-----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, ATK9gnDqVHd2hNSalyVv/8ganCS+ZVNS7hSrOWNClxKNw5fZo7FpWTvZuq/tH3SO 57OhnKBgeNfZx6I+AHvbyA== 0000950137-99-003087.txt : 19990817 0000950137-99-003087.hdr.sgml : 19990817 ACCESSION NUMBER: 0000950137-99-003087 CONFORMED SUBMISSION TYPE: 10-Q PUBLIC DOCUMENT COUNT: 5 CONFORMED PERIOD OF REPORT: 19990630 FILED AS OF DATE: 19990816 FILER: COMPANY DATA: COMPANY CONFORMED NAME: INFORMATION RESOURCES INC CENTRAL INDEX KEY: 0000714278 STANDARD INDUSTRIAL CLASSIFICATION: SERVICES-ENGINEERING, ACCOUNTING, RESEARCH, MANAGEMENT [8700] IRS NUMBER: 362947987 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: 10-Q SEC ACT: SEC FILE NUMBER: 000-11428 FILM NUMBER: 99693755 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 FORM 10-Q 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 June 30, 1999 [ ] 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 -------------- Securities registered pursuant to Section 12(g) of the Act: Title of each class ------------------- Common, $.01 Par Value Per Share Preferred Stock Purchase Rights 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 July 31, 1999 was 28,111,847. 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 10 PART II. OTHER INFORMATION Item 6 - Exhibits and Reports Form 8-K 19 Signatures 20
2 3 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONDENSED CONSOLIDATED BALANCE SHEETS (IN THOUSANDS, EXCEPT SHARE DATA)
ASSETS JUNE 30, 1999 DECEMBER 31, 1998 - ------ ------------- ----------------- (UNAUDITED) CURRENT ASSETS Cash and cash equivalents $ 11,562 $ 11,149 Accounts receivable, net 95,928 87,637 Prepaid expenses and other 11,776 9,223 --------- ----------- Total Current Assets 119,266 108,009 --------- ----------- Property and equipment, at cost 189,960 177,443 Accumulated depreciation (109,479) (97,940) --------- ----------- Net property and equipment 80,481 79,503 Investments 10,210 9,792 Other assets 174,572 171,989 --------- ----------- $ 384,529 $ 369,293 ========= =========== LIABILITIES AND STOCKHOLDERS' EQUITY CURRENT LIABILITIES Current maturities of capitalized leases $ 445 $ 521 Accounts payable 38,400 43,640 Accrued compensation and benefits 21,407 20,925 Accrued property, payroll and other taxes 5,643 4,486 Accrued expenses 14,036 11,287 Deferred revenue 33,240 21,940 --------- ----------- Total Current Liabilities 113,171 102,799 --------- ----------- Long-term debt 12,534 4,575 Deferred income taxes, net 13,880 14,017 Other liabilities 10,519 9,450 STOCKHOLDERS' EQUITY Preferred stock-authorized, 1,000,000 shares, $.01 par value; none issued -- -- Common stock - authorized 60,000,000 shares, $.01 par value, 28,111,847 and 27,867,884 shares issued and outstanding, respectively 281 279 Capital in excess of par value 190,640 190,701 Retained earnings 49,995 49,778 Accumulated other comprehensive loss (6,491) (2,306) --------- ----------- Total Stockholders' Equity 234,425 238,452 --------- ----------- $ 384,529 $ 369,293 ========= ===========
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 SIX MONTHS ENDED ---------------------- ---------------------- JUNE 30 JUNE 30 ---------------------- ---------------------- 1999 1998 1999 1998 --------- --------- --------- --------- Information services revenues $ 137,847 $ 129,392 $ 269,592 $ 248,582 Costs and expenses: Information services sold (124,318) (112,039) (245,049) (216,408) Selling, general and administrative expenses (13,135) (11,436) (25,923) (22,971) --------- --------- --------- --------- (137,453) (123,475) (270,972) (239,379) --------- --------- --------- --------- Operating profit (loss) 394 5,917 (1,380) 9,203 Interest expense and other, net (424) (45) (590) (210) Equity in earnings (losses) of affiliated companies (98) 220 96 294 Minority interests benefit (expense) 1,100 (251) 2,285 (136) --------- --------- --------- --------- Earnings before income taxes 972 5,841 411 9,151 Income tax expense (504) (2,400) (194) (3,800) --------- --------- --------- --------- Net earnings $ 468 $ 3,441 $ 217 $ 5,351 ========= ========= ========= ========= Net earnings per common share - basic $ .02 $ .12 $ .01 $ .19 ========= ========= ========= ========= Net earnings per common and common equivalent share - diluted $ .02 $ .12 $ .01 $ .18 ========= ========= ========= ========= Weighted average common shares - basic 28,080 28,860 27,973 28,766 ========= ========= ========= ========= Weighted average common and common equivalent shares - diluted 28,098 29,839 27,990 29,393 ========= ========= ========= =========
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)
SIX MONTHS ENDED -------------------- JUNE 30 -------------------- 1999 1998 -------- -------- CASH FLOWS FROM OPERATING ACTIVITIES: Net earnings $ 217 $ 5,351 Adjustments to reconcile net earnings to net cash provided by operating activities: Amortization of deferred data procurement costs 59,193 55,500 Depreciation 13,014 11,244 Amortization of capitalized software costs and intangibles 3,225 2,916 Deferred income tax expense 194 3,800 Equity in earnings of affiliated companies and minority interests (2,381) (158) Other (857) (429) Change in assets and liabilities: Increase in accounts receivable, net (8,405) (3,507) Decrease (increase) in other current assets (2,552) 108 Decrease in accounts payable and accrued liabilities (851) (3,837) Increase in deferred revenue 11,300 8,963 Other, net 1,847 (2,159) -------- -------- Total adjustments 73,727 72,441 -------- -------- Net cash provided by operating activities 73,944 77,792 CASH FLOWS FROM INVESTING ACTIVITIES: Deferred data procurement costs (64,476) (58,672) Purchase of property, equipment and software (15,053) (17,587) Capitalized software costs (3,454) (4,763) Other, net 2,890 98 -------- -------- Net cash used in investing activities (80,093) (80,924) CASH FLOWS FROM FINANCING ACTIVITIES: Net borrowings (repayments) 7,961 (752) Purchases of Common Stock (95) (5,424) Proceeds from exercise of stock options and other (92) 4,794 -------- -------- Net cash provided (used) by financing activities 7,774 (1,382) EFFECT OF EXCHANGE RATE CHANGES ON CASH (1,212) (157) -------- -------- Net increase (decrease) in cash and cash equivalents 413 (4,671) Cash and cash equivalents at beginning of period 11,149 20,925 -------- -------- Cash and cash equivalents at end of period $ 11,562 $ 16,254 ======== ========
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 - SUMMARY OF SIGNIFICANT ACCOUNTING POLICIES Basis of presentation: The accompanying condensed consolidated financial statements should be read in conjunction with the consolidated financial statements included in Information Resources, Inc.'s Annual Report on Form 10-K for the year ended December 31, 1998. The condensed consolidated financial information furnished herein reflects all adjustments (consisting of normal recurring accruals) which are, in the opinion of management, necessary for a fair presentation of the condensed consolidated financial statements for the periods shown. 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 and exercises significant influence over operating and financial policies. All significant intercompany accounts and transactions have been eliminated in consolidation. Earnings per Common and Common Equivalent Share: Net earnings per share is based upon the weighted average number of shares of common stock outstanding during each period. Net earnings 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. NOTE 2 - SUPPLEMENTAL CASH FLOW INFORMATION Cash paid for interest and income taxes during the period was as follows (in thousands):
SIX MONTHS ENDED ---------------- JUNE 30 ---------------- 1999 1998 ------ ------- Interest $ 622 $ 557 Income taxes 229 (78)
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):
JUNE 30, 1999 DECEMBER 31, 1998 ------------- ----------------- Billed $ 76,776 $ 71,141 Unbilled 23,376 21,258 --------- --------- 100,152 92,399 Reserve for accounts receivable (4,224) (4,762) --------- --------- $ 95,928 $ 87,637 ========= =========
NOTE 4 - OTHER ASSETS Other assets were as follows (in thousands):
JUNE 30, 1999 DECEMBER 31, 1998 ------------- ----------------- Deferred data procurement costs - net of accumulated amortization of of $134,590 in 1999 and $123,440 in 1998 $139,460 $138,356 Intangible assets, including goodwill - net of accumulated amortization of $15,011 in 1999 and $13,616 in 1998 17,216 18,610 Capitalized software costs - net of accumulated amortization of $4,528 in 1999 and $3,701 in 1998 11,549 9,876 Other 6,347 5,147 -------- -------- $174,572 $171,989 ======== ========
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):
JUNE 30, 1999 DECEMBER 31, 1998 ------------- ----------------- Bank borrowings $ 11,750 $ 3,000 Capitalized leases and other 1,229 2,096 -------- -------- 12,979 5,096 Less current maturities (445) (521) -------- -------- $ 12,534 $ 4,575 ======== ========
On February 10, 1999 the Company amended its existing $75 million bank revolving credit facility to (1) reduce the maximum commitments to $60 million, (2) extend the termination date to 2002, and (3) amend certain financial covenants and other terms and conditions of the agreement. The amended facility has floating rate options at or below prime and commitment fees of up to .25% payable on the unused portion. 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 $22.3 million is currently available for such distributions under the most restrictive of these covenants. The bank credit agreement also contains covenants which 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) for the three and six months ended June 30, 1999 and 1998 were as follows (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED ------------------ ---------------- JUNE 30 JUNE 30 ------------------ ---------------- 1999 1998 1999 1998 ------------------ ---------------- Net earnings $ 468 $ 3,441 $ 217 $ 5,351 Foreign currency translation adjustment (909) (708) (4,185) (1,573) ------- ------- ------- ------- Comprehensive income (loss) ($ 441) $ 2,733 ($3,968) $ 3,778 ======= ======= ======= =======
8 9 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS, CONT'D. (UNAUDITED) NOTE 7 - 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. The following table and discussion present certain information regarding the operations of the Company by geographic segment as of June 30, 1999 and 1998 (in thousands):
THREE MONTHS ENDED SIX MONTHS ENDED ---------------------- ---------------------- JUNE 30 JUNE 30 ---------------------- ---------------------- 1999 1998 1999 1998 --------- --------- --------- --------- Revenues: U.S. Services $ 105,629 $ 99,371 $ 207,953 $ 193,943 International Services 32,218 30,021 61,639 54,639 --------- --------- --------- --------- Total $ 137,847 $ 129,392 $ 269,592 $ 248,582 ========= ========= ========= ========= Operating Results: U.S. Services $ 7,021 $ 11,536 $ 12,243 $ 21,087 International Services: Operating loss (4,169) (3,973) (9,211) (8,961) Equity in earnings (losses) of affiliated companies (98) 220 96 294 Minority interest benefit (expense) 1,100 (251) 2,285 (136) --------- --------- --------- --------- Subtotal--International Services (3,167) (4,004) (6,830) (8,803) Corporate and other expenses (2,458) (1,646) (4,412) (2,923) --------- --------- --------- --------- Operating Results 1,396 5,886 1,001 9,361 Interest expense and other, net (424) (45) (590) (210) --------- --------- --------- --------- Earnings before income taxes $ 972 $ 5,841 $ 411 $ 9,151 ========= ========= ========= =========
9 10 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Operations: The Company's consolidated net earnings were $0.5 million or $.02 per diluted share for the second quarter of 1999 compared to consolidated net earnings of $3.4 million or $.12 per diluted share for the corresponding 1998 quarter. The Company's consolidated net earnings were $0.2 million or $.01 per diluted share for the six months ended June 30, 1999 compared to consolidated net earnings of $5.4 million or $.18 per diluted share for the corresponding 1998 period. Consolidated revenues for the quarter ended June 30, 1999 were $137.8 million, an increase of 7% over the corresponding quarter in 1998. This increase was the result of revenue growth of $6.3 million in the U.S. services business and a $2.2 million increase in international revenues. Consolidated revenues were $269.6 million for the six months ended June 30, 1999, an increase of 8% over the corresponding period of 1998. This increase was the result of revenue growth of $14.0 million in the U.S. services business and a $7.0 million increase in international revenues. Consolidated costs of information services sold increased 11% to $124.3 million for the three months ended June 30, 1999 compared to costs of $112.0 million for the second quarter of 1998. The major components of the 1999 increase included a $5.1 million increase in compensation expense resulting from higher employee costs in the U.S. and growing European operations, and costs related to increased data collection efforts and household panel expansion. Consolidated costs of information services sold increased 13% to $245.0 million for the six months ended June 30, 1999. Major components of the 1999 increase included a $12.0 million increase in compensation expense resulting from higher employee costs in the U.S. and growing European operations, and costs related to increased data collection efforts resulting from the Company's expanded convenience store and household panel operations. The Company is currently developing a program which is intended to improve productivity and operating efficiencies, and result in a reduction of its on-going cost structure. Consolidated selling, general and administrative expenses increased 15% to $13.1 million for the three months ended June 30, 1999 and 13% to $25.9 million for the six months ended June 30, 1999. These increases were primarily associated with employee-related costs related to the reorganization and transformation of the Company's U.S. sales, marketing and other operating functions, and higher legal costs in the U.S. The increased legal costs related to the Company's anti-trust lawsuit against the Dun and Bradstreet Corporation, ACNielsen Company and IMS International, Inc. The case is currently in the discovery and deposition phase, and the Company anticipates that it will continue to incur a high level of legal expenses as the case continues to progress toward trial. For all periods presented, the Company's effective income tax rate is greater than the U.S. Federal statutory rate due to certain unbenefitted foreign losses, goodwill amortization and other nondeductible expenses. 10 11 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. In the second quarter of 1999, revenues from the Company's U.S. services business were $105.6 million, an increase of 6% over the corresponding 1998 quarter. For the six months ended June 30, 1999, revenues from the Company's U.S. services business were $208.0 million, an increase of 7% over the first half of 1998. These revenue increases were due primarily to the increased sales of the Company's product tracking services including its retailer specific and all-store (i.e. Census) databases. Operating Results for the Company's U.S. services business were $7.0 million in the second quarter of 1999 versus $11.5 million in the second quarter of 1998. Operating Results for the Company's U.S. services business were $12.2 million for the six months ended June 30, 1999 compared to $21.1 million for the corresponding 1998 period. The U.S. operating margins were negatively affected by higher employee costs, Year 2000 costs and increased data collection expenses related to the Company's expanded convenience store and household panel operations. Second quarter 1999 revenues from the Company's International services business, primarily from Europe, were $32.2 million, an increase of 7% over the corresponding 1998 quarter. International services revenues were $61.6 million for the six months ended June 30, 1999, an increase of 13% over the corresponding 1998 period. These increases reflect continued strong growth in each of the major European businesses, offset somewhat by the effect of weaker Euro-currencies against the dollar. Excluding foreign exchange effects, European revenues for 1999 increased 12% over the second quarter of 1998 and 16% over the first half of 1998. Operating Results for the International service business were a ($3.2) million loss for the second quarter of 1999, a 21% improvement compared to the ($4.0) million loss in the corresponding 1998 quarter. Operating Results for the International services business were a ($6.8) million loss for the six months ended June 30, 1999, a 22% improvement compared to the ($8.8) million loss for the corresponding 1998 period. These improvements were largely due to continued revenue growth, partially offset by incremental costs associated with the launch of the Company's InfoScan service in Spain. Corporate and other expenses increased for the three and six months ended June 30, 1999 due to higher legal costs, primarily attributable to the Company's anti-trust litigation. LIQUIDITY AND CAPITAL RESOURCES The Company's current cash resources include its $11.6 million consolidated cash balance and $48.2 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. 11 12 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Financings: On February 10, 1999 the Company amended its existing $75 million bank revolving credit facility to (1) reduce the maximum commitments to $60 million, (2) extend the termination date to 2002, and (3) amend certain financial covenants and other terms and conditions of the agreement. The amended facility has floating rate options at or below prime and commitment fees of up to .25% payable on the unused portion. 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 $22.3 million is currently available for such distributions under the most restrictive of these covenants. The bank credit agreement also contains covenants which restrict the Company's ability to incur additional indebtedness. Cash Flow: Consolidated net cash provided by operating activities was $73.9 million for the six months ended June 30, 1999 compared to $77.8 million for the same period in 1998. This reduction was primarily attributable to lower earnings. Consolidated cash flow used in net investing activities was ($80.1) million in 1999 compared to ($80.9) million for the same period in 1998. Investing activities in 1999 reflect higher expenditures for data procurement primarily related to the release of retailer specific data in certain European countries. Net cash used before financing activities was ($6.1) million for the six months ended June 30, 1999 compared to ($3.1) for the same period in 1998. Consolidated cash flow provided (used) by net financing activities reflects borrowings of $8.8 million under its revolving line of credit in 1999. Financing activities include $0.1 million and $5.4 million of purchases of the Company's common stock for the six months ended June 30, 1999 and 1998, respectively. Other Deferred Costs and Capital Expenditures: Consolidated deferred data procurement expenditures were $64.5 million for the six months ended June 30, 1999 and $58.7 million for the same period in 1998. 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 $40.2 million and $37.8 million for the periods ended June 30, 1999 and 1998, respectively, for the Company's U.S. services business and $24.3 million and $20.9 million, respectively, for the Company's International services business. Consolidated capital expenditures were $15.1 million and $17.6 million for the six months ended June 30, 1999 and 1998, respectively. Capital expenditures for the Company's U.S. services business were $13.0 million and $15.0 million, while depreciation expense was $10.7 million and $8.9 million for the six months ended June 30, 1999 and 1998, respectively. The Company's International services business capital expenditures were $2.1 million and $2.6 million while depreciation expense was $2.3 million and $2.3 million, for the six months ended June 30, 1999 and 1998, respectively. 12 13 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Consolidated capitalized software development costs, primarily in the U.S., were $3.5 million and $4.8 million for the six months ended June 30, 1999 and 1998, respectively. Common Stock Purchase Plan: In November 1997 the Company's Board of Directors approved a plan to purchase up to two million shares of the Company's common stock from time to time in the open market. Purchases under the plan are subject to a number of considerations including the market price of the Company's common stock and general market conditions. As of June 30, 1999, the Company had purchased and retired 1,947,900 shares under the plan at an average cost of $12.29 per share. During the first half of 1999, the Company purchased 86,100 shares at an average cost of $8.54 per share. NOL Carryforwards: As of December 31, 1998, the Company had cumulative U.S. Federal net operating loss ("NOL") carryforwards of approximately $67.9 million that expire primarily in 2009 and 2011. Certain of these carryforwards have not been examined by the Internal Revenue Service and, therefore, are subject to adjustment. At December 31, 1998, the Company also had general business tax credit carryforwards of approximately $9.6 million which expire primarily between 1999 and 2012, and are available to reduce future Federal income tax liabilities. Impact of Inflation: Inflation has slowed in recent years and is currently not an important determinant of the Company's results of operations. 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. YEAR 2000 ISSUES Background: Many systems (including computers, software and other equipment) include programming code in which calendar year data is abbreviated to only two digits. As a result of this design decision, some of these systems could fail to operate or to produce correct results if "00" is interpreted to mean "1900". For the Company, such failures would cause disruptions of operations including, among other things, a temporary inability to obtain data from retailers, process transactions, communicate information to tracking service clients, send invoices or engage in normal business activities. 13 14 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. In 1996 and 1997, various internal review teams within the Company began addressing the Year 2000 issue in their respective areas. In early 1998, a steering committee was established to represent all operating, administrative and finance areas of the Company to direct the process of identifying, assessing and resolving significant Year 2000 issues in a timely manner. The process includes development of remediation plans, where necessary, as they relate to internally used software, commercial software applications licensed to clients, computer hardware and the use of computer applications in the Company's data warehouse operations. In addition, the Company is engaged in assessing the Year 2000 issue with third parties including significant suppliers, such as data vendors and tracking service clients. Executive management is represented on the steering committee and monitors the status of the Company's Year 2000 plans. In addition, management reports the status of the Year 2000 project to the Board of Directors. The operations of office and facilities equipment, such as fax machines, photocopiers, telephone switches, security systems, elevators and other common devices may also be affected by the Year 2000. The Company's current assessment of the potential effect of the Year 2000 issues on its office and facilities equipment is considered to be minimal, in terms of risk and incremental cost of remediation. Risks: The Company has identified potential Year 2000 risks in the following four categories: (1) reliance upon third party retailers in the U.S. and Europe for data for use in its InfoScan tracking services; (2) processing of data by the various computer applications in its Wood Dale, Illinois facilities; (3) commercial software products and applications produced and/or marketed by the Company; and (4) Company data interfaces with client developed applications. Third Party Retailers: The Company has identified and contacted, using surveys, all of its retailers in the U.S. and Europe to determine the extent to which the Company's interface systems are vulnerable to those third parties' failure to remedy their own Year 2000 issues. To the extent that retailer responses to Year 2000 readiness surveys were unsatisfactory, the Company is following up to assess whether all critical retailers are Year 2000 compliant. It is expected that full certification of Year 2000 compliance for all key suppliers of tracking data to the Company will be completed during the fourth quarter of 1999. The Company is also investigating alternative sources or methodologies to provide the Company with reasonable assurance of source retailer data should a key U.S. or European retailer encounter unforeseen difficulties during early 2000. 14 15 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Wood Dale Computer Applications: The Company has reviewed its information and operational systems used to process data in its InfoScan tracking services in order to identify those systems that are not Year 2000 compliant. The Company has determined that its InfoScan tracking service is largely Year 2000 compliant due to the Company's main feature of programming design which accounts for data by "weeks" as opposed to calendar dates. However, the Company has identified certain systems which might be negatively impacted by Year 2000. Appropriate remediation efforts are underway to address these issues. In addition, the Company has built and is currently utilizing a Year 2000 test environment to assess compliance on programs affecting major services to clients. The Company estimates that remediation and testing for major services to clients will be completed by the third quarter of 1999. Commercial Software Products and Applications: During 1997, the Company began an internal review of each of its software products which it intends to maintain through the Year 2000. Based upon this assessment, the Company concluded that its standard policy of regular software maintenance, upgrades and lifecycle evaluation will provide adequate assurance that the Company's current portfolio of software products will be Year 2000 compliant during the second half of 1999. In 1998, the Company began the process of identifying and contacting clients and former clients in both the U.S. and Europe for whom the Company previously developed custom applications. These investigations have determined the extent to which custom applications developed by the Company require Year 2000 remediation and whether the Company will provide software consulting services in order to assist these clients and former clients in such remediation. The Company believes it has completed the identification of all material custom application issues and that its outstanding obligations for remediation are not significant. Data Interfaces with Client Applications: As part of its ongoing services, the Company has assigned each of its client service teams to identify and coordinate the resolution of potential Year 2000 issues resulting from Company interfaces with client applications, including any custom applications developed by clients. However, management believes that it may not be possible for it to determine with complete certainty that Year 2000 issues affecting client applications can be identified or corrected due to the complexity of these applications and the fact that these systems interact and operate with computer systems which are not under the Company's control. Consequently, the Company is unable to estimate a timetable for remediation and any related costs, as the decision to allow the Company to conduct such investigations on a timely basis resides with each client. 15 16 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Costs: The Company uses both internal and external resources in the assessment and remediation of Year 2000 issues and believes these resources will provide adequate support for such resolution. While the costs of external resources are quantifiable, the costs of internal resources who deal with data vendors and tracking service and software clients on a daily basis on a variety of subjects, including Year 2000 issues, are difficult for the Company to estimate. Accordingly, costs included in the Company's disclosures are subject to uncertainty with respect to internal personnel. The Company currently estimates that the combined 1998 and 1999 internal and external Year 2000 project costs will range from $10 million to $12 million and will be funded through operating cash flow. To date, the Company estimates that approximately $4 million has been spent and expensed. Of the remaining $6 million to $8 million the Company expects to spend, up to approximately $4 million may be capitalized for new systems and equipment. Most Likely Consequences of Year 2000 Problems: The Company expects to identify and resolve all Year 2000 issues that could materially adversely affect its business operations. However, management believes that it may not be possible for it to determine with complete certainty that all Year 2000 issues affecting the Company will be identified or corrected on a timely basis. The number of devices that could be affected and the interactions among these devices are innumerable. In addition, accurate predictions of the extent of Year 2000 problem-related failures or the severity, duration, or financial consequences of these failures, cannot be made. As a result, management expects that the Company could potentially suffer the following consequences: 1. A significant number of operational inconveniences, inefficiencies, and temporary disruptions in service for the Company, its retailers and its clients may divert management's time and attention and financial and human resources from their ordinary business activities; and 2. A lesser number of serious system failures may require significant efforts by the Company, its retailers or its clients to prevent or alleviate material business disruptions. Contingency Plans: The Company is currently developing contingency plans to be implemented as part of its efforts to identify and correct Year 2000 issues affecting its internal systems. This is an ongoing process of which the bulk of the contingency plans will be completed in the third quarter of 1999. Depending on the systems affected, these plans could include accelerated replacement of affected equipment or software, short to medium-term use of backup equipment and software, or use of contract personnel to correct on an accelerated schedule any Year 2000 issues that arise or to provide manual workarounds for information systems, and similar approaches. If the Company actually is required to implement any of these contingency plans, it could have a material effect on the Company's financial condition and results of operations. However, based on the activities described above, the Company does not believe that the Year 2000 issues will have a material adverse effect on the Company's business or results of operations. 16 17 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. Disclaimer: The discussion of the Company's efforts, and management's expectations, relating to Year 2000 compliance are forward-looking statements. The Company's ability to achieve Year 2000 compliance and the level of incremental costs associated therewith, could be adversely impacted by, among other things, the availability and cost of programming and testing resources, retailers' and vendors' ability to modify proprietary software, and unanticipated problems subsequently identified in the ongoing compliance review. 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, which 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. During the transition period, which ends on January 1, 2002, the entities within participating countries have the option of accounting for their transactions in either euros or their legacy currencies. Euros are currently available for non-cash transactions only; euro bills and coins will be available for cash transactions at the conclusion of the transition period. No later than July 1, 2002, the participating countries will withdraw their legacy currencies from circulation and they will cease to be legal tender. Participating countries have ceded certain aspects of their monetary policy authority, including money supply and official interest rates for the euro, to the European Central Bank. As the Company has operations in several of the participating countries, it will be affected by issues surrounding the introduction of and transition to the euro. The Company's European Executive Committee ("the Committee") is charged with formulating and executing all aspects of the Company's response concerning the conversion to the euro. The Committee is currently investigating the impact of the euro on all computer systems that affect the Company. Specific systems concerns include the ability to provide its clients InfoScan services in euros and to pay bills, to receive payments, to invoice and to provide pricing in euros. The Company expects all systems issues to be resolved by the conclusion of the transition period and accordingly, anticipates no significant interruptions in its business operations. During the transition period, the Company's clients have the right to settle transactions in either the euro or legacy currencies. The Company may also be affected by other economic, legal, political, and social factors relating to the transition to the euro. The Company may also be impacted by: the ability of the banking systems to function smoothly during and after the transition period; the monetary policy as set by the European Central Bank; the interpretation of the Company's contracts and tax laws, regulations and treaties within the European Union, United States and the World Trade Organization; and by additional macroeconomic and other factors beyond the Company's control. 17 18 INFORMATION RESOURCES, INC. AND SUBSIDIARIES MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS, CONT'D. FORWARD LOOKING INFORMATION Certain matters discussed above are forward-looking statements that are subject to risks and uncertainties that could cause actual results to differ materially from those anticipated, including customer renewals of service contracts, the timing of significant new customer engagements, the success of transforming its domestic operations, competitive conditions, the success of implementing cost containment initiatives, 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, Year 2000 and European currency conversion issues and other factors beyond the Company's control. These risks and uncertainties are described in reports and other documents filed by the Company with the Securities and Exchange Commission. 18 19 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.(kk) Employment agreement dated April 30, 1999 between the Company And Joseph P. Durrett. EF 10.(ll) Restricted stock agreement dated April 30, 1999 between the Company and Joseph P. Durrett. EF 10.(mm) Employment agreement dated May 28, 1999 between the Company And Rick Kurz. EF 27 Financial Data Schedule (filed herewith). EF b. Reports on Form 8-K. None. 19 20 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/ Gary M. Hill --------------------------------- Gary M. Hill Executive Vice President and Chief Financial Officer (Authorized officer of Registrant and Principal Financial Officer) /s/ Sheri L. Huston --------------------------------- Sheri L. Huston Senior Vice President and Controller (Principal Accounting Officer) August 16, 1999 20 EX-10.(KK) 2 EMPLOYMENT AGREEMENT DATED 4/30/99 1 Exhibit 10.kk EMPLOYMENT AGREEMENT -------------------- THIS EMPLOYMENT AGREEMENT ("Agreement") is made as of the 30th day of April, 1999 by and between Information Resources, Inc., a Delaware corporation (the "Company"), and Joseph P. Durrett ("Executive"). W I T N E S S E T H: WHEREAS, the Company desires to employ Executive on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, Executive desires to accept such employment with the Company on the terms and subject to the conditions set forth in this Agreement; NOW THEREFORE, in consideration of the foregoing and of the mutual covenants of the Company and Executive set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by the Company and Executive, the parties agree as follows: ARTICLE I --------- Employment ---------- 1.0 Employment. The Company agrees to employ Executive and Executive agrees to be employed by the Company on a full-time basis in an executive capacity, according to the terms and subject to the conditions hereinafter set forth, for the period commencing on the date hereof (the "Effective Date"), and ending with the effective date of termination of employment as provided in Article V (the "Employment Period"). 1.1 Employment Duties. As of the Effective Date and continuing during the Employment Period, Executive shall be employed in the capacity of President and Chief Executive Officer, and he shall possess such powers and duties as are normally incident to such position, as provided in the Company's By-laws and in accordance with Delaware General Corporation Law. During the Employment Period, Executive shall devote his best efforts and all of his normal business time and attention (excluding permitted vacation, holidays and personal and sick leave, and reasonable time devoted to civic and charitable activities) to the business of the Company and its affiliated companies. Executive may, with the express written approval of the Company's Board of Directors or an appropriate committee thereof (the "Board"), serve and receive compensation as a director of any other company affiliated with the Company or any non-affiliated company that, in the opinion of the Board, does not compete with the Company. 1.2 Board Position. Contemporaneously with the execution and delivery of this Agreement, the Board has appointed Executive to be a director of the Company and has elected Executive Chairman of the Board. Executive agrees to serve in such capacity until the end of the Employment Period or his successor is elected and shall have qualified. 2 1.3 Place of Employment. Initially, Executive shall be based at the Company's offices in Norwalk, Connecticut. Beginning on the Effective Date and continuing until August 31, 2000, Executive shall be reimbursed for expenses for business travel between Connecticut and Chicago pursuant to Section 2.4 hereof and the Company shall provide at the Company's expense a two-bedroom apartment at Presidential Towers (or the reasonable equivalent thereof) in Chicago, to accommodate Executive's business travel to Chicago. ARTICLE II ---------- Compensation and Certain Benefits --------------------------------- The Company agrees to compensate Executive for the services rendered by him during the Employment Period as follows: 2.0 Base Salary. During the Employment Period, the Company shall pay Executive a base salary (the "Base Salary") at an annual rate of Five Hundred Twenty-Five Thousand Dollars ($525,000.00), subject to annual review and increase on or about May 1 by the Board, it being understood that the Base Salary as increased from time to time shall not decrease during the Employment Period unless and only to the extent that the Board authorizes such a decrease as part of a salary reduction program applied in a similar fashion to senior officers other than Executive. The Base Salary shall be payable in accordance with the Company's payroll practices, less appropriate deductions for applicable taxes. Except to the extent provided in Article III hereof, the Company shall not be required to pay Executive his Base Salary for the portion of any Disability Period (as defined in Article III) with respect to which Executive receives disability benefit payments according to the provisions of the Company's disability plans applicable to Executive. 2.1 Incentive Compensation. In addition to his Base Salary, Executive shall be eligible to receive incentive compensation as follows: (a) Management Incentive Plan. Executive shall be eligible to receive incentive compensation provided under the Company's Management Incentive Plan currently in effect (the "MIP"). Executive's target incentive bonus shall be an amount that is equal to 60% of the Base Salary paid to Executive for a given year ("Target Bonus Amount"). Within 90 days after the Effective Date, Executive and the Board shall mutually determine the initial incentive objectives to apply to Executive's participation in the MIP for the remainder of the 1999 fiscal year. Incentive objectives shall be subject to adjustment by the Board periodically during the Employment Period. Any incentive compensation awarded under the MIP shall be payable according to the provisions of the MIP. Executive shall be eligible to participate in any other applicable future incentive compensation plan of the Company which may succeed or replace the MIP or, in the absence of any such plan, such bonus or incentive compensation as the Board deems appropriate in light of the amount of bonus or other incentive compensation awarded by the Company to other similarly situated executives employed by the Company. The Company shall not be required to pay Executive bonus or incentive compensation under this provision for the portion of any Disability Period with respect to which Executive receives disability benefit 2 3 payments according to the provisions of the Company's disability plans applicable to Executive. (b) Supplemental Bonus. Executive shall be eligible to receive three equal annual supplemental bonuses of Forty-Four Thousand Dollars ($44,000) each, payable in accordance with the following Supplemental Bonus Payout Schedule, provided Executive is employed by the Company as President and Chief Executive Officer at the time of each such bonus payout: Supplemental Bonus Payout Schedule ---------------------------------- First Bonus Payout: June 1, 2000 Second Bonus Payout: June 1, 2001 Third Bonus Payout: June 1, 2002 2.2 Employee Benefit Plans. For purposes of this Agreement, the meaning of the terms "employee benefit" and "employee benefits" shall exclude any salary or incentive compensation, but shall include benefits under health and welfare plans, life insurance, disability and retirement plans, 401(k) plans, holidays, personal leave, sick leave and vacation allowances (which shall be no less than four weeks per year). Executive shall participate during the Employment Period in all employee benefit plans (as those plans may be in effect from time to time) generally applicable to senior officers of the Company. 2.3 Death Benefits. In the event of Executive's death during the Employment Period, the Company shall continue to pay the Executive's monthly Base Salary to his spouse, or his estate if there is no living spouse, for a period of 12 months commencing on the first day of the month following the month of Executive's death (the "Death Benefit"). In lieu of the Death Benefit, the Company may elect to cause payments in an amount equal to the Death Benefit to be made pursuant to a term life insurance policy on the life of Executive with a payment schedule reasonably equivalent to the Death Benefit schedule (the "Alternative Death Benefit"). If the Company elects to use the Alternative Death Benefit, Executive (or, in the alternative, a trust entity that he may designate) shall be the owner of and shall pay the annual premiums on the life insurance policy and the Company shall increase Executive's Base Salary by an amount that will, after tax deductions, equal the amount of such premium. Executive shall cooperate with the Company in applying for and obtaining any such life insurance policy. The Company reserves the right to terminate the Alternative Death Benefit at any time and will so notify Executive of any such termination, whereupon the Company will be obligated to pay the Death Benefit. 2.4 Expenses. The Company shall reimburse Executive for the reasonable and necessary business expenses incurred by him in connection with the performance of his duties and obligations as set forth herein during the Employment Period. Such expenses shall include, but are not limited to, all travel and living expenses while travelling between Connecticut and Chicago on business or at the request and in the service of the Company, provided that such expenses are properly incurred and accounted for in accordance with the applicable policies and procedures established by the Company. Reimbursement shall be made upon presentation by Executive to the Company of reasonably detailed statements of such expenses. In addition, the Company shall reimburse Executive for his expenses incurred for professional financial planning 3 4 services, in an amount not to exceed $7,500 per year, as well as relocation expenses incurred upon his relocation from Connecticut to Chicago pursuant to the Company's executive relocation policy (including, if necessary, the purchase of his residence in Connecticut in accordance with such policy). 2.5 Supplemental Executive Retirement Plan. Executive shall be entitled to receive from the Company, pursuant to the terms and conditions of this Section 2.5, a supplemental executive retirement plan benefit ("SERP") in the amount of One Million Six Hundred Fourteen Thousand Dollars ($1,614,000) (the "SERP Amount"), which the parties agree is equivalent to the amount of One Hundred Fifty Thousand Dollars ($150,000) payable on an annual basis over 18 years (life expectancy) at a discount rate of seven percent. (a) Commencement and Payment. Subject to Section 2.5(b), the Company will pay the SERP Amount to Executive in one lump sum payment only if Executive completes seven full years of service with the Company. Subject to Section 2.5(b), the SERP Amount will be paid on the date that is the later to occur of (i) the date Executive attains age 63 or (ii) the date of termination of Executive's employment with the Company. In no event shall the SERP be paid either in whole or in part while Executive continues in the employment of the Company. (b) Accrual and Vesting. Except as otherwise provided in this Section 2.5(b), the SERP shall fully vest and become nonforfeitable when Executive completes seven full years of service with the Company. If, at any time after Executive has completed seven full years of service with the Company, Executive's employment is terminated by the Company without Cause, or if Executive voluntarily terminates his employment with the Company with or without Good Reason, or if Executive dies or sustains a Disability resulting in the termination of his employment, then Executive (or his designated beneficiary, or if no beneficiary has been designated, his spouse on the date of his death) shall be entitled to receive the SERP Amount in a lump sum upon the date that is the later to occur of (1) the date Executive attains age 63 (or the date Executive would have attained age 63 if he dies before he reaches age 63) or (2) the date of termination of Executive's employment with the Company. Executive shall forfeit the SERP in its entirety and shall not be entitled to receive payment of the SERP Amount if (i) Executive has not completed seven full years of service with the Company (except for a termination of employment following a Change of Control), or (ii) at any time, whether before or after Executive has completed seven full years of service with the Company, the Company terminates Executive's employment for Cause or the Executive breaches, during the Employment Period, any of his obligations under Sections 6.0, 7.0 or 7.1 of this Agreement. Upon Executive's termination of employment following a Change of Control (other than a termination for Cause), unless Executive has breached, prior to such termination, any of his obligations under Sections 6.0, 7.0 or 7.1 hereof, the present value of the SERP (based on actuarial assumptions determined by an independent benefits consultant which is reasonably acceptable to Executive and the Company) shall be paid to Executive by the Company, whether or not he has then attained age 63 or completed seven years of service with the Company. 4 5 (c) Funding. All payments for the SERP shall be from the general funds of the Company. The Company may, at its expense, establish and contribute assets to a trust pursuant to which the SERP shall be paid, subject to the claims of the Company's unsecured creditors. ARTICLE III ----------- Disability ---------- 3.0 Disability. In the event of any disability or illness of Executive (a "Disability") of a nature, degree, or effect such that, within the Employment Period, Executive becomes unable to perform his duties under this Agreement on a full-time basis and such that the Company believes (as reasonably determined by the Board or an appropriate committee thereof) on the basis of the facts available that Executive will be unable to perform his duties under the terms of this Agreement on a full-time basis for a consecutive period of 180 days or more (the "Disability Period"), the following provisions shall apply, it being understood that prior to any such determination Executive shall continue to be paid his full Base Salary and shall continue participating in any Company incentive compensation plans in which he is then participating, subject to Sections 2.0 and 2.1 hereof. 3.1 Acting or Successor Officer. During any Disability Period, the Board (or an appropriate committee thereof) may appoint an acting or successor member or officer to each position or office then held by Executive. 3.2 Disability Benefit Plans. During any Disability Period, Executive shall be entitled to receive disability benefit payments according to the provisions of the Company's disability plans for salaried employees, if any, and Executive shall continue to be an employee of the Company for purposes of continued vesting and exercise of stock options (but not for purposes of participation in incentive plans) and shall continue to participate in all employee benefit plans for which he is eligible pursuant to this Agreement or otherwise. To the extent that Executive remains employed by the Company during a Disability Period, in addition to the disability benefit payments under such plans, during the first 180 days of any such Disability Period, Executive shall be entitled to receive, at normal payroll dates, supplemental disability payments directly from the Company in the amount necessary for the total of such supplemental disability payments and disability benefit plan payments to equal, on an annual basis, 100% of the Base Salary in effect at the beginning of the Disability Period. In the event the Disability Period continues beyond such 180-day period and Executive remains employed the Company, Executive shall then receive, for the remaining duration of the Disability Period for as long as he remains employed, in addition to the disability benefit payments under the provisions of the Company's disability plan(s), supplemental disability payments directly from the Company at a rate equal to one-third (33%) of his Base Salary in effect at the beginning of the Disability Period, such supplemental disability payments to be adjusted on an annual basis by the applicable percentage increase (or decrease) in the consumer price index (All Urban Consumers) as published by the US Department of Labor, or any successor index thereto. 5 6 3.3 Employment Upon Termination of Disability. If and when, in the reasonable judgment of the Board, after the commencement of a Disability Period Executive regains his ability to perform his duties hereunder on a full-time basis, such Disability Period and the Company's obligation to make supplemental disability payments pursuant to Section 3.2 shall cease and Executive may resume employment with the Company, unless the Employment Period has previously terminated. If Executive resumes employment with the Company, he shall, immediately thereafter, resume being paid his Base Salary under the same terms as he was being paid at the commencement of the Disability Period and resume participating in any Company incentive compensation plans in which he was then participating, with no cost-of-living or other adjustment of the Base Salary if the length of the Disability Period is less than 24 months. If the Disability Period continues for 24 months or more, Executive's Base Salary will be adjusted upon his resumption of duties by the applicable percentage increase (or decrease), during the Disability Period, in the consumer price index (All Urban Consumers) as published by the US Department of Labor, or any successor index thereto. ARTICLE IV Equity Incentives 4.0 Stock Options. Pursuant to the Company's 1992 Executive Stock Option Plan, as amended (the "Executive Option Plan"), or any other option plan of the Company in which Executive may be eligible to participate, as determined by the Company (the "Option Plan") as administered by the Board (or an appropriate committee thereof), the Company shall grant to Executive options (the "Stock Options") to purchase shares of the Company's common stock ("Common Stock") as provided in this Section 4.0 and in the form of the Company's Executive Stock Option Agreement attached hereto as Exhibit A (as amended from time to time) to be entered into by the Company and Executive contemporaneously with each Stock Option grant. (a) Stock Option Grants. The Company shall grant to Executive Stock Options as provided in this subsection (a). (i) On the Effective Date (the "First Grant Date"), the Company shall grant to Executive 250,000 Stock Options, at an exercise price equal to the Fair Market Value (as defined in the Option Plan) per share on the First Grant Date, which, subject to the provisions of subsections (b), (c) and (d) of this Section 4.0, shall vest and become exercisable in three annual installments as follows: 83,334 shares on the first anniversary of the First Grant Date; 83,333 shares on the second anniversary of the First Grant Date; and 83,333 shares on the third anniversary of the First Grant Date. (ii) Effective on the date that the Company's stockholders approve the requisite amendment to the Executive Option Plan (which is expected to be May 20, 1999) (the "Second Grant Date"), the Company shall grant to Executive 350,000 Stock Options, at an exercise price equal to $8.375 per share, which, subject to the provisions of subsections (b), (c) and (d) of this Section 4.0, shall vest and become exercisable in three annual installments as follows: 116,667 shares on the first anniversary of the Second Grant Date; 116,666 shares on the second anniversary of the Second 6 7 Grant Date; and 116,666 shares on the third anniversary of the Second Grant Date. (iii) In the event that Executive is employed by the Company on the first anniversary of the Effective Date, and subject to stockholder approval of additional Stock Options available for issuance under the Option Plan, if necessary, then, on any business day selected by the Company during calendar year 2000 up to and including May 20, 2000, the Company shall grant to Executive 300,000 Stock Options, at the exercise price of $12.00 per share, which, subject to the provisions of subsections (b), (c) and (d) of this Section 4.0, shall vest and become exercisable in three equal annual installments of 100,000 shares on each of May 20, 2001, May 20, 2002 and May 20, 2003. (b) Vesting and Exercise Upon Change of Control After Two Years. In the event of any Change of Control (as hereafter defined) that occurs on or after the second anniversary of the Effective Date, then, upon the termination of the Employment Period for any reason other than for Cause within six months of such Change of Control, Executive, or his estate if Executive is not then living, shall be entitled to immediately exercise in full any unexercised Stock Options, whether vested or unvested (other than terminated or expired options) then held by Executive or his estate if Executive is not then living, provided that Executive shall have a period of two years after the date the Employment Period terminates to exercise such Stock Options, to the extent they shall not have earlier expired. In the event Executive's employment is terminated for Cause, he may exercise only such Stock Options as are vested and exercisable on the date of termination of his employment, which such exercise shall occur, if at all, no later than 30 days after the date of such termination, and all other Stock Options held by Executive shall terminate. As used in this Agreement, "Change of Control" means: (i) Any "person" (as such term is used in Sections 13(d) and 14(d) of the Securities Exchange Act of 1934, as amended (the "Act")) is or becomes the "beneficial owner" (as defined in Rule 13d-3 of the Act), directly or indirectly, of securities of the Company representing 30% or more of the total voting power represented by the Company's then outstanding voting securities; or (ii) A change in the composition of the Board occurring within a two-year period, as a result of which fewer than a majority of the directors are Incumbent Directors. "Incumbent Directors" shall mean directors who either (A) are directors of the Company as of the date hereof, or (B) are elected, or nominated for election, to the Board with the affirmative votes of at least a majority of the Incumbent Directors at the time of such election or nomination (but shall not include an individual whose election or nomination is in connection with an actual or threatened proxy contest relating to the election of directors to the Company); or (iii) The date of the consummation of a merger or consolidation of the Company with any other entity that has been approved by the stockholders of the Company, other than a merger or consolidation which would result in the voting securities of the Company outstanding immediately prior thereto continuing to represent (either by 7 8 remaining outstanding or by being converted into voting securities of the surviving entity) at least 50% of the total voting power represented by the voting securities of the Company or such surviving entity outstanding immediately after such merger or consolidation, or the stockholders of the Company approve a plan of complete liquidation of the Company or an agreement for the sale or disposition by the Company of all or substantially all of the Company's assets. (c) Vesting and Exercise Upon Change of Control Within Two Years. In the event of any Change of Control that occurs before the second anniversary of the Effective Date, any Stock Options then held by Executive shall vest and become exercisable as provided in this Section 4.0(c). Unless Executive is terminated for Cause, such Stock Options shall vest, whether or not Executive continues to be employed by the Company, in accordance with the applicable vesting schedule provided in Section 4.0(a) and in the applicable Option Agreement and Executive shall have a period of 30 days after all of his Stock Options are fully vested and exercisable to exercise such Stock Options. In the event Executive's employment is terminated for Cause, he may exercise only such Stock Options as are vested and exercisable on the date of termination of his employment, which such exercise shall occur, if at all, no later than 30 days after the date of such termination, and all other Stock Options held by Executive shall terminate. (d) Vesting and Exercise Upon Termination of Employment Period Absent a Change of Control. Except as expressly provided in subsections (b) and (c) of this Section 4.0, all Stock Options granted to Executive as of the time of termination of the Employment Period shall vest and become exercisable by Executive, or his estate if he is not living, as follows: (i) in the event of Executive's death during the Employment Period, or termination of the Employment Period as a result of a Disability as provided in Section 5.6, all unvested Stock Options shall immediately vest and be exercisable by Executive or his estate for a period of 24 months from the date of death or termination of employment, as applicable; (ii) in the event Executive terminates the Employment Period for Good Reason, any Stock Options then held by Executive shall continue to vest after such termination in accordance with the applicable schedule as provided herein and in the applicable Option Agreement, and Executive shall have a period of 30 days after all such Stock Options are fully exercisable to exercise such Stock Options; (iii) in the event the Executive terminates the Employment Period without Good Reason, Executive's Stock Options which are vested and exercisable on the date of termination of employment will be exercisable for the period ending at the earlier of the expiration date of such Stock Options or 30 days after the date of termination of employment; (iv) in the event the Company terminates the Employment Period without Cause, Executive's Stock Options which are vested and exercisable on the date of termination will be exercisable for the period ending at the earlier of the expiration date 8 9 of such Stock Options or 24 months after the date of termination of employment; and (v) in the event the Company terminates the Employment Period for Cause, Executive's Stock Options which are vested and exercisable on the date of termination will be exercisable for the period ending at the earlier of the expiration date of such Stock Options or 30 days after the date of termination of employment. 4.1 Restricted Stock. On the Effective Date, the Company shall grant to Executive 310,000 shares of Common Stock, which shall be subject to such restrictions and other terms and conditions as are provided in the form of Restricted Stock Agreement attached hereto as Exhibit B. ARTICLE V --------- Term of Employment ------------------ 5.0 Term of Employment. The employment of Executive under this Agreement shall commence on the date hereof and continue for a period of three years ("Initial Period") unless earlier terminated pursuant to this Article V. Following the expiration of the Initial Period, Executive's employment shall automatically continue until terminated in accordance with this Article V. 5.1 Termination Without Cause. Either party may terminate the employment of Executive pursuant to this Agreement, without Cause or Good Reason, by giving the other party prior written notice specifying a termination date no earlier than 90 days and no later than 120 days following the delivery of such notice (a "No Cause Notice"). In the event the Company terminates Executive's employment without Cause in accordance with this Section 5.1 (i) Executive shall be paid during the next three years following such termination of employment, his Base Salary at the rate in effect immediately prior to the giving of the No Cause Notice (payable in accordance with the Company's payroll practices, less appropriate deductions for applicable taxes), (ii) Executive shall be entitled to continue to participate, during such three-year period, in the employee benefit plans identified in Section 2.2 in accordance with the terms thereof, (iii) the SERP Amount shall be payable, if at all, in accordance with the provisions of Section 2.5 hereof, and (iv) to the extent that Executive would have received the Target Bonus Amount had he continued to be employed by the Company through the end of the fiscal year in which he is terminated, Executive shall be entitled to receive a portion of such Target Bonus Amount as pro rated through the date of termination, which amount shall be payable according to the provisions of the MIP. 5.2 Termination by Executive for Good Reason. Except as otherwise provided in this Section 5.2, at any time prior to Executive's receipt of a No Cause Notice or the termination of Executive's employment by the Company for Cause, Executive may give notice to terminate his employment for "Good Reason" (described in subsections (a) through (c) of this Section 5.2) by delivering a written notice of termination to the Company specifying the Good Reason for the 9 10 termination and further specifying the effective date of termination which shall be no earlier than 30 days and no later than 60 days after the Company' receipt of such written notice of termination (a "Good Reason Notice"). A Good Reason Notice will not be effective unless received by the Company within 30 days after the occurrence of the event specified by Executive as being the "Good Reason" for termination. The Company shall have 30 days after receiving any Good Reason Notice within which to initiate corrective or remedial action, and if such action is timely initiated, then upon completion of such corrective or remedial action the Good Reason Notice shall be deemed withdrawn. For the purposes of this Agreement, Executive shall have "Good Reason" to terminate his employment hereunder if, but only if: (a) without the consent of Executive, he is assigned any duties inconsistent with Article I or his positions, duties, responsibilities and status with the Company immediately prior to a change in his titles or offices, or he is removed from or not re-elected to any of such positions, except in connection with (1) the termination of his employment for Cause or Disability or by him other than for "Good Reason" as hereafter provided or as a result of his death, or (2) the commencement or continuation of a Disability Period; (b) a reduction is made by the Company in Executive's Base Salary, except as provided in Section 2.0 hereof; (c) The Company fails to continue in effect any benefit, bonus or compensation plan, stock ownership plan, stock purchase plan, stock option plan, life insurance plan, health-and-accident plan or disability plan (other than those plans which expire by the express terms thereof) in which Executive is participating, without providing him with a plan having substantially similar benefits, or takes any action which would adversely affect his participation in or materially reduce his benefits under any of such plans or deprive him of a material fringe benefit enjoyed by him, in any case other than as part of a reduction or change generally applicable to other senior officers of the Company; or (d) The Company fails to obtain from any successor entity to the Company an agreement to perform this Agreement to the extent and in the manner required to be performed by the Company. In the event Executive terminates his employment for "Good Reason" in accordance with this Section 5.2, Executive shall be paid during the next three years following such termination of employment (1) his Base Salary at the rate in effect immediately prior to the giving of the Good Reason Notice (payable in accordance with the Company's payroll practices, less appropriate deductions for applicable taxes) and (2) that portion of the Target Bonus Amount (as defined in Section 2.1) that is related to the Company's component goals to the extent such goals are satisfied under the MIP during such three-year period. During such three-year period, Executive shall also be entitled to continue to participate in the employee benefit plans identified in Section 2.2 in accordance with the terms thereof. The SERP Amount shall be payable, if at all, in accordance with the provisions of Section 2.5 hereof. 5.3 Termination After Change of Control. In the event Executive's employment 10 11 hereunder terminates for any reason, other than a termination for Cause, within six months of a Change of Control, Executive shall be paid during the next three years following such termination of employment, his Base Salary at the rate in effect immediately prior to the date of such termination (payable in accordance with the Company's payroll practices, less appropriate deductions for applicable taxes) and Target Bonus Amount (as defined in Section 2.1), and, during such three-year period, shall also be entitled to continue to participate in the employee benefit plans identified in Section 2.2 in accordance with the terms thereof. The SERP Amount shall be payable, if at all, in accordance with the provisions of Section 2.5 hereof. 5.4 Termination For Cause. In the event of "Cause" (as defined below), the Company shall have the right to terminate this Agreement, either during or after the Initial Period, without any prior written notice to Executive. "Cause" shall be deemed to exist under the following circumstances: (a) if Executive refuses or fails or neglects to perform his obligations under this Agreement and Executive fails to rectify such deficiency within 30 days after receiving written notice from the Board, for any reason other than factors that, if continued, would reasonably give rise to the determination or continuation of a Disability Period; (b) if Executive has developed or pursued interests substantially adverse or substantially inconsistent with the material fulfillment of his obligations hereunder to the Company, and fails to cease such conduct within ten days after receiving written notice from the Board; (c) if Executive engages in illegal or other wrongful conduct which is detrimental to the business or reputation of the Company; or (d) if Executive engages in any conduct or activity prohibited by Section 6.0, 7.0 or 7.1 of this Agreement. In the event of termination in accordance with this Section 5.4, the Company shall have no further liability in respect of Executive's employment; provided, however, that the Company shall pay Executive the value of any accrued salary or other compensation due Executive on the date of termination. The SERP Amount shall be payable, if at all, in accordance with the provisions of Section 2.5 hereof. 5.5 Termination Upon Death of Executive. The employment of Executive under this Agreement shall automatically terminate upon the death of Executive. 5.6 Termination Upon Executive's Disability. Either party may terminate the employment of Executive pursuant to this Agreement in the event that Executive suffers a Disability as defined in Section 3.0 hereof. Such termination shall take effect upon the termination date specified in a written notice delivered by the terminating party to the other party. In the event the Employment Period is terminated in accordance with this Section 5.6, Executive shall be paid during the next three years following such termination of employment, an amount equal to the amount of his Base Salary at the rate in effect immediately prior to the 11 12 giving of such termination notice less any disability benefits and Social Security payments received by Executive during such period (payable in accordance with the Company's payroll practices, less appropriate deductions for applicable taxes). The SERP Amount shall be payable, if at all, in accordance with the provisions of Section 2.5 hereof. 5.7 Release; Future Conduct. Prior to receiving any termination payment under this Article V, Executive shall deliver a release, in a form reasonably satisfactory to the Company and Executive, of any and all claims he may have against the Company. In the event that Executive breaches any of his obligations under Sections 6.0, 7.0 or 7.1 of this Agreement, the Company shall have no obligation to pay or continue to pay to Executive any termination payment hereunder. ARTICLE VI ---------- Restrictive Covenants --------------------- 6.0 Covenant Not to Compete. For the period beginning on the Effective Date and ending on the third anniversary of the date of termination of the Employment Period, Executive shall not, directly or indirectly, whether on Executive's own behalf or in the service of or on behalf of any other individual or entity, either as a proprietor, employee, agent, independent contractor, executive, director, officer, partner or stockholder (other than a stockholder of a corporation listed on a national securities exchange or whose stock is regularly traded in the over-the-counter market, provided that Executive at no time owns, directly or indirectly, in excess of 5% of the outstanding stock of any class of any such corporation): (a) participate or engage in developing, manufacturing, marketing or distributing any products or services offered, or planned to be offered, by the Company ("Competitive Activities"), including, without limitation: (i) selling products or rendering services of the type (or similar to the type) sold or rendered by the Company; (ii) soliciting any person or entity that is or has been a customer during the Employment Period or that is or was a prospective customer prior to or during the Employment Period, in each case, of the Company or an affiliate of the Company (iii) (provided that it shall not be deemed a breach of this Agreement if Executive solicits such customers for products or services unrelated to the Competitive Activities); or (iv) assisting any person in any way to do, or attempt to do, anything prohibited by clauses (i) or (ii) above; (v) being employed by any person or entity that has received services of the type described above from Executive or with which Executive otherwise had material contact during the Employment Period or which received services of the type described 12 13 above from any officer or employee of the Company over which Executive had management responsibility, in either case to provide or supervise, directly or indirectly, the services comprising a Competitive Activity; or (b) perform any action, activity or course of conduct which is detrimental in any material respect to the businesses or business reputation of the Company (or any of its affiliates), including without limitation; (i) soliciting, recruiting or hiring any employees of the Company (or any of its affiliates) or persons who have worked for the Company (or any of its affiliates) at any time since the Effective Date, provided that any entity which employs Executive may hire, without Executive's knowledge or assistance, an employee of the Company or person who may have worked for the Company, and provided further that Executive may hire any employee of the Company that has been terminated by the Company; and (ii) soliciting or encouraging any employee of the Company (or any of its affiliates) to leave the employment of the Company. 6.1 Acknowledgement. Executive acknowledges that the restrictions set forth in this Article VI are (a) reasonable and necessary for the protection of the Company's interests and (b) are entered into by Executive in exchange for adequate consideration granted to him in connection with this Agreement. In the event that any provision of this Article VI is found by a court of competent jurisdiction to be unreasonable or unenforceable, the parties agree that such provision shall be enforceable against Executive to the greatest extent that would be found to be reasonable and enforceable. ARTICLE VII ----------- Confidentiality; Ideas and Improvements. ---------------------------------------- 7.0 Confidentiality. The Company is engaged in various lines and methods of doing business, and utilizes processes, programs, data, software and techniques which consist of or involve confidential business information. Such information has been or will be available to and used by Executive during the course of his employment as well as confidential client information including data disclosing the identity of clients of the Company, their particular needs, methods, data and other similar information. Executive agrees that so long as such information is confidential in fact and is not readily ascertainable by third parties through lawful means, he will not, during the Employment Period and for a period of five consecutive years immediately thereafter, disclose or use such confidential information, either directly or indirectly for the benefit of any person or entity other than the Company. Executive agrees to return all programs, manuals, documents, records, and other information relating to the business of the Company, including materials prepared by Executive, to the Company immediately upon the termination of employment hereunder. 7.1 Ideas and Improvements. Executive agrees to promptly disclose to the Company all ideas, designs, improvements, creations and inventions, whether or not patentable or subject 13 14 to other legal protection, which have significant relationship to the business of the Company or any affiliates of the Company, and which were developed or created by Executive at any place or time during the Employment Period (collectively, "Ideas and Creations"). Executive further agrees to take all steps necessary to execute and deliver to the Company copyright or patent rights on matters suitable for such protection, and to execute and deliver to the Company all documents which may be required to assign to the Company such copyright or patent rights, and to otherwise cooperate to the extent within Executive's control to ensure the Company's use and enjoyment of such Ideas and Creations, provided that there is no obligation to assign an invention for which no equipment, supplies, facility, or trade secret information of the Company was used and which was developed entirely on Executive's own time, unless (a) the invention relates to the business of the Company or to the Company's actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by Executive for the Company. ARTICLE VIII ------------ Miscellaneous Provisions ------------------------ 8.0 Legal Remedies. Executive hereby acknowledges that the Company would suffer irreparable injury if the provisions of Sections 6.0, 7.0 or 7.1 above were breached and that the Company's remedies at law would be inadequate in the event of such breach. Accordingly, Executive hereby agrees that any such breach or threatened breach may, in addition to any other available remedies, be preliminarily enjoined by the Company without bond. In the event of litigation under this Agreement, each side shall pay its own attorneys' fees and expenses, except that if Executive is enjoined either preliminarily or permanently, after an evidentiary hearing, then Executive shall pay the attorneys' fees and expenses of the Company in connection with that evidentiary hearing and, if such evidentiary hearing results in a court refusing a preliminary or permanent injunction, then the Company shall pay Executive's attorneys' fees and expenses in connection with such hearing. Sections 6.0, 7.0 and 7.1 shall survive, and shall continue in effect, notwithstanding any termination of this Agreement. 8.1 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of Executive and the Company and each of their respective heirs, personal representatives, permitted assigns, and successors in interest, including, in the case of the Company, any company with which the Company may be merged or consolidated or to which all or substantially all of the Company' assets may be transferred. Except as otherwise provided above, this Agreement shall not be assignable by the Company or Executive without the express written consent of the other party. 8.2 Governing Law. This Agreement shall be construed and enforced in accordance with the law of the State of Illinois. 14 15 8.3 Notices. All notices required or permitted hereunder shall be given in writing, either delivered personally or by registered or certified mail, addressed to the Company at its principal office to the attention of the General Counsel, or to Executive either at his residence address shown on the employment records of the Company or in care of the principal office of the Company, with a copy to Martin Cohn, Martin Cohn & Associates, 116 South Michigan Avenue, 14th Floor, Chicago, Illinois 60603. Notice delivered personally shall be deemed effectively given as of the time of personal delivery, and notice given by mail shall be deemed effectively given as of the date of such mailing. 15 16 8.4 Entire Agreement; Amendments; Headings. This Agreement embodies the entire Agreement of the Company and Executive with respect to the subject matter hereof, and replaces and supersedes any prior understandings, whether written or oral, regarding such subject matter, provided that in the event that any provision of this Agreement is inconsistent with any provision of the Restricted Stock Agreement or any Option Agreement, then the provision of this Agreement shall control. No amendment or modification of the terms of this Agreement shall be effective unless reduced to a written instrument executed by the Company and Executive. The headings of sections in this Agreement are for convenience only. IN WITNESS WHEREOF, the Company and Executive have caused this Employment Agreement to be duly executed as of the date first written above. INFORMATION RESOURCES, INC. ATTEST: By: /s/ Thomas W. Wilson, Jr. -------------------------------- /s/ Monica M. Weed Thomas W. Wilson, Jr. - --------------------------- Chief Executive Officer Monica M. Weed Assistant Secretary /s/ Joseph P. Durrett ------------------------------------ Joseph P. Durrett 16 EX-10.(LL) 3 RESTRICTED STOCK AGREEMENT 1 Exhibit 10.LL RESTRICTED STOCK AGREEMENT -------------------------- This agreement ("Agreement") is executed and made effective as of this 30th day of April, 1999 (the "Effective Date"), by and between Joseph P. Durrett (the "Executive") and Information Resources, Inc., a Delaware corporation (the "Company"). W I T N E S S E T H ------------------- WHEREAS, the Company and the Executive have executed, on the Effective Date, agreements governing the terms of the Executive's employment by the Company (the "Employment Agreement") and the award of stock options to the Executive (the "Stock Option Agreement"); WHEREAS, the Company and the Executive desire that the Executive should receive an award of the Company's common stock, par value $0.01 per share ("Common Stock"), as compensation for the Executive's service to Company; and WHEREAS, the Company desires to impose certain restrictions upon the Executive's rights to retain and/or transfer such Common Stock. NOW THEREFORE, in consideration of the premises and the mutual covenants and agreements hereinafter set forth and for other good and valuable consideration, the receipt and sufficiency of which is hereby acknowledged, the parties hereto (the "Parties") hereby agree as follows: 1. Award of Stock. The Company hereby awards to the Executive, and the Executive hereby accepts, as compensation for the Executive's service to the Company, Three Hundred Ten Thousand (310,000) shares of Company Common Stock (the "Restricted Stock"). The Restricted Stock shall be (a) comprised of One Hundred Twenty Thousand (120,000) shares, hereinafter referred to as "First Tranche Restricted Shares," plus Ninety Five Thousand (95,000) shares, hereinafter referred to as "Second Tranche Restricted Shares," plus Ninety Five Thousand (95,000) shares, hereinafter referred to as "Third Tranche Restricted Shares," and (b) subject to the terms, conditions and restrictions described in this Agreement. 2. Rights as Stockholder. Except as otherwise provided in this Agreement, the Executive shall have the rights of a stockholder of the Company (including the rights to receive dividends and vote) with respect to the Restricted Stock until the Restricted Stock is canceled and forfeited pursuant to Section 3(b). 3. Vesting and Forfeiture Conditions. The Restricted Stock shall become non-forfeitable and freely transferable ("Vested"), only under the conditions, and only to the extent, described in this Section 3: 2 (a) (i) Subject to the provisions of Section 3(b), all of the Restricted Stock shall automatically be fully Vested as of the seventh anniversary of the Effective Date. (ii) All of the Restricted Stock shall automatically be fully Vested immediately upon the Company's termination of Executive's employment with the Company if such termination by the Company occurs within the six months following a "Change of Control" (within the meaning of Section 4.0(b) of the Employment Agreement) which occurred on or after the second anniversary of the Effective Date. (iii) If on any date (a "First Tranche Measurement Date") following the Effective Date the 10 Day Trading Price of Company Common Stock is equal to or greater than $20.00 per share, then subject to the provisions of Section 3(b), (a) a sufficient number of the First Tranche Restricted Shares shall automatically become Vested as of the later of such First Tranche Measurement Date and the second anniversary of the Effective Date such that at least 40,000 of the First Tranche Restricted Shares shall be Vested as of such later date; (b) a sufficient number of the First Tranche Restricted Shares shall automatically become Vested as of the later of such First Tranche Measurement Date and the third anniversary of the Effective Date such that at least 80,000 of the First Tranche Restricted Shares shall be Vested as of such later date; and (c) all 120,000 First Tranche Restricted Shares shall automatically be Vested as of the later of such First Tranche Measurement Date and the fourth anniversary of the Effective Date. (iv) If on any date (a "Second Tranche Measurement Date") following the Effective Date the 10 Day Trading Price of Company Common Stock is equal to or greater than $25.00 per share, then subject to the provisions of Section 3(b), (a) a sufficient number of the Second Tranche Restricted Shares shall automatically become Vested as of the later of such Second Tranche Measurement Date and the second anniversary of the Effective Date such that at least 31,667 of the Second Tranche Restricted Shares shall be Vested as of such later date; (b) a sufficient number of the Second Tranche Restricted Shares shall automatically become Vested as of the later of such Second Tranche Measurement Date and the third anniversary of the Effective Date such that at least 63,333 of the Second Tranche Restricted Shares shall be Vested as of such later date; and (c) all 95,000 Second Tranche Restricted Shares shall automatically be Vested as of the later of such Second Tranche Measurement Date and the fourth anniversary of the Effective Date. (v) If on any date (a "Third Tranche Measurement Date") following the Effective Date the 10 Day Trading Price of Company Common Stock is -2- 3 equal to or greater than $30.00 per share, then subject to the provisions of Section 3(b), (a) a sufficient number of the Third Tranche Restricted Shares shall automatically become Vested as of the later of such Third Tranche Measurement Date and the second anniversary of the Effective Date such that at least 31,667 of the Third Tranche Restricted Shares shall be Vested as of such later date; (b) a sufficient number of the Third Tranche Restricted Shares shall automatically become Vested as of the later of such Third Tranche Measurement Date and the third anniversary of the Effective Date such that at least 63,333 of the Third Tranche Restricted Shares shall be Vested as of such later date; and (c) all 95,000 Third Tranche Restricted Shares shall automatically be Vested as of the later of such Third Tranche Measurement Date and the fourth anniversary of the Effective Date. (b) (i)Notwithstanding the provisions of Section 3(a), if at any time on or after the Effective Date the Executive ceases to be employed by the Company in the capacity of chief executive officer of the Company, then except as provided in Section 3(c), (a) no shares of Restricted Stock shall become Vested after the date of such cessation of the Executive's employment (the "Termination Date"), and (b) all shares of Restricted Stock which are not Vested as of such Termination Date shall be immediately canceled and forfeited to Company, and all of the Executive's (and/or any other holder's) rights therein shall immediately cease. (ii) In the event that any shares of the Restricted Stock shall be forfeited prior to becoming Vested for any reason, the Executive agrees to return to the Company promptly any stock certificate or certificates evidencing such shares of Restricted Stock. (c) If the Termination Date occurs as the direct result of the Executive's Termination of his employment for "Good Reason" (within the meaning of Section 5.2 of the Employment Agreement), Section 3(b)(i) of this Agreement shall not apply with respect to the Restricted Stock during the three year period immediately following such Termination Date. (d) For purposes of this Agreement, the term "10 Day Trading Price" as of a specific date means (i) the price per share of Common Stock determined by the average of the closing bid prices for Common Stock reported on the National Association of Securities Dealers Automated Quotation System's National Market System for the period of 10 consecutive trading days prior to and ending on the day preceding such specific date; or, if the foregoing information is not determinable, (ii) the average of the daily high and low prices at which one share of Common Stock has traded on the stock exchange on which the Common Stock generally has the greatest trading volume, for -3- 4 the period of 10 consecutive trading days prior to and ending on the day preceding such specific date. (e) After shares of Restricted Stock have become Vested, the restrictions imposed with respect to Restricted Stock under this Agreement shall no longer apply to such Vested shares. 4. Restricted Stock Non-Transferable Prior to Vesting. Prior to the time that the Restricted Stock has Vested, the Restricted Stock may not be transferred, pledged, hypothecated, assigned or otherwise disposed of to anyone other than a transfer to Executive's Immediate Family or a trust for the benefit of Executive's Immediate Family. "Immediate Family" as used in this Agreement shall mean spouse, lineal descendant or antecedent, father, mother, brother or sister. In such case, as a condition to any such transfer, the transferee shall agree in writing to comply with and be subject to the provisions of this Agreement, and there shall be no further transfer, pledge, hypothecation, assignment or other disposition of such Restricted Stock except in accordance with the terms of this Agreement. Any transfer, pledge, hypothecation, assignment or other disposition of the Restricted Stock prior to the time that the Restricted Stock has Vested, other than as permitted under this Section 4, shall cause the Restricted Stock to be immediately forfeited and canceled, and shall cause all of Executive's (and/or any other holder's) rights therein to immediately cease. 5. Withholding on Income Taxable to Executive. Company shall withhold from Executive's net cash bonus or net regular cash compensation the amounts of federal, state and local income taxes and Social Security or other employment-related taxes that Company reasonably determines are required to be withheld pursuant to any law, rule or regulation. If Company reasonably determines that the withholding obligations arising in connection with or as a result of the award or Vesting of the Restricted Stock cannot be satisfied from amounts due from Company to Executive, then upon written request from Company, Executive shall pay to Company an additional amount of cash sufficient to permit Company to timely satisfy all necessary withholding obligations arising in connection with or as a result of the award or Vesting of such Restricted Stock. 6. Investment Purpose; Transfers in Compliance with Securities Laws. Executive represents and warrants to Company that (a) Executive is aware of Company's business affairs and financial condition, and has acquired sufficient information about Company to reach an informed and knowledgeable decision to acquire the Restricted Stock, and (b) Executive is acquiring the Restricted Stock for Executive's own account for investment purposes only and not with a view to, or for the resale in connection with, any "distribution" thereof for purposes of the Securities Act of 1933, as amended (the "Securities Act"). Executive acknowledges that Executive understands that the Restricted Stock must be held indefinitely unless subsequently registered under the Securities Act or unless an exemption from registration is otherwise available. Executive understands that the certificate(s) evidencing the Restricted Stock will be imprinted with a legend which prohibits the transfer of the Restricted Stock unless the Restricted Stock is registered or such registration is not required in the opinion of counsel reasonably satisfactory to Company, in form and substance reasonably satisfactory to Company. -4- 5 7. Award Not Compensation for Certain Purposes. Executive agrees that, except as required by law, the Restricted Stock acquired pursuant to this Agreement shall not be considered or included as part of the annual compensation of Executive for purposes of computing Company's contribution to any qualified or non-qualified deferred compensation arrangements. 8. Restrictive Legends and Stop-Transfer Orders. (a) Certificates and Legends. Certificates shall be issued in respect of the Restricted Stock, and shall be registered in the name of the Executive. Executive understands and agrees that Company shall cause the legends set forth below or legends substantially equivalent thereto, to be placed upon any certificate(s) evidencing ownership of the Restricted Stock together with any other legends that may be required by state or federal securities laws: THE SECURITIES REPRESENTED HEREBY HAVE NOT BEEN REGISTERED UNDER THE SECURITIES ACT OF 1933, AS AMENDED (THE "ACT") AND MAY NOT BE OFFERED, SOLD OR OTHERWISE TRANSFERRED, PLEDGED OR HYPOTHECATED UNLESS AND UNTIL REGISTERED UNDER THE ACT OR, IN THE OPINION OF COUNSEL SATISFACTORY TO THE ISSUER OF THESE SECURITIES, IN FORM AND SUBSTANCE SATISFACTORY TO THE ISSUER OF THESE SECURITIES, SUCH OFFER, SALE OR TRANSFER, PLEDGE OR HYPOTHECATION IS IN COMPLIANCE THEREWITH. THE SHARES REPRESENTED BY THIS CERTIFICATE ARE SUBJECT TO CERTAIN CONDITIONS OF FORFEITURE AND RESTRICTIONS ON TRANSFER AS SET FORTH IN THE RESTRICTED STOCK AGREEMENT BETWEEN THE ISSUER AND THE ORIGINAL HOLDER OF THESE SHARES, A COPY OF WHICH MAY BE OBTAINED AT THE PRINCIPAL OFFICE OF THE ISSUER. SUCH CONDITIONS OF FORFEITURE AND TRANSFER RESTRICTIONS ARE BINDING ON TRANSFEREES OF THESE SHARES. (b) Stop-Transfer Notices. Executive agrees that, in order to ensure compliance with the restrictions referred to herein, Company may issue appropriate "stop transfer" instructions to its transfer agent, if any, and that, if Company transfers its own securities, it may make appropriate notations to the same effect in its own records. (c) Refusal to Transfer. Company shall not be required (i) to transfer on its books any shares of Restricted Stock that have been sold or otherwise transferred in violation of any of the provisions of this Agreement or (ii) to treat as owner of such Restricted Stock -5- 6 or to accord the right to vote or pay dividends to any purchaser or other transferee to whom such Restricted Stock shall have been so transferred. (d) Custody of Certificates. Any stock certificate(s) evidencing shares of the Restricted Stock shall be held in custody by a bank or other institution, or by the Company itself (at the Company's election), until such shares of Restricted Stock are Vested, or until such shares of Restricted Stock are canceled and forfeited, in accordance with the provisions of this Agreement. The Executive hereby agrees, as a condition to the award of Restricted Stock hereunder, to deliver to the Company a stock power endorsed in blank relating to the Restricted Stock covered by this Agreement so that, in the event of cancellation and forfeiture of shares of Restricted Stock, those shares will be transferred to the Company. 9. Miscellaneous. This Agreement (a) constitutes the entire agreement and supersedes all prior agreements and understandings, both written and oral, among the Parties with respect to the subject matter hereof, provided that if any provision of this Agreement conflicts with any provision of the Employment Agreement, the provision of the Employment Agreement shall control; (b) is not intended to confer upon any other persons any rights or remedies hereunder, except as hereinafter provided; (c) shall be binding on the Parties hereto and their respective heirs, executors, personal representatives, successors and assigns, and to any permitted transferees expressly permitted herein, and shall not be assigned by operation of law or otherwise except as expressly permitted herein, and any attempt to do so shall be void; (d) in case any provision in this Agreement shall be invalid, illegal or unenforceable, the validity, legality and enforceability of the remaining provisions shall not in any way be affected or impaired thereby; (e) may be amended only by a written instrument duly executed by the Parties hereto; (f) may be executed in counterparts, each of which shall be an original, but each of which together shall constitute one and the same agreement; and (g) shall be governed in all respects, including validity, interpretation and effect, by the laws of the State of Illinois. [Signature page follows] -6- 7 IN WITNESS WHEREOF, the Parties hereto have caused this Restricted Stock Agreement to be executed as of the date first written above. INFORMATION RESOURCES, INC. ATTEST: By: /s/ Thomas W. Wilson, Jr. -------------------------------- /s/ Monica M. Weed Thomas W. Wilson, Jr. - ------------------ Chief Executive Officer Monica M. Weed Assistant Secretary /s/ Joseph P. Durrett ------------------------------------ Joseph P. Durrett -7- EX-10.(MM) 4 EMPLOYMENT AGREEMENT DATED 5/28/99 1 Exhibit 10.mm May 28, 1999 Mr. Rick Kurz Two Morgan Place Avon, CT 06001 Dear Rick: We are delighted to offer you employment and new career opportunities at IRI. The purpose of this letter is to summarize our verbal offer to you. You will be employed as Division President for Strategic Business Development and Planning reporting to Joe Durrett. Your base salary will be $281,500 per year, your next review date will be May 1, and annually each May thereafter. Your May 1, 2000 increase will be pro-rated based on your start date. Your initial annual bonus target will be 35% of your base salary, and your final bonus will be based on your performance and IRI's bonus plan formula. You will not be bonus eligible for 1999. We will also provide you with a $203,000 sign on bonus that is intended to cover your Advo bonus and stock options you will lose by joining IRI. You will receive the sign on bonus in the following manner: $58,500 on October 1, 1999, $43,000 on December 1, 1999, $43,000 on January 3, 2000 and $58,500 on or about March 20, 2000. You will be required to repay the sign on bonus to IRI, if you are terminated for cause or you voluntarily resign your position before your one-year anniversary. You will enjoy all employee benefits and perquisites available generally to the other senior executive officers of the Company. This includes IRI's flexible benefits program which consists of health and welfare plans, life insurance, disability, 401(k) plan, holidays, personal leave, sick leave and vacation allowance (four weeks vacation per year), and IRI's Executive Deferred Compensation Program. In addition, we will reimburse you for any Cobra expense to continue your medical insurance when you leave Advo and start at IRI. In addition, you will be reimbursed for 12 months of temporary living expenses (maximum of $2,500 per month including utilities). In addition, we will reimburse you for your personal travel home weekly for a 12 month period. Both the temporary apartment and airfare will be considered compensation, and we will gross this up for tax purposes. Further, we will purchase you a cellular phone and laptop computer which meet IRI's technical requirements. You also will receive IRI's comprehensive relocation package for senior executives, which includes relocation assistance in planning your move to Chicago from a third party relocation company. You'll find the services first class. Enclosed is information regarding IRI's benefits and relocation package. Please contact me directly regarding questions pertaining to IRI's benefits and relocation assistance. 2 Mr. Rick Kurz May 28, 1999 Page 2 On your start date, the Company will grant you 90,000 options under its senior management Stock Option plan, to be evidenced by the Company's customary form of stock option agreement. For these 90,000 options the following conditions will apply: - 40,000 options will be issued on your first day of employment. These options will vest one third each year for three years. The strike price will be the closing stock price published in the WSJ the day before you start at IRI. - 25,000 options will be issued on the first day of employment with a strike price based on the previous day's closing price prior to start date. You will vest in these shares when both the following two conditions occur. You will vest in one third of the shares each year, and when the stock price hits $12. Both occurrences must occur for you to be vested. For example, if you pass your third year anniversary, and the stock price is $11.50, you will not be vested until the stock price hits $12. If the stock reaches $12 after two years of service, but before your three years of service, you will be fully vested in two thirds of these shares. The remaining one third will be fully vested on your third anniversary, regardless if the share price falls below $12. Again, for all these options the stock option strike price will be the stock price issued on the first day of employment. - You will receive 25,000 additional options with the same conditions as stated above, but the performance target for these shares will be $15 rather than $12. The service vesting will be one-third each year, and both the performance and service targets both must be achieved to vest. - For the 25,000 options that has a $12 performance target for vesting and the 25,000 options which have a $15 performance target, the following condition will apply: For these 50,000 shares, if your age and service equals 64 with a minimum of four years of completed service, you will automatically be vested in these 50,000 shares regardless of the performance targets established for vesting. Again, you will receive a stock option agreement that states all of these terms within 30 days of employment. You will also be eligible, based on performance, additional annual stock option grants with approval from IRI's Compensation Committee. Should a "change of control" (defined as the sale of the Company, whether by merger or otherwise, or the acquisition of more than 25% of the company's common stock by an acquirer, or group acting in concert) occur during your employment, the following will apply. If a change in control occurs before the second anniversary of your employment and you leave the Company within one year thereafter for any reason (other than for cause), your options (including any granted to you in the future) will continue to vest and become exercisable (until 30 days after the last options vest) in accordance with their vesting schedules notwithstanding the termination of your employment. If a change in control occurs after the second anniversary of your employment, all your unvested options will immediately vest and you will have 24 months from the termination date to exercise your options. 3 Mr. Rick Kurz May 28, 1999 Page 3 Upon starting with the Company, you will be expected to execute a customary noncompetition and confidentiality agreement (attached). Should your employment be terminated (including a reduction in responsibility) for any reason other than for cause, death or your voluntary resignation (except in case of resignation within one year following a change in control), you will continue for the next twelve months to receive all benefits including 135% of your base salary then in effect. Again, if your employment terminates for cause or as the result of your death, or your voluntary resignation (except for change of control as stated above) you will receive no severance benefits. Also, any options that would otherwise vest in the succeeding 18 month period following such termination not otherwise vested pursuant to the above change in control provision will vest immediately. Rick, Joe and I are extremely excited about your joining our team. I know everyone else will feel the same way upon meeting you. We know you can make a difference for IRI, and believe we can offer you the challenges you desire. On behalf of the Company and our entire senior management team, we are looking forward to your joining IRI and our team. Sincerely, Gary Newman Executive Vice President Human Resources Accepted this 28th day of May, 1999 /s/ Rick Kurz - ------------------------------------------- Rick Kurz cc: Joe Durrett EX-27 5 FINANCIAL DATA SCHEDULE
5 1,000 6-MOS DEC-31-1999 JUN-30-1999 11,562 0 100,152 4,224 0 119,266 189,960 109,479 384,529 113,171 0 0 0 281 234,144 384,529 0 269,592 0 270,972 0 0 590 411 (194) 217 0 0 0 217 0.01 0.01
-----END PRIVACY-ENHANCED MESSAGE-----