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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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FORM 10-K
(Mark
One)
[X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D)
OF THE SECURITIES EXCHANGE ACT OF 1934. [NO FEE REQUIRED]
For the fiscal year ended December 31, 1996
OR
[_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE
SECURITIES EXCHANGE ACT OF 1934 [NO FEE REQUIRED]
For the Transition period from to
COMMISSION FILE NUMBER 1-14348
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METROMAIL CORPORATION
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
DELAWARE 13-3015410
(STATE OF INCORPORATION) (I.R.S. EMPLOYER IDENTIFICATION NO.)
360 EAST 22ND STREET, LOMBARD, IL 60148-4989
(ADDRESS OF PRINCIPAL EXECUTIVE OFFICES INCLUDING ZIP CODE)
REGISTRANT'S TELEPHONE NUMBER, INCLUDING AREA CODE: (630) 620-3300
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SECURITIES REGISTERED PURSUANT TO SECTION 12(B) OF THE ACT:
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NAME OF EACH EXCHANGE
TITLE OF EACH CLASS ON WHICH REGISTERED
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<S> <C>
COMMON STOCK, $.01 New York Stock Exchange
PAR VALUE PER SHARE
PREFERRED STOCK PURCHASE New York Stock Exchange
RIGHTS
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SECURITIES REGISTERED PURSUANT TO SECTION 12(G) OF THE ACT: NONE
Indicate by check mark whether Metromail Corporation (1) has filed all
reports required by Section 13 or 15(d) of the Securities Exchange Act of 1934
during the preceding 12 months (or for such shorter period that Metromail
Corporation 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 [_]
The aggregate market value of the voting stock held by non-affiliates of
Metromail Corporation as of January 31, 1997 was approximately $281,432,250
(based on closing sale price of $20.625 as reported for the New York Stock
Exchange-Composite Transactions).
The number of shares of Metromail Corporation's common stock, $.01 par value
per share, outstanding as of January 31, 1997, was 22,311,900.
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DOCUMENTS INCORPORATED BY REFERENCE
PORTIONS OF THE PROXY STATEMENT FOR METROMAIL CORPORATION'S 1997 ANNUAL
MEETING OF STOCKHOLDERS TO BE HELD ON APRIL 24, 1997 ARE INCORPORATED BY
REFERENCE IN PART III.
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CROSS REFERENCE SHEET
AND
TABLE OF CONTENTS
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PAGE NO. OR
REFERENCE
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PART I
ITEM 1. BUSINESS................................................ 1
ITEM 2. PROPERTIES.............................................. 8
ITEM 3. LEGAL PROCEEDINGS....................................... 8
ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS... 9
ITEM 4A. EXECUTIVE OFFICERS OF METROMAIL CORPORATION............. 10
PART II
ITEM 5. MARKET FOR METROMAIL CORPORATION'S COMMON EQUITY AND
RELATED STOCKHOLDER MATTERS............................. 11
ITEM 6. SELECTED FINANCIAL DATA................................. 12
ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL
CONDITION AND RESULTS OF OPERATIONS..................... 13
ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA............. 17
ITEM 9. CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON
ACCOUNTING AND FINANCIAL DISCLOSURE..................... 37
PART III
ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF METROMAIL
CORPORATION............................................. 37
ITEM 11. EXECUTIVE COMPENSATION.................................. 37
ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND
MANAGEMENT.............................................. 37
ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.......... 37
PART IV
ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON
FORM 8-K................................................ 37
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PART I
ITEM 1: BUSINESS.
Metromail Corporation ("Metromail" or the "Company") is a leading provider
of direct marketing and reference products and services in the United States
and the United Kingdom. Metromail helps its customers identify and reach
targeted audiences utilizing its comprehensive, proprietary consumer database
encompassing more than 90% of the households in the United States, as well as
providing database marketing software and related services. The Company
provides its information, information services and software services to a wide
variety of organizations engaged in direct mail, telephone and target
marketing, as well as to clients who desire specific reference and information
services. The Company's clients include Fortune 500 companies, as well as
numerous mid-size and small businesses.
Metromail was incorporated under the laws of the State of Delaware in 1979.
It is a successor to several predecessor businesses, including a list
development business that was started in 1946. The Company became a public
company in 1984 and remained so until mid-1987 when it was acquired by
R. R. Donnelley & Sons Company ("R. R. Donnelley"). The Company has made
several acquisitions, including the acquisition in 1994 of the assets of
Customer Insight Company, a company that develops PC-based marketing oriented
database solutions ("CIC"). Data by Design, a database marketing consulting
service in the United Kingdom ("DBD"), and International Communication & Data
Plc, a compiler of lists in the United Kingdom primarily through the use of
surveys ("ICD"), were acquired by R. R. Donnelley in 1994 and 1995,
respectively. The Company managed the United Kingdom operations since their
acquisition by R. R. Donnelley, with ownership being transferred to the
Company in early 1996. On June 19, 1996, Metromail completed an initial public
offering of 13,800,000 shares of its common stock (the "IPO"), resulting in
the reduction of R. R. Donnelley's ownership in the Company to approximately
38.4%.
PRODUCTS AND SERVICES
Metromail provides two general categories of products and services to its
clients: Direct Marketing Services (including database marketing software and
services, list enhancement services, list development and personalization
printing and lettershop services) and Reference Services (including on-line
services and directory publishing). Direct Marketing Services accounted for
80.2%, 80.0% and 80.7% of the Company's total net sales in the years ended
December 31, 1994, 1995 and 1996, respectively, and Reference Services
accounted for 19.8%, 20.0% and 19.3% of total net sales in 1994, 1995 and
1996, respectively.
Direct Marketing Services
Database Marketing Software and Services. Metromail, through CIC, provides
PC-based database marketing products and services to clients that possess a
large amount of internal and external data and need a way to assemble and
analyze the data to determine their appropriate marketing initiatives. The
Company's software products are designed to enable each client to maintain its
database on its own personal computer for quick desktop access to information.
Alternatively, the client can choose to have the Company house the client's
database on the mainframe computer in the Company's Lombard, Illinois data
center and, with the use of the Company's proprietary MetroBase software
loaded on the client's personal computers, analyze the files contained in the
client's database and generate desired reports through on-line access.
The Company targets a variety of industries for these software products and
services, focusing on the financial services, telecommunications, catalog,
publishing, cable television, transportation, entertainment and travel-related
services industries. The Company currently supports over 2,000 installations
of these products at over 340 client sites.
The Company's software products provided by CIC are licensed to clients,
generally for a three-year period. A substantial portion of the license fee is
paid at the time the license agreement is entered into with the balance
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due upon completion of installation. In addition, the Company collects an
annual license and maintenance fee that is approximately 20% of the initial
license fee. In connection with some installations, the Company, as a service,
purchases and re-sells to the client certain computer equipment such as
storage devices and other peripherals.
List Enhancement Services. The Company improves the quality of lists or
databases provided by its clients by eliminating duplicate names, correcting
addresses and ZIP codes and appending additional information, such as
telephone numbers or other marketing-related characteristics, to the lists or
databases.
Metromail's list enhancement services enable a client to process information
utilized in direct mail campaigns. These processes help the Company's clients
identify persons on lists supplied by the client likely to respond favorably
to the client's mailing, improve the delivery of the items mailed and reduce
the postage costs of a direct mail campaign. Typically, a client sends to the
Company hundreds of lists, aggregating millions of names that have been rented
from list brokers or other sources and the client's current customer list.
Using its computer resources and proprietary software, the Company
consolidates these lists, corrects addresses and ZIP codes and eliminates
duplicate names (the merge/purge process). A client can enhance this
consolidated list by incorporating certain of the characteristics contained in
the Company's database and/or INSOURCE, an enhancement database that combines
Metromail's National Consumer Database and other proprietary databases with
the consumer databases of Experian Information Solutions Inc. (formerly TRW
Target Marketing Services) to provide in-depth information on approximately 95
percent of all U.S. households. INSOURCE, introduced in late 1996, is able to
append more than 300 data variables to customer records, including hobbies,
interests, product preferences and investment, educational and occupational
information. Metromail believes INSOURCE is the most complete enhancement
database currently available in the market.
The Company also uses its database to enhance a client's proprietary
customer list and to make that list more deliverable. The Company has non-
exclusive licenses from the United States Postal Service for certain services,
such as National Change of Address, Delivery Sequence File and Locatable
Address Conversion System, to facilitate these processes. These enhancements
usually include adding information from the Company's database, eliminating
undeliverable addresses and verifying households at a particular address. ZIP
codes and addresses on a proprietary list can be corrected and telephone
numbers can be added. In addition, the Company saves its clients money on the
mailing of these enhanced lists by carrier route coding, ZIP code presorting
and overlaying 9-digit ZIP codes.
The Company provides list enhancement services to approximately 400 clients
annually, most of whom are involved in continuity marketing (e.g., record
clubs), financial services, insurance, magazine and book publishing, mail
order and catalog merchandising or retail. The Company provides these services
primarily from its facilities in Lombard, Illinois.
List Development Services. The Company assists clients in implementing cost-
effective direct marketing strategies by creating for its clients lists of
those individuals and households in the client's trade area having the
characteristics that fit the marketing strategy and are most likely to respond
favorably to the client's marketing efforts. Metromail provides customized
list development services to two primary groups of clients: sales promotion
and mail order organizations. Sales promotion clients generally have
determined the characteristics of their target customers and provide the
Company with a trade area definition and a customer profile. The Company then
uses its computer software and database to identify the individuals and
households in the customer's trade area who have the characteristics that the
client has specified and compiles a list of those individuals and households.
Mail order clients use the Company's marketing services and statistical
software to identify the geographic, demographic and other marketing
characteristics in the Company's database that singly and in combination
describe the best prospects for the client's direct marketing campaign. The
Company reviews the client's customer files and direct marketing experience,
as well as syndicated research, publicly available marketing data,
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and relevant historical information and marketing research in the Company's
database. In addition, the Company may design, conduct and analyze market
surveys or test mailings. From this research and testing the Company defines
relevant market segments and their respective sizes and ranks these segments
according to their relative potential value to the client.
The Company provides lists to approximately 15,000 clients annually. The
Company generates most of its list sales from sales to consumer goods
manufacturers, financial institutions, magazine publishers, mail order houses
and not-for-profit organizations. These lists are used for targeted mailings,
telephone marketing campaigns and statistical samplings. Except for test
mailings, these list orders range in size from 500 to 20 million households
and prices generally range from $7 to $250 per thousand names, although
requests for certain information may be as high as $1,000 per thousand names.
Lists are generally delivered in the form of computer tape or mailing labels.
The Company provides its list development services from its facilities in
Lincoln, Nebraska.
Personalization Printing and Lettershop Services. Metromail's
personalization printing and lettershop services frequently are used in
conjunction with list development and enhancement services provided by the
Company. In 1996, 22 of the Company's top 25 list development and enhancement
clients used these services in addition to its list services. The Company
provides processing and mailing services to direct mail advertisers from
facilities located in Mt. Pleasant, Iowa; Rutland, Vermont; Seward, Nebraska;
and Lincoln, Nebraska.
Personalization printing involves applying addresses and variable text to
direct mail pieces. Lettershop services consist of forms trimming, folding,
affixing special items (such as coins, medallion or cards), inserting
materials into envelopes, polywrapping, applying address labels and mailing.
In connection with these services, the Company uses both addresses generated
from its own database and addresses provided by its customers. Lettershop
services are typically contracted for on an individual mailing basis.
Contracts range in size from relatively small test mailings and statistical
samplings to major promotions of up to 25 million pieces.
The Company is one of the largest providers of commercial lettershop
services in the United States. At its three lettershop facilities, the Company
has the capacity to insert material in more than 6.5 million envelopes per
day, package 10 million product samples per month and polywrap 26 million
packages per month. The Company has installed and improved special equipment
in its production facilities that permits production of a high volume of
polywrapped advertising materials. The Company has also established an
integrated computerized system of scheduling, production and inventory
control.
The Company's lettershop services processed over 1.2 billion pieces of mail
in 1996. To expedite mailing of materials, United States Postal Service
personnel have been permanently assigned to each of the lettershop facilities.
Reference Services
On-Line Services. Metromail offers a number of services that involve the
need for immediate electronic access to information contained in the Company's
database. The most important of these services are the Company's MetroNet and
National Directory Assistance ("NDA") services.
The Company's MetroNet service provides users with on-line or electronic
access to the Company's MetroNet Master file (a subset of the Company's
database), change of address files, business listings and regional Bell
operating companies' electronic directory assistance databases. These services
are marketed primarily to collection agencies, consumer finance companies and
credit card issuers. This service is used by many of the Company's clients to
confirm certain information that is contained on credit applications submitted
to them (such as name and address, but not credit history).
The Company's NDA services provide on-line access to a database consisting
of more than 108 million residential, business and government listings, as
well as on-line access to the electronic directory assistance
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databases maintained by the regional Bell operating companies. The Company
markets these services, which were commenced in 1995, to telephone companies,
operator service providers and other organizations with high-volume directory
assistance needs. To date the Company has entered into contracts to provide
these services to approximately 25 clients. The Company is in various stages
of testing with some of these clients and at the end of 1996 was sending
invoices to 23 clients for services being provided by the Company.
Directory Publishing Services. Metromail publishes the Cole directories,
local "reverse" directories covering approximately 150 urban and suburban
areas in the United States and Canada, including New York, Boston,
Philadelphia, Dallas and Houston. These directories, which contain
approximately 32 million residential and business listings, are available
either in printed form or on CD-ROM. The directories are derived from the
Company's database and contain listings arranged by street address and
telephone number. Many of the directories also include census demographic data
on a neighborhood basis and historical data, such as duration of residence.
The Company has approximately 48,000 clients annually for the printed Cole
directories and approximately 3,000 clients for its Cole and MetroSearch CD-
ROM products. The clients for these products are principally collection
agencies, financial institutions, government agencies, insurance brokers and
agents, local merchants such as home improvement businesses, and real estate
brokers. The Cole directories are primarily used by clients to market products
or services to prospects or to identify individuals at specific addresses or
telephone numbers within a specific geographic area. The Cole directories are
supplied on an annual subscription basis for prices ranging from $75 to over
$600, depending on the size of the market. In 1996, approximately 73% of
leases for Cole directories were renewed.
The Company publishes, prints and binds the Cole directories at its Lincoln,
Nebraska facility. In addition, the Company provides certain printing and
binding services for other publishers of short-run directories.
Cole(R), MetroBase(R), Metromail(R), Metromail's National Consumer Data
Base(R), MetroNet(R), MetroSearch(R) and NDA(R) are registered trademarks of
Metromail; AnalytiX(R) is a registered trademark of Customer Insight Company;
BehaviorBank is a service mark of Metromail; Explore is a trademark of
Customer Insight Company; INSOURCE is a service mark of Metromail and Experian
Information Solutions Inc.; and Windows(R) is a registered trademark of
Microsoft Corporation.
INTERNATIONAL OPERATIONS
Metromail's international operations currently consist primarily of its
operations in the United Kingdom of ICD, one of Britain's leading consumer
lifestyle and financial list developers and providers, and DBD, a provider of
database marketing consulting services. ICD acquires consumer lifestyle data
primarily through mailed surveys. During 1996, ICD received lifestyle data for
3.5 million individuals, bringing the number of individuals included in the
company's lifestyle file to 8.6 million. Another ICD product, the British
Investor Database, is compiled from share registers and contains 7.7 million
share transactions. More than 2,000 companies either sponsor survey questions
or rent data from ICD. Through DBD, ICD also offers a range of high value
analytical and consultancy services.
METROMAIL'S DATABASE
Metromail maintains and continually updates a large proprietary database
that contains geographic, demographic, individual and other marketing
information on over 90% of the households in the United States. The Company
believes that its database is one of the most complete, highest quality and
up-to-date direct marketing databases in the United States and is a principal
reason that clients use the Company's list development and enhancement
services. This database contains numerous characteristics relating to the
individuals and households reflected in the database in addition to name,
address and telephone number. Examples of these characteristics include age,
length of residence at a particular address, dwelling unit type, gender of the
head of household, presence of other family members, estimated household
income and home ownership.
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The Company has been accumulating data for almost 50 years, and management
believes that its processes of gathering data from numerous sources and
modifying and updating its database represent a significant competitive
advantage for the Company.
Metromail derives the data included in its database from a wide variety of
publicly available sources and proprietary, third-party providers. With the
exception of self-reported data which the Company obtains primarily through
the use of consumer surveys, the Company does not collect data directly from
consumers. Among the publicly available sources used by the Company are the
"white pages" (the Company's primary source of names, addresses and telephone
numbers), public records of driver's license registrations, real estate
transactions and U.S. census data. The Company has arrangements with numerous
third parties that provide proprietary data to the Company. These providers
include certain of the Company's clients that provide the Company with data
relating to their recent direct marketing experiences.
In 1993, the Company began collecting data directly from consumers in
response to surveys. The Company distributes to consumers, primarily through
co-op mailings, package inserts and magazine inserts, survey questionnaires in
various forms. These questionnaires solicit information from the recipients
such as standard demographic information, product preferences, purchasing
habits, activities, hobbies and interests, brand awareness and medical
ailments. Questionnaires can be tailored to address specific marketing
concerns of the Company's clients by developing specific survey questions
which seek the desired information. Survey respondents complete and return
questionnaires to the Company because they become eligible to receive offers
of coupons, samples and information from manufacturers, pharmaceutical
companies, financial institutions and other service providers. Incentives such
as sweepstakes offers, prizes and extensions to subscribed services are also
provided when appropriate to increase response rates. The Company provides
disclosure to potential survey respondents regarding the intended use of the
data thereby reducing privacy concerns because respondents are voluntarily
completing the surveys acknowledging that they understand how the information
may be used. The Company does not use the information collected through
surveys for its reference services and has stated that it will not do so
unless disclosure is provided in the survey regarding the use of such
information for reference services. The Company expects to continue to expand
its use of surveys as a data collection method. As indicated above under
"International Operations," the Company is using the survey method as a means
to develop its database in the United Kingdom.
The Company is dedicated to being a leader in ethical management of consumer
data. It has developed information management practices applicable to its
direct marketing services and its reference services. The Company believes
that responsible data management includes collecting, using and disseminating
information by fair, ethical and lawful means and respecting the requests of
individuals for information the Company possesses about them and any requests
that their names be suppressed in the Company's database so that they do not
receive unwanted marketing solicitations.
COMPETITION
The markets in which Metromail competes are highly competitive and
fragmented. While a number of large companies and many smaller competitors
provide certain of the direct marketing, database marketing and reference
services provided by the Company, the Company believes that it provides the
broadest range of these types of services of any company in the direct
marketing services, database marketing services and reference services
industries.
In list development and list enhancement services, Metromail competes on the
basis of the quality, accuracy and completeness of its database, its market
analysis and segmentation capabilities and the other list enhancement services
it offers. The Company competes in marketing database services on the basis of
the quality of its software products. The Company competes in lettershop
services on the basis of the capabilities and efficiencies of its equipment
and employees, which enable it to handle large and complicated orders in a
timely manner. Price is also a competitive factor for all the direct marketing
services the Company provides. In reference services, Metromail competes on
the basis of the quality, accuracy and scope of the information contained in
its
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database, the quality of its customer service and price. With respect to its
on-line services, two critical competitive factors are the ability to be
contacted by the user and the response time.
REGULATION
Although the manner in which Metromail collects, uses and transfers certain
types of data is regulated in certain respects at the federal level and by
certain states, as described below, Metromail's business is not currently
subject to direct regulation by any government agency, other than regulations
applicable to businesses generally, including regulations concerning the
environment.
In response to concerns about individual privacy and the collection,
distribution and use of information about individuals, the Direct Marketing
Association (the "DMA"), which is the leading trade association of direct
marketers, has established certain guidelines for fair information practices
which it recommends be followed by participants in the direct marketing
industry. The Company was actively involved in the formulation of the DMA's
guidelines, and many of the Company's significant direct marketing clients
have adopted and implemented such guidelines. In addition, the Company has
adopted and is implementing information management practices, principles and
procedures which supplement those of the DMA. One of the guidelines suggested
by the DMA is that direct marketers refrain from soliciting by mail or
telephone those individuals who have contacted the DMA and have asked that
they not be the subject of unrequested solicitations. To make compliance with
this guideline possible, the DMA maintains the Mail Preference Service and the
Telephone Preference Service, consisting of lists of those individuals who
have notified the DMA that they wish to "opt out" of receiving mail or
telephone solicitations. The DMA makes these lists available to participants
in the direct marketing industry who subscribe to these services. The Company
is a subscriber and receives updated lists from the DMA monthly and promptly
suppresses in its database all information concerning the individuals who
appear on the DMA lists.
Privacy concerns have also led to increased federal and state regulation of
the collection, use and transfer of information about individuals and of
direct marketers and their activities. Examples of laws regulating the use of
information include laws adopted by a number of states precluding the use of
information derived from voter registration records, real estate files and
driver's licenses and the federal Driver's Privacy Protection Act of 1994,
which becomes effective in September 1997. Under this act, each state will be
prohibited from disclosing personal information contained in motor vehicle
department records for bulk use in surveys, marketing or solicitations, unless
the state has implemented a procedure whereby each driver has the opportunity
to prohibit such use of information about such driver. Examples of laws
regulating direct marketers and their activities include: state laws requiring
telemarketers to be bonded or registered; a Federal Trade Commission
regulation prohibiting telemarketers from making a call to a person who
previously has stated that he or she does not wish to receive a call made by
or on behalf of the seller whose goods or services are being offered; and
federal and state restrictions on the use by telemarketers of automatic
dialing and artificial voices or prerecorded messages.
In May, 1996, a bill seeking to restrict the sale of data was introduced in
the United States Congress. The Children's Privacy Protection and Parental
Empowerment Act sought to prohibit list brokers (including the Company) from
knowingly selling or purchasing personal information (defined to include name,
address and telephone number) about a child (defined to be a person under 16
years old) without the written consent of a parent of that child. This bill
failed to become enacted into law in 1996. The Company believes that this bill
or a similar bill will be reintroduced in 1997.
In 1996, Congress asked the Federal Reserve Board (the "FRB") to examine the
availability to the general public of sensitive consumer identification
information, including social security numbers, mother's maiden names, prior
addresses and dates of birth. The FRB invited companies to respond to
questions relating to the collection, maintenance and use of sensitive data.
With the exception of month and year of birth, the Company does not distribute
data that is the subject of the FRB's inquiry.
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The Federal Trade Commission (the "FTC") continues to conduct workshops and
studies on the protection and use of personal information. These workshops and
studies examine the collection and availability of personal information on the
internet and on "look-up" services and the collection and availability of
children's information. The Company has been actively working with the FTC on
these and other issues. FTC Commissioners have stated publicly that they
prefer industry self-regulation over government regulations.
Because of the possibility of increased regulation brought on by privacy
concerns, the Company collects certain data directly from individuals, who
agree that their information may be used for direct marketing and other
purposes. Although the Company intends to continue to pursue actively the
collection of self-reported data, the percentage of data in the Company's
current database that constitutes self-reported data is small.
The Company is not aware of any generally accepted industry guidelines for
the use of information on individuals in connection with the Company's
reference services. The Company has adopted its own privacy principles for its
reference services.
Certain of the reference services provided by the Company to certain credit
card issuer associations and their member banks are subject to the Fair Credit
Reporting Act ("FCRA"). Amendments to the FCRA, scheduled to become effective
on September 30, 1997, provide consumers with easier access to their credit
reports, facilitate the correction of errors in reports and address the issue
of "prescreening," a procedure used by creditors in some direct marketing
programs.
CUSTOMERS AND SEASONALITY
The Company's business is based on long-standing client relationships.
Although sales are not guaranteed under long-term contracts, a substantial
portion of the Company's net sales is derived from clients that the Company
has served for many years. Net sales to the top 25 clients (almost all of
which have been clients for five or more years) amounted to $65.9 million in
1994, $68.6 million in 1995 and $75.4 million in 1996. Net sales to the top 25
clients accounted for 33.7%, 28.9% and 26.8% of total net sales in 1994, 1995
and 1996, respectively, as the Company expanded into new products and services
across all operations. No single client accounted for more than 10% of total
net sales in any of these years. The Company's business is somewhat seasonal.
See "Management's Discussion and Analysis of Financial Condition and Results
of Operations--Outlook".
COMPUTER OPERATIONS
The Company's data centers run on computer systems designed to provide
advanced processing capabilities, provide flexibility to meet the Company's
and its clients' changing needs and contain costs. The Company's mainframe
computer system consists of two IBM ES9000 computers, one located at the
Lombard data center and one located at the Lincoln data center. The IBM ES9000
computer located at the Lincoln data center has 223 MIPS (millions of
instructions per second) of processing power and the IBM ES9000 located at the
Lombard data center has 270 MIPS of processing power. The ES9000 platform
allows for expansion of processing capacity to approximately 3,000 MIPS,
without significant infrastructure changes. Other data center components
include robotic tape subsystems, DASD and high-speed laser, LED and compact
printers. The Company also supports alternate platforms from IBM, Hewlett
Packard and Sequent, which have approximately a terabyte of DASD attached to
them.
In 1996, the Company completed a major redesign of the file structure of its
database. This redesign, which commenced in 1994, takes advantage of new
relational software and parallel processing hardware technology. The new
database structure is expected to reduce the costs and time of adding newly
acquired data to the database, permit concurrent processing of a number of
separate jobs and reduce processing times.
EMPLOYEES
As of December 31, 1996, the Company had approximately 3,080 employees, of
whom approximately 2,975 were located in the United States and approximately
105 were located in the United Kingdom. The domestic
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employees included approximately 275 officers and managerial employees,
approximately 275 employees engaged in sales or sales support and
approximately 210 programmers, system engineers and systems analysts. The
domestic employees also include approximately 1,360 hourly employees, most of
whom are engaged in providing lettershop services. The Company employs part-
time workers as needed, primarily in lettershop services.
None of the Company's employees is covered by a collective bargaining
agreement. The Company believes that its relations with its employees are
good.
ITEM 2: PROPERTIES.
The Company's principal executive offices and one of the Company's data
centers are located at 360 East 22nd Street, Lombard, Illinois 60148, where
the Company leases a 115,000 square foot facility pursuant to a lease expiring
in 2001 and a 19,000 square foot facility pursuant to a lease expiring in
2000. The Company also owns a 233,000 square foot facility in Lincoln,
Nebraska, which includes the Company's second data center, and lettershop
facilities in Mt. Pleasant, Iowa (211,000 square feet); Seward, Nebraska
(161,000 square feet); and Rutland, Vermont (113,000 square feet). The Company
leases its 31 regional sales offices pursuant to leases that in general have
three-year terms. The Company's marketing database services operate from a
54,000 square foot leased facility in the Denver, Colorado area. The Company's
main phone number is (630) 620-3300 and its internet address is
http://www.metromail.com.
ITEM 3: LEGAL PROCEEDINGS.
In 1993, the Company purchased the assets of Computerized Marketing
Technologies, Inc. and affiliated companies ("CMT") relating to a database
created through the use of questionnaires distributed to consumers. Following
this purchase, the Company continued CMT's practice of contracting with
Computerized Image & Data Systems, Inc. ("CIDS") for CIDS to provide data
input services with respect to completed surveys. CIDS had been subcontracting
a portion of these services to a correctional facility maintained by the State
of Texas. This facility was a major supplier of data input services to the
State of Texas, including services with respect to voter registration and
drivers' license records, and according to CIDS, was selected as a
subcontractor, in part, because of the procedures followed by the facility to
safeguard the information made available to the prisoners. In June 1994, the
Company became aware of a report that a woman in Ohio, who apparently had
completed a Company survey, had received a letter purporting to contain
sexually explicit language from a convicted rapist held in the facility that
provided data input services. Immediately after becoming aware of this report,
the Company requested the third party to terminate its subcontract with the
facility. On April 18, 1996, a complaint was filed in the District Court of
Travis County, Texas (Beverly J. Dennis v. Metromail Corporation et al., Cause
No. 96-04451) against the Company, R. R. Donnelley, CIDS, the Texas Department
of Criminal Justice, the executive director of the Texas Department of
Criminal Justice and the chairman of the Texas Board of Criminal Justice by
the woman who allegedly had received the letter. The complaint alleges the
following causes of action against the Company and R. R. Donnelley and certain
of the other defendants: (1) defendants' conduct represented an intentional or
reckless disregard of plaintiffs' safety; (2) the conduct of the Company, R.
R. Donnelley and CIDS in inducing plaintiffs to provide information without
disclosing to plaintiffs that such information would be provided to convicted
felons constituted fraud; (3) defendants have been unjustly enriched by their
actions; (4) defendants' conduct resulted in the invasion of plaintiffs'
privacy; (5) defendants' conduct resulted in the infliction of severe
emotional distress upon plaintiffs; and (6) defendants were grossly negligent
in entrusting plaintiffs' information to convicted felons. In addition, the
complaint alleged two causes of action solely against the Texas Department of
Criminal Justice and the two state officials. The complaint seeks restitution,
actual and exemplary damages in an unspecified amount and injunctive relief on
behalf of the named plaintiff and a purported class consisting of all persons
who completed Company surveys and whose completed surveys were processed by
inmates in the Texas prison system from January 1, 1993 to the present time.
The Company is not yet able to determine the number of persons comprising the
purported class but believes the number of persons who completed surveys in
this period and whose surveys were processed by such inmates
8
<PAGE>
could exceed 1.3 million. The Company intends to defend vigorously this suit.
The Company had removed the case to the United States District Court for the
Western District of Texas but the case was subsequently remanded to state
court. The Company has filed a motion to dismiss all counts against it. If the
motion is not granted, the Company intends to challenge certification of the
class, and the Company believes that if such challenge is successful, this
litigation would not have a material adverse effect on the Company. However,
because this litigation is in its early stages, it is not possible to make a
meaningful determination of the ultimate outcome or to make an estimate of the
loss, if any, should the outcome be unfavorable. The Company has made a
preliminary estimate that its costs of litigating the case will be $1.5
million. The Company's insurer has agreed to assume the defense of this case
subject to a reservation of rights to deny coverage. In the event the
Company's insurer were to successfully deny coverage, R. R. Donnelley has
agreed to pay the legal fees and expenses incurred by the Company in defending
this case, but the Company would be responsible for any other amounts payable
by it as a result of this case. Because of such agreements to pay such fees
and expenses, such legal fees and expenses will not affect the Company's cash
flows; however, if R. R. Donnelley were to pay such fees and expenses,
applicable accounting principles would require the Company to recognize such
fees and expenses as incurred and apply all payments by R. R. Donnelley in
respect of such fees and expenses to additional paid-in capital.
The Company is subject to various claims and legal actions which arise in
the ordinary course of business. The Company believes such claims and legal
actions, individually and in the aggregate, will not have a material adverse
effect on the business or financial condition of the Company.
The statements contained in this "Legal Proceedings" section that are not
historical information are forward-looking statements that are based on the
Company's estimates, assumptions, projections and current expectations.
Reference is hereby made to "Management's Discussion and Analysis of Financial
Condition and Results of Operations--Cautionary Statements Regarding Future-
Looking Statements" for a discussion of certain factors that could cause the
matters discussed in this section to differ materially from the forward-
looking statements contained herein.
ITEM 4: SUBMISSION OF MATTERS TO A VOTE OF SECURITIES HOLDERS.
None
9
<PAGE>
ITEM 4A: EXECUTIVE OFFICERS OF METROMAIL CORPORATION.
Information with respect to those individuals who served as executive
officers of the Company as of December 31, 1996 is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <C> <S>
Barton L. Faber 49 Chairman and Director
Susan L. Henricks 46 President and Chief Executive Officer and
Director
Philip H. Bonello 45 Senior Vice President and General Manager, On-
Line Services
Ronald G. Eidell 52 Senior Vice President and Chief Financial Officer
Kenneth A. Glowacki 44 Vice President, Finance
Tery R. Larrew 43 President, Database Marketing Services and
President, Customer Insight Company
Thomas J. Quarles 47 Senior Vice President, General Counsel, Chief
Administrative Officer and Secretary
Michael T. Reynolds 47 Senior Vice President
Mac E. Rodgers 37 Senior Vice President and General Manager,
Information Services
</TABLE>
Barton L. Faber has been Chairman of the Company since January 1996 and a
director of the Company since July 1995. He served as President, Information
Resources of R. R. Donnelley from January 1995 to June 1996. From September
1989 until January 1995, he was President, Information Services of R. R.
Donnelley. Prior to that time, he was Vice President and Director, Information
Services of R. R. Donnelley in 1989, Vice President, Corporate Development of
R. R. Donnelley from April 1985 until 1989, and Group Manager, Business
Development and Analysis of R. R. Donnelley from the time he joined R. R.
Donnelley in January 1985 until April 1985. Prior to joining R. R. Donnelley,
he held various positions with Mobil Oil Corporation and Ramada Europe. Mr.
Faber is also a member of the board of directors of Dataware Technologies,
Inc., Document Sciences Corporation, GeoSystems Global Corporation and Xeikon
N.V.
Susan L. Henricks has been a Director of the Company since January 1996 and
has been President and Chief Executive Officer of the Company since July 1995.
She was President of the Company from May 1995 until July 1995. Ms. Henricks
joined the Company in 1986 and served as Reference and Information Services
Division President from 1990 to May 1995, Senior Vice President, Information
Services, in 1989, Vice President, Data Processing in 1988 and Vice President
of Production from 1986 to 1988. Prior to joining the Company, she held
various positions with CNA Insurance Company, Centerre Bank, N.A. and The
Signature Group.
Philip H. Bonello has served as Senior Vice President and General Manager,
On-Line Services of the Company since July 1995. Since joining the Company in
1986, he was Vice President, Electronic Services and Vice President, Marketing
Research from 1993 to 1995, Director of Marketing from 1992 to 1993 and
Director of Corporate Planning from 1986 to 1992. Prior to joining the
Company, he held various positions with Coopers & Lybrand from 1984 to 1986
and DePaul University from 1980 to 1994.
Ronald G. Eidell has been Senior Vice President and Chief Financial Officer
of the Company since February 1996. He served as Senior Vice President,
Finance of R. R. Donnelley from January 1996 to June 1996. From 1991 until
January 1996, he was Senior Vice President and Treasurer of R. R. Donnelley.
Prior to that time, he was Vice President and Treasurer of R. R. Donnelley
from 1988 to 1991, Treasurer of R. R. Donnelley in 1988 and Controller of
R. R. Donnelley from 1982 to 1986. From February 1987 until rejoining R. R.
Donnelley in 1988, he was Vice President-Chief Financial Officer and Treasurer
of Advanced Systems, Inc.
10
<PAGE>
Kenneth A. Glowacki has been Vice President, Finance of the Company since
September 1988. From December 1986 to September 1988, he served as Director of
Internal Audit of R. R. Donnelley. Prior to that time, Mr. Glowacki was an
Audit Manager at Arthur Andersen & Co.
Tery R. Larrew has served as President, Database Marketing Services of the
Company since December 1996 and President, Customer Insight Company since
1990. Prior to that time, he was a Principal at Pinnacle Management
Corporation and held various executive positions at First Financial Management
Corporation.
Thomas J. Quarles has been Senior Vice President, General Counsel and Chief
Administrative Officer of the Company since February 1996 and Secretary of the
Company since April 1996. He served as Senior Vice President and General
Counsel of R. R. Donnelley from February 1995 to June 1996. From January 1991
until February 1995, he was Vice President and Associate General Counsel of
Ameritech Corporation. From April 1985 until December 1990 he was Vice
President and General Counsel of Ameritech Publishing, Inc. and from 1979
until March 1985, he was general attorney for Michigan Bell Telephone Company.
Michael T. Reynolds served as Senior Vice President and General Manager,
Enhancement Services of the Company from July 1995 through December 1996. From
1992 to 1995, he was Vice President, Small Business/Alternate Channels of the
Company and from 1990 to 1992 he was Vice President, Sales of the Company.
Prior to joining the Company, he was Director of Sales and Marketing at Acxiom
Corporation from 1986 to 1990 and held various positions with Systematics from
1984 to 1986 and IBM from 1976 to 1983.
Mac E. Rodgers has served as Senior Vice President and General Manager,
Information Services of the Company since December 1996. Mr. Rodgers joined
the Company in 1984 and served as Vice President and General Manager, List and
Cole Services from July 1995 to December 1996, Vice President and General
Manager, Cole Services from January 1995 to July 1995, Vice President, Sales
from 1993 to January 1995 and Vice President and Plant Manager from 1990 to
1993, along with various production and managerial positions.
PART II
ITEM 5: MARKET FOR METROMAIL CORPORATION'S COMMON EQUITY AND RELATED
STOCKHOLDER MATTERS.
The Company's Common Stock is listed on the New York Stock Exchange ("NYSE")
under the symbol "ML". As of January 31, 1997, there were 117 holders of
record of the Common Stock.
Trading of the Common Stock commenced on the NYSE on June 14, 1996 in
connection with the IPO. Prior to the IPO, the Common Stock was not listed or
quoted on any organized market system. The following table sets forth the high
and low sales prices of the Common Stock during the periods indicated as
reported on the New York Stock Exchange Composite Transactions Tape during
such periods.
<TABLE>
<CAPTION>
HIGH LOW
------- -------
<S> <C> <C>
Second Quarter of 1996 (June 14 through June 30)......... $22 3/4 $19 3/4
Third Quarter of 1996.................................... $22 1/2 $16
Fourth Quarter of 1996................................... $23 3/8 $16
</TABLE>
The Company currently intends to retain earnings to finance the growth of
its business and therefore does not intend to pay any cash dividends for the
foreseeable future. Payment of any cash dividends in the future will depend on
the Company's results of operations, financial condition, cash requirements
and other factors deemed relevant by the Board of Directors of the Company.
11
<PAGE>
ITEM 6: SELECTED FINANCIAL DATA.
The following table sets forth selected historical consolidated and combined
financial data of the Company. Statement of operations data for each of the
three years in the period ended December 31, 1996 and balance sheet data as of
December 31, 1995 and 1996 have been derived from the audited consolidated and
combined financial statements of the Company contained herein. Statement of
operations data for the year ended December 31, 1993 and balance sheet data as
of December 31, 1994 are derived from audited consolidated and combined
financial statements of the Company not contained herein. Statement of
operations data for the year ended December 31, 1992 and balance sheet data as
of December 31, 1992 and 1993 are derived from unaudited information. The
unaudited financial data includes all adjustments that the Company considers
necessary for a fair presentation of the consolidated and combined financial
position and consolidated and combined results of operations for the periods
reflected therein.
The information set forth below should be read in conjunction with
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Financial Statements and Supplementary Data" included
elsewhere in this Annual Report on Form 10-K.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
-----------------------------------------------
1992 1993 1994(1) 1995(1) 1996
-------- -------- -------- -------- --------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Direct marketing sales...... $120,364 $127,683 $156,806 $189,713 $227,023
Reference sales............. 33,317 36,032 38,665 47,474 54,422
-------- -------- -------- -------- --------
Total net sales........... 153,681 163,715 195,471 237,187 281,445
Database and production
costs...................... 86,184 95,016 108,806 134,361 155,708
Amortization of goodwill.... 6,054 6,054 6,608 7,446 7,572
Selling expenses............ 26,252 29,625 37,107 45,913 53,240
General and administrative
expenses................... 13,232 12,372 14,408 16,645 25,524
Provisions for doubtful
accounts................... 1,798 1,959 1,848 2,180 2,143
-------- -------- -------- -------- --------
Earnings from operations.. 20,161 18,689 26,694 30,642 37,258
Interest expense--related
party...................... 21,337 22,112 18,999 21,329 10,178
Interest expense............ -- -- -- 80 776
Other expense (income)--net. (57) (138) 24 (87) (207)
-------- -------- -------- -------- --------
Earnings (loss) before
income taxes............. (1,119) (3,285) 7,671 9,320 26,511
Income taxes................ 2,034 1,181 5,684 6,585 12,649
-------- -------- -------- -------- --------
Net income (loss) from
operating before
cumulative effect of
accounting change........ (3,153) (4,466) 1,987 2,735 13,862
Cumulative after-tax effect
of change in accounting for
post retirement benefits
other than pensions........ -- 4,388 -- -- --
-------- -------- -------- -------- --------
Net income (loss)......... $ (3,153) $ (8,854) $ 1,987 $ 2,735 $ 13,862
======== ======== ======== ======== ========
BALANCE SHEET DATA (AT END OF
PERIODS):
Total assets................ $289,353 $293,691 $328,768 $378,721 $443,406
Total debt.................. 187,863 202,503 219,737 250,376 21,468
Total shareholders' equity.. 84,739 75,872 78,939 85,392 360,548
</TABLE>
- --------
(1) In 1994, the Company purchased CIC for approximately $20.0 million. In
1995, an affiliate of R. R. Donnelley acquired ICD for approximately $15.3
million. See Notes 1 and 14 of Notes to Consolidated and Combined
Financial Statements of Metromail.
12
<PAGE>
ITEM 7: MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS.
RESULTS OF OPERATIONS
Year ended December 31, 1996 compared to the year ended December 31, 1995
Total net sales increased 18.7% to $281.4 million for 1996 from $237.2
million for 1995. This $44.2 million increase resulted from a $37.3 million,
or 19.7%, increase in direct marketing sales and a $6.9 million, or 14.6%,
increase in reference sales. Direct marketing sales growth was due to $17.7
million of additional sales of U.K. business due to growth, completion by ICD
of two surveys in 1996 compared to one in 1995 and the inclusion of a full
twelve months of sales of ICD (acquired in May 1995). Additional direct
marketing growth was due to increased database marketing sales of $7.0 million
due to strong demand for the AnalytiX and Explore database products, increased
lettershop volume of $3.7 million and more modest increases across the
traditional direct marketing services of list, list enhancement and U.S.
survey. Reference services sales growth was primarily due to a 28.7% increase
in the Company's MetroNet and NDA on-line services plus a 5.8% increase in
directory publishing services.
Database and production costs increased from $134.4 million for 1995, or
56.7% as a percentage of total net sales, to $155.7 million, or 55.3% as a
percentage of total net sales, for 1996. This growth was due to increased
expenses of $4.9 million related to the second U.K. survey, start-up costs of
the NDA on-line services of $5.7 million, increased production costs to
support the higher sales volume for the lettershops, increased costs to
support the growth in marketing database services, increased U.S. survey
expenses, expenses related to the upgrade of computer capacity and increased
directory publishing costs. The decrease in the database and production costs
as a percentage of total net sales was due to improved efficiencies at ICD
(primarily the second survey, which has production costs as a percentage of
total net sales less than the Company's other operations) and increased sales
in the traditional direct marketing areas, which improved the coverage of
fixed costs. The decrease in database and production costs as a percentage of
total net sales was partially offset by increased costs related to the start
up of the NDA on-line services.
Selling expense increased $7.3 million, or 16.0%, from 1995 and decreased as
a percentage of total net sales from 19.4% for 1995 to 18.9% for 1996. The
increase in the amount is due to the increase in sales and related selling
expenses across all operations and from ICD, where selling expenses as a
percentage of total net sales are higher than the Company's other operations.
General and administrative expenses grew $8.9 million, or 53.3%, from 1995
and as a percentage of total net sales from 7.0% to 9.1% for 1996. The
increase resulted primarily from the acquisition and growth of ICD, and
increased staff costs associated with being a stand alone public company.
Earnings from operations of $37.3 million for 1996 increased $6.7 million
from $30.6 million for 1995 due to the foregoing factors.
Interest expense-related party decreased $11.1 million due to the use of the
IPO net proceeds to repay the amount owed to a subsidiary of R. R. Donnelley.
Interest expense of $0.8 million resulted from borrowings under a credit
agreement with a syndicate of banks (See "Changes in Financial Condition")
required to pay related party debt for ICD and provide operating funds in the
U.K.
The Company's tax expense in 1996 increased $6.1 million compared to 1995
due to the increase in earnings before income taxes. The effective tax rate
exceeds the U.S. federal statutory rate primarily due to the effect of non-
deductible goodwill amortization.
Net income increased $11.2 million to $13.9 million for 1996 as a result of
the foregoing factors.
13
<PAGE>
Year ended December 31, 1995 compared to the year ended December 31, 1994
Total net sales increased 21.3% to $237.2 million in 1995 from $195.5
million in 1994. This $41.7 million increase was comprised of a $32.9 million,
or 21.0%, increase in direct marketing sales and a $8.8 million, or 22.8%,
increase in reference sales. Direct marketing sales growth resulted primarily
from strong demand for list development and lettershop services and marketing
database software. List development sales increased $10.2 million due to
growth of 8.1% in sales to national list accounts, 12.7% in sales to small
business accounts and 51.9% in sales of the BehaviorBank list product.
Marketing database software sales grew $9.5 million reflecting a full year's
sales after the June 1994 acquisition of CIC along with volume growth of 35.8%
over comparable full year 1994 sales. Lettershop sales increased $4.2 million
due to increased sales efforts to utilize available capacity. Direct marketing
sales were also increased by $7.1 million due to the inclusion of ICD's sales
following the acquisition of ICD in May 1995. The increase in reference sales
reflects in large part the strong growth in on-line services, including the
NDA and MetroNet services.
Database and production costs increased in 1995 to $134.4 million, or 56.7%
as a percentage of total net sales, from $108.8 million in 1994, or 55.7% as a
percentage of total net sales, primarily due to the start-up of the NDA
service, along with increased expenses to upgrade computers resulting in
increased capacity.
Amortization of goodwill increased 12.7% to $7.4 million in 1995. This
increase reflected the inclusion of a full year of amortization of goodwill
resulting from the CIC acquisition and additional goodwill resulting from the
ICD acquisition.
Selling expenses increased $8.8 million, or 23.7%, from 1994 and as a
percentage of total net sales to 19.4% in 1995 from 19.0% in 1994. The
increase in selling expenses was due to the inclusion of CIC for a full year
($3.1 million), the acquisition of ICD ($1.5 million) and growth in the on-
line services sales staff ($0.7 million), as well as increased commissions and
support costs across all businesses due to increased sales. The increase in
selling expenses as a percentage of total net sales resulted primarily from
the fact that selling expenses of CIC and ICD as a percentage of their total
net sales was higher than for the Company's other operations.
General and administrative expenses grew $2.2 million, or 15.5%, from 1994,
but decreased as a percentage of total net sales from 7.4% to 7.0% in 1995.
The increase in these expenses resulted from the acquisition of ICD ($1.4
million), the settlement agreement with Aristotle Industries, Inc. regarding a
contract dispute ($0.7 million) and the inclusion of CIC for a full year ($0.6
million), as well as increased expenses across the Company's other operations.
Provisions for doubtful accounts increased $0.3 million, or 18.0%, from
1994, but remained the same as a percentage of total net sales at 0.9%.
Interest expense, primarily paid to a subsidiary of R. R. Donnelley,
increased by $2.3 million because the Company had higher average outstanding
debt levels in 1995. The higher debt levels were required to fund capital
expenditures, the ICD acquisition and increased working capital requirements
to support sales increases.
The Company's effective income tax rate decreased to 70.7% in 1995 from
74.1% in 1994. The effective tax rate exceeds the U.S. federal statutory rate
due to the effect of nondeductible goodwill amortization and of state and
foreign taxes. The decrease in the effective tax rate in 1995 reflects the
increase in pretax income, which reduces the relative effect of the
nondeductible items.
Net income increased $0.7 million, or 37.6%, to $2.7 million in 1995 as a
result of the foregoing factors.
CHANGES IN FINANCIAL CONDITION
For 1996, operating cash flow (net income plus depreciation and
amortization) of $42.2 million increased $18.6 million from 1995. The Company
believes that cash flows from operations will be sufficient to fund its on-
going operations on a long-term basis, as well as continued growth and
investment. The Company expects the credit agreement described below to be
available for seasonal cash needs and acquisitions.
14
<PAGE>
Capital expenditures for 1996 totaled $37.6 million, an increase of $9.1
million over the prior year. The increase was due to funding for the second
U.K. survey, database redesign, data center expansion and various
administrative software packages required as a stand alone public company.
The Company has entered into a credit agreement with a syndicate of banks (
the "Credit Agreement") under which it is entitled to borrow up to $45 million
on a revolving credit basis. Borrowings under the Credit Agreement mature in
2001 and bear interest (i) at the prime rate announced by the bank acting as
agent for the syndicate, (ii) at the LIBOR rate plus, depending on the
Company's leverage ratio and fixed charge coverage ratio, up to 42.5 basis
points per annum, or (iii) at a rate determined by competitive bidding. At
December 31, 1996 there was $21.5 million outstanding under the credit
agreement resulting from the repayment of related party debt for ICD and
borrowings to provide operating funds for the Company's U.K. operations.
Under the terms of a stock repurchase program approved by the Board of
Directors in December 1996, the Company repurchased 125,100 shares of Common
Stock for $2.1 million in 1996.
OUTLOOK
Historically, the Company's net sales build quarterly through the year, with
the majority of net sales being achieved in the second half of a given year.
In 1994, 1995 and 1996 total net sales of the Company during the second half
of the year constituted 56.3%, 55.3% and 56.0%, respectively, of the total net
sales for the year.
Many of the Company's expenses are incurred ratably through the year and,
when combined with the quarterly revenue pattern discussed above, result
historically in fluctuations in earnings from operations for the year.
Earnings from operations are strongest in the second half of the year.
Earnings from operations in the second half of 1994, 1995 and 1996 constituted
70.4%, 55.6% and 72.0%, respectively, of total earnings from operations for
the year. Had the deferral of approximately $2.0 million of expenses from the
second quarter of 1995 to the third and fourth quarters of 1995 (resulting in
a $2.0 million negative impact on earnings from operations for the second half
of 1995) not taken place, the Company estimates that the percentage of
earnings for the second half of 1995 would have been approximately 62.1% of
the full year's earnings from operations.
Management expects the historical patterns of larger second half portions of
the year's sales and operating earnings to occur again in 1997.
CAUTIONARY STATEMENTS REGARDING FUTURE-LOOKING STATEMENTS
The Company's Annual Report to Stockholders and this Form 10-K, including
the "Outlook" section above, are among certain communications by the Company
that contain forward-looking statements, including statements regarding the
Company's financial position, results of operations, market position, product
development and regulatory matters. These forward-looking statements are based
on the Company's estimates, assumptions, projections and current expectations.
The Company hereby notes several important 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.
Regulation. Adoption of additional guidelines by the DMA or new guidelines
applicable to the Company's reference services and enactment of federal or
state laws or regulations affecting either the Company's direct marketing or
reference services could have the effect of materially increasing the cost to
the Company of collecting certain kinds of information, precluding the use by
direct marketers of information that the Company could lawfully collect or
otherwise materially adversely affecting the Company's business, operating
results or financial condition.
Absence of Long-Term Contracts; Lack of Predictability of Sales;
Fluctuations in Operating Results. The Company's sales, particularly with
respect to its direct marketing products, are generally not derived from long-
term contracts. Therefore, the Company must continually engage in sales
efforts and must be prepared to adjust its pricing terms to meet competition.
The Company's net sales are affected by a number of seasonal
15
<PAGE>
characteristics and other factors, including, with respect to the Company's
direct marketing services, the timing and extent of the direct marketing
activities of the Company's clients. These activities are influenced by
general factors, such as postal rates, paper prices and overall economic
conditions, and by factors specific to a client, such as the client's
advertising budget and choice of advertising media. The Company's net sales
can also be affected by the availability of new or updated data. Thus, if the
Company does not update its database as quickly as do its competitors, the
Company's net sales could be adversely affected. The potential
unpredictability of the Company's net sales can lead to fluctuations in
quarterly and annual operating results, especially because many expenses are
incurred by the Company ratably throughout the year. 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.
Competition. The markets in which Metromail competes are highly competitive
and fragmented. Some of the Company's competitors have, and potential
competitors may have, materially greater financial, technical and marketing
resources than the Company that may allow them to compete effectively with the
Company in respect of some or all of its direct marketing and reference
services.
Technological Changes and Software Development. The Company's future success
is dependent on its ability to keep pace with technological improvements,
including as they affect the Company's ability to input collected information
into its database and produce the information desired by its clients and the
costs of doing so. In addition, the Company's future success in respect of its
marketing database software will depend upon its ability to enhance its
current products and to develop and introduce new products and services on a
timely basis that keep pace with technological developments and address the
increasingly sophisticated needs of its clients. If the Company is unable to
keep pace with technological improvements or is unable, for technological or
other reasons, to develop and introduce new products or enhancements of
existing products in a timely and cost-effective manner in response to
changing market conditions or customer requirements, the Company's business,
operating results or financial condition could be materially adversely
affected.
Litigation. The Company cannot predict the effects, if any, that the
litigation discussed under "Legal Proceedings" may have on its business,
operating results or financial condition, although such litigation could have
an adverse effect on the Company (including through adverse publicity) if the
Company were not to be successful in its defense or if the Company's insurer
were to deny coverage.
Risk of Loss of Data Centers or Interruption of Telecommunications Services.
The Company's operations are dependent on its ability to protect its data
centers in Lombard, Illinois and Lincoln, Nebraska against damage from fire,
power loss, telecommunications failure or similar event. In addition, the on-
line services provided by the Company are dependent on telecommunications
links to the regional Bell operating companies. The Company has taken
precautions to protect its data centers and telecommunications links from
events that could interrupt its 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, operating results or financial condition.
Growth Through Acquisitions and New Products. The Company's business
strategy includes growth through acquisitions of proprietary information and
of distribution channels and businesses complementary to the Company's
business. The Company has made a number of acquisitions in the past and
believes that it has been successful in integrating the acquired assets and
businesses into the Company's operations. There can be no assurance, however,
that future acquisitions will be consummated on acceptable terms or that any
acquired assets or business will be successfully integrated into the Company's
operations. The Company's business strategy also includes growth through the
introduction of new products or services that leverage the information
contained in the Company's database. There can be no assurance that new
products or services introduced by the Company will achieve acceptance.
Reference is also made to the Company's Registration Statement (No. 333-
2042) under "Risk Factors" for a more detailed discussion of the foregoing and
other factors that may affect the Company.
16
<PAGE>
ITEM 8: FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA.
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
To the Shareholders of Metromail
Corporation and Affiliates:
We have audited the accompanying consolidated and combined balance sheets of
Metromail Corporation and Affiliates as of December 31, 1996 and 1995, and the
related consolidated and combined statements of operations, changes in
shareholders' equity and cash flows for each of the three years ended December
31, 1996. 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 in accordance with generally accepted auditing
standards. Those standards require that we plan and perform the audits to
obtain reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
In our opinion, the financial statements referred to above present fairly,
in all material respects, the financial position of Metromail Corporation and
Affiliates as of December 31, 1996 and 1995 and the results of its operations
and cash flows for each of the three years ended December 31, 1996, in
conformity with generally accepted accounting principles.
Arthur Andersen LLP
Chicago, Illinois
January 21, 1997
17
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
CONSOLIDATED AND COMBINED BALANCE SHEETS
(IN THOUSANDS, EXCEPT SHARE INFORMATION)
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
ASSETS 1996 1995
------ -------- --------
<S> <C> <C>
Cash and equivalents....................................... $ 18,530 $ --
Receivables, less sales allowances and allowances for
doubtful accounts of $4,461 in 1996 and $3,965 in 1995.... 99,219 68,438
Inventories................................................ 6,722 5,658
Prepaid expenses........................................... 8,552 7,449
Current deferred income taxes.............................. 793 625
-------- --------
Total current assets................................... 133,816 82,170
Net property, plant and equipment, at cost, less
accumulated depreciation of $50,701 in 1996 and $43,392 in
1995...................................................... 45,313 37,545
Goodwill and other intangibles, net of accumulated
amortization of $86,372 in 1996 and $66,614 in 1995....... 255,799 252,526
Deferred income taxes...................................... -- 149
Other assets............................................... 8,478 6,331
-------- --------
Total assets........................................... $443,406 $378,721
======== ========
<CAPTION>
LIABILITIES AND SHAREHOLDERS' EQUITY
------------------------------------
<S> <C> <C>
Accounts payable........................................... $ 6,608 $ 5,742
Accrued compensation....................................... 8,540 6,073
Short-term debt............................................ -- 1,884
Short-term debt and advances--due to related party......... -- 248,492
Deferred revenue........................................... 9,050 6,721
Other accrued liabilities.................................. 28,560 19,206
-------- --------
Total current liabilities.............................. 52,758 288,118
Long-term debt............................................. 21,468 --
Deferred income taxes...................................... 1,591 --
Other noncurrent liabilities............................... 7,041 5,211
-------- --------
Total noncurrent liabilities........................... 30,100 5,211
Shareholders' equity:
Common stock, $.01 par value, authorized 75,000,000
shares; issued 22,437,000 and 8,600,000 shares in 1996
and 1995, respectively. Preferred stock, $.01 par value,
authorized 20,000,000 shares; no shares issued in 1996
and 1995 ............................................... 224 86
Additional paid-in capital............................... 374,832 111,779
Retained deficit (includes cumulative adjustment for
currency translation of $3 in 1996 and ($237) in 1995).. (12,362) (26,473)
Treasury stock, at cost, 125,100 shares in 1996.......... (2,146) --
-------- --------
Total shareholders' equity............................. 360,548 85,392
-------- --------
Total liabilities and shareholders' equity............. $443,406 $378,721
======== ========
</TABLE>
See accompanying Notes to Consolidated and Combined Financial Statements.
18
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
CONSOLIDATED AND COMBINED STATEMENTS OF OPERATIONS
(IN THOUSANDS, EXCEPT PER SHARE DATA)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Direct marketing sales............................ $227,023 $189,713 $156,806
Reference sales................................... 54,422 47,474 38,665
-------- -------- --------
Total net sales................................. 281,445 237,187 195,471
Database and production costs..................... 155,708 134,361 108,806
Amortization of goodwill.......................... 7,572 7,446 6,608
Selling expenses.................................. 53,240 45,913 37,107
General and administrative expenses............... 25,524 16,645 14,408
Provisions for doubtful accounts.................. 2,143 2,180 1,848
-------- -------- --------
Earnings from operations........................ 37,258 30,642 26,694
Interest expense--related party................... 10,178 21,329 18,999
Interest expense.................................. 776 80 --
Other expense (income)--net....................... (207) (87) 24
-------- -------- --------
Earnings before income taxes.................... 26,511 9,320 7,671
Income taxes...................................... 12,649 6,585 5,684
-------- -------- --------
Net income.................................... $ 13,862 $ 2,735 $ 1,987
======== ======== ========
Net income per share (Note 2)................. $ .62 $ .12 $ .09
======== ======== ========
Weighted average number of shares of common
stock and common stock equivalents
outstanding.................................. 22,427 22,427 22,427
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated and Combined Financial Statements.
19
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
CONSOLIDATED AND COMBINED STATEMENTS OF CHANGES IN SHAREHOLDERS' EQUITY
(IN THOUSANDS)
<TABLE>
<CAPTION>
ADDITIONAL TOTAL
COMMON TREASURY PAID-IN RETAINED SHAREHOLDERS'
STOCK STOCK CAPITAL DEFICIT EQUITY
------ -------- ---------- -------- -------------
<S> <C> <C> <C> <C> <C>
Balance at December 31,
1993........................ $ 86 $ -- $107,844 $(30,958) $ 76,972
Current year earnings..... -- -- -- 1,987 1,987
---- ------- -------- -------- --------
Balance at December 31,
1994....................... 86 -- 107,844 (28,971) 78,959
Current year earnings..... -- -- -- 2,735 2,735
Currency translation...... -- -- -- (237) (237)
ICD stock acquired........ -- -- 3,935 -- 3,935
---- ------- -------- -------- --------
Balance at December 31,
1995....................... 86 -- 111,779 (26,473) 85,392
Current year earnings..... -- -- -- 13,862 13,862
Currency translation...... -- -- -- 249 249
Common stock issued in
IPO...................... 138 -- 263,053 -- 263,191
Treasury stock acquired... -- (2,146) -- -- (2,146)
---- ------- -------- -------- --------
Balance at December 31,
1996....................... $224 $(2,146) $374,832 $(12,362) $360,548
==== ======= ======== ======== ========
</TABLE>
See accompanying Notes to Consolidated and Combined Financial Statements.
20
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
CONSOLIDATED AND COMBINED STATEMENTS OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31,
----------------------------
1996 1995 1994
-------- -------- --------
<S> <C> <C> <C>
Cash flows provided by (used in) operating
activities:
Net income from operations..................... $ 13,862 $ 2,735 $ 1,987
Depreciation and amortization of intangibles... 20,810 13,405 8,174
Amortization of goodwill....................... 7,572 7,446 6,607
Other--net..................................... 249 (236) 121
Net change in assets and liabilities........... (18,511) (13,651) (8,685)
-------- -------- --------
Net cash provided by operating activities.... 23,982 9,699 8,204
Cash flows used for investing activities:
Capital expenditures........................... (37,589) (28,459) (9,940)
Other investments including acquisitions, net
of cash....................................... -- (15,330) (19,987)
-------- -------- --------
Net cash used for investing activities....... (37,589) (43,789) (29,927)
Cash flows provided by (used for) financing
activities:
Borrowings and advances from related parties... 131,592 325,381 253,396
Repayments of borrowings and advances from
related party................................. (380,084) (296,526) (231,673)
Increase in borrowings......................... 19,584 1,300 --
Change in capital stock........................ 138 -- --
Proceeds from initial public offering.......... 263,053 -- --
Purchase of treasury stock..................... (2,146) -- --
Capital contribution from R. R. Donnelley...... -- 3,935 --
-------- -------- --------
Net cash provided by financing activities.... 32,137 34,090 21,723
Net increase in cash and equivalents............. 18,530 -- --
Cash and equivalents at beginning of year...... -- -- --
-------- -------- --------
Cash and equivalents at end of year............ $ 18,530 $ -- $ --
======== ======== ========
The changes in assets and liabilities, net of balances assumed through
acquisitions, were as follows:
Decrease (increase) in assets:
Receivables--net............................... $(30,781) $ (8,470) $(12,418)
Inventories--net............................... (1,064) (1,244) (829)
Prepaid expenses............................... (1,103) (4,545) 432
Current deferred income taxes.................. (168) 560 (486)
Deferred income taxes.......................... 149 (149) --
Other assets................................... (2,147) (3,106) (1,602)
Increase (decrease) in liabilities:
Accounts payable............................... 866 (1,954) 246
Accrued compensation........................... 2,467 151 2,299
Deferred revenue............................... 2,329 1,157 2,924
Other accrued liabilities...................... 8,859 4,873 (2,034)
Deferred income taxes.......................... 252 (1,121) 28
Other noncurrent liabilities................... 1,830 197 2,755
-------- -------- --------
Net change in assets and liabilities......... $(18,511) $(13,651) $ (8,685)
======== ======== ========
</TABLE>
See accompanying Notes to Consolidated and Combined Financial Statements.
21
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS
1. ORGANIZATION AND NATURE OF OPERATIONS
Metromail Corporation ("Metromail" or the "Company") is a leading provider
of marketing-oriented consumer information and reference services which it
supplies to a wide variety of organizations engaged in direct mail, telephone
and target marketing, as well as to clients who need specific reference and
information services. The Company operates entirely within the information
services industry segment. Within this segment, the Company offers two general
categories of products and services: direct marketing services and reference
services.
Metromail was a wholly owned subsidiary of R. R. Donnelley & Sons Company
("R. R. Donnelley") until June 19, 1996 when the Company completed an initial
public offering of 13.8 million shares of its common stock (the "IPO"),
reducing R. R. Donnelley's ownership in the Company to 38.4%. Metromail had
been acquired by R. R. Donnelley in 1987 in a business combination accounted
for as a purchase. On the date of acquisition, the financial position of
Metromail was adjusted to the fair value of the assets acquired and
liabilities assumed by R. R. Donnelley. All adjustments to Metromail's
financial position by R. R. Donnelley at the date of acquisition have been
pushed down to Metromail's financial statements.
The accompanying consolidated and combined financial statements include the
accounts of Metromail and subsidiaries, as well as International Communication
& Data Plc ("ICD") and Data by Design ("DBD"), which were affiliates of
Metromail in 1995. ICD was an affiliate of Metromail and an indirect wholly
owned subsidiary of R. R. Donnelley located in the United Kingdom. DBD was a
division of a wholly owned subsidiary of R. R. Donnelley located in the United
Kingdom, which was acquired by R. R. Donnelley in August 1994. ICD was
contributed to Metromail by R. R. Donnelley in February 1996. Subsequent to
this contribution, ICD purchased all of the assets of DBD. The accompanying
financial statements have been restated to reflect the combination of entities
under common control by R. R. Donnelley at December 31, 1995. ICD and DBD are
included in the results of operations of the accompanying consolidated and
combined financial statements from the date of original acquisition by R. R.
Donnelley in May 1995 and August 1994, respectively. Metromail, its wholly
owned subsidiaries, ICD and DBD are collectively referred to hereinafter as
the "Company".
2. SIGNIFICANT ACCOUNTING POLICIES
Basis of Consolidation and Combination
The consolidated and combined financial statements include all accounts of
the Company. All material intercompany balances and transactions are
eliminated in consolidation and combination.
Revenue Recognition and Deferred Revenues
The Company recognizes revenues for direct marketing services at the time
the services are provided. Revenues for reference services are recognized at
the time the service is provided or the product is delivered. The Company's
proprietary database software is generally licensed for an initial term of
three years. The license provides for an initial license fee, subsequent
annual license and maintenance fees and customer support service fees. Initial
license fee revenues are recognized when delivery of the software has
occurred, collectibility is probable and the Company retains no significant
obligations under the licensing agreements. Revenues from customer support
services are recognized in the period in which the support services are
performed by the Company. Annual license and maintenance fees are recognized
over the balance of the contract in accordance with specific contract terms.
The Company provides sales allowances for sales credits issued to clients in
the normal course of business. The allowances are recorded as reductions of
sales and are included in net sales in the accompanying statement of
operations. The reductions included in net sales were $3.6 million, $5.1
million and $5.0 million for the years ended 1994, 1995 and 1996,
respectively.
22
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Per Share Information
Net income per share for the years ended December 31, 1996, 1995 and 1994
has been computed using the weighted average number of common stock and common
stock equivalents outstanding for the year ended December 31, 1996 which
reflects the shares issued by the Company upon completion of the IPO as if
they were outstanding for all years presented.
Inventories
Inventories include materials, labor and production overhead and are carried
at weighted average cost.
Foreign Currency Translation
The financial statements of ICD are translated into U.S. dollars using
exchange rates in effect at the end of the period for assets and liabilities
and average exchange rates for results of operations during the period of
inclusion in the Company's financial statements. Gains and losses arising from
translation are included in shareholders' equity and are not included in
results of operations.
Property, Plant and Equipment--Capitalization and Depreciation
Property, plant and equipment are stated at cost. Depreciation is computed
using the straight-line method based on useful lives of up to 30 years for
buildings and 3 to 10 years for machinery, equipment and computer hardware.
Maintenance and repair costs are charged to expense as incurred. When
properties are retired or disposed, the costs and related depreciation
reserves are eliminated and the resulting profit or loss is recognized in
income.
Intangible Assets--Capitalization and Amortization
Intangible assets primarily consist of the cost of databases and data,
internal software, software development and goodwill.
Goodwill primarily consists of the excess of purchase price over the fair
market value of net assets acquired by R. R. Donnelley as a result of its
acquisition of Metromail in 1987. Goodwill also includes the excess of
purchase price over the fair market value of net assets for businesses the
Company has acquired and accounted for as a purchase. These costs are
amortized over their estimated useful lives of primarily 40 years.
Costs incurred for routine maintenance and updating of databases are
expensed as incurred. However, the Company does capitalize the costs incurred
to acquire databases, significantly enhance existing databases, acquire lists
and acquire data through Company-generated surveys. Such databases and data
enhancements are stated at cost and are amortized over their estimated useful
life of three years.
Internal software represents costs incurred to purchase externally developed
software, external consulting costs and direct internal costs incurred in the
development of various production and administrative applications. Intangible
assets as of December 31, 1996 included $9.7 million related to a major
redesign of the file structure of the Company's database. This new database
structure supports the delivery of the Company's information service
offerings. The costs related to this redesign will be amortized over its
expected period of benefit of five years. All other internal software is
amortized over three years.
Software development costs represent costs incurred to develop database
software which is licensed to clients. The Company capitalizes software
development costs when the technological feasibility of the product has been
assured, through the time at which the product is available for licensing to
its clients, in accordance with Statement of Financial Accounting Standards
No. 86. These costs are amortized over their estimated useful life of three
years. All development costs incurred prior to achieving technological
feasibility are expensed as incurred.
23
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Impairment of Long-lived Assets
The Company periodically assesses whether events or circumstances have
occurred that may indicate the carrying value of its long-lived assets may not
be recoverable. When such events or circumstances indicate the carrying value
of an asset may be impaired, the Company uses an estimate of the future
undiscounted cash flows to be derived from the asset over the remaining useful
life of the asset to assess whether or not the asset is recoverable. If the
future undiscounted cash flows to be derived over the life of the asset do not
exceed the asset's net book value, the Company recognizes an impairment loss
for the amount by which the net book value of the asset exceeds its estimated
fair market value. The Company has not recognized any material impairment
losses for the years ended December 31, 1994, 1995 and 1996. Management does
not believe any material impairment of long-lived assets exists as of December
31, 1996.
Income Taxes
Metromail and its wholly owned subsidiaries have been included in the
consolidated federal income tax return of R. R. Donnelley through June 19,
1996 (the date of completion of the IPO). DBD and ICD have historically been
included in the consolidated tax return of R. R. Donnelley's wholly owned
United Kingdom subsidiaries. The consolidated and combined tax provision is
presented as if the Company filed separate tax returns. Deferred taxes are
provided when tax laws and financial accounting standards differ with respect
to the amount of income calculated in a given year and the bases of assets and
liabilities, in accordance with Statement of Financial Accounting Standards
No. 109. Prior to completion of the IPO, income taxes were paid by R. R.
Donnelley on behalf of Metromail.
Use of Estimates and Assumptions
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets, liabilities, the
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
3. TRANSACTIONS WITH R. R. DONNELLEY & SONS COMPANY
Related party transactions with R. R. Donnelley not disclosed elsewhere in
the financial statements are as follows:
Employee Benefit Programs
Prior to completion of the IPO, the Company participated in various employee
benefit programs which were sponsored by R. R. Donnelley. These programs
included medical, dental and life insurance and workers' compensation. The
Company reimbursed R. R. Donnelley for its proportionate cost of these
programs based on historical experience and relative headcount. The costs
reimbursed to R. R. Donnelley included costs for reported claims as well as
incurred but not reported claims. The Company recorded expense related to the
reimbursement of these costs of approximately $7.3 million, $8.8 million and
$5.5 million in the years ended December 31, 1994 and 1995 and the period from
January 1, 1996 through the completion of the IPO, respectively. These costs
are charged to database and production costs, selling expense and general and
administrative expense based on the number of employees in each of these
categories. The Company believes its allocation of the proportionate cost is
reasonable and, in all material respects, approximates what would have been
incurred had the Company operated on a stand-alone basis prior to completion
of the IPO. Except as discussed below, R. R. Donnelley is liable for all
payments under these programs and, thus, no liability for these benefits has
been reflected on the accompanying balance sheet in respect of periods ended
prior to completion of the IPO.
24
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
At the completion of the IPO, the Company and R. R. Donnelley entered into a
Benefit Administration Services Agreement. This agreement, among other things,
permitted the Company to continue to participate in the welfare plans of R. R.
Donnelley until the Company established its own welfare plans, which it did on
July 1, 1996. The Benefit Administration Services Agreement also required the
Company to reimburse R. R. Donnelley for (1) the actual cost of benefits
provided under R. R. Donnelley's employee benefit plans for Company employees
during the period in which the Company continued to participate in such plans
following completion of the IPO and (2) the Company's pro rata share of
administration and plan asset management expenses incurred in the operation of
these plans during such period. The costs incurred by the Company under this
agreement in respect of the Company's participation in R. R. Donnelley's
employee benefit plans for the period from completion of the IPO through
December 31, 1996 were $1.3 million.
Post-Retirement Medical and Life Insurance Benefits
Prior to completion of the IPO, the Company also participated in a post-
retirement benefit program sponsored by R. R. Donnelley, which provides
certain post-retirement medical and life insurance benefits. Prior to
completion of the IPO, the Company reimbursed R. R. Donnelley for its
proportionate cost of these programs based on an actuarial estimation of the
proportionate costs attributable to all of the Company's employees. The
Company recorded expense related to the reimbursement of these costs of
approximately $2.1 million, $1.8 million and $1.2 million in the years ended
December 31, 1994, 1995 and 1996, respectively. Under the Benefit
Administration Services Agreement, the Company assumed the liability to
provide retiree medical and life insurance benefits with respect to active
employees who had not yet satisfied the age and service eligibility
requirements to receive such benefits as of the completion of the IPO and R.
R. Donnelley retained the liability to provide retiree benefits to all active
and terminated employees who had met the age and service requirements for
eligibility as of the completion of the IPO. The liability related to the
portion of post-retirement benefits which will be paid by the Company has been
reflected in other noncurrent liabilities in the accompanying financial
statements in the amounts of $4.8 million and $6.0 million as of December 31,
1995 and 1996, respectively. The liability related to the portion of post-
retirement liability retained by R. R. Donnelley, net of associated deferred
taxes receivable from R. R. Donnelley, has been reflected in other noncurrent
liabilities in the accompanying financial statements.
Corporate Services
Prior to completion of the IPO, R. R. Donnelley provided certain support
services to the Company, including legal, tax, treasury, benefits
administration, real estate, audit and corporate development services. These
charges were allocated by R. R. Donnelley to the Company based on various
formulas which reasonably approximate the actual costs incurred. The expenses
recorded by the Company for these allocations were approximately $1.4 million,
$1.8 million and $1.3 million for the years ended December 31, 1994 and 1995
and the period from January 1, 1996 through the completion of the IPO,
respectively, and are included in general and administrative expenses in the
accompanying income statements. The amounts allocated by R. R. Donnelley are
not necessarily indicative of the actual costs which may have been incurred
had the Company operated as an entity unaffiliated with R. R. Donnelley during
the periods prior to completion of the IPO. However, the Company believes that
such allocation was reasonable and in accordance with the Securities and
Exchange Commission's Staff Accounting Bulletin No. 55.
At the completion of the IPO, the Company and R. R. Donnelley entered into a
Transition Services Agreement, pursuant to which R. R. Donnelley or its
affiliates agreed to perform certain legal, environmental, real estate, risk
management and tax services for the Company, and the Company agreed to furnish
R. R. Donnelley certain financial information. The costs incurred by the
Company under this agreement for the period from completion of the IPO through
December 31, 1996 were $0.2 million.
25
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Metromail Computer Processing Services
Prior to completion of the IPO, the Company provided computer processing
services to R. R. Donnelley for most of the corporate software applications
used by R. R. Donnelley. The Company charged R. R. Donnelley the estimated
cost of providing these services. These costs include hardware, software and
labor costs associated with running the various application programs used by
R. R. Donnelley. The costs reimbursed by R. R. Donnelley were approximately
$3.1 million, $3.5 million and $1.8 million for the years ended December 31,
1994 and 1995 and the period from January 1, 1996 through the completion of
the IPO, respectively. These amounts have been recorded as reductions of
database and production costs in the accompanying income statement. The
Company believes these reimbursed costs reasonably approximate the actual
costs incurred by the Company.
At the completion of the IPO, the Company entered into a Data Center
Services Agreement with R. R. Donnelley. Under the Data Center Services
Agreement, the Company provides to R. R. Donnelley general computer and data
processing services, including mainframe processing and technical software
systems support and data processing for R. R. Donnelley's internal business
purposes. The Data Center Services Agreement will be in effect for the period
commencing on the closing of the IPO and ending on December 31, 1998. After
December 31, 1998, the Data Center Services Agreement will automatically renew
unless terminated by either party upon six months notice. R. R. Donnelley pays
the Company an annualized fee of $4.3 million for the Company's services under
the agreement during the period ending on December 31, 1996 and, thereafter,
the yearly fee will be adjusted according to changes in R. R. Donnelley's
service needs and increased by an amount equal to the average published
consumer price index increase for the preceding 12 months, measured at
September 30 of each year, provided that such increases shall not exceed six
percent per year. The fees paid by R. R. Donnelley under the agreement for the
period from completion of the IPO through December 31, 1996 were $2.3 million.
Sales through R. R. Donnelley
The Company sold products and services to clients who were also clients of
R. R. Donnelley. For some of these sales, the Company's clients were billed by
R. R. Donnelley. R. R. Donnelley then allocated to the Company that portion of
the revenue attributable to the Company's performed services, as agreed upon
by the Company and its client. Sales approximated $20.9 million, $22.7 million
and $21.8 million for the years ended December 31, 1994, 1995 and 1996,
respectively. The receivables from the Company's clients related to sales
prior to the completion of the IPO are excluded from the Company's balance
sheets as R. R. Donnelley retained risk of loss with collection. The
receivables from R. R. Donnelley related to these sales were included in
short-term debt and advances due to related party discussed in Note 11.
At the completion of the Offering, the Company and R. R. Donnelley entered
into a Sales Agreement. Pursuant to the Sales Agreement, if R. R. Donnelley
successfully sells the services of the Company to a customer, R. R. Donnelley
will, following performance of the services, invoice and seek to collect the
amounts owed from such customer for the services provided by the Company. Upon
collection of such amounts from the customer, R. R. Donnelley will pay over
the collected amount less two percent. Under this agreement, revenue
attributable to the Company's performed services are recognized at the
completion of the Company's services. The Company retains the risk of loss
related to these sales and $4.9 million of sales are included in receivables
at December 31, 1996.
Stock Purchase Plan
Prior to completion of the IPO, the Company participated in a stock purchase
plan for selected managers and key staff employees which was sponsored by R.
R. Donnelley. Under the plan, the Company contributed an amount equal to 70%
of participants' contributions, of which 50% was applied to the purchase of R.
R.
26
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Donnelley Common Stock and 20% was paid in cash. Amounts charged to expense by
the Company for this plan were $0.6 million and $0.3 million for the years
ended December 31, 1994 and 1995, respectively. The Company did not
participate in this plan in 1996. Accordingly, no amounts were charged to
expense by the Company for this plan for the year ended December 31, 1996.
Pursuant to the Benefit Administration Services Agreement between R. R.
Donnelley and the Company, the Company ceased being a participant in the R. R.
Donnelley stock purchase plan at completion of the IPO.
Tax Allocation and Indemnification Agreement
Prior to completion of the IPO, the Company was included in the consolidated
federal income tax return of R. R. Donnelley and filed on a combined basis
with R. R. Donnelley in certain states. Thus, rather than paying income taxes
directly in these jurisdictions, the Company made tax sharing payments to R.
R. Donnelley pursuant to R. R. Donnelley's tax allocation policy. In general,
R. R. Donnelley's tax allocation policy provided that the consolidated or
combined tax liability was allocated among the entities in the consolidated or
combined group based principally upon taxable income, credits, preferences and
other amounts directly related to each entity. As a result of completion of
the IPO, the Company is no longer permitted to be included in such
consolidated and combined tax returns. Instead, it files its own federal,
state and local income tax returns and pay its own taxes on a separate company
basis. Pursuant to a Tax Allocation and Indemnification Agreement entered into
by the Company and R. R. Donnelley at the completion of the IPO, the Company
remained obligated to pay to R. R. Donnelley any income taxes shown on R. R.
Donnelley's consolidated and combined tax returns, generally to the extent
attributable to the Company, for calendar year 1995 and for the tax period
(the "Interim Period") beginning on January 1, 1996 and ending on the date of
the consummation of the IPO (to the extent that it has not previously paid
such amounts to R. R. Donnelley). In addition, if the income tax liability
shown on any such consolidated or combined tax return for the Interim Period
and attributable to the Company is adjusted as a result of an action of a
taxing authority or a court, then the Company will pay to R. R. Donnelley the
full amount of any increase in such tax liability (together with any
applicable interest and penalties). Under federal regulations, the Company
will be subject to several liability for the consolidated federal income taxes
for any tax year (including the Interim Period) in which it was a member of
the R. R. Donnelley federal consolidated group (whether or not such taxes are
attributable to the Company). R. R. Donnelley has agreed to indemnify the
Company against such liability and any similar liability under state and local
law. R. R. Donnelley has also agreed to indemnify the Company against any
increase in the Company's income taxes (whether or not related to taxes paid
on a consolidated or combined basis) for periods prior to January 1, 1996 that
results from an action of a taxing authority or a court (except to the extent
such increase provides tax benefits to the Company for periods beginning on or
after January 1, 1996, in which case the sum of such tax benefits will be
retained by R. R. Donnelley or paid by the Company to R. R. Donnelley).
Impact of Operating as a Stand Alone Entity
The accompanying financial statements reflect all of the Company's costs of
doing business, including all expenses incurred by R. R. Donnelley on the
Company's behalf in accordance with SEC Staff Accounting Bulletin No. 55.
However, the Company estimates that prior to completion of the IPO it would
have incurred increased expenses for additional senior management and
administrative support functions associated with being a stand alone public
entity. In addition, the Company estimates that it would have incurred
additional sales commission expense of approximately $0.5 million for the year
ended December 31, 1995 payable to R. R. Donnelley related to sales to clients
of the Company who are also clients of R. R. Donnelley. These expenses would
have been offset partially by reduced database and production costs as a
result of increased charges for computer services to be provided by the
Company to R. R. Donnelley. The estimated pro forma impact of all of the above
adjustments would have reduced pretax income by approximately $1.6 million for
the year ended December 31, 1995.
27
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
4. INVENTORIES
The components of the Company's inventories were as follows:
<TABLE>
<CAPTION>
DECEMBER 31,
-------------
1996 1995
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Raw materials............................................... $2,662 $2,119
Work in process............................................. 4,060 3,539
------ ------
Total..................................................... $6,722 $5,658
====== ======
</TABLE>
Raw material inventories consist mainly of paper and other materials used in
the manufacturing of directories. Work in process inventories consist of costs
associated with jobs not completed for list, list enhancement, lettershop and
directories in process.
5. PROPERTY AND EQUIPMENT
Property and equipment consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Land.................................................. $ 1,439 $ 1,439
Buildings and improvements............................ 30,328 27,208
Machinery, equipment and computer hardware............ 64,247 52,290
-------- --------
Total property and equipment........................ 96,014 80,937
Accumulated depreciation.............................. (50,701) (43,392)
-------- --------
Net property and equipment.......................... $ 45,313 $ 37,545
======== ========
</TABLE>
Depreciation expense included in the Consolidated and Combined Statements of
Operations was $5.2 million, $6.5 million and $8.6 million for the years ended
December 31, 1994, 1995 and 1996, respectively.
6. INTANGIBLE ASSETS
Intangible assets consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
------------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Databases and software development costs.............. $ 65,410 $ 44,811
Goodwill.............................................. 276,761 274,329
-------- --------
Total intangibles................................... 342,171 319,140
Accumulated amortization.............................. (86,372) (66,614)
-------- --------
Total intangibles, net.............................. $255,799 $252,526
======== ========
</TABLE>
Amortization expense included in the Consolidated and Combined Statements of
Operations was $9.6 million, $14.4 million and $19.8 million for the years
ended December 31, 1994, 1995 and 1996, respectively.
28
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
7. OTHER ASSETS
Other assets include investment tax credits recorded in connection with an
investment and employment agreement between the Company and the state of
Nebraska. The credits recorded in other assets are approximately $4.0 million
and $4.9 million as of December 31, 1995 and 1996, respectively. Under the
terms of the agreement, the Company must maintain certain investments in plant
and equipment and the number of personnel in the state over a defined period
of time.
The Company records the income derived from this agreement in the period in
which the required wage and capital expenditures are made. The investment
credits will be realized through reductions of sales, use and other state
taxes in future periods. Approximately $3.1 million of these tax credits
expire in the year 2003 and $1.8 million expire in the year 2010. The benefits
associated with these credits are recorded in earnings from operations in the
amount of approximately $1.0 million for each of the years ended December 31,
1994, 1995 and 1996. The credits are classified in database and production
costs, selling expense and general and administrative expense based on a
proration of the amount of wage and capital expenditures applicable to each of
the respective areas.
8. PENSION PLAN AND POST-RETIREMENT BENEFITS
The Company's pension plan (the "Plan") is a defined benefit pension plan
sponsored by the Company for its employees. All contributions to the Plan are
made by the Company. Employees are considered eligible when they reach 21
years of age. The Plan provides a normal retirement benefit equal to the sum
of the following:
.The benefit accrued as of December 31, 1990;
. 1.5% of covered earnings for each year of benefit services earned after
December 31, 1990, up to a maximum of 38 total years of benefit service
(including years of benefit service earned prior to 1991);
. 0.5% of covered earnings in excess of covered compensation for each year
of benefit services earned after December 31, 1990, up to a maximum of 38
total years of benefit service (including years of benefit service earned
prior to 1991); and
.2.0% of covered earnings for each year of benefit service in excess of 38
years.
Participants are 100 percent vested upon the completion of five years of
vesting service; provided, however, that a participant who was employed by the
Company prior to 1995 will be vested upon attainment of age 55 regardless of
such participant's years of service. Plan participants are eligible for normal
benefits at age 65 but may elect early retirement after age 55. The
participants may also elect to continue working beyond age 65 and defer
retirement.
Net pension expenses (credits) included in operating results for the Plan
for the years ended December 31 were:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------- -------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost........................................ $ 2,178 $ 1,386 $ 1,602
Interest cost on the projected benefit obligation... 2,391 2,027 1,893
Actual (return) loss on plan assets................. (5,410) (6,506) 625
Amortization of unrecognized prior service costs and
of net obligation at adoption of SFAS No. 87 and
deferrals.......................................... 2,549 4,542 (2,443)
------- ------- -------
Total expense..................................... $ 1,708 $ 1,449 $ 1,677
======= ======= =======
</TABLE>
29
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The actuarial computations that derived the above amounts assumed a discount
rate on the projected benefit obligations of 7.50% at December 31, 1996, 7.25%
at December 31, 1995 and 8.5% at December 31, 1994, an expected long-term rate
of return on Plan assets of 9.5% and annual salary increases of 4.0%.
In June of 1992 certain accrued benefits and assets relating thereto were
transferred to the Plan from the Oregon Printing Industry Pension Plan (the
"OPI Benefits"). In connection with the IPO, in July of 1996, the OPI Benefits
(approximately $1.9 million) were transferred from the Plan to the R. R.
Donnelley Norwest Pension Plan. Had these assets been excluded from plan
assets, pension expense would not have been materially impacted for the years
ended December 31, 1994, 1995 and 1996, respectively.
Plan assets are mainly invested in marketable securities valued at the last
quoted market price during the fiscal year. The funded status and prepaid
pension cost as of December 31 are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
(IN THOUSANDS)
<S> <C> <C>
Fair value of Plan assets.............................. $38,432 $33,095
------- -------
Actuarial present value of benefit obligations:
Vested............................................... 24,482 22,756
Non-vested........................................... 1,527 1,709
------- -------
Total accumulated benefit obligations.................. 26,009 24,465
Additional amounts related to projected wage increases. 9,175 9,264
------- -------
Projected benefit obligations for services rendered to
date.................................................. 35,184 33,729
------- -------
Plan assets (liabilities) under projected benefit
obligations........................................... 3,248 (634)
Unrecognized prior service cost........................ 1,213 867
Unrecognized net (gain) loss from experience........... (2,385) 1,157
Unrecognized portion of net transition obligation...... 751 920
------- -------
Prepaid pension costs................................ $ 2,827 $ 2,310
======= =======
</TABLE>
In the event of Plan termination, the Plan provides that no funds can revert
to the Company and any excess assets over Plan liabilities must be used to
fund retirement benefits.
Benefits under the Pension Plan are limited to the extent required by
provisions of the Internal Revenue Code and the Employee Retirement Income
Security Act of 1974. If payment of retirement benefits is limited by such
provisions, an amount equal to any reduction in retirement benefits will be
paid as supplemental benefit under the Unfunded Supplemental Benefit Plan
effective January 1, 1996. In 1996, $0.3 million was charged to expense. The
accumulated benefit obligation of $0.4 million was recorded in other accrued
liabilities at December 31, 1996. At December 31, 1996 the related projected
benefit obligation was $1.2 million.
As a subsidiary of R. R. Donnelley, the Company also provided certain health
care and life insurance benefits for retired employees as part of a post-
retirement benefit program sponsored by R. R. Donnelley. Subsequent to the
IPO, the Company continues to provide certain health care and life insurance
benefits for retired employees similar to those sponsored under the R. R.
Donnelley program. Substantially all of the Company's domestic full-time
employees become eligible for those benefits upon reaching age 55 while
working for the Company and having 10 years of continuous service with the
Company or R. R. Donnelley at retirement. The Company does not fund the
liability and thus no plan assets have been considered in the determination of
post-retirement benefit expense below.
30
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The accrual basis expense for all employees of the Company recorded in the
accompanying statements of operations for post-retirement benefit programs
sponsored by R. R. Donnelley or the Company during 1994, 1995 and 1996 is as
follows:
<TABLE>
<CAPTION>
1996 1995 1994
------ ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Service cost....................................... $ 913 $1,088 $1,353
Interest cost...................................... 646 742 707
Amortization of prior service cost................. (378) -- --
------ ------ ------
Total expense.................................... $1,181 $1,830 $2,060
====== ====== ======
</TABLE>
The Company is liable for post-retirement medical and life insurance benefits
for active employees under 55 years of age who are not yet eligible to receive
benefits. This liability is as follows:
<TABLE>
<CAPTION>
1996 1995
------ ------
(IN
THOUSANDS)
<S> <C> <C>
Accumulated post-retirement benefit obligation for active
plan participants not yet fully eligible to retire and
receive benefits.......................................... $4,766 $4,647
Unrecognized prior service cost.......................... 863 --
Unrecognized net gain.................................... 345 185
------ ------
Net post-retirement liability............................ $5,974 $4,832
====== ======
</TABLE>
This liability, net of associated deferred taxes receivable from R. R.
Donnelley, has been reflected in other noncurrent liabilities. R. R. Donnelley
is liable for payments of post-retirement medical and life insurance benefits
for all other employees of the Company as of the completion of the IPO.
The actuarial computations assume a discount rate of 7.25% (8.5% at December
31, 1995) and a health care cost trend rate of 8.0%, declining gradually to
5.5% in the year 2023 and thereafter to determine the accumulated post-
retirement benefit obligation. A one percentage point increase in the health
care cost trend rate would increase the 1996 post-retirement benefit expense by
less than $0.1 million and the accumulated post-retirement benefit obligation
as of December 31, 1996 by approximately $0.2 million.
9. LEASE OBLIGATIONS
The Company leases office space and various equipment. The leases are mainly
accounted for as operating leases. Rental costs under the operating lease
agreements approximated $8.7 million, $9.4 million and $10.0 million for the
years ended December 31, 1994, 1995 and 1996, respectively.
Minimum future lease obligations in effect at December 31, 1996 are:
<TABLE>
<CAPTION>
OBLIGATION
--------------
(IN THOUSANDS)
<S> <C>
Period ending December 31,
1997..................................................... $10,747
1998..................................................... 9,697
1999..................................................... 8,905
2000..................................................... 7,331
2001 and thereafter...................................... 8,878
-------
Total.................................................. $45,558
=======
</TABLE>
31
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
The Company is treating the lease of a computer as a capital lease. This
lease was initiated on October 1, 1996 and is for a five-year period. The
gross asset value recorded under this lease is $4.8 million. Accumulated
amortization at December 31, 1996 was approximately $0.2 million and was
included in depreciation expense for the year.
Minimum future lease obligations and imputed interest in effect at December
31, 1996 are:
Period ending December 31,
<TABLE>
<CAPTION>
OBLIGATION
----------
(IN THOUSANDS)
PRINCIPAL INTEREST TOTAL
--------- -------- ------
<S> <C> <C> <C>
1997................................................ $ 822 $347 $1,169
1998................................................ 892 277 1,169
1999................................................ 969 200 1,169
2000................................................ 1,051 118 1,169
2001................................................ 847 29 876
------ ---- ------
Total............................................. $4,581 $971 $5,552
====== ==== ======
</TABLE>
10. COMMITMENTS AND CONTINGENCIES
The Company is a party to certain litigation arising in the ordinary course
of business which, in the opinion of the Company, will not have a material
adverse effect on the operations or financial position of the Company. See
Item 3: Legal Proceedings.
11. DEBT AND ADVANCES DUE TO A RELATED PARTY
The Company's debt and advances due to a related party consisted of the
following:
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------
1996 1995
-------- --------
(IN THOUSANDS)
<S> <C> <C>
Notes payable and accrued interest payable to Caslon
Incorporated:
Grid Note, dated October 12, 1987.................. $ -- $ 57,934
Fixed Note, 9.75%, dated August 13, 1987........... -- 160,000
Advance due R. R. Donnelley........................ -- 30,558
-------- --------
Total debt and accrued interest.................. $ -- $248,492
======== ========
</TABLE>
Caslon Incorporated is a wholly owned subsidiary of R. R. Donnelley. The
Grid Note was paid in full with a portion of the net proceeds of the IPO.
Prior to completion of the IPO, the Grid Note funded operating and investing
activities of the Company's domestic operations. Interest on the Grid Note was
payable on the first day of each calendar quarter based on an interest rate
equal to the prime rate in the preceding calendar quarter as published in The
Wall Street Journal. As of December 31, 1995, the interest rate on the Grid
Note was 8.75%. The Fixed Note was paid in full with a portion of the net
proceeds of the IPO. Interest on the Fixed Note was payable on the first day
of each calendar quarter based on an interest rate equal to 9.75% per annum.
Total accrued interest payable included in the above amounts is $5.2 million
as of December 31, 1995.
The debt is classified on the accompanying balance sheet in accordance with
the above stated terms. The Grid Note and the Fixed Note are classified as
short term at December 31, 1995.
32
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
Advances due to related party represents advances from R. R. Donnelley to
fund operating and investing activities, net of cash advanced to R. R.
Donnelley from operating cash flows generated by the Company and receivables
resulting from sales through R. R. Donnelley discussed in Note 3. Prior to
completion of the IPO, this payable was periodically transferred by R. R.
Donnelley into the Grid Note borrowings discussed above.
12. DEBT
Prior to the IPO, ICD had a $4.6 million revolving credit agreement. The
amount outstanding under this facility was $1.9 million at December 31, 1995.
The Company has entered into a credit agreement with a syndicate of banks
(the "Credit Agreement") under which it is entitled to borrow up to $45 million
on a revolving credit basis. Borrowings under the Credit Agreement mature in
2001 and bear interest (i) at the prime rate announced by the bank acting as
agent for the syndicate, (ii) at the LIBOR rate plus, depending on the
Company's leverage ratio and fixed charge coverage ratio, up to 42.5 basis
points per annum, or (iii) at a rate determined by competitive bidding. At
December 31, 1996, there was $21.5 million outstanding under the credit
agreement resulting from the repayment of related party debt for ICD and
borrowings to provide operating funds for the Company's U.K. operations.
Interest paid, net of capitalized interest and related party interest, was $0.6
million in 1996.
13. INCOME TAXES
The components of the provision for taxes for the years ended December 31 are
as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Federal............................................. $ 9,118 $5,435 $4,929
State............................................... 1,989 832 755
Foreign............................................. 1,542 318 --
------- ------ ------
Total tax provision............................... $12,649 $6,585 $5,684
======= ====== ======
</TABLE>
The current and deferred portions of the income tax provision are as follows:
<TABLE>
<CAPTION>
1996 1995 1994
------- ------ ------
(IN THOUSANDS)
<S> <C> <C> <C>
Current........................................... $12,357 $7,295 $6,142
Deferred.......................................... 292 (710) (458)
------- ------ ------
Total provision................................. $12,649 $6,585 $5,684
======= ====== ======
</TABLE>
A reconciliation of the effective tax rate from statutory U.S. federal income
tax rate of 35% for the years ended December 31 is as follows:
<TABLE>
<CAPTION>
1996 1995 1994
---- ---- ----
<S> <C> <C> <C>
Federal rate............................................ 35.0% 35.0% 35.0%
State taxes............................................. 6.0 8.9 9.8
Foreign taxes........................................... -- 2.4 --
Goodwill amortization................................... 8.9 23.0 27.7
Other................................................... .8 1.4 1.6
---- ---- ----
Effective tax rate.................................... 50.7% 70.7% 74.1%
==== ==== ====
</TABLE>
33
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
As of December 31, 1995 and 1996, total current deferred tax assets and total
noncurrent deferred tax (liability) asset are as follows:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Allowance for doubtful accounts......................... $ 690 $ 594
Inventory............................................... (1,086) (1,200)
Vacation liability...................................... 756 678
Payroll and related liabilities......................... -- 153
Miscellaneous, other.................................... 433 400
------- -------
Total net current deferred tax asset.................. 793 625
------- -------
Accumulated depreciation................................ (3,906) (3,006)
Goodwill and intangibles................................ 1,172 974
Other intangibles....................................... (1,014) 1,146
Pension accrual......................................... (267) (898)
Post retirement liabilities............................. 2,424 1,933
Miscellaneous, other.................................... -- --
------- -------
Total net noncurrent deferred tax (liability) asset... (1,591) 149
------- -------
Total................................................. $ (798) $ 774
======= =======
</TABLE>
The Company has not provided a valuation allowance for deferred tax assets
because, although realization is not assured, the Company believes it is more
likely than not that such tax assets will be recognized through reversals of
taxable timing differences and taxable income in future periods.
Taxes payable are included in debt and advances due to R. R. Donnelley and
its subsidiaries for the year ended December 31, 1995. Taxes payable at
December 31, 1996 are included in other accrued liabilities. Cash payments for
income taxes were $7.2 million for the period from completion of the IPO
through December 31, 1996.
14. ACQUISITIONS
The Company acquired Customer Insight Company, Inc. ("CIC") in June 1994 and
a wholly owned subsidiary of R. R. Donnelley acquired ICD in May 1995. Both
acquisitions were accounted for as purchases.
CIC was purchased for approximately $20.0 million. The excess of the purchase
price over the fair market value of net assets acquired, including identifiable
intangible assets, has been allocated to goodwill in the amount of
approximately $16.8 million. The goodwill is being amortized over its estimated
useful life of 15 years.
ICD was purchased for approximately $15.3 million. The excess of the purchase
price over the fair market value of net assets acquired, including identifiable
intangible assets, has been allocated to goodwill in the amount of $14.7
million. The goodwill is being amortized over its estimated useful life of 40
years.
In February 1996, a wholly owned subsidiary of R. R. Donnelley contributed
ICD to Metromail. Subsequent to the contribution, ICD purchased all of the net
assets of DBD. This contribution and purchase between entities under R. R.
Donnelley's common control resulted in the historical costs bases of ICD and
DBD (prior to their contribution and purchase) being carried over to Metromail
with no gain or loss recognized as a result of these transactions.
34
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONTINUED)
15. STOCK INCENTIVE PLANS
The Company has reserved for issuance under the 1996 Stock Incentive Plan
and the 1996 Broad-Based Employee Stock Plan an aggregate of 1,600,000 shares
of Common Stock. Under the 1996 Stock Incentive Plan, 1,168,500 options and
37,000 shares of restricted Common Stock were granted in 1996. The 1,147,500
options granted on June 19, 1996 have an exercise price per share of $20.50
and the 3,500 options granted on August 27, 1996 have an exercise price per
share of $18.1875. These options vest in four annual 25% installments on each
of the first four anniversaries of the date of grant. Non-employee directors
of the Company were granted 17,500 options on September 1, 1996. Such options
have an exercise price per share of $17.5626 and vest on September 1, 1997.
Each option granted under the 1996 Stock Incentive Plan has a 10-year term.
Options to purchase 142,750 shares of Common Stock were granted on June 19,
1996 under the 1996 Broad-Based Employee Stock Plan and have an exercise price
of $20.50. Each such option has a 10-year term and will become exercisable on
June 19, 1999. No options were exercised or cancelled during 1996.
The Company accounts for these plans under APB Opinion No. 25, under which
no compensation cost has been recognized. Had compensation cost for stock
options been determined consistent with FASB Statement No. 123, the Company's
net income and net income per share for 1996 would have been reduced by $1.6
million and $0.07, respectively. These plans were not effective for 1995,
accordingly 1995 and prior years were not affected by this accounting. The
fair value of each option grant is estimated on the date of grant using the
Black-Scholes option pricing model with the following assumptions: weighted
average risk-free interest of 7.1%; no expected dividend yield; expected life
of ten years; weighted average volatility of 36%. Management has provided this
information in accordance with the requirements of FASB Statement No. 123. The
value attached to the stock options using the Black-Scholes model, which was
intended to value short-term, publicly-traded options, may vary significantly
due to the lack of history to measure the market for the Common Stock. The
Company will continue to revise this calculation annually to report a more
current estimate.
16. OTHER ACCRUED LIABILITIES
The balance in other accrued liabilities consists of the following:
<TABLE>
<CAPTION>
1996 1995
------- -------
<S> <C> <C>
Taxes.................................................... $ 7,755 $ 4,671
Capital lease............................................ 4,581 4,670
Data/royalties........................................... 3,363 3,806
Amount due to related party.............................. 4,600 --
Customer deposits........................................ 422 2,127
Other.................................................... 7,839 3,932
------- -------
Total.................................................. $28,560 $19,206
======= =======
</TABLE>
35
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
NOTES TO CONSOLIDATED AND COMBINED FINANCIAL STATEMENTS--(CONCLUDED)
17. SELECTED QUARTERLY FINANCIAL DATA (UNAUDITED)
<TABLE>
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1996:
Direct marketing sales..................... $41,894 $55,959 $54,820 $74,350
Reference sales............................ 12,475 13,387 13,410 15,150
------- ------- ------- -------
Total net sales.......................... 54,369 69,346 68,230 89,500
Earnings from operations................... 1,725 8,713 10,893 15,927
Net income (loss).......................... (2,887) 1,484 5,947 9,318
Earnings (loss) per share.................. (0.13) 0.07 0.27 0.42
<CAPTION>
1ST 2ND 3RD 4TH
QUARTER QUARTER QUARTER QUARTER
------- ------- ------- -------
(IN THOUSANDS, EXCEPT PER SHARE
DATA)
<S> <C> <C> <C> <C>
1995:
Direct marketing sales..................... $38,860 $44,862 $48,018 $57,973
Reference sales............................ 10,972 11,531 13,105 11,866
------- ------- ------- -------
Total net sales.......................... 49,832 56,393 61,123 69,839
Earnings from operations................... 3,095 10,445 7,267 9,835
Net income (loss).......................... (1,733) 2,464 548 1,456
Earnings (loss) per share.................. (0.07) 0.11 0.02 0.06
</TABLE>
36
<PAGE>
ITEM 9: CHANGES IN AND DISAGREEMENTS WITH ACCOUNTANTS ON ACCOUNTING AND
FINANCIAL DISCLOSURE.
None
PART III
ITEM 10: DIRECTORS AND EXECUTIVE OFFICERS OF METROMAIL CORPORATION.
Information required by this item regarding directors is contained in the
section entitled "Election of Director" in the Company's Proxy Statement for
its 1997 Annual Meeting of Stockholders, which section is incorporated herein
by reference. Information regarding officers is included at the end of Part I
of this Annual Report on Form 10-K. Other information required by this item
regarding both directors and officers is contained in the section entitled
"Section 16(a) Beneficial Ownership Reporting Compliance" in the Company's
Proxy Statement for its 1997 Annual Meeting of Stockholders, which section is
incorporated herein by reference.
ITEM 11: EXECUTIVE COMPENSATION.
Information required by this item is contained in the section entitled
"Compensation of Directors and Executive Officers" in the Company's Proxy
Statement for its 1997 Annual Meeting of Stockholders, which section is
incorporated herein by reference.
ITEM 12: SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT.
Information required by this item is contained in the section entitled
"Beneficial Ownership of Common Stock" in the Company's Proxy Statement for its
1997 Annual Meeting of Stockholders, which section is incorporated herein by
reference.
ITEM 13: CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS.
Information required by this item is contained in the section entitled
"Certain Transactions" in the Company's Proxy Statement for its 1997 Annual
Meeting of Stockholders, which section is incorporated herein by reference.
PART IV
ITEM 14: EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K.
(a)1. FINANCIAL STATEMENTS
See Part II, Item 8 of this Annual Report on Form 10-K.
2. FINANCIAL STATEMENT SCHEDULES
See "Schedule II--Valuation and Qualifying Accounts" set forth
below.
3. EXHIBITS
Exhibits required to be attached pursuant to Item 601 of Regulation
S-K are listed in the Exhibit Index attached hereto, which Exhibit
Index is incorporated herein by reference.
(b)REPORTS ON FORM 8-K
No Current Report on Form 8-K was filed by the Company during the
fourth quarter of 1996.
(c)EXHIBITS
See Item 14(a)(3) above.
37
<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.
Metromail Corporation
/s/ Barton L. Faber
By: _________________________________
Name: Barton L. Faber
Title: Chairman
March 4, 1997
PURSUANT TO THE REQUIREMENTS OF THE SECURITIES EXCHANGE ACT OF 1934, THIS
REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF METROMAIL
CORPORATION AND IN THE CAPACITIES AND ON THE DATE INDICATED.
<TABLE>
<CAPTION>
SIGNATURE TITLE(S) DATE
--------- -------- ----
<S> <C> <C>
/s/ Barton L. Faber Director and Chairman March 4, 1997
____________________________________ (principal executive
Barton L. Faber officer)
/s/ Susan L. Henricks Director, President and March 4, 1997
____________________________________ Chief Executive Officer
Susan L. Henricks
/s/ Ronald G. Eidell Chief Financial Officer March 4, 1997
____________________________________ (principal financial
Ronald G. Eidell officer)
/s/ Kenneth A. Glowacki Vice President, Finance March 4, 1997
____________________________________ (principal accounting
Kenneth A. Glowacki officer)
/s/ Robert C. McCormack Director March 4, 1997
____________________________________
Robert C. McCormack
/s/ Peter F. Murphy Director March 4, 1997
____________________________________
Peter F. Murphy
/s/ Jonathan P. Ward Director March 4, 1997
____________________________________
Jonathan P. Ward
</TABLE>
<PAGE>
REPORT OF INDEPENDENT PUBLIC ACCOUNTANTS
We have audited in accordance with generally accepted auditing standards, the
consolidated and combined financial statements of Metromail Corporation and
Affiliates included in this Form 10-K and have issued our report thereon dated
January 21, 1997. Our audit was made for the purpose of forming an opinion on
the basic financial statements as a whole. The schedule immediately following
this report is presented for purposes of complying with the Securities and
Exchange Commissions rules and is not part of the basic financial statements.
This schedule has been subjected to the auditing procedures applied in the
audit of the basic financial statements and, in our opinion, fairly states in
all material respects the financial data required to be set forth therein in
relation to the basic financial statements taken as a whole.
Arthur Andersen LLP
Chicago, Illinois
January 21, 1997
<PAGE>
METROMAIL CORPORATION AND AFFILIATES
SCHEDULE II--VALUATION AND QUALIFYING ACCOUNTS
(IN THOUSANDS)
<TABLE>
<S> <C> <C> <C> <C> <C> <C>
DEDUCTIONS--
ADDITIONS WRITE-OFFS
BALANCE -------------------------------- OF TRADE
AT THE CHARGES CHARGES CHARGES TO RECEIVABLES, BALANCE AT
SALES ALLOWANCES AND BEGINNING TO TO OTHER NET OF END OF
ALLOWANCES FOR DOUBTFUL ACCOUNTS OF PERIOD SALES(1) EXPENSES(2) ACCOUNTS(3) RECOVERIES PERIOD
- -------------------------------- --------- -------- ----------- ----------- ------------ ----------
For the Year Ended December 31,
1995........................... 3,586 5,067 2,180 465 (7,333) 3,965
For the Year Ended December 31,
1996........................... 3,965 4,979 2,143 -- (6,626) 4,461
</TABLE>
- --------
(1) These amounts represent provisions for sales allowances that are included
in net sales.
(2) These amounts represent provisions for doubtful accounts that are included
in general and administrative expenses.
(3) Represent additions to the reserve resulting from the purchase of ICD in
1995.
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
EXHIBIT
NO. DESCRIPTION
------- -----------
<C> <S>
3(i) Third Restated Certificate of Incorporation of Metromail
Corporation, as amended.
3(ii) By-laws of Metromail Corporation. (1)
4 Rights Agreement, dated as of February 24, 1997, between Metromail
Corporation and American Stock Transfer and Trust Company, as
Rights Agent. (2)
10.1 Form of Transition Services Agreement between Metromail
Corporation and
R. R. Donnelley. (1)
10.2 Form of Sales Agreement between Metromail Corporation and R. R.
Donnelley. (1)
10.3 Form of Benefit Administration Services Agreement between
Metromail Corporation and R. R. Donnelley. (1)
10.4 Form of Data Center Services Agreement between Metromail
Corporation and
R. R. Donnelley. (1)
10.5 Form of Tax Allocation and Indemnification Agreement between
Metromail Corporation and R. R. Donnelley. (1)
10.6* Employment Agreement between Metromail Corporation and Barton L.
Faber. (1)
10.7* Employment Agreement between Metromail Corporation and Susan L.
Henricks. (1)
10.8* Employment Agreement between Metromail Corporation and Ronald G.
Eidell.
10.9* Employment Agreement between Metromail Corporation and Thomas J.
Quarles.
10.10* Employment Agreement dated June 16, 1994 between Customer Insight
Company and Tery R. Larrew. (1)
10.11* Management Agreement between Metromail Corporation and Barton L.
Faber.
10.12* Management Agreement between Metromail Corporation and Susan L.
Henricks.
10.13* Management Agreement between Metromail Corporation and Ronald G.
Eidell.
10.14* Management Agreement between Metromail Corporation and Thomas J.
Quarles.
10.15* Management Agreement between Metromail Corporation and Tery R.
Larrew.
10.16* Amended and Restated Metromail Corporation 1996 Stock Incentive
Plan.
10.17* Metromail Corporation 1996 Broad-Based Employee Stock Plan. (1)
10.18* Metromail Corporation Directors' Deferred Retainer Plan.
10.19 Form of Credit Agreement among Metromail Corporation and certain
Subsidiaries, as Borrower, the Banks named therein and the First
National Bank of Chicago, as Administrative Agent. (1)
10.20 Registration Rights Agreement, dated as of February 24, 1997,
between Metromail Corporation and R. R. Donnelley. (3)
10.21 Acknowledgment and Agreement, dated as of February 24, 1997,
between Metromail Corporation and R. R. Donnelley. (3)
21 Subsidiaries of Metromail Corporation.
23 Consent of Arthur Andersen LLP.
27 Financial Data Schedule.
</TABLE>
- --------
*Denotes management contract or compensatory plan or arrangement.
(1) Filed as an Exhibit to the Company's Registration Statement on Form S-1
(No. 333-2042) that became effective on June 13, 1996, and incorporated
herein by reference.
(2) Filed as an Exhibit to the Company's Registration Statement on Form 8-A,
filed on February 26, 1997, and incorporated herein by reference.
(3) Filed as an Exhibit to the Company's Current Report on Form 8-K dated
February 24, 1997, and incorporated herein by reference.
<PAGE>
Exhibit 3(i)
THIRD RESTATED CERTIFICATE OF INCORPORATION
OF
METROMAIL CORPORATION
Metromail Corporation, a Delaware corporation, the original
Certificate of Incorporation of which was filed with the Secretary of State of
the State of Delaware on November 29, 1979, HEREBY CERTIFIES that this Third
Restated Certificate of Incorporation restating, integrating and amending its
Restated Certificate of Incorporation was duly proposed by the Board of
Directors and unanimously adopted by its stockholders in accordance with
Sections 228, 242 and 245 of the Delaware General Corporation Law.
FIRST: The name of the Corporation is Metromail Corporation.
SECOND: The address of the Corporation's registered office in the
State of Delaware is Corporation Trust Center, 1209 Orange Street, in the City
of Wilmington, County of New Castle. The name of the Corporation's registered
agent at such address is The Corporation Trust Company.
THIRD: The purpose of the Corporation is to engage in any lawful act
or activity for which corporations may be organized under the General
Corporation Law of Delaware (the "DGCL").
FOURTH: A. The total number of shares of all classes of capital
stock which the Corporation shall have the authority to issue is 75,000,000
shares of Common Stock, each with a par value of $.01 per share, and 20,000,000
shares of Preferred Stock, each with a par value of $.01 per share. At the time
at which this Third Restated Certificate of Incorporation is filed with the
Secretary of State of the State of Delaware (the "Filing Time"), each share of
Common Stock, par value $.40 per share, of the Corporation that shall be issued
and outstanding or held for any purpose in the treasury of the Corporation
immediately prior thereto shall be reclassified by changing such share into
8,600 shares of Common Stock, par value $.01 per share.
B. The Board of Directors is expressly authorized to provide for the
issuance of all or any shares of the Preferred Stock in one or more classes or
series, and to fix for each such class or series such voting powers, full or
limited, or no voting powers, and such distinctive designations, preferences and
relative, participating, optional or other special rights and such
qualifications, limitations or restrictions thereof, as shall be stated and
expressed in the resolution or resolutions adopted by the Board of Directors
providing for the issuance of such class or series and as may be permitted by
the DGCL, including, without limitation, the authority to provide that any such
class or series may be (i) subject to redemption at such time or times and at
such
<PAGE>
price or prices; (ii) entitled to receive dividends (which may be
cumulative or non-cumulative) at such rates, on such conditions, at such times,
and payable in preference to, or in such relation to, the dividends payable on
any other class or classes or any other series; (iii) entitled to such rights
upon the dissolution of, or upon any distribution of the assets of, the
Corporation; or (iv) convertible into, or exchangeable for, shares of any other
class or classes of stock, or of any other series of the same or any other class
or classes of stock, or other securities or property, of the Corporation at such
price or prices or at such rates of exchange and with such adjustments; all as
may be stated in such resolution or resolutions.
FIFTH: A. The business and affairs of the Corporation shall be
managed by or under the direction of a Board of Directors consisting of not less
than one nor more than fifteen directors, the exact number of directors to be
determined from time to time by resolution adopted by affirmative vote of a
majority of the entire Board of Directors. The directors shall be divided into
three classes, designated Class I, Class II and Class III. Each class shall
consist, as nearly as may be possible, of one-third of the total number of
directors constituting the entire Board of Directors. Class I directors shall
be elected initially for a one-year term, Class II directors initially for a
two-year term and Class III directors initially for a three-year term. At each
succeeding annual meeting of stockholders beginning in 1997, successors to the
class of directors whose term expires at that annual meeting shall be elected
for a three-year term. If the number of directors is changed, any increase or
decrease shall be apportioned among the classes so as to maintain the number of
directors in each class as nearly equal as possible, and any additional director
of any class elected to fill a vacancy resulting from an increase in such class
shall hold office for a term that shall coincide with the remaining term of that
class, but in no case will a decrease in the number of directors shorten the
term of any incumbent director. A director shall hold office until the annual
meeting for the year in which his term expires and until his successor shall be
elected and shall qualify, subject, however, to prior death, resignation,
retirement, disqualification or removal from office. Any vacancy on the Board
of Directors may be filled only by a majority of the directors then in office,
even if less than a quorum, or a sole remaining director.
Any director elected to fill a vacancy not resulting from an increase
in the number of directors shall have the same remaining term as that of his
predecessor.
B. A director may be removed only by the holders of a majority of
shares of Common Stock then entitled to vote at an election of directors and
only for cause.
SIXTH: A director of the Corporation shall not be personally liable
to the Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director, except for liability (i) for any breach of the
director's duty of loyalty to the Corporation or its stockholders, (ii) for acts
or omissions not in good faith or which involve intentional misconduct or a
knowing violation of law, (iii) under Section 174 of the DGCL, or (iv) for any
transaction from which the director derived an improper personal benefit. If
the DGCL is amended to authorize corporate action further eliminating or
limiting the personal liability of directors, then the liability of a director
of the Corporation shall be eliminated or limited to the fullest extent
permitted by the DGCL, as so amended. Any repeal or modification of this
Article SIXTH by
<PAGE>
the stockholders of the Corporation shall not adversely affect any right or
protection of a director of the Corporation existing at the time of such repeal
or modification.
SEVENTH: A. The Corporation shall indemnify to the fullest extent
permitted under and in accordance with the laws of the State of Delaware any
person who was or is a party or is threatened to be made a party to any
threatened, pending or completed action, suit or proceeding, whether civil,
criminal, administrative or investigative by reason of the fact that he is or
was a director, officer, employee or agent of the Corporation, or is or was
serving at the request of the Corporation as a director, officer, trustee,
employee or agent of or in any other capacity with another corporation,
partnership, joint venture, trust or other enterprise, against expenses
(including attorneys' fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he 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 his
conduct was unlawful.
B. Expenses incurred in defending a civil or criminal action, suit or
proceeding shall (in the case of any action, suit or proceeding against a
director of the Corporation) or may (in the case of any action, suit or
proceeding against an officer, trustee, employee or agent of the Corporation) be
paid by the Corporation in advance of the final disposition of such action, suit
or proceeding as authorized by the Board of Directors upon receipt of an
undertaking by or on behalf of the indemnified person to repay such amount if it
shall ultimately be determined that he is not entitled to be indemnified by the
Corporation as authorized in this Article SEVENTH.
C. The indemnification and other rights set forth in this Article
SEVENTH shall not be exclusive of any provisions with respect thereto in the By-
laws or any other contract or agreement between the Corporation and any officer,
director, employee or agent of the Corporation.
D. Neither the amendment nor repeal of Section A, B or C of this
Article SEVENTH nor the adoption of any provision of this Third Restated
Certificate of Incorporation inconsistent with Section A, B or C of this Article
SEVENTH shall eliminate or reduce the effect of Sections A, B and C of this
Article SEVENTH in respect of any matter occurring prior to such amendment,
repeal or adoption of an inconsistent provision or in respect of any cause of
action, suit or claim relating to any such matter which would have given rise to
a right of indemnification or right to receive expenses pursuant to Section A, B
or C of this Article SEVENTH if such provision had not been so amended or
repealed or if a provision inconsistent therewith had not been so adopted.
EIGHTH: Any action required or permitted to be taken by the
stockholders of the Corporation may be effected only at a duly called annual or
special meeting of such holders and may not be effected by a consent in writing
by such holders in lieu of such a meeting.
NINTH: In furtherance and not in limitation of the powers conferred by
statute, the Board of Directors is expressly authorized to make, alter or repeal
the By-laws of the
<PAGE>
Corporation, subject to any specific limitation or such power contained in any
By-laws adopted by the stockholders of the Corporation and subject to the
provisions in this Third Restated Certificate of Incorporation. Elections of
directors need not be by written ballot unless the By-laws of the Corporation so
provide.
TENTH: In accordance with Section 203(b)(3) of the DGCL, the
Corporation expressly elects not to be governed by Section 203 of the DGCL;
provided, that this Article TENTH shall not be effective until 12 months after
the Filing Time and in no event shall this Article TENTH apply to any business
combination between the Corporation and any person who became an interested
stockholder of the Corporation prior to the Filing Time.
ELEVENTH: The Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Third Restated Certificate of
Incorporation, in the manner now or hereafter prescribed by statute, and all
rights conferred upon the stockholders herein are granted subject to this
reservation.
IN WITNESS WHEREOF, Metromail Corporation has caused this Third
Restated Certificate of Incorporation to be signed on this 29th day of February,
1996 in its name by a duly authorized officer.
METROMAIL CORPORATION
By: /s/ Barton L. Faber
-------------------------
Barton L. Faber
Chairman
<PAGE>
METROMAIL CORPORATION
CERTIFICATE OF DESIGNATION, PREFERENCES AND
RIGHTS OF JUNIOR PARTICIPATING PREFERRED STOCK, SERIES A
Pursuant to Section 151 of the Corporation Law
of the State of Delaware
I, Thomas J. Quarles, the Senior Vice President and General Counsel of
Metromail Corporation, a corporation organized and existing under the General
Corporation Law of the State of Delaware, in accordance with the provisions of
Section 151 thereof, DO HEREBY CERTIFY:
That pursuant to the authority conferred upon the Board of Directors
by the Third Restated Certificate of Incorporation of the Corporation, the Board
of Directors on February 24, 1997, adopted the following resolution creating a
series of 75,000 shares of Preferred Stock designated as Junior Participating
Preferred Stock, Series A:
RESOLVED, that pursuant to the authority vested in the Board by the
Third Restated Certificate of Incorporation of the Corporation and out of the
Preferred Stock authorized therein, the Board hereby authorizes that a series of
Preferred Stock of the Corporation be, and it hereby is, created and that the
designation and amount thereof and the voting powers, preferences and relative,
participating, optional and other special rights of the shares of such series,
and the qualifications, limitations or restrictions thereof are as follows:
Section 1. Designation and Amount. The shares of such series shall
be designated as "Junior Participating Preferred Stock, Series A," par value
$.01 per share (the "Series A Preferred Stock") and the number of shares
constituting such series shall be 75,000.
Section 2. Dividends and Distributions.
(A) Subject to the prior and superior rights of the holders of
any shares of any series of Preferred Stock ranking prior and superior
to the shares of Series A Preferred Stock with respect to dividends,
the holders of shares of Series A Preferred Stock, in preference to
the holders of Common Stock and of any other junior stock, shall be
entitled to receive, when, as and if declared by the Board of
Directors out of funds legally available for the purpose, quarterly
dividends payable in cash on the fifteenth day of March, June,
September and December in each year (each such date, a "Quarterly
Dividend Payment Date"), commencing
<PAGE>
on the first Quarterly Dividend Payment Date after the first issuance
of a share or fraction of a share of Series A Preferred Stock, in an
amount per share (rounded to the nearest cent) equal to the greater of
(a) $25.00 or (b) the Adjustment Number (as defined below) times the
aggregate per share amount of all cash dividends, and the Adjustment
Number times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend
payable in shares of Common Stock or a subdivision of the outstanding
shares of Common Stock (by reclassification or otherwise), declared on
the Common Stock since the immediately preceding Quarterly Dividend
Payment Date or, with respect to the first Quarterly Dividend Payment
Date, since the first issuance of any share or fraction of a share of
Series A Preferred Stock. The "Adjustment Number" shall initially be
1000. In the event the Corporation shall at any time after February
24, 1997 (i) declare or pay any dividend on Common Stock payable in
shares of Common Stock, (ii) subdivide the outstanding Common Stock
into a greater number of shares or (iii) combine the outstanding
Common Stock into a smaller number of shares, then in each such case
the Adjustment Number in effect immediately prior to such event shall
be adjusted by multiplying such Adjustment Number by a fraction the
numerator of which is the number of shares of Common Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Common Stock that were outstanding immediately
prior to such event.
(B) The Corporation shall declare a dividend or distribution on
the Series A Preferred Stock as provided in paragraph (A) of this
Section immediately after it declares a dividend or distribution on
the Common Stock (other than a dividend payable in shares of Common
Stock); provided that, in the event no dividend or distribution shall
have been declared on the Common Stock during the period between any
Quarterly Dividend Payment Date and the next subsequent Quarterly
Dividend Payment Date, a dividend of $25.00 per share on the Series A
Preferred Stock shall nevertheless be payable on such subsequent
Quarterly Dividend Payment Date.
(C) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series A Preferred Stock from the Quarterly
Dividend Payment Date next preceding the date of issue of such shares
of Series A Preferred Stock, unless the date of issue of such shares
is prior to the record date for the first Quarterly Dividend Payment
Date, in which case dividends on such shares shall begin to accrue
from the date of issue of such shares, or unless the date of issue is
a Quarterly Dividend Payment Date or is a date after the record date
for the determination of holders of shares of Series A Preferred Stock
entitled to receive a quarterly dividend and before such Quarterly
Dividend Payment Date, in either of which events such dividends shall
begin to accrue and be cumulative from such Quarterly Dividend Payment
Date. Accrued but unpaid dividends shall not bear interest.
Dividends paid on the shares of Series A Preferred Stock in an amount
less than the total amount of such dividends at the time accrued and
payable on
<PAGE>
such shares shall be allocated pro rata on a share-by-share basis
among all such shares at the time outstanding. The Board of Directors
may fix a record date for the determination of holders of shares of
Series A Preferred Stock entitled to receive payment of a dividend or
distribution declared thereon, which record date shall be no more than
30 days prior to the date fixed for the payment thereof.
Section 3. Voting Rights. The holders of shares of Series A
Preferred Stock shall have the following voting rights:
(A) Each share of Series A Preferred Stock shall entitle the
holder thereof to a number of votes equal to the Adjustment Number (as
adjusted from time to time pursuant to Section 2(A) hereof) on all
matters submitted to a vote of the stockholders of the Corporation.
(B) Except as otherwise provided herein, in the Certificate of
Incorporation or bylaws, the holders of shares of Series A Preferred
Stock and the holders of shares of Common Stock shall vote together as
one class on all matters submitted to a vote of stockholders of the
Corporation.
(C) (i) If at any time dividends on any Series A Preferred
Stock shall be in arrears in an amount equal to six quarterly
dividends thereon, the occurrence of such contingency shall mark the
beginning of a period (a "default period") that shall extend until
such time when all accrued and unpaid dividends for all previous
quarterly dividend periods and for the current quarterly period on all
shares of Series A Preferred Stock then outstanding shall have been
declared and paid or set apart for payment. During each default
period, (1) the number of Directors shall be increased by two,
effective as of the time of election of such Directors as herein
provided, and (2) the holders of Series A Preferred Stock and the
holders of other Preferred Stock upon which these or like voting
rights have been conferred and are exercisable (the "Voting Preferred
Stock") with dividends in arrears equal to six quarterly dividends
thereon, voting as a class, irrespective of series, shall have the
right to elect such two Directors.
(ii) During any default period, such voting right of the
holders of Series A Preferred Stock may be exercised initially at a
special meeting called pursuant to subparagraph (iii) of this Section
3(C) or at any annual meeting of stockholders, and thereafter at
annual meetings of stockholders, provided that such voting right shall
not be exercised unless the holders of at least one-third in number of
the shares of Voting Preferred Stock outstanding shall be present in
person or by proxy. The absence of a quorum of the holders of Common
Stock shall not affect the exercise by the holders of Voting Preferred
Stock of such voting right.
(iii) Unless the holders of Voting Preferred Stock shall,
during an existing default period, have previously exercised their
right to elect Directors, the
<PAGE>
Board of Directors may order, or any stockholder or stockholders
owning in the aggregate not less than 10% of the total number of
shares of Voting Preferred Stock outstanding, irrespective of series,
may request, the calling of a special meeting of the holders of Voting
Preferred Stock, which meeting shall thereupon be called by the
Chairman of the Board, the Chief Executive Officer, the President, a
Vice President or the Secretary of the Corporation. Notice of such
meeting and of any annual meeting at which holders of Voting Preferred
Stock are entitled to vote pursuant to this paragraph (C)(iii) shall
be given to each holder of record of Voting Preferred Stock by mailing
a copy of such notice to him at his last address as the same appears
on the books of the Corporation. Such meeting shall be called for a
time not earlier than 10 days and not later than 60 days after such
order or request or, in default of the calling of such meeting within
60 days after such order or request, such meeting may be called on
similar notice by any stockholder or stockholders owning in the
aggregate not less than 10% of the total number of shares of Voting
Preferred Stock outstanding. Notwithstanding the provisions of this
paragraph (C)(iii), no such special meeting shall be called during the
period within 60 days immediately preceding the date fixed for the
next annual meeting of the stockholders.
(iv) In any default period, after the holders of Voting
Preferred Stock shall have exercised their right to elect Directors
voting as a class, (x) the Directors so elected by the holders of
Voting Preferred Stock shall continue in office until their successors
shall have been elected by such holders or until the expiration of the
default period, and (y) any vacancy in the Board of Directors may be
filled by vote of a majority of the remaining Directors theretofore
elected by the holders of the class or classes of stock which elected
the Director whose office shall have become vacant. References in
this paragraph (C) to Directors elected by the holders of a particular
class or classes of stock shall include Directors elected by such
Directors to fill vacancies as provided in clause (y) of the foregoing
sentence.
(v) Immediately upon the expiration of a default period, (x)
the right of the holders of Voting Preferred Stock as a class to elect
Directors shall cease, (y) the term of any Directors elected by the
holders of Voting Preferred Stock as a class shall terminate and (z)
the number of Directors shall be such number as may be provided for in
the Certificate of Incorporation or bylaws irrespective of any
increase made pursuant to the provisions of paragraph (C) of this
Section 3 (such number being subject, however, to change thereafter in
any manner provided by law or in the Certificate of Incorporation or
bylaws). Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may be
filled by a majority of the remaining Directors.
<PAGE>
(D) Except as set forth herein, holders of Series A Preferred
Stock shall have no special voting rights and their consent shall not
be required (except to the extent they are entitled to vote with
holders of Common Stock as set forth herein) for taking any corporate
action.
Section 4. Certain Restrictions.
(A) Whenever quarterly dividends or other dividends or
distributions payable on the Series A Preferred Stock as provided in
Section 2 are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares of
Series A Preferred Stock outstanding shall have been paid in full, the
Corporation shall not:
(i) declare or pay dividends on, or make any other
distributions on, any shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity (either as to
dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except dividends paid ratably on the Series
A Preferred Stock and all such parity stock on which dividends are
payable or in arrears in proportion to the total amounts to which the
holders of all such shares are then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series A Preferred Stock, provided that the Corporation may at any
time redeem, purchase or otherwise acquire shares of any such junior
stock in exchange for shares of any stock of the Corporation ranking
junior (either as to dividends or upon dissolution, liquidation or
winding up) to the Series A Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series A Preferred Stock, or any shares of stock ranking on
a parity with the Series A Preferred Stock, except in accordance with
a purchase offer made in writing or by publication (as determined by
the Board of Directors) to all holders of such shares upon such terms
as the Board of Directors, after consideration of the respective
annual dividend rates and other relative rights and preferences of the
respective series and classes, shall determine in good faith will
result in fair and equitable treatment among the respective series or
classes.
(B) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration any
shares of stock of the Corporation unless the Corporation could, under
paragraph (A) of this Section 4, purchase or otherwise acquire such
shares at such time and in such manner.
<PAGE>
Section 5. Reacquired Shares. Any shares of Series A Preferred Stock
purchased or otherwise acquired by the Corporation in any manner whatsoever
shall be retired and cancelled promptly after the acquisition thereof. All such
shares shall upon their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of Directors, subject to
the conditions and restrictions on issuance set forth herein.
Section 6. Liquidation, Dissolution or Winding Up. Upon any
liquidation, dissolution or winding up of the Corporation, no distribution shall
be made (A) to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the Series A
Preferred Stock unless, prior thereto, the holders of shares of Series A
Preferred Stock shall have received the greater of (i) $100 per share, plus an
amount equal to accrued and unpaid dividends and distributions thereon, whether
or not declared, to the date of such payment, and (ii) an aggregate amount per
share, equal to the Adjustment Number (as adjusted from time to time pursuant to
Section 2(A) hereof) times the aggregate amount to be distributed per share to
holders of Common Stock, or (B) to the holders of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or winding up) with the
Series A Preferred Stock, except distributions made ratably on the Series A
Preferred Stock and all other such parity stock in proportion to the total
amounts to which the holders of all such shares are entitled upon such
liquidation, dissolution or winding up.
Section 7. Consolidation, Merger, etc. In case the Corporation shall
enter into any consolidation, merger, combination 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
Series A Preferred Stock then outstanding shall at the same time be similarly
exchanged or changed in an amount per share equal to the Adjustment Number (as
adjusted from time to time pursuant to Section 2(A) hereof) times the aggregate
amount of stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Common Stock is
changed or exchanged.
Section 8. No Redemption. The shares of Series A Preferred Stock
shall not be redeemable.
Section 9. Amendment. The Certificate of Incorporation of the
Corporation shall not be amended in any manner which would materially alter or
change the powers, preferences or special rights of the Series A Preferred Stock
so as to affect them adversely without the affirmative vote of the holders of
two-thirds of the outstanding shares of Series A Preferred Stock, voting
together as a single class.
<PAGE>
IN WITNESS WHEREOF, I have executed and subscribed this Certificate and do
affirm the foregoing as true under the penalties of perjury this 24th day of
February, 1997.
/s/ Thomas J. Quarles
------------------------------------------------
Name: Thomas J. Quarles
Title: Senior Vice President and General Counsel
<PAGE>
Exhibit 10.8
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of March 6, 1996 by and among
Metromail Corporation, a Delaware corporation (the "Company"), and Ronald G.
Eidell (the "Executive").
WHEREAS, the Company desires to employ the Executive as its Senior Vice
President and Chief Financial Officer, and the Executive desires to accept such
employment, for the term and upon the conditions set forth in this Agreement.
Agreement
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Now, therefore, the parties hereto hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive hereby accepts employment,
effective as of the time of the closing of the Company's initial public offering
of its common stock ("Common Stock") (the date of such closing being referred to
herein as the "Effective Date").
2. Term. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending at 5:00 p.m., Chicago time, on the fourth anniversary
of the Effective Date, or such later date to which the parties may agree. The
term of this Agreement is hereafter referred to as "the term of this Agreement"
or "the term hereof". If the closing of the Company's initial public offering
of its Common Stock is not consummated on or before June 30, 1996, this
Agreement shall automatically terminate and be without further force or effect.
3. Capacity and Performance.
3.1. Offices. During the term hereof, the Executive shall serve as
the Company's Senior Vice President and Chief Financial Officer. The
Executive shall be subject to the direction of, and shall have such other
powers, duties and responsibilities consistent with the Executive's
position as Senior Vice President and Chief Financial Officer as may from
time to time be prescribed by, the Chairman. In addition, for so long as
the Executive is employed by the Company and, unless otherwise determined
by the Company's Board of Directors (the "Board"), without further
compensation, the
<PAGE>
Executive shall serve as a director of one or more of the Company's
subsidiaries if so elected or appointed from time to time.
3.2. Performance. During the term hereof, the Executive shall be
employed by the Company and shall perform and discharge (faithfully,
diligently and to the best of the Executive's ability) such duties and
responsibilities on behalf of the Company and its subsidiaries as may be
designated from time to time by the Chairman and which are consistent with
the Executive's position as Senior Vice President and Chief Financial
Officer. During the term hereof, the Executive shall devote the Executive's
full business time and attention to the advancement of the business and
interests of the Company and its subsidiaries and to the discharge of the
Executive's duties and responsibilities hereunder. Nothing contained herein
shall be construed to prohibit or restrict the Executive from (a) serving
in various capacities in community, civic, religious or charitable
organizations, or (b) attending to personal business and investment
matters. It is expressly agreed that any such service or activity permitted
by the previous sentence shall not unreasonably interfere with the
performance of the Executive's duties and, if so, the Executive, after
consultation with the Chairman, will comply with the reasonable requests of
the Chairman to cease or limit the service or activity.
4. Compensation and Benefits. As compensation for all services performed
by the Executive under this Agreement and subject to Section 5 hereof and
performance of the Executive's duties and of the obligations to the Company and
its subsidiaries, pursuant to this Agreement or otherwise:
4.1. Base Salary. During the term hereof, the Company shall pay the
Executive a base salary at the rate of $230,000 per year, payable in
accordance with the payroll practices of the Company for its executives and
subject to increase at any time or from time to time by the Board in its
sole discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary". The Base Salary payable to the
Executive in 1996 shall be prorated for the period from the Effective Date
through December 31, 1996 and for any subsequent period of service less
than one full year.
4.2. Bonus Compensation. During the term hereof, the Company from
time to time shall pay the Executive an annual bonus (the "Bonus"). The
Bonus in respect of 1996 (the "1996 Bonus") will be calculated and payable
in accordance with and based on the following factors:
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(a) (1) If the Company's net income for 1996, as set forth in the
Company's audited financial statements (the "1996 Net Income"), is
less than $15,000,000, adjusted as set forth in subparagraph (b) below
(the "Minimum Target"), the 1996 Bonus shall equal zero;
(2) If the 1996 Net Income is equal to or greater than the Minimum
Target but less than $17,528,000, adjusted as set forth in
subparagraph (b) below (the "Base Target"), the 1996 Bonus shall equal
the sum of (i) 22.5% of the Executive's Base Salary as of the
Effective Date plus (ii) the number obtained by multiplying 22.5% of
the Executive's Base Salary as of the Effective Date by a fraction
(which shall not be greater than one), the numerator of which is the
difference between the 1996 Net Income and the Minimum Target and the
denominator of which is the amount determined by subtracting the
Minimum Target from the Base Target;
(3) If the 1996 Net Income is equal to or greater than the Base
Target but less than $23,528,000, adjusted as set forth in
subparagraph (b) below (the "Maximum Target"), the 1996 Bonus shall
equal the sum of (i) 45% of the Executive's Base Salary as of the
Effective Date plus (ii) the number obtained by multiplying 45% of the
Executive's Base Salary as of the Effective Date by a fraction (which
shall not be greater than one), the numerator of which is the
difference between the 1996 Net Income and the Base Target and the
denominator of which is the amount determined by subtracting the Base
Target from the Maximum Target; or
(4) If the 1996 Net Income is equal to or greater than the Maximum
Target, the 1996 Bonus shall equal 90% of the Executive's Base Salary
as of the Effective Date.
Any compensation paid to the Executive as Bonus shall be in addition to the
Base Salary. The 1996 Bonus, if any, shall be pro-rated by multiplying (x)
the amount of the 1996 Bonus by (y) a fraction, the numerator of which is
the lesser of (I) the number of days from and including the Effective Date
through and including December 31, 1996 and (II) the number of days from
and including the Effective Date through and including the date of the
Executive's termination of employment and the denominator of which is 366.
Except with respect to the 1996 Bonus, any Bonus payable to the Executive
shall be pro-rated for any period of service less than a full year by
multiplying (x) the amount of the Bonus calculated for such year by (y) a
fraction, the numerator of which is the number of days from and including
January 1 of such year
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<PAGE>
through and including the effective date of the Executive's termination of
employment and the denominator of which is 365. All bonus and benefit plans
are subject to annual review and change by the Board relative to key
strategic objectives for the year.
(b) Prior to determining the 1996 Bonus, each of the Minimum Target, the
Base Target and the Maximum Target shall be adjusted for changes occurring
during the period April 1, 1996 through the Effective Date by making those
adjustments reflected as Operating Structure and Capital Structure
Adjustments in the Unaudited Pro Forma Consolidated and Combined Statements
of Income set forth in the Form S-1 Registration Statement filed by the
Company in accordance with the footnotes thereto.
4.3. Stock Options. The Company shall establish the 1996 Long-Term
Incentive Plan (the "Plan") for management/employees of the Company. As of
the Effective Date, the Company shall grant to the Executive, pursuant to
the Plan, options to purchase a total of 64,000 shares of Common Stock at
an exercise price equal to the initial public offering price (the
"Options"), which amount shall include options to purchase 14,000 shares of
Common Stock as consideration for the cancellation of 3,500 shares of
restricted stock of R.R. Donnelley & Sons Company ("RRD"). Subject to the
termination of employment provisions contained in the agreement evidencing
the Options, the Options will become exercisable in four annual
installments on the one year (25%), two year (25%), three year (25%) and
four year (25%) anniversaries of the Effective Date, subject to
acceleration of vesting in accordance with the terms of the agreement
evidencing the Options. Within three months after the Effective Date the
Company shall cause all shares subject to the Options to be registered on
Form S-8.
4.4. Vacations. During the term hereof, the Executive shall be
entitled to five (5) weeks of vacation per annual vacation period of the
Company (currently March 1 of each year through the last day of February of
the following year), such vacation to be taken at such times and intervals
as shall be determined by the Executive in the Executive's reasonable
discretion, provided, that, for the annual vacation period commencing on
March 1, 1996 and ending on February 28, 1997, the Executive's number of
vacation days for the period commencing on the Effective Date and ending on
February 28, 1997 shall be reduced by the number of vacation days taken by
the Executive (whether as an employee of RRD or the Company) during the
period commencing on March 1, 1996 and ending on the day prior to the
Effective Date. The Executive may not accumulate or carry over from one
calendar year to another any unused, accrued vacation time. The Executive
shall not be entitled to compensation for vacation time not taken.
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<PAGE>
4.5. Other Benefits. During the term hereof and subject to any
contribution therefor generally required of executives of the Company, the
Executive shall be entitled to participate in all employee benefit plans
and other programs (including, but not limited to, any medical, dental,
retirement, disability, life insurance, sick leave and other benefits) from
time to time adopted by the Board and in effect for executives of the
Company generally, except to the extent such plans are in a category of
benefit otherwise already provided to the Executive. Such participation
shall be subject to (i) the terms of the applicable plan documents, (ii)
generally applicable Company policies and (iii) the discretion of the Board
or any administrative or other committee provided for in or contemplated by
such plan. The Executive's service period with R.R. Donnelley & Sons
Company, a Delaware corporation, or its affiliates shall be credited with
respect to any service period requirement of any plan adopted by the
Company. The Company may alter, modify, add to or delete its employee
benefit plans at any time as the Board, in its sole judgment, determines to
be appropriate.
4.6. Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable business expenses incurred or paid by the
Executive in the performance of the Executive's duties and responsibilities
hereunder, subject to (i) any expense policy of the Company set by the
Board from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Board from time to
time.
4.7. Severance. In the event the Executive's employment with the
Company is terminated by the Company other than for Cause or terminated by
the Executive pursuant to Section 5.5, the Executive will be entitled to
twelve (12) monthly severance payments, each in an amount equal to the
Executive's then applicable Base Salary, calculated on a monthly basis, at
the time of such termination (i.e., 1/12th of the Base Salary).
5. Termination of Employment and Severance Benefits. Notwithstanding the
provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1. Retirement or Death. In the event of the Executive's retirement
or death during the term hereof, the Executive's employment hereunder shall
immediately and automatically terminate. In the event of the Executive's
retirement after the age of sixty-five, age fifty-five with the prior
consent of the Board or death during the term hereof, the Company shall pay
to the Executive (or in the case of death, the Executive's designated
beneficiary or, if no beneficiary has been designated by the Executive, to
the
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<PAGE>
Executive's estate) (i) Base Salary earned but unpaid through and including
the date of such retirement or death, (ii) any amount payable pursuant to
Section 4.6, (iii) any unpaid portion of any Bonus for any fiscal year
preceding the year in which such retirement or death occurs that was earned
but had not previously been paid and (iv) at the times the Company pays its
executives bonuses in accordance with its general payroll policies, any
Bonus which would have been paid had such retirement or death not occurred
during the fiscal year of such retirement or death (pro-rated based on a
formula, the numerator of which shall be the number of days during the
fiscal year of such retirement or death in which the Executive was employed
by the Company and the denominator of which shall be 365 or 366, as the
case may be).
5.2. Disability.
5.2.1. The Company may terminate the Executive's employment
hereunder, upon written notice to the Executive, in the event that the
Executive becomes disabled during the Executive's employment hereunder
through any illness, injury, accident or condition of either a
physical or psychological nature and, as a result, is unable to
perform substantially all of the Executive's duties and
responsibilities hereunder for an aggregate of one hundred eighty
(180) days during any period of three hundred and sixty-five (365)
consecutive calendar days.
5.2.2. The Board may designate another employee to act
temporarily in the Executive's place during any period of the
Executive's disability. Notwithstanding any such designation, the
Executive shall continue to receive the Base Salary in accordance with
Section 4.1 and to receive benefits in accordance with Section 4.5, to
the extent permitted by the then current terms of the applicable
benefit plans, until the Executive becomes eligible for disability
income benefits under any disability income plan maintained by the
Company or until the termination of the Executive's employment,
whichever shall first occur. Upon becoming so eligible, or upon such
termination, whichever shall first occur, the Company shall pay to the
Executive (i) Base Salary earned but unpaid through and including the
date of such eligibility or termination, (ii) any amount payable
pursuant to Section 4.6, (iii) any unpaid portion of any Bonus for any
fiscal year preceding the year in which such eligibility or
termination occurs that was earned but had not previously been paid,
(iv) during the eighteen-month period commencing on such date of
eligibility or termination, amounts (payable from time to time at the
times the Company pays its executive in accordance with its general
payroll policies) equal to the difference, if positive, between the
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<PAGE>
Base Salary for the Executive for such period, or portion thereof, and
the amounts of disability income benefits that the Executive receives
pursuant to the above-referenced disability income plan in respect of
such period, and (v) at the times the Company pays its executives
bonuses in accordance with its general payroll policies, any Bonus
which would have been paid had disability not occurred during the
fiscal year in which such eligibility or termination occurs (pro-rated
based on a formula, the numerator of which shall, as applicable, (i)
the number of days from and including January 1 of the fiscal year in
which such eligibility occurs to but excluding the date of such
eligibility or (ii) the number of days on which the Executive was
employed by the Company during the fiscal year in which such
termination occurs and the denominator of which shall be 365 or 366,
as the case may be).
5.2.3. Except as provided in Section 5.2.2, while receiving
disability income payments under any disability income plan maintained
by the Company, the Executive shall not be entitled to receive any
Base Salary under Section 4.1 or Bonus payments under Section 4.2 but
shall continue to participate in the Company's benefit plans in
accordance with Section 4.5 and the terms of such plans, until the
termination of the Executive's employment. During the eighteen-month
period from and including the date of termination, the Company shall
pay for the cost of the Executive's participation in the Company's
group medical and dental plans, provided that the Executive is
entitled to continue such participation under applicable law and the
terms of such plan.
5.2.4. If any question shall arise as to whether during any
period the Executive is disabled through any illness, injury, accident
or condition of either a physical or psychological nature so as to be
unable to perform substantially all of the Executive's duties and
responsibilities hereunder, the Executive may, and at the request of
the Company shall, submit to a medical examination by a physician
selected by the Company to whom the Executive or the Executive's duly
appointed guardian, if any, has no reasonable objection to determine
whether the Executive is so disabled and such determination shall for
the purposes of this Agreement be conclusive of the issue. If such
question shall arise and the Executive shall fail to submit to such
medical examination, the Board's determination of the issue shall be
binding on the Executive.
5.3. By the Company for Cause. The Company may terminate the
Executive's employment hereunder for Cause as provided in Section 11.2. If
the Executive's employment hereunder is terminated for Cause, the Company
shall have no further
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<PAGE>
obligation or liability to the Executive relating to the Executive's
employment hereunder, or the termination thereof, except that the Company
shall pay to the Executive (i) Base Salary earned but unpaid through and
including the date of termination and (ii) any amount payable pursuant to
Section 4.6.
5.4. By the Company other than for Cause. The Company may terminate
the Executive's employment hereunder other than for Cause at any time after
the one year anniversary of the Effective Date upon two weeks prior written
notice to the Executive. In the event of such termination, then the Company
shall pay the Executive (i) Base Salary earned but unpaid through and
including the date of termination, (ii) any amount payable pursuant to
Section 4.6, (iii) the amounts specified in Section 4.7, (iv) any unpaid
portion of any Bonus for any fiscal year preceding the year in which such
termination occurs that was earned but had not previously been paid and (v)
at the times the Company pays its executives bonuses in accordance with its
general payroll policies, which would have been paid had termination not
occurred during the fiscal year in which such termination occurs (pro-rated
based on a formula, the numerator of which shall be the number of days
during the fiscal year in which such termination occurs the Executive was
employed by the Company and the denominator of which shall be 365 or 366,
as the case may be).
5.5. By the Executive upon Breach or for Good Reason. The Executive
may terminate the Executive's employment hereunder (i) in the event that
the Company fails to perform, in any material respect, its obligations
under this Agreement, after written notice to the Company setting forth in
reasonable detail the nature of such breach if such breach remains uncured
for a period of 30 days following such written notice to the Company, (ii)
there is a diminution in the material responsibilities, duties and powers
of the Executive or (iii) the Company's principal executive offices or the
Executive's office are moved from their present location to a location
outside of the Chicago Metropolitan Area. In the event of termination in
accordance with this Section 5.5, then the Company shall pay to the
Executive (i) Base Salary earned but unpaid through and including the date
of termination, (ii) any amount payable pursuant to Section 4.6, (iii) the
amounts specified in Section 4.7, (iv) any unpaid portion of any Bonus for
any fiscal year preceding the year in which such termination occurs that
was earned but had not previously been paid and (v) at the times the
Company pays its executives bonuses in accordance with its general payroll
policies, any Bonus which would have been paid had termination not occurred
during the fiscal year in which such termination occurs (pro-rated based on
a formula, the numerator of which shall be the
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<PAGE>
number of days during the fiscal year in which such termination occurs the
Executive was employed by the Company and the denominator of which shall be
365 or 366, as the case may be).
5.6. By the Executive Other than upon Breach or for Good Reason . The
Executive may terminate the Executive's employment hereunder at any time
upon ninety (90) days' written notice to the Company. In the event of
termination of the Executive pursuant to this Section 5.6, the Board may
elect to waive the period of notice, or any portion thereof, and, whether
or not the Board so elects, the Company shall pay to the Executive (i) Base
Salary for the full notice period and (ii) any amount payable pursuant to
Section 4.6.
5.7. Post-Agreement Employment. In the event the Executive remains
in the employ of the Company or any of its Affiliates following termination
of this Agreement, by the expiration of the term hereof or otherwise, then
such employment shall be at will, unless otherwise agreed in writing.
6. Effect of Termination. The provisions of this Section 6 shall apply in
the event of termination due to the expiration of the term of this Agreement,
pursuant to Section 5 or otherwise.
6.1. Receipt of Certain Benefits. It is the mutual intention of the
Company and the Executive that the Executive receive the full benefit of
the compensation and benefits provided to the Executive during the term
hereof which compensation and benefits may be payable over periods beyond
the particular year of employment. The Executive shall not be obligated to
seek other employment by way of mitigation of the amounts due to the
Executive nor shall the Executive's earnings after termination reduce the
Company's obligations hereunder. Nothing in this Section 6.1 is intended or
shall be construed to affect the rights and obligations of the Company and
its Affiliates, on the one hand, and the Executive, on the other, with
respect to any loans, stock pledge arrangements, option plans or other
agreements to the extent said rights or obligations survive termination of
employment under the provisions of the documents relating thereto.
6.2. Termination of Benefits. Except for medical and dental
insurance coverage continued pursuant to Sections 5.2 hereof and any right
of continuation of health coverage to the extent provided by Sections 601
through 608 of ERISA, benefits shall terminate pursuant to the terms of the
applicable benefit plans based on the date of termination of the
Executive's employment without regard to any continuation of Base
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Salary or other payments to the Executive following such date of
termination pursuant to Section 5.
6.3. Survival of Certain Provisions. Provisions of this Agreement
shall survive any termination if so provided herein or if necessary or
desirable fully to accomplish the purposes of such provision, including,
without limitation, the obligations of the Executive under Sections 7 and 8
hereof. The obligation of the Company to make payments to or on behalf of
the Executive under Sections 4.7, 5.4 or 5.5 hereof is expressly
conditioned upon the Executive's continued full performance of obligations
under Sections 7 and 8 hereof. The Executive recognizes that, except as
expressly provided in Section 4.7, 5.4 or 5.5, no compensation is earned
after termination of employment.
7. Confidential Information; Intellectual Property.
7.1. Confidentiality. The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information, that the
Executive may develop Confidential Information for the Company or its
Affiliates and that the Executive may learn of Confidential Information
during the course of employment. The Executive will comply with the
policies and procedures of the Company for protecting Confidential
Information and shall never disclose to any Person (except as required by
applicable law or for the proper performance of the Executive's duties and
responsibilities to the Company and its Affiliates), or use for the
Executive's own benefit or gain or otherwise use in a manner adverse to the
interests of the Company and its Affiliates, any Confidential Information
obtained by the Executive incident to the Executive's employment or other
association with the Company or any of its Affiliates. The Executive
understands that this restriction shall continue to apply after the
Executive's employment terminates, regardless of the reason for such
termination. Notwithstanding the foregoing, the Executive's covenant not to
disclose Confidential Information does not apply to information which (i)
becomes generally available to the public or otherwise becomes known
through sources other than the Executive, (ii) is subsequently disclosed to
the Executive by a source other than the Company who was under no duty of
confidence or (iii) is required to be disclosed by the Executive through
discovery in litigation or by order of a court or otherwise as required by
law.
7.2. Return of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company or its Affiliates and any copies, in whole or in
part, thereof (the "Documents"), whether or not prepared by the Executive,
shall be the sole and
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exclusive property of the Company and its Affiliates. The Executive shall
safeguard all Documents and shall surrender to the Company at the time the
Executive's employment terminates, or at such earlier time or times as the
Board or its designee may specify, all Documents then in the Executive's
possession or control.
7.3. Assignment of Rights to Intellectual Property. The Executive
shall promptly and fully disclose all Intellectual Property to the Company.
The Executive hereby assigns and agrees to assign to the Company (or as
otherwise directed by the Company) the Executive's full right, title and
interest in and to all Intellectual Property. The Executive agrees to
execute any and all applications for domestic and foreign patents,
copyrights or other proprietary rights and to do such other acts (including
without limitation the execution and delivery of instruments of further
assurance or confirmation) requested by the Company to assign the
Intellectual Property to the Company and to permit the Company to enforce
any patents, copyrights or other proprietary rights to the Intellectual
Property. The Executive will not charge the Company for time spent in
complying with these obligations. All copyrightable works that the
Executive creates shall be considered "work made for hire".
8. Agreement not to Compete with the Business. The Executive agrees that
during the term of the Executive's employment hereunder and for a period of
twelve (12) months following the date of termination thereof (the "Non-
Competition Period"), the Executive will not, directly or indirectly (a) own,
manage, operate, control or participate in any manner in the ownership,
management, operation or control of, or be connected as an officer, employee,
partner, director, principal, consultant, agent or otherwise with, or have any
financial interest in, or aid or assist anyone else in the conduct of, any
business, venture or activity which competes with the business of the Company,
or any group, division or subsidiary of the Company, as described in the
Company's Registration Statement on Form S-1 relating to the Company's initial
public offering of Common Stock or, beginning with the Company's Annual Report
on Form 10-K for the year ending December 31, 1996, the Company's most recent
Annual Report on Form 10-K filed with the Securities and Exchange Commission
prior to the date (the "Date of Termination") the Executive's employment under
this Agreement is terminated (hereinafter, "Competitive Business"), in the
United States, Canada, the United Kingdom or any other geographic area where
such Competitive Business is being conducted at the Date of Termination or (b)
recruit or otherwise seek to induce any employees of the Company or any of its
subsidiaries to terminate their employment or violate any agreement with or duty
to the Company or any of its subsidiaries. It is understood and agreed that, for
the purposes of the foregoing provisions of this Section 8, (i) no business,
venture or activity shall be deemed to be a Competitive Business unless not less
than five percent of the Company's consolidated gross sales or operating income
is derived from, or not less than five
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percent of the Company's consolidated assets are devoted to, such business,
venture or activity; and (ii) no business, venture or activity conducted by any
entity by which the Executive is employed or in which the Executive is
interested or with which the Executive is connected or associated shall be
deemed to be a Competitive Business unless it is one from which five percent or
more of such entity's consolidated gross sales or operating income is derived,
or to which five percent or more of such entity's consolidated assets are
devoted; provided, however, that if the actual gross sales or operating income
or assets of such entity derived from or devoted to such business, venture or
activity is equal to or in excess of 10% of the most nearly comparable figure
for the Company, such business, venture or activity of such entity shall be
deemed to be a Competitive Business. Further, ownership of not more than five
percent of the voting stock of any publicly held corporation shall not, of
itself, constitute a violation of this Section 8.
9. Enforcement of Covenants. The Executive acknowledges that the Executive
has carefully read and considered all the terms and conditions of this
Agreement, including without limitation the restraints imposed upon the
Executive pursuant to Sections 7 and 8 hereof. The Executive agrees that said
restraints are necessary for the reasonable and proper protection of the Company
and its Affiliates and that the restraints are reasonable as to the definition
of Competitive Business and length of time. The Executive further acknowledges
that, were the Executive to breach any of the covenants or agreements contained
in Sections 7 or 8 hereof, the damage to the Company could be irreparable. The
Executive therefore agrees that the Company, in addition to any other remedies
available to it, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by the Executive of any of said
covenants or agreements. The parties further agree that in the event that any
provision of Section 7 or 8 hereof shall be determined by any Court of competent
jurisdiction to be unenforceable by reason of its being extended over too great
a time, too large a geographic area or too great a range of activities, such
provision shall be deemed to be modified to permit its enforcement to the
maximum extent permitted by law.
10. Conflicting Agreements. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of the Executive's
obligations hereunder will not breach or be in conflict with any other agreement
to which or by which the Executive is a party or is bound and that the Executive
is not now subject to any covenants against competition or similar covenants
that would affect the performance of the Executive's obligations hereunder. The
Executive will not disclose to or use on behalf of the Company or any of its
Affiliates any proprietary information of a third party without such party's
consent.
11. Definitions. Terms defined elsewhere in this Agreement are used herein
as so defined. In addition, the following terms shall have the following
meanings:
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11.1. Affiliates. "Affiliates" means all persons and entities directly
or indirectly controlling, controlled by or under common control with the
Company.
11.2. Cause. The following events or conditions shall constitute
"Cause" for termination: (i) the willful failure by the Executive to
substantially perform the Executive's duties to the Company (other than any such
failure resulting from the Executive's incapacity due to physical or mental
illness), including the Executive's obligations under this Agreement, or (ii) a
willful and material breach by the Executive of Section 7.1, 7.3 or 8 or (iii) a
conviction for fraud, embezzlement or other act of dishonesty by the Executive
that causes material injury to the Company or any of its Affiliates or (iv)
conviction of, or plea of nolo contendere to, any felony involving dishonesty or
moral turpitude.
For purposes of this Section 11.2, no act or failure to act on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
actions or omissions were in the best interest of the Company. Notwithstanding
and with respect to clause (i) only in the immediately preceding paragraph, the
Executive shall not be deemed terminated for Cause unless and until there shall
have been delivered to the Executive a copy of a letter from the Chairman (after
reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard by the Chairman and after the
Executive has been provided with a period of not less than 30 days within which
to correct the situation) finding that in the opinion of the Chairman the
Executive engaged in the conduct set forth in such clause (i) and specifying the
particulars in reasonable detail.
11.3. Confidential Information. "Confidential Information" means any
and all information of the Company and its Affiliates that is not generally
known by others with whom they compete or do business, or with whom they plan to
compete or do business and any and all information the disclosure of which would
otherwise be adverse to the interests of the Company or any of its Affiliates.
Confidential Information includes without limitation such information relating
to (i) the services or products sold or offered by the Company or any of its
Affiliates, (ii) the costs, sources of supply, financial performance and
strategic plans of the Company and its Affiliates, (iii) the identity and
special needs of the customers of the Company and its Affiliates and (iv) the
people and organizations with whom the Company and its Affiliates have business
relationships and those relationships. Confidential Information also includes
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comparable information that the Company or any of its Affiliates have received
belonging to others or which was received by the Company or any of its
Affiliates with any understanding that it would not be disclosed.
11.4. ERISA. "ERISA" means the federal Employee Retirement Income
Security Act of 1974 or any successor statute, and the rules and regulations
thereunder, and in the case of any referenced section thereof any successor
section thereto, collectively and as from time to time amended and in effect.
11.5. Intellectual Property. "Intellectual Property" means inventions,
discoveries, developments, methods, processes, compositions, works, concepts and
ideas (whether or not patentable or copyrightable or constituting trade secrets)
conceived, made, created, developed or reduced to practice by the Executive
(whether alone or with others, whether or not during normal business hours or on
or off Company premises) during the Executive's employment that relate to either
the business of the Company or any of its Affiliates or any prospective activity
of the Company or any of its Affiliates.
11.6. Person. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust and
any other entity or organization.
12. Withholding. All payments made by the Company under this Agreement shall be
reduced by any tax or other amounts required to be withheld by the Company under
applicable law.
13. Miscellaneous.
13.1. Assignment. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein (provided, however, that
nothing contained herein shall be construed to place any limitation or
restriction on the transfer of the Common Stock in addition to any restrictions
set forth in any agreement applicable to such shares), by operation of law or
otherwise, without the prior written consent of the other; provided, however,
that the Company may assign its rights and obligations under this Agreement
without the consent of the Executive in the event that the Company shall
hereafter effect a reorganization, consolidate with, or merge into, any other
Person or transfer all or substantially all of its properties or assets to any
other Person, in which event such other Person shall be deemed the "Company"
hereunder for all purposes. The Company will require any successor (whether
direct or
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indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of the business or assets of the Company to expressly assume
and agree to perform this Agreement in the same manner and to the same extent
that the Company would be required to perform if the succession had not taken
place. This Agreement shall inure to the benefit of and be binding upon the
Company and the Executive, and their respective successors, executors,
administrators, heirs and permitted assigns.
13.2. Severability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of competent
jurisdiction, then the application of such provision in such circumstances shall
be deemed modified to permit its enforcement to the maximum extent permitted by
law, and both the application of such portion or provision in circumstances
other than those as to which it is so declared illegal or unenforceable and the
remainder of this Agreement shall not be affected thereby, and each portion and
provision of this Agreement shall be valid and enforceable to the fullest extent
permitted by law.
13.3. Waiver; Amendment. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party. The failure of
either party to require the performance of any term or obligation of this
Agreement, or the waiver by either party of any breach of this Agreement, shall
not prevent any subsequent enforcement of such term or obligation or be deemed a
waiver of any subsequent breach. This Agreement may be amended or modified only
by a written instrument signed by the Executive and the Company.
13.4. Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall be
effective when delivered in person or two business days after being deposited in
the United States mail, postage prepaid, registered or certified, and addressed
(a) in the case of the Executive, to Ronald G. Eidell at Metromail Corporation,
360 East 22nd Street, Lombard, Illinois 60148 or, (b) in the case of the
Company, at its principal place of business and to the attention of Board of
Directors; or to such other address as either party may specify by notice to the
other.
13.5. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the terms and conditions of the
Executive's employment and, except as otherwise provided herein, supersedes all
prior communications, agreements and understandings, written or oral, with the
Company with respect to the terms and conditions of the Executive's employment.
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13.6. Headings. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of any
provision of this Agreement.
13.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together shall
constitute one and the same instrument.
13.8. Governing Law. This Agreement shall be governed by and construed
in accordance with the domestic substantive laws of the State of Illinois
without giving effect to any choice or conflict of laws provision or rule that
would cause the application of the domestic substantive laws of any other
jurisdiction.
13.9. Consent to Jurisdiction. Each of the Company and the Executive,
by its or the Executive's execution hereof, (i) hereby irrevocably submits to
the exclusive jurisdiction of the state courts of the State of Illinois for the
purpose of any claim or action arising out of or based upon this Agreement or
relating to the subject matter hereof, (ii) hereby waives, to the extent not
prohibited by applicable law, and agrees not to assert by way of motion, as a
defense or otherwise, in any such claim or action, any claim that it is not
subject personally to the jurisdiction of the above-named courts, that its
property is exempt or immune from attachment or execution, that any such
proceeding brought in the above-named courts is improper, or that this Agreement
or the subject matter hereof may not be enforced in or by such court, and (iii)
hereby agrees not to commence any claim or action arising out of or based upon
this Agreement or relating to the subject matter hereof other than before the
above-named courts or any applicable governmental agency nor to make any motion
or take any other action seeking or intending to cause the transfer or removal
of any such claim or action to any court other than the above-named courts
whether on the grounds of inconvenient forum or otherwise. Each of the Company
and the Executive hereby consents to service of process in any such proceeding
in any manner permitted by Illinois law, and agrees that service of process by
registered or certified mail, return receipt requested, at its address specified
pursuant to Section 13.4 hereof is reasonably calculated to give actual notice.
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IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its
duly authorized representative, and by the Executive, as of the date first above
written.
THE COMPANY: METROMAIL CORPORATION
By /s/ Monica M. Fohrman
-----------------------------------------------
Name: Monica M. Fohrman
Title: Assistant Secretary
THE EXECUTIVE: /s/ Ronald G. Eidell
-----------------------------------------------
Ronald G. Eidell
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Exhibit 10.9
EMPLOYMENT AGREEMENT
This Employment Agreement is made as of March 6, 1996 by and among
Metromail Corporation, a Delaware corporation (the "Company"), and Thomas J.
Quarles (the "Executive").
WHEREAS, the Company desires to employ the Executive as its Senior Vice
President, General Counsel and Chief Administrative Officer, and the Executive
desires to accept such employment, for the term and upon the conditions set
forth in this Agreement.
Agreement
---------
Now, therefore, the parties hereto hereby agree as follows:
1. Employment. Subject to the terms and conditions set forth in this
Agreement, the Company offers and the Executive hereby accepts employment,
effective as of the time of the closing of the Company's initial public offering
of its common stock ("Common Stock") (the date of such closing being referred to
herein as the "Effective Date").
2. Term. Subject to earlier termination as hereafter provided, the
Executive shall be employed hereunder for an original term commencing on the
Effective Date and ending at 5:00 p.m., Chicago time, on the fourth anniversary
of the Effective Date, or such later date to which the parties may agree. The
term of this Agreement is hereafter referred to as "the term of this Agreement"
or "the term hereof". If the closing of the Company's initial public offering of
its Common Stock is not consummated on or before June 30, 1996, this Agreement
shall automatically terminate and be without further force or effect.
3. Capacity and Performance.
3.1. Offices. During the term hereof, the Executive shall serve as the
Company's Senior Vice President, General Counsel and Chief Administrative
Officer. The Executive shall be subject to the direction of, and shall have
such powers, duties and responsibilities consistent with the Executive's
position as Senior Vice President, General Counsel and Chief Administrative
Officer as may from time to time be prescribed by, the Chairman. In
addition, for so long as the Executive is employed by the Company and,
unless otherwise determined by the Company's Board of Directors
<PAGE>
(the "Board"), without further compensation, the Executive shall serve as a
director of one or more of the Company's subsidiaries if so elected or
appointed from time to time.
3.2. Performance. During the term hereof, the Executive shall be
employed by the Company and shall perform and discharge (faithfully,
diligently and to the best of the Executive's ability) such duties and
responsibilities on behalf of the Company and its subsidiaries as may be
designated from time to time by the Chairman and which are consistent with
the Executive's position as Senior Vice President, General Counsel and
Chief Administrative Officer. During the term hereof, the Executive shall
devote the Executive's full business time and attention to the advancement
of the business and interests of the Company and its subsidiaries and to
the discharge of the Executive's duties and responsibilities hereunder.
Nothing contained herein shall be construed to prohibit or restrict the
Executive from (a) serving in various capacities in community, civic,
religious or charitable organizations, or (b) attending to personal
business and investment matters. It is expressly agreed that any such
service or activity permitted by the previous sentence shall not
unreasonably interfere with the performance of the Executive's duties and,
if so, the Executive, after consultation with the Chairman, will comply
with the reasonable requests of the Chairman to cease or limit the service
or activity.
4. Compensation and Benefits. As compensation for all services performed by
the Executive under this Agreement and subject to Section 5 hereof and
performance of the Executive's duties and of the obligations to the Company and
its subsidiaries, pursuant to this Agreement or otherwise:
4.1. Base Salary. During the term hereof, the Company shall pay the
Executive a base salary at the rate of $230,000 per year, payable in
accordance with the payroll practices of the Company for its executives and
subject to increase at any time or from time to time by the Board in its
sole discretion. Such base salary, as from time to time increased, is
hereafter referred to as the "Base Salary". The Base Salary payable to the
Executive in 1996 shall be prorated for the period from the Effective Date
through December 31, 1996 and for any subsequent period of service less
than one full year.
4.2. Bonus Compensation. During the term hereof, the Company from time
to time shall pay the Executive an annual bonus (the "Bonus"). The Bonus in
respect of 1996 (the "1996 Bonus") will be calculated and payable in
accordance with and based on the following factors:
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(a) (1) If the Company's net income for 1996, as set forth in the
Company's audited financial statements (the "1996 Net Income"), is
less than $15,000,000, adjusted as set forth in subparagraph (b)
below (the "Minimum Target"), the 1996 Bonus shall equal zero;
(2) If the 1996 Net Income is equal to or greater than the Minimum
Target but less than $17,528,000, adjusted as set forth in
subparagraph (b) below (the "Base Target"), the 1996 Bonus shall equal
the sum of (i) 22.5% of the Executive's Base Salary as of the
Effective Date plus (ii) the number obtained by multiplying 22.5% of
the Executive's Base Salary as of the Effective Date by a fraction
(which shall not be greater than one), the numerator of which is the
difference between the 1996 Net Income and the Minimum Target and the
denominator of which is the amount determined by subtracting the
Minimum Target from the Base Target;
(3) If the 1996 Net Income is equal to or greater than the Base
Target but less than $23,528,000, adjusted as set forth in
subparagraph (b) below (the "Maximum Target"), the 1996 Bonus shall
equal the sum of (i) 45% of the Executive's Base Salary as of the
Effective Date plus (ii) the number obtained by multiplying 45% of the
Executive's Base Salary as of the Effective Date by a fraction (which
shall not be greater than one), the numerator of which is the
difference between the 1996 Net Income and the Base Target and the
denominator of which is the amount determined by subtracting the Base
Target from the Maximum Target; or
(4) If the 1996 Net Income is equal to or greater than the Maximum
Target, the 1996 Bonus shall equal 90% of the Executive's Base Salary
as of the Effective Date.
Any compensation paid to the Executive as Bonus shall be in addition to the
Base Salary. The 1996 Bonus, if any, shall be pro-rated by multiplying (x)
the amount of the 1996 Bonus by (y) a fraction, the numerator of which is
the lesser of (I) the number of days from and including the Effective Date
through and including December 31, 1996 and (II) the number of days from
and including the Effective Date through and including the date of the
Executive's termination of employment and the denominator of which is 366.
Except with respect to the 1996 Bonus, any Bonus payable to the Executive
shall be pro-rated for any period of service less than a full year by
multiplying (x) the amount of the Bonus calculated for such year by (y) a
fraction, the numerator of which is the number of days from and including
January 1 of such year
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through and including the effective date of the Executive's termination of
employment and the denominator of which is 365. All bonus and benefit plans
are subject to annual review and change by the Board relative to key
strategic objectives for the year.
(b) Prior to determining the 1996 Bonus, each of the Minimum Target, the
Base Target and the Maximum Target shall be adjusted for changes occurring
during the period April 1, 1996 through the Effective Date by making those
adjustments reflected as Operating Structure and Capital Structure
Adjustments in the Unaudited Pro Forma Consolidated and Combined Statements
of Income set forth in the Form S-1 Registration Statement filed by the
Company in accordance with the footnotes thereto.
4.3. Stock Options. The Company shall establish the 1996 Long-Term
Incentive Plan (the "Plan") for management/employees of the Company. As of
the Effective Date, the Company shall grant to the Executive, pursuant to
the Plan, options to purchase a total of 70,000 shares of Common Stock at
an exercise price equal to the initial public offering price (the
"Options"), which amount shall include options to purchase 20,000 shares of
Common Stock as consideration for the cancellation of 5,000 shares of
restricted stock of R.R. Donnelley & Sons Company ("RRD"). Subject to the
termination of employment provisions contained in the agreement evidencing
the Options, the Options will become exercisable in four annual
installments on the one year (25%), two year (25%), three year (25%) and
four year (25%) anniversaries of the Effective Date, subject to
acceleration of vesting in accordance with the terms of the agreement
evidencing the Options. Within three months after the Effective Date the
Company shall cause all shares subject to the Options to be registered on
Form S-8.
4.4. Vacations. During the term hereof, the Executive shall be
entitled to five (5) weeks of vacation per annual vacation period of the
Company (currently March 1 of each year through the last day of February of
the following year), such vacation to be taken at such times and intervals
as shall be determined by the Executive in the Executive's reasonable
discretion, provided, that, for the annual vacation period commencing on
March 1, 1996 and ending on February 28, 1997, the Executive's number of
vacation days for the period commencing on the Effective Date and ending on
February 28, 1997 shall be reduced by the number of vacation days taken by
the Executive (whether as an employee of RRD or the Company) during the
period commencing on March 1, 1996 and ending on the day prior to the
Effective Date. The Executive may not accumulate or carry over from one
calendar year to another any unused, accrued vacation time. The Executive
shall not be entitled to compensation for vacation time not taken.
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4.5. Other Benefits. During the term hereof and subject to any
contribution therefor generally required of executives of the Company, the
Executive shall be entitled to participate in all employee benefit plans
and other programs (including, but not limited to, any medical, dental,
retirement, disability, life insurance, sick leave and other benefits) from
time to time adopted by the Board and in effect for executives of the
Company generally, except to the extent such plans are in a category of
benefit otherwise already provided to the Executive. Such participation
shall be subject to (i) the terms of the applicable plan documents, (ii)
generally applicable Company policies and (iii) the discretion of the Board
or any administrative or other committee provided for in or contemplated by
such plan. The Executive's service period with R.R. Donnelley & Sons
Company, a Delaware corporation, or its affiliates shall be credited with
respect to any service period requirement of any plan adopted by the
Company. The Company may alter, modify, add to or delete its employee
benefit plans at any time as the Board, in its sole judgment, determines to
be appropriate.
4.6. Business Expenses. The Company shall pay or reimburse the
Executive for all reasonable business expenses incurred or paid by the
Executive in the performance of the Executive's duties and responsibilities
hereunder, subject to (i) any expense policy of the Company set by the
Board from time to time, and (ii) such reasonable substantiation and
documentation requirements as may be specified by the Board from time to
time.
4.7. Severance. In the event the Executive's employment with the
Company is terminated by the Company other than for Cause or terminated by
the Executive pursuant to Section 5.5, the Executive will be entitled to
twelve (12) monthly severance payments, each in an amount equal to the
Executive's then applicable Base Salary, calculated on a monthly basis, at
the time of such termination (i.e., 1/12th of the Base Salary).
5. Termination of Employment and Severance Benefits. Notwithstanding the
provisions of Section 2 hereof, the Executive's employment hereunder shall
terminate prior to the expiration of the term of this Agreement under the
following circumstances:
5.1. Retirement or Death. In the event of the Executive's retirement
or death during the term hereof, the Executive's employment hereunder shall
immediately and automatically terminate. In the event of the Executive's
retirement after the age of sixty-five, age fifty-five with the prior
consent of the Board or death during the term hereof, the Company shall pay
to the Executive (or in the case of death, the Executive's designated
beneficiary or, if no beneficiary has been designated by the Executive, to
the
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Executive's estate) (i) Base Salary earned but unpaid through and
including the date of such retirement or death, (ii) any amount payable
pursuant to Section 4.6, (iii) any unpaid portion of any Bonus for any
fiscal year preceding the year in which such retirement or death occurs
that was earned but had not previously been paid and (iv) at the times the
Company pays its executives bonuses in accordance with its general payroll
policies, any Bonus which would have been paid had such retirement or death
not occurred during the fiscal year of such retirement or death (pro-rated
based on a formula, the numerator of which shall be the number of days
during the fiscal year of such retirement or death in which the Executive
was employed by the Company and the denominator of which shall be 365 or
366, as the case may be).
5.2. Disability.
5.2.1. The Company may terminate the Executive's employment
hereunder, upon written notice to the Executive, in the event that the
Executive becomes disabled during the Executive's employment hereunder
through any illness, injury, accident or condition of either a
physical or psychological nature and, as a result, is unable to
perform substantially all of the Executive's duties and
responsibilities hereunder for an aggregate of one hundred eighty
(180) days during any period of three hundred and sixty-five (365)
consecutive calendar days.
5.2.2. The Board may designate another employee to act
temporarily in the Executive's place during any period of the
Executive's disability. Notwithstanding any such designation, the
Executive shall continue to receive the Base Salary in accordance with
Section 4.1 and to receive benefits in accordance with Section 4.5, to
the extent permitted by the then current terms of the applicable
benefit plans, until the Executive becomes eligible for disability
income benefits under any disability income plan maintained by the
Company or until the termination of the Executive's employment,
whichever shall first occur. Upon becoming so eligible, or upon such
termination, whichever shall first occur, the Company shall pay to the
Executive (i) Base Salary earned but unpaid through and including the
date of such eligibility or termination, (ii) any amount payable
pursuant to Section 4.6, (iii) any unpaid portion of any Bonus for any
fiscal year preceding the year in which such eligibility or
termination occurs that was earned but had not previously been paid,
(iv) during the eighteen-month period commencing on such date of
eligibility or termination, amounts (payable from time to time at the
times the Company pays its executive in accordance with its general
payroll policies) equal to the difference, if positive, between the
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Base Salary for the Executive for such period, or portion thereof, and
the amounts of disability income benefits that the Executive receives
pursuant to the above-referenced disability income plan in respect of
such period, and (v) at the times the Company pays its executives
bonuses in accordance with its general payroll policies, any Bonus
which would have been paid had disability not occurred during the
fiscal year in which such eligibility or termination occurs (pro-rated
based on a formula, the numerator of which shall be, as applicable,
(i) the number of days from and including January 1 of the fiscal year
in which such eligibility occurs to but excluding the date of such
eligibility or (ii) the number of days on which the Executive was
employed by the Company during the fiscal year in which such
termination occurs and the denominator of which shall be 365 or 366,
as the case may be).
5.2.3. Except as provided in Section 5.2.2, while receiving
disability income payments under any disability income plan maintained
by the Company, the Executive shall not be entitled to receive any
Base Salary under Section 4.1 or Bonus payments under Section 4.2 but
shall continue to participate in the Company's benefit plans in
accordance with Section 4.5 and the terms of such plans, until the
termination of the Executive's employment. During the eighteen-month
period from and including the date of termination, the Company shall
pay for the cost of the Executive's participation in the Company's
group medical and dental plans, provided that the Executive is
entitled to continue such participation under applicable law and the
terms of such plan.
5.2.4. If any question shall arise as to whether during any
period the Executive is disabled through any illness, injury, accident
or condition of either a physical or psychological nature so as to be
unable to perform substantially all of the Executive's duties and
responsibilities hereunder, the Executive may, and at the request of
the Company shall, submit to a medical examination by a physician
selected by the Company to whom the Executive or the Executive's duly
appointed guardian, if any, has no reasonable objection to determine
whether the Executive is so disabled and such determination shall for
the purposes of this Agreement be conclusive of the issue. If such
question shall arise and the Executive shall fail to submit to such
medical examination, the Board's determination of the issue shall be
binding on the Executive.
5.3. By the Company for Cause. The Company may terminate the
Executive's employment hereunder for Cause as provided in Section 11.2. If
the Executive's employment hereunder is terminated for Cause, the Company
shall have no further
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obligation or liability to the Executive relating to the Executive's
employment hereunder, or the termination thereof, except that the Company
shall pay to the Executive (i) Base Salary earned but unpaid through and
including the date of termination and (ii) any amount payable pursuant to
Section 4.6.
5.4. By the Company other than for Cause. The Company may terminate
the Executive's employment hereunder other than for Cause at any time after
the one year anniversary of the Effective Date upon two weeks prior written
notice to the Executive. In the event of such termination, then the
Company shall pay the Executive (i) Base Salary earned but unpaid through
and including the date of termination, (ii) any amount payable pursuant to
Section 4.6, (iii) the amounts specified in Section 4.7, (iv) any unpaid
portion of any Bonus for any fiscal year preceding the year in which such
termination occurs that was earned but had not previously been paid and (v)
at the times the Company pays its executives bonuses in accordance with its
general payroll policies, any Bonus which would have been paid had
termination not occurred during the fiscal year in which such termination
occurs (pro-rated based on a formula, the numerator of which shall be the
number of days during the fiscal year in which such termination occurs the
Executive was employed by the Company and the denominator of which shall be
365 or 366, as the case may be).
5.5. By the Executive upon Breach or for Good Reason. The Executive
may terminate the Executive's employment hereunder (i) in the event that
the Company fails to perform, in any material respect, its obligations
under this Agreement, after written notice to the Company setting forth in
reasonable detail the nature of such breach if such breach remains uncured
for a period of 30 days following such written notice to the Company, (ii)
there is a diminution in the material responsibilities, duties and powers
of the Executive or (iii) the Company's principal executive offices or the
Executive's office are moved from their present location to a location
outside of the Chicago Metropolitan Area. In the event of termination in
accordance with this Section 5.5, then the Company shall pay to the
Executive (i) Base Salary earned but unpaid through and including the date
of termination, (ii) any amount payable pursuant to Section 4.6, (iii) the
amounts specified in Section 4.7, (iv) any unpaid portion of any Bonus for
any fiscal year preceding the year in which such termination occurs that
was earned but had not previously been paid and (v) at the times the
Company pays its executives bonuses in accordance with its general payroll
policies, any Bonus which would have been paid had termination not occurred
during the fiscal year in which such termination occurs (pro-rated based on
a formula, the numerator of which shall be the
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number of days during the fiscal year in which such termination occurs the
Executive was employed by the Company and the denominator of which shall be
365 or 366, as the case may be).
5.6. By the Executive Other than upon Breach or for Good Reason.
The Executive may terminate the Executive's employment hereunder at any
time upon ninety (90) days' written notice to the Company. In the event of
termination of the Executive pursuant to this Section 5.6, the Board may
elect to waive the period of notice, or any portion thereof, and, whether
or not the Board so elects, the Company shall pay to the Executive (i) Base
Salary for the full notice period and (ii) any amount payable pursuant to
Section 4.6.
5.7. Post-Agreement Employment. In the event the Executive remains
in the employ of the Company or any of its Affiliates following termination
of this Agreement, by the expiration of the term hereof or otherwise, then
such employment shall be at will, unless otherwise agreed in writing.
6. Effect of Termination. The provisions of this Section 6 shall apply in
the event of termination due to the expiration of the term of this Agreement,
pursuant to Section 5 or otherwise.
6.1. Receipt of Certain Benefits. It is the mutual intention of the
Company and the Executive that the Executive receive the full benefit of
the compensation and benefits provided to the Executive during the term
hereof which compensation and benefits may be payable over periods beyond
the particular year of employment. The Executive shall not be obligated to
seek other employment by way of mitigation of the amounts due to the
Executive nor shall the Executive's earnings after termination reduce the
Company's obligations hereunder. Nothing in this Section 6.1 is intended
or shall be construed to affect the rights and obligations of the Company
and its Affiliates, on the one hand, and the Executive, on the other, with
respect to any loans, stock pledge arrangements, option plans or other
agreements to the extent said rights or obligations survive termination of
employment under the provisions of the documents relating thereto.
6.2. Termination of Benefits. Except for medical and dental
insurance coverage continued pursuant to Sections 5.2 hereof and any right
of continuation of health coverage to the extent provided by Sections 601
through 608 of ERISA, benefits shall terminate pursuant to the terms of the
applicable benefit plans based on the date of termination of the
Executive's employment without regard to any continuation of Base
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Salary or other payments to the Executive following such date of
termination pursuant to Section 5.
6.3. Survival of Certain Provisions. Provisions of this Agreement
shall survive any termination if so provided herein or if necessary or
desirable fully to accomplish the purposes of such provision, including,
without limitation, the obligations of the Executive under Sections 7 and 8
hereof. The obligation of the Company to make payments to or on behalf of
the Executive under Sections 4.7, 5.4 or 5.5 hereof is expressly
conditioned upon the Executive's continued full performance of obligations
under Sections 7 and 8 hereof. The Executive recognizes that, except as
expressly provided in Section 4.7, 5.4 or 5.5, no compensation is earned
after termination of employment.
7. Confidential Information; Intellectual Property.
7.1. Confidentiality. The Executive acknowledges that the Company
and its Affiliates continually develop Confidential Information, that the
Executive may develop Confidential Information for the Company or its
Affiliates and that the Executive may learn of Confidential Information
during the course of employment. The Executive will comply with the
policies and procedures of the Company for protecting Confidential
Information and shall never disclose to any Person (except as required by
applicable law or for the proper performance of the Executive's duties and
responsibilities to the Company and its Affiliates), or use for the
Executive's own benefit or gain or otherwise use in a manner adverse to the
interests of the Company and its Affiliates, any Confidential Information
obtained by the Executive incident to the Executive's employment or other
association with the Company or any of its Affiliates. The Executive
understands that this restriction shall continue to apply after the
Executive's employment terminates, regardless of the reason for such
termination. Notwithstanding the foregoing, the Executive's covenant not
to disclose Confidential Information does not apply to information which
(i) becomes generally available to the public or otherwise becomes known
through sources other than the Executive, (ii) is subsequently disclosed to
the Executive by a source other than the Company who was under no duty of
confidence or (iii) is required to be disclosed by the Executive through
discovery in litigation or by order of a court or otherwise as required by
law.
7.2. Return of Documents. All documents, records, tapes and other
media of every kind and description relating to the business, present or
otherwise, of the Company or its Affiliates and any copies, in whole or in
part, thereof (the "Documents"), whether or not prepared by the Executive,
shall be the sole and
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exclusive property of the Company and its Affiliates. The Executive shall
safeguard all Documents and shall surrender to the Company at the time the
Executive's employment terminates, or at such earlier time or times as the
Board or its designee may specify, all Documents then in the Executive's
possession or control.
7.3. Assignment of Rights to Intellectual Property. The Executive
shall promptly and fully disclose all Intellectual Property to the Company.
The Executive hereby assigns and agrees to assign to the Company (or as
otherwise directed by the Company) the Executive's full right, title and
interest in and to all Intellectual Property. The Executive agrees to
execute any and all applications for domestic and foreign patents,
copyrights or other proprietary rights and to do such other acts (including
without limitation the execution and delivery of instruments of further
assurance or confirmation) requested by the Company to assign the
Intellectual Property to the Company and to permit the Company to enforce
any patents, copyrights or other proprietary rights to the Intellectual
Property. The Executive will not charge the Company for time spent in
complying with these obligations. All copyrightable works that the
Executive creates shall be considered "work made for hire".
8. Agreement not to Compete with the Business. The Executive agrees that
during the term of the Executive's employment hereunder and for a period of
twelve (12) months following the date of termination thereof (the "Non-
Competition Period"), the Executive will not, directly or indirectly (a) own,
manage, operate, control or participate in any manner in the ownership,
management, operation or control of, or be connected as an officer, employee,
partner, director, principal, consultant, agent or otherwise with, or have any
financial interest in, or aid or assist anyone else in the conduct of, any
business, venture or activity which competes with the business of the Company,
or any group, division or subsidiary of the Company, as described in the
Company's Registration Statement on Form S-1 relating to the Company's initial
public offering of Common Stock or, beginning with the Company's Annual Report
on Form 10-K for the year ending December 31, 1996, the Company's most recent
Annual Report on Form 10-K filed with the Securities and Exchange Commission
prior to the date (the "Date of Termination") the Executive's employment under
this Agreement is terminated (hereinafter "Competitive Business"), in the United
States, Canada, the United Kingdom or any other geographic area where such
Competitive Business is being conducted at the Date of Termination or (b)
recruit or otherwise seek to induce any employees of the Company or any of its
subsidiaries to terminate their employment or violate any agreement with or duty
to the Company or any of its subsidiaries. It is understood and agreed that,
for the purposes of the foregoing provisions of this Section 8, (i) no business,
venture or activity shall be deemed to be a Competitive Business unless not less
than five percent of the Company's consolidated gross sales or operating income
is derived from, or not less than five
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percent of the Company's consolidated assets are devoted to, such business,
venture or activity; and (ii) no business, venture or activity conducted by any
entity by which the Executive is employed or in which the Executive is
interested or with which the Executive is connected or associated shall be
deemed to be a Competitive Business unless it is one from which five percent or
more of such entity's consolidated gross sales or operating income is derived,
or to which five percent or more of such entity's consolidated assets are
devoted; provided, however, that if the actual gross sales or operating income
or assets of such entity derived from or devoted to such business, venture or
activity is equal to or in excess of 10% of the most nearly comparable figure
for the Company, such business, venture or activity of such entity shall be
deemed to be a Competitive Business. Further, ownership of not more than five
percent of the voting stock of any publicly held corporation shall not, of
itself, constitute a violation of this Section 8.
9. Enforcement of Covenants. The Executive acknowledges that the
Executive has carefully read and considered all the terms and conditions of this
Agreement, including without limitation the restraints imposed upon the
Executive pursuant to Sections 7 and 8 hereof. The Executive agrees that said
restraints are necessary for the reasonable and proper protection of the Company
and its Affiliates and that the restraints are reasonable as to the definition
of Competitive Business and length of time. The Executive further acknowledges
that, were the Executive to breach any of the covenants or agreements contained
in Sections 7 or 8 hereof, the damage to the Company could be irreparable. The
Executive therefore agrees that the Company, in addition to any other remedies
available to it, shall be entitled to preliminary and permanent injunctive
relief against any breach or threatened breach by the Executive of any of said
covenants or agreements. The parties further agree that in the event that any
provision of Section 7 or 8 hereof shall be determined by any Court of competent
jurisdiction to be unenforceable by reason of its being extended over too great
a time, too large a geographic area or too great a range of activities, such
provision shall be deemed to be modified to permit its enforcement to the
maximum extent permitted by law.
10. Conflicting Agreements. The Executive hereby represents and warrants
that the execution of this Agreement and the performance of the Executive's
obligations hereunder will not breach or be in conflict with any other agreement
to which or by which the Executive is a party or is bound and that the Executive
is not now subject to any covenants against competition or similar covenants
that would affect the performance of the Executive's obligations hereunder. The
Executive will not disclose to or use on behalf of the Company or any of its
Affiliates any proprietary information of a third party without such party's
consent.
11. Definitions. Terms defined elsewhere in this Agreement are used
herein as so defined. In addition, the following terms shall have the following
meanings:
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11.1. Affiliates. "Affiliates" means all persons and entities
directly or indirectly controlling, controlled by or under common control
with the Company.
11.2. Cause. The following events or conditions shall constitute
"Cause" for termination: (i) the willful failure by the Executive to
substantially perform the Executive's duties to the Company (other than any
such failure resulting from the Executive's incapacity due to physical or
mental illness), including the Executive's obligations under this Agreement
or (ii) a willful and material breach by the Executive of Section 7.1, 7.3
or 8 or (iii) a conviction for fraud, embezzlement or other act of
dishonesty by the Executive that causes material injury to the Company or
any of its Affiliates or (iv) conviction of, or plea of nolo contendere to,
any felony involving dishonesty or moral turpitude.
For purposes of this Section 11.2, no act or failure to act on the
Executive's part shall be deemed "willful" unless done, or omitted to be
done, by the Executive not in good faith and without reasonable belief that
the actions or omissions were in the best interest of the Company.
Notwithstanding and with respect to clause (i) only in the immediately
preceding paragraph, the Executive shall not be deemed terminated for Cause
unless and until there shall have been delivered to the Executive a copy of
a letter from the Chairman (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel, to be
heard by the Chairman and after the Executive has been provided with a
period of not less than 30 days within which to correct the situation)
finding that in the opinion of the Chairman the Executive engaged in the
conduct set forth in such clause (i) and specifying the particulars in
reasonable detail.
11.3. Confidential Information. "Confidential Information" means any
and all information of the Company and its Affiliates that is not generally
known by others with whom they compete or do business, or with whom they
plan to compete or do business and any and all information the disclosure
of which would otherwise be adverse to the interests of the Company or any
of its Affiliates. Confidential Information includes without limitation
such information relating to (i) the services or products sold or offered
by the Company or any of its Affiliates, (ii) the costs, sources of supply,
financial performance and strategic plans of the Company and its
Affiliates, (iii) the identity and special needs of the customers of the
Company and its Affiliates and (iv) the people and organizations with whom
the Company and its Affiliates have business relationships and those
relationships. Confidential Information also includes comparable
information that the Company or any of its Affiliates have received
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belonging to others or which was received by the Company or any of its
Affiliates with any understanding that it would not be disclosed.
11.4. ERISA. "ERISA" means the federal Employee Retirement Income
Security Act of 1974 or any successor statute, and the rules and
regulations thereunder, and in the case of any referenced section thereof
any successor section thereto, collectively and as from time to time
amended and in effect.
11.5. Intellectual Property. "Intellectual Property" means
inventions, discoveries, developments, methods, processes, compositions,
works, concepts and ideas (whether or not patentable or copyrightable or
constituting trade secrets) conceived, made, created, developed or reduced
to practice by the Executive (whether alone or with others, whether or not
during normal business hours or on or off Company premises) during the
Executive's employment that relate to either the business of the Company or
any of its Affiliates or any prospective activity of the Company or any of
its Affiliates.
11.6. Person. "Person" means an individual, a corporation, an
association, a partnership, a limited liability company, an estate, a trust
and any other entity or organization.
12. Withholding. All payments made by the Company under this Agreement
shall be reduced by any tax or other amounts required to be withheld by the
Company under applicable law.
13. Miscellaneous.
13.1. Assignment. Neither the Company nor the Executive may make any
assignment of this Agreement or any interest herein (provided, however,
that nothing contained herein shall be construed to place any limitation or
restriction on the transfer of the Common Stock in addition to any
restrictions set forth in any agreement applicable to such shares), by
operation of law or otherwise, without the prior written consent of the
other; provided, however, that the Company may assign its rights and
obligations under this Agreement without the consent of the Executive in
the event that the Company shall hereafter effect a reorganization,
consolidate with, or merge into, any other Person or transfer all or
substantially all of its properties or assets to any other Person, in which
event such other Person shall be deemed the "Company" hereunder for all
purposes. The Company will require any successor (whether direct or
indirect, by purchase, merger, consolidation or otherwise) to all or
substantially all of
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the business or assets of the Company to expressly assume and agree to
perform this Agreement in the same manner and to the same extent that the
Company would be required to perform if the succession had not taken place.
This Agreement shall inure to the benefit of and be binding upon the
Company and the Executive, and their respective successors, executors,
administrators, heirs and permitted assigns.
13.2. Severability. If any portion or provision of this Agreement
shall to any extent be declared illegal or unenforceable by a court of
competent jurisdiction, then the application of such provision in such
circumstances shall be deemed modified to permit its enforcement to the
maximum extent permitted by law, and both the application of such portion
or provision in circumstances other than those as to which it is so
declared illegal or unenforceable and the remainder of this Agreement shall
not be affected thereby, and each portion and provision of this Agreement
shall be valid and enforceable to the fullest extent permitted by law.
13.3. Waiver; Amendment. No waiver of any provision hereof shall be
effective unless made in writing and signed by the waiving party. The
failure of either party to require the performance of any term or
obligation of this Agreement, or the waiver by either party of any breach
of this Agreement, shall not prevent any subsequent enforcement of such
term or obligation or be deemed a waiver of any subsequent breach. This
Agreement may be amended or modified only by a written instrument signed by
the Executive and the Company.
13.4. Notices. Any and all notices, requests, demands and other
communications provided for by this Agreement shall be in writing and shall
be effective when delivered in person or two business days after being
deposited in the United States mail, postage prepaid, registered or
certified, and addressed (a) in the case of the Executive, to Thomas J.
Quarles at Metromail Corporation, 360 East 22nd Street, Lombard, Illinois
60148 or, (b) in the case of the Company, at its principal place of
business and to the attention of Board of Directors; or to such other
address as either party may specify by notice to the other.
13.5. Entire Agreement. This Agreement constitutes the entire
agreement between the parties with respect to the terms and conditions of
the Executive's employment and, except as otherwise provided herein,
supersedes all prior communications, agreements and understandings, written
or oral, with the Company with respect to the terms and conditions of the
Executive's employment.
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13.6. Headings. The headings and captions in this Agreement are for
convenience only and in no way define or describe the scope or content of
any provision of this Agreement.
13.7. Counterparts. This Agreement may be executed in any number of
counterparts, each of which shall be an original and all of which together
shall constitute one and the same instrument.
13.8. Governing Law. This Agreement shall be governed by and
construed in accordance with the domestic substantive laws of the State of
Illinois without giving effect to any choice or conflict of laws provision
or rule that would cause the application of the domestic substantive laws
of any other jurisdiction.
13.9. Consent to Jurisdiction. Each of the Company and the
Executive, by its or the Executive's execution hereof, (i) hereby
irrevocably submits to the exclusive jurisdiction of the state courts of
the State of Illinois for the purpose of any claim or action arising out of
or based upon this Agreement or relating to the subject matter hereof, (ii)
hereby waives, to the extent not prohibited by applicable law, and agrees
not to assert by way of motion, as a defense or otherwise, in any such
claim or action, any claim that it is not subject personally to the
jurisdiction of the above-named courts, that its property is exempt or
immune from attachment or execution, that any such proceeding brought in
the above-named courts is improper, or that this Agreement or the subject
matter hereof may not be enforced in or by such court, and (iii) hereby
agrees not to commence any claim or action arising out of or based upon
this Agreement or relating to the subject matter hereof other than before
the above-named courts or any applicable governmental agency nor to make
any motion or take any other action seeking or intending to cause the
transfer or removal of any such claim or action to any court other than the
above-named courts whether on the grounds of inconvenient forum or
otherwise. Each of the Company and the Executive hereby consents to
service of process in any such proceeding in any manner permitted by
Illinois law, and agrees that service of process by registered or certified
mail, return receipt requested, at its address specified pursuant to
Section 13.4 hereof is reasonably calculated to give actual notice.
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IN WITNESS WHEREOF, this Agreement has been executed by the Company, by its
duly authorized representative, and by the Executive, as of the date first above
written.
THE COMPANY: METROMAIL CORPORATION
By /s/ Monica M. Fohrman
-----------------------------------------------
Name: Monica M. Fohrman
Title: Assistant Secretary
THE EXECUTIVE: /s/ Thomas J. Quarles
-----------------------------------------------
Thomas J. Quarles
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Exhibit 10.11
AGREEMENT
---------
THIS AGREEMENT dated as of January 30, 1997, is made by and between
Metromail Corporation, a Delaware corporation ("Metromail"; Metromail and its
Subsidiaries being hereafter referred to as the "Company"), and Barton L. (Faber
(the "Executive").
WHEREAS the Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel; and
WHEREAS the Board of Directors of Metromail (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
Change in Control (as defined in the last Section hereof) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
<PAGE>
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definition of capitalized terms used in this
Agreement is provided in the last Section hereof.
2. Term of Agreement. (a) This Agreement shall commence on the date
hereof and shall continue until terminated by the Company as provided in
paragraph (b) of this Section 2; provided, however, that this Agreement shall
terminate in any event upon the first to occur of (i) the Executive's death and
(ii) termination of the Executive's employment with the Company prior to a
Change in Control.
(b) The Company shall have the right prior to a Change in Control, in
its sole discretion, pursuant to action by the Board, to approve the termination
of this Agreement, which termination shall not become effective until the date
fixed by the Board for such termination, which date shall be at least 120 days
after notice thereof is given by the Company to the Executive in accordance with
Section 10 hereof; provided, however, that no such action shall be taken by the
Board during any period of time when the Board has knowledge that any Person has
taken steps reasonably calculated to effect a Change in Control until, in the
opinion of the Board, such Person has
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abandoned or terminated its efforts to effect a Change in Control; and provided
further, that in no event shall this Agreement be terminated in the event of a
Change in Control.
3. Company's Covenants Summarized. In order to induce the Executive
to remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein in the event the Executive's
employment with the Company is terminated following a Change in Control and
during the term of this Agreement. No amount or benefit shall be payable under
this Agreement unless there shall have been (or, under the terms hereof, there
shall be deemed to have been) a termination of the Executive's employment with
the Company following a Change in Control. This Agreement shall not be construed
as creating an express or implied contract of employment and, except as
otherwise agreed in writing between the Executive and the Company, the Executive
shall not have any right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the term of this Agreement, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
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from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason (determined by treating the Potential Change in
Control as a Change in Control in applying the definition of Good Reason), by
reason of death, Disability or Retirement, or (iv) the termination by the
Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
5.01 Following a Change in Control and during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's full salary to the
Executive at the rate in effect at the commencement of any such period, together
with all compensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement maintained by the
Company during such period, until the Executive's employment is terminated by
the Company for Disability.
5.02 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's full salary to the Executive through the Date of
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Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during such period.
5.03 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's normal post-termination compensation and benefits to
the Executive as such payments become due; provided that, in no event shall any
severance pay which might be payable to the Executive pursuant to the Company's
Separation Pay Plan be paid if the Executive is entitled to the Severance
Payments as a result of such termination. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit plans,
programs and arrangements.
6. Severance Payments.
6.01 The Company shall pay the Executive the payments described in
this Section 6.01 (the "Severance Payments") upon the termination of the
Executive's employment following a Change in Control and during the term of this
Agreement, in addition to the payments and benefits described in Section 5
hereof, unless such termination is (i) by the Company for Cause, (ii) by reason
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of death or Disability or (iii) by the Executive without Good Reason; provided,
however, that the Company shall pay the Executive the Severance Payments, in
addition to the payments and benefits described in Section 5 hereof, if the
Executive's employment is terminated by the Executive for any reason whatsoever
during the Window Period. The Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or by
the Executive with Good Reason if the Executive's employment is terminated prior
to a Change in Control without Cause at the direction of a Person who has
entered into an agreement with the Company the consummation of which will
constitute a Change in Control or if the Executive terminates his employment
with Good Reason prior to a Change in Control (determined by treating a
Potential Change in Control as a Change in Control in applying the definition of
Good Reason) if the circumstance or event which constitutes Good Reason occurs
at the direction of such Person.
(A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to the amount of three
(3) times the Executive's Planned Compensation.
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(B) In addition to the retirement benefits to which the Executive is
entitled under the Pension Plan or any successor plans thereto, the Company
shall pay the Executive a lump sum amount, in cash, equal to the actuarial
equivalent of the excess of (i) the retirement pension (determined as a straight
life annuity commencing at Normal Retirement Age) which the Executive would have
accrued under the terms of the Pension Plan (without regard to any amendment to
the Pension Plan made subsequent to a Change in Control and on or prior to the
Date of Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if the Executive
were fully vested thereunder and had accumulated (after the Date of Termination)
thirty-six (36) (or, if less, a number equal to the number of months, including
fractional parts thereof, from the Date of Termination until the Executive
reaches Normal Retirement Age) additional months of service credit thereunder at
the Executive's highest annual rate of compensation during the twelve (12)
months immediately preceding the Date of Termination, and (ii) the retirement
pension (determined as a straight life annuity commencing at Normal Retirement
Age) which the Executive had then accrued pursuant to the provisions of the
Pension Plan. For purposes of this Section 6.01(B), "actuarial equivalent"
shall be determined using the same assumptions
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utilized under the Pension Plan immediately prior to the Date of Termination.
(C) For a thirty-six (36) month period after the Date of Termination,
the Company shall arrange to provide the Executive with life, disability,
accident and health insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of Termination (without
giving effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason); provided, however, that, in
the event the date upon which the Executive attains Normal Retirement Age occurs
during such thirty-six (36) month period, the Executive shall thereafter receive
such life, disability, accident and health insurance benefits as would be
provided to him as a retiree. Benefits otherwise receivable by the Executive
pursuant to this Section 6.01(C) shall be reduced to the extent comparable
benefits are actually received by or made available to the Executive without
cost during the thirty-six (36) month period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive).
6.02 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the Total Payments will be subject to the Excise
Tax, the Company shall pay to the Executive
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an additional amount (the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Total Payments and
any federal, state and local income tax and Excise Tax upon the payment provided
for by this Section 6.02, shall be equal to the excess of the Total Payments
over the payment provided for by this Section 6.02.
(B) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any payments
or benefits received or to be received by the Executive in connection with a
Change in Control or the Executive's termination of employment (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company, any Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (the "Total Payments") shall
be treated as "parachute payments" (within the meaning of section 28OG(b) (2) of
the Code) unless, in the opinion of tax counsel selected by the Company's
independent auditors and reasonably acceptable to the Executive, such payments
or benefits (in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b) (4) (A) of the Code, and all "excess
parachute payments" (within the meaning of section 280G(b) (1) of the Code)
shall be treated as subject to the Excise Tax unless, in the opinion of such tax
counsel, such excess parachute
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payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b) (4) (B) of the Code),
or are otherwise not subject to the Excise Tax, and (ii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(C) In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of termination of
the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local
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income tax imposed on the Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income tax deduction) plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Executive's employment
(including increases in the Excise Tax resulting from any payment the existence
or amount of which could not be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by the Executive with respect
to such excess) at the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments.
6.03 The payments provided for in Section 6.01 (other than Section
6.01(C)) and 6.02 hereof shall be made not later than the fifth (5th) day
following the Date of Termination; provided, however, that, if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in
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good faith by the Company, of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section, the Company shall
provide the Executive with a written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
6.04 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive as a result of a termination which entitles
the Executive to the Severance Payments (including all such fees and expenses,
if any, incurred in disputing any such termination or in seeking in good faith
to
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obtain or enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
7.01 Notice of Termination. After a Change in Control and during the
term of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and, except for a termination during the Window
Period, shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of not
less than
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three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.02 Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days (except in the case of a
termination during the Window Period) nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
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7.03 Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.03), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected) of a court of competent jurisdiction; provided, however, that
the Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
7.04 Compensation During Dispute. If a purported termination occurs
following a Change in Control and during the term of this Agreement, and such
termination is disputed in accordance with Section 7.03 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the
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dispute was given, until the dispute is finally resolved in accordance with
Section 7.03 hereof. Amounts paid under this Section 7.04 are in addition to all
other amounts due under this Agreement (other than those due under Section 5.02
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section 6
or Section 7.04 hereof. Further, the amount of any payment or benefit provided
for in Section 6 (other than Section 6.01(C)) or Section 7.04 hereof shall not
be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
9.01 In addition to any obligations imposed by law upon any successor
to Metromail, Metromail will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Metromail to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that
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Metromail would be required to perform it if no such succession had taken place.
Failure of Metromail to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation in the same amount and on the same
terms as the Executive would be entitled to hereunder if the Executive were to
terminate the Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.02 This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been
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duly given when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon actual receipt:
To the Company:
Metromail Corporation
360 East 22nd Street
Lombard, IL 60148
Attention: General Counsel
To the Executive:
Barton L. Faber
_________________________
_________________________
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set
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forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Illinois. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
Sections 6 and 7 hereof shall survive the expiration of the term of this
Agreement.
12. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall
set forth the specific reasons for the denial and the
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specific provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Chicago, Illinois, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of the Executive's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Beneficial Owner" shall have the meaning defined in Rule 13d-3
under the Exchange Act.
(B) "Board" shall mean the Board of Directors of Metromail.
(C) "Bonus Plan" shall mean any supplementary compensation plan or
bonus plan or arrangement, or any similar successor plan or arrangement,
applicable to the Executive, other
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than the 1996 Stock Incentive Plan and the 1996 Broad-Based Employee Stock Plan.
(D) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination for Good
Reason by the Executive pursuant to Section 7.01 hereof) after a written demand
for substantial performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For purposes of
clauses (i) and (ii) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the Company.
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(E) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Metromail (not including in the securities
beneficially owned by such Person any securities acquired directly from
Metromail or its affiliates) representing 50% or more of the combined
voting power of Metromail's then outstanding securities; or
(II) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has entered into
an agreement with Metromail to effect a transaction described in clause
(I), (III) or (IV) of this paragraph) whose election by the Board or
nomination for election by Metromail's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved (a "Continuing
Director"), cease for any reason to constitute a majority thereof; or
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(III) the stockholders of Metromail approve a merger or
consolidation of Metromail with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of
Metromail outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit
plan of the Company, at least 50% of the combined voting power of the
voting securities of Metromail or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of Metromail (or
similar transaction) in which no Person acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or
(IV) the stockholders of Metromail approve a plan of complete
liquidation of Metromail or an agreement for the sale or disposition by
Metromail of all or substantially all Metromail's assets.
The foregoing to the contrary notwithstanding, a Change in Control
shall not be deemed to have occurred with respect to the Executive if (i) the
event first giving rise to the Potential
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Change in Control involves a publicly announced transaction or publicly
announced proposed transaction which at the time of the announcement has not
been previously approved by the Board and (ii) the Executive is "part of a
purchasing group" proposing the transaction. A Change in Control shall also not
be deemed to have occurred with respect to the Executive if the Executive is
part of a purchasing group which consummates the Change in Control transaction.
The Executive shall be deemed "part of a purchasing group" for purposes of the
two preceding sentences if the Executive is an equity participant or has agreed
to become an equity participant in the purchasing company or group (except for
(i) passive ownership of less than 5% of the stock of the purchasing company or
(ii) ownership of equity participation in the purchasing company or group which
is otherwise not deemed to be significant, as determined prior to the Change in
Control by a majority of the nonemployee Continuing Directors).
(F) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(G) "Company" shall mean Metromail and its Subsidiaries.
(H) "Date of Termination" shall have the meaning stated in Section
7.02 hereof.
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(I) "Disability" shall be deemed the reason for the termination by
the Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
(J) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(K) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
(L) "Executive" shall mean the individual named in the first
paragraph of this Agreement.
(M) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI), (VII), or (VIII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
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(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as a senior officer of the Company or a substantial
adverse alteration in the nature or status of the Executive's responsibilities
from those in effect immediately prior to the Change in Control;
(II) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased from time
to time;
(III) the Company's requiring that the Executive's principal
place of business be at an office located more than 25 miles from the site of
the Executive's principal place of business immediately prior to the Change in
Control except for required travel on the Company's business to an extent
substantially consistent with the Executive's present business travel
obligations;
(IV) the failure by the Company, without the Executive's consent,
to pay to the Executive any portion of the Executive's current compensation, or
to pay to the Executive any portion of an installment of deferred compensation
under any deferred compensation program of the Company, within seven (7) days of
the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive
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participates immediately prior to the Change in Control which is material to the
Executive's total compensation, including but not limited to the Stock Plans, or
any substitute plans adopted prior to the Change in Control, unless an equitable
arrangement (embodied in an ongoing substitute or alternative plan) has been
made with respect to such plan, or the failure by the Company to continue the
Executive's participation therein (or in such substitute or alternative plan) on
a basis not materially less favorable, both in terms of the amount of benefits
provided and the level of the Executive's participation relative to other
participants, as existed at the time of the Change in Control;
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the Executive
under any of the Company's pension, life insurance, medical, health and
accident, or disability plans in which the Executive was participating at the
time of the Change in Control, the taking of any action by the Company which
would directly or indirectly materially reduce any of such benefits or deprive
the Executive of any material fringe benefit enjoyed by the Executive at the
time of the Change in Control, or the failure by the Company to provide the
Executive with the number of paid vacation days
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to which the Executive is entitled on the basis of years of service with the
Company in accordance with the Company's normal vacation policy in effect at the
time of the Change in Control; or
(VII) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9.01 hereof; for purposes of this Agreement, no such
purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(N) "Gross-Up Payment" shall have the meaning given in Section 6.02
hereof.
(O) "Metromail" shall mean Metromail Corporation and any successor to
its business or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise (except in determining, under Section 15(F)
hereof, whether or not any Change in Control of Metromail has occurred in
connection with such succession).
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(P) "Normal Retirement Age" shall mean the earliest age at which the
Executive may commence Retirement and become entitled to an unreduced pension
under the Pension Plan.
(Q) "Notice of Termination" shall have the meaning stated in Section
7.01 hereof.
(R) "Pension Plan" shall mean the Metromail Corporation Pension Plan.
(S) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
provided, however, that a Person shall not include (i) Metromail or any of its
Subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of Metromail in substantially
the same proportions as their ownership of stock of Metromail.
(T) "Planned Compensation" shall mean the annual "planned
compensation" approved by the Board or an authorized committee thereof to be
paid to the Executive (or, if the Executive's "planned compensation" is not
presented for approval by the Board or an authorized committee thereof, then as
otherwise established by Metromail or one of its Subsidiaries) with respect to
the year in which the Date of Termination occurs,
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or with respect to either of the previous two (2) calendar years, whichever is
highest, such "planned compensation" being a gross amount comprised of base
salary plus any bonus payable to the Executive under any Bonus Plan for the
calendar year in question, assuming achievement of the maximum target level for
the period with respect to which such bonus was paid.
(U) a "Potential Change in Control" shall be deemed to have occurred
if the conditions set forth in any one of the following paragraphs shall have
been satisfied:
(I) Metromail enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(II) Metromail or any Person publicly announces an intention to
take or to consider taking actions which, if consummated, would constitute a
Change in Control;
(III) any Person who is or becomes the Beneficial Owner, directly
or indirectly, of securities of Metromail representing at least 9-1/2% or more
of the combined voting power of Metromail's then outstanding securities
increases such Person's beneficial ownership of such securities by 5% or more
over the percentage so owned by such Person on the date hereof; or
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(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(V) "Retirement" shall be deemed the reason for the termination by the
Company or the Executive of the Executive's employment if such employment is
terminated in accordance with the Company's retirement policy, not including
early retirement, generally applicable to its salaried employees, as in effect
immediately prior to the Change in Control, or in accordance with any retirement
arrangement established with the Executive's consent with respect to the
Executive.
(W) "Severance Payments" shall mean those payments described in
Section 6.01 hereof.
(X) "Stock Plans" shall mean the Company's 1996 Stock Incentive Plan,
1996 Broad-Based Employee Stock Plan and any other stock compensation plan
applicable to the Executive, or any similar successor plan or arrangement.
(Y) "Subsidiary" shall mean any corporation, partnership or other
entity, at least a majority of the outstanding voting shares or controlling
interest of which is at the time directly or indirectly owned or controlled
(either alone or through Subsidiaries or together with Subsidiaries) by
Metromail or another Subsidiary.
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(Z) "Total Payments" shall mean those payments described in Section
6.02 hereof.
(AA) "Window Period" shall mean the 90-day period commencing one year
after the date of a Change in Control.
METROMAIL CORPORATION
By /s/ Susan L. Henricks
-----------------------------------------------
Susan L. Henricks
President and Chief Executive Officer
and
By /s/ Ronald G. Eidell
-----------------------------------------------
Ronald G. Eidell
Senior Vice President and Chief
Financial Officer
/s/ Barton L. Faber
-----------------------------------------------
Barton L. Faber
Executive
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Exhibit 10.12
AGREEMENT
---------
THIS AGREEMENT dated as of January 30, 1997, is made by and between
Metromail Corporation, a Delaware corporation ("Metromail"; Metromail and its
Subsidiaries being hereafter referred to as the "Company"), and Susan L.
Henricks (the "Executive").
WHEREAS the Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel; and
WHEREAS the Board of Directors of Metromail (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
Change in Control (as defined in the last Section hereof) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
<PAGE>
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definition of capitalized terms used in this
Agreement is provided in the last Section hereof.
2. Term of Agreement. (a) This Agreement shall commence on the date
hereof and shall continue until terminated by the Company as provided in
paragraph (b) of this Section 2; provided, however, that this Agreement shall
terminate in any event upon the first to occur of (i) the Executive's death and
(ii) termination of the Executive's employment with the Company prior to a
Change in Control.
(b) The Company shall have the right prior to a Change in Control, in
its sole discretion, pursuant to action by the Board, to approve the termination
of this Agreement, which termination shall not become effective until the date
fixed by the Board for such termination, which date shall be at least 120 days
after notice thereof is given by the Company to the Executive in accordance with
Section 10 hereof; provided, however, that no such action shall be taken by the
Board during any period of time when the Board has knowledge that any Person has
taken steps reasonably calculated to effect a Change in Control until, in the
opinion of the Board, such Person has
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abandoned or terminated its efforts to effect a Change in Control; and provided
further, that in no event shall this Agreement be terminated in the event of a
Change in Control.
3. Company's Covenants Summarized. In order to induce the Executive
to remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein in the event the Executive's
employment with the Company is terminated following a Change in Control and
during the term of this Agreement. No amount or benefit shall be payable under
this Agreement unless there shall have been (or, under the terms hereof, there
shall be deemed to have been) a termination of the Executive's employment with
the Company following a Change in Control. This Agreement shall not be
construed as creating an express or implied contract of employment and, except
as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the term of this Agreement, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
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from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason (determined by treating the Potential Change in
Control as a Change in Control in applying the definition of Good Reason), by
reason of death, Disability or Retirement, or (iv) the termination by the
Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
------------------------------------------
5.01 Following a Change in Control and during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's full salary to the
Executive at the rate in effect at the commencement of any such period, together
with all compensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement maintained by the
Company during such period, until the Executive's employment is terminated by
the Company for Disability.
5.02 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's full salary to the Executive through the Date of
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Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during such period.
5.03 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's normal post-termination compensation and benefits to
the Executive as such payments become due; provided that, in no event shall any
severance pay which might be payable to the Executive pursuant to the Company's
Separation Pay Plan be paid if the Executive is entitled to the Severance
Payments as a result of such termination. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit plans,
programs and arrangements.
6. Severance Payments.
------------------
6.01 The Company shall pay the Executive the payments described in
this Section 6.01 (the "Severance Payments") upon the termination of the
Executive's employment following a Change in Control and during the term of this
Agreement, in addition to the payments and benefits described in Section 5
hereof, unless such termination is (i) by the Company for Cause, (ii) by reason
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of death or Disability or (iii) by the Executive without Good Reason; provided,
however, that the Company shall pay the Executive the Severance Payments, in
addition to the payments and benefits described in Section 5 hereof, if the
Executive's employment is terminated by the Executive for any reason whatsoever
during the Window Period. The Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or by
the Executive with Good Reason if the Executive's employment is terminated prior
to a Change in Control without Cause at the direction of a Person who has
entered into an agreement with the Company the consummation of which will
constitute a Change in Control or if the Executive terminates his employment
with Good Reason prior to a Change in Control (determined by treating a
Potential Change in Control as a Change in Control in applying the definition of
Good Reason) if the circumstance or event which constitutes Good Reason occurs
at the direction of such Person.
(A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to the amount of three
(3) times the Executive's Planned Compensation.
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(B) In addition to the retirement benefits to which the Executive is
entitled under the Pension Plan or any successor plans thereto, the Company
shall pay the Executive a lump sum amount, in cash, equal to the actuarial
equivalent of the excess of (i) the retirement pension (determined as a straight
life annuity commencing at Normal Retirement Age) which the Executive would have
accrued under the terms of the Pension Plan (without regard to any amendment to
the Pension Plan made subsequent to a Change in Control and on or prior to the
Date of Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if the Executive
were fully vested thereunder and had accumulated (after the Date of Termination)
thirty-six (36) (or, if less, a number equal to the number of months, including
fractional parts thereof, from the Date of Termination until the Executive
reaches Normal Retirement Age) additional months of service credit thereunder at
the Executive's highest annual rate of compensation during the twelve (12)
months immediately preceding the Date of Termination, and (ii) the retirement
pension (determined as a straight life annuity commencing at Normal Retirement
Age) which the Executive had then accrued pursuant to the provisions of the
Pension Plan. For purposes of this Section 6.01(B), "actuarial equivalent"
shall be determined using the same assumptions
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utilized under the Pension Plan immediately prior to the Date of Termination.
(C) For a thirty-six (36) month period after the Date of Termination,
the Company shall arrange to provide the Executive with life, disability,
accident and health insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of Termination (without
giving effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason); provided, however, that, in
the event the date upon which the Executive attains Normal Retirement Age occurs
during such thirty-six (36) month period, the Executive shall thereafter receive
such life, disability, accident and health insurance benefits as would be
provided to him as a retiree. Benefits otherwise receivable by the Executive
pursuant to this Section 6.01(C) shall be reduced to the extent comparable
benefits are actually received by or made available to the Executive without
cost during the thirty-six (36) month period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive).
6.02 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the Total Payments will be subject to the Excise
Tax, the Company shall pay to the Executive
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an additional amount (the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Total Payments and
any federal, state and local income tax and Excise Tax upon the payment provided
for by this Section 6.02, shall be equal to the excess of the Total Payments
over the payment provided for by this Section 6.02.
(B) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any payments
or benefits received or to be received by the Executive in connection with a
Change in Control or the Executive's termination of employment (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company, any Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (the "Total Payments") shall
be treated as "parachute payments" (within the meaning of section 28OG(b) (2) of
the Code) unless, in the opinion of tax counsel selected by the Company's
independent auditors and reasonably acceptable to the Executive, such payments
or benefits (in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b) (4) (A) of the Code, and all "excess
parachute payments" (within the meaning of section 280G(b) (1) of the Code)
shall be treated as subject to the Excise Tax unless, in the opinion of such tax
counsel, such excess parachute
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payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b) (4) (B) of the Code),
or are otherwise not subject to the Excise Tax, and (ii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(C) In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of termination of
the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local
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income tax imposed on the Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income tax deduction) plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Executive's employment
(including increases in the Excise Tax resulting from any payment the existence
or amount of which could not be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by the Executive with respect
to such excess) at the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments.
6.03 The payments provided for in Section 6.01 (other than Section
6.01(C)) and 6.02 hereof shall be made not later than the fifth (5th) day
following the Date of Termination; provided, however, that, if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in
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good faith by the Company, of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section, the Company shall
provide the Executive with a written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
6.04 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive as a result of a termination which entitles
the Executive to the Severance Payments (including all such fees and expenses,
if any, incurred in disputing any such termination or in seeking in good faith
to
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obtain or enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
------------------------------------------------------
7.01 Notice of Termination. After a Change in Control and during the
term of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and, except for a termination during the Window
Period, shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of not
less than
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three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.02 Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days (except in the case of a
termination during the Window Period) nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
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7.03 Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.03), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected) of a court of competent jurisdiction; provided, however, that
the Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
7.04 Compensation During Dispute. If a purported termination occurs
following a Change in Control and during the term of this Agreement, and such
termination is disputed in accordance with Section 7.03 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the
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dispute was given, until the dispute is finally resolved in accordance with
Section 7.03 hereof. Amounts paid under this Section 7.04 are in addition to all
other amounts due under this Agreement (other than those due under Section 5.02
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section 6
or Section 7.04 hereof. Further, the amount of any payment or benefit provided
for in Section 6 (other than Section 6.01(C)) or Section 7.04 hereof shall not
be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
-----------------------------
9.01 In addition to any obligations imposed by law upon any successor
to Metromail, Metromail will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Metromail to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that
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Metromail would be required to perform it if no such succession had taken place.
Failure of Metromail to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation in the same amount and on the same
terms as the Executive would be entitled to hereunder if the Executive were to
terminate the Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.02 This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been
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duly given when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon actual receipt:
To the Company:
Metromail Corporation
360 East 22nd Street
Lombard, IL 60148
Attention: General Counsel
To the Executive:
Susan L. Henricks
---------------------------
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11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set
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forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Illinois. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
Sections 6 and 7 hereof shall survive the expiration of the term of this
Agreement.
12. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall
set forth the specific reasons for the denial and the
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specific provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Chicago, Illinois, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of the Executive's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Beneficial Owner" shall have the meaning defined in Rule 13d-3
under the Exchange Act.
(B) "Board" shall mean the Board of Directors of Metromail.
(C) "Bonus Plan" shall mean any supplementary compensation plan or
bonus plan or arrangement, or any similar successor plan or arrangement,
applicable to the Executive, other
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than the 1996 Stock Incentive Plan and the 1996 Broad-Based Employee Stock Plan.
(D) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination for Good
Reason by the Executive pursuant to Section 7.01 hereof) after a written demand
for substantial performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For purposes of
clauses (i) and (ii) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the Company.
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(E) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Metromail (not including in the securities
beneficially owned by such Person any securities acquired directly from
Metromail or its affiliates) representing 50% or more of the combined
voting power of Metromail's then outstanding securities; or
(II) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has entered into
an agreement with Metromail to effect a transaction described in clause
(I), (III) or (IV) of this paragraph) whose election by the Board or
nomination for election by Metromail's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved (a "Continuing
Director"), cease for any reason to constitute a majority thereof; or
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(III) the stockholders of Metromail approve a merger or
consolidation of Metromail with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of
Metromail outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit
plan of the Company, at least 50% of the combined voting power of the
voting securities of Metromail or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of Metromail (or
similar transaction) in which no Person acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or
(IV) the stockholders of Metromail approve a plan of complete
liquidation of Metromail or an agreement for the sale or disposition by
Metromail of all or substantially all Metromail's assets.
The foregoing to the contrary notwithstanding, a Change in Control
shall not be deemed to have occurred with respect to the Executive if (i) the
event first giving rise to the Potential
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Change in Control involves a publicly announced transaction or publicly
announced proposed transaction which at the time of the announcement has not
been previously approved by the Board and (ii) the Executive is "part of a
purchasing group" proposing the transaction. A Change in Control shall also not
be deemed to have occurred with respect to the Executive if the Executive is
part of a purchasing group which consummates the Change in Control transaction.
The Executive shall be deemed "part of a purchasing group" for purposes of the
two preceding sentences if the Executive is an equity participant or has agreed
to become an equity participant in the purchasing company or group (except for
(i) passive ownership of less than 5% of the stock of the purchasing company or
(ii) ownership of equity participation in the purchasing company or group which
is otherwise not deemed to be significant, as determined prior to the Change in
Control by a majority of the nonemployee Continuing Directors).
(F) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(G) "Company" shall mean Metromail and its Subsidiaries.
(H) "Date of Termination" shall have the meaning stated in Section
7.02 hereof.
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(I) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
(J) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(K) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
(L) "Executive" shall mean the individual named in the first paragraph
of this Agreement.
(M) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI), (VII), or (VIII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
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(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as a senior officer of the Company or a
substantial adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the Change in
Control;
(II) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased from
time to time;
(III) the Company's requiring that the Executive's principal
place of business be at an office located more than 25 miles from the site
of the Executive's principal place of business immediately prior to the
Change in Control except for required travel on the Company's business to
an extent substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company, without the Executive's consent,
to pay to the Executive any portion of the Executive's current
compensation, or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive
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participates immediately prior to the Change in Control which is material
to the Executive's total compensation, including but not limited to the
Stock Plans, or any substitute plans adopted prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Executive's participation therein
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of the Executive's participation relative to other participants, as existed
at the time of the Change in Control;
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
health and accident, or disability plans in which the Executive was
participating at the time of the Change in Control, the taking of any
action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any material fringe
benefit enjoyed by the Executive at the time of the Change in Control, or
the failure by the Company to provide the Executive with the number of paid
vacation days
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to which the Executive is entitled on the basis of years of service with
the Company in accordance with the Company's normal vacation policy in
effect at the time of the Change in Control; or
(VII) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9.01 hereof; for purposes of this Agreement, no
such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(N) "Gross-Up Payment" shall have the meaning given in Section 6.02
hereof.
(O) "Metromail" shall mean Metromail Corporation and any successor to
its business or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise (except in determining, under Section 15(F)
hereof, whether or not any Change in Control of Metromail has occurred in
connection with such succession).
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(P) "Normal Retirement Age" shall mean the earliest age at which the
Executive may commence Retirement and become entitled to an unreduced pension
under the Pension Plan.
(Q) "Notice of Termination" shall have the meaning stated in Section
7.01 hereof.
(R) "Pension Plan" shall mean the Metromail Corporation Pension Plan.
(S) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
provided, however, that a Person shall not include (i) Metromail or any of its
Subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of Metromail in substantially
the same proportions as their ownership of stock of Metromail.
(T) "Planned Compensation" shall mean the annual "planned
compensation" approved by the Board or an authorized committee thereof to be
paid to the Executive (or, if the Executive's "planned compensation" is not
presented for approval by the Board or an authorized committee thereof, then as
otherwise established by Metromail or one of its Subsidiaries) with respect to
the year in which the Date of Termination occurs,
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or with respect to either of the previous two (2) calendar years, whichever is
highest, such "planned compensation" being a gross amount comprised of base
salary plus any bonus payable to the Executive under any Bonus Plan for the
calendar year in question, assuming achievement of the maximum target level for
the period with respect to which such bonus was paid.
(U) a "Potential Change in Control" shall be deemed to have occurred
if the conditions set forth in any one of the following paragraphs shall have
been satisfied:
(I) Metromail enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(II) Metromail or any Person publicly announces an intention to
take or to consider taking actions which, if consummated, would constitute
a Change in Control;
(III) any Person who is or becomes the Beneficial Owner,
directly or indirectly, of securities of Metromail representing at least 9-
1/2% or more of the combined voting power of Metromail's then outstanding
securities increases such Person's beneficial ownership of such securities
by 5% or more over the percentage so owned by such Person on the date
hereof; or
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(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(V) "Retirement" shall be deemed the reason for the termination by the
Company or the Executive of the Executive's employment if such employment is
terminated in accordance with the Company's retirement policy, not including
early retirement, generally applicable to its salaried employees, as in effect
immediately prior to the Change in Control, or in accordance with any retirement
arrangement established with the Executive's consent with respect to the
Executive.
(W) "Severance Payments" shall mean those payments described in
Section 6.01 hereof.
(X) "Stock Plans" shall mean the Company's 1996 Stock Incentive Plan,
1996 Broad-Based Employee Stock Plan and any other stock compensation plan
applicable to the Executive, or any similar successor plan or arrangement.
(Y) "Subsidiary" shall mean any corporation, partnership or other
entity, at least a majority of the outstanding voting shares or controlling
interest of which is at the time directly or indirectly owned or controlled
(either alone or through Subsidiaries or together with Subsidiaries) by
Metromail or another Subsidiary.
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(Z) "Total Payments" shall mean those payments described in Section
6.02 hereof.
(AA) "Window Period" shall mean the 90-day period commencing one year
after the date of a Change in Control.
METROMAIL CORPORATION
By /s/ Barton L. Faber
-----------------------------------------------
Barton L. Faber
Chairman
/s/ Susan L. Henricks
-----------------------------------------------
Susan L. Henricks
Executive
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<PAGE>
Exhibit 10.13
AGREEMENT
---------
THIS AGREEMENT dated as of January 30, 1997, is made by and between
Metromail Corporation, a Delaware corporation ("Metromail"; Metromail and its
Subsidiaries being hereafter referred to as the "Company"), and Ronald G. Eidell
(the "Executive").
WHEREAS the Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel; and
WHEREAS the Board of Directors of Metromail (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
Change in Control (as defined in the last Section hereof) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
<PAGE>
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definition of capitalized terms used in this
Agreement is provided in the last Section hereof.
2. Term of Agreement. (a) This Agreement shall commence on the date
hereof and shall continue until terminated by the Company as provided in
paragraph (b) of this Section 2; provided, however, that this Agreement shall
terminate in any event upon the first to occur of (i) the Executive's death and
(ii) termination of the Executive's employment with the Company prior to a
Change in Control.
(b) The Company shall have the right prior to a Change in Control, in
its sole discretion, pursuant to action by the Board, to approve the termination
of this Agreement, which termination shall not become effective until the date
fixed by the Board for such termination, which date shall be at least 120 days
after notice thereof is given by the Company to the Executive in accordance with
Section 10 hereof; provided, however, that no such action shall be taken by the
Board during any period of time when the Board has knowledge that any Person has
taken steps reasonably calculated to effect a Change in Control until, in the
opinion of the Board, such Person has
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abandoned or terminated its efforts to effect a Change in Control; and provided
further, that in no event shall this Agreement be terminated in the event of a
Change in Control.
3. Company's Covenants Summarized. In order to induce the Executive
to remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein in the event the Executive's
employment with the Company is terminated following a Change in Control and
during the term of this Agreement. No amount or benefit shall be payable under
this Agreement unless there shall have been (or, under the terms hereof, there
shall be deemed to have been) a termination of the Executive's employment with
the Company following a Change in Control. This Agreement shall not be
construed as creating an express or implied contract of employment and, except
as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the term of this Agreement, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
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from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason (determined by treating the Potential Change in
Control as a Change in Control in applying the definition of Good Reason), by
reason of death, Disability or Retirement, or (iv) the termination by the
Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
-------------------------------------------
5.01 Following a Change in Control and during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's full salary to the
Executive at the rate in effect at the commencement of any such period, together
with all compensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement maintained by the
Company during such period, until the Executive's employment is terminated by
the Company for Disability.
5.02 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's full salary to the Executive through the Date of
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Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during such period.
5.03 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's normal post-termination compensation and benefits to
the Executive as such payments become due; provided that, in no event shall any
severance pay which might be payable to the Executive pursuant to the Company's
Separation Pay Plan be paid if the Executive is entitled to the Severance
Payments as a result of such termination. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit plans,
programs and arrangements.
6. Severance Payments.
-------------------
6.01 The Company shall pay the Executive the payments described in
this Section 6.01 (the "Severance Payments") upon the termination of the
Executive's employment following a Change in Control and during the term of this
Agreement, in addition to the payments and benefits described in Section 5
hereof, unless such termination is (i) by the Company for Cause, (ii) by reason
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of death or Disability or (iii) by the Executive without Good Reason; provided,
however, that the Company shall pay the Executive the Severance Payments, in
addition to the payments and benefits described in Section 5 hereof, if the
Executive's employment is terminated by the Executive for any reason whatsoever
during the Window Period. The Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or by
the Executive with Good Reason if the Executive's employment is terminated prior
to a Change in Control without Cause at the direction of a Person who has
entered into an agreement with the Company the consummation of which will
constitute a Change in Control or if the Executive terminates his employment
with Good Reason prior to a Change in Control (determined by treating a
Potential Change in Control as a Change in Control in applying the definition of
Good Reason) if the circumstance or event which constitutes Good Reason occurs
at the direction of such Person.
(A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to the amount of three
(3) times the Executive's Planned Compensation.
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(B) In addition to the retirement benefits to which the Executive is
entitled under the Pension Plan or any successor plans thereto, the Company
shall pay the Executive a lump sum amount, in cash, equal to the actuarial
equivalent of the excess of (i) the retirement pension (determined as a straight
life annuity commencing at Normal Retirement Age) which the Executive would have
accrued under the terms of the Pension Plan (without regard to any amendment to
the Pension Plan made subsequent to a Change in Control and on or prior to the
Date of Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if the Executive
were fully vested thereunder and had accumulated (after the Date of Termination)
thirty-six (36) (or, if less, a number equal to the number of months, including
fractional parts thereof, from the Date of Termination until the Executive
reaches Normal Retirement Age) additional months of service credit thereunder at
the Executive's highest annual rate of compensation during the twelve (12)
months immediately preceding the Date of Termination, and (ii) the retirement
pension (determined as a straight life annuity commencing at Normal Retirement
Age) which the Executive had then accrued pursuant to the provisions of the
Pension Plan. For purposes of this Section 6.01(B), "actuarial equivalent"
shall be determined using the same assumptions
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utilized under the Pension Plan immediately prior to the Date of Termination.
(C) For a thirty-six (36) month period after the Date of Termination,
the Company shall arrange to provide the Executive with life, disability,
accident and health insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of Termination (without
giving effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason); provided, however, that, in
the event the date upon which the Executive attains Normal Retirement Age occurs
during such thirty-six (36) month period, the Executive shall thereafter receive
such life, disability, accident and health insurance benefits as would be
provided to him as a retiree. Benefits otherwise receivable by the Executive
pursuant to this Section 6.01(C) shall be reduced to the extent comparable
benefits are actually received by or made available to the Executive without
cost during the thirty-six (36) month period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive).
6.02 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the Total Payments will be subject to the Excise
Tax, the Company shall pay to the Executive
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an additional amount (the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Total Payments and
any federal, state and local income tax and Excise Tax upon the payment provided
for by this Section 6.02, shall be equal to the excess of the Total Payments
over the payment provided for by this Section 6.02.
(B) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any payments
or benefits received or to be received by the Executive in connection with a
Change in Control or the Executive's termination of employment (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company, any Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (the "Total Payments") shall
be treated as "parachute payments" (within the meaning of section 28OG(b) (2) of
the Code) unless, in the opinion of tax counsel selected by the Company's
independent auditors and reasonably acceptable to the Executive, such payments
or benefits (in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b) (4) (A) of the Code, and all "excess
parachute payments" (within the meaning of section 280G(b) (1) of the Code)
shall be treated as subject to the Excise Tax unless, in the opinion of such tax
counsel, such excess parachute
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<PAGE>
payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b) (4) (B) of the Code),
or are otherwise not subject to the Excise Tax, and (ii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(C) In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of termination of
the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local
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income tax imposed on the Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income tax deduction) plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Executive's employment
(including increases in the Excise Tax resulting from any payment the existence
or amount of which could not be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by the Executive with respect
to such excess) at the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments.
6.03 The payments provided for in Section 6.01 (other than Section
6.01(C)) and 6.02 hereof shall be made not later than the fifth (5th) day
following the Date of Termination; provided, however, that, if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in
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good faith by the Company, of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section, the Company shall
provide the Executive with a written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
6.04 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive as a result of a termination which entitles
the Executive to the Severance Payments (including all such fees and expenses,
if any, incurred in disputing any such termination or in seeking in good faith
to
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obtain or enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
------------------------------------------------------
7.01 Notice of Termination. After a Change in Control and during the
term of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and, except for a termination during the Window
Period, shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of not
less than
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three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.02 Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days (except in the case of a
termination during the Window Period) nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
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7.03 Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.03), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected) of a court of competent jurisdiction; provided, however, that
the Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
7.04 Compensation During Dispute. If a purported termination occurs
following a Change in Control and during the term of this Agreement, and such
termination is disputed in accordance with Section 7.03 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the
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dispute was given, until the dispute is finally resolved in accordance with
Section 7.03 hereof. Amounts paid under this Section 7.04 are in addition to all
other amounts due under this Agreement (other than those due under Section 5.02
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section 6
or Section 7.04 hereof. Further, the amount of any payment or benefit provided
for in Section 6 (other than Section 6.01(C)) or Section 7.04 hereof shall not
be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
-----------------------------
9.01 In addition to any obligations imposed by law upon any successor
to Metromail, Metromail will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Metromail to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that
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Metromail would be required to perform it if no such succession had taken place.
Failure of Metromail to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation in the same amount and on the same
terms as the Executive would be entitled to hereunder if the Executive were to
terminate the Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.02 This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been
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duly given when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon actual receipt:
To the Company:
Metromail Corporation
360 East 22nd Street
Lombard, IL 60148
Attention: General Counsel
To the Executive:
Ronald G. Eidell
-------------------------------
-------------------------------
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set
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forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Illinois. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
Sections 6 and 7 hereof shall survive the expiration of the term of this
Agreement.
12. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall
set forth the specific reasons for the denial and the
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specific provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Chicago, Illinois, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of the Executive's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Beneficial Owner" shall have the meaning defined in Rule 13d-3
under the Exchange Act.
(B) "Board" shall mean the Board of Directors of Metromail.
(C) "Bonus Plan" shall mean any supplementary compensation plan or
bonus plan or arrangement, or any similar successor plan or arrangement,
applicable to the Executive, other
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than the 1996 Stock Incentive Plan and the 1996 Broad-Based Employee Stock Plan.
(D) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination for Good
Reason by the Executive pursuant to Section 7.01 hereof) after a written demand
for substantial performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For purposes of
clauses (i) and (ii) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the Company.
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(E) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Metromail (not including in the securities
beneficially owned by such Person any securities acquired directly from
Metromail or its affiliates) representing 50% or more of the combined
voting power of Metromail's then outstanding securities; or
(II) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has entered into
an agreement with Metromail to effect a transaction described in clause
(I), (III) or (IV) of this paragraph) whose election by the Board or
nomination for election by Metromail's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved (a "Continuing
Director"), cease for any reason to constitute a majority thereof; or
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(III) the stockholders of Metromail approve a merger or
consolidation of Metromail with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of
Metromail outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit
plan of the Company, at least 50% of the combined voting power of the
voting securities of Metromail or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of Metromail (or
similar transaction) in which no Person acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or
(IV) the stockholders of Metromail approve a plan of complete
liquidation of Metromail or an agreement for the sale or disposition by
Metromail of all or substantially all Metromail's assets.
The foregoing to the contrary notwithstanding, a Change in Control
shall not be deemed to have occurred with respect to the Executive if (i) the
event first giving rise to the Potential
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Change in Control involves a publicly announced transaction or publicly
announced proposed transaction which at the time of the announcement has not
been previously approved by the Board and (ii) the Executive is "part of a
purchasing group" proposing the transaction. A Change in Control shall also not
be deemed to have occurred with respect to the Executive if the Executive is
part of a purchasing group which consummates the Change in Control transaction.
The Executive shall be deemed "part of a purchasing group" for purposes of the
two preceding sentences if the Executive is an equity participant or has agreed
to become an equity participant in the purchasing company or group (except for
(i) passive ownership of less than 5% of the stock of the purchasing company or
(ii) ownership of equity participation in the purchasing company or group which
is otherwise not deemed to be significant, as determined prior to the Change in
Control by a majority of the nonemployee Continuing Directors).
(F) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(G) "Company" shall mean Metromail and its Subsidiaries.
(H) "Date of Termination" shall have the meaning stated in Section
7.02 hereof.
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(I) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
(J) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(K) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
(L) "Executive" shall mean the individual named in the first paragraph
of this Agreement.
(M) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI), (VII), or (VIII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
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(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as a senior officer of the Company or a
substantial adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the Change in
Control;
(II) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased from
time to time;
(III) the Company's requiring that the Executive's principal
place of business be at an office located more than 25 miles from the site
of the Executive's principal place of business immediately prior to the
Change in Control except for required travel on the Company's business to
an extent substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company, without the Executive's consent,
to pay to the Executive any portion of the Executive's current
compensation, or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive
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participates immediately prior to the Change in Control which is material
to the Executive's total compensation, including but not limited to the
Stock Plans, or any substitute plans adopted prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Executive's participation therein
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of the Executive's participation relative to other participants, as existed
at the time of the Change in Control;
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
health and accident, or disability plans in which the Executive was
participating at the time of the Change in Control, the taking of any
action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any material fringe
benefit enjoyed by the Executive at the time of the Change in Control, or
the failure by the Company to provide the Executive with the number of paid
vacation days
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to which the Executive is entitled on the basis of years of service with
the Company in accordance with the Company's normal vacation policy in
effect at the time of the Change in Control; or
(VII) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9.01 hereof; for purposes of this Agreement, no
such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(N) "Gross-Up Payment" shall have the meaning given in Section 6.02
hereof.
(O) "Metromail" shall mean Metromail Corporation and any successor to
its business or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise (except in determining, under Section 15(F)
hereof, whether or not any Change in Control of Metromail has occurred in
connection with such succession).
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<PAGE>
(P) "Normal Retirement Age" shall mean the earliest age at which the
Executive may commence Retirement and become entitled to an unreduced pension
under the Pension Plan.
(Q) "Notice of Termination" shall have the meaning stated in Section
7.01 hereof.
(R) "Pension Plan" shall mean the Metromail Corporation Pension Plan.
(S) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
provided, however, that a Person shall not include (i) Metromail or any of its
Subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of Metromail in substantially
the same proportions as their ownership of stock of Metromail.
(T) "Planned Compensation" shall mean the annual "planned
compensation" approved by the Board or an authorized committee thereof to be
paid to the Executive (or, if the Executive's "planned compensation" is not
presented for approval by the Board or an authorized committee thereof, then as
otherwise established by Metromail or one of its Subsidiaries) with respect to
the year in which the Date of Termination occurs,
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or with respect to either of the previous two (2) calendar years, whichever is
highest, such "planned compensation" being a gross amount comprised of base
salary plus any bonus payable to the Executive under any Bonus Plan for the
calendar year in question, assuming achievement of the maximum target level for
the period with respect to which such bonus was paid.
(U) a "Potential Change in Control" shall be deemed to have occurred
if the conditions set forth in any one of the following paragraphs shall have
been satisfied:
(I) Metromail enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(II) Metromail or any Person publicly announces an intention to
take or to consider taking actions which, if consummated, would constitute
a Change in Control;
(III) any Person who is or becomes the Beneficial Owner,
directly or indirectly, of securities of Metromail representing at least 9-
1/2% or more of the combined voting power of Metromail's then outstanding
securities increases such Person's beneficial ownership of such securities
by 5% or more over the percentage so owned by such Person on the date
hereof; or
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(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(V) "Retirement" shall be deemed the reason for the termination by the
Company or the Executive of the Executive's employment if such employment is
terminated in accordance with the Company's retirement policy, not including
early retirement, generally applicable to its salaried employees, as in effect
immediately prior to the Change in Control, or in accordance with any retirement
arrangement established with the Executive's consent with respect to the
Executive.
(W) "Severance Payments" shall mean those payments described in
Section 6.01 hereof.
(X) "Stock Plans" shall mean the Company's 1996 Stock Incentive Plan,
1996 Broad-Based Employee Stock Plan and any other stock compensation plan
applicable to the Executive, or any similar successor plan or arrangement.
(Y) "Subsidiary" shall mean any corporation, partnership or other
entity, at least a majority of the outstanding voting shares or controlling
interest of which is at the time directly or indirectly owned or controlled
(either alone or through Subsidiaries or together with Subsidiaries) by
Metromail or another Subsidiary.
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(Z) "Total Payments" shall mean those payments described in Section
6.02 hereof.
(AA) "Window Period" shall mean the 90-day period commencing one year
after the date of a Change in Control.
METROMAIL CORPORATION
By /s/ Barton L. Faber
-----------------------------------------------
Barton L. Faber
Chairman
/s/ Ronald G. Eidell
-----------------------------------------------
Ronald G. Eidell
Executive
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<PAGE>
Exhibit 10.14
AGREEMENT
---------
THIS AGREEMENT dated as of January 30, 1997, is made by and between
Metromail Corporation, a Delaware corporation ("Metromail"; Metromail and its
Subsidiaries being hereafter referred to as the "Company"), and Thomas J.
Quarles (the "Executive").
WHEREAS the Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel; and
WHEREAS the Board of Directors of Metromail (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
Change in Control (as defined in the last Section hereof) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
<PAGE>
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definition of capitalized terms used in this
Agreement is provided in the last Section hereof.
2. Term of Agreement. (a) This Agreement shall commence on the date
hereof and shall continue until terminated by the Company as provided in
paragraph (b) of this Section 2; provided, however, that this Agreement shall
terminate in any event upon the first to occur of (i) the Executive's death and
(ii) termination of the Executive's employment with the Company prior to a
Change in Control.
(b) The Company shall have the right prior to a Change in Control, in
its sole discretion, pursuant to action by the Board, to approve the termination
of this Agreement, which termination shall not become effective until the date
fixed by the Board for such termination, which date shall be at least 120 days
after notice thereof is given by the Company to the Executive in accordance with
Section 10 hereof; provided, however, that no such action shall be taken by the
Board during any period of time when the Board has knowledge that any Person has
taken steps reasonably calculated to effect a Change in Control until, in the
opinion of the Board, such Person has
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abandoned or terminated its efforts to effect a Change in Control; and provided
further, that in no event shall this Agreement be terminated in the event of a
Change in Control.
3. Company's Covenants Summarized. In order to induce the Executive
to remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein in the event the Executive's
employment with the Company is terminated following a Change in Control and
during the term of this Agreement. No amount or benefit shall be payable under
this Agreement unless there shall have been (or, under the terms hereof, there
shall be deemed to have been) a termination of the Executive's employment with
the Company following a Change in Control. This Agreement shall not be
construed as creating an express or implied contract of employment and, except
as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the term of this Agreement, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
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from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason (determined by treating the Potential Change in
Control as a Change in Control in applying the definition of Good Reason), by
reason of death, Disability or Retirement, or (iv) the termination by the
Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
5.01 Following a Change in Control and during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's full salary to the
Executive at the rate in effect at the commencement of any such period, together
with all compensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement maintained by the
Company during such period, until the Executive's employment is terminated by
the Company for Disability.
5.02 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's full salary to the Executive through the Date of
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Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during such period.
5.03 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's normal post-termination compensation and benefits to
the Executive as such payments become due; provided that, in no event shall any
severance pay which might be payable to the Executive pursuant to the Company's
Separation Pay Plan be paid if the Executive is entitled to the Severance
Payments as a result of such termination. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit plans,
programs and arrangements.
6. Severance Payments.
------------------
6.01 The Company shall pay the Executive the payments described in
this Section 6.01 (the "Severance Payments") upon the termination of the
Executive's employment following a Change in Control and during the term of this
Agreement, in addition to the payments and benefits described in Section 5
hereof, unless such termination is (i) by the Company for Cause, (ii) by reason
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of death or Disability or (iii) by the Executive without Good Reason; provided,
however, that the Company shall pay the Executive the Severance Payments, in
addition to the payments and benefits described in Section 5 hereof, if the
Executive's employment is terminated by the Executive for any reason whatsoever
during the Window Period. The Executive's employment shall be deemed to have
been terminated following a Change in Control by the Company without Cause or by
the Executive with Good Reason if the Executive's employment is terminated prior
to a Change in Control without Cause at the direction of a Person who has
entered into an agreement with the Company the consummation of which will
constitute a Change in Control or if the Executive terminates his employment
with Good Reason prior to a Change in Control (determined by treating a
Potential Change in Control as a Change in Control in applying the definition of
Good Reason) if the circumstance or event which constitutes Good Reason occurs
at the direction of such Person.
(A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to the amount of three
(3) times the Executive's Planned Compensation.
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(B) In addition to the retirement benefits to which the Executive is
entitled under the Pension Plan or any successor plans thereto, the Company
shall pay the Executive a lump sum amount, in cash, equal to the actuarial
equivalent of the excess of (i) the retirement pension (determined as a straight
life annuity commencing at Normal Retirement Age) which the Executive would have
accrued under the terms of the Pension Plan (without regard to any amendment to
the Pension Plan made subsequent to a Change in Control and on or prior to the
Date of Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if the Executive
were fully vested thereunder and had accumulated (after the Date of Termination)
thirty-six (36) (or, if less, a number equal to the number of months, including
fractional parts thereof, from the Date of Termination until the Executive
reaches Normal Retirement Age) additional months of service credit thereunder at
the Executive's highest annual rate of compensation during the twelve (12)
months immediately preceding the Date of Termination, and (ii) the retirement
pension (determined as a straight life annuity commencing at Normal Retirement
Age) which the Executive had then accrued pursuant to the provisions of the
Pension Plan. For purposes of this Section 6.01(B), "actuarial equivalent"
shall be determined using the same assumptions
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utilized under the Pension Plan immediately prior to the Date of Termination.
(C) For a thirty-six (36) month period after the Date of Termination,
the Company shall arrange to provide the Executive with life, disability,
accident and health insurance benefits substantially similar to those which the
Executive is receiving immediately prior to the Notice of Termination (without
giving effect to any reduction in such benefits subsequent to a Change in
Control which reduction constitutes Good Reason); provided, however, that, in
the event the date upon which the Executive attains Normal Retirement Age occurs
during such thirty-six (36) month period, the Executive shall thereafter receive
such life, disability, accident and health insurance benefits as would be
provided to him as a retiree. Benefits otherwise receivable by the Executive
pursuant to this Section 6.01(C) shall be reduced to the extent comparable
benefits are actually received by or made available to the Executive without
cost during the thirty-six (36) month period following the Executive's
termination of employment (and any such benefits actually received by the
Executive shall be reported to the Company by the Executive).
6.02 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the Total Payments will be subject to the Excise
Tax, the Company shall pay to the Executive
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an additional amount (the "Gross-Up Payment") such that the net amount retained
by the Executive, after deduction of any Excise Tax on the Total Payments and
any federal, state and local income tax and Excise Tax upon the payment provided
for by this Section 6.02, shall be equal to the excess of the Total Payments
over the payment provided for by this Section 6.02.
(B) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any payments
or benefits received or to be received by the Executive in connection with a
Change in Control or the Executive's termination of employment (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company, any Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (the "Total Payments") shall
be treated as "parachute payments" (within the meaning of section 28OG(b) (2) of
the Code) unless, in the opinion of tax counsel selected by the Company's
independent auditors and reasonably acceptable to the Executive, such payments
or benefits (in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b) (4) (A) of the Code, and all "excess
parachute payments" (within the meaning of section 280G(b) (1) of the Code)
shall be treated as subject to the Excise Tax unless, in the opinion of such tax
counsel, such excess parachute
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payments (in whole or in part) represent reasonable compensation for services
actually rendered (within the meaning of section 280G(b) (4) (B) of the Code),
or are otherwise not subject to the Excise Tax, and (ii) the value of any
noncash benefits or any deferred payment or benefit shall be determined by the
Company's independent auditors in accordance with the principles of sections
280G(d)(3) and (4) of the Code. For purposes of determining the amount of the
Gross-Up Payment, the Executive shall be deemed to pay federal income taxes at
the highest marginal rate of federal income taxation in the calendar year in
which the Gross-Up Payment is to be made and state and local income taxes at the
highest marginal rate of taxation in the state and locality of the Executive's
residence on the Date of Termination, net of the maximum reduction in federal
income taxes which could be obtained from deduction of such state and local
taxes.
(C) In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of termination of
the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local
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income tax imposed on the Gross-Up Payment being repaid by the Executive to the
extent that such repayment results in a reduction in Excise Tax and/or a
federal, state or local income tax deduction) plus interest on the amount of
such repayment at the rate provided in section 1274(b)(2)(B) of the Code. In the
event that the Excise Tax is determined to exceed the amount taken into account
hereunder at the time of the termination of the Executive's employment
(including increases in the Excise Tax resulting from any payment the existence
or amount of which could not be determined at the time of the Gross-Up Payment),
the Company shall make an additional Gross-Up Payment in respect of such excess
(plus any interest, penalties or additions payable by the Executive with respect
to such excess) at the time that the amount of such excess is finally
determined. The Executive and the Company shall each reasonably cooperate with
the other in connection with any administrative or judicial proceedings
concerning the existence or amount of liability for Excise Tax with respect to
the Total Payments.
6.03 The payments provided for in Section 6.01 (other than Section
6.01(C)) and 6.02 hereof shall be made not later than the fifth (5th) day
following the Date of Termination; provided, however, that, if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in
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good faith by the Company, of the minimum amount of such payments to which the
Executive is clearly entitled and shall pay the remainder of such payments
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code) as soon as the amount thereof can be determined but in no event later than
the thirtieth (30th) day after the Date of Termination. In the event that the
amount of the estimated payments exceeds the amount subsequently determined to
have been due, such excess shall constitute a loan by the Company to the
Executive, payable on the fifth (5th) business day after demand by the Company
(together with interest at the rate provided in section 1274(b)(2)(B) of the
Code). At the time that payments are made under this Section, the Company shall
provide the Executive with a written statement setting forth the manner in which
such payments were calculated and the basis for such calculations including,
without limitation, any opinions or other advice the Company has received from
outside counsel, auditors or consultants (and any such opinions or advice which
are in writing shall be attached to the statement).
6.04 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive as a result of a termination which entitles
the Executive to the Severance Payments (including all such fees and expenses,
if any, incurred in disputing any such termination or in seeking in good faith
to
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obtain or enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
evidence of fees and expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
------------------------------------------------------
7.01 Notice of Termination. After a Change in Control and during the
term of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and, except for a termination during the Window
Period, shall set forth in reasonable detail the facts and circumstances claimed
to provide a basis for termination of the Executive's employment under the
provision so indicated. Further, a Notice of Termination for Cause is required
to include a copy of a resolution duly adopted by the affirmative vote of not
less than
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three-quarters (3/4) of the entire membership of the Board at a meeting of the
Board which was called and held for the purpose of considering such termination
(after reasonable notice to the Executive and an opportunity for the Executive,
together with the Executive's counsel, to be heard before the Board) finding
that, in the good faith opinion of the Board, the Executive was guilty of
conduct set forth in clause (i) or (ii) of the definition of Cause herein, and
specifying the particulars thereof in detail.
7.02 Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days (except in the case of a
termination during the Window Period) nor more than sixty (60) days,
respectively, from the date such Notice of Termination is given).
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7.03 Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.03), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual written agreement of the
parties or by a final judgment, order or decree (which is not appealable or with
respect to which the time for appeal therefrom has expired and no appeal has
been perfected) of a court of competent jurisdiction; provided, however, that
the Date of Termination shall be extended by a notice of dispute only if such
notice is given in good faith and the party giving such notice pursues the
resolution of such dispute with reasonable diligence.
7.04 Compensation During Dispute. If a purported termination occurs
following a Change in Control and during the term of this Agreement, and such
termination is disputed in accordance with Section 7.03 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the
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dispute was given, until the dispute is finally resolved in accordance with
Section 7.03 hereof. Amounts paid under this Section 7.04 are in addition to all
other amounts due under this Agreement (other than those due under Section 5.02
hereof) and shall not be offset against or reduce any other amounts due under
this Agreement.
8. No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section 6
or Section 7.04 hereof. Further, the amount of any payment or benefit provided
for in Section 6 (other than Section 6.01(C)) or Section 7.04 hereof shall not
be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
-----------------------------
9.01 In addition to any obligations imposed by law upon any successor
to Metromail, Metromail will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Metromail to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that
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Metromail would be required to perform it if no such succession had taken place.
Failure of Metromail to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement and
shall entitle the Executive to compensation in the same amount and on the same
terms as the Executive would be entitled to hereunder if the Executive were to
terminate the Executive's employment for Good Reason after a Change in Control,
except that, for purposes of implementing the foregoing, the date on which any
such succession becomes effective shall be deemed the Date of Termination.
9.02 This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been
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duly given when delivered or mailed by United States registered mail, return
receipt requested, postage prepaid, addressed to the respective addresses set
forth below, or to such other address as either party may have furnished to the
other in writing in accordance herewith, except that notice of change of address
shall be effective only upon actual receipt:
To the Company:
Metromail Corporation
360 East 22nd Street
Lombard, IL 60148
Attention: General Counsel
To the Executive:
Thomas J. Quarles
-------------------------------
-------------------------------
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set
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forth in this Agreement. The validity, interpretation, construction and
performance of this Agreement shall be governed by the laws of the State of
Illinois. All references to sections of the Exchange Act or the Code shall be
deemed also to refer to any successor provisions to such sections. Any payments
provided for hereunder shall be paid net of any applicable withholding required
under federal, state or local law and any additional withholding to which the
Executive has agreed. The obligations of the Company and the Executive under
Sections 6 and 7 hereof shall survive the expiration of the term of this
Agreement.
12. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall
set forth the specific reasons for the denial and the
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specific provisions of this Agreement relied upon. The Board shall afford a
reasonable opportunity to the Executive for a review of the decision denying a
claim and shall further allow the Executive to appeal to the Board a decision of
the Board within sixty (60) days after notification by the Board that the
Executive's claim has been denied. Any further dispute or controversy arising
under or in connection with this Agreement shall be settled exclusively by
arbitration in Chicago, Illinois, in accordance with the rules of the American
Arbitration Association then in effect. Judgment may be entered on the
arbitrator's award in any court having jurisdiction; provided, however, that the
Executive shall be entitled to seek specific performance of the Executive's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Beneficial Owner" shall have the meaning defined in Rule 13d-3
under the Exchange Act.
(B) "Board" shall mean the Board of Directors of Metromail.
(C) "Bonus Plan" shall mean any supplementary compensation plan or
bonus plan or arrangement, or any similar successor plan or arrangement,
applicable to the Executive, other
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than the 1996 Stock Incentive Plan and the 1996 Broad-Based Employee Stock Plan.
(D) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company (other than any such failure resulting from the
Executive's incapacity due to physical or mental illness or any such actual or
anticipated failure after the issuance of a Notice of Termination for Good
Reason by the Executive pursuant to Section 7.01 hereof) after a written demand
for substantial performance is delivered to the Executive by the Board, which
demand specifically identifies the manner in which the Board believes that the
Executive has not substantially performed the Executive's duties, or (ii) the
willful engaging by the Executive in conduct which is demonstrably and
materially injurious to the Company, monetarily or otherwise. For purposes of
clauses (i) and (ii) of this definition, no act, or failure to act, on the
Executive's part shall be deemed "willful" unless done, or omitted to be done,
by the Executive not in good faith and without reasonable belief that the
Executive's act, or failure to act, was in the best interest of the Company.
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(E) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Metromail (not including in the securities
beneficially owned by such Person any securities acquired directly from
Metromail or its affiliates) representing 50% or more of the combined
voting power of Metromail's then outstanding securities; or
(II) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has entered into
an agreement with Metromail to effect a transaction described in clause
(I), (III) or (IV) of this paragraph) whose election by the Board or
nomination for election by Metromail's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved (a "Continuing
Director"), cease for any reason to constitute a majority thereof; or
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(III) the stockholders of Metromail approve a merger or
consolidation of Metromail with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of
Metromail outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of
any trustee or other fiduciary holding securities under an employee benefit
plan of the Company, at least 50% of the combined voting power of the
voting securities of Metromail or such surviving entity outstanding
immediately after such merger or consolidation, or (ii) a merger or
consolidation effected to implement a recapitalization of Metromail (or
similar transaction) in which no Person acquires more than 50% of the
combined voting power of the Company's then outstanding securities; or
(IV) the stockholders of Metromail approve a plan of complete
liquidation of Metromail or an agreement for the sale or disposition by
Metromail of all or substantially all Metromail's assets.
The foregoing to the contrary notwithstanding, a Change in Control
shall not be deemed to have occurred with respect to the Executive if (i) the
event first giving rise to the Potential
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Change in Control involves a publicly announced transaction or publicly
announced proposed transaction which at the time of the announcement has not
been previously approved by the Board and (ii) the Executive is "part of a
purchasing group" proposing the transaction. A Change in Control shall also not
be deemed to have occurred with respect to the Executive if the Executive is
part of a purchasing group which consummates the Change in Control transaction.
The Executive shall be deemed "part of a purchasing group" for purposes of the
two preceding sentences if the Executive is an equity participant or has agreed
to become an equity participant in the purchasing company or group (except for
(i) passive ownership of less than 5% of the stock of the purchasing company or
(ii) ownership of equity participation in the purchasing company or group which
is otherwise not deemed to be significant, as determined prior to the Change in
Control by a majority of the nonemployee Continuing Directors).
(F) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(G) "Company" shall mean Metromail and its Subsidiaries.
(H) "Date of Termination" shall have the meaning stated in Section
7.02 hereof.
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(I) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
(J) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(K) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
(L) "Executive" shall mean the individual named in the first paragraph
of this Agreement.
(M) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI), (VII), or (VIII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
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(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as a senior officer of the Company or a
substantial adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the Change in
Control;
(II) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased from
time to time;
(III) the Company's requiring that the Executive's principal
place of business be at an office located more than 25 miles from the site
of the Executive's principal place of business immediately prior to the
Change in Control except for required travel on the Company's business to
an extent substantially consistent with the Executive's present business
travel obligations;
(IV) the failure by the Company, without the Executive's consent,
to pay to the Executive any portion of the Executive's current
compensation, or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive
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participates immediately prior to the Change in Control which is material
to the Executive's total compensation, including but not limited to the
Stock Plans, or any substitute plans adopted prior to the Change in
Control, unless an equitable arrangement (embodied in an ongoing substitute
or alternative plan) has been made with respect to such plan, or the
failure by the Company to continue the Executive's participation therein
(or in such substitute or alternative plan) on a basis not materially less
favorable, both in terms of the amount of benefits provided and the level
of the Executive's participation relative to other participants, as existed
at the time of the Change in Control;
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
health and accident, or disability plans in which the Executive was
participating at the time of the Change in Control, the taking of any
action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any material fringe
benefit enjoyed by the Executive at the time of the Change in Control, or
the failure by the Company to provide the Executive with the number of paid
vacation days
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to which the Executive is entitled on the basis of years of service with
the Company in accordance with the Company's normal vacation policy in
effect at the time of the Change in Control; or
(VII) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9.01 hereof; for purposes of this Agreement, no
such purported termination shall be effective.
The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(N) "Gross-Up Payment" shall have the meaning given in Section 6.02
hereof.
(O) "Metromail" shall mean Metromail Corporation and any successor to
its business or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise (except in determining, under Section 15(F)
hereof, whether or not any Change in Control of Metromail has occurred in
connection with such succession).
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(P) "Normal Retirement Age" shall mean the earliest age at which the
Executive may commence Retirement and become entitled to an unreduced pension
under the Pension Plan.
(Q) "Notice of Termination" shall have the meaning stated in Section
7.01 hereof.
(R) "Pension Plan" shall mean the Metromail Corporation Pension Plan.
(S) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
provided, however, that a Person shall not include (i) Metromail or any of its
Subsidiaries, (ii) a trustee or other fiduciary holding securities under an
employee benefit plan of the Company, (iii) an underwriter temporarily holding
securities pursuant to an offering of such securities, or (iv) a corporation
owned, directly or indirectly, by the stockholders of Metromail in substantially
the same proportions as their ownership of stock of Metromail.
(T) "Planned Compensation" shall mean the annual "planned
compensation" approved by the Board or an authorized committee thereof to be
paid to the Executive (or, if the Executive's "planned compensation" is not
presented for approval by the Board or an authorized committee thereof, then as
otherwise established by Metromail or one of its Subsidiaries) with respect to
the year in which the Date of Termination occurs,
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or with respect to either of the previous two (2) calendar years, whichever is
highest, such "planned compensation" being a gross amount comprised of base
salary plus any bonus payable to the Executive under any Bonus Plan for the
calendar year in question, assuming achievement of the maximum target level for
the period with respect to which such bonus was paid.
(U) a "Potential Change in Control" shall be deemed to have occurred
if the conditions set forth in any one of the following paragraphs shall have
been satisfied:
(I) Metromail enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(II) Metromail or any Person publicly announces an intention to
take or to consider taking actions which, if consummated, would constitute
a Change in Control;
(III) any Person who is or becomes the Beneficial Owner,
directly or indirectly, of securities of Metromail representing at least 9-
1/2% or more of the combined voting power of Metromail's then outstanding
securities increases such Person's beneficial ownership of such securities
by 5% or more over the percentage so owned by such Person on the date
hereof; or
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(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(V) "Retirement" shall be deemed the reason for the termination by the
Company or the Executive of the Executive's employment if such employment is
terminated in accordance with the Company's retirement policy, not including
early retirement, generally applicable to its salaried employees, as in effect
immediately prior to the Change in Control, or in accordance with any retirement
arrangement established with the Executive's consent with respect to the
Executive.
(W) "Severance Payments" shall mean those payments described in
Section 6.01 hereof.
(X) "Stock Plans" shall mean the Company's 1996 Stock Incentive Plan,
1996 Broad-Based Employee Stock Plan and any other stock compensation plan
applicable to the Executive, or any similar successor plan or arrangement.
(Y) "Subsidiary" shall mean any corporation, partnership or other
entity, at least a majority of the outstanding voting shares or controlling
interest of which is at the time directly or indirectly owned or controlled
(either alone or through Subsidiaries or together with Subsidiaries) by
Metromail or another Subsidiary.
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(Z) "Total Payments" shall mean those payments described in Section
6.02 hereof.
(AA) "Window Period" shall mean the 90-day period commencing one year
after the date of a Change in Control.
METROMAIL CORPORATION
By /s/ Barton L. Faber
-----------------------------------------------
Barton L. Faber
Chairman
/s/ Thomas J. Quarles
-----------------------------------------------
Thomas J. Quarles
Executive
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Exhibit 10.15
AGREEMENT
---------
THIS AGREEMENT dated as of January 30, 1997, is made by and between
Metromail Corporation, a Delaware corporation ("Metromail"; Metromail and its
Subsidiaries being hereafter referred to as the "Company"), and Tery R. Larrew
(the "Executive").
WHEREAS the Company considers it essential to the best interests of
its stockholders to foster the continuous employment of key management
personnel; and
WHEREAS the Board of Directors of Metromail (the "Board") recognizes
that, as is the case with many publicly held corporations, the possibility of a
Change in Control (as defined in the last Section hereof) exists and that such
possibility, and the uncertainty and questions which it may raise among
management, may result in the departure or distraction of management personnel
to the detriment of the Company and its stockholders; and
WHEREAS the Board has determined that appropriate steps should be
taken to reinforce and encourage the continued attention and dedication of
members of the Company's management, including the Executive, to their assigned
duties without distraction in the face of potentially disturbing circumstances
arising from the possibility of a Change in Control;
<PAGE>
NOW THEREFORE, in consideration of the promises and the mutual
covenants herein contained, the Company and the Executive hereby agree as
follows:
1. Defined Terms. The definition of capitalized terms used in this
Agreement is provided in the last Section hereof.
2. Term of Agreement. (a) This Agreement shall commence on the date
hereof and shall continue until terminated by the Company as provided in
paragraph (b) of this Section 2; provided, however, that this Agreement shall
terminate in any event upon the first to occur of (i) the Executive's death and
(ii) termination of the Executive's employment with the Company prior to a
Change in Control.
(b) The Company shall have the right prior to a Change in Control, in
its sole discretion, pursuant to action by the Board, to approve the termination
of this Agreement, which termination shall not become effective until the date
fixed by the Board for such termination, which date shall be at least 120 days
after notice thereof is given by the Company to the Executive in accordance with
Section 10 hereof; provided, however, that no such action shall be taken by the
Board during any period of time when the Board has knowledge that any Person has
taken steps reasonably calculated to effect a Change in Control until, in the
opinion of the Board, such Person has
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abandoned or terminated its efforts to effect a Change in Control; and provided
further, that in no event shall this Agreement be terminated in the event of a
Change in Control.
3. Company's Covenants Summarized. In order to induce the Executive
to remain in the employ of the Company and in consideration of the Executive's
covenants set forth in Section 4 hereof, the Company agrees, under the
conditions described herein, to pay the Executive the Severance Payments and the
other payments and benefits described herein in the event the Executive's
employment with the Company is terminated following a Change in Control and
during the term of this Agreement. No amount or benefit shall be payable under
this Agreement unless there shall have been (or, under the terms hereof, there
shall be deemed to have been) a termination of the Executive's employment with
the Company following a Change in Control. This Agreement shall not be
construed as creating an express or implied contract of employment and, except
as otherwise agreed in writing between the Executive and the Company, the
Executive shall not have any right to be retained in the employ of the Company.
4. The Executive's Covenants. The Executive agrees that, subject to
the terms and conditions of this Agreement, in the event of a Potential Change
in Control during the term of this Agreement, the Executive will remain in the
employ of the Company until the earliest of (i) a date which is six (6) months
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from the date of such Potential Change of Control, (ii) the date of a Change in
Control, (iii) the date of termination by the Executive of the Executive's
employment for Good Reason (determined by treating the Potential Change in
Control as a Change in Control in applying the definition of Good Reason), by
reason of death, Disability or Retirement, or (iv) the termination by the
Company of the Executive's employment for any reason.
5. Compensation Other Than Severance Payments.
------------------------------------------
5.01 Following a Change in Control and during the term of this
Agreement, during any period that the Executive fails to perform the Executive's
full-time duties with the Company as a result of incapacity due to physical or
mental illness, the Company shall pay the Executive's full salary to the
Executive at the rate in effect at the commencement of any such period, together
with all compensation and benefits payable to the Executive under the terms of
any compensation or benefit plan, program or arrangement maintained by the
Company during such period, until the Executive's employment is terminated by
the Company for Disability.
5.02 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's full salary to the Executive through the Date of
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Termination at the rate in effect at the time the Notice of Termination is
given, together with all compensation and benefits payable to the Executive
through the Date of Termination under the terms of any compensation or benefit
plan, program or arrangement maintained by the Company during such period.
5.03 If the Executive's employment shall be terminated for any reason
following a Change in Control and during the term of this Agreement, the Company
shall pay the Executive's normal post-termination compensation and benefits to
the Executive as such payments become due; provided that, in no event shall any
severance pay which might be payable to the Executive pursuant to the Company's
Separation Pay Plan be paid if the Executive is entitled to the Severance
Payments as a result of such termination. Such post-termination compensation
and benefits shall be determined under, and paid in accordance with, the
Company's retirement, insurance and other compensation or benefit plans,
programs and arrangements.
6. Severance Payments.
------------------
6.01 The Company shall pay the Executive the payments described in
this Section 6.01 (the "Severance Payments") upon the termination of the
Executive's employment following a Change in Control and during the term of this
Agreement, in addition to the payments and benefits described in Section 5
hereof, unless such termination is (i) by the Company for Cause, (ii) by reason
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of death or Disability or (iii) by the Executive without Good Reason. The
Executive's employment shall be deemed to have been terminated following a
Change in Control by the Company without Cause or by the Executive with Good
Reason if the Executive's employment is terminated prior to a Change in Control
without Cause at the direction of a Person who has entered into an agreement
with the Company the consummation of which will constitute a Change in Control
or if the Executive terminates his employment with Good Reason prior to a Change
in Control (determined by treating a Potential Change in Control as a Change in
Control in applying the definition of Good Reason) if the circumstance or event
which constitutes Good Reason occurs at the direction of such Person.
(A) In lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination and in lieu of any severance
benefit otherwise payable to the Executive, the Company shall pay to the
Executive a lump sum severance payment, in cash, equal to the amount of two (2)
times the Executive's Planned Compensation.
(B) In addition to the retirement benefits to which the Executive is
entitled under the Pension Plan or any successor plans thereto, the Company
shall pay the Executive a lump sum amount, in cash, equal to the actuarial
equivalent of the excess of (i) the retirement pension (determined as a straight
life
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annuity commencing at Normal Retirement Age) which the Executive would have
accrued under the terms of the Pension Plan (without regard to any amendment to
the Pension Plan made subsequent to a Change in Control and on or prior to the
Date of Termination, which amendment adversely affects in any manner the
computation of retirement benefits thereunder), determined as if the Executive
were fully vested thereunder and had accumulated (after the Date of Termination)
twenty-four (24) (or, if less, a number equal to the number of months, including
fractional parts thereof, from the Date of Termination until the Executive
reaches Normal Retirement Age) additional months of service credit thereunder at
the Executive's highest annual rate of compensation during the twelve (12)
months immediately preceding the Date of Termination, and (ii) the retirement
pension (determined as a straight life annuity commencing at Normal Retirement
Age) which the Executive had then accrued pursuant to the provisions of the
Pension Plan. For purposes of this Section 6.01(B), "actuarial equivalent"
shall be determined using the same assumptions utilized under the Pension Plan
immediately prior to the Date of Termination.
(C) For a twenty-four (24) month period after the Date of Termination,
the Company shall arrange to provide the Executive with life, disability,
accident and health insurance benefits substantially similar to those which the
Executive is
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receiving immediately prior to the Notice of Termination (without giving effect
to any reduction in such benefits subsequent to a Change in Control which
reduction constitutes Good Reason); provided, however, that, in the event the
date upon which the Executive attains Normal Retirement Age occurs during such
twenty-four (24) month period, the Executive shall thereafter receive such life,
disability, accident and health insurance benefits as would be provided to him
as a retiree. Benefits otherwise receivable by the Executive pursuant to this
Section 6.01(C) shall be reduced to the extent comparable benefits are actually
received by or made available to the Executive without cost during the twenty-
four (24) month period following the Executive's termination of employment (and
any such benefits actually received by the Executive shall be reported to the
Company by the Executive).
6.02 (A) Whether or not the Executive becomes entitled to the
Severance Payments, if any of the Total Payments will be subject to the Excise
Tax, the Company shall pay to the Executive an additional amount (the "Gross-Up
Payment") such that the net amount retained by the Executive, after deduction of
any Excise Tax on the Total Payments and any federal, state and local income tax
and Excise Tax upon the payment provided for by this Section 6.02, shall be
equal to the excess of the Total Payments over the payment provided for by this
Section 6.02.
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(B) For purposes of determining whether any of the Total Payments will
be subject to the Excise Tax and the amount of such Excise Tax, (i) any payments
or benefits received or to be received by the Executive in connection with a
Change in Control or the Executive's termination of employment (whether pursuant
to the terms of this Agreement or any other plan, arrangement or agreement with
the Company, any Person whose actions result in a Change in Control or any
Person affiliated with the Company or such Person) (the "Total Payments") shall
be treated as "parachute payments" (within the meaning of section 28OG(b) (2) of
the Code) unless, in the opinion of tax counsel selected by the Company's
independent auditors and reasonably acceptable to the Executive, such payments
or benefits (in whole or in part) do not constitute parachute payments,
including by reason of section 280G(b) (4) (A) of the Code, and all "excess
parachute payments" (within the meaning of section 280G(b) (1) of the Code)
shall be treated as subject to the Excise Tax unless, in the opinion of such tax
counsel, such excess parachute payments (in whole or in part) represent
reasonable compensation for services actually rendered (within the meaning of
section 280G(b) (4) (B) of the Code), or are otherwise not subject to the Excise
Tax, and (ii) the value of any noncash benefits or any deferred payment or
benefit shall be determined by the Company's independent auditors in accordance
with the principles of
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sections 280G(d)(3) and (4) of the Code. For purposes of determining the amount
of the Gross-Up Payment, the Executive shall be deemed to pay federal income
taxes at the highest marginal rate of federal income taxation in the calendar
year in which the Gross-Up Payment is to be made and state and local income
taxes at the highest marginal rate of taxation in the state and locality of the
Executive's residence on the Date of Termination, net of the maximum reduction
in federal income taxes which could be obtained from deduction of such state and
local taxes.
(C) In the event that the Excise Tax is subsequently determined to be
less than the amount taken into account hereunder at the time of termination of
the Executive's employment, the Executive shall repay to the Company, at the
time that the amount of such reduction in Excise Tax is finally determined, the
portion of the Gross-Up Payment attributable to such reduction (plus that
portion of the Gross-Up Payment attributable to the Excise Tax and federal,
state and local income tax imposed on the Gross-Up Payment being repaid by the
Executive to the extent that such repayment results in a reduction in Excise Tax
and/or a federal, state or local income tax deduction) plus interest on the
amount of such repayment at the rate provided in section 1274(b)(2)(B) of the
Code. In the event that the Excise Tax is determined to exceed the amount
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taken into account hereunder at the time of the termination of the Executive's
employment (including increases in the Excise Tax resulting from any payment the
existence or amount of which could not be determined at the time of the Gross-Up
Payment), the Company shall make an additional Gross-Up Payment in respect of
such excess (plus any interest, penalties or additions payable by the Executive
with respect to such excess) at the time that the amount of such excess is
finally determined. The Executive and the Company shall each reasonably
cooperate with the other in connection with any administrative or judicial
proceedings concerning the existence or amount of liability for Excise Tax with
respect to the Total Payments.
6.03 The payments provided for in Section 6.01 (other than Section
6.01(C)) and 6.02 hereof shall be made not later than the fifth (5th) day
following the Date of Termination; provided, however, that, if the amounts of
such payments cannot be finally determined on or before such day, the Company
shall pay to the Executive on such day an estimate, as determined in good faith
by the Company, of the minimum amount of such payments to which the Executive is
clearly entitled and shall pay the remainder of such payments (together with
interest at the rate provided in section 1274(b)(2)(B) of the Code) as soon as
the amount thereof can be determined but in no event later than the thirtieth
(30th) day after the Date of Termination. In the event
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that the amount of the estimated payments exceeds the amount subsequently
determined to have been due, such excess shall constitute a loan by the Company
to the Executive, payable on the fifth (5th) business day after demand by the
Company (together with interest at the rate provided in section 1274(b)(2)(B) of
the Code). At the time that payments are made under this Section, the Company
shall provide the Executive with a written statement setting forth the manner in
which such payments were calculated and the basis for such calculations
including, without limitation, any opinions or other advice the Company has
received from outside counsel, auditors or consultants (and any such opinions or
advice which are in writing shall be attached to the statement).
6.04 The Company also shall pay to the Executive all legal fees and
expenses incurred by the Executive as a result of a termination which entitles
the Executive to the Severance Payments (including all such fees and expenses,
if any, incurred in disputing any such termination or in seeking in good faith
to obtain or enforce any benefit or right provided by this Agreement or in
connection with any tax audit or proceeding to the extent attributable to the
application of section 4999 of the Code to any payment or benefit provided
hereunder). Such payments shall be made within five (5) business days after
delivery of the Executive's written requests for payment accompanied with such
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evidence of fees and expenses incurred as the Company reasonably may require.
7. Termination Procedures and Compensation During Dispute.
------------------------------------------------------
7.01 Notice of Termination. After a Change in Control and during the
term of this Agreement, any purported termination of the Executive's employment
(other than by reason of death) shall be communicated by written Notice of
Termination from one party hereto to the other party hereto in accordance with
Section 10 hereof. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination provision in
this Agreement relied upon and shall set forth in reasonable detail the facts
and circumstances claimed to provide a basis for termination of the Executive's
employment under the provision so indicated. Further, a Notice of Termination
for Cause is required to include a copy of a resolution duly adopted by the
affirmative vote of not less than three-quarters (3/4) of the entire membership
of the Board at a meeting of the Board which was called and held for the purpose
of considering such termination (after reasonable notice to the Executive and an
opportunity for the Executive, together with the Executive's counsel, to be
heard before the Board) finding that, in the good faith opinion of the Board,
the Executive was guilty
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of conduct set forth in clause (i) or (ii) of the definition of Cause herein,
and specifying the particulars thereof in detail.
7.02 Date of Termination. "Date of Termination," with respect to any
purported termination of the Executive's employment after a Change in Control
and during the term of this Agreement, shall mean (i) if the Executive's
employment is terminated for Disability, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have returned to the
full-time performance of the Executive's duties during such thirty (30) day
period), and (ii) if the Executive's employment is terminated for any other
reason, the date specified in the Notice of Termination (which, in the case of a
termination by the Company, shall not be less than thirty (30) days (except in
the case of a termination for Cause) and, in the case of a termination by the
Executive, shall not be less than fifteen (15) days nor more than sixty (60)
days, respectively, from the date such Notice of Termination is given).
7.03 Dispute Concerning Termination. If within fifteen (15) days
after any Notice of Termination is given, or, if later, prior to the Date of
Termination (as determined without regard to this Section 7.03), the party
receiving such Notice of Termination notifies the other party that a dispute
exists concerning the termination, the Date of Termination shall be the date on
which the dispute is finally resolved, either by mutual
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written agreement of the parties or by a final judgment, order or decree (which
is not appealable or with respect to which the time for appeal therefrom has
expired and no appeal has been perfected) of a court of competent jurisdiction;
provided, however, that the Date of Termination shall be extended by a notice of
dispute only if such notice is given in good faith and the party giving such
notice pursues the resolution of such dispute with reasonable diligence.
7.04 Compensation During Dispute. If a purported termination occurs
following a Change in Control and during the term of this Agreement, and such
termination is disputed in accordance with Section 7.03 hereof, the Company
shall continue to pay the Executive the full compensation in effect when the
notice giving rise to the dispute was given (including, but not limited to,
salary) and continue the Executive as a participant in all compensation, benefit
and insurance plans in which the Executive was participating when the notice
giving rise to the dispute was given, until the dispute is finally resolved in
accordance with Section 7.03 hereof. Amounts paid under this Section 7.04 are
in addition to all other amounts due under this Agreement (other than those due
under Section 5.02 hereof) and shall not be offset against or reduce any other
amounts due under this Agreement.
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8. No Mitigation. The Company agrees that, if the Executive's
employment by the Company is terminated during the term of this Agreement, the
Executive is not required to seek other employment or to attempt in any way to
reduce any amounts payable to the Executive by the Company pursuant to Section 6
or Section 7.04 hereof. Further, the amount of any payment or benefit provided
for in Section 6 (other than Section 6.01(C)) or Section 7.04 hereof shall not
be reduced by any compensation earned by the Executive as the result of
employment by another employer, by retirement benefits, by offset against any
amount claimed to be owed by the Executive to the Company, or otherwise.
9. Successors; Binding Agreement.
-----------------------------
9.01 In addition to any obligations imposed by law upon any successor
to Metromail, Metromail will require any successor (whether direct or indirect,
by purchase, merger, consolidation or otherwise) to all or substantially all of
the business or assets of Metromail to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that Metromail would be
required to perform it if no such succession had taken place. Failure of
Metromail to obtain such assumption and agreement prior to the effectiveness of
any such succession shall be a breach of this Agreement and shall entitle the
Executive to compensation in the same amount and on the same terms as the
Executive would be entitled to hereunder if the
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Executive were to terminate the Executive's employment for Good Reason after a
Change in Control, except that, for purposes of implementing the foregoing, the
date on which any such succession becomes effective shall be deemed the Date of
Termination.
9.02 This Agreement shall inure to the benefit of and be enforceable
by the Executive's personal or legal representatives, executors, administrators,
successors, heirs, distributees, devisees and legatees. If the Executive shall
die while any amount would still be payable to the Executive hereunder (other
than amounts which, by their terms, terminate upon the death of the Executive)
if the Executive had continued to live, all such amounts, unless otherwise
provided herein, shall be paid in accordance with the terms of this Agreement to
the executors, personal representatives or administrators of the Executive's
estate.
10. Notices. For the purpose of this Agreement, notices and all
other communications provided for in this Agreement shall be in writing and
shall be deemed to have been duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the respective addresses set forth below, or to such other address as either
party may have furnished to the other in writing in accordance herewith, except
that notice of change of address shall be effective only upon actual receipt:
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To the Company:
Metromail Corporation
360 East 22nd Street
Lombard, IL 60148
Attention: General Counsel
To the Executive:
Tery R. Larrew
-------------------------------
-------------------------------
11. Miscellaneous. No provision of this Agreement may be modified,
waived or discharged unless such waiver, modification or discharge is agreed to
in writing and signed by the Executive and such officer as may be specifically
designated by the Board. No waiver by either party hereto at any time of any
breach by the other party hereto of, or compliance with, any condition or
provision of this Agreement to be performed by such other party shall be deemed
a waiver of similar or dissimilar provisions or conditions at the same or at any
prior or subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been made by
either party which are not expressly set forth in this Agreement. The validity,
interpretation, construction and performance of this Agreement shall be governed
by the laws of the State of Illinois. All references to sections of the
Exchange Act or the Code shall be deemed also to refer to any successor
provisions to such sections. Any payments provided for hereunder shall be paid
net of any applicable withholding
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required under federal, state or local law and any additional withholding to
which the Executive has agreed. The obligations of the Company and the Executive
under Sections 6 and 7 hereof shall survive the expiration of the term of this
Agreement.
12. Validity. The invalidity or unenforceability or any provision of
this Agreement shall not affect the validity or enforceability of any other
provision of this Agreement, which shall remain in full force and effect.
13. Counterparts. This Agreement may be executed in several
counterparts, each of which shall be deemed to be an original but all of which
together will constitute one and the same instrument.
14. Settlement of Disputes; Arbitration. All claims by the Executive
for benefits under this Agreement shall be directed to and determined by the
Board and shall be in writing. Any denial by the Board of a claim for benefits
under this Agreement shall be delivered to the Executive in writing and shall
set forth the specific reasons for the denial and the specific provisions of
this Agreement relied upon. The Board shall afford a reasonable opportunity to
the Executive for a review of the decision denying a claim and shall further
allow the Executive to appeal to the Board a decision of the Board within sixty
(60) days after notification by the Board that the Executive's claim has been
denied. Any further dispute or
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controversy arising under or in connection with this Agreement shall be settled
exclusively by arbitration in Chicago, Illinois, in accordance with the rules of
the American Arbitration Association then in effect. Judgment may be entered on
the arbitrator's award in any court having jurisdiction; provided, however, that
the Executive shall be entitled to seek specific performance of the Executive's
right to be paid until the Date of Termination during the pendency of any
dispute or controversy arising under or in connection with this Agreement.
15. Definitions. For purposes of this Agreement, the following terms
shall have the meanings indicated below:
(A) "Beneficial Owner" shall have the meaning defined in Rule 13d-3
under the Exchange Act.
(B) "Board" shall mean the Board of Directors of Metromail.
(C) "Bonus Plan" shall mean any supplementary compensation plan or
bonus plan or arrangement, or any similar successor plan or arrangement,
applicable to the Executive, other than the 1996 Stock Incentive Plan and the
1996 Broad-Based Employee Stock Plan.
(D) "Cause" for termination by the Company of the Executive's
employment, after any Change in Control, shall mean (i) the willful and
continued failure by the Executive to substantially perform the Executive's
duties with the Company
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(other than any such failure resulting from the Executive's incapacity due to
physical or mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination for Good Reason by the Executive pursuant to
Section 7.01 hereof) after a written demand for substantial performance is
delivered to the Executive by the Board, which demand specifically identifies
the manner in which the Board believes that the Executive has not substantially
performed the Executive's duties, or (ii) the willful engaging by the Executive
in conduct which is demonstrably and materially injurious to the Company,
monetarily or otherwise. For purposes of clauses (i) and (ii) of this
definition, no act, or failure to act, on the Executive's part shall be deemed
"willful" unless done, or omitted to be done, by the Executive not in good faith
and without reasonable belief that the Executive's act, or failure to act, was
in the best interest of the Company.
(E) A "Change in Control" shall be deemed to have occurred if the
conditions set forth in any one of the following paragraphs shall have been
satisfied:
(I) any Person is or becomes the Beneficial Owner, directly or
indirectly, of securities of Metromail (not including in the securities
beneficially owned by such Person any securities acquired directly from
Metromail or
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its affiliates) representing 50% or more of the combined voting
power of Metromail's then outstanding securities; or
(II) during any period of two (2) consecutive years (not
including any period prior to the execution of this Agreement), individuals
who at the beginning of such period constitute the Board and any new
director (other than a director designated by a Person who has entered into
an agreement with Metromail to effect a transaction described in clause
(I), (III) or (IV) of this paragraph) whose election by the Board or
nomination for election by Metromail's stockholders was approved by a vote
of at least two-thirds (2/3) of the directors then still in office who
either were directors at the beginning of the period or whose election or
nomination for election was previously so approved (a "Continuing
Director"), cease for any reason to constitute a majority thereof; or
(III) the stockholders of Metromail approve a merger or
consolidation of Metromail with any other corporation, other than (i) a
merger or consolidation which would result in the voting securities of
Metromail outstanding immediately prior thereto continuing to represent
(either by remaining outstanding or by being converted into voting
securities of the surviving entity), in combination with the ownership of
any trustee or other
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fiduciary holding securities under an employee benefit plan of the Company,
at least 50% of the combined voting power of the voting securities of
Metromail or such surviving entity outstanding immediately after such
merger or consolidation, or (ii) a merger or consolidation effected to
implement a recapitalization of Metromail (or similar transaction) in which
no Person acquires more than 50% of the combined voting power of the
Company's then outstanding securities; or
(IV) the stockholders of Metromail approve a plan of complete
liquidation of Metromail or an agreement for the sale or disposition by
Metromail of all or substantially all Metromail's assets.
The foregoing to the contrary notwithstanding, a Change in Control
shall not be deemed to have occurred with respect to the Executive if (i) the
event first giving rise to the Potential Change in Control involves a publicly
announced transaction or publicly announced proposed transaction which at the
time of the announcement has not been previously approved by the Board and (ii)
the Executive is "part of a purchasing group" proposing the transaction. A
Change in Control shall also not be deemed to have occurred with respect to the
Executive if the Executive is part of a purchasing group which consummates the
Change in Control transaction. The Executive shall be deemed "part of a
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purchasing group" for purposes of the two preceding sentences if the Executive
is an equity participant or has agreed to become an equity participant in the
purchasing company or group (except for (i) passive ownership of less than 5% of
the stock of the purchasing company or (ii) ownership of equity participation in
the purchasing company or group which is otherwise not deemed to be significant,
as determined prior to the Change in Control by a majority of the nonemployee
Continuing Directors).
(F) "Code" shall mean the Internal Revenue Code of 1986, as amended
from time to time.
(G) "Company" shall mean Metromail and its Subsidiaries.
(H) "Date of Termination" shall have the meaning stated in Section
7.02 hereof.
(I) "Disability" shall be deemed the reason for the termination by the
Company of the Executive's employment, if, as a result of the Executive's
incapacity due to physical or mental illness, the Executive shall have been
absent from the full-time performance of the Executive's duties with the Company
for a period of six (6) consecutive months, the Company shall have given the
Executive a Notice of Termination for Disability, and, within thirty (30) days
after such Notice of Termination is given, the Executive shall not have returned
to the full-time performance of the Executive's duties.
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(J) "Exchange Act" shall mean the Securities Exchange Act of 1934, as
amended from time to time.
(K) "Excise Tax" shall mean any excise tax imposed under section 4999
of the Code.
(L) "Executive" shall mean the individual named in the first paragraph
of this Agreement.
(M) "Good Reason" for termination by the Executive of the Executive's
employment shall mean the occurrence (without the Executive's express written
consent) of any one of the following acts by the Company, or failures by the
Company to act, unless, in the case of any act or failure to act described in
paragraph (I), (V), (VI), (VII), or (VIII) below, such act or failure to act is
corrected prior to the Date of Termination specified in the Notice of
Termination given in respect thereof:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as a senior officer of the Company or a
substantial adverse alteration in the nature or status of the Executive's
responsibilities from those in effect immediately prior to the Change in
Control;
(II) a reduction by the Company in the Executive's annual base
salary as in effect on the date hereof or as the same may be increased from
time to time;
(III) the Company's requiring that the Executive's principal
place of business be at an office
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located more than 25 miles from the site of the Executive's principal place
of business immediately prior to the Change in Control except for required
travel on the Company's business to an extent substantially consistent with
the Executive's present business travel obligations;
(IV) the failure by the Company, without the Executive's consent,
to pay to the Executive any portion of the Executive's current
compensation, or to pay to the Executive any portion of an installment of
deferred compensation under any deferred compensation program of the
Company, within seven (7) days of the date such compensation is due;
(V) the failure by the Company to continue in effect any
compensation plan in which the Executive participates immediately prior to
the Change in Control which is material to the Executive's total
compensation, including but not limited to the Stock Plans, or any
substitute plans adopted prior to the Change in Control, unless an
equitable arrangement (embodied in an ongoing substitute or alternative
plan) has been made with respect to such plan, or the failure by the
Company to continue the Executive's participation therein (or in such
substitute or alternative plan) on a basis not materially less favorable,
both in terms of the amount of benefits provided and the
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level of the Executive's participation relative to other participants, as
existed at the time of the Change in Control;
(VI) the failure by the Company to continue to provide the
Executive with benefits substantially similar to those enjoyed by the
Executive under any of the Company's pension, life insurance, medical,
health and accident, or disability plans in which the Executive was
participating at the time of the Change in Control, the taking of any
action by the Company which would directly or indirectly materially reduce
any of such benefits or deprive the Executive of any material fringe
benefit enjoyed by the Executive at the time of the Change in Control, or
the failure by the Company to provide the Executive with the number of paid
vacation days to which the Executive is entitled on the basis of years of
service with the Company in accordance with the Company's normal vacation
policy in effect at the time of the Change in Control; or
(VII) any purported termination of the Executive's employment
which is not effected pursuant to a Notice of Termination satisfying the
requirements of Section 9.01 hereof; for purposes of this Agreement, no
such purported termination shall be effective.
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The Executive's right to terminate the Executive's employment for Good
Reason shall not be affected by the Executive's incapacity due to physical or
mental illness. The Executive's continued employment shall not constitute
consent to, or a waiver of rights with respect to, any act or failure to act
constituting Good Reason hereunder.
(N) "Gross-Up Payment" shall have the meaning given in Section 6.02
hereof.
(O) "Metromail" shall mean Metromail Corporation and any successor to
its business or assets which assumes and agrees to perform this Agreement by
operation of law, or otherwise (except in determining, under Section 15(F)
hereof, whether or not any Change in Control of Metromail has occurred in
connection with such succession).
(P) "Normal Retirement Age" shall mean the earliest age at which the
Executive may commence Retirement and become entitled to an unreduced pension
under the Pension Plan.
(Q) "Notice of Termination" shall have the meaning stated in Section
7.01 hereof.
(R) "Pension Plan" shall mean the Metromail Corporation Pension Plan.
(S) "Person" shall have the meaning given in Section 3(a)(9) of the
Exchange Act, as modified and used in Sections 13(d) and 14(d) thereof;
provided, however, that a Person shall
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not include (i) Metromail or any of its Subsidiaries, (ii) a trustee or other
fiduciary holding securities under an employee benefit plan of the Company,
(iii) an underwriter temporarily holding securities pursuant to an offering of
such securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of Metromail in substantially the same proportions as their
ownership of stock of Metromail.
(T) "Planned Compensation" shall mean the annual "planned
compensation" approved by the Board or an authorized committee thereof to be
paid to the Executive (or, if the Executive's "planned compensation" is not
presented for approval by the Board or an authorized committee thereof, then as
otherwise established by Metromail or one of its Subsidiaries) with respect to
the year in which the Date of Termination occurs, or with respect to either of
the previous two (2) calendar years, whichever is highest, such "planned
compensation" being a gross amount comprised of base salary plus any bonus
payable to the Executive under any Bonus Plan for the calendar year in question,
assuming achievement of the maximum target level for the period with respect to
which such bonus was paid.
(U) a "Potential Change in Control" shall be deemed to have occurred
if the conditions set forth in any one of the following paragraphs shall have
been satisfied:
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(I) Metromail enters into an agreement, the consummation of which
would result in the occurrence of a Change in Control;
(II) Metromail or any Person publicly announces an intention to
take or to consider taking actions which, if consummated, would constitute
a Change in Control;
(III) any Person who is or becomes the Beneficial Owner,
directly or indirectly, of securities of Metromail representing at least 9-
1/2% or more of the combined voting power of Metromail's then outstanding
securities increases such Person's beneficial ownership of such securities
by 5% or more over the percentage so owned by such Person on the date
hereof; or
(IV) the Board adopts a resolution to the effect that, for
purposes of this Agreement, a Potential Change in Control has occurred.
(V) "Retirement" shall be deemed the reason for the termination by the
Company or the Executive of the Executive's employment if such employment is
terminated in accordance with the Company's retirement policy, not including
early retirement, generally applicable to its salaried employees, as in effect
immediately prior to the Change in Control, or in accordance with any retirement
arrangement established with the Executive's consent with respect to the
Executive.
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(W) "Severance Payments" shall mean those payments described in
Section 6.01 hereof.
(X) "Stock Plans" shall mean the Company's 1996 Stock Incentive Plan,
1996 Broad-Based Employee Stock Plan and any other stock compensation plan
applicable to the Executive, or any similar successor plan or arrangement.
(Y) "Subsidiary" shall mean any corporation, partnership or other
entity, at least a majority of the outstanding voting shares or controlling
interest of which is at the time directly or indirectly owned or controlled
(either alone or through Subsidiaries or together with Subsidiaries) by
Metromail or another Subsidiary.
(Z) "Total Payments" shall mean those payments described in Section
6.02 hereof.
METROMAIL CORPORATION
By /s/ Susan L. Henricks
-----------------------------------------------
Susan L. Henricks
President and Chief Executive Officer
/s/ Tery R. Larrew
-----------------------------------------------
Tery R. Larrew
Executive
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Exhibit 10.16
AMENDED AND RESTATED
METROMAIL CORPORATION
1996 STOCK INCENTIVE PLAN
August 27, 1996
I. GENERAL
1. Plan. To provide incentives to management and other persons through rewards
based upon the ownership or performance of the common stock of Metromail
Corporation (the "Company"), the Committee hereinafter designated, may grant
cash or bonus awards, stock options, or combinations thereof, to eligible
persons, on the terms and subject to the conditions stated in the Plan. For
purposes of the Plan, references to employment by the Company also mean
employment by a majority-owned subsidiary of the Company and employment by any
other entity designated by the Board or the Committee in which the Company has a
direct or indirect equity interest.
2. Eligibility. Officers and other key management employees of, agents of,
consultants to and advisors to, the Company, its subsidiaries, and any other
entity designated by the Board or the Committee in which the Company has a
direct or indirect equity interest, and directors of the Company who are not
employees of the Company ("Non-Employee Directors"), shall be eligible, upon
selection by the Committee, to receive cash or bonus awards or stock options,
either singly or in combination, as the Committee, in its discretion, shall
determine. Non-Employee Directors shall also be eligible to participate in the
Plan in accordance with Article IV.
3. Limitation on Shares to be Issued. Subject to adjustment as provided in
Section 5 of this Article I, 1,600,000 million shares of common stock ("common
stock") shall be available under the Plan, reduced by (i) the aggregate number
of shares of common stock which become subject to outstanding stock options
under the terms of the Metromail Corporation 1996 Broad-Based Employee Stock
Plan, and (ii) the aggregate number of shares of common stock which become
subject to outstanding bonus awards and stock options under this Plan. Shares
subject to a grant or award under either the Metromail Corporation 1996 Broad-
Based Employee Stock Plan or this Plan which for any reason are not issued or
delivered, including by reason of the expiration, termination, cancellation or
forfeiture of all or a portion of the grant or award or by reason of the
delivery or withholding of shares to pay all or a portion of the exercise price
or to satisfy tax withholding obligations, shall again be available for future
grants and awards hereunder. For the purpose of complying with Section 162(m) of
the Internal Revenue Code of 1986, as amended (the "Code"), and the rules and
regulations thereunder, the maximum number of shares of common stock with
respect to which options may be granted during any three-year period to any
person shall be 250,000, subject to adjustment as provided in Section 5 of this
Article I. The
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maximum number of shares of common stock with respect to which fixed awards in
the form of restricted stock may be granted hereunder is 200,000 in the
aggregate, subject to adjustment as provided in Section 5 of this Article I.
Shares of common stock to be issued may be authorized and unissued shares
of common stock, treasury stock or a combination thereof.
4. Administration of the Plan. The Plan shall be administered by a Committee
designated by the Board of Directors (the "Committee"). Each member of the
Committee shall be (i) an "outside director" within the meaning of Section
162(m) of the Code and (ii), a "Non-Employee Director" within the meaning of
Rule 16b-3 under the Securities Exchange Act of 1934, as amended (the "Exchange
Act"). The Committee shall, subject to the terms of the Plan, select eligible
persons for participation; determine the form of each grant and award, either as
cash, a bonus award or stock options or a combination thereof; and determine the
number of shares or units subject to the grant or award, the fair market value
of the common stock or units when necessary, the time and conditions of vesting,
exercise or settlement, and all other terms and conditions of each grant and
award, including, without limitation, the form of instrument evidencing the
grant or award. The Committee may establish rules and regulations for the
administration of the Plan, interpret the Plan, and impose, incidental to a
grant or award, conditions with respect to competitive employment or other
activities not inconsistent with the Plan. All such rules, regulations,
interpretations and conditions shall be conclusive and binding on all parties.
Each grant and award shall be evidenced by a written instrument and no grant or
award shall be valid until an agreement is executed by the Company and the
recipient thereof and, upon execution by each party and delivery of the
agreement to the Company, such grant or award shall be effective as of the
effective date set forth in the agreement.
The Committee may delegate some or all of its power and authority hereunder
to the Chairman or other executive officer of the Company as the Committee deems
appropriate; provided, however, that the Committee may not delegate its power
and authority with regard to (i) the selection for participation in the Plan of
(A) an employee who is a "covered employee" within the meaning of Section 162(m)
of the Code or who, in the Committee's judgment, is likely to be a covered
employee at any time during the period a grant or award hereunder to such
employee would be outstanding or (B) an officer or other person subject to
Section 16 of the Exchange Act or (ii) decisions concerning the timing, pricing
or amount of a grant or award to such an employee, officer or other person.
A majority of the Committee shall constitute a quorum. The acts of the
Committee shall be either (i) acts of a majority of the members of the Committee
present at any meeting at which a quorum is present or (ii) acts approved in
writing by all of the members of the Committee without a meeting.
5. Adjustments. In the event of any stock split, stock dividend,
recapitalization,
<PAGE>
reorganization, merger, consolidation, combination, exchange of shares,
liquidation, spin-off or other similar change in capitalization or event, or any
distribution to holders of common stock other than a regular cash dividend, the
number and class of securities available under the Plan, the number and class of
securities subject to each outstanding bonus award, the number and class of
securities subject to each outstanding stock option, the purchase price per
security and the number and class of securities subject to each option and
restricted stock award to be granted to Non-Employee Directors pursuant to
Article IV shall be appropriately adjusted by the Committee, such adjustments to
be made in the case of outstanding stock options without a change in the
aggregate purchase price. If any such adjustment would result in a fractional
security being (i) available under the Plan, such fractional security shall be
disregarded, or (ii) subject to an outstanding grant or award under the Plan,
the Company shall pay the holder thereof, in connection with the first vesting,
exercise or settlement of such grant or award in whole or in part occurring
after such adjustment, an amount in cash determined by multiplying (i) the
fraction of such security (rounded to the nearest hundredth) by (ii) the excess,
if any, of (A) the fair market value on the date of such vesting, exercise or
settlement over (B) the exercise price, if any, of such grant or award.
6. Effective Date and Term of Plan. The Plan shall be submitted to the sole
stockholder of the Company for approval and, if approved, shall become effective
as of the closing date of the Company's initial public offering of common stock.
The Plan shall terminate when shares of common stock are no longer available
under the Plan unless terminated prior thereto by action of the Board. No
further grants or awards shall be made under the Plan after termination, but
termination shall not affect the rights of any participant under any grants or
awards made prior to termination.
7. Amendments. The Plan may be amended or terminated by the Board in any
respect except that no amendment may be made without stockholder approval if
stockholder approval is required by applicable law, rule or regulation,
including Section 162(m) of the Code, or such amendment would increase (subject
to Section 5 of this Article I) the maximum number of shares available under the
Plan. No amendment may impair the rights of a holder of an outstanding grant or
award without the consent of such holder.
II. BONUS AWARDS
1. Form of Award. Bonus awards, whether performance awards or fixed awards,
may be made to eligible persons in the form of (i) cash, whether in an absolute
amount or as a percentage of compensation, (ii) stock units, each of which is
substantially the equivalent of a share of common stock but for the power to
vote and, subject to the Committee's discretion, the entitlement to an amount
equal to dividends or other distributions otherwise payable on a like number of
shares of common stock, (iii) shares of common stock issued to the eligible
person but forfeitable and with
<PAGE>
restrictions on transfer in any form as hereinafter provided or (iv) any
combination of the foregoing.
2. Performance Awards. Awards may be made in terms of a stated potential
maximum dollar amount, percentage of compensation or number of units or shares,
with the actual such amount, percentage or number to be determined by reference
to the level of achievement of corporate, sector, business unit, division,
individual or other specific objectives over a performance period of not less
than one nor more than ten years, as determined by the Committee. No rights or
interests of any kind shall be vested in an individual receiving a performance
award until the conclusion of the performance period and the determination of
the level of achievement specified in the award, and the time of vesting, if
any, thereafter shall be as specified in the award.
3. Fixed Awards. Awards may be made which are not contingent on the achievement
of specific objectives, but are contingent on the participant's continuing in
the Company's employ for a period specified in the award.
4. Rights with Respect to Restricted Shares. If shares of restricted common
stock are subject to an award, the participant shall have the right, unless and
until such award is forfeited or unless otherwise determined by the Committee at
the time of grant, to vote the shares and to receive dividends thereon from the
date of grant and the right to participate in any capital adjustment applicable
to all holders of common stock; provided, however, that a distribution with
respect to shares of common stock, other than a regular quarterly cash dividend,
shall be deposited with the Company and shall be subject to the same
restrictions as the shares of common stock with respect to which such
distribution was made.
During the restriction period, a certificate or certificates representing
restricted shares shall be registered in the holder's name and may bear a
legend, in addition to any legend which may be required under applicable laws,
rules or regulations, indicating that the ownership of the shares of common
stock represented by such certificate is subject to the restrictions, terms and
conditions of the Plan and the agreement relating to the restricted shares. All
such certificates shall be deposited with the Company, together with stock
powers or other instruments of assignment (including a power of attorney), each
endorsed in blank with a guarantee of signature if deemed necessary or
appropriate, which would permit transfer to the Company of all or a portion of
the shares of common stock subject to the award in the event such award is
forfeited in whole or in part. Upon termination of any applicable restriction
period, including, if applicable, the satisfaction or achievement of applicable
objectives, and subject to the Company's right to require payment of any taxes,
a certificate or certificates evidencing ownership of the requisite number of
shares of common stock shall be delivered to the holder of such award.
5. Rights with Respect to Stock Units. If stock units are credited to a
participant pursuant to an award, then, subject to the Committee's discretion,
amounts equal to
<PAGE>
dividends and other distributions otherwise payable on a like number of shares
of common stock after the crediting of the units (unless the record date for
such dividends or other distributions precedes the date of grant of such award)
shall be credited to an account for the participant and held until the award is
forfeited or paid out. Interest shall be credited on the account annually at a
rate equal to the return on five year U.S. Treasury obligations.
6. Vesting and Resultant Events. The Committee may, in its discretion, provide
for early vesting of an award in the event of the participant's death, permanent
and total disability or retirement. At the time of vesting, (i) the award, if in
units, shall be paid to the participant either in shares of common stock equal
to the number of units, in cash equal to the fair market value of such shares,
or in such combination thereof as the Committee shall determine, and the
participant's account to which dividend equivalents, other distributions and
interest have been credited shall be paid in cash, (ii) the award, if a cash
bonus award, shall be paid to the participant either in cash, or in shares of
common stock with a then fair market value equal to the amount of such award, or
in such combination thereof as the Committee shall determine and (iii) shares of
restricted common stock issued pursuant to an award shall be released from the
restrictions.
III. STOCK OPTIONS
1. Grants of Options. Options to purchase shares of common stock may be
granted to such eligible persons as may be selected by the Committee. These
options may, but need not, constitute "incentive stock options" under Section
422 of the Code or any other form of option under the Code. An incentive stock
option may not be granted to any person who is not an employee of the Company or
any subsidiary (as defined in Section 424 of the Code). To the extent that the
aggregate fair market value (determined as of the date of grant) of shares of
common stock with respect to which options designated as incentive stock options
are exercisable for the first time by a participant during any calendar year
(under the Plan or any other plan of the Company, or any parent or subsidiary)
exceeds the amount (currently $100,000) established by the Code, such options
shall not constitute incentive stock options.
2. Number of Shares and Purchase Price. The number of shares of common stock
subject to an option and the purchase price per share of common stock
purchasable upon exercise of the option shall be determined by the Committee;
provided, however, that the purchase price per share of common stock shall not
be less than 100% of the fair market value of a share of common stock on the
date of grant of the option; provided further, that if an incentive stock option
shall be granted to any person who, on the date of grant of such option, owns
capital stock possessing more than ten percent of the total combined voting
power of all classes of capital stock of the Company (or of any parent or
subsidiary) (a "Ten Percent Holder"), the purchase price per share of common
stock shall be the price (currently 110% of fair market value) required by the
Code in order to constitute an incentive stock option.
<PAGE>
3. Exercise of Options. The period during which options granted hereunder may be
exercised shall be determined by the Committee; provided, however, that no
incentive stock option shall be exercised later than ten years after its date of
grant; provided further, that if an incentive stock option shall be granted to a
Ten Percent Holder, such option shall not be exercisable more than five years
after its date of grant. The Committee may, in its discretion, establish
performance measures which shall be satisfied or met as a condition to the grant
of an option or to the exercisability of all or a portion of an option. The
Committee shall determine whether an option shall become exercisable in
cumulative or non-cumulative installments and in part or in full at any time. An
exercisable option, or portion thereof, may be exercised only with respect to
whole shares of common stock.
An option may be exercised (i) by giving written notice to the Company
specifying the number of whole shares of common stock to be purchased and
accompanied by payment therefor in full (or arrangement made for such payment to
the Company's satisfaction) either (A) in cash, (B) in previously owned whole
shares of common stock (which the optionee has held for at least six months
prior to delivery of such shares or which the optionee purchased on the open
market and for which the optionee has good title free and clear of all liens and
encumbrances) having a fair market value, determined as of the date of exercise,
equal to the aggregate purchase price payable by reason of such exercise, (C) in
cash by a broker-dealer acceptable to the Company to whom the optionee has
submitted an irrevocable notice of exercise or (D) a combination of (A) and (B)
and (ii) by executing such documents as the Company may reasonably request. The
Committee shall have sole discretion to disapprove of an election pursuant to
any of clauses (B)-(D). Any fraction of a share of common stock which would be
required to pay such purchase price shall be disregarded and the remaining
amount due shall be paid in cash by the optionee. No certificate representing
common stock shall be delivered until the full purchase price therefor has been
paid.
4. Termination of Employment or Service. An option may be exercised during the
optionee's continued employment with the Company or during the optionee's
continued provision of services to the Company, and, unless otherwise determined
by the Committee as set forth in the agreement relating to the option, for a
period not in excess of ninety days following termination of employment or the
provision of services, as the case may be, and only within the original term of
the option; provided, however, that if employment of the optionee by the Company
or the provision of services by the optionee to the Company shall have
terminated by reason of retirement or total and permanent disability, then the
option may be exercised to the extent set forth in the agreement relating to the
option for a period not in excess of five years following termination of
employment or the provision of services, but not after the expiration of the
term of the option. In the event of the death of an optionee (i) during
employment or the term in which services are being provided, (ii) within a
period not in excess of five years after termination of employment or the term
in which services are being provided by reason of retirement or total and
permanent
<PAGE>
disability or (iii) within ninety days after termination of employment or the
term in which services are being provided for any other reason, outstanding
options held by such optionee at the time of death may be exercised to the
extent set forth in the agreement relating to the option by the executor,
administrator, personal representative, beneficiary or similar persons of such
deceased optionee within ninety days of the date of death, but in each case only
within the original term of the option.
IV. PROVISIONS RELATING TO NON-EMPLOYEE DIRECTORS
1. Eligibility. Each Non-Employee Director shall be granted options to purchase
shares of common stock and fixed awards in the form of restricted stock in
accordance with this Article IV. Options granted under this Article IV shall not
constitute incentive stock options.
2. Grants of Stock Options. Each Non-Employee Director shall be granted options
to purchase shares of common stock as follows:
(a) Non-Elective Grants. On September 1 of each year beginning September 1,
1996 (or, if a person is not a Non-Employee Director on the applicable September
1, on the date on which such person is first elected or begins to serve as a
Non-Employee Director other than by reason of termination of employment), each
person who is a Non-Employee Director on such date shall be granted an option to
purchase 5,000 shares of common stock (which amount shall be pro-rated if such
Non-Employee Director is first elected or begins to serve as a Non-Employee
Director on a date other than the applicable September 1) at a purchase price
per share equal to the fair market value of a share of common stock on the date
of grant of such option.
(b) Elective Grants. On September 1 of each year beginning September 1,
1996, options to purchase 2,500 shares of common stock shall be granted to each
Non-Employee Director who, prior to such date, files with the Company a written
election to receive options to purchase common stock in lieu of all of such Non-
Employee Director's annual cash retainer fee payable by the Company to such Non-
Employee Director for services as a Director of the Company for the one-year
period beginning on such September 1 ("Annual Retainer"). In the event a person
is not a Non-Employee Director on the applicable September 1, if such person
files with the Company, not later than the fifth business day after which such
person is first elected or begins to serve as a Non-Employee Director other than
by reason of termination of employment, a written election to receive options to
purchase common stock in lieu of all of such Non-Employee Director's Annual
Retainer payable with respect to the remainder of such one-year period, options
to purchase that number of shares of common stock set forth in the following
sentence shall be granted to such Non-Employee Director on the tenth business
day after the date such written election is filed with the Company. The number
of shares (rounded to the nearest whole
<PAGE>
number) of common stock underlying such Non-Employee Director's options granted
pursuant to the preceding sentence shall be determined by multiplying 2,500 by a
fraction, the numerator of which is the number of days from and including the
date on which such person was first elected or began to serve as a Non-Employee
Director to and including the following August 31, and the denominator of which
is 365. An election pursuant to this subsection 2(b) shall be irrrevocable on
and after the second business day prior to the date of grant of the options.
The purchase price per share of common stock subject to an option granted
pursuant to this subsection 2(b) shall equal the fair market value of a share of
common stock on the date of grant of such option.
(c) Option Period and Exercisability. Except as otherwise provided in
Section 3 of Article V of the Plan, each option granted under this Article IV
shall not be exercisable during the first year following its date of grant.
Thereafter, such option shall be fully exercisable on and after the first
anniversary of its date of grant. Each option granted under this Article IV
shall expire ten years after its date of grant. An exercisable option, or
portion thereof, may be exercised in whole or in part only with respect to whole
shares of common stock. Options granted under this Article IV shall be
exercisable in accordance with the second paragraph of Section 3 of Article III.
(d) Termination of Directorship. An option granted under this Article IV
may be exercised during the optionee's continued service as a Director of the
Company and for a period not in excess of one year following termination of
service as a Director of the Company other than by reason of death and only
within the original term of the option; provided, however, that if the
optionee's service as a Director of the Company shall have terminated (i) after
at least three but less than six years of service as a Director of the Company,
such option may be exercised for a period not in excess of two years following
such termination of service, (ii) after at least six but less than nine years of
service as a Director of the Company, such option may be exercised for a period
not in excess of three years following such termination of service, and (iii)
after nine or more years of service as a Director of the Company, such option
may be exercised for a period not in excess of four years following such
termination of service, but in each case only within the original term of the
option. In the event of the death of an optionee (i) while such optionee is
serving as a Director of the Company or (ii) after termination of service as a
Director of the Company and during the period in which an option is exercisable
as determined in accordance with the preceding sentence, any outstanding option
granted under this Article IV which is exercisable on the date of the optionee's
death may be exercised to the extent then exercisable by the executor,
administrator, personal representative, beneficiary or similar person of such
deceased optionee within 90 days of the date of death, but in each case only
within the original term of the option.
3. Grants of Restricted Stock Awards. Each Non-Employee Director shall be
granted fixed awards in the form of restricted stock as follows:
<PAGE>
(a) Time of Grant. On September 1, 1996 (or, if a person is not a Non-
Employee Director on September 1, 1996 on the date on which such person is first
elected or begins to serve as a Non-Employee Director other than by reason of
termination of employment), each person who is a Non-Employee Director on such
date shall be granted a restricted stock award of 1,000 shares of common stock.
(b) Vesting and Forfeiture. Except as otherwise provided in Section 3 of
Article V of the Plan, the shares of common stock covered by a restricted stock
award granted under this Article IV shall vest on the date of the third
anniversary of the date of grant of such award, provided, however, the shares of
common stock covered by such award shall be forfeited to and become the property
of the Company if prior to vesting the holder of such award shall terminate
service as a Director of the Company.
(c) Restrictions on Transfers. Until the shares of common stock covered by
a restricted stock award under this Article IV have become vested and until the
date which is 30 days after the termination of service as a Director of the
Company of the holder of such award, neither such award nor any shares of common
stock covered by such award nor any rights thereunder (i) may be transferred or
assigned by such holder other than by will or the laws of descent and
distribution or (ii) shall be subject to execution, attachment or other process,
and no person shall be entitled to exercise any rights of such holder under such
award by virtue of any attempted execution, attachment or other process. Any
transfer other than by will or the laws of descent and distribution or any
attempted assignment, pledge or hypothocation, whether or not by operation of
laws, shall be void. Notwithstanding the foregoing, in the event the shares of
common stock covered by a restricted stock award under this Article IV vest as a
result of a Change of Control, the Company shall, no later than five business
days after the Acceleration Date, deliver to the holder one or more certificates
for the vested shares, free of any restrictive legends, and destroy any stock
powers relating to the vested shares. The Company shall be entitled to hold the
certificate or certificates for shares of common stock covered by a restricted
stock award under this Article IV until the restrictions on transfer set forth
in this Article IV shall have lapsed.
(d) Rights as a Shareholder. The holder of a restricted stock award under
this Article IV shall have the right to vote the shares of common stock covered
by such award and to receive dividends, if any, thereon, unless and until such
shares are forfeited pursuant to subparagraph 3(b).
V. OTHER
1. Non-Transferability of Options. No option shall be transferable other than
(i) by will, the laws of descent and distribution or pursuant to beneficiary
designation procedures approved by the Company or (ii) as otherwise set forth in
the agreement
<PAGE>
relating to such option. Each option may be exercised during the participant's
lifetime only by the participant or the participant's guardian, legal
representative or similar person. Except as permitted by the second preceding
sentence, no option may be sold, transferred, assigned, pledged, hypothecated,
encumbered or otherwise disposed of (whether by operation of law or otherwise)
or be subject to execution, attachment or similar process. Upon any attempt to
so sell, transfer, assign, pledge, hypothecate, encumber or otherwise dispose of
any option, such award and all rights thereunder shall immediately become null
and void.
2. Tax Withholding. The Company shall have the right to require, prior
to the issuance or delivery of any shares of common stock or the payment of any
cash pursuant to a grant or award hereunder, payment by the holder thereof of
any Federal, state, local or other taxes which may be required to be withheld or
paid in connection therewith. An agreement may provide that (i) the Company
shall withhold whole shares of common stock which would otherwise be delivered
to a holder, having an aggregate fair market value determined as of the date the
obligation to withhold or pay taxes arises in connection therewith (the "Tax
Date"), or withhold an amount of cash which would otherwise be payable to a
holder, in the amount necessary to satisfy any such obligation or (ii) the
holder may satisfy any such obligation by any of the following means: (A) a cash
payment to the Company, (B) delivery to the Company of previously owned whole
shares of common stock (which the holder has held for at least six months prior
to the delivery of such shares or which the holder purchased on the open market
and for which the holder has good title, free and clear of all liens and
encumbrances) having an aggregate fair market value determined as of the Tax
Date, (C) authorizing the Company to withhold whole shares of common stock which
would otherwise be delivered having an aggregate fair market value determined as
of the Tax Date or withhold an amount of cash which would otherwise be payable
to a holder, (D) in the case of the exercise of an option, a cash payment by a
broker-dealer acceptable to the Company to whom the optionee has submitted an
irrevocable notice of exercise or (E) any combination of (A), (B) and (C);
provided, however, that the Committee shall have sole discretion to disapprove
of an election pursuant to any of clauses (B)-(E). An agreement relating to a
grant or award hereunder may provide for shares of common stock to be delivered
or withheld having an aggregate fair market value in excess of the minimum
amount required to be withheld, but not in excess of the amount determined by
applying the holder's maximum marginal tax rates. Any fraction of a share of
common stock which would be required to satisfy such an obligation shall be
disregarded and the remaining amount due shall be paid in cash by the holder.
3. Acceleration Upon Change in Control. If while any performance award or fixed
award granted under Article II or IV or any stock option granted under Article
III or IV is outstanding --
(a) any "person," as such term is defined in Section 3(a)(9) of the
Exchange Act, as modified and used in Section 13(d) and 14(d) thereof (but not
including (i) the Company or any of its subsidiaries, (ii) a trustee or other
fiduciary holding securities
<PAGE>
under an employee benefit plan of the Company or any of its subsidiaries, (iii)
an underwriter temporarily holding securities pursuant to an offering of such
securities, or (iv) a corporation owned, directly or indirectly, by the
stockholders of the Company in substantially the same proportions as their
ownership of stock of the Company) (hereinafter a "Person") is or becomes the
beneficial owner, as defined in Rule 13d-3 of the Exchange Act, directly or
indirectly, of securities of the Company (not including in the securities
beneficially owned by such Person any securities acquired directly from the
Company or its affiliates, excluding an acquisition resulting from the exercise
of a conversion or exchange privilege in respect of outstanding convertible or
exchangeable securities) representing 50% or more of the combined voting power
of the Company's then outstanding securities; or
(b) during any period of twenty-four (24) consecutive months (not including
any period prior to the effective date of the Plan), individuals who at the
beginning of such period constitute the Board and any new director (other than a
director designated by a Person who has entered into any agreement with the
Company to effect a transaction described in Clause (a), (c) or (d) of this
Section) whose election by the Board or nomination for election by the Company's
stockholders was approved by a vote of at least two-thirds (2/3) of the
directors then still in office who either were directors at the beginning of the
period or whose election or nomination for election was previously so approved,
cease for any reason to constitute a majority thereof; or
(c) the stockholders of the Company approve a merger or consolidation of
the Company with any other corporation, other than (i) a merger or consolidation
which would result in the voting securities of the Company outstanding
immediately prior thereto continuing to represent (either by remaining
outstanding or by being converted into voting securities of the surviving
entity), in combination with the ownership of any trustee or other fiduciary
holding securities under an employee benefit plan of the Company, at least 50%
of the combined voting power of the voting securities of the Company or such
surviving entity outstanding immediately after such merger or consolidation, or
(ii) a merger or consolidation effected to implement a recapitalization of the
Company (or similar transaction) in which no Person acquires more than 50% of
the combined voting power of the Company's then outstanding securities; or
(d) the stockholders of the Company approve a plan of complete liquidation
of the Company or an agreement for the sale or disposition by the Company of all
or substantially all the Company's assets, (any of such events being hereinafter
referred to as a "Change in Control"), then from and after the date on which
public announcement of the acquisition of such percentage shall have been made,
or the date on which the change in the composition of the Board set forth above
shall have occurred, or the date of any such stockholder approval of a merger,
consolidation, plan of complete liquidation or an agreement for the sale of the
Company's assets as described above occurs (the applicable date being
hereinafter referred to as the
<PAGE>
"Acceleration Date"), (i) with respect to such performance awards, the highest
level of achievement specified in the award shall be deemed met and the award
shall be immediately and fully vested, (ii) with respect to such fixed awards,
the period of continued employment or provision of services, as the case may be,
specified in the award upon which the award is contingent shall be deemed
completed and the award shall be immediately and fully vested and (iii) with
respect to such options, all such options, whether or not then exercisable in
whole or in part, shall be fully and immediately exercisable.
4. Restrictions on Shares. Each grant and award made hereunder shall be subject
to the requirement that if at any time the Company determines that the listing,
registration or qualification of the shares of common stock subject thereto upon
any securities exchange or under any law, or the consent or approval of any
governmental body, or the taking of any other action is necessary or desirable
as a condition of, or in connection with, the delivery of shares thereunder,
such shares shall not be delivered unless such listing, registration,
qualification, consent, approval or other action shall have been effected or
obtained, free of any conditions not acceptable to the Company. The Company may
require that certificates evidencing shares of common stock delivered pursuant
to any grant or award made hereunder bear a legend indicating that the sale,
transfer or other disposition thereof by the holder is prohibited except in
compliance with the Securities Act of 1933, as amended, and the rules and
regulations thereunder.
5. No Right of Participation or Employment. No person shall have any right to
participate in the Plan. Neither the Plan nor any grant or award made hereunder
shall confer upon any person any right to continued employment or engagement for
services by the Company, any subsidiary or any affiliate of the Company or
affect in any manner the right of the Company, any subsidiary or any affiliate
of the Company to terminate the employment or engagement for services of any
person at any time without liability hereunder.
6. Rights as Stockholder. No person shall have any right as a stockholder of the
Company with respect to any shares of common stock or other equity security of
the Company which is subject to a grant or award hereunder unless and until such
person becomes a stockholder of record with respect to such shares of common
stock or equity security.
7. Governing Law. The Plan, each grant and award hereunder and the related
agreement, and all determinations made and actions taken pursuant thereto, to
the extent not otherwise governed by the Code or the laws of the United States,
shall be governed by the laws of the State of Delaware and construed in
accordance therewith without giving effect to principles of conflicts of laws.
8. Approval of Plan. The Plan and all grants and awards made hereunder shall be
null and void if the adoption of the Plan is not approved by the sole
stockholder of the Company.
<PAGE>
9. Foreign Eligible Persons. Without amending this Plan, the Committee may grant
options to eligible persons who are foreign nationals on such terms and
conditions different from those specified in this Plan as may in the judgment of
the Committee be necessary or desirable to foster and promote achievement of
this Plan and, in furtherance of such purposes the Committee may make such
modifications, amendments, procedures, subplans and the like as may be necessary
or advisable to comply with provisions of laws in other countries or
jurisdictions in which the Company or its subsidiaries operates or has
employees, agents, consultants or advisors.
<PAGE>
Exhibit 10.18
METROMAIL CORPORATION
DIRECTORS' DEFERRED RETAINER PLAN
---------------------------------
1. Purpose of Plan. The purpose of this Metromail Corporation Directors'
Deferred Retainer Plan (the "Plan") is to permit members of the Board of
Directors of Metromail Corporation, a Delaware corporation, (the "Company") to
defer the receipt of the cash portion of their annual retainers until the time
set forth herein.
2. Participation. (a) Eligibility: Each person who on the first day of
any "Retainer Year" as defined below, is a member of the Board of Directors of
the Company (a "Director") shall be eligible to participate in this Plan. A
"Retainer year" shall be each twelve-month period beginning on September 1 of
each year during the term of this Plan.
(b) Elections. Each Director who is eligible to participate in this
Plan for a Retainer Year may file an election to defer the receipt of the cash
portion of the Director's annual retainer for such Retainer Year. An election to
defer hereunder shall authorize the Company to reduce the cash portion of the
Director's annual retainer by a whole percentage not in excess of 100% and shall
be made on a form provided by the Company and filed with the Secretary of the
Company not later than the day immediately preceding the first day of such
Retainer Year. An election to defer for a Retainer Year, once made, may not be
revoked or changed by the Director, and shall remain effective for each
succeeding Retainer Year unless revoked by the Director prior to the
commencement of a Retainer Year.
3. Deferred Retainer Accounts. The Company shall establish on its books a
Deferred Retainer Account in the name and on behalf of each Director who elects
to defer his or
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her retainer pursuant to paragraph 2 of this Plan. Such accounts shall be for
bookkeeping purposes only and shall not represent any interest in any asset or
assets of the Company. A Deferred Retainer Account established on behalf of a
Director shall be credited with the amount deferred pursuant to the Director's
election under this Plan as of the date on which such amounts would have been
paid but for such election.
4. Earnings on Accounts. As of the close of each calendar quarter, the
Company shall credit to each Deferred Retainer Account established on its books
pursuant to paragraph 3 of this Plan, an amount representing interest on the
balance of such Account. The amount of such interest shall be equal to the yield
on Treasury Notes with a 5-Year maturity on the first day of the Retainer Year
that includes such day, as reported in the Wall Street Journal. Notwithstanding
the foregoing, if the balance of a Director's Deferred Retainer Account becomes
payable prior to the last day of a calendar quarter, such account shall be
credited with interest at the rate described above for the period between the
last day of the immediately preceding quarter and the payment date.
5. Vesting. Amounts credited to a Key Director's Account pursuant to the
terms of this Plan shall be fully vested and not subject to forfeiture for any
reason.
6. Distributions. (a) In General. At the time a Director elects to defer
all or a portion of the Director's cash retainer pursuant to paragraph 2 of this
Plan, the Director shall designate a date as of which the balance of his or her
Deferred Retainer Account shall be paid, which date shall not be later than the
date on which such Director ceases to be a member of the Board. If a Director
shall cease to be a member of the Board on account of his or her death, the
value of the Director's Deferred Retainer Account shall be paid as soon as
practicable thereafter
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to the Director's beneficiary determined under paragraph 7 below.
Notwithstanding the foregoing, a Director may change the date on which his or
her Deferred Retainer Account is to be paid by written direction to the
Secretary of the Company prior to the beginning of the calendar year in which
such payment would otherwise be made.
(b) Alternate Distributees. Any distribution to a person who at the time
of payment is under legal disability or who is, in the judgment of the Company,
unable to care for his or her affairs because of illness or accident, may be
distributed to the spouse or any child or personal representative of such
person, or to any other individual or entity deemed by the Company to have
incurred expenses for such person. Any such distribution shall be a complete
discharge of the Company for such payment under the Plan.
(c) Effect of a Change in Control. Notwithstanding anything herein to the
contrary, immediately following a "Change of Control" as defined in the
Company's Amended and Restated Metromail Corporation 1996 Stock Incentive Plan,
each Director shall be entitled to receive a lump sum distribution equal to the
entire balance of the Director's Deferred Retainer Account as of the date of
such Change in Control.
7. Beneficiaries. Each Director for whom a Deferred Retainer Account is
maintained under this Plan shall have the right to designate a beneficiary, and
amend or revoke such designation at any time, in writing. Such designation,
amendment or revocation shall be effective upon receipt by the Secretary of the
Company. If no designated beneficiary survives the employee and the employee's
benefit is payable following the employee's death, the Board shall direct that
payment of such benefit be made to the person or persons in the first of the
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following classes of successive preference beneficiaries. The Director's: (a)
spouse, (b) descendants, per stirpes, (c) parents, (d) brother and sisters, and
(e) estate.
8. Unfunded Status. The Company shall establish a trust to set aside or
earmark an amount necessary to provide payments for the purpose of administering
assets of the Company to be used for the purpose of satisfying the obligations
of the Company under the Plan. Any such trust shall be established in such
manner so as to be a "grantor trust" of which the Company and the Employers are
the grantors, within the meaning of sections 671 et. seq. of the Internal
Revenue Code. The existence of such trust shall not relieve the Company of its
obligations under the Plan, but such obligations shall be satisfied to the
extent paid from such trust. It is the intention of the Company that the amounts
deferred hereunder be unfunded for purposes of the Code. In any event, the
Company's obligation hereunder shall constitute a general, unsecured obligation,
payable solely out of its general assets, and no Director shall have any right
to any specific assets.
9. Nonassignability. No amount deferred under this Plan shall be subject
in any manner to anticipation, alienation, sale, transfer, assignment, pledge,
encumbrance, attachment or garnishment by creditors of any employee or any
beneficiary, and any attempt to transfer or encumber the same shall be void.
10. Administration. The Plan shall be administered by the Secretary of the
Company, who shall have full power and authority to interpret, construe and
administer this Plan in accordance with the provisions herein set forth. The
Secretary's interpretation and construction hereof, and actions hereunder, or
the amount or recipient of the payment to be made here from, shall be binding
and conclusive on all persons for all purposes. In this connection, the
Secretary
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may delegate to any individual, the duty to act for the Secretary hereunder. No
officer or employee of the Company shall be liable to any person for any action
taken or omitted in connection with the interpretation and administration of
this Plan unless attributable to his or her own willful misconduct or lack of
good faith. The expenses of administering the Plan shall not be charged against
the Plan.
11. Amendment to the Plan. The Company may, in its sole discretion and
without the consent of any Director or beneficiary, amend the Plan at any time
provided, however, that no amendment shall reduce the amount to which any
Director has accrued under the Plan as in effect prior to such amendment.
12. Termination of the Plan. The Company may, in its sole discretion
without the consent of any Director or beneficiary, terminate the Plan at any
time by giving written notice thereof to each Director with a benefit under this
Plan. All amounts payable under this Plan shall be paid to the persons entitled
thereto at such time and in such manner as the Company shall determine, but not
later than payments would have been made had the Plan not been terminated.
13. Successors and Assigns. The provisions of this Plan shall bind and
inure to the benefit of the Company and its successor and assigns, as well as
each Director and his or her beneficiaries and successor.
14. Governing Law. This Plan shall be interpreted and construed according
to the laws of the State of Delaware (without regard to conflicts of law).
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Exhibit 21
SUBSIDIARIES OF METROMAIL CORPORATION
AS OF DECEMBER 31, 1996
<TABLE>
<CAPTION>
Subsidiary Jurisdiction of Incorporation
- ---------- -----------------------------
<S> <C>
Customer Insight Company Delaware
International Communication & Data plc United Kingdom
ICD Marketing Services Group Limited United Kingdom
ICD Marketing Services Limited United Kingdom
Lombard Information Resources Incorporated Delaware
</TABLE>
As of December 31, 1996, Metromail Corporation's other subsidiaries, considered
in the aggregate as a single subsidiary, would not constitute a significant
subsidiary as defined in Rule 1-02(w) of Regulation S-X.
<PAGE>
EXHIBIT 23
CONSENT OF INDEPENDENT PUBLIC ACCOUNTANTS
As independent public accountants, we hereby consent to the use of our
reports (and to all references to our Firm) included in or made part of the
Form 10-K of Metromail Corporation for the year ended December 31, 1996. We
also hereby consent to the incorporation by reference in Registration
Statement No. 333-06265 on Form S-8 of our reports dated January 21, 1997,
covering the financial statements and financial statement schedule of
Metromail Corporation and Affiliates included in the Company's Form 10-K for
the year ended December 31, 1996 (Commission file number 1-14348).
Arthur Andersen LLP
Chicago, Illinois
March 5, 1997
<TABLE> <S> <C>
<PAGE>
<ARTICLE> 5
<LEGEND> This schedule contains summary financial information extracted from
Form 10-K annual report for the year ended December 31, 1996, and is qualified
in its entirety by reference to such financial statements.
</LEGEND>
<MULTIPLIER> 1,000
<S> <C>
<PERIOD-TYPE> 12-MOS
<FISCAL-YEAR-END> DEC-31-1996
<PERIOD-START> JAN-01-1996
<PERIOD-END> DEC-31-1996
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<RECEIVABLES> 103,680
<ALLOWANCES> (4,461)
<INVENTORY> 6,722
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<PP&E> 96,014
<DEPRECIATION> (50,701)
<TOTAL-ASSETS> 443,406
<CURRENT-LIABILITIES> 52,758
<BONDS> 0
<COMMON> 224
0
0
<OTHER-SE> 360,324
<TOTAL-LIABILITY-AND-EQUITY> 443,406
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<NET-INCOME> 13,862
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<EPS-DILUTED> .62
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