-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, IIEmUu33IKtKJ4S4b5XvOXUNEwXvLETVfBKs/iLLGn120I594sjJIZLKh7fkbtIC VkhStG1bMNr6RIJ3UdZS1Q== /in/edgar/work/0000950137-00-004755/0000950137-00-004755.txt : 20001114 0000950137-00-004755.hdr.sgml : 20001114 ACCESSION NUMBER: 0000950137-00-004755 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 6 CONFORMED PERIOD OF REPORT: 20000930 FILED AS OF DATE: 20001113 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION RESOURCES INC CENTRAL INDEX KEY: 0000714278 STANDARD INDUSTRIAL CLASSIFICATION: [8700 ] IRS NUMBER: 521287752 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11428 FILM NUMBER: 759399 BUSINESS ADDRESS: STREET 1: 150 N CLINTON ST CITY: CHICAGO STATE: IL ZIP: 60661-1416 BUSINESS PHONE: 3127261221 MAIL ADDRESS: STREET 1: 150 N CLINTON ST CITY: CHICAGO STATE: IL ZIP: 60661-1416 10-Q 1 c58277e10-q.txt QUARTERLY REPORT 1 SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-Q (Mark One) X Quarterly Report Pursuant to Section 13 or 15(d) of The Securities -- Exchange Act of 1934. For the quarterly period ended September 30, 2000 -- Transition report pursuant to Section 13 or 15(d) of the Securities Exchange Act of 1934. Commission file number 0-11428 INFORMATION RESOURCES, INC. --------------------------- (Exact name of registrant as specified in its charter) Delaware 36-2947987 -------- ---------- (State or other jurisdiction of (I.R.S. Employer incorporation or organization) Identification No.) 150 North Clinton Street, Chicago, Illinois 60661 --------------------------------------------------- (Address of principal executive offices) (Zip Code) Registrant's telephone number, including area code (312) 726-1221 -------------- Indicate by check mark whether the registrant (1) has filed all reports required to be filed by Section 13 or 15(d) of the Securities Exchange Act of 1934 during the preceding 12 months (or for such shorter period that the registrant was required to file such reports), and (2) has been subject to such filing requirements for the past 90 days. Yes X No --- --- The number of shares of the registrant's common stock, $.01 par value per share outstanding, as of October 31, 2000 was 28,974,773. 2 INFORMATION RESOURCES, INC. AND SUBSIDIARIES INDEX
PAGE NUMBER ------ PART I. FINANCIAL INFORMATION Condensed Consolidated Balance Sheets 3 Condensed Consolidated Statements of Operations 4 Condensed Consolidated Statements of Cash Flows 5 Notes to Condensed Consolidated Financial Statements 6 Management's Discussion and Analysis of Financial Condition and Results of Operations 14 PART II. OTHER INFORMATION Item 6 -- Exhibits and Reports Form 8-K 22 Signatures 23
2 3 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS SEPTEMBER 30, 2000 DECEMBER 31, 1999 - ------ ------------------ ----------------- (UNAUDITED) CURRENT ASSETS Cash and cash equivalents ................................................. $ 12,937 $ 8,077 Accounts receivable, net .................................................. 78,495 94,125 Prepaid expenses and other ................................................ 8,920 8,569 --------- --------- Total Current Assets ................................................. 100,352 110,771 --------- --------- Property and equipment, at cost ................................................ 218,261 204,535 Accumulated depreciation ....................................................... (143,713) (123,550) --------- --------- Net property and equipment ..................................................... 74,548 80,985 Investments .................................................................... 16,366 9,624 Other assets ................................................................... 164,844 167,100 --------- --------- $ 356,110 $ 368,480 ========= ========= LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of capitalized leases .................................. $ 1,902 $ 55 Accounts payable .......................................................... 42,398 49,616 Accrued compensation and benefits ......................................... 13,802 23,838 Accrued property, payroll and other taxes ................................. 2,810 4,813 Accrued expenses .......................................................... 13,393 11,475 Accrued restructuring costs ............................................... 6,088 8,885 Deferred revenue .......................................................... 27,043 23,163 --------- --------- Total Current Liabilities ............................................ 107,436 121,845 --------- --------- Long-term debt ................................................................. 28,291 10,764 Deferred income taxes, net ..................................................... -- 2,269 Other liabilities .............................................................. 7,556 8,627 STOCKHOLDERS' EQUITY Preferred stock -- authorized, 1,000,000 shares, $.01 par value; none issued .......................................... -- -- Common stock -- authorized 60,000,000 shares, $.01 par value, 28,974,773 and 29,068,657 shares issued and outstanding, respectively ............... 291 291 Additional paid-in capital ................................................ 198,703 198,863 Retained earnings ......................................................... 26,251 31,390 Accumulated other comprehensive loss ...................................... (12,418) (5,569) --------- --------- Total Stockholders' Equity ........................................... 212,827 224,975 --------- --------- $ 356,110 $ 368,480 ========= =========
The accompanying notes are an integral part of these statements. 3 4 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF OPERATIONS (UNAUDITED) (IN THOUSANDS, EXCEPT PER SHARE DATA)
THREE MONTHS ENDED NINE MONTHS ENDED ------------------ ----------------- SEPTEMBER 30, SEPTEMBER 30, ------------- ------------- 2000 1999 2000 1999 ---- ---- ---- ---- Information services revenues ........................................ $ 131,672 $ 136,092 $ 394,744 $ 405,684 Costs and expenses: Information services sold ......................................... (114,581) (121,322) (353,403) (366,371) Selling, general and administrative expenses ...................... (13,052) (12,849) (40,294) (38,772) Restructuring and other charges ................................... (3,157) -- (8,796) -- --------- --------- --------- --------- (130,790) (134,171) (402,493) (405,143) --------- --------- --------- --------- Operating profit (loss) .............................................. 882 1,921 (7,749) 541 Equity in earnings (loss) of affiliated companies .................... (583) 84 (313) 180 Minority interest benefit ............................................ 487 1,170 2,336 3,455 Interest expense and other, net ...................................... (1,282) (501) (2,793) (1,091) --------- --------- --------- --------- Earnings (loss) before income taxes .................................. (496) 2,674 (8,519) 3,085 Income tax (expense) benefit ......................................... (102) (1,346) 3,380 (1,540) --------- --------- --------- --------- Net earnings (loss) .................................................. $ (598) $ 1,328 $ (5,139) $ 1,545 ========= ========= ========= ========= Net earnings (loss) per common share -- basic ........................ $ (.02) $ .05 $ (.18) $ .06 ========= ========= ========= ========= Net earnings (loss) per common and common equivalent share -- diluted ............................... $ (.02) $ .05 $ (.18) $ .06 ========= ========= ========= ========= Weighted average common shares -- basic .............................. 29,046 28,120 29,061 28,022 ========= ========= ========= ========= Weighted average common and common equivalent shares -- diluted .............................. 29,046 28,267 29,061 28,081 ========= ========= ========= =========
The accompanying notes are an integral part of these statements. 4 5 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED STATEMENTS OF CASH FLOWS (UNAUDITED) (IN THOUSANDS)
NINE MONTHS ENDED ----------------- SEPTEMBER 30, ------------- 2000 1999 ---- ---- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings (loss) .............................................................. $ (5,139) $ 1,545 Adjustments to reconcile net earnings (loss) to net cash provided by operating activities: Amortization of deferred data procurement costs ............................. 89,996 89,655 Depreciation ................................................................ 22,224 19,985 Amortization of capitalized software costs and intangibles .................. 4,508 5,086 Restructuring and other charges, net of cash payments ....................... (1,912) -- Deferred income tax (benefit) expense ....................................... (3,380) 1,540 Equity in earnings of affiliated companies and minority interests ........... (2,023) (3,635) Other ....................................................................... 225 (1,187) Change in assets and liabilities: Accounts receivable ....................................................... 15,957 1,146 Other current assets ...................................................... (351) (1,179) Accounts payable and accrued liabilities .................................. (18,186) 937 Deferred revenue .......................................................... 3,880 11,452 Other, net ................................................................ (4,761) 4,095 --------- --------- Net cash provided by operating activities ........................... 101,038 129,440 --------- --------- CASH FLOWS FROM INVESTING ACTIVITIES: Deferred data procurement costs .................................................. (92,867) (98,098) Purchase of property, equipment and software ..................................... (13,259) (24,569) Investment in joint venture ...................................................... (1,940) -- Capitalized software costs ....................................................... (1,490) (5,457) Other, net ....................................................................... 994 3,414 --------- --------- Net cash used in investing activities ............................... (108,562) (124,710) --------- --------- CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) ...................................................... 13,790 (1,588) Purchases of Common Stock ........................................................ (675) (1,036) Proceeds from exercise of stock options and other ................................ -- 871 --------- --------- Net cash provided by (used in) financing activities ................. 13,115 (1,753) --------- --------- EFFECT OF EXCHANGE RATE CHANGES ON CASH .......................................... (731) (771) --------- --------- Net increase in cash and cash equivalents ........................... 4,860 2,206 Cash and cash equivalents at beginning of period ............................... 8,077 11,149 --------- --------- Cash and cash equivalents at end of period ..................................... $ 12,937 $ 13,355 ========= =========
The accompanying notes are an integral part of these statements. 5 6 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS (UNAUDITED) NOTE 1 -- BASIS OF PRESENTATION Principles of consolidation: The condensed consolidated financial statements include the accounts of Information Resources, Inc. and all wholly or majority owned subsidiaries and affiliates (collectively "the Company"). Minority interests reflect the non-Company owned stockholder interests in international operations. The equity method of accounting is used for investments in which the Company has a 20% to 50% ownership interest because it exercises significant influence over operating and financial policies. All significant intercompany accounts and transactions have been eliminated in consolidation. Interim financial statements: The interim financial statements are unaudited, but include all adjustments (consisting of normal recurring adjustments) necessary, in the opinion of management, for a fair statement of financial position and results of operations for the period presented. The preparation of interim financial statements necessarily relies on estimates, requiring the use of caution in estimating results for the full year based on interim results of operations. Reclassifications: Certain amounts in the 1999 condensed consolidated financial statements have been reclassified to conform to the 2000 presentation. Earnings (Loss) per Common and Common Equivalent Share: Net earnings (loss) per share is based upon the weighted average number of shares of common stock outstanding during each period. Net earnings (loss) per common and common equivalent share-diluted is based upon the weighted average number of shares of common stock and common stock equivalents, entirely comprised of stock options, outstanding during each period. In 2000, common stock equivalents were excluded from the weighted average shares outstanding calculation because they were anti-dilutive. NOTE 2 -- SUPPLEMENTAL CASH FLOW INFORMATION Cash paid (received) for interest and income taxes during the period was as follows (in thousands):
NINE MONTHS ENDED ----------------- SEPTEMBER 30, ------------- 2000 1999 ---- ---- Interest $2,529 $770 Income taxes (277) 130
Non-cash investing and financing activities are excluded from the consolidated statement of cash flows. During the nine months ended September 30, 2000, the Company acquired mainframe computer equipment in exchange for a capital lease obligation recorded at $5.6 million. The Company repaid a portion of the capital lease obligation during the second and third quarters of 2000. 6 7 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) NOTE 3 -- ACCOUNTS RECEIVABLE Accounts receivable were as follows (in thousands):
SEPTEMBER 30, 2000 DECEMBER 31, 1999 ------------------ ----------------- Billed $60,514 $73,605 Unbilled 21,293 24,294 ------ ------ 81,807 97,899 Reserve for accounts receivable (3,312) (3,774) ------- ------- $78,495 $94,125 ======= =======
NOTE 4 -- OTHER ASSETS Other assets were as follows (in thousands):
SEPTEMBER 30, 2000 DECEMBER 31, 1999 ------------------ ----------------- Deferred data procurement costs -- net of accumulated amortization of $138,189 in 2000 and $141,531 in 1999 $137,864 $140,285 Intangible assets, including goodwill -- net of accumulated amortization of $11,390 in 2000 and $15,050 in 1999 9,688 11,659 Capitalized software costs -- net of accumulated amortization of $5,756 in 2000 and $3,149 in 1999 6,682 7,799 Other 10,610 7,357 -------- -------- $164,844 $167,100 ======== ========
7 8 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) NOTE 5 -- LONG TERM DEBT Long-term debt was as follows (in thousands):
SEPTEMBER 30, 2000 DECEMBER 31, 1999 ------------------ ----------------- Bank borrowings $24,750 $10,000 Capitalized leases and other 5,443 819 ------- ------- 30,193 10,819 Less current maturities (1,902) (55) ------- ------- $28,291 $10,764 ======= =======
The financial covenants in the bank credit agreement, as well as in the lease agreement for the Company's Chicago headquarters, require the Company to maintain a minimum tangible net worth and to meet certain cash flow coverage and leverage ratios. The agreements also limit the Company's ability to declare dividends or make distributions to holders of capital stock, or redeem or otherwise acquire shares of the Company. Approximately $4.6 million is currently available for such distributions under the most restrictive of these covenants. The bank credit agreement contains covenants that restrict the Company's ability to incur additional indebtedness. NOTE 6 -- COMPREHENSIVE INCOME (LOSS) The comprehensive income (loss) summary shown below sets forth certain items that affect stockholders' equity but are excluded from the presentation of net earnings. The components of comprehensive income (loss) were as follows (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Net earnings (loss) $ (598) $1,328 $ (5,139) $ 1,545 Foreign currency translation adjustment (3,062) 2,105 (6,849) (2,080) ------- ----- -------- ------- Comprehensive income (loss) $(3,660) $3,433 $(11,988) $ (535) ======= ====== ======== =======
8 9 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) NOTE 7 -- STOCK REPURCHASE During the third quarter of 2000, the Company began acquiring shares of its common stock in connection with a stock repurchase program announced in August 2000. The program, approved by the Company's Board of Directors, authorizes the periodic repurchase of up to 1,000,000 shares of its common stock on the open market, or in privately negotiated transactions, depending upon market conditions and other factors. The Company purchased 102,200 shares of common stock aggregating $.7 million during the third quarter of 2000. The shares are currently being held in treasury and will be sold to employees in connection with the Company's Employee Stock Purchase Plan. NOTE 8 -- JOINT VENTURE During the third quarter of 2000, the Company and Mosaic Group Inc. organized a joint venture company, Mosaic InfoForce, L.P. (MIF), in which the Company currently has a 49% ownership interest and Mosaic Group Inc. owns the remainder. The Company's domestic data collection, audit and merchandising business will be operated by MIF. The Company's investment of $1.9 million in MIF is being accounted for using the equity method of accounting. NOTE 9 -- SEGMENT INFORMATION The Company's business information services are conducted almost exclusively in the United States and Europe. The Company's operations in other markets account for approximately 1% of consolidated revenues. The executive management of the Company considers revenues from third parties and the aggregation of operating profit (loss), equity earnings (losses) and minority interests, ("Operating Results"), on a geographic basis to be the most meaningful measure of the operating performance of each respective geographic segment and of the Company as a whole. 9 10 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) The following table presents certain information regarding the operations of the Company by geographic segments (in thousands):
THREE MONTHS ENDED NINE MONTHS ENDED SEPTEMBER 30, SEPTEMBER 30, ------------------ ----------------- 2000 1999 2000 1999 ---- ---- ---- ---- Revenues: U.S. Services $98,589 $103,627 $298,369 $311,580 International Services 33,083 32,465 96,375 94,104 -------- -------- -------- -------- Total Revenue $131,672 $136,092 $394,744 $405,684 ======== ======== ======== ======== Operating Results: U.S. Services $6,020 $8,536 $ 14,580 $ 20,779 International Services Operating Loss (1,320) (3,350) (6,278) (12,561) Equity in earnings of affiliated companies 157 84 427 180 Minority interest benefit International Services 487 1,170 2,336 3,455 -------- -------- -------- -------- (676) (2,096) (3,515) (8,926) Corporate and other expenses (661) (3,265) (7,255) (7,677) Equity in losses of affiliated companies (740) - (740) - Restructuring and other charges (a) (3,157) - (8,796) - -------- -------- -------- -------- Operating Results 786 3,175 (5,726) 4,176 Interest expense and other, net (1,282) (501) (2,793) (1,091) -------- -------- -------- -------- Earnings (loss) before income taxes $ (496) $ 2,674 $ (8,519) $ 3,085 ======== ======== ======== ========
(a) Restructuring and other charges for the U.S. Services, International and Corporate were $1.2 million, $2.0 million and $0 million, respectively, for the three months ended September 30, 2000 and $5.4 million, $4.3 million and $(0.9) million, respectively, for the nine months ended September 30, 2000. 10 11 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) NOTE 10 -- RESTRUCTURING AND OTHER CHARGES RESTRUCTURING In the third quarter of 1999, the Company initiated a comprehensive cost reduction program named Project Delta. The first phase of Project Delta included the identification and assessment of potential operating efficiencies in the Company's various U.S. functional areas and was completed in the fourth quarter of 1999. The cost reduction program implementation began in the first quarter of 2000, with cost savings of approximately $11.0 million to $13.0 million achieved year to date. Certain restructuring costs were not eligible for accrual in 1999 and were recorded in the first three quarters of 2000. For the quarter and year to date September 30, 2000, the restructuring charges included in Restructuring and Other Charges in the Statement of Operations consist of the following (in thousands):
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 ------------------ ------------------ Termination benefits $ 730 $3,406 Discontinued activities 1,603 1,603 Disposition of excess office space (231) 519 Transition of German Production to U.S. facility 980 3,179 Other costs of project 75 997 ------ ------ $3,157 $9,704 ------ ------
A restructuring accrual was established in the fourth quarter of 1999 to reflect the outstanding obligations related to the fourth quarter 1999 restructuring charges. The following table reflects the additional restructuring charges incurred in the first three quarters of 2000 and all cash payments made to date (in thousands): 11 12 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED)
2000 ACTIVITY ------------------------------------- LIABILITY AT LIABILITY AT DECEMBER 31, 1999 PROVISION CASH SEPTEMBER 30, 2000 ----------------- --------- ---- ------------------ Termination benefits $8,391 $3,406 $ (7,035) $4,762 Discontinued activities -- 928 -- 928 Disposition of excess office space 494 (114) (371) 9 Transition of German production to U.S. facility -- 3,179 (2,790) 389 Other costs of project -- 997 (997) -- ------ ------ -------- ------ 8,885 8,396 (11,193) 6,088 Non-cash provision -- 1,308 -- -- ------ ------ -------- ------ $8,885 $9,704 $(11,193) $6,088 ====== ====== ======== ======
Termination Benefits: In the fourth quarter of 1999, the Company expected to terminate 325 full-time positions during 2000 impacting virtually all areas of the U.S. business, including operations, client services, technology and marketing, as well as Corporate headquarters. As of September 30, 2000, $7.0 million of accrued termination benefits have been disbursed and through October 31, 2000, 253 employees have been terminated under various Project Delta initiatives. Additional provisions have been made throughout the year to cover retention and relocation incentive costs that were not eligible for accrual at December 31, 1999. Discontinued Activities: During the third quarter of 2000, the Company ceased operations of entities in Japan (IRI Apollo K.K.) and Australia (Information Resources Australia Pty, Ltd.) which were responsible for distributing Apollo software. The Company has entered into agreements with its 40% owned affiliate, Information Resources Japan Ltd. and an unrelated company in Australia to distribute its Apollo software. In connection with the cessation of local operations, the Company reserved $.3 million and $.6 million, respectively, relating to the Japan and Australia businesses. During the third quarter of 2000, it was determined that certain equipment used by the Company's field staff to collect retail information will no longer be utilized after the second quarter of 2001. Accordingly, the Company recognized a non-cash charge of $1.1 million in the third quarter of 2000 relating to accelerated depreciation on this equipment. Disposition of Excess Office Space: As a result of planned headcount reductions and space not currently utilized, the Company has decided to vacate certain facilities. The Company recorded $.6 million of charges relating to accelerated depreciation on leasehold improvements and furniture and fixtures and $(.1) million in lease buyouts associated with these facilities in the first nine months of 2000. 12 13 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) Transition of German Production to U.S. Facility: The Company made a decision in the fourth quarter of 1999 to transfer production services for IRI/GfK Retail Services GmbH from an external vendor in Germany to the Company's U.S. headquarter facility in order to enhance its InfoScan offering in Germany and to reduce future production costs. As of September 30, 2000, charges of approximately $3.2 million were recorded related to this transition. Other Restructuring Costs: Other restructuring costs relate primarily to the final fees paid to the Boston Consulting Group for assistance in the identification and execution of the Project Delta objectives. OTHER CHARGES In the fourth quarter of 1999, Restructuring and Other Charges included a $0.9 million charge for a non-current receivables reserve. This reserve was reversed in the second quarter of 2000 pursuant to a settlement agreement reached with the other party. 13 14 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS The following narrative discusses the results of operations, liquidity and capital resources for the Company on a consolidated basis. This section should be read in conjunction with IRI's Annual Report on Form 10-K for the fiscal year ended December 31, 1999. See "Management's Discussion and Analysis of Financial Condition and Results of Operations" contained therein. RESULTS OF OPERATIONS The Company's consolidated net loss was $.6 million or $.02 per diluted share for the third quarter of 2000 compared to consolidated net income of $1.3 million or $0.05 per diluted share for the corresponding 1999 quarter. The Company's consolidated net loss was $5.1 million or $.18 per diluted share for the nine months ended September 30, 2000 compared to consolidated net income of $1.5 million or $0.06 per diluted share for the corresponding 1999 period. Excluding restructuring and other charges, net income for the quarter was $1.3 million or $.05 per diluted share and year to date 2000 net income was $.1 million. Third Quarter Versus Prior Year Consolidated revenues for the quarter ended September 30, 2000 were $131.7 million, a decrease of 3.2% over the corresponding quarter in 1999. U.S revenues were $98.6 million, a decrease of 4.9% compared to the prior year due to the impact of client losses experienced in 1999, delays in the delivery of client projects that have since been corrected with a capacity upgrade and client consolidation activity. International revenues increased 1.9% to $33.1 million. Excluding foreign exchange effects, European revenues for the third quarter, which comprise 98% of total international revenues, increased 20.0% over the prior year reflecting continued strong revenue growth in most of the European businesses. Consolidated costs of information services sold decreased 5.6% to $114.6 million for the three months ended September 30, 2000 compared to costs of $121.3 million for the third quarter of 1999. The decline in expenses resulted from the Company's cost reduction initiative, Project Delta, lower U.S. revenues, adjustments during the third quarter of 2000 to personnel expense accruals and the continued strengthening of the U.S. dollar against European currencies. These savings were offset slightly by increased costs related to the investment in the Company's CPGNetwork internet-based delivery service and other strategic opportunities. Consolidated selling, general and administrative expenses increased 1.6% to $13.1 million for the three months ended September 30, 2000 compared to $12.8 million for the third quarter of 1999. 14 15 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Earnings before interest and taxes, excluding restructuring and other charges of $3.2 million, was $3.9 million for the third quarter of 2000 compared to $3.2 million in the prior year. Improvements in the performance of the international operations and reduced U.S. expenses offset the decline in U.S. revenues. Restructuring and other charges are discussed below. Equity in earnings (losses) of affiliated companies were $(.6) million for the third quarter of 2000 compared to $.08 million in the prior year due to the Company's recognition of its share of the Mosaic InfoForce, L.P. start up costs. Interest and other expenses were $1.3 million for the third quarter of 2000 compared to $0.5 million in the prior year due to higher bank borrowings during 2000 and increased foreign currency exchange losses resulting from the continued strength of the U.S. dollar against European currencies in 2000. Third Quarter Year To Date Versus Prior Year Consolidated revenues were $394.7 million for the nine months ended September 30, 2000, a decrease of 2.7% over the corresponding period of 1999. U.S. business revenues decreased 4.2% to $298.4 million for the nine months ended September 30, 2000 compared to the prior year. The decline was due to the impact on the current period's revenues of 1999 client losses and delays in the delivery of client projects during the third quarter of 2000 that the Company has corrected with a capacity upgrade. International revenues were up 2.4% to $96.4 million over the first three quarters of 1999. Excluding the impact of foreign exchange rates, European revenues for the first nine months of 2000, which comprise 97% of total international revenues, increased 16.0% over the prior year. Consolidated costs of information services sold decreased 3.5% to $353.4 million for the nine months ended September 30, 2000 compared to costs of $366.4 million for the first nine months of 1999. Expenses declined primarily due to lower U.S. revenues, savings achieved through the Project Delta cost reduction initiative and the continued strengthening of the U.S. dollar against European currencies. These savings were offset slightly by increased costs related to the investment in the Company's CPGNetwork internet-based delivery service and other strategic opportunities. Consolidated selling, general and administrative expenses increased 3.9% to $40.3 million for the nine months ended September 30, 2000 compared to $38.8 million for the first nine months of 1999. The increase is primarily attributable to the costs incurred during 2000 to pursue new strategic opportunities for the Company, including internet-based business initiatives. For the first nine months of 2000, the Company's earnings before interest and taxes, excluding restructuring and other charges of $8.8 million, was $3.1 million compared to operating income of $4.2 million in the prior year. Results were below prior year because of the delayed financial impact of 1999 U.S. client losses on revenues partially offset by improved international performance and reduced U.S. expenses resulting from the Company's Project Delta cost reduction initiatives. 15 16 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Restructuring and other charges are discussed below. Interest and other expenses were $2.8 million for the nine months ended September 30, 2000 compared to $1.1 million in the prior year due to higher bank borrowings during 2000 and increased foreign currency exchange losses resulting from the continued strength of the U.S. dollar against European currencies in 2000. The Company's effective income tax rate is greater than the U.S. Federal statutory rate due to certain unbenefited foreign losses, goodwill amortization and other nondeductible expenses. LIQUIDITY AND CAPITAL RESOURCES The Company's current cash resources include its $12.9 million consolidated cash balance and $34.1 million available under the Company's bank revolving credit facility. The Company anticipates that it will have sufficient funds from these sources and internally generated funds from its U.S. operations to satisfy its cash needs for the foreseeable future. Financings The financial covenants in the bank credit agreement, as well as in the lease agreement for the Company's Chicago headquarters, require the Company to maintain a minimum tangible net worth and to meet certain cash flow coverage and leverage ratios. The agreements also limit the Company's ability to declare dividends or make distributions to holders of capital stock, or redeem or otherwise acquire shares of the Company. Approximately $4.6 million is currently available for such distributions under the most restrictive of these covenants. The bank credit agreement also contains covenants that restrict the Company's ability to incur additional indebtedness. Cash Flow Consolidated net cash provided by operating activities was $101.0 million for the nine months ended September 30, 2000 compared to $129.4 million for the same period in 1999. This reduction was primarily attributable to lower earnings resulting from restructuring charges and the timing of payments of accounts payable and accrued liabilities. Consolidated cash flow used in net investing activity was $108.6 million in 2000 compared to $124.7 million for the same period in 1999. Net investing activity in 2000 includes the Company's initial $1.9 million investment in the Mosaic InfoForce, L.P. joint venture. During the third quarter of 2000, the Company repurchased 102,200 shares of common stock aggregating $.7 million. The shares are currently being held in treasury and will be sold to employees in connection with the Company's Employee Stock Purchase Plan. Net cash provided by financing activities was $13.1 million for the nine months ended September 30, 2000 compared to net cash used of $1.8 million for the same period in 1999. Consolidated cash flow provided by financing activities reflects borrowings of $14.8 million under its revolving line of credit in 2000 compared to $2.3 million in the prior year. 16 17 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Other Deferred Costs and Capital Expenditures Consolidated deferred data procurement expenditures were $92.9 million for the nine months ended September 30, 2000 and $98.1 million for the same period in 1999. These expenditures are amortized over a period of 28 months and include payments and services to retailers for point-of-sale data and other costs related to collecting, reviewing and verifying panel, causal and other data which are an essential part of the Company's database. Such expenditures were $54.9 million and $61.2 million for the periods ended September 30, 2000 and 1999, respectively, for the Company's U.S. services business and $38.0 million and $36.9 million, respectively, for the Company's International services business. Consolidated capital expenditures were $13.3 million and $24.6 million for the nine months ended September 30, 2000 and 1999, respectively. Capital expenditures for the Company's U.S. services business were $9.3 million and $20.7 million, while depreciation expense was $18.8 million and $16.6 million for the nine months ended September 30, 2000 and 1999, respectively. Additionally, the Company acquired mainframe computer equipment in exchange for a capital lease obligation recorded at $5.6 million during the current year. Capital expenditures in the prior year included computer hardware and software purchases required for Year 2000 compliance. The Company's International services business capital expenditures were $4.0 million and $3.9 million, while depreciation expense was $3.4 million for each of the nine months ended September 30, 2000 and 1999. Consolidated capitalized software development costs, primarily in the U.S., were $1.5 million and $5.5 million for the nine months ended September 30, 2000 and 1999, respectively. Impact of Inflation Inflation has slowed in recent years, however the Company's results of operations are impacted by rising prices given the labor intensive nature of the business. To the extent permitted by competitive conditions, the Company passes increased costs on to customers by adjusting sales prices and, in the case of multi-year contracts, through consumer price index provisions in such agreements. RESTRUCTURING CHARGES In the third quarter of 1999, the Company initiated a comprehensive program named Project Delta, with the objective to improve productivity and operating efficiencies to reduce the Company's on-going cost structure in its U.S. operations. The first phase of Project Delta included the identification and assessment of potential operating efficiencies in the Company's various U.S. functional areas and was completed in the fourth quarter of 1999. The cost reduction program implementation began in the first quarter of 2000, with cost savings of approximately $11.0 million to $13.0 million achieved year to date. The Company expects that annualized cost savings in certain expenses of at least $15.0 million will be achievable in the U.S. operations by the end of 2000. 17 18 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Certain costs were not eligible for accrual in 1999 and were recorded during the first nine months of 2000. For the quarter and year to date September 30, 2000, the components of the restructuring charges included in Restructuring and Other Charges in the Statement of Operations consist of the following (in thousands):
THREE MONTHS NINE MONTHS ENDED ENDED SEPTEMBER 30, 2000 SEPTEMBER 30, 2000 ------------------ ------------------ Termination benefits $ 730 $3,406 Discontinued activities 1,603 1,603 Disposition of excess office space (231) 519 Transition of German production to U.S. facility 980 3,179 Other costs of project 75 997 ------ ------ $3,157 $9,704 ------ ------
Changes in the restructuring reserve, including cash payments, for the nine months ended September 30, 2000 are as follows (in thousands):
2000 ACTIVITY ------------------------------------- LIABILITY AT LIABILITY AT DECEMBER 31, 1999 PROVISION CASH SEPTEMBER 30, 2000 ----------------- --------- ---- ------------------ Termination benefits $8,391 $3,406 $ (7,035) $4,762 Discontinued activities -- 928 -- 928 Disposition of excess office space 494 (114) (371) 9 Transition of German production to U.S. facility -- 3,179 (2,790) 389 Other costs of project -- 997 (997) -- ------ ------ -------- ------ 8,885 8,396 (11,193) 6,088 Non-cash provision -- 1,308 -- -- ------ ------ -------- ------ $8,885 $9,704 $(11,193) $6,088 ====== ====== ======== ======
18 19 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Termination Benefits: In the fourth quarter of 1999, the Company expected to terminate 325 full-time positions during 2000 impacting virtually all areas of the U.S. business, including operations, client services, technology and marketing, as well as Corporate headquarters. As of September 30, 2000, $7.0 million of accrued termination benefits have been disbursed and through October 31, 2000, 253 employees have been terminated under various Project Delta initiatives. Additional provisions have been made throughout the year to cover retention and relocation incentive costs that were not eligible for accrual at December 31, 1999. Discontinued Activities: During the third quarter of 2000, the Company ceased operations of entities in Japan (IRI Apollo K.K.) and Australia (Information Resources Australia Pty, Ltd.) which were responsible for distributing Apollo software. The Company has entered into agreements with its 40% owned affiliate, Information Resources Japan Ltd. and an unrelated company in Australia to distribute its Apollo software. In connection with the cessation of local operations, the Company reserved $.3 million and $.6 million, respectively, relating to the Japan and Australia businesses. During the third quarter of 2000, it was determined that certain equipment used by the Company's field staff to collect retail information will no longer be utilized after the second quarter of 2001. Accordingly, the Company recognized a non-cash charge of $1.1 million in the third quarter of 2000 relating to accelerated depreciation on this equipment. Disposition of Excess Office Space: As a result of planned headcount reductions and space not currently utilized, the Company has decided to vacate certain facilities. The Company recorded $.6 million of charges relating to accelerated depreciation on leasehold improvements and furniture and fixtures and $(.1) million in lease buyouts associated with these facilities in the first three quarters of 2000. Transition of German Production to U.S. Facility: The Company made a decision in the fourth quarter of 1999 to transfer production of IRI/GfK Retail Services GmbH from an external vendor in Germany to the U.S. headquarter facility in order to enhance its InfoScan offering in Germany and to reduce future production costs. For the nine months ended September 30, 2000, charges of approximately $3.2 million were recorded related to this transition. The transition is expected to be completed during the first quarter of 2001, with estimated future costs that cannot currently be accrued of approximately $5.0 million. Other Restructuring Costs: Other restructuring costs primarily relate to final fees paid to the Boston Consulting Group for assistance in the identification and execution of the Project Delta objectives. 19 20 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Future Restructuring Charges: The Company is progressing on its previously announced restructuring activities, and believes that the restructuring provisions recorded will be adequate to cover the estimated restructuring costs. The Company anticipates that it will continue to incur restructuring charges for items that do not meet the criteria for accrual and for future restructurings. The Company expects to incur additional costs of $9.0 million to $10.0 million relating to the first phase of Project Delta which could not be accrued as of September 30, 2000. In addition, the Company has begun the initial stages of reviewing its International and information technology operations to assess potential restructuring costs and benefits. The Company cannot yet estimate the costs for these future restructuring programs. In the fourth quarter of 1999, Restructuring and Other Charges included a $0.9 million charge for a non-current receivables reserve. This reserve was reversed in the second quarter of 2000 pursuant to a settlement agreement reached with the other party. EUROPEAN CURRENCY CONVERSION ISSUES In accordance with the 1992 treaty of the European Union, on January 1, 1999, a new single European currency, the Euro, became legal tender. The Euro will replace the sovereign currencies ("legacy currencies") of the eleven initial members of the European Union ("participating countries"). On this date, fixed conversion rates between the Euro and the legacy currencies in those particular countries were established. As the Company has operations in several of the participating countries, it will be affected by issues relating to the introduction of and transition to the Euro. The Company's European Executive Committee is charged with formulating and executing all aspects of the Company's plan concerning the conversion to the Euro. The Company does not expect the cost of any system modifications to be material or result in any material increase in transaction costs. The Company will continue to evaluate the impact of the Euro, however, based on currently available information, management does not believe the introduction of the Euro will have a material adverse impact on the Company's financial condition or overall trends in results of operations. 20 21 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D FORWARD LOOKING INFORMATION All statements other than statements of historical fact made in this Quarterly Report on Form 10-Q are forward looking. In particular, statements regarding industry prospects, our future results of operations or financial position, and statements preceded by, followed by or that include the words "intends," "estimates," "believes," "expects," "anticipates," "should," "could," or similar expressions, are forward-looking statements and reflect our current expectations and are inherently uncertain. The Company's actual results may differ significantly from our expectations for a number of reasons, including risks and uncertainties relating to customer renewals of service contracts, the timing of significant new customer engagements, the success of implementing Project Delta, competitive conditions, the potential for future client losses, changes in client spending for the non-contractual services the Company offers, the release of chain-specific data by European retailers, foreign currency exchange rates, European currency conversion issues and other factors beyond the Company's control. These risks and uncertainties are described herein and in reports and other documents filed by the Company with the Securities and Exchange Commission. 21 22 INFORMATION RESOURCES, INC. AND SUBSIDIARIES PART II OTHER INFORMATION
ITEM 6. EXHIBITS AND REPORTS ON FORM 8-K a. Exhibits Exhibit No. Description of Exhibit Page ----------- ---------------------- ---- 10.1 Employment and Change in Control Agreement between EF the Company and certain executive officers 10.2 Outsourcing Services Agreement between the Company EF and Mosaic InfoForce, L.P. Portions of this exhibit have been omitted pursuant to a request for confidential treatment. 10.3 Information Resources, Inc. Third Amendment to EF Credit Agreement 10.4 Directors Deferred Compensation Agreement EF b. Reports on Form 8-K. None.
22 23 INFORMATION RESOURCES, INC. AND SUBSIDIARIES SIGNATURES Pursuant to the requirements of the Securities Exchange Act of 1934, the Registrant has duly caused this report to be signed on its behalf by the undersigned thereunto duly authorized. INFORMATION RESOURCES, INC. --------------------------- (Registrant) /s/ ANDREW G. BALBIRER ------------------------------------- Andrew G. Balbirer Executive Vice President and Chief Financial Officer (Authorized Officer of Registrant) /s/ MARY K. SINCLAIR ------------------------------------- Mary K. Sinclair Controller (Principal Accounting Officer) November 10, 2000 23 EX-10.1 2 c58277ex10-1.txt EMPLOYMENT AGREEMENT 1 EXHIBIT 10.1 EMPLOYMENT AGREEMENT THIS EMPLOYMENT AGREEMENT, dated as of May 19, 2000 (this "Agreement"), is entered into by and between Information Resources, Inc., a Delaware corporation (the "Company"), and (the "Executive"). WHEREAS, the Company and the Executive desire to set forth certain terms and conditions of continued employment with the Company as set forth herein. NOW, THEREFORE, in consideration of the mutual covenants contained herein, the parties hereto agree as follows: 1. Employment Term. The "Employment Term" shall commence on the date hereof (the "Effective Date") and shall expire on the third (3rd) anniversary of the Effective Date, unless earlier terminated as provided herein; provided, however, that on each anniversary of the Effective Date, the Employment Term shall automatically be extended for one (1) year unless either the Company or the Executive shall have given written notice to the other at least ninety (90) days prior thereto that the Employment Term shall not be so extended; provided further, however, that following the occurrence of a Change in Control, the Employment Term shall not expire prior to the expiration of twenty-four (24) months after such occurrence. 2. Employment. (a) The Company agrees to employ the Executive and the Executive agrees to remain in the employ of the Company during the Employment Term. During the Employment Term, the Executive shall be employed initially as the _________ of the Company or in such other comparable or more senior executive capacity as may be determined by the Board of Directors of the Company (the "Board") or the Chief Executive Officer of the Company. The Executive shall perform the duties, undertake the responsibilities and exercise the authority customarily performed, undertaken and exercised by persons situated in a similar executive capacity. He shall also promote, by entertainment or otherwise, the business of the Company. (b) During the Employment Term, excluding periods of vacation and sick leave to which the Executive is entitled, the Executive agrees to devote his best efforts and his full business time and attention to the business and affairs of the Company, provided that the Executive may (1) serve on corporate, civic or charitable boards or committees; (2) manage personal investments; and (3) deliver lectures and teach at educational institutions, so long as such activities do not significantly interfere with the performance of the Executive's responsibilities hereunder. 3. Compensation. In full consideration of the performance by the Executive of the Executive's obligations during the Employment Term (including any 2 services by the Executive as an officer, director, employee or member of any committee of any Affiliate of the Company, or otherwise on behalf of the Company), the Executive shall be compensated as follows: (a) Base Salary. The Executive shall receive a base salary at an annual rate of $__________ as the same may be increased from time to time (the "Base Salary"). The Base Salary, once increased, shall not thereafter be decreased. The Base Salary shall be payable in accordance with the normal payroll practices of the Company applicable to its executives. (b) Incentive Compensation. In addition to his Base Salary, the Executive shall be eligible to participate in any annual or long-term incentive compensation plan in which similarly situated executives of the Company participate, including, without limitation, the Company's Management Incentive Plan (the "MIP"), if in place, or any other applicable future incentive compensation plan of the Company which may succeed or replace the MIP. Awards under any such incentive compensation plan shall be as determined by the Board or the Chief Executive Officer. (c) Employee Benefits. During the Employment Term, the Executive will be entitled to (i) participate in all employee benefit plans, programs, policies and arrangements sponsored, maintained or contributed to by the Company, subject to and in accordance with the terms and conditions of such plans, programs, policies and arrangements as they relate to similarly situated executives of the Company, and (ii) receive all other benefits and perquisites generally provided or made available by the Company to its other executives, subject to and in accordance with the terms and conditions of such benefits and perquisites as they relate to similarly situated executives of the Company. (d) Vacations. During the Employment Term, the Executive shall be entitled to the number of paid vacation days in each calendar year determined by the Company in accordance with the Company's policy in effect from time to time as it relates to similarly situated executives of the Company. (e) Expenses. During the Employment Term, the Executive will be entitled to reimbursement of all documented reasonable travel and entertainment expenses incurred by him on behalf of the Company in the course of the performance of his duties hereunder, subject to and in accordance with the terms and conditions of the Company's expense reimbursement policies as they relate to similarly situated executives of the Company. (f) Taxes. All compensation and benefits payable or provided pursuant to this Agreement shall be subject to all applicable withholding taxes. 2 3 4. Termination. The Executive's employment with the Company under this Agreement and the Employment Term shall terminate upon the occurrence of any of the following events: (a) Death. The death of the Executive. (b) Disability. The termination of the Executive's employment by the Company for Disability. (c) By the Company for Cause. The termination of the Executive's employment by the Company for Cause. (d) By the Company Without Cause. The termination of the Executive's employment by the Company other than for Cause or Disability. (e) By the Executive for Good Reason. The termination of the Executive's employment by the Executive for Good Reason. (f) By the Executive Without Good Reason. The termination of the Executive's employment by the Executive other than for Good Reason, provided that the Executive provides a Notice of Termination at least forty-five (45) days prior to the termination, unless such notice period is waived by the Company. In the event Executive terminates his employment with the Company under this provision, Executive agrees to keep such termination confidential during the 45-day notice period (unless disclosure is permitted by the Company) and further agrees to fully cooperate with the Company in good faith to complete specific assignments as requested and to transition his responsibilities during such 45-day notice period. 5. Compensation Upon Termination. (a) Death or Disability; By Company for Cause; By Executive Without Good Reason. If the Executive's employment with the Company is terminated by reason of the Executive's death, by the Company for Disability, by the Company for Cause, or by the Executive other than for Good Reason, the Company's sole obligation hereunder shall be to pay the Executive or his estate, as the case may be, the Accrued Compensation. (b) By Company Without Cause. If the Executive's employment with the Company is terminated by the Company other than for Cause or Disability, and without duplication of and other than as described in Section 5(c) hereof, the Company shall pay to the Executive the Accrued Compensation within ten (10) days of the Termination Date, and, so long as the Executive is not in violation of the covenants 3 4 contained in Section 8 hereof, the Executive shall be entitled to the following additional compensation: (1) during the twelve (12) months following the Termination Date (the "Severance Period"), the Company shall pay to the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, the Base Salary (at the rate in effect on the Termination Date) in accordance with the normal payroll practices of the Company; (2) the Company shall pay the Executive the Executive's targeted bonus amount for the year in which the Termination Date occurs under the MIP, if in place, or any other annual incentive compensation plan of the Company which may succeed or replace the MIP, multiplied by a fraction, the numerator of which is the number of days in the year in which the Termination Date occurs through the Termination Date, and the denominator of which is three hundred and sixty-five (365), payable on the date upon which the Company pays its bonuses to employees of the Company for the year in which the Termination Date occurs; (3) during the Severance Period, the Company shall continue on behalf of the Executive and his dependents and beneficiaries the medical, dental, hospitalization, prescription drug, and life insurance coverages and benefits provided to the Executive immediately prior to the Termination Date, assuming the Company continues to provide these benefits generally. The coverages and benefits (including deductibles and costs) provided in this Section 5(b)(3) shall be no less favorable to the Executive and his dependents and beneficiaries than the most favorable of such coverages and benefits referred to above. The Company's obligation hereunder with respect to the foregoing coverages and benefits shall be reduced to the extent that the Executive obtains any such coverages and benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce any of the coverages or benefits it is required to provide the Executive hereunder so long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This Section 5(b)(3) shall not be interpreted so as to limit any benefits to which the Executive, his dependents or beneficiaries may be entitled under any of the Company's employee benefit plans, programs or practices following the Executive's termination of employment, including without limitation, retiree medical and life insurance benefits; 4 5 (4) during the Severance Period, and notwithstanding any contrary provisions contained in the applicable stock option agreements or option plan, all nonqualified stock options held by the Executive which are outstanding on the Termination Date shall, consistent with the Company's historic and current severance policy and practices, continue to vest in accordance with their terms, and shall remain outstanding through the last day of the Severance Period, unless such options sooner expire by their terms.; and (5) the Company shall pay or reimburse the Executive, upon presentation of invoices, for the costs, fees and expenses (not in excess of $20,000) of executive outplacement assistance services, to be provided for up to one (1) year from the Termination Date by any outplacement agency selected by the Executive. (c) Certain Terminations Within Twenty-Four (24) Months Following a Change in Control. If, during the Employment Term, the Executive's employment with the Company and its Affiliates shall be terminated within twenty-four (24) months following a Change in Control either by the Company without Cause or by the Executive for Good Reason, the Executive shall be entitled to the following compensation: (1) within ten (10) days of the Termination Date, the Company shall pay the Executive all Accrued Compensation and a Pro Rata Bonus; (2) the Company shall pay the Executive as severance pay and in lieu of any further compensation for periods subsequent to the Termination Date, an amount equal to two (2) times the sum of (A) the Executive's Base Salary (at the rate in effect on the Termination Date or, if greater, at the rate in effect immediately prior to the Change in Control) and (B) the Executive's Bonus Amount. The amount provided for in this Section 5(c)(2) shall be paid in twenty-four (24) equal monthly installments commencing on the first day of the calendar month following the Termination Date, with each subsequent payment due on the first day of each calendar month thereafter; (3) during the twenty-four (24) months following the Termination Date (the "Continuation Period"), the Company shall continue on behalf of the Executive and his dependents and beneficiaries the medical, dental, hospitalization, prescription drug, and life insurance coverages and benefits provided to the Executive immediately prior to the Change in Control, assuming the Company continues to provide these benefits generally or, if greater, the coverages and benefits generally provided to similarly situated executives of the 5 6 Company at any time thereafter. The coverages and benefits (including deductibles and costs) provided in this Section 5(c)(3) during the Continuation Period shall be no less favorable to the Executive and his dependents and beneficiaries than the most favorable of such coverages and benefits referred to above. The Company's obligation hereunder with respect to the foregoing coverages and benefits shall be reduced to the extent that the Executive obtains any such coverages and benefits pursuant to a subsequent employer's benefit plans, in which case the Company may reduce any of the coverages or benefits it is required to provide the Executive hereunder so long as the aggregate coverages and benefits of the combined benefit plans is no less favorable to the Executive than the coverages and benefits required to be provided hereunder. This Section 5(c)(3) shall not be interpreted so as to limit any benefits to which the Executive, his dependents or beneficiaries may be entitled under any of the Company's employee benefit plans, programs or practices following the Executive's termination of employment, including without limitation, retiree medical and life insurance benefits; (4) (A) all nonqualified stock options held by the Executive which are outstanding on the Termination Date shall become fully vested on the Termination Date and, consistent with the Company's historic and current severance policy and practices, all nonqualified stock options held by the Executive which are outstanding on the Termination Date shall remain outstanding through the last day of the Continuation Period unless such options sooner expire by their terms, notwithstanding any contrary provisions contained in the applicable stock option agreements or option plan; (5) the Company shall pay or reimburse the Executive for the costs, fees and expenses (not in excess of $20,000) of executive outplacement assistance services, to be provided for up to one (1) year from the Termination Date by any outplacement agency selected by the Executive; and (6) within ten (10) days after the Termination Date, the Company shall pay in a single payment an amount in cash equal to two times the amount of the Company matching contribution made or payable on the Executive's behalf to the Information Resources, Inc. Amended and Restated 401(k) Retirement Savings Plan in respect of the most recently completed plan year of such plan. (d) The Executive shall not be required to mitigate the amount of any payment provided for in this Agreement by seeking other employment or otherwise and no such payment shall be offset or reduced by the amount of any compensation or 6 7 benefits provided to the Executive in any subsequent employment except as provided in Sections 5(b)(3) and 5(c)(3). (e) The severance pay and benefits provided for in this Section 5 shall be in lieu of any other severance pay to which the Executive may be entitled under any other plan, policy, agreement or arrangement of the Company or any of its Affiliates. (f) If the Executive's employment is terminated by the Company without Cause (x) within six (6) months prior to a Change in Control or (y) at any time prior to a Change in Control which the Executive reasonably demonstrates (A) was at the request of a third party who has indicated an intention or taken steps reasonably calculated to effect a Change in Control (a "Third Party"), or (B) otherwise arose in connection with, or in anticipation of a Change in Control which has been threatened or proposed, shall be deemed to have occurred after a Change in Control, provided a Change in Control shall actually have occurred. 6. Effect of Section 280G of the Internal Revenue Code. (a) Except as provided in Section 6(b), in the event it shall be determined that any payment (other than the payment provided for in this Section 6) or distribution of any type to or for the benefit of the Executive, by the Company, any Affiliate of the Company, any Person who acquires ownership or effective control of the Company or ownership of a substantial portion of the Company's assets (within the meaning of Section 280G of the Internal Revenue Code of 1986, as amended (the "Code"), and the regulations thereunder) or any Affiliate of such Person, whether paid or payable or distributed or distributable pursuant to the terms of this Agreement or otherwise (the "Payments"), is or will be subject to the excise tax imposed by Section 4999 of the Code or any interest or penalties with respect to such excise tax (such excise tax, together with any such interest and penalties, are collectively referred to as the "Excise Tax"), then the Executive shall be entitled to receive an additional payment (a "Gross-Up Payment") in an amount such that after payment by the Executive of all taxes (including any interest or penalties imposed with respect to such taxes), including any income tax, employment tax or Excise Tax, imposed upon the Gross-Up Payment, the Executive retains an amount of the Gross-Up Payment equal to the Excise Tax imposed upon the Payments. (b) Notwithstanding Section 6(a) or any other provision of this Agreement to the contrary, in the event that the Payments (other than the payment provided for in this Section 6) exceed by less than fifty-thousand dollars ($50,000) an amount at which no Payment to be made or benefit to be provided to the Executive would be subject to an Excise Tax, the Executive will not be entitled to a Gross-Up Payment and the Payments shall be reduced (but not below zero) to the extent necessary so that no Payment to be made or benefit to be provided to the Executive shall be subject to the Excise Tax. Unless the Executive shall have given prior written notice to the Company 7 8 specifying a different order to effectuate the foregoing, the Company shall reduce or eliminate the Payments, first by reducing or eliminating the portion of the Payments (other than Payments as to which the Internal Revenue Service (the "IRS") Proposed Regulations ss.1.280G-1 Q/A-24(c) applies ("Q/A-24(c) Payments")) which are not payable in cash, second by reducing or eliminating cash payments, and third by reducing Q/A 24(c) Payments, in each case in reverse order beginning with payments or benefits which are to be paid the farthest in time from the "Determination" (as defined below). Any notice given by the Executive pursuant to the preceding sentence shall take precedence over the provisions of any other plan, arrangement or agreement governing the Executive's rights and entitlements to any benefits or compensation. (c) The determination of whether the Payments shall be reduced pursuant to this Agreement and the amount of such reduction, all mathematical determinations, and all determinations as to whether any of the Payments are "parachute payments" (within the meaning of Section 280G of the Code), that are required to be made under this Section 6, including determinations as to whether a Gross-Up Payment is required, the amount of such Gross-Up Payment and amounts referred to in this Section 6(c), shall be made by an independent accounting firm selected by the Executive from among the five (5) largest accounting firms in the United States (the "Accounting Firm"), which shall provide its determination (the "Determination"), together with detailed supporting calculations regarding the amount of any Gross-Up Payment and any other relevant matter, both to the Company and the Executive by no later than ten (10) days following the Termination Date, if applicable, or such earlier time as is requested by the Company or the Executive (if the Executive reasonably believes that any of the Payments may be subject to the Excise Tax). If the Accounting Firm determines that no Excise Tax is payable by the Executive, it shall furnish the Executive and the Company with an opinion reasonably acceptable to the Executive and the Company that no Excise Tax is payable (including the reasons therefor) and that the Executive has substantial authority not to report any Excise Tax on his federal income tax return. If a Gross-Up Payment is determined to be payable, it shall be paid to the Executive within twenty (20) days after the Determination (and all accompanying calculations and other material supporting the Determination) is delivered to the Company by the Accounting Firm. Any determination by the Accounting Firm shall be binding upon the Company and the Executive, absent manifest error. As a result of uncertainty in the application of Section 4999 of the Code at the time of the initial determination by the Accounting Firm hereunder, it is possible that Gross-Up Payments not made by the Company should have been made ("Underpayment"), or that Gross-Up Payments will have been made by the Company which should not have been made ("Overpayments"). In either such event, the Accounting Firm shall determine the amount of the Underpayment or Overpayment that has occurred. In the case of an Underpayment, the amount of such Underpayment (together with any interest and penalties payable by the Executive as a result of such 8 9 Underpayment) shall be promptly paid by the Company to or for the benefit of the Executive. The Executive and the Company shall, at the direction and expense of the Company, take such steps as are reasonably necessary (including defending of any claim or assessment by the IRS and the filing of claims for refund), follow reasonable instructions from, and procedures established by, the Company, and otherwise reasonably cooperate with the Company to correct any Overpayment or Underpayment, provided, however, that (i) the Executive shall not in any event be obligated to return to the Company an amount greater than the net after-tax portion of any Overpayment that he has retained or has recovered as a refund from the applicable taxing authorities; (ii) if, in connection with any claim by the IRS that may result in the payment of an additional amount pursuant to this Section 6, the Company requests that the Executive pay to the IRS any amount claimed by the IRS to be due and to file a claim for a refund, the Company shall advance to the Executive the amount of such payment; and (iii) this provision shall be interpreted in a manner consistent with an intent to make the Executive whole, on an after-tax basis, from the application of the Excise Tax, it being understood that the correction of an Overpayment may result in the Executive repaying to the Company an amount which is less than the Overpayment. The cost of all determinations made pursuant to this Section 6 shall be paid by the Company. 7. Notice of Termination. Any intended termination of the Executive's employment by the Company shall be communicated by a Notice of Termination from the Company to the Executive, and any intended termination of the Executive's employment by the Executive with or without Good Reason shall be communicated by a Notice of Termination from the Executive to the Company. 8. Executive Covenants. (a) Unauthorized Disclosure. The Executive agrees and understands that in the Executive's position with the Company, the Executive will be exposed to and will receive information relating to the confidential affairs of the Company and its Affiliates, including but not limited to technical information, intellectual property, business and marketing plans, strategies, customer information, other information concerning the products, promotions, development, financing, expansion plans, business policies and practices of the Company and its Affiliates, computer programs and systems, test designs, analytical models, client lists, employee confidential information (i.e. salary, medical and performance reviews), financial data, and other forms of information considered by the Company to be confidential and in the nature of trade secrets ("Confidential Information"). The Executive agrees that during the Employment Term and thereafter, the Executive will not disclose or use for any purpose other than Company business such Confidential Information (other than information which has become publicly available other than by disclosure by the Executive in violation of this Section 8(a)) either directly or indirectly, to any third person or entity 9 10 without the prior written consent of the Company. This confidentiality covenant has no temporal, geographical or territorial restriction. Upon termination of the Employment Term, the Executive will promptly return to the Company, and will not retain or copy or reproduce in any manner, all property, keys, notes, memoranda, writings, lists, files, reports, customer lists, correspondence, tapes, disks, cards, surveys, maps, logs, machines, technical data or any other tangible product or document which has been produced by, received by or otherwise submitted to the Executive during or prior to the Employment Term. (b) Work Made for Hire. (1) The Executive recognizes and understands that his duties include or may include the preparation of works, including but not limited to computer software and computer programs and other written or graphic materials, and that each such work has been or will be prepared by the Executive as an employee within the scope of the Executive's employment, and constitutes a "work made for hire" as that phrase is used in 17 U.S.C. ss. 101 et seq. The Executive understands that the Company is considered the author of each "work made for hire" and exclusively owns all of the rights to such work. The Executive understands that as owner of each copyright, the Company has the exclusive rights to use, reproduce, distribute and publicly display the work. Without limiting the foregoing, to the extent necessary, the Executive assigns and agrees to assign all intellectual property rights in all such works, including but not limited to computer software and computer programs and other written or graphic materials, and agrees to execute all documents necessary to effectuate such assignments. (2) The Executive will promptly disclose to his immediate supervisor or to any persons designated by the Company all inventions, discoveries, improvements, works of authorship, computer programs, machines, methods of analysis concepts, formulas, compositions, ideas, designs, processes, techniques, know-how and data, or other intellectual property reduced to any tangible form, whether or not patentable (collectively "Inventions") made or conceived or reduced to practice or developed by the Executive, either alone or jointly with others, during the term of the Executive's employment. The Executive will also disclose to the Company Inventions conceived, reduced to practice, or developed by him within six months of the termination of his employment with the Company; such disclosures shall be received by the Company in confidence (to the extent they are not assigned under this Agreement) and do not extend the assignment made in this Agreement. The Executive agrees to keep and maintain adequate and current written records of all Inventions made by the Executive (in the form of notes, sketches, drawings and 10 11 other records as may be specified by the Company), which records shall be available to and remain the sole property of the Company at all times. (3) The Executive agrees to perform, during and after his employment, all acts deemed necessary or desirable by the Company to permit and assist the Company, at the Company's sole expense, in evidencing, perfecting, obtaining, maintaining, defending and enforcing the Company's rights and/or the Executive's assignment with respect to such Inventions in any and all countries. (4) The Executive understands that any Invention which he develops entirely on his own time not using any of the Company's equipment, supplies, facilities, or trade secret information ("Personal Invention") is excluded from this Agreement provided such Personal Invention (i) does not relate at the time of conception or reduction to practice to the Company's business, or research or development of the Company; and (ii) does not result from any work performed by the Executive for the Company. It is understood that all Personal Inventions made by the Executive prior to his employment by the Company are excluded from this Agreement. The Executive agrees to notify the Company in writing before making any disclosure or performing work on behalf of the Company which appears to threaten or conflict with proprietary rights the Executive claims in any Personal Invention. In the event of the Executive's failure to give such notice, the Executive agrees that he will make no claim against the Company with respect to any such Personal Invention. (c) Non-competition. By and in consideration of the Company's entering into this Agreement and the payments to be made and benefits to be provided by the Company hereunder, and further in consideration of the Executive's exposure to the Confidential Information of the Company, the Executive agrees that the Executive will not, during the Employment Term, and thereafter during the "Non-competition Period" (as defined below), without the prior written consent of the Company, directly or indirectly, for himself or for others, individually, jointly as a partner, stockholder (except as a holder of not more than five percent (5%) of the outstanding shares of a publicly-held corporation), officer, director, employee, agent or consultant, accept employment with or serve as a consultant, advisor or in any other capacity to any of the following named competitors of the Company (or any parent, subsidiary, affiliate, successor or assign of any such competitor): Efficient Market Services (EMS), the A.C. Nielsen Company, Intactix, or Spectra Marketing. Following termination of the Executive's employment, upon request of the Company, the Executive shall notify the Company of the Executive's then current employment status. For purposes of this Agreement, the "Non-competition Period" shall mean the period beginning on the Termination Date and ending on the 11 12 second (2nd) anniversary of such date. Any material breach of the terms of this Section 8(c) shall constitute Cause. (d) Non-solicitation. The Executive further agrees that, during the Employment Term, and thereafter, during the Non-competition Period, without the prior written consent of the Company, he will not, directly or indirectly, for himself or for others, individually, jointly as a partner, stockholder, officer, director, employee, agent or consultant, cause any other person to, induce, attempt to induce, participate in or facilitate, by referral to another individual or otherwise, the inducing of or attempt to induce, of any employee, consultant, sales representative or other personnel of the Company, who is then, or at any time during the preceding year was employed by the Company, to terminate or alter his relationship with the Company or to breach his agreements with the Company, or to perform work or services for the Executive, a competitor of the Company, or any other company or entity which the Executive serves, creates, acts as a consultant for, or with which the Executive obtains employment. (e) Remedies. The Executive agrees that any breach of the terms of this Section 8 would result in irreparable injury and damage to the Company, or any of its Affiliates for which the Company or any of its Affiliates would have no adequate remedy at law; the Executive therefore also agrees that in the event of said breach or any threat of breach, the Company or any of its Affiliates, as applicable, shall be entitled to an immediate injunction and restraining order to prevent such breach and/or threatened breach and/or continued breach by the Executive and/or any and all persons and/or entities acting for and/or with the Executive, without having to prove damages, in addition to any other remedies to which the Company or any of its Affiliates may be entitled at law or in equity. The terms of this Section 8(e) shall not prevent the Company or any of its Affiliates from pursuing any other available remedies for any breach or threatened breach hereof, including but not limited to the recovery of damages from the Executive. The Executive and the Company further agree that the provisions of the covenants contained in this Section 8 are reasonable and necessary to protect the businesses of the Company or any of its Affiliates because of the Executive's access to Confidential Information and his material participation in the operation of such businesses. The Executive hereby acknowledges that due to the global aspects of the Company's and its Affiliates' businesses and competitors it would not be appropriate to include any geographic limitation on this Section 8. Should a court or arbitrator determine, however, that any provision of the covenants contained in this Section 8 is not reasonable or valid, either in period of time, geographical area, or otherwise, the parties hereto agree that such covenants should be interpreted and enforced to the maximum extent which such court or arbitrator deems reasonable or valid. The Executive agrees to pay all of the Company's attorney fees and costs associated with the Company's efforts to enforce the covenants contained in this Agreement. 12 13 9. Executive Representation. The Executive expressly warrants and represents to the Company that his execution and performance of this Agreement shall not violate any agreement or obligation (whether or not written) that he may have with or to any person or entity, including, without limitation, any current or prior employer. 10. Fees and Expenses. The Company shall pay all arbitration fees and reasonable legal fees and related expenses not in excess of $10,000 (including the costs of experts, evidence and counsel) incurred in good faith by the Executive as they become due as a result of (a) the Executive's termination of employment (including all such fees and expenses, if any, incurred in contesting or disputing any such termination of employment), (b) the Executive's seeking to obtain or enforce any right or benefit provided by this Agreement or by any other plan or arrangement maintained by the Company under which the Executive is or may be entitled to receive benefits, or (c) the Executive's hearing before the Board as contemplated in Section 23(d) of this Agreement; provided, however, that the obligation of the Company to pay any fees and expenses pursuant to either of clauses (a) or (b) of this Section 10 shall apply only if the circumstances giving rise to the claim occurred on or after a Change in Control. 11. Non-exclusivity of Rights. Except as provided in Section 5(e), nothing in this Agreement shall prevent or limit the Executive's continuing or future participation in any benefit, bonus, incentive or other plan or program provided by the Company or any of its Affiliates for which the Executive may qualify, nor shall anything herein limit or reduce such rights as the Executive may have under any other agreements with the Company or any of its Affiliates. Amounts which are vested benefits or which the Executive is otherwise entitled to receive under any plan or program of the Company or any of its Affiliates shall be payable in accordance with such plan or program, except as explicitly modified by this Agreement. 12. Settlement of Claims. The Company's obligation to make the payments provided for in this Agreement and otherwise to perform its obligations hereunder shall not be affected by any circumstances, including, without limitation, any set-off, counterclaim, defense, recoupment, or other right which the Company may have against the Executive or others. 13. 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 the Company. 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 agreement or representation, oral or otherwise, express or implied, 13 14 with respect to the subject matter hereof has been made by either party which is not expressly set forth in this Agreement. 14. Non-Waiver of Rights. The failure to enforce at any time the provisions of this Agreement or to require at any time performance by any other party of any of the provisions hereof shall in no way be construed to be a waiver of such provisions or to affect either the validity of this Agreement or any part hereof, or the right of any party to enforce each and every provision in accordance with its terms. 15. Notice. For the purposes of this Agreement, notices and all other communications provided for in the Agreement (including the Notice of Termination) shall be in writing and shall be delivered in person, by telecopier (with confirmation of receipt) or by United States mail, postage prepaid, certified or registered, addressed to the Company at its principal office to the attention of the General Counsel, or to the Executive either at his residence address shown on the employment records of the Company or in care of the principal office of the Company. All notices and communications shall be deemed to have been received on the date of delivery thereof or on the third business day after the mailing thereof, except that notice of change of address shall be effective only upon receipt. 16. Successors and Assigns. (a) This Agreement shall be binding upon and shall inure to the benefit of the Company and its Successors and Assigns, and the Company shall require any Successor or Assign to expressly assume and agree to perform this Agreement in the same manner and to the same extent that the Company would be required to perform it if no succession or assignment had taken place. The term "Company" as used herein shall include such Successors and Assigns. (b) Neither this Agreement nor any right or interest hereunder shall be assignable or transferable by the Executive, his beneficiaries or his legal representatives, except by will or by the laws of descent and distribution. This Agreement shall inure to the benefit of and be enforceable by the Executive's legal personal representative. 17. Entire Agreement. This Agreement constitutes the entire agreement between the parties hereto and supersedes all prior agreements, understandings and arrangements, oral or written, between the parties hereto with respect to the subject matter hereof, including, without limitation, ____________________ _______________________________. 18. Severability. If any provision of this Agreement, or any application thereof to any circumstances, is invalid, in whole or in part, such provision or application shall to that extent be severable and shall not affect other provisions or applications of this Agreement. 14 15 19. Arbitration. The Executive and the Company hereby agree that any dispute arising under this Agreement or any claim for breach or violation of any provision of this Agreement will be submitted for arbitration in accordance with the rules of the American Arbitration Association (the "AAA") to a single arbitrator selected by mutual agreement between the Executive and the Company (or, if the Executive and the Company cannot mutually agree on an arbitrator, in accordance with the rules of the AAA). All determinations of the arbitrator will be final and binding upon the Executive and the Company. The venue for all proceedings in arbitration under this Section 19, and for any judicial proceedings related to the arbitration, will be in Chicago, Illinois. 20. Governing Law. This Agreement shall be governed by and construed and enforced in accordance with the laws of the State of Illinois without giving effect to the conflict of law principles thereof. 21. Headings. The headings contained herein are solely for purposes of reference, are not part of this Agreement and shall not in any way affect the meaning or interpretation of this Agreement. 22. Counterparts. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed to be an original but all of which together shall constitute one and the same instrument. 23. Definitions. As used in this Agreement, the following terms shall have the following meanings: (a) "Accrued Compensation" shall mean the following amounts of compensation for services rendered to the Company or any of its Affiliates that have been earned through the Termination Date but that have not been paid as of the Termination Date: (1) Base Salary; (2) reimbursement for reasonable and necessary business expenses incurred by the Executive on behalf of the Company or any of its Affiliates during the period ending on the Termination Date; (3) vacation pay; and (4) bonuses and incentive compensation. (b) "Affiliate" shall mean any entity, directly or indirectly, controlled by, controlling or under common control with the Company. (c) "Bonus Amount" shall mean, as of the Termination Date, the greater of (x) the highest annual bonus paid or payable in respect of any of the three full fiscal years of the Company immediately preceding the Termination Date, and (y) the Executive's targeted bonus amount for the year in which the Termination Date occurs under the MIP, if in place, or any other annual incentive compensation plan of the Company which may succeed or replace the MIP. 15 16 (d) "Cause" shall mean: (1) the continued failure of the Executive to substantially perform the Executive's duties with the Company or one of its Affiliates (other than any such failure resulting from incapacity due to physical or mental illness or from the assignment to the Executive of duties that would constitute Good Reason), after a written demand for substantial performance is delivered to the Executive by the Board or the Chief Executive Officer of the Company which specifically identifies the manner in which the Board or Chief Executive Officer believes that the Executive has not substantially performed the Executive's duties, or (2) the willful engaging by the Executive in illegal conduct or gross misconduct which is materially and demonstrably injurious to the Company, or (3) the conviction of a felony, or entry of a guilty or nolo contendere plea by the Executive with respect thereto. For purposes of this Section 23(d), no act or failure to act, on the part of the Executive, shall be considered "willful" unless it is done, or omitted to be done, by the Executive in bad faith or without reasonable belief that the Executive's action or omission was in the best interests of the Company. Any act, or failure to act, based upon authority given pursuant to a resolution duly adopted by the Board or upon the instructions of the Chief Executive Officer or a senior executive officer of the Company or based upon the advice of counsel for the Company shall be conclusively presumed to be done, or omitted to be done, by the Executive in good faith and in the best interests of the Company. The termination of employment of the Executive following a Change in Control shall not be deemed to be for Cause unless and until there shall have been delivered to the Executive a copy of a resolution duly adopted by the affirmative vote of not less than three-fourths of the entire membership of the Board at a meeting of the Board called and held for such purpose (after reasonable notice is provided to the Executive and the Executive is given an opportunity, together with counsel, to be heard before the Board) finding that, in the good faith opinion of the Board, the Executive is guilty of the conduct described in subparagraph (1), (2), or (3) above, and specifying the particulars thereof in detail. 16 17 (e) "Change in Control" shall mean the occurrence of any of the following: (1) An acquisition (other than directly from the Company) of any voting securities of the Company (the "Voting Securities") by any "Person" (as the term person is used for purposes of Section 13(d) or 14(d) of the Exchange Act), immediately after which such Person has "Beneficial Ownership" (within the meaning of Rule 13d-3 promulgated under the Exchange Act) of thirty percent (30%) or more of the then outstanding common stock, par value $.01 per share, of the Company ("Common Stock") or other Voting Securities, or the combined voting power of the Company's then outstanding Voting Securities; provided, however, that in determining whether a Change in Control has occurred pursuant to this Section 23(e), shares of Common Stock or Voting Securities which are acquired in a "Non-Control Acquisition" (as hereinafter defined) shall not constitute an acquisition which would cause a Change in Control. A "Non-Control Acquisition" shall mean an acquisition by (i) an employee benefit plan (or a trust forming a part thereof) maintained by (A) the Company or (B) any Company or other Person of which a majority of its voting power or its voting equity securities or equity interest is owned, directly or indirectly, by the Company (for purposes of this definition, a "Related Entity"), (ii) the Company or any Related Entity, or (iii) any Person in connection with a "Non-Control Transaction" (as hereinafter defined); (2) The individuals who, as of the date of this Agreement are members of the Board (the "Incumbent Board"), cease for any reason to constitute at least a majority of the members of the Board or, following a Merger which results in a Parent Company (as defined in paragraph (3)(i)(A) below), the board of directors of the ultimate Parent Company; provided, however, that if the election, or nomination for election by the Company's common stockholders, of any new director was approved by a vote of a majority of the Incumbent Board, such new director shall, for purposes of this Agreement, be considered as a member of the Incumbent Board; provided further, however, that no individual shall be considered a member of the Incumbent Board if such individual initially assumed office as a result of either an actual or threatened "Election Contest" (as described in Rule 14a-11 promulgated under the Exchange Act) or other actual or threatened solicitation of proxies or consents by or on behalf of a Person other than the Board (a "Proxy Contest") including by reason of any agreement intended to avoid or settle any Election Contest or Proxy Contest; or (3) The consummation of: 17 18 (i) A merger, consolidation or reorganization with or into the Company or in which securities of the Company are issued (a "Merger"), unless such Merger is a "Non-Control Transaction." A "Non-Control Transaction" shall mean a Merger in which: (A) the stockholders of the Company immediately before such Merger own directly or indirectly immediately following such Merger at least fifty percent (50%) of the combined voting power of the outstanding voting securities of (x) the Company resulting from such Merger (the "Surviving Company") if fifty percent (50%) or more of the combined voting power of the then outstanding voting securities of the Surviving Company is not Beneficially Owned, directly or indirectly by another Person (a "Parent Company"), or (y) if there is one or more Parent Companies, the ultimate Parent Company; and (B) the individuals who were members of the Incumbent Board immediately prior to the execution of the agreement providing for such Merger constitute at least a majority of the members of the board of directors of (x) the Surviving Company, if there is no Parent Company, or (y) if there is one or more Parent Companies, the ultimate Parent Company; and (C) no Person other than (1) the Company, (2) any Related Entity, (3) any employee benefit plan (or any trust forming a part thereof) that, immediately prior to such Merger was maintained by the Company or any Related Entity, or (4) any Person who, immediately prior to such Merger had Beneficial Ownership of thirty percent (30%) or more of the then outstanding Voting Securities or Shares, has Beneficial Ownership of thirty percent (30%) or more of the combined voting power of the outstanding voting securities or common stock of (x) the Surviving Company if there is no Parent Company, or (y) if there is one or more Parent Companies, the ultimate Parent Company. (ii) A complete liquidation or dissolution of the Company; or (iii) The sale or other disposition of all or substantially all of the assets of the Company to any Person (other than (A) a transfer to a Related Entity or under conditions that would constitute a Non-Control Transaction with the disposition of assets being regarded as a Merger for this purpose or (B) the distribution to the Company's stockholders of the stock of a Related Entity or any other assets). 18 19 Notwithstanding the foregoing, a Change in Control shall not be deemed to occur solely because any Person (the "Subject Person") acquired Beneficial Ownership of more than the permitted amount of the then outstanding Common Stock or Voting Securities as a result of the acquisition of Common Stock or Voting Securities by the Company which, by reducing the number of Common Stock or Voting Securities then outstanding, increases the proportional number of shares Beneficially Owned by the Subject Persons, provided that if a Change in Control would occur (but for the operation of this sentence) as a result of the acquisition of Common Stock or Voting Securities by the Company, and after such share acquisition by the Company, the Subject Person becomes the Beneficial Owner of any additional Common Stock or Voting Securities which increases the percentage of the then outstanding Common Stock or Voting Securities Beneficially Owned by the Subject Person, then a Change in Control shall occur. (f) "Disability" shall mean a physical or mental infirmity that constitutes a disability entitling the Executive to long-term disability benefits under the applicable Company long-term disability plan, or in the absence of such a plan, shall mean the inability of the Executive to perform his duties, services and responsibilities hereunder by reason of a physical or mental infirmity, as reasonably determined by the Board, for a total of 180 calendar days in any twelve-month period during the Employment Term. (g) "Good Reason" shall mean the occurrence after a Change in Control of any of the following events or conditions, provided that the Executive provides a Notice of Termination within sixty (60) days after the occurrence of such event or condition: (1) a change in the Executive's status, title, position or responsibilities (including reporting responsibilities) which represents an adverse change from his status, title, position or responsibilities as in effect immediately prior thereto; the assignment to the Executive of any duties or responsibilities which are inconsistent with his status, title or position as in effect immediately prior thereto; or any removal of the Executive from or failure to reappoint or reelect him to any of such positions, except in connection with the termination of his employment for Disability, Cause, as a result of his death or by the Executive other than for Good Reason; (2) a reduction in the Executive's annual Base Salary as in effect on the date of the Change in Control or as it may be increased thereafter; (3) the relocation of the offices of the Company at which the Executive is principally employed to a location more than forty (40) miles 19 20 farther from the Executive's principal residence than the location of such offices immediately prior to the Change in Control, or the requirement that the Executive be based anywhere other than such offices, except to the extent the Executive was not previously assigned to a principal location and except for required travel on the business of the Company to an extent substantially consistent with the Executive's business travel obligations at the time of the Change in Control; (4) the failure by the Company 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 in which the Executive participated, within seven (7) days of the date such compensation is due; (5) the failure by the Company or any Affiliate to (i) continue in effect (without reduction in benefit level and/or reward opportunities) any material compensation, employee benefit or fringe benefit plan program or practice in which the Executive was participating immediately prior to the Change in Control, unless a substitute or replacement plan has been implemented which provides substantially identical compensation or benefits to the Executive or (ii) provide the Executive with compensation and benefits, in the aggregate, at least equal (in terms of benefit levels and/or reward opportunities) to those provided for under each other compensation, employee benefit or fringe benefit plan, program or practice in which the Executive was participating immediately prior to the Change in Control; (6) the failure of the Company to obtain from its Successors and Assigns the express assumption of this Agreement; or (7) any purported termination of the Executive's employment by the Company which is not effected pursuant to a Notice of Termination, and in the event of a purported termination for Cause, the failure of the Company to follow the procedure set forth in Section 23(d). Any event or condition described in Section 23(g)(1) through (7) which occurs (x) within six (6) months prior to a Change in Control or (y) at any time prior to a Change in Control but which the Executive reasonably demonstrates (A) was at the request of a Third Party, or (B) otherwise arose in connection with, or in anticipation of a Change in Control which has been threatened or proposed, shall constitute Good Reason for purposes of this Agreement notwithstanding that it occurred prior to the Change in Control, provided a Change in Control shall actually have occurred. 20 21 (h) "Notice of Termination" shall mean a written notice of termination of the Executive's employment, signed by the Executive if to the Company or by a duly authorized officer of the Company if to the Executive, which indicates the specific termination provision in this Agreement, if any, relied upon and which sets 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. Any purported termination by the Company or by the Executive shall be communicated by written Notice of Termination to the other. For purposes of this Agreement, no such purported termination of employment shall be effective without such Notice of Termination. (i) "Pro Rata Bonus" shall mean the Bonus Amount multiplied by a fraction, the numerator of which is the number of days in the year in which the Termination Date occurs through the Termination Date, and the denominator of which is three hundred and sixty-five (365). (j) "Successors and Assigns" shall mean a corporation or other entity with which the Company may be merged or consolidated or which acquires all or substantially all the assets and business of the Company, whether by operation of law or otherwise. (k) "Termination Date" shall mean (i) in the case of the Executive's death, his date of death; (ii) 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 performance of his duties on a full-time basis during such thirty (30) day period); (iii) if the Executive terminates his employment other than for Good Reason, forty-five (45) days after Notice of Termination is given or such other date designated by the Company in the event that it waives the Executive's notice requirements; and (iv) 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 for Cause shall not be less than thirty (30) days and, in the case of a termination for Good Reason shall not be more than sixty (60) days, from the date such Notice of Termination is given). IN WITNESS WHEREOF, the Company has caused this Agreement to be executed by authority of its Board of Directors, and the Executive has hereunto set his hand, on the day and year first above written. 21 22 INFORMATION RESOURCES, INC. By:________________________________ Name: Title: [EMPLOYEE NAME] ___________________________________ 22 EX-10.2 3 c58277ex10-2.txt OUTSOURCING SERVICES AGREEMENT 1 EXHIBIT 10.2 EXECUTION COPY CONFIDENTIAL PORTIONS OF THIS DOCUMENT HAVE BEEN OMITTED. THE FOLLOWING MARK "**" INDICATES THE APPLICABLE PLACES IN THIS DOCUMENT WHERE CONFIDENTIAL INFORMATION HAS BEEN OMITTED. THE OMITTED INFORMATION HAS BEEN FILED SEPARATELY WITH THE SECURITIES AND EXCHANGE COMMISSION. OUTSOURCING SERVICES AGREEMENT THIS OUTSOURCING SERVICES AGREEMENT is made as of July 1, 2000 by and between Information Resources, Inc., a Delaware corporation ("IRI"), and Mosaic InfoForce, L.P., a limited partnership organized under the laws of the State of Delaware ("NewCo"). WITNESSETH: WHEREAS, IRI conducts InfoScan Causal Collection Services, InfoForce Recurring Audit Collection Services and InfoForce Custom Audit Collection Services (each as defined below) related to its business of providing information and value added insights related to consumer purchasing behavior and attitudes through a combination of data, software and analytical processes, to client companies that market and sell to consumers and to related service providers; WHEREAS, the Board of Directors of IRI has determined that it is in the best interest of IRI and its stockholders to discontinue conducting such services and to enter into a joint venture with Mosaic Group Inc., a corporation organized under the laws of the Province of Ontario ("MGI"), through NewCo, pursuant to which NewCo will provide such services to IRI on the terms and conditions set forth in this Agreement; and WHEREAS, this Agreement is entered into pursuant to the Co-operation Agreement of even date herewith between MGI and IRI (the "Co-operation Agreement"); NOW, THEREFORE, in consideration of the mutual covenants and agreements made herein, the parties hereto agree as follows: ARTICLE I DEFINITIONS Section 1.01. Definitions. As used in this Agreement, the following terms will have the meanings set forth below, applicable both to the singular and the plural forms of the terms described. "AAA" has the meaning ascribed thereto in Section 7.02. "Accounting Referee" has the meaning ascribed thereto in Section 2.09. "Actual Cost of Services" has the meaning ascribed thereto in Section 3.04. 2 "Additional Cost Reductions" has the meaning ascribed thereto in Section 2.09 "Additional Initial Term Services" has the meaning ascribed thereto in Section 2.04. "Additional Subsequent Year Services" has the meaning ascribed thereto in Section 2.08. "Additional Volume Initial Term Services" has the meaning ascribed thereto in Section 2.03. "Additional Volume Subsequent Year Services" has the meaning ascribed thereto in Section 2.07. "Affiliate" of any Person means any Person directly or indirectly controlling, controlled by, or under common control with such other Person. The term "control" means the ownership of more than fifty percent (50%) of the outstanding equity securities or equivalent interests of any Person. "Agreement" means this Outsourcing Services Agreement, as amended and supplemented from time to time in accordance with its terms. "Allocable Cost Certificate" has the meaning ascribed thereto in Section 2.06. "Allocable Costs" means Central Office Costs, Executive Costs, Field Management Costs and Other Field Expenses. "Alternative Remedies" has the meaning ascribed thereto in Section 7.02. "Amended and Restated Limited Partnership Agreement" means the amended and restated limited partnership agreement by and among Mosaic InfoForce GP Holding Co, Inc., Mosaic InfoForce LP Holding Co, Inc. and IRI. "Applicable Subsequent Year Service Charges" has the meaning ascribed thereto in Section 2.06. "Audited Financial Statements" has the meaning ascribed thereto in Section 3.04. "Budget" has the meaning ascribed thereto in Section 2.01. "Budgeted Cost of Services" has the meaning ascribed thereto in Section 3.04. "Business Plan Acquisitions" has the meaning ascribed thereto in Section 2.06. 2 3 "Call Right" has the meaning ascribed thereto in the Amended and Restated Limited Partnership Agreement. "Causal Data Cure Period" has the meaning ascribed thereto in Section 7.02. "Causal Data Defective Service" has the meaning ascribed thereto in Section 7.02. "Central Office Costs" has the meaning ascribed thereto in the Budget. "Confidential Information" has the meaning ascribed thereto in Section 10.04. "Cost Reduction Certificate" has the meaning ascribed thereto in Section 2.09. "Cost Reduction Date" has the meaning ascribed thereto in Section 2.09. "Cost Reduction Period" has the meaning ascribed thereto in Section 2.09. "Cost Reductions" has the meaning ascribed thereto in Section 2.09. "Cure Periods" has the meaning ascribed thereto in Section 7.02. "Custom Audit Cure Period" has the meaning ascribed thereto in Section 7.02. "Custom Audit Defective Service" has the meaning ascribed thereto in Section 7.02. "Data Challenge" means a question regarding the validity of data collected by NewCo. "Data Challenge Report" has the meaning ascribed thereto in Section 2.12. "Defective Service" has the meaning ascribed thereto in Section 7.02. "Delayed Cost Reduction Certificate" has the meaning ascribed thereto in Section 2.09. "Delayed Payment Period" has the meaning ascribed thereto in Section 3.03. "Delivery Date" has the meaning ascribed thereto in Section 2.06. "Designated Employee" means the Designated IRI Employees and the Designated NewCo Employees. "Designated IRI Employee" means David Rosenblatt, Executive Vice President of IRI, or if Mr. Rosenblatt is no longer employed by IRI in such capacity, his successor. 3 4 "Designated NewCo Employee" means Michael Britton, Executive Vice President of Operations of NewCo, or if Mr. Britton is no longer employed by NewCo in such capacity, his successor. "Disclosing Party" has the meaning ascribed thereto in Section 10.04. "E&Y" has the meaning ascribed thereto in Section 3.04. "EBIT" means earnings before interest and taxes. "Event of Force Majeure" has the meaning ascribed thereto in Section 2.11. "Executive Costs" has the meaning ascribed thereto in the Budget. "Expedited Procedures" has the meaning ascribed thereto in Section 7.02. "Field Management Costs" has the meaning ascribed thereto in the Budget. "Financial Statements" has the meaning ascribed thereto in Section 3.04. "Following Twelve Month Period" has the meaning ascribed thereto in Section 2.06. "Future IRI Relevant Technology" has the meaning ascribed thereto in Section 5.02. "Future NewCo Relevant Technology" has the meaning ascribed thereto in Section 5.02. "Group Hire Agreement" has the meaning ascribed thereto in the Co-operation Agreement. "InfoForce Business" means that segment of IRI's business which consists of providing audit services to clients pursuant to contract-specific, fee-based arrangements with such clients and pursuant to which InfoForce Recurring Audit Collection Service and/or InfoForce Custom Audit Collection Service services are provided. "InfoForce Custom Audit Collection Service" has the meaning ascribed thereto in the Budget. "InfoForce Custom Audit Data" has the meaning ascribed thereto in the Budget. "InfoForce Recurring Audit Collection Service" has the meaning ascribed thereto in the Budget. "InfoForce Recurring Audit Data" has the meaning ascribed thereto in the Budget. 4 5 "InfoScan Causal Collection Service" has the meaning ascribed thereto in the Budget. "InfoScan Causal Data" has the meaning ascribed thereto in the Budget. "Initial Term" has the meaning ascribed thereto in Section 2.01. "Initial Term Service Charges" has the meaning ascribed thereto in Section 3.01. "Initial Term Services" has the meaning ascribed thereto in Section 2.01. "Interim Period" has the meaning ascribed thereto in Section 3.04. "Interim Period Variation Analysis" has the meaning ascribed thereto in Section 3.04. "Interim Period Variation Certificate" has the meaning ascribed thereto in Section 3.04. "Interim Unaudited Financial Statements" has the meaning ascribed thereto in Section 3.04. "IRI Data" has the meaning ascribed thereto in Section 2.13. "IRI Indemnified Person" has the meaning ascribed thereto in Section 7.03. "IRI's Relevant Technology" has the meaning ascribed thereto in Section 5.01. "IRI Usage Agreement" has the meaning ascribed thereto in the Co-operation Agreement. "JV" means the joint venture between MGI and IRI in the form of a limited partnership established under the laws of the State of Delaware and having the name "Mosaic InfoForce." "Losses" has the meaning ascribed thereto in Section 7.02. "More Favorable Services" has the meaning ascribed thereto in Section 2.06. "NewCo's Relevant Technology" has the meaning ascribed thereto in Section 5.01. "Other Field Expenses" has the meaning ascribed thereto in the Budget. "Operative Documents" has the meaning ascribed thereto in the U.S. Co-operation Agreement. "Percentage Interest" has the meaning ascribed thereto in the Amended and Restated Limited Partnership Agreement. 5 6 "Person" means any individual, partnership, limited liability company, joint venture, corporation, trust, unincorporated organization, government (and any department or agency thereof) or other entity. "Prior Twelve Month Period" has the meaning ascribed thereto in Section 2.06. "Receiving Party" has the meaning ascribed thereto in Section 10.04. "Recipient Party" has the meaning ascribed thereto in Section 4.01. "Recurring Audit Cure Period" has the meaning ascribed thereto in Section 7.02. "Recurring Audit Defective Service" has the meaning ascribed thereto in Section 7.02. "Reinvestment Proposal" has the meaning ascribed thereto in Section 3.04. "Relevant Technology" has the meaning ascribed thereto in Section 5.01 "Remaining Term" has the meaning ascribed thereto in Section 2.06. "Requesting Party" has the meaning ascribed thereto in Section 4.01. "Service Level Agreement" has the meaning ascribed thereto in Section 2.01. "Services" has the meaning ascribed thereto in Section 2.06. "Six Month Period" has the meaning ascribed thereto in Section 3.04. "Six Month Period Variation Analysis" has the meaning ascribed thereto in Section 3.04. "Six Month Period Variation Certificate" has the meaning ascribed thereto in Section 3.04. "Stores" means the locations from which InfoScan Causal Data, InfoForce Recurring Audit Data and/or InfoForce Custom Audit Data is collected. "Subsequent Year Requirements Proposal" has the meaning ascribed thereto in Section 2.06. "Subsequent Year Requirements Proposals" has the meaning ascribed thereto in Section 2.06. "Subsequent Year Service Charge" has the meaning ascribed thereto in Section 2.06. 6 7 "Subsequent Year Service Charges" has the meaning ascribed thereto in Section 2.06. "Subsequent Year Service Level Agreement" has the meaning ascribed thereto in Section 2.06. "Subsequent Year Service Level Agreements" has the meaning ascribed thereto in Section 2.06. "Subsequent Year Services" has the meaning ascribed thereto in Section 2.06. "Subsidiary" means, as to any Person, any corporation, association, partnership, joint venture or other business entity of which more than 50% of the voting capital stock or other voting ownership interests is owned or controlled directly or indirectly by such Person or by one or more of the Subsidiaries of such Person or by a combination thereof. "Term" has the meaning ascribed thereto in Section 9.01. "Threshold Amount" has the meaning ascribed thereto in Section 7.02. "Transition Services Agreement" has the meaning ascribed thereto in Section 2.09. "Twelve Month Period" has the meaning ascribed thereto in Section 3.04. "Twelve Month Period Variation Analysis" has the meaning ascribed thereto in Section 3.04. "Twelve Month Period Variation Certificate" has the meaning ascribed thereto in Section 3.04. "Variation Analysis" has the meaning ascribed thereto in Section 3.04. "Variation Certificate" has the meaning ascribed thereto in Section 3.04. "Year 2000 Audited Financial Statements" has the meaning ascribed thereto in Section 3.04. "Year 2001 Audited Financial Statements" has the meaning ascribed thereto in Section 3.04. Section 1.02. Internal References. Unless the context indicates otherwise, references to Articles, Sections and paragraphs shall refer to the corresponding articles, sections and paragraphs in this Agreement and references to the parties shall mean the parties to this Agreement. 7 8 ARTICLE II PROVISION OF SERVICES Section 2.01. Provision of Services During the Initial Term. On the terms and subject to the conditions set forth in this Agreement and in consideration of the Initial Term Service Charges (defined below), NewCo agrees to provide to IRI the services (the "Initial Term Services") described in the budget for NewCo for the period beginning July 1, 2000 and ending June 30, 2003 mutually agreed to by the parties hereto (the "Budget"), which Initial Term Services shall be provided from the date of this Agreement through and including December 31, 2001 (the "Initial Term"). Subject to the provisions of Section 2.02 below or unless otherwise specifically agreed by IRI and NewCo through their respective Designated Employees in accordance with the provisions of Article IV hereof, the Initial Term Services to be provided by NewCo hereunder shall be provided to IRI at the service levels set forth in Exhibit A hereto (the "Service Level Agreement") and in the volumes set forth in the Budget. Section 2.02. Adjustment to Service Level Agreement. (a) On or before September 30, 2000, IRI shall deliver to NewCo its documented market-specific, historical service levels. Following receipt of IRI's documented market-specific, historical service levels the parties shall amend the Service Level Agreement to include market-specific service levels and NewCo shall thereafter provide the Initial Term Services to IRI at the service levels, including the market-specific service levels, included in such amended Service Level Agreement. During the period from October 1, 2000 through December 31, 2000, the parties shall review jointly (through their respective Designated Employees) the market-specific service levels included in the amended Service Level Agreement, based upon (a) IRI's documented market-specific, historical service levels during the period beginning June 28, 1999 and ending June 25, 2000 and (b) the collection methodology of NewCo during the period beginning October 1, 2000 and ending December 31, 2000. If the parties determine through such review that the underlying market-specific, historical service levels upon which the amended Service Level Agreement was based were lower than the market-specific service levels set forth in the amended Service Level Agreement, then the amended Service Level Agreement immediately (and no later than five (5) business days following determination of any such inaccuracy) shall be revised to reflect such lower service levels and NewCo shall thereafter provide the Initial Term Services to IRI at the new service levels in such revised Service Level Agreement. Any disagreement between the parties regarding this Section 2.02(a) shall be settled in accordance with Section 4.03 hereof. (b) During the period from July 1, 2000 through December 31, 2000, the parties hereto shall review jointly (through their respective Designated Employees) the service levels set forth in the Service Level Agreement, based upon (a) IRI's documented historical service levels during the period beginning June 28, 1999 and ending June 25, 2000 and (b) the collection methodology of NewCo during the period beginning July 1, 2000 and ending December 31, 2000. If the parties determine through such review that the underlying historical service levels upon which the Service Level Agreement was based were lower than the service levels set forth in the Service Level Agreement, then the Service Level Agreement immediately (and no later than five (5) business days following determination of any such inaccuracy) shall be amended to reflect 8 9 such lower service levels and NewCo shall thereafter provide the Initial Term Services to IRI at the new services levels in such amended Service Level Agreement. Any disagreement between the parties regarding this Section 2.02(b) shall be settled in accordance with the provisions of Section 4.03 hereof. Section 2.03. Increases in Volume of Services During Initial Term. In addition to the volume of Initial Term Services to be provided by NewCo to IRI pursuant to Section 2.01 hereof as set forth in the Budget, if requested by IRI pursuant to written notice to the Designated NewCo Employee of at least (a) four (4) weeks with regard to an increase of less than ten percent (10%), (b) eight (8) weeks with regard to an increase of ten percent (10%) or greater, up to and including twenty percent (20%) and (c) twelve (12) weeks with regard to an increase greater than twenty percent (20%), prior to the date on which IRI wishes to increase such volume, and to the extent that IRI and NewCo (through their respective Designated Employees) may mutually agree in writing, NewCo shall provide increased volumes of the Services to IRI during the Initial Term (the "Additional Volume Initial Term Services"). Subject to Section 2.02 above or unless otherwise specifically agreed to by IRI and NewCo in accordance with the provisions of Article IV hereof, any Additional Volume Initial Term Services shall be provided to IRI at the service levels set forth in the Service Level Agreement. The service charges for any such Additional Volume Initial Term Services shall be paid in accordance with the provisions of Section 3.04 hereof. Section 2.04. Additional Services During Initial Term. In addition to the Initial Term Services and Additional Volume Initial Term Services, if any, to be provided by NewCo to IRI pursuant to Sections 2.01 and 2.03 hereof, if requested by IRI pursuant to written notice to the Designated NewCo Employee and to the extent that IRI and NewCo (through their respective Designated Employees in accordance with Article IV hereof) may mutually agree in writing, NewCo shall provide additional services (including Services not included in the Budget) to IRI during the Initial Term (the "Additional Initial Term Services"). The timing for the commencement of the provision by NewCo of any such Additional Initial Term Services, volume, scope and nature of any such Additional Initial Term Services, as well as the term, service charges, service levels and other terms and conditions applicable thereto, shall be commercially reasonable and mutually agreed in writing by IRI and NewCo (through their respective Designated Employees in accordance with Article IV hereof). The service charges for any such Additional Initial Term Services shall be paid in accordance with the provisions of Section 3.04 hereof. Section 2.05. [**] Section 2.06. Provisions of Services During the Remaining Term. (a) The remaining term of this Agreement shall begin on January 1, 2002 and shall end upon the expiration or earlier termination of this Agreement in accordance with Article IX hereof (the "Remaining Term"). 9 10 (b) On or before October 31 (the "Delivery Date") of each year beginning October 31, 2001, IRI shall provide to NewCo, a subsequent year service requirements proposal (each a "Subsequent Year Requirements Proposal," and together with all such proposals delivered during the Remaining Term, the "Subsequent Year Requirements Proposals") and service level agreement (each a "Subsequent Year Service Level Agreement," and together with all such service level agreements delivered during the Remaining Term, the "Subsequent Year Service Level Agreements") for the twelve month period beginning the January 1 following the applicable Delivery Date. The services (including any Additional Volume Subsequent Year Services and Additional Subsequent Year Services (each as defined below)) rendered by NewCo to IRI during the Remaining Term are hereafter referred to as the "Subsequent Year Services" and, collectively with the Initial Term Services, the Additional Volume Initial Term Services and the Additional Initial Term Services, the "Services." (c) Within thirty (30) days following receipt of the applicable proposed Subsequent Year Requirements Proposal and Subsequent Year Service Level Agreement from IRI, NewCo shall provide to IRI its proposed service charges for the Subsequent Year Services requested by IRI to be provided during the applicable twelve month period (the "Subsequent Year Service Charge," and together with all service charges during the Remaining Term, the "Subsequent Year Service Charges"). Upon receipt of such Subsequent Year Service Charge proposal from NewCo, NewCo and IRI shall promptly use their respective best efforts to negotiate (through their respective Designated Employees in accordance with Article IV hereof) the volume, scope and nature of such Subsequent Year Services, as well as the Subsequent Year Service Charges and other terms and conditions applicable to such Subsequent Year Services; provided, however, that if during the prior twelve-month period NewCo enters into an agreement (whether written or oral) to provide services to any customer, other than IRI, that provides for less than an [**] margin to NewCo after allocating Central Office Costs and Executive Costs pro-rata across all of the services provided by NewCo based on the revenues generated by such services (the "More Favorable Services"), the Subsequent Year Service Charges in effect during the year in which NewCo enters into such agreement to provide More Favorable Services (the "Applicable Subsequent Year Service Charges"), shall be promptly (but in no event later than thirty (30) days following the execution of such agreement to provide More Favorable Services) adjusted as necessary so that the Applicable Subsequent Year Service Charges are no less favorable to IRI than those associated with the More Favorable Services for the twelve-month period during which NewCo provides such More Favorable Services. Thereafter, such adjustment shall similarly be made to the Subsequent Year Service Charges for each Following Twelve Month Period (as hereinafter defined) for so long as NewCo continues to provide such More Favorable Services. (d) In addition, in negotiating the Subsequent Year Service Charges, the parties agree to use their commercially reasonable best efforts to ensure that: (i) NewCo maintains at least a [**] margin (which margin shall include IRI's InfoForce Business) on the Subsequent Year Services to be provided by NewCo during each of the twelve month periods following the Initial Term; provided, however, that if the Percentage 10 11 Interest in the JV held by IRI decreases from the Percentage Interest set forth on Exhibit A to the Amended and Restated Limited Partnership Agreement on the date hereof, such [**] margin shall be adjusted so that no more than an [**] margin is allocable to the Percentage Interests in the JV held by MGI; (ii) Subsequent Year Service Charges are established on an activity-based, rather than a time and materials-based, model; (iii) Except as provided in the second sentence of this Section 2.06(d)(iii) and Section 2.06(e), for each twelve month period during the Remaining Term (each a "Following Twelve Month Period"), NewCo's (A) Central Office Costs and Executive Costs are allocated pro rata across all services outlined in the business plan and/or budget for NewCo based on the revenues projected in such business plan and/or budget to be generated by NewCo from such services, and (B) NewCo's Field Management Costs and Other Field Expenses are allocated across the services projected to use the resources included in such Field Management Costs and/or Other Field Expenses as specifically outlined in the business plan and/or budget based on the revenues projected to be generated from such services in such business plan and/or budget, in each case including (1) revenues attributable to acquisitions completed in the immediately preceding twelve month period (the "Prior Twelve Month Period") and (2) revenues attributable to acquisitions included in the business plan and/or budget for the applicable Following Twelve Month Period; provided, however, that revenues attributable to such acquisitions shall not be included in the allocation until each such acquisition is consummated, at which time the parties agree to promptly (but in no event later than thirty (30) days after consummation of such acquisition) adjust the Subsequent Year Service Charges for the Following Twelve Month Period during which such acquisition was consummated to reflect a reallocation of Central Office Costs and Executive Costs and, if applicable, Field Management Costs and Other Field Expenses (on a pro rata basis, based on the number of calendar days remaining in the applicable Following Twelve Month Period beginning with the date following the of consummation of each such acquisition and ending on the last day of such Following Twelve Month Period). If the business plan and/or budget for the Prior Twelve Month Period included potential acquisitions (the "Business Plan Acquisitions") that were not completed during such Prior Twelve Month Period, the Subsequent Year Service Charges for the applicable Following Twelve Month Period shall reflect an allocation of costs established by multiplying NewCo's Central Office Costs and Executive Costs by two (2) and allocating this total amount, pro rata based on revenues generated or projected, as the case may be, across the greater of (A) the actual revenues generated by NewCo during the applicable Prior Twelve Month Period or (B) the revenues projected by NewCo in the applicable business plan and/or budget for NewCo for the applicable Following Twelve Month Period, assuming for this purpose that such Business Plan Acquisitions had been consummated by NewCo in the Prior Twelve Month Period. The foregoing notwithstanding, no adjustment for Business Plan Acquisitions shall be made with respect to any Following Twelve Month Period in the event that (1) IRI has not equaled or exceeded its projected revenue levels as set forth in the business plan and/or budget for the Prior Twelve Month Period or (2) the Business Plan Acquisitions during the applicable Prior Twelve Month Period were not consummated due to IRI's election not to participate in a capital call for the purpose of funding 11 12 any such Business Plan Acquisition pursuant to the terms of the Amended and Restated Limited Partnership Agreement; and (iv) such Subsequent Year Service Charges include the Cost Reductions (as defined below) described in Section 2.09 hereof. (e) Adjustment to Subsequent Year Service Charges. If MGI violates the provisions of Section 16.2 of the Amended and Restated Limited Partnership Agreement, the Subsequent Year Service Charges for each calendar year during the Remaining Term of this Agreement, beginning with the calendar year of the date of consummation of an Acquisition or the execution of a Third Party Contract (each as defined in the Amended and Restated Limited Partnership Agreement), shall be established (or retroactively adjusted in the case of the calendar year in which such violation occurs) to reflect such Acquisition or execution of a Third Party Contract by multiplying NewCo's Central Office Costs and Executive Costs by two (2) and allocating this total amount, pro rata based upon the revenues projected or generated as the case may be, across the total of (1) the revenues projected to be generated (or generated in the case of the calendar year in which such violation occurs) by NewCo in the business plan and/or budget for NewCo for the applicable calendar year (or portion thereof, as applicable), plus (2) the revenues projected by MGI (in MGI's sole reasonable judgment) in the business plan and/or budget for MGI or its applicable Affiliate to be generated (or generated in the case of the calendar year in which such violation occurs) by MGI or its applicable Affiliate from Covered Services (as defined in the Amended and Restated Limited Partnership Agreement) attributable to such Acquisition or Third Party Contract during the applicable calendar year (or portion thereof, as applicable). (f) In conjunction with the preparation of its financial statements for each fiscal year during the Remaining Term, NewCo shall review the allocation of Allocable Costs for the Prior Twelve Month Period and to the extent that such Allocable Costs were not accurately allocated by NewCo during such Prior Twelve Month Period, after taking into account any adjustments related to Business Plan Acquisitions as provided in the second sentence of clause (d)(iii) above and any adjustments pursuant to clause (e) above, the Subsequent Year Service Charges related to such Prior Twelve Month Period shall be retroactively increased or decreased, as applicable, to reflect such reallocation. NewCo shall deliver to IRI within sixty (60) days following the end of the applicable Prior Twelve Month Period a certificate setting forth its revised allocation of Allocable Costs (the "Allocable Cost Certificate"). In the event that the Allocable Costs allocated to IRI exceeded the actual costs allocable to IRI and paid by NewCo during the applicable Prior Twelve Month Period, NewCo shall reimburse IRI for any excess amounts paid immediately upon (and in any event no later that fifteen (15) days following) receipt by IRI of the Allocable Cost Certificate. In the event that the actual costs allocable to IRI and paid to NewCo during the applicable Prior Twelve Month Period exceed the Allocable Costs allocated to IRI, IRI shall reimburse NewCo for such underpayment immediately upon (and in any event no later than fifteen (15) days following) receipt by IRI of the Allocable Costs Certificate. (g) In the event that the parties fail to agree, on or before December 15, on the Subsequent Year Service Charges and/or the other terms and conditions related to the Services to 12 13 be provided by NewCo to IRI for any year in the Remaining Term, then (i) the Subsequent Year Service Charges applicable to such year shall be the same as (A) the Initial Term Service Charges (as defined below), as adjusted pursuant to Section 3.04 hereof, minus the Cost Reductions, as the same may be adjusted pursuant to Section 2.09(d) hereof for the same or similar services, or (B) Subsequent Year Service Charges, as the case may be, for the immediately preceding year; provided, however, that such Subsequent Year Service Charges shall be adjusted (x) to ensure that NewCo maintains at least a [**] margin, subject to adjustment in the event of a decrease in IRI's Percentage Interest as set forth in Section 2.09(d) above and (y) for wage (including benefits) inflation, as mutually agreed by IRI and NewCo, and (ii) the other terms and conditions related to the Services applicable to such year shall be identical to those of the preceding year for the same or similar services. Section 2.07. Increases in Volume of Services During Any Subsequent Year. In addition to the Subsequent Year Services to be provided by NewCo to IRI pursuant to Section 2.06 hereof, if requested by IRI pursuant to written notice to the Designated NewCo Employee of at least (a) four (4) weeks with regard to an increase of less than ten percent (10%), (b) eight (8) weeks with regard to an increase of ten percent (10%) or greater, up to and including twenty percent (20%) and (c) twelve (12) weeks with regard to an increase greater than twenty percent (20%), prior to the date on which IRI wishes to increase such volume, and to the extent that IRI and NewCo (through their respective Designated Employees ) may mutually agree in writing, NewCo shall provide increased volumes of Subsequent Year Services to IRI during a Subsequent Year (the "Additional Volume Subsequent Year Services") at the same rates as the applicable Subsequent Year Service Charges. Unless otherwise specifically agreed to by IRI and NewCo in accordance with the provisions of Article IV hereof, any Additional Volume Subsequent Year Services shall be provided to IRI at the service levels set forth in the applicable Subsequent Year Service Level Agreement. The service charges for any such Additional Volume Subsequent Year Services shall be paid in accordance with the provisions of Section 3.02 hereof. Section 2.08. Additional Services During Any Subsequent Year. In addition to the Subsequent Year Services and Additional Volume Subsequent Year Services, if any, to be provided by NewCo to IRI pursuant to Sections 2.06 and 2.07 hereof, if requested by IRI pursuant to written notice to the Designated NewCo Employee, and to the extent that IRI and NewCo (through their respective Designated Employees in accordance with Article IV hereof) may mutually agree in writing, NewCo shall provide additional services (including Services not provided by NewCo to IRI during the Initial Term) to IRI during the Remaining Term (the "Additional Subsequent Year Services"). The timing for the commencement of the provision by NewCo of any such Additional Subsequent Year Services, volume, scope and nature of any such Additional Subsequent Year Services, as well as the term, service charges, service levels and other terms and conditions applicable thereto, shall be commercially reasonable and mutually agreed in writing by IRI and NewCo (through their respective Designated Employees in accordance with Article IV hereof). The service charges for any such Subsequent Year Services shall be paid in accordance with the provisions of Section 3.02 hereof. 13 14 Section 2.09. Cost Reduction. (a) Subject to the provisions of Section 2.09(d) below, the Subsequent Year Service Charges for the twelve month period beginning January 1, 2002 and ending December 31, 2002 (the "Cost Reduction Period") shall reflect at least [**] in aggregate cost reductions (the "Cost Reductions") from the actual costs of delivering the Services as of the date of this Agreement. Such Cost Reductions shall consist of reductions in fixed costs and/or reductions in the rates for variable costs during the Cost Reduction Period and such Cost Reductions shall be maintained by NewCo during the Remaining Term. On or before January 1, 2002, NewCo shall deliver to IRI a certificate (the "Cost Reduction Certificate") that sets forth in reasonable detail the Cost Reductions. (b) In the event that, by the end of the Initial Term, NewCo believes it will achieve cost reductions of the type and nature comprising the Cost Reductions in excess of [**] (the "Additional Cost Reductions") or has initiated programs which it believes will generate the Additional Cost Reductions during the thirty (30) month period beginning July 1, 2000 and ending December 31, 2002, the Cost Reduction Certificate delivered to IRI pursuant to Section 2.09(a) above shall also set forth in reasonable detail the programs and savings that comprise the Additional Cost Reductions. If IRI does not object to the Cost Reduction Certificate pursuant to the provisions of Section 2.09(c) below, IRI shall pay NewCo [**] of the aggregate Additional Cost Reductions shown on the certificate as a performance bonus. In the event that the Additional Cost Reductions shown on the Cost Reduction Certificate have not been achieved by December 31, 2002, then NewCo shall reimburse IRI a pro rata portion of the [**] bonus payment. Any Additional Cost Reductions actually achieved by NewCo shall be maintained by NewCo during the Remaining Term in order to be eligible for the performance bonus. (c) IRI shall have a period of ten (10) business days after the delivery of the Cost Reduction Certificate to present in writing to NewCo notice of any objections IRI may have to the Cost Reduction Certificate, setting forth in reasonable detail the reasons for such objection, including any objection to the Additional Cost Reductions. If IRI objects in writing to the Cost Reduction Certificate within the 10 day period, IRI and NewCo shall negotiate in good faith (through their respective Designated Employees) and use their reasonable best efforts to resolve such dispute. If the parties fail to agree within an additional five (5) business days, then the disputed items shall be resolved by Arthur Andersen LLP, or if such firm declines to act in such capacity or is no longer qualified as a firm of independent public accountants with respect to IRI, MGI or NewCo, by such other firm of independent public accountants chosen and mutually accepted by both parties (the "Accounting Referee"). The Accounting Referee shall resolve the dispute within ten (10) business days of having the disputed items referred to it. The Cost Reduction Certificate, as revised by the Accounting Referee, shall be final and binding on the parties. The cost, fees and expenses of the Accounting Referee shall be borne equally by IRI and NewCo. (d) In the event IRI breaches or fails to comply with any of the terms or conditions set forth in the Transition Services Agreement of even date herewith by and between IRI and NewCo (the "Transition Services Agreement") and fails to cure such breach or failure to comply 14 15 within the applicable cure period specified therein and such breach or failure has or is reasonably expected to have a material adverse effect on NewCo's ability to achieve the Cost Reductions by December 31, 2002 (the "Cost Reduction Date"), NewCo shall deliver, as soon as reasonably practicable (and in no event later than forty-five (45) days) following the applicable cure period, a certificate to IRI (the "Delayed Cost Reduction Certificate") that sets forth (i) in reasonable detail the material adverse effect that IRI's breach or failure to comply with the terms of the Transition Services Agreement will have or is reasonably expected to have on the timing of the Cost Reductions and (ii) an alternative date by which the Subsequent Year Service Charges will reflect the Cost Reductions. IRI shall have a period of ten (10) business days after the delivery of the Delayed Cost Reduction Certificate to present in writing to NewCo notice of any objections IRI may have to the Delayed Cost Reduction Certificate, setting forth in reasonable detail the reasons for such objection. If IRI does not object to the Delayed Cost Reduction Certificate, the Cost Reduction Date shall be amended as set forth in the Delayed Cost Reduction Certificate and such change shall be final and binding on the parties. If IRI objects in writing to the Delayed Cost Reduction Certificate within the 10 day period, IRI and NewCo shall negotiate in good faith (through their respective Designated Employees) and use their reasonable best efforts to resolve such dispute. If the parties fail to agree within an additional five (5) business days, then the disputed items shall be resolved by the Accounting Referee. The Accounting Referee shall resolve the dispute within ten (10) business days of having the disputed items referred to it. The Delayed Cost Reduction Certificate, as revised by the Accounting Referee, shall be final and binding on the parties. The cost, fees and expenses of the Accounting Referee shall be borne equally by IRI and NewCo. The foregoing notwithstanding, NewCo shall remain obligated to deliver by the Cost Reduction Date that portion of the Cost Reductions that are not affected by IRI's breach or failure to comply with the terms or conditions of the Transition Services Agreement. (e) For each year following the Cost Reduction Period, the Subsequent Year Service Charges shall be adjusted to reflect additional permanent cost reductions from the actual cost of delivering the Services as of the date of this Agreement, if any, achieved by NewCo. Section 2.10. Reporting. NewCo shall deliver to IRI weekly on Tuesday beginning the second full week following the date of this Agreement a service usage report, substantially in the form attached hereto as Exhibit B-1. NewCo shall deliver to IRI on the fifteenth (15th) day of each month beginning the second full month following the date of this Agreement (such initial report to cover the period beginning on the date of this Agreement and ending on the last day of the first full month following the date of this Agreement) a report setting forth (A) costs savings achieved as of the date of such report, together with planned and/or initiated programs to achieve the Cost Reductions described in Section 2.09 above and (B) technology issues, proposed technology developments and the status of any initiated technology development programs pursuant to Sections 2.14 and 5.01 below, substantially in the form attached hereto as Exhibit B-2. Section 2.11. Force Majeure. NewCo shall not be required to provide any Service to the extent the failure to perform such Service is caused by any event or condition not existing as of 15 16 the date of this Agreement and not reasonably within the control of NewCo, including without limitation, by fire, flood, typhoon, earthquake, explosion, strikes, labor troubles or other industrial disturbances, unavoidable accidents, war (declared or undeclared), acts of terrorism, sabotage, embargoes, blockage, acts of governmental authorities, riots, insurrections, or any other cause beyond the control of NewCo (an "Event of Force Majeure"); provided, that NewCo promptly notifies IRI of the Event of Force Majeure and takes all commercially reasonable steps necessary to resume performance of such Services within 10 business days of the date that such Service ceases to be provided by NewCo. The parties acknowledge that IRI is relying on NewCo to perform the Services and that any interruption in the InfoScan Causal Collection Service may have a material adverse effect on the business of IRI. Section 2.12. Data Challenges. NewCo shall provide IRI with a monthly report on Data Challenges by the last day of each month during the first 12 months of this Agreement. Such report (the "Data Challenge Report") shall be substantially in the form of Exhibit C hereto and shall report on the occurrence of Data Challenges and NewCo's acknowledgement of and response to such Data Challenges during the prior month. After the end of the twelve-month period and prior to September 30, 2001, the parties shall amend the Initial Term Service Level Agreement and each Subsequent Year Service Level Agreement to include the maximum number of Data Challenges permitted based on the Data Challenge history during the first 12 months of this Agreement, and to include the response times set forth in the following sentence. Until such addition is made to the applicable Service Level Agreement, NewCo agrees to use commercially reasonable efforts to acknowledge all Data Challenges within 48 hours of NewCo's receipt of the Data Challenge and resolve each such Data Challenge within ten (10) business days. Section 2.13. Ownership of Data. NewCo acknowledges and agrees that all data collected and provided to IRI or a client of IRI at the request of IRI as part of the Services ("IRI Data") shall be owned solely by IRI and shall not be provided to any other party without IRI's prior written consent. Without the consent of IRI, which consent shall not be unreasonably withheld, NewCo further agrees that it shall not collect, at the same time it is collecting IRI Data, the same data for itself or for any third party. Section 2.14. Replacement of MONet Equipment. It is anticipated that NewCo will lease hardware to replace the MONet hardware provided by IRI for NewCo's use under the IRI Usage Agreement during the Initial Term. When NewCo leases such replacement hardware, the applicable budget and/or Subsequent Year Service Charges shall be amended to include up to [**] per annum (the current depreciation charge related to the MONet hardware) to be allocated to the cost of leasing such replacement hardware. ARTICLE III SERVICE CHARGES Section 3.01. Initial Term Service Charges; Invoicing of Initial Term Service Charges. The charges for the Initial Term Services (the "Initial Term Service Charges") to be provided by 16 17 NewCo to IRI hereunder shall be as set forth in the Budget. NewCo shall invoice IRI for the Initial Term Service Charges in eighteen (18) monthly installments on the first business day of each month, provided that any failure by NewCo to provide an invoice within such time period shall not relieve IRI of its obligation to pay an invoice received after such date. Section 3.02. Subsequent Year Service Charges; Invoicing of Subsequent Year Services Charges. The Subsequent Year Service Charges shall be determined in accordance with Section 2.06 hereof. NewCo shall invoice IRI for the Subsequent Year Service Charges on the first business day of each month; provided that any failure by NewCo to provide an invoice within such time period shall not relieve IRI of its obligation to pay an invoice received after such date; provided, further, that NewCo shall review the Subsequent Year Service Charges quarterly for the immediately preceding three month period and compare actual use of Services to budgeted use of Services during such three (3) month period. To the extent that such Subsequent Year Service Charges resulted in an overpayment or an underpayment to NewCo during such three month period, the Subsequent Year Service Charges related to such three month period shall be retroactively increased or decreased, as applicable, and the next scheduled invoice for Subsequent Year Service Charges shall be increased or decreased, as the case may be, to reflect such overpayment or underpayment. Section 3.03. Settlement of Service Charges; Audit Right. (a) IRI shall pay within fifteen (15) days following its receipt of any invoice from NewCo, by wire transfer of immediately available funds payable to the order of NewCo and without set-off, all amounts invoiced by NewCo during the current calendar month; provided, however, that during the period (the "Delayed Payment Period") beginning on the effective date of this Agreement and ending on the later to occur of six (6) months from the effective date hereof or the last day of the last month during which IRI funds payroll for the Leased Employees under the terms of the Transition Services Agreement, whether before or after such Leased Employees become NewCo employees, IRI shall pay within forty-five (45) days following its receipt of an invoice from NewCo; provided, further, that during the Delayed Payment Period, IRI may set-off amounts owed to IRI by NewCo pursuant to the Transition Services Agreement against amounts invoiced pursuant to this Agreement. If IRI fails to pay any monthly payment within fifteen (15) days, with respect to months after the Delayed Payment Period through the expiration or termination of this Agreement, or forty-five (45) days, with respect to the months during the Delayed Payment Period, following its receipt of any invoice from NewCo, IRI shall pay, in addition to the amount indicated in such invoice, interest on such amount at the rate publicly announced by Harris Bank and Trust Company as its base rate in Chicago, Illinois in effect from time to time during the period such amount remains unpaid. (b) In the event of a dispute as to the propriety of the amount invoiced, IRI shall pay all undisputed amounts, but shall be entitled to withhold payment of any amount in dispute (and shall not be obligated to pay interest on the amount so withheld) and shall notify a NewCo Designated Employee in writing in accordance with the provisions of Section 10.07 hereof within ten (10) business days from receipt of any disputed invoice of the disputed amount and the reasons each such charge is disputed by IRI. NewCo shall provide to a IRI Designated 17 18 Employee records relating to the disputed amount so as to enable the parties (through their respective Designated Employees) to resolve the dispute. The parties shall use the dispute resolution procedures set forth in Article VIII hereof to resolve any such dispute promptly. Section 3.04. Adjustments to Initial Term Service Charges. (a) As promptly as practicable (but no later than sixty (60) days) after the six month period beginning July 1, 2000 and ending December 31, 2000 (the "Six Month Period"), the six month period beginning January 1, 2001 ending June 30, 2001 (the "Interim Period") and the twelve month period beginning January 1, 2001 and ending December 31, 2001 (the "Twelve Month Period"), NewCo (i) in the case of the Six Month Period and the Twelve Month Period, will cause Ernst & Young, LLP ("E&Y") to conduct an audit and deliver an audit opinion on the financial statements of NewCo at December 31, 2000 (the "Year 2000 Audited Financial Statements") and December 31, 2001 (the "Year 2001 Audited Financial Statements," and together with the Year 2000 Audited Financial Statements, the "Audited Financial Statements"), respectively, and (ii) in the case of the Interim Period, shall prepare the unaudited financial statements of NewCo at June 30, 2001 (the "Interim Unaudited Financial Statements," and together with the Audited Financial Statements, the "Financial Statements"). NewCo shall also prepare (i) a variation analysis for each of the Six Month Period (the "Six Month Period Variation Analysis"), Interim Period (the "Interim Period Variation Analysis") and Twelve Month Period (the "Twelve Month Period Variation Analysis," and collectively with the Six Month Period Variation Analysis and the Interim Period Variation Analysis, the "Variation Analysis") and (ii) a certificate based on the applicable Variation Analysis setting forth (A) [**] (including Additional Volume Initial Term Services and Additional Initial Term Services) ("Actual Cost of Services") during each of the Six Month Period, Interim Period and Twelve Month Period and (B) the amounts set forth in the Budget, as adjusted pursuant to paragraph (d) or (e) of this Section 3.04 in the case of the Interim Period and/or the Twelve Month Period, in respect to such Services ("Budgeted Cost of Services") during each of the Six Month Period (the "Six Month Period Variation Certificate"), Interim Period (the "Interim Period Variation Certificate") and the Twelve Month Period (the "Twelve Month Period Variation Certificate," and together with the Six Month Period Variation Certificate and the Interim Period Variation Certificate, the "Variation Certificate"). NewCo will cause draft Audited Financial Statements, together with a clearance letter from E&Y stating that E&Y has completed the audit of NewCo's financial statements and setting forth any adjustments expected to be made to such draft Audited Financial Statements, or draft Interim Unaudited Financial Statements, as applicable, to be delivered to IRI's independent certified public accountant on or before January 31, 2001 with respect to the Six Month Period, July 15, 2001 with respect to the Interim Period and January 31, 2002 with respect to the Twelve Month Period. NewCo will cause the applicable final Audited Financial Statements, together with the audit opinion and report of E&Y thereon, or the final Interim Unaudited Financial Statements, and the related Variation Analysis and Variation Certificate to be delivered to IRI on or before March 1, 2001, with respect to the Six Month Period, August 31, 2001, with respect to the Interim Period, and March 1, 2002, with respect to the Twelve Month Period. The final Financial Statements shall fairly present, in all material respects, the financial position and results of operations of NewCo as of the close of business on December 31, 2000, June 30, 2001 and December 31, 2001, as applicable, and shall be prepared in accordance with generally 18 19 accepted accounting principles applied on a consistent basis. The Variation Analysis and Variation Certificate for each period shall be determined in good faith based upon the applicable Financial Statements. The cost of the audits for the Six Month Period and the Twelve Month Period shall be borne by NewCo. The parties hereto acknowledge that the adjustment to the Initial Term Service Charges set forth in this Section 3.04 relates to all revenues of NewCo except that no such adjustment shall be made regarding revenues of NewCo (after allocating expenses of NewCo attributable to such revenues pro rata based on gross revenues) that are attributable to acquisitions and no adjustment shall be made in respect of payments, if any, made to NewCo pursuant to Section 2.09(b) hereof or with respect to the Base Service Charges set forth in the Transition Services Agreement. (b) IRI shall have a period of twenty (20) business days after the delivery of the final Year 2000 Audited Financial Statements, final Interim Unaudited Financial Statements or the final Year 2001 Audited Financial Statements and the related Variation Analysis and Variation Certificate to present in writing to NewCo notice of any objections IRI may have to the Six Month Period Variation Analysis and related Variation Certificate, the Interim Period Variation Analysis and related Variation Certificate or the Twelve Month Period Variation Analysis and related Variation Certificate, as the case may be, setting forth in reasonable detail the reasons for such objection. If IRI does not object to the Six Month Period Variation Analysis and related Variation Certificate, the Interim Period Variation Analysis and related Variation Certificate or the Twelve Month Period Variation Analysis and related Variation Certificate within such twenty (20) business day period, the applicable Variation Analysis and related Variation Certificate shall be final and binding on the parties hereto and any adjustment to the Initial Term Service Charges shall be based thereon. (c) If IRI objects in writing to the Six Month Period Variation Analysis and related Variation Certificate, the Interim Period Variation Analysis and related Variation Certificate or the Twelve Month Period Variation Analysis and related Variation Certificate within the twenty (20) business day period, IRI and NewCo shall negotiate in good faith and use their best efforts to resolve such dispute. If the parties fail to agree within five (5) business days after the delivery of the notice, then the disputed items shall be resolved by the Accounting Referee. The Accounting Referee shall resolve the dispute within ten (10) business days of having the disputed items referred to it. The Six Month Period Variation Analysis and related Variation Certificate, the Interim Period Variation Analysis and related Variation Certificate or the Twelve Month Period Variation Analysis and related Variation Certificate as revised by the Accounting Referee shall be final and binding on the parties and any adjustment to the Initial Term Service Charges shall be based thereon. The cost, fees and expenses of the Accounting Referee shall be borne equally by IRI and NewCo. (d) If Budgeted Cost of Services is greater than Actual Cost of Services as set forth on the Six Month Period Variation Analysis, the Interim Period Variation Analysis or the Twelve Month Period Variation Analysis, the Initial Term Service Charge related to the Six Month Period, the Interim Period or the Twelve Month Period, as applicable, shall be reduced by an amount, as determined by NewCo and IRI (through their respective Designated Employees) 19 20 taking into account seasonality and other related factors, no greater than such excess and the Budget (including the related assumptions) for the remaining portion of the Initial Term shall be amended to reflect such reduction. Subject to the provisions of Section 3.04(f), NewCo shall reimburse IRI for any excess amounts paid pursuant to the Initial Term Service Charge, if any, immediately upon (and in any event no later than fifteen (15) days following) receipt by IRI of the Six Month Period Variation Analysis and related Variation Certificate, the Interim Period Variation Analysis and related Variation Certificate or the Twelve Month Period Variation Analysis and related Variation Certificate, as the case may be; provided, however, that in the event IRI has objected to NewCo's calculation pursuant to paragraph (b) hereof, such disputed amounts shall become due and payable upon resolution of such dispute between IRI and NewCo or upon final determination by the Accounting Referee. (e) If Budgeted Cost of Services is less than Actual Cost of Services as set forth on the Six Month Period Variation Analysis and related Variation Certificate, the Interim Period Variation Analysis and related Variation Certificate or the Twelve Month Period Variation Analysis and related Variation Certificate, the Initial Term Service Charge related to the Six Month Period, the Interim Period or the Twelve Month Period, as applicable, shall be increased by an amount, as determined by NewCo and IRI (through their respective Designated Employees) taking into account seasonality and other related factors, no greater than such difference and the Budget (including the related assumptions) for the remaining portion of the Initial Term shall be amended to reflect such increase. Any such increase in the Initial Service Charge shall be paid by IRI to NewCo immediately upon (and in any event no later than fifteen (15) days following) receipt by IRI of the Six Month Period Variation Analysis and related Variation Certificate or Twelve Month Period Variation Analysis and related Variation Certificate, as the case may be; provided, however, that in the event IRI has objected to NewCo's calculation pursuant to paragraph (b) hereof, such disputed amounts shall become due and payable upon resolution of such dispute between IRI and NewCo or upon final determination by the Accounting Referee. (f) In each event that IRI is entitled to receive a payment from NewCo pursuant to the provisions of Section 3.04(d), NewCo shall have the right, but not the obligation, to submit to IRI a written proposal (the "Reinvestment Proposal") relating to the reinvestment in NewCo of the amount of any payment (or portion thereof) that IRI is entitled to receive pursuant to Section 3.04(d) to achieve additional cost savings or other benefits. IRI shall have a period of ten (10) business days after the delivery of the Reinvestment Proposal. If IRI accepts the Reinvestment Proposal, the payment that IRI would otherwise be entitled to receive from NewCo pursuant to the provisions of Section 3.04(d) shall be retained by NewCo in accordance with the terms of the Reinvestment Proposal. If IRI does not accept the Reinvestment Proposal, or if IRI does not respond to the Reinvestment Proposal within such ten (10) business day period, then all amounts that IRI is entitled to receive from NewCo pursuant to the Provisions of Section 3.04(d) shall be paid to IRI promptly in accordance with the provisions of Section 3.04(d). Section 3.05. Audit. NewCo shall keep complete and accurate records reflecting all information necessary or useful in verifying the accuracy of each invoice for a reasonable time 20 21 after the date of such invoice, noting IRI's rights under this Section 3.05. IRI shall have the right to hire an independent certified public accountant to inspect all such records so required to be kept by NewCo (which accountant shall agree in writing to keep all information confidential except as needed to disclose any discovered discrepancies); provided (but not in limitation of the rights provided in Section 13.1 of the Amended and Restated Limited Partnership Agreement), that such audit: (i) is conducted during normal business hours, (ii) is conducted no more often than once per year, and (iii) is conducted only after IRI has given ten (10) business days notice of such audit. IRI shall bear the full cost and expense of such audit, unless a discrepancy in excess of $100,000 in favor of IRI is discovered, in which event NewCo shall bear the full cost and expense of such audit. Regardless of the amount of discrepancy discovered, all discrepancies (and interest thereon) shall be immediately due and payable. Section 3.06. Taxes. IRI will pay or reimburse NewCo for any sales, use, gross receipts or similar tax imposed in connection with the payments made hereunder. ARTICLE IV ALTERATION OF SERVICES Section 4.01. Request for Alteration of Services. If either party wishes to change the Services specified in the Budget or in any Subsequent Year Requirements Proposal or under the Service Level Agreement or any Subsequent Year Service Level Agreement, then the party making such request (the "Requesting Party") must give the other party (the "Recipient Party") written notice to the applicable Designated Employee of at least two (2) months prior to the date on which the Requesting Party wishes to alter a Service, unless this Agreement specifically provides otherwise with respect to notice timing. All such requests (a) if made by IRI, must be made by a Designated IRI Employee and must be delivered to a Designated NewCo Employee in writing in accordance with the provisions of Section 10.07 hereof or (b) if made by NewCo, must be made by a Designated NewCo Employee and must be delivered to a Designated IRI Employee in writing in accordance with the provisions of Section 10.07 hereof. Section 4.02. Response to Request for Alteration of Services. Upon receipt of a request for the alteration of Services as set forth in Section 4.01, the Recipient Party (through a Designated Employee) as promptly as practicable, but in no event later than ten (10) business days after receipt of such request, shall deliver a notice to the Requesting Party (through a Designated Employee) responding to such request specifying any objections that the Recipient Party has to the Requesting Party's request. The Recipient Party shall be deemed to accept all terms and conditions of the request not included in its response. In addition, if the Recipient Party does not respond within the ten (10) business day period set forth above, the Recipient Party shall be deemed to have accepted the Requesting Party's request for the alteration of Services on the terms and conditions set forth in the Requesting Party's request. Section 4.03. Escalation. If the Recipient Party has any objection to the Requesting Party's request, the parties (through their respective Designated Employees), shall during the ten 21 22 (10) business days following delivery of the notice of objection to the Requesting Party, use their commercially reasonable best efforts to reach agreement on the objectional items. If the parties are unable to reach agreement during such ten (10) business day period, following the expiration of such ten (10) business day period, either party may escalate any dispute pursuant to the dispute resolution procedures set forth in Article VIII hereof; provided, however, that if IRI is the Recipient Party and an objection is raised in writing by a senior executive officer of IRI which relates to InfoScan Causal Collection Service Services, IRI shall have the right to prohibit NewCo from making any alteration of such Services so long as IRI has a valid business reason for objecting to the alteration. Notwithstanding the foregoing paragraph, if IRI is the Requesting Party, NewCo shall have no right to object to an alteration so long as IRI provides NewCo with (i) adequate notice of the change (which shall be deemed to be at least two (2) months without NewCo's prior written consent unless this Agreement specifically provides otherwise with respect to notice timing) and (ii) pays to NewCo all of the direct and consequential costs associated with such change, provided that NewCo has first advised IRI in writing of the nature and amount of such costs. ARTICLE V COOPERATION ON TECHNOLOGY DEVELOPMENT Section 5.01. Cooperation on Technology Development. IRI shall provide reasonable consultation and assistance to NewCo, and NewCo's third-party developers, at no charge, for the integration of NewCo's relevant technology set forth on Exhibit D hereto ("NewCo's Relevant Technology") with IRI's relevant technology set forth on Exhibit E hereto ("IRI's Relevant Technology" and, together with NewCo's Intellectual Property, the "Relevant Technology"). The scope of such consultation and assistance shall include periodic updates regarding each party's technology development plans, periodic telephonic, e-mail, and written consultation, and engineering consultation at locations designated by NewCo, which such updates shall be no less frequently than monthly during the first 18 months of the term of this Agreement and quarterly thereafter. In addition, if a material change to either party's Relevant Technology is anticipated, both parties will cooperate to ensure that changes in one party's Relevant Technology do not result in NewCo's inability to provide the Services to IRI at the levels specified in the Service Level Agreement or any Subsequent Year Service Level Agreement, as the case may be. NewCo agrees to pay IRI's reasonable travel and accommodation expenses for on-site assistance. Section 5.02. Grant of Technology Rights. (a) IRI hereby grants to NewCo, and NewCo hereby accepts, a royalty-free, U.S. right to use all IRI Relevant Technology owned or licensable by IRI in connection with performance of the Services. In addition, IRI agrees to grant to NewCo, as necessary and as the parties shall agree, the right to use, in connection with performance of the Services, any IRI relevant technology hereinafter developed, owned or controlled by IRI ("Future IRI Relevant Technology"). IRI agrees to execute and deliver any additional agreements or documents as may be necessary or desirable to grant to NewCo the right to use such Future IRI Relevant Technology. 22 23 (b) NewCo hereby grants to IRI, and IRI hereby accepts, a royalty-free, U.S. right to use all NewCo Relevant Technology owned or licensable by NewCo in connection with the delivery of the Services. In addition, NewCo agrees to grant to IRI, as necessary and as the parties shall agree, the right to use, in connection with the delivery of the Services, any NewCo relevant technology hereinafter developed, owned or controlled by NewCo ("Future NewCo Relevant Technology"). NewCo agrees to execute and deliver any additional agreements or documents as may be necessary or desirable to grant to IRI the right to use such Future NewCo Relevant Technology. Section 5.03. Limitation and Reservation of Rights. (a) NewCo shall not, and shall not cause or authorize any third party to sell, lease, license or sublicense the IRI Relevant Technology or Future IRI Relevant Technology. NewCo shall not reverse engineer the IRI Relevant Technology or Future IRI Relevant Technology to determine the internal functioning of the IRI Relevant Technology or Future IRI Relevant Technology. No license or right is granted, by implication or otherwise, to NewCo under any IRI intellectual property now or hereafter owned or controlled by IRI, except for the rights expressly granted in this Agreement and those to be granted with respect to the Future IRI Relevant Technology. (b) IRI shall not, and shall not cause or authorize any third party to sell, lease, license or sublicense the NewCo Relevant Technology or Future NewCo Relevant Technology. IRI shall not reverse engineer the NewCo Relevant Technology or Future NewCo Relevant Technology to determine the internal functioning of the NewCo Relevant Technology or Future IRI Relevant Technology. No license or right is granted, by implication or otherwise, to NewCo under any NewCo intellectual property now or hereafter owned or controlled by NewCo, except for the rights expressly granted in this Agreement and those to be granted with respect to the Future NewCo Relevant Technology. (C) DISCLAIMER OF WARRANTIES. THE TECHNOLOGY LICENSED HEREUNDER IS PROVIDED ON AN AS IS BASIS, WITH NO WARRANTIES WHATSOEVER. TO THE EXTENT PERMITTED BY APPLICABLE LAW, IRI, NEWCO AND THEIR RESPECTIVE SUPPLIERS SPECIFICALLY DISCLAIM ANY IMPLIED WARRANTIES OF TITLE, NON-INFRINGEMENT, MERCHANTABILITY, AND FITNESS FOR A PARTICULAR PURPOSE, REGARDLESS OF ANY KNOWLEDGE OF PARTICULAR NEEDS. NO EMPLOYEE, AGENT, DEALER, OR DISTRIBUTOR IS AUTHORIZED TO MAKE ANY ADDITIONAL WARRANTIES OR MODIFY THE FOREGOING LIMITED WARRANTY. (D) LIMITATION OF LIABILITY. IN NO EVENT SHALL EITHER PARTY OR THEIR RESPECTIVE DISTRIBUTORS, SUPPLIERS, LICENSORS OR RESELLERS, OR THE MANUFACTURERS, SUPPLIERS, OR DISTRIBUTORS OF PRODUCTS WITH WHICH THE TECHNOLOGY LICENSED HEREUNDER MAY BE BUNDLED, BE LIABLE FOR ANY SPECIAL, INCIDENTAL, INDIRECT, CONSEQUENTIAL, OR PUNITIVE DAMAGES WHATSOEVER (INCLUDING, WITHOUT LIMITATION, DAMAGES FOR LOSS OF BUSINESS PROFITS, BUSINESS INTERRUPTION, OR 23 24 LOSS OF BUSINESS INFORMATION) ARISING OUT OF THE USE OF OR INABILITY TO USE SUCH TECHNOLOGY OR OTHERWISE, EVEN IF ADVISED OF THE POSSIBILITY OF SUCH DAMAGES. THE FOREGOING LIMITATION OF LIABILITY SHALL APPLY REGARDLESS OF THE CAUSE OF ACTION UNDER WHICH SUCH DAMAGES ARE SOUGHT, INCLUDING, WITHOUT LIMITATION, BREACH OF CONTRACT, NEGLIGENCE, OR OTHER TORT. EACH PARTY UNDERSTANDS THAT, IN CONNECTION WITH THE OTHER PARTY'S TECHNOLOGY, IT SHALL HAVE SOLE RESPONSIBILITY FOR ADEQUATE PROTECTION AND BACK-UP OF DATA USED IN CONNECTION WITH SUCH TECHNOLOGY. ARTICLE VI REPRESENTATIONS AND WARRANTIES Section 6.01. Representations and Warranties of Each Party. Each of IRI and NewCo hereby represents and warrants severally and not jointly to the other as to itself that: (a) Corporate Existence and Power. In the case of IRI: Such party is a corporation duly organized, validly existing and in good standing under the laws of the State of Delaware, and has all corporate powers and all material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. In the case of NewCo: Such party is a limited partnership duly formed and validly existing under the laws of the State of Delaware, and has all powers and material governmental licenses, authorizations, consents and approvals required to carry on its business as now conducted. (b) Authorization. The execution, delivery and performance by such party of this Agreement and the consummation by such party of the transactions contemplated hereby are within such party's corporate, in the case of IRI, or limited partnership, in the case of NewCo, powers and have been duly authorized by all necessary corporate, in the case of IRI, or limited partnership, in the case of NewCo, action on the part of such party. This Agreement constitutes a valid and binding agreement of such party, enforceable in accordance with its terms. (c) Governmental Authorization; Consents. The execution, delivery and performance by such party of this Agreement require no action by or in respect of, or filing with, any governmental body, agency, official or authority, except for required actions and filings under applicable securities laws and regulations. No consent, approval, waiver or other action by any Person under any contract, agreement, indenture, lease, instrument or other document to which such party is a party or by which it is bound is required or necessary for the execution, delivery and performance of this Agreement by such party or the consummation of the transactions contemplated hereby. 24 25 (d) Non-Contravention. The execution, delivery and performance by such party of this Agreement does not and will not (i) contravene or conflict with the certificate of incorporation or by-laws, in the case of IRI, or certificate of limited partnership or limited partnership agreement, in the case of NewCo, (or other governing documents) of such party or (ii) contravene or conflict with or constitute a violation of any provision of any law, regulation, judgment, injunction, order or decree binding upon or applicable to such party. (e) No Default. It is not in default under any contract, agreement or other instrument that is material to the undertaking of its obligations under this Agreement. Section 6.02. Additional Representations and Warranties of IRI. IRI hereby represents and warrants to NewCo that: (a) Validity of Historical Information. To the best of IRI's knowledge, all of the historical information provided by IRI to NewCo, in particular the historical information referred to in Section 2.02 above that was the basis of the service levels in the Service Level Agreement, is true, accurate and complete in all material respects. This representation and warranty shall survive the execution and delivery of this Agreement until January 1, 2001. In addition, the provisions of Section 2.02 shall serve as the exclusive remedy for a breach of this representation and warranty. (b) Budget. The Budget (including the related assumptions) constitutes IRI's best estimate of the information purported to be shown therein, and IRI is not aware of any fact or information that would lead it to believe that the Budget is incorrect or misleading in any material respect; provided, however, that IRI makes no representation or warranty with respect to the line item "NewCo Executive" in the Budget. The provisions of Section 3.03 shall serve as the exclusive remedy for a breach of the representation and warranty. ARTICLE VII LIMITATION OF LIABILITY; INDEMNIFICATION Section 7.01. Limited Warranty. IRI hereby acknowledges that, except as set forth in the Service Level Agreement or any Subsequent Year Service Level Agreement or in this Section 7.01, NewCo does not otherwise warrant or assume any responsibility for its Services. The warranty stated above is in lieu of and exclusive of all other representations and warranties of any kind whatsoever. EXCEPT AS STATED ABOVE, NEWCO MAKES NO WARRANTY, WHETHER EXPRESS OR IMPLIED, INCLUDING WITHOUT LIMITATION, ANY WARRANTY OF MERCHANTABILITY OR FITNESS FOR A PARTICULAR PURPOSE, RELATED TO ANY SERVICES, AND SUCH WARRANTIES ARE HEREBY DISCLAIMED. Section 7.02. Performance Remedy. (a) In the event that NewCo fails to provide a Service hereunder, or the quality of a Service is not in accordance with the Service Level 25 26 Agreement or any Subsequent Year Service Level Agreement (a "Defective Service"), IRI shall give NewCo prompt written notice thereof in accordance with the provisions of Section 10.07 hereof. Subject to the provisions of Section 2.11 (Force Majeure), NewCo shall cause such Defective Service to be remedied or cured or waived by IRI within (i) ten (10) days (the "Causal Data Cure Period") after receipt by NewCo of notice of a Defective Service related to InfoScan Causal Collection Service (a "Causal Data Defective Service") or (ii) ten (10) days or as specified in the applicable agreement (the "Recurring Audit Cure Period") after receipt by NewCo of notice of a Defective Service related to InfoForce Recurring Audit Collection Service (a "Recurring Audit Defective Service") or (iii) ten (10) days or as specified in the applicable agreement (the "Custom Audit Cure Period" and together with the Causal Data Cure Period and the Recurring Audit Cure Period, the "Cure Periods") after receipt by NewCo of notice of a Defective Service related to InfoForce Custom Audit Collection Service (a "Custom Audit Defective Service"). If NewCo does not cause the Defective Service to be remedied, cured or waived within the applicable Cure Period, (i) subject to Section 7.02(b) with respect to a Causal Data Defective Service, IRI may exercise its Call Right pursuant to the provisions of Section 7.5 of the Amended and Restated Limited Partnership Agreement or (ii) with respect a Recurring Audit Defective Service, NewCo shall reperform such Service within five (5) business days of receipt of notice from IRI at NewCo's sole cost and expense or (iii) with respect to InfoForce Custom Audit Collection Service, NewCo shall promptly reperform the Defective Service at NewCo's sole cost and expense, unless the parties agree otherwise. If IRI chooses not to exercise its Call Right pursuant to the immediately preceding clause (i) or if NewCo fails to reperform the Defective Service pursuant to the immediately preceding clauses (ii) or (iii), then IRI shall have the absolute right, upon written notice to NewCo, to provide such Service, or to retain any third party to provide such Service, in which case all reasonable costs and expenses (in IRI's reasonable judgment) incurred by IRI to replace such Service shall be charged to NewCo or, if the Defective Service cannot be reperformed to the client's satisfaction, then at IRI's request, NewCo shall refund to IRI all amounts paid for such Defective Service. Under no circumstances shall IRI be required to pay for any Service that was not performed or that was improperly performed and not cured by NewCo within the applicable cure period. (b) NewCo shall have no obligation to deliver the applicable Services at the levels set forth in the appropriate Service Level Agreement and IRI shall not have the right to exercise its Call Right pursuant to Section 7.5 of the Amended and Restated Limited Partnership Agreement, in each case to the extent that the Causal Data Defective Service is directly attributable to one of the following events, but only if NewCo, after using its commercially reasonable best efforts to continue to provide the InfoScan Causal Collection Services, is prevented from doing so because of such event and only if NewCo complies with the terms of subparagraph (c) below: (i) the assets provided by IRI to NewCo pursuant to the IRI Usage Agreement, for as long as IRI is required to provide such assets thereunder, are insufficient, whether in nature, quantity, quality or otherwise, in order for NewCo to provide the type, scope and volume of Services to IRI hereunder at the service levels specified in the applicable Service Level Agreement or any Subsequent Year Service Level Agreement; 26 27 (ii) NewCo is unable to hire a sufficient number of employees in the categories specified in Section 5(a) of the Group Hire Agreement to enable NewCo to provide the type, scope and volume of the Services to IRI hereunder at the service levels specified in the applicable Service Level Agreement or any Subsequent Year Service Level Agreement; (iii) IRI fails to provide the services described in the Transition Services Agreement as set forth in the Transition Services Agreement in order for NewCo to provide the type, scope and volume of Services to IRI hereunder at the service levels specified in the applicable Service Level Agreement; (iv) IRI has taken any action or failed to take any action that prevents NewCo from completing the transmission of InfoScan Causal Data to IRI; (v) IRI fails to ensure that NewCo has access to the Stores on substantially the same access terms as exist on the date of this Agreement (it being expressly understood and agreed by IRI that IRI shall bear, at its sole cost and expense, any increase in the fees charged by the Stores), provided that such failure is not caused by the acts or omissions of NewCo; or (vi) an event of Force Majeure. (c) Within two (2) business days after NewCo becomes aware of any event described in subparagraph (b) above, NewCo shall notify IRI in writing of the occurrence of such event and the Designated Employees of IRI and NewCo shall meet, as soon as possible but in any event within five (5) business days after receipt of such notice from NewCo, to mutually determine how to perform the InfoScan Causal Collection Services while such event continues, including, as appropriate, the implementation of a workaround acceptable to IRI and revised service levels and a revised plan for InfoScan Causal Collection Services and delivery of the InfoScan Causal Collection Services. NewCo and IRI agree to cooperate with one another and use their best efforts to mitigate the damage caused by the occurrence of any event specified in subparagraph (b) above and NewCo shall continue to perform the Services to the extent possible during the continuation of any such event. (d) Subject to the provisions of Section 7.02(b), in the event of a Causal Data Defective Service which has not been cured, IRI shall be entitled to exercise its Call Right or to pursue alternative remedies against NewCo (the "Alternative Remedies"); provided, that IRI may only pursue Alternative Remedies to the extent the aggregate documented losses attributable solely to any such Causal Data Defective Service actually incurred and paid by IRI to a third party to which IRI provides InfoScan Causal Collection Services ("Losses") exceed $25,000, exclusive of attorney's fees and costs (the "Threshold Amount"); provided, further, that at such time as the amount IRI shall be entitled to pursue through Alternative Remedies exceeds the Threshold Amount, IRI shall be entitled to pursue Alternative Remedies up to the full amount of its Losses including the Threshold Amount; and provided, further, that in the event that IRI exercises its Call Right, IRI's ability to pursue Alternative Remedies will cease and the exercise of the Call Right shall be IRI's exclusive remedy. The foregoing notwithstanding, IRI shall not be entitled 27 28 to seek Losses from NewCo in excess of $1,000,000 during any single calendar year. By means of clarification, nothing herein shall limit IRI's remedies hereunder, other than with respect to Causal Data Defective Services provided by NewCo to IRI pursuant to this Agreement. (e) Notwithstanding anything to the contrary in Sections 8.01 and 8.02 of this Agreement, any and all disputes concerning a Causal Data Defective Service shall be resolved exclusively by confidential arbitration pursuant to the Expedited Procedures of the Commercial Arbitration Rules of the American Arbitration Association ("AAA") as then in effect (the "Expedited Procedures"), in Wilmington, Delaware or such other location as may be agreed by the parties. The parties shall request that a list of proposed arbitrators be sent by the AAA to each party, from which one arbitrator shall be appointed, pursuant to the Expedited Procedures. Any arbitration concerning a Causal Data Defective Service shall be conducted separately and independently from any other arbitration concerning any other disputes arising under or affecting this Agreement, unless the parties otherwise agree. Any arbitration concerning such other disputes arising under or affecting this Agreement shall be governed exclusively by the provisions of Article VIII of this Agreement. The judgment upon award of the arbitrators shall be final and binding and may be enforced in any court of competent jurisdiction in the United States, and each of the parties hereto unconditionally submits to the jurisdiction of such court for the purpose of any proceeding seeking such enforcement. The procedure described in this Section 7.02(e) shall be the exclusive means of resolving disputes concerning a Causal Data Defective Service under this Agreement. The provisions of Sections 8.02(c), 8.02(d) and 8.02(e) shall apply in any such arbitration concerning a Causal Data Defective Service. Section 7.03. Limitation of Liability. NewCo agrees that none of IRI nor any of its Subsidiaries or Affiliates nor their respective general partners, limited partners, directors, officers, agents and employees (each, a "IRI Indemnified Person") shall have any liability, whether direct or indirect, in contract or tort or otherwise, to NewCo for or in connection with the Services rendered or to be rendered by any IRI Indemnified Person pursuant to this Agreement, the transactions contemplated hereby or any IRI Indemnified Person's actions or inactions in connection with any such Services or transactions, except that such liability limitation shall not apply to the extent that it is determined by a court of competent jurisdiction that the liability has been caused by or results from the act, negligence or fault of a IRI Indemnified Person. Section 7.04. (a) Cross-Indemnification. NewCo agrees to indemnify and hold harmless each IRI Indemnified Person from and against any claims, damages, losses, obligations, liabilities, costs and expenses (including, without limitation, reasonable attorneys' fees) arising out of or in connection with Services rendered or to be rendered by any IRI Indemnified Person pursuant to this Agreement, the transactions contemplated hereby, any IRI Indemnified Person's actions or inactions in connection with any such Services or transactions, including all claims, damages, losses, obligations, liabilities, costs and expenses associated with tort or statutory claims, except that such indemnification shall not apply to the extent it is determined by a court of competent jurisdiction that such claim, damage, loss, obligation, liability, cost or expense has been caused by or results from the act, negligence or fault of a IRI Indemnified Person. 28 29 (b) IRI agrees to indemnify and hold harmless Newco, its Subsidiaries and Affiliates and their respective general partners, limited partners, directors, officers, agents and employees (each, a "Newco Indemnified Person") from and against any claims, damages, losses, obligations, liabilities, costs and expenses (including, without limitation, reasonable attorneys' fees) arising out of or in connection with any obligations of any Newco Indemnified Person arising under this Agreement, the transactions contemplated hereby, any Newco Indemnified Person's actions or inactions in connection with any such obligations or transactions, including all claims, damages, losses, obligations, liabilities, costs and expenses associated with tort or statutory claims, except that such indemnification shall not apply to the extent it is determined by a court of competent jurisdiction that such claim, damage, loss, obligation, liability, cost or expense has been caused by or results from the act, negligence or fault of a Newco Indemnified Person. ARTICLE VIII DISPUTE RESOLUTION Section 8.01. Dispute Resolution. Prior to pursuing arbitration with respect to any dispute hereunder, the parties (through their respective Designated Employees) shall use their commercially reasonable best efforts to reach agreement on the disputed items. If the parties are unable to reach agreement, either party may escalate any dispute not resolved to the appropriate (as determined by the party) executive officers of the parties by providing written notice to the other party in accordance with the provisions of Section 10.07 hereof. Within five (5) business days after delivery of the notice specified in Section 8.01 above, the appropriate executive officers of each party will meet at a mutually acceptable time and place, and thereafter as often as they deem reasonably necessary, to exchange relevant information and to attempt to resolve the dispute. Section 8.02. Arbitration. (a) No party shall be entitled to make and bring a claim in arbitration unless it has attempted to reach such amicable resolution pursuant to the provisions of Section 8.01 above. (b) Subject to the provisions of Section 8.02(d) and Section 10.06, after expiration of periods referred to in Section 8.01 above, any and all disputes arising under or affecting this Agreement shall be resolved exclusively by confidential arbitration pursuant to the rules of the American Arbitration Association then in effect for that Association in Wilmington, Delaware or such other location as may be agreed by the parties. Each of the parties shall designate one arbitrator and the two arbitrators so designated shall select a third arbitrator. Among the remedies available to them, the arbitrators shall be authorized to order the specific performance of provisions of this Agreement and of the Operative Documents. The judgment upon award of the arbitrators shall be final and binding and may be enforced in any court of competent jurisdiction in the United States and each of the parties hereto unconditionally submits to the jurisdiction of such court for the purpose of any proceeding seeking such enforcement. Subject 29 30 to the provisions of Sections 8.02(d) and 10.06, the procedure described in this Section 8.02 shall be the exclusive means of resolving disputes arising under or affecting this Agreement. (c) All papers, documents or evidence, whether written or oral, filed with or presented to the panel of arbitrators shall be deemed by the parties and by the arbitrators to be Confidential Information. No party or arbitrator shall disclose in whole or in part to any other person any Confidential Information submitted in connection with the arbitration proceedings, except to the extent reasonably necessary to assist counsel in the arbitration or preparation for arbitration of the dispute. Confidential Information may be disclosed (i) to attorneys, (ii) to parties, and (iii) to outside experts requested by either party's counsel to furnish technical or expert services or to give testimony at the arbitration proceedings, subject, in the case of such experts, to execution of a legally binding written statement that such expert is fully familiar with the terms of this Section 8.02(c), agrees to comply with the confidentiality terms of this Section 8.02(c) and will not use any Confidential Information disclosed to such expert for personal or business advantage. (d) The parties hereto further acknowledge that any breach of this Agreement may result in irreparable harm to the other party. Accordingly, nothing in this Agreement shall be construed to prohibit any party, pursuant to Section 10.06 hereof or on a preliminary basis in aid of arbitration from instituting proceedings for injunctive or other provisional or interim relief in any court having jurisdiction over the parties and the subject matter of the dispute, to obtain specific performance of the provisions of this Agreement, to enjoin activities in violation of the provisions of this Agreement, or as necessary to protect such party's name, confidential or proprietary information, trade secrets, know-how or any other proprietary rights. (e) Except where clearly prevented by the area in dispute, both parties agree to continue performing their respective obligations under this Agreement while the dispute is being resolved. ARTICLE IX TERM AND TERMINATION Section 9.01. Term. Except as otherwise provided in this Article IX, the Service Level Agreement or as otherwise agreed in writing by the parties, this Agreement shall become effective as of the date hereof and shall terminate on the tenth anniversary of the date hereof at 11:59 p.m. Chicago time (the "Term"); provided, however, that, unless either party to this Agreement gives the other party to this Agreement written notice in accordance with the provisions of Section 10.07 hereof at least one year prior to the expiration of the Term or any subsequent term, this Agreement shall automatically extend for subsequent five (5) year periods and the provisions hereof shall remain applicable for each such subsequent period. Section 9.02. Termination. (a) Notwithstanding Section 9.01, this Agreement shall be terminable if one of the following events occurs: 30 31 (i) either party commences any case, proceeding or other action (or an involuntary action is commenced against it which is not dismissed within 90 days) seeking reorganization, adjustment, liquidation or dissolution of it or its debts under any law relating to bankruptcy, insolvency, reorganization or relief of debtors, or seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its property; (ii) NewCo or any of its partners is dissolved; (iii) the Amended and Restated Limited Partnership Agreement is terminated; (iv) one of the parties hereto at any time breaches or fails to comply with a material provision under this Agreement and fails to remedy, cure or have waived such breach within ten (10) business days from the receipt of a written notice from the complaining party, specifying the nature of the breach of the other party; provided, however, that the right to terminate this Agreement under this Section 9.02(a)(iv) shall not be available to any party whose action or failure to act gave rise to the other party's ability to terminate under this Agreement and; provided, further, that NewCo's right to terminate this Agreement pursuant to this subsection (iv) shall be suspended for a period of ninety (90) days from the date of the occurrence of any event described in Section 7.02(b) and, if such event is cured during such 90 day suspension, then NewCo shall no longer have the right to terminate this Agreement as a result of the occurrence of such event; (v) IRI fails to pay any amount when due hereunder and such failure is not cured within ten (10) business days after written notice thereof from NewCo to IRI (excluding any amounts which are the subject of a good faith dispute); or (vi) any party to any of the Operative Documents (as defined in the Co-operation Agreement) at any time breaches or fails to comply with a material provision under such Operative Document and fails to remedy, cure or have waived such breach in accordance with the terms of the applicable Operative Document and such breach or such failure to comply prevents the non-breaching party from performing its obligations under this Agreement to any material extent; provided, however, that the right to terminate this Agreement under this Section 9.02(a)(vi) shall not be available to any party whose action or failure to act gave rise to the other party's ability to terminate under such Operative Document and; provided, further, that NewCo's right to terminate this Agreement pursuant to this subsection (vi) shall be suspended for a period of ninety (90) days from the date of the occurrence of any event described in Section 7.02(b) and, if such event is cured during such 90 day suspension, then NewCo shall no longer have the right to terminate this Agreement as a result of the occurrence of such event. (b) In case one of the events referred to in subsections (a)(i), (ii) or (iii) occurs, each party has the right to terminate the Agreement forthwith by written notice to the other party. (c) In the event of a material breach or failure to comply with (i) a material provision under this Agreement pursuant to subsections (a)(iv) or (a)(v) and (ii) any of the Operative 31 32 Agreements referred to in subsection (vi), the complaining party may terminate this Agreement after giving ten (10) business days written notice to the non-terminating party; provided, that such non-terminating party has not remedied, cured or had waived such breach or failure to comply during the applicable cure period; and provided, further, that if the non-terminating party considers that no material breach or failure to comply has taken place or that such breach or failure to comply has been adequately remedied in the ten (10) business day notice period, and refers the matter to arbitration pursuant to the provisions of Section 8 hereof, this Agreement will remain in full force and effect during the arbitration procedure and will be terminated only if the arbitrators confirm that a breach has taken place and has not been cured during the cure period. (d) Nothing in this Agreement shall prevent a party from enforcing the provisions of this Agreement by such remedies as may be available in lieu of termination. Section 9.03. Effect of Termination. Upon expiration or termination of this Agreement, all rights and obligations hereunder shall terminate forthwith, except the provisions of Article III, Article VII, Article VIII, Sections 10.04, 10.05, 10.06, 10.07, 10.08 and 10.11 and this Section 9.03 which shall survive the expiration or termination of this Agreement. ARTICLE X MISCELLANEOUS Section 10.01. No Agency. The parties hereto are independent contractors and neither party is an employee, agent or partner of the other. Neither party shall have the right to bind the other to any agreement with a third party or to incur any obligation or liability on behalf of the other party with respect to dealings with any third party. Section 10.02. Entire Agreement; Third Party Rights. This Agreement and the Operative Documents constitute the entire agreement between the parties with respect to the subject matter hereof and supersede all prior agreements, understandings and negotiations, both written and oral, between the parties with respect to the subject matter of this Agreement. No representation, inducement, promise, understanding, condition or warranty not set forth herein has been made or relied upon by any party hereto. Neither this Agreement nor any provision hereof is intended to confer upon any Person other than the parties to this Agreement any rights or remedies hereunder. Section 10.03. Further Assurances. In connection with this Agreement, as well as all transactions contemplated by this Agreement, each party agrees to execute and deliver such additional documents and instruments, including amendments to this Agreement, and to perform such additional acts as may be necessary, appropriate or reasonably requested to carry out or evidence the provisions of this Agreement and the transactions contemplated hereby. 32 33 Section 10.04. Confidential Information. Subject to Section 10.05, each undersigned party (the "Receiving Party") understands that the other party (the "Disclosing Party") has disclosed or may disclose information in the Disclosing Party's business (including, without limitation, computer programs, technical drawings, algorithms, names and expertise of employees and consultants, know- how, formulas, processes, ideas, inventions (whether patentable or not), schematics and other technical, business, financial, customer and product development plans, forecasts, strategies and information, which to the extent previously, presently, or subsequently disclosed to or learned by the Receiving Party is hereinafter referred to as "Confidential Information" of the Disclosing Party. "Confidential Information" also includes the manner in which any such information may be combined with other information, or synthesized or used by the Disclosing Party. The Receiving Party hereby agrees (i) to hold the Disclosing Party's Confidential Information in strict confidence and to take all reasonable precautions to protect such Confidential Information (including, without limitation, all precautions the Receiving Party employs with respect to its confidential materials), (ii) not to divulge any such Confidential Information or any information derived therefrom to any third person (except consultants, subject to the conditions stated below), (iii) not to make any use whatsoever at any time of such Confidential Information except as expressly contemplated in this Agreement or in the Operative Documents (as defined in the Co-operation Agreement), (iv) not to remove or export from the United States or reexport any such Confidential Information or any direct product thereof, except in compliance with, and with all licenses and approvals required under applicable U.S. and foreign export laws and regulations, including, without limitation, those of the U.S. Department of Commerce, and (v) not to copy or reverse engineer any such Confidential Information except as expressly allowed by this Agreement or any Operative Document. Any employee or consultant given access to any such Confidential Information must have a legitimate "need to know" and shall be similarly bound in writing. Without granting any right or license, the Disclosing Party agrees that the foregoing clauses (i), (ii), (iii), and (v) shall not apply with respect to any information that the Receiving Party can document (i) is or (through no improper action or inaction by the Receiving Party or any affiliate, agent, consultant or employee) becomes generally known to the public, or (ii) with regard to information obtained after the execution of this Agreement, was rightfully disclosed to it by a third party without restriction provided the Receiving Party complies with restrictions imposed by the third party or (iii) with regard to information obtained after the execution of this Agreement, was independently developed without use of any Confidential Information of the Disclosing Party by employees or consultants of the Receiving Party who have had no access to such information, or (iv) was or is provided by the Disclosing Party to third parties without similar restrictions. Except to the extent required by law, neither party shall disclose the existence or subject matter of the negotiations or business relationship contemplated by this Agreement. Section 10.05. Protective Arrangements. In the event that the Receiving Party (or any of its Affiliates) either determines on the advice of its counsel that it is required to disclose any Confidential Information pursuant to applicable law or receives any demand under lawful process or from any governmental department, commission, board, bureau, agency or official to 33 34 disclose or provide Confidential Information of the Disclosing Party (or any of its Affiliates) that is subject to the confidentiality provisions hereof, the Receiving Party shall notify the Disclosing Party prior to disclosing or providing such Confidential Information and shall cooperate at the expense of the Disclosing Party, if requested, in seeking any reasonable protective arrangements requested by the Disclosing Party. Subject to the foregoing, the Receiving Party may thereafter disclose or provide Confidential Information to the extent required by such law (as so advised by counsel) or by lawful process or such governmental department, commission, board, bureau, agency or official. Section 10.06. Equitable Relief. The Receiving Party acknowledges and agrees that due to the unique nature of the Disclosing Party's Confidential Information, there can be no adequate remedy at law for any breach of its obligations hereunder, that any such breach may allow the Receiving Party or third parties to unfairly compete with the Disclosing Party resulting in irreparable harm to the Disclosing Party, and therefore, that upon any such breach or any threat thereof, the Disclosing Party shall be entitled to appropriate equitable relief without the posting of a bond in addition to whatever remedies it might have at law. The Receiving Party will notify the Disclosing Party in writing in accordance with the provisions of Section 10.07 hereof immediately upon the occurrence of any such unauthorized release or other breach of which it is aware. Section 10.07. Notices. All notices, requests and other communications to any party hereunder shall be in writing and shall be given, if to IRI, to: General Counsel Information Resources, Inc. 150 North Clinton Street Chicago, IL 60661 if to NewCo, to: Chief Executive Officer Mosaic InfoForce, L.P. 525 West Monroe Street Chicago, IL 60661 34 35 with a copy to: Chief Financial Officer Mosaic Group Inc. 469A King Street West Toronto, Ontario M5V 3M4 All notices shall be deemed to have been given (i) when personally delivered, (ii) three (3) business days following deposit in the U.S. mail, certified or registered, return receipt requested, postage prepaid or (iii) one (1) business day following dispatch by a nationally recognized overnight courier service. Section 10.08. Governing Law. This Agreement shall be construed in accordance with and governed by the law of the State of Delaware, without regard to the conflicts of law rules of such state. The parties agree that any action, suit, claim or proceeding arising out of or relating to this Agreement or the transactions contemplated hereby shall be brought by the parties in a Delaware state court or a federal court sitting in the State of Delaware, which shall be the exclusive venue of any such action, suit, claim or proceeding. Each party waives any objection which such party may now or hereafter have to the laying of venue of any such action, suit, claim or proceeding, and irrevocably consents and submits to the jurisdiction of any such court in the State of Delaware (and the appropriate appellate courts) in any such action, suit, claim or proceeding. Any and all service of process and any other notice in any such action, suit, claim or proceeding shall be effective against such party when transmitted in accordance with Section 10.07 of this Agreement. Nothing contained herein shall be deemed to affect the right of any party to serve process in any manner permitted by law. This provision is intended to comply with 6 Del. C. Section 2708. Section 10.09. Amendments; No Waivers. (a) Any provision of this Agreement may be amended or waived if, and only if, such amendment or waiver is in writing and signed, in the case of an amendment, by all of the parties hereto, or in the case of a wavier, by the party against whom the waiver is to be effective. (b) No failure or delay by any party 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. The rights and remedies herein provided shall be cumulative and not exclusive of any rights or remedies provided by law. Section 10.10. Successors and Assigns. The provisions of this Agreement shall be binding upon and inure to the benefit of the parties hereto and their respective successors and assigns, neither of the parties hereto may assign, delegate or otherwise transfer any of its rights or obligations under this Agreement without the prior written consent of the other parties hereto. 35 36 Section 10.11. Severability. If any provisions of this Agreement or the application thereof to any Person or circumstance shall be held invalid or unenforceable, the other provisions of this Agreement or the application of such provision to other Persons or circumstances shall not be affected thereby but shall continue in force to the fullest extent permitted by law. Section 10.12. Counterparts; Effectiveness. This Agreement may be signed in any number of counterparts, each of which shall be an original, with the same effect as if the signatures thereto and hereto were upon the same instrument. This Agreement shall become effective when each party hereto shall have received a counterpart hereof signed by the other party hereto. Section 10.13. Captions. The captions herein are included for convenience of reference only and shall be ignored in the construction or interpretation hereof. 36 37 IN WITNESS WHEREOF, the parties have caused this Agreement to be signed by their duly authorized representatives. INFORMATION RESOURCES, INC. By: __________________________________ Name: ________________________________ Title: _________________________________ MOSAIC INFOFORCE, L.P. By:____________________________________ Name: ________________________________ Title: _________________________________ 37 38 SCHEDULE 3 TO EXHIBIT A SERVICE LEVEL AGREEMENT [** - Omitted portions consist of 23 pages] 39 EXHIBIT B-1 SERVICES USAGE REPORT For the period June 5, 2000 IRI Weeks 1084 ------------- -----
PROJECT TYPES WEEKLY FOUR WEEK YEAR TO DATE AVERAGE % AVERAGE % % Infoscan Causal Data Collection XX XX XX Weekly Displays XX XX XX Feature Ads XX XX XX Coupons XX XX XX Convenience Stores Total XX XX XX Scanning Signage XX XX XX Scanning Features XX XX XX Scanning Displays XX XX XX Volumetric Inventory XX XX XX Volumetric Delivery XX XX XX InfoForce Recurring Audit Total XX XX XX [**] XX XX XX [**] XX XX XX [**] XX XX XX InfoForce Custom Audit Total XX XX XX Data Challenge - (reported after 7/01)
40 EXHIBIT B-2 COST SAVINGS AND TECHNOLOGY REPORT MONTHLY REPORT FOR __________ Submitted By: Date: A. Savings Projects Summary: Submitted By: Date: Savings Project #: Projected Savings: Period of Savings: Description: Savings Project #: Projected Savings: Period of Savings: Description: B. Technology Issues: Summary of Major Issues: Action Plan: 41 Follow-up From Last Month: Additional Comments, Concerns: Project Definition Report Update: B-2-2 42 EXHIBIT C DATA CHALLENGE REPORT SUMMARY FOR THE PERIOD _______________ THROUGH ______________
DATA CHALLENGE # DATE RECEIVED DATE ACKNOWLEDGED DATE RESOLVED X X X X X X X X X X X X
43 DATA CHALLENGE REPORT DETAIL FOR THE PERIOD _______________ THROUGH ______________ Data Challenge#______. Submitted By: _________________ Location: __________ Date Reported to NewCo: ______________ Date Acknowledgement Sent to CS&S: ___________ NewCo Contact: __________ Date Resolution Sent to CS&S: ______________ Data Challenge Description: Resolution Description: Data Challenge#______. Submitted By:_________________ Location: __________ Date Reported to NewCo: ______________ Date Acknowledgement Sent to CS&S: ___________ NewCo Contact: __________ Date Resolution Sent to CS&S: ______________ Data Challenge Description: Resolution Description: C-2 44 EXHIBIT D NEWCO'S RELEVANT TECHNOLOGY The relevant technologies within NewCo for up to the first 18 months of the agreement will be the current IRI field and back office technologies including the current processes utilizing MONet collected data. Relevant technologies include: - Fujitsu Model [**] hand held units - Fujitsu Model [**] hand held units - Proprietary applications to maintain and create new functionality for data collection on the Fujistu hand held units - Time tracking software applications developed for use on the hand held units - Sample selection application software (SAS) used to select stores for audit - IRI database of US retailers - IRI dictionary of UPC and other product dimension information - Spare part inventory for Fujistu hand held devises 45 EXHIBIT E IRI'S RELEVANT TECHNOLOGY - Management Summary Reporting. - Weekly Displays: 1. Display Approval 2. Data Loading(UPCSelect processing) - RJRSELCT - Cigarette Displays(includes edit capabilities once received in Chicago) - Custom Reporting - Internal and external reporting - Dictionary - Seasonal New Items - Convenience Store - Audit(sales) and Display data. - Corporate Timetracking data for payroll & mileage - Timetracking information for Performance Trackers. - Store/data moves EX-10.3 4 c58277ex10-3.txt THIRD AMENDMENT TO CREDIT AGREEMENT 1 EXHIBIT 10.3 INFORMATION RESOURCES, INC. THIRD AMENDMENT TO CREDIT AGREEMENT This Third Amendment to Credit Agreement (herein, the "Amendment") is entered into as of October 18, 2000, between Information Resources, Inc., the Banks party thereto, and Harris Trust and Savings Bank, as Agent for the Banks. PRELIMINARY STATEMENTS A. The Borrower and the Banks entered into a certain Credit Agreement, dated as of October 31, 1997 (the Credit Agreement, as amended prior to the date hereof, being referred to herein as the "Credit Agreement"). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement. B. The Borrower and the Required Banks have agreed to (i) amend the Cash Flow Coverage Ratio, (ii) add an EBITDA covenant, (iii) amend the Eurodollar Margin, (iv) amend the Commitment Fee, and (v) make certain other amendments to the Credit Agreement, under the terms and conditions set forth in this Amendment. NOW, THEREFORE, for good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto agree as follows: SECTION 1. AMENDMENTS. 1.1. The definition of "Eurodollar Margin" appearing in Section 1.3(b) of the Credit Agreement shall be amended and restated to read as follows: "Eurodollar Margin" means, from one Pricing Date to the next, a rate per annum determined in accordance with the following schedule: CASH FLOW COVERAGE RATIO EURODOLLAR FOR SUCH PRICING DATE: MARGIN: Less than 0.75 to 1.0 2.00% Equal to or greater than 0.75 to 1.0, but less than 0.90 to 1.0 1.75% Equal to or greater than 0.90 to 1.0, but less than or equal to 1.00 to 1.0 1.50% Greater than 1.00 to 1.0 1.25% The Borrower and the Banks acknowledge and agree that from and after the effective date of the Third Amendment to Credit Agreement dated as of October 18, 2000, by and among the Borrower, the Banks, and the Agent (the "Third Amendment"), the 2 Eurodollar Margin shall be 2.00%, and the Eurodollar Margin shall not be adjusted until the Pricing Date occurring after the Agent's receipt of the Borrower's September 30, 2000, financial statements and corresponding compliance certificate. 1.2. Section 1 of the Credit Agreement shall be amended by adding the following new Sections 1.20 and 1.21 immediately after Section 1.19: Section 1.20. Collateral; Security Effective Date; Actions Prior to the Security Effective Date. (a) Collateral. The payment and performance of the Obligations shall be secured by valid and enforceable Liens in favor of the Agent for the benefit of the Banks on all of the Borrower's now existing or hereafter arising or acquired accounts, general intangibles, inventory, equipment and all other goods, chattel paper, instruments, documents and certain other assets and property of the Borrower as more fully described in the Collateral Documents. The Borrower covenants and agrees that it shall comply with all the terms and conditions of each of the Collateral Documents and that it shall, at any time and from time to time as requested by the Agent or the Required Banks, execute and deliver such further instruments and do such acts and things as the Agent or the Required Banks may deem necessary or desirable to provide for or protect or perfect the Lien of the Agent in the Collateral. (b) Security Effective Date. At the request of the Borrower, the Banks have agreed that the provisions of the Security Agreement shall not become effective, and the Agent and the Banks agree not to perfect the liens or security interests created or provided for by the Security Agreement by filing financing statements or taking any other actions to perfect such security interests or liens, unless and until (i) an Event of Default (whether or not subsequently waived) shall have occurred and (ii) any Bank shall direct the Agent in writing to take such action prior to any such waiver (the occurrence of an Event of Default and such direction of the Agent being hereinafter referred to as the "Security Effective Date"). Upon the occurrence of the Security Effective Date, (i) the provisions of the Security Agreement shall become effective, (ii) the Banks and the Agent shall have the right to file the financing statements provided by the Borrower pursuant to Section 2.2 of the Third Amendment and any additional financing statements or other instruments theretofore provided pursuant to this Section 1.20, in each case, in order to perfect the security interests and liens created and provided for by the Security Agreement and to take such other actions as the Agent or any Bank shall deem necessary or appropriate to create or provide for liens or -2- 3 security interest in the Collateral. The Borrower agrees that it will from time to time at the request of the Agent or any Bank after the Security Effective Date, execute and deliver such instruments and documents and do such other acts and things as the Agent or any Bank may reasonably request in order to create or provide for or perfect security interests or liens in the Collateral. It is understood and agreed that the Security Agreement and any financing statements executed by the Borrower and delivered to the Agent pursuant to the Third Amendment will not be filed by the Agent or any Bank prior to the Security Effective Date. (c) Actions Prior to the Security Effective Date. Notwithstanding that the Security Agreement and any other Collateral Documents will become effective only on the Security Effective Date, the Borrower shall provide the Agent with an updated Schedule A to the Security Agreement and any other information to correct Section 3(b) thereof to the extent the information contained in such Schedule or Section changes. In addition, if at any time any Collateral described in the Security Agreement is located or to be located outside the jurisdictions for which financing statements have been theretofore delivered, the Borrower shall provide to the Agent executed financing statements for filing in each jurisdiction where such Collateral is located or to be located. In addition to the other fees and expenses payable under this Agreement and without limiting the Borrower's obligations under the Collateral Documents, if the Security Effective Date takes place, the Borrower agrees to pay all of the costs and expenses of the Agent in connection with the recording or filing of any of the Collateral Documents and any lien searches conducted in connection therewith. Section 1.21. Borrowing Base. Notwithstanding anything herein to the contrary, on and after the Security Effective Date, the sum of the aggregate principal amount of all Loans (whether Committed Loans, Swing Loans or Bid Loans) and L/C Obligations at any time outstanding shall not exceed the lesser of (i) the Revolving Credit Commitments in effect at such time and (ii) the Borrowing Base as then determined and computed. The Borrower covenants and agrees that if at any time on or after the Security Effective Date the sum of the aggregate principal amount of all Loans (whether Committed Loans, Swing Loans or Bid Loans) and L/C Obligations then outstanding shall be in excess of the Borrowing Base as then determined and computed, the Borrower shall immediately and without notice or demand pay over the amount of the excess to the Agent for the account of the Banks as and for a mandatory prepayment on such Obligations, with each -3- 4 such prepayment first to be applied to the Swing Line Note until payment in full thereof, and then to the Committed Loan Notes until payment in full thereof, and then to the Bid Loan Notes until payment in full thereof with any remaining balance to be held by the Agent as collateral security for the L/C Obligations. 1.3. The last sentence of Section 2.1(a) of the Credit Agreement shall be amended and restated to read as follows: For purposes hereof, the term "Applicable Commitment Fee" means, from one Pricing Date to the next, a rate per annum determined in accordance with the following: CASH FLOW COVERAGE RATIO APPLICABLE FOR SUCH PRICING DATE: COMMITMENT FEE: Less than 0.75 to 1.0 0.50% Equal to or greater than 0.75 to 1.0, but less than 0.90 to 1.0 0.35% Equal to or greater than 0.90 to 1.0, but less than or equal to 1.00 to 1.0 0.25% Greater than 1.00 to 1.0 0.20% The Borrower and the Banks acknowledge and agree that from and after the effective date of the Third Amendment, the Applicable Commitment Fee shall be .50%, and the Applicable Commitment Fee shall not be adjusted until the Pricing Date occurring after the Agent's receipt of the Borrower's September 30, 2000, financial statements and corresponding compliance certificate. 1.4. The definition of the term "Loan Documents" appearing in Section 4.1 of the Credit Agreement shall be amended and restated to read as follows: "Loan Documents" means this Agreement, the Notes, the Applications, and the Collateral Documents. 1.5. Section 4.1 of the Credit Agreement shall be amended by inserting the following new definitions in the appropriate alphabetical order: "Borrowing Base" means, as of any time it is to be determined, 85% of the then outstanding unpaid amount of Eligible Accounts; provided that the Borrowing Base shall be computed only as against and on so much of the Collateral as is included on the certificates to be furnished from time to time by the Borrower pursuant to Section 7.5(e) hereof and, if required by the Agent or -4- 5 the Required Banks pursuant to any of the terms hereof or any Collateral Document, as verified by such other evidence required to be furnished to the Agent or the Banks pursuant hereto or pursuant to any such Collateral Document. "Collateral" means all properties, rights, interests and privileges from time to time subject to the Liens granted to the Agent for the benefit of the Banks by the Collateral Documents. "Collateral Documents" means the Security Agreement and all other mortgages, deeds of trust, security agreements, assignments, financing statements and other documents as shall from time to time secure the Obligations. "EBITDA" means, with reference to any period, Consolidated Net Income for such period plus all amounts deducted in arriving at such Consolidated Net Income amount (but without duplication) in respect of (i) Consolidated Interest Expense for such period, plus (ii) federal, state and local income taxes for such period, plus (iii) all amounts properly charged for depreciation of fixed assets and amortization of intangible assets during such period on the books of the Borrower and its Consolidated Subsidiaries, plus (iv) all amounts properly charged for amortization of the InfoScan Costs and Software Costs during such period on the books of the Borrower and its Subsidiaries. "Eligible Account" means each account receivable of the Borrower that: (a) arises out of the sale by the Borrower of finished goods inventory delivered to and accepted by, or out of the rendition of services fully performed by the Borrower and accepted by, the account debtor on such account receivable, and such account receivable otherwise represents a final sale; (b) the account debtor on such account receivable is located within the United States of America or, if such right has arisen out of the sale of such goods shipped to an account debtor located in any other country, such right is secured by a valid and irrevocable letter of credit pursuant to which any of the Borrower or its transferee may draw on a lender reasonably acceptable to the Agent for the full amount thereof; (c) is the valid, binding and legally enforceable obligation of the account debtor obligated thereon and such account debtor is not (i) a Subsidiary or an Affiliate of the -5- 6 Borrower, (ii) a shareholder, director, officer or employee of the Borrower or any Subsidiary, (iii) the United States of America, or any state or political subdivision thereof, or any department, agency or instrumentality of any of the foregoing unless the Borrower has complied with the Assignment of Claims Act or any similar state or local statute, as the case may be, to the satisfaction of the Agent, (iv) a debtor under any proceeding under the United States Bankruptcy Code, as amended, or any other comparable bankruptcy or insolvency law, or (v) an assignor for the benefit of creditors; (d) is not evidenced by an instrument or chattel paper unless the same has been endorsed and delivered to the Agent; (e) is an asset of the Borrower to which it has good and marketable title, is freely assignable, is subject to a perfected, first priority Lien in favor of the Agent for the benefit of the Banks, and is free and clear of any other Lien other than Liens permitted by Section 7.11(a) and (b) hereof; (f) is net of any credit or allowance given by the Borrower to such account debtor; (g) is not owing from an account debtor who is also creditor or supplier of the Borrower, is not subject to any offset, counterclaim or other defense with respect thereto and, with respect to said account receivable or the contract or purchase order out of which the same arose, no surety bond was required or given in connection therewith; (h) is not unpaid more than 60 days after the original invoice date (which must be not more than 5 days subsequent to the shipment date or the date services were fully performed by the Borrower); (i) is not owed by an account debtor who is obligated on accounts receivable owed to the Borrower more than 5% of the aggregate unpaid balance of which have been past due for longer than the relevant period specified in subsection (h) above unless the Agent has approved the continued eligibility thereof; (j) would not cause the total accounts receivable owing from any one account debtor and its Affiliates to exceed 5% of all Eligible Accounts; and -6- 7 (k) does not arise from a sale to an account debtor on a bill-and-hold, guaranteed sale, sale-or-return, sale-on-approval, consignment or any other repurchase or return basis. "Security Agreement" means the Security Agreement dated as of October 18, 2000, from the Borrower to the Agent, as the same may from time to time be modified, amended or restated. 1.6. Section 7.5 of the Credit Agreement shall be amended by deleting the period appearing at the end of subsection (d) thereof and substituting therefor a semicolon followed by the word "and" and then adding the following new subsection (e) to read as follows: (e) as soon as available, and in any event within 10 days after the last day of each calendar month (commencing with the first such date occurring after the Security Effective Date), a Borrowing Base certificate in the form attached hereto as Schedule 7.5(e) showing the computation of the Borrowing Base in reasonable detail as of the close of business on the last day of such month, prepared by the Borrower and certified to by its chief financial officer. 1.7. Section 7.8 of the Credit Agreement shall be amended and restated to read as follows: Section 7.8. Cash Flow Coverage Ratio. The Borrower shall, as of the last day of each quarter-annual accounting period of the Borrower ending during the periods specified below, maintain the ratio of Consolidated Cash Flow for the four fiscal quarters of the Borrower then ended to Consolidated Fixed Charges for the same four fiscal quarters then ended (the "Cash Flow Coverage Ratio") of not less than: CASH FLOW FROM AND TO AND COVERAGE RATIO INCLUDING INCLUDING SHALL NOT BE LESS THAN: 6/30/00 12/30/00 .70 to 1.0 12/31/00 9/29/01 .90 to 1.0 9/30/01 and at all times thereafter 1.0 to 1.0 1.8. Section 7.9 of the Credit Agreement shall be amended and restated to read as follows: Section 7.9. Restricted Payments. The Borrower shall not directly or indirectly purchase, redeem or otherwise acquire or -7- 8 retire any of its common stock, except that the Borrower may repurchase, from and after the effective date of the Third Amendment through the Termination Date, portions of its common stock so long as (a) at the time of, and after giving effect to, any such repurchase, no Event of Default exists, (b) such repurchases are made only in connection with the Borrower's existing employee stock purchase program, and (c) the total expenditure by the Borrower from the date of the Third Amendment through the Termination Date for all of such repurchases, net of amounts received by the Borrower in respect of sales by the Borrower of its common stock under its existing employee stock purchase program, shall not exceed $2,000,000 in the aggregate. 1.9. Section 7.11(d) of the Credit Agreement shall be amended and restated to read as follows: (d) Liens in favor of the Agent pursuant to the Collateral Documents and liens, mortgages and security interests existing as of December 22, 1992 and disclosed in the financial statements referred to in Section 5.4 hereof; and 1.10. Section 7.17 of the Credit Agreement shall be amended and restated to read as follows: Section 7.17. Use of Proceeds. The Borrower shall use the proceeds of all credit extended under this Agreement for its general corporate purposes which may include the repurchases of its common stock to the extent permitted by Section 7.9 hereof. 1.11. Section 7 of the Credit Agreement shall be amended by adding the following new Section 7.18 immediately after Section 7.17: Section 7.18. EBITDA. The Borrower shall, as of the last day of each quarter-annual accounting period of the Borrower ending during the periods specified below, maintain its EBITDA for the four fiscal quarters of the Borrower then ended at not less than: FROM AND TO AND EBITDA SHALL INCLUDING INCLUDING NOT BE LESS THAN: 6/30/00 12/30/00 $110,000,000 12/31/00 6/29/01 $135,000,000 6/30/01 12/30/01 $145,000,000 12/31/01 and at all times thereafter $165,000,000 -8- 9 1.12. Section 8.1(b) of the Credit Agreement shall be amended and restated to read as follows: (b) default in the observance or performance of any covenant set forth in Sections 7.5(e), 7.6, 7.7, 7.8, 7.9, 7.10, 7.13, 7.14, 7.17 or 7.18 hereof; or 1.13. The Credit Agreement shall be further amended by adding a new Schedule 7.5(e) thereto which shall read as set forth on Annex A to this Amendment. SECTION 2. CONDITIONS PRECEDENT. The effectiveness of this Amendment is subject to the satisfaction of all of the following conditions precedent: 2.1. The Borrower and the Required Banks shall have executed and delivered this Amendment. 2.2. The Borrower shall have executed and delivered to the Agent the Security Agreement and any UCC financing statements required by the Agent in connection therewith. 2.3. The Agent shall have received copies (executed or certified, as may be appropriate) of all legal documents or proceedings taken in connection with the execution and delivery of this Amendment to the extent the Agent or its counsel may reasonably request. 2.4. Legal matters incident to the execution and delivery of this Amendment and the Security Agreement shall be satisfactory to the Agent and its counsel; and the Agent shall have received the favorable written opinion of counsel for the Borrower in form and substance satisfactory to the Agent and its counsel. 2.5. The Agent shall have received, for the benefit of each Bank executing this Amendment on or before October 18, 2000, an amendment fee equal to 0.25% of the Commitment of such Bank. SECTION 3. REPRESENTATIONS. In order to induce the Banks to execute and deliver this Amendment, the Borrower hereby represents to the Banks that as of the date hereof, the representations and warranties set forth in Section 5 of the Credit Agreement are and shall be and remain true and correct (except that the representations contained in Section 5.4 shall be deemed to refer to the most recent financial statements of the Borrower delivered to the Banks) and the Borrower is in compliance with the terms and conditions of the Credit Agreement and no Default or Event of Default has occurred and is continuing under the Credit Agreement or shall result after giving effect to this Amendment. -9- 10 SECTION 4. MISCELLANEOUS. 4.1. Except as specifically amended herein, the Credit Agreement shall continue in full force and effect in accordance with its original terms. Reference to this specific Amendment need not be made in the Credit Agreement, the Notes, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby. 4.2. The Borrower agrees to pay on demand all costs and expenses of or incurred by the Agent in connection with the negotiation, preparation, execution and delivery of this Amendment and the replacement Notes, including the fees and expenses of counsel for the Agent. 4.3. This Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This Amendment shall be governed by the internal laws of the State of Illinois. [SIGNATURE PAGES TO FOLLOW] -10- 11 This Third Amendment, to Credit Agreement is dated as of the date first above written. INFORMATION RESOURCES, INC. By Name _________________________________ Title ________________________________ Accepted and agreed to as of the date and year first above written. HARRIS TRUST AND SAVINGS BANK, in its individual capacity as a Bank and as Agent By Name _________________________________ Title ________________________________ LASALLE BANK NATIONAL ASSOCIATION By Name _________________________________ Title ________________________________ THE BANK OF NEW YORK By Name _________________________________ Title ________________________________ -11- 12 ANNEX A TO THIRD AMENDMENT TO CREDIT AGREEMENT SCHEDULE 7.5(E) BORROWING BASE CERTIFICATE To: Harris Trust and Savings Bank, as Agent under, and the Banks party to, the Credit Agreement described below. Pursuant to the terms of the Credit Agreement dated as of October 31, 1997 among us as amended from time to time (the "Credit Agreement"), we submit this Borrowing Base Certificate to you and certify that the information set forth below and on any attachments to this Certificate is true, correct and complete as of the date of this Certificate. A. ACCOUNTS IN BORROWING BASE 1. Gross Accounts ___________ Less (a) Ineligible sales (i.e. not within the U.S. or not supported by an eligible letter of credit) ___________ (b) Owed by an account debtor who is a Subsidiary or an Affiliate ___________ (c) Owed by an account debtor who is in an insolvency or reorganization proceeding ___________ (d) Credits/allowances/retainage ___________ (e) Unpaid more than 60 days ___________ (f) Ineligible because of 5% concentration factor ___________ (g) Otherwise ineligible ___________ 2. Total Deductions (sum of lines A1a - A1g) ___________ 3. Eligible Accounts (line A1 minus line A2) ___________ 4. Accounts in Borrowing Base (line A3 x .85) ___________ 13 B. REVOLVING CREDIT ADVANCES 1. Committed Loans ___________ 2. Swing Loans ___________ 3. Bid Loans ___________ 4. L/C Obligations ___________ 5. Total Revolving Credit Advances (sum of lines B1 - B4) ___________ C. UNUSED AVAILABILITY (line A4 minus line B5) ___________ Dated as of this ___________ day of __________________, 20____. INFORMATION RESOURCES, INC. By Name _________________________________ Title ________________________________ -2- 14 INFORMATION RESOURCES, INC. SECURITY AGREEMENT This Security Agreement (the "Agreement") dated as of October 13, 2000, by and between Information Resources, Inc. a Delaware corporation with its principal place of business and mailing address at 150 North Clinton Street, Chicago, Illinois 60606 (the "Company"), and Harris Trust and Savings Bank, an Illinois banking corporation ("Harris Bank") with its mailing address 111 West Monroe Street, Chicago, Illinois 60603 acting as agent hereunder for the Lenders hereinafter identified and defined (said Harris Bank acting as such agent and any successor or successors to said Harris Bank acting in such capacity being hereinafter referred to as the "Agent"); WITNESSETH THAT: WHEREAS, the Company, Harris Bank individually and as agent, certain other financial institutions have entered into a Credit Agreement dated as October 31, 1997, as amended and currently in effect (such Credit Agreement, as so amended, as the same may be further amended, modified or restated from time to time being hereinafter referred to as the "Credit Agreement"), pursuant to which such lenders (those lenders which are now or which from time to time hereafter become party to the Credit Agreement being hereinafter referred to collectively as the "Lenders" and individually as a "Lender") have agreed, subject to certain terms and conditions, to extend a revolving credit facility to the Company; WHEREAS, the Company may from time to time enter into one or more interest rate exchange, cap, collar, floor or other agreements with one or more of the Lenders party to the Credit Agreement or their affiliates for the purpose of hedging or otherwise protecting the Company against changes in interest rates on the Notes (the liability of the Company in respect of such agreements with such Lenders or their affiliates being hereinafter referred to as the "Hedging Liability"); and WHEREAS, as a condition precedent to maintaining the credit facilities to the Company under the Credit Agreement, the Lenders have required, among other things, that the Company grant to the Agent a lien on and security interest in certain personal properties of the Company as collateral security for such credit facilities and related obligations pursuant to this Agreement and various other instruments and documents (this Agreement and such other instruments and documents being hereinafter referred to as the "Collateral Documents"); NOW, THEREFORE, for and in consideration of the execution and delivery by the Lenders of the Third Amendment to Credit Agreement dated as of even date herewith, and other good and valuable consideration, receipt whereof is hereby acknowledged, the parties hereto hereby agree as follows: Section 1. Grant of Security Interest in the Collateral; Obligations Secured. (a) The Company hereby grants to the Agent for the benefit of the Lenders (and, in the case of Hedging Liability, their affiliates) a security interest in and right of set-off against, and 15 acknowledges and agrees that the Agent has and shall continue to have for the benefit of the Lenders (and, in the case of Hedging Liability, their affiliates) a continuing security interest in and right of set-off against, any and all right, title and interest of the Company, whether now owned or existing or hereafter created, acquired or arising, in and to the following: (i) Receivables. Receivables, whether now owned or existing or hereafter created, acquired or arising, and however evidenced or acquired, or in which the Company now has or hereafter acquires any rights (the term "Receivables" means and includes all accounts, accounts receivable, contract rights, instruments, notes, drafts, acceptances, documents, chattel paper, any right of the Company to payment for goods sold or leased or for services rendered, whether arising out of the sale of Inventory (as hereinafter defined) or otherwise and whether or not earned by performance, and all other forms of obligations owing to the Company, and all of the Company's rights to any merchandise or other goods (including without limitation any returned or repossessed goods and the right of stoppage in transit) which is represented by, arises from or is related to any of the foregoing); (ii) General Intangibles. All general intangibles, whether now owned or existing or hereafter created, acquired or arising, or in which the Company now has or hereafter acquires any rights, including, without limitation, all patents, patent applications, patent licenses, trademarks, trademark registrations, trademark licenses, trade styles, trade names, copyrights, copyright registrations, copyright licenses and other licenses and similar intangibles, all customer, client and supplier lists (in whatever form maintained), all rights in leases and other agreements relating to real or personal property, all causes of action and tax refunds of every kind and nature, all privileges, franchises, immunities, licenses, permits and similar intangibles, all rights to receive payments in connection with the termination of any pension plan or employee stock ownership plan or trust established for the benefit of employees of the Company and all other personal property (including things in action) not otherwise covered by this Agreement; (iii) Inventory. Inventory, whether now owned or existing or hereafter created, acquired or arising, or in which the Company now has or hereafter acquires any rights and all documents of title at any time evidencing or representing any part thereof (the term "Inventory" means and includes all goods which are held for sale or lease or are to be furnished under contracts of service or consumed in the Company's business, all goods which are raw materials, work-in-process, finished goods, materials or supplies of every kind and nature, in each case used or usable in connection with the acquisition, manufacture, processing, supply, servicing, storing, packing, shipping, advertising, selling, leasing or furnishing of such goods, and any constituents or ingredients thereof, and all goods which are returned or repossessed goods); (iv) Equipment. Equipment, whether now owned or existing or hereafter created, acquired or arising, or in which the Company now has or hereafter acquires any rights (the term "Equipment" means and includes all equipment, machinery, tools, trade fixtures, furniture, furnishings, office equipment, vehicles (including vehicles subject to a certificate of title law) and all other goods now or hereafter used or usable in connection -2- 16 with the Company's business, together with all parts, accessories and attachments relating to any of the foregoing); (v) Investment Property. All Investment Property, whether now owned or existing or hereafter created, acquired, or arising, or in which the Company now has or hereafter acquires any rights (the term "Investment Property" means and includes all investment property and any other securities (whether certificated or uncertificated), security entitlements, securities accounts, commodity contracts, and commodity accounts, including all substitutions and additions thereto, all dividends, distributions, and sums distributable or payable from, upon, or in respect of such property, and all rights and privileges incident to such property); (vi) Deposits and Property in Possession. All deposit accounts (whether general, specific or otherwise) maintained with the Agent or any of the Lenders and all sums now or hereafter on deposit therein or payable thereon, and any and all other property or interests in property which now is or may from time to time hereafter come into the possession, custody or control of the Agent or any of the Lenders, or any agent of any of them, in any way and for any purpose (whether for safekeeping, custody, pledge, transmission, collection or otherwise); (vii) Records. Supporting evidence and documents relating to any of the above-described property, including, without limitation, computer programs, disks, tapes, and related electronic data processing media, and all rights of the Company to retrieve the same from third parties, written applications, credit information, account cards, payment records, correspondence, delivery and installation certificates, invoice copies, delivery receipts, notes and other evidences of indebtedness, insurance certificates and the like, together with all books of account, ledgers and cabinets in which the same are reflected or maintained, all whether now existing or hereafter arising; (viii) Accessions and Additions. All accessions and additions to and substitutions and replacements of any and all of the foregoing, whether now existing or hereafter arising; and (ix) Proceeds and Products. All proceeds and products of the foregoing and all insurance of the foregoing and proceeds thereof, whether now existing or hereafter arising; all of the foregoing being herein sometimes referred to as the "Collateral". (b) This Agreement is made and given to secure, and shall secure, the payment and performance of (i) any and all indebtedness, obligations and liabilities of the Company under or in connection with or evidenced by (w) the Credit Agreement or (x) the Notes of the Company heretofore or hereafter issued under the Credit Agreement and the obligations of the Company to reimburse the Agent for the amount of all drawings on all Letters of Credit issued for the account of the Company pursuant to the Credit Agreement, and all other obligations of the Company under any and all Applications for such Letters of Credit or (y) any of the Collateral Documents -3- 17 or (z) agreements with any one or more of the Lenders or their affiliates with respect to Hedging Liability, in each case whether now existing or hereafter arising (and whether arising before or after the filing of a petition in bankruptcy), due or to become due, direct or indirect, absolute or contingent, and howsoever evidenced, held or acquired and (ii) any and all expenses and charges, legal or otherwise, suffered or incurred by the Agent and the Lenders in collecting or enforcing any of such indebtedness, obligations and liabilities or in realizing on or protecting or preserving any security therefor, including, without limitation, the lien and security interest granted hereby (all of the indebtedness, obligations, liabilities, expenses and charges described in clauses (i) and (ii) above being hereinafter referred to as the "Obligations"). Section 2. Terms Defined in Credit Agreement. All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement. Section 3. Covenants, Agreements, Representations and Warranties. The Company hereby covenants and agrees with, and represents and warrants to, the Agent and the Lenders that: (a) The Company is a corporation duly organized, validly existing and in good standing under the laws of the State Delaware is the sole and lawful owner of the Collateral and has full right, power and authority to enter into this Agreement and to perform each and all of the matters and things herein provided for; and the execution and delivery of this Agreement, and the observance and performance of any of the matters and things herein set forth, will not contravene or constitute a default under any provision of law or any judgment, injunction, order or decree binding upon the Company or any provision of the Company's charter, articles of incorporation or by-laws or of any covenant, indenture or agreement of or affecting the Company or any of its properties, or result in the creation or imposition of any lien or encumbrance on any property of the Company. The Company's Federal tax identification number is 36-2947987. (b) The Collateral is and will remain in the Company's possession or control at the locations listed under Item 1 on Schedule A attached hereto (collectively, the "Permitted Collateral Locations"), except for Collateral which in the ordinary course of the Company's business is in transit between the Permitted Collateral Locations. If for any reason Collateral is at any time kept or located at locations other than the Permitted Collateral Locations, the Agent shall nevertheless have and retain a security interest therein. The Company owns and will at all times own all Permitted Collateral Locations, except to the extent otherwise indicated on Schedule A. The Company's chief executive office and principal place of business is at, and the Company keeps and shall keep all of its books and records relating to Receivables only at, 150 North Clinton Street, Chicago, Illinois 60606 and the Company has no other executive offices or places of business other than those listed under Item 2 on Schedule A. The Company will not maintain an executive office or place of business at a location other than those specified pursuant to the immediately preceding sentence without first providing the Agent 30 days' prior written notice of the Company's intent to do so; provided, however, that the Company -4- 18 will at all times maintain its chief executive office in the contiguous continental United States of America. (c) The Collateral and every part thereof is and will be free and clear of all security interests, liens (including, without limitation, mechanics', laborers' and statutory liens), attachments, levies and encumbrances of every kind, nature and description and whether voluntary or involuntary, except for the security interest of the Agent therein and as otherwise permitted by Section 7.11 of the Credit Agreement. The Company will warrant and defend the Collateral against any claims and demands of all persons or entities at any time claiming the same or any interest in the Collateral adverse to the Agent or any Lender. (d) The Company will promptly pay when due all taxes, assessments and governmental charges and levies upon or against the Company or the Collateral, in each case before the same become delinquent and before penalties accrue thereon, unless and to the extent that the same are being contested in good faith by appropriate proceedings which prevent foreclosure on or other realization upon any Collateral and preclude interference with the operation of the Company's business in the ordinary course and the Company shall have established adequate reserves therefor. (e) The Company will not waste or destroy the Collateral or any part thereof and will not be negligent in the care or use of any Collateral. The Company will not use, manufacture, sell or distribute any Collateral in violation of any statute, ordinance or other governmental requirement. The Company will perform in all material respects its obligations under any contract or other agreement constituting part of the Collateral, it being understood and agreed that the Agent and the Lenders have no responsibility to perform such obligations. (f) Subject to Sections 4(b), 5(a), 6(b) and 6(c) hereof, the Company will not, without the Agent's prior written consent, sell, assign, mortgage, lease or otherwise dispose of the Collateral or any interest therein. (g) The Company will insure the Collateral which is insurable against such risks and hazards as other companies similarly situated insure against, and including in any event loss or damage by fire, theft, burglary, pilferage, loss in transit and such other hazards as the Agent may reasonably specify, in amounts and under policies containing loss payable clauses to the Agent as its interest may appear (and, if the Agent requests, naming the Agent and the Lenders as additional insureds therein) by insurers reasonably acceptable to the Agent. All premiums on such insurance shall be paid by the Company and the policies of such insurance (or certificates therefor) delivered to the Agent. All insurance required hereby shall provide that any loss shall be payable notwithstanding any act or negligence of the Company, shall provide that no cancellation thereof shall be effective until at least thirty (30) days after receipt by the Company and the Agent of written notice thereof, and shall be satisfactory to the Agent in all other respects. In case of any material loss, damage to or destruction of the Collateral or any part thereof, the Company shall promptly give written notice thereof to the Agent and the Lenders -5- 19 generally describing the nature and extent of such damage or destruction. In case of any loss, damage to or destruction of the Collateral or any part thereof, the Company, whether or not the insurance proceeds, if any, received on account of such damage or destruction shall be sufficient for that purpose, at the Company's cost and expense, will promptly repair or replace the Collateral so lost, damaged or destroyed, except to the extent (i) such Collateral, prior to its loss, damage or destruction, had become uneconomical, obsolete or worn out or (ii) such Collateral is not necessary for or of importance to the proper conduct of the Company's business in the ordinary course and such Collateral and all other Collateral lost, damaged or destroyed during the immediately preceding 12 calendar months had an aggregate fair market value, prior to its loss, damage or destruction, of less than $1,000,000. In the event the Company shall receive any proceeds of such insurance, the Company will immediately pay over such proceeds to the Agent. The Company hereby authorizes the Agent, at the Agent's option, to adjust, compromise and settle any losses under any insurance afforded at any time after the occurrence and during the continuation of any Default or Event of Default, and the Company does hereby irrevocably constitute the Agent, its officers, agents and attorneys, as the Company's attorneys-in-fact, with full power and authority to effect such adjustment, compromise and/or settlement and to endorse any drafts drawn by an insurer of the Collateral or any part thereof and to do everything necessary to carry out such purposes and to receive and receipt for any unearned premiums due under policies of such insurance. Unless the Agent elects to adjust, compromise or settle losses as aforesaid, any adjustment, compromise and/or settlement of any losses under any insurance shall be made by the Company subject to final approval of the Agent in the case of losses exceeding $1,000,000. Net insurance proceeds received by the Agent under the provisions hereof or under any policy or policies of insurance covering the Collateral or any part thereof shall be applied to the reduction of the Obligations (whether or not then due); provided, however, that the Agent agrees to release such insurance proceeds to the Company for replacement or restoration of the portion of the Collateral lost, damaged or destroyed required by this Agreement to be so replaced or restored if, but only if, (i) at the time of release no Default or Event of Default exists hereunder, (ii) written application for such release is received from the Company within 30 days of receipt of such proceeds and (iii) the Agent has received evidence reasonably satisfactory to it that the Collateral lost, damaged or destroyed has been or will be replaced or restored to its condition immediately prior to the loss, destruction or other event giving rise to the payment of such insurance proceeds. All insurance proceeds shall be subject to the lien and security interest of the Agent hereunder. UNLESS THE COMPANY PROVIDES THE AGENT WITH EVIDENCE OF THE INSURANCE COVERAGE REQUIRED BY THIS AGREEMENT, THE AGENT MAY PURCHASE INSURANCE AT THE COMPANY'S EXPENSE TO PROTECT THE AGENT'S INTERESTS IN THE COLLATERAL. THIS INSURANCE MAY, BUT NEED NOT, PROTECT THE COMPANY'S INTERESTS IN THE COLLATERAL. THE COVERAGE PURCHASED BY THE AGENT MAY NOT PAY ANY CLAIMS THAT THE COMPANY MAKES OR ANY CLAIM THAT IS MADE AGAINST THE COMPANY IN CONNECTION WITH THE COLLATERAL. THE COMPANY MAY LATER CANCEL ANY SUCH INSURANCE PURCHASED BY THE AGENT, BUT ONLY AFTER PROVIDING THE AGENT WITH EVIDENCE THAT THE COMPANY HAS OBTAINED INSURANCE AS REQUIRED BY THIS AGREEMENT. IF THE AGENT PURCHASES INSURANCE -6- 20 FOR THE COLLATERAL, THE COMPANY WILL BE RESPONSIBLE FOR THE COSTS OF THAT INSURANCE, INCLUDING INTEREST AND ANY OTHER CHARGES THAT THE AGENT MAY IMPOSE IN CONNECTION WITH THE PLACEMENT OF THE INSURANCE, UNTIL THE EFFECTIVE DATE OF THE CANCELLATION OR EXPIRATION OF THE INSURANCE. THE COSTS OF THE INSURANCE MAY BE ADDED TO THE OBLIGATIONS SECURED HEREBY. THE COSTS OF THE INSURANCE MAY BE MORE THAN THE COST OF INSURANCE THE COMPANY MAY BE ABLE TO OBTAIN ON ITS OWN. (h) The Company will at all times allow the Agent, any Lender and their respective representatives free access to and right of inspection of the Collateral, provided that prior to the occurrence of any Default or Event of Default hereunder any such access or inspection shall only be required during the Company's normal business hours. (i) If any Collateral is in the possession or control of any of the Company's agents or processors and the Agent so requests, the Company agrees to notify such agents or processors in writing of the Agent's security interest therein and instruct them to hold all such Collateral for the Agent's account and subject to the Agent's instructions. The Company will, upon request of the Agent, authorize and instruct all bailees and any other parties, if any, at any time processing, labeling, packaging, holding, storing, shipping or transferring all or any part of the Collateral to permit the Agent, any Lender and their respective representatives to examine and inspect any of the Collateral then in such party's possession and to verify from such party's own books and records any information concerning the Collateral or any part thereof which the Agent, any Lender or their respective representatives may seek to verify. As to any premises not owned by the Company wherein any of the Collateral is located, if any, the Company shall, unless the Agent requests otherwise, cause each party having any right, title or interest in, or lien on, any of such premises to enter into an agreement (any such agreement to contain a legal description of such premises) whereby such party disclaims any right, title and interest in, and lien on, the Collateral, allowing the removal of such Collateral by the Agent or by the Lenders and otherwise in form and substance acceptable to the Agent; provided, however, that no such agreement need be obtained with respect to any one location wherein the value of the Collateral as to which such agreement has not been obtained aggregates less than $1,000,000 and the value of all Collateral as to which such agreements have not been obtained aggregates less than $2,000,000. (j) The Company agrees from time to time to deliver to the Agent and any Lender such evidence of the existence, identity and location of the Collateral and of its availability as collateral security pursuant hereto (including, without limitation, schedules describing all Receivables created or acquired by the Company, copies of customer invoices or the equivalent and original shipping or delivery receipts for all merchandise and other goods sold or leased or services rendered, together with the Company's warranty of the genuineness thereof, and reports stating the book value of Inventory and Equipment by major category and location), in each case as the Agent or such Lender may reasonably request. The Agent shall have the right to verify all or any part of the Collateral in any manner, and through any medium, which the Agent or the Lenders consider appropriate, and the Company agrees to furnish all assistance and information, and perform any acts, -7- 21 which the Agent may reasonably require in connection therewith. The Company will promptly notify the Agent and each Lender of any Collateral which the Company has determined to have been rendered obsolete stating the prior book value of such Collateral, its type and location. (k) The Company will comply in all material respects with the terms and conditions of any and all leases, easements, right-of-way agreements and other agreements binding upon the Company or affecting the Collateral, in each case which cover the premises wherein the Collateral is located, and any orders, ordinances, laws or statutes of any city, state or other governmental entity, department or agency having jurisdiction with respect to such premises or the conduct of business thereon. (l) The Company has not invoiced Receivables or otherwise transacted business, and does not invoice Receivables or otherwise transact business, under any trade names other than the Company's name set forth in the introductory paragraph of this Agreement. The Company will not change its name or transact business under any other trade name, in each case without first giving the Agent 30 days' prior written notice of its intent to do so. (m) The Company agrees to execute and deliver to the Agent such further agreements and assignments or other instruments and documents and to do all such other things as the Agent may reasonably deem necessary or appropriate to assure the Agent its security interest hereunder, including such financing statement or statements or amendments thereof or supplements thereto or other instruments and documents as the Agent may from time to time reasonably require in order to comply with the Uniform Commercial Code as enacted in the State of Illinois and any successor statute(s) thereto (the "Code"). The Company hereby agrees that a carbon, photographic or other reproduction of this Agreement or any such financing statement is sufficient for filing as a financing statement by the Agent without notice thereof to the Company wherever the Agent in its sole discretion desires to file the same. In the event for any reason the law of any jurisdiction other than Illinois becomes or is applicable to the Collateral or any part thereof, or to any of the Obligations, the Company agrees to execute and deliver all such instruments and documents and to do all such other things as the Agent in its sole discretion deems necessary or appropriate to preserve, protect and enforce the security interest of the Agent under the law of such other jurisdiction. The Company agrees to mark its books and records to reflect the security interest of the Agent in the Collateral. (n) On failure of the Company to perform any of the covenants and agreements herein contained, the Agent may at its option perform the same and in so doing may expend such sums as the Agent may reasonably deem advisable in the performance thereof, including, without limitation, the payment of any insurance premiums, the payment of any taxes, liens and encumbrances, expenditures made in defending against any adverse claims, and all other expenditures which the Agent may be compelled to make by operation of law or which the Agent may make by agreement or otherwise for the protection of the security hereof. All such sums and amounts so expended shall be repayable by the Company immediately without notice or demand, shall constitute -8- 22 additional Obligations secured hereunder and shall bear interest from the date said amounts are expended at the rate per annum (computed on the basis of a 360-day year for the actual number of days elapsed) determined by adding 2% to the Domestic Rate as from time to time in effect with any change in such rate per annum as so determined by reason of a change in such Domestic Rate to be effective on the date of such change in said Domestic Rate (such rate per annum as so determined being hereinafter referred to as the "Default Rate"). No such performance of any covenant or agreement by the Agent on behalf of the Company, and no such advancement or expenditure therefor, shall relieve the Company of any default under the terms of this Agreement or in any way obligate the Agent or any Lender to take any further or future action with respect thereto. The Agent in making any payment hereby authorized may do so according to any bill, statement or estimate procured from the appropriate public office or holder of the claim to be discharged without inquiry into the accuracy of such bill, statement or estimate or into the validity of any tax assessment, sale, forfeiture, tax lien or title or claim. The Agent in performing any act hereunder shall be the sole judge of whether the Company is required to perform the same under the terms of this Agreement. The Agent is hereby authorized to charge any depository or other account of the Company maintained with the Agent for the amount of such sums and amounts so expended. Section 4. Special Provisions Re: Receivables. (a) As of the time any Receivable becomes subject to the security interest provided for hereby and at all times thereafter, the Company shall be deemed to have warranted as to each and all of such Receivables that all warranties of the Company set forth in this Agreement are true and correct with respect to each such Receivable; that each Receivable and all papers and documents relating thereto are genuine and in all respects what they purport to be; that each Receivable is valid and subsisting and, if such Receivable is an account, arises out of a bona fide sale of goods sold and delivered by the Company to, or in the process of being delivered to, or out of and for services theretofore actually rendered by the Company to, the account debtor named therein; that no such Receivable is evidenced by any instrument or chattel paper unless such instrument or chattel paper has theretofore been endorsed by the Company and delivered to the Agent (except to the extent the Agent specifically requests the Company not to do so with respect to any such instrument or chattel paper); that no surety bond was required or given in connection with such Receivable or the contracts or purchase orders out of which the same arose; and that if said Receivable is scheduled, listed or referred to on any certificate evidencing the Borrowing Base or is otherwise a Receivable which the Company wants the Lenders to consider as an Eligible Account, that said Receivable qualifies as an Eligible Account. Without limiting the foregoing, if any Receivable which the Company desires to qualify as an Eligible Account arises out of a contract with the United States of America or any of its departments, agencies or instrumentalities, the Company agrees to notify the Agent and execute whatever instruments and documents are required by the Agent in order that such Receivable shall be assigned to the Agent and that proper notice of such assignment shall be given under the federal Assignment of Claims Act (or any successor statute). (b) Unless and until an Event of Default hereunder occurs, any merchandise or other goods which are returned by a customer or account debtor or otherwise recovered may be resold -9- 23 by the Company in the ordinary course of its business as presently conducted in accordance with Section 6(b) hereof; upon the occurrence and during the continuation of any Event of Default hereunder, such merchandise and other goods shall be set aside at the request of the Agent and held by the Company as trustee for the Agent and the Lenders and shall remain part of the Collateral. Unless and until an Event of Default hereunder occurs, the Company may settle and adjust disputes and claims with its customers and account debtors, handle returns and recoveries and grant discounts, credits and allowances in the ordinary course of its business as presently conducted for amounts and on terms which the Company in good faith considers advisable. Upon the occurrence and during the continuation of any Event of Default hereunder, unless the Agent requests otherwise, the Company shall notify the Agent promptly of all returns and recoveries and, on the Agent's request, deliver any such merchandise or other goods to the Agent. Upon the occurrence and during the continuation of any Event of Default hereunder, unless the Agent requests otherwise, the Company shall also notify the Agent promptly of all disputes and claims and settle or adjust them at no expense to the Agent or the Lenders hereunder, but no discount, credit or allowance other than on normal trade terms in the ordinary course of business as presently conducted shall be granted to any customer or account debtor and no returns of merchandise or other goods shall be accepted by the Company without the Agent's consent. The Agent may, at all times upon the occurrence and during the continuation of any Event of Default hereunder, settle or adjust disputes and claims directly with customers or account debtors for amounts and upon terms which the Agent considers advisable. Section 5. Collection of Receivables. (a) Except as otherwise provided in this Agreement, the Company shall make collection of all Receivables and may use the same to carry on its business in accordance with sound business practice and otherwise subject to the terms hereof. (b) Whether or not any Default or Event of Default has occurred hereunder and whether or not the Agent has exercised any or all of its rights under other provisions of this Section 5, in the event the Agent requests the Company to do so: (i) all instruments and chattel paper at any time constituting part of the Receivables (including any postdated checks) shall, upon receipt by the Company, be immediately endorsed to and deposited with Agent; and/or (ii) the Company shall instruct all customers and account debtors to remit all payments in respect of Receivables to a lockbox or lockboxes under the sole custody and control of Agent and which are maintained at post offices selected by the Agent. (c) Upon the occurrence and during the continuation of any Default or Event of Default hereunder, whether or not the Agent has exercised any or all of its rights under other provisions of this Section 5, the Agent or its designee may notify the Company's customers and account debtors at any time that Receivables have been assigned to the Agent or of the Agent's security interest therein, and either in its own name, or the Company's name, or both, demand, collect (including, without limitation, through a lockbox analogous to that described in Section 5(b)(ii) hereof), receive, receipt for, sue for, compound and give acquittance for any or all amounts due or -10- 24 to become due on Receivables, and in the Agent's discretion file any claim or take any other action or proceeding which the Agent may deem reasonably necessary or appropriate to protect and realize upon the security interest of the Agent in the Receivables. (d) Any proceeds of Receivables or other Collateral transmitted to or otherwise received by the Agent pursuant to any of the provisions of Sections 5(b) or 5(c) hereof may be handled and administered by the Agent in and through a remittance account or accounts maintained at the Agent or by the Agent at a commercial bank or banks selected by the Agent (each a "Depositary Bank"), and the Company acknowledges that the maintenance of such remittance accounts by the Agent is solely for the Agent's convenience and that the Company does not have any right, title or interest in such remittance accounts or any amounts at any time standing to the credit thereof. The Agent may apply all or any part of any proceeds of Receivables or other Collateral received by it from any source to the payment of the Obligations (whether or not then due and payable), such applications to be made in such amounts, in such manner and order and at such intervals as the Agent may from time to time in its discretion determine, but not less often than once each week. The Agent need not apply or give credit for any item included in proceeds of Receivables or other Collateral until the relevant Depositary Bank has received final payment therefor at its office in cash or final solvent credits current at the site of deposit acceptable to the Agent and the relevant Depositary Bank as such. However, if the Agent does permit credit to be given for any item prior to a Depositary Bank receiving final payment therefor and such Depositary Bank fails to receive such final payment or an item is charged back to the Agent or any Depositary Bank for any reason, the Agent may at its election in either instance charge the amount of such item back against any such remittance accounts or any depository account of the Company maintained with the Agent, together with interest thereon at the Default Rate. Concurrently with each transmission of any proceeds of Receivables or other Collateral to any remittance account, the Company shall furnish the Agent with a report in such form as Agent shall reasonably require identifying the particular Receivable or such other Collateral from which the same arises or relates. Unless and until a Default or an Event of Default shall have occurred and be continuing hereunder, the Agent will cause proceeds of Collateral which the Agent has not applied to the Obligations as provided above to be released from the remittance accounts from time to time or otherwise make such proceeds available to the Company at its request, but not less often than once per week. The Company hereby indemnifies the Agent and the Lenders from and against all liabilities, damages, losses, actions, claims, judgments, costs, expenses, charges and attorneys' fees suffered or incurred by the Agent or any Lender because of the maintenance of the foregoing arrangements; provided, however, that the Company shall not be required to indemnify the Agent or any Lender for any of the foregoing to the extent they arise solely from the gross negligence or willful misconduct of the person seeking to be indemnified. The Agent and the Lenders shall have no liability or responsibility to the Company for the Agent or any other Depositary Bank accepting any check, draft or other order for payment of money bearing the legend "payment in full" or words of similar import or any other restrictive legend or endorsement whatsoever or be responsible for determining the correctness of any remittance. Section 6. Special Provisions Re: Inventory and Equipment. (a) The Company will at its own cost and expense maintain, keep and preserve the Inventory in good and merchantable condition and keep and preserve the Equipment in good -11- 25 repair, working order and condition, ordinary wear and tear excepted, and, without limiting the foregoing, make all necessary and proper repairs, replacements and additions to the Equipment so that the efficiency thereof shall be fully preserved and maintained. (b) The Company may, until an Event of Default has occurred and is continuing and thereafter until otherwise notified by the Agent, use, consume and sell the Inventory in the ordinary course of its business, but a sale in the ordinary course of business shall not under any circumstance include any transfer or sale in satisfaction, partial or complete, of a debt owing by the Company. (c) The Company may, until an Event of Default has occurred and is continuing and thereafter until otherwise notified by the Agent, sell (i) obsolete, worn out or unusable Equipment which is concurrently replaced with similar Equipment at least equal in quality and condition to that sold and owned by the Company free of any lien, charge or encumbrance other than the security interest granted hereby and (ii) Equipment which this Agreement would not require the Company to repair or replace if the same were lost, damaged or destroyed pursuant to Section 3(g) hereof. (d) As of the time any Inventory or Equipment becomes subject to the security interest provided for hereby and at all times thereafter, the Company shall be deemed to have warranted as to any and all of such Inventory and Equipment that all warranties of the Company set forth in this Agreement are true and correct with respect to such Inventory and Equipment; that all of such Inventory and Equipment is located at a location set forth pursuant to Section 3(b) hereof. The Company warrants and agrees that no Inventory is or will be consigned to any other person or entity without the Agent's prior written consent. (e) Upon the Agent's request, the Company shall at its own cost and expense cause the lien of the Agent in and to any portion of the Collateral subject to a certificate of title law to be duly noted on such certificate of title or to be otherwise filed in such manner as is prescribed by law in order to perfect such lien and will cause all such certificates of title and evidences of lien to be deposited with the Agent. (f) Except for Equipment from time to time located on the real estate described on Schedule B attached hereto and as otherwise disclosed to the Lenders in writing, none of the Equipment is or will be attached to real estate in such a manner that the same may become a fixture. (g) If any of the Inventory is at any time evidenced by a document of title, such document shall be promptly delivered by the Company to the Agent. -12- 26 Section 7. Special Provisions Re: Investment Property. (a) Unless and until an Event of Default has occurred and is continuing and thereafter until notified to the contrary by the Agent pursuant to Section 9(d) hereof: (i) The Company shall be entitled to exercise all voting and/or consensual powers pertaining to the Investment Property or any part thereof, for all purposes not inconsistent with the terms of this Agreement or any other document evidencing or otherwise relating to any Obligations; and (ii) The Company shall be entitled to receive and retain all cash dividends paid upon or in respect of the Investment Property. (b) At the Agent's request, certificates for all securities now or at any time constituting Investment Property shall be promptly delivered by the Company to the Agent duly endorsed in blank for transfer or accompanied by an appropriate assignment or assignments or an appropriate undated stock power or powers, in every case sufficient to transfer title thereto, including, without limitation, all stock received in respect of a stock dividend or resulting from a split-up, revision, or reclassification of the Investment Property or any part thereof or received in addition to, in substitution of, or in exchange for the Investment Property or any part thereof as a result of a merger, consolidation, or otherwise. With respect to any Investment Property held by a securities intermediary, commodity intermediary, or other financial intermediary of any kind, at the Agent's request, the Company shall execute and deliver, and shall cause any such intermediary to execute and deliver, an agreement among the Company, the Agent, and such intermediary in form and substance reasonably satisfactory to the Agent which provides, among other things, for the intermediary's agreement that it shall comply with entitlement orders, and apply any value distributed on account of any Investment Property maintained in an account with such intermediary, as directed by the Agent without further consent by the Company. The Agent may at any time, after the occurrence of an Event of Default or an event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, cause to be transferred into its name or the name of its nominee or nominees all or any part of the Investment Property hereunder. (c) Unless and until an Event of Default, or an event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, has occurred and is continuing, the Company may sell or otherwise dispose of any Investment Property, provided that sales or other dispositions of capital stock of any direct or indirect Subsidiary shall be in accordance with the terms of the Credit Agreement. After the occurrence and during the continuation of any Event of Default or of any event or condition which with the lapse of time or the giving of notice, or both, would constitute an Event of Default, the Company shall not sell all or any part of the Investment Property without the prior written consent of the Agent. (d) The Company represents that on the date of this Agreement, none of the Investment Property consists of margin stock (as such term is defined in Regulation U of the Board of Governors of the Federal Reserve System) except to the extent the Company has delivered to the Agent a duly executed and completed Form U-1 with respect to such stock. If at any time the -13- 27 Investment Property or any part thereof consists of margin stock, the Company shall promptly so notify the Agent and deliver to the Agent a duly executed and completed Form U-1 and such other instruments and documents reasonably requested by the Agent in form and substance reasonably satisfactory to the Agent. (e) Notwithstanding anything to the contrary contained herein, in the event any Investment Property is subject to the terms of a separate security agreement in favor of the Agent, the terms of such separate security agreement shall govern and control unless otherwise agreed to in writing by the Agent. Section 8. Power of Attorney. In addition to any other powers of attorney contained herein, the Company hereby appoints the Agent, its nominee, or any other person whom the Agent may designate as the Company's attorney in fact, with full power upon the occurrence and during the continuation of an Event of Default hereunder to sign the Company's name on verifications of accounts, to send requests for verification of Receivables to the Company's customers and account debtors, to endorse the Company's name on any checks, notes, acceptances, money orders, drafts and any other forms of payment or security that may come into the Agent's possession, to sign the Company's name on any invoice or bill of lading relating to any Receivables, on claims to enforce collection of any Receivable, on notices to and drafts against customers and account debtors, on schedules and assignments of Receivables, on notices of assignment and on public records, to notify the post office authorities to change the address for delivery of the Company's mail to an address designated by the Agent, to receive, open and dispose of all mail addressed to the Company and to do all things necessary to carry out this Agreement. The Company hereby ratifies and approves all acts of any such attorney and agrees that neither the Agent nor any such attorney will be liable for any acts or omissions nor for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct. The foregoing power of attorney, being coupled with an interest, is irrevocable until the Obligations have been fully paid and satisfied and the commitments of the Lenders to extend credit to or for the account of the Company under the Credit Agreement have terminated. The Agent may file one or more financing statements disclosing its security interest in any or all of the Collateral without the Company's signature appearing thereon. The Company also hereby grants the Agent a power of attorney to execute any such financing statements, or amendments and supplements to financing statements, on behalf of the Company without notice thereof to the Company, which power of attorney is coupled with an interest and is irrevocable until the Obligations have been fully paid and satisfied and the commitments of the Lenders to extend credit to or for the account of the Company under the Credit Agreement have terminated. Section 9. Defaults and Remedies. (a) The occurrence of any event or the existence of any condition which is specified as an "Event of Default" under the Credit Agreement shall constitute an "Event of Default" hereunder. (b) Upon the occurrence and during the continuation of any Event of Default hereunder, the Agent shall have, in addition to all other rights provided herein or by law, the rights and remedies of a secured party under the Code (regardless of whether the Code is the law of the -14- 28 jurisdiction where the rights or remedies are asserted and regardless of whether the Code applies to the affected Collateral), and further the Agent may, without demand and without advertisement, notice, hearing or process of law, all of which the Company hereby waives, at any time or times, sell and deliver any or all Collateral held by or for it at public or private sale, for cash, upon credit or otherwise, at such prices and upon such terms as the Agent deems advisable, in its sole discretion. In addition to all other sums due the Agent or any Lender hereunder, the Company shall pay the Agent and any Lender all costs and expenses incurred by the Agent or such Lender, including attorneys' fees and court costs, in obtaining, liquidating or enforcing payment of Collateral or the Obligations or in the prosecution or defense of any action or proceeding by or against the Agent, such Lender or the Company concerning any matter arising out of or connected with this Agreement or the Collateral or the Obligations, including, without limitation, any of the foregoing arising in, arising under or related to a case under the United States Bankruptcy Code (or any successor statute). Any requirement of reasonable notice shall be met if such notice is personally served on or mailed, postage prepaid, to the Company in accordance with Section 13(b) hereof at least ten days before the time of sale or other event giving rise to the requirement of such notice; provided however, no notification need be given to the Company if the Company has signed, after an Event of Default hereunder has occurred, a statement renouncing any right to notification of sale or other intended disposition. The Agent shall not be obligated to make any sale or other disposition of the Collateral regardless of notice having been given. The Agent or any Lender may be the purchaser at any such sale. The Company hereby waives all of its rights of redemption from any such sale. Subject to the provisions of applicable law, the Agent may postpone or cause the postponement of the sale of all or any portion of the Collateral by announcement at the time and place of such sale, and such sale may, without further notice, be made at the time and place to which the sale was postponed or the Agent may further postpone such sale by announcement made at such time and place. (c) Without in any way limiting the foregoing, upon the occurrence and during the continuation of any Event of Default hereunder, the Agent shall have the right, in addition to all other rights provided herein or by law, to take physical possession of any and all of the Collateral and anything found therein, the right for that purpose to enter without legal process any premises where the Collateral may be found (provided such entry be done lawfully), and the right to maintain such possession on the Company's premises (the Company hereby agreeing to lease such premises without cost or expense to the Agent or its designee if the Agent so requests) or to remove the Collateral or any part thereof to such other places as the Agent may desire. Upon the occurrence and during the continuation of any Event of Default hereunder, the Agent shall have the right to exercise any and all rights with respect to deposit accounts of the Company maintained with the Agent or any Lender, including, without limitation, the right to collect, withdraw and receive all amounts due or to become due or payable under each such deposit account. Upon the occurrence and during the continuation of any Event of Default hereunder, the Company shall, upon the Agent's demand, assemble the Collateral and make it available to the Agent at a place designated by the Agent. If the Agent exercises its right to take possession of the Collateral, the Company shall also at its expense perform any and all other steps requested by the Agent to preserve and protect the security interest hereby granted in the Collateral, such as placing and maintaining signs indicating the security interest of the Agent, appointing overseers for the Collateral and maintaining Collateral records. -15- 29 (d) Without in any way limiting the foregoing, upon the occurrence and during the continuation of any Event of Default, all rights of the Company to exercise the voting and/or consensual powers which it is entitled to exercise pursuant to Section 7(a)(i) hereof and/or to receive and retain the distributions which it is entitled to receive and retain pursuant to Section 7(a)(ii) hereof, shall, at the option of the Agent, cease and thereupon become vested in the Agent, which, in addition to all other rights provided herein or by law, shall then be entitled solely and exclusively to exercise all voting and other consensual powers pertaining to the Investment Property and/or to receive and retain the distributions which the Company would otherwise have been authorized to retain pursuant to Section 7(a)(ii) hereof and shall then be entitled solely and exclusively to exercise any and all rights of conversion, exchange, or subscription or any other rights, privileges, or options pertaining to any Investment Property as if the Agent were the absolute owner thereof. Without limiting the foregoing, the Agent shall have the right to exchange, at its discretion, any and all of the Investment Property upon the merger, consolidation, reorganization, recapitalization, or other readjustment of the respective issuer thereof or upon the exercise by or on behalf of any such issuer or the Agent of any right, privilege, or option pertaining to any Investment Property and, in connection therewith, to deposit and deliver any and all of the Investment Property with any committee, depositary, transfer agent, registrar, or other designated agency upon such terms and conditions as the Agent may determine. In the event the Agent in good faith believes any of the Collateral constitutes restricted securities within the meaning of any applicable securities laws, any disposition thereof in compliance with such laws shall not render the disposition commercially unreasonable. (e) Without in any way limiting the foregoing, the Company hereby grants to the Agent and the Lenders a royalty-free irrevocable license and right to use all of the Company's patents, patent applications, patent licenses, trademarks, trademark registrations, trademark licenses, trade names, trade styles, and similar intangibles in connection with any foreclosure or other realization by the Agent or the Lenders on all or any part of the Collateral. The license and right granted the Agent and the Lenders hereby shall be without any royalty or fee or charge whatsoever. (f) The powers conferred upon the Agent hereunder are solely to protect its interest in the Collateral and shall not impose on it any duty to exercise such powers. The Agent shall be deemed to have exercised reasonable care in the custody and preservation of Investment Property in its possession if such Collateral is accorded treatment substantially equivalent to that which the Agent accords its own property, consisting of similar type assets, it being understood, however, that the Agent shall have no responsibility for ascertaining or taking any action with respect to calls, conversions, exchanges, maturities, tenders, or other matters relating to any such Collateral, whether or not the Agent has or is deemed to have knowledge of such matters. This Agreement constitutes an assignment of rights only and not an assignment of any duties or obligations of the Company in any way related to the Collateral, and the Agent shall have no duty or obligation to discharge any such duty or obligation. The Agent shall have no responsibility for taking any necessary steps to preserve rights against any parties with respect to any Collateral or initiating any action to protect the Collateral against the possibility of a decline in market value. Neither the Agent nor any party acting as attorney for the Agent shall be liable for any acts or omissions or for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct. -16- 30 (g) Failure by the Agent to exercise any right, remedy or option under this Agreement or any other agreement between the Company and the Agent or provided by law, or delay by the Agent in exercising the same, shall not operate as a waiver; and no waiver shall be effective unless it is in writing, signed by the party against whom such waiver is sought to be enforced and then only to the extent specifically stated. Neither the Agent or any Lender, nor any party acting as attorney for the Agent or any Lender, shall be liable hereunder for any acts or omissions or for any error of judgment or mistake of fact or law other than their gross negligence or willful misconduct. The rights and remedies of the Agent and the Lenders under this Agreement shall be cumulative and not exclusive of any other right or remedy which the Agent or the Lenders may have. For purposes of this Agreement, a Default or Event of Default shall be construed as continuing after its occurrence until the same is waived in writing by the Lenders or the Required Lenders, as the case may be, in accordance with the Credit Agreement or, in the case of a Default, the same is cured by the Company within any applicable cure period. Section 10. Application of Proceeds. The proceeds and avails of the Collateral at any time received by the Agent upon the occurrence and during the continuation of any Event of Default hereunder shall, when received by the Agent in cash or its equivalent, be applied by the Agent as follows: (a) first, to the payment of any outstanding costs and expenses incurred by the Agent in monitoring, verifying, protecting, preserving or enforcing the Liens on the Collateral, and in protecting, preserving or enforcing rights under this Agreement or any of the other Loan Documents, and in any event including all costs and expenses of a character which the Company has agreed to pay under Section 11.15 of the Credit Agreement (such funds to be retained by the Agent for its own account unless it has previously been reimbursed for such costs and expenses by the Lenders, in which event such amounts shall be remitted to the Lenders to reimburse them for payments theretofore made to the Agent); (b) second, to the payment of any outstanding interest or other fees or amounts due under this Agreement or any of the other Loan Documents other than for principal, pro rata as among the Agent and the Lenders in accord with the amount of such interest and other fees or amounts owing each; (c) third, to the payment of the principal of the Notes and any liabilities in respect of unpaid drawings under the Letters of Credit, pro rata as among the Lenders in accord with the then respective unpaid principal balances of the Notes and the then unpaid liabilities in respect of unpaid drawings under the Letters of Credit; (d) fourth, to the Agent, to be held as collateral security for any undrawn Letters of Credit, until the Agent is holding an amount of cash equal to the then outstanding amount of all Letters of Credit; and (e) fifth, to the Agent and the Lenders pro rata in accord with the amounts of any other Obligations (including, without limitation, Hedging Liability) owing to them and secured hereby unless and until all such Obligations have been fully paid and satisfied. -17- 31 The Company shall remain liable to the Agent and the Lenders for any deficiency. Any surplus remaining after the full payment and satisfaction of the Obligations shall be returned to the Company or to whomsoever the Agent reasonably determines is lawfully entitled thereto. Section 11. Continuing Agreement. This Agreement shall be a continuing agreement in every respect and shall remain in full force and effect until all of the Obligations, both for principal and interest, have been fully paid and satisfied and the commitments of the Lenders to extend credit to or for the account of the Company under the Credit Agreement have terminated. Upon such termination of this Agreement, the Agent shall, upon the request and at the expense of the Company, forthwith release its security interest hereunder. Section 12. The Agent. In acting under or by virtue of this Agreement, the Agent shall be entitled to all the rights, authority, privileges and immunities provided in Section 10 of the Credit Agreement, all of which provisions of said Section 10 are incorporated by reference herein with the same force and effect as if set forth herein in their entirety. The Agent hereby disclaims any representation or warranty to the Lenders concerning the perfection of the security interest granted hereunder or in the value of any of the Collateral. Section 13. Miscellaneous. (a) This Agreement cannot be changed or terminated orally. This Agreement shall create a continuing security interest in the Collateral and shall be binding upon the Company, its successors and assigns and shall inure, together with the rights and remedies of the Agent and the Lenders hereunder, to the benefit of the Agent, the Lenders, and their successors and assigns; provided, however, that the Company may not assign its rights or delegate its duties hereunder without the Agent's prior written consent. Without limiting the generality of the foregoing, and subject to the provisions of Section 11.12 of the Credit Agreement, any Lender may assign or otherwise transfer any indebtedness held by it secured by this Agreement to any other person or entity, and such other person or entity shall thereupon become vested with all the benefits in respect thereof granted to such Lender herein or otherwise, subject, however, to the provisions of the Credit Agreement. The Company hereby releases the Agent and each Lender from any liability for any act or omission relating to the Collateral or this Agreement, except for the Agent's or such Lender's gross negligence or willful misconduct. (b) Except as otherwise specified herein, all notices hereunder shall be in writing (including, without limitation, notice by telecopy) and shall be given to the relevant party, and shall be deemed to have been made when given to the relevant party, in accordance with Section 11.8 of the Credit Agreement. (c) No Lender shall have the right to institute any suit, action or proceeding in equity or at law for the foreclosure or other realization upon any Collateral subject to this Agreement or for the execution of any trust or power hereof or for the appointment of a receiver, or for the enforcement of any other remedy under or upon this Agreement; it being understood and intended that no one or more of the Lenders shall have any right in any manner whatsoever to affect, disturb or prejudice the lien and security interest of this Agreement by its or their action or to -18- 32 enforce any right hereunder, and that all proceedings at law or in equity shall be instituted, had and maintained by the Agent in the manner herein provided for the benefit of the Lenders. (d) In the event that any provision hereof shall be deemed to be invalid or unenforceable by reason of the operation of any law or by reason of the interpretation placed thereon by any court, this Agreement shall be construed as not containing such provision, but only as to such jurisdictions where such law or interpretation is operative, and the invalidity or unenforceability of such provision shall not affect the validity of any remaining provisions hereof, and any and all other provisions hereof which are otherwise lawful and valid shall remain in full force and effect. (e) This Agreement shall be deemed to have been made in the State of Illinois and shall be governed by, and construed in accordance with, the laws of the State of Illinois. All terms which are used in this Agreement which are defined in the Code shall have the same meanings herein as said terms do in the Code unless this Agreement shall otherwise specifically provide. The headings in this Agreement are for convenience of reference only and shall not limit or otherwise affect the meaning of any provision hereof. (f) This Agreement may be executed in any number of counterparts and by different parties hereto on separate counterpart signature pages, each constituting an original, but all together one and the same agreement. (g) This Agreement shall be and become effective on the Security Effective Date as defined in Section 1.20(b) of the Credit Agreement. IN WITNESS WHEREOF, the Company has caused this Agreement to be duly executed and delivered as of the date first above written. INFORMATION RESOURCES, INC. By Name _________________________________ Title ________________________________ Accepted and agreed to as of the date first above written. HARRIS TRUST AND SAVINGS BANK, as Agent as aforesaid for the Lenders By Name _________________________________ Title ________________________________ -19- 33 SCHEDULE A LOCATIONS Item 1. Debtor's chief financial office and principal place of business: 150 North Clinton Street Chicago, Illinois 60606 Item 2. Additional Places of Business and/or Permitted Collateral Locations: IRI CORPORATE AND BRANCH OFFICES
OFFICE LOCATION STREET ADDRESS CITY STATE ZIP Chicago 150 N. Clinton Chicago IL 60661 Chicago (12/1/2000) 550 W. Washington Chicago IL 60661 Chicago 564 W. Randolph Chicago IL 60661 Chicago 6616 N. Cumberland Chicago IL 60656 Wood Dale 341-361 Haynes Drive Wood Dale IL 60191 Atlanta 7840 Rosewell Road, Building #100, Atlanta GA 30350 Suite Cincinnati Chiquita Center - Suite #700, 250 E. Cincinnati OH 45202 Fifth Fairfield Greenbrook Corporate Center, 100 Fairfield NJ 07004 Passi Fort Washington 500 Office Center Drive Fort Washington PA 19034 Los Angeles 200 North Sepulveda Blvd., Suite #800 El Segundo CA 90245 Minneapolis 7650 Edinborough Way, Suite #650 Edina MN 55435 Norwalk 383 Main Avenue Norwalk CT 06851 San Francisco 525 Market Street, 24th Floor San Francisco CA 94105 Waltham 1601 Trapelo Road Waltham MA 02451 Winston-Salem, N.C. 150 South Stratford Road, Suite #530 Winston-Salem NC 27103 Toronto 4711 Yonge Street North York Ontario M2N 6K8 B'SCAN MARKETS 1/1/2001 OFFICE LOCATION STREET ADDRESS CITY STATE ZIP #10 Cedar Rapids 819 Fifth Street, S.E. Cedar Rapids IA 52401 #3 Eau Claire 3540 Jeffers Road Eau Claire WI 54703 #7 Grand Junction Solarus Square, 2829 North Avenue Grand Junction CO 81501 #4 Midland 15 Byron Road Midland TX 79703 #1 Pittsifeld 631 North Street Pittsfield MA 01201 #1 Visalia 2043 South Court Street Visalia CA 93277 B'SCAN STUDIOS 1/1/2001 OFFICE LOCATION STREET ADDRESS CITY STATE ZIP Cedar Rapids 6300 Council St., N.E., Suite #8 Cedar Rapids IA 52402 Eau Claire 1040 Mary Lane Eau Claire WI 54703 Midland 2528 South Midkiff Avenue Midland TX 79701 Pittsfield 4 Fredrico Drive, Suite #C Pittsfield MA 01201
34 SCHEDULE B REAL ESTATE LEGAL DESCRIPTIONS --NONE-- EX-10.4 5 c58277ex10-4.txt DIRECTORS DEFERRED COMPENSATION AGREEMENT 1 EXHIBIT 10.4 INFORMATION RESOURCES, INC. DIRECTORS DEFERRED COMPENSATION PLAN EFFECTIVE: MAY 1, 2000 2 INFORMATION RESOURCES, INC. DIRECTORS DEFERRED COMPENSATION PLAN I. PURPOSE The purpose of the Information Resources, Inc. Directors Deferred Compensation Plan is to provide a means whereby the Company may afford certain members of the Board of Directors an opportunity to defer Director Fees otherwise payable in cash or stock. By providing a means whereby Director Fees may be deferred into the future, the Plan will further the growth and development of the Company and aid in attracting and retaining directors of exceptional ability. II. DEFINITIONS 2.01 "Administrative Committee" and "Committee" means the Plan Committee appointed pursuant to Article VI to manage and administer the Plan. 2.02 "Agreement" means the Information Resources, Inc. Directors Deferred Compensation Plan Participation Agreement, executed between a Participant and the Company, whereby a Participant agrees to defer a portion of his or her Director Fees pursuant to the provisions of the Plan, and the Company agrees to make benefit payments in accordance with the provisions of the Plan. 2.03 "Beneficiary" means the person, persons or trust who under the Plan, becomes entitled to receive a Participant's interest in the event of the Participant's death. 2.04 "Board of Directors" means the Board of Directors of Information Resources, Inc. or any committee acting within the scope of its authority. 2.05 "Company" means Information Resources, Inc. (also known as IRI), and its successors and assigns. 2.06 "Deferred Compensation Account" means the book entry account(s) maintained by the Company for each Participant, pursuant to Article III. Notwithstanding the provisions of Section 8.10, a Participant's Deferred Compensation Account shall not constitute or be treated as a trust fund or escrow arrangement of any kind. For purposes of this Plan, a book entry account shall mean a phantom account in which a Participant's deferrals and investments earnings and gains and/or losses and expenses are credited. No shares of Common Stock will actually be held (either by issuance or purchase) with respect to any investment in the Company stock-based deferral option. 2.07 "Deferred Compensation Plan Trust" and "Trust" mean the Information Resources, Inc. Deferred Compensation Plan Trust, an irrevocable grantor trust or trusts established by the Company, in accordance with Section 8.10, with an independent trustee for the benefit of persons entitled to receive payments under this Plan. 1 3 2.08 "Determination Date" means the date on which the amount of a Participant's Deferred Compensation Account is determined as provided in Article III hereof. The last day of each calendar quarter and the date of a Participant's Termination of Service shall be a Determination Date. 2.09 "Director Fees" for purposes of this Plan shall be the total of the director fees, including both cash and stock payments, and other remuneration for services rendered as a member of the Board of Directors during a Plan Year, including Retainer Fees and Meeting Fees. Director Fees shall not include any amounts paid that are not strictly for personal services, such as expense reimbursements. In addition, for purposes of this Plan, Director Fees shall not include any stock options received by a director. 2.10 "Fair Market Value" means either (a) the closing price of a share of the Company's Common Stock as reported on the NASDAQ Exchange (the "NASDAQ") on the date as of which such value is being determined, or, if there are no reported transactions for such date, on the next preceding date for which transactions were reported, as published in the Midwest Edition of The Wall Street Journal, or (b) if there is no reporting of transactions on the NASDAQ, the fair market value of a share of the Company's Common Stock as determined by the Board of Directors from time to time. 2.11 "Meeting Fees" means the compensation payable to a director with regard to the number of Board or committee meetings attended, or committee positions held, as determined by the Board from time to time. 2.12 "Participant" means a member of the Board of Directors of the Company who is not an employee, who is eligible to participate in the Plan pursuant to Section 3.01, and who enters into an Agreement. 2.13 "Plan" means the Information Resources, Inc. Directors Deferred Compensation Plan as amended from time-to-time. 2.14 "Plan Effective Date" means May 1, 2000. 2.15 "Plan Year" means a twelve (12) month period beginning on May 1 and ending on April 30. 2.16 "Retainer Fees" means the portion of a director's annual compensation that is payable without regard to the number of Board or committee meetings attended or committee positions, as determined by the Board from time to time. 2.17 "Retirement" means the date of a Termination of Service of a Participant for reasons other than death after he or she has completed at least one full term of three (3) years serving on the Board of Directors of the Company. 2.18 "Termination of Service" means the Participant's ceasing his or her service with the Company for any reason whatsoever, whether voluntarily or involuntarily, including by reason of Retirement or death. 2 4 III. ELIGIBILITY; PARTICIPATION LIMITS 3.01 a) Eligibility to Participate. Participation in the Plan shall be limited to non-employee directors of the Company approved to participate by the Committee. b) Election to Participate. An eligible director may elect to become a Participant by filing a properly completed Agreement with the Committee by such time and in such form as the Committee may require or permit. A Participant's election to defer pursuant to Section 3.02, shall remain in full force and effect for all subsequent Plan Years until such time as the Participant files a new Agreement with the Committee indicating a change in his prior Agreement. In order to be effective for the next calendar year, a Participant's Agreement must be received by December 1st of the preceding year. c) New Participants. A Participant who first attains such status subsequent to May 1, 2000 shall be eligible to participate in the Plan after satisfying the requirements of Section 3.01(a) and (b), as applicable, and shall be bound by all terms and conditions of the Plan, provided, however, that his or her Agreement is filed no later than thirty (30) days following notification by the Committee of his or her eligibility to participate in the Plan. 3.02 Deferral of Director Fees. A Participant may, in his or her Agreement filed with the Committee, elect to defer up to one hundred percent (100%) of his or her cash-based Director Fees in twenty-five (25%) increments during a Plan Year. In addition, a Participant may elect to defer up to one hundred percent (100%) of his or her stock-based compensation payable during a Plan Year, in twenty-five percent (25%) increments. At the time of election, a Participant may elect to defer a different percentage of his or her cash-based Director Fees and/or stock-based Director Fees for each Plan Year and may also elect not to defer any portion of his or her cash-based and/or stock-based Director Fees in a Plan Year. Except as provided in Section 4.05, "Hardship Distributions; Waiver of Deferrals," any election so made shall be irrevocable with respect to Director Fees applicable to the Plan Year. A Participant who does not file an Agreement for a Plan Year may file an Agreement for any subsequent Plan Year for which he or she is eligible to participate in the Plan. 3.03 Timing of Deferral Credits. The amount of Director Fees that a Participant elects to defer in his or her Agreement shall cause an equivalent reduction in the Participant's Director Fees, respectively. Deferrals shall be credited to the Participant's Deferred Compensation Account throughout the Plan Year as the Participant otherwise would have been paid the deferred portion of Director Fees. 3.04 Vesting. A Participant shall be one hundred percent (100%) vested in his or her Deferred Compensation Account equal to the amount of Director Fees the Participant deferred into his or her Deferred Compensation Account and the investment gains or losses credited thereon. 3 5 3.05 Determination of Account. Each Participant's Deferred Compensation Account as of each Determination Date shall consist of the balance of the Participant's Deferred Compensation Account as of the immediately preceding Determination Date adjusted for: - additional deferrals pursuant to Section 3.02, - distributions (if any); and - the appropriate investment earnings and gains and/or losses and expenses pursuant to Section 3.06 and 3.07. All adjustments and earnings related thereto, will be determined on a quarterly basis. The stock-based deferrals of a Participant's Deferred Compensation Account will be determined based on the performance of the Company's Common Stock. A Participant's deferral of stock-based Director Fees and related investment earnings must remain allocated to the phantom stock account. 3.06 Deferred Compensation Account Cash-Based Deferral Investment Options. The Committee shall designate from time to time one or more investment options in which the cash-based deferrals of a Participant's Deferred Compensation Accounts may be deemed invested. A Participant or Beneficiary shall allocate his or her Deferred Compensation Account among the deemed investment options by filing with the Committee a Deferral Allocation Election Form. A Participant may elect to allocate his or her Deferred Compensation Account in ten percent (10%) increments among as many of the investment options which are offered by the Company. For the Plan Year beginning May 1, 2000, and until changed by the Committee, the Committee has designated the following phantom investment options: a) Short-Term Bond Fund b) Equity Index Fund c) Large Cap Growth Fund d) Enhanced U.S. Equity Fund e) Mid-Cap Value Fund Any such investment allocation election shall be made on the Deferral Allocation Election Form and shall be subject to such rules as the Committee may prescribe, including, without limitation, rules concerning the manner of making investment allocation elections and the frequency and timing of changing such investment allocation elections. 4 6 The Committee shall have the sole discretion to determine the number of investment options to be designated hereunder and the nature of the investment options and may change or eliminate the investment options provided hereunder from time to time. For each investment option the Committee shall, in its sole discretion, select a mutual fund(s), an investment index, or shall create a phantom portfolio of such investments as it deems appropriate, to constitute the investment option. The Company may, but is under no obligation to, acquire any investment or otherwise set aside assets for the deemed investment of Deferred Compensation Accounts hereunder. The Committee shall determine the amount and rate of investment gains or losses with respect to any such investment option for any period, and may take into account any deemed expenses which would be incurred if actual investments were made. 3.07 Deferred Compensation Account Stock-Based Deferral Option. Amounts deemed invested in the Company stock-based deferral option shall initially be deemed invested in a number of phantom shares of Common Stock of the Company equal to the number of shares which would have otherwise been actually distributed to the Participant, on the date the amount is deemed so invested. When a dividend (other than a dividend payable in the form of shares) is declared with respect to the outstanding shares, the number of stock units credited to the Participant shall be increased by the number of stock units, determined by dividing (I) the product of (A) the number of stock units credited to the Participant's account under the Plan on the related dividend record date and (B) the amount of any cash dividend declared by the Company on a share (or, in the case of any dividend distributable in property other than shares, the per share value of such dividend, as determined by the Company for purposes of income tax reporting) by (ii) the Fair Market Value on the related dividend payment date. In the case of any dividend declared on shares which is payable in shares, the amount credited to a Participant's deemed investment in the Company stock-based deferral option shall be increased by the number of stock units equal to the product of (I) the number of Common Stock units credited to the Participant under the Plan on the related dividend record date and (ii) the number of shares distributable as a dividend on a share. In the event of any change in the number or kind of outstanding shares by reason of any recapitalization, reorganization, merger, consolidation, stock split or any similar change affecting the shares, other than a stock dividend as provided above, the Committee shall make an appropriate adjustment in the number of Common Stock units credited to the Participant. No shares of Common Stock will actually be held (either by issuance or purchase) with respect to any investment in the Company stock-based deferral option. 3.08 Change of Investment Election. A Participant may by a written notice delivered to the Committee no later than twenty (20) days before the first day of the next quarter, elect to change the manner in which his or her current cash-based Deferred Compensation Account and his or her future cash-based deferrals are deemed invested among the then-available investment options. Any change of investment allocations shall be effective on the first day of the quarter following the timely receipt of such notice. Once deferrals are made or investment earnings are credited into the Company stock-based deferral option, such deferrals may not be transferred out of this investment option. 5 7 IV. DISTRIBUTIONS 4.01 Distribution on Retirement. Upon a Participant's Termination of Service on or after a Retirement Date, distribution of the Participant's Deferred Compensation Account, determined under Section 3.05, as of the Determination Date coincident with or next following such Retirement Date, shall be made or commence as soon as practicable but in any event within ninety (90) days following the Participant's Termination of Service on or after his or her Retirement Date. The distribution shall be made as designated by the Participant in his or her Retirement Payout Election Form, subject to Section 4.04. In the event a lump-sum payment is elected, no investment earnings or losses shall be credited to a Participant's Deferred Compensation Account from the date of Termination of Service to the date of distribution. In the event a distribution is made pursuant to this Section 4.01, the Participant shall immediately cease to be eligible for any other benefit provided under this Plan. 4.02 Distribution on Death. Upon the death of a Participant prior to the distribution of all of his or her Deferred Compensation Account, distribution of the Participant's Deferred Compensation Account, as of the Determination Date coincident with or next following the date of death, shall be made or continue to be made to such Participant's Beneficiary. If the distribution of the Participant's Deferred Compensation Account has not yet commenced as of the date of death, distribution to the Beneficiary shall be made or commence as soon as practicable and in any event within ninety (90) days following the Participant's death. The method of distribution shall be as designated by the Participant in his or her Retirement Payout Election Form, subject to Section 4.04. In the event a lump-sum payment is elected, no investment earnings or losses shall be credited to a Participant's Deferred Compensation Account from the date of Termination of Service to the date of distribution. 4.03 Distribution on Termination of Service. Unless otherwise directed by the Committee, upon the Termination of Service of a Participant prior to his or her Retirement Date for reasons other than death, distribution of the Participant's Deferred Compensation Account shall be made as soon as practicable and in any event within ninety (90) days following such Termination of Service, in a single lump-sum, notwithstanding the provisions of Section 4.04. No investment earnings or losses shall be credited to a Participant's Deferred Compensation Account from the date of Termination of Service to the date of distribution. 6 8 4.04 Method of Timing of Distribution. a) Election in Agreement. Except in the case of a Termination of Service prior to the Participant's Retirement Date for reasons other than death, distribution of a Participant's cash-based Deferred Compensation Account shall be made in a lump-sum or installments, as elected by the Participant in his or her Retirement Payout Election Form. Installment payments shall be made quarterly over a period of up to twenty (20) years as elected by the Participant. The amount of each quarterly installment shall be determined annually and shall be equal to the quotient obtained by dividing the balance of the Participant's cash-based Deferred Compensation Account being distributed in installments by the number of installments remaining to be paid, including the current installment. Distribution of a Participant's stock-based Deferred Compensation Account shall be made in a lump-sum of shares of the Company's Common Stock or installments as elected by the Participant in his or her Retirement Payout Election form. Lump-sum distributions of the Company's Common Stock shall be equal to the value of a Participant's stock-based Deferred Compensation Account as of the applicable Determination Date. Installment payments of a Participant's stock-based Deferred Compensation Account will be paid to a Participant in an approximate equal number of shares over each quarter. b) Election to Change Method of Distribution. A Participant may, by written request filed with the Committee at least thirteen (13) months prior to the distribution or commencement of distribution of a Deferred Compensation Account, change the method of distribution elected with respect to a Deferred Compensation Account to any other method permitted under Section 4.04(a), provided that such request shall not be effective unless and until approved by the Committee. After a Participant's death, the Participant's Beneficiary may, prior to the distribution or commencement of distribution of the Participant's Deferred Compensation Account, petition the Committee requesting an acceleration of benefit payments otherwise due to be paid to the Beneficiary. The Committee may, but is not required, to grant such request. c) Notwithstanding any payment method elected by a Participant or Beneficiary, the Company may, in its sole discretion, elect to pay in a lump-sum any Deferred Compensation Account whose balance is less than $10,000. 4.05 Hardship Distributions; Waiver of Deferrals. In the event that the Committee, upon written petition of the Participant or Beneficiary, determines in its sole discretion that the Participant or Beneficiary has suffered an unforeseeable financial emergency, the Company if so directed by the Committee, shall distribute to the Participant or Beneficiary as soon as reasonably practicable following such determination, an amount, not in excess of the value of the Participant's Deferred Compensation Account, necessary to satisfy the emergency. For purposes of this Plan, an unforeseeable financial emergency is an unanticipated emergency that is caused by an event beyond the reasonable control of 7 9 the Participant or Beneficiary, such as the financial hardship which may result from accident, sudden illness or death of an immediate family member, or casualty loss. Financial need arising from foreseeable events, such as the purchase of a residence or educational expenses, shall not be considered an emergency. The Committee shall also grant a waiver of the Participant's Agreement to defer Director Fees upon finding that the Participant has suffered an unforeseeable financial emergency. The waiver shall be for such period of time as the Committee deems necessary under the circumstances. A Participant who is required to cease making deferrals due to the receipt of a hardship distribution, shall be permitted to begin making deferrals into this Plan by filing a new Agreement with the Company which such new Agreement shall become effective with respect to the designated Plan Year upon acceptance of the new Agreement by the Company. The new Agreement must be filed with the Company at least thirty (30) days prior to the calendar quarter in which deferrals are to commence. In the event the Committee determines a hardship distribution is appropriate, no investment earnings or losses will be credited to the Participant's Deferred Compensation Account with regards to the amount of the hardship distribution from the date the Committee approves the hardship distribution to the actual distribution date. 4.06 Withholding; Employment Taxes. To the extent required by the law in effect at the time payments are made, the Company shall withhold any taxes required to be withheld by the federal, or any state or local, government. 4.07 Commencement of Payments. Unless otherwise provided in this Plan, payments under this Plan shall commence as soon as practicable following the Participant's eligibility for payment, but in no event later than ninety (90) days following receipt of notice by the Committee of an event which entitles a Participant or Beneficiary to payments under this Plan, or at such other reasonably subsequent date as may be determined by the Committee. 4.08 Lump-sum Settlement/Call Right Option. Notwithstanding any other provision of this Plan, any Participant or Beneficiary may, at any time elect to receive an immediate lump-sum payment of the balance of his or her Deferred Compensation Account, reduced by a penalty equal to eight percent (8%) of the value of the Participant's remaining Deferred Compensation Account. The eight percent (8%) penalty amount shall be permanently forfeited and shall not be paid to, or in respect of, the Participant or his or her Beneficiary. In the event no such request is made by a Participant or Beneficiary, the Participant's Deferred Compensation Account shall be paid in accordance with the provisions of this Article IV. Any Participant who elects to receive an immediate lump-sum payment pursuant to this Section 4.08, shall forego further participation in the Plan for the remainder of the Plan Year in which the payment is received, in addition to the subsequent Plan Year. In the event a lump-sum payment is elected pursuant to this Section 4.08, no investment earnings or losses shall be credited to the Participant's Deferred Compensation Account from the date the Participant elects to receive the lump-sum payment until the actual distribution date. 8 10 4.09 Recipients of Payments: Designation of Beneficiary. All payments to be made by the Company under the Plan shall be made to the Participant during his or her lifetime, provided that if the Participant dies prior to the commencement or completion of such payments, then all subsequent payments under the Plan shall be made by the Company to the Beneficiary determined in accordance with this Section 4.09. The Participant may designate a Beneficiary by filing a written notice of such designation with the Committee in such form as the Committee requires and may include a contingent Beneficiary. The Participant may from time-to-time change the designated Beneficiary by filing a new designation in writing with the Committee. If no designation is in effect at the time any benefits payable under this Plan become due, the Beneficiary shall be the spouse of the Participant, or if no spouse is then living, the executor(s) or administrator(s) of the Participant's estate. 4.10 Distributions. All distributions of a Participant's cash-based Deferred Compensation Account shall be paid in United States dollars. All distributions of a Participant's stock-based Deferred Compensation Account shall be paid in shares of the Company's Common Stock. V. CLAIM FOR BENEFITS PROCEDURE 5.01 Claim for Benefits. Any claim for benefits under the Plan shall be made in writing to the Committee. If such claim for benefits is wholly or partially denied by the Committee, the Committee shall, within a reasonable period of time, but not later than sixty (60) days after receipt of the claim, notify the claimant of the denial of the claim. Such notice of denial shall be in writing and shall contain: a) The specific reason or reasons for the denial of the claim; b) A reference to the relevant Plan provisions upon which the denial is based; c) A description of any additional material or information necessary for the claimant to perfect the claim, together with an explanation of why such material or information is necessary; and d) A reference to the Plan's claim review procedure. 5.02 Request for Review of a Denial of a Claim for Benefits. Upon the receipt by the claimant of written notice of the denial of a claim, the claimant may within ninety (90) days file a written request to the Committee, requesting a review of the denial of the claim, which review shall include a hearing if deemed necessary by the Committee. In connection with the claimant's appeal of the denial of his or her claim, he or she may review relevant documents and may submit issues and comments in writing. To provide for fair review and a full record, the claimant must submit in writing all facts, reasons and arguments in support of his or her position within the time allowed for filing a written request for review. All issues and matters not raised for review will be deemed waived by the claimant. 9 11 5.03 Decision Upon Review of a Denial of a Claim for Benefits. The Committee shall render a decision on the claim review promptly, but no more than sixty (60) days after the receipt of the claimant's request for review, unless special circumstances (such as the need to hold a hearing) require an extension of time, in which case the sixty (60) day period shall be extended to one hundred-twenty (120) days. Such decision shall: a) Include specific reasons for the decision; b) Be written in a manner calculated to be understood by the claimant; and c) Contain specific references to the relevant Plan provisions upon which the decision is based. The decision of the Committee shall be final and binding in all respects on the Company, the claimant and any other person claiming an interest in the Plan through or on behalf of the claimant. No litigation may be commenced by or on behalf of a claimant with respect to this Plan until after and unless the claim and review process described in this Article V has been exhausted. Judicial review of Committee action shall be limited to whether the Committee acted in an arbitrary and capricious manner. VI. ADMINISTRATION 6.01 Plan Administrative Committee. The Plan shall be administered by the Administrative Committee. The Administrative Committee may assign duties to an officer or other employees of the Company, and may delegate such duties as it sees fit. An employee of the Company or the Administrative Committee member who is also a Participant in the Plan shall not be involved in the decisions of the Company or the Administrative Committee regarding any determination of any specific claim for benefit with respect to himself or herself. 6.02 General Rights, Powers and Duties of the Administrative Committee. The Administrative Committee shall be responsible for the management, operation and administration of the Plan. In addition to any powers, rights and duties set forth elsewhere in the Plan, it shall have complete discretion to exercise the following powers and duties: a) To adopt such rules and regulations consistent with the provisions of the Plan as it deems necessary for the proper and efficient administration of the Plan; b) To administer the Plan in accordance with its terms and any rules and regulations it establishes; c) To maintain records concerning the Plan sufficient to prepare reports, returns, and other information required by the Plan or by law; d) To construe and interpret the Plan, and to resolve all questions arising under the Plan; 10 12 e) To direct the Company to pay benefits under the Plan, and to give such other directions and instructions as may be necessary for the proper administration of the Plan; f) To employ or retain agents, attorneys, actuaries, accountants or other persons, who may also be Participants in the Plan or be employed by or represent the Company, as it deems necessary for the effective exercise of its duties, and may delegate to such persons any power and duties, both ministerial and discretionary, as it may deem necessary and appropriate, and the Committee shall be responsible for the prudent monitoring of their performance; and g) To be responsible for the preparation, filing, and disclosure on behalf of the Plan of such documents and reports as are required by any applicable federal or state law. 6.03 Information to be Furnished to Committee. The records of the Company shall be determinative of each Participant's period of service with the Company, Retirement Date, Termination of Service and the reason therefore, personal data, numbers of completed board terms and Director Fees and any deferrals. Participants and their Beneficiaries shall furnish to the Committee such evidence, data or information, and execute such documents as the Committee requests. 6.04 Indemnification. No director or member of the Committee shall be liable to any person for any action taken or omitted in connection with the administration of this Plan unless attributable to his or her own fraud or willful misconduct. The Company shall not be liable to any person for any such action unless attributable to fraud or willful misconduct on the part of a director, officer or employee of the Company. This indemnification shall not duplicate, but may supplement any coverage available under any applicable insurance coverage. VII. AMENDMENT AND TERMINATION 7.01 Amendment. The Plan may be amended in whole or in part at any time by a written instrument adopted by the Company. Notice of any material amendment shall be given in writing to the Committee and to each Participant, and each Beneficiary. No amendment shall retroactively decrease either the balance of a Participant's Deferred Compensation Account or a Participant's interest in his or her Deferred Compensation Account as existing immediately prior to the later of the effective date or adoption date of such amendment. 7.02 Company's Right to Terminate. The Company reserves the sole right to terminate, by action of its Administrative Committee, the Plan and/or the Agreement pertaining to a Participant at any time prior to the commencement of payment of his or her benefits. In the event of any such termination, a Participant shall be deemed to have incurred a Termination of Service, and his or her Deferred Compensation Account shall be paid in the manner provided in Section 4.03. 11 13 7.03 Special Termination. Any other provision of the Plan to the contrary notwithstanding, the Plan shall terminate if: The Plan is held to be ERISA Funded or Tax Funded, (as defined below), by a federal court, and appeals from that holding are no longer timely or have been exhausted. The Company may terminate the Plan if it determines, based on a legal opinion which is satisfactory to the Company, that either judicial authority or the opinion of the U.S. Department of Labor, Treasury Department or Internal Revenue Service (as expressed in proposed or final regulations, advisory opinions or rulings, or similar announcements) creates a significant risk that the Plan will be held to be ERISA Funded or Tax Funded, and failure to amend the Plan could subject the Company or the Participants to material penalties. Upon any such termination, the Company may: a) Transfer the rights and obligations of the Company and some or all Participants as determined by the Company in its sole discretion to a new plan established by the Company, which is not deemed to be ERISA Funded or Tax Funded, but which is substantially similar in all other respect to this Plan, if the Company determines that it is possible to establish such a Plan; or b) If the Company, in its sole discretion, determines that it is not possible to establish the Plan in 7.03(a) above for some or all Participants, such Participants shall be paid, a lump-sum equal to the value of his or her Deferred Compensation Account; or c) Pay to a Participant a lump-sum benefit equal to the value of his or her Deferred Compensation Account to the extent that a federal court has held that the interest of the Participant in the Plan is includable in the gross income of the Participant for federal income tax purposes prior to actual payment of Plan benefits; or d) Pay to a Participant a lump-sum benefit equal to the value of his or her Deferred Compensation Account if, based on a legal opinion satisfactory to the Company, there is a significant risk that such Participant will be determined not to be part of a "select group of management or highly compensated employees" for purposes of ERISA. For purposes of this Plan, "ERISA Funded" means that the Plan is prevented from meeting the "unfunded" criterion of the exceptions to the application of Parts 2 through 4 of Subtitle B of Title I of the Employee Retirement Income Security Act of 1974 (ERISA). In addition, for purposes of this Plan, "Tax Funded" means that the interest of a Participant in the Plan is determined to be includable in the gross income of the Participant for federal income tax purposes prior to actual receipt of Plan benefits by the Participant. A lump-sum payment to be made in accordance with this Section shall be subject to the provisions of Section 4.07. 12 14 VIII. MISCELLANEOUS 8.01 Separation of Plan: No Implied Rights. Neither the establishment of the Plan nor any amendment thereof shall be construed as giving any Participant, Beneficiary, or any other person any legal or equitable right unless such right shall be specifically provided for in the Plan or conferred by specific action of the Committee or Company in accordance with the terms and provisions of the Plan. Except as expressly provided in this Plan, the Company shall not be required or be liable to make any payment under this Plan. 8.02 No Right to Company Assets. Neither the Participant, a Beneficiary, nor any other person shall acquire by reason of the Plan any right in or title to any assets, funds or property of the Company whatsoever, including, without limiting the generality of the foregoing, any specific funds, assets or other property which the Company, in its sole discretion, may set aside in anticipation of a liability hereunder. Any benefits which become payable hereunder shall be paid from the general assets of the Company. The Participant and his or her Beneficiary shall have only a contractual right to the amounts, if any, payable hereunder, unsecured by any asset of the Company. Nothing contained in the Plan constitutes a guarantee by the Company that the assets of the Company shall be sufficient to pay any benefits to any person. 8.03 No Employment Rights. Nothing herein shall constitute a contract of employment or of continuing service or in any manner obligate the Company to continue the services of the Participant, or obligate the Participant to continue in the service of the Company, or as a limitation of the right of the Company to discharge any of its directors, with or without cause. Nothing herein shall be construed as fixing or regulating the Director Fees payable to the Participant. 8.04 Offset. If, at the time payments or installments of payments are to be made hereunder, either the Participant or Beneficiary is indebted or obligated to the Company, then the payments remaining to be made to the Participant or the Beneficiary may, at the discretion of the Company, be reduced by the amount of such indebtedness or obligation. However, an election by the Company not to reduce any such payment or payments shall not constitute a waiver of its claim, or prohibit or otherwise impair the Company's right to offset future payments for such indebtedness or obligation. 8.05 Protective Provisions. In order to facilitate the payment of benefits hereunder, each non-employee director designated eligible to participate in the Plan, shall cooperate with the Company by furnishing any and all information requested by the Company, including taking such physical examinations as the Company may deem necessary, and taking such other actions as may be requested by the Company. If the non-employee director refuses to cooperate, he or she shall not become a Participant in the Plan and the Company shall have no further obligation to him or her under the Plan. In the event a Participant has a balance in his or her Deferred Compensation Account, the Participant or his or her Beneficiary shall receive a benefit equal to his or her Deferred Compensation Account determined pursuant to Section 3.05 and paid in accordance with Section 4.03. 13 15 8.06 Non-assignability. Neither the Participant nor any other person shall have any voluntary or involuntary right to commute, sell, assign, pledge, anticipate, mortgage or otherwise encumber, transfer, hypothecate, or convey in advance of actual receipt the amounts, if any, payable hereunder, or any part thereof, which are expressly declared to be unassignable and non-transferable. No part of the amounts payable shall be, prior to actual payment, subject to seizure or sequestration for the payment of any debts, judgments, alimony or separate maintenance owed by the Participant or any other person, or be transferable by operation of law in the event of the Participant's, or any other person's bankruptcy or insolvency. 8.07 Gender and Number. Wherever appropriate herein, the masculine may mean feminine and the singular may mean the plural, or vice versa. 8.08 Notice. Any notice required or permitted to be given under the Plan shall be sufficient if in writing and hand delivered, or sent by registered or certified mail, and if given to the Company, delivered to the principal office of the Company, directed to the attention of the Administrative Committee. Such notice shall be deemed given as of the date of delivery, or, if delivery is made by mail, as of the date shown on the postmark or the receipt for registration or certification. 8.09 Governing Laws. The Plan shall be construed and administered according to the laws of the State of Illinois, to the extent not pre-empted by federal law. 8.10 Deferred Compensation Plan Trust. The Company may establish a Trust with (an) independent trustee(s), and shall comply with the terms of the Trust. The Company may transfer to the trustee(s) an amount of cash, marketable securities, or other property acceptable to the trustee(s) ("Trust Property") equal in value to all or a portion of the amount necessary, calculated in accordance with the terms of the Trust, to pay the Company's obligations under the Plan (the "Funding Amount"), and may make additional transfers to the trustees as may be necessary in order to maintain the Funding Amount. Trust Property so transferred shall be held, managed, and disbursed by the trustee(s) in accordance with the terms of the Trust. To the extent that Trust Property shall be used to pay the Company's obligations under the Plan, such payments shall discharge obligations of the Company; however, the Company shall continue to be liable for amounts not paid by the Trust. Trust Property will nevertheless be subject to claims of the Company's creditors in the event of bankruptcy or insolvency of the Company, and the Participant's, a Beneficiary's, or any other person's rights under the Plan and Trust shall at all times be subject to the provisions of Section 8.02. 14 16 IN WITNESS WHEREOF, the Company has adopted the Information Resources, Inc. Directors Deferred Compensation Plan effective May 1, 2000. Information Resources, Inc. By: /s/ Gary S. Newman ----------------------------------------- Its: Executive Vice President, Human Resources ----------------------------------------- 15 EX-27 6 c58277ex27.txt FINANCIAL DATA SCHEDULE
5 1,000 9-MOS DEC-31-2000 SEP-30-2000 12,937 0 81,807 3,312 0 100,352 218,261 143,713 356,110 107,436 0 0 0 291 212,536 356,110 0 394,744 0 402,493 0 0 2,793 (8,519) (3,380) (5,139) 0 0 0 (5,139) (0.18) (0.18)
-----END PRIVACY-ENHANCED MESSAGE-----