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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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SCHEDULE 14D-9
SOLICITATION/RECOMMENDATION STATEMENT
PURSUANT TO SECTION 14(D)(4) OF THE
SECURITIES EXCHANGE ACT OF 1934
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METROMAIL CORPORATION
(NAME OF SUBJECT COMPANY)
METROMAIL CORPORATION
(NAME OF PERSON FILING STATEMENT)
COMMON STOCK, PAR VALUE $.01 PER SHARE
(TITLE OF CLASS OF SECURITIES)
591680 103
(CUSIP NUMBER OF CLASS OF SECURITIES)
THOMAS J. QUARLES
SENIOR VICE PRESIDENT, GENERAL COUNSEL,
CHIEF ADMINISTRATIVE OFFICER AND SECRETARY
METROMAIL CORPORATION
360 EAST 22ND STREET
LOMBARD, ILLINOIS 60148
(630) 620-3300
(NAME, ADDRESS AND TELEPHONE NUMBER OF PERSON)
AUTHORIZED TO RECEIVE NOTICE AND COMMUNICATIONS
ON BEHALF OF THE PERSON FILING STATEMENT)
WITH COPIES TO:
CARTER W. EMERSON, P.C.
KIRKLAND & ELLIS
200 EAST RANDOLPH DRIVE
CHICAGO, IL 60601
(312) 861-2000
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ITEM 1. SECURITY AND SUBJECT COMPANY
The name of the subject company is Metromail Corporation, a Delaware
corporation (the "Company" or "Metromail"). The address of the principal
executive offices of the Company is 360 East 22nd Street, Lombard, Illinois
60148. This Solicitation/Recommendation Statement on Schedule 14D-9 (this
"Statement" or this "Schedule 14D-9") relates to the Company's common stock,
par value $.01 per share (including the related Rights (as defined below)
issued pursuant to the Rights Agreement (as defined below), the "Shares").
ITEM 2. TENDER OFFER OF BIDDER
This statement relates to a tender offer by Great Universal Acquisition
Corp. ("Purchaser"), a Delaware corporation and an indirect wholly owned
subsidiary of The Great Universal Stores P.L.C., a company incorporated under
the laws of England ("Parent"), as set forth in a Tender Offer Statement on
Schedule 14D-1, dated March 16, 1998 (the "Schedule 14D-1"), to purchase all
outstanding Shares at a price of $31.50 per share, net to the seller in cash
(the "Purchase Price"), upon the terms and subject to the conditions set forth
in the Offer to Purchase, dated March 16, 1998 (the "Offer to Purchase"), and
the related Letter of Transmittal (which, together with any amendments or
supplements thereto, collectively constitute the "Offer").
The Offer is being made pursuant to an Agreement and Plan of Merger, dated
as of March 12, 1998 (the "Merger Agreement"), by and among Parent, Purchaser
and the Company. The Offer is subject to certain conditions. The Merger
Agreement provides that, if the Offer is consummated pursuant to its terms,
Purchaser will be merged with and into the Company (the "Merger"), and the
Company will continue as the surviving corporation (the "Surviving
Corporation"). A copy of the Merger Agreement is filed as Exhibit 1 hereto and
incorporated herein by reference.
As set forth in the Schedule 14D-1, the principal executive offices of
Purchaser are located at the principal executive offices of Experian
Corporation, a wholly-owned subsidiary of Parent, at 505 City Parkway West,
Orange, California 92668. The principal executive offices of Parent are
located at Leconfield House, Curzon Street, London W1Y7FL.
ITEM 3. IDENTITY AND BACKGROUND
(a) The name and business address of the Company, which is the person filing
this Statement, are set forth in Item 1 above.
(b) Except as described herein or in Schedule I attached hereto, to the
knowledge of the Company, as of the date hereof, there are no material
contracts, agreements, arrangements or understandings, or any actual or
potential conflicts of interest, between the Company or its affiliates and (i)
the Company, its executive officers, directors or affiliates or (ii)
Purchaser, Parent or their respective executive officers, directors or
affiliates.
THE MERGER AGREEMENT
The following is a summary of certain portions of the Merger Agreement which
relate to arrangements among the Company, Purchaser, Parent and the Company's
executive officers and directors and is qualified in its entirety by reference
to the Merger Agreement. For the purposes of this Item 3(b), capitalized terms
used and not otherwise defined herein have the meanings given to such terms in
the Merger Agreement. The Merger Agreement is incorporated herein by
reference.
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The Offer. The Merger Agreement provides that Parent and Purchaser will
commence the Offer and that, upon the terms and subject to the prior
satisfaction or waiver of the conditions of the Offer, Purchaser and/or Parent
will purchase all Shares validly tendered and not properly withdrawn pursuant
to the Offer as promptly as practicable after the expiration date of the Offer
upon the terms and subject solely to the condition that there be validly
tendered and not withdrawn prior to the expiration of the Offer that number of
Shares which, when added to any Shares acquired pursuant to the Stock Purchase
Agreements (as defined below) simultaneously with the acceptance of Shares
pursuant to the Offer, represents at least a majority of the Shares
outstanding on a fully diluted basis (the "Minimum Condition") and the prior
satisfaction or waiver of the conditions of the Offer, the Merger Agreement
and Annex I to the Merger Agreement. The obligation of Purchaser to accept for
payment and pay for Shares tendered is subject to the satisfaction of the
other conditions set forth in Annex I to the Merger Agreement described in the
following paragraph. The Merger Agreement provides that, without prior written
consent of the Company, neither Purchaser nor Parent may decrease the price
per Share or change the form of consideration payable in the Offer, decrease
the number of Shares sought to be purchased in the Offer, change any of the
conditions set forth in Annex I to the Merger Agreement, impose additional
conditions to the Offer or amend any other term of the Offer in any manner
materially adverse to the holders of the Shares; provided that Purchaser may,
without the consent of the Company, (i) extend the Offer on one or more
occasions for up to ten business days for each such extension beyond the then
scheduled expiration date (the initial scheduled expiration date being 20
business days following commencement of the Offer), if at the then scheduled
expiration date of the Offer any of the conditions to Purchaser's obligation
to accept for payment and pay for the Shares shall not be satisfied or waived,
until such time as such conditions are satisfied or waived, (ii) increase the
Purchase Price and extend the Offer for any period required by any rule,
regulation, interpretation or provision of the Securities and Exchange
Commission (the "Commission") or the staff thereof applicable to the Offer and
(iii) extend the Offer for an aggregate period of not more than 10 business
days beyond the latest expiration date that would otherwise be permitted under
clause (i) or (ii) of this sentence if there shall not have been tendered and
not withdrawn pursuant to the Offer at least 90% of the outstanding Shares.
Conditions to the Offer. Notwithstanding any other provisions of the Offer,
and in addition to (and not in limitation of) Purchaser's rights to extend and
amend the Offer at any time in its sole discretion (subject to the provisions
of the Merger Agreement), Purchaser will not be required to accept for payment
or, subject to any applicable rules and regulations of the Commission,
including Rule 14e-l(c) under the Securities Exchange Act of 1934, as amended
(the "Exchange Act") (relating to Purchaser's obligation to pay for or return
tendered Shares promptly after termination or withdrawal of the Offer), pay
for, and may delay the acceptance for payment of or, subject to the
restriction referred to above, the payment for, any tendered Shares, and may
terminate or amend the Offer as to any Shares not then paid for, if (i) any
applicable waiting period under the Hart-Scott-Rodino Act of 1976, as amended
(the "HSR Act"), has not expired or terminated, (ii) the Minimum Condition has
not been satisfied or (iii) at any time on or after the date of the Merger
Agreement and before the time of acceptance for payment for any such Shares,
any of the following events shall have occurred: (a) there shall be threatened
or pending any suit, action or proceeding by any Governmental Entity against
Purchaser, Parent, the Company or any Subsidiary of the Company (i) seeking to
prohibit or impose any material limitations on Purchaser's or Parent's
ownership or operation (or that of any of their respective Subsidiaries or
affiliates) of all or a material portion of their or the Company's businesses
or assets (or that of any of its Subsidiaries), or to compel Purchaser or
Parent or their respective Subsidiaries and affiliates to dispose of or hold
separate any material portion of the business or assets of the Company or
Parent and their respective Subsidiaries, in each case taken as a whole, (ii)
challenging the acquisition by Purchaser or Parent of any Shares under the
Offer, seeking to restrain or prohibit the making or consummation of the Offer
or the Merger or the performance of any of the other transactions contemplated
by the Merger Agreement or the Stock Purchase Agreements, or seeking to obtain
from the Company, Purchaser or Parent any damages that are material in
relation to the Company and its Subsidiaries taken as a whole, (iii) seeking
to impose material limitations on the ability of Purchaser, or render
Purchaser unable, to accept for payment, pay for or purchase some or all of
the Shares pursuant to the Offer and the Merger or (iv) seeking to impose
material limitations on the ability of Purchaser or Parent effectively to
exercise full rights of ownership of the Shares, including, without
limitation, the right to vote the Shares purchased by it on all matters
properly presented to the Company's stockholders or there shall be pending any
suit, action or proceeding by any Governmental Entity against Purchaser,
Parent, the Company or any Subsidiary
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of the Company which is reasonably likely to have a Material Adverse Effect on
the Company; (b) there shall be any statute, rule, regulation, judgment, order
or injunction enacted, entered, enforced, promulgated, or deemed applicable,
pursuant to an authoritative interpretation by or on behalf of a Government
Entity, to the Offer or the Merger, or any other action shall be taken by any
Governmental Entity, other than the application to the Offer or the Merger of
applicable waiting periods under HSR Act, that is reasonably likely to result,
directly or indirectly, in any of the consequences referred to in clauses (i)
through (iv) of (a) above; (c) there shall have occurred (i) any general
suspension of trading in, or limitation on prices for, securities on the New
York Stock Exchange for a period in excess of 24 hours (excluding suspensions
or limitations resulting solely from physical damage or interference with such
exchanges not related to market conditions), (ii) a declaration of a banking
moratorium or any suspension of payments in respect of banks in the United
States (whether or not mandatory), (iii) a commencement of a war or other
international or national calamity directly or indirectly involving the United
States, (iv) any limitation (whether or not mandatory) by any United States
governmental authority on the extension of credit generally by banks or other
financial institutions, (v) a change in general financial, bank or capital
market conditions which materially and adversely affects the ability of
financial institutions in the United States to extend credit or syndicate
loans or (vi) in the case of any of the foregoing existing at the time of the
commencement of the Offer, a material acceleration or worsening thereof;
provided, however, the right to terminate the Merger Agreement pursuant to
this provision shall not be available after 11:59 P.M. Chicago time March 30,
1998 unless the expiration of applicable waiting periods under the HSR Act
shall not have occurred at or prior to such time; (d) there shall have
occurred any events after the date of the Merger Agreement which have or will
have a Material Adverse Effect on the Company; provided, however, the right to
terminate the Merger Agreement pursuant to this provision shall not be
available after 11:59 P.M. Chicago time March 30, 1998 unless the expiration
of applicable waiting periods under the HSR Act shall not have occurred at or
prior to such time; (e) (i) the Board of Directors of the Company (the
"Board") or any committee thereof shall have withdrawn or modified in a manner
adverse to Parent or Purchaser its approval or recommendation of the Offer,
the Merger or the Merger Agreement, or approved or recommended any Acquisition
Proposal (as defined below) or (ii) the Company shall have entered into any
agreement with respect to any Superior Proposal (as defined below) in
accordance with the Merger Agreement; provided, however, the right to
terminate the Merger Agreement pursuant to this provision shall not be
available after 11:59 P.M. Chicago time March 30, 1998 unless the expiration
of applicable waiting periods under the HSR Act shall not have occurred at or
prior to such time; (f) the representations and warranties of the Company set
forth in the Merger Agreement shall not be true and correct, in each case (i)
as of the date referred to in any representation or warranty which addresses
matters as of a particular date, or (ii) as to all other representations and
warranties, as of the date of the Merger Agreement and as of the scheduled
expiration of the Offer (or if applicable waiting periods under the HSR Act
shall have expired on or before March 30, 1998, as of March 30, 1998), unless
the inaccuracies without giving effect to any materiality or material adverse
effect qualifications or materiality exceptions contained therein under such
representations and warranties, taking all the inaccuracies under all such
representations and warranties together in their entirety, do not result in
Material Adverse Effect on the Company; provided, however, the right to
terminate the Merger Agreement pursuant to this provision shall not be
available after 11:59 P.M. Chicago time March 30, 1998 unless the expiration
of applicable waiting periods under the HSR Act shall not have occurred at or
prior to such time; (g) the Company shall have failed to perform any
obligation or to comply with any agreement or covenant to be performed or
complied with by it (i) under provisions in the Merger Agreement regarding
covenants concerning the conduct of the business of the Company or provisions
in the Merger Agreement regarding no solicitation or (ii) under any other
agreement or covenant to be performed or complied with by it under the Merger
Agreement, unless the failure to so perform or comply would not have a
Material Adverse Effect on the Company; (h) it shall have been publicly
disclosed or Purchaser or Parent shall have otherwise learned that any person,
entity or "group" (as defined in Section 13(d)(3) of the Exchange Act), other
than Purchaser or its affiliates or any group of which any of them is a
member, shall have acquired beneficial ownership (determined pursuant to Rule
13d-3 promulgated under the Exchange Act) of more than 20% of the outstanding
shares of any class or series of capital stock of the Company (including the
Shares), through the acquisition of stock, the formation of a group or
otherwise, or shall have been granted an option, right or warrant, conditional
or otherwise, to acquire beneficial ownership of more than 20% of any class or
series of capital stock of the Company (including the Shares); provided,
however, the right to terminate the Merger Agreement pursuant
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to this provision shall not be available after 11:59 P.M. Chicago time March
30, 1998 unless the expiration of applicable waiting periods under the HSR Act
shall not have occurred at or prior to such time; (i) the Merger Agreement
shall have been terminated in accordance with its terms; or (j) the Company
shall have failed to obtain the irrevocable letter of credit that is a
condition precedent to the obligations of the insurer under the insurance
endorsement described in the Merger Agreement by March 20, 1998 in accordance
with the terms of such endorsement. The Company expects that it will obtain
the letter of credit referred to in clause (j) within the time called for.
The foregoing conditions are for the benefit of Purchaser and Parent and may
be asserted by Purchaser or Parent regardless of the circumstances giving rise
to any such conditions and may be waived by Purchaser or Parent in whole or in
part at any time and from time to time in their reasonable discretion, in each
case, subject to the terms of the Merger Agreement. The failure by Purchaser
or Parent at any time to exercise any of the foregoing rights shall not be
deemed a waiver of any such right and each such right shall be deemed an
ongoing right which may be asserted at any time and from time to time.
Board of Directors. Promptly upon the purchase of Shares by Parent or
Purchaser or any of its Subsidiaries pursuant to the Offer and/or pursuant to
any of the Stock Purchase Agreements which represents at least a majority of
the outstanding Shares, Purchaser will be entitled to designate such number of
directors, rounded up to the next whole number, on the Board as is equal to
the number of directors which is the product of (i) the total number of
directors on the Board (giving effect to the directors designated by Purchaser
pursuant to this sentence) multiplied by (ii) the percentage that the number
of Shares so accepted for payment bears to the total number of Shares then
outstanding. In furtherance thereof, the Company will, upon request of the
Purchaser, use its reasonable best efforts promptly either to increase the
size of its Board of Directors or secure the resignations of such number of
its incumbent directors, or both, as is necessary to enable Purchaser's
designees to be so elected to the Company's Board of Directors, and shall take
all actions available to the Company to cause Purchaser's designees to be so
elected. At such time, the Company will, if requested by Purchaser, also cause
persons designated by Purchaser to constitute at least the same percentage
(rounded up to the next whole number) as is on the Company's Board of
Directors of (i) each committee of the Company's Board of Directors, (ii) each
board of directors (or similar body) of each Subsidiary of the Company and
(iii) each committee (or similar body) of each such board. Notwithstanding the
foregoing, the Company, Parent and Purchaser have agreed that, until the
Effective Time, the Board shall have at least two directors who are directors
on the date of the Merger Agreement (the "Independent Directors"); provided,
however, that, in such event, if the number of Independent Directors shall be
reduced below two, the remaining Independent Director will be entitled to
designate a person to fill such vacancy who shall be deemed to be an
Independent Director for purposes of the Merger Agreement or, if no
Independent Director then remains, the other directors will designate two
persons to fill such vacancies who shall not be stockholders, affiliates or
associates of Purchaser or Parent and such persons shall be deemed to be
Independent Directors for purposes of the Merger Agreement. In the Merger
Agreement, the Company has agreed to promptly take all actions required
pursuant to Section 14(f) of the Exchange Act and Rule 14f-1 promulgated
thereunder in order to fulfill its obligations under the Merger Agreement,
including mailing to stockholders the information required by such Section
14(f) and Rule 14f-1 as is necessary to enable Purchaser's designees to be
elected to the Board. Purchaser or Parent will supply the Company and be
solely responsible for any information with respect to either of them and
their nominees, officers, directors and affiliates required by such Section
14(f) and Rule 14f-1. A copy of the Information Statement pursuant to Section
14(f) of the Exchange Act and Rule 14f-1 thereunder is attached as Annex I
hereto.
The Merger. Following the consummation of the Offer, the Merger Agreement
provides that, subject to the terms and conditions thereof, at the Effective
Time, Purchaser will be merged with and into the Company. Following the
Merger, the separate corporate existence of Purchaser will cease and the
Company will continue as the surviving corporation (the "Surviving
Corporation"). As soon as practicable after the satisfaction or waiver (to the
extent permitted under the Merger Agreement) of the conditions set forth in
the Merger Agreement, the Company will execute in the manner required by the
General Corporation Law of the State of Delaware ("GCL") and deliver to the
Secretary of State of the State of Delaware a duly executed and verified
certificate of merger, or, if permitted, a certificate of ownership and
merger, and the parties will take such other and further actions as may be
required by law to make the Merger effective.
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The Merger Agreement provides that, at the Effective Time, by virtue of the
Merger and without any action on the part of Parent, Purchaser, the Company or
the holders of the following securities, each Share issued and outstanding
immediately prior to the Effective Time (other than any Shares held by Parent,
Purchaser, any wholly owned subsidiary or Parent or Purchaser, in the treasury
of the Company or by any wholly owned Subsidiary of the Company, which Shares,
by virtue of the Merger and without any action on the part of the holder
thereof, shall be canceled and retired and shall cease to exist with no
payment being made with respect thereto, and other than Dissenting Shares)
will be converted into the right to receive the Purchase Price in cash,
without interest thereon, upon surrender of the certificate formerly
representing such Share.
The Merger Agreement provides that the Certificate of Incorporation of the
Company, as in effect immediately prior to the Effective Time, will be the
Certificate of Incorporation of the Surviving Corporation, until thereafter
amended in accordance with the provisions thereof and the Merger Agreement and
applicable law. The By-Laws of Purchaser in effect at the Effective Time will
be the By-Laws of the Surviving Corporation, until thereafter amended in
accordance with the provisions thereof and the Merger Agreement and applicable
law. At the Effective Time, each share of common stock, par value $.01 per
share, of Purchaser issued and outstanding immediately prior to the Effective
Time will, by virtue of the Merger and without any action on the part of the
holder thereof, be converted into and become one validly issued, fully paid
and non-assessable share of common stock, par value $.01 per share, of the
Surviving Corporation.
Conditions to the Merger. The respective obligations of Parent, Purchaser
and the Company to consummate the Merger and the transactions contemplated
thereby are subject to the satisfaction, at or before the Effective Time, of
certain conditions, including: (i) if required by the GCL, the stockholders of
the Company shall have duly approved the transactions contemplated by the
Merger Agreement; (ii) the consummation of the Merger shall not be restrained,
enjoined or prohibited by any order, judgment, decree, injunction or ruling of
a court of competent jurisdiction or any Governmental Entity and there shall
not have been any statute, rule or regulation enacted, promulgated or deemed
applicable to the Merger by any Governmental Entity which prevents the
consummation of the Merger; and (iii) Parent and/or Purchaser shall have
purchased all Shares validly tendered and not withdrawn pursuant to the Offer
(however, this condition is not applicable to the obligations of Parent or
Purchaser if Parent and/or Purchaser fails to purchase Shares tendered
pursuant to the Offer in violation of the terms of the Merger Agreement or the
Offer).
Representations and Warranties. The Merger Agreement contains various
representations and warranties of the parties thereto, including
representations by the Company as to, among other things, (i) organization and
qualification of the Company, (ii) charter and by-laws of the Company, (iii)
capitalization, (iv) authority of the Company relative to the Merger Agreement
and the Company Stock Purchase Agreement (as defined below), (v) the absence
of conflict of the Merger Agreement, the Company Stock Purchase Agreement and
the transactions contemplated thereby with the Company's organizational
documents, certain agreements and applicable laws, (vi) Commission reports and
financial statements, (vii) information provided by the Company, (viii)
changes since December 31, 1997, (ix) the Lehman Brothers fairness opinion,
(x) the Rights Agreement, (xi) Section 203 of the GCL, (xii) litigation,
(xiii) employee plans and arrangements, (xiv) assets, (xv) intellectual
property, (xvi) taxes, (xvii) environmental laws and regulations and (xviii)
brokers' fees. In addition, Parent and Purchaser represented as to, among
other things, (i) organization and qualification of Parent and Purchaser, (ii)
authority of Parent and Purchaser relative to the Merger Agreement and the
Stock Purchase Agreements, (iii) the absence of conflict of the Merger
Agreement, the Stock Purchase Agreements and the transactions contemplated
thereby with the organizational documents of Parent and Purchaser, certain
agreements and applicable laws, (iv) information provided by Parent and
Purchaser, (v) financing and (vi) brokers' fees.
Covenants. The Merger Agreement contains various covenants of the parties
thereto, including covenants as to, among other things, during the period from
the date of the Merger Agreement to the Effective Time relating to (i) the
conduct of the business of the Company, (ii) access to information of the
Company by Parent and Purchaser, (iii) reasonable best efforts by the parties
to the Merger Agreement to consummate and make effective the transactions
contemplated by the Merger Agreement, (iv) the obtaining of required consents
to the transactions, (v) public announcements, (vi) notification of certain
matters and (vii) certain real estate.
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No Solicitation. Pursuant to the Merger Agreement, the Company has agreed
that neither the Company nor any of its subsidiaries will (and the Company and
its subsidiaries will use their reasonable best efforts to cause their
respective officers, directors, employees, representatives and agents,
including, but not limited to, investment bankers, attorneys and accountants,
not to), directly or indirectly, encourage, solicit, participate in or
initiate discussions or negotiations with, or provide any information to, any
corporation, partnership, person or other entity or group (other than
Purchaser, any of its affiliates or representatives) concerning any proposal
or offer to acquire all or a substantial part of the business and properties
of the Company or any of its subsidiaries or any capital stock of the Company
or any of its subsidiaries, whether by merger, tender offer, exchange offer,
sale of assets or similar transactions involving the Company or any
subsidiary, division or operating or principal business unit of the Company
(an "Acquisition Proposal"), except that the Company and the Board are not
prohibited from (i) taking and disclosing to the Company's stockholders a
position with respect to a tender or exchange offer by a third party pursuant
to Rules 14d-9 and 14e-2 promulgated under the Exchange Act, or (ii) making
such disclosure to the Company's stockholders as, in the good faith judgment
of the Board, after receiving advice from outside counsel, is required under
applicable law, provided that the Company may not, except as described below,
withdraw or modify, its position with respect to the Offer or the Merger or
approve or recommend, or propose to approve or recommend, any Acquisition
Proposal, or enter into any agreement with respect to any Acquisition
Proposal. Except as described below, the Company also agreed, and agreed to
cause each of its subsidiaries to immediately cease and cause to be terminated
any existing activities, discussions or negotiations by the Company, any of
its subsidiaries or any officer, director, employee or affiliate of, or
investment banker, attorney, accountant or other advisor or representative of,
the Company or any of its subsidiaries with any parties conducted prior to the
date of the Merger Agreement with respect to any of the foregoing. The Merger
Agreement provides that the Company, prior to the later of (i) 11:59 P.M.
Chicago time March 30, 1998 and (ii) the expiration of the applicable waiting
periods under the HSR Act, may furnish information concerning the Company and
its subsidiaries to any corporation, partnership, person or other entity or
group pursuant to appropriate confidentiality agreements with terms
substantially similar to the Confidentiality Agreement (as defined below), and
may negotiate and participate in discussions and negotiations with such entity
or group concerning an Acquisition Proposal if (i) such entity or group, which
has not been solicited by or on behalf of the Company after the date of the
Merger Agreement, submitted a bona fide written proposal to the Company
relating to any such transaction which the Board concludes in good faith,
after consulting with a nationally recognized investment banking firm, (A) is
more favorable to the Company's stockholders (in their capacities as
stockholders), from a financial point of view, than the Offer and the Merger
and (B) is reasonably capable of being completed and (ii) in the good faith
opinion of the Board, only after receipt of advice from outside legal counsel,
the failure to provide such information or access or to engage in such
discussions or negotiations would cause the Board to violate its fiduciary
duties to the Company's stockholders under applicable law (an Acquisition
Proposal which satisfies clauses (i) and (ii) is referred to in the Merger
Agreement as a "Superior Proposal"). The Company will provide reasonable
notice to Purchaser to the effect that it has received an Acquisition
Proposal, including its terms and conditions (but excluding the identity of
the party or parties making such Acquisition Proposal unless the terms and
conditions of such Acquisition Proposal contain a purchase price that includes
stock of such party or parties). At any time after 48 hours following
notification to Purchaser of the Company's intent to do so (which notification
shall include the identity of the bidder and the material terms and conditions
of the proposal) and if permitted to do so pursuant to the terms of the Merger
Agreement, the Board may withdraw or modify its approval or recommendation of
the Offer and may cause the Company to enter into an agreement with respect to
a Superior Proposal, provided it concurrently with entering into such
agreement pays or cause to be paid to Purchaser the Termination Fee (as
defined below) plus any amount payable at the time for reimbursement of
expenses. If the Company has notified Purchaser of its intent to enter into an
agreement with respect to a Superior Proposal in compliance with the preceding
sentence and has otherwise complied with such sentence, the Company may enter
into an agreement with respect to such Superior Proposal (with the bidder and
on terms no less favorable than those specified in such notification to
Purchaser) after the expiration of the 48 hour period.
Termination; Fees. The Merger Agreement may be terminated and the Merger
abandoned at any time prior to the Effective Time, whether before or after
approval of the stockholders of the Company: (a) by the
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mutual written consent of Parent and the Company; (b) by either the Company or
Parent (i) if any court or Governmental Entity has issued an order, decree or
ruling or taken any other action (which order, decree, ruling or action the
parties have agreed to use reasonable efforts to lift) restraining, enjoining
or otherwise prohibiting the Merger and such order, decree or other action has
become final and nonappealable, or (ii) if (x) the Offer has expired without
any Shares being purchased therein or (y) Purchaser has not accepted for
payment all Shares tendered pursuant to the Offer by September 30, 1998,
provided, however, that the right to terminate the Merger Agreement under such
provision is not available to any party whose failure to fulfill any
obligation under the Merger Agreement is the cause of, or results in, the
failure of Purchaser to purchase the Shares pursuant to the Offer on or prior
to such date; (c) by the Company, (i) if Parent and/or Purchaser fails to
commence the Offer as provided in the Merger Agreement, provided, that the
Company may not terminate the Merger Agreement pursuant to such provision if
the Company is at such time in breach of its obligations under the Merger
Agreement such as to cause a Material Adverse Effect on the Company, (ii) in
connection with entering into a definitive agreement with respect to a
Superior Proposal, provided the Company has complied with all of the
applicable provisions of the Merger Agreement, including the notice provisions
described under "No Solicitation"above, and that it makes simultaneous payment
of the Termination Fee plus any amounts then due as a reimbursement of
expenses, or (iii) if Parent or the Purchaser has made a material
misrepresentation or has breached in any material respect any of their
respective representations, warranties, covenants or other agreements
contained in the Merger Agreement, which breach cannot be or has not been
cured, in all material respects, within 30 days after the giving of written
notice to Parent or the Purchaser, as applicable provided, however, that the
right to terminate the Merger Agreement under this provision shall not be
available (other than as a result of any breach of covenants or other
agreements contained in the Merger Agreement) after 11:59 P.M. Chicago time on
March 30, 1998 unless the expiration of applicable waiting periods under the
HSR Act shall not have occurred at or prior to such time; or (d) by Parent (i)
if, due to an occurrence, not involving a breach by Parent or the Purchaser of
their obligations under the Merger Agreement, which makes it impossible to
satisfy any of the conditions to the Offer, Parent or the Purchaser fail to
commence the Offer on or prior to five business days following the date of the
initial public announcement of the Offer, (ii) if prior to the purchase of
Shares pursuant to the Offer, the Company has breached any representation,
warranty, covenant or other agreement contained in the Merger Agreement which
(x) would give rise to the failure of a condition described in paragraph (f)
or (g) under Annex I to the Merger Agreement (which are set forth in clauses
(f) and (g) of "Conditions to the Offer" above) and (y) cannot be or has not
been cured, in all material respects, within 30 days after the giving of
written notice to the Company, provided, however, that the right to terminate
the Merger Agreement under this provision shall not be available (other than
as a result of any breach of covenants or other agreements contained in the
Merger Agreement) after 11:59 P.M. Chicago time March 30, 1998 unless the
expiration of applicable waiting periods under the HSR Act shall not have
occurred at or prior to such time, (iii) if either Parent or the Purchaser is
entitled to terminate the Offer as a result of the occurrence of any event set
forth in paragraph (e) under Annex I to the Merger Agreement or (iv) if the
condition set forth paragraph (j) of Annex I to the Merger Agreement (which is
set forth in clause (j) of "Conditions to the Offer" above) fails to be
fulfilled by March 20, 1998.
In accordance with the Merger Agreement, if (w) the Company terminates the
Merger Agreement pursuant to clause (c)(ii) of the immediately preceding
paragraph, (x) Parent terminates the Merger Agreement pursuant to clause
(d)(iii) of the immediately preceding paragraph, (y) either the Company or
Parent terminates the Merger Agreement pursuant to clause (b)(ii) of the
immediately preceding paragraph and (a) prior thereto there shall have been
publicly announced another Acquisition Proposal (provided, however, that
solely for purposes of this clause (a), the term Acquisition Proposal shall
not include (1) the purchase of less than 5% of any class or series of capital
stock of the Company if such purchase does not involve an offer to acquire
additional shares of capital stock of the Company that could cause any person,
entity or "group" (as defined in Section 13(d)(3) of the Exchange Act), other
than Purchaser or its affiliates or any group of which any of them is a
member, to beneficially own 5% or more of any such class or series or (2) any
purchase of 5% or more of any class or series of capital stock of the Company
which can properly be reported on a Schedule 13G) or an event set forth in
paragraph (h) of Annex I to the Merger Agreement (which is set forth in clause
(h) in "Conditions to the Offer" above) shall have occurred and (b) an
Acquisition Proposal pursuant to which any Person acquires all or a
7
<PAGE>
substantial part of the business or properties of the Company or any of its
Subsidiaries, any of the capital stock (or securities exercisable for or
convertible into such capital stock) of any of the Subsidiaries of the Company
or any capital stock (or securities exercisable for or convertible into such
capital stock) of the Company which represents 20% or more of the equity
interest or voting power of the Company shall be consummated on or prior to
December 31, 1998 or (z) Parent shall terminate the Merger Agreement pursuant
to clause (d)(iv) of the preceding paragraph and an Acquisition Proposal
pursuant to which any Person acquires all or a substantial part of the
business or properties of the Company or any of its Subsidiaries, any of the
capital stock (or securities exercisable for or convertible into such capital
stock) of any of the Subsidiaries of the Company or any capital stock (or
securities exercisable for or convertible into such capital stock) of the
Company which represents 20% or more of the equity interest or voting power of
the Company is consummated on or prior to December 31, 1998, then the Company
has agreed to pay to Purchaser an amount equal to $15,000,000 (the
"Termination Fee") plus an amount equal to Purchaser's actual documented out-
of-pocket fees and expenses (including legal, investment banking, financing
commitment fees and commercial banking fees and expenses) incurred by Parent
and Purchaser in connection with the due diligence investigation, Offer, the
Merger, the Merger Agreement and the consummation of the transactions
contemplated by the Merger Agreement (the "Reimbursable Expenses"). The
Company is also obligated to pay to Purchaser the Reimbursable Expenses in
such manner if Parent shall terminate the Merger Agreement pursuant to clause
(d)(iv) of the preceding paragraph (regardless of whether an Acquisition
Proposal is consummated thereafter). The Termination Fee and Purchaser's good
faith estimate of its Reimbursable Expenses will be paid concurrently with any
such termination, together with delivery of a written acknowledgment by the
Company of its obligation to reimburse Purchaser for its actual expenses in
excess of such estimated expenses payment, except that the Termination Fee and
such expenses will be payable in connection with a termination described in
clauses (x) and (y) above upon the consummation of an Acquisition Proposal
referenced in such clauses.
The Merger Agreement provides that, except as contemplated by the Merger
Agreement, each party thereto will bear its own expenses and costs in
connection with the Merger Agreement and the transactions contemplated
thereby.
Amendments and Modification. The Merger Agreement may be amended by Parent
and the Company at any time before or after any approval of the Merger
Agreement by the stockholders of the Company but, after any such approval, no
amendment may be made which decreases the Purchase Price or changes the form
thereof without the approval of such stockholders. The Merger Agreement may
not be amended except by an instrument in writing signed on behalf of all the
parties.
Stock Options. The Merger Agreement provides that the Company will (i)
terminate its Option Plans immediately prior to the Effective Time without
prejudice to the rights of the holders of Options awarded pursuant thereto and
(ii) grant no additional Options, restricted stock, stock units, performance
units, performance shares, fixed awards or similar rights or awards under the
Option Plans or otherwise on or after the date of the Merger Agreement. The
Merger Agreement also provides that the Company will (i) use its reasonable
best efforts to obtain from each holder of any Option that it does not have
the right to cancel the consent of such holder to the cancellation of each
such Option, and (ii) cancel each Option that the Company has the right to
cancel or as to which the Company has obtained the consent of the holder
thereof to such cancellation, each such cancellation (whether or not a consent
is required therefor) to take effect immediately after the Effective Time. In
consideration of each cancellation of an Option, the Company will pay to the
holder of such Option, promptly after such cancellation, in respect of such
Option, an amount equal to the excess, if any, of the Purchase Price over the
per Share exercise price of such Option, multiplied by the number of Shares
subject to such Option. The Merger Agreement also provides that the Company
will suspend its 1997 Employee Stock Purchase Plan (the "Purchase Plan") so as
to provide that no purchase period shall begin after March 31, 1998, and that
the Company will terminate the Purchase Plan prior to the Effective Time.
Indemnification; Directors' and Officers' Insurance. Pursuant to the Merger
Agreement, Parent and Purchaser will indemnify the present and former
officers, directors or employees of the Company and its subsidiaries (the
"Indemnified Parties") against all losses, liabilities, expenses, claims or
damages in connection with any claim, suit, action, proceeding or
investigation based in whole or in part on the fact that such
8
<PAGE>
Indemnified Party is or was an officer, director or employee of the Company or
any of its subsidiaries and arising out of acts or omissions occurring prior
to and including the Effective Time (including but not limited to the
transactions contemplated by the Merger Agreement) to the fullest extent
permitted by the General Corporation Law of the State of Delaware, for a
period of not less than six years following the Effective Time; provided,
however, that in the event that any claim or claims are asserted or made
within such six-year period, all rights to indemnification in respect of any
such claim or claims will continue until final disposition of any and all such
claims.
The Merger Agreement provides that Parent will cause the Certificate of
Incorporation and By-Laws of the Company and its subsidiaries to include
provisions for the limitation of liability of directors and indemnification of
the Indemnified Parties to the fullest extent permitted under applicable law
and will not permit the amendment of such provisions in any manner adverse to
the Indemnified Parties, as the case may be, without the prior written consent
of such persons, for a period of six years from and after the date thereof.
Without limitation of the foregoing, in the event any such Indemnified Party
is or becomes involved in any capacity in any action, proceeding or
investigation in connection with any matter, including, without limitation,
the transactions contemplated by the Merger Agreement, occurring prior to, and
including, the Effective Time, Parent will pay as incurred such Indemnified
Party's legal and other expenses (including the cost of any investigation and
preparation) incurred in connection therewith, subject to the provision by
such Indemnified Party of an undertaking to reimburse such payments in the
event of a final determination by a court of competent jurisdiction that such
Indemnified Party is not entitled thereto. Parent will pay all expenses,
including attorneys' fees, that may be incurred by any Indemnified Party in
enforcing the indemnity and other obligations provided for in the Merger
Agreement or any action involving an Indemnified Party resulting from the
transactions contemplated by the Merger Agreement. For six years after the
Effective Time, the Company will cause to be maintained policies of directors
and officers' liability insurance comparable to those currently maintained by
the Company for the benefit of directors and officers of the Company (provided
that the Company may substitute therefor policies of at least the same
coverage containing terms and conditions which are substantially equivalent)
with respect to matters occurring prior to the Effective Time. Notwithstanding
the foregoing, in no case will the Company be required to pay an annual
premium for such insurance greater than 300% of the last annual premium paid
prior to March 12, 1998.
THE STOCK PURCHASE AGREEMENTS AND DONNELLEY COMMERCIAL AGREEMENTS
Company Stock Purchase Agreement
The following is a summary of certain provisions of a Stock Purchase
Agreement, dated as of March 12, 1998, between the Company and Parent (the
"Company Stock Purchase Agreement"), pursuant to which the Company has, among
other things, agreed to sell Shares to Parent under certain circumstances.
Simultaneously with the execution of the Merger Agreement and the Company
Stock Purchase Agreement, R. R. Donnelley & Sons Company ("Donnelley") and
Parent entered into a Stock Purchase Agreement, dated as of March 12, 1998
(the "Donnelley Stock Purchase Agreement"), and certain executives of the
Company and Parent entered into Stock Purchase Agreements, dated as of March
12, 1998 (each, an "Executive Stock Purchase Agreement", and, collectively
with the Company Stock Purchase Agreement and the Donnelley Stock Purchase
Agreement, the "Stock Purchase Agreements"), pursuant to which Donnelley and
such executives will, among other things, sell Shares to Parent under certain
circumstances. This summary is qualified in its entirety by reference to the
Company Purchase Agreement. A copy of the Company Stock Purchase Agreement is
filed as Exhibit 2 hereto and is incorporated herein by reference.
As a condition and inducement to Parent and Purchaser to enter into the
Merger Agreement, the Company, concurrently with the execution and delivery of
the Merger Agreement, entered into the Company Stock Purchase Agreement. The
Company agreed to sell to Parent a number of authorized but unissued Shares
equal to the number of Shares that when added to the sum of (a) the number of
Shares owned by Purchaser and its affiliates immediately following
consummation of the Offer, (b) the number of Shares purchased or to be
purchased by Parent from Donnelley pursuant to the Donnelley Stock Purchase
Agreement and (c) the number of Shares purchased or to be purchased by Parent
from certain executives of the Company pursuant to the Executive Stock
Purchase Agreements, will constitute 51% of the sum of the Shares then
outstanding (assuming
9
<PAGE>
the issuance of Shares pursuant to the Company Stock Purchase Agreement) and
any Shares issuable upon the exercise of options, warrants or other rights to
acquire Shares (whether or not exercisable or vested) at a price equal to the
Purchase Price.
The obligation of the Company and Parent to consummate the transactions
described above are subject to the conditions that: (a) any waiting period
under the HSR Act applicable to the issuance and delivery of the Shares
pursuant to the Company Stock Purchase Agreement shall have expired or
terminated; and (b) there shall be no preliminary or permanent injunction or
other order by any court of competent jurisdiction restricting, preventing or
prohibiting the issuance and delivery of the Shares. The closing of such
transactions will occur simultaneously with the acceptance of Shares for
purchase by the Purchaser pursuant to the Offer. In the Company Stock Purchase
Agreement, Parent and the Company agreed that each shall promptly after the
date of the Company Stock Purchase Agreement make such filings and provide
such information as may be required under the HSR Act with respect to the sale
of the Shares. The Company also agreed to accelerate the vesting of all of
options and restricted Shares by the executives party to the Executive Stock
Purchase Agreements prior to the earlier of (i) upon a request by Purchaser
pursuant to the Executive Stock Purchase Agreements, the timely tender and
sale by such executives of certain Shares and (ii) the closing of the
transactions contemplated by the Executive Stock Purchase Agreements.
In the Company Stock Purchase Agreement, the Company makes certain
representations and warranties with respect to (i) the Shares and (ii)
brokers' fees. In the Company Stock Purchase Agreement, Parent makes certain
representations and warranties with respect to (i) authority relative to the
Company Stock Purchase Agreement, (ii) the absence of conflict with Parent's
organizational documents, certain agreements and applicable laws, (iii)
brokers' fees and (iv) the investment intent of Parent.
The Company Stock Purchase Agreement terminates automatically in the event
the Merger Agreement is terminated in accordance with its terms and
conditions.
Donnelley Stock Purchase Agreement and Executive Stock Purchase Agreements
The following is a summary of certain provisions of the Donnelley Stock
Purchase Agreement and the Executive Stock Purchase Agreements. This summary
is qualified in its entirety by reference to the Donnelley Stock Purchase
Agreement and the Executive Stock Purchase Agreements. Copies of the Donnelley
Stock Purchase Agreement and the Executive Stock Purchase Agreements are filed
as Exhibits 3 and 4, respectively, hereto and are incorporated herein by
reference.
As a condition and inducement to Parent and Purchaser to enter into the
Merger Agreement and to make the Offer at the Purchase Price, concurrently
with the execution and delivery of the Merger Agreement (i) Donnelley entered
into the Donnelley Stock Purchase Agreement and (ii) Barton L. Faber, the
Company's Chairman, President and Chief Executive Officer, Ronald G. Eidell,
the Company's Senior Vice President and Chief Financial Officer, and Thomas J.
Quarles, the Company's Senior Vice President, General Counsel, Chief
Administrative Officer and Secretary (each such person is referred to herein
as an "Executive"), each entered into an Executive Stock Purchase Agreement.
Under the Donnelley Stock Purchase Agreement and the Executive Stock
Purchase Agreements, Donnelley has agreed to sell to Parent 8,600,000 Shares
(being all Shares owned by Donnelley) and the Executives have agreed to sell
to Parent the following numbers of Shares: Mr. Faber--264,420; Mr. Eidell--
115,214; and Mr. Quarles--114,000 (being the total numbers of Shares each such
Executive owns and has options to acquire). The purchase price under such
agreements is equal to the Purchase Price.
The obligations of Donnelley and the Executives and Parent to consummate the
transactions described above are subject to the same conditions, as applied to
the Donnelley and Executive Shares, as those contained in the Company Stock
Purchase Agreement. The closing of the purchase of such Shares will occur
simultaneously with the acceptance of Shares for purchase by the Purchaser
pursuant to the Offer. In the Executive Stock Purchase Agreements, the
Executives agree upon request of Parent after March 30, 1998, to tender their
Shares to Purchaser pursuant to the Offer.
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<PAGE>
In such agreements, Donnelley and the Executives agree with Parent to vote
their Shares in favor of the Merger and against actions or agreements that
would reasonably be expected to impede, interfere with, delay or attempt to
discourage the Offer or the Merger, including opposing merger proposals, sales
of material amounts of the Company's assets, changes in the Company's
management or Board, material changes in the Company's capitalization or
dividend policy or other material changes in the Company's corporate structure
or business and grant Parent any irrevocable proxy to vote their Shares in a
manner consistent with such voting agreement.
In the Donnelley and Executive Stock Purchase Agreements, Donnelley and the
Executives make certain representations and warranties with respect to (i)
title to their Shares, (ii) authority with respect to such agreements, (iii)
the absence of conflict with laws or other agreements and (iv) brokers' fees.
In such agreements, Parent makes certain representations and warranties with
respect (i) authority with respect to the agreements, (ii) the absence of
conflict with Parent's organizational documents, agreements and applicable
laws, (iii) brokers' fees and (iv) the investment intent of Parent.
The Donnelley Stock Purchase Agreement and the Executive Stock Purchase
Agreements automatically terminate in the event the Merger Agreement is
terminated in accordance with its terms.
Donnelley Commercial Agreements
As a condition and inducement to Parent and Purchaser to enter into the
Merger Agreement and to make the Offer at the Purchase Price, Donnelley and
the Company entered into amendments which, among other things, extended the
term of certain agreements between them relating to sales opportunities
brought to the Company by Donnelley and computer data processing services
performed by the Company for Donnelley. See Schedule I hereto.
CONFIDENTIALITY AGREEMENT
The following is a summary of certain provisions of the Confidentiality
Agreement (the "Confidentiality Agreement"), dated February 6, 1998, by and
between Lehman Brothers Inc. ("Lehman Brothers"), as financial advisor to and
on behalf of the Company, and Experian Corporation ("Experian"), filed as
Exhibit 5 hereto and incorporated herein by reference. Because Experian is an
affiliate of Purchaser and a wholly-owned subsidiary of Parent, the provisions
of the Confidentiality Agreement are also applicable to Purchaser and Parent.
This summary is qualified in its entirety by reference to the Confidentiality
Agreement. Pursuant to the Confidentiality Agreement, Experian has agreed,
among other things, to keep confidential certain nonpublic confidential or
proprietary information of the Company furnished to Experian and its
representatives by or on behalf of the Company, including notes, analyses,
compilations, studies, interpretations or other documents prepared by Experian
and its representatives which contain, reflect or are based upon such
information ("Evaluation Material"), and to use the Evaluation Material solely
for the purpose of evaluating a possible transaction with the Company.
Experian has further agreed to maintain the confidentiality of any discussions
or negotiations with the Company and, upon request, to redeliver or destroy
all the Evaluation Material. Experian also agreed that, without the prior
written consent of the Company, Experian will not directly or indirectly,
enter into any agreement, arrangement or understanding, or any discussions
which might lead to an agreement, arrangement or understanding, with any other
person regarding a possible transaction involving the Company. The
Confidentiality Agreement further provides that, for a period of one year from
the date of the Confidentiality Agreement, without the prior written consent
of the Board, neither Experian nor any of its affiliates, acting alone or as a
part of a group, may acquire or offer to agree to acquire, directly or
indirectly, by purchase or otherwise, any voting securities (or direct or
indirect rights or options to acquire any voting securities) of the Company,
or otherwise seek to influence or control, in any manner whatsoever, the
management or policies of the Company. For a period of eighteen months from
the date of the Confidentiality Agreement, neither Experian, its affiliates or
any person on behalf of Experian or its affiliates will solicit to employ
(whether as an employee, officer, director, agent consultant or independent
contractor) any person who is employed by the Company and its subsidiaries or
affiliates.
CERTAIN STOCK OWNERSHIP INFORMATION
The following table sets forth certain information with respect to the
beneficial ownership of the outstanding Shares as of the date of this
Statement by the Company's directors, executive officers and affiliates.
Unless otherwise indicated, all persons listed have sole voting and
dispositive power over the shares beneficially owned.
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<PAGE>
<TABLE>
<CAPTION>
SHARES OF COMMON
STOCK PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME OWNED SHARES OWNED
---- ---------------- -------------
<S> <C> <C>
R. R. Donnelley & Sons Company............ 8,600,000 38.2%
David L. Babson and Company Incorporated.. 1,495,740 6.6%
Snyder Capital Management, L. P........... 1,335,700 5.9%
Barton L. Faber........................... 61,920(1) *
Ronald G. Eidell.......................... 24,214(2) *
Donald N. Boyce........................... 2,000(3) *
Robert C. McCormack....................... 18,200(4) *
Peter F. Murphy........................... 6,000(5) *
Tery R. Larrew............................ 13,348(6) *
Thomas J. Quarles......................... 18,500(7) *
Jonathan P. Ward.......................... 8,500(8) *
Philip H. Bonello......................... 12,600(9) *
James R. Drake............................ 14,372(10) *
Kenneth A. Glowacki....................... 12,500(9) *
Prabhuling Patel.......................... 13,081(11) *
Mac E. Rodgers............................ 14,558(10) *
Directors and executive officers as a
group (13 persons)....................... 219,793(12) *
</TABLE>
- --------
* Less than 1%.
(1) Includes 12,750 shares of restricted Common Stock that vest in increments
of 4,250 shares on each of June 19, 1998, 1999 and 2000. Also includes
42,500 shares which are not currently owned but which could be acquired
by exercise of stock options. Does not include unvested stock options to
purchase 202,500 shares.
(2) Includes 16,000 shares which are not currently owned but which could be
acquired by exercise of stock options. Does not include unvested stock
options to purchase 91,000 shares.
(3) Includes 1,000 shares of restricted Common Stock that vest on July 28,
2000. Does not include unvested stock options to purchase 8,218 shares.
(4) Includes 1,000 shares of restricted Common Stock that vest on September
1, 1999. Also includes 5,000 shares which are not currently owned but
which could be acquired by exercise of stock options. Does not include
unvested stock options to purchase 7,500 shares.
(5) Includes 1,000 shares of restricted Common Stock that vest on September
1, 1999. Also includes 5,000 shares which are not currently owned but
which could be acquired by exercise of stock options. Does not include
unvested stock options to purchase 5,000 shares.
(6) Includes 12,500 shares which are not currently owned but which could be
acquired by exercise of stock options. Does not include unvested stock
options to purchase 72,500 shares.
(7) Includes 17,500 shares which are not currently owned but which could be
acquired by exercise of stock options. Does not include unvested stock
options to purchase 95,500 shares.
(8) Includes 1,000 shares of restricted Common Stock that vest on September
1, 1999. Also includes 7,500 shares which are not currently owned but
which could be acquired by exercise of stock options. Does not include
unvested stock options to purchase 7,500 shares.
(9) Includes 12,500 shares which are not currently owned but which could be
acquired by exercise of stock options. Does not include unvested stock
options to purchase 49,500 shares.
(10) Includes 12,500 shares which are not currently owned but which could be
acquired by exercise of stock options. Does not include unvested stock
options to purchase 72,500 shares.
(11) Includes 12,500 shares which are not currently owned but which could be
acquired by exercise of stock options. Does not include unvested stock
options to purchase 57,500 shares.
(12) Includes the options and the shares of restricted Common Stock described
in the notes above.
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<PAGE>
ITEM 4. THE SOLICITATION OR RECOMMENDATION
(a) Recommendation of the Board of Directors. The Board has unanimously
determined that the Merger Agreement and the transactions contemplated
thereby, including without limitation the Offer and the Merger, are fair to
the stockholders of the Company and that the Offer and the Merger are
otherwise in the best interests of the Company and its stockholders, has
approved and adopted the Merger Agreement and the transactions contemplated
thereby, including the Offer and the Merger, and recommends that all holders
of Shares accept the Offer and tender their Shares pursuant to the Offer and
approve and adopt the Merger Agreement and the Merger.
(b) Background; Reasons for the Recommendation. The initial public offering
("IPO") of Shares in June 1996 by the Company's former parent corporation,
Donnelley, was part of a divestiture process initiated by Donnelley and a sale
of the Company was also considered and pursued on a limited basis
simultaneously with the IPO. This process included contacts with some
potential purchasers. One such candidate was the predecessor of Experian,
which is in the direct marketing services business and was at the time being
acquired by a financial buyer (which later sold Experian to Parent). After the
IPO, the Company was contacted from time to time by such potential purchasers
and others regarding their possible interest in a business combination.
Beginning in October 1997, the number and frequency of such contacts
increased. This increase may have been related to declines in the market price
of the Shares in the summer and fall of 1997 and the announcement by
Donnelley's new Chairman and Chief Executive Officer in October 1997 that his
company was going to focus on its core commercial printing business. At the
Direct Marketing Association trade show in Chicago in October 1997, senior
management of the Company was approached by senior officers of two companies
who expressed continued interest in a business combination (those companies
had previously expressed interest) and by another which expressed interest for
the first time. After the trade show, two other companies expressed interest
in a business combination in October and November 1997 and Company management
met with one of them. During the same period, Donnelley advised the Company of
several indications of interest it was receiving as the major stockholder of
the Company.
The Company engaged Lehman Brothers on November 13, 1997 to render financial
advisory services to the Company. This engagement included evaluating the
Company's posture with respect to unsolicited and other acquisition proposals
(see Item 5 below). At its December 15, 1997 meeting in Chicago, the Board was
presented with information by Lehman Brothers and management with respect to
how a process could be organized to better determine the interest in a
business combination of the Company with the entities that had been contacting
Company management and others, as well as information with respect to possible
acquirors of the Company, the historical market prices of the Shares and the
Company's earnings performance compared to analysts' expectations since the
IPO and the Company's public market trading valuation compared to other
companies in the direct marketing services industry. Lehman Brothers also
described recent acquisition activity in such industry and gave a general
summary of potential revenue and cost synergies that might be realized through
a business combination with some of the potential acquirors. At that meeting,
the Board authorized management to continue to explore whether to embark on
such process and report further on it at the February 10, 1998 Board meeting.
In December 1997 and the first part of January 1998, Company representatives
met three times with personnel from the company that had expressed interest
for the first time at the Direct Marketing trade show to explore how the two
companies could be combined. At a fourth meeting with such company late in
January 1998, Company management told the representatives of such company that
a combination did not appear to be as attractive as other alternatives the
Company might have. At a meeting with a second company late in January 1998
held for other purposes, such second company expressed for the first time its
conditional interest in a business combination.
On January 21, 1998, the Chairman of the Company met in Chicago with the
Chairman of Experian North America, at his request. At such meeting, the
Company's Chairman was advised that Experian and Parent were
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<PAGE>
interested in acquiring the Company. Parent communicated to the Company that
it was important that an acquisition be structured so that Parent could
include the Company in its consolidated financial statements for the fiscal
year ending March 31, 1998 such that goodwill arising from the acquisition
could be accounted for under U.K. GAAP applicable to Parent's financial
statements for such fiscal year. On January 27, 1998, the Company received a
letter from a third company expressing a conditional interest in purchasing
the Company. On January 29, 1998, the Company received a letter to that effect
from a fourth company. On February 4, 1998, the Company's Chairman, its Senior
Vice President and Chief Financial Officer and its Senior Vice President,
Corporate Development met in Chicago with the Chairman of Experian North
America, a director of Parent and the Chief Executive of its Information
Services Division, and the Deputy Chairman of Parent and Chairman of its
Information Services Division to further discuss a possible acquisition of the
Company. On February 6, 1998, Experian entered into a Confidentiality
Agreement with Lehman Brothers on behalf of the Company. See Item 3(b) above.
On February 10, 1998, the Board met and, after presentations by Lehman
Brothers and management, determined to evaluate the Company's strategic
alternatives, including through a controlled, publicly announced process
intended to determine the level of interest of all potential acquirors of the
Company, and authorized the engagement of Lehman Brothers pursuant to an
agreement dated that date (see Item 5 below). These actions were publicly
announced following the Board meeting. On the same day, the Company received a
letter from Experian indicating an interest in acquiring the Company for cash
at a price in the range of $26 to $31 per Share. On the next day, Experian
sent another letter increasing its price range for a possible transaction to
$28 to $32 per Share. Beginning on February 11, 1998, Lehman Brothers began
the process authorized by the Board, including obtaining confidentiality
agreements (substantially similar to the Confidentiality Agreement described
in Item 3(b)) from 30 other potentially interested parties, including those
referred to above. On February 12, 1998, there was a conference call between
members of senior management of the Company and Experian and Parent, as well
as Lehman Brothers and counsel to the parties, in which the timing of the due
diligence process and other timing issues were discussed. Management of the
Company met in Chicago on February 13, 1998 with representatives of Experian
and Parent to provide information about the Company's business. During the
next two weeks, representatives of Experian and Parent reviewed due diligence
materials provided by the Company and held further meetings with Company
management and Lehman Brothers distributed confidential information to other
third parties, responded to questions in order to assist such parties in their
review of the Company and scheduled meetings between Company management and
such third parties. The Company, through Lehman Brothers, also received
written and oral conditional indications of interest from certain of these
parties as to the price levels such parties might be willing to consider for
an acquisition of the Company. Outside counsel for the Company provided a
draft of the Merger Agreement to outside counsel for the Parent and received
and discussed comments on such draft during these two weeks.
On February 25, 1998, representatives of Parent called Lehman Brothers and
said that Parent wished to acquire the Company, but that this was contingent
on the satisfactory resolution of certain issues, including issues related to
a lawsuit involving the Company, the Company's projected operating plan, a
provision in an agreement under which the Company had previously acquired
another business and the extension of certain commercial arrangements between
the Company and Donnelley. On that day, the Company began discussing such
extension with Donnelley and providing additional information and working
towards a resolution regarding the other issues raised by Parent.
On February 27, 1998, the Chief Executive of Parent's Information Services
Division advised the Company that Parent did not wish to proceed with a
transaction with the Company because it determined that it would be unable to
resolve certain issues. The Company then began exploring additional means by
which to resolve these issues and scheduled management presentations to, and
due diligence access for, five other companies which had expressed possible
interest in a transaction. Such parties met with Company management and
conducted due diligence investigations of the Company from March 2 through
March 10, 1998. On March 5, 1998, such parties were sent draft merger
agreements by the Company. On March 6, 1998, Parent indicated that if it went
forward with a transaction, it would only be willing to do so if, among other
things, the Company, Donnelley and the Executives were willing to enter into
the Stock Purchase Agreements. On March 8, 1998, the Company's
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Chairman met with the Chief Executive of Parent's Information Services
Division and was advised that, subject to reaching a resolution concerning the
lawsuit satisfactory to Parent, the requested extension of the Donnelley
commercial arrangements and execution of the Stock Purchase Agreements, Parent
was willing to acquire the Company for $31.50 in cash per Share. The next day,
Lehman Brothers advised the other five interested parties that they should
indicate in the next two days at what price and on what terms they were
interested in acquiring the Company. From March 10 up to the time of the Board
meeting on March 12, the Merger Agreement, the Stock Purchase Agreements, the
Donnelley extension and other documents were negotiated with Parent. From
March 10 until the March 12, 1998 Board meeting described below, the Company
and Lehman Brothers did not receive any indications of price or expressions of
interest from such other interested parties that were more definitive or more
favorable than those previously received. Certain of the expressions of
interest which had previously been received from such parties were subject to
financing contingencies.
On March 12, 1998, the Board met and approved the Merger Agreement and the
transactions contemplated thereby.
In approving the Merger Agreement and the transactions contemplated thereby
and recommending that all holders tender their Shares pursuant to the Offer,
the Board considered a number of factors, including the following:
(i) the Board's familiarity with, and information provided by the
Company's management as to, the business, financial condition, results of
operations, current business strategy and future prospects of the Company,
the nature of the markets in which the Company operates, the Company's
position in such markets, the historical and current market prices for the
Shares, including the information provided by Lehman Brothers as to the
Company's strategic and other alternatives;
(ii) the terms of the Merger Agreement, including (x) the proposed
structure of the Offer and the Merger involving an immediate cash tender
offer followed by a merger for the same consideration and (y) the fact that
financing is not a condition to the Offer and the Merger, thereby enabling
stockholders to obtain cash for their shares quickly;
(iii) that the per share price contemplated by the Merger Agreement, at
$31.50, represented a significant premium to the trading prices of the
Shares prior to the announcement of the process to seek strategic
alternatives, and, later, prior to the announcement of the execution of the
Merger Agreement, and represented the highest unconditional cash price any
potential acquiror was willing to offer;
(iv) the process engaged in by the Company's management and financial
advisors, which included the February 10, 1998 public announcement and
discussions with a significant number of potential acquirors, as a result
of which the Board had what it believed to be an accurate sense of the
values that could be achieved in a third party transaction;
(v) the presentation of Lehman Brothers at the March 12, 1998 Board
meeting and the opinion of Lehman Brothers to the effect that, as of such
date, and based on the assumptions made, matters considered and limits of
review set forth therein, the consideration to be received by the holders
of the Shares, other than Purchaser, any affiliates of Purchaser and any
holder of Dissenting Shares (the "Holders"), in the Offer and the Merger is
fair to the Holders, from a financial point of view (A COPY OF THE LEHMAN
BROTHERS OPINION IS ATTACHED TO THIS SOLICITATION/RECOMMENDATION STATEMENT
ON SCHEDULE 14D-9 AND FILED AS EXHIBIT 8 HERETO, IS INCORPORATED HEREIN BY
REFERENCE, AND STOCKHOLDERS ARE URGED TO READ SUCH OPINION CAREFULLY IN ITS
ENTIRETY);
(vi) that the Merger Agreement permits the Company to furnish nonpublic
information to, and to participate in negotiations with, any third party
that has submitted a Superior Proposal prior to the later of (x) 11:59 P.M.
Chicago time March 30, 1998 and (y) the expiration or termination of the
applicable waiting periods under the HSR Act, if the Board determines in
good faith that taking such action is necessary in the exercise of its
fiduciary obligations under applicable law and the Merger Agreement permits
the Company's Board to terminate the Merger Agreement in certain
circumstances in the exercise of its fiduciary duties;
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(vii) the termination provisions of the Merger Agreement, which under
certain circumstances could obligate the Company to pay termination fees to
Parent and reimburse Parent for its actual expenses incurred in connection
with the transaction, and the Board's belief that such fees and expense
reimbursement provisions would not deter a higher offer;
(viii) the desirability of providing liquidity to stockholders;
(ix) strategic considerations, such as the Company's competitive position
and the rapid changes currently occurring in the direct marketing, database
marketing and reference products and services business; and
(x) a consideration of alternatives to the sale of the Company, including
the development of proposals with other parties and continuing to maintain
the Company as a public corporation and not engaging in any extraordinary
transaction.
The foregoing discussion addresses the material information and factors
considered by the Board in its consideration of the Offer. In view of the
variety of factors and the amount of information considered, the Board did not
find it practicable to provide specific assessments of, quantify or otherwise
assign relative weights to the specific factors considered in reaching its
determination. The determination to recommend that stockholders accept the
Offer was made after consideration of all of the factors taken as a whole. In
addition, individual members of the Board may have given different weights to
different factors.
ITEM 5. PERSONS RETAINED, EMPLOYED OR TO BE COMPENSATED
The Company initially retained Lehman Brothers as its financial advisor with
respect to assisting the Company in exploring its strategic alternatives.
Pursuant to the initial engagement of Lehman Brothers on November 13, 1997 and
the engagement letter between Lehman Brothers and the Company dated February
10, 1998 (the "Engagement Letter"), the Company has agreed to pay Lehman
Brothers as follows: (i) a retainer of $250,000, payable to Lehman Brothers no
later than June 30, 1998; (ii) an opinion fee of $500,000 payable upon
delivery of each fairness opinion and (iii) if during the term of Lehman
Brothers' engagement under the Engagement Letter, or within 12 months after
the termination of Lehman Brothers' engagement thereunder, a sale (as defined
below) occurs, then the Company shall pay to Lehman Brothers a fee based upon
the value of the transaction. If the transactions contemplated by the Merger
Agreement are consummated, Lehman Brothers will receive aggregate fees of $8.3
million.
A "sale" means any transaction or series or combination of transactions,
other than in the ordinary course of business, whereby, directly or
indirectly, control of or a material interest in the Company or any of its
significant businesses, or a material amount of any of their respective
assets, is transferred for consideration, including, without limitation, by
means of a sale or exchange of capital stock or assets, a merger or
consolidation, a tender or exchange offer, a leveraged buy-out, a significant
minority investment, the formation of a joint venture or partnership, or any
similar transaction.
The Company has also agreed to reimburse Lehman Brothers for its reasonable
expenses (including, without limitation, professional and legal fees and
disbursements) incurred in connection with its engagement with respect to the
services to be rendered by it, and to indemnify Lehman Brothers against
certain liabilities in connection with its engagement.
In the Engagement Letter, the Company acknowledged that Lehman Brothers is a
full service securities firm and as such from time to time may effect
transactions for its own account or the account of its customers and hold long
or short positions in debt or equity securities of the companies which may be
the subject of the transactions contemplated by the Merger Agreement.
Except as described above, neither the Company, nor any person acting on its
behalf, currently intends to employ, retain or compensate any other person to
make solicitations or recommendations to stockholders on its behalf concerning
the Offer.
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ITEM 6. RECENT TRANSACTIONS AND INTENT WITH RESPECT TO SECURITIES
(a) To the knowledge of the Company, except as described in Schedule II
attached hereto, no transactions in Shares have been effected within the past
60 days by the Company or any executive officer, director, affiliate or
subsidiary of the Company. See also Item 8 below, which sets forth certain
information as to certain related matters.
(b) To the knowledge of the Company, its executive officers, directors,
affiliates and subsidiaries presently intend to tender, pursuant to the Offer,
or sell all Shares which are held of record or are beneficially owned by such
persons.
ITEM 7. CERTAIN NEGOTIATIONS AND TRANSACTIONS BY THE SUBJECT COMPANY
(a) Except as set forth in this Schedule 14D-9, the Company is not engaged
in any negotiation in response to the Offer which relates to or would result
in (i) an extraordinary transaction, such as a merger or reorganization,
involving the Company or any subsidiary of the Company; (ii) a purchase, sale
or transfer of a material amount of assets by the Company or any subsidiary of
the Company; (iii) a tender offer for or other acquisition of securities by or
of the Company; or (iv) any material change in the present capitalization or
dividend policy of the Company.
(b) None.
ITEM 8. ADDITIONAL INFORMATION TO BE FURNISHED
The following information is in addition to the information set forth in
Item 4.
Restated Certificate of Incorporation. The Company's Restated Certificate of
Incorporation (the "Restated Certificate of Incorporation") and By-Laws
contain certain provisions that may delay, defer or prevent a takeover of the
Company. The Board has the authority to issue up to 20,000,000 shares of
preferred stock, par value $.01 per share (the "Preferred Stock"), and to
determine the price, rights, preferences and restrictions, including voting
rights, of these shares, without further vote or action by the stockholders.
The rights of holders of Shares will be subject to, and may be adversely
affected by, the rights of holders of any Preferred Stock that may be issued
in the future. The Restated Certificate of Incorporation also provides for a
classified board of directors, with three classes of directors, each class
being elected for three-year, staggered terms, prohibits the removal of
directors except for "cause" and prohibits stockholder action by written
consent. In addition, the Company's By-laws include provisions establishing
advance notice procedures with respect to stockholder proposals and director
nominations and permits the calling of special stockholder meetings only by
the Board, the Chairman or the President. The Company has elected (effective
March 5, 1997) not to be governed by Section 203 of the General Corporation
Law of the State of Delaware, which, if applicable, would impose a three-year
moratorium on certain business combinations between the Company and an
"interested stockholder" (in general, a stockholder owning 15% or more of the
Company's outstanding voting stock).
The foregoing summary of the Restated Certificate of Incorporation is
qualified in its entirety by reference to the Restated Certificate of
Incorporation, a copy of which is filed as Exhibit 7 to this Statement and is
incorporated herein by reference.
The Rights Agreement. On February 24, 1997, the Board authorized the
issuance of one preferred share purchase right (a "Right") for each
outstanding Share. The description and terms of the Rights are set forth in a
Rights Agreement (the "Rights Agreement"), dated as of February 24, 1997,
between the Company and American Stock Transfer & Trust Company, as Rights
Agent (the "Rights Agent"). The distribution is payable to the stockholders of
record at the close of business on March 7, 1997 (the "Record Date") and with
respect to all Shares that are issued after the Record Date and prior to the
earliest of the Distribution Date (as defined in the Rights Agreement), the
redemption of the Rights, the exchange of the Rights and the expiration of the
Rights
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(and, in certain cases, following the Distribution Date). Each Right entitles
the registered holder to purchase from the Company one one-thousandth of a
share of a Junior Participating Preferred Stock, Series A, par value $.01 per
share, of the Company (the "Preferred Shares") at a price of $100.00 per one
one-thousandth of a Preferred Share (the "Purchase Price"), subject to
adjustment. On March 12, 1998, pursuant to the Merger Agreement, the Board
adopted a First Amendment to Rights Agreement (the "Rights Amendment")
pursuant to which the Rights Agreement was amended to exempt from its
operation the execution and delivery of the Merger Agreement and the Stock
Purchase Agreements and the consummation of the transactions contemplated
thereby.
The foregoing summary of the Rights is qualified in its entirety by
reference to the Rights Agreement and the Rights Amendment, copies of which
are filed as Exhibits 9 and 10 to this Statement and are incorporated herein
by reference.
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MATERIAL TO BE FILED AS EXHIBITS
The following Exhibits are filed herewith:
Exhibit 1--Agreement and Plan of Merger, dated as of March 12, 1998, by and
among Parent, Purchaser and the Company (filed as an exhibit to the Company's
Current Report on Form 8-K as filed on March 13, 1998, and incorporated herein
by reference).
Exhibit 2--Stock Purchase Agreement, dated as of March 12, 1998, between the
Company and Parent (filed as an exhibit to the Company's Current Report on
Form 8-K as filed on March 13, 1998, and incorporated herein by reference)).
Exhibit 3--Stock Purchase Agreement, dated as of March 12, 1998, between
R.R. Donnelley & Sons Company and Parent (filed herewith).
Exhibit 4--Form of Stock Purchase Agreements, dated as of March 12, 1998,
between Parent and each of Barton L. Faber, Ronald G. Eidell and Thomas J.
Quarles (filed herewith).
Exhibit 5--Confidentiality Agreement, dated February 6, 1998, by and between
Lehman Brothers, as financial advisor to and on behalf of the Company, and
Experian Corporation (filed herewith).
Exhibit 6--Letter to Stockholders of the Company, from Barton L. Faber,
dated March 16, 1998 (filed herewith).
Exhibit 7--Third Restated Certificate of Incorporation of the Company, as
amended (filed as an exhibit to the Company's Annual Report on Form 10-K for
the year ended December 31, 1996, and incorporated herein by reference).
Exhibit 8--Opinion of Lehman Brothers Inc., dated March 12, 1998 (filed
herewith).
Exhibit 9--Rights Agreement, dated as of February 24, 1997, between the
Company and American Stock Transfer & Trust Company (filed as an exhibit to
the Company's Registration Statement on Form 8-A, filed on February 26, 1997,
and incorporated herein by reference).
Exhibit 10--First Amendment to Rights Agreement, dated as of March 12, 1998
(filed herewith).
Exhibit 11--Employment Agreement between the Company and Barton L. Faber
(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).
Exhibit 12--Management Agreement between the Company and Barton L. Faber
(filed as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by reference).
Exhibit 13--Amendment to the Management Agreement between the Company and
Barton L. Faber (filed herewith).
Exhibit 14--Employment Agreement between the Company and Ronald G. Eidell
(filed as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference).
Exhibit 15--Management Agreement between the Company and Ronald G. Eidell
(filed as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference).
Exhibit 16--Amendment to the Management Agreement between the Company and
Ronald G. Eidell (filed herewith).
Exhibit 17--Employment Agreement between the Company and Thomas J. Quarles
(filed as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996 and incorporated herein by reference).
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Exhibit 18--Management Agreement between the Company and Thomas J. Quarles
(filed as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by reference).
Exhibit 19--Amendment to the Management Agreement between the Company and
Thomas J. Quarles (filed herewith).
Exhibit 20--Employment Agreement between the Company and Tery R. Larrew
(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).
Exhibit 21--Amendment to the Employment Agreement between the Company and
Tery R. Larrew (filed herewith).
Exhibit 22--Management Agreement between the Company and Tery R. Larrew
(filed as an exhibit to the Company's Annual Report on Form 10-K for the year
ended December 31, 1996, and incorporated herein by reference).
Exhibit 23--Amendment to the Management Agreement between the Company and
Tery R. Larrew (filed herewith).
Exhibit 24--Management Agreement between the Company and Philip H. Bonello
(filed herewith).
Exhibit 25--Amendment to the Management Agreement between the Company and
Philip H. Bonello (filed herewith).
Exhibit 26--Management Agreement between the Company and James R. Drake
(filed herewith).
Exhibit 27--Amendment to the Management Agreement between the Company and
James R. Drake (filed herewith).
Exhibit 28--Management Agreement between the Company and Prabhuling Patel
(filed herewith).
Exhibit 29--Amendment to the Management Agreement between the Company and
Prabhuling Patel (filed herewith).
Exhibit 30--Management Agreement between the Company and Mac Rodgers (filed
herewith).
Exhibit 31--Amendment to the Management Agreement between the Company and
Mac Rodgers (filed herewith).
Exhibit 32--Management Agreement between the Company and Kenneth A. Glowacki
(filed herewith).
Exhibit 33--Amendment to the Management Agreement between the Company and
Kenneth A. Glowacki (filed herewith).
Exhibit 34--Registration Rights Agreement, dated as of February 24, 1997,
between the Company and
R. R. Donnelley & Sons Company (filed as an exhibit to the Company's Current
Report on Form 8-K, dated February 24, 1997, and incorporated herein by
reference).
Exhibit 35--Acknowledgment and Agreement, dated as of February 24, 1997,
between the Company and R. R. Donnelley & Sons Company (filed as an exhibit to
the Company's Current Report on Form 8-K, dated February 24, 1997, and
incorporated herein by reference).
Exhibit 36--Letter Agreement dated March 12, 1998 between the Company and
R. R. Donnelley & Sons Company (filed herewith).
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Exhibit 37--Transition Services Agreement between the Company and R. R.
Donnelley & Sons Company (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).
Exhibit 38--Sales Agreement between the Company and R. R. Donnelley & Sons
Company (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).
Exhibit 39--Amendment dated March 12, 1998 to Sales Agreement between the
Company and R. R. Donnelley & Sons Company (filed herewith).
Exhibit 40--Data Center Services Agreement between the Company and R. R.
Donnelley & Sons Company (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).
Exhibit 41--Amendment dated March 12, 1998 to Data Center Services Agreement
between the Company and R. R. Donnelley & Sons Company (filed herewith).
Exhibit 42--Tax Allocation and Indemnification Agreement between the Company
and R. R. Donnelley & Sons Company (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).
Exhibit 43--Press Release, dated March 12, 1998 (filed as an exhibit to the
Company's Current Report on Form 8-K as filed on March 13, 1998, and
incorporated herein by reference).
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SCHEDULE I
Employment Contracts, Termination of Employment and Change-in-Control
Arrangements
Mr. Faber entered into a four-year employment agreement with the Company
commencing on June 19, 1996, the date of the closing of the IPO which provides
for a minimum annual base salary of $310,000. Mr. Eidell entered into a four-
year employment agreement with the Company commencing on June 19, 1996 which
provides for a minimum annual base salary of $230,000. Mr. Quarles entered
into a four-year employment agreement with the Company commencing on June 19,
1996 which provides for a minimum annual base salary of $230,000.
Mr. Faber's employment agreement provides for a severance payment equal to
(i) one and one-half times base salary (one times base salary for each of
Messrs. Eidell and Quarles) minus the amount of any disability benefits where
termination is by reason of disability or (ii) one and one-half times base
salary (one times base salary for each of Messrs. Eidell and Quarles) where
termination is by the Company for any reason other than for cause or by the
executive upon breach by the Company of the agreement or for good reason. A
severance payment will not be payable where termination is by the Company for
cause, by the executive for any reason other than upon breach by the Company
of the agreement or for good reason, or by reason of the executive's
retirement or death. Each agreement also contains customary provisions
providing for the non-disclosure of confidential information. Mr. Faber's
agreement contains an agreement not to compete with the Company for a period
of 18 months after the termination of the agreement. Each of Mr. Eidell's and
Mr. Quarles' agreements contains an agreement not to compete with the Company
for a period of 12 months after the termination of the agreement.
Mr. Larrew entered into an employment agreement with Customer Insight
Company, a wholly-owned subsidiary of the Company ("CIC"), in connection with
the Company's acquisition of CIC in 1994. The agreement required CIC to pay
Mr. Larrew a retention bonus equal to $300,000 if Mr. Larrew was employed by
CIC on the third anniversary of CIC's acquisition by the Company. This
retention bonus was paid to Mr. Larrew in 1997. In addition, the Company has
agreed to pay Mr. Larrew another retention bonus equal to $300,000 if Mr.
Larrew is employed by the Company on June 16, 2000. Pursuant to the agreement,
Mr. Larrew agreed not to compete with CIC or any affiliate of CIC within North
America and Europe during the term of the agreement and, upon the prior
written notice from CIC and the payment of $100,000 in four quarterly
installments, for one year after the termination of the agreement.
Each of Messrs. Faber, Eidell, Larrew, Quarles, Bonello, Drake, Glowacki,
Patel and Rodgers have entered into Management Agreements with the Company
which provide severance benefits in the event of a change in control (as
defined in the agreements) of the Company followed by termination of
employment. The consummation of the Offer will constitute a change in control
under these agreements. These agreements provide that if the executive's
employment is terminated following a change in control of the Company unless
such termination is (a) by the Company for cause (as defined in the
agreements), (b) as a consequence of death or disability (as defined in the
agreements), or (c) by the executive without Good Reason (as defined in the
agreements), the executive will receive certain payments and benefits. These
payments and benefits include (i) a lump sum payment equal to up to three
times (two times in the case of the agreements of Messrs. Larrew, Bonello,
Drake, Glowacki, Patel and Rodgers) the executive's current planned
compensation (salary and bonus), (ii) an amount in cash equal to three years
(two years in the case of the agreements of Messrs. Larrew, Bonello, Drake,
Glowacki, Patel and Rodgers) of additional accrued benefits under the Pension
Plan and (iii) life, disability, accident and health insurance benefits for a
period of 36 months (24 months in the case of the agreements of Messrs.
Larrew, Bonello, Drake, Glowacki, Patel and Rodgers) after termination of
employment. These agreements also provide that if, after a change in control
of the Company, any compensation paid to the executive, whether or not
pursuant to such agreement, is subject to the federal excise tax on "excess
parachute payments," the Company will pay to the executive such additional
amount as may be necessary so that the executive realizes, after the payment
of such excise tax and any income tax or excise tax on such additional amount,
the amount of such compensation.
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Certain Transactions
Prior to completion of the IPO, the Company was a wholly-owned subsidiary of
Donnelley. During 1997, the Company had no outstanding indebtedness to
Donnelley and Donnelley owned approximately 38.2% of the outstanding Shares.
In addition, Messrs. Ward and Murphy, who are directors of the Company, are
employees of Donnelley. Mr. Ward is President and Chief Operating Officer of
Donnelley and Mr. Murphy is Vice President and Corporate Controller of
Donnelley.
Prior to completion of the IPO, the Company obtained certain services from,
and provided certain services to, Donnelley, participated in a number of
employee benefit plans maintained by Donnelley and was included as part of
Donnelley's federal income tax and certain other tax returns. In connection
with the IPO, the Company entered into certain agreements with Donnelley
relating to these matters. None of these agreements resulted from "arm's
length" negotiations.
Pursuant to a Transition Services Agreement between Donnelley and the
Company, 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 Donnelley certain financial information. The
Transition Services Agreement was in effect until December 31, 1996, except
with respect to tax services, the provision of which ended on January 31,
1997, and with respect to certain legal services, the provision of which ended
on June 30, 1997. Total payments by the Company to Donnelley for services
performed pursuant to the Transition Services Agreement were approximately
$16,000 in 1997.
Pursuant to a Sales Agreement between Donnelley and the Company, Donnelley
agreed that, to the extent Donnelley identifies certain opportunities for
sales of services of the type that the Company provides from among Donnelley's
current and prospective customers, it will obtain detailed requirements
regarding the sales opportunity and, prior to soliciting any competitor of the
Company to provide the services, request a quotation from the Company for the
Company's terms of providing the services. If the Company furnishes a
quotation and if Donnelley successfully sells the services of the Company to
the customer, Donnelley will, following performance of the services, invoice
and seek to collect the amounts owed from the customer for the services
provided by the Company. Upon collection of such amounts from the customer,
Donnelley will pay over the collected amount less a specified percentage
which, pursuant to an amendment to the Sales Agreement dated March 12, 1998,
is generally four percent. During 1997, sales by Donnelley of the Company's
products and services approximated $21.9 million. Pursuant to the amendment
described above, the term of this Agreement was extended until December 31,
2000. This amendment is effective upon the consummation of the Offer, but
should the consummation of the Offer not occur prior to May 31, 1998, this
amendment shall be null and void.
Pursuant to a Data Center Services Agreement between Donnelley and the
Company, the Company provides to Donnelley general computer and data
processing services, including mainframe processing and technical software
systems support and data processing for Donnelley's internal business
purposes. Pursuant to the Data Center Services Agreement, Donnelley agreed to
pay the Company an annualized fee of $4.3 million for the Company's services
under the agreement during the period ended on December 31, 1996 and,
thereafter, the yearly fee would be adjusted according to changes in
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 would not exceed
six percent per year. In 1997, Donnelley paid approximately $4.4 million to
the Company in connection with such services. Pursuant to an amendment to the
Data Center Services Agreement dated March 12, 1998, the term of this
Agreement was extended until December 31, 1999 and certain performance
standards were added. After December 31, 1999, the Data Center Services
Agreement will automatically renew unless terminated by either party upon six
months' notice. This amendment is effective upon consummation of the Offer,
but should the consummation of the Offer not occur prior to May 31, 1998, this
amendment shall be null and void.
Prior to completion of the IPO, the Company was included in the consolidated
federal income tax return of Donnelley and filed on a combined basis with
Donnelley in certain states. Thus, rather than paying income taxes directly in
these jurisdictions, the Company made tax sharing payments to Donnelley
pursuant to Donnelley's
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tax allocation policy. In general, 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. Upon completion of the IPO, the Company no longer was permitted to be
included in such consolidated and combined tax returns. Instead, it began to
file 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 between Donnelley and the Company, however, the Company remained
obligated to pay to Donnelley any income taxes shown on such consolidated and
combined tax returns, generally to the extent attributable to the Company, for
the tax period (the "Interim Period") beginning on January 1, 1996 and ending
on June 19, 1996 (to the extent that it has not previously paid such amounts
to Donnelley). In addition, the Tax Allocation and Indemnification Agreement
provides that 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 would pay to 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 Donnelley federal consolidated group
(whether or not such taxes are attributable to the Company). Donnelley has
agreed to indemnify the Company against such liability and any similar
liability under state and local law. 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 Donnelley or paid by the Company to
Donnelley). During 1997, the Company did not pay any amounts to Donnelley
pursuant to the Tax Allocation and Indemnification Agreement.
On February 24, 1997, the Board of Directors of the Company adopted a
stockholder rights plan (the "Rights Plan"). Contemporaneously with the
adoption of the Rights Plan, the Company entered into a Registration Rights
Agreement and a Letter Agreement with Donnelley. Pursuant to the Registration
Rights Agreement, the Company granted Donnelley, among other things, the right
to four demands for the registration of the Common Stock owned by it under the
federal securities laws and the right to be included in other registrations of
the Common Stock on behalf of the Company or others. In consideration of the
grant of such registration rights, Donnelley entered into the Letter Agreement
whereby it agreed, among other things, not to oppose the adoption of the
Rights Plan and not to seek the redemption of the rights or the termination of
the Rights Plan. In addition, the Letter Agreement sets forth the number of
directors of the Company that Donnelley is entitled to elect based on the
level of Donnelley's ownership in the Company. As a condition and inducement
to Parent and Purchaser to enter into the Merger Agreement, the Company and
Donnelley entered into an amendment to the Letter Agreement that provided for
the termination of the Letter Agreement effective upon the consummation of the
Offer.
24
<PAGE>
SCHEDULE II
The following purchases of Shares were made on December 31, 1997 by the
executive officers listed below pursuant to the Company's Employee Stock
Purchase Plan:
<TABLE>
<CAPTION>
EXECUTIVE OFFICER NUMBER OF SHARES
----------------- ----------------
<S> <C>
James R. Drake........................................... 197.368
Ronald G. Eidell......................................... 78.947
Barton L. Faber.......................................... 400
Tery R. Larrew........................................... 184.539
Prabhuling Patel......................................... 254.933
Mac E. Rodgers........................................... 296.053
</TABLE>
As part of the annual stock option grants to employees of the Company on
February 5, 1998, the Human Resources Committee of the Board of Directors of
the Company granted stock options in the following amounts to the executive
officers listed below:
<TABLE>
<CAPTION>
NUMBER OF SHARES
UNDERLYING
EXECUTIVE OFFICER OPTIONS GRANTED
----------------- ----------------
<S> <C>
Philip H. Bonello........................................ 7,000
James R. Drake........................................... 25,000
Ronald G. Eidell......................................... 30,000
Barton L. Faber.......................................... 50,000
Kenneth A. Glowacki...................................... 7,000
Tery R. Larrew........................................... 25,000
Prabhuling Patel......................................... 15,000
Thomas J. Quarles........................................ 30,000
Mac E. Rodgers........................................... 25,000
</TABLE>
25
<PAGE>
SIGNATURE
After reasonable inquiry and to the best of its knowledge and belief, the
undersigned certifies that the information set forth in this statement is
true, complete and correct.
Metromail Corporation
/s/ Thomas J. Quarles
By: _________________________________
Name: Thomas J. Quarles
Title: Senior Vice President,
General Counsel,
Chief Administrative Officer
and Secretary
Dated: March 16, 1998
26
<PAGE>
ANNEX I
INFORMATION STATEMENT PURSUANT TO
SECTION 14(F) OF THE SECURITIES
EXCHANGE ACT OF 1934 AND RULE 14F-1 THEREUNDER
This Information Statement is being mailed on or about March 16, 1998 as a
part of the Solicitation/Recommendation Statement on Schedule 14D-9 (the
"Schedule 14D-9") of Metromail Corporation (the "Company") to the holders of
record of shares of Common Stock, par value $.01 per share, of the Company
(the "Shares" or "Common Stock"). You are receiving this Information Statement
in connection with the possible election of persons designated by Parent (as
defined below) to a majority of the seats on the Board of Directors of the
Company (the "Board of Directors").
On March 12, 1998, the Company, The Great Universal Stores P.L.C., a company
incorporated under the laws of England ("Parent"), and Great Universal
Acquisition Corp. ("Purchaser"), a Delaware corporation and an indirect wholly
owned subsidiary of Parent, entered into an Agreement and Plan of Merger (the
"Merger Agreement") and, in accordance with the terms and subject to the
conditions therein, (i) Parent and Purchaser commenced a tender offer (the
"Offer") for any and all outstanding Shares at a price of $31.50 per Share,
net to the seller in cash, without interest thereon (the "Purchase Price"),
and (ii) at the Effective Time (as such term is defined in the Merger
Agreement), Purchaser will be merged with and into the Company (the "Merger").
As a result of the Offer and the Merger, the Company will become an indirect
and wholly owned subsidiary of Parent.
The Merger Agreement provides that, promptly upon the purchase of Shares by
Parent or Purchaser or any of its Subsidiaries pursuant to the Offer and/or
pursuant to any of the Stock Purchase Agreements (as defined in the Merger
Agreement) which represents at least a majority of the outstanding Shares,
Purchaser will be entitled to designate up to such number of directors,
rounded up to the next whole number, on the Board of Directors as is equal to
the number of directors which is the product of (i) the total number of
directors on the Board of Directors (giving effect to the directors designated
by Purchaser pursuant to this sentence) multiplied by (ii) the percentage that
the number of Shares so accepted for payment bears to the total number of
Shares then outstanding. In furtherance thereof, the Company will, upon
request of Purchaser, use its reasonable best efforts promptly either to
increase the size of its Board of Directors or secure the resignations of such
number of its incumbent directors, or both, as is necessary to enable
Purchaser's designees to be so elected to the Board of Directors, and shall
take all actions available to the Company to cause Purchaser's designees to be
so elected. At such time, the Company will, if requested by Purchaser, also
cause persons designated by Purchaser to constitute at least the same
percentage (rounded up to the next whole number) as is on the Board of
Directors of (i) each committee of the Board of Directors, (ii) each board of
directors (or similar body) of each subsidiary of the Company and (iii) each
committee (or similar body) of each such board. Notwithstanding the foregoing,
the Company, Parent and Purchaser have agreed that, until the Effective Time,
the Board of Directors shall have at least two directors who are directors as
of the date of the Merger Agreement (the "Independent Directors"); provided,
however, that, in such event, if the number of Independent Directors shall be
reduced below two, the remaining Independent Director shall be entitled to
designate a person to fill such vacancy who shall be deemed to be an
Independent Director for purposes of the Merger Agreement or, if no
Independent Director then remains, the other directors shall designate two
persons to fill such vacancies who shall not be stockholders, affiliates or
associates of Purchaser or Parent and such persons shall be deemed to be
Independent Directors for purposes of the Merger Agreement. This Information
Statement is required by Section 14(f) of the Securities Exchange Act of 1934,
as amended (the "Exchange Act"), and Rule 14f-1 thereunder.
The following information is given as of the date of the Schedule 14D-9,
March 16, 1998, unless indicated otherwise. You are urged to read this
Information Statement carefully. You are not, however, required to take any
action. Capitalized terms used herein and not otherwise defined herein shall
have the meaning set forth in the Schedule 14D-9.
1
<PAGE>
Pursuant to the Merger Agreement, the Purchaser commenced the Offer on March
16, 1998. The Offer is scheduled to expire at 12:00 midnight, New York City
time, on Friday, April 10, 1998, unless extended.
The information contained in this Information Statement concerning Parent
and Purchaser has been furnished to the Company by the Parent, and the Company
assumes no responsibility for the accuracy or completeness of such
information.
CERTAIN INFORMATION WITH RESPECT TO THE COMPANY
VOTING RIGHTS AND PROCEDURES
The Common Stock is the only issued and outstanding class of stock. At the
close of business on March 12, 1998, the Company had issued and outstanding
22,516,996 shares of Common Stock. Each Share entitles the holder thereof to
one vote on each matter submitted to a vote of stockholders.
BOARD OF DIRECTORS
The Company's Certificate of Incorporation provides for three classes of
directors of as nearly equal size as possible, and further provides that the
total number of directors shall be determined by resolution adopted by a
majority of the directors, except that the total number of directors shall not
be less than one nor more than fifteen. The term of each class of directors is
three years and the term of one class expires each year in rotation.
INFORMATION ABOUT DIRECTORS
Director of the Second Class
Term Expires at the 1998 Annual Meeting
Robert C. McCormack has been a director of the Company since August 1996.
Mr. McCormack is a founding partner of Trident Capital Inc., a private equity
investment firm that invests in information and business services companies.
Prior to founding Trident Capital, he served as Assistant Secretary of the
Navy (financial management) and Comptroller of the Navy from 1990 to 1993.
From 1987 to 1990, he also served as Deputy Under Secretary of Defense for
Acquisitions (acting), Deputy Under Secretary of Defense for Industrial and
International Programs and Deputy Assistant Secretary of Defense for
Production Support. From 1981 to 1987, Mr. McCormack was vice president,
principal and managing director of Morgan Stanley & Co. Incorporated. He is
also a member of the board of directors of Illinois Tool Works, Inc. and DeVry
Inc. Mr. McCormack is Chairman of the Human Resources and Audit Committees.
Age 58.
Directors of the Third Class
Terms Expire in 1999
Barton L. Faber has been Chairman of the Company since January 1996,
President and Chief Executive Officer since January 1998 and a director of the
Company since July 1995. He served as President, Information Resources of R.
R. Donnelley & Sons Company ("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 Document
Sciences Corporation and Xeikon N.V. Age 50.
Peter F. Murphy has been a director of the Company since February 1996 and
has been Vice President and Corporate Controller of R. R. Donnelley since
April 1995. From June 1994 until April 1995, Mr. Murphy was
2
<PAGE>
Director, Financial Reporting of R. R. Donnelley. Prior to joining R. R.
Donnelley, he was with Kraft General Foods, Inc. where he served as Assistant
Controller-International from May 1992 until May 1994 and Assistant Corporate
Controller from 1989 until 1992, and was general practice manager with Coopers
& Lybrand from 1983 until 1989. Age 42.
Directors of the First Class
Terms Expire in 2000
Jonathan P. Ward has been a director of the Company since February 1996 and
has been President and Chief Operating Officer of R. R. Donnelley since
October 1997. Mr. Ward joined R. R. Donnelley in 1977 and has held a number of
positions, including Executive Vice President and Sector President, Commercial
Print Sector of R. R. Donnelley from 1995 until October 1997, Sector
President, Commercial Print Sector of R. R. Donnelley in 1994, President,
Merchandise Media of R. R. Donnelley from 1992 to 1994 and President,
Financial Services of R. R. Donnelley in 1991. Mr. Ward is also a member of
the board of directors of Siegwerk, Inc. Age 43.
Donald N. Boyce has been a director of the Company since July 1997. Mr.
Boyce is the Chairman and Chief Executive Officer of IDEX Corporation, a
manufacturer of fluid handling and industrial products. He has held that
position since 1988. Mr. Boyce is a member of the board of directors of United
Dominion Industries. Mr. Boyce is a member of the Human Resources and Audit
Committees. Age 59.
MEETINGS AND COMMITTEES OF THE BOARD
The Board of Directors has two standing committees: the Human Resources
Committee and the Audit Committee. The Board of Directors does not have a
Nominating Committee or any committee performing similar functions. The Board
of Directors met eight times during 1997. During 1997, each director was
present for 75% or more of the total number of meetings of the Board of
Directors and Committees of the Board of which such director was a member.
The Human Resources Committee makes recommendations to the Board of
Directors regarding the selection, retention and compensation of senior
officers of the Company, the overall compensation strategy of the Company, the
compensation of non-employee directors and management succession. The Human
Resources Committee also is responsible for administering and making grants
under the Amended and Restated Metromail Corporation 1996 Stock Incentive Plan
(the "1996 Plan") and the Metromail Corporation 1996 Broad-Based Employee
Stock Plan and is responsible for administering the Metromail Corporation 1997
Employee Stock Purchase Plan. The Human Resources Committee met twice in 1997.
The Audit Committee is responsible for reviewing with management the
financial controls, accounting and audit and reporting activities of the
Company. The Audit Committee reviews the qualifications of the Company's
independent auditors, makes recommendations to the Board of Directors as to
the selection of independent auditors, reviews the scope, fees and results of
any audit and reviews non-audit services and related fees provided by the
independent auditors. The Audit Committee also reviews and reports to the
Board of Directors regarding the implementation of the Company's Standards of
Ethics and Business Conduct and the Company's Information Practices Group. The
Audit Committee met twice in 1997.
3
<PAGE>
EXECUTIVE OFFICERS
Information with respect to those individuals who served as executive
officers of the Company as of December 31, 1997 is set forth below.
<TABLE>
<CAPTION>
NAME AGE POSITION
---- --- --------
<C> <S> <C>
Barton L. Faber 50 Chairman, Chief Executive Officer, President and Director (1)
Susan L. Henricks 47 Former President and Chief Executive Officer and Director (1)
Philip H. Bonello 46 Senior Vice President, Information (2)
James R. Drake 36 President, Mail Production Services
Ronald G. Eidell 53 Senior Vice President and Chief Financial Officer
Kenneth A. Glowacki 45 Vice President, Finance
Tery R. Larrew 43 President, Database Marketing Services and President, Customer
Insight Company
Thomas J. Quarles 48 Senior Vice President, General Counsel, Chief Administrative Officer
and Secretary
Mac E. Rodgers 38 President, Information Services
</TABLE>
- --------
(1) Effective January 2, 1998, Ms. Henricks resigned as President and Chief
Executive Officer and a director of the Company. Effective with Ms.
Henricks' resignation, Mr. Faber was elected to the additional positions
of President and Chief Executive Officer of the Company.
(2) Effective January 1, 1998, Mr. Bonello became Senior Vice President,
Information of the Company. Prior to that time, Mr. Bonello was Senior
Vice President and General Manager, On-Line Services of the Company.
Barton L. Faber has been Chairman of the Company since January 1996,
President and Chief Executive Officer since January 1998 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 Document Sciences Corporation and Xeikon
N.V.
Susan L. Henricks resigned from the Company effective January 2, 1998. Prior
to that time, Ms. Henricks had been a director of the Company since January
1996 and 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, Information of the
Company since January 1998. Since joining the Company in 1986, he was Senior
Vice President and General Manager, On-Line Services of the Company from July
1995 to January 1998, 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.
4
<PAGE>
James R. Drake has served as President, Mail Production Services since
January 1997. Since joining the Company in 1984, he served as Senior Vice
President and General Manager, Mail Production Services from 1995 to 1996,
Vice President, Plant Manager from 1989 to 1995, and has held various other
managerial and financial positions. For the six-month period between September
1995 and March 1996, Mr. Drake left the Company and served as President of
INSYNQ Services, a mailing, sorting and distribution venture.
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.
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.
Mac E. Rodgers has served as President, Information Services of the Company
since November 1997. Mr. Rodgers joined the Company in 1984 and served as
Senior Vice President and General Manager, Information Services from December
1996 to November 1997, 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.
5
<PAGE>
BENEFICIAL OWNERSHIP OF COMMON STOCK
OWNERSHIP BY CERTAIN BENEFICIAL OWNERS
The following table sets forth certain information with respect to the
beneficial ownership of the outstanding Common Stock by each person known to
the Company to be the beneficial owner of more than 5% of the outstanding
Common Stock as of December 31, 1997. The information set forth below is based
on information available to the Company and a review of statements filed with
the Securities and Exchange Commission (the "Commission") pursuant to Sections
13(d) and 13(g) of the Securities Exchange Act of 1934 (the "Exchange Act").
<TABLE>
<CAPTION>
SHARES OF PERCENTAGE OF
COMMON STOCK OUTSTANDING
NAME AND ADDRESS BENEFICIALLY OWNED SHARES OWNED
---------------- ------------------ -------------
<S> <C> <C>
R. R. Donnelley & Sons Company......... 8,600,000 38.2%
77 West Wacker Drive
Chicago, Illinois 60601
David L. Babson and Company
Incorporated.......................... 1,495,740 6.6%
One Memorial Drive
Cambridge, Massachusetts 02142
Snyder Capital Management, L.P......... 1,335,700 5.9%
350 California Street, Suite 1460
San Francisco, California 94104
</TABLE>
OWNERSHIP BY DIRECTORS AND EXECUTIVE OFFICERS
The following table sets forth certain information with respect to the
beneficial ownership of the outstanding Common Stock as of December 31, 1997
by (i) each director of the Company, (ii) each of the five executive officers
of the Company named in the table under "Compensation of Directors and
Executive Officers--Summary Compensation Table," and (iii) all directors and
officers of the Company as a group. Unless otherwise indicated, all persons
listed have sole voting and dispositive power over the shares beneficially
owned. For more information regarding stock ownership and stock options, see
"Certain Stock Ownership Information" in, and Schedule II to, the Schedule
14D-9.
<TABLE>
<CAPTION>
SHARES OF
COMMON STOCK PERCENTAGE OF
BENEFICIALLY OUTSTANDING
NAME OWNED SHARES OWNED
---- ------------ -------------
<S> <C> <C>
Barton L. Faber............................... 61,920(1) *
Susan L. Henricks............................. 49,242(2) *
Ronald G. Eidell.............................. 24,214(3) *
Donald N. Boyce............................... 2,000(4) *
Robert C. McCormack........................... 18,200(5) *
Peter F. Murphy............................... 6,000(5) *
Tery R. Larrew................................ 13,348(6) *
Thomas J. Quarles............................. 18,500(7) *
Jonathan P. Ward.............................. 8,500(8) *
Directors and executive officers as a group
(13 persons)................................. 255,954(9) 1.1%
</TABLE>
- --------
*Less than 1%.
(1) Includes 12,750 shares of restricted Common Stock that vest in increments
of 4,250 shares on each of June 19, 1998, 1999 and 2000. Also includes
42,500 shares which are not currently owned but which could be acquired
by exercise of stock options.
(2) Includes 42,500 shares which are not currently owned but which could be
acquired by exercise of stock options. Excludes 12,750 shares of
restricted Common Stock that were forfeited upon Ms. Henricks'
resignation as President and Chief Executive Officer and a director of
the Company, effective January 2, 1998.
6
<PAGE>
(3) Includes 16,000 shares which are not currently owned but which could be
acquired by exercise of stock options.
(4) Includes 1,000 shares of restricted Common Stock that vest on July 28,
2000.
(5) Includes 1,000 shares of restricted Common Stock that vest on September
1, 1999. Also includes 5,000 shares which are not currently owned but
which could be acquired by exercise of stock options.
(6) Includes 12,500 shares which are not currently owned but which could be
acquired by exercise of stock options.
(7) Includes 17,500 shares which are not currently owned but which could be
acquired by exercise of stock options.
(8) Includes 1,000 shares of restricted Common Stock that vest on September
1, 1999. Also includes 7,500 shares which are not currently owned but
which could be acquired by exercise of stock options.
(9) Includes the options and the shares of restricted Common Stock described
in the notes above. Also includes 50,000 shares which are not currently
owned but which could be acquired by exercise of stock options by the
four executive officers not listed in the above table.
SECTION 16(A) BENEFICIAL OWNERSHIP REPORTING COMPLIANCE
Section 16(a) of the Exchange Act requires the Company's directors, officers
and certain stockholders to file with the Commission an initial statement of
beneficial ownership and certain statements of changes in beneficial ownership
of equity securities of the Company. During 1997, none of such directors,
officers or stockholders were late in filing their required statements under
Section 16(a).
COMPENSATION OF DIRECTORS AND EXECUTIVE OFFICERS
SUMMARY COMPENSATION TABLE
The following table sets forth compensation information for the Company's
Chairman and the other four most highly compensated executive officers of the
Company serving as such on December 31, 1997. Information for prior years is
omitted in accordance with the rules of the Commission.
<TABLE>
<CAPTION>
ANNUAL COMPENSATION LONG-TERM COMPENSATION
----------------------------- -------------------------------
AWARDS PAYOUTS
OTHER ----------------------- ------- ALL
ANNUAL RESTRICTED SECURITIES OTHER
COMPEN- STOCK UNDERLYING LTIP COMPEN-
NAME AND SALARY BONUS SATION AWARDS(S) OPTIONS/SARS PAYOUTS SATION
PRINCIPAL POSITION YEAR ($) ($) ($) ($)(1) (#)(2) ($) ($)
------------------ ---- ------- ------- ------- ---------- ------------ ------- -------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Barton L. Faber......... 1997 310,008 62,001 0 0 25,000 0 0
Chairman, President and 1996 310,008 106,764 13,033 357,000 170,000 0 7,864
Chief Executive Officer
(3) 1995 275,000 100,047 10,016 286,875 13,500 220,559 4,665
Susan L. Henricks....... 1997 280,000 56,000 0 0 20,000 0 6,923(5)
Former President and 1996 245,667 118,620 8,694 357,000 170,000 0 6,412
Chief Executive Officer
(4) 1995 216,233 70,420 6,716 286,875 12,000 0 0
Ronald G. Eidell........ 1997 230,004 34,500 0 0 13,000 0 1,650(5)
Senior Vice President
and 1996 123,149(6) 67,949 9,917 0 64,000 0 5,271
Chief Financial Officer
Tery R. Larrew.......... 1997 189,583 411,475(7) 0 0 10,000 0 0
President, Database
Marketing 1996 156,000 113,568 8,985 0 50,000 0 0
Services and President, 1995 147,710 109,008 2,583 0 6,000 0 0
Customer Insight
Company
Thomas J. Quarles....... 1997 230,004 34,500 0 0 13,000 0 5,316(5)
Senior Vice President,
General 1996 123,149(6) 67,949 9,383 0 70,000 0 0
Counsel, Chief
Administrative
Officer and Secretary
</TABLE>
7
<PAGE>
- --------
(1) All 1996 amounts reflect the value of restricted stock awards of Company
Common Stock and all 1995 amounts reflect the value of restricted stock
awards of R. R. Donnelley common stock. As of December 31, 1997, both Mr.
Faber and Ms. Henricks held 12,750 shares of restricted Company Common
Stock valued at $227,906 in the aggregate. Values of restricted stock
awards shown in the Summary Compensation Table are based on the closing
price of the Company Common Stock or R. R. Donnelley common stock on the
respective dates of grant. Dividends are paid on restricted Company
Common Stock at the same rate and at the same time as on the Company
Common Stock. Such restricted Company Common Stock vests in increments of
4,250 shares on each of June 19, 1998, 1999 and 2000.
(2) The security underlying the stock options reflected in this column for
1996 and 1997 is Company Common Stock and for 1995 is R. R. Donnelley
common stock.
(3) Until June 19, 1996, the compensation of Mr. Faber was paid by R. R.
Donnelley.
(4) Ms. Henricks resigned as President and Chief Executive Officer and a
director of the Company, effective January 2, 1998.
(5) Premiums paid by the Company in connection with whole life insurance
policies.
(6) Reflects salary paid by the Company for the period beginning on June 19,
1996. Prior to that date, Messrs. Eidell and Quarles were employees of R.
R. Donnelley.
(7) Includes payment to Mr. Larrew of a $300,000 retention bonus payable
pursuant to his employment agreement with Customer Insight Company, a
wholly-owned subsidiary of the Company ("CIC"), which provided that if Mr.
Larrew was employed by CIC on the third anniversary of the Company's
acquisition of CIC, he would receive such bonus.
OPTION GRANTS IN LAST FISCAL YEAR
The following table sets forth information for the individuals named in the
Summary Compensation Table regarding grants in 1997 of options to purchase
Common Stock.
<TABLE>
<CAPTION>
POTENTIAL
REALIZABLE
VALUE AT
ASSUMED ANNUAL
RATES OF STOCK
PRICE
APPRECIATION
INDIVIDUAL GRANTS FOR OPTION TERM
-------------------------------------------------------------- ---------------
NUMBER OF % OF TOTAL EXERCISE
SECURITIES UNDERLYING OPTIONS GRANTED TO PRICE EXPIRATION
NAME OPTIONS GRANTED (#)(1) EMPLOYEES IN 1997 ($/SHARE) DATE 5%($) 10%($)
- ---- ---------------------- ------------------ --------- ---------- ------- -------
<S> <C> <C> <C> <C> <C> <C>
Barton L. Faber......... 25,000 5.8% $19.25 7/29/07 302,656 766,989
Susan L. Henricks....... 20,000(2) 4.6% $19.25 7/29/07 242,124 613,591
Ronald G. Eidell........ 13,000 3.0% $19.25 7/29/07 157,380 398,834
Tery R. Larrew.......... 10,000 2.3% $19.25 7/29/07 121,062 306,795
Thomas J. Quarles....... 13,000 3.0% $19.25 7/29/07 157,380 398,834
</TABLE>
- --------
(1) Each of the options becomes exercisable in three annual 33 1/3%
installments on each of the first three anniversaries of the date of
grant, unless the vesting schedule is accelerated to become fully
exercisable upon a change of control as defined in the 1996 Plan or after
the first anniversary of the date of grant upon death, retirement or
disability.
(2) The options granted to Ms. Henricks during 1997 were canceled upon her
resignation from the Company.
AGGREGATED OPTION EXERCISES IN 1997 AND FISCAL YEAR-END OPTION VALUES
The following table sets forth information for the individuals named in the
Summary Compensation Table regarding their holdings of unexercised options to
purchase Common Stock as of December 31, 1997. None of the named individuals
exercised options to purchase Common Stock in 1997.
8
<PAGE>
<TABLE>
<CAPTION>
NUMBER OF SECURITIES VALUE OF UNEXERCISED
UNDERLYING UNEXERCISED IN-THE-MONEY OPTIONS
OPTIONS AT DECEMBER 31, 1997 AT DECEMBER 31, 1997 ($)
NAME EXERCISABLE/UNEXERCISABLE EXERCISABLE/UNEXERCISABLE
- ---- ---------------------------- -------------------------
<S> <C> <C>
Barton L. Faber.......... 42,500/152,500 -0-
Susan L. Henricks........ 42,500/147,500(1) -0-
Ronald G. Eidell......... 16,000/61,000 -0-
Tery R. Larrew........... 12,500/47,500 -0-
Thomas J. Quarles........ 17,500/65,500 -0-
</TABLE>
- --------
(1) Ms. Henricks' unexercisable options were canceled upon her resignation
from the Company and her exercisable options will be canceled if not
exercised on or prior to April 2, 1998.
RETIREMENT BENEFITS
Under the Metromail Corporation Pension Plan (the "Pension Plan"), employees
who met the eligibility requirements accrued in 1997 an annual retirement
benefit computed at the rate of 1.5% on compensation up to "covered
compensation," and 2% on compensation in excess of "covered compensation" but
not in excess of $160,000 (the maximum amount of compensation for 1997 on
which benefits can accrue under current law). The compensation covered by the
Pension Plan includes wages and salaries, supplementary compensation and
commissions. An employee's "covered compensation" for a year is the average of
the Social Security wage bases for the 35-year period ending with such year.
Benefits are paid monthly after retirement for the life of the participant
(straight life annuity amount) or, if the participant is married or has
elected an optional benefit form, in an actuarially reduced amount for the
life of the participant and the participant's surviving spouse or other
surviving person named as a contingent member. 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 actual
retirement benefits is limited by such provisions, an amount equal to any
reduction in retirement benefits will be paid as a supplemental benefit under
the Unfunded Supplemental Benefit Plan (the "Supplemental Plan") adopted by
the Board of Directors in 1995.
The following table contains information concerning annual benefits payable
pursuant to the Pension Plan and the Supplemental Plan on a straight life
annuity basis upon retirement at age 65 for the individuals named in the
Summary Compensation Table. These benefits include the annual benefits to be
paid at age 65 computed on service through December 31, 1997, estimated
additional annual benefits which may be earned in the future, assuming the
individuals continue in the Company's employ to age 65 and current
compensation levels remain unchanged, and total estimated annual benefits on
retirement at age 65.
<TABLE>
<CAPTION>
ESTIMATED ADDITIONAL
ANNUAL BENEFITS ON TOTAL ESTIMATED ANNUAL
RETIREMENT AT AGE 65 BENEFITS COMPUTED ON
FOR SERVICE AFTER SERVICE THROUGH
ANNUAL BENEFITS TO BE 1997 ASSUMING DECEMBER 31, 1997
PAID AT AGE 65 ON THE CONTINUATION OF PLUS BENEFITS WHICH
BASIS OF SERVICE THROUGH EMPLOYMENT UNTIL MAY BE EARNED IN
INDIVIDUAL DECEMBER 31, 1997 ($) AGE 65 ($) FUTURE ($)
- ---------- ------------------------ -------------------- ----------------------
<S> <C> <C> <C>
Barton L. Faber......... 11,492 117,225 128,717
Susan L. Henricks....... 40,359 141,245 181,604
Ronald G. Eidell........ 8,263 67,043 75,306
Tery R. Larrew (1)...... -0- -0- -0-
Thomas J. Quarles....... 8,023 102,327 110,350
</TABLE>
- --------
(1) Mr. Larrew is not covered by the Pension Plan or the Supplemental Plan.
9
<PAGE>
COMPENSATION OF DIRECTORS
Pursuant to the 1996 Plan, on September 1 of each year, directors who are
not employees of the Company ("non-employee directors") are granted an option
to purchase 5,000 shares of Common Stock at a price equal to the fair market
value of a share of Common Stock on the date of grant. At their election, non-
employee directors also receive annually either (i) a cash retainer equal to
$15,000, payable quarterly in arrears, or (ii) an option to purchase 2,500
shares of Common Stock at a price equal to the fair market value of a share of
the Common Stock on the date of grant, which option is granted on September 1
of each year. All such option grants become exercisable on the first
anniversary of the date of grant. Each non-employee director also receives a
one-time grant of 1,000 shares of restricted Common Stock, which shares vest
on the third anniversary of the date of grant so long as such person is still
serving as a director of the Company at that time. Each of Messrs. McCormack,
Murphy and Ward received such grant on September 1, 1996. Mr. Boyce received
such grant on July 28, 1997. Each future non-employee director will be granted
the restricted shares and the options described above on the date on which
such person is first elected or begins to serve as a non-employee director.
Beginning on September 1, 1997 pursuant to the Metromail Corporation
Directors' Deferred Retainer Plan, directors may elect to defer receipt of
their cash retainer, if any, until a date not to exceed the date on which they
cease to be directors of the Company. During any such deferral period, the
deferred cash retainer will accrue interest at a rate equal to the return on
five-year U.S. Treasury obligations. None of the current non-employee
directors has made such election.
EMPLOYMENT CONTRACTS, TERMINATION OF EMPLOYMENT AND CHANGE-IN-CONTROL
ARRANGEMENTS
Mr. Faber entered into a four-year employment agreement with the Company
commencing on June 19, 1996, the date of the closing of the IPO which provides
for a minimum annual base salary of $310,000. Ms. Henricks resigned as
President and Chief Executive Officer and as a director of the Company,
effective January 2, 1998. Ms. Henricks had entered into a four-year
employment agreement with the Company commencing on June 19, 1996 which
provided for a minimum annual base salary of $255,000. Mr. Eidell entered into
a four-year employment agreement with the Company commencing on June 19, 1996
which provides for a minimum annual base salary of $230,000. Mr. Quarles
entered into a four-year employment agreement with the Company commencing on
June 19, 1996 which provides for a minimum annual base salary of $230,000.
Mr. Faber's employment agreement provides for a severance payment equal to
(i) one and one-half times base salary (one times base salary for each of
Messrs. Eidell and Quarles) minus the amount of any disability benefits where
termination is by reason of disability or (ii) one and one-half times base
salary (one times base salary for each of Messrs. Eidell and Quarles) where
termination is by the Company for any reason other than for cause or by the
executive upon breach by the Company of the agreement or for good reason. A
severance payment will not be payable where termination is by the Company for
cause, by the executive for any reason other than upon breach by the Company
of the agreement or for good reason, or by reason of the executive's
retirement or death. No severance was payable to Ms. Henricks as a result of
her resignation. Each agreement also contains customary provisions providing
for the non-disclosure of confidential information. Each of Mr. Faber's and
Ms. Henricks' agreements contains an agreement not to compete with the Company
for a period of 18 months after the termination of the agreement. Each of Mr.
Eidell's and Mr. Quarles' agreements contains an agreement not to compete with
the Company for a period of 12 months after the termination of the agreement.
Mr. Larrew entered into an employment agreement with Customer Insight
Company, a wholly-owned subsidiary of the Company ("CIC"), in connection with
the Company's acquisition of CIC in 1994. The agreement required CIC to pay
Mr. Larrew a retention bonus equal to $300,000 if Mr. Larrew was employed by
CIC on the third anniversary of CIC's acquisition by the Company. This
retention bonus was paid to Mr. Larrew in 1997. In addition, the Company has
agreed to pay Mr. Larrew another retention bonus equal to $300,000 if Mr.
Larrew is employed by the Company on June 16, 2000. Pursuant to the agreement,
Mr. Larrew agreed not
10
<PAGE>
to compete with CIC or any affiliate of CIC within North America and Europe
during the term of the agreement and, upon the prior written notice from CIC
and the payment of $100,000 in four quarterly installments, for one year after
the termination of the agreement.
Each of Messrs. Faber, Eidell, Larrew and Quarles have entered into
Management Agreements with the Company which provide severance benefits in the
event of a change in control (as defined in the agreements) of the Company
followed by termination of employment. The consummation of the Offer will
constitute a change in control under these agreements. These agreements
provide that if the executive's employment is terminated following a change in
control of the Company unless such termination is (a) by the Company for cause
(as defined in the agreements), (b) as a consequence of death or disability
(as defined in the agreements), or (c) by the executive without Good Reason
(as defined in the agreements), the executive will receive certain payments
and benefits. These payments and benefits include (i) a lump sum payment equal
to up to three times (two times in the case of Mr. Larrew's agreement) the
executive's current planned compensation (salary and bonus), (ii) an amount in
cash equal to three years (two years in the case of Mr. Larrew's agreement) of
additional accrued benefits under the Pension Plan and (iii) life, disability,
accident and health insurance benefits for a period of 36 months (24 months in
the case of Mr. Larrew's agreement) after termination of employment. These
agreements also provide that if, after a change in control of the Company, any
compensation paid to the executive, whether or not pursuant to such agreement,
is subject to the federal excise tax on "excess parachute payments," the
Company will pay to the executive such additional amount as may be necessary
so that the executive realizes, after the payment of such excise tax and any
income tax or excise tax on such additional amount, the amount of such
compensation.
See also the discussion of certain Stock Purchase Agreements between the
Parent and certain executives in the Schedule 14D-9.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During 1997, each of Barton L. Faber, Chairman, and Susan L. Henricks, the
then President and Chief Executive Officer, were members of the Company's
Board of Directors and participated in deliberations concerning executive
officer compensation.
HUMAN RESOURCES COMMITTEE REPORT ON EXECUTIVE COMPENSATION
Compensation Policy and Objectives
The Human Resources Committee (the "Committee") is responsible for making
recommendations to the Board of Directors regarding base salary and annual
cash incentive compensation and other compensation of executive officers,
including the named executive officers. The Committee is also responsible for
determining the size and terms of any stock option or other stock-based awards
made under the 1996 Plan. The Company's executive compensation package is
designed to attract and retain highly qualified executives and motivate them
to contribute to the achievement of the Company's strategic goals and
operating performance objectives and to the creation of value for the
Company's stockholders. The compensation package for executive officers,
including the named executive officers, consists of three principal elements:
(i) base salary, (ii) annual cash incentive compensation, and (iii) long-term
stock incentive compensation.
In designing the Company's executive compensation package and in determining
the actual executive compensation for 1997, the Committee utilized a number of
resources and considered a variety of factors, including (i) Company and
business unit performance, (ii) individual performance of executive officers,
(iii) historical compensation levels of executive officers, (iv) comparative
compensation surveys supplied by professional compensation consultants
retained by the Company, and (v) the advice of professional compensation
consultants and management.
11
<PAGE>
Compensation of Executive Officers
Consistent with the Company's policy of having its executive compensation
package motivate executives to contribute to the achievement of the Company's
strategic goals and operating performance objectives and to the creation of
value for the Company's stockholders, the total compensation package for
executive officers, including the named executive officers, is designed so
that each executive's total compensation falls near the 50th percentile of the
market if the Company's performance goals are achieved and increases toward
the 75th percentile of the market as the Company's performance goals are
exceeded. In determining market compensation levels, the Committee, with the
assistance of professional compensation consultants, reviewed various
compensation surveys for companies of comparable size to the Company (revenues
between $300-$500 million) and in comparable industries to the Company (e.g.,
information technology). These compensation surveys included information on
hundreds of companies, some of which may be included in the Dow Jones
Industrial and Commercial Services Index, which is used as the industry index
in constructing the Company's performance graph set forth elsewhere in this
Proxy Statement.
Base Salary. The base salary of each of the named executive officers is
designed to fall near the 50th percentile of the market for base salaries of
officers with similar authority and responsibility at comparable companies.
Increases in base salary for 1997 were determined based on this objective,
together with individual performance evaluations, taking into consideration
the recommendations of management.
Annual Cash Incentive. As described above, the annual cash incentives are
designed to enable the executives to achieve a total compensation package
between the 50th and 75th percentile of the market depending upon whether
certain Company performance targets are achieved or exceeded. The performance
targets and potential payout amounts (expressed as a percentage of base
salary) were established by the Committee at the beginning of the year, taking
into consideration the recommendations of management and the Company's
professional compensation consultants.
For corporate executive officers (all of the named executive officers other
than Mr. Larrew), the performance targets are based on consolidated earnings
growth for the Company. For executive officers responsible for various
business units (such as Mr. Larrew), the performance targets are based on
Company and business unit growth, with business unit growth being weighted
more heavily (approximately 60%-80%) than Company growth. The Committee
believes that these measures of performance provide the proper incentives and
rewards for the achievement of the Company's strategic goals and operating
performance objectives. The 1997 annual cash incentive compensation payouts
for the executive officers reflect consolidated earnings amounts in 1997 for
the Company below the Company performance target levels and, in the case of
Mr. Larrew, earnings amounts in 1997 for the business unit for which Mr.
Larrew has responsibility at the performance target levels.
Long-Term Stock Incentive. As stated above, the Company and the Committee
place a great deal of emphasis on tying a meaningful portion of compensation
to the performance of the Company's stock in order to align the interests of
management more closely with those of the stockholders of the Company. In
furtherance of this objective, the Committee granted stock options to a wide
range of executives and other managers in 1997. The stock options were granted
with an exercise price equal to the fair market value (the average of the high
and the low market price) of the Company's common stock on the date of grant,
and become exercisable in three annual 33 1/3% installments on each of the
first three anniversaries of the date of grant.
In determining the size of the stock option grants, the Committee assessed
the value of the stock options and set the size of each grant to the
executives based upon the target compensation level for such executive's
position relative to the market. In establishing these target levels and the
actual number of stock options granted, the Committee considered the
recommendations of management and the Company's professional compensation
consultants.
Consistent with the Companys emphasis on stock ownership, the Committee
implemented stock ownership guidelines for all officers in 1997. These
guidelines, which will be phased in over a number of years, require all
officers to hold Common Stock having a market value at least equal to a
multiple of their base salary. The
12
<PAGE>
minimum ownership target for officers is to own Common Stock having a market
value at least equal to their salary, and the ownership targets increase as
levels of responsibility increase. For the named executive officers (other
than the Chairman, Chief Executive Officer and President), the ownership
target is two times salary and for the Chairman, Chief Executive Officer and
President, the ownership target is three times salary.
In addition, the Company implemented the Metromail Corporation 1997 Employee
Stock Purchase Plan (the "Stock Purchase Plan") to encourage eligible
employees of the Company and its subsidiaries to purchase Common Stock. The
Company believes that the Stock Purchase Plan accomplishes the dual goals of
motivating employees to work toward the creation of value for the Company's
stockholders and rewarding participating employees by facilitating their
ability to participate in the economic growth of the Company. Executive
officers are eligible to participate in the Stock Purchase Plan.
Deductibility of Executive Compensation. Tax laws limit the deduction a
publicly-held corporation is allowed for compensation paid to the chief
executive officer and to the four most highly compensated executive officers
other than the chief executive officer. Generally, amounts paid in excess of
$1 million to a covered executive, other than performance-based compensation,
cannot be deducted. The Company will consider ways to maximize the
deductibility of executive compensation but has reserved the right to
compensate executive officers in a manner commensurate with performance and
the competitive environment for executive talent. As a result, some portion of
executive compensation paid to an executive officer whose compensation is
subject to the deduction limits described above may not be deductible by the
Company. None of the 1997 executive compensation was subject to these
deduction limits.
Compensation of Chairman
The compensation of Mr. Faber is designed on the same basis as the
compensation for the other named executive officers. Mr. Faber's base salary
is designed to be near the 50th percentile of the market for chairmen of
comparable companies and after a review of the market, Mr. Faber's 1997 base
salary was not increased over his 1996 base salary. Like the compensation
package for the other named executive officers, Mr. Faber's annual cash
incentive compensation is designed to enable him to achieve a total
compensation package between the 50th and 75th percentile of the market
depending upon whether certain Company performance targets are achieved or
exceeded. Mr. Faber's 1997 cash bonus reflected consolidated earnings amounts
in 1997 for the Company below the Company performance target level. The 25,000
stock options granted to Mr. Faber in July, 1997 were based on the Committee's
evaluation of the value of such options and the desire to grant Mr. Faber
options with a value slightly above the value of option grants in the 50th
percentile of the market for chairmen of comparable companies. As stated
above, the stock option grants are designed to align the interests of Mr.
Faber more closely with those of the stockholders of the Company by increasing
his stock ownership and tying a meaningful portion of his compensation to the
performance of the Company's stock.
This report is submitted by the Human Resources Committee of the Board of
Directors of Metromail Corporation.
Human Resources Committee
Robert C. McCormack, Chairman
Donald N. Boyce
13
<PAGE>
PERFORMANCE GRAPH
The following graph compares the cumulative total return on the Common Stock
with the cumulative total return on the Standard & Poor's 500 Stock Index (a
broad market index) and the Dow Jones Industrial and Commercial Services Index
(an industry index) for the period from June 14, 1996, the date upon which the
Common Stock began trading on the New York Stock Exchange, through December
31, 1997. These comparisons assume an initial investment of $100 and the
reinvestment of dividends.
PERFORMANCE GRAPH
LOGO
The data points for the above graph are as follows:
<TABLE>
<CAPTION>
6/14/96 6/28/96 9/30/96 12/31/96 3/31/97 6/30/97 9/30/97 12/31/97
------- ------- ------- -------- ------- ------- ------- --------
<S> <C> <C> <C> <C> <C> <C> <C> <C>
Metromail............... 100 109.15 105.49 89.02 83.54 120.73 98.48 87.20
Dow Jones Industrial &
Commercial............. 100 95.50 97.51 86.02 77.99 93.10 91.48 99.66
Standard & Poor's 500... 100 100.72 103.22 111.25 113.71 132.93 142.27 145.75
</TABLE>
14
<PAGE>
CERTAIN TRANSACTIONS
Prior to completion of the initial public offering of the Common Stock (the
"IPO"), the Company was a wholly-owned subsidiary of R. R. Donnelley. During
1997, the Company had no outstanding indebtedness to R. R. Donnelley and
R. R. Donnelley owned approximately 38.2% of the outstanding Common Stock. In
addition, Messrs. Ward and Murphy, who are directors of the Company, are
employees of R. R. Donnelley. Mr. Ward is President and Chief Operating
Officer of R. R. Donnelley and Mr. Murphy is Vice President and Corporate
Controller of R. R. Donnelley.
Prior to completion of the IPO, the Company obtained certain services from,
and provided certain services to, R. R. Donnelley, participated in a number of
employee benefit plans maintained by R. R. Donnelley and was included as part
of R. R. Donnelley's federal income tax and certain other tax returns. In
connection with the IPO, the Company entered into certain agreements with
R. R. Donnelley relating to these matters. None of these agreements resulted
from "arm's length" negotiations.
Pursuant to a Transition Services Agreement between R. R. Donnelley and the
Company, 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 Transition Services Agreement was in effect until December
31, 1996, except with respect to tax services, the provision of which ended on
January 31, 1997, and with respect to certain legal services, the provision of
which ended on June 30, 1997. Total payments by the Company to R. R. Donnelley
for services performed pursuant to the Transition Services Agreement were
approximately $16,000 in 1997.
Pursuant to a Sales Agreement between R. R. Donnelley and the Company,
R. R. Donnelley agreed that, to the extent R. R. Donnelley identifies certain
opportunities for sales of services of the type that the Company provides from
among R. R. Donnelley's current and prospective customers, it will obtain
detailed requirements regarding the sales opportunity and, prior to soliciting
any competitor of the Company to provide the services, request a quotation
from the Company for the Company's terms of providing the services. If the
Company furnishes a quotation and if R. R. Donnelley successfully sells the
services of the Company to the customer, R. R. Donnelley will, following
performance of the services, invoice and seek to collect the amounts owed from
the 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 a specified percentage which, pursuant to an amendment to the Sales
Agreement dated March 12, 1998, is generally four percent. During 1997, sales
by R. R. Donnelley of the Company's products and services approximated $21.9
million. Pursuant to the amendment described above, the term of the Sales
Agreement was extended until December 31, 2000. This amendment is effective
upon consummation of the Offer, but should the consummation of the Offer not
occur prior to May 31, 1998, this amendment shall be null and void.
Pursuant to a Data Center Services Agreement between R. R. Donnelley and the
Company, 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. Pursuant to the Data Center Services Agreement, R. R. Donnelley
agreed to pay the Company an annualized fee of $4.3 million for the Company's
services under the agreement during the period ended on December 31, 1996 and,
thereafter, the yearly fee would 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 would not exceed
six percent per year. In 1997, R. R. Donnelley paid approximately $4.4 million
to the Company in connection with such services. Pursuant to an amendment to
the Data Center Agreement dated March 12, 1998, the term of this Agreement was
extended until December 31, 1999 and certain performance standards were added.
After December 31, 1999, the Data Center Services Agreement will automatically
renew unless terminated by either party upon six months' notice. This
amendment is effective upon consummation of the Offer, but should the
consummation of the Offer not occur prior to May 31, 1998, this amendment
shall be null and void.
15
<PAGE>
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. Upon completion of the IPO, the
Company no longer was permitted to be included in such consolidated and
combined tax returns. Instead, it began to file 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 between R. R.
Donnelley and the Company, however, the Company remained obligated to pay to
R. R. Donnelley any income taxes shown on such consolidated and combined tax
returns, generally to the extent attributable to the Company, for the tax
period (the "Interim Period") beginning on January 1, 1996 and ending on June
19, 1996 (to the extent that it has not previously paid such amounts to R. R.
Donnelley). In addition, the Tax Allocation and Indemnification Agreement
provides that 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 would 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). During 1997, the Company did not pay any
amounts to R. R. Donnelley pursuant to the Tax Allocation and Indemnification
Agreement.
On February 24, 1997, the Board of Directors of the Company adopted a
stockholder rights plan (the "Rights Plan"). Contemporaneously with the
adoption of the Rights Plan, the Company entered into a Registration Rights
Agreement and a Letter Agreement with R. R. Donnelley. Pursuant to the
Registration Rights Agreement, the Company granted R. R. Donnelley, among
other things, the right to four demands for the registration of the Common
Stock owned by it under the federal securities laws and the right to be
included in other registrations of the Common Stock on behalf of the Company
or others. In consideration of the grant of such registration rights, R. R.
Donnelley entered into the Letter Agreement whereby it agreed, among other
things, not to oppose the adoption of the Rights Plan and not to seek the
redemption of the rights or the termination of the Rights Plan. In addition,
the Letter Agreement sets forth the number of directors of the Company that R.
R. Donnelley is entitled to elect based on the level of R. R. Donnelley's
ownership in the Company. As a condition and inducement to Parent and
Purchaser to enter into the Merger Agreement, the Company and R. R. Donnelley
entered into an amendment to the Letter Agreement that provided for the
termination of the Letter Agreement effective upon the consummation of the
Offer.
16
<PAGE>
CERTAIN INFORMATION WITH RESPECT TO PARENT
PARENT DESIGNEES
Set forth below are the names, ages, present principal occupations, five year
employment history and other directorships held in public companies of the
persons designated by Parent for appointment or election to the Board of
Directors (the "Parent Designees"). Such information has been provided by
Parent to the Company.
<TABLE>
<CAPTION>
PRINCIPAL OCCUPATION OR EMPLOYMENT; MATERIAL
NAME AND BUSINESS ADDRESS POSITIONS HELD DURING THE PAST FIVE YEARS
------------------------- --------------------------------------------
<S> <C>
D. Van Skilling........... Chief Executive Officer, President and Director of
Purchaser; also serves as Chief Executive Officer,
President and Director of Experian Corporation
("Experian"); Mr. Skilling joined TRW, Inc. ("TRW")
in 1970 and, in 1989, assumed the position of
Executive Vice President and General Manager,
Information Systems and Services, Inc. ("IS&S").
Experian acquired the information services business
of TRW in connection with a recapitalization
effected in September 1996.
James Antal............... Vice President, Chief Financial Officer, Treasurer,
Assistant Secretary and Director of Purchaser; also
serves as Executive Vice President and Chief
Financial Officer of Experian. Mr. Antal joined TRW
in 1978 and, in 1994, assumed the position of Vice
President, Finance, IS&S. Previously, he served as
Director of Finance, Information Services Division,
IS&S, responsible for all division-level finance
and administration functions (1991-1994) and
Assistant Corporate Controller of TRW (1989-1990).
Thomas A. Gasparini....... Vice President, General Counsel, Secretary,
Assistant Treasurer and Director of Purchaser; also
serves as Senior Vice President, General Counsel &
Secretary of Experian. Mr. Gasparini joined TRW in
1979 and, in 1991, assumed the position of Vice
President and Assistant General Counsel, IS&S.
John W. Peace............. Director of Purchaser; also serves as Director of
Parent since June 1997 and as Chief Executive
Officer of Experian, Parent's global information
services division. Citizen of England.
Eric M. Barnes............ Director of Purchaser; also serves as Deputy
Chairman of Parent and as Chairman of the
Information Services Division of Parent; previously
served as Chairman of Parent's Property, Finance
and Burberry's divisions. Citizen of England.
David G. Bury............. Director of Purchaser; also serves as Commercial
Director/Treasurer of Parent; previously served as
Chief Financial Officer of TBG Management, a
privately owned industrial holding company based in
Monaco. Citizen of England.
</TABLE>
17
<PAGE>
SECURITY OWNERSHIP OF PARENT DESIGNEES
The Company has been advised by Parent that no Parent Designee directly or
beneficially owns shares of Common Stock of the Company.
CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS
Based solely on the information provided by Parent, there have been no
transactions or series of transactions, since January 1, 1997, to which the
Company or any of its Subsidiaries was or is to be a party in which the amount
involved exceeds $60,000 and in which any of the Parent Designees had or will
have a direct or indirect material interest, nor has any Parent Designee been
indebted to the Company or its subsidiaries in an amount in excess of $60,000
or been involved in a material business relationship with the Company or its
subsidiaries.
18
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
Stock Purchase Agreement (this "Agreement"), dated as of March 12, 1998,
between The Great Universal Stores P.L.C., a corporation incorporated under the
laws of England ("Parent"), and R.R. Donnelley & Sons Company ("Stockholder").
WHEREAS, Stockholder owns (both beneficially and of record) 8,600,000
shares (the "Shares") of common stock, par value $.01 per share ("Common
Stock"), of Metromail Corporation, a Delaware corporation (the "Company");
WHEREAS, concurrently herewith, Parent and an indirect wholly owned
subsidiary of Parent ("Purchaser") are entering into an agreement and plan of
merger with the Company, dated as of March 12, 1998 (the "Merger Agreement"),
pursuant to which Purchaser has agreed to make a cash tender offer (the "Offer")
for, among other things, all outstanding shares of Common Stock at $31.50 per
share (or any higher price paid in the Offer, the "Offer Price"), net to the
seller in cash, to be followed by a merger of Purchaser with and into the
Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, Parent has required that Stockholder agree, and in order to
induce Parent to enter into the Merger Agreement, Stockholder has agreed, among
other things, (i) to sell the Shares (as defined herein) to Parent, (ii) to
appoint Parent as Stockholder's proxy to vote the Shares, and (iii) with respect
to certain questions put to stockholders of the Company for a vote, to vote the
Shares, in each case, in accordance with the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Purchase and Sale of Shares.
1.1. Purchase of Shares. On the terms and subject to the conditions
set forth in this Agreement, on (and assuming the occurrence of) the
Closing Date (as defined herein), Parent will purchase from the
Stockholder, and the Stockholder will sell and transfer to the Parent, all
of the Shares at a purchase price per share equal to the Offer Price, free
and clear of all mortgages, pledges, security interests, encumbrances,
liens, options, debts, charges, claims and restrictions of any kind.
1.2. Conditions to Closing. The obligations of the parties to
consummate the transactions contemplated by Section 1.1 hereof are subject
to the following conditions: (a) any waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
applicable to the delivery of the Shares shall have expired or been
terminated; and (b) there shall be no preliminary or permanent injunction
or other order by any court of competent
<PAGE>
jurisdiction restricting, preventing or prohibiting the delivery of the
Shares. Parent and the Stockholder shall each promptly after the date
hereof make such filings and provide such information as may be required
under the HSR Act with respect to the sale of the Shares.
1.3. Closing. Subject to the conditions contained in this Agreement,
the closing of the transactions contemplated by Section 1.1 hereof (the
"Closing") shall occur at a site designated by Parent in Chicago, Illinois
simultaneously with the acceptance by Purchaser of the shares of Common
Stock validly tendered and not withdrawn pursuant to the terms of the Offer
in accordance with the terms and conditions of the Offer and the Merger
Agreement (the "Closing Date"). Subject to the conditions contained in
this Agreement, Parent may direct Stockholder to deliver to Purchaser at
the Closing a certificate or certificates evidencing the Shares, each such
certificate being duly endorsed in blank and accompanied by such stock
powers and such other documents as may reasonably be necessary in
Purchaser's judgment to transfer record ownership of the Shares into
Purchaser's name on the stock transfer books of the Company, and Parent
will purchase the Shares at a purchase price equal to the Offer Price. All
payments made by Parent to Stockholder pursuant to this Section 1.3 shall
be made by wire transfer of immediately available funds to an account
designated by Stockholder, in an amount equal to the sum of the product of
(i) the Offer Price and (ii) the total number of Shares delivered at the
Closing.
1.4. Adjustments Upon Changes in Capitalization. In the event of any
change in the number of issued and outstanding shares of Common Stock by
reason of any stock dividend, subdivision, merger, recapitalization,
combination, conversion or exchange of shares, or any other change in the
corporate or capital structure of the Company (including, without
limitation, the declaration or payment of an extraordinary dividend of cash
or securities) which would have the effect of diluting or otherwise
adversely affecting Parent's rights and privileges under this Agreement,
the number and kind of the Shares and the consideration payable in respect
of the Shares shall be appropriately and equitably adjusted to restore to
Parent its rights and privileges under this Agreement.
2. Representations and Warranties of Stockholder. Stockholder hereby
represents and warrants to Parent as follows:
2.1. Title to the Shares. Stockholder is the owner (both
beneficially and of record) of the Shares. Except for the Shares,
Stockholder is not the record or beneficial owner (as defined in Rule 13d-3
under the Securities Exchange Act of 1934, as amended) of, and does not
have any other rights of any nature to acquire any additional shares of,
any shares of capital stock of the Company. Stockholder owns all of the
Shares free and clear of all security interests, liens, claims, pledges,
options, rights of first refusal, agreements, limitations on Stockholder's
voting rights, charges and other encumbrances of any nature whatsoever,
and, except as provided in
-2-
<PAGE>
this Agreement, Stockholder has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to any of the Shares.
The Stockholder has sole power of disposition with respect to all of the
Shares and sole voting power with respect to the matters set forth in
Section 5 hereof. Upon the delivery to Parent by Stockholder of a
certificate or certificates evidencing the Shares, Parent will receive
valid and marketable title to the Shares, free and clear of all security
interests, liens, claims, pledges, options, rights of first refusal,
agreements, limitations on Parent's voting rights, charges and other
encumbrances of any nature whatsoever.
2.2. Authority Relative to This Agreement. Stockholder has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Stockholder and, assuming the due authorization, execution and
delivery by Parent, constitutes a legal, valid and binding obligation of
Stockholder, enforceable against Stockholder in accordance with its terms,
except that such enforceability (i) may be limited by bankruptcy,
insolvency, moratorium or other similar laws affecting or relating to the
enforcement of creditors' rights generally and (ii) is subject to general
principles of equity.
2.3. No Conflict. The execution and delivery of this Agreement by
Stockholder does not, and the performance of this Agreement by Stockholder
will not, (a) except for any filings required under the HSR Act and for
requirements of U.S. federal and state securities laws, require any
consent, approval, authorization or permit of, or filing with or
notification to, any governmental or regulatory authority of the United
States or any political subdivision thereof, (b) conflict with or violate
the certificate of incorporation or bylaws of the Stockholder, or (c)
conflict with, violate or result in any breach of or constitute a default
under (or an event which with notice or lapse of time or both would become
a default under) any agreement, judgment, injunction, order, law, rule,
regulation, decree or arrangement to which Stockholder is a party or is
bound, other than, in the case of clause (c), any such conflicts,
violations, breaches or defaults that, individually or in the aggregate,
would not materially impair the ability of Stockholder to perform its
obligations hereunder.
2.4. Brokers. No broker, finder or investment banker is entitled to
any brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on
behalf of Stockholder.
3. Representations and Warranties of Parent. Parent hereby represents
and warrants to Stockholder as follows:
3.1. Authority Relative to This Agreement. Parent has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. The execution
-3-
<PAGE>
and delivery of this Agreement by Parent and the consummation by Parent of
the transactions contemplated hereby have been duly and validly authorized
by all necessary corporate action on the part of Parent. This Agreement
has been duly and validly executed and delivered by Parent and, assuming
the due authorization, execution and delivery by Stockholder, constitutes a
legal, valid and binding obligation of Parent, enforceable against Parent
in accordance with its terms, except that such enforceability (i) may be
limited by bankruptcy, insolvency, moratorium or other similar laws
affecting or relating to the enforcement of creditors' rights generally and
(ii) is subject to general principles of equity.
3.2. No Conflict. The execution and delivery of this Agreement by
Parent does not, and the performance of this Agreement by Parent will not,
(a) except for any filings required under the HSR Act and for requirements
of federal and state securities laws, require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign, (b) conflict
with or violate the certificate of incorporation or bylaws of Parent, (c)
conflict with, violate or result in any breach of or constitute a default
under (or an event which with notice or lapse of time or both would become
a default under) any agreement, judgment, injunction, order, law, rule,
regulation, decree or arrangement applicable to Parent or by which any
property or asset of Parent is bound or affected, other than, in the case
of clause (c), any such conflicts, violations, breaches or defaults that,
individually or in the aggregate, would not materially impair the ability
of Parent to perform its obligations hereunder.
3.3. Brokers. Except for Bear Stearns & Co. Inc., whose fees will be
paid by Parent, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission in connection with the
transactions contemplated hereby based upon arrangements made by or on
behalf of Parent.
3.4. Investment Intent. Parent hereby represents that any securities
it purchases pursuant to this Agreement are being purchased for its own
account for purposes of investment and not with a view to, or for sale in
connection with, any public distribution thereof. In addition, Purchaser
acknowledges that the Shares being purchased pursuant to this Agreement
have not been and will not be registered under the Securities Act of 1933,
as amended, and may not be resold without registration under such Act or
unless an exception therefrom is available.
3.5. Financing. Parent or Purchaser will have available to it at the
time required the funds necessary to consummate the purchase of the Shares
pursuant to the terms hereof.
-4-
<PAGE>
4. Covenants of Stockholder.
4.1. No Disposition or Encumbrance of Shares. Stockholder hereby
covenants and agrees that, except as contemplated by this Agreement and
except pursuant to the Offer, Stockholder shall not, and shall not offer or
agree to, sell, transfer, tender, assign, hypothecate or otherwise dispose
of, or create or permit to exist any security interest, lien, claim,
pledge, option, right of first refusal, agreement, limitation on
Stockholder's voting rights, charge or other encumbrance of any nature
whatsoever with respect to the Shares now owned or that may hereafter be
acquired by Stockholder.
4.2. No Solicitation of Transactions. Stockholder (and its
subsidiaries and affiliates) shall not, and Stockholder (and its
subsidiaries and affiliates) shall use their reasonable best efforts to
ensure that their respective officers, directors, employees,
representatives and agents (including, but not limited to, investment
bankers, attorneys and accountants) do not, directly or indirectly,
encourage, solicit, participate in or initiate discussions or negotiations
with, or provide any information to, any corporation, partnership, person
or other entity or group (other than Parent, any of its affiliates or
representatives) concerning any proposal or offer to acquire all or a
substantial part of the business or properties of the Company or any of its
subsidiaries or any capital stock of the Company or any of its
subsidiaries, whether by merger, tender offer, exchange offer, sale of
assets or similar transaction involving the Company or any subsidiary,
division or operating or principal business unit of the Company (an
"Acquisition Proposal"), unless the Company is permitted to do so in
accordance with the terms of the Merger Agreement; provided, that the
foregoing shall not apply to any directors of the Company in their capacity
as such who are also directors, officers, employees, representatives or
agents of Stockholder (the "Donnelley Directors"), it being acknowledged
and agreed that the Donnelley Directors are subject to the terms and
conditions set forth in the Merger Agreement in their capacity as such.
Notwithstanding the foregoing, prior to the later of (i) 11:59 p.m.,
Chicago time, on March 30, 1998 and (ii) the expiration of the applicable
waiting periods under the HSR Act (as defined in the Merger Agreement),
Stockholder may furnish information concerning the Company and its
subsidiaries to any corporation, partnership, person or other entity or
group pursuant to appropriate confidential agreements with terms
substantially similar to those contained in the Confidentiality Agreement
(as defined in the Merger Agreement), and may negotiate and participate in
discussions and negotiations with such entity or group concerning an
Acquisition Proposal that constitutes a Superior Proposal (as defined in
the Merger Agreement). Stockholder shall, and shall cause each of its
affiliates to, immediately cease and cause to be terminated any existing
activities, discussions or negotiations by Stockholder, any of its
affiliates or any officer, director, employee or affiliate of, or
investment banker, attorney, accountant or other advisor or representative
of, Stockholder or any of its affiliates with parties conducted heretofore
with respect to
-5-
<PAGE>
any of the foregoing. The parties acknowledge and agree that the Company
shall not be deemed an affiliate of Stockholder for purposes of this
Section 4.2
4.3. Compliance of Stockholder with This Agreement. Stockholder
shall take all actions and forbear from all actions, in each case,
necessary in order that (a) all of Stockholder's representations and
warranties hereunder are true and correct and (b) Stockholder fulfills all
of its obligations hereunder.
5. Voting Agreement; Proxy of Stockholder.
5.1. Voting Agreement. Stockholder hereby agrees that, during the
time this Agreement is in effect, at any meeting of the stockholders of the
Company, however called, and in any action by written consent of the
stockholders of the Company, Stockholder shall, to the extent applicable,
(a) vote (or execute a consent in respect of) all of the Shares and any
shares of Common Stock or other securities acquired of record or
beneficially by the Stockholder after the date hereof (the "Stockholder
Shares") in favor of the Merger, the Merger Agreement (as amended from time
to time) and any of the transactions contemplated by the Merger Agreement;
and (b) vote (or execute a consent in respect of) the Shares and the
Stockholder Shares against any action or agreement that would reasonably be
expected to impede, interfere with, delay or attempt to discourage the
Offer or the Merger, including, but not limited to: (i) any extraordinary
corporate transaction (other than the Merger), such as a merger,
reorganization, recapitalization or liquidation involving the Company or
any of its Subsidiaries (as defined in the Merger Agreement) or any
proposal made in opposition to or in competition with the Merger; (ii) a
sale or transfer of a material amount of assets of the Company or any of
its Subsidiaries; (iii) any change in the management or board of directors
of the Company, except as otherwise agreed to in writing by Parent; (iv)
any material change in the present capitalization or dividend policy of the
Company; or (v) any other material change in the corporate structure or
business of the Company or any of its Subsidiaries.
5.2. Irrevocable Proxy. Stockholder agrees that, in the event
Stockholder shall fail to comply with the provisions of Section 5.1 hereof
as determined by Parent in its sole discretion, such failure shall result,
without any further action by Stockholder, in the irrevocable appointment
of Parent as the attorney and proxy of Stockholder, with full power of
substitution, to vote, and otherwise act (by written consent or otherwise)
with respect to all shares of Common Stock and other securities, including
the Shares and the Stockholder Shares, that Stockholder is entitled to vote
at any meeting of stockholders of the Company (whether annual or special
and whether or not an adjourned or postponed meeting) or consent in lieu of
any such meeting or otherwise, on the matters and in the manner specified
in Section 5.1. THIS PROXY AND POWER OF ATTORNEY IS IRREVOCABLE AND
COUPLED WITH AN INTEREST AND IS EXECUTED AND INTENDED
-6-
<PAGE>
TO BE IRREVOCABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 212(e) OF
THE DELAWARE GENERAL CORPORATION LAW ("DGCL"). Stockholder hereby revokes,
effective upon the execution and delivery of the Merger Agreement by the
parties thereto, all other proxies and powers of attorney with respect to
the Shares and the Stockholder Shares that Stockholder may have heretofore
appointed or granted, and no subsequent proxy or power of attorney (except
in furtherance of Stockholder's obligations under Section 5.1 hereof) shall
be given or written consent executed (and if given or executed, shall not
be effective) by Stockholder with respect thereto so long as this Agreement
remains in effect.
6. Termination. This Agreement (including any power of attorney and
proxy granted pursuant to Section 5.2 hereof or otherwise) shall terminate
automatically on the earlier of (i) the termination of the Merger Agreement in
accordance with the terms and conditions thereof and (ii) September 30, 1998.
7. Miscellaneous.
7.1. Expenses. All costs and expenses incurred in connection with
the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
7.2. Further Assurances. Stockholder and Parent shall execute and
deliver all such further documents and instruments and take all such
further action as may be reasonably necessary in order to consummate the
transactions contemplated hereby.
7.3. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any
other remedy at law or in equity.
7.4. Entire Agreement. This Agreement constitutes the entire
agreement between Parent and Stockholder with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both written
and oral, between Parent and Stockholder with respect to the subject matter
hereof.
7.5. Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that Parent may assign all or any of its rights
and obligations hereunder to any affiliate of Parent, provided that no such
assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
7.6. Parties in Interest. This Agreement shall be binding upon,
inure solely to the benefit of, and be enforceable by, the parties hereto
and their successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to or
-7-
<PAGE>
shall confer upon any other person any right, benefit or remedy of any
nature whatsoever under or by reason of this Agreement.
7.7. Amendment; Waiver. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto. Any party hereto
may (a) extend the time for the performance of any obligation or other act
of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any agreement or condition contained
herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
7.8. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to any party.
7.9. Notices. Except as otherwise provided herein, all notices,
requests, claims, demands and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by cable, facsimile transmission,
telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 7.9):
if to Parent:
The Great Universal Stores P.L.C.
c/o Experian Corporation
505 City Parkway West
Orange, California 92868
Attention: Thomas Gasparini
Senior Vice President,
Secretary and General Counsel
Facsimile: (714) 938-2513
Telephone: (714) 385-8296
-8-
<PAGE>
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Donald G. Lubin, Esq.
Facsimile: (312) 876-7934
Telephone: (312) 876-8000
if to Stockholder:
R.R. Donnelley & Sons Company
77 West Wacker Drive
Chicago, Illinois 60601
Attention: Monica Fohrman, Secretary
Facsimile: (312) 326-7156
Telephone: (312) 326-8000
7.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable
to contracts executed in and to be performed in Delaware without regard to
any principles of choice of law or conflicts of law of such State. All
actions and proceedings arising out of or relating to this Agreement shall
be heard and determined in any state or federal court sitting in Delaware.
Each of the parties hereto (i) consents to submit such party to the
personal jurisdiction of any Federal court located in the State of Delaware
or any Delaware state court in the event any dispute arises out of this
Agreement or any of the transactions contemplated hereby, (ii) agrees that
such party will not attempt to deny or defeat such personal jurisdiction by
motion or other request for leave from any such court, (iii) agrees that
such party will not bring any action relating to this Agreement or the
transactions contemplated hereby in any court other than a Federal court
sitting in the state of Delaware or a Delaware state court and (iv) waives
any right to trial by jury with respect to any claim or proceeding related
to or arising out of this Agreement or any of the transactions contemplated
hereby.
7.11. Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
7.12. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which when
so executed and delivered
-9-
<PAGE>
shall be deemed to be an original but all of which taken together shall
constitute one and the same agreement.
-10-
<PAGE>
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed and delivered as of the date first written above.
THE GREAT UNIVERSAL STORES P.L.C.
/s/ Thomas Gasparini
By: ___________________________________
Name: Thomas Gasparini
Title: Authorized Signatory
R.R. DONNELLEY & SONS COMPANY
/s/ Cheryl A. Francis
By: ___________________________________
Name: Cheryl A. Francis
Title: Executive Vice President and
Chief Financial Officer
-11-
<PAGE>
STOCK PURCHASE AGREEMENT
------------------------
Stock Purchase Agreement (this "Agreement"), dated as of March 12, 1998,
between The Great Universal Stores P.L.C., a corporation incorporated under the
laws of England ("Parent"), and ____________________ ("Executive").
WHEREAS, Executive owns (both beneficially and of record) __________ shares
(together with any shares to be issued to Executive on or about March 31, 1998
pursuant to the Company's Stock Purchase Plan) (the "Shares") of common stock,
par value $.01 per share ("Common Stock"), of Metromail Corporation, a Delaware
corporation (the "Company"), and options (the "Options") to acquire ___________
shares of Common Stock (the shares issuable upon exercise of the Options are
referred to herein as the "Option Shares"); and
WHEREAS, concurrently herewith, Parent and an indirect wholly owned
subsidiary of Parent ("Purchaser") are entering into an agreement and plan of
merger with the Company, dated as of March 12, 1998 (the "Merger Agreement"),
pursuant to which Purchaser has agreed to make a cash tender offer (the "Offer")
for, among other things, all outstanding shares of Common Stock at $31.50 per
share (or any higher price paid in the Offer, the "Offer Price"), net to the
seller in cash, to be followed by a merger of Purchaser with and into the
Company (the "Merger"); and
WHEREAS, as a condition to the willingness of Parent to enter into the
Merger Agreement, Parent has required that Executive agree, and in order to
induce Parent to enter into the Merger Agreement, Executive has agreed, among
other things, (i) to exercise the Options and sell the Shares and the Option
Shares to Parent, (ii) to appoint Parent as Executive's proxy to vote the Shares
and the Option Shares, and (iii) with respect to certain questions put to
stockholders of the Company for a vote, to vote the Shares and the Option
Shares, in each case, in accordance with the terms and conditions of this
Agreement.
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein and other good and valuable consideration, the adequacy of
which is hereby acknowledged, and intending to be legally bound hereby, the
parties hereto agree as follows:
1. Purchase and Sale of Shares.
1.1. Purchase of Shares. On the terms and subject to the conditions
set forth in this Agreement, on (and assuming the occurrence of) the
Closing Date (as defined herein), Parent will purchase from the Executive,
and the Executive will sell and transfer to the Parent, all of the Shares
and the Option Shares at a purchase price per share equal to the Offer
Price, free and clear of all mortgages, pledges, security interests,
encumbrances, liens, options, debts, charges, claims and restrictions of
any kind.
<PAGE>
1.2. Conditions to Closing. The obligations of the parties to
consummate the transactions contemplated by Section 1.1 hereof are subject
to the following conditions: (a) any waiting period under the Hart-Scott-
Rodino Antitrust Improvements Act of 1976, as amended (the "HSR Act")
applicable to the delivery of the Shares and the Option Shares shall have
expired or been terminated; and (b) there shall be no preliminary or
permanent injunction or other order by any court of competent jurisdiction
restricting, preventing or prohibiting the delivery of the Shares or the
Option Shares. Parent and the Executive shall each promptly after the date
hereof make such filings and provide such information as may be required
under the HSR Act with respect to the sale of the Shares and the Option
Shares.
1.3. Closing. Subject to the conditions contained in this Agreement,
the closing of the transactions contemplated by Section 1.1 hereof (the
"Closing") shall occur at a site designated by Parent simultaneously with
the acceptance by Purchaser of the shares of Common Stock validly tendered
and not withdrawn pursuant to the terms of the Offer in accordance with the
terms and conditions of the Offer and the Merger Agreement (the "Closing
Date"). Prior to the Closing, Executive shall exercise all of the Options,
pay the Company the aggregate exercise price thereof in cash and obtain a
certificate evidencing all of the Option Shares duly executed by the
Company and registered in the name of Executive. Notwithstanding anything
in the agreements evidencing the Options to the contrary, the Executive
shall not pay the Company the exercise price of the Options in any
consideration other than cash (whether by cashless exercise or otherwise).
At the Closing and subject to the conditions contained in this Agreement,
Parent hereby directs Executive to deliver to Purchaser a certificate or
certificates evidencing the Shares and the Option Shares, each such
certificate being duly endorsed in blank and accompanied by such stock
powers and such other documents as may be necessary in Purchaser's judgment
to transfer record ownership of the Shares and the Option Shares into
Purchaser's name on the stock transfer books of the Company, and Parent
will purchase the Shares and the Option Shares at a purchase price equal to
the Offer Price. All payments made by Parent to Executive pursuant to this
Section 1.3 shall be made by wire transfer of immediately available funds
to an account designated by Executive or by certified bank check payable to
Executive, in an amount equal to the sum of the product of (i) the Offer
Price and (ii) the total number of Shares and Option Shares delivered at
the Closing.
1.4. Adjustments Upon Changes in Capitalization. In the event of any
change in the number of issued and outstanding shares of Common Stock by
reason of any stock dividend, subdivision, merger, recapitalization,
combination, conversion or exchange of shares, or any other change in the
corporate or capital structure of the Company (including, without
limitation, the declaration or payment of an extraordinary dividend of cash
or securities) which would have the effect of diluting or otherwise
adversely affecting Parent's rights and privileges under this Agreement,
the number and kind of the Shares and the Option Shares and the
consideration
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payable in respect of the Shares and the Option Shares shall be
appropriately and equitably adjusted to restore to Parent its rights and
privileges under this Agreement.
1.5. Tender of Shares and Option Shares. Upon the request of Parent
after 11:59 p.m., Chicago time, on March 30, 1998, Executive agrees to
tender and sell to Purchaser pursuant to the Offer all of the Shares and
the Option Shares. If requested by Parent to so tender and sell the Shares
and the Option Shares, Executive shall exercise all of the Options, pay the
Company the aggregation exercise price thereof in cash and obtain a
certificate evidencing all of the Option Shares duly executed by the
Company and registered in the name of Executive. Notwithstanding anything
in the agreements evidencing the Options to the contrary, Executive shall
not pay the Company the exercise price of the Options in any consideration
other than cash (whether by cashless exercise or otherwise). If requested
by Parent to so tender and sell the Shares and the Option Shares, Executive
agrees that Executive shall deliver to the depository for the Offer for
receipt prior to the Expiration Date (as defined in the Offer) of the
Offer, either a letter of transmittal together with the certificates for
the Shares and the Option Shares, if available, or a "Notice of Guaranteed
Delivery", if the Shares or the Option Shares are not available.
Stockholder agrees not to withdraw any Shares or Option Shares tendered
into the Offer.
2. Representations and Warranties of Executive. Executive hereby
represents and warrants to Parent as follows:
2.1. Title. Executive is the owner (both beneficially and of record)
of the Shares and the Options. Except for the Shares and the Options,
Executive is not the record or beneficial owner (as defined in the Merger
Agreement) of, and does not have any other rights of any nature to acquire
any additional shares of, any shares of capital stock of the Company. All
of the Options are fully vested and exercisable, and any acceleration of
the vesting of the Options has been duly and validly authorized by all
necessary corporate action on the part of the Company. Executive owns all
of the Shares and, upon exercise of the Options and payment therefor, will
own all of the Option Shares, in each case free and clear of all security
interests, liens, claims, pledges, options, restrictions, rights of first
refusal, agreements, limitations on Executive's voting rights, charges and
other encumbrances of any nature whatsoever, and, except as provided in
this Agreement, Executive has not appointed or granted any proxy, which
appointment or grant is still effective, with respect to any of the Shares
or the Option Shares. The Executive has sole power of disposition with
respect to all of the Shares and the Option Shares and sole voting power
with respect to the matters set forth in Section 5 hereof. Upon the
delivery to Parent by Executive of a certificate or certificates evidencing
the Shares and the Option Shares, Parent will receive good, valid and
marketable title to the Shares and the Option Shares, in each case free and
clear of all security interests, liens, claims,
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pledges, options, restrictions, rights of first refusal, agreements,
limitations on Parent's voting rights, charges and other encumbrances of
any nature whatsoever.
2.2. Authority Relative to This Agreement. Executive has all
necessary power and authority to execute and deliver this Agreement, to
perform its obligations hereunder and to consummate the transactions
contemplated hereby. This Agreement has been duly and validly executed and
delivered by Executive and, assuming the due authorization, execution and
delivery by Parent, constitutes a legal, valid and binding obligation of
Executive, enforceable against Executive in accordance with its terms.
2.3. No Conflict. The execution and delivery of this Agreement by
Executive does not, and the performance of this Agreement by Executive will
not, (a) except for any filings required under the HSR Act and for
requirements of federal and state securities laws, require any consent,
approval, authorization or permit of, or filing with or notification to,
any governmental or regulatory authority, domestic or foreign, or (b)
conflict with, violate or result in any breach of or constitute a default
under (or an event which with notice or lapse of time or both would become
a default under) any agreement, judgment, injunction, order, law, rule,
regulation, decree or arrangement to which Executive is a party or is
bound.
2.4. Brokers. Except for Lehman Brothers Inc., whose fees will be
paid by the Company and a true and correct copy of whose engagement letter
has been provided by Purchaser, no broker, finder or investment banker is
entitled to any brokerage, finder's or other fee or commission in
connection with the transactions contemplated hereby based upon
arrangements made by or on behalf of Executive.
3. Representations and Warranties of Parent. Parent hereby represents
and warrants to Executive as follows:
3.1. Authority Relative to This Agreement. Parent has all necessary
power and authority to execute and deliver this Agreement, to perform its
obligations hereunder and to consummate the transactions contemplated
hereby. The execution and delivery of this Agreement by Parent and the
consummation by Parent of the transactions contemplated hereby have been
duly and validly authorized by all necessary corporate action on the part
of Parent. This Agreement has been duly and validly executed and delivered
by Parent and, assuming the due authorization, execution and delivery by
Executive, constitutes a legal, valid and binding obligation of Parent,
enforceable against Parent in accordance with its terms.
3.2. No Conflict. The execution and delivery of this Agreement by
Parent does not, and the performance of this Agreement by Parent will not,
(a) except for any filings required under the HSR Act and for requirements
of federal and state securities laws, require any consent, approval,
authorization or permit of, or filing with or notification to, any
governmental or regulatory authority, domestic or foreign,
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<PAGE>
(b) conflict with or violate the certificate of incorporation or bylaws of
Parent, (c) conflict with, violate or result in any breach of or constitute
a default under (or an event which with notice or lapse of time or both
would become a default under) any agreement, judgment, injunction, order,
law, rule, regulation, decree or arrangement applicable to Parent or by
which any property or asset of Parent is bound or affected, other than, in
the case of clause (c), any such conflicts, violations, breaches or
defaults that, individually or in the aggregate, would not materially
impair the ability of Parent to perform its obligations hereunder.
3.3. Brokers. Except for Bear Stearns & Co. Inc., whose fees will be
paid by Parent, no broker, finder or investment banker is entitled to any
brokerage, finder's or other fee or commission from Executive in connection
with the transactions contemplated hereby based upon arrangements made by
or on behalf of Parent.
3.4. Investment Intent. Parent hereby represents that any securities
it purchases pursuant to this Agreement are being purchased for its own
account for investment and not with a view to, or for sale in connection
with, any public distribution thereof
4. Covenants of Executive.
4.1. No Disposition or Encumbrance. Executive hereby covenants and
agrees that, except as contemplated by this Agreement and except pursuant
to the Offer, Executive shall not, and shall not offer or agree to, sell,
transfer, tender, assign, hypothecate or otherwise dispose of, or create or
permit to exist any security interest, lien, claim, pledge, option,
restriction, right of first refusal, agreement, limitation on Executive's
voting rights, charge or other encumbrance of any nature whatsoever with
respect to the Shares, the Options or the Option Shares now owned or that
may hereafter be acquired by Executive.
4.2. No Solicitation of Transactions. Executive and his affiliates
shall not, and Executive and his affiliates shall use their best efforts to
ensure that Executive's representatives and agents (including, but not
limited to, investment bankers, attorneys and accountants) and his
affiliates' officers, directors, employees, representatives and agents
(including, but not limited to, investment bankers, attorneys and
accountants) do not, directly or indirectly, encourage, solicit,
participate in or initiate discussions or negotiations with, or provide any
information to, any corporation, partnership, person or other entity or
group (other than Parent, any of its affiliates or representatives)
concerning any proposal or offer to acquire all or a substantial part of
the business or properties of the Company or any of its subsidiaries or any
capital stock of the Company or any of its subsidiaries, whether by merger,
tender offer, exchange offer, sale of assets or similar transaction
involving the Company or any subsidiary, division or operating or principal
business unit of the
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Company (an "Acquisition Proposal"), unless the Company is permitted to do
so in accordance under the terms of the Merger Agreement. Executive shall
immediately cease and cause to be terminated any existing activities,
discussions or negotiations by Executive or his affiliates or any
investment banker, attorney, accountant or other advisor or representative
of, Executive or his affiliates with parties conducted heretofore with
respect to any of the foregoing.
4.3. Compliance of Executive with This Agreement. Executive shall
take all actions and forbear from all actions, in each case, necessary in
order that (a) all of Executive's representations and warranties hereunder
are true and correct and (b) Executive fulfills all of its obligations
hereunder.
5. Voting Agreement; Proxy of Executive.
5.1. Voting Agreement. Executive hereby agrees that, during the time
this Agreement is in effect, at any meeting of the stockholders of the
Company, however called, and in any action by written consent of the
stockholders of the Company, Executive shall, to the extent applicable, (a)
vote (or execute a consent in respect of) all of the Shares and the Option
Shares and any shares of Common Stock or other securities acquired of
record or beneficially by the Executive after the date hereof (the
"Executive Shares") in favor of the Merger, the Merger Agreement (as
amended from time to time) and any of the transactions contemplated by the
Merger Agreement; (b) vote (or execute a consent in respect of) the Shares,
the Option Shares and the Executive Shares against any action or agreement
that would result in a breach of any covenant, representation or warranty
or any other obligation of the Company under the Merger Agreement; and (c)
vote (or execute a consent in respect of) the Shares, the Option Shares and
the Executive Shares against any action or agreement that would reasonably
be expected to impede, interfere with, delay or attempt to discourage the
Offer or the Merger, including, but not limited to: (i) any extraordinary
corporate transaction (other than the Merger), such as a merger,
reorganization, recapitalization or liquidation involving the Company or
any of its Subsidiaries (as defined in the Merger Agreement) or any
proposal made in opposition to or in competition with the Merger; (ii) a
sale or transfer of a material amount of assets of the Company or any of
its Subsidiaries; (iii) any change in the management or board of directors
of the Company, except as otherwise agreed to in writing by Parent; (iv)
any material change in the present capitalization or dividend policy of the
Company; or (v) any other material change in the corporate structure or
business of the Company or any of its Subsidiaries.
5.2. Irrevocable Proxy. Executive agrees that, in the event
Executive shall fail to comply with the provisions of Section 5.1 hereof as
determined by Parent in its sole discretion, such failure shall result,
without any further action by Executive, in the irrevocable appointment of
Parent as the attorney and proxy of Executive, with full power of
substitution, to vote, and otherwise act (by written consent or otherwise)
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with respect to all shares of Common Stock and other securities, including
the Shares, the Option Shares and the Executive Shares, that Executive is
entitled to vote at any meeting of stockholders of the Company (whether
annual or special and whether or not an adjourned or postponed meeting) or
consent in lieu of any such meeting or otherwise, on the matters and in the
manner specified in Section 5.1. THIS PROXY AND POWER OF ATTORNEY IS
IRREVOCABLE AND COUPLED WITH AN INTEREST AND IS EXECUTED AND INTENDED TO BE
IRREVOCABLE IN ACCORDANCE WITH THE PROVISIONS OF SECTION 212(e) OF THE
DELAWARE GENERAL CORPORATION LAW ("DGCL"). Executive hereby revokes,
effective upon the execution and delivery of the Merger Agreement by the
parties thereto, all other proxies and powers of attorney with respect to
the Shares, the Option Shares and the Executive Shares that Executive may
have heretofore appointed or granted, and no subsequent proxy or power of
attorney (except in furtherance of Executive's obligations under Section
5.1 hereof) shall be given or written consent executed (and if given or
executed, shall not be effective) by Executive with respect thereto so long
as this Agreement remains in effect.
6. Termination. This Agreement shall terminate automatically in the
event that the Merger Agreement is terminated in accordance with the terms and
conditions thereof.
7. Miscellaneous.
7.1. Expenses. All costs and expenses incurred in connection with
the transactions contemplated by this Agreement shall be paid by the party
incurring such expenses.
7.2. Further Assurances. Executive and Parent shall execute and
deliver all such further documents and instruments and take all such
further action as may be necessary in order to consummate the transactions
contemplated hereby.
7.3. Specific Performance. The parties hereto agree that irreparable
damage would occur in the event any provision of this Agreement were not
performed in accordance with the terms hereof and that the parties shall be
entitled to specific performance of the terms hereof, in addition to any
other remedy at law or in equity.
7.4. Entire Agreement. This Agreement constitutes the entire
agreement between Parent and Executive with respect to the subject matter
hereof and supersedes all prior agreements and understandings, both written
and oral, between Parent and Executive with respect to the subject matter
hereof.
7.5. Assignment. This Agreement shall not be assigned by operation
of law or otherwise, except that Parent may assign all or any of its rights
and obligations hereunder to any affiliate of Parent, provided that no such
assignment shall relieve Parent of its obligations hereunder if such
assignee does not perform such obligations.
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7.6. Parties in Interest. This Agreement shall be binding upon,
inure solely to the benefit of, and be enforceable by, the parties hereto
and their successors and permitted assigns. Nothing in this Agreement,
express or implied, is intended to or shall confer upon any other person
any right, benefit or remedy of any nature whatsoever under or by reason of
this Agreement.
7.7. Amendment; Waiver. This Agreement may not be amended except by
an instrument in writing signed by the parties hereto. Any party hereto
may (a) extend the time for the performance of any obligation or other act
of any other party hereto, (b) waive any inaccuracy in the representations
and warranties contained herein or in any document delivered pursuant
hereto and (c) waive compliance with any agreement or condition contained
herein. Any such extension or waiver shall be valid if set forth in an
instrument in writing signed by the party or parties to be bound thereby.
7.8. Severability. If any term or other provision of this Agreement
is invalid, illegal or incapable of being enforced by any rule of law, or
public policy, all other conditions and provisions of this Agreement shall
nevertheless remain in full force and effect so long as the economic or
legal substance of this Agreement is not affected in any manner materially
adverse to any party. Upon such determination that any term or other
provision is invalid, illegal or incapable of being enforced, the parties
hereto shall negotiate in good faith to modify this Agreement so as to
effect the original intent of the parties as closely as possible in a
mutually acceptable manner in order that the terms of this Agreement remain
as originally contemplated to the fullest extent possible.
7.9. Notices. Except as otherwise provided herein, all notices,
requests, claims, demands and other communications hereunder shall be in
writing and shall be given (and shall be deemed to have been duly given
upon receipt) by delivery in person, by cable, facsimile transmission,
telegram or telex or by registered or certified mail (postage prepaid,
return receipt requested) to the respective parties at the following
addresses (or at such other address for a party as shall be specified in a
notice given in accordance with this Section 7.9):
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<PAGE>
if to Parent:
The Great Universal Stores P.L.C.
c/o Experian Corporation
505 City Parkway West
Orange, California 92868
Attention: Thomas Gasparini
Senior Vice President, Secretary
and General Counsel
Facsimile: (714) 938-2513
Telephone: (714) 385-8296
with a copy to:
Sonnenschein Nath & Rosenthal
8000 Sears Tower
Chicago, Illinois 60606
Attention: Donald G. Lubin, Esq.
Facsimile: (312) 876-7934
Telephone: (312) 876-8000
if to Executive:
-------------------------
-------------------------
-------------------------
-------------------------
Facsimile: ______________
Telephone: ______________
with a copy to:
Kirkland & Ellis
200 East Randolph Drive
Chicago, Illinois 60601
Attention: Carter W. Emerson, Esq.
Facsimile: (312) 861-2200
Telephone: (312) 861-2000
7.10. Governing Law. This Agreement shall be governed by, and
construed in accordance with, the laws of the State of Delaware applicable
to contracts executed in and to be performed in Delaware without regard to
any principles of choice of law
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or conflicts of law of such State. All actions and proceedings arising out
of or relating to this Agreement shall be heard and determined in any state
or federal court sitting in Delaware. Each of the parties hereto (i)
consents to submit such party to the personal jurisdiction of any Federal
court located in the State of Delaware or any Delaware state court in the
event any dispute arises out of this Agreement or any of the transactions
contemplated hereby, (ii) agrees that such party will not attempt to deny
or defeat such personal jurisdiction by motion or other request for leave
from any such court, (iii) agrees that such party will not bring any action
relating to this Agreement or the transactions contemplated hereby in any
court other than a Federal court sitting in the state of Delaware or a
Delaware state court and (iv) waives any right to trial by jury with
respect to any claim or proceeding related to or arising out of this
Agreement or any of the transactions contemplated hereby.
7.11. Headings. The descriptive headings contained in this Agreement
are included for convenience of reference only and shall not affect in any
way the meaning or interpretation of this Agreement.
7.12. Counterparts. This Agreement may be executed and delivered
(including by facsimile transmission) in one or more counterparts, and by
the different parties hereto in separate counterparts, each of which when
so executed and delivered shall be deemed to be an original but all of
which taken together shall constitute one and the same agreement.
IN WITNESS WHEREOF, each of the parties hereto has caused this Agreement to
be duly executed and delivered as of the date first written above.
By: ____________________________
THE GREAT UNIVERSAL STORES P.L.C.
By: _____________________________
Name:
Title:
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LEHMAN BROTHERS
February 6, 1998
Experian Corporation
505 City Parkway West
Orange, CA 92868
Attention: Mr. Van Skilling
Chairman & Chief Executive Officer
Dear Mr. Skilling:
In connection with your consideration of a possible transaction with
Metromail Corporation and/or its subsidiaries or affiliates (collectively, with
such subsidiaries or affiliates, the "Company"), the Company is prepared to make
available to you certain information concerning the business, financial
condition, operations, prospects, assets and liabilities of the Company. As a
condition to such information being furnished to you and your parent company's
directors, officers, employees, agents or advisors (including, without
limitation, attorneys, accountants, consultants, bankers and financial advisors)
(collectively, "Representatives"), you agree to treat any information concerning
the Company (whether prepared by the Company, its advisors or otherwise and
irrespective of the form of communication) which has been or will be furnished
to you or to your Representatives by or on behalf of the Company (herein
collectively referred to as the "Evaluation Material") in accordance with the
provisions of this letter agreement, and to take or abstain from taking certain
other actions hereinafter set forth.
The term "Evaluation Material" shall be deemed to include all notes,
analyses, compilations, studies, interpretations or other documents or materials
prepared by you or your Representatives which contain, reflect or are based
upon, in whole or in part, the information furnished to you or your
Representatives pursuant hereto. The term "Evaluation Material" does not include
information which (i) is or becomes generally available to the public other than
as a result of a disclosure by you or your Representatives, (ii) was within your
possession prior to its being furnished to you by or on behalf of the Company
pursuant hereto, provided that the source of such information was not known by
you or any of your Representatives, after reasonable investigation, to be bound
by a confidentiality agreement with or other contractual, legal or fiduciary
obligation of confidentiality to the Company or any other party with respect to
such information or (iii) becomes available to you on a non-confidential basis
from a source other than the Company or any of its Representatives, provided
that such source is not bound by a confidentiality agreement with or other
contractual, legal or fiduciary obligation of confidentiality to the Company or
any other party with respect to such information.
LEHMAN BROTHERS INC.
190 SOUTH LASALLE STREET SUITE 2300 CHICAGO, ILLINOIS 60605
TELEPHONE 312/609-7200 FACSIMILE 312/609-8562
<PAGE>
You hereby agree that you and your Representatives shall use the Evaluation
Material solely for the purpose of evaluating a possible transaction between the
Company and you, that the Evaluation Material will be kept confidential by you
and your Representatives and that (except as may be required by law) you and
your Representatives will not disclose any of the Evaluation Material in any
manner whatsoever; provided, however, that (i) you may make any disclosure of
such information to which the Company gives its prior written consent and (ii)
any of such information may be disclosed to your Representatives who need to
know such information for the sole purpose of evaluating a possible transaction
with the Company, who agree to keep such information confidential in accordance
with this letter agreement and who are provided with a copy of this letter
agreement and agree to be bound by the terms hereof to the same extent as if
they were parties hereto. In any event, you shall be responsible for any breach
of this letter agreement by any of your Representatives and you agree, at your
sole expense, to take all reasonable measures to restrain your Representatives
from prohibited or unauthorized disclosure or use of the Evaluation Material.
In addition, you agree that, without the prior written consent of the
Company, you and your Representatives will not disclose to any other person the
fact that the Evaluation Material has been made available to you, that
discussions or negotiations are taking place concerning a possible transaction
involving the Company or any of the terms, conditions or other facts with
respect thereto (including the status thereof), unless in the written opinion of
your counsel such disclosure is required by law and then only with as much prior
written notice to the Company as is practical under the circumstances. Without
limiting the generality of the foregoing, you further agree that, without the
prior written consent of the Company, you will not, directly or indirectly,
enter into any agreement, arrangement or understanding, or any discussions which
might lead to such agreement, arrangement or understanding, with any other
person regarding a possible transaction involving the Company. The term "person"
as used in this letter agreement shall be broadly interpreted to include the
media and any corporation, partnership, group, individual or other entity. The
Company agrees that, without your prior written consent, neither the Company nor
its Representatives will disclose to any other person the fact that the
Evaluation Material has been made available to you or that discussions or
negotiations are taking place concerning a possible transaction involving the
Company and you, unless in the written opinion of its counsel such disclosure is
required by law and then only with as much prior written notice to you as is
practical under the circumstances.
You further agree that, without the prior consent of Lehman Brothers Inc.
as financial advisor to the Company ("Lehman Brothers"), all communications
regarding the proposed transaction, requests for additional information, and
discussions or questions regarding procedures, will be submitted or directed
only to Lehman Brothers and not to the Company or any of its affiliates or any
of their respective directors, officers or employees.
In the event that you or any of your Representatives are requested or
required (by deposition, interrogatories, requests for information or documents
in legal proceedings, subpoena, civil investigative demand or other similar
process) to disclose any of the Evaluation Material, you shall provide the
Company with prompt written notice of any such
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<PAGE>
request or requirement so that the Company may seek a protective order or other
appropriate remedy and/or waive compliance with the provisions of this letter
agreement. If, in the absence of a protective order or other remedy or the
receipt of a waiver by the Company, you or any of your Representatives are
nonetheless, in the written opinion of your counsel, legally compelled to
disclose Evaluation Material to any tribunal or else stand liable for contempt
or suffer other censure or penalty, you or your Representative may, without
liability hereunder, disclose to such tribunal only that portion of the
Evaluation Material which such counsel advises you is legally required to be
disclosed, provided that you exercise your reasonable efforts to preserve the
confidentiality of the Evaluation Material, including, without limitation, by
cooperating with the Company to obtain an appropriate protective order or other
reliable assurance that confidential treatment will be accorded the Evaluation
Material by such tribunal.
If you decide that you do not wish to proceed with a transaction with the
Company, you will promptly inform Lehman Brothers of that decision. In that
case, or at any time upon the request of the Company or its agent for any reason
or for no reason, you will promptly deliver to the Company all Evaluation
Material (and all copies thereof) furnished to you or your Representatives by or
on behalf of the Company pursuant hereto except for one copy thereof to be kept
in a sealed box by your legal department for record purposes only. In the event
of such a decision or request, all other Evaluation Material prepared by you or
your Representatives shall be destroyed and no copy thereof shall be retained
and you agree to certify in writing that such destruction has occurred except
for one copy thereof to be kept in a sealed box by your legal department for
record purposes only. Notwithstanding the return or destruction of the
Evaluation Material, you and your Representatives will continue to be bound by
your obligations of confidentiality and other obligations hereunder.
You understand and acknowledge that neither the Company nor any of its
Representatives (including without limitation Lehman Brothers) makes any
representation or warranty, express or implied, as to the accuracy or
completeness of the Evaluation Material. You agree that neither the Company nor
any of its Representatives (including without limitation Lehman Brothers) shall
have any liability to you or to any of your Representatives relating to or
resulting from the use of the Evaluation Material. Only those representations or
warranties which are made in a final definitive agreement regarding the
transactions contemplated hereby, when, as and if executed, and subject to such
limitations and restrictions as may be specified therein, will have any legal
effect.
In consideration of the Evaluation Material being furnished to you, you
hereby agree that, for a period of eighteen months from the date hereof, neither
you, your affiliates nor any person on behalf of you or your affiliates will
solicit to employ (whether as an employee, officer, director, agent, consultant
or independent contractor) any person who is employed by the Company, its
subsidiaries or its affiliates. The term "solicit to employ" includes any
communication (written, telephone or oral) from or initiated by you, your
affiliates or any person on behalf of you or your affiliates to any employee of
the Company, its subsidiaries or its affiliates but does not include advertising
to fill one or more positions in any newspaper of general circulation or
industry publication on a basis consistent with past practice.
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<PAGE>
In consideration of the Evaluation Material being furnished to you, you
hereby agree that, without the prior written consent of the Board of Directors
of the Company, for a period of one year from the date hereof, neither you nor
any of your affiliates (as such term is defined in Rule 12b-2 of the Securities
Exchange Act of 1934, as amended), acting alone or as part of a group, will
acquire or offer or agree to acquire, directly or indirectly, by purchase or
otherwise, any voting securities (or direct or indirect rights or options to
acquire any voting securities) of the Company, or otherwise seek to influence or
control, in any manner whatsoever, the management or policies of the Company.
You agree that unless and until a final definitive agreement regarding a
transaction between the Company and you has been executed and delivered, neither
the Company nor you will be under any legal obligation of any kind whatsoever
with respect to such a transaction by virtue of this letter agreement except for
the rights and obligations specifically agreed to herein. You further
acknowledge and agree that the Company reserves the right, in its sole
discretion, to reject any and all proposals made by you or any of your
Representatives with regard to a transaction between the Company and you, and to
terminate discussions and negotiations with you at any time.
The Company reserves the right to assign all of its rights, powers and
privileges under this letter agreement (including, without limitation, the right
to enforce all of the terms of this letter agreement) to a successor in interest
to the Company.
It is understood and agreed that no failure or delay by the Company in
exercising any right, power or privilege hereunder shall operate as a waiver
thereof, nor shall any single or partial exercise thereof preclude any other or
further exercise thereof or the exercise of any other right, power or privilege
hereunder.
It is further understood and agreed that any breach of this letter
agreement by you or any of your Representatives may result in irreparable harm
to the Company, that money damages may not be a sufficient remedy for any such
breach of this letter agreement and that the Company shall be entitled to seek
equitable relief, including injunction and specific performance, as a remedy
for any such breach. Such remedies shall not be deemed to be the exclusive
remedies for a breach by you of this letter agreement but shall be in addition
to all other remedies available at law or equity to the Company. In the event of
litigation relating to this letter agreement, the party that fails to prevail
in such action shall pay the reasonable legal fees incurred by the prevailing
party in connection with such litigation, including any appeal therefrom.
This letter agreement shall be governed by and construed in accordance with
the laws of the State of Illinois and may not be amended or terminated except
pursuant to a written agreement duly executed by you and the Company. You and
the Company hereby irrevocably and unconditionally consent to submit to the
exclusive jurisdiction of the courts of the State of Illinois and of the United
States District Court located in the City of Chicago for any lawsuits, actions
or other proceedings arising out of or relating to this Agreement and agree not
to commence any such lawsuit, action or other proceeding except in such courts.
You further
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<PAGE>
agree that service of any process, summons, notice or document by registered
mail to your address set forth above shall be effective service of process for
any lawsuit, action or other proceeding brought against you in any such court.
You and the Company hereby irrevocably and unconditionally waive any objection
to the laying of venue of any lawsuit, action or other proceeding arising out of
or relating to this Agreement in the courts of the State of Illinois or the
United States District Court located in the City of Chicago, and hereby further
irrevocably and unconditionally waive and agree not to plead or claim in any
such court that any such lawsuit, action or other proceeding brought in any such
court has been brought in an inconvenient forum.
The obligations of each party under this agreement will cease three years
from the date hereof, provided that with respect to the copy of the Evaluation
Material kept for record purposes, your obligation to keep such Evaluation
Materials in a sealed box shall continue until such Evaluation Materials are
destroyed or returned to the Company.
Please confirm your agreement with the foregoing by signing and returning
one copy of this letter to the undersigned, whereupon this letter agreement
shall become a binding agreement between you and the Company.
Very truly yours,
/s/ Michael K. Stake
-------------------------------------
Lehman Brothers Inc.
as financial advisor to, and on behalf of,
Metromail Corporation
Accepted and agreed as of
the date first written above:
EXPERIAN CORPORATION
By: /s/ Thomas A. Gasparini
------------------------------
Name: THOMAS A. GASPARINI
Title: Vice President and
General Counsel
-5-
<PAGE>
[LOGO]
METROMAIL
360 East 22nd Street
Lombard, Illinois 60148
Dear Stockholder:
We are pleased to inform you that Metromail Corporation ("Metromail") has
entered into a merger agreement with The Great Universal Stores P.L.C. ("GUS")
under which a subsidiary of GUS has offered to purchase all of the outstanding
Metromail shares for $31.50 per share in cash. The offer is to be followed by
a merger of the GUS subsidiary into the Company in which each share not
purchased in the offer will be converted into the right to receive the same
cash consideration per share as is paid to stockholders in the offer.
YOUR BOARD OF DIRECTORS HAS DETERMINED THAT THE GUS TENDER OFFER AND THE
MERGER ARE FAIR TO AND IN THE BEST INTERESTS OF THE COMPANY AND ITS
STOCKHOLDERS AND RECOMMENDS THAT ALL STOCKHOLDERS ACCEPT THE GUS OFFER AND
TENDER THEIR SHARES PURSUANT TO THE GUS OFFER.
In addition to the benefits of this transaction to our stockholders, we
believe the combination of Metromail and GUS will be a dynamic one that will
greatly benefit both companies and will provide great opportunities for
Metromail's customers. Metromail's employees will benefit from being part of a
larger, stronger company with exciting new growth opportunities.
Enclosed is GUS's Offer to Purchase together with related materials
including a Letter of Transmittal to be used in tendering your shares. These
documents set forth the terms and conditions of GUS's offer. Also enclosed is
a copy of the Company's Schedule 14D-9 filed with the Securities and Exchange
Commission, which sets forth certain information concerning the tender offer,
including a description of certain factors considered by your Board of
Directors in approving the transaction with GUS. Among other things, the Board
considered the opinion of Lehman Brothers Inc., its financial advisor, that
the price of $31.50 per share is fair to the stockholders of the Company from
a financial point of view. We urge you to read the enclosed documents
carefully.
Your Board of Directors, management and employees thank you for your loyal
support.
On behalf of the Board of Directors,
Sincerely
/s/ Barton L. Faber
SIGNATURE OF BARTON L. FABER
Barton L. Faber
Chairman
Lombard, Illinois
March 16, 1997
<PAGE>
LEHMAN BROTHERS
March 12, 1998
Board of Directors
Metromail Corporation
360 East 22nd Street
Lombard, Illinois 60148
Members of the Board:
We understand that Metromail Corporation (the "Company"), The Great Universal
Stores P.L.C. ("GUS") and GUS Acquisition Corp., a subsidiary of GUS ("Newco,"
and, together with GUS, the "Bidder"), expect to enter into an Agreement and
Plan of Merger (the "Merger Agreement") and related Stock Purchase Agreements
(the "Stock Purchase Agreements"), which provide, among other things, for (i)
the tender offer by Newco for all outstanding shares of common stock, together
with certain associated rights, of the Company for consideration of $31.50 net
per share in cash (the "Tender Offer"), and (ii) the subsequent merger (the
"Merger," and together with the Tender Offer, the "Proposed Transaction") of
Newco with and into the Company, pursuant to which each outstanding share of
the common stock of the Company (other than shares held in treasury or held by
the Bidder or any of its affiliates or as to which dissenters' rights are
exercised) will be converted into the right to receive consideration of $31.50
net per share in cash. The terms and conditions of the Proposed Transaction
are set forth in more detail in the Merger Agreement.
We have been requested by the Board of Directors of the Company to render our
opinion with respect to the fairness, from a financial point of view, to the
Company's stockholders of the consideration to be offered to such stockholders
in the Proposed Transaction. We have not been requested to opine as to, and
our opinion does not in any manner address, the Company's underlying business
decision to proceed with or effect the Proposed Transaction.
In arriving at our opinion, we reviewed and analyzed: (i) the Merger
Agreement, the Stock Purchase Agreements and the specific terms of the
Proposed Transaction, (ii) publicly available information concerning the
Company that we believe to be relevant to our analysis, (iii) financial and
operating information with respect to the business, operations and prospects
of the Company furnished to us by the Company, (iv) a trading history of the
Company's common stock from June 13, 1996, its initial public offering date,
to the present and a comparison of that trading history with those of other
companies that we deemed relevant, (v) a comparison of the historical
financial results and present financial condition of the Company with those of
other companies that we deemed relevant, and (vi) a comparison of the
financial terms of the Proposed Transaction with the financial terms of
certain other recent transactions that we deemed relevant. We also have had
discussions with the management of the Company concerning its business,
operations, assets, financial condition and prospects and have undertaken such
other studies, analyses and investigations as we deemed appropriate.
LEHMAN BROTHERS INC.
190 SOUTH LASALLE STREET CHICAGO, IL 60603 PHONE 312 609 7200
<PAGE>
In addition, in arriving at our opinion, we have considered the results of
efforts to solicit indications of interest from third parties with respect to
an acquisition of all or part of the Company, including the likelihood of
consummation of an acquisition as contemplated by any such indication of
interest received by the Company.
In arriving at our opinion, we have assumed and relied upon the accuracy and
completeness of the financial and other information provided by the Company
and used by us without assuming any responsibility for independent
verification of such information and have further relied upon the assurances
of management of the Company that they are not aware of any facts or
circumstances that would make such information inaccurate or misleading. With
respect to the financial projections of the Company, upon advice of the
Company we have assumed that such projections have been reasonably prepared on
a basis reflecting the best currently available estimates and judgments of the
management of the Company as to the future financial performance of the
Company and that the Company will perform substantially in accordance with
such projections. In arriving at our opinion, we have not conducted a physical
inspection of the properties and facilities of the Company and have not made
or obtained any evaluations or appraisals of the assets or liabilities of the
Company. Our opinion necessarily is based upon market, economic and other
conditions as they exist on, and can be evaluated as of, the date of this
letter.
Based upon and subject to the foregoing, we are of the opinion as of the date
hereof that, from a financial point of view, the consideration to be offered
to the stockholders of the Company in the Proposed Transaction is fair to such
stockholders.
We have acted as financial advisor to the Company in connection with the
Proposed Transaction and will receive a fee for our services which is
contingent upon the consummation of the Proposed Transaction. In addition, the
Company has agreed to indemnify us for certain liabilities that may arise out
of the rendering of this opinion. We also have performed various investment
banking services for the Company in the past (including acting as co-manager
for the Company's initial public offering and as financial advisor to the
Company in its acquisition of Atlantes Corporation) and have received
customary fees for such services. In the ordinary course of our business, we
actively trade in the equity securities of the Company for our own account and
for the accounts of our customers and, accordingly, may at any time hold a
long or short position in such securities.
This opinion is for the use and benefit of the Board of Directors of the
Company and is rendered to the Board of Directors in connection with its
consideration of the Proposed Transaction. This opinion is not intended to be
and does not constitute a recommendation to any stockholder of the Company as
to whether to accept the consideration to be offered to the stockholders in
connection with the Proposed Transaction.
Very truly yours,
/s/ Lehman Brothers
Lehman Brothers
<PAGE>
FIRST AMENDMENT TO RIGHTS AGREEMENT
THIS FIRST AMENDMENT to the Rights Agreement (the "Rights Agreement") dated
as of February 24, 1997, between Metromail Corporation, a Delaware corporation
(the "Company") and American Stock Transfer & Trust Company, as Rights Agent, is
dated as of the 12th day of March 1998.
WHEREAS, the Company intends to enter into an Agreement and Plan of Merger,
dated as of March 12, 1998, among the Company, The Great Universal Stores P.L.C.
("GUS") and Great Universal Acquisition Corp., a Delaware corporation and an
indirect wholly owned subsidiary of GUS ("Acquisition Sub") (as it may be
amended from time to time, the "Merger Agreement"), pursuant to which
Acquisition Sub has agreed to make a cash tender offer (the "Offer") for, among
other things, all outstanding shares of Common Stock, including the associated
preferred stock purchase rights (the "Shares"), of the Company, to be followed
by a merger of Acquisition Sub with and into the Company (the "Merger");
WHEREAS, in connection with the execution of the Merger Agreement, GUS
intends to enter into (i) a Stock Purchase Agreement, dated as of March 12, 1998
(the "Donnelley Stock Purchase Agreement"), with R.R. Donnelley & Sons Inc.
("Donnelley"), pursuant to which Donnelley will, among other things, agree to
sell all Shares owned by it on the terms and subject to the conditions set forth
therein; (ii) a Stock Purchase Agreement, dated as of March 12, 1998 (the
"Executive Stock Purchase Agreement"), with certain executives of the Company,
pursuant to which such executives will, among other things, agree to validly
tender all Shares owned by them pursuant to the Offer on the terms and subject
to the conditions set forth therein; and (iii) a Stock Purchase Agreement, dated
as of March 12, 1998 (the "Company Stock Purchase Agreement" and collectively
with the Donnelley Stock Purchase Agreement and the Executive Stock Purchase
Agreement, the "Stock Purchase Agreements"), with the Company, pursuant to which
the Company will, among other things, agree to issue Shares to Acquisition Sub
on the terms and subject to the conditions set forth therein;
WHEREAS, the Board of Directors of the Company believes that it is in the
best interests of the Company and its stockholders that the Offer and Merger be
consummated on the terms set forth in the Merger Agreement;
WHEREAS, the Board of Directors of the Company desires to amend the Rights
Agreement such that the execution of the Merger Agreement and the Stock Purchase
Agreements and the consummation of the transactions contemplated thereby will
not cause (i) GUS and/or the Acquisition Sub or their respective Affiliates or
Associates to become an Acquiring Person (as such terms are defined in the
Rights Agreement) so long as the Merger Agreement or the Stock Purchase
Agreements are in effect or (ii) a Distribution Date, a Stock Acquisition Date
or a Triggering Event
<PAGE>
(as such terms are defined in the Rights Agreement) to occur, irrespective of
the number of Shares acquired pursuant to the Offer;
WHEREAS, the Board of Directors of the Company believes that it is in the
best interests of the Company and its stockholders that the Rights Agreement be
amended as set forth herein; and
WHEREAS, Section 26 of the Rights Agreement authorizes the Board of
Directors of the Company and the Rights Agent to adopt the proposed amendment
without the approval of the Company's stockholders;
NOW, THEREFORE, in consideration of the recitals (which are deemed to be a
part of this Amendment) and agreements contained herein, the parties hereto
agree to amend the Rights Agreement as follows:
1. Section 1(o) of the Rights Agreement is hereby amended by deleting the
word "and" immediately prior to clause (vii) thereof and substituting ","
therefor and by inserting the following at the end of such clause (vii):
, and (viii) The Great Universal Stores P.L.C., a corporation organized
under the laws of England ("GUS"), Great Universal Acquisition Corp., a
Delaware corporation (collectively with GUS, the "Acquirors"), and their
respective Affiliates and Associates, from and after the execution of the
Merger Agreement, the Donnelley Stock Purchase Agreement, the Executive
Stock Purchase Agreement or the Company Stock Purchase Agreement; provided
that if the tender offer contemplated by the Merger Agreement is not
consummated, then the Acquirors and their respective Affiliates and
Associates shall not be deemed to be "Exempt Persons" at any time after the
Merger Agreement and the Stock Purchase Agreements have terminated in
accordance with their respective terms.
2. Section 1(aa) of the Rights Agreement is hereby modified and amended by
adding the following sentence at the end thereof:
Notwithstanding any provision of this Agreement to the contrary, neither
the execution and delivery of the Merger Agreement or the Stock Purchase
Agreements nor consummation of the transactions contemplated by the Merger
Agreement or the Stock Purchase Agreements shall be deemed to cause a Stock
Acquisition Date.
-2-
<PAGE>
3. Section 1(cc) of the Rights Agreement is hereby modified and amended by
adding the following sentence at the end thereof:
Notwithstanding any provision of this Agreement to the contrary, neither
the execution and delivery of the Merger Agreement or the Stock Purchase
Agreements nor consummation of the transactions contemplated by the Merger
Agreement or the Stock Purchase Agreements shall be deemed to be a
Triggering Event.
4. Section 3(a) of the Rights Agreement is hereby modified and amended by
adding the following sentence at the end thereof:
Notwithstanding any provision of this Agreement to the contrary, neither
the execution and delivery of the Merger Agreement or the Stock Purchase
Agreements nor consummation of the transactions contemplated by the Merger
Agreement or the Stock Purchase Agreements shall cause a Distribution Date.
5. Section 15 of the Rights Agreement is hereby modified and amended to
add the following sentence at the end thereof:
Nothing in this Agreement shall be construed to give any holder of Rights
or any other Person any legal or equitable rights, remedy or claim under
this Agreement in connection with any transactions contemplated by the
Merger Agreement or the Stock Purchase Agreements.
6. Capitalized terms used but not defined herein shall have the meaning
assigned to such terms in the Rights Agreement.
7. Except as expressly amended hereby, the Rights Agreement remains in
full force and effect.
8. This Amendment shall be deemed to be a contract made under the laws of
the State of Delaware, and for all purposes shall be governed by and construed
in accordance with the laws of such State applicable to contracts made and
performed entirely within such State.
9. This Amendment may be executed in any number of counterparts and each
of such counterparts shall for all purposes be deemed to be an original, and all
such counterparts shall together constitute but one and the same instrument.
-3-
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Amendment to be
duly executed as of the day and year first above written.
METROMAIL CORPORATION
Attest:
By _________________________ By _____________________________
Name: Name:
Title: Title: Chairman and Chief
Executive Officer
AMERICAN STOCK TRANSFER & TRUST
COMPANY
Attest:
By _________________________ By _____________________________
Name: Name:
Title: Title:
-4-
<PAGE>
AMENDMENT TO AGREEMENT
This shall serve as an amendment dated as of January 23, 1998 (this
"Amendment") to the Agreement dated as of January 30, 1997 (the "Agreement")
between Metromail Corporation (the "Company") and Barton L. Faber (the
"Executive"). The parties agree as follows:
1. The Agreement and the terms, provisions, and definitions thereof shall
continue in full force and effect, except to the extent that the
Agreement is modified by this Amendment. The parties agree that the
Agreement is hereby modified and amended as set forth herein. To the
extent that any provision of this Amendment is inconsistent with the
Agreement, the terms of this Amendment shall control.
2. Section 2(a) of the Agreement is amended to read in its entirety as
follows:
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, (ii) termination of the Executive's employment
with the Company prior to a Change in Control, and (iii) the date
which is two years following the date of a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
METROMAIL CORPORATION
By: /s/ Thomas J. Quarles
______________________________
Thomas J. Quarles
Senior Vice President, General Counsel
and Secretary
/s/ Barton L. Faber
______________________________
Barton L. Faber
Executive
<PAGE>
AMENDMENT TO AGREEMENT
This shall serve as an amendment dated as of January 23, 1998 (this
"Amendment") to the Agreement dated as of January 30, 1997 (the "Agreement")
between Metromail Corporation (the "Company") and Ronald G. Eidell (the
"Executive"). The parties agree as follows:
1. The Agreement and the terms, provisions, and definitions thereof shall
continue in full force and effect, except to the extent that the
Agreement is modified by this Amendment. The parties agree that the
Agreement is hereby modified and amended as set forth herein. To the
extent that any provision of this Amendment is inconsistent with the
Agreement, the terms of this Amendment shall control.
2. Section 2(a) of the Agreement is amended to read in its entirety as
follows:
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, (ii) termination of the Executive's employment
with the Company prior to a Change in Control, and (iii) the date
which is two years following the date of a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
METROMAIL CORPORATION
By: /s/ Thomas J. Quarles
______________________________
Thomas J. Quarles
Senior Vice President, General Counsel
and Secretary
/s/ Ronald G. Eidell
______________________________
Ronald G. Eidell
Executive
<PAGE>
AMENDMENT TO AGREEMENT
This shall serve as an amendment dated as of January 23, 1998 (this
"Amendment") to the Agreement dated as of January 30, 1997 (the "Agreement")
between Metromail Corporation (the "Company") and Thomas J. Quarles (the
"Executive"). The parties agree as follows:
1. The Agreement and the terms, provisions, and definitions thereof shall
continue in full force and effect, except to the extent that the
Agreement is modified by this Amendment. The parties agree that the
Agreement is hereby modified and amended as set forth herein. To the
extent that any provision of this Amendment is inconsistent with the
Agreement, the terms of this Amendment shall control.
2. Section 2(a) of the Agreement is amended to read in its entirety as
follows:
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, (ii) termination of the Executive's employment
with the Company prior to a Change in Control, and (iii) the date
which is two years following the date of a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
METROMAIL CORPORATION
By: /s/ Ronald G. Eidell
______________________________
Ronald G. Eidell
Senior Vice President and Chief Financial
Officer
/s/ Thomas J. Quarles
______________________________
Thomas J. Quarles
Executive
<PAGE>
CONFIDENTIAL
Date: January 7, 1997
To: Tery Larrew
From: Susan Henricks
Subject: PROMOTION/1997 COMPENSATION
Consistent with our discussions regarding your assumption of responsibility for
the Database Marketing Services Business Unit of Metromail which would result
from combining our current Customer Insight Company Business Unit and our List
Enhancement Services Business Unit, the following described plans for your
compensation in 1997.
BASE PAY: Your base pay would increase 20% effective December 1, 1996 and
continue through December 31, 1997. Your current annual base of $156,000 would
be increased to an annual rate of $187,000.
INCENTIVE COMPENSATION: You currently have an incentive opportunity of 100% of
base pay based on CIC revenue performance (35%), profit performance (35%),
customer satisfaction (5%) and individual objectives (25%).
Your 1997 incentive compensation would be based on the performance against plan
of the Datebase Marketing Services Business Unit (75%) and personal objectives
(25%). It is our intent to remove caps on incentive plans for 1997. You will
contribute to discussions in the structure of the 1997 incentive plan for the
Database Marketing Services Business Unit, but the Board of Directors will
establish plan structure.
NOTE: As we discussed, we will need to finalize whether there is one combined
bonus or one CIC bonus and one LES bonus in 1997.
DEFERRED COMPENSATION: You currently have a deferred compensation plan that
awards you $100,000 per year for each of three years if you are employed on June
16, 1997. We would continue this plan concept with $100,000 per year accrued for
each of three years beginning June 17, 1997 and payable to you in a $300,000
lump sum on June 16, 2000, if you are employed by Metromail at that time.
Conditions of this payment will be consistent with those reached in your current
employment agreement.
STOCK OPTIONS: You will continue participation in Metromail's stock option plan.
When the Board approves stock option awards for those at your level of
responsibility within the organization, i.e., Business Unit senior executives,
you will be nominated for an award of 10,000 shares of Metromail stock. We
anticipate that this will occur in 1997, but it is an action that will require
Board of Director and likely shareholder approval.
-1-
<PAGE>
STOCK PURCHASE PLAN: We are considering establishing a stock purchase plan
similar in structure to that which we had as a part of R.R. Donnelley & Sons
Company. You will be a participant in this plan once it is established.
In your new capacity you would report directly to me with the title of
President, Database Marketing Services. You will remain a Senior Vice President
of Metromail Corporation. I am enthusiastic about your assuming this challenging
additional responsibility with the expectation that you will bring the focus,
structure and results realized at CIC to the Database Marketing Services
Business Unit.
-2-
<PAGE>
AMENDMENT TO AGREEMENT
This shall serve as an amendment dated as of January 23, 1998 (this
"Amendment") to the Agreement dated as of January 30, 1997 (the "Agreement")
between Metromail Corporation (the "Company") and Tery R. Larrew (the
"Executive"). The parties agree as follows:
1. The Agreement and the terms, provisions, and definitions thereof shall
continue in full force and effect, except to the extent that the
Agreement is modified by this Amendment. The parties agree that the
Agreement is hereby modified and amended as set forth herein. To the
extent that any provision of this Amendment is inconsistent with the
Agreement, the terms of this Amendment shall control.
2. Section 2(a) of the Agreement is amended to read in its entirety as
follows:
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, (ii) termination of the Executive's employment
with the Company prior to a Change in Control, and (iii) the date
which is two years following the date of a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
METROMAIL CORPORATION
By: /s/ Thomas J. Quarles
______________________________
Thomas J. Quarles
Senior Vice President, General Counsel
and Secretary
/s/ Tery R. Larrew
______________________________
Tery R. Larrew
Executive
<PAGE>
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 Philip H.
Bonello (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
<PAGE>
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control;
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
-2-
<PAGE>
has taken steps reasonably calculated to effect a Change in Control until, in
the opinion of the Board, such Person has 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.
-3-
<PAGE>
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
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,
-4-
<PAGE>
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
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
-5-
<PAGE>
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
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.
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(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 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
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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 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
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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.
(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
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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 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
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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 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
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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 that the amount of the
estimated payments exceeds the amount
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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
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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 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
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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 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
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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 duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the
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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:
Philip H. Bonello
_________________________
_________________________
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
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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 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.
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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
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.
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(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 (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)
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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
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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 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
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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.
(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
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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:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as a senior officer
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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
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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.
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(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, 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
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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
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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.
(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/ Philip H. Bonello
________________________________________
Philip H. Bonello
Executive
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<PAGE>
AMENDMENT TO AGREEMENT
This shall serve as an amendment dated as of January 23, 1998 (this
"Amendment") to the Agreement dated as of January 30, 1997 (the "Agreement")
between Metromail Corporation (the "Company") and Philip H. Bonello (the
"Executive"). The parties agree as follows:
1. The Agreement and the terms, provisions, and definitions thereof shall
continue in full force and effect, except to the extent that the
Agreement is modified by this Amendment. The parties agree that the
Agreement is hereby modified and amended as set forth herein. To the
extent that any provision of this Amendment is inconsistent with the
Agreement, the terms of this Amendment shall control.
2. Section 2(a) of the Agreement is amended to read in its entirety as
follows:
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, (ii) termination of the Executive's employment
with the Company prior to a Change in Control, and (iii) the date
which is two years following the date of a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
METROMAIL CORPORATION
By: /s/ Thomas J. Quarles
______________________________
Thomas J. Quarles
Senior Vice President, General Counsel
and Secretary
/s/ Philip H. Bonello
______________________________
Philip H. Bonello
Executive
<PAGE>
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 James Drake (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
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<PAGE>
has taken steps reasonably calculated to effect a Change in Control until, in
the opinion of the Board, such Person has 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.
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<PAGE>
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
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,
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<PAGE>
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
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
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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
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.
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<PAGE>
(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 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
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<PAGE>
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 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
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<PAGE>
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.
(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
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<PAGE>
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 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
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<PAGE>
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
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
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<PAGE>
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 that the amount of the
estimated payments exceeds the amount
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<PAGE>
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
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<PAGE>
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 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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<PAGE>
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
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<PAGE>
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 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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<PAGE>
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
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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 duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the
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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:
James Drake
_________________________
_________________________
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
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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 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.
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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
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.
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(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 (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)
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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
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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 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
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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.
(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
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<PAGE>
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:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as a senior officer
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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
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<PAGE>
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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<PAGE>
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.
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(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, 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
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<PAGE>
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
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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.
(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/ James Drake
-------------------------------------
James Drake
Executive
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AMENDMENT TO AGREEMENT
This shall serve as an amendment dated as of January 23, 1998 (this
"Amendment") to the Agreement dated as of January 30, 1997 (the "Agreement")
between Metromail Corporation (the "Company") and James R. Drake (the
"Executive"). The parties agree as follows:
1. The Agreement and the terms, provisions, and definitions thereof shall
continue in full force and effect, except to the extent that the
Agreement is modified by this Amendment. The parties agree that the
Agreement is hereby modified and amended as set forth herein. To the
extent that any provision of this Amendment is inconsistent with the
Agreement, the terms of this Amendment shall control.
2. Section 2(a) of the Agreement is amended to read in its entirety as
follows:
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, (ii) termination of the Executive's employment
with the Company prior to a Change in Control, and (iii) the date
which is two years following the date of a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
METROMAIL CORPORATION
By: /s/ Thomas J. Quarles
______________________________
Thomas J. Quarles
Senior Vice President, General Counsel
and Secretary
/s/ James R. Drake
______________________________
James R. Drake
Executive
<PAGE>
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 Prabhuling Patel
(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
<PAGE>
distraction in the face of potentially disturbing circumstances arising from the
possibility of a Change in Control;
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
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has taken steps reasonably calculated to effect a Change in Control until, in
the opinion of the Board, such Person has 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.
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<PAGE>
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
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,
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<PAGE>
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
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
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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
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.
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(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 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
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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 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
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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.
(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
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<PAGE>
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 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
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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 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
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<PAGE>
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 that the amount of the
estimated payments exceeds the amount
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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
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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 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
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<PAGE>
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 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
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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 duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the
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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:
Prabhuling Patel
_________________________
_________________________
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
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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 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.
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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
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.
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(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 (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)
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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
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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 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
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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.
(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
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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:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as a senior officer
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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
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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.
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(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, 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
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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
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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.
(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/ Prabhuling Patel
________________________________________
Prabhuling Patel
Executive
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AMENDMENT TO AGREEMENT
This shall serve as an amendment dated as of January 23, 1998 (this
"Amendment") to the Agreement dated as of January 30, 1997 (the "Agreement")
between Metromail Corporation (the "Company") and Prabhuling Patel (the
"Executive"). The parties agree as follows:
1. The Agreement and the terms, provisions, and definitions thereof shall
continue in full force and effect, except to the extent that the
Agreement is modified by this Amendment. The parties agree that the
Agreement is hereby modified and amended as set forth herein. To the
extent that any provision of this Amendment is inconsistent with the
Agreement, the terms of this Amendment shall control.
2. Section 2(a) of the Agreement is amended to read in its entirety as
follows:
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, (ii) termination of the Executive's employment
with the Company prior to a Change in Control, and (iii) the date
which is two years following the date of a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
METROMAIL CORPORATION
By: /s/ Thomas J. Quarles
______________________________
Thomas J. Quarles
Senior Vice President, General Counsel
and Secretary
/s/ Prabhuling Patel
______________________________
Prabhuling Patel
Executive
<PAGE>
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 Mac Rodgers (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
<PAGE>
arising from the possibility of a Change in Control;
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
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Control until, in the opinion of the Board, such Person has 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
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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 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
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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
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.
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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
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
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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 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
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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 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
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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.
(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
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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 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
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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 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
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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 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
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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
evidence of fees and expenses incurred as the Company reasonably
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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
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<PAGE>
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 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
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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 duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the
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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:
Mac Rodgers
_________________________
_________________________
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
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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 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.
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<PAGE>
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
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.
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(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 (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)
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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
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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 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
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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.
(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
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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:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as a senior officer
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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
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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.
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(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, 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
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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.
(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/ Mac Rodgers
________________________________________
Mac Rodgers
Executive
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AMENDMENT TO AGREEMENT
This shall serve as an amendment dated as of January 23, 1998 (this
"Amendment") to the Agreement dated as of January 30, 1997 (the "Agreement")
between Metromail Corporation (the "Company") and Mac Rodgers (the "Executive").
The parties agree as follows:
1. The Agreement and the terms, provisions, and definitions thereof shall
continue in full force and effect, except to the extent that the
Agreement is modified by this Amendment. The parties agree that the
Agreement is hereby modified and amended as set forth herein. To the
extent that any provision of this Amendment is inconsistent with the
Agreement, the terms of this Amendment shall control.
2. Section 2(a) of the Agreement is amended to read in its entirety as
follows:
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, (ii) termination of the Executive's employment
with the Company prior to a Change in Control, and (iii) the date
which is two years following the date of a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
METROMAIL CORPORATION
By: /s/ Thomas J. Quarles
______________________________
Thomas J. Quarles
Senior Vice President, General Counsel
and Secretary
/s/ Mac Rodgers
______________________________
Mac Rodgers
Executive
<PAGE>
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 Kenneth Glowacki
(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
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has taken steps reasonably calculated to effect a Change in Control until, in
the opinion of the Board, such Person has 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.
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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
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,
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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
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
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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
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.
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(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 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
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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 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
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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.
(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
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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 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
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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
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
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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 that the amount of the
estimated payments exceeds the amount
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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
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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 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
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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 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
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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 duly given when delivered or mailed by United
States registered mail, return receipt requested, postage prepaid, addressed to
the
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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:
Kenneth Glowacki
_________________________
_________________________
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
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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 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.
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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
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.
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(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 (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)
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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
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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 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
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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.
(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
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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:
(I) the assignment to the Executive of any duties inconsistent
with the Executive's status as a senior officer
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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
-29-
<PAGE>
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.
-30-
<PAGE>
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.
-31-
<PAGE>
(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, 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
-32-
<PAGE>
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:
-33-
<PAGE>
(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
-34-
<PAGE>
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.
(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/ Kenneth Glowacki
-------------------------------------
Kenneth Glowacki
Executive
-35-
<PAGE>
AMENDMENT TO AGREEMENT
This shall serve as an amendment dated as of January 23, 1998 (this
"Amendment") to the Agreement dated as of January 30, 1997 (the "Agreement")
between Metromail Corporation (the "Company") and Kenneth A. Glowacki (the
"Executive"). The parties agree as follows:
1. The Agreement and the terms, provisions, and definitions thereof shall
continue in full force and effect, except to the extent that the
Agreement is modified by this Amendment. The parties agree that the
Agreement is hereby modified and amended as set forth herein. To the
extent that any provision of this Amendment is inconsistent with the
Agreement, the terms of this Amendment shall control.
2. Section 2(a) of the Agreement is amended to read in its entirety as
follows:
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, (ii) termination of the Executive's employment
with the Company prior to a Change in Control, and (iii) the date
which is two years following the date of a Change in Control.
IN WITNESS WHEREOF, the parties have executed this Amendment as of the date
first written above.
METROMAIL CORPORATION
By: /s/ Thomas J. Quarles
______________________________
Thomas J. Quarles
Senior Vice President, General Counsel
and Secretary
/s/ Kenneth A. Glowacki
______________________________
Kenneth A. Glowacki
Executive
<PAGE>
March 12, 1998
R.R. Donnelley & Sons Company
77 West Wacker Drive
Chicago, Illinois 60601
Ladies and Gentlemen:
This letter will confirm our understanding that Metromail Corporation (the
"Company") and Great Universal Stores P.L.C. ("GUS"), and a wholly-owned
subsidiary of GUS ("Sub"), concurrently herewith are entering into an agreement
and plan of merger dated as of March 12, 1998 (the "Merger Agreement") by which
GUS and Sub will make a cash tender offer (the "Offer") for all outstanding
shares of common stock of the Company at a $31.50 price per share, and as a
condition to entering into the Merger Agreement GUS and Sub require that the
letter agreement dated February 24, 1997 (the "Letter Agreement") between the
Company and you be terminated effective as of the Closing (as defined in the
Stock Purchase Agreement dated March 12, 1998 between GUS and you). By your
execution below, you therefore agree with us that the Letter Agreement will be
terminated effective as of the Closing. Should the Closing not occur on or
before September 30, 1998 then the Letter Agreement shall remain in full force
and effect.
Very truly yours,
METROMAIL CORPORATION
By: /s/ Barton Faber
-------------------------
Name: Barton Faber
-----------------------
Title: Chairman, President and Chief Executive Officer
------------------------------------------------
Agreed to and accepted this 12th day of
March 1998:
R.R. DONNELLEY & SONS COMPANY
By: /s/ Cheryl A. Francis
---------------------------
Name: Cheryl A. Francis
Title: Executive Vice President & Chief
Financial Officer
<PAGE>
AMENDMENT
---------
Amendment to a Sales Agreement dated as of June 19, 1996 (the "Sales Agreement")
by and between R. R. Donnelley & Sons Company, a Delaware corporation
("Donnelley") and Metromail Corporation, a Delaware corporation ("Metromail").
WITNESSETH
----------
WHEREAS, in conjunction with its initial public offering of shares, Donnelley
and Metromail entered into the Sales Agreement pursuant to which Donnelley
agreed to sell certain Services on behalf of Metromail and Metromail agreed to
pay certain amounts to Donnelley in exchange therefore;
WHEREAS, as a condition to a tender offer for the shares of Metromail, Great
Universal Stores P.L.C. ("GUS") has required an extension of the term of the
Sales Agreement; and
WHEREAS, Donnelley is agreeable to extending the term of the Sales Agreement,
provided certain other amendments to the Sales Agreement are made;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
Section 1. Definitions. All terms used herein shall have the meanings set forth
in the Sales Agreement.
Section 2. Effectiveness. This Amendment shall be effective upon the closing
by GUS of its offer to purchase the issued and outstanding shares
of Metromail (the "Amendment Effective Date"), but should such
closing not occur prior to May 31, 1998, this Amendment shall be
null and void and of no further force and effect.
Section 3. Charges. Upon the Amendment Effective Date, in lieu of the sales
commission described in Paragraphs 4(b) and (c) of the Sales
Agreement, the sales commission to be either withheld by Donnelley
(in the case of Paragraph 4(b)) or to be paid to Donnelley (in the
case of Paragraph 4(c)) shall be calculated on the same basis as set
forth on page 30 and according to the "Commissions" terms set forth
on page 45, both in a proposal from Metromail to Donnelley dated
February 5, 1998, except that the sales commission on sales of Mail
Production Services shall be calculated at a rate of 3%.
Furthermore, to the extent that the parties have entered into side
agreements prior to the Amendment Effective Date that alter the
terms of the Sales Agreement, then notwithstanding the provisions of
this Amendment, such side agreements shall continue to govern the
terms of the relationship to which they relate.
<PAGE>
Section 4. Term. Upon the Amendment Effective Date, the provisions of Paragraph
7 of the Sales Agreement shall be deemed amended to change the
reference therein to "December 31, 1998" to "December 31, 2000."
Section 5. Additional Terms. Upon the Amendment Effective Date, the following
additional paragraphs shall be deemed added to the Sales Agreement:
10. In consideration of the mutual agreements contained
herein, MM agrees that during the term of this Agreement, it
shall not provide any of the Services to any of the
following entities, their subsidiaries or affiliates (each
being a "Restricted Entity"):
(a) Quad Graphics
(b) Quebecor
(c) World Color
(d) Banta
(e) Big Flower;
provided that nothing herein shall prevent MM from providing
Services to the entities named above when such Services are
part of a contractual arrangement with RRD or a publisher.
MM further agrees that it shall not allow its affiliated
companies to either (i) enter into agreements to pay
commissions to any Restricted Entity for the sale of
Services; or (ii) allow any Restricted Entity to broker or
market the Services of such affiliated companies; but will
allow such affiliated companies to provide only spot or
overflow Services to any Restricted Entity as requested by
such Entity from time to time.
11. During the term of this Agreement, MM agrees to provide
support to RRD in its postal rate matters and other postal
affairs efforts at a level consistent with the support
provided in 1997.
12. MM currently has and supports DataLink connections at
two RRD facilities and absorbs tape and freight costs for
Services provided at other RRD facilities. MM agrees to
continue to support its DataLink connections as currently
installed at RRD facilities and to absorb tape and freight
costs for Services provided at other RRD facilities.
Further, MM agrees to determine the total tape and freight
costs for RRD facilities not utilizing a DataLink
connection, and to work with RRD to analyze opportunities to
improve service and costs through among other options,
DataLink installations at such facilities and the migration
of tape and freight costs to the ultimate customer.
<PAGE>
13. MM and RRD agree to explore together opportunities to
create co-branded and/or proprietary product and service
offerings for mutual marketing efforts.
14. MM agrees to continue to provide up to 200 hours of
consulting and analytical services to RRD for RRD's internal
use during any calendar year beginning 1998 upon the request
of RRD.
15. The parties acknowledge that MM has products and
services beyond the Services described in this Agreement,
including database products. MM and RRD agree to work
together in good faith to establish a cost-plus arrangement
covering the sale of database products by RRD to its
targeted customer accounts, but the terms and conditions of
any such arrangement shall be contained in a further
amendment or addendum to this Agreement.
16. MM agrees to continue to support financially joint
marketing efforts by MM and RRD at not less than historical
levels (1997=$110,000). Further, MM agrees to increase such
historical levels at a rate of not less than 1% for each
dollar of gross sales other than sales of Mail Production
Services above $20.7 million provided by RRD to MM, and RRD
shall match any such expenditures by MM.
17. RRD agrees that should RRD contract in its own name
with its ultimate customer for the Services of MM, it shall
name MM as its subcontractor in its contract for such
Services.
18. RRD and MM agree to work together to determine the
level of support required by RRD sales personnel in order
for the sales commissions described in paragraph 4 to
continue to be payable thereunder when the ultimate customer
is no longer a customer of RRD, and the terms of this
Agreement shall be amended to reflect the agreement of the
parties.
Section 7. Execution in Counterparts. This Amendment may be executed in one
or more counterparts, each of which shall be considered an original instrument,
but all of which shall be considered one and the same amendment, and shall
become binding when one or more counterparts have been signed by each of the
parties hereto and delivered to each of Donnelley and Metromail.
<PAGE>
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
as of March 12, 1998.
R.R. DONNELLEY & SONS COMPANY
By: /s/ Cheryl A. Francis
---------------------------------------
Cheryl A. Francis
Executive Vice President and
Chief Financial Officer
METROMAIL CORPORATION
By: /s/ Barton L. Faber
---------------------------------------
Barton L. Faber
Chairman, President & Chief Executive
Officer
<PAGE>
AMENDMENT
---------
Amendment to a Data Center Services Agreement dated as of June 19, 1996 (the
"DCSA") by and between R. R. Donnelley & Sons Company, a Delaware corporation
("Donnelley") and Metromail Corporation, a Delaware corporation ("Metromail").
WITNESSETH
----------
WHEREAS, in conjunction with its initial public offering of shares, Donnelley
entered into the DCSA pursuant to which Metromail agreed to provide certain
services to Donnelley for the period ending December 31, 1998; and
WHEREAS, as a condition to a tender offer for the shares of Metromail, Great
Universal Stores P.L.C. ("GUS") has required an extension of the term of the
DCSA; and
WHEREAS, Donnelley is agreeable to extending the term of the DCSA, provided
certain other amendments to the DCSA are made;
NOW, THEREFORE, in consideration of the mutual covenants and agreements
contained herein, the parties hereto agree as follows:
Section 1. Definitions. All terms used herein shall have the meanings set
forth in the DCSA.
Section 2. Effectiveness. This Amendment shall be effective upon the closing
by GUS of its offer to purchase the issued and outstanding shares
of Metromail (the "Amendment Effective Date"), but should such
closing not occur prior to May 31, 1998, this Amendment shall be
null and void and of no further force and effect.
Section 3. Term. Upon the Amendment Effective Date, the provisions of
Paragraph 3 of the DCSA shall be deemed amended to change each
reference therein to "December 31, 1998" to "December 31, 1999."
Section 4. Annual Fee. Upon the Amendment Effective Date, the provisions of
Paragraph 9.2 of the DCSA shall be deemed amended to read as
follows:
From the beginning of the Term until December 31, 1996, the
Annual Fee shall be $4,300,000 ($358,333 per month, prorated
for any portion of a month). For each subsequent year of the
Term
<PAGE>
through December 31, 1999, the Annual Fee shall be adjusted
according to the terms set forth in Schedule D.
Section 5. Additional Provisions. Upon the Amendment Effective Date, the
following shall be added as Section 4.11 of the DCSA:
Operating Procedures. By December 31, 1998, MM, at no
additional cost to RRD, shall provide to RRD, documentation
of all operating procedures, including but not limited to,
production control, schedule and job control procedures,
according to standards established by RRD. In the event
that MM fails to provide such documentation by December 31,
1998, RRD shall engage contractor resources to perform this
work and charge MM all direct costs associated with the
documentation engagement. MM shall make available the staff
requested by RRD to assist the contractor in the
documentation work. All documentation prepared pursuant to
this Section 4.11 shall be and become the sole property of
RRD.
Section 6. Schedule B. Upon the Amendment Effective Date, the provisions
contained in Attachment B1, Service Level Memorandum, to Schedule B
shall be deemed amended as follows:
a. Paragraph I shall be amended to read as follows:
SYSTEM AVAILABILITY - The mainframe will be available 24
hours a day, 6 days a week; on Saturday, it will be
available 20 hours from midnight until 8 p.m. It will be
attended 24 hours per day, 7 days per week, other than on
Thanksgiving Day and Christmas Day. A service level goal of
99% of available time (excluding holidays and scheduled
downtime), each month is established.
b. Paragraph II shall be amended to read as follows:
VAX AVAILABILITY - The SOS System and the electronic mail
system will be available and attended during the same hours
as established in paragraph 1 above. Similarly, a service
level goal of 99% of available time is established.
c. Paragraph III shall be amended to substitute "one second or
less" for "one second."
<PAGE>
Section 7. Schedule C. Upon the Amendment Effective Date, the following
paragraph shall be added to Schedule C:
MM shall use all efforts to replace immediately all
personnel who terminate their employment with MM whether
through new hiring or redeployment of existing personnel. In
any event, MM shall allow RRD an opportunity to review the
qualifications of, or to participate in the interviewing of,
candidates for such replacements.
Section 8. Execution in Counterparts. This Amendment may be executed in one or
more counterparts, each of which shall be considered an original
instrument, but all of which shall be considered one and the same
amendment, and shall become binding when one or more counterparts
have been signed by each of the parties hereto and delivered to
each of Donnelley and Metromail.
IN WITNESS WHEREOF, the parties have caused this Amendment to be duly executed
as of March 12, 1998.
R.R. DONNELLEY & SONS COMPANY
By: /s/ Cheryl A. Francis
-------------------------------------
Cheryl A. Francis
Executive Vice President and
Chief Financial Officer
METROMAIL CORPORATION
By: /s/ Barton L. Faber
-------------------------------------
Barton L. Faber
Chairman, President & Chief Executive
Officer
