-----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, SxSg5mpE5SGkZxjhyzqYkZ6Qd6C4YUOctZLjpv5J60n2GJZCv8fxtHmukqAwxf/4 hJ3l4Y6z0jid/HPhqAIDeQ== 0000950131-97-002076.txt : 19970328 0000950131-97-002076.hdr.sgml : 19970328 ACCESSION NUMBER: 0000950131-97-002076 CONFORMED SUBMISSION TYPE: 10-K PUBLIC DOCUMENT COUNT: 12 CONFORMED PERIOD OF REPORT: 19961231 FILED AS OF DATE: 19970327 SROS: NASD 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-K SEC ACT: 1934 Act SEC FILE NUMBER: 000-11428 FILM NUMBER: 97564232 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-K 1 FORM 10-K - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 FORM 10-K (Mark One) [X] ANNUAL REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. [NO FEE REQUIRED] For the fiscal year ended December 31, 1996 OR [_] TRANSITION REPORT PURSUANT TO SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934. [NO FEE REQUIRED] For the Transition period from to COMMISSION FILE NO. 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 STOCK, $.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 [_] Indicate by check mark if disclosure of delinquent filers pursuant to Item 405 of Regulation S-K is not contained herein, and will not be contained, to the best of registrant's knowledge, in definitive proxy or information statements incorporated by reference in Part III of this Form 10-K or any amendment to this Form 10-K [_] The aggregate market value of the voting stock held by nonaffiliates of the registrant as of February 28, 1997 (based on the closing price as quoted by NASDAQ as of such date) was $404,695,274. The number of shares of the registrant's common stock, $.01 par value per outstanding share, as of February 28, 1997 was 28,194,537. DOCUMENTS INCORPORATED BY REFERENCE Portions of the registrant's definitive proxy statement for the annual meeting of stockholders to be held May 22, 1997 to be filed pursuant to Regulation 14A are incorporated by reference into Part III of this Form 10-K. - ------------------------------------------------------------------------------- - ------------------------------------------------------------------------------- PART I ITEM 1. BUSINESS Introduction Information Resources, Inc. ("IRI") and its subsidiaries (collectively "the Company") is a leading provider of information services to the consumer packaged goods ("CPG") industry. The Company obtains consumer purchase data primarily from electronic point-of-sale scanners in retail stores and integrates this scan data with other proprietary data collected by the Company. The Company maintains this data in massive data warehouses and provides CPG manufacturers, retailers, wholesalers and brokers with timely, detailed and accurate information regarding consumer purchasing patterns. The Company's software products assist clients in analyzing and using the Company's data, enabling them to make more cost-effective decisions in marketing, selling and distributing their products. The Company derives approximately 85% of its revenues from its U.S. services. These services center in large part around the Company's flagship InfoScan(R) service, which tracks consumer purchasing of products sold in supermarkets, drug stores, mass merchandisers and convenience stores across the United States. The Company also offers a number of other services to CPG manufacturers, such as BehaviorScan(R), for the testing and evaluation of alternative marketing strategies and tactics. Closely related to its information services, the Company also markets a family of software application products to the CPG industry based on Oracle EXPRESS(R) multidimensional relational software technology. In July 1995, the Company sold the underlying EXPRESS technology to Oracle Corporation ("Oracle"), while retaining rights to market and distribute Oracle EXPRESS software. During the past five years, the Company has been expanding internationally, establishing information services principally in Western Europe. Revenues from the Company's U.S. and International information services, as well as from the software products business sold to Oracle in mid-1995, were as follows for the periods shown (in thousands):
1996 1995 1994 --------- -------- -------- U.S. Services................................. $ 344,612 $317,553 $299,068 International Services........................ 60,991 42,165 13,580 --------- -------- -------- Subtotal.................................. 405,603 359,718 312,648 Software products business sold to Oracle..... -- 40,198 63,922 --------- -------- -------- Total..................................... $ 405,603 $399,916 $376,570 ========= ======== ========
U.S. Services The Company's U.S. Information Services include InfoScan product tracking services, related software product sales, analytical and consulting services, BehaviorScan product testing services and a variety of emerging applications for the Company's census (all stores within participating chains) scanner data bases. INFOSCAN. The Company's principal information service marketed in the United States is InfoScan. InfoScan is a service used by the CPG industry to monitor and evaluate the market performance of products sold in retail stores. The InfoScan service provides subscribers with a variety of information including how much product they and their competitors are selling, where the products are being purchased, at what price the products are being sold and under what promotional conditions sales are occurring. This information helps subscribers make fundamental strategic and tactical decisions for their businesses in the areas of sales, marketing, pricing, promotion and logistics. 2 InfoScan utilizes universal product code ("UPC") information printed via bar codes on CPG product packaging. Scanners at retail checkouts read the UPC code and record product sales electronically. On an on-going basis, the Company procures such electronic sales data (weekly and daily) along with related promotional data from a sample of national and local market retail stores. The Company also collects consumer purchase information directly from approximately 70,000 individual households across the United States. The Company processes the information at its computer facilities and stores it in the Company's proprietary data bases. InfoScan subscribers access the information in the Company's data bases through a variety of means, including the use of analytical software provided by the Company. Subscriptions to InfoScan by CPG manufacturers are a principal source of revenue for the Company. Manufacturers subscribe to InfoScan by contracting with the Company to obtain access to the InfoScan data bases for specified product categories. InfoScan contracts generally have a multi-year term, usually of three years or more. In late 1995, the Company transitioned its Towne-Oller division's product tracking service for health and beauty aid manufacturers into its InfoScan service. Previously, Towne-Oller had tracked deliveries of health and beauty care products from retailer and wholesaler warehouses to approximately 30,000 individual drug stores and supermarkets in the United States. InfoScan Data Collection. For the Company's InfoScan sample service, the Company continuously collects weekly product sales and price information from approximately 4,200 representative retail outlets throughout the United States. Included in the Company's national and local market samples are 3,000 supermarkets, 525 drug stores, 250 mass merchandisers, and 575 convenience stores. Contracting retailers typically deliver their scanner data electronically to the Company's computer facilities in Wood Dale, Illinois. While most retail stores in the United States have installed scanner equipment to record product sales information, certain convenience stores have not. When scanner data is not available, the Company uses its field personnel to visit stores and manually obtain sales information via a manual audit of the stores' product purchases and inventory. The InfoScan data bases typically contain both scanner data and "causal" data. Causal data consist of information which might help explain changes in product sales, such as, price, retailers' newspaper ads and in-store displays, as well as other promotion and merchandising data related to the sale of CPG products. The Company employs a field force of part-time workers to collect causal data. These employees conduct weekly on-site visits to retail stores participating in the InfoScan service to collect causal information such as in-store promotions and displays. Field force personnel perform other services as well, such as those related to the Company's test marketing services. The Company's InfoScan service also collects consumer purchase information from approximately 70,000 individual households in the United States. Shoppers from approximately 60,000 of these households present an identification card when shopping at participating supermarkets, thereby allowing scanners to record specific details of their product purchases. The Company also provides about 15,000 households with hand-held scanners to record their product purchases made in retail outlets which either do not have scanners or do not otherwise participate in the Company's household data collection system. The Company often pays cash for scanner data covering a sample of retailers' stores. However, the Company also exchanges software and other services to obtain access to data for all stores within certain supermarket and drug chains. (See "InfoScan Census--QScan" below.) Typical data procurement contracts run from year to year and generally are cancelable by either party on 90 days notice. InfoScan Data Processing. The Company receives and processes data for its InfoScan service at its production center and computer facilities located in Wood Dale, Illinois. The Company's production center operates with numerous mainframe and RISC-based computers as well as proprietary production software and related technology developed exclusively by the Company to process and store very large amounts of data. Through direct telecommunication connections with InfoScan clients, the Company also provides electronic on-line access to InfoScan data services. The Company leases its mainframe computers from third party financial institutions. 3 InfoScan Delivery. Subscriptions to the InfoScan service entitle the Company's clients to access the Company's data bases and receive information for specific product categories. Because large amounts of data are involved, clients usually either take electronic delivery of the data or obtain electronic access to the Company's data bases through the Company's on-line service. Clients taking electronic delivery generally license software from the Company. The Company's on-line service permits clients to build and store their own data bases which remain resident on the Company's computers. Clients then access the data bases through remote electronic connection. Clients also purchase software services from the Company. (See "Software Products" below for more information on Company revenues derived from software licensing.) Client Service. The Company places a major emphasis on the provision of experienced and knowledgeable client service personnel to assist InfoScan subscribers in the use and interpretation of InfoScan data as well as the use of the Company's analytical software. Accordingly, costs of client service personnel are a significant component of total Company costs to deliver the InfoScan service. Analytical and Consulting Services. The Company provides numerous analytical and consulting services to both CPG manufacturers and retailers. These revenues mostly follow from subscriptions to the Company's InfoScan service and principally relate to analytical use of InfoScan data. These services are generally billed on a time and materials basis. Client service personnel costs constitute the principal expenses incurred in providing these services. Analytical and consulting services are directed at helping clients identify new marketing opportunities, more effectively manage their marketing mix, identify appropriate opportunities for product line optimization and increase productivity of marketing expenditures through more effective couponing, advertising and in-store merchandising programs. The Company's Neo, Inc. subsidiary provides management consulting services focused on sales force effectiveness, retailer marketing, information utilization and training and support for selling organizations. INFOSCAN CENSUS. InfoScan Census is a product tracking service based on scanner data from all stores within participating retail chains, as opposed to a sample only. InfoScan Census offers the CPG industry more complete and accurate data than sample services, since it has no sampling or projection errors. Currently, InfoScan Census revenues come mainly from manufacturers purchasing "census key account" data, which is sales data for a product category based on all the stores of a specific retailer. This service permits manufacturers' sales representatives to negotiate with retail buyers based on a mutually consistent and accurate measure of consumer purchasing. In addition, an evaluation of differences in brand and product category purchasing across individual stores within a chain can often pin-point opportunities to effectively build sales--to the benefit of both manufacturers and retailers. The Company is also developing a wide variety of uses for InfoScan Census data which go beyond "key account" information. These include improved management of trade promotions, validation of "pay-for-performance" promotions, more effective sales force and broker compensation programs and improved inventory and distribution management. (See "Logistics" below.) There are presently approximately 13,000 supermarket stores and nearly 7,000 drug stores in the Company's InfoScan Census data base. QScan. The Company provides its QScan(TM) system to retailers in exchange for their participation in the provision of their all-store data for InfoScan Census. QScan is an information system designed to provide retailers with easy access to their scanner data. The system addresses retailers' problems of organizing and analyzing their own data bases of information for products sold in their stores. With a RISC workstation at a retailer's buying office along with software provided by the Company, the QScan system allows for the processing and analysis of scanner data from all of the retailer's stores on a weekly basis. 4 SOFTWARE PRODUCTS. In close association with InfoScan, the Company markets analytical software to the CPG industry principally for use in accessing, managing and analyzing the Company's data bases. The Company also markets space management software for use in managing retail shelf space, software for the improved management of a manufacturer's promotion expenditures and software applications to facilitate enhanced uses of InfoScan data, such as logistics software. The Company markets a line of software application products based on Oracle EXPRESS(R) primarily to the CPG industry. Oracle EXPRESS is a software technology designed for working with large and complex data bases. In July 1995, the Company sold its EXPRESS technology and certain software products to Oracle, while retaining ownership of certain EXPRESS-based sales and marketing software application products for use in the CPG industry. Through licensing agreements with Oracle, the Company continues to market and distribute the full line of Oracle EXPRESS software products. Many of the Company's InfoScan and QScan clients need the Oracle EXPRESS- based software application, DataServer AnalyzerTM, in order to access, manage and analyze the Company's data bases. DataServer Analyzer is a decision support software application built in Oracle EXPRESS and now owned by Oracle. The product provides users with a range of analytical and reporting tools. The Company has added specific scanner data modules to the product and now licenses DataServer Analyzer to InfoScan clients often at the same time as clients subscribe to the InfoScan data bases. The Company's principal source of software revenues is on-line access services provided to InfoScan subscribers who desire to easily and efficiently access InfoScan data residing on the Company's computers. These services include licenses to use various Oracle EXPRESS software products, principally DataServer Analyzer. A secondary source of software revenues derives from issuance of Oracle EXPRESS software product licenses to InfoScan subscribers which load InfoScan data on their own computer systems and do not use the Company's on-line services. Licenses typically require a one-time paid-up license fee upon acceptance of the software and annual maintenance payments for update and support services thereafter. Oracle is entitled to receive royalties on most licenses granted by the Company and its distributors within the CPG industry until July 2001. Oracle is not entitled to receive royalties on certain licenses granted by the Company and its data affiliates to CPG end- users. After July 2001, the Company and Oracle shall renegotiate the royalty rates owed to Oracle. InfoScan clients have available from the Company a number of other software applications for use with scanner data. These include the following: DataServer Reporter(TM) used by managers to track and analyze sales performance for territory management; DataServer FastCast(TM) used by sales and marketing managers to improve the accuracy of their sales forecasts; and DataServer Partners(TM) used by sales and marketing professionals to develop profitable product strategies and sales presentations. The Company retained ownership of DataServer Partners. DataServer Analyzer and DataServer Reporter were included in the EXPRESS line of products and technology sold to Oracle. The Company markets FastCast under license from an independent third party. Prior to the 1995 sale to Oracle, the Company operated a decision support software business engaged in general application development using the EXPRESS product line. Following the sale to Oracle, the Company has rights to market, distribute and provide first line customer support for the full range of Oracle EXPRESS products. However, it is anticipated that further software development work by the Company is directed toward the development of applications for specific use in the CPG industry. Space Management. The Company markets its proprietary APOLLO Space Management System software to CPG retailers, wholesalers, manufacturers and brokers in the United States and overseas. APOLLO software is designed to assist in the management of retail shelf space. The APOLLO Space Management System provides a range of tools for space management including APOLLO VIVID(TM) for producing picture schematics of shelf layouts, APOLLO TotalStore(TM) for evaluating space utilization, APOLLO BriefCase(TM) for field sales use, and the National Product Library(TM) which provides a national data base of product dimensions and product images. 5 Logistics. The Company has developed logistics software to help manufacturers and retailers improve the efficiency of product replenishment across their distribution channels. The Company's software products and consulting services for retailers are aimed at forecasting consumer demand at point-of-sale by product item, planning orders based on the forecast and generating orders based on the plan. Developments for manufacturers are aimed at the provision of software, census scanner data and implementation services designed to provide comprehensive supply chain solutions. Other Software Products. The Company develops and markets a number of other software products for use in the CPG industry. These include DataServer Targeter(TM), which provides sales and marketing organizations with tools to analyze InfoScan census data on a store-by-store basis and thereby improve the execution of comprehensive micro-marketing and sales programs. The Category Manager(TM) is an expert software system designed to facilitate strategic category planning for retailers and suppliers. TradeWins(TM), released during 1996, is a software system designed to help manufacturers manage their retail trade promotion expenditures in a more effective manner. The Company owns DataServer Targeter and TradeWins. The Category Manager was jointly developed by the Company and The Partnering Group, Inc. BEHAVIORSCAN(R) AND OTHER TESTING SERVICES. The Company's BehaviorScan service is a test marketing system which enables CPG manufacturers to measure the impact of different marketing variables on consumer purchase behavior. Typical marketing variables tested in BehaviorScan are television advertisements, newspaper ads, manufacturers' coupons, free samples, in-store displays, shelf price and packaging changes. BehaviorScan tests compare the purchases of a group of consumers exposed to test variable(s) with the purchases of a control group of consumers not exposed to the test variable(s). A unique feature of the BehaviorScan system is its ability to deliver alternative television advertising to different groups of panel households using the Company's patented targetable television technology. BehaviorScan is currently available in six markets and is the only such electronic test marketing system in the United States. Major costs associated with the BehaviorScan system include payments to retailers, compensation to participating panel households, field personnel costs, cable television studio operation, computer resources and client service personnel costs. The Company also provides a number of other testing services primarily for CPG manufacturers. These include controlled retail testing, matched market analyses and related special analyses using the Company's InfoScan data bases. Controlled testing involves testing the placement of new products or changes in advertising, shelf location, price or promotional conditions in different retail outlets or different markets and involves custom manipulation and analysis of the Company's InfoScan data bases. International Services Through subsidiaries and joint ventures with other leading marketing information firms, the Company offers information services in a number of countries outside of the United States. Specific products offered depend upon local country competitive conditions, the stage of development of the Company's business and the availability of scanner data, but generally provide clients with InfoScan market tracking services based upon a representative sample of retail scanning stores and proprietary causal data collected by the Company. Most of the Company's major European subsidiaries and joint venture companies rely on the Company's data production facilities in the United States and know-how to provide InfoScan product tracking services. The Company's only significant competitor offering product tracking services internationally is the ACNielsen Company ("ACNielsen"). (See "Competition" below.) The Company competes with ACNielsen in virtually every foreign market where the Company has established information services. ACNielsen maintains a dominant position throughout most of Europe where the Company's expenditures to establish product tracking services have been most significant. 6 United Kingdom. The Company's subsidiary in the United Kingdom offers a product tracking service under the InfoScan name to the British market. Organized in 1992 as a joint venture, the Company's partners are Taylor Nelson AGB plc of the United Kingdom and GfK AG of Germany ("GfK"). The Company now owns substantially all of the joint venture. When first formed, the joint venture purchased certain assets of a tracking service providing retail audits primarily of food products in grocery stores. In 1993, the venture expanded its sample of scanning stores, initiated the collection of causal data and began offering a fully operational scanning service covering major chains under the InfoScan name. It also expanded the service to cover stores selling health and beauty aids. Currently the Company is the only source of retailer scanner-based information on sales of health and beauty products sold by the Boots the Chemist and SuperDrug chains of drug stores representing approximately 30% of all sales of these categories in the U.K. Pursuant to contractual arrangements, the Company provides data production services to the joint venture from the Company's computer facilities in Wood Dale, Illinois. France. The Company's subsidiary in France offers a scanning-based product tracking service under the InfoScan name. In 1993, the Company organized a joint venture, IRI-SECODIP S.C.S. with GfK and SECODIP S.A. to acquire the operations of SECODIP's retail audit business and the business of a former development-stage scanner-based operation of GfK. In 1994, the Company funded most of the joint venture's capital requirements. In 1995 and 1996, the Company funded all of the joint venture's requirements and recorded 100% of the operating results and now owns substantially all of the joint venture interests. Pursuant to contractual arrangements, the Company provides data production services to the joint venture from the Company's computer facilities in Wood Dale, Illinois. Italy. In 1994, the Company began development of an information service in Italy through the formation of a wholly-owned subsidiary, IRI InfoScan Italy. In early 1995, the subsidiary produced its initial reports to clients. Its basic service consists of retail sales and promotion tracking using a sample of retail grocery outlets. Supermarket sales are tracked by means of scanning data, while sales in smaller, traditional shops are measured by manual audit techniques. The Company provides production services to IRI InfoScan Italy from the Company's computer facilities in Wood Dale, Illinois. Germany. Since 1993, the Company has had a 15% ownership interest in GfK Panel Services GmbH ("GfK Panel"), a subsidiary of GfK. GfK Panel has been offering both retail and consumer panel tracking services based on consumer household panel data, retail audit data and scanner data. It also has provided related consulting studies. Scanner data are not available from all major retailers in Germany, and use of scanning equipment in the former East Germany is limited. Therefore, scanner data in Germany, when available, are primarily used for diagnostic and promotion analysis rather than for provision of a product tracking service. GfK provides production services to GfK Panel through GfK's own facilities in Nuremberg, Germany. Effective February 1, 1997, the Company and GfK organized a new joint venture company, IRI/GfK Retail Services GmbH ("IRI/GfK Retail"). The Company has a 51% ownership interest in IRI/GfK Retail, and GfK owns the remainder. IRI/GfK Retail purchased the German retail tracking business and related software business from GfK Panel and will now provide those business services to the German market. In a separate transaction, the Company sold its 15% ownership interest in GfK Panel to GfK. GfK Panel will continue to provide consumer panel and ad hoc research services to the market, and GfK Panel and IRI/GfK Retail will cooperate in selling and delivering services to appropriate customers. Benelux. The Company and GfK also operate a joint venture which offers a scanner-based product tracking service to the Netherlands market. This joint venture is owned 80.1% by GfK and 19.9% by the Company. The scanner-based product tracking service became fully-operational in 1994 and operates under the InfoScan name. The Company provides production services to the joint venture through the Company's computer facilities in 7 Wood Dale, Illinois. The Company also has a 19.9% ownership interest in GfK Panel Services Benelux B.V. and GfK Belgium S.A. These companies operate household panel services in the Netherlands and Belgium. Turkey. In 1993, the Company acquired a retail audit business in Turkey which conducts its service in a national sample of supermarkets, large and small grocery stores, pharmacies, cosmetic shops and other stores, provides related special consulting services and distributes IRI software products in Turkey. Greece. In 1994, the Company acquired a retail audit business in Greece. The operation includes collecting, reporting, analyzing and interpreting national and regional sales data from manual audits. Sweden. In 1995, the Company acquired a 9.98% interest in a newly-formed joint venture with GfK for scanner-based product tracking services in Sweden. The business is being operated by GfK and offers a fully operational national scanner based tracking service. Eastern Europe, Middle East and North Africa. In 1995, the Company entered into an alliance with Middle East Market Research Bureau ("MEMRB"), a market research company based in Cyprus. MEMRB provides market research throughout more than 20 countries in the Middle East, Eastern Europe, the Mediterranean, the Commonwealth of Independent States and North Africa. Under the terms of the alliance, MEMRB has agreed to cooperate in the adoption of multi-country technical standards developed by the Company and co-market certain information and software products with the Company. The Company has an option to acquire up to a 49% ownership interest in MEMRB. Japan. In 1995, the Company formed a joint venture in Japan with Tokyo-based Mitsui & Co., Ltd to provide software and information services in Japan whereby the Company obtained 60% ownership in the joint venture. Latin America. The Company has operations in the certain Latin American markets through joint ventures and acquisitions in Venezuela, Puerto Rico and Guatemala. The Company owns 49.9% of the Venezuelan joint venture, Datos Information Resources, which provides audit-based product tracking as well as ad hoc and software services to the Venezuelan market. The Company's wholly- owned subsidiary, IRI Puerto Rico, is the largest full-service market research company in Puerto Rico, offering both audit-based product tracking and ad hoc services. The Company owns 19.9% of a Guatemalan based company called GSI/IRI that provides research services in Central America. TRADEMARKS, PATENTS, LICENSES AND SOFTWARE PROTECTION The Company is the owner of various trademarks, including InfoScan(R), InfoScan CensusTM, QScanTM, IRI SoftwareTM, IRI LogisticsTM, BehaviorScan(R), APOLLOTM, DataServer PartnersTM, DataServer TargeterTM, TradeWinsTM, Logistics PartnerTM, Shoppers' HotlineTM, EZPrompt(R), CouponScanTM, PromotionScanTM and Customer Marketing ResourcesTM. The Company also holds certain patents relating to the targetable television technology utilized in its BehaviorScan service. The patents expire at various dates between 1999 and 2005. Loss or infringement of these patents would likely not have a material adverse effect upon the Company's revenues. As a result of the sale of the EXPRESS technology and line of software products to Oracle in July 1995, the Company no longer owns a large portion of the software that is used in the delivery of InfoScan data. The Company secured a license back from Oracle assuring the continued use of the EXPRESS software in the Company's business, including rights to sublicense the software to clients of the Company. The initial term of the license is six years. After July 2001, the Company and Oracle shall renegotiate the royalty rates owed to Oracle. The Company also has rights to use various trademarks owned by Oracle, including Oracle EXPRESS(R), DataServer(TM), DataServer Analyzer(TM) and DataServer Reporter(TM). 8 The Company regards its data bases as proprietary and, in addition to copyright protection, relies upon trade secret laws, limitations on access to its computer source codes, confidentiality agreements with clients and internal nondisclosure safeguards to protect its rights to proprietary interests. The Company's own computer software is also proprietary and bears appropriate copyright notices. Because of the rapid pace of technological change in the computer industry, trademark, patent or copyright protection is of less significance than the knowledge and experience of the Company's personnel and their ability to develop and market new systems or software products. WORKING CAPITAL PRACTICES The Company invoices its information service clients in accordance with agreed contract terms. This procedure normally requires quarterly or monthly billing for long-term contracts and payment is typically due within 30 days of receipt of invoice. However, in specially negotiated circumstances, the Company may grant delayed billings terms. In other circumstances, the Company may discount its invoices for advanced payments. Software licenses generally require payment in full upon acceptance of software. The Company pays retailers cash in accordance with negotiated terms for providing scanner data for use in the InfoScan sample service. Payments to other vendors are normally made in accordance with vendor terms. CUSTOMERS The Company had approximately 1,700, 1,300 and 900 clients using its information services in 1996, 1995 and 1994, respectively. Many of the Company's clients are CPG manufacturers in the United States or in foreign countries where the Company offers its services. No client of the Company accounted for revenues in excess of 10% of the Company's total revenues. The Company's top ten customers accounted for approximately 35% of the Company's 1996 revenues. BACKLOG ORDERS At December 31, 1996, 1995 and 1994, the Company had committed contract revenues for information services of approximately $265 million, $235 million and $161 million respectively. Older InfoScan contracts generally require a minimum one-year client commitment. Contracts continuing beyond the initial commitment are generally cancelable at any time by the client on six months prior written notice. More recent contracts generally include commitments of three years or more. Committed contract revenues include only the noncancelable portion of a contract. The portion of these committed contract revenues expected to be earned subsequent to 1997 is approximately 42%. COMPETITION Numerous firms supply marketing and advertising research products and services to CPG manufacturers and retailers. However, the Company and ACNielsen are the only two firms which provide national scanner-based product tracking services in the United States to such manufacturers and retailers. While the Company generates more revenues than ACNielsen in the United States market, ACNielsen is far larger than the Company in terms of worldwide revenues, giving it access to greater financial resources than the Company. In the product tracking services markets across Europe, ACNielsen currently maintains a dominant market position in most European countries and is the Company's only competitor. Principal competitive factors include: innovation, quality, reliability, timeliness and comprehensiveness of analytical services and data provided; flexibility in tailoring services to client needs; experience; the capability of technical and client service personnel; data processing and decision support software; reputation; price; and geographical coverage. 9 RESEARCH AND DEVELOPMENT The Company is continuously developing new business products and services. In this regard, the Company is actively engaged in research and development of new software services and new data base analyses and applications. Expenditures for research and development for the years ended December 31, 1996, 1995 and 1994 approximated $24.9 million, $37.4 million and $35.1 million, respectively. Included in these expenditures were $5.8 million, $9.9 million and $11.7 million of software development costs that were capitalized. Expenditures not capitalized were expensed as incurred. PERSONNEL At December 31, 1996, the Company had approximately 3,900 full-time and 2,400 part-time employees. The Company depends to a significant extent on its skilled technical personnel. Its future success will depend to a large degree upon its ability to continue to hire, train and retain its professional staff. ITEM 2. PROPERTIES The Company markets and provides its information services and software support services to domestic clients from full-service sales offices in New York, New York; San Francisco and Los Angeles, California; Cincinnati, Ohio; Norwalk, Connecticut; Fairfield, New Jersey; and Toronto, Canada as well as from its headquarters in Chicago, Illinois and software development headquarters in Waltham, Massachusetts. The Company markets to international clients through subsidiaries and/or offices in Australia, Belgium, Canada, France, Germany, Guatemala, Greece, Italy, Japan, Mexico, the Netherlands, Puerto Rico, Sweden, Turkey, United Kingdom, Venezuela and through its various distributors. Principal leased facilities of the Company are as follows:
APPROXIMATE FLOOR AREA LOCATION PRINCIPAL OPERATION (SQ. FT.) - -------- ------------------- ----------- Chicago, IL............. Corporate headquarters and offices for professional staff 427,000 Waltham, MA............. Professional staff and computer facilities 45,000 Wood Dale, IL........... Computer facilities 45,000 Regional sales and client service offices. Sales, client service and analysis 263,000 International offices... Sales, client service, computer facilities and professional staff 132,000 Data collection Data collection and client test market control, cable TV studio facilities............. facilities, warehouse 160,000
ITEM 3. LEGAL PROCEEDINGS On July 29, 1996, IRI filed an action against The Dun & Bradstreet Corp., ACNielsen and IMS International, Inc. in the United States District Court for the Southern District of New York entitled Information Resources, Inc. v. The Dun & Bradstreet Corp., et. al. No. 96 CIV. 5716 (the "Action"). IRI alleged that, among other things, the Defendants violated Sections 1 and 2 of the Sherman Act, 15 U.S.C. (S)(S)1 and 2, by engaging in a series of anti- competitive practices aimed at excluding the Company from various export markets for retail tracking services and regaining monopoly power in United States market for such services. These practices included: i) entering into exclusionary contracts with retailers in several countries in order to restrict the Company's access to sales data necessary to provide retail tracking services; ii) illegally tying services in markets over which Defendants' had monopoly power with services in markets in which ACNielsen competed with the Company; iii) predatory pricing; iv) acquiring foreign market competitors with the intent of impeding the Company's efforts at export market expansion; v) tortiously interfering with Company contracts and relationships with clients, joint venture partners and other market research companies; and vi) disparging the Company to financial analysts and clients. By the Action, the Company seeks to enjoin Defendants' anti-competitive practices and to recover damages in excess of $350 million, prior to trebling. 10 The Action followed legal proceedings by the Canadian Competition Tribunal and the European Commission against ACNielsen for anti-competitive practices. On August 30, 1995, following a full hearing, the Canadian Competition Tribunal issued an Order and Reasons for Order against ACNielsen in In Re: The D&B Companies of Canada Ltd., concluding that ACNielsen had engaged in "anti- competitive acts" with the express intent "to exclude potential competitors generally and the Company specifically" from the Canadian retail tracking services market. On May 4, 1996, the European Commission issued a "Statement of Objections" against ACNielsen, following an 18 month investigation, alleging that ACNielsen had infringed Article 86 of the Treaty of Rome through several practices undertaken intentionally as part of a strategy to exclude the Company from the European markets for retail tracking services. On December 3, 1996, ACNielsen signed an Undertaking to the European Commission agreeing to halt numerous contractual practices which the Company contended was part of ACNielsen's intentional and unlawful strategy aimed at preventing the Company from establishing a competitive position in Europe and eliminating the Company as a competitor. In the ordinary course of business, IRI and its subsidiaries become involved as plaintiffs or defendants in various other legal proceedings. The claims and counterclaims in such litigation, including those for punitive damages, individually in certain cases and in the aggregate, involve amounts which may be material. However, it is the opinion of the Company's management, based upon the advice of counsel, that the ultimate disposition of pending litigation against the Company will not be material. The Company was involved in a shareholder class action suit filed by certain shareholders in 1989. In June 1994 a federal district court jury returned a unanimous verdict in favor of the Company. The plaintiffs appealed such determination with the United States Court of Appeals for the Seventh Circuit. In August 1995 the Appeals Court rendered its decision in favor of the Company. The plaintiffs did not file any further appeals. In April 1994 certain shareholders filed a class action lawsuit against the Company, and in October 1994 the Company entered into an agreement to settle this lawsuit. Pursuant to the terms of the court approved settlement agreement, in December 1995 the Company satisfied its obligations by issuing 211,223 shares of Common Stock valued at $2.6 million and paying $2.6 million in cash to the settlement class. ITEM 4. SUBMISSION OF MATTERS TO A VOTE OF SECURITY HOLDERS None. ITEM 4(A). EXECUTIVE OFFICERS OF THE REGISTRANT
NAME AGE POSITION WITH COMPANY AND BUSINESS EXPERIENCE ---- --- --------------------------------------------- Thomas W. Wilson Jr.. 65 Chairman of the Board of Directors of the Company since April 1995. Director of the Company since 1991. Senior Partner of McKinsey & Company, management consultants, from 1973 until 1990 (retired). Director of Aerial Communications Inc. since October 1996. Gian M. Fulgoni...... 49 Chief Executive Officer since January 1986; Chairman of the Board of Directors of the Company from February 1991 to April 1995; Director since 1981; Director of PLATINUM technology, Inc. Randall S. Smith..... 45 President of International Information Services Group since January 1995 and President of Operations Group since February 1996; President--International Operations Division from December 1993 until January 1995; President of European Data Operations Division from February 1993 until December 1993; President of the Testing Services Division from prior to March 1992 to January 1993. Gary M. Hill......... 49 Executive Vice President and Chief Financial Officer of the Company since May 1995. Financial consultant from August 1994 to December 1994. Senior Vice President--Finance of Itel Corporation from prior to March 1992 to July 1994.
11
NAME AGE POSITION WITH COMPANY AND BUSINESS EXPERIENCE ---- --- --------------------------------------------- Edward S. Berger........ 56 Executive Vice President since June 1993; Secretary and General Counsel of the Company since 1988; Division Senior Vice President of the Company from February 1991 until June 1993. John P. McNicholas, Jr.. 43 Controller of the Company since June 1995; Vice President--Controller of Itel Corporation from May 1992 to March 1995; Controller of Itel Corporation from prior to March 1992 to May 1992.
All of the foregoing executive officers hold office until the next annual meeting of the Board of Directors and until their successors are elected and qualified. PART II ITEM 5. MARKET FOR REGISTRANT'S COMMON EQUITY AND RELATED STOCKHOLDER'S MATTERS The Company's Common Stock has been traded on the NASDAQ Stock Market under the symbol "IRIC" since 1983. The stock currently trades on the National Market System. Share data has been adjusted for all stock splits and stock dividends to date. The high and low closing sales prices for the Company's Common Stock were as follows:
QUARTERS HIGH LOW -------- ------- --------- 1995 1st quarter........................................... $15 1/4 $12 1/4 2nd quarter........................................... 17 7/8 11 11/16 3rd quarter........................................... 14 3/8 12 11/16 4th quarter........................................... 13 3/8 10 1/8 1996 1st quarter........................................... 15 5/8 12 3/4 2nd quarter........................................... 15 1/8 12 3rd quarter........................................... 13 1/2 11 1/8 4th quarter........................................... 14 1/4 11 1/8
The last sale price on February 28, 1997 was $14 7/8 per share. As of February 28, 1997 there were 2,158 record holders of the Company's Common Stock. The Company has never paid cash dividends. It is the present policy of the Company's Board of Directors to retain earnings for use in the Company's business. Accordingly, the Board of Directors does not anticipate that cash dividends will be paid in the foreseeable future. There are restrictions in IRI's bank loan and certain lease agreements which limit the payment of dividends and the repurchases or redemption of Common Stock. (See Note 11 of the Notes to the Consolidated Financial Statements.) 12 ITEM 6. SELECTED FINANCIAL DATA
YEARS ENDED DECEMBER 31 -------------------------------------- 1996 1995 1994 1993 1992 ------ ------ ------ ------ ------ (IN MILLIONS, EXCEPT PER SHARE DATA) HISTORICAL RESULTS OF OPERATIONS (1)(2) Revenues................................ $405.6 $399.9 $376.6 $334.5 $276.4 ====== ====== ====== ====== ====== Nonrecurring expenses (3)............... (4.8) (22.8) -- (3.0) -- ====== ====== ====== ====== ====== Operating profit (loss)................. (5.1) (54.9) 5.3 37.9 37.7 ====== ====== ====== ====== ====== Net gain (loss) on sale of assets (4)... (4.6) 41.1 -- -- -- ====== ====== ====== ====== ====== Earnings (loss) before cumulative effect of change in accounting principle (5).. $ (7.6) $(11.7) $ (8.9) $ 22.2 $ 19.2 Cumulative effect on prior years of change in accounting principle (2) (6). -- -- (6.6) 1.9 -- ------ ------ ------ ------ ------ Net earnings (loss)..................... $ (7.6) $(11.7) $(15.5) $ 24.1 $ 19.2 ====== ====== ====== ====== ====== Earnings (loss) per common and common equivalent share (2): Before cumulative effect of accounting changes............................... $ (.27) $ (.43) $ (.34) $ .82 $ .78 Cumulative effect of accounting changes (6)................................... -- -- (.26) .07 -- ------ ------ ------ ------ ------ Net earnings (loss)..................... $ (.27) $ (.43) $ (.60) $ .89 $ .78 ====== ====== ====== ====== ====== Weighted average common and common equivalent shares...................... 27.8 27.0 26.1 27.2 24.8 ====== ====== ====== ====== ====== BALANCE SHEET DATA (1) Total assets............................ $334.5 $338.5 $346.8 $317.3 $263.1 ====== ====== ====== ====== ====== Working capital......................... 34.6 44.4 66.9 83.4 96.2 ====== ====== ====== ====== ====== Long-term debt.......................... 7.9 3.8 31.5 3.1 4.7 ====== ====== ====== ====== ====== Stockholders' equity.................... $226.3 $229.8 $227.2 $228.7 $186.9 ====== ====== ====== ====== ====== Book value per common and common equivalent share....................... $ 8.12 $ 8.33 $ 8.58 $ 9.00 $ 7.61 ====== ====== ====== ====== ====== Dividends paid per common share......... -- -- -- -- -- ====== ====== ====== ====== ====== ADDITIONAL FINANCIAL INFORMATION (1) Deferred data procurement costs......... $ 98.0 $ 96.8 $ 79.2 $ 68.0 $ 51.9 ====== ====== ====== ====== ====== Capital expenditures.................... 18.8 24.5 24.0 25.9 20.0 ====== ====== ====== ====== ====== Capitalized software costs.............. $ 5.8 $ 9.9 $ 11.7 $ 10.2 $ 8.8 ====== ====== ====== ====== ======
- -------- (1) In 1995, the Company purchased 39% of its French joint venture, IRI- SECODIP, from its joint venture partner increasing IRI's ownership in the joint venture from 50% to 89%. As a result of a disproportionate capital contribution made in 1996, the Company now owns substantially all of the joint venture interests. IRI-SECODIP has been consolidated effective January 1, 1995. (2) Effective January 1, 1994, the Company changed its method of recognizing revenue on its information service products whereby revenue is recognized over the term of the contract on a straight-line basis. Previously, the Company recognized a portion of the initial contract revenue in the period between client commitment and either the start of forward data or the test commencement with the remaining revenue recognized ratably over the initial contract term. Pro forma revenues and earnings per common and common equivalent share before cumulative effect of accounting change for 1993 and 1992 were $334.6 million and $279.2 million and $.83 and $.85, respectively. (3) The $4.8 million nonrecurring charge in 1996 principally relates to the disposal of certain cable TV advertising cut-in equipment originally developed for use in the Company's market testing operations. Nonrecurring expenses in 1995 included a $12.4 million write-down of assets, principally accelerated recognition of deferred European data procurement costs, to net realizable value and a $10.4 million charge 13 principally relating to the Company's Towne-Oller facility closing and related severance charge. Nonrecurring expenses in 1993 primarily related to a loss on the disposition of certain non-strategic assets. (4) In December 1996, the Company recorded a $4.6 million charge primarily for the final settlement of the escrow account related to the sale of a portion of the Company's software business to Oracle in 1995. In July 1995, the Company completed the sale to Oracle of certain assets, liabilities and related software application products of its software products business resulting in a $41.1 million gain. (See Note 4 of the Notes to Consolidated Financial Statements.) (5) The 1994 results reflected a pre-tax provision of $8.3 million related to shareholder litigation. (See Note 13 of the Notes to Consolidated Financial Statements.) The 1992 results reflected a pre-tax provision of $4.4 million related to patent infringement litigation. (6) Effective January 1, 1993, the Company adopted Statement of Financial Accounting Standards No. 109--Accounting for Income Taxes (FAS 109). ITEM 7. MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS RESULTS OF OPERATIONS Overview: Over the periods presented, the Company has generated increased revenues resulting from the continued growth of its U.S. services business and the startup and significant expansion of its International services business. The revenue gains in recent years were achieved in spite of an intensely competitive pricing environment that began in late 1993, which continued through 1995 and moderated somewhat in 1996. Due to the longer-term nature of most InfoScan contracts, pricing changes have a delayed effect on the results of operations as reported in the Company's consolidated financial statements. This lagged effect is especially apparent in the Company's U.S. operations because only a portion of all InfoScan contracts come up for renewal and are subject to competitive bidding in any particular year. The development of the Company's International services business has resulted in significant operating losses which will likely continue until these operations achieve a substantially higher level of revenues. The Company's European operations also will continue to require substantial cash investment. On December 3, 1996, the AC Nielsen Company ("ACNielsen") signed an Undertaking with the European Commission ("the Commission") agreeing to halt numerous contractual practices which the Company believes has hampered the Company's participation in European markets. In May 1996, the Commission issued a Statement of Objections to ACNielsen regarding various anticompetitive activities. The Company had contended that those practices were pursued by ACNielsen as part of an intentional and unlawful strategy aimed at preventing the Company from establishing a competitive position in Europe and eliminating the Company as a competitor. As a result of the Undertaking, the Company believes that clients can now benefit from the Company's services without risk of financial penalties being imposed by ACNielsen and that a significant artificial barrier to the Company's efforts to provide services to the European markets has been removed. On an ongoing basis, the Company reviews the outlook of its European services business, including current and near term economic conditions, expected market growth and the regulatory and competitive environment. Based upon currently projected operating results and cash flows, the Company's assessment is that the realizability of its European assets is not impaired. To the extent that actual operating results and cash flows are lower than current projections, the Company may be required to write down a portion of these assets in future periods. Special Items: In July 1995, the Company completed the sale to Oracle Corporation ("Oracle") of certain assets, liabilities and software products relating to its on-line analytical processing business, the software products business previously operated by the Company's software division. Since this business was not a separate business segment, prior period's consolidated financial statements have not been restated. The sale resulted in a pre-tax gain of $41.1 million in 1995. In December 1996, the Company recorded a ($4.6) million charge primarily for final settlement of the escrow account related to the sale. 14 In addition, in 1996 the Company recorded a ($4.8) million nonrecurring charge primarily due to the disposal of certain cable TV advertising cut-in equipment originally developed for use in the Company's market testing operation. In 1995, the Company recorded a nonrecurring charge of ($22.8) million primarily related to the accelerated recognition of European deferred data procurement costs and the reorganization of the Company's Towne-Oller unit. In addition, selling, general and administrative expenses in the third quarter of 1995 reflect approximately ($6.7) million of special charges, principally related to a provision for doubtful accounts. In 1995, IRI increased its ownership in its French joint venture, IRI- SECODIP, from 50% to 89%. As a result of a disproportionate capital contribution made in 1996, the Company now owns substantially all of the joint venture interests. All 1996 and 1995 consolidated financial information reflects IRI-SECODIP as a consolidated subsidiary of the Company. All prior period consolidated financial information reflects IRI-SECODIP as an equity investment since its purchase by the Company in April 1993. Operations: While overall revenues in 1996 increased over 1995 and 1994, the Company incurred consolidated operating losses in all three years. A number of factors influenced operating results, including: (a) the continued competitive environment in Europe and costs relating to the development of the Company's International services business; (b) the effects of strong price competition on U.S. InfoScan renewals; (c) costs related to building the Company's InfoScan Census data base and its Omega re-engineering initiatives; (d) increased client deliverables associated with past InfoScan contract renewals; (e) increased costs of software development efforts; (f) nonrecurring charges in 1996 and 1995; and (g) the impact of the sale of a portion of the Company's software business to Oracle including the net gain (loss) on sale in 1995 and 1996, respectively. The Company considers the aggregation of operating profit (loss), equity earnings (losses) and minority interests ("Operating Results") to be a meaningful and readily comparable measure of the Company's relative performance. A comparative analysis of consolidated revenues and Operating Results for the years ended December 31, 1996, 1995 and 1994 follows (in thousands):
1996 1995 1994 -------- -------- -------- Revenues: U.S. Services.................................. $344,612 $317,553 $299,068 International Services......................... 60,991 42,165 13,580 -------- -------- -------- Subtotal..................................... 405,603 359,718 312,648 Software products business sold to Oracle...... -- 40,198 63,922 -------- -------- -------- $405,603 $399,916 $376,570 ======== ======== ======== Operating Results: U.S. Services Operating profit............................. $ 31,106 $ 15,286 $ 38,112 Equity in loss of affiliated companies....... -- (200) (1,215) -------- -------- -------- Subtotal--U.S. Services...................... 31,106 15,086 36,897 International Services Operating loss............................... (29,425) (35,756) (18,056) Equity in earnings (loss) of affiliated companies................................... 30 579 (7,958) Minority interests........................... 986 304 979 -------- -------- -------- Subtotal--International Services............. (28,409) (34,873) (25,035) Corporate and other expenses................... (1,965) (3,652) (7,535) Software products business sold to Oracle- operating loss................................ -- (8,044) (7,215) Nonrecurring expenses.......................... (4,808) (22,759) -- -------- -------- -------- Operating Results.............................. $ (4,076) $(54,242) $ (2,888) ======== ======== ========
Revenues from the Company's U.S. services business in 1996 were 8.5% higher than in 1995. Revenues in 1996 reflected market growth, net share gains and increased InfoScan Census and analytic revenues, partially offset by the effect of the close-down of the Company's Towne-Oller service during late 1995. Revenues from 15 the Company's U.S. services business in 1995 increased 6.2% over 1994. Revenues in 1995 reflected market growth and net share gains, offset somewhat by the difficult competitive environment resulting in severe price pressure upon obtaining contract renewals for existing clients. U.S. Operating Results increased $16.0 million in 1996. This increase was due to revenue gains, the benefit of lower expense growth resulting from the Company's cost containment initiatives and production process reengineering and the effect of $6.7 million of special charges in 1995. U.S. Operating Results in 1995 decreased $21.8 million compared to 1994. This decline was due to a 15.4% increase in costs related primarily to increases in personnel and system capabilities to support current client contracts as well as to enhance future revenue and achieve operating efficiencies, and $6.7 million of special general and administrative expenses, primarily related to a provision for uncollectible accounts receivable. International service revenues in 1996 increased 44.6% over 1995 primarily as a result of significant revenue gains in France, the U.K. and Italy due to an increase in the number of InfoScan clients and expanded usage among existing clients. International services revenues in 1995 also increased significantly over 1994 due to the continuing development of the various European start-up operations, and in part, to the consolidation of IRI-SECODIP as of January 1, 1995. The International Operating Results were a ($28.4) million loss in 1996 compared to a ($34.9) million loss in 1995. Results continue to reflect a difficult competitive pricing environment in Europe, the ramp-up of Italian operations and high retailer costs in the U.K. The International Operating Results were a ($34.9) million loss in 1995 compared to a ($25.0) million loss in 1994, resulting from higher costs in the United Kingdom, the start-up of the Company's business in Italy in late 1994 and the effect of foreign exchange rates. Nonrecurring expenses in 1996 include a ($4.8) million write-off of certain assets, principally related to the disposal of certain cable TV advertising cut-in equipment originally developed for use in the Company's market-testing operations. Nonrecurring expenses in 1995 included a ($12.4) million write- down of assets, principally accelerated recognition of deferred European data procurement costs to net realizable value and a ($10.4) million charge principally relating to the Company's Towne-Oller facility closing and related severance charge. The accelerated recognition of deferred European data procurement costs was based upon the Company's assessment of the realizability of these assets, in part due to lower than originally expected revenues and operating results in the Company's startup operations in the United Kingdom and Italy. The 1995 nonrecurring expense relating to the Company's Towne-Oller business was initiated by the Company's decision to transition Towne-Oller service from the use of warehouse withdrawal data to InfoScan scanner data and close down of its New York operation. Consolidated results in 1995 included seven-months of Operating Results of the software products business sold to Oracle on July 27, 1995 in comparison to full year results in 1994. Operating Results of the software products business were an ($8.0) million loss and a ($7.2) million loss in 1995 and 1994, respectively. Net loss on sale of assets in 1996 reflected a ($4.6) million pre-tax charge primarily for final settlement of the escrow account related to the sale of a portion of the Company's software business to Oracle in 1995. Net gain on sale of assets in 1995 of $41.1 million included the pre-tax gain attributable to the Oracle sale. Year Ended December 31, 1996: Consolidated net loss was ($7.6) million in 1996 compared to a net loss of ($11.7) million in 1995. Results in 1996 included a ($4.8) million nonrecurring charge principally related to the disposal of certain cable TV advertising cut-in equipment and a ($4.6) million charge primarily related to final settlement on the sale of a portion of the Company's software business to Oracle in 1995. Results in 1995 included several special items including: (a) a $41.1 million pre-tax gain on sale of a portion of the Company's software business to Oracle; (b) a $22.8 million nonrecurring charge primarily related to the accelerated recognition of European deferred data procurement costs and the reorganization of the Company's Towne-Oller unit; and (c) $6.7 million of special charges included in selling, general and administrative expenses, principally relating to a provision for uncollectible accounts receivable. Consolidated revenues increased 12.8% to $405.6 million in 1996, after adjusting revenues for 1995 to remove that portion of the Company's software business that was sold to Oracle in July 1995. Including such revenues in the 1995 base results in a 1.4% consolidated revenue increase from 1995 to 1996. 16 Consolidated costs of information services sold increased $27.4 million or 8.0% to $369.0 million in 1996. Major components of the 1996 increase included: (a) an $11.4 million or 7.4% increase in U.S. services compensation expense resulting primarily from higher headcount required for software development and client servicing; (b) a $9.0 million increase in International services compensation expense resulting from the continued expansion of operations; and (c) a $5.9 million increase in amortization of deferred data procurement costs. Consolidated results for 1995 included the operations of the software products business unit sold to Oracle in July 1995. This part of the software business reported costs of software products sold for the seven months of 1995 of approximately $41.1 million. Consolidated selling, general and administrative expenses decreased $12.4 million or 25.2% to $36.9 million in 1996. Excluding that portion of selling, general and administrative expenses attributable to the software products business sold to Oracle, consolidated selling, general and administrative expenses decreased $5.4 million or 12.6% in 1996 compared to 1995. This decrease was attributable to the special charges of $6.7 million incurred in 1995 principally related to a provision for uncollectible accounts receivable. Interest and other expenses for 1996 and 1995 were $1.2 million and $2.8 million, respectively. This decrease was principally due to application of proceeds from the July 1995 Oracle sale to reduce bank debt. The Company's 1996 and 1995 income tax benefit, resulting from pretax losses, was lower than the income tax benefit computed using the U.S. Federal statutory rate due to certain unbenefitted foreign losses, goodwill amortization and other nondeductible expenses. Year Ended December 31, 1995: Loss before cumulative effect of change in accounting principle was ($11.7) million in 1995 compared to a loss of ($8.9) million in 1994. Results in 1995 included several special items including: (a) a $41.1 million pre-tax gain on sale of a portion of the Company's software products business to Oracle in July 1995; (b) a $22.8 million nonrecurring charge primarily related to the accelerated recognition of deferred European data procurement costs and the reorganization of the Company's Towne-Oller unit; and (c) $6.7 million of special charges included in selling, general and administrative expenses, principally relating to a provision for uncollectible accounts receivable. Results in 1994 included a pre-tax provision of $8.3 million related to settled shareholder litigation. Exclusive of the revenues of the disposed business in both years, consolidated revenues increased 15.1% in 1995 in comparison to 1994, due to increases in U.S. services revenues along with increases in revenues of the Company's developing International services business. The Company's U.S. services revenue growth reflected the continued negative effect of an intense pricing environment which began in late 1993. Including revenues of the disposed business, consolidated revenues increased 6.2% to $399.9 million in 1995 compared to $376.6 million in 1994, as the above factors were reduced by the effect of the sale of the software business to Oracle in July 1995. Consolidated costs of information services sold increased $76.5 million, or 28.8% to $341.6 million in 1995. Major components of the 1995 increase included: (a) a $19.8 million or 14.9% increase in U.S. services compensation expense resulting from higher headcount required to service clients and salary increases; (b) a $23.1 million increase in International services compensation expense resulting from the consolidation of IRI-SECODIP and the continued expansion of all international operations; (c) a $16.3 million increase in amortization of deferred data procurement costs, principally arising from expansion of the International services business in Europe; (d) and a $12.0 million increase in depreciation and computer expenses required to deliver increasing levels of InfoScan services in Europe and the United States. Increases in computer operations were required to support the Company's Census product initiative and its production re-engineering and future cost reduction projects. Consolidated results for all periods included the operations of the software products business until sold to Oracle in July 1995. This part of the software business reported costs of software products sold for the seven months of 1995 of approximately $41.1 million compared to $60.4 million for the full year of 1994. 17 Consolidated selling, general and administrative expenses increased $3.6 million or 7.9% to $49.4 million in 1995. Excluding that portion of selling, general and administrative expenses attributable to the software products business, consolidated selling, general and administrative expenses were $42.3 million in 1995 and $35.0 million in 1994. This $7.3 million increase was primarily due to $6.7 million of special charges incurred in 1995 principally related to a provision for uncollectible accounts receivable. In addition, approximately $2.9 million of the increase in total selling, general and administrative expenses for 1995 were due to the consolidation of IRI-SECODIP. Consolidated selling, general and administrative expense in 1994 included a one-time charge of $1.4 million incurred in connection with the canceled acquisition of Asia-based SRG Holdings Limited. Interest and other expenses for 1995 and 1994 were $2.8 million and $1.6 million, respectively, increasing because of extensive borrowing requirements in the first half of 1995, which were needed to fund the expansion of the Company's International services business in Europe. In July 1995, the Company repaid its bank borrowings in full. Equity in earnings (loss) of affiliated companies reflected earnings and losses from equity investments. The reduction in the equity loss in 1995 was primarily due to the Company's increased ownership interest in its French affiliate which, effective January 1, 1995, has been included as a consolidated subsidiary of the Company. The Company's 1995 and 1994 income tax benefit, resulting from pretax losses, was lower than the income tax benefit computed using the U.S. Federal statutory rate due to certain unbenefitted foreign losses, goodwill amortization and other nondeductible expenses. LIQUIDITY AND CAPITAL RESOURCES The expansion of its information services business in Europe has required extensive cash investment. The Company's current cash resources include its $12.2 million consolidated cash balance, $44.5 million available under the bank line of credit and internally generated funds from its U.S. operations. The Company anticipates that it will have sufficient funds from these sources to satisfy its cash needs for the foreseeable future. Bank line availability is subject to compliance with financial covenants relating to operating and cash flow results, tangible net worth and leverage and quick ratios. Certain of the Company's loan and lease agreements include various financial covenants which require that the Company maintain a minimum tangible net worth, as defined, and otherwise limit IRI's ability to declare dividends or make distributions to holders of capital stock, or redeem or otherwise acquire shares of the Company. Approximately $3.5 million is available for such distributions under the most restrictive of these covenants. In July 1995, the Company sold its software products business to Oracle for approximately $100 million in cash, including $8.0 million of cash in escrow, subject to post-closing adjustment. The $8.0 million constituted a general escrow which was settled in December 1996. In July 1995, the entire amount outstanding under the Company's existing credit facility was repaid by using a portion of the proceeds from the sale. The remainder of the proceeds was used to pay expenses associated with the sale and for general corporate purposes. Cash Flow for the Year Ended December 31, 1996: Consolidated net cash provided by operating activities was $102.1 million for the year ended December 31, 1996 compared to $76.1 million in 1995. Cash provided by operating activities increased primarily due to improved operating performance in 1996. Consolidated cash used in net investing activities was ($121.2) million in 1996 compared to ($43.9) million in 1995 as the 1995 period benefitted from the $92.0 million of proceeds received from the sale of the software products business to Oracle. Net cash provided (used) before financing activities was ($19.1) million for 1996 and $32.2 million in 1995 as 1995 cash flow was benefitted by $92.0 million of proceeds from the Oracle transaction. Consolidated cash 18 provided by (used in) net financing activities was $7.1 million in 1996 compared to ($19.1) million in 1995. The 1995 net financing activities primarily reflect the repayment of bank borrowings using proceeds from the Oracle sale. Cash Flow for the Year Ended December 31, 1995: Consolidated net cash provided by operating activities was $76.1 million for the year ended December 31, 1995 compared to $77.7 million in 1994. Cash provided by operating activities decreased due primarily to lower cash earnings from operations offset by a smaller increase in accounts receivable and other working capital in 1995. Consolidated cash used for net investing activities was ($43.9) million in 1995 versus ($116.4) million in 1994. The decrease in consolidated investing activities in 1995 was due to the benefit of proceeds received from the sale of a portion of the software products business to Oracle, partially offset by increases in data procurement costs attributable to the expansion of the Company's data collection efforts in Europe and, to a much lesser degree, the United States. Net cash provided (used) before financing activities was $32.2 million in 1995 and ($38.8) million in 1994 as 1995 cash flow was benefitted by $92.0 million of proceeds from the Oracle transaction. Consolidated cash (used) provided by net financing activities was ($19.1) million for the year ended December 31, 1995 in comparison to $30.3 million for the year ended December 31, 1994. The net financing activities reflected bank loan repayments in 1995 made possible by the sale of the software products business to Oracle. Net financing activities in 1994 reflected net bank borrowings of $29.0 million used to fund the Company's continuing development of its International information operations. Financings: In 1995, following the sale of a portion of its software business to Oracle, the Company repaid the entire amount of bank debt outstanding and entered into a new credit facility. The Company has a $50.0 million bank credit facility maturing in 1998, with fixed or floating interest rate options at or below prime. Facility fees of .4% are payable on the bank credit facility, and there are no commitment fees. The credit facility contains financial covenants which restrict the Company's ability to incur additional indebtedness or liens on its assets. The financial covenants also require the Company to meet certain tangible net worth and operating income levels and cash flow coverage and working capital ratios. The primary use of borrowings has been for the expansion of the Company's information services in Europe. At December 31, 1996, $44.5 million was available under the bank credit facility for general corporate purposes. Other Deferred Costs and Capital Expenditures: Consolidated deferred data procurement expenditures were $98.0 million, $96.8 million and $79.2 million for the years ended December 31, 1996, 1995 and 1994, respectively. These expenditures are amortized over a period of 28 months and include payments to retailers for point-of-sale data and costs related to collecting, reviewing and verifying other data (i.e., causal factors) which are an essential part of the data base. The increase in deferred data procurement expenditures was principally related to the expansion of the Company's International services business. Deferred data procurement expenditures for the Company's U.S. services business were $65.6 million, $64.7 million and $61.6 million for the years ended December 31, 1996, 1995 and 1994, respectively. The Company's International services business deferred data procurement expenditures were $32.4 million, $32.1 million and $17.6 million for the years ended December 31, 1996, 1995 and 1994, respectively. Management expects to continue the development of its businesses in Europe, and accordingly, the Company's European operations will continue to require substantial investment in data procurement costs. Based upon currently projected operating results and cash flows, the Company's assessment is that the realizability of its European assets is not impaired. To the extent that actual operating results and cash flows are lower than current projections, the Company may be required to write down a portion of these assets in future periods. Consolidated capital expenditures were $18.8 million, $24.5 million and $24.0 million for the years ended December 31, 1996, 1995 and 1994, respectively. Capital expenditures for the Company's U.S. services business were $15.2 million, $18.6 million and $17.3 million for the years ended December 31, 1996, 1995 and 1994, respectively, while related depreciation expense was $16.0 million, $16.1 million and $14.7 million, respectively. The Company's International services business capital expenditures were $3.6 million, $5.9 million 19 and $6.7 million for the years ended December 31, 1996, 1995 and 1994, respectively, while depreciation expense was $4.2 million, $4.1 million and $2.4 million, respectively. Consolidated capitalized software development costs were $5.8 million, $9.9 million and $11.7 million for the years ended December 31, 1996, 1995 and 1994, respectively. NOL Carryforwards: As of December 31, 1996, the Company had cumulative U.S. Federal net operating loss ("NOL") carryforwards of approximately $64.8 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. In addition, at December 31, 1996, various foreign subsidiaries of IRI had aggregate cumulative NOL carryforwards for foreign income tax purposes of approximately $6.2 million which are subject to various income tax provisions of each respective country. Approximately $3.0 million of these foreign NOLs may be carried forward indefinitely, while the remaining $3.2 million expire in 2000 and 2001. At December 31, 1996 the Company had general business tax credit carryforwards of approximately $4.9 million which expire primarily between 1999 and 2010, 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 of such agreements. ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA Listed below are the financial statements and supplementary data included in this part of the Annual Report on Form 10-K:
PAGE NO. ---- (a) Financial Statements Report of Independent Auditors (Ernst & Young LLP)...................... 21 Report of Independent Certified Public Accountants (Grant Thornton LLP). 22 Consolidated Balance Sheets at December 31, 1996 and 1995............... 23 Consolidated Statements of Operations for the years ended December 31, 1996, 1995 and 1994.................................................... 24 Consolidated Statements of Stockholders' Equity for the years ended December 31, 1996, 1995 and 1994....................................... 25 Consolidated Statements of Cash Flows for the years ended December 31, 1996, 1995 and 1994.................................................... 26 Notes to Consolidated Financial Statements.............................. 27 (b) Supplementary Data Summary of Quarterly Data............................................... 39
Financial statement schedule is included on page 43 preceding the signature pages of this report (see Item 14). 20 REPORT OF INDEPENDENT AUDITORS Board of Directors and Stockholders Information Resources, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheet of Information Resources, Inc. and Subsidiaries as of December 31, 1996, and the related consolidated statements of operations, stockholders' equity and cash flows for the year then ended. Our audit also included the financial statement schedule listed in the Index at Item 14(a). These financial statements and schedule are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements and schedule based on our audit. We conducted our audit in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Information Resources, Inc. and Subsidiaries at December 31, 1996 and the consolidated results of their operations and their consolidated cash flows for the year then ended, in conformity with generally accepted accounting principles. Also, in our opinion, the related financial statement schedule, when considered in relation to the basic financial statements taken as a whole, presents fairly in all material respects the information set forth therein. Ernst & Young LLP Chicago, Illinois February 12, 1997 21 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors and Stockholders Information Resources, Inc. and Subsidiaries We have audited the accompanying consolidated balance sheet of Information Resources, Inc. and Subsidiaries as of December 31, 1995, and the related consolidated statements of operations, stockholders' equity and cash flows for each of the two years in the period ended December 31, 1995. These financial statements are the responsibility of the Company's management. Our responsibility is to express an opinion on these financial statements based on our audits. We conducted our audits in accordance with generally accepted auditing standards. Those standards require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements. An audit also includes assessing the accounting principles used and significant estimates made by management, as well as evaluating the overall financial statement presentation. We believe that our audits provide a reasonable basis for our opinion. In our opinion, the financial statements referred to above present fairly, in all material respects, the consolidated financial position of Information Resources, Inc. and Subsidiaries at December 31, 1995, and the consolidated results of their operations and their consolidated cash flows for each of the two years in the period ended December 31, 1995, in conformity with generally accepted accounting principles. As discussed in NOTE 1, effective January 1, 1994, the Company changed its method of recognizing revenue. Grant Thornton LLP Chicago, Illinois February 15, 1996 22 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED BALANCE SHEETS DECEMBER 31,
1996 1995 -------- -------- (IN THOUSANDS) ASSETS ------ CURRENT ASSETS Cash and cash equivalents................................ $ 12,195 $ 24,884 Accounts receivable, net................................. 99,413 95,862 Escrow receivable........................................ -- 8,000 Prepaid expenses and other............................... 6,575 5,169 -------- -------- Total Current Assets................................... 118,183 133,915 -------- -------- Property and equipment, at cost............................ 147,398 136,946 Accumulated depreciation and amortization................ (92,806) (76,541) -------- -------- Net property and equipment............................. 54,592 60,405 Investments................................................ 18,737 18,791 Other assets............................................... 142,981 125,425 -------- -------- $334,493 $338,536 ======== ======== LIABILITIES AND STOCKHOLDERS' EQUITY ------------------------------------ CURRENT LIABILITIES Current maturities of capitalized leases................. $ 2,805 $ 2,317 Accounts payable......................................... 36,059 36,214 Accrued compensation and benefits........................ 17,660 19,812 Accrued property, payroll and other taxes................ 4,506 3,981 Accrued expenses......................................... 7,015 11,571 Deferred revenue......................................... 15,558 15,599 -------- -------- Total Current Liabilities.............................. 83,603 89,494 -------- -------- Long-term debt............................................. 7,892 3,760 Deferred income taxes, net................................. 9,113 8,643 Deferred gain.............................................. 3,632 4,047 Other liabilities.......................................... 3,925 2,838 STOCKHOLDERS' EQUITY Preferred stock--authorized 1,000,000 shares, $.01 par value; none issued...................................... -- -- Common stock--authorized 60,000,000 shares, $.01 par value; 27,886,406 and 27,587,176 shares issued and outstanding, respectively............................... 279 276 Capital in excess of par value........................... 187,213 183,615 Retained earnings........................................ 38,270 45,828 Cumulative translation adjustment........................ 566 35 -------- -------- Total Stockholders' Equity............................. 226,328 229,754 -------- -------- $334,493 $338,536 ======== ========
The accompanying notes to consolidated financial statements are an integral part of these statements. 23 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF OPERATIONS YEARS ENDED DECEMBER 31,
1996 1995 1994 -------- -------- -------- (IN THOUSANDS, EXCEPT PER SHARE DATA) Revenues: Information services........................... $405,603 $359,718 $312,648 Software products business sold to Oracle...... -- 40,198 63,922 -------- -------- -------- 405,603 399,916 376,570 Costs and expenses: Information services sold...................... (368,951) (341,566) (265,115) Software products business sold to Oracle...... -- (41,142) (60,392) Selling, general and administrative expenses... (36,936) (49,374) (45,757) Nonrecurring expenses.......................... (4,808) (22,759) -- -------- -------- -------- (410,695) (454,841) (371,264) -------- -------- -------- Operating profit (loss).......................... (5,092) (54,925) 5,306 Net gain (loss) on sale of assets................ (4,600) 41,126 -- Interest expense and other, net.................. (1,182) (2,752) (1,580) Litigation provision............................. -- -- (8,275) Equity in earnings (loss) of affiliated companies....................................... 30 379 (9,173) -------- -------- -------- Loss before income taxes, minority interests and cumulative effect of change in accounting principle....................................... (10,844) (16,172) (13,722) Income tax benefit............................... 2,300 4,190 3,822 -------- -------- -------- Loss before minority interests and cumulative effect of change in accounting principle........ (8,544) (11,982) (9,900) Minority interests............................... 986 304 979 -------- -------- -------- Loss before cumulative effect of change in accounting principle............................ (7,558) (11,678) (8,921) Cumulative effect on prior years of change in accounting principle............................ -- -- (6,594) -------- -------- -------- Net loss..................................... $ (7,558) $(11,678) $(15,515) ======== ======== ======== Loss per common and common equivalent share: Before cumulative effect of accounting change.. $ (.27) $ (.43) $ (.34) Cumulative effect of accounting change......... -- -- (.26) -------- -------- -------- Net loss..................................... $ (.27) $ (.43) $ (.60) ======== ======== ======== Weighted average common and common equivalent shares.......................................... 27,755 26,991 26,056 ======== ======== ========
The accompanying notes to consolidated financial statements are an integral part of these statements. 24 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF STOCKHOLDERS' EQUITY YEARS ENDED DECEMBER 31,
CAPITAL IN EXCESS CUMULATIVE COMMON OF PAR RETAINED TRANSLATION STOCK VALUE EARNINGS ADJUSTMENT TOTAL ------ -------- -------- ----------- -------- (IN THOUSANDS) Balance at December 31, 1993... $254 $157,972 $ 72,333 $(1,897) $228,662 ---- -------- -------- ------- -------- Net loss....................... -- -- (15,515) -- (15,515) Shares issued: Employee stock option plans and other................... 2 1,926 -- -- 1,928 Acquisitions and joint ventures.................... 9 9,805 688 -- 10,502 Translation adjustment......... -- -- -- 1,624 1,624 ---- -------- -------- ------- -------- Balance at December 31, 1994... 265 169,703 57,506 (273) 227,201 ---- -------- -------- ------- -------- Net loss....................... -- -- (11,678) -- (11,678) Shares issued: Employee stock option plans and other................... 9 10,420 -- -- 10,429 Acquisitions and joint ventures.................... 2 3,492 -- -- 3,494 Translation adjustment......... -- -- -- 308 308 ---- -------- -------- ------- -------- Balance at December 31, 1995... 276 183,615 45,828 35 229,754 ---- -------- -------- ------- -------- Net loss....................... -- -- (7,558) -- (7,558) Shares issued: Employee stock option plans and other................... 3 3,598 -- -- 3,601 Translation adjustment......... -- -- -- 531 531 ---- -------- -------- ------- -------- Balance at December 31, 1996... $279 $187,213 $ 38,270 $ 566 $226,328 ==== ======== ======== ======= ========
The accompanying notes to consolidated financial statements are an integral part of these statements. 25 INFORMATION RESOURCES, INC. AND SUBSIDIARIES CONSOLIDATED STATEMENTS OF CASH FLOWS YEARS ENDED DECEMBER 31,
1996 1995 1994 --------- -------- --------- (IN THOUSANDS) CASH FLOWS FROM OPERATING ACTIVITIES: Net loss..................................... $ (7,558) $(11,678) $ (15,515) Adjustments to reconcile net loss to net cash provided by operating activities: Amortization of deferred data procurement costs..................................... 87,944 82,095 65,819 Depreciation............................... 20,204 20,196 17,057 Amortization of capitalized software costs. 4,125 6,701 8,839 Amortization of intangibles................ 3,015 4,219 3,258 Deferred income tax benefit................ (2,938) (5,284) (6,270) Equity in (earnings) loss of affiliated companies and minority interests.......... (1,016) (683) 8,194 Cumulative effect of change in accounting principle................................. -- -- 6,594 Nonrecurring expenses...................... 4,808 22,759 -- Net (gain) loss on disposition of assets... 4,600 (41,126) -- Provision for losses on accounts receivable................................ 719 6,295 2,584 Other...................................... (3,002) (2,543) 552 Change in assets and liabilities: Increase in accounts receivable.......... (6,163) (7,593) (22,586) Increase in other current assets......... (1,334) (3,760) (1,555) Increase (decrease) in accounts payable and accrued liabilities................. (3,314) 2,382 9,842 Increase (decrease) in deferred revenue.. (84) 3,578 2,319 Other, net............................... 2,077 583 (1,471) --------- -------- --------- Total adjustments...................... 109,641 87,819 93,176 --------- -------- --------- Net cash provided by operating activities............................ 102,083 76,141 77,661 CASH FLOWS FROM INVESTING ACTIVITIES: Proceeds from disposition of assets.......... 2,900 92,000 -- Deferred data procurement costs.............. (98,005) (96,808) (79,162) Purchase of property and equipment........... (18,772) (24,497) (23,953) Capitalized software costs................... (5,784) (9,887) (11,681) Investments and net assets acquired in business acquisitions....................... (950) (4,812) (1,832) Other........................................ (600) 62 210 --------- -------- --------- Net cash used by investing activities.. (121,211) (43,942) (116,418) CASH FLOWS FROM FINANCING ACTIVITIES: Net bank borrowings (repayments) ............ 5,500 (29,000) 29,000 Net borrowings (repayments) of capitalized leases...................................... (880) 1,606 (435) Proceeds from exercise of stock options and other....................................... 2,445 8,246 1,697 --------- -------- --------- Net cash provided (used) by financing activities............................ 7,065 (19,148) 30,262 EFFECT OF EXCHANGE RATE CHANGES ON CASH........ (626) 41 919 --------- -------- --------- Net increase (decrease) in cash and cash equivalents................................. (12,689) 13,092 (7,576) Cash and cash equivalents at beginning of year........................................ 24,884 11,792 19,368 --------- -------- --------- Cash and cash equivalents at end of year..... $ 12,195 $ 24,884 $ 11,792 ========= ======== =========
The accompanying notes to consolidated financial statements are an integral part of these statements. 26 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS DECEMBER 31, 1996, 1995 AND 1994 NOTE 1--SUMMARY OF ACCOUNTING POLICIES Business Information Resources, Inc. ("IRI") and its subsidiaries (collectively the "Company") is a leading provider of information services to the consumer package goods ("CPG") industry. The Company obtains consumer purchase data from electronic point-of-sale scanners in retail stores and integrates this scan data with other proprietary data collected by the Company's field personnel. The Company maintains this data in massive data warehouses and provides CPG manufacturers, retailers, wholesalers and brokers with timely, detailed and accurate information regarding consumer purchasing patterns. The Company's software products assist clients in analyzing and using the Company's data, enabling them to make more cost effective decisions in marketing, selling and distributing their products. Principles of Consolidation The consolidated financial statements include the accounts of IRI and all wholly or majority owned subsidiaries and affiliates. Minority interests reflect the non-Company owned stockholder interests in Information Resources Japan, Ltd., IRI-SECODIP, S.C.S., (France) ("IRI-SECODIP") and IRI InfoScan Limited (U.K.). The equity method of accounting is used for investments in which the Company has a 20% to 50% ownership and exercises significant influence over operating and financial policies. All significant intercompany accounts and transactions have been eliminated in consolidation. Accounting Estimates The preparation of financial statements in conformity with generally accepted accounting principles requires management to make estimates and assumptions that affect the reported amounts of assets and liabilities and disclosure of contingent assets and liabilities at the date of the financial statements and the reported amounts of revenues and expenses during the reported period. Actual results may differ from estimates. Reclassifications Certain reclassifications have been made in the prior years' consolidated financial statements to conform to the 1996 presentation. Revenue Recognition and Change in Accounting Principle Revenues on contracts for retail tracking services, which generally have terms not less than one year, are recognized over the terms of the contracts. Such contracts are generally categorized into one of two classes: 1) cancelable at the end of each year by the giving of six months written notice by either party; or 2) multi-year contracts either non-cancelable or cancelable only with significant penalties, generally by the giving of six months written notice after the initial multi-year term. Revenues for special analytical services, market research and consulting projects are recognized as services are performed. Certain of these projects are fixed-price in nature and use the percentage-of-completion method for the recognition of revenue. Revenues for projects that include a timesharing aspect are allocated over the timesharing period. Revenues from the sale of software application products, or products sold under licensing agreements, are recognized upon delivery when there is a reasonable basis for estimating collectibility and the Company has no significant remaining obligations. If there are significant other obligations, revenues are recognized on the basis of the ratio of incurred cost to total estimated cost over the life of the contract. Related software maintenance fees are recognized as earned over the terms of their respective contracts. 27 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Effective January 1, 1994, the Company changed its method of recognizing revenue on its retail tracking service products whereby revenue is recognized over the term of the contract on a straight-line basis. Previously, the Company recognized a portion of the initial contract revenue in the period between client commitment and either the start of forward data or the test commencement, with the remaining revenue recognized ratably over the initial contract term. The cumulative effect of this change for periods prior to January 1, 1994 of $6.6 million (after reduction for the income tax effect of $4.4 million) is shown separately in the 1994 consolidated statement of operations. Research and Development Expenditures for research and development for the years ended December 31, 1996, 1995 and 1994 approximated $24.9 million, $37.4 million and $35.1 million, respectively. Included in these expenditures were $5.8 million, $9.9 million and $11.7 million of software development costs that were capitalized for the years ended December 31, 1996, 1995 and 1994, respectively. Expenditures not capitalized are charged to expense as incurred. Benefits Plan The Company sponsors an employee savings plan that qualifies as a deferred salary arrangement under Section 401(k) of the Internal Revenue Code. The plan allows eligible employees to contribute a portion of their pre-tax income in accordance with specified guidelines. The Company matches a percentage of employee contributions up to certain limits. The expense recognized for the 401(k) plan totaled approximately $2.0 million, $1.5 million and $1.3 million in 1996, 1995 and 1994, respectively. Cash and Cash Equivalents For purposes of reporting cash flows, cash and cash equivalents include cash on hand, commercial paper and funds held in money market accounts with a maturity of three months or less. Fair Value of Financial Instruments and Credit Risk The carrying value of the Company's financial instruments, cash and cash equivalents, investments and debt obligations represent a reasonable estimate of their fair value. As of December 31, 1996 and 1995, the Company had no significant concentrations of credit risk related to cash equivalents and trade receivables. Property and Equipment Property and equipment is recorded at cost and is depreciated over the estimated service lives. For financial statement purposes, depreciation is provided by the straight-line method. Leasehold improvements are amortized over the shorter of their estimated service lives or the terms of their respective lease agreements. Estimated useful lives are as follows: Computer equipment.......................................... 3 to 5 years Market testing and other operating equipment................ 3 to 7 years Leasehold improvements...................................... 5 to 20 years Equipment and furniture..................................... 3 to 8 years
Other Assets Other assets include deferred data procurement costs, intangible assets and capitalized software costs. Data procurement costs are amortized over a period of 28 months and include actual payments to retailers for point-of-sale data and causal costs related to collecting, reviewing and verifying other data (i.e., causal factors) which are 28 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) an essential part of the data base. Intangible assets include goodwill, solicitation rights and non-compete agreements, all of which arose from acquisitions, investment or strategic alliances. Goodwill is amortized on a straight-line basis over periods from ten to twenty years. Solicitation rights are amortized on a straight-line basis over the expected useful lives of six to ten years. Non-compete agreements are being amortized over periods from five to seven years. Capitalized costs of computer software held for sale are amortized on a straight-line basis beginning upon the software's general release date over a period not to exceed three years. On an ongoing basis, management reviews the valuation and amortization of other assets to determine possible impairment by comparing the carrying value to the undiscounted future cash flows of the related assets. (See Notes 5 and 10.) Based upon currently projected operating results and cash flows, the Company's assessment is that the realizability of its European assets is not impaired. To the extent that actual operating results and cash flows are lower than these projections, the Company may be required to write down a portion of these assets in future periods. Income Taxes Deferred income taxes are recognized at statutory rates to reflect the future effects of tax carryforwards and temporary differences arising between the tax bases of assets and liabilities and their financial reporting amounts at each year end. Deferred income taxes arise in business combinations accounted for as purchases as a result of differences between the fair value of assets acquired and their tax bases. Loss per Common and Common Equivalent Share and Stock-Based Compensation Loss per common and common equivalent share is based on the weighted average number of shares of common stock and common stock equivalents (if dilutive) outstanding during each year. The Company has accounted and will continue to account for stock option grants in accordance with provisions of APB Opinion No. 25, "Accounting for Stock Issued to Employees." Adoption of Recent Statement of Financial Accounting Standards The Company adopted the Statement of Financial Accounting Standards, No. 121 "Accounting for the Impairment of Long-Lived Assets and for Long-Lived Assets to Be Disposed Of" ("Standard") on January 1, 1996. The adoption of this Standard did not have a material impact on the Company's consolidated financial statements. NOTE 2--SUPPLEMENTAL CASH FLOW INFORMATION Cash paid (refunded) for interest and income taxes during the years ended December 31, was as follows (in thousands):
1996 1995 1994 ------ ------ ------ Interest........................................... $2,103 $4,876 $2,087 Income taxes....................................... $ (735) $ (855) $1,547
Excluded from the consolidated statements of cash flows was the effect of several non-cash investing and financing activities. In December 1995, the Company issued shares of Common Stock having a market value of $2.6 million in connection with the settlement of a 1994 shareholder lawsuit. (See Note 13.) In addition, in 1995, the Company issued shares of its Common Stock having a market value of $3.5 million in connection with a strategic alliance agreement and other acquisitions. In 1994, the Company issued shares of its Common Stock having a value of $10.5 million to acquire certain businesses and to invest in joint ventures. (See Note 3.) In 1996, 1995 and 1994, receivables of $.7 million, $1.6 million and $7.4 million, respectively, were reclassified to investment in joint ventures. 29 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 3--ACQUISITIONS AND JOINT VENTURES In March 1995, IRI entered into an alliance with Middle East Market Research Bureau International ("MEMRB"), a market research company based in Cyprus and operating primarily in Eastern Europe, the Middle East and North Africa. In connection with this agreement, IRI issued Common Stock having a market value of approximately $2.6 million and obtained a long-term option to acquire up to a 49% ownership interest in MEMRB. IRI's investment in MEMRB has been accounted for as a cost investment in the consolidated financial statements. In 1995, the Company purchased 39% of its French joint venture, IRI-SECODIP, from its joint venture partner increasing IRI's ownership in the joint venture from 50% to 89%. As a result of a disproportionate capital contribution made in 1996, the Company now owns substantially all of the joint venture interests. IRI-SECODIP has been consolidated effective January 1, 1995. In September 1994, the Company acquired 19.9% of GfK Panel Services Benelux B.V., a household consumer panel service operating in the Netherlands, for approximately $1.9 million and a 19.9% ownership interest in GfK Belgium S.A. for approximately $.6 million . In January 1994, the Company acquired for $5.8 million a 49% interest in Datos Information Resources, a joint venture with Datos C.A. of Venezuela to offer market research services and to promote the licensing of the Company's software and related services in Venezuela. NOTE 4--NET GAIN (LOSS) ON DISPOSITION OF ASSETS In July 1995, the Company completed the sale to Oracle Corporation ("Oracle") of certain assets, liabilities and related software application products relating to its on-line analytical processing business (the "General Software Business") previously operated by the Company's software division. The sale transaction resulted in a pre-tax gain in 1995 of approximately $41.1 million. The Company retained sales and marketing application products for use in the consumer packaged goods industry. In consideration for such assets and liabilities, Oracle paid, subject to post-closing adjustment, approximately $100 million in cash, including $8.0 million to an interest-bearing escrow account. A portion of the sale proceeds were used to repay the Company's bank credit facility. The remainder of the proceeds was used to pay expenses of the sale and held for general corporate purposes. In December 1996, the Company recorded a $4.6 million charge related primarily to the final settlement of the escrow account. NOTE 5--NONRECURRING EXPENSES Nonrecurring expenses in 1996 included a $4.8 million charge principally related to the planned disposal of certain cable TV advertising cut-in equipment originally developed for use in the Company's market-testing operation. Nonrecurring expenses in 1995 included a $12.4 million write-down of assets, principally accelerated recognition of deferred European data procurement costs to net realizable value and a $10.4 million charge principally relating to the Company's Towne-Oller facility closing and related severance charge. The accelerated recognition of deferred European data procurement costs was based upon the Company's assessment of the realizability of these assets in part due to lower than originally expected revenues and operating results in the Company's startup operations in the United Kingdom and Italy. The nonrecurring expense relating to the Company's Towne-Oller business was initiated by the Company's decision to transition Towne-Oller service from the use of warehouse withdrawal data to InfoScan scanner data and close down its New York operation. Amounts charged against the $2.9 million reserve established for facility operating leases and severance aggregated $1.0 million in 1996 and $.2 million in 1995. 30 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 6--INCOME TAXES IRI and its U.S. subsidiaries and partnerships file their U.S. Federal income tax return on a consolidated basis. As of December 31, 1996, the Company had cumulative U.S. Federal net operating loss ("NOL") carryforwards of approximately $64.8 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. In addition, at December 31, 1996, various foreign subsidiaries of IRI had aggregate cumulative NOL carryforwards for foreign income tax purposes of approximately $6.2 million which are subject to various income tax provisions of each respective country. Approximately $3.0 million of these foreign NOLs may be carried forward indefinitely, while the remaining $3.2 million expire in 2000 and 2001. The Company is subject to the alternative minimum tax for financial reporting purposes resulting in an alternative minimum tax carryforward of $1.3 million as of December 31, 1996. This amount will be allowed as a credit carryover against regular tax in the future when the regular tax liability exceeds the alternative minimum tax liability. At December 31, 1996 the Company had general business tax credit carryforwards of approximately $4.9 million which expire primarily between 1999 and 2010, and are available to reduce future U.S. Federal income tax liabilities. Domestic earnings before income taxes, minority interests and cumulative effect of changes in accounting principle were $11.7 million, $27.1 million and $3.4 million for 1996, 1995 and 1994, respectively. The foreign loss before income taxes, minority interests and cumulative effect of changes in accounting principle was ($22.5) million, ($43.3) million, and ($17.1) million for 1996, 1995 and 1994, respectively. A majority of the European foreign pre- tax losses are deducted as partnership losses in IRI's consolidated U.S. income tax return in accordance with the U.S. Internal Revenue Code. Income tax (expense) benefit relating to earnings (loss) before minority interests and cumulative effect of changes in accounting principle for the years ended December 31, 1996, 1995 and 1994 consisted of the following components (in thousands):
1996 1995 1994 ------ ------- ------- Current income tax (expense) Federal...................................... $ -- $ -- $ (385) Foreign...................................... (638) (1,094) (976) State and local.............................. -- -- (1,087) ------ ------- ------- (638) (1,094) (2,448) ------ ------- ------- Deferred income tax benefit (expense) Federal...................................... 3,805 3,282 3,577 Foreign...................................... (937) 1,181 920 State and local.............................. 70 821 1,773 ------ ------- ------- 2,938 5,284 6,270 ------ ------- ------- Income tax benefit............................. $2,300 $ 4,190 $ 3,822 ====== ======= =======
In accordance with generally accepted accounting principles, the Company has reflected a reduction of its deferred tax liability for its Federal and state NOL carryforwards in its consolidated financial statements. The Company's recognition of Federal and state future tax benefits is due to the expected utilization of those benefits based upon future receipt of substantial taxable income, specifically resulting from over $87 million of existing net temporary differences at December 31, 1996, primarily deferred data procurement costs, capitalized software costs, and other items, most of which will reverse over the next three years. 31 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Significant components of the Company's deferred tax liabilities and assets were as follows (in thousands):
DECEMBER 31, ---------------- 1996 1995 ------- ------- Deferred tax liabilities: Deferred data procurement costs....................... $40,098 $37,959 Capitalized software costs............................ 4,732 3,664 Property and equipment................................ -- 2,392 Other................................................. 5,268 710 ------- ------- Total deferred tax liabilities...................... 50,098 44,725 Deferred tax assets: Domestic NOL carryforwards............................ 25,535 16,505 Domestic tax credit carryforwards..................... 6,210 4,318 Foreign NOL carryforwards............................. 2,440 1,492 Revenue recognition change............................ 2,097 2,911 Reserve for nonrecurring items........................ 664 4,472 Other................................................. 10,583 10,504 ------- ------- Total deferred tax assets........................... 47,529 40,202 Valuation allowance on deferred tax assets.............. (6,544) (4,120) ------- ------- Net deferred tax assets................................. 40,985 36,082 ------- ------- Net deferred tax liability.............................. $ 9,113 $ 8,643 ======= =======
The valuation allowance increased by $2.4 million in 1996 and $.6 million in 1995, as it is more likely than not that the net operating loss and domestic tax credit carryforwards generated by certain Company subsidiaries in these years will not be utilized to offset taxable income. Income tax expense differs from the statutory U.S. Federal income tax rate of 35% applied to earnings (loss) before income taxes, minority interests and cumulative effect of changes in accounting principle for the years ended December 31, 1996, 1995 and 1994 as follows (in thousands):
1996 1995 1994 ------ ------ ------ Statutory tax benefit............................ $3,795 $5,660 $4,803 Effects of-- State income taxes, net of Federal income tax benefit....................................... 45 534 446 Nondeductible meals and entertainment.......... (365) (502) (372) Nondeductible acquisition/organization costs... (210) (719) (231) Other non-taxable income (nondeductible expenses)..................................... 18 (374) (436) Foreign taxes.................................. (1,150) (976) (171) Change in valuation allowance.................. 419 -- -- Other.......................................... (252) 567 (217) ------ ------ ------ $2,300 $4,190 $3,822 ====== ====== ======
32 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 7--ACCOUNTS RECEIVABLE Accounts receivable at December 31, were as follows (in thousands):
1996 1995 -------- ------- Billed................................................. $ 63,102 $62,580 Unbilled............................................... 37,615 34,903 Other.................................................. 3,033 2,239 -------- ------- 103,750 99,722 Reserve for accounts receivable........................ (4,337) (3,860) -------- ------- $ 99,413 $95,862 ======== =======
Payments in advance of revenue recognition are reflected in the consolidated financial statements as deferred revenue. Unbilled accounts receivable represent revenues and fees on contracts and other services earned to date for which customers were not invoiced as of the balance sheet date. NOTE 8--PROPERTY AND EQUIPMENT Property and equipment at December 31, were as follows (in thousands):
1996 1995 -------- -------- Computer equipment.................................... $ 82,708 $ 69,814 Market testing and other operating equipment.......... 14,291 18,956 Leasehold improvements................................ 15,345 15,425 Equipment and furniture............................... 35,054 32,751 -------- -------- 147,398 136,946 Accumulated depreciation and amortization............. (92,806) (76,541) -------- -------- $ 54,592 $ 60,405 ======== ========
NOTE 9--INVESTMENTS Investments at December 31 were as follows (in thousands):
1996 1995 ------- ------- Datos Information Resources, at cost plus equity in undistributed earnings................................. $ 5,500 $ 6,399 GfK Panel Services GmbH, at cost........................ 5,772 5,772 Other investments, primarily GfK Panel Services Benelux B.V.................................................... 7,465 6,620 ------- ------- $18,737 $18,791 ======= =======
Effective February 1, 1997, the Company and GfK AG of Germany ("GfK") organized a new joint venture company, IRI/GfK Retail Services GmbH ("IRI/GfK Retail"). The Company has a 51% ownership interest in IRI/GfK Retail, and GfK owns the remainder. IRI/GfK Retail purchased the German retail tracking business and related software business from GfK Panel Services GmbH ("GfK Panel") and will now provide those business services to the German market. In a separate transaction, the Company sold its 15% ownership interest in GfK Panel to GfK. GfK Panel will continue to provide consumer panel and ad hoc research services to the market, and GfK Panel and IRI/GfK Retail will cooperate in selling and delivering services to appropriate customers. 33 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 10--OTHER ASSETS Other assets at December 31 were as follows (in thousands):
1996 1995 -------- -------- Deferred data procurement costs--net of accumulated amortization of $102,372 in 1996 and $92,912 in 1995................................................ $113,926 $ 98,602 Intangible assets, including goodwill primarily related to acquisitions--net of accumulated amortization of $12,171 in 1996 and $14,026 in 1995. 13,940 13,395 Capitalized software costs--net of accumulated amortization of $5,554 in 1996 and $3,648 in 1995... 11,516 9,857 Other................................................ 3,599 3,571 -------- -------- $142,981 $125,425 ======== ======== NOTE 11--LONG-TERM DEBT Long-term debt at December 31, was as follows (in thousands): 1996 1995 -------- -------- Bank borrowings...................................... $ 5,500 $ -- Capitalized leases................................... 5,197 6,077 -------- -------- 10,697 6,077 Less current maturities.............................. (2,805) (2,317) -------- -------- $ 7,892 $ 3,760 ======== ========
The Company has a $50.0 million bank credit facility maturing in 1998, with fixed or floating interest rate options at or below prime. The weighted average interest rate at December 31, 1996 was 7.1%. Facility fees of .4% are payable on the bank credit facility, and there are no commitment fees. The credit facility contains financial covenants which restrict the Company's ability to incur additional indebtedness or liens on its assets. The financial covenants also require the Company to meet certain tangible net worth and operating income levels and cash flow coverage and working capital ratios. Capitalized leases primarily consist of leases for computer and telephone equipment expiring through 2000. Maturities of capitalized leases and other long-term debt during each of the years 1997 through 2000 are $2.8 million, $7.0 million, $.5 million and $.4 million, respectively. Certain of the Company's loan and lease agreements include various financial covenants which require that the Company maintain a minimum tangible net worth, as defined, and otherwise limit IRI's ability to declare dividends or make distributions to holders of capital stock, or redeem or otherwise acquire shares of the Company. Approximately $3.5 million is available for such distributions under the most restrictive of these covenants. NOTE 12--CAPITAL STOCK Preferred Stock IRI has authority to issue one million shares of $.01 par value Preferred Stock in series with the rights and limitation of each series being determined by the Board of Directors. 34 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) Common Stock At December 31, 1996, 1995 and 1994, 27,886,406, 27,587,176, and 26,493,277 shares of Common Stock, respectively were issued and outstanding. At December 31, 1996, .5 million and 4.6 million options were available for grant under the Executive Stock Option Plan and the Employee Stock Option Plan, respectively. In connection with all IRI employee and director stock plans, 13.4 million shares were reserved for issuance at December 31, 1996. In May 1996, the Company's shareholders approved the 1996 Stock Plan for Non-Employee Directors in Lieu of Cash Retainer (the Director's Plan), authorizing the issuance of up to 100,000 shares of Common Stock. Under the Directors' Plan an eligible director is paid annually in shares of Common Stock in lieu of 75% of the cash retainer otherwise payable for services on the Board. The number of shares issued is based upon the fair market value of the Company's Common Stock. In 1996, the Company issued 10,692 shares at a price of $14.25 per share under the Director's Plan. In December 1995, the Company issued 211,223 shares of Common Stock in settlement of a shareholder lawsuit. (See Note 13.) In 1995 and 1994 the Company issued 244,000 and 907,000 shares of Common Stock, respectively, in connection with a strategic alliance agreement and acquisition of businesses and joint ventures. There are restrictions in IRI's bank loan and lease agreements which limit the payment of dividends and the repurchases or redemption of Common Stock. (See Note 11.) Stock Options The Company has several stock option plans. The Employee Stock Option Plan covers most employees other than executive officers and directors. Substantially all options under these plans have been granted at fair market value or higher. Most option grants are exercisable in equal annual increments of 25% beginning on the first anniversary of the grant date and expire ten years after the date of grant. IRI also has an Executive Stock Option Plan covering executive officers and directors which at inception authorized up to 2.5 million stock options. Most options under this plan were granted at fair market value and are exercisable in equal annual increments of 25% beginning on the first anniversary of the grant date and expire ten years after the date of grant. For options granted at less than fair market value, the Company recognizes compensation expense over the vesting period for the difference between the total fair market value and the total exercise price on the date of grant. Compensation expense of approximately $.1 million, $1.8 million and $3.0 million was recognized in 1996, 1995 and 1994, respectively for such options. In April 1994, the Board of Directors of the Company canceled certain outstanding stock options with exercise prices exceeding $14.25 and replaced those options with new stock options if the employee agreed to an extension in the vesting schedule. Executive officers and directors were not eligible to participate in this program. In December 1995, the Financial Accounting Standards Board issued Statement of Financial Accounting Standards No. 123, "Accounting for Stock-Based Compensation" ("new Standard"), which establishes an alternative method of accounting for stock-based compensation plans. The new Standard allows companies which have stock-based compensation arrangements with employees to continue to apply existing accounting rules under APB Opinion No. 25, "Accounting for Stock Issued to Employees", with supplemental pro forma disclosures. 35 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) The following table presents, on an (unaudited) pro forma basis, net loss and net loss per share for the years ended December 31, 1996 and 1995 as if the alternate method had been adopted (in thousands, except per share data):
1996 1995 ---------- -------- Net loss--as reported................................. $ (7,558) $(11,678) ========== ======== Net loss--unaudited pro forma......................... $ (8,673) $(13,956) ========== ======== Loss per share--as reported........................... $ (.27) $ (.43) ========== ======== Loss per share--unaudited pro forma................... $ (.31) $ (.52) ========== ======== The fair value of each option grant is estimated on the date of grant using the Black-Scholes option-pricing model with assumed risk-free interest rates of 5.9% and 6.7% for 1996 and 1995, respectively, stock price volatility factor of 41.4% and an expected life of the options of five years. Because the Company's employee stock options have characteristics significantly different from those of traded options, and because changes in the subjective input assumptions can materially affect the fair value estimate, in management's opinion, the existing model does not necessarily provide a reliable single measure of the fair value of its employee stock options. Using the foregoing assumptions, the weighted-average fair value of options granted in 1996 and 1995 was $5.85 and $5.66, respectively. Transactions involving stock options for the Executive and Employee Stock Option Plans are summarized as follows: WEIGHTED AVERAGE NUMBER EXERCISE OF OPTIONS PRICE ---------- -------- Outstanding December 31, 1993......................... 7,298,239 $ 21.17 Granted............................................... 6,588,162 14.44 Canceled/Expired...................................... (4,145,428) 25.67 Exercised............................................. (169,926) 7.35 ---------- -------- Outstanding December 31, 1994......................... 9,571,047 14.83 Granted............................................... 2,042,565 12.89 Canceled/Expired...................................... (2,122,603) 15.93 Exercised............................................. (638,748) 10.20 ---------- -------- Outstanding December 31, 1995......................... 8,852,261 14.44 Granted............................................... 430,000 12.90 Canceled/Expired...................................... (645,543) 18.43 Exercised............................................. (288,538) 8.32 ---------- -------- Outstanding December 31, 1996......................... 8,348,180 $ 14.26 ========== ======== Exercisable December 31, 1996......................... 5,822,941 $ 14.22 ========== ========
Stock options outstanding at December 31, 1996 are as follows:
WEIGHTED OUTSTANDING- EXERCISABLE- AVERAGE WEIGHTED WEIGHTED REMAINING AVERAGE AVERAGE RANGE OF NUMBER CONTRACTUAL EXERCISE NUMBER EXERCISE EXERCISE PRICES OUTSTANDING LIFE PRICE EXERCISABLE PRICE --------------- ----------- ----------- ------------ ----------- ------------ $ 7.63-$12.75........... 2,022,774 5.20 $10.33 1,431,857 $ 9.62 12.88- 13.50........... 764,513 8.43 13.10 389,260 12.98 13.63- 14.25........... 3,941,619 6.51 14.17 2,852,623 14.18 14.38- 16.50........... 755,000 7.44 14.97 420,622 14.99 17.88- 34.00........... 864,274 6.15 24.27 728,579 23.66 --------- ---- ------ --------- ------ $ 7.63-$34.00........... 8,348,180 6.41 $14.26 5,822,941 $14.22 ========= ==== ====== ========= ======
36 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) NOTE 13--COMMITMENTS, CONTINGENCIES AND LITIGATION 1. Lease Agreements and Other Commitments The Company leases certain property and equipment under operating leases expiring at various dates through 2010. The Company's headquarters lease agreement contains financial and other covenants including restrictions on the payment of dividends. This lease, which was part of a sale/leaseback transaction in 1990, resulted in a $6.2 million deferred gain which is being recognized over the lease's initial term. At December 31, 1996 obligations to make future minimum payments under all operating leases were $140.5 million in the aggregate and $28.5 million, $24.7 million, $17.4 million, $12.4 million and $8.1 million for the five years ended December 31, 2001, respectively. Rent expense for all operating leases was $32.0 million, $32.6 million and $29.8 million for the years ended December 31, 1996, 1995 and 1994, respectively. 2. Legal Proceedings On July 29, 1996, IRI filed an action against The Dun & Bradstreet Corp., ACNielsen and IMS International, Inc. in the United States District Court for the Southern District of New York entitled Information Resources, Inc. v. The Dun & Bradstreet Corp., et. al. No. 96 CIV. 5716 (the "Action"). IRI alleged that, among other things, the Defendants violated Sections 1 and 2 of the Sherman Act, 15 U.S.C. (S)(S)1 and 2, by engaging in a series of anti- competitive practices aimed at excluding the Company from various export markets for retail tracking services and regaining monopoly power in United States market for such services. These practices included: (i) entering into exclusionary contracts with retailers in several countries in order to restrict the Company's access to sales data necessary to provide retail tracking services; (ii) illegally tying services in markets over which Defendants' had monopoly power with services in markets in which ACNielsen competed with the Company; (iii) predatory pricing; (iv) acquiring foreign market competitors with the intent of impeding the Company's efforts at export market expansion; (v) tortiously interfering with Company contracts and relationships with clients, joint venture partners and other market research companies; and (vi) disparaging the Company to financial analysts and clients. By the Action, the Company seeks to enjoin Defendants' anti-competitive practices and to recover damages in excess of $350 million, prior to trebling. The Action followed legal proceedings by the Canadian Competition Tribunal and the European Commission against ACNielsen for anti-competitive practices. On August 30, 1995, following a full hearing, the Canadian Competition Tribunal issued an Order and Reasons for Order against ACNielsen in In Re: The D&B Companies of Canada Ltd., concluding that ACNielsen had engaged in "anti- competitive acts" with the express intent "to exclude potential competitors generally and the Company specifically" from the Canadian retail tracking services market. On May 4, 1996, the European Commission issued a "Statement of Objections" against ACNielsen, following an 18 month investigation, alleging that ACNielsen had infringed Article 86 of the Treaty of Rome through several practices undertaken intentionally as part of a strategy to exclude the Company from the European markets for retail tracking services. On December 3, 1996 ACNielsen signed an Undertaking to the European Commission agreeing to halt numerous contractual practices which the Company contended was part of ACNielsen's intentional and unlawful strategy aimed at preventing the Company from establishing a competitive position in Europe and eliminating the Company as a competitor. In the ordinary course of business, IRI and its subsidiaries become involved as plaintiffs or defendants in various other legal proceedings. The claims and counterclaims in such litigation, including those for punitive damages, individually in certain cases and in the aggregate, involve amounts which may be material. However, it is the opinion of the Company's management, based upon advice of counsel, that the ultimate disposition of pending litigation against the Company will not be material. 37 INFORMATION RESOURCES, INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED) In April 1994, certain shareholders filed a class action lawsuit against the Company, and in October 1994 the Company entered into an agreement to settle this lawsuit. Pursuant to the terms of the court approved settlement agreement, in December 1995 the Company satisfied its obligations by issuing 211,223 shares of Common Stock valued at $2.6 million and paying $2.6 million in cash to the settlement class. NOTE 14--GEOGRAPHIC AREA INFORMATION The Company develops and maintains computer-based proprietary data bases, decision support software, and mathematical models, primarily for the analysis of detailed information on purchasing of consumer goods, all within one industry segment business information services. The following table presents information about the Company by geographic areas, including operations of the General Software Business, which was sold to Oracle in 1995, (in thousands).
1996 1995 1994 -------- -------- -------- Operating revenues (a): To unaffiliated customers: United States................................. $344,612 $329,340 $318,091 Europe........................................ 54,520 62,693 48,359 Other International........................... 6,471 7,882 10,120 Transfers between geographic areas (b): United States................................. -- 4,343 8,802 Europe........................................ -- 1,099 1,938 Eliminations.................................. -- (5,441) (10,740) -------- -------- -------- Total operating revenues.................... $405,603 $399,916 $376,570 ======== ======== ======== Operating profit (loss) (c) (d): United States................................. $ 26,699 $ (4,922) $ 33,421 Europe........................................ (23,864) (42,983) (17,559) Other International........................... (5,962) (3,368) (3,021) Corporate expenses............................ (1,965) (3,652) (7,535) -------- -------- -------- Operating profit (loss)..................... $ (5,092) $(54,925) $ 5,306 ======== ======== ======== Identifiable assets at December 31 (e): United States................................. $230,371 $239,069 $253,885 Europe........................................ 87,380 84,109 80,051 Other International........................... 16,742 15,358 12,858 -------- -------- -------- Total identifiable assets................... $334,493 $338,536 $346,794 ======== ======== ========
- -------- (a) Total international revenues, including export sales, were $62.5 million, $72.9 million and $61.9 million for 1996, 1995 and 1994, respectively. (b) Transfers in 1995 and 1994 related to the software products business sold to Oracle in 1995. (See Note 4.) (c) Operating profit (loss) includes nonrecurring expenses of $4.8 million and $22.8 million in 1996 and 1995, respectively. (See Note 5.) Operating profit (loss) excludes net gain (loss) on disposition of assets of ($4.6) million and $41.1 million in 1996 and 1995, respectively. (See Note 4.) (d) Operating profit (loss) excludes litigation provision of $8.3 million in 1994. (See Note 13.) (e) Identifiable assets includes investments aggregating $18.7 million, $18.8 million and $21.0 million at December 31, 1996, 1995 and 1994, respectively. (See Note 9.) 38 INFORMATION RESOURCES, INC. AND SUBSIDIARIES SUMMARY OF QUARTERLY DATA (UNAUDITED) Summaries of consolidated results on a quarterly basis are as follows (in thousands, except per share data):
1996 -------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- Revenues............................... $ 92,998 $102,955 $101,980 $107,670 ======== ======== ======== ======== Nonrecurring expenses(a)............... -- -- -- (4,808) ======== ======== ======== ======== Operating profit (loss)................ (4,474) 771 28 (1,417) ======== ======== ======== ======== Net loss on sale of assets(b).......... -- -- -- (4,600) ======== ======== ======== ======== Net earnings (loss).................... $ (2,247) $ 242 $ 10 $ (5,563) ======== ======== ======== ======== Net earnings (loss) per common and common equivalent shares.............. $ (.08) $ .01 $ -- $ (.20) ======== ======== ======== ======== Weighted average common and common equivalent shares..................... 27,653 27,753 27,775 27,837 ======== ======== ======== ======== 1995 -------------------------------------- FIRST SECOND THIRD FOURTH QUARTER QUARTER QUARTER QUARTER -------- -------- -------- -------- Revenues(b)............................ $104,795 $109,332 $ 87,288 $ 98,501 ======== ======== ======== ======== Nonrecurring expenses(c)............... -- -- (22,759) -- ======== ======== ======== ======== Operating loss......................... (4,980) (5,033) (44,305) (607) ======== ======== ======== ======== Net gain on sale of assets(b).......... -- -- 41,126 -- ======== ======== ======== ======== Net earnings (loss).................... $ (3,291) $ (3,609) $ (4,802) $ 24 ======== ======== ======== ======== Net earnings (loss) per common and common equivalent shares.............. $ (.12) $ (.13) $ (.18) $ -- ======== ======== ======== ======== Weighted average common and common equivalent shares..................... 26,615 26,826 27,128 27,394 ======== ======== ======== ========
- -------- (a) The nonrecurring charge in 1996 principally relates to the disposal of certain cable TV advertising cut-in equipment originally developed for use in the Company's market testing operations. (b) The net loss on sale of assets in 1996 is primarily for the final settlement of the escrow account related to the sale of a portion of the Company's software business to Oracle in 1995. In July 1995, the Company completed the sale to Oracle of certain assets, liabilities and related software application products. (c) Nonrecurring expenses in 1995 included a $12.4 million write-down of assets, principally accelerated recognition of deferred European data procurement costs, to net realizable value and a $10.4 million charge principally relating to the Company's Towne-Oller facility closing and related severance charge. 39 ITEM 9. DISAGREEMENTS ON ACCOUNTING AND FINANCIAL DISCLOSURES None PART III ITEM 10. DIRECTORS AND EXECUTIVE OFFICERS OF THE REGISTRANT The sections entitled "Election of Directors" and "Section 16(a) Beneficial Ownership Reporting Compliance" are incorporated by reference from the definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the Company's 1997 annual meeting of stockholders scheduled for May 22, 1997. Information about the Company's executive officers is set forth in Item 4(a) in Part I of this Report. ITEM 11. EXECUTIVE COMPENSATION The section entitled "Executive Compensation" excluding the Board Compensation Committee Report and the stock price performance graph is incorporated by reference from the definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the Company's 1997 annual meeting of stockholders scheduled for May 22, 1997. ITEM 12. SECURITY OWNERSHIP OF CERTAIN BENEFICIAL OWNERS AND MANAGEMENT The section entitled "Ownership of Securities" is incorporated by reference from the definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the Company's 1997 annual meeting of stockholders scheduled for May 22, 1997. ITEM 13. CERTAIN RELATIONSHIPS AND RELATED TRANSACTIONS The section entitled "Certain Transactions" is incorporated by reference from the definitive proxy statement to be filed with the Securities and Exchange Commission in connection with the Company's 1997 annual meeting of stockholders scheduled for May 22, 1997. PART IV ITEM 14. EXHIBITS, FINANCIAL STATEMENT SCHEDULES AND REPORTS ON FORM 8-K (a) Documents filed as a part of this Report: 1. Financial Statements The consolidated financial statements of the Company are included in Part II, Item 8 of this Report. 2. Financial Statement Schedules
PAGE NO. -------- Report of Independent Certified Public Accountants on Schedule.... 42 Schedule II--Valuation and Qualifying Accounts; Allowance for Doubtful Receivables............................................. 43
All other schedules are omitted because they are not applicable, or not required, or because the required information is included in the financial statements or notes thereto. 40 3. Exhibits (I) See Exhibit Index (immediately following the signature pages). (II) Executive Compensation Plans and Arrangements. The following Executive Compensation Plans and Arrangements are listed as exhibits to this Form 10-K: Employment Agreement dated November 27, 1978 between the Company and Gerald Eskin. Employment Agreement dated March 15, 1985 between the Company and Jeffrey Stamen. Employment Agreement dated March 15, 1985 between the Company and Leonard Lodish. Noncompetition Agreements dated March 15, 1985 between the Company and John D.C. Little, Glen Urban, and Leonard Lodish, respectively. Letter agreement dated January 17, 1989 between the Company and Glen Urban. Form of letter agreement between the Company and John D.C. Little. Consulting and Noncompetition Agreement dated January 16, 1987 between the Company and Edwin Epstein. Agreement effective January 1, 1989 between the Company and Edwin Epstein, amending the Consulting and Non-competition Agreement dated January 16, 1987, which Consulting and Noncompetition Agreement is referred to above. Letter agreement dated August 7, 1989 between the Company and Leonard Lodish. Employment Agreement dated November 16, 1989 between the Company and James G. Andress. Amended and Restated Employment Agreement dated March 16, 1994 between the Company and Thomas M. Walker. 1992 Executive Stock Option Plan, as amended. 1992 Employee Incentive Stock Option Plan. Employment Agreement dated November 4, 1993 between the Company and George R. Garrick. 1994 Employee Nonqualified Stock Option Plan. Form of Information Resources, Inc. Directorship/Officership Agreement between the Company and its directors, its executive officers and certain other officers. Employment Termination Agreement dated as of March 4, 1996, between the Company and George R. Garrick. Employment Agreement dated as of August 22, 1996, between the Company and Randall S. Smith and First Amendment to Employment Agreement dated November 11, 1996. 41 REPORT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS Board of Directors Information Resources, Inc. and Subsidiaries In connection with our audit of the consolidated financial statements of Information Resources, Inc. and Subsidiaries referred to in our report dated February 15, 1996 which is included in Part II of this form, we have also audited Schedule II for each of the two years in the period ended December 31, 1995. In our opinion, this schedule presents fairly, in all material respects, the information required to be set forth therein. Grant Thornton LLP Chicago, Illinois February 15, 1996 42 SCHEDULE II INFORMATION RESOURCES, INC. AND SUBSIDIARIES VALUATION AND QUALIFYING ACCOUNTS RESERVE FOR ACCOUNTS RECEIVABLE (IN THOUSANDS)
ADDITIONS BALANCE CHARGED DEDUCTIONS BALANCE AT TO COSTS (NET AT END BEGINNING & WRITEOFFS/ OF DESCRIPTION OF PERIOD EXPENSES RECOVERIES) PERIOD - ----------- --------- --------- ----------- ------- Year ended December 31, 1994............ $2,250 $2,565 $(1,889) $2,926 Year ended December 31, 1995............ $2,926 $6,295 $(5,361) $3,860 Year ended December 31, 1996............ $3,860 $ 719 $ (242) $4,337
43 SIGNATURES PURSUANT TO THE REQUIREMENTS OF SECTION 13 OR 15(D) OF THE SECURITIES EXCHANGE ACT OF 1934, THE REGISTRANT HAS DULY CAUSED THIS REPORT TO BE SIGNED ON ITS BEHALF BY THE UNDERSIGNED THEREUNTO DULY AUTHORIZED. Dated: March 25, 1997 Information Resources, Inc. /s/ Gian M. Fulgoni By: _________________________________ Gian M. Fulgoni Chief Executive Officer PURSUANT TO THE REQUIREMENT OF THE SECURITIES EXCHANGE ACT OF 1934, THIS REPORT HAS BEEN SIGNED BELOW BY THE FOLLOWING PERSONS ON BEHALF OF THE REGISTRANT AND IN THE CAPACITIES INDICATED ON MARCH 25, 1997.
SIGNATURE TITLE --------- ----- /s/ Thomas W. Wilson, Jr. Chairman of the Board of Directors and ___________________________________________ Director Thomas W. Wilson, Jr. /s/ Gian M. Fulgoni Chief Executive Officer and Director ___________________________________________ [Principal executive officer] Gian M. Fulgoni /s/ Gary M. Hill Executive Vice President and Chief ___________________________________________ Financial Officer [Principal financial Gary M. Hill officer] /s/ John P. McNicholas, Jr. Controller [Principal accounting officer] ___________________________________________ John P. McNicholas, Jr. */s/ James G. Andress Director ___________________________________________ James G. Andress */s/ Gerald J. Eskin Director ___________________________________________ Gerald J. Eskin */s/ Edwin E. Epstein Director ___________________________________________ Edwin E. Epstein */s/ John D. C. Little Director ___________________________________________ John D. C. Little */s/ Leonard M. Lodish Director ___________________________________________ Leonard M. Lodish */s/ Edward E. Lucente Director ___________________________________________ Edward E. Lucente
44
SIGNATURE TITLE --------- ----- */s/ Edith W. Martin Director ___________________________________________ Edith W. Martin */s/ Jeffrey P. Stamen Director ___________________________________________ Jeffrey P. Stamen */s/ Glen L. Urban Director ___________________________________________ Glen L. Urban
/s/ Gian M. Fulgoni *BY:_________________________________ Gian M. Fulgoni pursuant to a power of attorney 45 EXHIBIT INDEX The following documents are the exhibits to this Report. For convenient reference, each exhibit is listed according to the number assigned to it in the Exhibit Table of Item 601 of Regulation S-K.
SEQUENTIAL EXHIBIT DOCUMENT NUMBER DESCRIPTION OF DOCUMENT FILING ------- ----------------------- ---------- 3(a) Copy of the certificate of incorporation of the Company dated May 27, 1982, as amended. (Incorporated by reference. Previously filed as Exhibit 3(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988.) IBRF (b) Copy of the bylaws of the Company, as amended. (Incorporated by reference. Previously filed as Exhibit 3(b) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1988.) IBRF (c) Copy of amendments to the Certificate of Incorporation approved by the stockholders on May 16, 1989. (Incorporated by reference. Previously as Exhibit 3(c) to the Company's Annual Report 10-K for the fiscal year ended December 31, 1989.) IBRF (d) Copy of amendments to the bylaws of the Company as approved by the Board of Directors bringing the bylaws into conformity with the amendments to the Certificate of Incorporation approved by the stockholders May 16, 1989. (Incorporated by reference. Previously filed as Exhibit 3(d) to the Company's Annual Report on Form 10- K for the fiscal year ended December 31, 1989.) IBRF (e) Certificate of Designations of Series A Participating Preferred Stock, as adopted by the Board of Directors of the Company on March 2, 1989 and duly filed with the Secretary of State of the State of Delaware March 15, 1989. (Incorporated by reference. Previously filed as Exhibit 3(e) to the Company's Annual Report on Form 10- K for the fiscal year ended December 31, 1989.) IBRF 10 Material Contracts (a) 1982 Incentive Stock Option Plan adopted November 3, 1982, as amended. (Incorporated by reference. Previously filed as Exhibit 10(a) to the Company's Registration Statement on Form S-8 filed with the SEC on December 31, 1988.) IBRF (b) Information Resources, Inc., Nonqualified Stock Option Plan effective January 1, 1984, as amended. (Incorporated by reference. Previously filed as Exhibit 10(b) to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1988.) IBRF (c) Employment Agreement dated November 27, 1978 between the Company and Gerald Eskin. (Incorporated by reference. Previously filed as Exhibit 10(e) to Registration Statement No. 2-81544.) IBRF (d) Consulting and Noncompetition Agreement dated January 16, 1987 between the Company and Edwin Epstein. (Incorporated by reference. Previously filed as Exhibit 10(e) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1987.) IBRF (e) Employment agreement dated March 15, 1985 between the Company and Jeffrey Stamen. (Incorporated by reference. Previously filed as Exhibit 10(d) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1985, as amended on Form 8 dated April 29, 1986 and August 25, 1986.) IBRF (f) Employment agreements dated March 15, 1985 between the Company and Leonard Lodish. (Incorporated by reference. Previously filed as Exhibit 10.14 to Registration Statement No. 2-96940.) IBRF (g) Noncompetition Agreement dated March 15, 1985 between the Company and John Little, Glen Urban, and Leonard Lodish, respectively. (Incorporated by reference. Previously filed as Exhibit 10.15 to Registration Statement No. 2-96490.) IBRF
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SEQUENTIAL EXHIBIT DOCUMENT NUMBER DESCRIPTION OF DOCUMENT FILING ------- ----------------------- ---------- (h) Letter agreement dated January 17, 1989 between the Company and Glen Urban (Incorporated by reference. Previously filed as Exhibit 10(1) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.) IBRF (i) Form of letter agreement between the Company and John D.C. Little (Incorporated by reference. Previously filed as Exhibit 10(m) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.) IBRF (j) Form of Rights Plan Agreement between the Company and Harris Trust and Savings Bank. (Incorporated by reference. Previously filed on Form 8-A Registration Statement filed with the SEC on March 15, 1989.) IBRF (k) Agreement effective January 1, 1989 between the Company and Edwin Epstein, amending the Consulting and Noncompetition Agreement dated January 16, 1987, which Consulting and Noncompetition Agreement is referred to in Exhibit 10(d) hereof. (Incorporated by reference. Previously filed as Exhibit 19(a) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.) IBRF (l) Letter agreement dated August 7, 1989 between the Company and Leonard Lodish (Incorporated by reference. Previously filed as Exhibit 3(q) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.) IBRF (m) Employment Agreement dated November 16, 1989 between the Company and James G. Andress (Incorporated by reference. Previously filed as Exhibit 3(r) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.) IBRF (n) Form of 401(k) Retirement Savings Plan and Trust adopted by the Company effective August 1, 1989. (Incorporated by reference. Previously filed as Exhibit 3(v) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1989.) IBRF (o) Amended and Restated Employment Agreement dated March 16, 1994 between the Company and Thomas M. Walker. (Incorporated by reference. Previously filed as Exhibit 10(s) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.) IBRF (p) Lease Agreement dated September 27, 1990 between Randolph/ Clinton Limited Partnership and the Company (Incorporated by reference. Previously filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated September 27, 1990.) IBRF (q) 1992 Employee Incentive Stock Option Plan (Incorporated by reference. Previously filed as Exhibit 10 (x) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1992.) IBRF (r) 1994 Employee Nonqualified Stock Option Plan. (Incorporated by reference. Previously filed as Exhibit 10(y) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.) IBRF (s) Employment Agreement dated November 4, 1993 between the Company and George Garrick. (Incorporated by reference. Previously filed as Exhibit 10(z) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1993.) IBRF (t) Credit Agreement dated May 13, 1994, between the Company and Harris Trust and Savings Bank. Superseded by Credit Agreement dated November 3, 1994 filed at Exhibit 10(w). (Incorporated by reference. Previously filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.) IBRF (u) Letter regarding change in accounting principle. (Incorporated by reference. Previously filed as Exhibit 18 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1994.) IBRF
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SEQUENTIAL EXHIBIT DOCUMENT NUMBER DESCRIPTION OF DOCUMENT FILING ------- ----------------------- ---------- (v) Credit Agreement dated November 3, 1994, between the Company and Harris Trust and Savings Bank. (Incorporated by reference. Previously filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1994.) IBRF (w) Second Amendment to Lease Agreement dated September 27, 1990 between the Company and Randolph/Clinton Limited Partnership. (Incorporated by reference. Previously filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended March 31, 1995.) IBRF (x) 1992 Executive Stock Option Plan, as amended effective May 24, 1995. (Incorporated by reference. Previously filed as Exhibit 3 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.) IBRF (y) Amended and Restated Asset Purchase Agreement dated as of June 12, 1995 by and between the Company and Oracle Corporation. (Incorporated by reference. Previously filed as Exhibit 2.1 to the Company's Current Report on Form 8-K dated July 27, 1995 and filed August 11, 1995.) IBRF (z) 1992 Executive Stock Option Plan, as amended effective May 24, 1995. (Incorporated by reference. Previously filed as Exhibit 3 to the Company's Quarterly Reparation Form 10-Q for the quarter ended June 30, 1995.) IBRF (aa) Licenses-Back Agreement dated as of July 27, 1995 between the Company and Oracle Corporation. (Incorporated by reference. Previously filed as Exhibit B to the Amended and Restated Asset Purchase Agreement dated as of July 27, 1995 filed as Exhibit 2.1 to the Current Report on Form 8-K dated July 27, 1995 and filed August 11, 1995.) IBRF (bb) Amendment to Credit Agreement dated November 3, 1994 between the Company, the Bank Parties thereto and Harris Trust and Savings Bank, as agent. Superseded by Credit Agreement November 10, 1995 filed at Exhibit [10(ee)]. (Incorporated by reference. Previously filed as Exhibit 10.2 to the Company's Quarterly Report on Form 10-Q for the quarter ended June 30, 1995.) IBRF (cc) Credit Agreement dated November 10, 1995 between the Company, the Bank Parties thereto and Harris Trust and Savings Bank, as agent. (Incorporated by reference. Previously filed as Exhibit 10 to the Company's Quarterly Report on Form 10-Q for the quarter ended September 30, 1995.) IBRF (dd) Employment Termination Agreement, dated as of March 4, 1996 between the Company and George R. Garrick (Incorporated by reference. Previously filed as Exhibit 10(dd) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1995.) IBRF (ee) Form of Information Resources, Inc. Directorship/Officership Agreement between the Company and each of its directors, executive officers and certain other officers. (Incorporated by reference. Previously filed as Exhibit 10(x) to the Company's Annual Report on Form 10-K for the fiscal year ended December 31, 1994.) IBRF (ff) Amendment to Credit Agreement dated November 10, 1995 between the Company, the Bank Parties thereto and Harris Trust and Savings Bank, as agent (filed herewith). EF (gg) Employment Agreement dated as of August 22, 1996, between the Company and Randall S. Smith and First Amendment to Employment Agreement dated November 11, 1996 (filed herewith). EF (hh) Information Resources, Inc. Amended and Restated 401(k) Retirement Savings Plan and Trust adopted by the Company effective May 24, 1995 (filed herewith). EF (ii) First Amendment to the Information Resources, Inc. Amended and Restated 401(k) Retirement Savings Plan effective July 1, 1996 (filed herewith). EF
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SEQUENTIAL EXHIBIT DOCUMENT NUMBER DESCRIPTION OF DOCUMENT FILING ------- ----------------------- ---------- (jj) Second Amendment to the Information Resources, Inc. Amended and Restated 401(k) Retirement Savings Plan effective March 1, 1997 (filed herewith). EF (kk) Trust Agreement between Information Resources, Inc. and Fidelity Management Trust. Company dated as of July 1, 1996 (filed herewith). EF (ll) First Amendment to Trust Agreement between Fidelity Management Trust Company and Information Resources, Inc. effective March 1, 1997 (filed herewith). EF 21 Subsidiaries of the Registrant (filed herewith). EF 23 Consent of Independent Auditors (filed herewith). EF 23.1 Consent of Independent Certified Public Accountants (filed herewith). EF 24 Powers of Attorney (filed herewith). EF 27 Financial Data Schedule (filed herewith). EF
4 EX-10.FF 2 AMD. TO CREDIT AGMT DTD. 11-10-95 EXHIBIT 10(ff) First Amendment To Credit Agreement To Each of the Banks Signatory Hereto Ladies and Gentlemen: Reference is hereby made to that certain Credit Agreement dated as of November 10, 1995 (the "Credit Agreement"), between the undersigned, Information Resources, Inc., a Delaware corporation (the "Borrower"), Harris Trust and Savings Bank, as agent for the Banks (the "Agent"), and you (the "Banks"). All capitalized terms used herein without definition shall have the same meanings herein as such terms have in the Credit Agreement. The Borrower has requested that the Banks waive the Borrower's non- compliance as of December 31, 1996, with Section 7.6 of the Credit Agreement (Consolidated Tangible Net Worth), amend Sections 7.6 (Consolidated Tangible Net Worth), 7.8 (Quick Ratio), and 7.9 (Cash Flow Coverage Ratio), add an additional financial covenant and amend the facility fee payable under Section 2.1(a) of the Credit Agreement, and the Banks are willing to do so on the terms and conditions set forth in this First Amendment. 1. Waiver. The Borrower has indicated that as of December 31, 1996, it was not in compliance with Section 7.6 of the Credit Agreement (Consolidated Tangible Net Worth). The Borrower hereby requests the Banks waive the foregoing and, by the Required Banks signing below, the Banks hereby agree to waive compliance with the same for, and only for, the period ending December 31, 1996; provided, however, that this waiver shall not become effective unless and until the conditions set forth in Section 3 hereof have been satisfied. 2. Amendments. Upon the execution and delivery of this First Amendment by the Borrower and the Required Banks in the space provided for that purpose below, the Credit Agreement shall be and hereby is amended as follows: (a) Section 2.1(a) of the Credit Agreement shall be amended and restated to read as follows: "(a) Facility Fee. The Borrower shall pay to the Agent for the ratable account of the Banks in accordance with their Percentages a facility fee at the rate of 0.15% per annum until February 9, 1997, and on and after February 10, 1997, at the rate per annum equal to the Applicable Facility Fee (in each case computed on the basis of a year of 360 days and the actual number of days elapsed) on the average daily amount of Commitments hereunder (whether used or unused). Such facility fee shall be payable quarter-annually in arrears on the last day of each March, June, September and December in each year and on the Termination Date, unless the Revolving Credit Commitments are terminated in whole on an earlier date, in which event the facility fee for the period to the date of such termination in whole shall be paid on the date of such termination. For purposes hereof, the term "Applicable Facility Fee" means .40% per annum on and after February 10, 1997, until the next Pricing Date, and thereafter from one Pricing Date to the next a rate per annum determined in accordance with the following: Cash Flow Coverage Ratio for such Pricing Date: Applicable Facility Fee: Less than or equal to 1.0 to 1.0 0.40% Greater than 1.0 to 1.0 0.15%" (b) The definition of "Pricing Date" appearing in Section 4.1 of the Credit Agreement shall be amended and restated to read as follows: "Pricing Date" means, for any fiscal quarter of the Borrower ended after the date hereof, the latest date by which the Borrower is required to deliver a Compliance Certificate for such fiscal quarter pursuant to Section 7.5. The Eurodollar Margin and Applicable Facility Fee established on a Pricing Date shall remain in effect until the next Pricing Date. If the Borrower has not delivered a Compliance Certificate by the date such Compliance Certificate is required to be delivered under Section 7.5, until a Compliance Certificate is delivered before the next Pricing Date, the Eurodollar Margin shall be 1% per annum and the Applicable Facility Fee shall be .40% per annum. If the Borrower subsequently delivers such a Compliance Certificate before the next Pricing Date, the Eurodollar Margin and Applicable Facility Fee established by such late delivered Compliance Certificate shall take effect from the date of delivery until the next Pricing Date." (c) Section 4.1 of the Credit Agreement shall be amended to include a new definition which shall read as follows: "Consolidated Operating Income" means, with reference to any period, the operating income (or operating loss) of the Borrower and its Consolidated Subsidiaries for such period as computed on a consolidated basis in accordance with GAAP. (d) The last sentence of Section 7.5 of the Credit Agreement shall be amended and restated to read as follows: "Such certificate shall also set forth the calculations supporting such statements in respect of Sections 7.6, 7.7, 7.8, 7.9 and 7.17 of this Agreement." (e) Sections 7.6, 7.8, and 7.9 of the Credit Agreement shall each be amended and restated to read as follows: "Section 7.6. Consolidated Tangible Net Worth. The Borrower shall, as of the last day of each quarter-annual accounting period of the Borrower ending during the periods specified below, maintain Consolidated Tangible Net Worth of not less than:
Consolidated Tangible From and To and Net Worth Including Including Shall not Be less than: 12/31/96 12/30/97 $205,000,000 12/31/97 12/30/98 $210,000,000 12/31/98 and at all times thereafter $230,000,000
; provided that the minimum required amount of Consolidated Tangible Net Worth set forth above shall be increased by 100% of the net proceeds received by the Borrower from any offering of equity securities of the Borrower received at any time after December 31, 1996 (other than proceeds received from the exercise of stock options to purchase shares of the Borrower's common stock existing as of the date of this Agreement)." "Section 7.8. Quick Ratio. The Borrower shall, as of the last day of each quarter-annual accounting period of the Borrower, maintain a Consolidated Quick Ratio of not less than 1.1 to 1.0." "Section 7.9. Cash Flow Coverage Ratio. The Borrower shall, as of the last day of each quarter-annual accounting period of the Borrower ending during the periods specified below, maintain the ratio of Consolidated Cash Flow for the four fiscal quarters of the Borrower then ended to Consolidated Fixed Charges for the same four fiscal quarters then ended (the "Cash Flow Coverage Ratio") of not less than:
Cash Flow Coverage From and To and Ratio shall not Including Including be less than: 12/31/96 03/30/98 .80 to 1.0 03/31/98 and at all times thereafter 1.00 to 1.0
(f) Section 7 of the Credit Agreement shall be amended to include a new Section 7.17 which shall read as follows: "Section 7.17. Consolidated Operating Income. The Borrower shall have Consolidated Operating Income for the fiscal quarter ending March 31, 1997, of not less than ($2,000,000), and the Borrower shall have Consolidated Operating Income for each fiscal quarter ending after March 31, 1997, of not less than $1." (g) Section 8.1(b) of the Credit Agreement shall be amended and restated to read as follows:. "(b) default in the observance or performance of any covenant set forth in Sections 7.5(e), 7.6, 7.7, 7.8, 7.9, 7.10, 7.13, 7.14 or 7.17 hereof; or" (h) The Covenant Compliance Certificate worksheet attached to Schedule 7.5 of the Credit Agreement shall be amended and restated to read as set forth on Exhibit A attached hereto. 3. Conditions Precedent. The effectiveness of this First Amendment is subject to the satisfaction of all of the following conditions precedent: (a) The Borrower, the Agent and the Required Banks shall have executed and delivered this First Amendment. (b) Legal matters incident to the execution and delivery of this First Amendment shall be satisfactory to the Agent and its counsel. 4. Representations. In order to induce the Banks to execute and deliver this First Amendment, the Borrower hereby represents to the Banks that as of the date hereof, and after giving effect to this First Amendment, the representations and warranties set forth in Section 5 of the Credit Agreement are and shall be and remain true and correct (except that the representations contained in Section 5.4 shall be deemed to refer to the most recent financial statements of the Borrower delivered to the Banks) and the Borrower is in full compliance with all of the terms and conditions of the Credit Agreement and no Default or Event of Default has occurred and is continuing under the Credit Agreement or shall result after giving effect to this First Amendment. 5. Miscellaneous. (a) Except as specifically amended herein, the Credit Agreement shall continue in full force and effect in accordance with its original terms. Reference to this specific First Amendment need not be made in the Credit Agreement, the Notes, or any other instrument or document executed in connection therewith, or in any certificate, letter or communication issued or made pursuant to or with respect to the Credit Agreement, any reference in any of such items to the Credit Agreement being sufficient to refer to the Credit Agreement as amended hereby. (b) The Borrower agrees to pay on demand all costs and expenses of or incurred by the Agent in connection with the negotiation, preparation, execution and delivery of this First Amendment, including the fees and expenses of counsel for the Agent. (c) This First Amendment may be executed in any number of counterparts, and by the different parties on different counterpart signature pages, all of which taken together shall constitute one and the same agreement. Any of the parties hereto may execute this First Amendment by signing any such counterpart and each of such counterparts shall for all purposes be deemed to be an original. This First Amendment shall be governed by the internal laws of the State of Illinois. Dated as of February 10, 1997. Information Resources, Inc. By Its Accepted and agreed to as of the date and year last above written. Harris Trust and Savings Bank, individually and as Agent By Its Bank of America Illinois By Its LaSalle National Bank (as assignee of Comerica Bank-Illinois) By Its Exhibit A First Amendment to Credit Agreement Attachment To Compliance Certificate Information Resources, Inc. Compliance Calculations for Credit Agreement Dated as of November 10, 1995 Calculations as of ____________, _____ - -------------------------------------------------------------------------------- A. Consolidated Tangible Net Worth (Section 7.6) 1. Consolidated total assets $_________ 2. Goodwill $_________ 3. Line A.1 minus A.2 $_________ 4. Consolidated Total Liabilities $_________ 5. Line A.3 minus A.4 (Consolidated Tangible Net Worth) $_________ 6. Line A.5 shall not be less than $_________ B. Leverage Ratio (Section 7.7) 1. Consolidated Total Liabilities (Line A.4 above) $_________ 2. Consolidated Tangible Net Worth (Line A.5 above) $_________ 3. Ratio of Line B.1 to B.2 ____ : 1.0 4. Line B.3 Ratio shall not be more than 0.75 : 1.0 C. Consolidated Quick Ratio (Section 7.8) 1. Cash and cash equivalent $_________ 2. Accounts receivable net of reserves $_________ 3. Outstanding principal of Oracle Escrow $_________ 4. Sum of Lines C.1, C.2 and C.3 $_________ 5. Ratio of Line C.1 to C.4 (Consolidated Quick Ratio) ____ : 1.0 6. Line C.5 Ratio shall not be less than 1.1 : 1.0 D. Cash Flow Coverage Ratio (Section 7.9) 1. Consolidated Net Income $_________ 2. Consolidated Interest Expense $_________ 3. Income Taxes $_________ 4. Depreciation and Amortization $_________ 5. Amortization of InfoScan Costs and Software Costs $_________ 6. Net Proceeds from Equity Security Offerings $_________ 7. Net Proceeds from Subordinated Debt $ ========== 8. Sum of Lines D.1 through D.7 (Consolidated Cash Flow) $ ========== 9. Principal payments on Indebtedness for Borrowed Money $_________ 10. Consolidated Interest Expense $_________ 11. Capital Expenditures $_________ 12. Dividends $_________ 13. Cash Payments made in connection with InfoScan Costs and Software Costs $_________ 14. Cash Investments $_________ 15. Sum of Lines D.9 through D.14 (Consolidated Fixed Charges) $ ========== 16. Ratio of Line D.8 to D.15 ____ : 1.0 17. Line D.16 Ratio shall not be less than ____ : 1.0 E. Consolidated Operating Income (Section 7.17) 1. Consolidated Operating Income for fiscal quarter then ended $_________ 2. Line E.1 shall not be less than $_________ EX-10.GG 3 EMPLOYMENT AGREEMENT AND 1ST AMENDMENT EXHIBIT 10 (gg) FIRST AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------------- This First Amendment To Employment Agreement ("Amendment") is entered into as of November 11, 1996 by and between INFORMATION RESOURCES, INC. ("Information Resources") and RANDALL S. SMITH (the "Employee") for the purpose of amending that certain Employment Agreement entered into by and between the parties hereto as of August 22, 1996 (the "Employment Agreement"). In consideration of the mutual promises and obligations set forth below, Information Resources and the Employee hereby agree to amend the Employment Agreement as follows: 1. Section 4.0 of Article IV of the Employment Agreement shall be amended by adding an additional paragraph, said paragraph to read in its entirety as follows: "Information Resources may choose to cause the payments described above to be made pursuant to a term life insurance policy on the life of Employee, with a death benefit and payment schedule equivalent to the twelve (12) monthly Base Salary payments described above, and the payment of such death benefit shall be in lieu of and in full satisfaction of Information Resources' obligation to continue to pay Employee's Base Salary subsequent to his death as described in this Section 4.0. Employee shall be the owner of and shall pay the annual premiums on such policy, provided that Information Resources shall increase Employee's Base Salary by an amount that will, after tax deductions, equal the amount of said premium (as such premium amount may change from time to time), such increased amount to be paid in a lump sum upon Information Resources' receiving from Employee a paid receipt (or canceled check) evidencing payment of the annual premium. Employee agrees to cooperate with Information Resources in applying for and obtaining the above-described term life insurance policy. Information Resources reserves the right to terminate this alternative method of payment and will so notify Employee of such termination, whereupon Information Resources will reassume the direct payment obligation described in the preceding paragraph." IN WITNESS WHEREOF, Information Resources and the Employee have caused this Amendment to be executed as of the date first written above. INFORMATION RESOURCES, INC. /s/ Randall S. Smith By: /s/ Gary S. Newman - -------------------------- ------------------------ EMPLOYEE Title: EVP - H.R. -------------------- Exhibit 10(gg) EMPLOYMENT AGREEMENT by and between INFORMATION RESOURCES, INC. and RANDALL S. SMITH EMPLOYMENT AGREEMENT -------------------- THIS AGREEMENT ("Agreement") is made as of the 22nd day of August, 1996 (the "Effective Date") by and between INFORMATION RESOURCES, INC., a Delaware corporation ("Information Resources" or "IRI"), and RANDALL S. SMITH (the "Employee"). WHEREAS, Information Resources has employed the Employee in an executive capacity since 1981 and desires to continue to employ the Employee in an executive capacity on the terms and subject to the conditions set forth in this Agreement; and WHEREAS, the Employee desires to accept such employment with Information Resources 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 Information Resources and the Employee set forth in this Agreement and for other good and valuable consideration, the receipt and sufficiency of which are hereby acknowledged by Information Resources and the Employee, the parties hereto agree as follows: ARTICLE I --------- Employment ----------- 1.0 Employment. Information Resources agrees to employ the Employee, and the Employee agrees to serve Information Resources 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 and ending with the effective date of termination of employment as provided in ARTICLE VI (the "Employment Period"). 1.1 Employment Duties. During the Employment Period, the Employee shall devote his best efforts and all of his normal business time and attention (excluding permitted vacation, holidays, personal and sick leave, and reasonable time devoted to civic and charitable activities) to the business of Information Resources and its affiliated companies, and to serve as President, Operations Group and International Information Services Group of Information Resources or to serve as such other officer or senior executive employee of Information Resources or any of its affiliated companies as the Chief Executive Officer and/or the Board of Directors (or the appropriate committee thereof) of IRI may from time to time stipulate. As an officer or other senior executive of Information Resources, the Employee shall have all the responsibilities and authority normally incident to the office he holds as provided in the by-laws of Information Resources or otherwise, subject to the authority and responsibilities of the Board of Directors and its committees, and he shall have such additional duties, not inconsistent with the responsibilities of his office, as the Board of Directors, its committees or the Chief Executive Officer of IRI shall prescribe. The Employee may, with the express written approval of the Information Resources Board of Directors, serve and receive compensation as a director of any other company affiliated with Information Resources or any other company that, in the opinion of the Board of Directors, does not compete with Information Resources. 1.2 Place of Employment. In connection with his employment with Information Resources, the Employee shall be based at the principal offices of Information Resources in the Chicago metropolitan area. The Employee may be required to perform ordinary business travel consistent with the responsibilities of his office. Information Resources agrees that the Employee shall not be required to relocate his principal place of business outside the Chicago metropolitan area during the Employment Period. ARTICLE II ---------- Compensation ------------ Information Resources agrees to compensate the Employee for the services rendered by him during the Employment Period as follows: 2.0 Base Salary. During the Employment Period, Information Resources shall pay the Employee a salary at an initial rate of Two Hundred Eighty-Six Thousand Dollars ($286,000.00) per year subject to review by the Compensation Committee of the Board of Directors for possible increase on the same basis and at the same intervals as applicable for other senior officers of Information Resources ("Base Salary"), it being understood that (a) increases in the Base Salary shall be commensurate with the Employee's position, duties and responsibilities and in conformity with IRI's policies and practices as applied to other senior officers of IRI and (b) the Base Salary as increased from time to time shall not decrease during the term of this Agreement unless and only to the extent that the Compensation Committee of the Board of Directors (or its successor) authorizes such a decrease as part of a broadly applied salary reduction program applied in the same fashion to other senior officers in addition to Employee. The Base Salary shall be payable in accordance with the practice followed by Information Resources with respect to its other senior officers. Information Resources shall not be required to pay the Employee his Base Salary for the portion of any Disability Period with respect to which the Employee receives disability benefit payments according to the provisions of Information Resources' disability plans applicable to the Employee, except to the extent provided in Article III hereof. 2.1 Bonus or Incentive Compensation. Information Resources shall award the Employee, in respect of each calendar year during the term hereof (including 1996) bonus or incentive compensation as provided under any present or future incentive compensation plan of Information Resources as applied to other senior officers of Information Resources. Information Resources shall not be required to pay the Employee bonus or incentive compensation for the portion of any Disability Period with respect to which the Employee receives disability benefit payments according to the provisions of Information Resources' disability plans applicable to the Employee. 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 bonus 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. The Employee shall participate during the Employment Period in all employee benefit plans generally applicable to senior officers of Information Resources, as those plans may be in effect from time to time, and shall continue that participation after his retirement on a basis comparable to that upon which other senior officers of Information Resources may continue participation following their retirement. During the Employment Period, the Employee shall be entitled to all other employee benefits generally provided to senior officers of Information Resources in accordance with then prevailing practice concerning such employee benefits. The Employee shall be eligible for paid vacation at the rate of four (4) weeks per year during 1996 and ratably for each year of service thereafter. ARTICLE III ----------- Disability ---------- 3.0 Disability. In the event of any illness or disability of the Employee of a nature, degree, or effect such that, within the Employment Period, the Employee becomes unable to perform his duties under this Agreement on a full-time basis and such that Information Resources believes (as reasonably determined by the Chief Executive Officer of Information Resources or the Board of Directors or appropriate committee thereof) on the basis of the facts available that the Employee 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 the Employee shall continue to be paid his full Base Salary and shall continue participating in any Information Resources bonus or incentive compensation plans. 3.1 Acting or Successor Officer. During any Disability Period, the Chief Executive Officer of Information Resources (or the Board of Directors or appropriate committee thereof) may appoint an acting or successor member or officer to each position or office then held by the Employee. 3.2 Disability Benefit Plans. During any Disability Period, the Employee shall be entitled to receive disability benefit payments according to the provisions of Information Resources' disability plans for salaried employees, if any, and the Employee shall continue to be an employee of IRI for purposes of continued vesting and exercise of stock options (but not for purposes of participation in incentive or bonus plans) and shall continue to participate in all employee benefit plans for which he is eligible pursuant to this Agreement or otherwise. In addition to the disability benefit payments under said plans, during the first 180 days of any such Disability Period the Employee shall be entitled to receive, at normal payroll dates, supplemental disability payments directly from Information Resources 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, Employee shall then receive, for the remaining duration of the Disability Period, in addition to the disability benefit payments under the provisions of IRI's disability plan(s), supplemental disability payments directly from Information Resources at a rate equal to one- third (33.3%) 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. 3.3 Termination of Disability. If and when, in the reasonable judgment of the Board of Directors, after the commencement of a Disability Period the Employee regains his ability to perform his duties hereunder on a full-time basis, such Disability Period and Information Resources' obligation to make supplemental disability payments pursuant to Section 3.2 hereof shall cease. The Employee 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 Information Resources bonus or incentive compensation plans, 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, the Employee'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. The Board of Directors shall consider the Employee's redesignation to the particular positions and offices held by him prior to the Disability Period, but the Board of Directors shall be under no obligation with respect thereto. ARTICLE IV ---------- Supplemental Benefits --------------------- 4.0 Supplemental Benefits. In addition to any other employee benefits to which the Employee, his spouse or his estate may be entitled, in the event of the Employee's death during the term of this Agreement, Information Resources shall continue to pay Employee's monthly Base Salary to his spouse, or his estate if there is no living spouse, for a period of twelve (12) months commencing on the first day of the month following the month of the Employee's death. ARTICLE V --------- Stock Options -------------- 5.0 Stock Option Grants. Except as provided in Sections 5.1, 5.2, 5.3, 6.3 and 6.4 of this Agreement, nothing in this Agreement shall alter the terms which govern any options previously granted to the Employee pursuant to the Information Resources Executive Stock Option Plan or any other option plan under which Employee receives or has received options to acquire Information Resources, Inc. common stock (the "Plan"). 5.1 Acceleration and Expiration/Cancellation. Notwithstanding any provisions of the Plan (or any option granted pursuant to the Plan or any Stock Option Agreement) to the contrary, in the event of any "Change of Control" (defined as any merger, consolidation or reorganization in which Information Resources is a merging, consolidating or reorganizing party and pursuant to which neither Information Resources nor any entity controlled by it is the surviving entity; or as the acquisition of beneficial ownership of, or power to vote, forty percent (40%) or more of the outstanding voting securities of Information Resources by any acquiror (or group of acquirors acting in concert) within any period of 90 consecutive days) which occurs after the second anniversary of the effective date of this Agreement, then the Employee (or his estate) shall be entitled to immediately exercise in full any unexercised options (vested or unvested) granted pursuant to the Plan prior to the Change of Control (other than expired options) then held by the Employee (or his estate). For purposes of this Agreement, an unexercised option "expires" at the end of a specified period of time after the date of grant (currently 10 years from such date of grant) in compliance with applicable law and as specified in the Stock Option Agreement under which the grant is made. Unvested options held by Employee shall not be canceled by action of the Executive Stock Option Plan Committee (or its successor) and no cancellation of unvested options shall occur other than in accordance with Section 5.2 (c) below. 5.2 Stock Option Vesting and Exercise Following Termination. Notwithstanding any provisions of the Plan (or any option granted pursuant to the Plan or any Stock Option Agreement) to the contrary, upon termination of employment hereunder, Employee (or his estate) shall have the following vesting and exercise rights with respect to the stock options held at the date of such termination (including but not limited to those options which vest as a consequence of the termination of employment, which options shall be deemed to be vested as of the date of such termination): a. In the event of Employee's death during the Employment Period, all unvested options will immediately vest and all options will be exercisable by his estate for the period ending at the earlier of the expiration date of the options or 24 months from the date of death. b. In the event that Employee's employment hereunder is terminated by Information Resources without cause or by Employee for "Good Reason," vested stock options will be exercisable for the period ending at the earlier of the expiration date of the options or 24 months from the date of termination of employment. In the event that such termination is effective prior to the second anniversary of the Effective Date, all unvested options held by Employee at such termination date will continue to vest according to the vesting schedule set forth in the applicable Stock Option Agreement for such options (but will vest immediately upon the death of Employee) and, upon such vesting, shall be exercisable by Employee (or his estate) for the period ending 24 months after the date of such vesting. In the event that such termination is effective at or subsequent to the second anniversary of the Effective Date, the unvested options held by Employee at such termination date will vest immediately upon such termination date and be exercisable by Employee (or his estate) for the period ending at the earlier of the expiration date of the options or 24 months after the date of such termination of employment. c. In the event that Employee's employment hereunder is terminated for any reason other than as set forth in subsections (a) and (b) above, all options which are vested as of the effective date of such termination will be exercisable by Employee (or his estate) for the period ending at the earlier of the expiration date of the options or 13 months from the date of termination of employment, and stock options which are unvested as of the effective date of termination of employment will be canceled as of that date. 5.3 1995 Stock Option Grant. It is hereby acknowledged and agreed that Employee was granted 80,000 options under IRI's Executive Stock Option Plan on May 24, 1995, which shall vest in accordance with the following schedule: a. one-half (50%) on May 24, 1996 b. three-quarters (75%) on May 24, 1997 c. 100% on May 24, 1998 This option grant will be further evidenced by a separate Stock Option Agreement containing the terms and conditions under said Plan. ARTICLE VI Term of Employment ------------------ 6.0 Term of Employment. The employment of the Employee pursuant to this Agreement shall commence on the date hereof and shall automatically continue thereafter until terminated in accordance with this Agreement. 6.1 Termination Without Cause. Either party to this Agreement may terminate the employment of the Employee pursuant to this Agreement, without cause, by giving prior written notice to the other party specifying a termination date no earlier than 60 days and no later than 90 days following the delivery of such notice (a "Section 6.1 Notice"). 6.2 Termination by the Employee for Good Reason. Except as otherwise provided in this Section 6.2, at any time prior to the Employee's receipt of a Section 6.1 Notice or the termination of the Employee's employment by Information Resources for "Cause," the Employee may give notice to terminate his employment for "Good Reason" by delivering a written notice of termination to Information Resources specifying the "Good Reason" (described in subsections (a) through (d) of this Section 6.2) for the termination and further specifying the effective date of termination which shall be no earlier than thirty (30) days and no later than sixty (60) days after Information Resources' receipt of such written notice of termination (a "Section 6.2 Notice"). A Section 6.2 Notice will not be effective unless received by Information Resources within 30 days after the occurrence of the event specified by the Employee as being the "Good Reason" for termination. Information Resources shall have 30 days after receiving any Section 6.2 Notice within which to initiate corrective or remedial action, and if such action is timely initiated then upon the completion of such corrective or remedial action the Section 6.2 Notice will be deemed withdrawn; provided, however, that the Section 6.2 Notice shall not be deemed withdrawn if the events specified by the Employee as being the "Good Reason" for termination were repeated, intentional and directed at the Employee individually. For the purpose of this Agreement, the Employee shall have "Good Reason" to terminate his employment hereunder if, but only if: (a) without the express written consent of the Employee, he is assigned any duties inconsistent with Article I or his positions, duties, responsibilities and status with Information Resources immediately prior to a change in his reporting relationships, duties, responsibilities, title or offices, except in connection with (1) his reassignment by the Chief Executive Officer and/or the Board of Directors (or the appropriate committee thereof) of Information Resources to a comparable position, in conformity with the provisions of Section 1.2 hereof, with a comparable level of duties and responsibilities and with the same salary, same eligibility for bonus/incentive compensation and same grade level, or (2) the commencement or continuation of a Disability Period; or he is removed from or not re-elected to any of those positions except in connection with such reassignment or the commencement or continuation of a Disability Period; (b) a reduction is made by Information Resources in the Employee's Base Salary, except as provided for in Section 2.0 hereof; (c) Information Resources 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 their express terms) in which the Employee is participating, other than as part of a reduction or change generally applicable to other senior officers of Information Resources, except that in no case shall the benefits available to Employee under Article III be reduced; or (d) Information Resources fails to obtain from any successor entity to Information Resources an agreement to perform this Agreement to the extent and in the manner required to be performed by Information Resources. 6.3 Consequences of Termination Without Cause or for Good Reason. In the event Information Resources terminates the employment of Employee without cause pursuant to Section 6.1, or the Employee terminates his employment for "Good Reason" pursuant to Section 6.2 hereof, the Employee shall receive, for each of the twelve (12) months following any such termination of employment, his monthly Base Salary at the rate in effect immediately prior to the giving of the Section 6.1 Notice or Section 6.2 Notice. In addition, Employee shall receive the cash equivalent of such Base Salary multiplied by the average percentage of base salary awarded as a bonus (in cash or otherwise) to the other Executive Officers of Information Resources who remained full-time employees in good standing through the date on which the relevant bonus, if any, was paid for the year in which such termination of Employee's employment occurs, prorated for the portion of the relevant calendar year prior to the effective date of termination and payable at the same time as the bonus payment for such year is made to the other Executive Officers. By way of illustrative example, assume a termination by Employee for "Good Reason" on June 30 of a year in which Employee's Base Salary is $300,000 and the average percent of base salary awarded as a bonus to Executive Officers for that year is 20%, Employee shall receive a bonus payment of $30,000, payable at the same time as that year's bonus is paid to the other Executive Officers (typically in March or April of the following year). In addition to the foregoing, upon such termination, Information Resources agrees to compensate the Employee for the amount of any premiums for COBRA insurance coverage for the Employee and his spouse and dependent children for a period from the date of his termination until the earlier of (a) the first anniversary of such date or (b) the date he becomes eligible for similar benefits under a health insurance plan at a subsequent employer. During the 12 month period following termination of employment hereunder, Employee agrees to make himself available, at the reasonable request of Information Resources, for up to sixty (60) hours of work on behalf of Information Resources, at the headquarters of Information Resources or by telephone or by such methods or under such circumstances as shall be mutually determined and agreed by Employee and Information Resources. 6.4 Termination For Cause. In the event of "Cause," Information Resources shall have the right to terminate the employment of the Employee pursuant to this Agreement without prior written notice, except as provided in this Section 6.4. "Cause" shall be deemed to exist under the following circumstances: (a) if the Employee refuses or fails or neglects to perform his obligations under this Agreement and the Employee fails to rectify such deficiency within thirty (30) days, after receiving written notice from the Board of Directors of Information Resources, for any reason other than factors that, if continued, would reasonably give rise to the determination or continuation of a Disability Period; (b) if the Employee has developed or pursued interests substantially adverse or substantially inconsistent with the material fulfillment of his obligations hereunder to Information Resources, and fails to cease such conduct within ten (10) days after receiving written notice from the Board of Directors of Information Resources; (c) if the Employee engages in illegal or other wrongful conduct which is materially detrimental to the business or reputation of Information Resources; or (d) if the Employee engages in any conduct or activity prohibited by Section 8.0 or 8.1 of this Agreement. No notice of termination under this Section 6.4 will be effective unless delivered by IRI to Employee within 60 days following the date on which the Chief Executive Officer or the Chairman of the Board of Directors first becomes aware of the nature and significance of the event specified as "Cause" for termination. In the event of termination of the Employee's employment in accordance with this Section 6.4, Information Resources shall have no further liability in respect of the Employee's employment; provided, however, that Information Resources shall (a) pay the Employee the value of any accrued salary or other compensation due the Employee on the date of termination and (b) Employee shall retain the rights set forth in Section 5.2 hereof. 6.5 Termination Upon Death of Employee. The employment of the Employee under this Agreement shall automatically terminate upon the death of the Employee. ARTICLE VII Covenant Not To Compete ----------------------- 7.0 Covenant Not To Compete. The Employee shall not, without the prior express written consent of Information Resources, directly or indirectly, for himself or for any other person or entity, individually, jointly or as a partner, stockholder (except as a holder of not more than five percent (5%) of the outstanding shares of a publicly-held corporation), employee, agent, consultant or otherwise: (a) during the Employment Period, and for a period of two (2) consecutive years immediately thereafter, work or perform any service for the Dun & Bradstreet Corporation or the A.C. Nielsen Company, Efficient Market Services, Inc., Cornerstone Technologies, Inc. or any parent, subsidiary, affiliate or successor of any of the foregoing; (b) during the Employment Period, and for a period of two (2) consecutive years immediately thereafter, induce, attempt to induce, or participate in or facilitate the inducing of or attempting to induce, any employee, officer, director, consultant, sales representative or agent of Information Resources (or any of its subsidiaries or affiliates) to terminate or alter his or her business relationship with Information Resources (or any of its subsidiaries or affiliates) or to breach any agreement or obligation he or she has with or to Information Resources (or any of its subsidiaries or affiliates) or to perform work or services for the Employee or for a competitor of Information Resources described in Section 7.0(a), or hire any such person within six months of the termination of such business relationship; or (c) during the Employment Period, and for a period of one (1) year immediately thereafter, attempt in any manner to persuade any customer or supplier of Information Resources (or any of its subsidiaries or affiliates) to cease or reduce the amount of business which such customer or supplier engages in or contemplates engaging in with Information Resources (or any of its subsidiaries or affiliates), regardless of whether the relationship between such customer or supplier and Information Resources (or its subsidiary or affiliate) was originally established in whole or in part through Employee's efforts. The Employee acknowledges that the restrictions set forth in this Article VII are (a) reasonable and necessary for the protection of Information Resources' interests and (b) are entered into by the Employee in exchange for adequate consideration granted to him in connection with this Agreement. In the event that any provision of this Section 7.0 is found by a court of competent jurisdiction to be unreasonable or unenforceable, the parties agree that such provision shall be enforceable against the Employee to the greatest extent that would be found to be reasonable and enforceable. ARTICLE VIII ------------ Confidentiality; Ideas and Improvements --------------------------------------- 8.0 Confidentiality. Information Resources 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 the Employee during the course of his employment as well as confidential client information including data disclosing the identity of clients of Information Resources, their particular needs, methods, data and other similar information. The Employee agrees that so long as such information is confidential in fact and is not readily ascertainable by third parties through lawful means, the Employee 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 Information Resources. The Employee agrees to return all programs, manuals, documents, records, and other information relating to the business of Information Resources, including materials prepared by the Employee, to Information Resources immediately upon the termination of employment hereunder. 8.1 Ideas and Improvements. The Employee agrees to promptly disclose to Information Resources all ideas, designs, improvements, creations and inventions, whether or not patentable or subject to other legal protection, which have significant relationship to the business of Information Resources or any affiliates of Information Resources, and which were developed or created by the Employee at any place or time during the Employment Period (collectively, "Ideas and Creations"). The Employee further agrees to take all steps necessary to execute and deliver to Information Resources copyright or patent rights on all matters suitable for such protection, and to execute and deliver to Information Resources all documents which may be required to assign to Information Resources such copyright or patent rights, and to otherwise cooperate to the extent within the Employee's control to ensure Information Resources' 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 Information Resources was used and which was developed entirely on the Employee's own time, unless (a) the invention relates to the business of Information Resources or to Information Resources' actual or demonstrably anticipated research or development, or (b) the invention results from any work performed by the Employee for Information Resources. ARTICLE IX ---------- Miscellaneous Provisions ------------------------ 9.0 Legal Remedies. The Employee hereby acknowledges that Information Resources would suffer irreparable injury if the provisions of Sections 7.0, 8.0 or 8.1 above were breached and that Information Resources' remedies at law would be inadequate in the event of such breach. Accordingly, the Employee hereby agrees that any such breach or threatened breach may, in addition to any other available remedies, be preliminarily enjoined by Information Resources without bond. In the event of litigation under this Agreement, each side shall pay its own attorneys' fees and expenses, except that if the Employee is enjoined either preliminarily or permanently, after an evidentiary hearing, then the Employee shall pay the attorneys' fees and expenses of Information Resources in connection with that evidentiary hearing and, if such evidentiary hearing results in a court refusing a preliminary or permanent injunction, then Information Resources shall pay the Employee's attorneys' fees and expenses in connection with such hearing. Sections 7.0, 8.0 and 8.1 shall survive, and shall continue in effect, notwithstanding any termination of this Agreement. 9.1 Successors and Assigns. This Agreement shall be binding upon and shall inure to the benefit of the Employee and Information Resources and each of their respective heirs, personal representatives, permitted assigns, and successors in interest, including, in the case of Information Resources, any company with which Information Resources may be merged or consolidated or to which all or substantially all of Information Resources' assets may be transferred. Except as otherwise provided above, this Agreement shall not be assignable by Information Resources or the Employee without the express written consent of the other party. 9.2 Governing Law. This Agreement shall be construed and enforced in accordance with the law of the State of Illinois. 9.3 Notices. All notices required or permitted hereunder shall be given in writing, either delivered personally or by registered or certified mail, addressed to Information Resources at its principal office to the attention of the Corporate Secretary, or to the Employee either at his residence address shown on the employment records of Information Resources or in care of the principal office of Information Resources, as appropriate. 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 two days after the date of such mailing. 9.4 Entire Agreement; Amendments; Headings. This Agreement embodies the entire agreement of Information Resources and the Employee with respect to the subject matter hereof. No amendment or modification of the terms of this Agreement shall be effective unless reduced to a written instrument executed by Information Resources and the Employee. The headings of sections in this Agreement are for convenience only. IN WITNESS WHEREOF, Information Resources and the Employee have caused this Agreement to be duly executed as of the date first above written. INFORMATION RESOURCES, INC. /s/ Randall S. Smith By: /s/ Gian M. Fulgoni - --------------------- -------------------------- EMPLOYEE Its: CEO ------------------------- Final As Executed FIRST AMENDMENT TO EMPLOYMENT AGREEMENT --------------------------------------- This First Amendment To Employment Agreement ("Amendment") is entered into as of November 11, 1996 by and between INFORMATION RESOURCES, INC. ("Information Resources") and RANDALL S. SMITH (the "Employee") for the purpose of amending that certain Employment Agreement entered into by and between the parties hereto as of August 22, 1996 (the "Employment Agreement"). In consideration of the mutual promises and obligations set forth below, Information Resources and the Employee hereby agree to amend the Employment Agreement as follows: 1. Section 4.0 of Article IV of the Employment Agreement shall be amended by adding an additional paragraph, said paragraph to read in its entirety as follows: "Information Resources may choose to cause the payments described above to be made pursuant to a term life insurance policy on the life of Employee, with a death benefit and payment schedule equivalent to the twelve (12) monthly Base Salary payments described above, and the payment of such death benefit shall be in lieu of and in full satisfaction of Information Resources' obligation to continue to pay Employee's Base Salary subsequent to his death as described in this Section 4.0. Employee shall be the owner of and shall pay the annual premiums on such policy, provided that Information Resources shall increase Employee's Base Salary by an amount that will, after tax deductions, equal the amount of said premium (as such premium amount may change from time to time), such increased amount to be paid in a lump sum upon Information Resources' receiving from Employee a paid receipt (or canceled check) evidencing payment of the annual premium. Employee agrees to cooperate with Information Resources in applying for and obtaining the above-described term life insurance policy. Information Resources reserves the right to terminate this alternative method of payment and will so notify Employee of such termination, whereupon Information Resources will reassume the direct payment obligation described in the preceding paragraph." IN WITNESS WHEREOF, Information Resources and the Employee have caused this Amendment to be executed as of the date first written above. INFORMATION RESOURCES, INC. /s/ Randall S. Smith By: /s/ Gary S. Newman - -------------------------- ------------------------ EMPLOYEE Title: EVP - H.R. -------------------- EX-10.HH 4 AMENDED AND RESTATED 401(K) EXHIBIT 10(HH) INFORMATION RESOURCES, INC. AMENDED AND RESTATED 401(k) RETIREMENT SAVINGS PLAN AND TRUST TABLE OF CONTENTS Article Heading Page - --------------- ---- I. DEFINITIONS .................................................. 1 II. SERVICE ...................................................... 6 III. ELIGIBILITY FOR PARTICIPATION ................................ 8 IV. CONTRIBUTIONS AND FORFEITURES ................................ 9 V. MAXIMUM ANNUAL ADDITIONS ..................................... 17 VI. MAINTENANCE OF PARTICIPANTS' ACCOUNTS ........................ 18 VII. VESTED INTERESTS ............................................. 21 VIII. DISTRIBUTION OF BENEFITS ..................................... 23 IX. INVESTMENT DISCRETION ........................................ 26 X. ADMINISTRATION ............................................... 28 XI. AMENDMENTS AND DISCONTINUANCE ................................ 31 XII. TOP-HEAVY PROVISIONS ......................................... 33 XIII. TRUST PROVISIONS ............................................. 35 XIV. ADOPTION BY SUBSIDIARIES AND AFFILIATES ...................... 44 XV. LOANS TO PARTICIPANTS ........................................ 45 XVI. MISCELLANEOUS ................................................ 47 INFORMATION RESOURCES, INC. AMENDED AND RESTATED 401(k) RETIREMENT SAVINGS PLAN AND TRUST This amended and restated agreement (the "Amended and Restated Plan and Trust") is made this _____ day of ___________________, 1995 by and between Information Resources, Inc. (hereinafter referred to as "Company") and the Trustees of the Information Resources, Inc. 401(k) Retirement Savings Plan and Trust. WITNESSETH: WHEREAS, the Company established a 401(k) Retirement Savings Plan and Trust which became effective August 1, 1989 (the "Plan and Trust"); WHEREAS, the Plan and Trust is for the benefit of eligible employees of the Company; WHEREAS, the Plan and Trust is intended to be qualified under Section 401 et. seq. of the IRS Code of 1986, as amended (the "Code") and to be a tax exempt trust under Section 501 of the Code; WHEREAS, the Executive Committee of the Board of Directors of the Company has, since the effective date of the Plan and Trust, adopted various amendments to the Plan and Trust; WHEREAS, the Executive Committee of the Board of Directors of the Company has determined it to be in the best interests of the Company to now incorporate all previous amendments to the Plan and Trust into one restated document; NOW, THEREFORE, BE IT RESOLVED, that the Plan and Trust is hereby amended and restated, such amended and restated Plan and Trust to be known as the "Information Resources, Inc. Amended and Restated 401(k) Retirement Savings Plan and Trust". INFORMATION RESOURCES, INC. AMENDED AND RESTATED 401(k) RETIREMENT SAVINGS PLAN AND TRUST ARTICLE I DEFINITIONS As used in this Amended and Restated Plan and Trust, the following terms shall have the meaning hereinafter set forth unless the context shall clearly indicate otherwise. 1.1 "ACCRUED BENEFIT" as of any date shall mean the combined balances of a Participant's 401(k) Account, Company Matching Contribution Account, and Rollover Contribution Account. 1.2 "ANNUAL ADDITIONS" to a Participant's accounts for any Plan Year shall mean the sum of the Company's contributions to the Participant's 401(k) Account and Matching Contribution Account for the Plan Year under consideration, including the Participant's share, if any, of forfeitures in accordance with Section 415(c)(2) of the Code. 1.3 "AUTHORIZED LEAVE OF ABSENCE" shall mean, as to any Employee, an absence authorized by the Company for nonworking time by reason of layoff, pregnancy, jury duty, illness, temporary disability, or military service. In granting such Authorized Leaves of Absence, the Company shall treat similarly situated Employees uniformly. 1.4 "BENEFICIARY" shall mean any person or persons designated by a Participant in accordance with Section 8.6 to receive any death benefits that may be payable under the Plan. Wherever the rights of Participants are stated or limited herein, their Beneficiaries shall be deemed bound thereby. 1.5 "BOARD OF DIRECTORS" shall mean the Board of Directors of Information Resources, Inc. 1.6 "CODE" shall mean the Internal Revenue Code of 1986, as amended from time-to-time. 1.7 "COMMITTEE" shall mean the individuals designated by the Board of Directors pursuant to Article X to administer the Plan. 1.8 "COMPANY" shall mean Information Resources, Inc. and each affiliate or subsidiary of the Company which adopts this Plan with the consent of the Board of Directors in accordance with the provisions of Article XIV. 1.9 "COMPENSATION" shall mean an Employee's total cash compensation, including overtime pay and bonuses, but excluding (a) any Compensation in excess of $150,000 or such higher amount which may from time to time be prescribed in accordance with regulations issued by the Secretary of the Treasury or his delegate in accordance with Section 401(a)(17) of the Code and subject to the provisions of Article IV below, and (b) any Compensation due to a Company contribution for life insurance, medical insurance, or disability insurance. If a Participant enters into a Salary Reduction Agreement (as defined in Section 4.2) with the Company for a given Plan Year, his compensation for such Plan Year for all purposes of this Plan except Sections 4.2, 4.4, and 12.3 shall be equal to his compensation after application of the Salary Reduction Agreement. For purposes of Sections 4.2, 4.4, and 12.3, Compensation shall be determined without application of any Salary Reduction Agreement. 1.10 "DATE OF TERMINATION" shall mean the earlier of the following dates: (a) the date an Employee quits, is discharged, retires for reasons other than disability, or dies; (b) the date which is the first anniversary of the date of an Employee is laid off or commences an Authorized Leave of Absence, excluding Military Leave of Absence, if such Employee has not returned to the active employ of the Company by such anniversary; or (c) the date which is the ninety-first (91st) day following the date an Employee separates from military service, if such Employee was on a Military Leave of Absence, and such Employee has not returned to the active employ of the Company by such date. 1.11 "DETERMINATION DATE" means, with respect to any Plan Year, the last day of the preceding Plan Year. For the short Plan Year beginning August 1, 1989 and ending December 31, 1989, the Determination Date shall be the last day of such Plan Year. 1.12 "DISABLED" or "DISABILITY" shall mean a physical or mental condition which qualifies an Employee for disability benefits under the Company's disability plan. Retirement due to Disability shall be granted on a uniform basis for all Participants in similar circumstances. 1.13 "EARLY RETIREMENT DATE" shall mean, as applicable, the date an Employee retires from the active employ of the Company on or after attaining age fifty-five (55) and receiving credit for at least seven (7) years of Vesting Service, or the date that an Employee who has satisfied such seven (7) year Vesting Service requirement before separating from service with the Company (with a nonforfeitable right to an accrued benefit), but who separated from service prior to reaching such age requirement, attains age fifty-five (55). 1.14 "EFFECTIVE DATE" shall mean August 1, 1989. 2 1.15 AN "EMPLOYEE" shall mean any individual currently in the employ of the Company, including Leased Employees, but excluding any director of such Company who is not in the employ of the Company. 1.16 "ERISA" shall mean the Employee Retirement Income Security Act of 1974 as amended from time-to-time. 1.17 "FORMER PARTICIPANT" shall mean a former Employee or Beneficiary who is entitled to receive, is receiving, or has received distributions provided herein. 1.18 "FUND" shall mean all monies as from time-to-time held by the Trustees. 1.19 "401(K) ACCOUNT" shall mean an account established by the Company for each Participant to hold the Company's 401(k) Contributions made hereunder on behalf of such Participant and a proportionate share of the net earnings for each Plan Year. The maintenance of separate 401(k) Accounts shall be primarily for accounting purposes and shall not restrict Fund investments. 1.20 "401(K) CONTRIBUTION" shall mean contributions made by the Company to the Plan on behalf of a Participant under the terms of a Salary Reduction Agreement (as defined in Section 4.2) entered into between the Company and the Plan and the Participant. 1.21 "HIGHLY COMPENSATED EMPLOYEE" means any Employee or former Employee who, at any time during the Plan Year or the preceding Plan Year, is a Highly Compensated Employee as defined in Code Section 414(q) and the implementing regulations thereunder, as amended from time to time. 1.22 "HOUR OF SERVICE" shall mean and be determined on the following basis for all Employees: (a) each hour for which he is either directly or indirectly paid or entitled to payment by the Company or an Affiliated Company for the performance of duties (these hours shall be credited to the period in which the duties are performed); excluding, payments on account of a period during which no duties are performed if such payment is made or due under a plan maintained solely for the purpose of complying with applicable worker's compensation, or unemployment compensation or disability insurance laws; (b) each hour for which he is directly or indirectly paid, or entitled to payment, by the Company or an Affiliated Company for reasons (such as vacation, holiday, jury duty, sickness, or disability, layoff, military duty or leave of absence) other than for the performance of duties (these hours shall be credited to the computation period or periods as determined under the 3 rules set forth in 29 Code of Federal Regulations Section 2530.200b-2(c)(2)); and (c) each hour for which back pay, irrespective of mitigation of damages, has been awarded to the Employee or Participant or agreed to by the Company or an Affiliated Company, except that hours under this paragraph 1.22(c) shall not duplicate hours under paragraph 1.22(a) and (b) (these hours shall be credited for the computation period or periods to which the award or agreement pertains rather than the computation period in which the award, agreement, or payment was made). No more than 501 hours of service shall be credited under subparagraph 1.22(b) to an Employee or Participant on account of any single continuous period during which he performs no duties (whether or not such period occurs in a single computation period) unless the Committee establishes uniform, nondiscriminating rules which provides to the contrary. An Employee or Participant who is on leave due to military duty shall be created as required by Federal law, provided the Participant returns to an Affiliated Company within the time provided under Federal and State laws following eligibility for discharge, at a rate of 8 hours a day, 40 hours a week during such period of time. In case of payment which is made or due on account of a period during which an Employee performs no duties, and which results in the crediting of Hours of Service under paragraph 1.22(c), or in the case of an award or agreement is made with respect to a period described in paragraph 1.22(b), the number of Hours of Service to be credited shall be determined on the basis of the rules set forth in 29 Code of Federal Regulations Section 2530.200b-2(b). 1.23 "KEY EMPLOYEE" means any Participant or Former Participant in the Plan who, at any time during the Plan Year or any of the preceding four (4) Plan Years, is a Key Employee as defined in Code Section 416(i)(l). Upon the death of a Key Employee, the Key Employee's Beneficiary shall be considered a Key Employee. 1.24 "LEASED EMPLOYEE" shall mean any individual who is not an Employee of the Company and who provides services for the Company if (a) such services are provided pursuant to an agreement between the Company and any other person; (b) such individual has performed such services for the Company (or a related person within the meaning of Section 144(a)(3) of the Code) on a substantially full-time basis for a period of at least one (1) year; and (c) such services are of a type historically performed by employees in the business field of the Company. 4 1.25 "LIMITATION YEAR" shall mean the Plan Year. 1.25.1 "LOAN ADMINISTRATOR" shall mean the individual designated by the Committee to administer the Plan's loan program described in Article XV. If at any time and for any reason there ceases to be a Loan Administrator, the term Loan Administrator shall mean the Committee until such time as a new Loan Administrator is appointed. 1.26 "MATCHING CONTRIBUTION ACCOUNT" shall mean an account established by the Company for each Participant to hold the Participant's share of the Company Matching Contribution for each Plan Year, if any, and a proportionate share of the net earnings for each Plan Year. The maintenance of separate Matching Contribution Accounts shall be primarily for accounting purposes and shall not restrict Fund investments. 1.27 "MILITARY LEAVE OF ABSENCE" shall mean a leave of absence granted automatically for any period of military service in which an individual s employment rights are protected by any law of the United States governing military service, provided such individual returns to the service of the Company within such individual returns to the service of the Company within ninety (90) days of his separation from such military service. 1.28 "NON-HIGHLY COMPENSATED EMPLOYEE" shall mean an Employee who is not a Highly Compensated Employee. 1.29 "NON-KEY EMPLOYEE" shall mean an Employee who is not a Key Employee. 1.30 "NORMAL RETIREMENT DATE" shall mean the Participant's sixty-fifth (65th) birthday. 1.31. "PARTICIPANT" shall mean an Employee of the Company who becomes a Participant as provided in Article III. Once a Participant becomes eligible for participation in the Plan, he shall continue to be a Participant under the Plan until the date he terminates his employment with the Company. 1.32. "PLAN" shall mean the Information Resources, Inc. Amended and Restated 401(k) Retirement Savings Plan as set forth herein or as amended from time-to-time. 1.33 "PLAN ADMINISTRATOR" shall mean the Company. 1.34 "PLAN YEAR" shall initially mean the five-month period beginning August 1, 1989 and ending December 31, 1989 and thereafter shall mean the twelve-month period commencing on a January 1 and ending on the following December 31. 1.35 "RETIREMENT DATE" shall mean a Participant's date of retirement on or after his 5 Normal Retirement Date, Early Retirement Date, or retirement due to Disability, whichever is applicable. 1.36 "ROLLOVER CONTRIBUTION ACCOUNT" shall mean an account established by the Company for each Participant to hold any rollover contributions made to the Plan by or on behalf of the Participant pursuant to Section 6.3, and a proportionate share of net earnings for each Plan Year. The maintenance of separate Rollover Contribution Accounts shall primarily be for accounting purposes and shall not restrict Fund investments. 1.37 "TOP-HEAVY PLAN" means a defined contribution plan where, as of a Determination Date, the aggregate of the accounts of Key Employees under the plan is greater than sixty percent (60%) of the aggregate of the accounts of all Employees under such plan. The calculation of the aggregate of Employees accounts for both Key and Non-Key Employees shall exclude amounts attributable to (a) deductible Employee contributions (in accordance with Treasury Department regulations Section 1.416-1, T-28 and its successor provisions), and (b) rollover contributions from a plan of an unrelated employer accepted by the Plan. Aggregate values of Employee's accounts shall include any distributions made within the Plan Year that includes the Determination Date, as well as within the four preceding Plan Years, but exclude the accounts of any Participant or Former Participant who has not rendered any service for the Employer during any of the five (5) Plan Years ending on the Determination Date. 1.38 "TRUST" shall mean the Information Resources, Inc. Amended and Restated 401(k) Retirement Savings Trust as set forth herein or as amended from time-to-time. 1.39 "TRUSTEES" shall mean the individual, individuals or corporation designated by the Board of Directors to hold and administer the Fund, and any successor trustees appointed in accordance with the terms of the Trust in Article XIII. 1.40 "VALUATION DATE" shall mean June 30 and December 31 of each Plan Year and at the discretion of the Company, but applied consistently, may be any other additional dates selected by the Company. ARTICLE II SERVICE 2.1 ONE-YEAR BREAK IN SERVICE. An Employee shall suffer a One-year Break in Service during any Plan Year in which the Employee does not complete more than 500 Hours of Service. Notwithstanding anything contained in this Section 2.1 to the contrary, a Participant shall, solely for purposes of avoiding a One-Year Break in Service, be credited with up to 501 Hours of Service as if the Participant remained in the active employ of the Company during an 6 Authorized Leave of Absence of up to one (1) year for reasons of (a) the pregnancy of the Employee, (b) the birth of a child to the Employee or the Employee's spouse, (c) the placement of a child with the Employee, or (d) caring for a child immediately following birth or placement in connection with adoption. Hours shall be credited at the rate of eight (8) hours per working day and shall be credited solely in the Plan Year in which the leave commenced if required to avoid a One-year Break in Service in that Plan Year or otherwise in the Plan Year in which the one (1) year leave ended. 2.2 PARTICIPATION SERVICE. Participation Service shall mean employment for which an Employee receives credit for purposes of determining his eligibility for participation in the Plan. One year of Participation Service shall be granted if, during the initial twelve-month period commencing with an Employee's date of employment, he is credited with at least one thousand (1,000) Hours of Service. If an Employee is not credited with at least one thousand (1,000) Hours of Service during this initial twelve-month period, one year of Participation Service shall be granted for the first Plan Year, commencing with the Plan Year immediately following an Employee's date of hire, during which the Employee is credited with at least one thousand (1,000) Hours of Service. Thirty days of Participation Service shall be granted for the first calendar month that an employee is credited with at least eighty-three (83) Hours of Service. For purposes hereunder, employment with any corporation, trade, or business which is a member of a controlled group of corporations or under common control (as defined in Section 1563(a) and Section 414 of the Internal Revenue Code), or is a member of an affiliated service group (as defined in Section 414(m) of the Internal Revenue Code) and any other entity required to be aggregated with the Company pursuant to regulations under Section 414(o) of the Internal Revenue Code shall be recognized. In case of subsidiaries or affiliates which adopt this Plan in accordance with Section 1.8, the Board of Directors of Information Resources, Inc., in its sole discretion, at the time of adoption by the subsidiary or affiliate, shall determine the date from which Participation Service is to be credited. 2.3 VESTING SERVICE. Vesting Service shall mean employment for which an Employee receives credit for purposes of determining his eligibility to receive early retirement or vested benefits hereunder. An Employee shall receive one year of Vesting Service for each calendar year in which he is credited with 1,000 or more Hours of Service. Notwithstanding the above, no Vesting Service shall be credited for calendar years prior to 1984. In the event an Employee suffers a One-Year Break in Service prior to having a nonforfeitable interest in his Matching Contribution Account, as determined in accordance with the provisions of Section 7.2, his Vesting Service shall be forfeited if the Employee suffers the greater of (a) five (5) consecutive One-Year Breaks in Service and (b) the number of consecutive One-Year Breaks in Service if equal to or in excess of his Vesting Service. For purposes hereunder, employment with any corporation, trade, or business which is a 7 member of a controlled group of corporations or under common control (as defined in Section 1563(a) and Section 414 of the Code), or is a member of an affiliated service group (as defined in Section 414(m) of the Code) shall be recognized. In the case of subsidiaries or affiliates which adopt this Plan in accordance with Article XIV, the Board of Directors of the Company, in its sole discretion, shall determine the date from which Vesting Service is to be credited. 2.4 PREDECESSOR COMPANY SERVICE. Notwithstanding anything herein to the contrary, an Employee who was an employee of a predecessor company shall receive credit for employment and Vesting Service hereunder for his service with the predecessor company, provided, however, that where this Plan is not an amendment, restatement or continuation of the plan of the predecessor company, service credit may be limited to the extent permitted under regulations to Section 414 of the Code. ARTICLE III ELIGIBILITY FOR PARTICIPATION 3.1 ELIGIBILITY. (a) Employees of the Company on August 1, 1989 who have attained age twenty-one (21) and have completed one year of Participation Service shall become Participants on August 1, 1989. Except as provided in subsection (b), all other Employees shall become Participants on the January 1 or July 1 coincident with or immediately following the date the Employee attains age twenty-one (21) and completes One Year of the Participation Service (as provided in Section 2.2 hereof), provided the Employee remains in the employ of the Company on such January 1 or July 1. (b) Beginning October 1, 1995, a Full-Time Employee of the Company who has attained age twenty-one (21) and has completed thirty (30) days of Participation Service shall become a Participant on the first day of that quarter of a Plan Year that begins on or after the later of (1) the date on which the Full- Time Employee attained age twenty-one (21) and (2) the date on which the Full-Time Employee completed thirty (30) days of Participation Service, provided that the Employee remains in the employ of the Company as a Full-Time Employee on such first day of such first quarter. For purposes of this Section 3.1, a Full-Time Employee is an Employee that is treated by the Company as working for the Company at least 40 hours per week. 3.2 PARTICIPATION UPON REEMPLOYMENT. In the event a Participant terminates his Employment and is subsequently reemployed as an Employee, he shall resume participation as of his date of reemployment. ARTICLE IV 8 CONTRIBUTIONS AND FORFEITURES 4.1 401(K) CONTRIBUTION. For each Plan year, the Company shall contribute to the Plan an amount equal to the total amount of contributions which the Company has agreed to make pursuant to Salary Reduction Agreements, subject to the limitations in Article V. 4.2 SALARY REDUCTION AGREEMENT. Subject to the provisions stated herein, a Participant may enter into a written Salary Reduction Agreement with the Company. The terms of such Agreement shall provide that the Participant agrees to accept a reduction in Compensation from the Company based on multiples of one percent (1%) of his Compensation per payroll period in an amount which is at least two percent (2%) and does not exceed ten percent (10%). For the short Plan Year beginning August 1, 1989 and ending December 31, 1989, the reduction in Compensation per payroll period can not exceed twenty percent (20%). This reduction in compensation shall not exceed $7,000 or such higher amount which may from time-to-time be prescribed in accordance with regulations issued by the Secretary of the Treasury or his delegate. In consideration of such Agreement, the Company shall make a 401(k) Contribution to the Participant's 401(k) Account on behalf of such Participant for such Plan Year in an amount equal to the total amount by which the Participant's Compensation was reduced during the Plan Year. The Salary Reduction Agreement and other such forms as may be required hereunder shall be filed at the time and in the manner specified by the Committee. The Committee shall be the agent of the Company for the purpose of executing, amending or revoking Salary Reduction Agreements, and for giving or receiving notices as provided herein. All Salary Reduction Agreements shall be governed by the following: (a) A Salary Reduction Agreement shall apply to each payroll period during which it is on file with the Committee until terminated, amended, or revoked as provided herein. With the exception of the 1989 Plan Year, each future Salary Reduction Agreement shall be deemed to be renewed on each January 1 unless the Company or Participant shall give not less than thirty (30) days advance written notice of termination. (b) Salary Reduction Agreements shall initially take effect as of August 1, 1989, or any subsequent January 1 on which an Employee becomes a Participant hereunder. Thereafter, any Salary Reduction Agreement or an amendment thereto shall be effective as of the first day of the payroll period immediately following the January 1 or July 1 which is on or after the thirtieth (30) day after the Salary Reduction Agreement or amendment thereto is executed by the Participant and filed with the Committee. (c) The Company may amend or revoke its Salary Reduction Agreement with any Participant at any time if the Company determines that such revocation 9 or amendment is necessary to insure that a Participant s Annual Additions for any Plan Year will not exceed the limitations of Article V or to insure that the discrimination tests of Section 401(k) of the Code are met for such Plan Year, provided that no such amendment shall increase the salary reduction percentage specified in a Participant's Salary Reduction Agreement. Any such amendment or revocation shall be done in a manner which shall not discriminate in favor of officers, shareholders, directors or other highly compensated Participants. (d) A Participant may suspend 401(k) Contributions to the Plan upon thirty (30) days written notice. A Participant who suspends 401(k) Contributions shall not be eligible to resume 401(k) Contributions until the January 1 or July 1 at least six months after suspension. (e) The Committee may make such reasonable rules as it shall deem desirable to reduce undue clerical and administrative time and expense in connection with filing or amending Salary Reduction Agreements. (f) The Plan is to be interpreted and applied in a manner that satisfies the requirements of Section 401(k) of the Code, including section 401(k)(3) thereof, and the regulations promulgated thereunder, as amended from time to time, and all provisions of the Plan shall be construed and applied in accordance with such requirements. In the event the Plan shall fail in the Committee's reasonable judgment to meet the nondiscrimination tests for 401(k) Contributions of Section 401(k) of the Code for any Plan Year, the Committee may, during the 2 1/2 month period following the close of the Plan Year, return all or any portion of such salary reduction amounts (including income allocable thereto for the Plan Year) to the Highly Compensated Employees, in accordance with the nondiscrimination test and corrective provisions of Section 401(k) and the regulations promulgated thereunder, as amended form time to time, including but not limited to Treasury Regulations Sections 1.401(k)-1(g)(1)(ii), 1.401(k)-1(f)(2), 1.401(k)-1(f)(5)(i) and 1.401(k)-1(f)(5)(ii). The amounts returned to the Highly Compensated Employees shall be deemed Compensation to them in the year to which the deferral applied, and the Salary Reduction Agreements of all affected Highly Compensated Employees shall be deemed retroactively amended as provided in subsection (c) hereinabove. For purposes of this subsection (f), in order to meet the nondiscrimination tests for 401(k) Contributions, one of the following tests must be satisfied: (i) The average percentage of compensation contributed by the Company to the Plan attributable to 401(k) Contributions on behalf 10 of the eligible Highly Compensated Employees may not exceed one hundred twenty-five percentage (125%) of the average percentage of compensation contributed by the Company to the Plan attributable to 401(k) Contributions on behalf of the eligible Non-Highly Compensated Employees. (ii) The average percentage of compensation contributed by the Company to the Plan attributable to 401(k) Contributions on behalf of the Highly Compensated Employees may not exceed the average percentage of compensation contributed by the Company to the Plan attributable to 401(k) Contributions on behalf of the eligible Non-Highly Compensated Employees, plus two percent (2%), up to a maximum of two hundred percent (200%) of such average percentage on behalf of the eligible Non-Highly Compensated Employees. For purposes of the foregoing tests, and in accordance with Code Sections 401(k)(9) and 414(s), "compensation" shall be defined in accordance with Code Sections 401(k)(9) and 414(s) and the regulations promulgated thereunder, specifically including Treasury Regulations Section 1.414(s)-1, as the same may be amended from time to time. (g) In the event the Company's tax deduction shall be denied for any 401(k) Contribution, then all Salary Reduction Agreements shall be deemed retroactively amended pursuant to subsection (c) above, and upon the Company's recovery of the amount disallowed (as provided in Section 4.8), the amount so recovered shall be allocated among Participants in accordance with such amended Salary Reduction Agreements and paid to such Participants as Compensation. (h) In the event the 401(k) Contribution made on behalf of a Participant for any Plan Year shall exceed $7,000 (or such higher amount as may be prescribed in accordance with Code Section 402(g) and regulations promulgated thereunder), the Committee may, no later than April 15 after the close of the applicable Plan Year, return the amount of the excess. Such amounts returned to the affected Participants shall be deemed Compensation to the Participants in the year to which the deferral applied, and the Salary Reduction Agreements of all affected Participants shall be deemed retroactively amended. 4.3 AFTER-TAX EMPLOYEE CONTRIBUTIONS. No after-tax employee contributions are required or permitted under the terms of this Plan. 11 4.4 MATCHING CONTRIBUTIONS. For each Plan Year, the Company shall have the options, in its sole discretion, to make a Matching Contribution to the Plan. Such contribution, if any, shall be determined solely by the Committee and shall be announced at least thirty (30) days prior to the Plan Year to which it applies. The Company or the Committee acting on behalf of the Company shall be under no obligation to make this Matching Contribution, but instead, it shall be at their sole discretion, subject to the requirements of Section 12.4, if such section applied hereunder. Such contribution shall be made to each Participant's Matching Contribution Account and shall be allocated as a percentage of the total amount the Participant defers for such period from the prior Valuation Date to the current Valuation Date that does not exceed 6% of the Participant's compensation for the same such period. 4.5 CONTRIBUTIONS. The Company's Matching Contributions under Section 4.4 shall be made monthly on any date or dates selected by the Company; provided, however, that the total annual contribution for each Plan Year shall be paid on or before the date on which the Company's federal income tax return is due, including any extensions of time obtained for the filing of the return. The Company's 401(k) Contributions shall be made as of the end of each Participant's payroll period provided, however, that in no event shall any 401(k) contribution for a Plan Year be paid on or after the thirtieth (30th) day next following the close of the Plan Year. Notwithstanding anything herein to the contrary, the sum of the Company s 401(k) Contributions and Matching Contributions for any Plan year shall not exceed an amount equal to fifteen percent (15%) of Compensation otherwise paid or accrued to all Participants for the Plan Year under consideration. The Plan is to be interpreted and applied in a manner that satisfies the requirements of Section 401(m) of the Code, including Section 401(m)(2) thereof, and the regulations promulgated thereunder, as amended from time to time, and all provisions of the Plan shall be construed and applied in accordance with such requirements. In the event the Plan shall fail in the Committee's reasonable judgment to meet the nondiscrimination tests for Matching Contributions or other contributions of Section 401(m) of the Code for any Plan Year, the Committee may, before the close of the following Plan Year, cause the amount of the excess aggregate contributions by Highly Compensated Employees (including the income allocable thereto) for such Plan Year to be distributed or, if forfeitable, forfeited, to such Highly Compensated Employees in accordance with the requirements of Section 401(m) and the regulations thereunder. The amount of such excess aggregate contributions shall be determined in accordance with the requirements of Section 401(m)(6) of the Code and the regulations promulgated thereunder. For purposes of this Section 4.5, in order to meet the nondiscrimination tests for Matching Contributions, one of the following tests must be satisfied: (i) The average contribution percentage on behalf of the eligible Highly Compensated Employees may not exceed one hundred twenty-five 12 percent (125%) of the average contribution percentage on behalf of the eligible Non-Highly Compensated Employees. (ii) The average contribution percentage on behalf of the eligible Highly Compensated Employees may not exceed the average contribution percentage on behalf of the eligible Non-Highly Compensated Employees, plus two percent (2%), up to a maximum of two hundred percent (200%) of such average contribution percentage on behalf of the eligible Non-Highly Compensated Employees. Average contribution percentage for purposes of the above tests is the average of the ratios (calculated separately for each Employee who is an eligible employee within the meaning of Code Section 401(m)(5)) of (i) the Matching Contributions paid under the Plan on behalf of each such Employee for the Plan Year and (ii) such Employee's compensation for the Plan Year, computed in accordance with Code Section 401(m) and regulations promulgated thereunder. Optional Use of Matching Contributions to Comply With 401(k) Nondiscrimination Test. The Company may, if it so elects, include Matching Contributions, if any, as employer contributions for purposes of compliance with the nondiscrimination test specified in Section 4.2(f) of this Plan, provided that it does so in accordance with the requirements of Code Section 401(k)(3)(D) and regulations promulgated thereunder, including but not limited to Treas. Reg. Sections 1.401(k)-1(g)(13) and 1.401(k)-1(b)(5). In the event the Company makes such an election, to the extent so used, such Matching Contributions shall not additionally be taken into account under the nondiscrimination test of Code Section 401(m) for such year, in accordance with Code Section 401(m)(3). As required to prevent the occurrence of a multiple use of limitations prohibited by Code Section 401(m)(9), the Company shall calculate the actual deferral percentage of those Highly Compensated Employees eligible to make both 401(k) and 401(m) contributions in the manner described in, and in accordance with the requirements of, Treasury Regulations Sections 1.401(k)-1(f)(2), 1.401(m)-2(c)(1) and 1.401(m)-2(c)(3), as the same may be amended from time to time. 4.6 FORFEITURES. If upon termination of employment, a Participant s vested interest in his Matching Contribution Account is less than one hundred percent (100%), a forfeiture shall occur as of the end of the Plan Year in which the Participant's termination of employment occurs or a distribution under the Plan is received, whichever is later. The Forfeiture shall equal the portion of the Participant's Matching Contribution Account in which the Participant is not vested as of his Date of Termination. Notwithstanding anything herein to the contrary, reference to a Matching Contribution under the Plan for any Plan Year shall mean the portion of the Forfeitures so applied to reduce the total amount the Company is otherwise required to contribute for that Plan Year, plus the actual amount contributed by the Company for that Plan Year. 13 4.7 WITHDRAWALS. No amounts may be withdrawn by a participant hereunder prior to his or her termination of employment with the Company or prior to age 59-1/2 unless it is determined by the Committee upon written application of a Participant that an immediate and heavy financial need exists on the part of the Participant. The existence of an immediate and heavy financial need shall be determined based on the Participant's relevant facts and circumstances. Notwithstanding the above, a Participant's need shall automatically be deemed an immediate and heavy financial need if it is for the purpose of meeting one of the following events or any additional events that may be permitted in future rulings or notices from the Commissioner of the Internal Revenue Service: 1. Medical expenses described in Section 213(d) of the Internal Revenue Code incurred by the Participant, the Participant's spouse, or any dependent of the Participant; 2. Purchase (excluding mortgage payments) of a principal residence for the Participant; 3. Payment of tuition for the next semester or quarter of post-secondary education for the Participant, the Participant's spouse or the Participant's children or other dependents; or 4. Payment to prevent eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence. In the event of an immediate and heavy financial need and with the consent of the Committee, withdrawals will be permitted from the Participant's 401(k) Account and the Participant's Rollover Account (if any), but will be restricted to the lesser of (i) the accumulated 401(k) Contributions made by the Company on behalf of the Participant plus the Participant's Rollover Account balance (if any), (ii) the Participant's 401(k) Account balance plus the Participant's Rollover Account balance (if any), or (iii) the amount required to meet the immediate and heavy financial need, with (i) and (ii) both as of the immediately preceding Valuation Date. Such withdrawals shall be available within a reasonable time after the notice for withdrawal is filed with and approved by the Committee. The Committee shall be protected in determining financial need upon the Participant's representation that the need cannot be satisfied from other resources of the Participant, including his spouse and minor children, to the extent the assets are available to the Participant. This representation shall include the following resources: 1. Reimbursement or compensation by insurance or otherwise; 2. Reasonable liquidation of the Participant's assets to the extent such liquidation would not, in itself, cause an immediate and heavy financial need; 14 3. Cessation of 401(k) Contributions; or 4. Other distributions or nontaxable loans available from this Plan or other plans maintained by the Company or by borrowing from commercial sources on reasonable terms. Notwithstanding the above, the Committee may automatically determine that the Participant's immediate and heavy financial need cannot be met through other resources and thus waive the Participant representation requirement if each of the following requirements are met: 1. The hardship withdrawal does not exceed the amount needed to cover the immediate and heavy financial need. 2. The Participant has exhausted all distribution options, excluding hardship withdrawals, and all nontaxable loans available from the Plan or any qualified plan maintained by the Company. 3. The Participant shall be precluded from entering into a Salary Reduction Agreement for the twelve (12) months which immediately follow the date of the hardship withdrawal. 4. For the Participant's taxable year in which the Participant is again permitted to enter into a Salary Reduction Agreement following the twelve (12) month period specified in (3) above, the maximum 401(k) Contribution permitted for such tax year shall be equal to (a) below less (b) below, where (a) and (b) are as follows: (a) The maximum 401(k) Contribution permitted for said tax year under the terms of Section 4.2 herein as prescribed under Section 402(g) of the Code, less (b) The total 401(k) Contributions made on behalf of the Participant during the Participant's taxable year in which the hardship withdrawal was made. For purposes of Section 4.2, a Participant shall be deemed to have automatically revoked his Salary Reduction Agreement upon receiving a hardship withdrawal and the provisions of Section 4.2(b) shall apply upon the end of the twelve (12) month period specified in (3) above. The decision of the Committee relevant to hardship withdrawals shall be final and conclusive as it respects all Participants, and the Committee shall carry out its duties in a manner which is uniform and nondiscriminatory for all Participants. 15 4.8 RETURN OF COMPANY CONTRIBUTIONS. It shall be impossible at any time prior to the satisfaction of all liabilities with respect to Participants or Former Participants and their Beneficiaries under the Plan for any part of the corpus or income to be used for, or diverted to, purposes other than (a) the exclusive benefit of Participants and Former Participants or the Beneficiaries, or (b) defraying reasonable expenses of administering the Plan and Fund to the extent such expenses are not paid by the Company, provided that: (a) if the Plan is denied either initial qualification or qualification due to an amendment under Section 401(a) of the Code, any Company contribution conditioned upon the continued qualification of the Plan shall be returned to the Company within one (1) year of the denial of qualification; (b) if, and to the extent, a tax deduction for a Company contribution under Section 404 of the Code is disallowed, Company contributions conditioned upon deductibility shall be returned to the Company within one (1) year after the disallowance of the deduction; and (c) if, and to the extent, a Company contribution is made through a mistake of fact, such Company contribution shall be returned to the Company within one (1) year of the payment of the contribution. 4.9 OBRA '93 ANNUAL COMPENSATION LIMIT. In addition to other applicable limitations set forth in the Plan, and notwithstanding any other provision of the Plan to the contrary, for Plan Years beginning on or after January 1, 1994, the annual compensation of each employee taken into account under the Plan shall not exceed the OBRA 93 annual compensation limit. The OBRA 93 annual compensation limit is $150,000, as adjusted by the Commissioner for increases in the cost of living in accordance with section 401(a)(17)(B) of the Code. The cost-of-living adjustment in effect for a calendar year applies to any period, not exceeding 12 months, over which compensation is determined (determination period) beginning in such calendar year. If a determination period consists of fewer than 12 months, the OBRA 93 annual compensation limit will be multiplied by a fraction, the numerator of which is the number of months in the determination period, and the denominator of which is 12. For Plan Years beginning on or after January 1, 1994, any reference in this Plan to the limitation under section 401(a)(17) of the Code shall mean the OBRA 93 annual compensation limit set forth in this provision. If compensation for any prior determination period is taken into account in determining an employee's benefits accruing in the current Plan Year, the compensation for that prior determination period is subject to the OBRA 93 annual compensation limit in effect for that prior determination period. For this purpose, for determination periods beginning before the first day of the first Plan Year beginning on or after January 1, 1994, the OBRA 93 annual compensation limit is $150,000. 16 ARTICLE V MAXIMUM ANNUAL ADDITIONS 5.1 MAXIMUM LIMITATIONS. Notwithstanding any other provisions of this Plan, the Annual Additions to a Participant's accounts for any Limitation Year shall not exceed the lesser of: (a) $30,000 or such higher amount which may from time-to-time be prescribed in accordance with regulations issued by the Secretary of the Treasury or his delegate; or (b) 25% of such Participant's nondeferred compensation received during the Limitation Year under consideration. 5.2 DEFINED BENEFIT PLAN FRACTION. For any Plan Year, the numerator of the defined benefit plan fraction is the projected annual benefit of a Participant under any defined benefit plan maintained by the Company, determined as of the end of the Plan Year, and the denominator of the defined benefit plan fraction is the lesser of (a) the product of 1.25 multiplied by the dollar limitation in effect under Code Section 415(b)(1)(A) for such year, or (b) the product of 1.4 multiplied by the amount which may be taken into account under Code Section 415(b)(1)(B) with respect to such Participant under the plan for such year. For any Plan Year in which a defined benefit plan maintained by the Company is Top-Heavy, the 1.25 in (a) above shall be replaced by 1.0. 5.3 DEFINED CONTRIBUTION PLAN FRACTION. For any Plan Year, the numerator of the defined contribution plan fraction is the sum of the Annual Additions to a Participant's account for the Plan Year under consideration and all prior Plan Years, and the denominator of the defined contribution plan fraction is the sum of the lesser of the following amounts determined for the current Plan Year and for each prior year: (a) the product of 1.25 multiplied by the dollar limitation in effect under Code Section 415(c)(1)(A) for such year or (b) the product of 1.4 multiplied by the amount which may be taken into account under Code Section 415(c)(1)(B) (or subsection (c)(7) or (8), if applicable) with respect to such Participant under the Plan for such year. For any Plan Year in which the Plan is a Top-Heavy Plan, the 1.25 in (a) above shall be replaced by 1.0. 5.4 COMBINED PLAN LIMITATION. In the event any Participant under this Plan is also a Participant under a defined benefit plan maintained by the Company, the Annual Additions to a Participant's accounts for any Plan Year shall not cause the sum of the Participant's Defined Benefit Plan Fraction for such Plan Year and his Defined Contribution Plan Fraction for such Plan Year to exceed 1.0. If the sum of the Defined Benefit Plan Fraction and the Defined Contribution Plan Fraction shall exceed 1.0 in any such Plan Year, the numerator of the Defined Benefit Plan 17 Fraction shall be adjusted so that the sum of both fractions shall not exceed 1.0 for such year. 5.5 EXCESS ADDITIONS. In the event it is determined that the Annual Additions to a Participant's accounts for any Plan Year would be in excess of the limitations described in Section 5.1 herein, such Annual Additions for the Plan Year shall be reduced to the extent necessary to bring the Annual Additions for such Plan Year within such limitations in the following order of precedence: (a) Reduction of the Participant's allocable share of the Matching Contribution to his Matching Contribution Account for the Plan Year; and (b) Reduction of such Participant's share of the 401(k) Contribution pursuant to his Salary Reduction Agreement for the Plan Year, and such reduction shall be deemed to be an amendment to the Participant's Salary Reduction Agreement as provided in Section 4.2. 5.6 AMOUNT OF REDUCTION. If, and to the extent that the Annual Additions to a Participants's Accounts is reduced in accordance with the provisions of Section 5.5(a) above, the amount of such reduction shall, subject to the limitations in Sections 5.1 and 5.4, be allocated among the respective Accounts respectively of all remaining Participants in the proportion that the Compensation of a Participant bears to the total Compensation of all Participants, excluding those affected by the limitations in Sections 5.1 and 5.4. ARTICLE VI MAINTENANCE OF PARTICIPANTS' ACCOUNTS 6.1 ALLOCATION PROCEDURE. As of each Valuation Date, the Company shall adjust the individual accounts of each Participant and Former Participant, as follows, in the order indicated: (a) Each Participant's and Former Participant's 401(k) Account, Matching Contribution Account and Rollover Contribution Account shall be reduced by any payments received from such account since the prior Valuation Date. (b) Subject to the provisions of Sections 5.1 and 5.4, each Participant's 401(k) Account shall be increased on each Valuation Date by one half (1/2) of the amount of 401(k) Contributions made by the Company on behalf of the Participant for the period from the prior Valuation Date to the current Valuation Date under the terms of the Participant's Salary Reduction Agreement. (c) Subject to the provisions of Sections 5.1 and 5.4, each Participant's 18 Matching Contribution Account shall be increased on each Valuation Date by one half (1/2) of the amount of Matching Contributions made on behalf of the Participant for the period from the prior Valuation Date to the current Valuation Date. (d) Each Valuation Date, pursuant to the election made under Section 9.2, if any, the value in each Participant's accounts (including undistributed balances of Former Participant's accounts and including the adjustments in subsections (a), (b), and (c) above but excluding Loan Accounts under Section 15.2), shall be proportionately increased or decreased so that the total of all such accounts shall equal the total assets of the Fund at fair market value as of the current Valuation Date. In determining the assets of the Fund, one half (1/2) of the Matching Contributions and one half (1/2) of the 401(k) Contributions with respect to the current Valuation Date shall be deducted. (e) Subject to the provisions of Sections 5.1 and 5.4, each Participant's 401(k) Account shall be increased on each Valuation Date by the other one half (1/2) of the amount of 401(k) Contributions made by the Company on behalf of the Participant for the period from the prior Valuation Date to the current Valuation Date under the terms of the Participant's Salary Reduction Agreement. (f) Subject to the provisions of Sections 5.1 and 5.4, each Participant's Matching Contribution Account shall be increased on each Valuation Date by the other one half (1/2) of the amount of Matching Contributions made on behalf of the Participant for the period from the prior Valuation Date to the current Valuation Date. Notwithstanding anything herein to the contrary, in the event the Trustees are able to accurately record investment gains and losses of Participant's accounts due to segregated investments or otherwise, such records shall be used in lieu of the allocation method set forth in subsection (d) above. In all other circumstances, the method established in subsection (d) above shall be followed. 6.2 LATE RETIREMENT. In the event a Participant remains in the active employ of the Company beyond the Plan Year in which occurs his Normal Retirement Date, the Participant shall be entitled to continue his participation in the Plan in all respects as if he had not yet reached his Normal Retirement Date. 6.3 ROLLOVERS. (a) Requirements for Rollover Contributions. If an Employee receives, either 19 before or after becoming a Participant, an eligible rollover distribution from a qualified trust or a qualified annuity plan within the meaning of Section 402(c) or Section 403(a) of the Internal Revenue Code, then such Employee may contribute to the Plan an amount which does not exceed the portion of such eligible rollover distribution that would be includible in the gross income of the Employee but for the application of Section 402(c)(1) or Section 403(a)(4) of the Internal Revenue Code. If an Employee receives, either before or after becoming a Participant, a distribution or distributions from an individual retirement account, an individual retirement annuity or a simplified employee pension within the meaning of Section 408 of the Internal Revenue Code, then such Employee may contribute to the Plan an amount which does not exceed the portion of such distribution or distributions that would be treated as a rollover contribution within the meaning of Section 408(d)(3) of the Internal Revenue Code. (b) Delivery of Rollover Contributions. Any rollover contribution pursuant to this Section shall be delivered by the Employee to the Trustees on or before the 60th day after the day on which the Employee receives the distribution or on or before such later date as may be prescribed by law. Any such contributions must be accompanied by (i) a statement of the Employee that to the best of his knowledge the amount so transferred meets the conditions specified in this Section, (ii) a copy of such documents as may have been received by the Employee advising him of the amount of and the character of such distribution, and (iii) if the Employee is not a Participant, an investment election under Section 9.1. Notwithstanding the foregoing, the Trustees shall not accept a rollover contribution if in its judgment, accepting such contribution would cause the Plan to violate any provision of the Internal Revenue Code or regulations, or if such contribution would cause the qualified joint and survivor annuity rules of Section 401(a)(11) of the Internal Revenue Code to take effect hereunder. (c) Special Accounting Rules for Rollover Contributions. An Employee's rollover contribution shall be credited to a Rollover Account established for this purpose, as of the date on which such contribution is delivered to the Trustees, and in accordance with the investment direction pursuant to Section 9.1, to the appropriate subaccounts of such account. For purposes of the investment allocations under Section 6.1(c), a Participant's Rollover Account in the year in which the rollover contribution is received, shall be credited with investment income (loss) on a weighted average basis. The value shall then be increased by the rollover contribution multiplied by a factor, with such factor based on the timing of the rollover contribution as set forth in the following table: 20 Date Trustees Receive Rollover Contribution Factor ------------------------------------------- ------ January 1 to February 15, or July 1 to August 15 .75 February 16 to March 31, or August 16 to September 30 .5 April 1 to May 15, or October 1 to November 15 .25 May 16 to June 30, or November 16 to December 31 0 This table is based on the premise that the allocations will be performed each June 30 and December 31. If allocations are performed more frequently, then equivalent time periods shall be used. For years subsequent to the year in which the rollover contribution is received, the Rollover Account shall be treated in the same manner as the 401(k) Account or Matching Contribution Account under Section 6.1 as it relates to the allocation of investment income. ARTICLE VII VESTED INTERESTS 7.1 401(K) ACCOUNT AND ROLLOVER CONTRIBUTION ACCOUNT VESTING. The amounts credited to a Participant's 401(k) Account and Rollover Contribution Account shall be fully vested and nonforfeitable at all times. 7.2 VESTING OF MATCHING CONTRIBUTION ACCOUNT. A Participant's matching Contribution Account shall become vested and nonforfeitable under the following circumstances, and to the extent indicated: (a) In the event of the Participant's retirement (i) on or after his Normal Retirement Date, (ii) on or after his Early Retirement Date, or (iii) due to Disability, his vested interest shall be 100% of his individual Matching Contribution Account. Notwithstanding anything herein to the contrary, a Participant shall be one hundred percent (100%) vested in his individual Matching Contribution Account upon reaching his Normal Retirement Date. (b) In the even of the Participant's death, his vested interest shall be 100% of 21 his individual Matching Contribution Account. (c) In the event a Participant terminates employment prior to becoming eligible for retirement as set forth in subsection (a) or for reasons other than death, his vested interest in his Matching Contribution Account shall be determined from the following table: Years of Vesting Service Vesting Percentage --------------- ------------------ Less than 2 0% 2 but less than 3 10% 3 but less than 4 20% 4 but less than 5 40% 5 but less than 6 60% 6 but less than 7 80% 7 or more 100% 7.3 REEMPLOYMENT. In the event (a) a Participant terminates his employment for any reason other than retirement or death, (b) the Participant has less than a 100% vested interest in his Matching Contribution Account on his Date of Termination, and (c) such Participant is subsequently reemployed after having suffered the greater of (i) five (5) consecutive One-Year Breaks in Service or (ii) the number of consecutive One-Year Breaks in Service if equal to or in excess of his Vesting Service, the Participant's Matching Contribution Account shall remain fixed except for any net earnings which may be allocated to such account in accordance with the provisions of Section 6.1(c). Upon reemployment, the Company shall set up a new Matching Contribution Account for the reemployed Participant, primarily for accounting purposes, such that any additional Vesting Service that the Participant is credited with on account of his reemployment shall cause his vested interest to increase from his vested interest prior to reemployment, but such vested interest shall only apply to the Participant's new Matching Contribution. 7.4 RESTORATION OF FORFEITURES. In the event a Participant who has terminated employment resumes employment covered under the Plan prior to incurring five (5) consecutive One-Year Breaks in Service, any Forfeiture from his Matching Contribution Account shall be restored and shall be credited to his Matching Contribution Account as of the end of the Plan Year in which he resumes employment, to be held and thereafter applied to provide benefits in accordance with the provisions of the Plan, provided if such Participant has already received a distribution in accordance with Article VIII, the provisions of Section 8.8 are met. Any Forfeiture so restored shall be deducted from the Forfeitures otherwise available for the Plan Year in which such restoration is made, or to the extent such Forfeitures are insufficient, shall be paid to the Fund by the Company. See Article VIII, Section 8.12, for rules regarding reemployment of a Participant. 22 ARTICLE VIII DISTRIBUTION OF BENEFITS 8.1 RETIREMENT. Subject to the provisions of Section 8.7, in the event a Participant becomes entitled to benefits because of his retirement on or after his Normal Retirement Date or on or after his Early Retirement Date, benefit payments shall commence as soon as administratively possible following the Valuation Date coincident with or following the actual date of retirement; provided, that with respect to an early retirement benefit, the Participant has made a claim for benefits to the Company in accordance with Treasury Regulation Section 1.401(a)-14(c)(1)(ii). Benefit payments shall be based on the value of the Participant's vested amount (determined under Article VII hereof) in his or her Matching Contribution Account, 401(k) Account, and Rollover Contribution Account, if any, determined as of the Valuation Date immediately preceding the benefit commencement date hereunder. At the discretion of the Committee, a payment may be made other than on the Plan's Valuation Date; however, the value of his accounts will be the amount determined as of the Plan's last Valuation Date plus contributions made to the Fund after such date and no payment shall be deferred other than in accordance with Section 8.7 hereof. No investment experience will be credited for the period following such Valuation Date to the date specified for the distribution. 8.2 DEATH. In the event a Participant dies in the active employ of the Company prior to receiving his nonforfeitable rights hereunder, benefit payments shall commence as soon as administratively possible following the Valuation Date coincident with or following the Participant's actual date of death. Benefit payments shall be based on the value of the Participant's Matching Contribution Account, 401(k) Account, and Rollover Contribution Account, if any, determined as of the Valuation Date immediately preceding the benefit commencement date hereunder. At the discretion of the Committee, a payment may be made other than on the Plan's Valuation Date; however, the value of his accounts will be the amount determined as of the Plan's last Valuation Date plus contributions made to the Fund after such date and no payment shall be deferred other than in accordance with Section 8.7 hereof. No investment experience will be credited for the period following such Valuation Date to the date specified for the distribution. 8.3 DISABILITY. Subject to provisions of Section 8.7, in the event a Participant becomes eligible for disability benefits under a Company insured long-term disability plan, benefit payments shall commence as soon as administratively possible following the Valuation Date coincident with or following the actual date of disability. However, if such disability plan benefits would be reduced by the benefits payable from this Plan, the payment of his accounts can be deferred until the earlier of the end of the Plan Year during which a member attains age 65 or the date as of which the insured disability benefits cease. Benefit payments shall be based on the value of the Participant's Matching Contribution Account, 401(k) Account, and Rollover Contribution Account, if any, determined as of the 23 Valuation Date immediately preceding the benefit commencement date hereunder. At the discretion of the Committee, a payment may be made other than on the Plan's Valuation Date; however, the value of his accounts will be the amount determined as of the Plan's last Valuation Date plus contributions made to the Fund after such date and no payment shall be deferred other than in accordance with Section 8.7 hereof. No investment experience will be credited for the period following such Valuation Date to the date specified for the distribution. 8.4 TERMINATION. In the event a Participant terminates his employment for reasons other than retirement, Disability, or death, payments shall commence as soon as administratively possible following the Valuation Date coincident with or following the Participant's actual Date of Termination. Benefit payments shall be based on the value of the Participant's 401(k) Account, Matching Contribution Account, and Rollover Contribution Account, if any, determined as of the Valuation Date immediately following the Date of Termination. At the discretion of the Committee, a payment may be made other than on the Plan's Valuation Date; however, the value of his accounts will be the amount determined as of the Plan's last Valuation Date plus contributions made to the Fund after such date and no payment shall be deferred other than in accordance with Section 8.7 hereof. No investment experience will be credited for the period following such Valuation Date to the date specified for the distribution. 8.5 MANNER OF DISTRIBUTION. Distribution of any Participant's share in the Fund shall be made to the person or persons entitled to such distribution by payment in a lump sum, unless the distribution is made to an eligible retirement plan in accordance with Section 8.10 hereof. 8.6 BENEFICIARY. Each Participant shall designate one or more persons to receive any distribution payable upon the death of the Participant by filing such designation in writing with the Committee. The Participant has the right to change and successively change his designated Beneficiary. In no event, however, shall such designation or change of Beneficiary be valid unless the Participant's spouse, if any, consents in writing to the designation, or change in designation, of a Beneficiary or Beneficiaries. If the Participant has filed no designation, the death benefits shall be paid to the Participant's spouse, if any. If the Participant has filed no designation and there is no spouse, or if such person or persons so designated shall have predeceased the Participant, the death benefits shall be paid to the Participant's duly appointed and qualified executor or administrator, or if no executor or administrator is appointed and qualified, within sixty (60) days following receipt by the Committee of notice of the death of the Participant, such death benefits may be paid, as the Committee in its sole discretion may determine, to or among any one or more of the following: the spouse, issue of the Participant, or any person or persons found by the Committee to be equitably entitled thereto by reason of having paid or incurred expenses on account of the funeral or the last illness of the Participant. 8.7 REQUIRED DISTRIBUTION DATES. In no event shall any distributions hereunder be made later than sixty (60) days after the close of the Plan Year in which occurs the Participant's Normal Retirement Date, or, if later, his actual retirement. Notwithstanding the above, distributions hereunder shall be made no later than April 1 after the close of the Plan Year in 24 which the Participant attains age seventy and one half (70-1/2), regardless of whether or not the Participant actually retires. If any distribution is made hereunder to a Participant prior to age fifty-nine and one half (59-1/2), the Participant may be subject to a ten percent (10%) tax based on the amount of Company contributions allocated to him. 8.8 FACILITY OF PAYMENT. If the Committee shall be of the opinion, from information deemed by it to be reliable, that a person entitled to distributions hereunder is unable for any reason to attend to his affairs, the Committee may direct that benefits due shall be withheld until a guardian for such person has been duly appointed and that such benefits be paid only to such guardian; or, in the alternative, the Committee may direct that such benefits be paid to any relative by blood or connection by marriage of the person appearing to the Committee to be equitably entitled to same or best qualified to apply same to the comfort, maintenance, and support of such person. The Committee's decision on such matters shall be conclusive and binding on all persons and parties in interest. 8.9 CASH-OUT. Subject to the provisions of Section 8.7, the Plan may not make a distribution to a Participant if the value of the Participant's account is in excess of $3,500 unless the Participant consents to such distribution. 8.10 DIRECT ROLLOVERS. This Section applies to distributions made on or after January 1, 1993. Notwithstanding any provision of the Plan to the contrary that would otherwise limit a distributee's election under this Section, a distributee may elect, at the time and in the manner prescribed by the Plan Administrator, to have any portion of an eligible rollover distribution paid directly to a eligible retirement plan specified by the distributee in a direct rollover. The following definitions shall apply for purposes of the application of this Section: (a) ELIGIBLE ROLLOVER DISTRIBUTION. An eligible rollover distribution is any distribution of all or any portion of the balance to the credit of the distributee, except that an eligible rollover distribution does not include: any distribution that is one of a series of substantially equal periodic payments (not less frequently than annually) made for the life (or life expectancy) of the distributee or the joint lives (or joint life expectancies) of the distributee and the distributee's designated beneficiary, or for a specified period of ten years or more; any distribution to the extent such distribution is required under section 401(a)(9) of the Code; and the portion of any distribution that is not includible in gross income (determined without regard to the exclusion for net unrealized appreciation with respect to employer securities). (b) ELIGIBLE RETIREMENT PLAN. An eligible retirement plan is an individual retirement account described in section 408(a) of the Code, an individual 25 retirement annuity described in section 408(b) of the Code, an annuity plan described in section 403(a) of the Code, or a qualified trust described in section 401(a) of the Code, that accepts the distributee eligible rollover distribution. However, in the case of an eligible rollover distribution to the surviving spouse, an eligible retirement plan is an individual retirement account or individual retirement annuity. (c) DISTRIBUTEE. A distributee includes an employee or former employee. In addition, the employee's or former employee's surviving spouse and the employee's or former employee's spouse or former spouse who is the alternate payee under a qualified domestic relations order, as defined in section 414(p) of the Code, are distributees with regard to the interest of the spouse or former spouse. (d) DIRECT ROLLOVER. A direct rollover is a payment by the Plan to the eligible retirement plan specified by the distributee. 8.11 TAX WITHHOLDING ON DISTRIBUTIONS. The Trustee or other payor of any distribution under the Plan is authorized to withhold from any distribution the amount of any tax required by law to be withheld from such distribution and to pay such amount over to the appropriate taxing authorities. 8.12 REEMPLOYMENT OF A PARTICIPANT. In the event a Participant is reemployed by the Employer prior to incurring five (5) consecutive One-Year Breaks in Service and the Participant had previously received a lump sum distribution of his Accounts representing less than a one hundred percent (100%) interest in all such Accounts, the Participant shall have the right to pay back the amount of his lump sum distribution, and thus be entitled to a restoration of his forfeitures in accordance with the procedures established in Section 7.4. Such repayment shall be made not later than the earlier of five (5) consecutive One-Year Breaks in Service or five (5) years from the date the Participant is reemployed. ARTICLE IX INVESTMENT DISCRETION 9.1 INVESTMENT ACCOUNTS. The Committee shall direct the Trustee, in accordance with the Participant's instructions, regarding the manner in which the Participant wishes to have his accounts invested. A Participant may direct that investments be made in either the Investment Reserve Fund, the Balanced Blend Fund, the Low P/E Common Stock Fund, the Special Capital Fund, or a combination of the funds. The Trustees shall establish and maintain the funds described herein. (a) Investment Reserve Fund - This fund is a money market fund which 26 consists of short-term high-quality securities, such as commercial paper sold by corporations that have excellent credit ratings, and issues of the U.S. Treasury and Government Agencies. (b) Balanced Blend Fund - This fund is a diversified selection of individual investment funds including bond funds and common stock funds combined into a single portfolio. (c) Common Stock Fund - This fund is composed of stocks that can be purchased at prices that are low in relation to the amount of earnings (profits) a company has the potential to make. (d) Special Capital Fund - This fund provides a systematic, disciplined investment process of choosing mispriced and undervalued "special cap" stocks: those with capitalization between $50 million and $500 million. Notwithstanding the above, the Company may at some time in the future establish additional funds or may terminate existing funds. All charges and expenses incurred in connection with the purchase and sale of investments for a fund shall be charged to such fund. 9.2 INVESTMENT ELECTION. Subject to the provisions of Section 9.1, each Participant, in writing, initially as of his participation date and thereafter on a date which is at least thirty (30) days prior to the January 1 or July 1 on which the Participant wishes to revise his investment election, shall make an investment election which shall apply to the investment of any contributions to his accounts, plus any investment gains or losses thereon. Such investment election shall be to have such contributions invested either (i) wholly in one of the funds described in Section 9.1(a, b, c or d), or (ii) in ten percent (10%) increments in any combination of the funds described in Section 9.1(a, b, c or d). Notwithstanding the above, in the event the Trustees, in accordance with the instructions from the Plan Administrator, establish additional funds or terminate existing funds, Participants may elect to invest wholly in one of the funds or in ten percent (10%) increments in any combination of funds. 9.3 CHANGE OF INVESTMENT ELECTION. Subject to the provisions of Section 9.1, a Participant may elect to change his investment election with respect to amounts credited to his 401(k) Account, Matching Contribution Account, and Rollover Contribution Account, in writing to the Committee, at least thirty (30) days prior to the January 1 or July 1 on which the election is to take effect. Such change shall be limited to the investment choices described in Section 9.2, and shall take effect on the next following applicable January 1 or July 1, or first business day thereafter. 27 ARTICLE X ADMINISTRATION 10.1 APPOINTMENT OF COMMITTEE. The Board of Directors may appoint at least three (3) individuals to serve as the Committee responsible for administering the Plan. These individuals may, but need not be, Employees of the Company. A Committee member shall continue to serve as such until his death, resignation or incapability, or until he shall be removed by action of the Board of Directors. Such removal shall become effective upon delivery to the Committee member of written notice to that effect. Any Committee member may resign and such resignation shall become effective thirty (30) days after delivery of a notice thereof to the Board of Directors, or sooner, if designated by the Board of Directors. In the event of the death, resignation or removal of any Committee member, the Board of Directors shall appoint a successor Committee member. 10.2 COMMITTEE RIGHTS. The Committee shall have the following powers, rights, and duties in addition to those given it elsewhere in the Plan: (a) To select a secretary, if it believes it advisable, who may, but need not be, an Employee of the Company; (b) To determine all questions arising under the Plan, including the power to determine the rights or eligibility of Employees or Participants and their Beneficiaries, or the amount in their accounts under the Plan, and to remedy ambiguities, inconsistencies or omissions; (c) To adopt such rules and regulations as, in its opinion, may be necessary for the proper and efficient administration of the Plan, provided such rules and regulations are consistent with the Plan; (d) To enforce the Plan and the rules and regulations, if any, adopted by the Committee; (e) To direct the Trustees as respects payments under the Plan; (f) To prepare and distribute, in such manner as the Committee determines to be appropriate, information explaining the Plan; and (g) To appoint or employ individuals to assist in the administration of the Plan and any other agents it deems advisable, including legal and actuarial counsel. 28 10.3 RESPONSIBILITY OF COMMITTEE. In the execution of its duties according to Section 10.2, the Committee shall, to the best of its ability, discharge its duties: (a) For the exclusive purpose of providing benefits to Participants and their Beneficiaries; (b) For the exclusive purpose of defraying reasonable expenses for the administration of this Plan; (c) With the care, prudence, and diligence under the circumstances then prevailing that a prudent man acting in like capacity and familiar with such matters would use in the conduct of an enterprise of a like character with like aims; and (d) Solely in the interest of Participants and their Beneficiaries in accordance with the provisions of Title 1 of the Employee Retirement Income Security Act of 1974. 10.4 CLAIMS PROCEDURE. Each Employee, Participant, or Beneficiary shall submit his claim for benefits to the Committee in writing in such a form as is permitted by the Committee. A Participant or Beneficiary shall have no right to seek review of a denial of benefits, or to bring any action in any court to enforce a claim for benefits prior to his filing a claim for benefits and exhausting his rights to review under this Article. When a claim for benefits has been filed properly, such claim for benefits shall be evaluated and the claimant shall be notified of the approval or the denial within ninety (90) days after the receipt of such claim unless special circumstances require an extension of time for processing the claim. If such an extension of time for processing is required, written notice of the extension shall be furnished to the claimant prior to the termination of the initial ninety (90) day period which shall specify the special circumstances requiring an extension and the date by which a final decision will be reached (which date shall not be later than one hundred eighty (180) days after the date on which the claim was filed). A claimant shall be given a written notice on which the claimant shall be advised as to whether the claim is granted or denied, in whole or in part. If a claim is denied in whole or in part, the claimant shall be given written notice which shall contain (a) the specific reasons for the denial, (b) references to pertinent Plan provisions on which the denial is based, (c) a description of any additional material or information necessary to perfect the claim, and an explanation of why such material or information is necessary, and (d) the claimant's rights to seek review of the denial. If a claim is denied in whole or in part, the claimant shall have the right to request that the Committee review the denial, provided that the claimant files a written request for review with the Committee within sixty (60) days after the date on which the claimant received written notification of the denial. Within sixty (60) days after a request for review is received, the review 29 shall be made and the claimant shall be advised in writing of the decision on review, unless special circumstances require an extension of time for processing the review, in which case the claimant shall be given a written notification within such initial sixty (60) day period specifying the reasons for the extension and when such review shall be completed (provided that such review shall be completed within one hundred twenty (120) days after the date on which the request for review was filed). The decision on review shall be forwarded to the claimant in writing and shall include specific reasons for the decision and references to Plan provisions upon which the decision is based. A decision on review shall be final and binding on all persons for all purposes. If a claimant shall fail to file a request for review in accordance with the procedures herein outlined, such claimant shall have no rights to review and shall have no right to bring action in any court and the denial of the claim shall become final and binding on all persons for all purposes. 10.5 RULES GOVERNING COMMITTEE ACTION. In the administration of the Plan, the following provisions shall apply where the context permits: (a) A Committee member may delegate in writing any or all of his rights, powers, duties, and discretions to any other member, with the consent of the latter. (b) The Committee members may act by meeting or by written statement without meeting, and may sign any document on behalf of the Committee by signing one document or by signing concurrent documents. (c) An action or a decision of a majority of Committee members as to a matter shall be effective as if taken or made by all Committee members. (d) If a Committee member is also a Participant in the Plan, he may not decide or determine any matter or question concerning distributions of any kind to be made to him, or the amount or nature of his benefits with him. (e) If, because of the number qualified to act, there is an even division of opinion among the Committee members as to a matter, the Company shall decide the matter. (f) The certificate of the majority of the Committee members or any person the Committee may authorize to act on their behalf as to any action the Committee has taken as authorized shall be conclusive in favor of any person relying on the certificate. 10.6 REIMBURSEMENT. The Committee members shall be reimbursed for expenses reasonably incurred, but no compensation shall be paid to any Committee member as such. 10.7 FIDUCIARY DESIGNATION. The Board of Directors and the members of the 30 Committee are hereby designated as "named fiduciaries" within the meaning of Section 402(a) of the Employee Retirement Income Security Act, with respect to the operation and administration of the Plan. The Trustees and the Board of Directors are hereby designated as "named fiduciaries" of the Plan with respect to control and management of the assets of the Plan, except as it relates to individual investment elections under Article IX. Each named fiduciary may establish procedures for the allocation of its fiduciary responsibilities among its members and the designation of persons other than the named fiduciaries to carry out its fiduciary responsibilities. In addition, the Board of Directors or the Trustees may appoint as investment manager of all or any portion of the assets of the Fund, one or more banks, investment advisers registered under the Investment Advisers Act of 1940 or insurance companies qualified under the laws of more than one state to manage assets of the Fund. Each named fiduciary shall be responsible for the proper exercise of its own powers, duties, responsibilities and obligations under the Plan, and to the maximum extent allowable under ERISA, may rely upon the directions, information or actions of any other named fiduciary as being proper under the Plan and shall not guaranty the Trust and assets of the Trust in any manner against investment loss or depreciation in asset value. ARTICLE XI AMENDMENTS AND DISCONTINUANCE 11.1 AMENDMENT OF PLAN. The provisions of this Plan may be amended at any time and from time-to-time by the Board of Directors, provided that no amendment: (a) shall cause or permit any part of the Fund to revert to or become the property of the Company or to be diverted to purposes other than for the exclusive benefit of Participants or their Beneficiaries hereunder, except as provided in Section 4.8; (b) shall increase the duties or liabilities of the Committee without its written consent; or (c) shall cause the Accrued Benefit of any Participant to be decreased unless authority to decrease such Accrued Benefit is applied for and specifically granted by the Secretary of Labor. 11.2 RIGHT TO TERMINATE. Although the Company expects to maintain this Plan indefinitely as a continuing program, the right to terminate the provision of benefits hereunder is unconditionally reserved by the Company. 11.3 MERGER OR CONSOLIDATION. In the event of any merger or consolidation of the Plan with any other plan, or the proposed transfer of assets or liabilities, in whole or in part, of the Fund to any other fund, the assets of the Fund shall be transferred to the other fund only if: 31 (a) the other fund is maintained or established for the benefit of some or all of the Participants of this Plan; (b) each Participant of this Plan would be entitled to receive a benefit from the other plan immediately after the date of the merger, consolidation or transfer, if the other plan then terminated, which is not less than the benefit the Participant was entitle to receive under the provisions of Section 11.5 of this Plan, if this Plan had been terminated on the date of the merger, consolidation, or transfer; (c) resolutions of the respective Boards of Directors of the Company under this Plan and of any new or successor company under the other plan authorize such transfer of assets; and, in the case of the new or successor company, its resolution includes an assumption of liabilities with respect to those Participants who, as a result of the merger, consolidation or transfer, are participants under the new or successor company's plan; and (d) such other plan and trust are qualified under Sections 401(a) and 501(a) of the Code. 11.4 DISCONTINUANCE OF PLAN UPON DISSOLUTION. In the event the Company is legally dissolved or liquidated by any procedure other than by consolidation, merger or sale of substantially all of its assets, this Plan shall automatically be terminated and the Fund disposed of as hereinafter provided. 11.5 DISTRIBUTION OF FUND ON DISCONTINUANCE OF THE PLAN. In the event this Plan shall be completely or partially terminated for any reason, or the Company contributions permanently suspended, the Company shall, after the Fund has been evaluated and all expenses are paid, determine or cause to be determined the respective interests of the Participants, Former Participants and Beneficiaries affected by the Plan termination and shall authorize and direct the Trustees to pay out such respective interests in cash or in kind to the Participants, Former Participants and Beneficiaries within a reasonable period of time after the date of such termination. There shall be full vesting in the accounts of all affected Participants at the time of the complete or partial termination of the Plan or if Company contributions are permanently suspended, and such accounts shall be nonforfeitable. No Participant herein who has not yet reached his Normal Retirement Date shall receive a lump sum distribution in excess of $3,500 without the written consent of the Participant. 11.6 RIGHTS AGAINST COMPANY. Neither the establishment of the Plan, nor the payments of any benefits hereunder shall be construed as giving to any Participant or any person whomsoever any legal or equitable rights against the Company, or its officers, directors or shareholders as such. All benefits payable under the Plan shall be paid or provided for solely from the Fund, and the Company shall have no liability or responsibility other than to make 32 contributions to such Fund as herein provided. ARTICLE XII TOP-HEAVY PROVISIONS 12.1 TOP-HEAVY PLAN. In accordance with Section 416 of the Code, the Top-Heavy provisions as outlined in this Article XII shall come into effect for any Plan Year in which this Plan is a Top-Heavy Plan, notwithstanding any contrary provisions in any other Article of this Plan. If this Plan is not Top-Heavy, then the provisions of this Article should have no force and effect. 12.2 MINIMUM VESTING. If this Plan is considered a Top-Heavy Plan, then the following vesting schedule will take effect in lieu of the schedule set forth in Section 7.2(c): Years of Vesting Service Vesting Percentage --------------- ------------------ Less than 2 0% 2 but less than 3 20% 3 but less than 4 40% 4 but less than 5 60% 5 but less than 6 80% 6 or more 100% The schedule set forth herein shall continue to be in effect until such time that the Plan ceases to be a Top-Heavy Plan, in which event, the provisions of Sections 7.2(c) and 12.5 shall apply. Such schedule shall not apply to Participants who do not complete at least one Hour of Service after the Plan becomes a Top-Heavy Plan. 12.3 COMPENSATION LIMIT. For any Plan Year in which this Plan is considered a Top-Heavy Plan, the Compensation taken into account for that Plan Year on behalf of any Employee shall be limited to a maximum of $200,000 (as adjusted in accordance with regulations adopted by the Secretary of the Treasury). 12.4 MINIMUM CONTRIBUTION. For any Plan Year in which this Plan is considered a Top-Heavy Plan, notwithstanding the contribution allocation procedures outlined in Section 6.1, any Participant who is not a Key Employee and who is not a participant in any defined benefit plan maintained by the Company shall have a minimum amount allocated to his Matching Contribution Account. Such minimum shall be equal to the lesser of three percent (3%) of such Participant's compensation, which shall include base pay or salary, overtime, bonuses, commissions and any other form of remuneration included in Section 1.415-2 of the Income Tax Regulations, or the highest amount allocated to a Key Employee's Matching Contribution 33 Account, expressed as a percent of compensation for the Plan Year as aforesaid. Any required additional contributions hereunder shall be made by the Company. For Participants who are not Key Employees and who also are participants in any defined benefit plan maintained by the Company, the minimum benefit required under the defined benefit plan shall apply in lieu of the minimum contribution hereunder. 12.5 ANTI-CUTBACK PROVISIONS. In the event that the Top-Heavy Plan provisions come into effect, no amendment to the vesting provisions shall deprive a Participant of his nonforfeitable right accrued to the date such provisions come into effect. This requirement shall also apply to any amendment to the vesting provisions made as a result of a Top-Heavy Plan ceasing to be a Top-Heavy Plan. Upon any amendment to the vesting provisions, each Participant with at least two (2) years of vesting Service with the Company may elect to have his nonforfeitable percentage computed under the Plan without regard to such amendment. Each Participant so entitled shall be given a period of not less than sixty (60) days following the latest of the effective date of the amendment or the date written notice of said amendment is furnished to the Participant in which he may make the election outlined herein. Such election shall be made in writing to the Committee. 12.6 AGGREGATION RULES. Notwithstanding anything to the contrary herein, this Plan shall not be considered a Top-Heavy Plan if it is part of either a required aggregation group or a permissive aggregation group and such aggregation group is not top-heavy. An aggregation group will be considered top- heavy if the sum of the present value of accrued benefits and account balances of Key Employees is more than sixty percent (60%) of the sum of the present value of accrued benefits and account balances for all Employees. The required aggregation group of a company includes (a) each plan of a company in which a Key Employee participates, (b) each other plan of the company that enables a plan covering a Key Employee to meet the nondiscrimination requirements of Code Sections 401(a)(4) and 410, and (c) each plan of a company which has been terminated in the five (5) Plan Years immediately preceding the determination date. Each plan in a required aggregation group will be top-heavy if the group is top-heavy. No plan in a required aggregation group will be top-heavy if the group is not top-heavy. A permissive aggregation group consists of plans that are required to be aggregated plus one or more plans (providing comparable benefits or contributions) that are not required to be aggregated, all of which, when taken together, meet the requirements of Code Sections 401(a)(4) and 410. If a permissive aggregation group is top-heavy, only those plans that are part of an underlying top-heavy required aggregation group are top-heavy. No plan in a permissive aggregation group will be top-heavy if the group is not top-heavy. ARTICLE XIII TRUST PROVISIONS 34 13.1 GENERAL. (a) Pursuant to the Plan, the Company hereby creates and establishes a Trust to be known as the Information Resources, Inc. 401(k) Retirement Savings Trust. (b) The Plan shall be administered by the Company as provided for in the Plan and the Trustee shall not be responsible for the administration of the Plan. (c) The Company, as provided in the Plan, may allocate fiduciary responsibilities among fiduciaries of this Plan and Trust. A fiduciary shall be responsible only for the duties and responsibilities allocated to him. 13.2 CONTRIBUTIONS TO THE TRUST FUND. The Company shall, from time to time, make contributions to the Trustee as provided in the Plan. The Trustee shall be accountable to the Company for all contributions received from the Company but the Trustee shall have no duty to see that the contributions received comply with the provisions of the Plan, nor shall the Trustee be obliged or have any right to enforce or collect any contribution from the Company or otherwise see that the funds are deposited according to the provisions of the Plan. Nor shall the Trustee be responsible for establishing a funding policy for the Plan. 13.3 PAYMENTS FROM THE TRUST FUND. (a) Payments of benefits under the Plan shall be made from the Trust Fund by the Trustee to such persons, or accounts, in such manner, at such times and in such amounts as the Committee may in writing from time to time direct. The Trustee shall be fully protected in making payments out of the Trust Fund in accordance with such written directions. (b) If any payment or distribution directed to be made from the Trust Fund is not claimed, the Trustee shall notify the Committee of that fact promptly. The Trustee shall have no obligation to search for or ascertain the whereabouts of any payee or distributee of benefits from the Trust Fund. 13.4 THE TRUST FUND. Unless the context clearly implies or indicates the contrary, the term Trust Fund comprises all property of any kind held by the Trustee from time to time pursuant to this agreement. With respect to the Trust Fund, the Trustee shall have the following powers and rights, in addition to those vested in it elsewhere in this Agreement or by law: 35 (a) To invest the Trust Fund in such bonds, notes, debentures, mortgages, equipment trust certificates, investment trust certificates, preferred or common stock, insurance and annuity contracts, common or collective trust funds, shares of registered investment companies, including any registered investment company advised by the Harris Trust and Savings Bank or its affiliates (including, specifically, HT Insight Funds, Inc.), provided the provisions of Prohibited Transaction Class Exemption #77-4 and other applicable laws or regulations are adhered to), or in such other property, real or personal, as the Trustee may deem advisable, with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. In addition, the Trustee is specifically authorized to deposit any part or all of the money and property of this trust with Harris Trust and Savings Bank, Chicago, Illinois as Trustee of the HARRIS TRUST AND SAVINGS BANK TRUST FOR COLLECTIVE INVESTMENT OF EMPLOYEE BENEFIT ACCOUNTS, restated by Declaration of Trust, effective August 31, 1993, and as amended, to be held and administered by the trustee pursuant to all terms and conditions of such Declaration of Trust which is hereby incorporated by reference and made a part hereof. The Trustee may hold a reasonable portion of the Trust Fund in cash to provide for the payment of current expenses and benefits under this Trust and otherwise as permitted by law, and may deposit any cash so held in its banking department without liability to the Trust Fund for interest thereon; the Harris Trust and Savings Bank, as Plan Trustee, shall have the power and authority to invest plan assets in deposits in itself or in its affiliates, which deposits shall bear a reasonable rate of interest; (b) To manage, sell, contract to sell, grant options to purchase, convey, exchange, transfer, abandon, improve, repair, insure, lease for any term even though commencing in the future or extending beyond the term of the Trust, and otherwise deal with all property, real or personal, in such manner and on such terms and conditions as the Trustee may decide; and no person dealing with the Trustee shall be required to see to the application of any money or property delivered to the Trustee or to inquire into the validity or propriety of any transaction with the Trustee; (c) To borrow such sum or sums from time to time as the Trustee considers necessary or desirable and in the best interest of the Trust Fund, and for that purpose to mortgage or pledge any part of the Trust Fund; provided that the consent of the Company has first been obtained; (d) To compromise, contest, arbitrate or abandon claims or demands by or 36 against the Trust Fund; (e) To have, with respect to the Trust Fund, all of the rights of an individual owner, including the power to give proxies, to participate in voting trusts, mergers, consolidations, foreclosures, reorganizations or liquidations, and to exercise or sell stock subscription or conversion rights; (f) To hold any securities or other property in the name of the Trustee or its nominee, or in such form as it deems best, with or without disclosing the trust relationship; (g) To retain any funds or property subject to any dispute without liability for payment of interest, or to withhold payment or delivery thereof until final adjudication of the dispute by a court of competent jurisdiction; (h) To begin, maintain or defend any litigation necessary in connection with the administration of the Plan and Trust, and the Company shall indemnify the Trustee against all expenses and liabilities sustained or anticipated by it by reason thereof; (i) To pay out of any benefit distributable from the Trust Fund any estate, inheritance, income or other tax, charge or assessment attributable thereto, but the Trustee shall give the Company notice of its intention to make such payments as far in advance as may be practicable, and shall defer such payments if the Company so requests and indemnifies the Trustee to its satisfaction in the premises. The Company and the Trustee, or either, before making payment of any benefit, may require such release or other documents from any lawful taxing authority and such indemnity from the intended payee as they respectively consider necessary for their protection; (j) To buy, sell and exercise call and put options on the following; stocks, fixed income securities, stock and fixed income indices, and stock index and interest rate futures contracts; provided that such options must be traded on a regulated exchange and counterbalanced against appropriate stock, fixed income or cash reserve positions held by the Trustee; (k) To buy and sell interest rate and stock index futures contracts traded on a regulated exchange which are offset by cash reserves or counterbalanced against appropriate fixed income or stock positions held by the Trustee; (l) To engage in the lending of securities to banks and broker-dealers approved by the Trustee, pursuant to regulations of the Department of Labor and any other applicable regulatory authority; 37 (m) To deposit securities with a clearing corporation as defined in Article 8 of the Illinois Uniform Commercial Code. The certificates representing securities, including those in bearer form, may be held in bulk form with, and may be merged into, certificates of the same class of the same issuer which constitute assets of other accounts or owners, without certification as to the ownership attached. Utilization of a book-entry system may be made for the transfer or pledge of securities held by the Trustee or by a clearing corporation. The Trustee shall at all times, however, maintain a separate and distinct record of the securities owned by the Trust Fund; (n) To participate in and use the Federal Book-entry account System, a service provided by the Federal Reserve Bank for its member banks for deposit of Treasury securities; (o) To employ agents, experts and counsel and to delegate discretionary powers to, and reasonably rely upon information and advice furnished by, such agents, experts and counsel; and (p) To perform any and all other acts in its judgment necessary or appropriate for the proper and advantageous management, investment and distribution of the Trust Fund. (q) To make loans to Participants as directed by the Company. 13.5 PAYMENT OF EXPENSES. All reasonable costs, charges and expenses incurred by the Trustee in connection with the administration of the Trust, including such reasonable compensation of the Trustee as may be agreed upon from time to time between the Company and the Trustee, shall be paid from the Trust Fund unless paid or advanced by the Company. The Trustee shall also pay such expenses in connection with the administration of the Plan as may be directed in writing by the Company and shall be fully protected in making such payments pursuant to written directions of the Company. 38 13.6 ACCOUNTS. (a) The Trustee shall maintain accurate and detailed records and accounts of all investments, receipts, disbursements and other transactions hereunder; and all accounts, books and records relating thereto shall be open at all reasonable times to inspection and audit by such person or persons as the Company may designate. (b) The Trustee shall submit to the auditors for the Company or to anyone the Company designates, such valuations, reports or other information as they may reasonably require. (c) All monies and other property and the income therefrom shall be held and invested as a single fund. (d) The Trustee shall establish and maintain for operational and accounting purposes such other accounts and records as the Company and the Trustee may form time to time consider necessary. (e) In no event shall the maintenance of any account or record by the Trustee mean that any person shall have an interest in any specific asset of the Trust Fund. (f) Within ninety days following the close of each calendar year (or following the close of such other annual period as may be agreed upon by the Trustee and the Company) and as often as may reasonably be requested by the Company, the Trustee shall file with the Company a written account setting forth a description of all securities and other property purchased and sold, and all receipts, disbursements and other transactions effected by it during such annual or shorter period, and showing the securities and other properties held at the end of such period, and their fair market value. (g) The Company may approve such accounting by written notice of approval delivered to the Trustee or by failure to express objection to such accounting in writing delivered to the Trustee within six months from the date upon which the accounting was delivered to the Company. (h) Upon the receipt of a written approval of the accounting, or upon the passage of the period of time within which objection may be filed without written objections having been delivered to the Trustee, such accounting shall be deemed to be approved, and the Trustee shall be released and discharged as to all items, matters and things set forth in such account, as fully as if such accounting had been settled and allowed by decree of a 39 court of competent jurisdiction in an action or proceeding in which the Trustee, the Company and all persons having or claiming to have any interest in the Trust Fund or under the Plan were parties. If the Trustee and the Company cannot agree with respect to any act or transaction reported in any statement, the Trustee shall have the right to have its accounts settled by judicial proceedings, in which event only the Trustee and the Company shall be necessary parties. 13.7 PROTECTION OF THE TRUSTEE. (a) The Trustee shall not be obligated to inquire whether any payee of funds or any distributee of benefits designated by the Company is entitled thereto or whether any payment, allocation or distribution directed or authorized by the Company is proper, or within the terms of this Agreement or the Plan, and shall not be accountable for any payment, allocation or distribution made by the Trustee in good faith on the order or direction of the Company. The Trustee shall not be liable or responsible for any payment made by it in good faith without actual notice or knowledge of the changed condition or status of the payee. (b) Evidence required of anyone under the Plan or this Agreement may be by certificate, affidavit, document or other information which the person acting in reliance thereon may consider pertinent, reliable and genuine, and to have been signed, made or presented by the proper party or parties, except that any action required to be taken by the Company shall be by resolution of its Board of Directors or by a person authorized by resolution of its Board of Directors. The Committee appointed under the terms of the Plan to administer the Plan, or any member of the Committee, or any other person, may by authorized by resolution of the Company's Board of Directors to act on behalf of the Company. The Trustee shall not recognize or take notice of an appointment of any representative of the Company unless and until the Company shall have notified the Trustee in writing of such appointment and the extent of such representative's authority. The Trustee may assume that such appointment and authority continue in effect until it receives written notice to the contrary from the Company. Any action taken or omitted to be taken by the Trustee by authority of any representative of the Company within the scope of his authority shall be as effective for all purposes hereof as if such action or nonaction had been authorized by the Company. The Trustee, the Company and any representative of the Company shall each be fully protected in acting and relying upon any evidence described in this section. (c) The Trustee shall have no power, authority or duty with respect to the 40 determination of the rights or interests of any persons in and to the Trust Fund or under the Plan nor to examine into the determination of any right or interest. 13.8 RESIGNATION, REMOVAL AND SUCCESSION OF TRUSTEE. (a) Any Trustee may resign at any time by giving thirty (30) days prior written notice to the Company. (b) The Company may remove the Trustee at any time by giving thirty (30) days prior written notice to the Trustee being removed. The Company shall fill any vacancy in the office of the Trustee, howsoever caused. (c) Each successor Trustee shall succeed to the title to the Trust Fund vested in its predecessor, without the signing or filing of any further instrument, but any resigning or removed Trustee shall execute all documents and do all acts necessary to vest such title of record in any successor Trustee. Each successor Trustee shall have and enjoy all powers, both discretionary and ministerial, of its predecessor. No successor Trustee shall be personally liable for any act or failure to act of any predecessor Trustee; and, with the approval of the Company, a successor Trustee may accept the account rendered and the property delivered to it by its predecessor Trustee as a full and complete discharge to the predecessor Trustee without incurring any liability or responsibility for so doing. 13.9 TERMINATION. (a) This Trust shall terminate upon the first to occur of the following: (i) Thirty (30) days after the receipt by the Trustee of written notice of such termination from the Company; (ii) The date the Company shall be judicially declared bankrupt or insolvent; (iii) The dissolution, consolidation or reorganization of the Company, or the sale by the Company of all or substantially all of its assets without provision for continuing this Trust, except that in any such event provision may be made for the continuance of this Trust by any successor to the Company or any purchaser of all or substantially all of its assets, and in that event such successor or purchaser shall be substituted for the Company hereunder. 41 (b) Upon termination of this Trust the Trustee shall first reserve such reasonable amounts as it may deem necessary to provide for the payment of any expenses then or thereafter chargeable to the Trust Fund. Subject to such reserve, the balance of the Trust Fund shall be liquidated and distributed by the Trustee to or for the benefit of the employees or former employees of the Company, or their beneficiaries, as directed by the Company, after compliance with any requirements of ERISA, as amended from time to time, or other applicable law. The Company shall have full responsibility to see that such distribution is proper and within the terms of the Plan and Trust. The Company shall secure any necessary governmental approval for such termination, and shall send a copy of such approval to the Trustee before any disbursements are to be made. Such distribution may be effected by payment in cash, the maintenance of another or substituted trust fund, by the purchase of insured annuities or otherwise. The Company shall have no beneficial interest in the Trust Fund either during its continuance or upon termination of the Trust. (c) Upon termination of the Trust, the Trustee shall continue to have such of the powers provided in this Agreement as are necessary or desirable for the orderly liquidation and distribution of the Trust Fund. 13.10 AMENDMENT. This Agreement may be amended by the Company at any time and from time to time in whole or in part by an instrument in writing executed by the Company and delivered to the Trustee; provided that no amendment shall cause any part of the Trust Fund to be used for or diverted to or for the benefit of anyone other than the employees or retired employees of the Company or their beneficiaries; and provided further that the rights, duties or responsibilities of the Trustee shall not be substantially changed without its written consent. 13.11 FIDUCIARY RESPONSIBILITY AND LIABILITY. (a) In carrying out its responsibilities under the Trust, the Trustee and any other fiduciary hereunder shall act solely in the interest of the participants and beneficiaries and with the care, skill, prudence and diligence under the circumstances then prevailing that a prudent man acting in a like capacity and familiar with such matters would use in the conduct of an enterprise of a like character and with like aims. The Trustee shall be a fiduciary to the Plan to the extent that the Trustee performs the duties of a fiduciary to the Plan, as that term in defined in ERISA. (b) In determining whether the requirements of prudence and diversification stated in Sections 404(a)(1)(B) and (C), respectively, of ERISA have been 42 met, all the investments of the Trust Fund shall be considered in their entirety, and the portion managed by the Trustee hereunder shall be only one consideration in making such a determination. If one or more investment managers in addition to the Trustee are appointed, the Company so appointing shall be responsible for seeing that the requirement of proper diversification of the total plan assets mentioned above has been met, and neither the Trustee nor any investment manager shall have any such responsibility therefore. (c) To the maximum extent allowed by ERISA, the Trustee shall be indemnified and saved harmless by the Company, from and against any and all liability to which the Trustee shall be subjected by reason of carrying out any directions of the Company, Committee or any authorized person made in accordance with this Agreement, including all expenses reasonably incurred in its defense if the Company fails to provide such defense. The Company's obligation to indemnify the Trustee under this Agreement shall survive the termination of the Trust or removal of the Trustee with respect to any act or omission by the Trustee arising under or in connection with this Trust Agreement. 13.12 NONALIENATION OF BENEFITS. Except as provided by law or by court order, in no event shall the Trustee pay over or assign any part of an employee's or his beneficiary s interest in the Trust which is payable, distributable, or credited to his account, to any assignee or creditor of such employee. Prior to the time of distribution specified herein, neither an employee nor his legal representative shall have any right, by way of anticipation or otherwise, to assign or in any manner dispose of any interest in the Trust; and every attempted assignment or other disposition of such interest in the Trust shall not be merely voidable but absolutely void. 13.13 GOVERNING LAWS. To the extent that ERISA does not do so, the laws of the State of Illinois shall govern, control and determine all questions arising with respect to this Agreement and the validity, interpretation and performance of its provisions. 13.14 COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be considered as an original, and no other counterparts need be produced. 13.15 LIMIT OF TRUSTEE'S RESPONSIBILITY. 43 The Company shall deliver to the Trustee a certified or executed copy of the Plan and Trust and of any amendments thereto for convenience of reference, and the rights, powers and duties of the Trustee shall be governed only by the terms of this Article XIII without reference to the other provisions of the Plan and Trust. 13.16 WAIVER OF NOTICE. Any notice required hereunder may be waived by the person entitled thereto. 13.17 GENDER AND NUMBER. Where the context admits, words in the masculine gender shall include the feminine and neuter genders, the singular shall include the plural, and the plural shall include the singular. 13.18 HEADINGS. The headings of Sections of this Article XIII are for convenience of reference only and shall have no substantive effect on the provisions of this Plan and Trust. 13.19 SEVERABILITY. In the event any provision of this Trust Agreement shall be held illegal or invalid for any reason, such illegality or invalidity shall not affect the remaining provisions of the Trust Agreement, and the Trust Agreement shall be construed and enforced as if such illegal or invalid provisions had never been contained therein. ARTICLE XIV ADOPTION BY SUBSIDIARIES AND AFFILIATES 14.1 ADOPTION BY SUBSIDIARIES AND AFFILIATES. Any employer which is a subsidiary or affiliate of the Company may adopt the Plan by instrument to that effect, and thereafter, if such adoption is consented to by the Board of Directors, such employer shall be treated as a Company under the Plan. 14.2 DELEGATION OF AUTHORITY. Each such adopting employer hereby irrevocably grants to the Board of Directors full and exclusive authority to exercise all of the powers conferred on the Company by the terms of the Plan and to take or refrain from taking any and all action which such employer might otherwise take or refrain from taking with respect to the Plan, including the exclusive power to amend or terminate the Plan, to appoint the Committee and Trustees, and to exercise, enforce or waive any rights whatsoever which such employer might otherwise have with respect to the Plan, and each such employer, by adopting the Plan, irrevocably appoints the Board of Directors as its agent for those purposes. 44 ARTICLE XV LOANS TO PARTICIPANTS 15.1 LOANS TO PARTICIPANTS. Upon written application to the Loan Administrator by a Participant hereunder, specifying the reason therefore, the Loan Administrator may, in the Loan Administrator's sole discretion, grant a loan or loans to such Participant from such Participant's 401(k) Account, Matching Contribution Account, and Rollover Contribution Account, if any, upon such terms, interest and conditions as the Loan Administrator deems appropriate, with uniform, and nondiscriminatory application to all Participants, provided, however, that: (a) The Loan Administrator shall determine, in its sole discretion, that such loan is for a lawful purpose and that the making of such loan is not prohibited under any applicable rule or statute or regulation governing the treatment of loans to Participants; and that the Participant's spouse (if any) consents in writing to such loan or loans. (b) The Loan Administrator shall determine a reasonable rate of interest. The rate of interest to be charged for such loan or loans shall be the prime rate, plus 1%, which interest shall be payable contemporaneously with payments of principal. The Loan Administrator may contact Harris Trust and Savings Bank to determine what Harris Trust and Savings Bank considers as its prime interest rate on a particular date; however, the Loan Administrator shall be responsible for the final determination of a reasonable interest rate for each loan. (c) The aggregate amount loaned to a Participant shall not exceed the lesser of fifty thousand dollars ($50,000) or fifty percent (50%) of such Participant's then vested interest in his 401(k) and Matching Contribution Accounts and Rollover Contribution Account, if any, as of the Valuation Date next preceding the date of such loans. The $50,000 limit shall be reduced by the difference between (i) the Participant's highest outstanding loan balance of the prior twelve (12) months and (ii) the outstanding balance at the time the new loan is made. (d) The Participant shall execute a customary form of promissory note which shall: (i) create in the Trust a valid first lien against the Participant's entire right, title and interest in and to his 401(k) and Matching Contribution Accounts in the Plan subject to the restrictions and requirements of Department of Labor Regulations Section 2550.408b- 45 1(f)(2) and its successor provisions; (ii) provide for a maturity date not to exceed five (5) years from the date of said note, and for repayment of principal in equal installments, not less frequently than quarterly; provided however that if the Loan Administrator shall determine, at the time that the loan is made, that the proceeds of such loan are to be used for the purpose of purchasing property which is used, or is intended to be used within a reasonable time after the loan is made, as the principal residence of the Participant, then said note may provide for a maturity date not to exceed twenty (20) years from the date of said note; (iii) provide a right upon default in payment or otherwise, to accelerate (with or without notice) the unpaid indebtedness and to satisfy the amount of such unpaid indebtedness from any distribution then due; and (iv) provide a right upon termination of the Participant's employment or other event permitting or requiring distribution, to accelerate (with or without notice) the unpaid indebtedness and to satisfy the amount of such unpaid indebtedness from any benefits payable or distributable to the Participant, his Beneficiary or his estate, as the case may be. (e) Only one (1) such loan shall be outstanding at any time as it affects a Participant hereunder. (f) The Participant's spouse consents, in writing and witnessed by a notary public or officer of the Company, to the loan in the event the Participant is married on the date the loan is to be made. (g) Loan Administration Expenses. Each time a Participant obtains a loan under this Article XV, such Participant will be charged a fee not exceeding the actual and reasonable costs incurred by the Plan in connection with the loan. The amount of any fee charged to a Participant pursuant to this Section 15.1(g) must be paid either (a) by the Participant at or prior to the time the loan is made or (b) out of the proceeds of the loan. The amount of fees to be charged to Participants pursuant to this section 15.1(g) may be adjusted periodically by the Loan Administrator. In no event shall the Loan Administrator grant any loan hereunder for an amount which is less than one thousand dollars ($1,000). To the extent required by law, the repayment by a Participant of a loan or loans made pursuant to this Section 15.1 shall be taken into account for purpose of calculating the Annual Additions to such Participant's accounts. 46 15.2 LOAN ACCOUNTS. Each loan made to a Participant hereunder shall be a loan by the Fund; provided, however, that for Fund accounting purposes, the loan shall be deemed made from the Participant's own 401(k) Account and next from the Matching Contribution Account. The note executed by the Participant shall be deemed to be an asset of his respective accounts as hereinafter provided. Upon making a loan hereunder, the borrowing Participant s respective accounts shall be reduced by an amount equal to the principal balance of the loan made to such Participant, effective as of the immediately preceding Valuation Date, and a Loan Account shall be established for each borrowing Participant with an initial balance equal to the principal amount of such Participant's loan. All such Loan Accounts shall be excluded for purposes of determining the net earnings (or losses) of the Fund and for purposes of the allocation of such earnings (or losses) pursuant to Section 6.1(d) hereof. A borrowing Participant's payment of principal and interest shall be credited to his respective accounts on the Valuation Date coincident with or next following the Trustee's receipt of such payment, and on each such Valuation Date, the Loan Account of each Participant shall be reduced by the amount of the principal payment credited to such borrowing Participant's accounts on such date. 15.3 INTERIM LOAN PAYMENTS. The Loan Administrator may establish a means pursuant to which a Participant may make loan repayments by payroll deduction or other periodic payments. Such periodic payments may be accumulated in an interest-bearing account, and the accumulated payments, plus interest earned thereon, shall be applied against the loan as of each Valuation Date. ARTICLE XVI MISCELLANEOUS 16.1 INFORMATION TO BE FURNISHED BY PARTICIPANTS. Participants must furnish to the Committee such evidence, data or information as the Committee considers necessary to carry out the Plan. The benefits of the Plan for each person are on the condition that they furnish prompt, true and complete evidence, data and information requested by the Committee. 16.2 EVIDENCE. Evidence required of anyone under the Plan may be by certificate, affidavit, document or other information which the person acting on it considers pertinent and reliable, and signed, made or presented by the proper party or parties. Any notice required under the Plan may be waived by the person entitled to such notice, provided that all Participants similarly situated are treated uniformly. 16.3 EMPLOYMENT RIGHTS. The Plan does not constitute a contract of employment, and participation in the Plan will not give any Employee the right to be retained in the employ of the Company, nor any right or claim to any benefit under the Plan, unless such right or claim has specifically accrued under the terms of the Plan. 16.4 NONALIENATION OF BENEFITS. No benefits payable under the Plan shall be subject in any manner to attachment, anticipation, alienation, sale, transfer, pledge, encumbrance or charge, 47 and any attempt to so attach, anticipate, alienate, sell transfer, pledge, encumber or charge shall not be recognized. No benefit payable under the Plan shall be subject in any manner to the debts, contract, liabilities, engagements, or torts of any person, except as may be required by law. Notwithstanding anything to the contrary specified herein, in the case of a qualified domestic relations order as defined in Section 414(p) of the Code, the Committee should adopt such procedures and comply with such order in accordance with the provisions of Section 414(p) of the Code. If a qualified domestic relations order requires that payment be made to an alternate payee prior to the date of the Participant's earliest retirement age as defined in section 414(p)(4)(B) of the Code and section 206(d)(3)(E)(ii) of ERISA, a distribution may be made out of the Plan to such alternate payee in accordance with the terms of the qualified domestic relations order. 16.5 QUALIFICATION. The Company shall apply for a ruling by the United States Treasury Department that the Plan is qualified under Section 401(a) and 401(k) and that the fund is exempt from Federal income taxation under Section 501(a) of the Code. Any modification or amendment of the Plan may be retroactive, as necessary or appropriate, to maintain such qualification and exemption. 16.6 TERMINOLOGY. Except as otherwise indicated by the context, any masculine terminology used herein shall also include the feminine and the neuter, and the definition of any term in the singular may include the plural. 16.7 APPLICABLE LAWS. Subject to the provisions of ERISA, the Plan shall be construed, administered and governed under and by the laws of the State of Illinois. 16.8 CONTEXT TO CONTROL. The headings of the sections are included solely for convenience of reference, and if there is any conflict between headings and the text of this Plan, the text shall control. 48 IN WITNESS WHEREOF, Information Resources, Inc. has caused this Amended and Restated Plan and Trust to be executed by its officers thereunto duly authorized and its corporate seal affixed and attested and the Trustees have done the same this ______________ day of _________________, 1995. INFORMATION RESOURCES, INC. By: ------------------------------- ATTEST: -------------------- (Seal) TRUSTEES HARRIS TRUST AND SAVINGS BANK By: ------------------------------- By: ------------------------------- By: ------------------------------- ATTEST: -------------------- (Seal) 49 EX-10.II 5 FIRST AMENDMENT TO THE 401(K) Exhibit 10(ii) FIRST AMENDMENT TO THE INFORMATION RESOURCES, INC. AMENDED AND RESTATED 401(K) RETIREMENT SAVINGS PLAN The Information Resources, Inc. Amended and Restated 401(k) Retirement Savings Plan is hereby amended, effective July 1, 1996, as follows: 1. Section 4.2(b) (Salary Reduction Agreement) shall be amended to read as follows: Salary Reduction Agreements, or any changes thereto, shall be effective as of the first day of any calendar year month, provided the Participant submits an appropriate executed authorization and notice to the Company prior to such calendar year month, on a form or in the manner prescribed by the Plan Administrator. The Plan Administrator may establish additional rules regarding the timing and frequency of a change in the amount of salary reductions, provided such policy is applied uniformly to all Participants. 2. Section 4.7 of the Plan (Withdrawals) shall be amended to read as follows: A Participant may elect in writing (or in such other form as may be permitted from time to time by the Plan Administrator) to withdraw any amount (but not less than $500) from his 401(k) Account or Rollover Contribution Account at any time subject to the following conditions: (a) The distribution of a Participant's 401(k) Account or Rollover Contribution Account shall not commence prior to his death, Disability, attainment of age 59-1/2, or termination of employment, except upon his demonstration of financial hardship. A distribution based upon financial hardship may be made only if the Participant has an immediate and heavy financial need, and cannot exceed the amount required to satisfy such financial need, which may not be satisfied from other resources reasonably available to the Participant. A Participant shall be deemed to have an immediate and heavy financial need if the distribution is on account of: (1) Medical expenses described in Code Section 213(d) incurred by the Participant, the Participant's spouse or any of the Participant's dependents (as defined in Code Section 152); (2) The purchase (excluding mortgage payments) of a principal residence of the Participant; (3) Payment of tuition and related educational fees for the next twelve (12) months of post- secondary education for the Participant, his spouse, children or dependents; (4) The need to prevent the eviction of the Participant from his principal residence or foreclosure on the mortgage of the Participant's principal residence; or (5) Any other emergency that the Plan Administrator, pursuant to a uniform and nondiscriminatory policy and in accordance with guidelines issued by the Internal Revenue Service, deems a bona fide financial emergency. (b) A distribution shall be considered necessary to satisfy an immediate and heavy financial need if: (1) The distribution is not in excess of the amount of the immediate and heavy financial need of the Participant; (2) The Participant has obtained all distributions, other than hardship distributions, and all nontaxable loans currently available under all plans maintained by the Company; and (3) The Participant does not make elective deferrals or employee contributions under any plan maintained by the Company for a twelve (12) month period following the date of receipt of the hardship distribution, nor does he make elective deferrals under any plan maintained by the Company for the taxable year immediately following the taxable year of the hardship distribution in excess of the limitation imposed by Section 402(g) of the Code for such next taxable year, less the amount of such Participant's elective deferrals for the taxable year of the hardship distribution. (c) The Participant must request a hardship withdrawal in writing on a form provided by the Plan Administrator, or in such other form or manner as the Plan Administrator may from time to time determine. The Plan Administrator shall specify any supporting data required and shall follow a uniform, nondiscriminatory policy in determining the eligibility for, and timing of, hardship withdrawals. (d) A Participant shall be entitled to a hardship withdrawal pursuant to this Section 4.7 from that portion of his 401(k) Account that represents his 401(k) Contributions, but not on that portion that represents any earnings credited on such account. -2- 3. Section 7.2 of the Plan shall be amended to add the following Paragraph (d): (d) Effective July 1, 1996, for purposes of determining a Participant's vested interest in accordance with this Paragraph 7.2, the Plan shall apply the "elapsed time" method of crediting Vesting Service, based upon the Participant's date of hire and as such method is described in Department of Labor Regulations Section 2530.200b-9. In accordance therewith, all Participants shall thereupon receive vested credit in a manner that is consistent with Paragraph (f) of Department of Labor Regulations Section 2530.200b-9; provided that, a Participant shall be credited with no fewer years of Vesting Service as of July 1, 1996 than he had been credited with under the Plan as of June 30, 1996. 4. Article IX (Investment Discretion) shall be amended to read as follows: ARTICLE IX - INVESTMENT DISCRETION ---------------------------------- 9.1 DIRECTED INVESTMENT ACCOUNTS (a) The Company may establish separate investment funds in which the assets of the Trust will be held. Upon such establishment, the Trustee shall, if the Plan Administrator so directs, and in accordance with the Trust Agreement, permit the Participants to direct the Trustee as to the investment of all or a portion of their Accrued Benefit. If such authorization is given by the Plan Administrator, Participants may, subject to a procedure established and applied in a uniform and nondiscri- minatory manner, direct the Trustee to invest their Accrued Benefit in a specific investment fund or funds. To the extent so directed, and as permitted by law, the Trustee and the Plan Administrator shall be relieved of their fiduciary responsibilities under Section 404 of ERISA. That portion of the accounts of any Participant so directed will thereupon be considered a "Directed Investment Account," which shall not share in Trust Fund earnings nor be taken into consideration for purposes of Section 6.1. In lieu thereof, the Trustee shall, following the end of each Valuation Date, value all assets of the Trust Fund, allocate net gains or losses, and process additions to and withdrawals from Participants' accounts in the following manner: (1) The Trustee shall first compute the fair market value of securities and/or the other assets comprising each investment fund. Each account shall be adjusted each business day by applying the closing market price of the investment fund on the current business day to -3- the share/unit balance of the investment fund as of the close of business on the current business day. (2) The Trustee then shall account for any requests of additions or withdrawals made to or from a specific designated investment fund by any Participant, including allocations of contributions. In completing the valuation procedure described above, such adjustments in the amounts credited to such accounts shall be made on the business day to which the investment activity relates. Contributions received by the Trustee pursuant to the Plan shall not be taken into account until the Valuation Date coinciding with or next following the date such contribution was both actually paid to the Trustee and allocated among the accounts of the Participants. (3) Notwithstanding paragraphs 1 and 2 above, if a pooled investment fund is created as a designated fund for Participants, valuation of the pooled investment fund and allocation of earnings of the pooled investment fund shall be governed by any agreement of such pooled investment fund. The provisions of any agreement shall be incorporated by reference in this Section 9.1. It is intended that this Section 9.1 operate to distribute among each Participant all income of the Trust Fund and changes in the value of the assets of the Trust Fund. (b) A separate Directed Investment Account shall be established for each Participant who has directed an investment. Transfers between a Participant's regular account, if any, and his Directed Investment Account shall be charged and credited as the case may be to each account. (c) All investments, including that of any common stock, shall be held in the name of the Trustee or one or more of its nominees as provided in the Trust Agreement. (d) Each Participant shall file an investment election with, and on a form or in the manner provided by, the Plan Administrator at the time he becomes a Participant in the Plan. A Participant may change his investment fund elections regarding existing accounts and future contributions pursuant to procedures established by the Plan Administrator, which may include daily trading via the Trustee's telephonic toll-free system. A Participant also may transfer amounts attributable to prior contributions among the investment funds pursuant to such procedures. All investments and changes must be -4- made in multiples of one percent (1%), or, for purposes of transfers only, in multiples of one dollar ($1.00) (with minimum transfers to be equal to the lesser of $250 or 100% of a fund account). Elections shall become effective as soon as practicable after receipt by the Plan Administrator, subject to such limitations and restrictions as the Plan Administrator may, from time to time, establish. (e) If no election form has been executed by the Participant for his Directed Investment Account, his entire Accrued Benefit shall be invested by the Trustee pursuant to the Trust Agreement. 5. Article XIII of the Plan (Trust Provisions) shall be deleted in its entirety, and all corresponding references in the Plan to Article XIII shall be similarly deleted, and the Information Resources, Inc. 401(k) Retirement Savings Plan Trust Agreement, which is attached hereto, shall be established as a separate Trust Agreement by and between Fidelity Management Trust Company and Information Resources, Inc. 6. Article XV (Loans to Participants) shall be amended to read as follows: 15.1 LOANS TO PARTICIPANTS Upon application by an Employee who is a Participant or any other party-in-interest, as defined in Section 3(14) of ERISA, the Trustee may lend such Employee or other party-in- interest an amount such that the aggregate of all of his outstanding loans under this Plan and all other plans maintained by the Company does not exceed the lesser of: (1) fifty thousand dollars ($50,000) (reduced by the excess, if any, of (A) the highest outstanding balance of loans from the Plan and all other plans maintained by the Company during the one (1) year period ending on the day before the date on which such loan is made over (B) the outstanding balance of loans from the Plan and all other plans maintained by the Company on the date on which such loan is made); or (2) an amount which does not exceed one-half (1/2) of the vested interest of his Accrued Benefit, if any, under the Plan as of the date on which the loan is approved. All loans shall follow a uniform, nondiscriminatory policy. Loans shall not be made available to Highly Compensated Employees in an amount greater than the amount made available to other Employees. -5- In addition to such rules and regulations as the Plan Administrator may adopt, all loans shall comply with the following terms and conditions: (a) An application for a loan by an Employee or other party-in-interest shall be made in writing to the Plan Administrator, whose action thereon shall be final. The Plan Administrator shall specify the form of the application and any supporting data required. (b) The period of repayment for any loan shall be five (5) years, unless the loan is used to acquire a dwelling unit which within a reasonable time shall be used as the principal residence of the Employee or other party-in-interest, in which case the period of repayment shall be determined by the Plan Administrator but shall not be greater than twenty (20) years. Loans shall be repayable in substantially equal amortized installments of both principal and interest payable not less frequently than quarterly. Loans to Employees shall be repaid through automatic payroll deduction, and for parties-in-interest who are not Employees, on such other terms and conditions as the Plan Administrator deems appropriate. To the extent that such loan is unpaid at the time a distribution of such Participant's Accrued Benefit becomes payable, such unpaid amount shall be deducted from the amount otherwise payable from his Accrued Benefit. Any loan described in this Section 15.1 shall be considered an investment of the account from which it was borrowed. Such account shall not share in the allocation of earnings under the Plan to the extent of such loan. (c) Each loan shall bear interest at a rate which is the rate being charged by the area banking businesses for similar well-secured loans. (d) Each loan shall be supported by collateral equal to no more than fifty percent (50%) of the Employee's or other party-in-interest's entire vested interest in the Trust. A loan also shall be supported by the Employee's or other party-in-interest's promissory note for the amount of the loan, including interest, payable to the order of the Trustee. The promissory note shall require that the unpaid principal and interest will become due and payable if a loan payment is not made by the last day of the calendar year quarter following the calendar year quarter in which the installment was due and owing. In the event of default, foreclosure on the note and attachment of security will not occur until a distributable event occurs in the Plan. (e) Each loan shall be in an amount not less than one thousand dollars ($1,000.00) and shall be made in increments of not less than ten dollars ($10.00). No more than one (1) loan may be outstanding at any one time. -6- (f) Each loan shall be for a period of not less than six (6) months. IN WITNESS WHEREOF, Information Resources, Inc. has caused this Amendment to be executed by its officer hereto duly authorized this ____ day of May, 1996. INFORMATION RESOURCES, INC., a Delaware corporation By:______________________________ Its:_____________________________ -7- EX-10.JJ 6 SECOND AMENDMENT TO THE 401(K) Exhibit 10(jj) SECOND AMENDMENT TO THE INFORMATION RESOURCES, INC. AMENDED AND RESTATED 401(K) RETIREMENT SAVINGS PLAN The Information Resources, Inc. Amended and Restated 401(k) Retirement Savings Plan (attached hereto as Exhibit A and incorporated herein by reference) is hereby amended, effective March 1, 1997, as follows: 1. The words "or (c)" shall be inserted after the words "subsection (b)" in sentence two of Section 3.1(a). 2. The following subsection (c) shall be added to Section 3.1: "(c) Beginning March 1, 1997, a Full-Time Employee of the Company who has attained age twenty-one (21) and has completed thirty (30) days of Participation Service shall become a Participant on the first day of the month coincident with or following the later of (1) the date on which the Full-Time Employee attained age twenty-one and (2) the date on which the Full-Time Employee was hired by the Company, provided that the Employee remains in the employ of the Company as a Full-Time Employee on such first day of such month. For purposes of this Section 3.1, a Full-Time Employee is an Employee that is treated by the Company as working for the Company at least 40 hours per week." 3. The following sentence shall be added as the fourth sentence of Section 4.2: "Effective March 1, 1997, the reduction in Compensation per payroll period cannot exceed fifteen percent (15%)." 4. The second sentence of Section 4.2(f) shall be amended to read as follows: "In the event the Plan shall fail in the Committee's reasonable judgment to meet the nondiscrimination tests for 401(k) Contributions of Section 401(k) of the Code for any Plan Year, the Committee may, during the 2 1/2 month period following the close of the Plan Year, return all or any portion of such salary reduction amounts (including income allocable thereto for the Plan Year) to the Highly Compensated Employees, in accordance with the nondiscrimination test and corrective provisions of Section 401(k) and the regulations promulgated thereunder, as amended from time to time, including but not limited to Treasury Regulations Sections 1.401(k)-1(g)(1)(ii), 1.401.(k)-1(f)(2), 1.401(k)-1(f)(5)(i) and 1.401(k)-1(f)(5)(ii); provided, however, that any such excess contributions shall be distributed first from 401(k) Contributions in excess of 6% of the Participant's Compensation." 5. The fourth sentence of Section 4.4 shall be amended to read as follows: "Such contribution shall be made to Participant's Matching Contribution Account and shall be allocated as a percentage of the total amount of the Participant defers for such period from the prior Valuation Date to the current Valuation Date that does not exceed 6% of the Participant's Compensation for the same such period; provided, however, that the Matching Contribution allocated to any Participant that reduces his or her Compensation in accordance with Section 4.2 in the maximum amount permitted by law during any Plan Year shall be determined in accordance with 6% of the Participant's Compensation for such Plan Year regardless of the percentage of Compensation deferred by such Participant under Section 4.2." 6. The vesting schedule contained in Section 7.2(c) shall be amended to read as follows: "Years of Vesting Service Vesting Percentage --------------- ------------------ Less than 3 0% 3 but less than 4 50% 4 but less than 5 75% 5 or more 100% ; provided, however, that a Participant who has 2 but less than 3 years of Vesting Service on March 1, 1997 shall retain a 10% vesting percentage in his or her Matching Contribution Account until such time as Participant has 3 years of Vesting Service, at which time such Participant's Vesting Service shall be determined in accordance with the vesting schedule contained in this Section 7.2(c), as amended." 7. The first sentence of Section 9.1(a) shall be amended to read as follows: "The Company may establish separate investment funds (including a Company stock fund) in which the assets of the Trust will be held." IN WITNESS WHEREOF, Information Resources, Inc. has caused this Amendment to executed by its officer hereto duly authorized this ____ Day of February, 1997. INFORMATION RESOURCES, INC. A Delaware corporation By: ______________________ Its: ______________________ -2- EX-10.KK 7 TRUST AGREEMENT DATED 7/1/96 EXHIBIT 10(KK) TRUST AGREEMENT BETWEEN _______________________________________________________________________ INFORMATION RESOURCES, INC. AND FIDELITY MANAGEMENT TRUST COMPANY _______________________________________________________________________ INFORMATION RESOURCES, INC. 401(K) RETIREMENT SAVINGS PLAN TRUST DATED AS OF JULY 1, 1996 TABLE OF CONTENTS ----------------- SECTION PAGE - ------------------------------------------------------------------------- ---- 1 Trust . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 2 Exclusive Benefit and Reversion of Sponsor Contributions. . . . . . . 2 3 Disbursements . . . . . . . . . . . . . . . . . . . . . . . . . . . . 2 (a) Administrator Directed Disbursements (b) Participant Withdrawal Requests (c) Limitations 4 Investment of Trust . . . . . . . . . . . . . . . . . . . . . . . . . 3 (a) Selection of Investment Options (b) Available Investment Options (c) Participant Direction (d) Mutual Funds (e) Notes (f) Notes for General Purposes (g) Notes for Purchase of Primary Residence (h) Reliance of Trustee on Directions (i) Trustee Powers 5 Recordkeeping and Administrative Services to Be Performed . . . . . . 7 (a) General (b) Accounts (c) Inspection and Audit (d) Effect of Plan Amendment (e) Returns, Reports and Information 6 Compensation and Expenses . . . . . . . . . . . . . . . . . . . . . . 9 7 Directions and Indemnification. . . . . . . . . . . . . . . . . . . . 9 (a) Identity of Administrator and Named Fiduciary (b) Directions from Administrator (c) Directions from Named Fiduciary (d) Co-Fiduciary Liability (e) Indemnification (f) Survival 8 Resignation or Removal of Trustee . . . . . . . . . . . . . . . . . . 10 (a) Resignation (b) Removal -i- TABLE OF CONTENTS ----------------- (CONTINUED) SECTION PAGE - ------------------------------------------------------------------------- ---- 9 Successor Trustee . . . . . . . . . . . . . . . . . . . . . . . . . . 11 (a) Appointment (b) Acceptance (c) Corporate Action 10 Termination . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 11 11 Resignation, Removal, and Termination Notices . . . . . . . . . . . . 12 12 Duration. . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 13 Amendment or Modification . . . . . . . . . . . . . . . . . . . . . . 12 14 General . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . . 12 (a) Performance by Trustee, its Agents or Affiliates (b) Entire Agreement (c) Waiver (d) Successors and Assigns (e) Partial Invalidity (f) Section Headings 15 Governing Law . . . . . . . . . . . . . . . . . . . . . . . . . . . . 13 (a) Massachusetts Law Controls (b) Trust Agreement Controls SCHEDULES - --------- A. Recordkeeping and Administrative Services B. Fee Schedule C. Investment Options D. Sponsor's Authorization Letter E. Named Fiduciary's Authorization Letter F. IRS Determination Letter or Opinion of Counsel G. Telephone Exchange Procedures -ii- TRUST AGREEMENT, dated as of the first day of July, 1996, between INFORMATION RESOURCES, INC., a Delaware corporation, having an office at 150 North Clinton Street, Chicago, Illinois 60661-1416 (the "Sponsor"), and FIDELITY MANAGEMENT TRUST COMPANY, a Massachusetts trust company, having an office at 82 Devonshire Street, Boston, Massachusetts 02109 (the "Trustee"). WITNESSETH: WHEREAS, the Sponsor is the sponsor of the Information Resources, Inc. 401(k) Retirement Savings Plan (the "Plan"); and WHEREAS, the Sponsor wishes to establish a trust to hold and invest plan assets under the Plan for the exclusive benefit of Participants in the Plan and their beneficiaries; and WHEREAS, the Committee as defined in the Plan (the "Named Fiduciary") is the named fiduciary of the Plan (within the meaning of section 402(a) of the Employee Retirement Income Security Act of 1974, as amended ("ERISA")); and WHEREAS, the Trustee is willing to hold and invest the aforesaid plan assets in trust among several investment options selected by the Named Fiduciary; and WHEREAS, the Sponsor wishes to have the Trustee perform certain ministerial recordkeeping and administrative functions under the Plan; and WHEREAS, the Sponsor (the "Administrator") is the administrator of the Plan (within the meaning of section 3(16)(A) of ERISA); and WHEREAS, the Trustee is willing to perform recordkeeping and administrative services for the Plan if the services are purely ministerial in nature and are provided within a framework of plan provisions, guidelines and interpretations conveyed in writing to the Trustee by the Administrator. NOW, THEREFORE, in consideration of the foregoing premises and the mutual covenants and agreements set forth below, the Sponsor and the Trustee agree as follows: SECTION 1. TRUST. The Sponsor hereby establishes the Information Resources, Inc. 401(k) Retirement Savings Plan Trust (the "Trust"), with the Trustee. The Trust shall consist of an initial contribution of money or other property acceptable to the Trustee in its sole discretion, made by the Sponsor or transferred from a previous trustee under the Plan, such additional sums of money as shall from time to time be delivered to the Trustee under the Plan, all investments made therewith and proceeds thereof, and all earnings and profits thereon, less the payments that are made by the Trustee as provided herein, without distinction between principal and income. The Trustee hereby accepts the Trust on the terms and conditions set forth in this Agreement. In accepting this Trust, the Trustee shall be accountable for the assets received by it, subject to the terms and conditions of this Agreement. SECTION 2. EXCLUSIVE BENEFIT AND REVERSION OF SPONSOR CONTRIBUTIONS. Except as provided under applicable law, no part of the Trust may be used for, or diverted to, purposes other than the exclusive benefit of the Participants in the Plan or their beneficiaries prior to the satisfaction of all liabilities with respect to the Participants and their beneficiaries. SECTION 3. DISBURSEMENTS. (a) Administrator Directed Disbursements. The Trustee shall make disbursements in the amounts and in the manner that the Administrator directs from time to time in writing. The Trustee shall have no responsibility to ascertain such direction's compliance with the terms of the Plan or of any applicable law or the direction's effect for tax purposes or otherwise; nor shall the Trustee have any responsibility to see to the application of any disbursement. (b) Participant Withdrawal Requests. The Sponsor hereby directs that, pursuant to the Plan, a Participant withdrawal request (in-service or full 2 withdrawal) may be made by the Participant by telephone, and the Trustee shall process such request only after the identity of the Participant is verified by use of a personal identification number ("PIN") and social security number. The Trustee shall process such withdrawal in accordance with written guidelines provided by the Sponsor and documented in the Plan Administrative Manual. (c) Limitations. The Trustee shall not be required to make any disbursement in excess of the net realizable value of the assets of the Trust at the time of the disbursement. The Trustee shall not be required to make any disbursement in cash unless the Administrator has provided a written direction as to the assets to be converted to cash for the purpose of making the disbursement. SECTION 4. INVESTMENT OF TRUST. (a) Selection of Investment Options. The Trustee shall have no responsibility for the selection of investment options under the Trust and shall not render investment advice to any person in connection with the selection of such options. (b) Available Investment Options. The Named Fiduciary shall direct the Trustee as to what investment options: (i) the Trust shall be invested in during the period beginning on the date of the initial transfer of assets to the Trust and ending on the date of the completion of the reconciliation of Participant records ("Participant recordkeeping reconciliation period"), and (ii) the investment options in which Plan Participants may invest, subject to the following limitations. The Named Fiduciary may determine to offer as investment options only (i) securities issued by the investment companies advised by Fidelity Management & Research Company ("Mutual Funds") and (ii) notes evidencing loans to Plan Participants in accordance with the terms of the Plan. The investment options initially selected by the Named Fiduciary are identified on Schedules "A" and "C" attached hereto. The Named Fiduciary may add additional investment options with the consent of the Trustee and upon mutual amendment of this Trust Agreement and the Schedules thereto to reflect such additions. 3 (c) Participant Direction. Each Plan Participant shall direct the Trustee in which investment option(s) to invest the assets in the Participant's individual accounts. Such directions may be made by Plan Participants by use of the telephone exchange system maintained for such purposes by the Trustee or its agent, in accordance with written Telephone Exchange Guidelines attached hereto as Schedule "G". In the event that the Trustee fails to receive a proper direction, the assets shall be invested in the securities of the Mutual Fund set forth for such purpose on Schedule "C", until the Trustee receives a proper direction. (d) Mutual Funds. The Sponsor hereby acknowledges that it has received from the Trustee a copy of the prospectus for each Mutual Fund selected by the Named Fiduciary as a Plan investment option or short-term investment fund. Trust investments in Mutual Funds shall be subject to the following limitations: (i) Execution of Purchases and Sales. Purchases and sales of Mutual Funds (other than for exchanges) shall be made on the date on which the Trustee receives from the Sponsor in good order all information and documentation necessary to accurately effect such purchases and sales (or in the case of a purchase, the subsequent date on which the Trustee has received a wire transfer of funds necessary to make such purchase). Exchanges of Mutual Funds shall be made in accordance with the Telephone Exchange Guidelines attached hereto as Schedule "G". (ii) Voting. At the time of mailing of notice of each annual or special stockholders' meeting of any Mutual Fund, the Trustee shall send a copy of the notice and all proxy solicitation materials to each Plan Participant who has shares of the Mutual Fund credited to the Participant's accounts, together with a voting direction form for return to the Trustee or its designee. The Sponsor shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the Mutual Fund shares held in any short-term investment fund or liquidity reserve. The Participant shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the shares credited to the Participant's accounts (both vested and unvested). The Trustee shall vote the shares as directed by the Participant. The Trustee shall not vote shares for which it has received no directions from the Participant. During the 4 Participant recordkeeping reconciliation period, the Sponsor shall have the right to direct the Trustee as to the manner in which the Trustee is to vote the shares of the Mutual Funds in the Trust including Mutual Fund shares held in any short-term investment fund for liquidity reserve. With respect to all rights other than the right to vote, the Trustee shall follow the directions of the Participant and if no such directions are received, the directions of the Named Fiduciary. The Trustee shall have no further duty to solicit directions from Participants or the Sponsor. (e) Notes for General Purpose (five years or less). The Administrator shall act as the Trustee's agent for Participant loan notes and as such shall (i) collect and remit all principal and interest payments to the Trustee and (ii) keep the proceeds of such loans separate from the other assets of the Administrator and clearly identify such assets as Plan assets. To originate a Participant loan, the Plan Participant shall direct the Trustee as to the term and amount of the loan to be made from the Participant's individual account. Such directions shall be made by Plan Participants by use of the telephone exchange system maintained for such purpose by the Trustee or its agent. The Trustee shall determine, based on the current value of the Participant's account on the date of the request and any guidelines provided by the Sponsor, the amount available for the loan. Based on the interest rate supplied by the Sponsor in accordance with the terms of the Plan, the Trustee shall advise the Participant of such interest rate, as well as the installment payment amounts. The Trustee shall distribute the loan note with the proceeds check to the Participant. The Trustee also shall distribute truth-in-lending disclosure to the Participant. To facilitate recordkeeping, the Trustee may destroy the original of any promissory note made in connection with a loan to a Participant under the Plan, provided that the Trustee first creates a duplicate by a photographic or optical scanning or other process yielding a reasonable facsimile of the promissory note and the Plan Participant's signature thereon, which duplicate may be reduced or enlarged in size from the actual size of the original promissory note. (f) Notes for Purchase of Primary Residence (for a period greater than five years. The Administrator shall act as the Trustee's agent for the 5 purpose of holding all trust investments in Participant loan notes and related documentation and as such shall (i) hold physical custody of and keep safe the notes and other loan documents, (ii) collect and remit all principal and interest payments to the Trustee, (iii) keep the proceeds of such loans separate from the other assets of the Administrator and clearly identify such assets as Plan assets, and (iv) cancel and surrender the notes and other loan documentation when a loan has been paid in full. To originate a Participant loan, the Plan Participant shall direct the Trustee as to the type of loan to be made from the Participant's individual account. Such directions shall be made by Plan Participants by use of the telephone exchange system maintained for such purpose by the Trustee or its agent. The Trustee shall determine, based on the current value of the Participant's account, the amount available for the loan. Based on the interest rate supplied by the Sponsor in accordance with the terms of the Plan, the Trustee shall advise the Participant of such interest rate, as well as the installment payment amounts. The Trustee shall forward the loan document to the Participant for execution and submission for approval to the Administrator. The Administrator shall have the responsibility for approving the loan and instructing the Trustee to send the loan proceeds to the Administrator or to the Participant if so directed by the Administrator. In all cases, such instruction by the Administrator shall be made within thirty (30) days of the Participant's initial request (the origination date). (g) Reliance of Trustee on Directions. (i) The Trustee shall not be liable for any loss, or by reason of any breach, which arises from any Participant's exercise or non-exercise of rights under this Section 4 over the assets in the Participant's accounts. (ii) The Trustee shall not be liable for any loss, or by reason of any breach, which arises from the Named Fiduciary's exercise or non-exercise of rights under this Section 4, unless it was clear on their face that the actions to be taken under the Named Fiduciary's directions were prohibited by the fiduciary duty rules of section 404(a) of ERISA or were contrary to the terms of the Plan or this Agreement. 6 (h) Trustee Powers. The Trustee shall have the following powers and authority: (i) Subject to paragraphs (b), (c) and (d) of this Section 4, to sell, exchange, convey, transfer, or otherwise dispose of any property held in the Trust, by private contract or at public auction. No person dealing with the Trustee shall be bound to see to the application of the purchase money or other property delivered to the Trustee or to inquire into the validity, expediency, or propriety of any such sale or other disposition. (ii) Subject to paragraphs (b) and (c) of this Section 4, to invest in guaranteed investment contracts and short term investments (including interest bearing accounts with the Trustee or money market mutual funds advised by affiliates of the Trustee) and in collective investment funds maintained by the Trustee for qualified plans, in which case the provisions of each collective investment fund in which the Trust is invested shall be deemed adopted by the Sponsor and the provisions thereof incorporated as a part of this Trust as long as the fund remains exempt from taxation under Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended. (iii) To cause any securities or other property held as part of the Trust to be registered in the Trustee's own name, in the name of one or more of its nominees, or in the Trustee's account with the Depository Trust Company of New York and to hold any investments in bearer form, but the books and records of the Trustee shall at all times show that all such investments are part of the Trust. (iv) To keep that portion of the Trust in cash or cash balances as the Named Fiduciary or Administrator may, from time to time, deem to be in the best interest of the Trust. (v) To make, execute, acknowledge, and deliver any and all documents of transfer or conveyance and to carry out the powers herein granted. (vi) To borrow funds from a bank not affiliated with the Trustee in order to provide sufficient liquidity to process Plan transactions in a timely 7 fashion, provided that the cost of borrowing shall be allocated in a reasonable fashion to the investment fund(s) in need of liquidity. (vii) To settle, compromise, or submit to arbitration any claims, debts, or damages due to or arising from the Trust; to commence or defend suits or legal or administrative proceedings; to represent the Trust in all suits and legal and administrative hearings; and to pay all reasonable expenses arising from any such action, from the Trust if not paid by the Sponsor. (viii) To employ legal, accounting, clerical, and other assistance as may be required in carrying out the provisions of this Agreement and to pay their reasonable expenses and compensation from the Trust if not paid by the Sponsor. (ix) To do all other acts although not specifically mentioned herein, as the Trustee may deem necessary to carry out any of the foregoing powers and the purposes of the Trust. SECTION 5. RECORDKEEPING AND ADMINISTRATIVE SERVICES TO BE PERFORMED. (a) General. The Trustee shall perform those recordkeeping and administrative functions described in Schedule "A" attached hereto. These recordkeeping and administrative functions shall be performed within the framework of the Administrator's written directions regarding the Plan's provisions, guidelines and interpretations. (b) Accounts. The Trustee shall keep accurate accounts of all investments, receipts, disbursements, and other transactions hereunder, and shall report the value of the assets held in the Trust as of the last day of each fiscal quarter of the Plan and, if not on the last day of a fiscal quarter, the date on which the Trustee resigns or is removed as provided in Section 8 of this Agreement or is terminated as provided in Section 10 (the "Reporting Date"). Within thirty (30) days following each Reporting Date or within sixty (60) days in the case of a Reporting Date caused by the resignation or removal of the Trustee, or the termination of this Agreement, the Trustee shall file with the Administrator a written account setting forth all investments, receipts, disbursements, and other transactions effected by the Trustee between the 8 Reporting Date and the prior Reporting Date, and setting forth the value of the Trust as of the Reporting Date. Except as otherwise required under ERISA, upon the expiration of six (6) months from the date of filing such account with the Administrator, the Trustee shall have no liability or further accountability to anyone with respect to the propriety of its acts or transactions shown in such account, except with respect to such acts or transactions as to which the Sponsor shall within such six (6) month period file with the Trustee written objections. (c) Inspection and Audit. All records generated by the Trustee in accordance with paragraphs (a) and (b) shall be open to inspection and audit, during the Trustee's regular business hours prior to the termination of this Agreement, by the Administrator or any person designated by the Administrator. Upon the resignation or removal of the Trustee or the termination of this Agreement, the Trustee shall provide to the Administrator, at no expense to the Sponsor, in the format regularly provided to the Administrator, a statement of each Participant's accounts as of the resignation, removal, or termination, and the Trustee shall provide to the Administrator or the Plan's new recordkeeper such further records as are reasonable, at the Sponsor's expense. (d) Effect of Plan Amendment. A confirmation of the current qualified status of the Plan is attached hereto as Schedule "F". The Trustee's provision of the recordkeeping and administrative services set forth in this Section 5 shall be conditioned on the Sponsor delivering to the Trustee a copy of any amendment to the Plan as soon as administratively feasible following the amendment's adoption, with, if requested, an IRS determination letter or an opinion of counsel substantially in the form of Schedule "F" covering such amendment, and on the Administrator providing the Trustee on a timely basis with all the information the Administrator deems necessary for the Trustee to perform the recordkeeping and administrative services and such other information as the Trustee may reasonably request. (e) Returns, Reports and Information. The Administrator shall be responsible for the preparation and filing of all returns, reports, and information required of the Trust or Plan by law. The Trustee shall provide the Administrator with such information as the Administrator may reasonably 9 request to make these filings. The Administrator shall also be responsible for making any disclosures to Participants required by law including, without limitation, such disclosures as may be required by law, except such disclosure as may be required under federal or state truth-in-lending laws with regard to Participant loans, which shall be provided by the Trustee. SECTION 6. COMPENSATION AND EXPENSES. Within thirty (30) days of receipt of the Trustee's bill, which shall be computed and billed in accordance with Schedule "B" attached hereto and made a part hereof, as amended from time to time, the Sponsor shall send to the Trustee a payment in such amount or the Sponsor may direct the Trustee to deduct such amount from Participants' accounts. All expenses of the Trustee relating directly to the acquisition and disposition of investments constituting part of the Trust, and all taxes of any kind whatsoever that may be levied or assessed under existing or future laws upon or in respect of the Trust or the income thereof, shall be a charge against and paid from the appropriate Plan Participants' accounts. SECTION 7. DIRECTIONS AND INDEMNIFICATION. (a) Identity of Administrator and Named Fiduciary. The Trustee shall be fully protected in relying on the fact that the Named Fiduciary and the Administrator under the Plan are the individuals or persons named as such above or such other individuals or persons as the Sponsor may notify the Trustee in writing. (b) Directions from Administrator. Whenever the Administrator provides a direction to the Trustee, the Trustee shall not be liable for any loss, or by reason of any breach, arising from the direction if the direction is contained in a writing (or is oral and immediately confirmed in a writing) signed by any individual whose name and signature have been submitted (and not withdrawn) in writing to the Trustee by the Administrator in the form attached hereto as Schedule "D", provided the Trustee reasonably believes the signature of the individual to be genuine. Such direction may also be made via electronic data transfer (EDT) in accordance with procedures agreed to by the Administrator and the Trustee; provided, however, that the Trustee shall be fully protected in relying on such direction as if it were a direction made in writing by the Administrator. The Trustee shall have no responsibility to 10 ascertain any direction's (i) accuracy, (ii) compliance with the terms of the Plan or any applicable law, or (iii) effect for tax purposes or otherwise. (c) Directions from Named Fiduciary. Whenever the Named Fiduciary or Sponsor provides a direction to the Trustee, the Trustee shall not be liable for any loss, or by reason of any breach, arising from the direction (i) if the direction is contained in a writing (or is oral and immediately confirmed in a writing) signed by any individual whose name and signature have been submitted (and not withdrawn) in writing to the Trustee by the Named Fiduciary in the form attached hereto as Schedule "E" and (ii) if the Trustee reasonably believes the signature of the individual to be genuine, unless it is clear on the direction's face that the actions to be taken under the direction would be prohibited by the fiduciary duty rules of section 404(a) of ERISA or would be contrary to the terms of the Plan or this Agreement. (d) Co-Fiduciary Liability. In any other case, the Trustee shall not be liable for any loss, or by reason of any breach, arising from any act or omission of another fiduciary under the Plan except as provided in section 405(a) of ERISA. (e) Indemnification. The Sponsor shall indemnify the Trustee against, and hold the Trustee harmless from, any and all loss, damage, penalty, liability, cost, and expense, including without limitation, reasonable attorneys' fees and disbursements, that may be incurred by, imposed upon, or asserted against the Trustee by reason of any claim, regulatory proceeding, or litigation arising from any act done or omitted to be done by any individual or person with respect to the Plan or Trust, excepting only any and all loss, etc., arising solely from the Trustee's negligence or bad faith. (f) Survival. The provisions of this Section 7 shall survive the termination of this Agreement. SECTION 8. RESIGNATION OR REMOVAL OF TRUSTEE. (a) Resignation. The Trustee may resign at any time upon sixty (60) days' notice in writing to the Sponsor, unless a shorter period of notice is agreed upon by the Sponsor. 11 (b) Removal. The Sponsor may remove the Trustee at any time upon sixty (60) days' notice in writing to the Trustee, unless a shorter period of notice is agreed upon by the Trustee. SECTION 9. SUCCESSOR TRUSTEE. (a) Appointment. If the office of Trustee becomes vacant for any reason, the Sponsor may in writing appoint a successor trustee under this Agreement. The successor trustee shall have all of the rights, powers, privileges, obligations, duties, liabilities, and immunities granted to the Trustee under this Agreement. The successor trustee and predecessor trustee shall not be liable for the acts or omissions of the other with respect to the Trust. (b) Acceptance. When the successor trustee accepts its appointment under this Agreement, title to and possession of the Trust assets shall immediately vest in the successor trustee without any further action on the part of the predecessor trustee. The predecessor trustee shall execute all instruments and do all acts that reasonably may be necessary or reasonably may be requested in writing by the Sponsor or the successor trustee to vest title to all Trust assets in the successor trustee or to deliver all Trust assets to the successor trustee. (c) Corporate Action. Any successor of the Trustee or successor trustee, through sale or transfer of the business or trust department of the Trustee or successor trustee, or through reorganization, consolidation, or merger, or any similar transaction, shall, upon consummation of the transaction, become the successor trustee under this Agreement. SECTION 10. TERMINATION. This Agreement may be terminated at any time by the Sponsor upon sixty (60) days' notice in writing to the Trustee. On the date of the termination of this Agreement, the Trustee shall forthwith transfer and deliver to such individual or entity as the Sponsor shall designate, all cash and assets then constituting the Trust. If, by the termination date, the Sponsor has not notified the Trustee in writing as to whom the assets and cash are to be transferred and delivered, the Trustee may bring an appropriate action or proceeding for leave to deposit the assets and cash in a court of competent 12 jurisdiction. The Trustee shall be reimbursed by the Sponsor for all costs and expenses of the action or proceeding including, without limitation, reasonable attorneys' fees and disbursements. SECTION 11. RESIGNATION, REMOVAL, AND TERMINATION NOTICES. All notices of resignation, removal, or termination under this Agreement must be in writing and mailed to the party to which the notice is being given by certified or registered mail, return receipt requested, to the Sponsor c/o Kimberly Mark, Information Resources, Inc., 150 North Clinton Street, Chicago Illinois 60661-1416, and to the Trustee c/o John M. Kimpel, Fidelity Investments, 82 Devonshire Street, Boston, Massachusetts 02109, or to such other addresses as the parties have notified each other of in the foregoing manner. SECTION 12. DURATION. This Trust shall continue in effect without limit as to time, subject, however, to the provisions of this Agreement relating to amendment, modification, and termination thereof. SECTION 13. AMENDMENT OR MODIFICATION. This Agreement may be amended or modified at any time and from time to time only by an instrument executed by both the Sponsor and the Trustee. Notwithstanding the foregoing, to reflect increased operating costs the Trustee may once each calendar year amend Schedule "B" without the Sponsor's consent upon seventy-five (75) days written notice to the Sponsor. SECTION 14. GENERAL. (a) Performance by Trustee, its Agents or Affiliates. The Sponsor acknowledges and authorizes that the services to be provided under this Agreement shall be provided by the Trustee, its agents or affiliates, including Fidelity Investments Institutional Operations Company or its successor, and that certain of such services may be provided pursuant to one or more other contractual agreements or relationships. (b) Entire Agreement. This Agreement contains all of the terms agreed upon between the parties with respect to the subject matter hereof. 13 (c) Waiver. No waiver by either party of any failure or refusal to comply with an obligation hereunder shall be deemed a waiver of any other or subsequent failure or refusal to so comply. (d) Successors and Assigns. The stipulations in this Agreement shall inure to the benefit of, and shall bind, the successors and assigns of the respective parties. (e) Partial Invalidity. If any term or provision of this Agreement or the application thereof to any person or circumstances shall, to any extent, be invalid or unenforceable, the remainder of this Agreement, or the application of such term or provision to persons or circumstances other than those as to which it is held invalid or unenforceable, shall not be affected thereby, and each term and provision of this Agreement shall be valid and enforceable to the fullest extent permitted by law. (f) Section Headings. The headings of the various sections and subsections of this Agreement have been inserted only for the purposes of convenience and are not part of this Agreement and shall not be deemed in any manner to modify, explain, expand or restrict any of the provisions of this Agreement. SECTION 15. GOVERNING LAW. (a) Massachusetts Law Controls. This Agreement is being made in the Commonwealth of Massachusetts, and the Trust shall be administered as a Massachusetts trust. The validity, construction, effect, and administration of this Agreement shall be governed by and interpreted in accordance with the laws of the Commonwealth of Massachusetts, except to the extent those laws are superseded under section 514 of ERISA. (b) Trust Agreement Controls. The Trustee is not a party to the Plan, and in the event of any conflict between the provisions of the Plan and the provisions of this Agreement, the provisions of this Agreement shall control. 14 IN WITNESS WHEREOF, the parties hereto have caused this Agreement to be executed by their duly authorized officers as of the day and year first above written. INFORMATION RESOURCES, INC. Attest: ______________________ By: ______________________________ Secretary Vice President FIDELITY MANAGEMENT TRUST COMPANY Attest: ______________________ By ______________________________ Assistant Clerk Vice President 15 SCHEDULE "A" ADMINISTRATIVE SERVICES ----------------------- Administration - -------------- * Establishment and maintenance of Participant account and election percentages. * Maintenance of seven (7) plan investment options: - Fidelity Magellan Fund - Fidelity Money Market Trust: Retirement Money Market Portfolio - Fidelity Puritan Fund - Fidelity OTC Portfolio - Fidelity U.S. Equity Index Portfolio - Fidelity Growth & Income Portfolio - Fidelity Overseas Fund * Maintenance of four (4) money classifications: - 401(k) Savings - Matching - Rollover - Prior Plan P.S. * The Trustee will provide the recordkeeping and administrative services set forth on this Schedule "A" and as detailed in the Plan Administrative Manual and no others. A) PROVIDE PARTICIPANT TELEPHONE SERVICES 1. Fidelity registered representatives are available from 8:30 a.m. - 12:00 Midnight ET to provide toll free telephone service for Participant inquiries and transactions. Additionally, Participants have 24 hour account balance inquiry access utilizing our automated voice response system. 2. For security purposes, all calls are recorded. In addition, several levels of security are available including the verification of a Personal Identification Number (PIN) and/or any other indicative data resident on the system. 3. Through our telephone services, Fidelity provides the following services: - Provide mutual fund investment information. - Maintain plan specific provisions. - Process exchanges (transfers) between Fidelity's mutual funds on a daily basis. 16 - Maintain and process changes to Participants' contribution allocations for all money sources. - Allow Participants to change their deferral percentages and provide updates via EDT for customer to apply to its payrolls accordingly. - Consult with Participants in various loan scenarios and generate all documentation. - Process all Participant loan and withdrawal requests via Fidelity's toll-free telephone service according to plan provisions on a daily basis. - In-service withdrawals via telephone as directed and approved by the Sponsor. - Hardship withdrawals via telephone as directed and approved by the Sponsor. B) PLAN ACCOUNTING 1. Process payroll contributions according to your payroll frequency via electronic data transfer (EDT) or consolidated magnetic tape. The data format will be provided by Fidelity. 2. Provide plan and Participant level accounting for up to nine (9) money classifications for the Plan. 3. Audit and reconcile the plan and Participant accounts daily. 4. Provide daily plan and Participant level accounting for the Plan investment options. 5. Reconcile and process Participant withdrawal requests as approved and directed by the Sponsor. All requests are paid based on the current market values of Participants' accounts, not advanced or estimated values. A distribution report will accompany each check. 6. Track individual Participant loans; process loan withdrawals; re-invest loan repayments; and prepare and deliver comprehensive reports to plan sponsor to assist in the administration of Participant loans. 7. Maintain and process changes to Participants' prospective and existing investment mix elections via Fidelity's toll-free telephone service. C) PARTICIPANT REPORTING 1. Mail confirmation to Participants of all transactions initiated via Fidelity Telephone Services within three (3) calendar days of the transaction. 2. Prepare and mail via first class to each plan Participant a quarterly detailed Participant statement reflecting all activity for the period. Statements will be mailed no later than twenty (20) calendar days after each quarter end. 17 3. Mail required 402(f) notification for distribution from the plan. This notice advises Participants of tax consequences of their plan distribution. D) PLAN REPORTING 1. Prepare, reconcile and deliver a monthly Trial Balance Report presenting all money classes and investments. This report is based on the market value as of the last business day of the month. The report will be delivered not later than twenty (20) days after the end of each month in the absence of unusual circumstances. 2. Prepare, reconcile and deliver a Quarterly Administrative Report presenting both on a Participant and a total plan basis all money classes, investment positions and a summary of all activity of the Participant and plan as of the last business day of the quarter. The report will be delivered not later than twenty (20) days after the end of each quarter in the absence of unusual circumstances. E) GOVERNMENT REPORTING Process year-end tax reports for Participants - 1099R, as well as financial reporting to assist in the preparation of Form 5500. F) COMMUNICATION SERVICES Employee communications describing available investment options, including multimedia informational materials and group presentations. G) OTHER Performance of non-discrimination limitation testing upon request. In order to obtain this service, the Sponsor shall be required to provide the information identified in the Fidelity Discrimination Testing Package Guidelines. INFORMATION RESOURCES, INC. FIDELITY MANAGEMENT TRUST COMPANY By: _______________________ By: ____________________________ Date Vice President Date 18 SCHEDULE "B" FEE SCHEDULE Annual Participant Fee: $8.00 per Participant*, subject to a $15,000 per year minimum, billed and payable quarterly. Enrollments by Phone (optional): $5.00 per non-active employee residing on Fidelity's Participant recordkeeping system. Loan Fee: Establishment fee of $35.00 per loan account; annual fee of $15.00 per loan account. In-Service Withdrawals by Phone: $20.00 per withdrawal. Remote Access: $1,000 per year. Installation of two remote access terminals will be provided free of charge. Installation of each additional terminal is $1,500. Return of Excess Contribution Fee: $25.00 per Participant, one-time charge per calculation and check generation. - - Other Fees: separate charges for optional non-discrimination testing, extraordinary expenses resulting from large numbers of simultaneous manual transactions or from errors not caused by Fidelity, or for reports not contemplated in this Agreement. The Administrator may withdraw reasonable administrative fees from the Trust by written direction to the Trustee. * This fee will be imposed pro rata for each calendar quarter, or any part thereof, that it remains necessary to keep a Participant's account(s) as part of the Plan's records, e.g., vested, deferred, forfeiture, top-heavy and terminated Participants who must remain on file through calendar year-end for 1099-R reporting purposes. Note: These fees have been negotiated and accepted based on current plan assets of $28 million, current participation of 2,252 Participants and projected net cash flows of $6.2 million per year. Fees will be subject to revision if these Plan characteristics change significantly by either falling below or exceeding current or projected levels. Fees also have been based on the use of up to 19 seven (7) investment options, and such fees will be subject to revision if additional investment options are added. INFORMATION RESOURCES, INC. FIDELITY MANAGEMENT TRUST COMPANY By: _______________________ By: ____________________________ Date Vice President Date 20 SCHEDULE "C" INVESTMENT OPTIONS In accordance with Section 4(b), the Named Fiduciary hereby directs the Trustee that Participants' individual accounts may be invested in the following investment options: - Fidelity Magellan Fund - Fidelity Money Market Trust: Retirement Money Market Portfolio - Fidelity Puritan Fund - Fidelity OTC Portfolio - Fidelity U.S. Equity Index Portfolio - Fidelity Growth & Income Portfolio - Fidelity Overseas Fund The mutual fund advised by Fidelity Management & Research Company referred to in Section 4(c) shall be the Fidelity Money Market Trust: Retirement Money Market Portfolio. INFORMATION RESOURCES, INC. By: ______________________ Date 21 SCHEDULE "D" [ADMINISTRATOR'S LETTERHEAD] Ms. Carolyn Redden Fidelity Investments Institutional Operations Company 82 Devonshire Street Boston, Massachusetts 02109 [NAME OF PLAN] *** NOTE: This schedule should contain names and signatures for ALL individuals who will be providing directions to Fidelity representatives in connection with the Plan. Fidelity representatives will be unable to accept directions from any individual whose name does not appear on this schedule.*** Dear Ms. Redden: This letter is sent to you in accordance with Section 7(b) of the Trust Agreement, dated as of [date], between [name of Plan Sponsor] and Fidelity Management Trust Company. [I or We] hereby designate [name of individual], [name of individual], and [name of individual], as the individuals who may provide directions upon which Fidelity Management Trust Company shall be fully protected in relying. Only one such individual need provide any direction. The signature of each designated individual is set forth below and certified to be such. You may rely upon each designation and certification set forth in this letter until [I or we] deliver to you written notice of the termination of authority of a designated individual. Very truly yours, [ADMINISTRATOR] By [signature of designated individual] - ------------------------------------ [name of designated individual] [signature of designated individual] - ------------------------------------ [name of designated individual] [signature of designated individual] - ------------------------------------ 22 [name of designated individual] 23 SCHEDULE "E" [NAMED FIDUCIARY'S LETTERHEAD] Ms. Carolyn Redden Fidelity Investments Institutional Operations Company 82 Devonshire Street Boston, Massachusetts 02109 [NAME OF PLAN] Dear Ms. Redden: This letter is sent to you in accordance with Section 7(c) of the Trust Agreement, dated as of [date], between [name of Plan Sponsor] and Fidelity Management Trust Company. [I or We] hereby designate [name of individual], [name of individual], and [name of individual], as the individuals who may provide directions upon which Fidelity Management Trust Company shall be fully protected in relying. Only one such individual need provide any direction. The signature of each designated individual is set forth below and certified to be such. You may rely upon each designation and certification set forth in this letter until [I or we] deliver to you written notice of the termination of authority of a designated individual. Very truly yours, [NAMED FIDUCIARY] By [signature of designated individual] - ------------------------------------ [name of designated individual] [signature of designated individual] - ------------------------------------ [name of designated individual] [signature of designated individual] - ------------------------------------ [name of designated individual] 24 SCHEDULE "F" [LAW FIRM LETTERHEAD] **NOTE : THE PLAN S IRS DETERMINATION LETTER MAY BE SUBSTITUTED; PROVIDED IT IS NOT MORE THAN TWO YEARS OLD. Carolyn Redden Fidelity Institutional Retirement Services Company 82 Devonshire Street - MM3H Boston, MA 02109 [NAME OF PLAN] Dear Ms. Redden: In accordance with your request, this letter sets forth our opinion with respect to the qualified status under section 401(a) of the Internal Revenue Code of 1986 (including amendments made by the Employee Retirement Income Security Act of 1974) (the "Code"), of the [name of plan], as amended to the date of this letter (the "Plan"). The material facts regarding the Plan as we understand them are as follows. The most recent favorable determination letter as to the Plan's qualified status under section 401(a) of the Code was issued by the [location of Key District] District Director of the Internal Revenue Service and was dated [date] (copy enclosed). The version of the Plan submitted by [name of company] (the "Company") for the District Director's review in connection with this determination letter did not contain amendments made effective as of [date]. These amendments, among other matters, [brief description of amendments]. [Subsequent amendments were made on [date] to amend the provisions dealing with [brief description of amendments].] The Company has informed us that it intends to submit the Plan to the [location of Key District] District Director of the Internal Revenue Service and to request from him a favorable determination letter as to the Plan's qualified status under section 401(a) of the Code. The Company may have to make some modifications to the Plan at the request of the Internal Revenue Service in order to obtain this favorable determination letter, but we do not expect any of these modifications to be material. The Company has informed us that it will make these modifications. Based on the foregoing statements of the Company and our review of the provisions of the Plan, it is our opinion that the Internal Revenue Service will issue a favorable determination letter as to the qualified status of the Plan, as modified at the request of the Internal Revenue Service, under section 401(a) of the Code, subject to the customary condition that continued qualification of the Plan, as modified, will depend on its effect in operation. Sincerely, [name of law firm] 25 By [signature] ----------------- [name of partner] 26 SCHEDULE "G" TELEPHONE EXCHANGE PROCEDURES ----------------------------- The following telephone exchange procedures are currently employed by Fidelity Institutional Retirement Services Company (FIRSCO). Telephone exchange hours are 8:30 a.m. (ET) to 8:00 p.m. (ET) on each business day. A "business day" is any day on which the New York Stock Exchange is open. FIRSCO reserves the right to change these telephone exchange procedures at its discretion. EXCHANGES BETWEEN MUTUAL FUNDS ------------------------------ Participants may call on any business day to exchange between the mutual funds. If the request is received before 4:00 p.m. (ET), it will receive that day's trade date. Calls received after 4:00 p.m. (ET) will be processed on a next day basis. INFORMATION RESOURCES, INC. By: _____________________ Date 27 EX-10.LL 8 FIRST AMENDMENT TO TRUST AGREEMENT EXHIBIT 10(LL) FIRST AMENDMENT TO TRUST AGREEMENT BETWEEN FIDELITY MANAGEMENT TRUST COMPANY AND INFORMATION RESOURCES, INC. THIS FIRST AMENDMENT, effective as of the first day of March, 1997, by and between Fidelity Management Trust Company (the "Trustee") and Information Resources, Inc. (the "Sponsor"); WITNESSETH: WHEREAS, the Trustee and the Sponsor heretofore entered into a Trust Agreement dated July 1, 1996, with regard to the Information Resources, Inc. 401(k) Retirement Savings Plan (the "Plan"); and WHEREAS, the Trustee and the Sponsor now desire to amend said Trust Agreement as provided for in Section 13 thereof; NOW THEREFORE, in consideration of the above premises, the Trustee and the Sponsor hereby amend the Trust Agreement by: (1) Amending Section 4(b) by adding the following subsection where appropriate: (iii) equity securities issued by the Sponsor or an affiliate which are publicly-traded and which are "qualifying employer securities" within the meaning of section 407(d)(5) of ERISA ("Sponsor Stock"). (2) Amending Section 4 by inserting the following new Section 4(g) and relettering existing subsections and any cross references accordingly: (g) Sponsor Stock. Trust investments in Sponsor Stock shall be made via the Information Resources Stock Fund (the "Sponsor Stock Fund") which shall consist of shares of Sponsor Stock and short-term liquid investments, including Fidelity Institutional Cash Portfolios: Money Market Portfolio: Class 1 or such other Mutual Fund or commingled money market pool as agreed to by the Sponsor and Trustee, necessary to satisfy the Fund's cash needs for transfers and payments. A cash target range shall be maintained in the Sponsor Stock Fund. Such target range may be changed as agreed to in writing by the Sponsor and the Trustee. The Trustee is responsible for ensuring that the actual cash held in the Sponsor Stock Fund falls within the agreed upon range over time. Each Participant's proportional interest in the Sponsor Stock Fund shall be measured in units of participation, rather than shares of Sponsor Stock. Such units shall represent a proportionate interest in all of the assets of the Sponsor Stock Fund, which includes shares of Sponsor Stock, short-term investments and at times, receivables 1 for dividends and/or Sponsor Stock sold and payables for Sponsor Stock purchased. A Net Asset Value ("NAV") per unit will be determined daily for each unit outstanding of the Sponsor Stock Fund. The return earned by the Sponsor Stock Fund will represent a combination of the dividends paid on the shares of Sponsor Stock held by the Sponsor Stock Fund, gains or losses realized on sales of Sponsor Stock, appreciation or depreciation in the market price of those shares owned, and interest on the short-term investments held by the Sponsor Stock Fund. Dividends received by the Sponsor Stock Fund are reinvested in additional units of the Sponsor Stock Fund. Investments in Sponsor Stock shall be subject to the following limitations: (i) Acquisition Limit. Pursuant to the Plan, the Trust may be invested in Sponsor Stock to the extent necessary to comply with investment directions under Section 4(c) of this Agreement. (ii) Fiduciary Duty of Named Fiduciary. The Named Fiduciary shall continually monitor the suitability under the fiduciary duty rules of section 404(a)(1) of ERISA (as modified by section 404(a)(2) of ERISA) of acquiring and holding Sponsor Stock. The Trustee shall not be liable for any loss, or by reason of any breach, which arises from the directions of the Named Fiduciary with respect to the acquisition and holding of Sponsor Stock, unless it is clear on their face that the actions to be taken under those directions would be prohibited by the foregoing fiduciary duty rules or would be contrary to the terms of the Plan or this Agreement. (iii) Execution of Purchases and Sales. (A) Purchases and sales of Sponsor Stock (other than for exchanges) shall be made on the open market on the date on which the Trustee receives from the Sponsor in good order all information and documentation necessary to accurately effect such purchases and sales (or, in the case of purchases, the subsequent date on which the Trustee has received a wire transfer of the funds necessary to make such purchases). Exchanges of Sponsor Stock shall be made in accordance with the Telephone Exchange Guidelines attached hereto as Schedule "G". Such general rules shall not apply in the following circumstances: 2 (1) If the Trustee is unable to purchase or sell the total number of shares required to be purchased or sold on such day as a result of market conditions; or (2) If the Trustee is prohibited by the Securities and Exchange Commission, the New York Stock Exchange, or any other regulatory body from purchasing or selling any or all of the shares required to be purchased or sold on such day. In the event of the occurrence of the circumstances described in (1) or (2) above, the Trustee shall purchase or sell such shares as soon as possible thereafter and shall determine the price of such purchases or sales to be the average purchase or sales price of all such shares purchased or sold, respectively. The Trustee may follow directions from the Named Fiduciary to deviate from the above purchase and sale procedures provided that such direction is made in writing by the Named Fiduciary. (B) Purchases and Sales from or to Sponsor. If directed by the Sponsor in writing prior to the trading date, the Trustee may purchase or sell Sponsor Stock from or to the Sponsor if the purchase or sale is for adequate consideration (within the meaning of section 3(18) of ERISA) and no commission is charged. If Sponsor contributions or contributions made by the Sponsor on behalf of the Participants under the Plan are to be invested in Sponsor Stock, the Sponsor may transfer Sponsor Stock in lieu of cash to the Trust. In either case, the number of shares to be transferred will be determined by dividing the total amount of Sponsor Stock to be purchased or sold by the 4:00 p.m. closing price of the Sponsor Stock on the New York Stock Exchange on the trading date. (C) Use of an Affiliated Broker. The Sponsor hereby directs the Trustee to use Fidelity Brokerage Services, Inc. ("FBSI") to provide brokerage services in connection with any purchase or sale of Sponsor Stock in accordance with directions from Plan Participants. FBSI shall execute such directions directly or through its affiliate, National Financial Services Company ("NFSC"). The provision of brokerage services shall be subject to the following: 3 (1) As consideration for such brokerage services, the Sponsor agrees that FBSI shall be entitled to remuneration under this authorization provision in the amount of three and one-half cents ($.035) commission on each share of Sponsor Stock. Any change in such remuneration may be made only by a signed agreement between Sponsor and Trustee. (2) Following the procedures set forth in Department of Labor Prohibited Transaction Class Exemption 86-128, the Trustee will provide the Sponsor with the following documents: (1) a description of FBSI's brokerage placement practices; (2) a copy of PTCE 86-128; and (3) a form by which the Sponsor may terminate this authorization to use a broker affiliated with the Trustee. The Trustee will provide the Sponsor with this termination form annually. (3) Any successor organization of FBSI, through reorganization, consolidation, merger or similar transactions, shall, upon consumption of such transaction, become the successor broker in accordance with the terms of this authorization provision. (4) The Trustee and FBSI shall continue to rely on this authorization provision until notified to the contrary. The Sponsor reserves the right to terminate this authorization upon written notice to FBSI (or its successor) and the Trustee, in accordance with Section 11 of this Agreement. (iv) Securities Law Reports. The Named Fiduciary shall be responsible for filing all reports required under Federal or state securities laws with respect to the Trust's ownership of Sponsor Stock, including, without limitation, any reports required under section 13 or 16 of the Securities Exchange Act of 1934, and shall immediately notify the Trustee in writing of any requirement to stop purchases or sales of Sponsor Stock pending the filing of any report. The Trustee shall provide to the Named Fiduciary such information on the Trust's ownership of Sponsor Stock as the Named Fiduciary may reasonably request in order to comply with Federal or state securities laws. (v) Voting and Tender Offers. Notwithstanding any other provision of this Agreement, the provisions of this Section shall govern the voting and tendering of 4 Sponsor Stock. The Sponsor, after consultation with the Trustee, shall provide and pay for all printing, mailing, tabulation and other costs associated with the voting and tendering of Sponsor Stock. (A) Voting. (1) When the issuer of the Sponsor Stock prepares for any annual or special meeting, the Sponsor shall notify the Trustee thirty (30) days in advance of the intended record date and shall cause a copy of all materials to be sent to the Trustee. Based on these materials the Trustee shall prepare a voting instruction form. At the time of mailing of notice of each annual or special stockholders' meeting of the issuer of the Sponsor Stock, the Sponsor shall cause a copy of the notice and all proxy solicitation materials to be sent to each Plan Participant with an interest in Sponsor Stock held in the Trust, together with the foregoing voting instruction form to be returned to the Trustee or its designee. The form shall show the proportional interest in the number of full and fractional shares of Sponsor Stock credited to the Participant's accounts held in the Sponsor Stock Fund. The Sponsor shall provide the Trustee with a copy of any materials provided to the Participants and shall certify to the Trustee that the materials have been mailed or otherwise sent to Participants. (2) Each Participant with an interest in the Sponsor Stock Fund shall have the right to direct the Trustee as to the manner in which the Trustee is to vote (including not to vote) that number of shares of Sponsor Stock reflecting such Participant's proportional interest in the Sponsor Stock Fund (both vested and unvested). Directions from a Participant to the Trustee concerning the voting of Sponsor Stock shall be communicated in writing, or by mailgram or similar means. These directions shall be held in confidence by the Trustee and shall not be divulged to the Sponsor, or any officer or employee thereof, or any other person. Upon its receipt of the directions, the Trustee shall vote the shares of Sponsor Stock reflecting the Participant's proportional interest in the Sponsor Stock Fund as directed by the Participant. The Trustee shall not vote shares of Sponsor Stock reflecting a Participant's proportional interest in the Sponsor Stock Fund for which it has received no direction from the Participant. 5 (3) The Trustee shall vote that number of shares of Sponsor Stock not credited to Participants' accounts in the same proportion on each issue as it votes those shares credited to particpants' accounts for which it received voting directions from Participants. (B) Tender Offers. (1) Upon commencement of a tender offer for any securities held in the Trust that are Sponsor Stock, the Sponsor shall notify each Plan Participant with an interest in such Sponsor Stock of the tender offer and utilize its best efforts to timely distribute or cause to be distributed to the Participant the same information that is distributed to shareholders of the issuer of Sponsor Stock in connection with the tender offer, and, after consulting with the Trustee, shall provide and pay for a means by which the Participant may direct the Trustee whether or not to tender the Sponsor Stock reflecting such Participant's proportional interest in the Sponsor Stock Fund (both vested and unvested). The Sponsor shall provide the Trustee with a copy of any material provided to the Participants and shall certify to the Trustee that the materials have been mailed or otherwise sent to Participants. (2) Each Participant shall have the right to direct the Trustee to tender or not to tender some or all of the shares of Sponsor Stock reflecting such Participant's proportional interest in the Sponsor Stock Fund (both vested and unvested). Directions from a Participant to the Trustee concerning the tender of Sponsor Stock shall be communicated in writing, or by mailgram or such similar means as is agreed upon by the Trustee and the Sponsor under the preceding paragraph. These directions shall be held in confidence by the Trustee and shall not be divulged to the Sponsor, or any officer or employee thereof, or any other person except to the extent that the consequences of such directions are reflected in reports regularly communicated to any such persons in the ordinary course of the performance of the Trustee's services hereunder. The Trustee shall tender or not tender shares of Sponsor Stock as directed by the Participant. The Trustee shall not tender shares of Sponsor Stock reflecting a Participant's proportional interest in the Sponsor Stock Fund for which it has received no direction from the Participant. 6 (3) The Trustee shall tender that number of shares of Sponsor Stock not credited to Participants' accounts in the same proportion as the total number of shares of Sponsor Stock credited to Participants' accounts for which it has received instructions from Participants. (4) A Participant who has directed the Trustee to tender some or all of the shares of Sponsor Stock reflecting the Participant's proportional interest in the Sponsor Stock Fund may, at any time prior to the tender offer withdrawal date, direct the Trustee to withdraw some or all of the tendered shares reflecting the Participant's proportional interest, and the Trustee shall withdraw the directed number of shares from the tender offer prior to the tender offer withdrawal deadline. Prior to the withdrawal deadline, if any shares of Sponsor Stock not credited to Participants' accounts have been tendered, the Trustee shall redetermine the number of shares of Sponsor Stock that would be tendered under Section 4(g)(v)(B)(3) if the date of the foregoing withdrawal were the date of determination, and withdraw from the tender offer the number of shares of Sponsor Stock not credited to Participants' accounts necessary to reduce the amount of tendered Sponsor Stock not credited to Participants' accounts to the amount so redetermined. A Participant shall not be limited as to the number of directions to tender or withdraw that the Participant may give to the Trustee. (5) A direction by a Participant to the Trustee to tender shares of Sponsor Stock reflecting the Participant's proportional interest in the Sponsor Stock Fund shall not be considered a written election under the Plan by the Participant to withdraw, or have distributed, any or all of his withdrawable shares. The Trustee shall credit to each proportional interest of the Participant from which the tendered shares were taken the proceeds received by the Trustee in exchange for the shares of Sponsor Stock tendered from that interest. Pending receipt of directions (through the Administrator) from the Participant or the Named Fiduciary, as provided in the Plan, as to which of the remaining investment options the proceeds should be invested in, the Trustee shall invest the proceeds in the Mutual Fund described in Schedule "C". (vi) Shares Credited. For all purposes of this Section, the number of shares of Sponsor Stock deemed "credited" to a Participant's accounts as of the relevant date (the record date or the date specified in a tender offer) shall be calculated by reference to 7 the number of shares reflected on the books of the transfer agent as of the relevant date. In the case of a tender, the number of shares credited shall be determined as of a date as closely administratively feasible to the relevant date. For all purposes of this Section, the number of shares of Sponsor Stock deemed "credited" or "reflected" to a Participant's proportional interest shall be determined as of the last preceding valuation date. The trade date is the date the transaction is valued. (vii) General. With respect to all rights other than the right to vote, the right to tender, and the right to withdraw shares previously tendered, in the case of Sponsor Stock credited to a Participant's proportional interest in the Sponsor Stock Fund, the Trustee shall follow the directions of the Participant and if no such directions are received, the directions of the Named Fiduciary. The Trustee shall have no duty to solicit directions from Participants. With respect to all rights other than the right to vote and the right to tender, in the case of Sponsor Stock not credited to Participants' accounts, the Trustee shall follow the directions of the Named Fiduciary. (viii) Conversion. All provisions in this Section 4(g) shall also apply to any securities received as a result of a conversion of Sponsor Stock. (3) Adding the following to the "investment options" portion of Schedules "A" and "C," respectively: Information Resources Stock Fund (Sponsor Stock Fund) (4) Amending Schedule "B" by adding the following fee: Trustee Fee To the extent that assets are invested in Sponsor Stock, .10% of such assets in the Trust payable pro rata quarterly on the basis of such assets as of the calendar quarter's last valuation date, with an annual minimum of $10,000 and an annual maximum of $35,000. (5) Amending Schedule "C" by restating in its entirety the last sentence of said Schedule as follows: The mutual fund advised by Fidelity Management & Research Company referred to in Sections 4(c) and 4(g)(v)(B)(5) shall be Fidelity Money Market Trust: Retirement Money Market Portfolio. 8 (6) Amending Schedule "G" by adding the following at the end thereof: SPONSOR STOCK FUND ------------------ EXCHANGES BETWEEN MUTUAL FUNDS AND THE SPONSOR STOCK FUND --------------------------------------------------------- Participants may call on any business day to exchange between the mutual funds and the Sponsor Stock Fund. If the request is received before 4:00 p.m. (ET), it will receive that day's trade date. Calls received after 4:00 p.m. (ET) will be processed on a next day basis. EXCHANGE RESTRICTIONS --------------------- Investments in the Sponsor Stock Fund will consist primarily of shares of Sponsor Stock. However, in order to satisfy daily Participant requests for exchanges, loans and withdrawals, the Sponsor Stock Fund will also hold cash or other short-term liquid investments in an amount that has been agreed to in writing by the Sponsor and the Trustee. The Trustee will be responsible for ensuring that the percentage of these investments falls within the agreed upon range over time. However, if there is insufficient liquidity in the Sponsor Stock Fund to allow for such activity, the Trustee will sell shares of Sponsor Stock in the open market. Exchange and redemption transactions will be processed as soon as proceeds from the sale of Sponsor Stock are received. IN WITNESS WHEREOF, the Trustee and the Sponsor have caused this First Amendment to be executed by their duly authorized officers effective as of the day and year first above written. INFORMATION RESOURCES, INC. FIDELITY MANAGEMENT TRUST COMPANY By By ---------------------------- ----------------------------- Date Vice President Date 9 EX-21 9 SUBSIDIARIES OF REGISTRANT Exhibit 21 INFORMATION RESOURCES, INC. SUBSIDIARIES DOMESTIC SUBSIDIARIES
Subsidiary State of Incorporation ---------- ---------------------- 564 Randolph Co. #2....................................................... Illinois IRI Puerto Rico, Inc. (formerly Market Trends, Inc.)...................... Puerto Rico NEO, Inc.................................................................. Connecticut IRI Venezuela Holdings, Inc............................................... Delaware IRI Guatemala Holdings, Inc............................................... Delaware IRI Greek Holdings, Inc................................................... Delaware IRI French Holdings, Inc.................................................. Delaware IRI Italy Holdings, Inc................................................... Delaware InfoScan Italy Holdings, Inc.............................................. Delaware IRI Logistics, Inc. (formerly LogiCNet, Inc.)............................. Delaware Shoppers Hotline, Inc..................................................... Delaware North Clinton Corporation................................................. Illinois
Exhibit 21 INFORMATION RESOURCES, INC. SUBSIDIARIES FOREIGN SUBSIDIARIES
Subsidiary Country of Incorporation ---------- --------------------------- Information Resources S.A..................................................... France IRI Software, Ltd. (formerly known as Management Decision Systems, Limited) d/b/a Information Resources............................... United Kingdom Information Resources GmbH.................................................... Federal Republic of Germany Information Resources Australia Pty. Ltd...................................... Australia Information Resources Japan, Ltd.............................................. Japan IRI Apollo K.K................................................................ Japan Information Resources New Zealand Pty. Ltd.................................... New Zealand Information Resources Singapore Pte. Ltd...................................... Singapore IRI Software (India) Private Limited.......................................... India Panel Pazar Arastirma ve Danismanlik A.S...................................... Republic of Turkey IRI-SECODIP, S.C.S............................................................ France IRI Hellas, S.A............................................................... Greece Information Resources de Mexico, S.A. de C.V. (formerly known as IRI Software de Mexico, S.A. de C.V.).................................... Mexico IRI InfoScan S.r.l............................................................ Italy Precis (1136) Limited......................................................... United Kingdom IRI InfoScan Limited (formerly InfoScan NMRA Limited)......................... United Kingdom
EX-23 10 CONSENT OF INDEPENDENT CERT. PUBLIC ACCOUNTANTS Exhibit 23.1 INFORMATION RESOURCES, INC. & SUBSIDIARIES CONSENT OF INDEPENDENT CERTIFIED PUBLIC ACCOUNTANTS We have issued our reports dated February 15, 1996 accompanying the consolidated financial statements and schedules and, March 24, 1995 accompanying the December 31, 1994 financial statements of IRI-SECODIP, S.N.C., included in the Annual Report of Information Resources, Inc. & Subsidiaries on Form 10-K for the year ended December 31, 1995. We hereby consent to the incorporation by reference of said reports in the Registration Statements of Information Resources, Inc. on Forms S-8 (File Nos. 33-48289, 33-48290, 33-48291, 33-52719, 33-52721 and 33-54649). Grant Thornton LLP Chicago, Illinois March 22, 1996 EXHIBIT 23 CONSENT OF INDEPENDENT AUDITORS We consent to the incorporation by reference in the Registration Statement (Form S-8 No. 33-48289) pertaining to the Information Resources, Inc. Nonqualified Stock Option Plan , the Registration Statement (Form S-8 No. 33-48290) pertaining to the Information Resources, Inc. 1992 Incentive Stock Option Plan, the Registration Statement (Form S-8 No. 33-48291) pertaining to the Information Resources, Inc. 1992 Executive Stock Option Plan, the Registration Statement (Form S-8 No. 33-52719) pertaining to the Information Resources, Inc. Nonqualified Stock Option Plan , the Registration Statement (Form S-8 No. 33-52721) pertaining to the Information Resources, Inc. Employee Nonqualified Stock Option Plan and the Registration Statement (Form S-8 No. 33-54649) pertaining to the Information Resources, Inc. 1992 Executive Stock Option Plan and in the related Prospectuses of our report dated February 12, 1997 with respect to the consolidated financial statements and schedule of Information Resources, Inc. included in this Annual Report (Form 10-K) for the year ended December 31, 1996. ERNST & YOUNG LLP Chicago, Illinois March 25, 1997 EX-24 11 POWERS OF ATTORNEY Exhibit 24 INFORMATION RESOURCES, INC. AND SUBSIDIARIES POWER OF ATTORNEY KNOW ALL MEN BY THESE PRESENTS, that the undersigned constitutes and appoints Gian M. Fulgoni, Gary M. Hill and Edward S. Berger, and each of them, his true and lawful attorneys-in-fact and agents, with full power of substitution and re-substitution, for him and in his name, place and stead, in any and all capacities, to sign the Annual Report on Form 10-K for the year ended December 31, 1996 of Information Resources, Inc., together with any and all amendments to such Annual Report, and to file the same, with all exhibits thereto, and other documents in connection therewith, with the Securities and Exchange Commission, granting unto said attorneys-in-fact and agents, and each of them, full power and authority to do and perform each and every act and thing requisite and necessary to be done, as fully to all intents and purposes as he might or could do in person, hereby ratifying and confirming all that said attorneys-in-fact and agent of either of them, or their substitute or substitutes, may lawfully do or cause to be done by virtue hereof. Dated: March 25, 1997 /s/ James G. Andress ------------------------------------- James G. Andress, Director /s/ Gerald J. Eskin -------------------------------------- Gerald J. Eskin, Director /s/ Edwin E. Epstein -------------------------------------- Edwin E. Epstein, Director /s/ John D.C. Little -------------------------------------- John D.C. Little, Director /s/ Leonard M. Lodish -------------------------------------- Leonard M. Lodish, Director /s/ Edward E. Lucente -------------------------------------- Edward E. Lucente, Director /s/ EDITH W. MARTIN -------------------------------------- Edith W. Martin, Director /s/ Jeffrey P. Stamen -------------------------------------- Jeffrey P. Stamen, Director /s/ GLEN L. URBAN -------------------------------------- Glen L. Urban, Director /s/ THOMAS W. WILSON, Jr. -------------------------------------- Thomas W. Wilson, Director EX-27 12 FINANCIAL DATA SCHEDULE
5 1,000 YEAR DEC-31-1996 DEC-31-1996 12,195 0 103,750 (4,337) 0 118,183 147,398 (92,806) 334,493 83,603 7,892 279 0 0 226,049 334,493 0 405,603 0 368,951 0 0 2,110 (10,844) 2,300 (8,544) 0 0 0 (7,558) (.27) (.27)
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