rights Agreement, "Certain Definitions", is
hereby amended and restated by deleting the definition of
"Acquiring Person" thereof and inserting in lieu thereof the
following:
<PAGE>
"Acquiring Person" shall mean any Person (as such term is
hereinafter defined) who or which, together with all Affiliates and
Associates (as such terms are hereinafter defined) of such Person, shall be
the Beneficial Owner (as such term is hereinafter defined) of 15% or more
of the Common Shares of the Company then outstanding, but shall not include
the Company, any Subsidiary (as such term is hereinafter defined) of the
Company, any employee benefit plan of the Company or any Subsidiary of the
Company, any Person holding Common Shares for or pursuant to the terms of
any such plan, or any Grandfathered Person. Notwithstanding the foregoing,
no Person (including, without limitation, any Grandfathered Person) shall
become an "Acquiring Person" as the result of (a) an acquisition of Common
Shares by the Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned by such
Person to 15% or more of the Common Shares of the Company then outstanding;
(b) the acquisition by such Person of newly issued Common shares directly
from the Company (it being understood that a purchase from an underwriter
or other intermediary is not directly from the Company); or (c) that the
Parent, and its Affiliates and Associates shall not be deemed to be an
Acquiring Person as a result of either (i) the grant of the Option (as such
term is defined in the Stock Option Agreement) pursuant to the Stock Option
Agreement, or at any time following the exercise thereof and the issuance
of shares of Common Shares in accordance with the terms of the Stock Option
Agreement or (ii) the grant of the Proxies by and between the Stockholders
and Parent, or at any time following the delivery and execution thereof;
provided, however, that if a Person shall become the Beneficial Owner of
15% or more of the Common Shares of the Company then outstanding by reason
of share purchases by the Company or the receipt of newly issued Common
Shares directly from the Company and shall, after such share purchases or
direct issuance by the Company, become the Beneficial Owner of any
additional Common Shares of the Company, then such Person shall be deemed
to be an "Acquiring Person;" provided further, however, that any transferee
from such Person who becomes the Beneficial Owner of 15% or more of the
Common Shares of the Company then outstanding shall nevertheless be deemed
to be an "Acquiring Person." Notwithstanding the foregoing, if the Board
of Directors of the Company determines in good faith that a Person who
would otherwise be an "Acquiring Person," as defined pursuant to the
foregoing provisions of this paragraph, has become such inadvertently, and
such Person divests as promptly as practicable (and in any event within ten
business days after notification by the Company) a sufficient number of
Common Shares so that such Person would no longer be an Acquiring Person,
as defined pursuant to the foregoing provisions of this paragraph, then
such Person shall not be deemed to be an "Acquiring Person" for any
purposes of this Agreement.
b. Section 7(a) of the Rights Agreement is hereby amended by
deleting subsections 7(a)(i), 7(a)(ii), and 7(a)(iii) and
inserting in lieu thereof the following:
(i) the close of business on the tenth anniversary of the
effective date of this Agreement (the "Final Expiration Date"), (ii)
the time at which the Rights are redeemed as provided in Section 23
hereof (the "Redemption Date"), (iii) the time immediately prior to
the Effective Time (as such term is defined in that certain Agreement
and Plan of Merger dated as of May 26, 1998, among the Company, Acxiom
Corporation and ACX Acquisition Co., Inc. (the earliest to occur of
(i), (ii) and (iii) being herein referred to as the "Expiration
Date"), and (iv) the time at which such Rights are exchanged as
provided in Section 24 hereof.
<PAGE>
3. Miscellaneous.
a. The term "Agreement" as used in the Rights Agreement shall be
deemed to refer to the Rights Agreement as amended hereby.
b. The foregoing amendment shall be effective as of the date first
above written, and, except as set forth herein, the Rights
Agreement shall remain in full force and effect and shall be
otherwise unaffected hereby.
c. This Amendment may be executed in two or more counterparts, each
of which shall be deemed to be an original, but all for which
together shall constitute one and the same instrument.
d. This Amendment shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such
State applicable to contracts to be made and performed entirely
within such State.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Number One to be duly executed and attested, all as of the day and year
first above written.
Attest: MAY & SPEH, INC.
By: By:
-------------------------------- ----------------------------------
Name: Name:
Title: Title:
Attest: HARRIS TRUST AND SAVINGS BANK
By: By:
------------------------------- ---------------------------------
Name: Name:
Title: Title:
<PAGE>
EXHIBIT C
FORM OF AFFILIATE LETTER FOR AFFILIATES OF THE COMPANY
Acxiom Corporation
301 Industrial Boulevard
Conway, AR 72032
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of May & Speh, Inc., a Delaware corporation
(the "Company"), as the term "affiliate" is (i) defined for purposes of
paragraphs (c) and (d) of Rule 145 of the rules and regulations (the "Rules
and Regulations") of the Securities and Exchange Commission (the "SEC")
under the Securities Act of 1933, as amended (the "Securities Act"), and/or
(ii) used in and for purposes of Accounting Series Releases No. 130 and No.
135, as amended, of the SEC. Pursuant to the terms of the Agreement and
Plan of Merger, dated as of May 26, 1998 (the "Merger Agreement"), among
Acxiom Corporation, a Delaware corporation ("Parent"), ACX Acquisition Co.,
a Delaware corporation (" Sub"), and the Company, (i) Sub will be merged
with and into the Company, with the Company continuing as the surviving
corporation (the "Merger"), (ii) the Company will become a subsidiary of
Parent, and (iii) stockholders of the Company will become stockholders of
Parent. Capitalized terms used in this letter without definition shall have
the meanings assigned to them in the Merger Agreement.
As a result of the Merger, I may receive shares of common stock,
par value $.10 per share, of Parent (the "Parent Common Stock"). I would
receive such Parent Common Stock in exchange for shares (or upon exercise
of options for shares) owned by me of common stock, par value $0.01 per
share, of the Company (the "Company Common Stock").
1. I hereby represent and warrant to, and covenant with Parent
that in the event I receive any shares of Parent Common Stock as a result
of the Merger:
A. I shall not make any offer, sale, pledge, transfer or
other disposition of shares of Parent Common Stock in violation
of the Securities Act or the Rules and Regulations.
B. I have carefully read this letter and the Merger
Agreement and discussed the requirements of such documents and
other applicable limitations upon my ability to sell, transfer or
otherwise dispose of shares of Parent Common Stock, to the extent
I felt necessary, with my counsel or counsel for the Company.
C. I have been advised that the issuance of shares of
Parent Common Stock to me pursuant to the Merger has been
registered with the SEC under the Securities Act on a
Registration Statement on Form S-4. However, I have also been
advised that, because at the time the Merger is submitted for a
vote of the stockholders of the Company, (a) I may be deemed to
be an affiliate of the Company and (b) the distribution by me of
shares of Parent Common Stock has not been registered under the
Act, I may not sell, transfer or otherwise dispose of the shares
of Parent Common Stock issued to me in the Merger unless (i) such
sale, transfer or other disposition is made in conformity with
the volume and other limitations of Rule 145 promulgated by the
SEC under the Securities Act, (ii) such sale, transfer or other
disposition has been registered under the Securities Act or (iii)
in the opinion of counsel reasonably acceptable to Parent, or a
"no action" letter obtained by the undersigned from the staff of
the SEC such sale, transfer or other disposition is otherwise
exempt from registration under the Securities Act.
<PAGE>
D. I understand that Parent is under no obligation to
register the sale, transfer or other disposition of Parent Common
Stock by me or on my behalf under the Act or, except as provided
in paragraph 2(A) below, to take any other action necessary in
order to make compliance with an exemption from such registration
available.
E. I also understand that stop transfer instructions will
be given to the Company's transfer Agent with respect to shares
of Company Common Stock currently held by me and to Parent's
transfer Agent with respect to shares of Parent Common Stock
issued to me in the Merger, and there will be placed on the
certificates for such shares of Parent Common Stock, a legend
stating in substance:
"THE SHARES REPRESENTED BY THIS CERTIFICATE WERE
ISSUED IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
REPRESENTED BY THIS CERTIFICATE MAY ONLY BE TRANSFERRED
IN ACCORDANCE WITH THE TERMS OF AN AGREEMENT DATED MAY
, 1998 BETWEEN THE REGISTERED HOLDER HEREOF AND ACXIOM
CORPORATION, A COPY OF WHICH AGREEMENT IS ON FILE AT
THE PRINCIPAL OFFICES OF ACXIOM CORPORATION."
F. I also understand that unless a sale or transfer is
made in conformity with the provisions of Rule 145, or pursuant
to a registration statement, Parent reserves the right to put the
following legend on the certificates issued to my transferee:
"THE SHARES REPRESENTED BY THIS CERTIFICATE HAVE
NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933
AND WERE ACQUIRED FROM A PERSON WHO RECEIVED SUCH
SHARES IN A TRANSACTION TO WHICH RULE 145 PROMULGATED
UNDER THE SECURITIES ACT OF 1933 APPLIES. THE SHARES
HAVE BEEN ACQUIRED BY THE HOLDER NOT WITH A VIEW TO, OR
FOR RESALE IN CONNECTION WITH, ANY DISTRIBUTION THEREOF
WITHIN THE MEANING OF THE SECURITIES ACT OF 1933 AND
MAY NOT BE SOLD, PLEDGED OR OTHERWISE TRANSFERRED
EXCEPT IN ACCORDANCE WITH AN EXEMPTION FROM THE
REGISTRATION REQUIREMENTS OF THE SECURITIES ACT OF
1933."
G. I further represent to, and covenant with Parent that I
will not sell, transfer or otherwise dispose of or reduce my risk
(as contemplated by the SEC Accounting Series Release No. 135)
with respect to shares of Company Common Stock that I may hold
and, furthermore, that I will not sell, transfer or otherwise
dispose of or reduce my risk (as contemplated by SEC Accounting
Series Release No. 135) with respect to the shares of Parent
Common Stock received by me in the Merger or any other shares of
the capital stock of Parent during the 30 days prior to the
Effective Time until after such time as results covering at least
30 days of continued operations of Parent and the Company have
been published by Parent, in the form of a quarterly earnings
report, an effective registration statement filed with the SEC, a
report to the SEC on Form 10-K, 10-Q or 8-K, or any other public
filing or announcement which includes the combined results of
operations of Parent and the Company (the period commencing 30
days prior to the Effective Time and ending on the date of the
publication of the post-Merger financial results is referred to
herein as the "Pooling Period"). Parent shall notify the
"affiliates" of the publication of such results. Notwithstanding
the foregoing, I understand that during the Pooling Period I will
be permitted to sell, transfer or otherwise dispose of or reduce
my risk with respect to an amount of Parent Common Stock and
Company Common Stock not more than the de minimus amount
permitted by the SEC in its rules and releases relating to
pooling of interests accounting treatment and in accordance with
Rule 145(d)(i) under the Securities Act, subject to providing
advance written notice to Parent.
<PAGE>
H. Execution of this letter should not be considered an
admission on my part that I am an "affiliate" of the Company as
described in the first paragraph of this letter, nor as a waiver
of any rights I may have to object to any claim that I am such an
affiliate on or after the date of this letter.
2. By Parent's acceptance of this letter, Parent hereby agrees
with me as follows:
A. For so long as and to the extent necessary to permit me
to sell the shares of Parent Common Stock pursuant to Rule 145
and, to the extent applicable, Rule 144 under the Act, Parent
shall (a) use its reasonable best efforts to (i) file, on a
timely basis, all reports and data required to be filed with the
SEC by it pursuant to Section 13 of the Securities Exchange Act
of 1934, as amended and (ii) furnish to me upon request a written
statement as to whether Parent has complied with such reporting
requirements during the 12 months preceding any proposed sale of
the shares of Parent Common Stock by me under Rule 145, and (b)
otherwise use its reasonable efforts to permit such sales
pursuant to Rule 145 and Rule 144.
B. It is understood and agreed that certificates with the
legends set forth in paragraphs E and F above will be substituted
by delivery of certificates without such legend if (i) one year
shall have elapsed from the date the undersigned acquired the
shares of Parent Common Stock received in the Merger and the
provisions of Rule 145(d)(2) are then available to the
undersigned, (ii) two years shall have elapsed from the date the
undersigned acquired the shares of Parent Common Stock received
in the Merger and the provisions of Rule 145(d)(3) are then
applicable to the undersigned, or (iii) Parent has received
either an opinion of counsel, which opinion and counsel shall be
reasonably satisfactory to Parent, or a "no-action" letter
obtained by the undersigned from the staff of the SEC, to the
effect that the restrictions imposed by Rule 144 and Rule 145
under the Act no longer apply to the undersigned.
Very truly yours,
____________________________________
Name:
Agreed and accepted this __ day
of ____________ 1998, by
ACXIOM CORPORATION
By: __________________________
Name:
Title:
<PAGE>
EXHIBIT D
FORM OF AFFILIATE LETTER FOR AFFILIATES OF PARENT
Acxiom Corporation
301 Industrial Boulevard
Conway, AR 72032
Ladies and Gentlemen:
I have been advised that as of the date of this letter I may be
deemed to be an "affiliate" of Acxiom Corporation, a Delaware corporation
("Parent"), as the term "affiliate" is defined for purposes of Accounting
Series Releases No. 130 and No. 135, as amended, of the Securities and
Exchange Commission (the "SEC"). Pursuant to the terms of the Agreement
and Plan of Merger, dated as of May 26, 1998 (the "Merger Agreement"),
among May & Speh, Inc., a Delaware corporation (the "Company"), ACX
Acquisition Co., a Delaware corporation ("Sub"), and Parent, (i) Sub will
be merged with and into the Company, with the Company continuing as the
Surviving Corporation (the "Merger"), (ii) the Company will become a
subsidiary of Parent, and (iii) stockholders of the Company will become
stockholders of Parent.
I hereby represent to, and covenant with Parent that I will not
sell, transfer or otherwise dispose of or reduce my risk (as contemplated
by the SEC Accounting Series Release No. 135) with respect to any shares of
common stock, par value $.10 per share, of Parent (the "Parent Common
Stock") that I may hold and, furthermore, that I will not sell, transfer or
otherwise dispose of or reduce my risk (as contemplated by the SEC
Accounting Series Release No. 135) with respect to any shares of common
stock, par value $0.01 per share, of the Company ("Company Common Stock")
that I may hold during the 30 days prior to the Effective Time (as defined
in the Merger Agreement) until after such time as results covering at least
30 days of combined operations of Parent and the Company have been
published by Parent, in the form of a quarterly earnings report, an
effective registration statement filed with the SEC, a report to the SEC on
Form 10-K, 10-Q or 8-K, or any other public filing or announcement which
includes the combined results of operations of Parent and the Company (the
period commencing 30 days prior to the Effective Time and ending on the
date of the publication of the post-Merger financial results is referred to
herein as the "Pooling Period"). Parent shall notify the "affiliates"of
the publication of such results. Notwithstanding the foregoing, I
understand that during the Pooling Period I will be permitted to sell,
transfer or otherwise dispose of or reduce my risk with respect to an
amount of Parent Common Stock and Company Common Stock not more than the de
minimus amount permitted by the SEC in its rules and releases relating to
pooling of interests accounting treatment, subject to providing advance
written notice to Parent.
<PAGE>
Execution of this letter should not be considered an admission
on my part that I am an "affiliate" of Parent as described in the first
paragraph of this letter, nor as a waiver of any rights I may have to
object to any claim that I am such an affiliate on or after the date of
this letter.
Very truly yours,
_______________________________
Name:
Agreed and accepted this __ day
of ___________, 1998, by
ACXIOM CORPORATION
By: __________________________
Name:
Title:
MAY & SPEH, INC.
By: _________________________
Name:
Title:
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 26, 1998 (the "Agreement"),
between MAY & SPEH, INC., a Delaware corporation ("Issuer"), and Acxiom
Corporation, a Delaware corporation ("Grantee").
RECITALS
A. Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"; defined terms
used but not defined herein have the meanings set forth in the Merger
Agreement), providing for, among other things, the merger of Sub with and
into Issuer pursuant to the terms of the Merger; and
B. As a condition and inducement to Grantee's willingness to enter
into the Merger Agreement, Grantee has requested that Issuer agree, and
Issuer has agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
Issuer and
Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 19.9% of the number of shares (the "Option
Shares") of common stock, par value $0.01 per share ("Issuer Common
Stock"), of Issuer issued and outstanding immediately prior to the grant of
the Option at a purchase price of $14.96 (as adjusted as set forth herein)
per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, with
respect to any or all of the Option Shares at any one time, subject to the
provisions of Section 2(c), upon the occurrence of a Purchase Event (as
defined in Section 7(c)), except that (i) subject to the last sentence of
this Section 2(a), the Option will terminate and be of no further force and
effect upon the earliest to occur of (A) the Effective Time, (B) six
months after the date on which a Purchase Event (as defined herein) occurs,
and (C) termination of the Merger Agreement in accordance with its terms
prior to the occurrence of a Purchase Event, unless, in the case of clause
(C), the Grantee has the right to receive the Company Termination Fee
following such termination upon the occurrence of certain events, in which
case the Option will not terminate until the later of (x) six months
following the time such Company Termination Fee becomes payable and (y) the
expiration of the period in which the Grantee has such right to receive the
Company Termination Fee, and (ii) any purchase of Option Shares upon
exercise of the Option will be subject to compliance with the HSR Act and
the obtaining or making of any consents, approvals, orders, notifications
or authorizations, the failure of which to have obtained or made would have
the effect of making the issuance of Option Shares illegal (the "Regulatory
Approvals") and no preliminary or permanent injunction or other order by
any court of competent jurisdiction prohibiting or otherwise restraining
such issuance shall be in effect. Notwithstanding the termination of the
Option, Grantee will be entitled to purchase the Option Shares if it has
exercised the Option in accordance with the terms hereof prior to the
termination of the Option, and the termination of the Option will not
affect any rights hereunder which by their terms do not terminate or expire
prior to or as of such termination.
<PAGE>
(b) In the event that Grantee wishes to exercise the Option, it will
send to Issuer a written notice (an "Exercise Notice"; the date of which
being herein referred to as the "Notice Date") to that effect which
Exercise Notice also specifies the number of Option Shares, if any, Grantee
wishes to purchase pursuant to this Section 2(b), the number of Option
Shares, if any, with respect to which Grantee wishes to exercise its
Cash-Out Right (as defined herein) pursuant to Section 7(c), the
denominations of the certificate or certificates evidencing the Option
Shares which Grantee wishes to purchase pursuant to this Section 2(b) and a
date not earlier than 20 business days nor later than 30 business days from
the Notice Date for the closing (an "Option Closing") of such purchase (an
"Option Closing Date"). Any Option Closing will be at an agreed location
and time in New York, New York on the applicable Option Closing Date or at
such later date as may be necessary so as to comply with clause (ii) of
Section 2(a).
(c) Notwithstanding anything to the contrary contained herein, any
exercise of the Option and purchase of Option Shares shall be subject to
compliance with applicable laws and regulations, which may prohibit the
purchase of all the Option Shares specified in the Exercise Notice without
first obtaining or making certain Regulatory Approvals. In such event, if
the Option is otherwise exercisable and Grantee wishes to exercise the
Option, the Option may be exercised in accordance with Section 2(b) and
Grantee shall acquire the maximum number of Option Shares specified in the
Exercise Notice that Grantee is then permitted to acquire under the
applicable laws and regulations, and if Grantee thereafter obtains the
Regulatory Approvals to acquire the remaining balance of the Option Shares
specified in the Exercise Notice, then Grantee shall be entitled to acquire
such remaining balance. Issuer agrees to use its reasonable best efforts to
assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory
Approval required for the purchase of any Option Shares will not be issued
or granted or (ii) such Regulatory Approval has not been issued or granted
within six months of the date of the Exercise Notice, Grantee shall have
the right to exercise its Cash-Out Right (as defined herein) pursuant to
Section 7(c) with respect to the Option Shares for which such Regulatory
Approval will not be issued or granted or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option Closing,
Grantee will pay to Issuer in same day funds by wire transfer to a bank
account designated in writing by Issuer an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased at such
Option Closing.
(b) At any Option Closing, simultaneously with the delivery of same
day funds as provided in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased
at such Option Closing, which Option Shares will be free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever. If at the
time of issuance of Option Shares pursuant to an exercise of the Option
hereunder, Issuer shall not have issued any securities similar to rights
under a shareholder rights plan, then each Option Share issued pursuant to
such exercise will also represent such a corresponding right with terms
substantially the same as and at least as favorable to Grantee as are
provided under any Issuer shareholder rights agreement or any similar
agreement then in effect.
(c) Certificates for the Option Shares delivered at an Option Closing
will have typed or printed thereon a restrictive legend which will read
substantially as follows:
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY BE OFFERED,
SOLD, PLEDGED OR OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR IF
ANY EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES
ARE ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH
IN THE STOCK OPTION AGREEMENT, DATED AS OF MAY 26, 1998, A COPY OF
WHICH MAY BE OBTAINED FROM THE SECRETARY OF MAY & SPEH, INC. AT ITS
PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have
been sold in compliance with the registration and prospectus delivery
requirements of the Securities Act, such Option Shares have been sold in
reliance on and in accordance with Rule 144 under the Securities Act or
Grantee has delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel in form and substance reasonably satisfactory
to Issuer and its counsel, to the effect that such legend is not required
for purposes of the Securities Act and (ii) the reference to restrictions
pursuant to this Agreement in the above legend will be removed by delivery
of substitute certificate(s) without such reference if the Option Shares
evidenced by certificate(s) containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
4. Incorporation of Representations and Warranties of Issuer. The
representations and warranties of Issuer contained in Article V of the
Merger Agreement are hereby incorporated by reference herein with the same
force and effect as though made pursuant to this Agreement.
5. Representations and Warranties of Issuer. Issuer hereby represents
and warrants to Grantee as follows:
(a) Corporate Authorization. Issuer has the corporate power and
authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of Issuer,
and no other corporate proceedings on the part of Issuer are
necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Issuer, and assuming this Agreement
constitutes a valid and binding agreement of Grantee, this Agreement
constitutes a valid and binding agreement of Issuer, enforceable
against Issuer in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of
equitable remedies).
(b) Authorized Stock. Issuer has taken all necessary corporate
and other action to authorize and reserve and, subject to the
expiration or termination of any required waiting period under the
HSR Act, to permit it to issue, and, at all times from the date
hereof until the obligation to deliver Option Shares upon the
exercise of the Option terminates, shall have reserved for issuance,
upon exercise of the Option, shares of Issuer Common Stock necessary
for Grantee to exercise the Option, and Issuer will take all
necessary corporate action to authorize and reserve for issuance all
additional shares of Issuer Common Stock or other securities which
may be issued pursuant to Section 7 upon exercise of the Option. The
shares of Issuer Common Stock to be issued upon due exercise of the
Option, including all additional shares of Issuer Common Stock or
other securities which may be issuable upon exercise of the Option or
any other securities which may be issued pursuant to Section 7, upon
issuance pursuant hereto, will be duly and validly issued, fully paid
and nonassessable, and will be delivered free and clear of all liens,
claims, charges and encumbrances of any kind or nature whatsoever,
including without limitation any preemptive rights of any stockholder
of Issuer.
<PAGE>
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Corporate Authorization. Grantee has the corporate power and
authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have
been duly and validly authorized by the Board of Directors of
Grantee, and no other corporate proceedings on the part of Grantee
are necessary to authorize this Agreement and the transactions
contemplated hereby. This Agreement has been duly and validly
executed and delivered by Grantee, and assuming this Agreement
constitutes a valid and binding agreement of Issuer, this Agreement
constitutes a valid and binding agreement of Grantee, enforceable
against Grantee in accordance with its terms (except insofar as
enforceability may be limited by applicable bankruptcy, insolvency,
reorganization, moratorium or similar laws affecting creditors'
rights generally, or by principles governing the availability of
equitable remedies).
(b) Purchase Not For Distribution. Any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not
be, and the Option is not being, acquired by Grantee with a view to
the public distribution thereof. Neither the Option nor any of the
Option Shares will be offered, sold, pledged or otherwise transferred
except in compliance with, or pursuant to an exemption from, the
registration requirements of the Securities Act.
7. Adjustment upon Changes in Capitalization, Etc. (a) In the event
of any changes in Issuer Common Stock by reason of a stock dividend,
reverse stock split, merger, recapitalization, combination, exchange of
shares, or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, will be adjusted
appropriately, and proper provision will be made in the agreements
governing such transaction, so that Grantee will receive upon exercise of
the Option the number and class of shares or other securities or property
that Grantee would have received with respect to Issuer Common Stock if the
Option had been exercised immediately prior to such event or the record
date therefor, as applicable.
(b) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that the Issuer enters into an
agreement (i) to consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and Issuer will not be the continuing
or surviving corporation in such consolidation or merger, (ii) to permit
any person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer will be the continuing or surviving corporation, but in
connection with such merger, the shares of Issuer Common Stock outstanding
immediately prior to the consummation of such merger will be changed into
or exchanged for stock or other securities of Issuer or any other person or
cash or any other property, or the shares of Issuer Common Stock
outstanding immediately prior to the consummation of such merger will,
after such merger represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or
one of its subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option
will, upon the consummation of any such transaction and upon the terms and
condition set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class
of shares or other securities or property that Grantee would have received
in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such consolidation, merger, sale, or transfer, or the
record date therefor, as applicable and make any other necessary
adjustments.
<PAGE>
(c) If, at any time during the period commencing on the occurrence of
an event as a result of which Grantee is entitled to receive the Company
Termination Fee pursuant to Section 7.12 of the Merger Agreement (the
"Purchase Event") and ending on the termination of the Option in accordance
with Section 2, Grantee sends to Issuer an Exercise Notice indicating
Grantee's election to exercise its right (the "Cash-Out- Right") pursuant
to this Section 7(c), then Issuer shall pay to Grantee, on the Option
Closing Date, in exchange for the cancellation of the Option with respect
to such number of Option Shares as Grantee specifies in the Exercise
Notice, an amount in cash equal to such number of Option Shares multiplied
by the difference between (i) the average closing price for the 10 trading
days commencing on the 12th Nasdaq trading day immediately preceding the
Notice Date, per share of Issuer Common Stock as reported on the Nasdaq
National Market (or, if not listed on the Nasdaq, as reported on any other
national securities exchange or national securities quotation system on
which the Issuer Common Stock is listed or quoted, as reported in The Wall
Street Journal (Northeast edition), or, if not reported thereby, any other
authoritative source) (the "Closing Price") and (ii) the Purchase Price,
except that in no event shall the Issuer be required to pay to the Grantee
pursuant to this Section 7(c) an amount exceeding the product of (x) $2.00
and (y) such number of Option Shares. Notwithstanding the termination of
the Option, Grantee will be entitled to exercise its rights under this
Section 7(c) if it has exercised such rights in accordance with the terms
hereof prior to the termination of the Option.
8. Repurchase Option. In the event that Grantee notifies Issuer of
its intention to exercise the Option pursuant to Section 2(a), Issuer may
require Grantee upon the delivery to Grantee of written notice during the
period beginning on the Notice Date and ending two days prior to the Option
Closing Date, to sell to Issuer the Option Shares acquired by Grantee
pursuant to such exercise of the Option at a purchase price per share for
such sale equal to the Purchase Price plus $2.00. The Closing of any
repurchase of Option Shares pursuant to this Section 8 shall take place
immediately following consummation of the sale of the Option Shares to
Grantee on the Option Closing Date at the location and time agreed upon
with respect to such Option Closing Date.
9. Registration Rights.
(a) Grantee may by written notice (a "Registration Notice") to
Issuer request Issuer to register under the Securities Act all or any part
of the Option Shares or other securities acquired by Grantee pursuant to
this Agreement (collectively, the "Registrable Securities") in order to
permit the sale or other disposition of such securities pursuant to a bona
fide, firm commitment underwritten public offering in which Grantee and the
underwriters shall effect as wide a distribution of such Registrable
Securities as is reasonably practicable and shall use reasonable efforts to
prevent any person or group from purchasing through such offering shares
representing more than 3% of the shares of Issuer Common Stock then
outstanding on a fully-diluted basis; provided, however, that any such
Registration Notice must relate to a number of shares equal to at least 2%
of the shares of Issuer Common Stock then outstanding on a fully-diluted
basis and that any rights to require registration hereunder shall terminate
with respect to any shares that may be sold pursuant to Rule 144(k) under
the Securities Act.
(b) Issuer shall use reasonable best efforts to effect, as
promptly as practicable, the registration under the Securities Act of the
Registrable Securities requested to be registered in the Registration
Notice; provided, however, that (i) Grantee shall not be entitled to more
than an aggregate of two effective registration statements hereunder and
<PAGE>
(ii) Issuer will not be required to file any such registration statement
during any period of time (not to exceed 40 days after a Registration
Notice in the case of clause (A) below or 90 days after a Registration
Notice in the case of clauses (B) and (C) below) when (A) Issuer is in
possession of material non-public information which it reasonably believes
would be detrimental to be disclosed at such time and, based upon the
advice of outside securities counsel to Issuer, such information would have
to be disclosed if a registration statement were filed at that time; (B)
Issuer would be required under the Securities Act to include audited
financial statements for any period in such registration statement and such
financial statements are not yet available for inclusion in such
registration statement; or (C) Issuer determines, in its reasonable
judgment, that such registration would interfere with any financing,
acquisition or other material transaction involving Issuer. If the
consummation of the sale of any Registrable Securities pursuant to a
registration hereunder does not occur within 180 days after the filing with
the SEC of the initial registration statement therefor, the provisions of
this Section shall again be applicable to any proposed registration, it
being understood that Grantee shall not be entitled to more than an
aggregate of two effective registration statements hereunder. Issuer will
use reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are
required therefor, and to keep such registration statement effective for
such period not in excess of 180 calendar days from the day such
registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. Issuer shall use
reasonable best efforts to cause any Registrable Securities registered
pursuant to this Section to be qualified for sale under the securities or
blue sky laws of such jurisdictions as Grantee may reasonably request and
shall continue such registration or qualification in effect in such
jurisdictions; provided, however, that Issuer shall not be required to
qualify to do business in, or consent to general service of process in, any
jurisdiction.
(c) If Issuer effects a registration under the Securities Act of
Issuer Common Stock for its own account or for any other stockholders of
Issuer (other than on Form S-4 or Form S-8, or any successor form), it will
allow Grantee the right to participate in such registration, and such
participation will not affect the obligation of Issuer to effect demand
registration statements for Grantee under this Section 9, except that, if
the managing underwriters of such offering advise Issuer in writing that in
their opinion the number of shares of Issuer Common Stock requested to be
included in such registration exceeds the number which can be sold in such
offering, Issuer will include the shares requested to be included therein
by Grantee pro rata with the shares intended to be included therein by
Issuer.
(d) The registration rights set forth in this Section are subject
to the condition that Grantee shall provide Issuer with such information
with respect to Grantee Registrable Securities, the plan for distribution
thereof, and such other information with respect to Grantee as, in the
reasonable judgment of counsel for Issuer, is necessary to enable Issuer to
include in a registration statement all material facts required to be
disclosed with respect to a registration hereunder.
(e) A registration effected under this Section shall be effected
at Issuer's expense, except for underwriting discounts and commissions and
the fees and expenses of Grantee's counsel, and Issuer shall provide to the
underwriters such documentation (including certificates, opinions of
counsel and "comfort" letters from auditors) as are customary in connection
with underwritten public offerings and as such underwriters may reasonably
require. In connection with any registration, Grantee and Issuer agree to
enter into an underwriting agreement reasonably acceptable to each such
party, in form and substance customary for transactions of this type.
<PAGE>
10. Transfers. The Option Shares may not be sold, assigned,
transferred, or otherwise disposed of except (i) pursuant to Section 8
hereof, (ii) in an underwritten public offering as provided in Section 9 or
(iii) to any purchaser or transferee who would not, to the knowledge of the
Grantee after reasonable inquiry, immediately following such sale,
assignment, transfer or disposal beneficially own more than 4.9% of the
then-outstanding voting power of the Issuer, except that Grantee shall be
permitted to sell any Option Shares if such sale is made pursuant to a
tender or exchange offer that has been approved or recommended by a
majority of the members of the Board of Directors of Issuer (which majority
shall include a majority of directors who were directors as of the date
hereof).
11. Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on the Nasdaq (or any
other national securities exchange or national securities quotation
system), Issuer, upon the request of Grantee, will promptly file an
application to list the shares of Issuer Common Stock or other securities
to be acquired upon exercise of the Option on the Nasdaq (and any such
other national securities exchange or national securities quotation system)
and will use reasonable efforts to obtain approval of such listing as
promptly as practicable.
12. Miscellaneous. (a) Expenses. Except as otherwise provided in the
Merger Agreement, each of the parties hereto will pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to waive
any provision of this Agreement, or to extend the time for performance,
will be valid only if set forth in an instrument in writing signed on
behalf of such party. The failure of any party to this Agreement to assert
any of its rights under this Agreement or otherwise will not constitute a
waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This Agreement,
the Merger Agreement (including the documents and instruments attached
thereto as exhibits or schedules or delivered in connection therewith) and
the Confidentiality Agreement (i) constitute the entire agreement, and
supersede all prior agreements and understandings, both written and oral,
between the parties with respect to the subject matter of this Agreement,
and (ii) are not intended to confer upon any person other than the parties
any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and construed
in accordance with, the laws of the State of Delaware, regardless of the
laws that might otherwise govern under applicable principles of conflict of
laws thereof.
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed
given if delivered personally, telecopied (which is confirmed), or sent by
overnight courier (providing proof of delivery) to the parties at the
following addresses (or at such other address for a party as shall be
specified by like notice):
<PAGE>
If to Issuer to:
May & Speh, Inc.
1501 Opus Place
Downers Grove, IL 60515
Fax: (630) 719-0525
Attention: Chief Executive Officer
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
Fax: (312) 558-5700
Attention: Bruce A. Toth
If to Grantee to:
Acxiom Corporation
P.O. Box 2000
301 Industrial Boulevard
Conway, AR 72033-2000
Fax: (501) 336-3913
Attention: President
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell
Telecopy: (212) 735-2000
(g) Assignment. Neither this Agreement, the Option nor any of the
rights, interests, or obligations under this Agreement may be assigned,
transferred or delegated, in whole or in part, by operation of law or
otherwise, by Issuer or Grantee without the prior written consent of the
other. Any assignment, transfer or delegation in violation of the preceding
sentence will be void. Subject to the first and second sentences of this
Section 12(g), this Agreement will be binding upon, inure to the benefit
of, and be enforceable by, the parties and their respective successors and
assigns.
(h) Further Assurances. In the event of any exercise of the Option by
Grantee, Issuer and Grantee will execute and deliver all other documents
and instruments and take all other action that may be reasonably necessary
in order to consummate the transactions provided for by such exercise.
(i) Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal
court located in the State of Delaware or in Delaware state court, the
foregoing being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (i) consents
to submit itself to the personal jurisdiction of any Federal court located
in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, and (iii) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated
by this Agreement in any court other than a Federal court sitting in the
State of Delaware or a Delaware state court.
<PAGE>
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the
day and year first
written above.
MAY & SPEH, INC.
By: /s/ Peter I. Mason
-----------------------------------
Name: Peter I. Mason
Title: Chairman, President and CEO
ACXIOM CORPORATION
By: /s/ Charles D. Morgan
-----------------------------------
Name: Charles D. Morgan
Title: President
<PAGE>
STOCK OPTION AGREEMENT
STOCK OPTION AGREEMENT, dated as of May 26, 1998 (the "Agreement"),
between Acxiom Corporation, a Delaware corporation ("Issuer"), and May &
Speh, Inc., a Delaware corporation ("Grantee").
RECITALS
A. Issuer and Grantee have entered into an Agreement and Plan of
Merger, dated as of the date hereof (the "Merger Agreement"; defined terms
used but not defined herein have the meanings set forth in the Merger
Agreement), providing for, among other things, the merger of Sub with and
into Grantee pursuant to the terms of the Merger; and
B. As a condition and inducement to Grantee's willingness to enter
into the Merger Agreement, Grantee has requested that Issuer agree, and
Issuer has agreed, to grant Grantee the Option (as defined below).
NOW, THEREFORE, in consideration of the foregoing and the respective
representations, warranties, covenants and agreements set forth herein,
Issuer and Grantee agree as follows:
1. Grant of Option. Subject to the terms and conditions set forth
herein, Issuer hereby grants to Grantee an irrevocable option (the
"Option") to purchase up to 19.9% of the number of shares (the "Option
Shares") of common stock, par value $0.10 per share ("Issuer Common
Stock"), of Issuer issued and outstanding immediately prior to the grant of
the Option at a purchase price of $23.55 (as adjusted as set forth herein)
per Option Share (the "Purchase Price").
2. Exercise of Option. (a) Grantee may exercise the Option, with
respect to any or all of the Option Shares at any one time, subject to the
provisions of Section 2(c), upon the occurrence of a Purchase Event (as
defined in Section 7(c)), except that (i) subject to the last sentence of
this Section 2(a), the Option will terminate and be of no further force and
effect upon the earliest to occur of (A) the Effective Time, (B) six months
after the date on which a Purchase Event (as defined herein) occurs, and
(C) termination of the Merger Agreement in accordance with its terms prior
to the occurrence of a Purchase Event, unless, in the case of clause (C),
the Grantee has the right to receive the Parent Termination Fee following
such termination upon the occurrence of certain events, in which case the
Option will not terminate until the later of (x) six months following the
time such Parent Termination Fee becomes payable and (y) the expiration of
the period in which the Grantee has such right to receive a Parent
Termination Fee, and (ii) any purchase of Option Shares upon exercise of
the Option will be subject to compliance with the HSR Act and the obtaining
or making of any consents, approvals, orders, notifications or
authorizations, the failure of which to have obtained or made would have
the effect of making the issuance of Option Shares illegal (the "Regulatory
Approvals") and no preliminary or permanent injunction or other order by
any court of competent jurisdiction prohibiting or otherwise restraining
such issuance shall be in effect. Notwithstanding the termination of the
Option, Grantee will be entitled to purchase the Option Shares if it has
exercised the Option in accordance with the terms hereof prior to the
termination of the Option, and the termination of the Option will not
affect any rights hereunder which by their terms do not terminate or expire
prior to or as of such termination.
<PAGE>
(b) In the event that Grantee wishes to exercise the Option, it will
send to Issuer a written notice (an "Exercise Notice"; the date of which
being herein referred to as the "Notice Date") to that effect which
Exercise Notice also specifies the number of Option Shares, if any, Grantee
wishes to purchase pursuant to this Section 2(b), the number of Option
Shares, if any, with respect to which Grantee wishes to exercise its Cash-
Out Right (as defined herein) pursuant to Section 7(c), the denominations
of the certificate or certificates evidencing the Option Shares which
Grantee wishes to purchase pursuant to this Section 2(b) and a date not
earlier than 20 business days nor later than 30 business days from the
Notice Date for the closing (an "Option Closing") of such purchase (an
"Option Closing Date"). Any Option Closing will be at an agreed location
and time in New York, New York on the applicable Option Closing Date or at
such later date as may be necessary so as to comply with clause (ii) of
Section 2(a).
(c) Notwithstanding anything to the contrary contained herein, any
exercise of the Option and purchase of Option Shares shall be subject to
compliance with applicable laws and regulations, which may prohibit the
purchase of all the Option Shares specified in the Exercise Notice without
first obtaining or making certain Regulatory Approvals. In such event, if
the Option is otherwise exercisable and Grantee wishes to exercise the
Option, the Option may be exercised in accordance with Section 2(b) and
Grantee shall acquire the maximum number of Option Shares specified in the
Exercise Notice that Grantee is then permitted to acquire under the
applicable laws and regulations, and if Grantee thereafter obtains the
Regulatory Approvals to acquire the remaining balance of the Option Shares
specified in the Exercise Notice, then Grantee shall be entitled to acquire
such remaining balance. Issuer agrees to use its reasonable best efforts
to assist Grantee in seeking the Regulatory Approvals.
In the event (i) Grantee receives official notice that a Regulatory
Approval required for the purchase of any Option Shares will not be issued
or granted or (ii) such Regulatory Approval has not been issued or granted
within six months of the date of the Exercise Notice, Grantee shall have
the right to exercise its Cash-Out Right (as defined herein) pursuant to
Section 7(c) with respect to the Option Shares for which such Regulatory
Approval will not be issued or granted or has not been issued or granted.
3. Payment and Delivery of Certificates. (a) At any Option Closing,
Grantee will pay to Issuer in same day funds by wire transfer to a bank
account designated in writing by Issuer an amount equal to the Purchase
Price multiplied by the number of Option Shares to be purchased at such
Option Closing.
(b) At any Option Closing, simultaneously with the delivery of same
day funds as provided in Section 3(a), Issuer will deliver to Grantee a
certificate or certificates representing the Option Shares to be purchased
at such Option Closing, which Option Shares will be free and clear of all
liens, claims, charges and encumbrances of any kind whatsoever. If at the
time of issuance of Option Shares pursuant to an exercise of the Option
hereunder, Issuer shall not have issued any securities similar to rights
under a shareholder rights plan, then each Option Share issued pursuant to
such exercise will also represent such a corresponding right with terms
substantially the same as and at least as favorable to Grantee as are
provided under any Issuer shareholder rights agreement or any similar
agreement then in effect.
(c) Certificates for the Option Shares delivered at an Option Closing
will have typed or printed thereon a restrictive legend which will read
substantially as follows:
<PAGE>
"THE SECURITIES REPRESENTED BY THIS CERTIFICATE HAVE NOT BEEN
REGISTERED UNDER THE SECURITIES ACT OF 1933, AND MAY BE OFFERED, SOLD,
PLEDGED OR OTHERWISE TRANSFERRED ONLY IF SO REGISTERED OR IF ANY
EXEMPTION FROM SUCH REGISTRATION IS AVAILABLE. SUCH SECURITIES ARE
ALSO SUBJECT TO ADDITIONAL RESTRICTIONS ON TRANSFER AS SET FORTH IN
THE STOCK OPTION AGREEMENT, DATED AS OF MAY 26, 1998, A COPY OF WHICH
MAY BE OBTAINED FROM THE SECRETARY OF AXCIOM CORPORATION AT ITS
PRINCIPAL EXECUTIVE OFFICES."
It is understood and agreed that (i) the reference to restrictions arising
under the Securities Act in the above legend will be removed by delivery of
substitute certificate(s) without such reference if such Option Shares have
been sold in compliance with the registration and prospectus delivery
requirements of the Securities Act, such Option Shares have been sold in
reliance on and in accordance with Rule 144 under the Securities Act or
Grantee has delivered to Issuer a copy of a letter from the staff of the
SEC, or an opinion of counsel in form and substance reasonably satisfactory
to Issuer and its counsel, to the effect that such legend is not required
for purposes of the Securities Act and (ii) the reference to restrictions
pursuant to this Agreement in the above legend will be removed by delivery
of substitute certificate(s) without such reference if the Option Shares
evidenced by certificate(s) containing such reference have been sold or
transferred in compliance with the provisions of this Agreement under
circumstances that do not require the retention of such reference.
4. Incorporation of Representations and Warranties of Issuer. The
representations and warranties of Issuer contained in Article V of the
Merger Agreement are hereby incorporated by reference herein with the same
force and effect as though made pursuant to this Agreement.
5. Representations and Warranties of Issuer. Issuer hereby
represents and warrants to Grantee as follows:
(a) Corporate Authorization. Issuer has the corporate power and
authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of Issuer, and
no other corporate proceedings on the part of Issuer are necessary to
authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by
Issuer, and assuming this Agreement constitutes a valid and binding
agreement of Grantee, this Agreement constitutes a valid and binding
agreement of Issuer, enforceable against Issuer in accordance with its
terms (except insofar as enforceability may be limited by applicable
bankruptcy, insolvency, reorganization, moratorium or similar laws
affecting creditors' rights generally, or by principles governing the
availability of equitable remedies).
(b) Authorized Stock. Issuer has taken all necessary corporate
and other action to authorize and reserve and, subject to the
expiration or termination of any required waiting period under the HSR
Act, to permit it to issue, and, at all times from the date hereof
until the obligation to deliver Option Shares upon the exercise of the
Option terminates, shall have reserved for issuance, upon exercise of
the Option, shares of Issuer Common Stock necessary for Grantee to
exercise the Option, and Issuer will take all necessary corporate
action to authorize and reserve for issuance all additional shares of
Issuer Common Stock or other securities which may be issued pursuant
to Section 7 upon exercise of the Option. The shares of Issuer Common
Stock to be issued upon due exercise of the Option, including all
additional shares of Issuer Common Stock or other securities which may
be issuable upon exercise of the Option or any other securities which
may be issued pursuant to Section 7, upon issuance pursuant hereto,
will be duly and validly issued, fully paid and nonassessable, and
will be delivered free and clear of all liens, claims, charges and
encumbrances of any kind or nature whatsoever, including without
limitation any preemptive rights of any stockholder of Issuer.
<PAGE>
6. Representations and Warranties of Grantee. Grantee hereby
represents and warrants to Issuer that:
(a) Corporate Authorization. Grantee has the corporate power
and authority to enter into this Agreement and to carry out its
obligations hereunder. The execution and delivery of this Agreement
and the consummation of the transactions contemplated hereby have been
duly and validly authorized by the Board of Directors of Grantee, and
no other corporate proceedings on the part of Grantee are necessary to
authorize this Agreement and the transactions contemplated hereby.
This Agreement has been duly and validly executed and delivered by
Grantee, and assuming this Agreement constitutes a valid and binding
agreement of Issuer, this Agreement constitutes a valid and binding
agreement of Grantee, enforceable against Grantee in accordance with
its terms (except insofar as enforceability may be limited by
applicable bankruptcy, insolvency, reorganization, moratorium or
similar laws affecting creditors' rights generally, or by principles
governing the availability of equitable remedies).
(b) Purchase Not For Distribution. Any Option Shares or other
securities acquired by Grantee upon exercise of the Option will not
be, and the Option is not being, acquired by Grantee with a view to
the public distribution thereof. Neither the Option nor any of the
Option Shares will be offered, sold, pledged or otherwise transferred
except in compliance with, or pursuant to an exemption from, the
registration requirements of the Securities Act.
7. Adjustment upon Changes in Capitalization, Etc. (a) In the event
of any changes in Issuer Common Stock by reason of a stock dividend,
reverse stock split, merger, recapitalization, combination, exchange of
shares, or similar transaction, the type and number of shares or securities
subject to the Option, and the Purchase Price therefor, will be adjusted
appropriately, and proper provision will be made in the agreements
governing such transaction, so that Grantee will receive upon exercise of
the Option the number and class of shares or other securities or property
that Grantee would have received with respect to Issuer Common Stock if the
Option had been exercised immediately prior to such event or the record
date therefor, as applicable.
(b) Without limiting the parties' relative rights and obligations
under the Merger Agreement, in the event that the Issuer enters into an
agreement (i) to consolidate with or merge into any person, other than
Grantee or one of its subsidiaries, and Issuer will not be the continuing
or surviving corporation in such consolidation or merger, (ii) to permit
any person, other than Grantee or one of its subsidiaries, to merge into
Issuer and Issuer will be the continuing or surviving corporation, but in
connection with such merger, the shares of Issuer Common Stock outstanding
immediately prior to the consummation of such merger will be changed into
or exchanged for stock or other securities of Issuer or any other person or
cash or any other property, or the shares of Issuer Common Stock
outstanding immediately prior to the consummation of such merger will,
after such merger represent less than 50% of the outstanding voting
securities of the merged company, or (iii) to sell or otherwise transfer
all or substantially all of its assets to any person, other than Grantee or
one of its subsidiaries, then, and in each such case, the agreement
governing such transaction will make proper provision so that the Option
will, upon the consummation of any such transaction and upon the terms and
condition set forth herein, be converted into, or exchanged for, an option
with identical terms appropriately adjusted to acquire the number and class
of shares or other securities or property that Grantee would have received
in respect of Issuer Common Stock if the Option had been exercised
immediately prior to such consolidation, merger, sale, or transfer, or the
record date therefor, as applicable and make any other necessary
adjustments.
<PAGE>
(c) If, at any time during the period commencing on the occurrence
of an event as a result of which Grantee is entitled to receive the Parent
Termination Fee pursuant to Section 7.12 of the Merger Agreement (the
"Purchase Event") and ending on the termination of the Option in accordance
with Section 2, Grantee sends to Issuer an Exercise Notice indicating
Grantee's election to exercise its right (the "Cash-Out-Right") pursuant to
this Section 7(c), then Issuer shall pay to Grantee, on the Option Closing
Date, in exchange for the cancellation of the Option with respect to such
number of Option Shares as Grantee specifies in the Exercise Notice, an
amount in cash equal to such number of Option Shares multiplied by the
difference between (i) the average closing price for the 10 trading days
commencing on the 12th Nasdaq trading day immediately preceding the Notice
Date, per share of Issuer Common Stock as reported on the Nasdaq National
Market (or, if not listed on the Nasdaq, as reported on any other national
securities exchange or national securities quotation system on which the
Issuer Common Stock is listed or quoted, as reported in The Wall Street
Journal (Northeast edition), or, if not reported thereby, any other
authoritative source) (the "Closing Price") and (ii) the Purchase Price,
except that in no event shall the Issuer be required to pay to the Grantee
pursuant to this Section 7(c) an amount exceeding the product of (x) $1.00
and (y) such number of Option Shares. Notwithstanding the termination of
the Option, Grantee will be entitled to exercise its rights under this
Section 7(c) if it has exercised such rights in accordance with the terms
hereof prior to the termination of the Option.
8. Repurchase Option. In the event that Grantee notifies Issuer of
its intention to exercise the Option pursuant to Section 2(a), Issuer may
require Grantee upon the delivery to Grantee of written notice during the
period beginning on the Notice Date and ending two days prior to the Option
Closing Date, to sell to Issuer the Option Shares acquired by Grantee
pursuant to such exercise of the Option at a purchase price per share for
such sale equal to the Purchase Price plus $1.00. The Closing of any
repurchase of Option Shares pursuant to this Section 8 shall take place
immediately following consummation of the sale of the Option Shares to
Grantee on the Option Closing Date at the location and time agreed upon
with respect to such Option Closing Date.
9. Registration Rights.
(a) Grantee may by written notice (a "Registration Notice") to
Issuer request Issuer to register under the Securities Act all or any part
of the Option Shares or other securities acquired by Grantee pursuant to
this Agreement (collectively, the "Registrable Securities") in order to
permit the sale or other disposition of such securities pursuant to a bona
fide, firm commitment underwritten public offering in which Grantee and the
underwriters shall effect as wide a distribution of such Registrable
Securities as is reasonably practicable and shall use reasonable efforts to
prevent any person or group from purchasing through such offering shares
representing more than 3% of the shares of Issuer Common Stock then
outstanding on a fully-diluted basis; provided, however, that any such
Registration Notice must relate to a number of shares equal to at least 2%
of the shares of Issuer Common Stock then outstanding on a fully-diluted
basis and that any rights to require registration hereunder shall terminate
with respect to any shares that may be sold pursuant to Rule 144(k) under
the Securities Act.
<PAGE>
(b) Issuer shall use reasonable best efforts to effect, as
promptly as practicable, the registration under the Securities Act of the
Registrable Securities requested to be registered in the Registration
Notice; provided, however, that (i) Grantee shall not be entitled to more
than an aggregate of two effective registration statements hereunder and
(ii) Issuer will not be required to file any such registration statement
during any period of time (not to exceed 40 days after a Registration
Notice in the case of clause (A) below or 90 days after a Registration
Notice in the case of clauses (B) and (C) below) when (A) Issuer is in
possession of material non-public information which it reasonably believes
would be detrimental to be disclosed at such time and, based upon the
advice of outside securities counsel to Issuer, such information would have
to be disclosed if a registration statement were filed at that time; (B)
Issuer would be required under the Securities Act to include audited
financial statements for any period in such registration statement and such
financial statements are not yet available for inclusion in such
registration statement; or (C) Issuer determines, in its reasonable
judgment, that such registration would interfere with any financing,
acquisition or other material transaction involving Issuer. If the
consummation of the sale of any Registrable Securities pursuant to a
registration hereunder does not occur within 180 days after the filing with
the SEC of the initial registration statement therefor, the provisions of
this Section shall again be applicable to any proposed registration, it
being understood that Grantee shall not be entitled to more than an
aggregate of two effective registration statements hereunder. Issuer will
use reasonable efforts to cause each such registration statement to become
effective, to obtain all consents or waivers of other parties which are
required therefor, and to keep such registration statement effective for
such period not in excess of 180 calendar days from the day such
registration statement first becomes effective as may be reasonably
necessary to effect such sale or other disposition. Issuer shall use
reasonable best efforts to cause any Registrable Securities registered
pursuant to this Section to be qualified for sale under the securities or
blue sky laws of such jurisdictions as Grantee may reasonably request and
shall continue such registration or qualification in effect in such
jurisdictions; provided, however, that Issuer shall not be required to
qualify to do business in, or consent to general service of process in, any
jurisdiction.
(c) If Issuer effects a registration under the Securities Act of
Issuer Common Stock for its own account or for any other stockholders of
Issuer (other than on Form S-4 or Form S-8, or any successor form), it will
allow Grantee the right to participate in such registration, and such
participation will not affect the obligation of Issuer to effect demand
registration statements for Grantee under this Section 9, except that, if
the managing underwriters of such offering advise Issuer in writing that in
their opinion the number of shares of Issuer Common Stock requested to be
included in such registration exceeds the number which can be sold in such
offering, Issuer will include the shares requested to be included therein
by Grantee pro rata with the shares intended to be included therein by
Issuer.
(d) The registration rights set forth in this Section are subject
to the condition that Grantee shall provide Issuer with such information
with respect to Grantee Registrable Securities, the plan for distribution
thereof, and such other information with respect to Grantee as, in the
reasonable judgment of counsel for Issuer, is necessary to enable Issuer to
include in a registration statement all material facts required to be
disclosed with respect to a registration hereunder.
<PAGE>
(e) A registration effected under this Section shall be effected
at Issuer's expense, except for underwriting discounts and commissions and
the fees and expenses of Grantee's counsel, and Issuer shall provide to the
underwriters such documentation (including certificates, opinions of
counsel and "comfort" letters from auditors) as are customary in connection
with underwritten public offerings and as such underwriters may reasonably
require. In connection with any registration, Grantee and Issuer agree to
enter into an underwriting agreement reasonably acceptable to each such
party, in form and substance customary for transactions of this type.
10. Transfers. The Option Shares may not be sold, assigned,
transferred, or otherwise disposed of except (i) pursuant to Section 8
hereof, (ii) in an underwritten public offering as provided in Section 9 or
(iii) to any purchaser or transferee who would not, to the knowledge of the
Grantee after reasonable inquiry, immediately following such sale,
assignment, transfer or disposal beneficially own more than 4.9% of the
then-outstanding voting power of the Issuer, except that Grantee shall be
permitted to sell any Option Shares if such sale is made pursuant to a
tender or exchange offer that has been approved or recommended by a
majority of the members of the Board of Directors of Issuer (which majority
shall include a majority of directors who were directors as of the date
hereof).
11. Listing. If Issuer Common Stock or any other securities to be
acquired upon exercise of the Option are then listed on the Nasdaq (or any
other national securities exchange or national securities quotation
system), Issuer, upon the request of Grantee, will promptly file an
application to list the shares of Issuer Common Stock or other securities
to be acquired upon exercise of the Option on the Nasdaq (and any such
other national securities exchange or national securities quotation system)
and will use reasonable efforts to obtain approval of such listing as
promptly as practicable.
12. Miscellaneous. (a) Expenses. Except as otherwise provided in
the Merger Agreement, each of the parties hereto will pay all costs and
expenses incurred by it or on its behalf in connection with the
transactions contemplated hereunder, including fees and expenses of its own
financial consultants, investment bankers, accountants and counsel.
(b) Amendment. This Agreement may not be amended, except by an
instrument in writing signed on behalf of each of the parties.
(c) Extension; Waiver. Any agreement on the part of a party to
waive any provision of this Agreement, or to extend the time for
performance, will be valid only if set forth in an instrument in writing
signed on behalf of such party. The failure of any party to this Agreement
to assert any of its rights under this Agreement or otherwise will not
constitute a waiver of such rights.
(d) Entire Agreement; No Third-Party Beneficiaries. This
Agreement, the Merger Agreement (including the documents and instruments
attached thereto as exhibits or schedules or delivered in connection
therewith) and the Confidentiality Agreement (i) constitute the entire
agreement, and supersede all prior agreements and understandings, both
written and oral, between the parties with respect to the subject matter of
this Agreement, and (ii) are not intended to confer upon any person other
than the parties any rights or remedies.
(e) Governing Law. This Agreement will be governed by, and
construed in accordance with, the laws of the State of Delaware, regardless
of the laws that might otherwise govern under applicable principles of
conflict of laws thereof.
<PAGE>
(f) Notices. All notices, requests, claims, demands, and other
communications under this Agreement must be in writing and will be deemed
given if delivered personally, telecopied (which is confirmed), or sent by
overnight courier (providing
proof of delivery) to the parties at the following addresses (or at such
other address for a party as shall be specified by like notice):
If to Issuer to:
Acxiom Corporation
P.O. Box 2000
301 Industrial Boulevard
Conway, AR 72033-2000
Fax: (501) 336-3913
Attention: President
with a copy to:
Skadden, Arps, Slate, Meagher & Flom LLP
919 Third Avenue
New York, New York 10022
Attention: J. Michael Schell
Telecopy: (212) 735-2000
If to Grantee to:
May & Speh, Inc.
1501 Opus Place
Downes Grove, IL 60515
Fax: (630) 719-0525
Attention: Chief Executive Officer
with a copy to:
Winston & Strawn
35 West Wacker Drive
Chicago, IL 60601
Fax: (312) 558-5700
Attention: Bruce A. Toth
(g) Assignment. Neither this Agreement, the Option nor any of the
rights, interests, or obligations under this Agreement may be assigned,
transferred or delegated, in whole or in part, by operation of law or
otherwise, by Issuer or Grantee without the prior written consent of the
other. Any assignment, transfer or delegation in violation of the
preceding sentence will be void. Subject to the first and second sentences
of this Section 12(g), this Agreement will be binding upon, inure to the
benefit of, and be enforceable by, the parties and their respective
successors and assigns.
(h) Further Assurances. In the event of any exercise of the Option
by Grantee, Issuer and Grantee will execute and deliver all other documents
and instruments and take all other action that may be reasonably necessary
in order to consummate the transactions provided for by such exercise.
<PAGE>
(i) Enforcement. The parties agree that irreparable damage would
occur and that the parties would not have any adequate remedy at law in the
event that any of the provisions of this Agreement were not performed in
accordance with their specific terms or were otherwise breached. It is
accordingly agreed that the parties will be entitled to an injunction or
injunctions to prevent breaches of this Agreement and to enforce
specifically the terms and provisions of this Agreement in any Federal
court located in the State of Delaware or in Delaware state court, the
foregoing being in addition to any other remedy to which they are entitled
at law or in equity. In addition, each of the parties hereto (i) consents
to submit itself to the personal jurisdiction of any Federal court located
in the State of Delaware or any Delaware state court in the event any
dispute arises out of this Agreement or any of the transactions
contemplated by this Agreement, (ii) agrees that it will not attempt to
deny or defeat such personal jurisdiction by motion or other request for
leave from any such court, and (iii) agrees that it will not bring any
action relating to this Agreement or any of the transactions contemplated
by this Agreement in any court other than a Federal court sitting in the
State of Delaware or a Delaware state court.
IN WITNESS WHEREOF, Issuer and Grantee have caused this Agreement to
be signed by their respective officers thereunto duly authorized as of the
day and year first written above.
ACXIOM CORPORATION
By: /s/ Charles D. Morgan
-----------------------------------
Name: Charles D. Morgan
Title: President
MAY & SPEH, INC.
By: /s/ Peter I. Mason
-----------------------------------
Name: Peter I. Mason
Title: Chairman, President, CEO
<PAGE>
AMENDMENT TO RIGHTS AGREEMENT
Amendment Number One, dated as of May 26, 1998, to the Rights
Agreement, dated as of January 28, 1998 (the "Rights Agreement"), between
Acxiom Corporation, a Delaware corporation (the "Company"), and First
Chicago Trust Company of New York, as Rights Agent (the "Rights Agent").
WHEREAS, the Company and the Rights Agent entered into the Rights
Agreement specifying the terms of the Rights (as defined therein);
WHEREAS, the Company desires to amend the Rights Agreement in
accordance with Section 5.4 of the Rights Agreement;
WHEREAS, the Company proposes to enter into an Agreement and Plan
of Merger, dated as of May 26, 1998 (the "Merger Agreement"), among the
Company, ACX Acquisition Co., Inc. and May & Speh, Inc. ("May & Speh");
WHEREAS, as a condition to the Merger Agreement and in order to
induce May & Speh to enter into the Merger Agreement, the Company proposes
to enter into a Stock Option Agreement, dated as of May 26, 1998, between
the Company and May & Speh (the "Stock Option Agreement"), pursuant to
which the Company will grant May & Speh an option (the "Option") to
purchase up to 19.9% of the number of shares (the "Option Shares") of
common stock, par value $.10 per share, ("Common Stock"), of the Company
issued and outstanding immediately prior to the grant of the Option;
WHEREAS, as a condition to the Merger Agreement and in order to
induce May & Speh to enter into the Merger Agreement, Charles D. Morgan, a
holder of shares of Common Stock ("Stockholder"), proposes to enter into
an irrevocable proxy, dated as of May 26, 1998, between Stockholder and
May & Speh, pursuant to which Stockholder is granting May & Speh an
irrevocable proxy (the "Proxy") to vote such shares of Common Stock; and
WHEREAS, the Board of Directors of the Company has determined it
advisable and in the best interest of its stockholders to amend the Rights
Agreement to enable the Company to enter into the Merger Agreement and
Stock Option Agreement and consummate the transactions contemplated thereby
without causing May & Speh to become an "Acquiring Person" (as defined in
the Rights Agreement).
NOW, THEREFORE, in consideration of the premises and mutual
agreements set forth herein and in the Rights Agreement, the parties hereby
agree as follows:
Section 1. Definitions. Capitalized terms used and not
otherwise defined herein shall have the meaning assigned to such terms in
the Rights Agreement.
Section 2. Amendments to the Rights Agreement. The Rights
Agreement is hereby amended as set forth in this Section 2.
(a) Section 1.1 of the Rights Agreement is hereby amended
by deleting the first sentence there of and inserting in lieu thereof the
following:
<PAGE>
"Acquiring Person" shall mean any Person who is Beneficial
Owner of 20% or more of the outstanding shares of Voting Stock (as
hereinafter defined); provided, however, that the term "Acquiring Person"
shall not include any Person (i) who is the Beneficial Owner of 20% or more
of the outstanding Shares of Common Stock on the date of this Agreement or
who shall become the Beneficial Owner (as hereinafter defined) of 20% or
more of the outstanding shares of Voting Stock solely as a result of an
acquisition by the Company of shares of Voting Stock, until such time
hereafter or thereafter as any of such Persons shall become the Beneficial
Owner (other than by means of a stock dividend or stock split) of any
additional shares of Voting Stock, (ii) who is the Beneficial Owner of 20%
or more of the outstanding shares of Voting Stock but who acquired
Beneficial Ownership (as hereinafter defined) of shares of Voting Stock
without plan or intention to seek or affect control of the Company, if such
Person (as hereinafter defined), upon notice by the Company, promptly
enters into an irrevocable commitment promptly to divest, and thereafter
promptly divests (without exercising or retaining any power, including
voting, with respect to such shares), sufficient shares of Voting Stock (or
securities convertible into, exchangeable into or exercisable for Voting
Stock) so that such Person ceases to be the Beneficial Owner of 20% or more
of the outstanding shares of Voting Stock; and (iii) who Beneficially Owns
shares of Voting Stock consisting solely of one or more of (A) shares of
Voting Stock Beneficially Owned pursuant to the grant or exercise of an
option granted to such Person by the Company in connection with an
agreement to merge with, or acquire, the Company at a time at which there
is no Acquiring Person, (B) shares of Voting Stock (or securities
convertible into, exchangeable into or exercisable for Voting Stock),
Beneficially Owned by such Person or its Affiliates (as hereinafter
defined) or Associates (as hereinafter defined) at the time of grant of
such option or (C) shares of Voting Stock (or securities convertible into,
exchangeable into or exercisable for Voting Stock) acquired by Affiliates
or Associates of such Person after the time of such grant, which, in the
aggregate, amount to less than 1% of the outstanding shares of Voting
Stock; and provided, further, however, that May & Speh, Inc. ("May & Speh")
and its Affiliates and Associates shall not be deemed to be an Acquiring
Person as a result of either (x) the grant of the Option (as such term is
defined in the Stock Option Agreement, dated as of May 26, 1998 between the
Company and May & Speh (the "Stock Option Agreement")) pursuant to the
Stock Option Agreement, or at any time following the exercise thereof and
the issuance of shares of Common Stock in accordance with the terms of the
Stock Option Agreement, (y) the grant of the Proxy, dated as of May 26,
1998, to May & Speh by Charles D. Morgan, or at any time following the
delivery and execution thereof or (z) the grant of certain additional
proxies with respect to shares of Common Stock owned by certain other
stockholders of the Company contemplated by the Agreement and Plan of
Merger, dated as of May 26, 1998, among the Company, May & Speh and ACX
Acquisition Co., Inc.
Section 3. Miscellaneous.
(a) The term "Agreement" as used in the Rights Agreement
shall be deemed to refer to the Rights Agreement as amended hereby.
(b) The foregoing amendment shall be effective as of the
date first above written, and, except as set forth herein, the Rights
Agreement shall remain in full force and effect and shall be otherwise
unaffected hereby.
(c) This Amendment may be executed in two or more
counterparts, each of which shall be deemed to be an original, but all for
which together shall constitute one and the same instrument.
<PAGE>
(d) This Amendment shall be deemed to be a contract made
under the laws of the State of Delaware and for all purposes shall be
governed by and construed in accordance with the laws of such State
applicable to contracts to be made and performed entirely within such
State.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Number One to be duly executed and attested, all as of the day and year
first above written.
Attest: ACXIOM CORPORATION
By: /s/ Catherine L. Hughes By: /s/ Charles D. Morgan
------------------------ ---------------------------
Name: Catherine L. Hughes Name: Charles D. Morgan
Title: Secretary Title: President
Attest: FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: /s/ T. Marshall By: /s/ Peter Sablich
------------------------ ------------------------------------
Name: T. Marshall Name: Peter Sablich
Title: Account Officer Title: Vice President
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934
Date of Report (Date of earliest event reported): September 17, 1998
ACXIOM CORPORATION
(Exact name of registrant as specified in its charter)
Delaware 0-13163 71-0581897
(State of other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
301 Industrial Boulevard, Conway, Arkansas 72033-2000
(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (501) 336-1000
Former name or former address, if changed since last report; No change
ITEM 5. OTHER EVENTS.
At an annual meeting of stockholders (the "Annual Meeting") of Acxiom
Corporation (the "Company"), held on September 17, 1998, the stockholders
of the Company approved the acquisition of May & Speh, Inc. ("May & Speh")
pursuant to a merger of a wholly owned subsidiary of the Company with and
into May & Speh (the "Merger"). The Merger became effective on September
17, 1998. As a result of the Merger, the holders of the outstanding shares
of May & Speh's common stock, $.01 par value (the "May & Speh Common
Stock"), will receive 0.8 of a share of common stock, $.10 par value, of
the Company for each share of May & Speh Common Stock held.
The Company incorporates by reference into the Current Report on Form
8-K the additional information about the Merger set forth in the joint
press release of the Company and May & Speh, dated September 17, 1998, a
copy of which is attached hereto as Exhibit 99.1.
ITEM 7. FINANCIAL STATEMENTS, PRO FORMA FINANCIAL INFORMATION AND EXHIBITS.
(c) Exhibits
99.1 Joint Press Release of the Company and May & Speh dated
September 17, 1998 (announcing consummation of Merger).
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by
the undersigned hereunto duly authorized.
ACXIOM CORPORATION
By: /s/ Catherine L. Hughes
_________________________________
Name: Catherine L. Hughes
Title: Secretary and
General Counsel
Date: September 18, 1998
EXHIBIT INDEX
EXHIBIT NO. DESCRIPTION
99.1 Joint Press Release of the Company and May & Speh
dated September 17, 1998 (announcing consummation
of Merger).
<PAGE>
Exhibit 99.1
Acxiom Corporation May & Speh, Inc.
301 Industrial Blvd. 1501 Opus Place
P.O. Box 2000 Downers Grove, IL 60515-5713
Conway, AR 72233-2000
For more information, contact: For more information, contact:
Robert S. Bloom Eric Loughmiller
Company Finance Leader Chief Financial Officer
(501) 336-1321 (630) 719-0432
ACXIOM(R) CORPORATION AND MAY & SPEH, INC.
COMPLETE MERGER
CONWAY, AR AND DONWERS GROVE, IL, SEPTEMBER 17, 1998
Acxiom(R) Corporation (Nasdaq: ACXM) and May & Speh, Inc.
(Nasdaq
SPEH) today jointly announced completion of their merger. As a
result of the merger, which became effective today following approval by
the stockholders of each company, May & Speh will become a wholly-owned
subsidiary of Acxiom. Stockholders of May & Speh will receive .8 of a
share of Acxiom common stock for each share of May & Speh common stock
held.
May & Speh stockholders will be sent information explaining the
procedures to be followed for exchanging their shares for shares of Acxiom
common stock they are entitled to receive as a result of the merger. Also
in connection with the merger, Acxiom has announced that it will be a co-
obligor of the May & Speh 51/4% Senior Subordinated Notes due 2003.
Charles D. Morgan, Chairman and Company Leader of Acxiom,
commented, "The new company's joint resources are a very powerful
combination. Our product and services offerings will be significantly
enhanced when we marry Acxiom's data with May and Speh's analytical
capability and the combined know-how of our two companies. We are very
excited about the cost-saving and significant growth opportunities that the
merger of the two companies will create."
An organizational alignment plan has been developed and approved
and will be phased in over the next several months. The new alignment,
which will be effective and fully in place by April 1, 1999, will represent
five Acxiom Divisions: International (headquartered in London) and
Outsourcing (headquartered in Chicago), as well as Financial, Data
Products, and Services (headquartered in Conway). The objective is to
create maximum focus and synergy on the vertical industries, outsourcing
opportunities and international development of the combined company.
Acxiom provides a wide spectrum of data products, data
integration services, and mailing list services, as well as data
warehousing and decision support services to major U.S. and international
firms. Founded in 1969, Acxiom is headquartered in Conway, Arkansas, with
operations throughout the United States and in the United Kingdom and
France.
Founded in 1947, May & Speh is a leading provider of technology-
based information management services with a focus on direct marketing
services and information technology (IT) outsourcing services. The
company's database marketing solutions help companies execute more
profitable direct marketing and customer management programs. Services
include strategic analysis and management; systems consulting; data
warehouse design and management; modeling and analysis; and list
processing. For companies looking to outsource all or part of their
information systems operations, May & Speh provides IT services to support
mainframe and mid-range (client/server) processing and network management.
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
-----------------------
FORM 8-K
CURRENT REPORT
-----------------------
PURSUANT TO SECTION 13 OR 15(d) OF THE
SECURITIES EXCHANGE ACT OF 1934
February 8, 1999
DATE OF REPORT (Date of earliest event reported)
ACXIOM CORPORATION
(Exact name of registrant as specified in its charter)
DELAWARE 0-13163 71-0581897
(State or other (Commission (IRS Employer
jurisdiction of File Number) Identification Number)
incorporation)
301 Industrial Boulevard
Conway, Arkansas 72033-2000
(Address of principal executive offices)
(Zip Code)
(501) 336-1000
(Registrant's telephone number, including area code)
<PAGE>
Item 5. Other Events.
As has been disclosed by registrant in prior filings, on September 17,
1998, registrant acquired May & Speh, Inc. Registrant accounted for the
transaction as a pooling of interests. Because of this transaction, if
registrant desires to file a registration statement under the Securities Act of
1933, registrant will be required to prepare restated financial statements
reflecting such transaction.
Registrant has prepared restated consolidated financial statements
reflecting the above-described transaction and is filing them as Exhibit 99 to
this Current Report on Form 8-K so that registrant may incorporate such
financial statements into any future registration statements by reference to
this report.
Item 7. Financial Statements and Exhibits
(c) Exhibits
23.1 Consent of KPMG LLP
23.2 Consent of PricewaterhouseCoopers LLP
99 Consolidated Financial Statements of Acxiom Corporation (as
restated to reflect the acquisition of May & Speh, Inc. on
September 17, 1998)
SIGNATURE
Pursuant to the requirements of the Securities Exchange Act of 1934,
the registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
ACXIOM CORPORATION
By: /s/ Catherine L. Hughes
-----------------------------------
Catherine L. Hughes
Secretary and General Counsel
Date: February 8, 1999
<PAGE>
Exhibit Index
Number in
Exhibit Table Exhibit
23.1 Consent of KPMG LLP
23.2 Consent of PricewaterhouseCoopers LLP
99 Consolidated Financial Statements of Acxiom Corporation (as
restated to reflect the acquisition of May & Speh, Inc. on
September 17, 1998)
<PAGE>
EXHIBIT 23.1
Independent Auditors' Consent
The Board of Directors
Acxiom Corporation:
We consent to incorporation by reference in the registration statements (No.
33-17115, No. 33-37609, No. 33-37610, No. 33-42351, No. 33-72310, No. 33-72312,
No. 33-63423 and No. 333-03391) on Form S-8 of Acxiom Corporation of our report
dated January 28, 1999, relating to the consolidated financial statements and
related consolidated financial statement schedule of Acxiom Corporation and
subsidiaries as of March 31, 1998 and 1997, and for each of the years in the
three-year period ended March 31, 1998 which report appears in this current Form
8-K of Acxiom Corporation.
/s/ KPMG LLP
Little Rock, Arkansas
February 5, 1999
<PAGE>
EXHIBIT 23.2
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the incorporation by reference in the Registration
Statements on Form S-8 (No. 33-17115, No. 33-37609, No. 33-37610, No. 33-42351,
No. 33-72310, No. 33-72312, No. 33-63423, No. 333-03391 and No. 333-63633) of
Acxiom Corporation of our report dated November 1, 1996, in this Current Report
on Form 8-K of Acxiom Corporation, relating to the consolidated balance sheet of
May & Speh, Inc. as of September 30, 1996 (not presented separately herein) and
the related consolidated statements of operations and of cash flows for the
years ended September 30, 1996 and 1995 (not presented separately herein).
PricewaterhouseCoopers LLP
Chicago, Illinois
February 2, 1999
<PAGE>
ACXIOM CORPORATION
AND SUBSIDIARIES
Index to Consolidated Financial Statements
Page
Independent Auditors' Reports 1
Consolidated Balance Sheets - March 31, 1998 and 1997 3
Consolidated Statements of Earnings - Years ended March 31, 1998,
1997 and 1996 4
Consolidated Statements of Stockholders' Equity - Years ended
March 31, 1998, 1997 and 1996 5
Consolidated Statements of Cash Flows - Years ended
March 31, 1998, 1997 and 1996 7
Notes to Consolidated Financial Statements 9
Financial Statement Schedule - Valuation and Qualifying Accounts -
Years ended March 31, 1998, 1997 and 1996 26
<PAGE>
Independent Auditors' Report
The Board of Directors and Stockholders
Acxiom Corporation:
We have audited the accompanying consolidated financial statements of Acxiom
Corporation and subsidiaries as listed in the accompanying index. In connection
with our audits of the consolidated financial statements, we have also audited
the financial statement schedule as listed in the accompanying index. These
consolidated financial statements are the responsibility of the Company's
management. Our responsibility is to express an opinion on these consolidated
financial statements based on our audits. We did not audit the consolidated
financial statements of May & Speh, Inc., a wholly-owned subsidiary, which
statements reflect total assets constituting 27 percent at March 31, 1997, and
total revenues constituting 16 percent and 19 percent during the years ended
March 31, 1997 and 1996, respectively, of the related consolidated totals. Those
statements were audited by other auditors whose report has been furnished to us,
and our opinion, insofar as it relates to the amounts included for May & Speh,
Inc., is based solely on the report of the other auditors.
We conducted our audits in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of material
misstatement. An audit includes examining, on a test basis, evidence supporting
the amounts and disclosures in the financial statements. An audit also includes
assessing the accounting principles used and significant estimates made by
management, as well as evaluating the overall financial statement presentation.
We believe that our audits and the report of the other auditors provide a
reasonable basis for our opinion.
In our opinion, based on our audits and the report of the other auditors, the
consolidated financial statements referred to above present fairly, in all
material respects, the financial position of Acxiom Corporation and subsidiaries
as of March 31, 1998 and 1997, and the results of their operations and their
cash flows for each of the years in the three-year period ended March 31, 1998,
in conformity with generally accepted accounting principles. Also in our
opinion, based on our audits and the report of other auditors, the related
financial statement schedule, when considered in relation to the basic
consolidated financial statements taken as a whole, presents fairly in all
material respects the information set forth therein.
/s/ KPMG LLP
Little Rock, Arkansas
January 28, 1999
-1-
<PAGE>
Report of Independent Accountants
The Board of Directors and Stockholders
of May & Speh, Inc.
In our opinion, the consolidated balance sheet of May & Speh, Inc. (not
presented separately herein) and the related statements of operations, of cash
flows and of changes in stockholders' equity (not presented separately herein)
present fairly, in all material respects, the financial position, results of
operations and cash flows of May & Speh, Inc. as of and for each of the two
years in the period 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 audits. We conducted our
audits 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
audits provide a reasonable basis for the opinion expressed above.
/s/ PricewaterhouseCoopers LLP
PricewaterhouseCoopers LLP
Chicago, Illinois
November 1, 1996
-2-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Consolidated Balance Sheets
March 31, 1998 and 1997
(Dollars in thousands)
Assets 1998 1997
------- -------
Current assets:
Cash and cash equivalents $ 115,510 13,119
Marketable securities 11,794 20,334
Trade accounts receivable, net 118,281 90,922
Refundable income taxes 7,670 5,360
Other current assets (note 8) 34,615 14,412
------- -------
Total current assets 287,870 144,147
Property and equipment, net of accumulated
depreciation and amortization (notes 4 and 5) 185,684 142,919
Software, net of accumulated amortization of $11,642
in 1998 and $11,347 in 1997 (note 3) 38,673 24,167
Excess of cost over fair value of net assets acquired,
net of accumulated amortization of $8,585 in 1998
and $5,030 in 1997 (note 2) 73,851 55,160
Other assets 87,072 45,236
------- -------
$ 673,150 411,629
======= =======
Liabilities and Stockholders' Equity
Current liabilities:
Current installments of long-term debt (note 5) 10,466 9,411
Trade accounts payable 21,946 19,036
Accrued expenses:
Payroll 18,293 9,255
Other 20,846 10,951
Deferred revenue 11,197 3,537
------- -------
Total current liabilities 82,748 52,190
Long-term debt, excluding current installments (note 5) 254,240 109,371
Deferred income taxes (note 8) 34,968 18,240
Stockholders' equity (notes 2, 5, 7 and 8):
Common stock 7,405 7,268
Additional paid-in capital 121,130 106,546
Retained earnings 175,946 125,597
Foreign currency translation adjustment 676 278
Unearned ESOP compensation (1,782) (5,346)
Treasury stock, at cost (2,181) (2,515)
------- -------
Total stockholders' equity 301,194 231,828
Commitments and contingencies (notes 5, 6, 9, 10 and 13)
------- -------
$ 673,150 411,629
======= =======
See accompanying notes to consolidated financial statements.
-3-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Earnings
Years ended March 31, 1998, 1997 and 1996
(Dollars in thousands, except per share amounts)
1998 1997 1996
------- ------- -------
Revenue (notes 2 and 11) $ 569,020 479,239 331,543
Operating costs and expenses (notes 3, 6,
9 and 10):
Salaries and benefits 210,327 171,364 121,470
Computer, communications and other
equipment 86,338 76,366 54,850
Data costs 88,246 77,874 64,945
Other operating costs and expenses 100,272 87,283 45,689
Severance cost 4,700 - -
------- ------- -------
Total operating costs and expenses 489,883 412,887 286,954
------- ------- -------
Income from operations 79,137 66,352 44,589
------- ------- -------
Other income (expense):
Interest expense (10,044) (5,746) (3,227)
Other, net (note 14) 4,294 (71) 560
------- ------- -------
(5,750) (5,817) (2,667)
------- ------- -------
Earnings before income taxes 73,387 60,535 41,922
Income taxes (note 8) 27,332 22,800 15,838
------- ------- -------
Net earnings $ 46,055 37,735 26,084
======= ======= =======
Earnings per share:
Basic $ .64 .54 .41
======= ======= =======
Diluted $ .57 .49 .38
======= ======= =======
See accompanying notes to consolidated financial statements.
-4-
<PAGE>
ACXIOM CORPORATION
AND SUBSIDIARIES
Consolidated Statements of Stockholders' Equity
Years ended March 31, 1998, 1997 and 1996
(Dollars in thousands)
Common stock
-------------------- Additional
Number paid-in
of shares Amount capital
---------- ------ -------
Balances at March 31, 1995 62,525,172 $ 6,252 44,280
DataQuick merger (note 2) 1,969,678 197 5,113
Retirement of DataQuick common stock prior
to merger - - (1,010)
Sale of DataQuick common stock prior to
merger - - 190
DataQuick dividends prior to merger - - -
May & Speh dividends - - -
Tax benefit of dividends paid on unallocated
shares of ESOP - - -
Sale of common stock 562,794 56 2,063
Tax benefit of stock options exercised
(note 8) - - 656
Purchase and retirement of May & Speh common
stock (82,464) (8) 7
Employee stock awards and shares issued to
employee benefit plans, net of treasury
shares repurchased 13,356 2 881
ESOP compensation earned - - -
Translation adjustment - - -
Net earnings - - -
---------- ----- -------
Balances at March 31, 1996 64,988,536 6,499 52,180
Pro CD merger (note 2) 3,313,324 331 2,647
Sale of common stock 4,381,362 438 46,828
Tax benefit of stock options exercised
(note 8) - - 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 - - -
Translation adjustment - - -
Net earnings - - -
---------- ----- -------
Balances at March 31, 1997 72,683,222 7,268 106,546
May & Speh merger (note 2) 72,160 7 115
Sale of common stock 1,235,971 124 9,158
Tax benefit of stock options exercised
(note 8) - - 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 - - -
Translation adjustment - - -
Net earnings - - -
---------- ----- -------
Balances at March 31, 1998 74,048,882 $ 7,405 121,130
========== ===== =======
See accompanying notes to consolidated financial statements.
-5-
<PAGE>
Foreign Treasury stock Total
currency Unearned ---------------------- stockholders'
Retained translation ESOP Number equity
earnings adjustment compensation of shares Amount (note 7)
- -------- ----------- ------------ --------- ------ -------------
69,108 7 (11,363) (1,311,570) $ (2,407) 105,877
447 - - - - 5,757
- - - - - (1,010)
- - - - - 190
(468) - - - - (468)
(2,545) - 1,230 - - (1,315)
247 - - - - 247
- - - - - 2,119
- - - - - 656
(259) - - - - (260)
- - - 69,328 84 967
- - 2,411 - - 2,411
- (870) - - - (870)
26,084 - - - - 26,084
------- ----- ----- --------- ----- -------
92,614 (863) (7,722) (1,242,242) (2,323) 140,385
(4,752) - - - - (1,774)
- - - - - 47,266
- - - - - 2,232
- - - - - 1,300
- - - 145,912 (192) 1,167
- - 2,376 - - 2,376
- 1,141 - - - 1,141
37,735 - - - - 37,735
------- ----- ----- --------- ----- -------
125,597 278 (5,346) (1,096,330) (2,515) 231,828
4,294 - 1,188 - - 5,604
- - - - - 9,282
- - - - - 2,763
- - - 259,410 334 2,888
- - 2,376 - - 2,376
- 398 - - - 398
46,055 - - - - 46,055
------- ----- ----- --------- ----- -------
175,946 676 (1,782) (836,920) $ (2,181) 301,194
======= ===== ===== ========= ===== =======
-6-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows
Years ended March 31, 1998, 1997 and 1996
(Dollars in thousands)
1998 1997 1996
------- ------- -------
Cash flows from operating activities:
Net earnings $ 46,055 37,735 26,084
Adjustments to reconcile net earnings to net
cash provided by operating activities:
Depreciation and amortization 49,658 35,400 22,832
Loss (gain) on disposal or impairment
of assets (960) 2,412 49
Provision for returns and doubtful accounts 3,094 4,462 149
Deferred income taxes 12,143 8,163 3,926
Tax benefit of stock options exercised 2,763 2,232 656
ESOP principal payments 2,376 2,376 2,411
Changes in operating assets and liabilities:
Accounts receivable (29,453) (24,034) (4,971)
Other assets (42,258) (16,107) (4,816)
Accounts payable and other liabilities 21,025 (8,649) 6,417
------- ------- ------
Net cash provided by operating
activities 64,443 43,990 52,737
------- ------- ------
Cash flows from investing activities:
Disposition of assets 15,340 2,385 402
Proceeds from sale of marketable securities 19,021 12,919 1,575
Purchases of marketable securities (5,778) (31,366) (648)
Cash received in merger - 21 1,624
Development of software (21,411) (10,715) (5,172)
Capital expenditures (67,865) (64,973) (45,939)
Investments in joint ventures (6,072) - -
Net cash paid in acquisitions (note 2) (19,841) (16,223) (6,020)
------- ------- ------
Net cash used in investing activities (86,606) (107,952) (54,178)
------- ------- ------
Cash flows from financing activities:
Proceeds from debt 125,820 39,459 23,995
Payments of debt (10,015) (20,994) (16,414)
Sale of common stock 12,171 48,433 2,309
DataQuick pre-merger retirement of common
stock - - (1,010)
DataQuick pre-merger dividends - - (468)
Dividends paid, net of related ESOP remittance - - (1,315)
Repurchases of common stock - - (202)
------- ------- ------
Net cash provided by financing
activities 127,976 66,898 6,895
------- ------- ------
(Continued)
-7-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Consolidated Statements of Cash Flows, Continued
Years ended March 31, 1998, 1997 and 1996
(Dollars in thousands)
1998 1997 1996
------- ------ ------
Effect of exchange rate changes on cash $ 2 - (63)
------- ------ ------
Net increase (decrease) in cash and cash
equivalents 105,815 2,936 5,391
Cash and cash equivalents at beginning of year 9,695 10,183 4,792
------- ------ ------
Cash and cash equivalents at end of year $ 115,510 13,119 10,183
======= ====== ======
Supplemental cash flow information:
Convertible debt issued in acquisition
(note 2) $ - 25,000 -
Cash paid during the year for:
Interest 9,303 5,053 3,879
Income taxes 12,627 15,131 13,815
Acquisition of property and equipment
under capital lease 14,939 11,373 342
======= ====== ======
See accompanying notes to consolidated financial statements.
-8-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
(1) Summary of Significant Accounting Policies
(a) Nature of Operations
The Company provides information management technology and other
related services, primarily for marketing applications. Operating
units of the Company provide list services, data warehouse services,
data and information products, fulfillment services, computerized
list, postal and database services, and outsourcing and facilities
management services primarily in the United States (U.S.) and United
Kingdom (U.K.), along with limited activities in Canada, Netherlands
and Asia.
(b) Consolidation Policy
The consolidated financial statements include the accounts of Acxiom
Corporation and its subsidiaries ("Company"). 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.
(c) Use of Estimates
Management of the Company has made a number of estimates and
assumptions relating to the reporting of assets and liabilities and
the disclosure of contingent assets and liabilities to prepare these
consolidated financial statements in conformity with generally
accepted accounting principles. Actual results could differ from those
estimates.
(d) Marketable Securities
Investments 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
receivables. 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 $3.6 million and $4.7 million in 1998 and
1997, respectively.
(Continued)
-9-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
(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.
(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.
The American Institute of Certified Public Accountants has issued
Statement of Position 98-1, "Accounting for the Costs of Computer
Software Developed or Obtained for Internal Use" ("SOP 98-1") which is
effective for financial statements for fiscal years beginning after
December 14, 1998. SOP 98-1 provides guidance on accounting for the
costs of computer software developed or obtained for internal use.
This pronouncement identifies the characteristics of internal use
software and provides guidance on new cost recognition principles. The
Company does not believe the adoption of SOP 98-1 will have a material
impact on the manner in which the Company has been accounting for such
costs.
(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 25
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 direct marketing services, including the production and
delivery of marketing lists and enhancement data, and from information
technology outsourcing services, including facilities management
contracts, are recognized as services are performed. Services
performed are generally determined based upon records processed or
computer time used. 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
(Continued)
-10-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
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 value. Billed but unearned portions of
revenue are deferred.
Included in other assets are unamortized outsourcing capital
expenditure costs in the amount of $25.0 million and $18.1 million as
of March 31, 1998 and 1997, respectively. Noncurrent receivables from
software license, data, and equipment sales are also included in other
assets in the amount of $20.3 million and $9.6 million as of March 31,
1998 and 1997, respectively. The current portion of such receivables
is included in other current assets in the amount of $9.5 million and
$2.9 million as of March 31, 1998 and 1997, 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.
(j) Income Taxes
The Company and its domestic subsidiaries file a consolidated Federal
income tax return. The Company's foreign subsidiaries file separate
income tax returns in the countries in which their operations are
based.
Income taxes are accounted for under the asset and liability method.
Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial
statement carrying amounts of existing assets and liabilities and
their respective tax bases and operating loss and tax credit
carryforwards. Deferred tax assets and liabilities are measured using
enacted tax rates expected to apply to taxable income in the years in
which those temporary differences are expected to be recovered or
settled. The effect on deferred tax assets and liabilities of a change
in tax rates is recognized in income in the period that includes the
enactment date.
(k) Foreign Currency Translation
The balance sheets of the Company's foreign subsidiaries are
translated at year-end rates of exchange, and the statements of
earnings are translated at the weighted average exchange rate for the
period. Gains or losses resulting from translating foreign currency
financial statements are accumulated in a separate component of
stockholders' equity.
(Continued)
-11-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
(l) Earnings Per Share
The Company adopted Statement of Financial Accounting Standards
("SFAS") No. 128, "Earnings Per Share" during the year ended March 31,
1998. Below is the calculation and reconciliation of the numerator and
denominator of basic and diluted earnings per share (in thousands,
except per share amounts):
1998 1997 1996
------ ------ ------
Basic earnings per share:
Numerator (net earnings) $ 46,055 37,735 26,084
====== ====== ======
Denominator (weighted
average shares outstanding) 72,199 69,279 63,398
====== ====== ======
Earnings per share $ .64 .54 .41
====== ====== ======
Diluted earnings per share:
Numerator:
Net earnings $ 46,055 37,735 26,084
Interest expense on
convertible debt
(net of tax effect) 465 445 -
------ ------ ------
$ 46,520 38,180 26,084
====== ====== ======
Denominator:
Weighted average shares
outstanding 72,199 69,279 63,398
Effect of common stock options 3,593 3,782 2,874
Effect of common stock warrant 3,015 3,004 2,295
Convertible debt 2,102 2,000 -
------ ------ ------
80,909 78,065 68,567
====== ====== ======
Earnings per share $ .57 .49 .38
====== ====== ======
Options to purchase shares of common stock that were outstanding
during 1998, 1997 and 1996 but were not included in the computation of
diluted earnings per share because the option exercise price was
greater than the average market price of the common shares are shown
below.
1998 1997 1996
--------------- --------------- ---------------
Number of shares
under option 2,176,043 1,431,992 568,287
Range of exercise
prices $15.94 - $35.92 $18.61 - $35.00 $12.25 - $24.81
(Continued)
-12-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
(m) Impairment of Long-Lived Assets and Long-Lived Assets to Be Disposed
Of
Long-lived assets and certain identifiable intangibles are reviewed
for impairment whenever events or changes in circumstances indicate
that the carrying amount of an asset may not be recoverable.
Recoverability of assets to be held and used is measured by a
comparison of the carrying amount of an asset to future net cash flows
expected to be generated by the asset. If such assets are considered
to be impaired, the impairment to be recognized is measured by the
amount by which the carrying amount of the assets exceeds the fair
value of the assets. Assets to be disposed of are reported at the
lower of the carrying amount or fair value less costs to sell.
(n) Cash and Cash Equivalents
The Company considers all highly liquid debt instruments with original
maturities of three months or less to be cash equivalents.
(o) Reclassifications
To conform to the 1998 presentation, certain accounts for 1997 and
1996 have been reclassified. The reclassifications had no effect on
net earnings.
(2) Acquisitions
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 currently
outstanding options granted under May & Speh's stock option plans with the
result that 4,289,202 shares of the Company's common stock became subject
to issuance upon exercise of such options. This business combination has
been accounted for as a pooling-of-interests and, accordingly, the
consolidated financial statements for periods prior to the combination have
been restated to include the accounts and results of operations of May &
Speh.
The results of operations previously reported by the separate enterprises
and the combined amounts presented in the accompanying consolidated
financial statements are summarized below.
1998 1997 1996
------- ------- -------
Revenue:
Acxiom Corporation $ 465,065 402,016 269,902
May & Speh 103,955 77,223 61,641
------- ------- -------
Combined $ 569,020 479,239 331,543
======= ======= =======
Net earnings:
Acxiom Corporation 35,597 27,512 18,223
May & Speh 10,458 10,223 7,861
------- ------- -------
Combined $ 46,055 37,735 26,084
======= ======= =======
(Continued)
-13-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
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 September
30, 1996 and for each of the two years ended September 30, 1996 were
combined with Acxiom's consolidated financial statements as of March 31,
1997 and for each of the two years ended March 31, 1997, respectively. 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.
Effective October 1, 1997, the Company acquired 100% ownership of
MultiNational Concepts, Ltd. ("MultiNational") and Catalog Marketing
Services, Inc. (d/b/a Shop the World by Mail), entities under common
control (collectively "STW"). Total consideration was $4.6 million (net of
cash acquired) and other cash consideration based on the future performance
of STW. MultiNational, headquartered in Hoboken, New Jersey, is an
international mailing list and database maintenance provider for consumer
catalogers interested in developing foreign markets. Shop the World by
Mail, headquartered in Sarasota, Florida, provides cooperative customer
acquisition programs, and also produces an international catalog of
catalogs whereby end-customers in over 60 countries can order catalogs from
around the world.
Also effective October 1, 1997, the Company acquired Buckley Dement, L.P.
and its affiliated company, KM Lists, Incorporated (collectively "Buckley
Dement"). Buckley Dement, headquartered in Skokie, Illinois, provides list
brokerage, list management, promotional mailing and fulfillment, and
merchandise order processing to pharmaceutical, health care, and other
commercial customers. Total consideration was $14.2 million (net of cash
acquired) and other cash consideration based on the future performance of
Buckley Dement.
Both the Buckley Dement and STW acquisitions are accounted for as purchases
and their operating results are included with the Company's results
beginning October 1, 1997. The purchase price for the two acquisitions
exceeded the fair value of net assets acquired by $12.6 million and $5.2
million for Buckley Dement and STW, respectively. The resulting excess of
cost over net assets acquired is being amortized over its estimated
economic life of 20 years. The pro forma combined results of operations,
assuming the acquisitions occurred at the beginning of the fiscal year, are
not materially different than the historical results of operations
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.
(Continued)
-14-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
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 is payable in three years, is partially
collateralized by a letter of credit (see note 5), and may, at DMI's
option, be paid in two million shares of Acxiom common stock in lieu of
cash plus accrued interest. 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 is being
amortized over its estimated economic life of 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.
The purchase price for DMI has been allocated as follows (dollars in
thousands):
Trade accounts receivable $ 7,558
Property and equipment 2,010
Software 3,500
Excess of cost over fair value of net assets acquired 25,993
Other assets 840
Short-term note payable to bank (11,594)
Accounts payable and other liabilities (3,020)
Long-term debt (287)
------
$ 25,000
======
On August 25, 1995, the Company acquired all of the outstanding capital
stock of DataQuick Information Systems (formerly an "S" Corporation) and DQ
Investment Corporation (collectively, "DataQuick"). The Company exchanged
1,969,678 shares of its common stock for all of the outstanding shares of
capital stock of DataQuick. Additionally, the Company assumed all of the
currently outstanding options granted under DataQuick's stock option plans,
with the result that 1,616,740 shares of the Company's common stock became
subject to issuance upon exercise of such options (see note 7). The
acquisition was accounted for as a pooling-of-interests.
DataQuick, headquartered in San Diego, California, provides real property
information to support a broad range of applications including marketing,
appraisal, real estate, banking, mortgage and insurance. This information
is distributed on-line and via CD-ROM, list services, and microfiche.
The stockholders' equity and operations of DataQuick 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, 1995, without
restating prior years' financial statements to reflect the
pooling-of-interests combination. DataQuick's net assets as of April 1,
1995 totaled $5.8 million. The statements of earnings for the years ended
March 31, 1998, 1997 and 1996 include the results of DataQuick for the
entire periods presented. Included in the statement of earnings for 1996
are revenues of $8.0 million and earnings before income taxes of $79,000
for DataQuick for the period from April 1, 1995 to August 25, 1995.
(Continued)
-15-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
(3) Software and Research and Development Costs
The Company recorded amortization expense related to internally developed
computer software of $5.9 million, $5.4 million and $3.1 million in 1998,
1997 and 1996, respectively. Additionally, research and development costs
of $13.7 million, $13.0 million and $8.3 million were charged to operations
during 1998, 1997 and 1996, respectively.
(4) Property and Equipment
Property and equipment is summarized as follows (dollars in thousands):
1998 1997
------- -------
Land $ 8,344 8,441
Buildings and improvements 74,634 68,122
Office furniture and equipment 24,456 17,036
Data processing equipment 193,959 141,766
------- -------
301,393 235,365
Less accumulated depreciation and amortization 115,709 92,446
------- -------
$ 185,684 142,919
======= =======
(5) Long-Term Debt
Long-term debt consists of the following (dollars in thousands):
1998 1997
------- -------
5.25% convertible subordinated notes due 2003 $ 115,000 -
Unsecured revolving credit agreement 36,445 21,454
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; partially collateralized
by letter of credit; 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 $359 of
principal and interest; remaining terms of
from five to twenty years; interest rates
approximately 8% 22,818 9,975
Obligation payable under software license
agreement 10,949 -
(Continued)
-16-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
1998 1997
------- -------
8.5% unsecured term loan; quarterly principal
payments of $200 plus interest with the
balance due in 2005 $ 9,800 11,200
9.75% Senior notes, due May 1, 2000, payable
in annual installments of $2,143 each May 1;
interest is payable semi-annually 6,429 8,571
ESOP loan (note 10) 1,782 5,346
Other capital leases, debt and long-term
liabilities 6,483 7,236
------- -------
Total long-term debt 264,706 118,782
Less current installments 10,466 9,411
------- -------
Long-term debt, excluding current
installments $ 254,240 109,371
======= =======
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, 1998, the effective rate was 7.175%. The agreement requires a
commitment fee equal to 3/16 of 1% on the average unused portion of the
loan. A letter of credit in the amount of $6.6 million is outstanding in
connection with an acquisition (see note 2), leaving $118.4 million
available for revolving loans. The Company also has another unsecured line
of credit amounting to $1.5 million of which none was outstanding at March
31, 1998 or 1997. The other unsecured line expires July 30, 1998 and bears
interest at the prime rate less 1/2 of 1%.
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, 1998, the
Company was in compliance with all such financial requirements. The
aggregate maturities of long-term debt for the five years ending March 31,
2003 are as follows: 1999, $9.5 million; 2000, $31.4 million; 2001, $10.7
million; 2002, $7.3 million; and 2003, $44.2 million.
(Continued)
-17-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
In June 1997, May & Speh entered into a sale-leaseback agreement with a
third party selling its existing office building and land, including 10.4
acres located adjacent to the existing building that will be used to build
a new 200,000 square foot building. May & Speh has entered into a 20-year
lease with the third party on the existing building, and it has also
entered into a 20-year lease for the new 200,000 square foot building
currently under construction on the property adjacent to May & Speh's
executive offices. The lease commences upon completion of the building
which is expected to be completed in September 1998 and is classified as a
capital lease. The existing building and land were sold at its book value
of approximately $12.2 million. The interest rate implicit in the capital
lease approximates 8%.
(6) 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, 2003 are as follows: 1999, $12.5 million; 2000,
$10.2 million; 2001, $7.2 million; 2002, $3.7 million; and 2003, $2.5
million.
Total rental expense on operating leases was $15.2 million, $18.4 million
and $12.3 million for the years ended March 31, 1998, 1997 and 1996,
respectively.
(7) Stockholders' Equity
The Company has authorized 200 million shares of $.10 par value common
stock and 1 million shares of authorized but unissued $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 ("Agreement")
entered into in August, 1992 with Trans Union Corporation ("Trans Union"),
the Company issued a warrant, which expires on August 31, 2000 and entitles
Trans Union to acquire up to 4 million additional shares of newly-issued
common stock. The exercise price for the warrant stock is $3.06 per share
through August 31, 1998 and increases $.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.
(Continued)
-18-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
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, 1998, 2,161,461 shares and 824,163 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:
Weighted
Number average Number of
of price shares
shares per share exercisable
---------- --------- -----------
Outstanding at March 31, 1995 4,928,696 $ 4.68 1,715,966
Granted 3,821,356 9.42
DataQuick acquisition (note 2) 1,616,740 2.93
Exercised (371,046) 2.49
Terminated (486,000) 2.59
----------
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
========== =========
The per share weighted-average fair value of stock options granted during
fiscal 1998, 1997 and 1996 was $9.91, $8.61 and $4.14, respectively, on the
date of grant using the Black-Scholes option pricing model with the
following weighted-average assumptions: Dividend yield of 0% for 1998, 1997
and 1996; risk-free interest rate of 6.79% in 1998, 6.71% in 1997 and 6.16%
in 1996; expected option life of 10 years for 1998, 1997 and 1996; and
expected volatility of 38.69% in 1998, 34.85% in 1997 and 28.53% in 1996.
(Continued)
-19-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
Following is a summary of stock options outstanding as of March 31, 1998:
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
-------------- ----------- ----------- -------- ----------- --------
$ 1.38 - 2.54 1,413,970 6.72 years $ 2.13 1,270,298 $ 2.17
2.56 - 4.69 2,602,553 3.77 years 3.39 1,704,543 3.41
5.38 - 6.25 1,500,635 5.12 years 6.11 891,683 6.04
7.43 - 15.70 3,296,022 4.15 years 12.49 1,071,475 13.32
15.75 - 24.85 2,318,924 5.39 years 20.43 352,267 22.05
25.34 - 35.92 269,876 12.82 years 31.00 26,595 30.96
---------- ----------- ----- ---------- -----
11,401,980 4.96 years $ 9.63 5,316,861 $ 6.92
========== =========== ===== ========== =====
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 earnings 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 would have been reduced to the following pro
forma amounts for the years ended March 31 (dollars in thousands, except
per share amounts):
1998 1997 1996
------ ------ ------
Net earnings As reported $ 46,055 37,735 26,084
Pro forma 39,625 36,672 25,902
Basic earnings per share As reported $ .64 .54 .41
Pro forma .55 .53 .41
Diluted earnings per share As reported $ .57 .49 .38
Pro forma .50 .48 .38
Pro forma net earnings 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 125,151, 110,332 and 190,470 shares purchased under the plan during
the years ended March 31, 1998, 1997 and 1996, respectively.
(Continued)
-20-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
(8) Income Taxes
Total income tax expense was allocated as follows (dollars in thousands):
1998 1997 1996
------ ------ ------
Income from operations $ 27,332 22,800 15,838
Stockholders' equity, for compensation
expense for tax purposes in excess
of amounts recognized for financial
reporting purposes (2,763) (2,232) (656)
------ ------ ------
$ 24,569 20,568 15,182
====== ====== ======
Income tax expense attributable to earnings from operations consists of
(dollars in thousands):
1998 1997 1996
------ ------ ------
Current expense:
Federal $ 12,247 13,009 10,079
Foreign 1,206 83 -
State 1,736 1,545 1,833
------ ------ ------
15,189 14,637 11,912
------ ------ ------
Deferred expense:
Federal 9,792 5,979 3,105
Foreign 23 687 161
State 2,328 1,497 660
------ ------ ------
12,143 8,163 3,926
------ ------ ------
Total tax expense $ 27,332 22,800 15,838
====== ====== ======
The actual income tax expense attributable to earnings from operations
differs from the expected tax expense (computed by applying the U.S.
Federal corporate tax rate of 35% to earnings before income taxes) as
follows (dollars in thousands):
1998 1997 1996
------ ------ ------
Computed expected tax expense $ 25,685 21,187 14,673
Increase (reduction) in income taxes
resulting from:
State income taxes, net of Federal
income tax benefit 2,642 1,977 1,621
Research and experimentation credits (715) (683) (800)
Other (280) 319 344
------ ------ ------
$ 27,332 22,800 15,838
====== ====== ======
(Continued)
-21-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
The tax effects of temporary differences that give rise to significant
portions of the deferred tax assets and liabilities at March 31, 1998 and
1997 are presented below (dollars in thousands).
1998 1997
------ ------
Deferred tax assets:
Accrued expenses not currently deductible
for tax purposes $ 2,150 1,840
Investments, principally due to differences
in basis for tax and financial reporting
purposes 676 327
Net operating loss carryforwards - 1,208
Other 849 949
Valuation allowance - (1,208)
----- ------
Total deferred tax assets 3,675 3,116
----- ------
Deferred tax liabilities:
Property and equipment, principally due
to differences in depreciation (11,099) (7,494)
Intangible assets, principally due to
differences in amortization (2,212) (551)
Capitalized software and other costs
expensed as incurred for tax purposes (20,618) (12,554)
Installment sale gains for tax purposes (1,843) (259)
------ ------
Total deferred tax liabilities (35,722) (20,858)
------ ------
Net deferred tax liability $(32,097) (17,742)
====== ======
The valuation allowance for deferred tax assets as of March 31, 1996 was
$328,000. The net change in the total valuation allowance for the years
ended March 31, 1998 and 1997 was a decrease of $1.2 million and an
increase of $880,000, respectively. In assessing the realizability of
deferred tax assets, management considers whether it is more likely than
not that some portion or all of the deferred tax assets will not be
realized. The ultimate realization of deferred tax assets is dependent upon
the generation of future taxable income during the periods in which those
temporary differences become deductible. Based upon the Company's history
of substantial profitability and taxable income and its utilization of tax
planning strategies, management believes it is more likely than not the
Company will realize the benefits of these deductible differences, net of
any valuation allowances. Included in other current assets are deferred tax
assets of $2.9 million and $0.5 million at March 31, 1998 and 1997,
respectively.
(Continued)
-22-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
(9) 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, 1998 and 1997, respectively, and $371,000 during
the year ended March 31, 1996. Under the terms of the lease in effect at
March 31, 1998 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 $5.4 million at March 31,
1998) 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.
(10) Retirement Plans
The Company has a retirement savings plan which covers substantially all
domestic employees. The Company also offers a supplemental non-qualified
deferred compensation plan for certain management employees. The Company
matches 50% of the employee's salary deferred contributions under both
plans up to 6% annually and may contribute additional amounts to the plans
from the Company's earnings at the discretion of the Board of Directors.
Effective October 1, 1988, May & Speh established the May & Speh, Inc.
Employee Stock Ownership Plan ("ESOP") for the benefit of substantially all
of its employees. May & Speh borrowed $22,500,000 from a bank ("ESOP Loan")
and loaned the proceeds to the ESOP for the purpose of providing the ESOP
sufficient funds to purchase 9,887,340 shares of May & Speh's common stock
at $2.28 per share. The terms of the ESOP agreement required May & Speh to
make minimum contributions sufficient to meet the ESOP's debt service
obligations.
Company contributions for the above plans amounted to approximately $4.3
million, $3.9 million and $3.2 million in 1998, 1997 and 1996,
respectively.
(11) Major Customers
In 1998, 1997 and 1996, the Company had two major customers who accounted
for more than 10% of revenue. Allstate Insurance Company accounted for
revenue of $74.7 million (13.1%), $67.7 million (14.1%), and $55.8 million
(16.8%) in 1998, 1997 and 1996, respectively, and Trans Union accounted for
revenue of $54.9 million (9.6%), $56.6 million (11.8%) and $42.0 million
(12.7%) in 1998, 1997 and 1996, respectively. At March 31, 1998, accounts
receivable from these customers was $7.6 million and $10.1 million,
respectively.
(Continued)
-23-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
(12) Foreign Operations
The following table shows financial information by geographic area for the
years 1998, 1997 and 1996 (dollars in thousands).
United United
States Kingdom Consolidated
------- ------- ------------
1998:
Revenue $ 534,374 34,646 569,020
Earnings before income taxes 70,945 2,442 73,387
Net earnings 44,517 1,538 46,055
Total assets 643,694 29,456 673,150
Total tangible assets 577,551 21,748 599,299
Total liabilities 360,441 11,515 371,956
Total equity 283,253 17,941 301,194
======= ====== =======
1997:
Revenue 450,819 28,420 479,239
Earnings before income taxes 58,862 1,673 60,535
Net earnings 36,689 1,046 37,735
Total assets 388,793 22,836 411,629
Total tangible assets 341,360 15,109 356,469
Total liabilities 171,269 8,532 179,801
Total equity 217,524 14,304 231,828
======= ====== =======
1996:
Revenue 313,831 17,712 331,543
Earnings (loss) before income
taxes 42,230 (238) 41,992
Net earnings (loss) 26,483 (399) 26,084
Total assets 223,125 17,728 240,853
Total tangible assets 216,775 10,096 226,871
Total liabilities 94,332 6,136 100,468
Total equity 128,793 11,592 140,385
======= ====== =======
(13) 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.
(Continued)
-24-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Notes to Consolidated Financial Statements
March 31, 1998, 1997 and 1996
(14) 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 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 is the gain on disposal
related to this transaction of $855,000.
(15) 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, 1998 the
estimated fair value of long-term debt approximates its carrying
value.
(16) 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):
1st 2nd 3rd 4th
quarter quarter quarter quarter
------- ------- ------- -------
1998:
Revenue $ 123,952 135,876 147,043 162,149
Income from operations 14,852 20,072 20,329 23,884
Net earnings 8,186 11,995 11,766 14,108
Basic earnings per share .11 .17 .16 .19
Diluted earnings per share .10 .15 .15 .18
1997:
Revenue 109,997 116,679 124,531 128,032
Income from operations 11,688 15,908 20,093 18,663
Net earnings 5,906 8,632 11,930 11,267
Basic earnings per share .09 .13 .17 .16
Diluted earnings per share .08 .11 .15 .14
-25-
<PAGE>
ACXIOM CORPORATION AND SUBSIDIARIES
Schedule of Valuation and Qualifying Accounts
Years ended March 31, 1998, 1997 and 1996
(In thousands)
Additions Bad Balance
Balance at charged to Other debts Bad at
beginning costs and additions written debts end of
of period expenses (note) off recovered period
---------- ---------- --------- ------- --------- -------
1998:
Allowance for
doubtful
accounts,
returns and
credits $ 4,692 3,094 224 4,777 397 3,630
===== ===== ===== ===== === =====
1997:
Allowance for
doubtful
accounts,
returns and
credits $ 2,230 4,402 4,800 7,044 298 4,686
===== ===== ===== ===== === =====
1996:
Allowance for
doubtful
accounts,
returns and
credits $ 2,493 150 131 726 182 2,230
===== ====== ===== ===== === =====
Note - Other additions in 1998 represent the valuation accounts acquired in the
Multinational and STW acquisitions. Other additions in 1997 represent the
valuation accounts acquired in the Pro CD and DMI acquisitions. Other
additions in 1996 represent the valuation accounts acquired in the
Generator and DataQuick acquisitions.
-26-
<PAGE>
Annex G
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C.
20549
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
CCX NETWORK, INC.
(exact name of registrant as specified in its charter)
Delaware 71-0581897
(State of incorporation (I.R.S. Identification No.)
organization)
301 Industrial Boulevard
Conway, Arkansas 72032
(Address of principal executive offices including Zip Code)
(501) 329-6836
(Registrant Telephone No. including Area Code)
Securities to be Registered Pursuant to
Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
None None
Securities to be Registered Pursuant to
Section 12(g) of the Act:
Common Stock, $.10 par value
<PAGE>
INFORMATION REQUIRED IN REGISTRATION STATEMENT
Item 1. Description of Registrant's Securities to be Registered.
The authorized capital of CCX Network, Inc. (the "Company") consists of
10,000,000 shares of Common Stock, $.10 par value, and 1,000,000 shares of
Preferred Stock, $1.00 par value. At the date of the filing of this Registration
Statement on Form 8-A, 2,082,496 shares of Common Stock and no shares of
Preferred Stock are issued and outstanding.
Holders of Common Stock are entitled to one vote per share on all
questions presented for shareholders' vote; the shares are not entitled to
cumulative voting for election of directors. Holders of Common Stock are
entitled to receive ratably such dividends, if any, as may be declared by the
Board of Directors out of funds legally available therefore and after payment of
dividends, if any, as may be declared by the Board of Directors out of funds
legally available therefor and after payment of dividends on any outstanding
shares of Preferred Stock. Upon liquidation of the Company, such holders would
share equally and ratably in the assets, if any, remaining after payment of all
debts and liabilities and after satisfaction of the liquidation preference, if
any, of any outstanding shares of Preferred Stock. Holders of Common Stock do
not have preemptive, conversion or redemption rights. The outstanding shares of
Common Stock are validly issued, fully paid and non-assessable.
Under the Company's Certificate of Incorporation, the power to
designate the relative rights and preferences of the power to designate the
relative rights and preferences of the Preferred Stock, when and if issued, has
been delegated to the Board of Directors. Such rights and preferences may
include liquidation preferences, redemption and convertibility rights, voting
rights, dividends, etc. Share of Preferred Stock may be issued in multiple
series, with different rights and preferences, in the discretion of the Board of
Directors. Item 2. Exhibits.
I. 1. Copy of Form of Specimen Certificate for Common Stock, $.10 par
value per share, of the Company.
2. Not applicable.
II. Not applicable.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the registrant has duly caused this registration statement to be
signed on its behalf by the undersigned, thereto duly authorized.
CCX NETWORK, INC.
By: /s/ Charles D. Morgan, Jr.
------------------------------
Charles D. Morgan, Jr.
Chairman of the Board and
Chief Executive Office
Date: January 25, 1985
<PAGE>
Annex H
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20569
----------------------
FORM 8-A
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
ACXIOM CORPORATION
----------------------------------------------------------
(Exact name of registrant as specified in its charter)
Delaware 71-058189
---------------------- ------------------
(State of incorporation (IRS Employer
or organization) Identification No.)
P. O. Box 2000
301 Industrial Boulevard
Conway, Arkansas 72033-2000
-------------------------------------- ------------------
(Address of principal executive offices) (Zip Code)
If this Form relates to the registration of a class of securities pursuant to
Section 12(b) of the Exchange Act and is effective pursuant to General
Instruction A.(c), please check the following box. [ ]
If this Form relates to the registration of a class of securities pursuant to
Section 12(g) of the Exchange Act and is effective pursuant to General
Instruction A.(d), please check the following box. [ X ]
Securities Act registration statement file number to which this form relates:
N/A
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
To be so registered each class is to be registered
- ------------------- ------------------------------
NONE NONE
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Stock Purchase Rights
- --------------------------------------------------------------------------------
(Title of Class)
<PAGE>
Item 1. Description of Registrant's Securities to be Registered.
On January 28, 1998, the Board of Directors of Acxiom
Corporation, a Delaware corporation (the "Company"), declared a dividend of one
right (a "Right") for each outstanding share of common stock, par value $.10 per
share ("Common Stock"), of the Company held of record at the close of business
on February 9, 1998, (the "Record Time"), or issued thereafter and prior to the
Separation Time (as hereinafter defined) and thereafter pursuant to options and
convertible or exchangeable securities outstanding at the Separation Time. The
Rights will be issued pursuant to a Rights Agreement, dated as of January 28,
1998 (the "Rights Agreement"), between the Company and First Chicago Trust
Company of New York, as Rights Agent (the "Rights Agent"). Each Right entitles
its registered holder to purchase from the Company, after the Separation Time,
one one-thousandth of a share of Participating Preferred Stock, par value $1.00
per share ("Preferred Stock"), for $100.00 (the "Exercise Price"), subject to
adjustment. The Preferred Stock is designed so that each one one-thousandth of a
share of Preferred Stock has economic and voting terms similar to those of one
share of Common Stock.
The Rights will be evidenced by the Common Stock certificates
until the close of business on the earlier of (either, the "Separation Time")
(i) the tenth business day (or such later date as the Board of Directors of the
Company may from time to time fix by resolution adopted prior to the Separation
Time that would otherwise have occurred) after the date on which any Person (as
defined in the Rights Agreement) commences a tender or exchange offer which, if
consummated, would result in such Person's becoming an Acquiring Person, as
defined below, and (ii) the first date (the "Flip-in Date") of public
announcement by the Company or an Acquiring Person that a Person has become an
Acquiring Person; provided that if the foregoing results in the Separation Time
being prior to the Record Time, the Separation Time shall be the Record Time;
and provided further that if a tender or exchange offer referred to in clause
(i) is cancelled, terminated or otherwise withdrawn prior to the Separation Time
without the purchase of any shares of stock pursuant thereto, such offer shall
be deemed never to have been made.
An Acquiring Person is any Person having Beneficial Ownership
(as defined in the Rights Agreement) of 20% or more of the outstanding shares of
Voting Stock, which term shall not include (i) the Company, any wholly-owned
subsidiary of the Company or any employee stock ownership or other employee
benefit plan of the Company, (ii) any person who is the Beneficial Owner of 20%
or more of the outstanding Voting Stock as of the date of the Rights Agreement
or who shall become the Beneficial Owner of 20% or more of the outstanding
Voting Stock solely as a result of an acquisition of Voting Stock by the
Company, until such time as such Person acquires additional Voting Stock, other
than through a dividend or stock split, (iii) any Person who becomes an
Acquiring Person without any plan or intent to seek or affect control of the
Company if such Person, upon notice by the Company, promptly divests sufficient
securities such that such 20% or greater Beneficial Ownership ceases or (iv) any
Person who Beneficially Owns shares of Voting Stock consisting solely of (A)
shares of Voting Stock acquired pursuant to the grant or exercise of an option
granted by the Company in connection with an agreement to merge with, or
acquire, the Company at a time at which there is no Acquiring Person, (B) shares
of Voting Stock owned by such Person and its Affiliates and Associates at the
time of such grant and (C) shares of Voting Stock, amounting to less than 1% of
the outstanding Voting Stock, acquired by Affiliates and Associates of such
Person after the
<PAGE>
time of such grant. "Voting Stock" means shares of capital stock of the Company
entitled to vote generally in the election of directors.
The Rights Agreement provides that, until the Separation Time,
the Rights will be transferred with and only with the Common Stock. Common Stock
certificates issued after the Record Time but prior to the Separation Time shall
evidence one Right for each share of Common Stock represented thereby and shall
contain a legend incorporating by reference the terms of the Rights Agreement
(as such may be amended from time to time). Notwithstanding the absence of the
legend, certificates evidencing shares of Common Stock outstanding at the Record
Time shall also evidence one Right for each share of Common Stock evidenced
thereby. Promptly following the Separation Time, separate certificates
evidencing the Rights ("Rights Certificates") will be mailed to holders of
record of Common Stock at the Separation Time.
The Rights will not be exercisable until the Business Day (as
defined in the Rights Agreement) following the Separation Time. The Rights will
expire on the earliest of (i) the Exchange Time (as defined below), (ii) the
close of business on February 9, 2008, (iii) the date on which the Rights are
redeemed as described below and (iv) upon the merger of the Company into another
corporation pursuant to an agreement entered into when there is no Acquiring
Person (in any such case, the "Expiration Time").
The Exercise Price and the number of Rights outstanding, or in
certain circumstances the securities purchasable upon exercise of the Rights,
are subject to adjustment from time to time to prevent dilution in the event of
a Common Stock dividend on, or a subdivision or a combination into a smaller
number of shares of, Common Stock, or the issuance or distribution of any
securities or assets in respect of, in lieu of or in exchange for Common Stock.
In the event that prior to the Expiration Time a Flip-in Date
occurs, the Company shall take such action as shall be necessary to ensure and
provide that each Right (other than Rights Beneficially Owned by the Acquiring
Person or any affiliate or associate thereof, which Rights shall become void)
shall constitute the right to purchase from the Company, upon the exercise
thereof in accordance with the terms of the Rights Agreement, that number of
shares of Common Stock or Preferred Stock of the Company having an aggregate
Market Price (as defined in the Rights Agreement), on the date of the public
announcement of an Acquiring Person's becoming such (the "Stock Acquisition
Date") that gave rise to the Flip-in Date, equal to twice the Exercise Price for
an amount in cash equal to the then current Exercise Price.
In addition, the Board of Directors of the Company may, at its
option, at any time after a Flip-in Date and prior to the time that an Acquiring
Person becomes the Beneficial Owner of more than 50% of the outstanding shares
of Voting Stock, elect to exchange all (but not less than all) the then
outstanding Rights (other than Rights Beneficially Owned by the Acquiring Person
or any affiliate or associate thereof, which Rights become void) for shares of
Common Stock at an exchange ratio of one share of Common Stock per Right,
appropriately adjusted to reflect any stock split, stock dividend or similar
transaction occurring after the date of the Separation Time (the "Exchange
Ratio"). Immediately upon such action by the Board of Directors (the "Exchange
Time"), the right to exercise the Rights will terminate and each Right
<PAGE>
will thereafter represent only the right to receive a number of shares of Common
Stock equal to the Exchange Ratio.
Whenever the Company shall become obligated to issue shares of
Common Stock upon exercise of or in exchange for Rights, the Company, at its
option, may substitute therefor shares of Preferred Stock, at a ratio of one
one-thousandth of a share of Preferred Stock for each share of Common Stock so
issuable.
In the event that prior to the Expiration Time the Company
enters into, consummates or permits to occur a transaction or series of
transactions after the time an Acquiring Person has become such in which,
directly or indirectly, (i) the Company shall consolidate or merge or
participate in a binding share exchange with any other Person if, at the time of
the consolidation, merger or share exchange or at the time the Company enters
into an agreement with respect to such consolidation, merger or share exchange,
the Acquiring Person controls the Board of Directors of the Company, or (ii) the
Company shall sell or otherwise transfer (or one or more of its subsidiaries
shall sell or otherwise transfer) directly or by sale of stock, assets or
control of assets (A) aggregating more than 50% of the assets (measured by
either book value or fair market value) as of the end of the most recently
completed fiscal year or (B) generating more than 50% of the operating income or
cash flow during the most recently completed fiscal year, of the Company and its
subsidiaries (taken as a whole) to any other Person (other than the Company or
one or more of its wholly owned subsidiaries) or to two or more such Persons
which are affiliated or otherwise acting in concert, if, at the time of such
sale or transfer of assets or at the time the Company (or any such subsidiary)
enters into an agreement with respect to such sale or transfer, the Acquiring
Person controls the Board of Directors of the Company, then any such
transactions or events shall constitute a "Flip-over Transaction or Event" under
the Rights Agreement.
The Company shall take such action as shall be necessary to
ensure, and shall not enter into, consummate or permit to occur, such Flip-over
Transaction or Event until it shall have duly entered into a binding and
enforceable supplemental agreement with the Person engaging in such Flip-over
Transaction or Event or the parent corporation thereof (the "Flip-over Entity"),
for the benefit of the holders of the Rights, providing, that upon consummation
or occurrence of the Flip-over Transaction or Event (i) each Right shall
thereafter constitute the right to purchase from the Flip-over Entity, upon
exercise thereof in accordance with the terms of the Rights Agreement, that
number of shares of common stock of the Flip-over Entity having an aggregate
Market Price on the date of consummation or occurrence of such Flip-over
Transaction or Event equal to twice the Exercise Price for an amount in cash
equal to the then current Exercise Price and (ii) the Flip-over Entity shall
thereafter be liable for, and shall assume, by virtue of such Flip-over
Transaction or Event and such supplemental agreement, all the obligations and
duties of the Company pursuant to the Rights Agreement, but the Company's
obligations under the Rights Agreement will not be discharged and will continue
in full. For purposes of the foregoing description, the term "Acquiring Person"
shall include any Acquiring Person and its Affiliates and Associates and others
with whom it is acting in concert counted together as a single Person.
The Board of Directors of the Company may, at its option, at
any time prior to the close of business on the Flip-in Date, redeem all (but not
less than all) the then outstanding
<PAGE>
Rights at a price of $.01 per Right (the "Redemption Price"), as provided in the
Rights Agreement. Immediately upon the action of the Board of Directors of the
Company electing to redeem the Rights, without any further action and without
any notice, the right to exercise the Rights will terminate and each Right will
thereafter represent only the right to receive the Redemption Price in cash for
each Right so held.
The holders of Rights will, solely by reason of their
ownership of Rights, have no rights as stockholders of the Company, including
without limitation, the right to vote or to receive dividends.
The Rights have certain anti-takeover effects and can cause
substantial dilution to a person or group that acquires 20% of more of the
Common Stock on terms not approved by the Board of Directors of the Company. The
Rights should not, however, interfere with any merger or other business
combination that the Board finds to be in the best interests of the Company and
its stockholders because the Rights can be redeemed by the Board on or prior to
the close of business on the Flip-in Date, before the consummation of such
transaction.
As of January 28, 1998, there were approximately 52,257,783
shares of Common Stock issued and outstanding. As long as the Rights are
attached to the Common Stock, the Company will issue one Right with each new
share of Common Stock so that all such shares will have Rights attached.
The Rights Agreement, the forms of Rights Certificate and
Election to Exercise and the form of Certificate of Designation and Terms of the
Participating Preferred Stock are attached hereto as exhibits and are
incorporated herein by reference. The foregoing description of the Rights is
qualified in its entirety by reference to such exhibits.
Item 2. Exhibits.
Exhibit No. Description
(1) Rights Agreement, dated as of January 28, 1998 (the
"Rights Agreement"), between Acxiom Corporation and
First Chicago Trust Company of New York, as Rights
Agent, including the forms of Rights Certificate and
of Election to Exercise, attached as Exhibit A to the
Rights Agreement, and the form of Certificate of
Designation and Terms of Participating Preferred
Stock of the Company, attached as Exhibit B to the
Rights Agreement.
<PAGE>
SIGNATURE
Pursuant to the requirements of Section 12 of the Securities
Exchange Act of 1934, the registrant has duly caused this registration statement
to be signed on its behalf by the undersigned, thereunto duly authorized.
ACXIOM CORPORATION
By: /s/ Catherine L. Hughes
------------------------------------
Name: Catherine L. Hughes
Title: Secretary/General Counsel
Dated: January 29, 1998
<PAGE>
EXHIBIT INDEX
Exhibit No. Description
(1) Rights Agreement, dated as of January 28, 1998 (the
"Rights Agreement"), between Acxiom Corporation and
First Chicago Trust Company of New York, as Rights
Agent, including the forms of Rights Certificate and
of Election to Exercise, attached as Exhibit A to the
Rights Agreement and the form of Certificate of
Designation and Terms of Participating Preferred
Stock of the Company, attached as Exhibit B to the
Rights Agreement.
<PAGE>
EXHIBIT 1
RIGHTS AGREEMENT
dated as of
January 28, 1998
between
ACXIOM CORPORATION
and
FIRST CHICAGO TRUST COMPANY OF NEW YORK
as Rights Agents
<PAGE>
ARTICLE I CERTAIN DEFINITIONS ........................................... 2
1.1 Certain Definitions ........................................... 2
ARTICLE II THE RIGHTS .................................................... 9
2.1 Summary of Rights ............................................. 9
2.2 Legend on Common Stock Certificates .......................... 10
2.3 Exercise of Rights; Separation of Rights ..................... 11
2.4 Adjustments to Exercise Price; Number of Rights .............. 14
2.5 Date on Which Exercise is Effective .......................... 15
2.6 Execution, Authentication, Delivery and Dating of
Rights Certificates .......................................... 16
2.7 Registration, Registration of Transfer and Exchange .......... 17
2.8 Mutilated, Destroyed, Lost and Stolen Rights Certificates .... 18
ARTICLE III ADJUSTMENTS TO THE RIGHTS IN THE EVENT OF CERTAIN
TRANSACTIONS ................................................. 21
3.1 Flip-in ...................................................... 21
3.2 Flip-over .................................................... 24
ARTICLE IV THE RIGHTS AGENT ............................................. 25
4.1 General ...................................................... 25
4.2 Merger or Consolidation or Change of Name of Rights Agent .... 26
4.3 Duties of Rights Agent ....................................... 27
4.4 Change of Rights Agent ....................................... 30
ARTICLE V MISCELLANEOUS ................................................ 32
5.1 Redemption ................................................... 32
5.2 Expiration ................................................... 32
5.3 Issuance of New Rights Certificates .......................... 33
5.4 Supplements and Amendments ................................... 34
5.5 Fractional Shares ............................................ 34
5.6 Rights of Action ............................................. 34
5.7 Holder of Rights Not Deemed a Stockholder .................... 35
5.8 Notice of Proposed Actions ................................... 35
5.9 Notices ...................................................... 36
5.10 Suspension of Exercisability ................................. 37
5.11 Costs of Enforcement ......................................... 37
5.12 Successors ................................................... 37
<PAGE>
5.13 Benefits of this Agreement ................................... 38
5.14 Determination and Actions by the Board of Directors, etc. .... 38
5.15 Descriptive Headings ......................................... 38
5.16 Governing Law ................................................ 38
5.17 Counterparts ................................................. 39
5.18 Severability ................................................. 39
EXHIBITS
Exhibit A Form of Rights Certificate
(Together with Form of
Election to Exercise)
Exhibit B Form of Certificate of
Designation and Terms of
Participating Preferred Stock
<PAGE>
RIGHTS AGREEMENT
RIGHTS AGREEMENT (as amended from time to time, this
"Agreement"), dated as of January 28, 1998, between Acxiom Corporation, a
Delaware corporation (the "Company"), and First Chicago Trust Company of New
York, as Rights Agent (the "Rights Agent," which term shall include any
successor Rights Agent hereunder).
WITNESSETH:
WHEREAS, the Board of Directors of the Company has (a)
authorized and declared a dividend of one right ("Right") in respect of each
outstanding share of Common Stock (as hereinafter defined) held of record as of
the close of business on February 9, 1998 (the "Record Time") and (b) authorized
the issuance of one Right in respect of each share of Common Stock issued after
the Record Time and prior to the Separation Time (as hereinafter defined) and,
to the extent provided in Section 5.3, each share of Common Stock issued after
the Separation Time;
WHEREAS, subject to the terms hereof, each Right entitles the
holder thereof, after the Separation Time, to purchase securities of the Company
(or, in certain cases, of certain other entities) pursuant to the terms and
subject to the conditions set forth herein; and
WHEREAS, the Company desires to appoint the Rights Agent to
act on behalf of the Company, and the Rights Agent is willing so to act, in
connection with the issuance, transfer, exchange and replacement of Rights
Certificates (as hereinafter defined), the exercise of Rights and other matters
referred to herein;
NOW THEREFORE, in consideration of the premises and the
respective agreements set forth herein, the parties hereby agree as follows:
ARTICLE I
CERTAIN DEFINITIONS
1.1 For purposes of this Agreement, the following terms have the meaning
indicated:
"Acquiring Person" shall mean any Person who is Beneficial
Owner of 20% or more of the outstanding shares of Voting Stock (as hereinafter
defined); provided, however, that the term "Acquiring Person" shall not include
any Person (i) who is the Beneficial Owner of 20% or more of the outstanding
Shares of Common Stock on the date of this Agreement or who shall become the
Beneficial Owner (as hereinafter defined) of 20% or more of the outstanding
shares of Voting Stock solely as a result of an acquisition by the Company of
shares of Voting Stock, until such time hereafter or thereafter as any of such
Persons shall become the Beneficial Owner (other than by means of a stock
dividend or stock split) of any additional shares of Voting Stock, (ii) who is
the Beneficial Owner of 20% or more of the outstanding shares of Voting Stock
but who acquired Beneficial Ownership (as hereinafter defined) of shares of
Voting Stock without plan or intention to seek or affect control of the Company,
if such Person (as hereinafter defined), upon notice by the Company, promptly
enters into an irrevocable commitment promptly to divest, and thereafter
promptly divests (without exercising or retaining any power, including voting,
with respect to such shares), sufficient shares of Voting Stock (or securities
convertible into, exchangeable into or exercisable for Voting Stock) so that
such Person ceases to be the Beneficial Owner of 20% or more of the outstanding
shares of Voting Stock or (iii) who
<PAGE>
Beneficially Owns shares of Voting Stock consisting solely of one ore more of
(A) shares of Voting Stock Beneficially Owned pursuant to the grant or exercise
of an option granted to such Person by the Company in connection with an
agreement to merge with, or acquire, the Company at a time at which there is no
Acquiring Person, (B) shares of Voting Stock (or securities convertible into,
exchangeable into or exercisable for Voting Stock), Beneficially Owned by such
Person or its Affiliates (as hereinafter defined) or Associates (as hereinafter
defined) at the time of grant of such option or (C) shares of Voting Stock (or
securities convertible into, exchangeable into or exercisable for Voting Stock)
acquired by Affiliates or Associates of such Person after the time of such
grant, which, in the aggregate, amount to less than 1% of the outstanding shares
of Voting Stock. In addition, the Company, any wholly owned Subsidiary (as
hereinafter defined) of the Company and any employee stock ownership or other
employee benefit plan of the Company or a wholly owned Subsidiary of the Company
shall not be an Acquiring Person.
"Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 under the Securities Exchange Act of 1934,
as such Rule is in effect on the date of this Agreement.
A Person shall be deemed the "Beneficial Owner", and to have
"Beneficial Ownership" of, and to "Beneficially Own", any securities as to which
such Person or any of such Person's Affiliates or Associates is or may be deemed
to be the beneficial owner pursuant to Rule 13d-3 and 13d-5 under the Securities
Exchange Act of 1934, as such Rules are in effect on the date of this Agreement,
as well as any securities as to which such Person or any of such Person's
Affiliates or Associates has the right to become the Beneficial Owner (whether
such right is exercisable immediately or only after the passage of time or
the occurrence of conditions) pursuant to any agreement, arrangement or
understanding, or upon the exercise of conversion rights, exchange rights,
rights (other than the Rights), warrants or options, or otherwise; provided,
however, that a Person shall not be deemed the "Beneficial Owner", or to have
"Beneficial Ownership" of, or to " Beneficially Own", any security (i) solely
because such security has been tendered pursuant to a tender or exchange offer
made by such Person or any of such Person's affiliates or Associates until such
tendered security is accepted for payment or exchange or (ii) solely because
such Person or any of such Person's Affiliates or Associates has or shares the
power to vote or direct the voting of such security pursuant to a revocable
proxy given in response to a public proxy or consent solicitation made to
holders of shares of a class of stock of the Company registered under Section 12
of the Securities Exchange Act of 1934, and pursuant to, and in accordance with,
the applicable rules and regulations under the Securities Exchange Act of 1934,
except if such power, (or the arrangements relating thereto) is then reportable
under Item 6 of Schedule 13D under the Securities Exchange Act of 1934 (or any
similar provision of a comparable or successor report). For purposes of the
Agreement, in determining the percentage of the outstanding shares of Voting
Stock with respect to which a Person is the Beneficial Owner, all shares as to
which such Person is deemed the Beneficial Owner shall be deemed outstanding.
"Business Day" shall mean any day other than a Saturday,
Sunday or a day on which banking institutions in the City of New York are
generally authorized or obligated by law or executive order to close.
"Close of business" on any given date shall mean 5:00 P.M.,
New York City time,
<PAGE>
on such date or, if such date is not a Business Day, 5:00 P.M., New York City
time, on the next succeeding Business Day.
"Common Stock" shall mean the shares of Common Stock, $0.10
per share par value, of the Company.
"Control" or "control" shall mean the possession, direct or
indirect, of the power to direct or cause the direction of the management and
policies of a Person, whether through the ownership of voting securities, by
contract or otherwise.
"Exchange Time" shall mean the time at which the right to
exercise the Rights shall terminate pursuant to Section 3.1(c) hereof.
"Exercise Price" shall mean, as of any date, the price at
which a holder may purchase the securities issuable upon exercise of one whole
Right. Until adjustment thereof in accordance with the terms hereof, the
Exercise Price shall equal $100.00.
"Expiration Time" shall meant the earliest of (i) the Exchange
Time, (ii) the Redemption Time (as hereinafter defined), (iii) the close of
business on the tenth-year anniversary of the Record Time and (iv) upon the
merger of the Company into another corporation pursuant to an agreement entered
into when there is no Acquiring Person.
"Flip-in Date" shall mean any Stock Acquisition Date (as
hereinafter defined) or such earlier or later date as the Board of Directors of
the Company may from time to time fix by resolution adopted prior to the Flip-in
Date that would otherwise have occurred.
"Flip-over Entity," for purposes of Section 3.2, shall mean
(i) in the case of Flip-over Transaction or Event (as hereinafter defined)
described in clause (i) of the definition thereof, the Person issuing any
securities into which shares of Common Stock are being converted or exchanged
and, if no such securities are being issued, the other party to such Flip-over
Transaction or Event and (ii) in the case of Flip-over Transaction or Event
referred to in clause (ii) of the definition thereof, the Person receiving the
greatest portion of the assets or earning power being transferred in such
Flip-over Transaction or Event, provided in all cases if such Person is a
subsidiary of a corporation, the parent corporation shall be the Flip-over
Entity.
"Flip-over Stock" shall mean the class of capital stock (or
similar equity interest) with the greatest voting power in respect of the
election of directors (or other persons similarly responsible for direction of
the business and affairs) of the Flip-over Entity.
"Flip-over Transaction or Event" shall mean a transaction or
series of transactions after the time when an Acquiring Person has become such
in which, directly or indirectly, (i) the Company shall consolidate or merge or
participate in a share exchange with any other Person if, at the time of the
consolidation, merger or share exchange or at the time the Company enters into
any agreement with respect to any such conciliation, merger or share exchange,
the Acquiring Person controls the Board of Directors of the Company, or (ii) the
company shall sell or otherwise transfer (or one or more of its Subsidiaries
shall sell or otherwise transfer) directly or by sale of stock, assets or
control of assets (A) aggregating more than 50% of the assets (measured by
either book value or fair market value) as of the end of the more recently
completed fiscal year or (B) generating more than 50% of the operating income or
cash flow during the more recently completed fiscal year, of the Company and its
Subsidiaries (taken as a whole) to any Person (other than the Company or one or
more of its wholly owned Subsidiaries)
<PAGE>
or to two or more such Persons which are Affiliates or Associates or otherwise
acting in concert, if, at the time of the entry by the Company (or any such
Subsidiary) into an agreement with respect to such sale or transfer of assets,
the Acquiring Person controls the Board of Directors of the Company. For
purposes of the foregoing description, the term "Acquiring Person" shall include
any Acquiring Person and its Affiliates and Associates and others acting
directly or indirectly on behalf of or in concert with any such Acquiring
Person, Affiliate or Associate, counted together as a single Person.
"Market Price" per share of any securities on any date shall
mean the average of the daily closing prices per share of such securities
(determined as described below) on each of the 20 consecutive Trading Days
through and including the Trading Day immediately preceding such date; provided,
however, that if a type of event analogous to any of the events described in
Section 2.4 hereof shall have caused the closing prices used to determine the
Market Price on any Trading Days during such period of 20 Trading Days not to be
fully comparable with the closing price on such date because of stock exchange
or other trading adjustments, each such closing price so used shall be
appropriately adjusted in order to make it fully comparable with the closing
price on such date. The closing price per share of any securities on any date
shall be the last reported sale price, regular way, or, in case no such sale
takes place or is quoted on such date, the average of the closing bid and asked
prices, regular way, for each share of such securities, in either case as
reported in the principal consolidated transaction reporting system with respect
to securities listed on the principal national securities exchange on which the
securities are listed or admitted to trading or, if the securities are not
listed or admitted to trading on any national securities exchange, as reported
on the NASDAQ National Market System, or if the securities are not included
therein or reported thereby, as reported by the National Association of
Securities Dealers, Inc. Automated Quotation System or such other system then in
use, or, if any such date the securities are not listed or admitted to trading
on any national securities exchange or quoted by any such organization or
system, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the securities selected by the
Board of Directors of the Company; provided, however, that if on any such date
the securities are not listed or admitted to trading on a national securities
exchange or quoted in the over-the-counter market, the closing price per share
of such securities on such date as determined in good faith by the Board of
Directors of the Company, after consultation with a nationally recognized
investment banking firm, and set forth in a certificate delivered to the Rights
Agent.
<PAGE>
"Person" shall mean any individual, firm, partnership,
association, group (as such term is used in Rule 13d-5 under the Securities
Exchange Act of 1934, as such Rule is in effect on the date of the Agreement),
corporation or other entity.
"Preferred Stock" shall mean the series of Participating
Preferred Stock, par value $1.00 per share, of the Company created by a
Certificate of Designation and Terms in substantially the form set forth in
Exhibit B hereto appropriately completed.
"Redemption Price" shall mean an amount equal to one cent
($0.01) per Right, as such amount may be appropriately adjusted to reflect any
stock split, stock dividend or similar transaction occurring after the date
hereof.
"Redemption Time" shall mean the time at which the right to
exercise the Rights shall terminate pursuant to Section 5.1 hereof.
"Separation Time" shall mean the close of business on the
earlier of (i) the tenth Business Day (or such later date as the Board of
Directors of the Company may from time to time fix by resolution adopted prior
to the Separation Time that would otherwise have occurred) after the date on
which any Person commences a tender or exchange offer which, if consummated,
would result in such Person's becoming an Acquiring Person and (ii) the Flip-in
Date; provided, that if the foregoing results in the Separation Time being prior
to the Record Time, the Separation Time shall be the Record Time and provided
further, that if any tender or exchange offer referred to in clause (i) of this
paragraph is cancelled, terminated or otherwise withdrawn prior to the
Separation Time without the purchase of any shares of Voting Stock pursuant
thereto, such offer shall be deemed, for purposes of this paragraph, never to
have been made.
"Stock Acquisition Date" shall mean the first date of public
announcement by the Company or an Acquiring Person (by any means) that an
Acquiring Person has become such, provided such Person otherwise comes within
the definition of an "Acquiring Person" hereinabove set forth.
"Subsidiary" of any specified Person shall mean any
corporation or other entity of which a majority of the voting power of the
equity securities or a majority of the equity interest is Beneficially Owned,
directly or indirectly, by such Person.
"Trading Day," when used with respect to any securities, shall
mean a day on which the principal national securities exchange or quotation
system on which such securities are listed or traded is open for the transaction
of business or, if such securities are not listed or traded on any national
securities exchange or quotation system, a Business Day.
<PAGE>
"Voting Stock" means shares of capital stock of the Company
entitled to vote generally in the election of directors.
ARTICLE II
THE RIGHTS
2.1 As soon as practicable after the Record Time, the Company will mail a
letter summarizing the terms of the Rights to each holder of record of Common
Stock as of the Record Time, at such holder's address as shown by the records of
the Company.
2.2 Certificates for the Common Stock issued after the Record Time but prior
to the Separation Time shall evidence one Right for each share of Common Stock
represented thereby and shall have impressed on, printed on, written on or
otherwise affixed to them the following legend:
Until the Separation Time (as defined in the Rights Agreement
referred to below), this certificate also evidences and entitles the holder
hereof to certain Rights as set forth in a Rights Agreement, dated as of January
28, 1998, (as such may be amended from time to time, the "Rights Agreement"),
between Acxiom Corporation (the "Company") and First Chicago Trust Company of
New York, as Rights Agent, the terms of which are hereby incorporated herein by
reference and a copy of which is on file at the principal executive offices of
the Company. Under certain circumstances, as set forth in the Rights Agreement,
such Rights may be redeemed, may be exchanged for shares of Common Stock or
other securities or assets of the Company or a Subsidiary of the Company, may
expire, may become void (if they are "Beneficially Owned" by an "Acquiring
Person" or an Affiliate or Associate thereof, as such terms are defined in the
Rights Agreement, or by any transferee of any of the foregoing) or may be
evidenced by separate
<PAGE>
certificates and may no longer be evidenced by this certificate. The Company
will mail or arrange for the mailing of a copy of the Rights Agreement to the
holder of this certificate without charge within five days after the receipt of
a written request therefor.
Certificates representing shares of Common Stock that are
issued and outstanding at the Record Time shall evidence one Right for each
share of Common Stock evidenced thereby notwithstanding the absence of the
foregoing legend.
2.3 Exercise of Rights; Separation of Rights.
(a) Subject to Sections 3.1, 5.1 and 5.10 and subject to adjustment as
herein set forth, each Right will entitle the holder thereof, after the
Separation Time and prior to the Expiration Time, to purchase, for the Exercise
Price, one one-thousandth of a share of Preferred Stock.
(b) Until the Separation Time, (i) no Right may be exercised and (ii) each
Right will be evidenced by the certificate for the associated share of Common
Stock (together, in the case of certificates issued prior to the Record Time,
with the letter mailed to the record holder thereof pursuant to Section 2.1) and
will be transferable only together with, and will be transferred by a transfer
(whether with or without such letter) of, such associated share.
(c) Subject to the terms hereof, after the Separation Time and prior to
the Expiration Time, the Rights (i) may be exercised and (ii) may be transferred
independent of shares of Common Stock. Promptly following the Separation Time,
the Rights Agent will mail to each holder of record of Common Stock as of the
Separation Time (other than any Person whose Rights have become void pursuant to
Section 3.1(b)), at such holder's address as shown
<PAGE>
by the records of the Company (the Company hereby agreeing to furnish copies of
such records to the Rights Agent for this purpose), (x) a certificate (a "Rights
Certificate") in substantially the form of Exhibit A hereto appropriately
completed, representing the number of Rights held by such holder at the
Separation Time and having such marks of identification or designation and such
legends, summaries or endorsements printed thereon as the Company may deem
appropriate and as are not inconsistent with the provisions of this Agreement,
or as may be required to comply with any law or with any rule or regulation made
pursuant thereto or with any rule or regulation of any national securities
exchange or quotation system on which the Rights may from time to time be listed
or traded, or to conform to usage, and (y) a disclosure statement describing the
Rights.
(d) Subject to the terms hereof, Rights may be exercised on any Business
Day after the Separation Time and prior to the Expiration Time by submitting to
the Rights Agent the Rights Certificate evidencing such Rights with an Election
to Exercise (an "Election to Exercise") substantially in the form attached to
the Rights Certificate duly completed, accompanied by payment in cash, or by
certified or official bank check or money order payable to the order of the
Company, of a sum equal to the Exercise Price multiplied by the number of Rights
being exercised and a sum sufficient to cover any transfer tax or charge which
may be payable in respect of any transfer involved in the transfer or delivery
of Rights Certificates or the issuance or delivery of certificates for shares or
depositary receipts (or both) in a name other than that of the holder of the
Rights being exercised.
(e) Upon receipt of a Rights Certificate, with an Election to Exercise
accompanied by payment as set forth in Section 2.3(d), and subject to the terms
hereof, the
<PAGE>
Rights Agent will thereupon promptly (i)(A) requisition from a transfer agent
stock certificates evidencing such number of shares or other securities to be
purchased (the Company hereby irrevocably authorizing its transfer agents to
comply with all such requisitions) and (B) if the Company elects pursuant to
Section 5.5 not to issue certificates representing fractional shares,
requisition from the depositary selected by the Company depositary receipts
representing the fractional share to be purchased or requisition from the
Company the amount of cash to be paid in lieu of fractional shares in accordance
with Section 5.5 and (ii) after receipt of such certificates, depositary
receipts and/or cash, deliver the same to or upon the order of the registered
holder of such Rights Certificate, registered (in the case of certificates or
depositary receipts) in such name or names as may be designated by such holder.
(f) In case the holder of any Rights shall exercise less than all the
Rights evidenced by such holder's Rights Certificate, a new Rights Certificate
evidencing the Rights remaining unexercised will be issued by the Rights Agent
to such holder or to such holder's duly authorized assigns.
(g) The Company covenants and agrees that it will (i) take all such action
as may be necessary to ensure that all shares delivered upon exercise of Rights
shall, at the time of delivery of the certificates for such shares (subject to
payment of the Exercise Prices), be duly and validly authorized, executed,
issued and delivered and fully paid and nonassessable; (ii) take all such action
as may be necessary to comply with any applicable requirements of the Securities
Act of 1933 or the Securities Exchange Act of 1934, and the rules and
regulations thereunder, and any other applicable law, rule or regulation, in
connection with the issuance of any shares upon exercise of Rights; and (iii)
pay when due and payable any and all federal and state transfer
<PAGE>
taxes and charges which may be payable in respect of the original issuance or
delivery of the Rights Certificates or of any shares issued upon the exercise of
Rights, provided that the Company shall not be required to pay any transfer tax
or charge which may be payable in respect of any transfer involved in the
transfer of delivery of Rights Certificates or the issuance or delivery of
certificates for shares in a name other than that of the holder of the Rights
being transferred or exercised.
2.4 Adjustments to Exercise Price; Number of Rights.
(a) In the event the Company shall at any time after the Record Time and
prior to the Separation Time (i) declare or pay a dividend on Common Stock
payable in Common Stock, (ii) subdivide the outstanding Common Stock or (iii)
combine the outstanding Common Stock into a smaller number of shares of Common
Stock, (x) the Exercise Price in effect after such adjustment will be equal to
the Exercise Price in effect immediately prior to such adjustment divided by the
number of shares of Common Stock (the "Expansion Factor") that a holder of one
share of Common Stock immediately prior to such dividend, subdivision or
combination would hold thereafter as a result thereof and (y) each Right held
prior to such adjustment will become that number of Rights equal to the
Expansion Factor, and the adjusted number of Rights will be deemed to be
distributed among the shares of Common Stock with respect to which the original
Rights were associated (if they remain outstanding) and the shares issued in
respect of such dividend, subdivision or combination, so that each such share of
Common Stock will have exactly one Right associated with it. Each adjustment
made pursuant to this paragraph shall be made as of the payment or effective
date for the applicable dividend, subdivision or combination.
<PAGE>
In the event the Company shall at any time after the Record
Time and prior to the Separation Time issue any shares of Common Stock otherwise
than in a transaction referred to in the preceding paragraph, each such share of
Common Stock so issued shall automatically have one new Right associated with
it, which Right shall be evidenced by the certificate representing such share.
To the extent provided in Section 5.3, Rights shall be issued by the Company in
respect of shares of Common Stock that are issued or sold by the Company after
the Separation Time.
(b) In the event the Company shall at any time after the Record Time and
prior to the Separation Time issue or distribute any securities or assets in
respect of, in lieu of or in exchange for Common Stock (other than pursuant to a
regular periodic cash dividend or a dividend paid solely in Common Stock)
whether by dividend, in a reclassification or recapitalization (including any
such transaction involving a merger, consolidation or share exchange), or
otherwise, the Company shall make such adjustments, if any, in the Exercise
Price, number of Rights and/or securities or other property purchasable upon
exercise of Rights as the Board of Directors of the Company, in its sole
discretion, may deem to be appropriate under the circumstances in order
adequately to protect the interests of holders of Rights generally, and the
Company and the Rights Agent shall amend this Agreement as necessary to provide
for such adjustments.
(c) Each adjustment to the Exercise Price made pursuant to this Section
2.4 shall be calculated to the nearest cent. Whenever an adjustment to the
Exercise Price is made pursuant to this Section 2.4, the Company shall (i)
promptly prepare a certificate setting forth such adjustment and a brief
statement of the facts accounting for such adjustment, (ii) promptly
<PAGE>
file with the Rights Agent and with each transfer agent for the Common Stock a
copy of such certificate and (iii) mail a brief summary thereof to each holder
of Rights.
(d) Irrespective of any adjustment or change in the securities purchase
upon exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the securities so purchasable which were
expressed in the initial Rights Certificates issued hereunder.
2.5 Date on Which Exercise is Effective. Each person in whose name any
certificate for shares is issued upon the exercise of Rights shall for all
purposes be deemed to have become the holder of record of the shares represented
thereby on, and such certificate shall be dated, the date upon which the Rights
Certificate evidencing such Rights was duly surrendered and payment of the
Exercise Price for such Rights (and any applicable taxes and other governmental
charges payable by the exercising holder hereunder) was made; provided, however,
that if the date of such surrender and payment is a date upon which the stock
transfer books of the Company are closed, such person shall be deemed to have
become the record holder of such shares on, and such certificates shall be
dated, the next succeeding Business Day on which the stock transfer books of the
Company are open.
2.6 Execution, Authentication, Delivery and Dating of Rights Certificates.
(a) The Rights Certificates shall be executed on behalf of the Company by
its Chief Executive Officer, President, Chief Operations Officer or one of its
Vice Presidents, under its corporate seal reproduced thereon attested by its
Secretary or one of its Assistant Secretaries. The signature of any of these
officers on the Rights Certificates may be manual or facsimile.
<PAGE>
Rights Certificates bearing the manual or facsimile signatures
of individuals who were at any time the proper officers of the Company shall
bind the Company, notwithstanding that such individuals or any of them have
ceased to hold such officer prior to the countersignature and delivery of such
Rights Certificates.
Promptly after the Company learns of the Separation Time, the
Company will notify the Rights Agent of such Separation Time and will deliver
Rights Certificates executed by the Company to the Rights Agent for
countersignature, and, subject to Section 3.1(b), the Rights Agent shall
manually countersign and deliver such Rights Certificates to the holders of the
Rights pursuant to Section 2.3(c) hereof. No Rights Certificate shall be valid
for any purpose unless manually countersigned by the Rights Agent.
(b) Each Rights Certificate shall be date the date of countersignature
thereof.
2.7 Registration, Registration of Transfer and Exchange.
(a) After the Separation Time, the Company will cause to be kept
register (the "Rights Register") in which, subject to such reasonable
regulations as it may prescribe, the Company will provide for the registration
and transfer of Rights. The Rights Agent is hereby appointed "Rights Registrar"
for the purpose of maintaining the Rights Register for the Company and
registering Rights and transfers of Rights after the Separation Time as herein
provided. In the event that the Rights Agent will have the right to examine the
Rights Register at all reasonable times after the Separation Time.
After the Separation Time and prior to the Expiation Time,
upon surrender for registration of transfer or exchange of any Rights
Certificate, and subject to the provisions of
<PAGE>
Section 2.7(c) and (d), the Company will execute, and the Rights Agent will
countersign and deliver, in the name of the holder or the designated transferee
or transferees, as required pursuant to the holder's instructions, one or more
new Rights Certificates evidencing the same aggregate number of Rights as did
the Rights Certificate so surrendered.
(b) Except as otherwise provided in Section 3.1(b), all Rights issued upon
any registration of transfer or exchange of Rights Certificates shall be the
valid obligations of the Company, and such Rights shall be entitled to the same
benefits under this Agreement as the Rights surrendered upon such registration
of transfer or exchange.
(c) Every Rights Certificate surrendered for registration of transfer or
exchange shall be duly endorsed, or be accompanied by a written instrument of
transfer in form satisfactory to the Company or the Rights Agent, as the case
may be, duly executed by the holder thereof or such holder's attorney duly
authorized in writing. As a condition to the issuance of any new Rights
Certificate under this Section 2.7, the Company may require the payment of a sum
sufficient to cover any tax or other governmental charge that may be imposed in
relation thereto.
(d) The Company shall not be required to register the transfer or exchange
of any Rights after such Rights have become void under Section 3.1(b), been
exchanged under Section 3.1(c) or been redeemed or terminated under Section 5.1.
2.8 Mutilated, Destroyed, Lost and Stolen Rights Certificate.
(a) If any mutilated Rights Certificate is surrendered to the Rights Agent
prior to the Expiration Time, then, subject to Section 3.1(b) and 5.1, the
Company shall execute and
<PAGE>
the Rights Agent shall countersign and deliver in exchange therefor a new Rights
Certificate evidencing the same number of Right as did the Rights Certificate so
surrendered.
(b) If there shall be delivered to the Company and the Rights Agent prior
to the Expiration Time (i) evidence to their satisfaction of the destruction,
loss or theft of any Rights Certificate and (ii) such security or indemnity as
may be required by them to save each of them and any of their agents harmless,
then, subject to Section 3.1(b) and 5.1 and in the absence of notice to the
Company or the Rights Agent that such Rights Certificate has been acquired by a
bona fide purchaser, the Company shall execute and upon its request the Rights
Agent shall countersign and deliver, in lieu of any such destroyed, lost or
stolen Rights Certificate, a new Rights Certificate so destroyed, lost or
stolen.
(c) As a condition to the issuance of any new Rights Certificate under this
Section 2.8, the Company may require the payment of a sum sufficient to cover
any tax or other governmental charge that may be imposed in relation thereto and
any other expenses (including the fees and expenses of the Rights Agent)
connected therewith.
(d) Every new Rights Certificate issued pursuant to this Section 2.8 in
lieu of any destroyed, lost or stolen Rights Certificate shall evidence an
original additional contractual obligation of the Company, whether or not the
destroyed, lost or stolen Rights Certificate shall be at any time enforceable by
anyone, and shall be entitled to all the benefits of this Agreement equally and
proportionately with any and all other Rights duly issued hereunder.
2.9 Persons Deemed Owners. Prior to due presentment of a Rights Certificate (or,
prior to the Separation Time, the associated Common Stock Certificate) for
registration of
<PAGE>
transfer, the Company, the Rights Agent and any agent of the Company or the
Rights Agent may deem and treat the person in whose name such Rights Certificate
(or, prior to the Separation Time, such Common Stock certificate) is registered
as the absolute owner thereof and of the Rights evidenced thereby for all
purposes whatsoever, including the payment of the Redemption Price, and neither
the Company nor the Rights Agent shall be affected by any notice to the
contrary. As used in the Agreement, unless the context otherwise requires, the
term "holder" of any Rights shall mean the registered holder of such Rights (or,
prior to the Separation Time, the associated shares of Common Stock).
2.10 Delivery and Cancellation of Certificates. All Rights Certificates
surrendered upon exercise or for registration of transfer or exchange shall, if
surrendered to any person other than the Rights Agent, be delivered to the
Rights Agent and, in any case, shall be promptly cancelled by the Rights Agent.
The Company may at any time deliver to the Rights Agent for cancellation any
Rights Certificate previously countersigned and delivered hereunder which the
Company may have acquired in any manner whatsoever, and all Rights Certificate
so delivered shall be promptly cancelled by the Rights Agent. No Rights
Certificate shall be countersigned in lieu of or in exchange for any Rights
Certificate cancelled as provided in this Section 2.10, except as expressly
permitted by this Agreement. The Rights Agent shall destroy all cancelled Rights
Certificate and deliver a certificate of destruction to the Company.
2.11 agreement of Rights Holders. Every holder of Rights by accepting the same
consents and agrees with the Company and the Rights Agent and with every other
holder of Rights that:
<PAGE>
(a) Prior to the Separation Time, each Right will be transferable only
together with, and will be transferred by a transfer of, the associated share of
Common Stock;
(b) After the Separation Time, the Rights Certificate will be transferable
only on the Rights Register as provided herein;
(c) Prior to due presentment of a Rights Certificate (or, prior to the
Separation Time, the associated Common Stock certificate) for registration of
transfer, the Company, the Rights Agent and any agent of the Company or the
Rights Agent may deem and treat the person in whose name the Rights Certificate
(or, prior to the Separation Time, the associated Common Stock certificate) is
registered as the absolute owner thereof and of the Rights evidenced thereby for
all purposes whatsoever, and neither the Company nor the Rights Agent shall be
affected by any notice to the contrary;
(d) Rights beneficially owned by certain Persons will, under the
circumstances set forth in Section 3.1(b), become void; and
(e) This Agreement may be supplemented or amended from time to time
pursuant to Section 2.4(b) or 5.4 hereof.
ARTICLE III
ADJUSTMENTS TO THE RIGHTS IN
THE EVENT OF CERTAIN TRANSACTIONS
3.1 Flip-in
(a) In the event that prior to the Expiration Time a Flip-in Date shall
occur, the Company shall take such action as shall be necessary to ensure and
provide that, except as
<PAGE>
provided in this Section 3.1, each Right shall constitute the right to purchase
from the Company, upon exercise thereof in accordance with the terms hereof (but
subject to Section 5.10), that number of shares of Common Stock having an
aggregate Market Price on the Stock Acquisition Date equal to twice the Exercise
Price for an amount in cash equal to the Exercise Price (such right to be
appropriately adjusted in order to protect the interests of the holders of
Rights generally in the event that on or after such Stock Acquisition Date an
event of a type analogous to any of the events described in Section 2.4(a) or
(b) shall have occurred with respect to the Common Stock).
(b) Notwithstanding the foregoing, any Rights that are or were Beneficially
Owned on or after the Stock Acquisition Date by an Acquiring Person or an
Affiliate or Associate thereof or by any transferee, direct or indirect, of any
of the foregoing shall become void and any holder of such Rights (including
transferees) shall thereafter have no right to exercise or transfer such Rights
under any provision of this Agreement. If any Rights Certificate is presented
for assignment or exercise and the Person presenting the same will not complete
the certification set forth at the end of the form or assignment or notice of
election to exercise and provide such additional evidence of the identity of the
Beneficial Owner and its Affiliates and Associates (or former Beneficial Owners
and their Affiliates and Associates) as the Company shall reasonably request,
then the Company shall be entitled conclusively to deem the Beneficial Owner
thereof to be an Acquiring Person or an Affiliate or Associate thereof or a
transferee of any of the foregoing and accordingly will deem the Rights
evidenced thereby to be void and not transferable or exercisable.
<PAGE>
(c) The Board of Directors of the Company may, at its option, at any time
after a Flip-in Date and prior to the time that an Acquiring Person becomes the
Beneficial owner of more than 50% of the outstanding shares of Voting Stock
elect to exchange all (but not less than all) the then outstanding Rights (which
shall not include Rights that have become void pursuant to the provisions of
Section 3.1(b)) for shares of Common Stock at an exchange ratio of one share of
Common Stock per Right, appropriately adjusted in order to protect the interests
of holders of Rights generally in the event that after the Separation Time an
event of a type analogous to any of the events described in Section 2.4(a) or
(b) shall have occurred with respect to the Common Stock (such exchange ratio,
as adjusted from time to time, being hereinafter referred to as the "Exchange
Ratio").
Immediately upon the action of the Board of Directors of the
Company electing to exchange the Rights, without any further action and without
any notice, the right to exercise the Rights will terminate and each Right
(other than Rights that have become void pursuant to Section 3.1(b), will
thereafter represent only the right to receive a number of shares of Common
Stock equal to the Exchange Ratio. Promptly after the action of the Board of
Directors electing to exchange the Rights, the Company shall give notice thereof
(specifying the steps to be taken to receive shares of Common Stock in exchange
for Rights) to the Rights Agent and the holders of the Rights (other than Rights
that have become void pursuant to Section 3.1(b)) outstanding immediately prior
thereto by mailing such notice in accordance with Section 5.9.
Each Person in whose name any certificate for shares is issued
upon the exchange of Rights pursuant to the Section 3.1(c) or Section 3.1(d)
shall for all purposes be deemed to have become the holder or record of the
shares represented thereby on, and such certificate shall
<PAGE>
be dated, the date upon which the Rights Certificate evidencing such Rights was
duly surrendered and payment of any applicable taxes and other governmental
charges by the holder was made; provided, however, that if the date of such
surrender and payment is a date upon which the stock transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares on, and such certificate shall be dated, the next succeeding
Business Day on which the stock transfer books of the Company are open.
(d) Whenever the Company shall become obligated under Section 3.1(a) or (c)
to issue shares of Common Stock upon exercise of or in exchange for Rights, the
Company, at its option, may substitute therefor shares of Preferred Stock, at a
ratio of one-thousandth of a share of Preferred Stock for each share of Common
Stock so issuable, appropriately adjusted to protect interests of the holders of
the Rights generally to reflect any event of this type analogous to any of the
events described in Section 2.4 (a) or (b) which may have occurred with respect
to the Common Stock.
(e) In the event that there shall not be sufficient treasury shares or
authorized but unissued shares of Common Stock or Preferred Stock of the Company
to permit the exercise or exchange in full of the Rights in accordance with
Section 3.1(a) or (c), the Company shall either (1) call a meeting of
Stockholders seeking approval to cause sufficient additional shares to be
authorized (provided that if such approval is not obtained the Company will take
the action specified in clause (ii) of this sentence) or (ii) take such action
as shall be necessary to ensure and provide, to the extent permitted by
applicable law and any agreements or instruments in effect on the Stock
Acquisition Date to which it is a party, that each Right shall thereafter
constitute the right to receive, (x) at the Company's option, either (A) in
return for the Exercise Price, debt or
<PAGE>
equity securities or other assets (or a combination thereof) having a fair value
equal to twice the Exercise Price, or (B) without payment of consideration
(except as otherwise required by applicable law), debt or equity securities or
other assets (or a combination thereof) having a fair value equal to the
Exercise Price, or (y) if the Board of Directors of the Company elects to
exchange the Rights in accordance with Section 3.1(c), debt or equity securities
or other assets (or a combination thereof) having a fair value equal to the
product of the Market Price of a share of Common Stock on the Flip-in Date times
the Exchange Ratio in effect on the Flip-in Date, where in any case set forth in
(x) or (y) above the fair value of such debt or equity securities or other
assets shall be as determined in good faith by the Board of Directors of the
Company, after consultation with a nationally recognized investment banking
firm.
3.2 Flip-over
(a) Prior to the Expiration Time, the Company shall not enter into any
agreement with respect to, or consummate or permit to occur, any Flip-over
Transaction or Event unless and until it shall have duly entered into a binding
and enforceable supplemental agreement with the Flip-over Entity, for the
benefit of the holders of the Rights, providing that, upon consummation or
occurrence or the Flip-over Transaction or Event (i) each Right shall thereafter
constitute the right to purchase from the Flip-over Entity, upon exercise
thereof in accordance with the terms hereof, that number of shares of Flip-over
Stock of the Flip-over Entity having an aggregate Market Price on the date of
consummation or occurrence of such Flip-over Transaction or Event Equal to twice
the Exercise Price for an amount in cash equal to the Exercise Price (such right
to be appropriately adjusted in order to protect the interests of the holders of
Rights generally in the event that after such date of consummation or occurrence
an event of a type
<PAGE>
analogous to any of the events described in Section 2.4(a) or (b) shall have
occurred with respect to the Flip-over Stock) and (ii) the Flip-over Entity
shall thereafter be liable for, and shall assume, by virtue of such Flip-over
Transaction or Event and such supplemental agreement, all the obligations and
duties of the Company pursuant to this Agreement, but the Company's obligations
under this Agreement shall not be discharged and shall continue in full. The
provisions of this Section 3.2 shall apply to successive Flip-over Transactions
or Events.
(b) Prior to the Expiration Time, the Company shall not enter into any
agreement with respect to, or consummate or permit to occur, any Flip-over
Transaction or Event of at the time thereof there are any rights, warrants or
securities outstanding or any other arrangements, agreements or instruments that
would eliminate or otherwise diminish in any material respect the benefits
intended to be afforded by this Rights Agreement to the holders of Rights upon
consummation of such transaction. ARTICLE IV THE RIGHTS AGENT
4.1 General
(a) The Company hereby appoints the Rights Agent to act as agent for the
Company in accordance with the terms and conditions hereof, and the Rights Agent
hereby accepts such appointment. The Company agrees to pay to the Rights Agent
reasonable compensation for all services rendered by it hereunder and, from time
to time, on demand of the Rights Agent, its reasonable expenses and counsel fees
and other disbursements incurred in the administration and execution of this
Agreement and the exercise and performance of its duties
<PAGE>
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted to be done by the Rights Agent in connection with the
acceptance and administration of this Agreement, including the costs and
expenses of defending against any claim of liability.
(b) The Rights Agent shall be protected and shall incur no liability for or
in respect of any action taken, suffered or omitted by it in connection with its
administration of this Agreement in reliance upon any certificate for securities
purchasable upon exercise of Rights, Rights Certificate, certificate for other
securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper person or persons.
4.2 Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor Rights
Agent may be merged or with which it may be consolidated, or any corporation
resulting from any merger or consolidation to which the rights Agent or any
successor Rights Agent is a party, or any corporation succeeding to the
stockholder services business of the rights Agent or any successor Rights Agent,
will be the successor to the Rights Agent under this Agreement without the
execution or filing of any paper or any further act on the part of any of the
parties hereto, provided that such corporation would be eligible for appointment
as a successor Rights Agent under the provisions of Section 4.4 hereof. In case
at the time such successor Rights Agent succeeds to the agency created by this
Agreement any of the Rights Certificates have been
<PAGE>
countersigned but not delivered, any such successor Rights Agent may adopt the
countersignature of the predecessor Rights Agent and deliver such Rights
Certificates so countersigned; and in case at that time any of the Rights
Certificates have not be countersigned, any successor Rights Agent may
countersign such Rights Certificates either in the name of the predecessor
Rights Agent or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates will have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent is changed and at such
time any of the Rights Certificates shall have been countersigned but not
delivered, the Rights Agent may adopt the countersignature under its prior name
and deliver Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, the Rights Agent
may countersign such Rights Certificates either in its prior name or in its
changed name; and in all such cases such Rights Certificates shall have the full
force provided in the Rights Certificates and in this Agreement.
4.3 Duties of Rights Agent.
The Rights Agent undertakes the duties and obligations imposed
by this Agreement upon the following terms and conditions, by all of which the
Company and the holders of Rights Certificates, by their acceptance thereof,
shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel will be full and
complete
<PAGE>
authorization and protection to the Rights Agent as to any action taken or
omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent deems it necessary or desirable that any fact or matter be provided
or established by the Company prior to taking or suffering any action hereunder,
such fact or matter (unless other evidence in respect thereof be herein
specifically prescribed) may be deemed to be conclusively provided and
established by a certificate signed by a person believed by the Rights Agent to
be the Chief Executive Officer, the Chief Operating Officer, the President or
any Vice President and by the Treasurer or any Assistant Treasurer or the
Secretary or any Assistant Secretary of the Company and delivered to the Rights
Agent; and such certificate will be full authorization to the Rights Agent for
any action taken or suffered in good faith by it under the provisions of this
Agreement in reliance upon such certificate.
(c) The Rights Agent will be liable hereunder only for its own negligence,
bad faith or willful misconduct.
(d) The Rights Agent will not be liable for or by reason of any of the
statements of fact or recitals contained in this Agreement or in the
certificates for securities purchasable upon exercise of Rights or the Rights
Certificates (except its countersignature thereof) or be required to verify the
same, but all such statements and recitals are and will be deemed to have been
made by the Company only.
(e) The Rights Agent will not be under any responsibility in respect of the
validity of this Agreement or the execution and delivery hereof (except the due
authorization,
<PAGE>
execution and delivery hereof by the Rights Agent) or in respect of the validity
or execution of any certificate for securities purchasable upon exercise of
Rights or Rights Certificate (except its countersignature thereof); nor will it
be responsible for any breach by the Company of any covenant or condition
contained in this Agreement or in any Rights Certificate; nor will it be
responsible for any change in the exercisability of the Rights (including the
Rights becoming void pursuant to Section 3.1(b) hereof) or any adjustment
required under the provisions of Section 2.4, 3.1 or 3.2 hereof or responsible
for the manner, method or amount of any such adjustment or the ascertaining of
the existence of facts that would require any such adjustment (except with
respect to the exercise of Rights after receipt of the certificate contemplated
by Section 2.4 describing any such adjustment); nor will it by any act hereunder
be deemed to make any representation or warranty as to the authorization or
reservation of any securities purchasable upon exercise of Rights or any Rights
or as to whether any securities purchasable upon exercise of Rights will, when
issued, be duly and validly authorized, executed, issued and delivered and fully
paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may be reasonably be
required by the Rights Agent for the carrying out or performing by the Rights
Agent of the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from any
person believed by the Rights Agent to be the Chief Executive Officer, the Chief
Operating Officer, the President or any Vice President or the Secretary or any
Assistant Secretary or the Treasurer or any Assistant Treasurer
<PAGE>
of the Company, and to apply to such persons for advice or instructions in
connection with its duties, and it shall not be liable for any action taken or
suffered by it in good faith in accordance with instructions of any such person.
(h) The Rights Agent and any Stockholder, director, officer or employee of
the Rights Agent may buy, sell or deal in Common Stock, Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or powers
hereby vested in it or perform any duty hereunder either itself or by or through
its attorneys or agents, and the Rights Agent will not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any such act, default,
neglect or misconduct, provided reasonable care was exercised in the selection
and continued employment thereof.
4.4 Change of Rights Agent. The Rights Agent may resign and be discharged from
its duties under this Agreement upon 90 days' notice (or such lesser notice as
is acceptable to the Company) in writing mailed to the Company and to each
transfer agent of Common Stock by registered or certified mail, and to the
holders of the Rights in accordance with Section 5.9. The Company may remove the
Rights Agent upon 30 days' notice in writing, mailed to the Rights Agent and to
each transfer agent of the Common Stock by registered or certified mail, and to
the holders of the Rights in accordance with Section
<PAGE>
5.9. If the Rights Agent should resign or be removed or otherwise become
incapable of acting, the Company will appoint a successor to the Rights Agent.
If the Company fails to make such appointment within a period of 30 days after
such removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by the holder of
any rights (which holder shall, with such notice, submit such holder's Rights
Certificate for inspection by the Company), then the holder of any Rights may
apply to any court of competent jurisdiction for the appointment of a new Rights
Agent. Any successor Rights Agent, whether appointed by the Company or by such a
court, shall be a corporation organized and doing business under the laws of the
United States or of the State of New York, or of any other state of the United
States so long as such corporation is authorized to do business as a banking
institution in the State of New York, which is authorized under such laws to
exercise the powers of the Rights Agent contemplated by this Agreement and is
subject to supervision or examination by federal or state authority and which
has at the time of its appointment as Rights Agent a combined capital and
surplus of at least $50,000,000. After appointment, the successor Rights Agent
will be vested with the same powers, rights, duties and responsibilities as if
it had been originally named as Rights Agent without further act or deed; but
the predecessor rights Agent shall deliver and transfer to the successor rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company will file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock, and mail a notice thereof in writing to the holders of the
Rights. Failure to give any notice provided for in this Section 4.4, however, or
any defect therein, shall not affect the
<PAGE>
legality or validity of the resignation or removal of the Rights Agent or the
appointment of the successor Rights Agent, as the case may be.
ARTICLE V
MISCELLANEOUS
5.1 Redemption
(a) The Board of Directors of the Company may, at its option, at any time
prior to the close of business on the Flip-in Date, elect to redeem all (but not
less than all) the then outstanding Rights at the Redemption Price and the
Company, at its option, may pay the Redemption Price either in cash or shares of
Common Stock or other securities of the Company deemed by the Board of
Directors, in the exercise of its sole discretion, to be at least equivalent in
value to the Redemption Price.
(b) Immediately upon the action of the Board of Directors of the Company
electing to redeem the Rights (or, if the resolution of the Board of Directors
electing to redeem the Rights states that the redemption will not be effective
until the occurrence of a specified future time or event, upon the occurrence of
such future time or event), without any further action and without any notice,
the right to exercise the Rights will terminate and each Right will thereafter
represent only the right to receive the Redemption Price in cash or securities,
as determined by the Board of Directors. Promptly after the Rights are redeemed,
the Company shall give notice of such redemption to the Rights Agent and the
holders of the then outstanding Rights by mailing such notice in accordance with
Section 5.9.
<PAGE>
5.2 Expiration. The Rights and this Agreement shall expire at the Expiration
Time and no Person shall have any rights pursuant to this Agreement or any Right
after the Expiration Time, except as provided in Sections 3.1 and 5.1 hereof,
with respect to Rights which the Board of Directors of the Company have elected
to exchange or redeem, and except with respect to any Rights for which an
Election to Exercise has been duly filed with the Rights Agents prior to the
Expiration time.
5.3 Issuance of New Rights Certificates. Notwithstanding any of the provisions
of this Agreement or of the Rights to the contrary, the Company may, at its
option, issue new Rights Certificates evidencing Rights in such form as may be
approved by its Board of Directors to reflect any adjustment or change in the
number or kind or class of shares of stock purchasable upon exercise of Rights
made in accordance with the provisions of this Agreement. In addition, in
connection with the issuance or sale of shares of Common Stock by the Company
following the Separation Time and prior to the Redemption Time or Expiration
Time pursuant to the terms of securities exercisable, convertible or
exchangeable into shares of Common Stock or pursuant to options exercisable for
Common Stock or in connection with the vesting or payment of securities awarded
by the Corporation under any plan or arrangement, in each case issued, granted
or awarded prior to, and outstanding at, the Separation Time, the Company shall
issue to the holders of such shares of Common Stock, Rights Certificates
representing the appropriate number of Rights in connection with the issuance or
sale of such shares of Common Stock; provided, however, in each case, (i) no
such Rights Certificate shall be issued, if, and to the extent that, the Company
shall be advised by counsel that such issuance would create a significant risk
of material adverse tax consequences to the Company or to the Person to whom
such Rights Certificates would be issued, (ii) no such Rights Certificates shall
be issued if, and to
<PAGE>
the extent that, appropriate adjustment shall have otherwise been made in lieu
of the issuance thereof, and (iii) the Company shall have no obligation to
distribute Rights Certificates to any Acquiring Person or Affiliate or Associate
of an Acquiring Person or any transferee of any of the foregoing.
5.4 Supplements and Amendments. The Company and the Rights Agent may from time
to time supplement or amend this Agreement without the approval of any holders
of Rights (i) prior to the close of business on the Flip-in Date, in any respect
and (ii) after the close of business on the Flip-in Date, to make any changes
that the Company may deem necessary or desirable and which shall not materially
adversely affect the interests of the holders of Rights generally (other than an
Acquiring Person or an Affiliate or Associate of an Acquiring Person). The
Rights Agent will duly execute and deliver any supplement or amendment hereto
requested by the Company which satisfies the terms of the preceding sentence.
5.5 Fractional Shares. If the Company elects not to issue certificates
representing fractional shares upon exercise or redemption of Rights, the
Company shall, in lieu thereof, in the sole discretion of the Board of
Directors, either (a) evidence such fractional shares by depositary receipts
issued pursuant to an appropriate agreement between the Company and a depositary
selected by it, providing that each holder of a depositary receipt shall have
all of the rights, privileges and preferences to which such holder would be
entitled as a beneficial owner of such fractional share, or (b) sell such shares
on behalf of the holders of Rights and pay to the registered holder of such
Rights the appropriate fraction of price per share received upon such sale.
<PAGE>
5.6 Rights of Action. Subject to the terms of this Agreement (including Section
3.1(b)), rights of action in respect of this Agreement, other than rights of
action vested solely in the Rights Agent, are vested in the respective holders
of the Rights; and any holder of any Rights, without the consent of the Rights
Agent or of the holder of any other Rights, may, on such holder's own behalf and
for such holder's own benefit and the benefit of other holders of Rights,
enforce, and may institute and maintain any suit, action or proceeding against
the Company to enforce, or otherwise act in respect of, such holder's right to
exercise such holder's Rights in the manner provided in such holder's Rights
Certificate and in this Agreement. Without limiting the foregoing or any
remedies available to the holders of rights, it is specifically acknowledged
that the holders of Rights would not have an adequate remedy at law for any
breach of this Agreement and will be entitled to specific performance of the
obligations under, and injunctive relief against actual or threatened violations
of, the obligations of any Person subject to this Agreement.
5.7 Holder of Rights Not Deemed a Stockholder. No holder, as such, of any
Rights shall be entitled to vote, receive dividends or be deemed for any purpose
the holder of shares or any other securities which may at any time be issuable
on the exercise of such Rights, nor shall anything contained herein or in any
Rights Certificate be construed to confer upon the holder of any rights, as
such, any of the rights of a Stockholder of the Company or any right to vote for
the election of directors or upon any matter submitted to Stockholders at any
meeting thereof, or to give or withhold consent to any corporate action, or to
receive notice of meetings or other actions affecting Stockholders (except as
provided in Section 5.8 hereof), or to receive dividends or subscription rights,
or otherwise, until such Rights shall have been exercised or exchanged in
accordance with the provisions hereof.
<PAGE>
5.8 Notice of Proposed Actions. In case the Company shall propose after the
Separation Time and prior to the Expiration Time (i) to effect or permit (in
cases where the Company's permission is required) occurrence of any Flip-in Date
or Flip-over Transaction or Event or (ii) to effect the liquidation, dissolution
or winding up of the Company, then, in each such case, the Company shall give to
each holder of a Right, in accordance with Section 5.9 hereof, a notice of such
proposed action, which shall specify the Flip-in Date or the date on which such
Flip-over Transaction or Event, liquidation, dissolution, or winding up is to
take place, and such notice shall be as given at least 20 Business Days prior to
the date of the taking of such proposed action.
5.9 Notices. Notices or demands authorized or required by this Agreement to be
given or made by the Rights Agent or by the holder of any Rights to or on the
Company shall be sufficiently given or made if delivered or sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
Acxiom Corporation
P.O. Box 2000
301 Industrial Boulevard
Conway, Arkansas 72033-2000
Attention: Secretary
Any notice or demand authorized or required by this Agreement
to be given or made by the Company or by the holder of any Rights to or on the
Rights Agent shall be sufficiently given or made if delivered or sent by
first-class mail, postage prepaid, addressed (until another address is filed in
writing with the Company) as follows:
First Chicago Trust Company of New York
525 Washington Boulevard
<PAGE>
Suite 4660
Jersey City, New Jersey 07310
Attention: Tenders and Exchanges Administration
Notices or demands authorized or required by this Agreement to
be given or made by the Company or the Rights Agent to or on the holder of any
Rights shall be sufficiently given or made if delivered or sent by first-class
mail, postage prepaid, addressed to such holder at the address of such holder as
it appears upon the registry books of the Rights Agent or, prior to the
Separation Time, on the registry books of the transfer agent for the Common
Stock.
All such notices and demands shall be deemed to have been
given on the date of delivery thereof, if delivered by hand, and on the third
day after the mailing thereof, if mailed. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice.
5.10 Suspension of Exercisability. To the extent that the Company determines in
good faith that some action will or need be taken pursuant to Section 3.1(a),
(b), (d) or (e) or to comply with federal or state securities laws, the Company
may suspend the exercisability of the Rights for a period of up to ninety (90)
days following the date of the occurrence of the Separation Time or the Flip-in
Date in order to take such action or comply with such laws. In the event of any
such suspension, the Company shall issue as promptly as practicable a public
announcement stating that the exercisability or exchangeability of the Rights
has been temporarily suspended. Notice thereof pursuant to Section 5.9 shall not
be required.
Failure to give a notice pursuant to the provisions of this
Agreement shall not affect the validity of any action taken hereunder.
<PAGE>
5.11 Costs of Enforcement. The Company agrees that if the Company or any other
Person the securities of which are purchasable upon exercise of Rights fails to
fulfill any of its obligations pursuant to this Agreement, then the Company or
such Person will reimburse the holder of any Rights for the costs and expenses
(including legal fees) incurred by such holder in actions to enforce such
holder's rights pursuant to any Rights or this Agreement.
5.12 Successors. All the covenants and provisions of this Agreement by or for
the benefit of the Company or the Rights Agent shall bind and inure to the
benefit of their respective successors and assigns hereunder.
5.13 Benefits of this Agreement. Nothing in this Agreement shall be construed to
give to any Person other than the Company, the Rights Agent and the holders of
the Rights any legal or equitable right, remedy or claim under this Agreement;
this Agreement shall be for the sole and exclusive benefit of the Company, the
Rights Agent and the holders of the Rights.
5.14 Determination and Actions by the Board of Directors, etc. The Board of
Directors of the Company shall have the exclusive power and authority to
administer this Agreement and to exercise all rights and powers specifically
granted to the Board or to the Company, or as may be necessary or advisable in
the administration of this Agreement, including, without limitation, the right
and power to (i) interpret the provisions of this Agreement and (ii) make all
determinations deemed necessary or advisable for the administration of this
Agreement. All such actions, calculations, interpretations and determinations
(including, for purposes of clause (y) below, all omissions with respect to the
foregoing) which are done or made by the Board in good faith, shall (x) be
final, conclusive and binding on the Company, the Rights Agent, the holders of
<PAGE>
the Rights and all other parties, and (y) not subject the Board of Directors of
the Company to any liability to the holders of the Rights.
5.15 Descriptive Headings. Descriptive headings appear herein for convenience
only and shall not control or affect the meaning or construction of any of the
provisions hereof.
5.16 Governing Law. THIS AGREEMENT AND EACH RIGHT ISSUED HEREUNDER SHALL BE
DEEMED TO BE A CONTRACT MADE UNDER THE LAWS OF THE STATE OF DELAWARE AND FOR ALL
PURPOSES SHALL BE GOVERNED BY AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF SUCH
STATE APPLICABLE TO CONTRACTS TO BE MADE AND PERFORMED ENTIRELY WITHIN SUCH
STATE.
5.17 Counterparts. This Agreement may be executed in any number of counterparts
and each of such counterparts shall for all purposes be deemed to be an
original, and all such counterparts shall together constitute but one and the
same instrument.
5.18 Severability. If any term or provision hereof or the application thereof to
any circumstance shall, in any jurisdiction and to any extent, be invalid or
unenforceable, such term or provision shall be ineffective as to such
jurisdiction to the extent of such invalidity or unenforceability without
invalidation or rendering unenforceable the remaining terms and provision hereof
or the application of such term or provision to circumstances other than those
as to which it is held invalid or unenforceable.
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this
Agreement to be duly executed as of the date first above written.
ACXIOM CORPORATION
By: /s/ Catherine L. Hughes
----------------------------------------
Name: Catherine L. Hughes
Title: Secretary/General Counsel
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: /s/ Joanne Gorostiola
----------------------------------------
Name: Joanne Gorostiola
Title: Assistant Vice President
<PAGE>
EXHIBIT A
[Form of Rights Certificate]
Certificate No. Rights
----------
THE RIGHTS ARE SUBJECT TO REDEMPTION OR MANDATORY EXCHANGE, AT THE
OPTION OF THE COMPANY, ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT.
RIGHTS BENEFICIALLY OWNED BY ACQUIRING PERSONS OR AFFILIATES OR
ASSOCIATES THEREOF (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT)
OR TRANSFEREES OF ANY OF THE FOREGOING WILL BE VOID.
Rights Certificate
ACXIOM CORPORATION
This certifies that ----------------, or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the registered holder thereof, subject to the terms, provisions and
conditions of the Rights Agreement, dated as of January 28, 1998 (as amended
from time to time, the "Rights Agreement"), between Acxiom Corporation, a
Delaware corporation (the "Company"), and First Chicago Trust Company of New
York, as Rights Agent (the "Rights Agent", which term shall include any
successor Rights Agent under the Rights Agreement), to purchase from the Company
at any time after the Separation Time (as such term is defined in the Rights
Agreement) and prior to the close of business on February 9, 2008 one
one-thousandth of a fully paid share of Participating Preferred Stock, par value
$1.00 per share (the "Preferred Stock"), of the Company (subject to adjustment
as provided in the Rights Agreement) at the Exercise Price referred to below,
upon presentation and surrender of this Rights Certificate with the Form of
Election to Exercise duly executed at the principal office of the Rights Agent
in The City of New York. The Exercise Price shall initially be $100.00 per Right
and shall be subject to adjustment in certain events as provided in the Rights
Agreement.
<PAGE>
In certain circumstances described in the Rights Agreement,
the Rights evidenced hereby may entitle the registered holder thereof to
purchase securities of an entity other than the Company or securities or assets
of the Company other than Preferred Stock, all as provided in the Rights
Agreement.
This Rights Certificate is subject to all of the terms,
provisions and conditions of the Rights Agreement, which terms, provisions and
conditions are hereby incorporated herein by reference and made a part hereof
and to which Rights Agreement reference is hereby made for a full description of
the rights, limitations of rights, obligations, duties and immunities hereunder
of the Rights Agent, the Company and the holders of the Rights Certificates.
Copies of the Rights Agreement are on file at the principal office of the
Company and are available without cost upon written request.
This Rights Certificate, with or without other Rights
Certificates, upon surrender at the office of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor evidencing an aggregate number of Rights equal to the
aggregate number of Rights evidenced by the Rights Certificate or Rights
Certificates surrendered. If this Rights Certificate shall be exercised in part,
the registered holder shall be entitled to receive, upon surrender hereof,
another Rights Certificate or Rights Certificates for the number of whole Rights
not exercised.
Subject to the provisions of the Rights Agreement, each Right
evidenced by this Certificate may be (a) redeemed by the Company under certain
circumstances, at its option, at a redemption price of $0.01 per Right, or (b)
exchanged by the Company under certain circumstances, at its option, for one
share of Common Stock or one-thousandth of a share of
<PAGE>
Preferred Stock per Right (or, in certain cases, other securities or assets of
the Company), subject in each case to adjustment in certain events as provided
in the Rights Agreement.
No holder of this Rights Certificate, as such, shall be
entitled to vote or receive dividends or be deemed for any purpose the holder of
any securities which may at any time be issuable on the exercise hereof, nor
shall anything contained in the Rights Agreement or herein be construed to
confer upon the holder hereof, as such, any of the rights of a Stockholder of
the Company or any right to vote for the election of directors or upon any
matter submitted to Stockholders at any meeting thereof, or to give or withhold
consent to any corporate action, or to receive notice of meetings or other
actions affecting the Stockholders (except as provided in the Rights Agreement),
or to receive dividends or subscription rights, or otherwise, until the Rights
evidenced by this Rights Certificate shall have been exercised or exchanged as
provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for
any purpose until it shall have been countersigned by the Rights Agent.
<PAGE>
WITNESS the facsimile signature of the proper officers of the
Company and its corporate seal.
Date:
----------------- ----, --------
ATTEST: ACXIOM CORPORATION
By:
- ---------------------------------- ------------------------------------
Secretary
Countersigned:
FIRST CHICAGO TRUST COMPANY OF NEW YORK
By:
-------------------------------
Authorized Signature
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such holder desires
to transfer this Rights Certificate.)
FOR VALUE RECEIVED --------------------- hereby sells, assigns
and transfers unto -------------------------------------------------------------
(Please print name and address of transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint ------------------- Attorney,
to transfer the within Rights Certificate on the books of the within-named
Company, with full power of substitution.
Dated:
--------------------, ---------
Signature Guaranteed: ----------------------------------------
Signature
(Signature must correspond to name as
written upon the face of this Rights
Certificate in every particular,
without alteration or enlargement or any
change whatsoever)
Signatures must be guaranteed by a member firm of a registered national
securities exchange, a member of the National Association of Securities Dealers,
Inc., or a commercial bank or trust company having an office or correspondent in
the United States.
<PAGE>
- --------------------------------------------------------------------------------
(To be completed if true)
The undersigned hereby represents, for the benefit of all holders of Rights and
shares of Common Stock, that the Rights evidenced by this Rights Certificate are
not, and, to the knowledge of the undersigned, have never been, Beneficially
Owned by an Acquiring Person or an Affiliate or Associate thereof (as defined in
the Rights Agreement).
----------------------------------------
Signature
- --------------------------------------------------------------------------------
NOTICE
In the event the certification set forth above is not
completed in connection with a purported assignment, the Company will deem the
Beneficial Owner of the Rights evidenced by the enclosed Rights Certificate to
be an Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement) or a transferee of any of the foregoing and accordingly will
deem the Rights evidenced by such Rights Certificate to be void and not
transferable or exercisable.
<PAGE>
(To be attached to each Rights Certificate)
FORM OF ELECTION TO EXERCISE
(To be executed if holder desires to exercise the
Rights Certificate.)
TO: [ ]
The undersigned hereby irrevocably elects to exercise
- -------------------- whole Rights represented by the attached Rights Certificate
to purchase the shares of Common or Participating Preferred Stock issuable upon
the exercise of such Rights and requests that certificates for such shares be
issued in the name of:
-----------------------------------------------
Address:
-----------------------------------------------
-----------------------------------------------
Social Security or Other Taxpayer
Identification Number--------------------------
If such number of Rights shall not be all the Rights evidenced by this Rights
Certificate, a new Rights Certificate for the balance of such Rights shall be
registered in the name of and delivered to:
-----------------------------------------------
Address:
-----------------------------------------------
-----------------------------------------------
Social Security or Other Taxpayer
Identification Number--------------------------
Dated:
---------------------, -------
Signature Guaranteed: ----------------------------------------
Signature
(Signature must correspond to name as
written upon the face of this Rights
Certificate in every particular, without
alteration or enlargement or any change
whatsoever)
<PAGE>
Signatures must be guaranteed by a member firm of a registered
national securities exchange, a member of the National Association of Securities
Dealers, Inc., or a commercial bank of trust company having an office or
correspondent in the United States.
- --------------------------------------------------------------------------------
(To be completed if true)
The undersigned hereby represents, for the benefit of all
holders of Rights and shares of Common Stock, that the Rights evidenced by this
Rights Certificate are not, and, to the knowledge of the undersigned, have never
been, Beneficially Owned by an Acquiring Person or an Affiliate or Associate
thereof (as defined in the Rights Agreement).
----------------------------------------
Signature
- --------------------------------------------------------------------------------
NOTICE
In the event the certification set forth above is not
completed in connection with a purported exercise, the Company will deem the
Beneficial Owner of the Rights evidenced by the attached Rights Certificate to
be an Acquiring Person or an Affiliate or Associate thereof (as defined in the
Rights Agreement) or a transferee of any of the foregoing and accordingly will
deem the Rights evidenced by such Rights Certificate to be void and not
transferable or exercisable.
<PAGE>
EXHIBIT B
FORM OF CERTIFICATE OF DESIGNATION AND TERMS
OF PARTICIPATING PREFERRED STOCK OF ACXIOM CORPORATION
Pursuant to Section 151 of the General
Corporation Law of the State of Delaware
We, the undersigned, Charles D. Morgan and Catherine L. Hughes,
the President and Secretary, respectively, of Acxiom Corporation, a Delaware
corporation (the "Corporation"), do hereby certify as follows:
Pursuant to authority granted by Article FOURTH of the Restated
Certificate of Incorporation of the Corporation and in accordance with the
provisions of Section 151 of the General Corporation Law of the State of
Delaware, the Board of Directors of the Corporation has adopted the following
resolutions fixing the designation and certain terms, powers, preferences and
other rights of a new series of the Corporation's Preferred Stock, par value
$1.00 per share, and certain qualifications, limitations and restrictions
thereon:
RESOLVED, that there is hereby established a series
of Preferred Stock, par value $1.00 per share, of the Corporation, and
the designation and certain terms, powers, preferences and other rights
of the shares of such series, and certain qualifications, limitations
and restrictions thereon, are hereby fixed as follows:
(i) The distinctive serial designation of this series
shall be "Participating Preferred Stock" (hereinafter called
"this Series"). Each share of this Series shall be identical
in all respects with the other shares of this Series except as
to the dates from and after which dividends thereon shall be
cumulative.
(ii) The number of shares in this Series shall
initially be 200,000, which number may from time to time be
increased or decreased (but not below the
<PAGE>
number then outstanding) by the Board of Directors. Shares of
this Series purchased by the Corporation shall be cancelled
and shall revert to authorized but unissued shares of
Preferred Stock undesignated as to series. Shares of this
Series may be issued in fractional shares, which fractional
shares shall entitle the holder, in proportion to such
holder's fractional share, to all rights of a holder of a
whole share of this Series.
(iii) The holders of full or fractional shares of
this Series shall be entitled to receive, when and as declared
by the Board of Directors, but only out of funds legally
available therefor, dividends, (A) on each date that dividends
or other distributions (other than dividends or distributions
payable in Common Stock of the Corporation) are payable on or
in respect of Common Stock comprising part of the Reference
Package (as defined below), in an amount per whole share of
this Series equal to the aggregate amount of dividends or
other distributions (other than dividends or distributions
payable in Common Stock of the Corporation) that would be
payable on such date to a holder of the Reference Package (as
hereinafter defined) and (B) on the last day of March, June,
September and December in each year, in an amount per whole
share of this Series equal to the excess (if any) of $2.50
over the aggregate dividends paid per whole share of this
Series during the three month period ending on such last day.
Each such dividend shall be paid to the holders of record of
shares of this Series on the date, not exceeding sixty days
preceding such dividend or distribution payment date, fixed
for the purpose by the Board of Directors in advance of
payment of each particular dividend or distribution. Dividends
on each full and each fractional share of this Series shall be
cumulative from the date such full or fractional share is
originally issued; provided that any such full or fractional
share originally issued after a dividend record date and on or
prior to the dividend payment date to which such record date
relates shall not be entitled to receive the dividend payable
on such dividend payment date or any amount in respect of the
period from such original issuance to such dividend payment
date.
The term "Reference Package" shall initially mean
1,000 shares of Common Stock, $.10 par value per share
("Common Stock"), of the Corporation. In the event the
Corporation shall at any time after the close of business on
February 9, 1998 (A) declare of pay a dividend on any Common
Stock payable in Common Stock, (B) subdivide any Common Stock
or (C) combine any Common Stock into a smaller number of
shares, then and in each such case the Reference Package after
such event shall be the Common Stock that a holder of the
Reference Package immediately prior to such event would hold
thereafter as a result thereof.
<PAGE>
Holders of shares of this Series shall not be
entitled to any dividends, whether payable in cash, property
or stock, in excess of full cumulative dividends, as herein
provided on this Series.
So long as any shares of this series are outstanding,
no dividends (other than a dividend in Common Stock or in any
other stock ranking junior to this Series as to dividends and
upon liquidation) shall be declared or paid or set aside for
payment or other distribution declared or made upon the Common
Stock or upon any other stock ranking junior to this Series as
to dividends or upon liquidation, nor shall any Common Stock
nor any other stock of the Corporation ranking junior to or on
a parity with this Series as to dividends or upon liquidation
be redeemed, purchased or otherwise acquired for any
consideration (or any moneys be paid to or made available for
a sinking fund for the redemption of any shares of any such
stock) by the Corporation (except by conversion into or
exchange for stock of the Corporation ranking junior to this
Series as to dividends and upon liquidation), unless, in each
case, the full cumulative dividends (including the dividend to
be due upon payment of such dividend, distribution,
redemption, purchase or other acquisition) on all outstanding
shares of this Series shall have been, or shall
contemporaneously be, paid.
(iv) In the event of any merger, consolidation,
reclassification or other transaction in which the shares of
Common Stock are exchanged for or changed into other stock or
securities, cash and/or any other property, then in any such
case the shares of this Series shall at the same time be
similarly exchanged or changed in an amount per whole share
equal to the aggregate amount of stock, securities, cash
and/or any other property (payable in kind), as the case may
be, that a holder of the Reference Package would be entitled
to receive as a result of such transaction.
(v) In the event of any liquidation, dissolution or
winding up of the affairs of the Corporation, whether
voluntary or involuntary, the holders of full and fractional
shares of this Series shall be entitled, before any
distribution or payment is made on any date to the holders of
the Common Stock or any other stock of the Corporation ranking
junior to this Series upon liquidation, to be paid in full an
amount per whole share of this Series equal to the greater of
(A) $100 or (B) the aggregate amount distributed or to be
distributed prior to such date in connection with such
liquidation, dissolution or winding up to a holder of the
Reference Package (such greater amount being hereinafter
referred to as the "Liquidation Preference"), together with
accrued dividends to such distribution or payment date,
whether or not earned or declared. If such payment shall have
been made in full to all holders of shares of this Series, the
holders of shares of this Series as such shall have no right
or claim to any of the remaining assets of the Corporation.
<PAGE>
In the event the assets of the Corporation available
for distribution to the holders of shares of this Series upon
any liquidation, dissolution or winding up of the Corporation,
whether voluntary or involuntary, shall be insufficient to pay
in full all amounts to which such holders are entitled
pursuant to the first paragraph of this Section (v), no such
distribution shall be made on account of any shares of any
other class or series of Preferred Stock ranking on a parity
with the shares of this Series upon such liquidation,
dissolution or winding up unless proportionate distributive
amounts shall be paid on account of the shares of this Series,
ratably in proportion to the full distributable amounts for
which holders of all such parity shares are respectively
entitled upon such liquidation, dissolution or winding up.
Upon the liquidation, dissolution or winding up of
the Corporation, the holders of shares of this Series then
outstanding shall be entitled to be paid out of assets of the
Corporation available for distribution to its Stockholders all
amounts to which such holders are entitled pursuant to the
first paragraph of this Section (v) before any payment shall
be made to the holders of Common Stock or any other stock of
the Corporation ranking junior upon liquidation to this
Series.
For the purposes of this Section (v), the
consolidation or merger of, or binding share exchange by, the
Corporation with any other corporation shall not be deemed to
constitute a liquidation, dissolution or winding up of the
Corporation.
(vi) The shares of this Series shall not be
redeemable.
(vii) In addition to any other vote or consent of
Stockholders required by law or by the Restated Certificate of
Incorporation, as amended, of the Corporation, each whole
share of this Series shall, on any matter, vote as a class
with any other capital stock comprising part of the Reference
Package and voting on such matter and shall have the number of
votes thereon that a holder of the Reference Package would
have.
IN WITNESS WHEREOF, the undersigned have signed and attested
this certificate on the 28th day of January, 1998.
----------------------------------------
President
Attest:
- -----------------------------------
Secretary
<PAGE>
SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
FORM 8-A/A
Amendment Number One
FOR REGISTRATION OF CERTAIN CLASSES OF SECURITIES
PURSUANT TO SECTION 12(b) OR (g) OF THE
SECURITIES EXCHANGE ACT OF 1934
Acxiom Corporation
------------------------------------------------------------------
(Exact Name of Registrant as Specified in its Charter)
Delaware 71-0581897
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(State of Incorporation (I.R.S. Employer
or Organization) Identification No.)
P.O. Box 2000, 301 Industrial Blvd., Conway, Arkansas 72033-2000
------------------------------------------------------------------
(Address of Principal Executive Offices) (Zip Code)
If this form relates to the registration of a class of securities pursuant to
Section 12(b) of the Exchange Act and is effective pursuant to General
Instruction A.(c), please check the following box. ( )
If this form relates to the registration of a class of securities pursuant
to Section 12(g) of the Exchange Act and is effective pursuant to General
Instruction A.(d), please check the following box. (X)
Securities Act registration statement file number to which this form
relates: N/A
Securities to be registered pursuant to Section 12(b) of the Act:
Title of each class Name of each exchange on which
to be so registered each class is to be registered
------------------- ------------------------------
None None
Securities to be registered pursuant to Section 12(g) of the Act:
Preferred Stock Purchase Rights
------------------------------------------------------------------
Title of Class
ITEM 1. DESCRIPTION OF REGISTRANT'S SECURITIES TO BE REGISTERED.
On January 28, 1998, the Board of Directors of Acxiom Corporation, a
Delaware corporation (the "Company"), declared a dividend of one right (a
"Right") for each outstanding share of common stock, par value $.10 per share
("Common Stock"), of the Company held of record at the close of business on
February 9, 1998, (the "Record Time"), or issued thereafter and prior to the
Separation Time (as hereinafter defined) and thereafter pursuant to options and
convertible or exchangeable securities outstanding at the Separation Time. The
Rights were issued pursuant to a Rights Agreement, dated as of January 28,
1998, between the Company and First Chicago Trust Company of New York, as
Rights Agent (the "Rights Agent"), as the same was amended by an Amendment
Number One to the Rights Agreement dated as of May 26, 1998, and as may be
further amended from time to time (the "Rights Agreement"). Each Right entitles
its registered holder to purchase from the Company, after the Separation Time,
one one-thousandth of a share of Participating Preferred Stock, par value $1.00
per share ("Preferred Stock"), for $100.00 (the "Exercise Price"), subject to
adjustment. The Preferred Stock is designed so that each one one-thousandth of
a share of Preferred Stock has economic and voting terms similar to those of
one share of Common Stock.
The Rights will be evidenced by the Common Stock certificates until
the close of business on the earlier of (either, the "Separation Time") (i) the
tenth business day (or such later date as the Board of Directors of the Company
may from time to time fix by resolution adopted prior to the Separation Time
that would otherwise have occurred) after the date on which any Person (as
defined in the Rights Agreement) commences a tender or exchange offer which, if
consummated, would result in such Person's becoming an Acquiring Person, as
defined below, and (ii) the first date (the "Flip-in Date") of public
announcement by the Company or an Acquiring Person that a Person has become an
Acquiring Person; provided that if the foregoing results in the Separation Time
being prior to the Record Time, the Separation Time shall be the Record Time;
and provided further that if a tender or exchange offer referred to in clause
(i) is cancelled, terminated or otherwise withdrawn prior to the Separation
Time without the purchase of any shares of stock pursuant thereto, such offer
shall be deemed never to have been made.
An Acquiring Person is any Person having Beneficial Ownership (as
defined in the Rights Agreement) of 20% or more of the outstanding shares of
Voting Stock, which term shall not include (i) the Company, any wholly-owned
subsidiary of the Company or any employee stock ownership or other employee
benefit plan of the Company, (ii) any person who is the Beneficial Owner of 20%
or more of the outstanding Voting Stock as of the date of the Rights Agreement
or who shall become the Beneficial Owner of 20% or more of the outstanding
Voting Stock solely as a result of an acquisition of Voting Stock by the
Company, until such time as such Person acquires additional Voting Stock, other
than through a dividend or stock split, (iii) any Person who becomes an
Acquiring Person without any plan or intent to seek or affect control of the
Company if such Person, upon notice by the Company, promptly divests sufficient
securities such that such 20% or greater Beneficial Ownership ceases or (iv)
any Person who Beneficially Owns shares of Voting Stock consisting solely of
(A) shares of Voting Stock acquired pursuant to the grant or exercise of an
option granted by the Company in connection with an agreement to merge with, or
acquire, the Company at a time at which there is no Acquiring Person, (B)
shares of Voting Stock owned by such Person and its Affiliates and Associates
at the time of such grant and (C) shares of Voting Stock, amounting to less
than 1% of the outstanding Voting Stock, acquired by Affiliates and Associates
of such Person after the time of such grant; and provided, further, however,
that May & Speh, Inc. ("May & Speh") and its Affiliates and Associates shall
not be deemed to be an Acquiring Person as a result of either (x) the grant of
the Option (as such term is defined in the Stock Option Agreement, dated as of
May 26, 1998 between the Company and May & Speh (the "Stock Option Agreement"))
pursuant to the Stock Option Agreement, or at any time following the exercise
thereof and the issuance of shares of Common Stock in accordance with the terms
of the Stock Option Agreement, (y) the grant of the Proxy, dated as of May 26,
1998, to May & Speh by Charles D. Morgan, or at any time following the delivery
and execution thereof or (z) the grant of certain additional proxies with
respect to shares of Common Stock owned by certain other stockholders of the
Company contemplated by the Agreement and Plan of Merger, dated as of May 26,
1998, among the Company, ACX Acquisition Co., Inc. and May & Speh. "Voting
stock" means shares of capital stock of the Company entitled to vote generally
in the election of directors.
The Rights Agreement provides that, until the Separation Time, the
Rights will be transferred with and only with the Common Stock. Common Stock
certificates issued after the Record Time but prior to the Separation Time
shall evidence one Right for each share of Common Stock represented thereby and
shall contain a legend incorporating by reference the terms of the Rights
Agreement (as such may be amended from time to time). Notwithstanding the
absence of the legend, certificates evidencing shares of Common Stock
outstanding at the Record Time shall also evidence one Right for each share of
Common Stock evidenced thereby. Promptly following the Separation Time,
separate certificates evidencing the Rights ("Rights Certificates") will be
mailed to holders of record of Common Stock at the Separation Time.
The Rights will not be exercisable until the Business Day (as defined
in the Rights Agreement) following the Separation Time. The Rights will expire
on the earliest of (i) the Exchange Time (as defined below), (ii) the close of
business on February 9, 2008, (iii) the date on which the Rights are redeemed
as described below and (iv) upon the merger of the Company into another
corporation pursuant to an agreement entered into when there is no Acquiring
Person (in any such case, the "Expiration Time").
The Exercise Price and the number of Rights outstanding, or in
certain circumstances the securities purchasable upon exercise of the Rights,
are subject to adjustment from time to time to prevent dilution in the event of
a Common Stock dividend on, or a subdivision or a combination into a smaller
number of shares of, Common Stock, or the issuance or distribution of any
securities or assets in respect of, in lieu of or in exchange for Common Stock.
In the event that prior to the Expiration Time a Flip-in Date occurs,
the Company shall take such action as shall be necessary to ensure and provide
that each Right (other than Rights Beneficially Owned by the Acquiring Person
or any affiliate or associate thereof, which Rights shall become void) shall
constitute the right to purchase from the Company, upon the exercise thereof in
accordance with the terms of the Rights Agreement, that number of shares of
Common Stock or Preferred Stock of the Company having an aggregate Market Price
(as defined in the Rights Agreement), on the date of the public announcement of
an Acquiring Person's becoming such (the "Stock Acquisition Date") that gave
rise to the Flip-in Date, equal to twice the Exercise Price for an amount in
cash equal to the then current Exercise Price.
In addition, the Board of Directors of the Company may, at its
option, at any time after a Flip-in Date and prior to the time that an
Acquiring Person becomes the Beneficial Owner of more than 50% of the
outstanding shares of Voting Stock, elect to exchange all (but not less than
all) the then outstanding Rights (other than Rights Beneficially Owned by the
Acquiring Person or any affiliate or associate thereof, which Rights become
void) for shares of Common Stock at an exchange ratio of one share of Common
Stock per Right, appropriately adjusted to reflect any stock split, stock
dividend or similar transaction occurring after the date of the Separation Time
(the "Exchange Ratio"). Immediately upon such action by the Board of Directors
(the "Exchange Time"), the right to exercise the Rights will terminate and each
Right will thereafter represent only the right to receive a number of shares of
Common Stock equal to the Exchange Ratio.
Whenever the Company shall become obligated to issue shares of Common
Stock upon exercise of or in exchange for Rights, the Company, at its option,
may substitute therefor shares of Preferred Stock, at a ratio of one
one-thousandth of a share of Preferred Stock for each share of Common Stock so
issuable.
In the event that prior to the Expiration Time the Company enters
into, consummates or permits to occur a transaction or series of transactions
after the time an Acquiring Person has become such in which, directly or
indirectly, (i) the Company shall consolidate or merge or participate in a
binding share exchange with any other Person if, at the time of the
consolidation, merger or share exchange or at the time the Company enters into
an agreement with respect to such consolidation, merger or share exchange, the
Acquiring Person controls the Board of Directors of the Company, or (ii) the
Company shall sell or otherwise transfer (or one or more of its subsidiaries
shall sell or otherwise transfer) directly or by sale of stock, assets or
control of assets (A) aggregating more than 50% of the assets (measured by
either book value or fair market value) as of the end of the most recently
completed fiscal year or (B) generating more than 50% of the operating income
or cash flow during the most recently completed fiscal year, of the Company and
its subsidiaries (taken as a whole) to any other Person (other than the Company
or one or more of its wholly owned subsidiaries) or to two or more such Persons
which are affiliated or otherwise acting in concert, if, at the time of such
sale or transfer of assets or at the time the Company (or any such subsidiary)
enters into an agreement with respect to such sale or transfer , the Acquiring
Person controls the Board of Directors of the Company, then any such
transactions or events shall constitute a "Flip-over Transaction or Event"
under the Rights Agreement.
The Company shall take such action as shall be necessary to ensure,
and shall not enter into, consummate or permit to occur, such Flip- over
Transaction or Event until it shall have duly entered into a binding and
enforceable supplemental agreement with the Person engaging in such Flip-over
Transaction or Event or the parent corporation thereof (the "Flip-over
Entity"), for the benefit of the holders of the Rights, providing, that upon
consummation or occurrence of the Flip-over Transaction or Event (i) each Right
shall thereafter constitute the right to purchase from the Flip-over Entity,
upon exercise thereof in accordance with the terms of the Rights Agreement,
that number of shares of common stock of the Flip-over Entity having an
aggregate Market Price on the date of consummation or occurrence of such
Flip-over Transaction or Event equal to twice the Exercise Price for an amount
in cash equal to the then current Exercise Price and (ii) the Flip-over Entity
shall thereafter be liable for, and shall assume, by virtue of such Flip-over
Transaction or Event and such supplemental agreement, all the obligations and
duties of the Company pursuant to the Rights Agreement, but the Company's
obligations under the Rights Agreement will not be discharged and will continue
in full. For purposes of the foregoing description, the term "Acquiring Person"
shall include any Acquiring Person and its Affiliates and Associates and others
with whom it is acting in concert counted together as a single Person.
The Board of Directors of the Company may, at its option, at any time
prior to the close of business on the Flip-in Date, redeem all (but not less
than all) the then outstanding Rights at a price of $.0l per Right (the
"Redemption Price"), as provided in the Rights Agreement. Immediately upon the
action of the Board of Directors of the Company electing to redeem the Rights,
without any further action and without any notice, the right to exercise the
Rights will terminate and each Right will thereafter represent only the right
to receive the Redemption Price in cash for each Right so held.
The holders of Rights will, solely by reason of their ownership of
Rights, have no rights as stockholders of the Company, including without
limitation, the right to vote or to receive dividends.
The Rights have certain anti-takeover effects and can cause
substantial dilution to a person or group that acquires 20% of more of the
Common Stock on terms not approved by the Board of Directors of the Company.
The Rights should not, however, interfere with any merger or other business
combination that the Board finds to be in the best interests of the Company and
its stockholders because the Rights can be redeemed by the Board on or prior to
the close of business on the Flip-in Date, before the consummation of such
transaction.
As of May 26, 1998, there were approximately 52,446,883 shares of
Common Stock issued and outstanding. As long as the Rights are attached to the
Common Stock, the Company will issue one Right with each new share of Common
Stock so that all such shares will have Rights attached.
The Rights Agreement, the forms of Rights Certificate and Election to
Exercise and the form of Certificate of Designation and Terms of the
Participating Preferred Stock are attached hereto as exhibits and are
incorporated herein by reference. The foregoing description of the Rights is
qualified in its entirety by reference to such exhibits.
A copy of the Rights Agreement is available free of charge from the
Company. This summary description of the Rights does not purport to be complete
and is qualified in its entirety by reference to the Rights Agreement, which is
hereby incorporated herein by reference.
ITEM 2. EXHIBITS.
4.1* Rights Agreement dated as of June 25, 1997, including Exhibit
A, "Form of Right Certificate"; Exhibit B, "Form of
Certificate of Designation and Terms of Participating
Preferred Stock."
4.2 Amendment Number One to Rights Agreement, dated as of May 26,
1998.
------------------
* Previously filed.
SIGNATURES
Pursuant to the requirements of Section 12 of the Securities Exchange
Act of 1934, the Registrant has duly caused this registration statement
amendment to be signed on its behalf by the undersigned, thereunto duly
authorized.
Date: June 4, 1998
ACXIOM CORPORATION
By: /s/ Catherine L. Hughes
----------------------------------
Name: Catherine L. Hughes
Title: Secretary and General Counsel
<PAGE>
AMENDMENT TO RIGHTS AGREEMENT
Amendment Number One, dated as of May 26, 1998, to the Rights
Agreement, dated as of January 28, 1998 (the "Rights Agreement"), between
Acxiom Corporation, a Delaware corporation (the "Company"), and First Chicago
Trust Company of New York, as Rights Agent (the "Rights Agent").
WHEREAS, the Company and the Rights Agent entered into the Rights
Agreement specifying the terms of the Rights (as defined therein);
WHEREAS, the Company desires to amend the Rights Agreement in
accordance with Section 5.4 of the Rights Agreement;
WHEREAS, the Company proposes to enter into an Agreement and Plan
of Merger, dated as of May 26, 1998 (the "Merger Agreement"), among the
Company, ACX Acquisition Co., Inc. and May & Speh, Inc. ("May & Speh");
WHEREAS, as a condition to the Merger Agreement and in order to
induce May & Speh to enter into the Merger Agreement, the Company proposes to
enter into a Stock Option Agreement, dated as of May 26, 1998, between the
Company and May & Speh (the "Stock Option Agreement"), pursuant to which the
Company will grant May & Speh an option (the "Option") to purchase up to 19.9%
of the number of shares (the "Option Shares") of common stock, par value $.10
per share, ("Common Stock"), of the Company issued and outstanding immediately
prior to the grant of the Option;
WHEREAS, as a condition to the Merger Agreement and in order to
induce May & Speh to enter into the Merger Agreement, Charles D. Morgan, a
holder of shares of Common Stock ("Stockholder"), proposes to enter into an
irrevocable proxy, dated as of May 26, 1998, between Stockholder and May &
Speh, pursuant to which Stockholder is granting May & Speh an irrevocable proxy
(the "Proxy") to vote such shares of Common Stock; and
WHEREAS, the Board of Directors of the Company has determined it
advisable and in the best interest of its stockholders to amend the Rights
Agreement to enable the Company to enter into the Merger Agreement and Stock
Option Agreement and consummate the transactions contemplated thereby without
causing May & Speh to become an "Acquiring Person" (as defined in the Rights
Agreement).
NOW, THEREFORE, in consideration of the premises and mutual
agreements set forth herein and in the Rights Agreement, the parties hereby
agree as follows:
Section 1. Definitions. Capitalized terms used and not
otherwise defined herein shall have the meaning assigned to such terms in
the Rights Agreement.
Section 2. Amendments to the Rights Agreement. The Rights
Agreement is hereby amended as set forth in this Section 2.
(a) Section 1.1 of the Rights Agreement is hereby amended by
deleting the first sentence there of and inserting in lieu thereof the
following:
"Acquiring Person" shall mean any Person who is Beneficial Owner
of 20% or more of the outstanding shares of Voting Stock (as hereinafter
defined); provided, however, that the term "Acquiring Person" shall not include
any Person (i) who is the Beneficial Owner of 20% or more of the outstanding
Shares of Common Stock on the date of this Agreement or who shall become the
Beneficial Owner (as hereinafter defined) of 20% or more of the outstanding
shares of Voting Stock solely as a result of an acquisition by the Company of
shares of Voting Stock, until such time hereafter or thereafter as any of such
Persons shall become the Beneficial Owner (other than by means of a stock
dividend or stock split) of any additional shares of Voting Stock, (ii) who is
the Beneficial Owner of 20% or more of the outstanding shares of Voting Stock
but who acquired Beneficial Ownership (as hereinafter defined) of shares of
Voting Stock without plan or intention to seek or affect control of the
Company, if such Person (as hereinafter defined), upon notice by the Company,
promptly enters into an irrevocable commitment promptly to divest, and
thereafter promptly divests (without exercising or retaining any power,
including voting, with respect to such shares), sufficient shares of Voting
Stock (or securities convertible into, exchangeable into or exercisable for
Voting Stock) so that such Person ceases to be the Beneficial Owner of 20% or
more of the outstanding shares of Voting Stock; and (iii) who Beneficially Owns
shares of Voting Stock consisting solely of one or more of (A) shares of Voting
Stock Beneficially Owned pursuant to the grant or exercise of an option granted
to such Person by the Company in connection with an agreement to merge with, or
acquire, the Company at a time at which there is no Acquiring Person, (B)
shares of Voting Stock (or securities convertible into, exchangeable into or
exercisable for Voting Stock), Beneficially Owned by such Person or its
Affiliates (as hereinafter defined) or Associates (as hereinafter defined) at
the time of grant of such option or (C) shares of Voting Stock (or securities
convertible into, exchangeable into or exercisable for Voting Stock) acquired
by Affiliates or Associates of such Person after the time of such grant, which,
in the aggregate, amount to less than 1% of the outstanding shares of Voting
Stock; and provided, further, however, that May & Speh, Inc. ("May & Speh") and
its Affiliates and Associates shall not be deemed to be an Acquiring Person as
a result of either (x) the grant of the Option (as such term is defined in the
Stock Option Agreement, dated as of May 26, 1998 between the Company and May &
Speh (the "Stock Option Agreement")) pursuant to the Stock Option Agreement, or
at any time following the exercise thereof and the issuance of shares of Common
Stock in accordance with the terms of the Stock Option Agreement, (y) the grant
of the Proxy, dated as of May 26, 1998, to May & Speh by Charles D. Morgan, or
at any time following the delivery and execution thereof or (z) the grant of
certain additional proxies with respect to shares of Common Stock owned by
certain other stockholders of the Company contemplated by the Agreement and
Plan of Merger, dated as of May 26, 1998, among the Company, May & Speh and ACX
Acquisition Co., Inc.
Section 3. Miscellaneous.
(a) The term "Agreement" as used in the Rights Agreement shall
be deemed to refer to the Rights Agreement as amended hereby.
(b) The foregoing amendment shall be effective as of the date
first above written, and, except as set forth herein, the Rights Agreement
shall remain in full force and effect and shall be otherwise unaffected hereby.
(c) This Amendment may be executed in two or more counterparts,
each of which shall be deemed to be an original, but all for which together
shall constitute one and the same instrument.
(d) This Amendment shall be deemed to be a contract made under
the laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such State applicable to contracts to
be made and performed entirely within such State.
IN WITNESS WHEREOF, the parties hereto have caused this Amendment
Number One to be duly executed and attested, all as of the day and year first
above written.
Attest: ACXIOM CORPORATION
By: /s/ Catherine L. Hughes By: /s/ Charles D. Morgan
------------------------ ---------------------------
Name: Catherine L. Hughes Name: Charles D. Morgan
Title: Secretary Title: President
Attest: FIRST CHICAGO TRUST COMPANY OF NEW YORK
By: /s/ T. Marshall By: /s/ Peter Sablich
------------------------ ------------------------------------
Name: T. Marshall Name: Peter Sablich
Title: Account Officer Title: Vice President
<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 20. 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 Charter 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 Delaware corporate 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 Charter 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.
II-1
<PAGE>
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.
ITEM 21. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
*2 Acquisition Agreement Between Acxiom Corporation and CGA Acquisition
Corporation #1; CGA Acquisition Corporation #2; and CGA Acquisition
Corporation #3; and Computer Graphics of Arizona, Inc.; CG Marketing
of Arizona, Inc.; Enstech Resources, Inc.; Norman, Riley & Associates,
Inc.; and Vi-Tech, Inc.; and Ronald L. Jensen and James K. Martens,
dated as of December 31, 1998, as amended April 12, 1999 (attached as
Annex A to the information statement/prospectus included in this
Registration Statement).
**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 By-laws 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, 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
II-2
<PAGE>
Form 8-K dated June 4, 1998, Commission File No. 0-13163, and
incorporated herein by reference).
***5 Opinion of Catherine L. Hughes, Esq., General Counsel of Acxiom,
regarding the validity of the securities being registered.
*8 Opinion of Hughes Hubbard & Reed LLP, counsel to the Acquired
Companies, concerning certain federal income tax consequences of the
mergers.
*11 Statement regarding computation of earnings per share.
*23.1 Consent of KPMG LLP.
***23.2 Consent of Catherine L. Hughes, Esq., General Counsel of Acxiom
(included in the opinion filed as Exhibit 5 to this Registration
Statement and incorporated herein by reference).
*23.3 Consent of Hughes Hubbard & Reed LLP (included in the opinion filed as
Exhibit 8 to this Registration Statement and incorporated herein by
reference).
*23.4 Consent of PricewaterhouseCoopers LLP.
***24 Powers of Attorney
- -----------
* Filed herewith.
** Incorporated herein by reference as indicated.
*** Previously filed.
ITEM 22. UNDERTAKINGS.
(a) The undersigned registrant hereby undertakes:
(1) To file, during any period in which offers or sales are being
made, a post-effective amendment to this registration statement:
(i) to include any prospectus required by Section 10(a)(3) of the
Securities Act of 1933;
(ii) to reflect in the prospectus any facts or events arising
after the effective date of the registration statement (or the most
recent post-effective amendment thereof) which individually or in the
aggregate, represent a fundamental change in the information set forth
II-3
<PAGE>
in the registration statement. Notwithstanding the foregoing, any
increase or decrease in volume of securities offered (if the total
dollar value of securities offered would not exceed that which was
registered) and any deviation from the low on high end of the
estimated maximum offering range may be reflected in the form of
prospectus filed with the Commission pursuant to Rule 424(b) if, in
the aggregate, the changes in volume and price represent no more than
a 20% change in the maximum aggregate offering price set forth in the
"Calculation of Registration Fee" table in the effective registration
statement; and
(iii) to include any material information with respect to the
plan of distribution not previously disclosed in the Registration
Statement or any material change to such information in the
Registration Statement.
(2) That, for the purpose of determining any liability under the
Securities Act of 1933, each such post-effective amendment 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.
(3) To remove from registration by means of a post-effective amendment
any of the securities being registered which remain unsold at the
termination of the offering.
(4) That prior to any public reoffering of the securities registered
hereunder through use of a prospectus which is a part of this registration
statement, by any person or party who is deemed to be an underwriter within
the meaning of Rule 145(c), such reoffering prospectus will contain the
information called for by the applicable registration form with respect to
reofferings by persons who may be deemed underwriters, in addition to the
information called for by the other items of the applicable form.
(5) That every prospectus (i) that is filed pursuant to paragraph
(4)immediately preceding, or (ii) that purports to meet the requirements of
Section 10(a)(3) of the Securities Act of 1933 and is used in connection
with an offering of securities subject to Rule 415, will be filed as a part
of an amendment to the registration statement and will not be used until
such amendment is effective, and that, for purposes of determining any
liability under the Securities Act of 1933, each such post-effective
amendment 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-4
<PAGE>
(b) The undersigned registrant hereby undertakes to respond to requests for
information that is incorporated by reference into the Information
Statement/Prospectus pursuant to Item 4, 10(b), 11 or 13 of this Form, within
one business day of receipt of such request, and to send the incorporated
documents by first class mail or other equally prompt means. This includes
information contained in documents filed subsequent to the effective date of the
registration statement through the date of responding to the request.
(c) The undersigned registrant hereby undertakes to supply by means of a
post-effective amendment all information concerning a transaction, and the
company being acquired involved therein, that was not the subject of and
included in the registration statement when it became effective.
(d) The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act of 1933, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 13(d) of the
Securities Exchange Act of 1934 (and, where applicable, each filing of an
employee benefit plan's annual report pursuant to 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.
(e) Insofar as indemnification for liabilities arising under the Securities
Act of 1933 may be permitted to directors, officers and controlling persons of
the registrant pursuant to the foregoing provisions, 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
Securities Act of 1933 and is, therefore, unenforceable. In the event that a
claim for indemnification against such liabilities (other than the payment by
the registrant of expenses 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
Securities Act of 1933 and will be governed by the final adjudication of such
issue.
II-5
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant has
duly caused this Amendment No. 1 to the Registration Statement to be signed on
its behalf by the undersigned, thereunto duly authorized, in the City of Conway,
State of Arkansas, on April 19, 1999.
ACXIOM CORPORATION
By: /s/ Charles D. Morgan
---------------------------------
Charles D. Morgan
Chairman of the Board of Directors
and Company Leader
Pursuant to the requirements of the Securities Act of 1933, this Amendment No. 1
to the Registration Statement has been signed by the following persons on behalf
of the Registrant in the capacities and on the dates indicated.
SIGNATURE TITLE DATE
--------- ----- ----
* Chairman of the Board and April 19, 1999
- ----------------------------- Company Leader
(Charles D. Morgan) (principal executive officer)
* Financial Leader April 19, 1999
- ----------------------------- (principal financial officer and
(Robert S. Bloom) principal accounting officer)
* Director April 19, 1999
- -----------------------------
(Dr. Ann H. Die)
II-6
<PAGE>
* Director April 19, 1999
- -----------------------------
(William T. Dillard II)
* Director April 19, 1999
- -----------------------------
Harry C. Gambill
* Director April 19, 1999
- -----------------------------
(Rodger S. Kline)
* Director April 19, 1999
- -----------------------------
(Robert A. Pritzker)
* Director April 19, 1999
- -----------------------------
(James T. Womble)
*By: /s/ Catherine L. Hughes
-------------------------
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-7
<PAGE>
EXHIBIT INDEX
EXHIBIT
NUMBER DESCRIPTION
- ------- -----------
*2 Acquisition Agreement Between Acxiom Corporation and CGA Acquisition
Corporation #1; CGA Acquisition Corporation #2; and CGA Acquisition
Corporation #3; and Computer Graphics of Arizona, Inc.; CG Marketing
of Arizona, Inc.; Enstech Resources, Inc.; Norman, Riley & Associates,
Inc.; and Vi-Tech, Inc.; and Ronald L. Jensen and James K. Martens,
dated as of December 31, 1998, as amended April 12, 1999 (attached as
Annex A to the information statement/prospectus included in this
Registration Statement).
**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 By-laws 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 February 28, 1998 between Acxiom and First
Chicago Trust Company of New York, 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 Catherine L. Hughes, Esq., General Counsel of Acxiom,
regarding the validity of the securities being registered.
<PAGE>
*8 Opinion of Hughes Hubbard & Reed LLP, counsel to the Acquired
Companies, concerning certain federal income tax consequences of the
Acquired companies Mergers.
*11 Statement regarding computation of earnings per share.
*23.1 Consent of KPMG LLP.
***23.2 Consent of Catherine L. Hughes, Esq., General Counsel of Acxiom
(included in the opinion filed as Exhibit 5 to this Registration
Statement and incorporated herein by reference).
*23.3 Consent of Hughes Hubbard & Reed LLP (included in the opinion filed as
Exhibit 8 to this Registration Statement and incorporated herein by
reference).
*23.4 Consent of PricewaterhouseCoopers LLP.
***24 Powers of Attorney
- --------------------------
* Filed herewith.
** Incorporated herein by reference as indicated.
*** Previously filed.
Exhibit 8
[LETTERHEAD OF HUGHES HUBBARD & REED LLP]
DRAFT
[FORM OF TAX OPINION]
Computer Graphics of
Arizona, Inc.
CG Marketing of Arizona, Inc.
Enstech Resources, Inc.
Norman, Riley & Associates, Inc.
Vi-Tech, Inc.
Ronald L. Jensen
James K. Martens
c/o
Computer Graphics of
Arizona, Inc.
19621 N. 23rd Drive
Phoenix, Arizona 85027
Dear Ladies and Gentlemen:
You have asked us to render our opinion concerning certain United States federal
income tax consequences of the acquisition described below.
The Proposed Transaction
It is proposed that subject to the satisfaction of certain conditions, Acxiom
Corporation, a Delaware corporation, will acquire Computer Graphics of Arizona,
Inc., an Arizona corporation ("CGA"), CG Marketing of Arizona, Inc., an Arizona
corporation ("CG Marketing"), Enstech Resources, Inc., an Arizona corporation
("Enstech"), Norman, Riley & Associates, Inc., an Arizona corporation
("Norman"), and Vi-Tech, Inc., an Arizona corporation ("Vi-Tech") in statutory
mergers pursuant to the corporation laws of the state of Arizona (the
"Acquisition"). The Acquisition is to be effected as follows: (i) the creation
by Acxiom of three wholly owned subsidiaries, CGA Acquisition Corporation #1,
CGA Acquisition Corporation #2, and CGA Acquisition Corporation #3; (ii) the
reverse triangular merger of CGA Acquisition Corporation #1 with and into CGA,
with CGA surviving; (iii) the reverse triangular merger of
<PAGE>
CGA Acquisition Corporation #2 with and into CG Marketing, with CG Marketing
surviving; and (iv) the forward triangular mergers of Enstech, Norman and
Vi-Tech with and into CGA Acquisition Corporation #3, with CGA Acquisition
Corporation #3 surviving (thereafter to be known as Acxiom/CG, Inc.). Such
mergers shall take place pursuant to the Acquisition Agreement, dated December
31, 1998, between Acxiom Corporation, CGA Acquisition Corporation #1, CGA
Acquisition Corporation #2, CGA Acquisition Corporation #3, CGA, CG Marketing,
Enstech, Norman, Vi-Tech, and shareholders Ronald L. Jensen and James K. Martens
(as amended, the "Agreement").
Unless otherwise defined herein, capitalized terms shall have the meanings
ascribed to them in the Agreement.
We understand that no rulings have been sought from the Internal Revenue Service
concerning the federal income tax consequences of the Acquisition.
Opinion
For purposes of rendering the opinion set forth below, we have made such
investigation of law and have examined such documents and made such inquiries of
officers of Acxiom Corporation, CGA, CG Marketing, Enstech, Norman and Vi-Tech,
Ronald L. Jensen and James K. Martens and other persons as to factual matters as
we have deemed relevant or proper, and have relied on representations provided
by letter of Acxiom Corporation, CGA, CG Marketing, Enstech, Norman, Vi-Tech,
Ronald L. Jensen and James K. Martens to Hughes Hubbard & Reed LLP dated
- ----------------, 1999.
In addition, for purposes of this opinion we have assumed that cash received by
CGA shareholders who exercise dissenter's rights will not exceed 10 percent of
the net assets that CGA held immediately prior to the Acquisition, and will not
exceed 30 percent of the gross assets that CGA held immediately prior to the
Acquisition.
Based upon and subject to the foregoing, it is our opinion that under current
law for United States federal income tax purposes: the merger of CGA Acquisition
Corporation #1 with and into CGA will qualify as a reorganization under Sections
368(a)(1)(A) and (a)(2)(E) of the Internal Revenue Code of 1986, as amended (the
"Code"); the merger of CGA Acquisition Corporation #2 with and into CG Marketing
will qualify as a reorganization under Code Sections 368(a)(1)(A) and (a)(2)(E);
the merger of Enstech with and into CGA Acquisition Corporation #3 will qualify
as a reorganization under Code Sections 368(a)(1)(A) and (a)(2)(D); the merger
of Norman with and into CGA Acquisition Corporation #3 will qualify as a
reorganization under Code Sections 368(a)(1)(A) and (a)(2)(D); and the merger of
Vi-Tech with and into CGA Acquisition Corporation #3 will qualify as a
reorganization under Code Sections 368(a)(1)(A) and (a)(2)(D).
<PAGE>
The foregoing opinion is based on laws, regulations, rulings, and decisions
currently in effect, all of which are subject to change (possibly with
retroactive effect). We disclaim any duty to update this opinion to reflect any
changes in the laws, regulations, rulings, decisions or any other authorities
after the Acquired Companies Effective Date.
This opinion is furnished by us solely for the benefit of the shareholders of
CGA, CG Marketing, Enstech, Norman and Vi-Tech and may not be relied upon by any
other person. We understand that this opinion will be filed with the Securities
and Exchange Commission as an exhibit to the Registration Statement on Form S-4
of Acxiom Corporation to be filed on or about ------------ 1999. We consent to
the filing of this opinion as an exhibit to the Registration Statement and to
the use of our name under the caption "Legal Matters" in the Prospectus which is
a part thereof. Except to this extent, this opinion may not be furnished to,
used by, circulated to, quoted to or otherwise referred to by any other person
without our prior written consent in each instance.
Exhibit 11
COMPUTATION OF SHARES TO BE ISSUED
ACXIOM
SHARES
TO BE
SHARES ASSUMED RECEIVED
OUT- EXCHANGE UPON
STANDING RATIO EXCHANGE
-------- -------- --------
Company
Computer Graphics of Arizona, Inc. 20,000 45.75768 915,153
CG Marketing of Arizona, Inc. 2,000 274.54605 549,092
Enstech Resources, Inc. 200 915.15352 183,030
Norman, Riley & Associates, Inc. 2,000 45.75768 91,514
Vi-Tech, Inc. 2,000 45.75768 91,514
---------
Total shares to be issued to Acquired
Companies 1,830,303
=========
COMPUTATION OF EARNINGS PER SHARE
(IN THOUSANDS, EXCEPT PER SHARE DATA)
NINE MONTHS
ENDED
FOR THE FISCAL YEARS ENDED MARCH 31, DECEMBER 31,
-------------------------------------- --------------
1994 1995 1996 1997 1998 1997 1998
----- ----- ----- ----- ----- ----- -----
Acquired Companies
net earnings $562 $623 $1,200 $1,209 $1,100 $1,062 $1,118
===== ===== ===== ===== ===== ===== =====
Acquired Companies
pro forma shares
outstanding -
basic and diluted 1,830 1,830 1,830 1,830 1,830 1,830 1,830
===== ===== ===== ===== ===== ===== =====
Acquired Companies
pro forma earnings
per share - basic
and diluted $0.31 $0.34 $0.66 $0.66 $0.60 $0.58 $0.61
===== ===== ===== ===== ===== ===== =====
Shares used in
computing basic
earnings per share:
Acxiom 60,248 61,025 63,398 69,279 72,199 72,042 75,230
Acquired Companies 1,830 1,830 1,830 1,830 1,830 1,830 1,830
------ ------ ------ ------ ------ ------ ------
Combined 62,078 62,855 65,228 71,109 74,029 73,872 77,060
====== ====== ====== ====== ====== ====== ======
Shares used in
computing diluted
earnings per share:
Acxiom 62,014 63,574 68,567 78,065 80,909 80,660 75,230
Acquired Companies 1,830 1,830 1,830 1,830 1,830 1,830 1,830
------ ------ ------ ------ ------ ------ ------
Combined 63,844 65,404 70,397 79,895 82,739 82,490 77,060
====== ====== ====== ====== ====== ====== ======
Exhibit 23.1
INDEPENDENT AUDITORS' CONSENT
To the Board of Directors
Acxiom Corporation:
We consent to the use of our report included in Acxiom's current report on Form
8-K dated February 8, 1999 and attached as Annex F to this information
statement/prospectus and to the reference to our Firm under the heading Experts
in the information statement/prospectus.
/s/ KPMG LLP
Little Rock, Arkansas
April 16, 1999
Exhibit 23.4
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Information Statement/Prospectus
constituting part of this Registration Statement on Form S-4 of Acxiom
Corporation of our report dated November 1, 1996, appearing in the Current
Report on Form 8-K of Acxiom Corporation dated February 8, 1999 which is
attached to the Information Statement-Prospectus as Annex F, relating to the
consolidated balance sheet of May & Speh, Inc. as of September 30, 1996 (not
presented separately therein) and the related consolidated statements of
operations and of cash flows for the years ended September 30, 1996 and 1995
(not presented separately therein). We also consent to the reference to us under
the heading "Experts" in such Information Statement/Prospectus.
PricewaterhouseCoopers LLP
Chicago, Illinois
April 19, 1999
