AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON JUNE 5, 1996
REGISTRATION NO. 333-4238
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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
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AMENDMENT NO. 1
TO
FORM S-1
REGISTRATION STATEMENT
UNDER
THE SECURITIES ACT OF 1933
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FACTSET RESEARCH SYSTEMS INC.
(Exact name of registrant as specified in its charter)
DELAWARE 7374 13-3362547
(State or Other Jurisdiction (Primary Standard Industrial (I.R.S. Employer
of Classification Number) Identification No.)
Incorporation or
Organization)
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ONE GREENWICH PLAZA
GREENWICH, CONNECTICUT 06830
(203) 863-1500
(Addresss, including zip code, and telephone number, including area code, of
registrant's principal executive offices)
-------------------
HOWARD E. WILLE
CHAIRMAN & CHIEF EXECUTIVE OFFICER
FACTSET RESEARCH SYSTEMS INC.
ONE GREENWICH PLAZA
GREENWICH, CONNECTICUT 06830
(203) 863-1500
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
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COPIES TO:
WILLIAM P. ROGERS, JR., ESQ. SARAH JONES BESHAR, ESQ.
CRAVATH, SWAINE & MOORE DAVIS POLK & WARDWELL
WORLDWIDE PLAZA 450 LEXINGTON AVENUE
825 EIGHTH AVENUE NEW YORK, NEW YORK 10017
NEW YORK, NEW YORK 10019 (212) 450-4131
(212) 474-1270
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THE REGISTRANT HEREBY AMENDS THIS REGISTRATION STATEMENT ON SUCH DATE OR
DATES AS MAY BE NECESSARY TO DELAY ITS EFFECTIVE DATE UNTIL THE REGISTRANT SHALL
FILE A FURTHER AMENDMENT WHICH SPECIFICALLY STATES THAT THIS REGISTRATION
STATEMENT SHALL THEREAFTER BECOME EFFECTIVE IN ACCORDANCE WITH SECTION 8(A) OF
THE SECURITIES ACT OF 1933, OR UNTIL THE REGISTRATION STATEMENT SHALL BECOME
EFFECTIVE ON SUCH DATE AS THE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A),
MAY DETERMINE.
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FACTSET RESEARCH SYSTEMS INC.
CROSS REFERENCE SHEET
PURSUANT TO ITEM 501(B) OF REGULATION S-K
FORM S-1 ITEM NUMBER AND CAPTION LOCATION IN PROSPECTUS
--------------------------------- ----------------------
1. Forepart of Registration Statement and
Outside Front Cover Page of Prospectus.... Facing Page; Cross-Reference Sheet;
Outside Front Cover Page
2. Inside Front and Outside Back Cover Pages
of Prospectus............................. Inside Front and Outside Back Cover Pages;
Available Information
3. Summary Information, Risk Factors and
Ratio of Earnings to Fixed Charges........ Prospectus Summary; Risk Factors
4. Use of Proceeds........................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price........... Underwriting
6. Dilution.................................. Risk Factors; Dilution
7. Selling Security-Holders.................. Principal and Selling Stockholders
8. Plan of Distribution...................... Outside Front Cover Page; Underwriting
9. Description of Securities to be
Registered................................ Prospectus Summary; Description of Capital
Stock
10. Interests of Named Experts and Counsel.... Legal Matters; Experts
11. Information with Respect to the
Registrant................................ Inside Front and Outside Back Cover Pages;
Prospectus Summary; Risk Factors;
Dividend Policy; Capitalization;
Selected Historical Consolidated
Financial Data; Management's Discussion
and Analysis of Financial Condition and
Results of Operations; Business;
Management; Certain Transactions and
Relationships; Description of Capital
Stock; Shares Eligible for Future Sale;
Consolidated Financial Statements.
12. Disclosure of Commission Position on
Indemnification for Securities Act
Liabilities............................... Part II, Item 17
SUBJECT TO COMPLETION, DATED JUNE 5, 1996
PROSPECTUS
, 1996
N08706BE.G01,1230,240,H
3,125,000 SHARES
FACTSET RESEARCH SYSTEMS INC.
COMMON STOCK
All of the shares of Common Stock (the "Common Stock") of FactSet Research
Systems Inc. ("FactSet" or the "Company") offered hereby (the "Offering") are
being sold by certain stockholders of the Company (the "Selling Stockholders").
The Company will not receive any of the proceeds from the Offering. See "Use of
Proceeds" and "Principal and Selling Stockholders."
Prior to the Offering, there has been no public market for the Common Stock.
It is currently estimated that the initial public offering price will be between
$15 and $17 per share. See "Underwriting" for information relating to the
factors considered in determining the initial public offering price.
The Common Stock has been approved for listing on the New York Stock
Exchange under the symbol "FDS."
SEE "RISK FACTORS" BEGINNING ON PAGE 8 FOR A DISCUSSION OF CERTAIN FACTORS
THAT SHOULD BE CONSIDERED BY PROSPECTIVE PURCHASERS OF THE COMMON STOCK OFFERED
HEREBY.
THESE SECURITIES HAVE NOT BEEN APPROVED OR DISAPPROVED BY THE SECURITIES AND
EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION NOR HAS THE
SECURITIES AND EXCHANGE COMMISSION OR ANY STATE SECURITIES COMMISSION
PASSED UPON THE ACCURACY OR ADEQUACY OF THIS PROSPECTUS. ANY
REPRESENTATION TO THE CONTRARY IS A CRIMINAL OFFENSE.
PRICE UNDERWRITING PROCEEDS TO
TO THE DISCOUNTS AND THE SELLING
PUBLIC COMMISSIONS(1) STOCKHOLDERS(2)
Per Share.......................................... $ $ $
Total(3)........................................... $ $ $
(1) The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act of 1933, or to contribute to payments that the Underwriters
may be required to make in respect thereof.
(2) Before deducting expenses payable by the Selling Stockholders estimated at
$580,000. The Company has agreed to pay additional expenses of the Offering
estimated at $290,000.
(3) The Selling Stockholders have granted the Underwriters a 30-day option to
purchase up to 468,750 additional shares of Common Stock on the same terms
as set forth above solely to cover over-allotments, if any. See
"Underwriting." If such option is exercised in full, the total Price to
Public, Underwriting Discounts and Commissions and Proceeds to the Selling
Stockholders will be $ , $ and $ , respectively.
The shares of Common Stock are being offered by the several Underwriters
named herein, subject to prior sale, when, as and if accepted by them and
subject to certain conditions. It is expected that certificates for the shares
of Common Stock offered hereby will be available for delivery in New York, New
York on or about , 1996.
DONALDSON, LUFKIN & JENRETTE ALEX. BROWN & SONS
SECURITIES CORPORATION INCORPORATED
INFORMATION CONTAINED HEREIN IS SUBJECT TO COMPLETION OR AMENDMENT. A
REGISTRATION STATEMENT RELATING TO THESE SECURITIES HAS BEEN FILED WITH THE
SECURITIES AND EXCHANGE COMMISSION. THESE SECURITIES MAY NOT BE SOLD NOR MAY
OFFERS TO BUY BE ACCEPTED PRIOR TO THE TIME THE REGISTRATION STATEMENT
BECOMES EFFECTIVE. THIS PROSPECTUS SHALL NOT CONSTITUTE AN OFFER TO SELL OR THE
SOLICITATION OF AN OFFER TO BUY NOR SHALL THERE BE ANY SALE OF THESE SECURITIES
IN ANY STATE IN WHICH SUCH OFFER, SOLICITATION OR SALE WOULD BE UNLAWFUL PRIOR
TO REGISTRATION OR QUALIFICATION UNDER THE SECURITIES LAWS OF ANY SUCH STATE.
[FACTSET LOGO AND LOGOS
OF VARIOUS DATABASE SUPPLIERS]
IN CONNECTION WITH THE OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT
TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET OF THE COMMON STOCK OF THE
COMPANY AT A LEVEL ABOVE THAT WHICH MIGHT OTHERWISE PREVAIL IN THE OPEN MARKET.
SUCH TRANSACTIONS MAY BE EFFECTED ON THE NEW YORK STOCK EXCHANGE OR THE
OVER-THE-COUNTER MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE
DISCONTINUED AT ANY TIME.
2
PROSPECTUS SUMMARY
The following summary is qualified in its entirety by the more detailed
information and financial statements and related notes appearing elsewhere in
this Prospectus. Unless otherwise indicated, all information in this Prospectus
(x) reflects a four for one split with respect to the Common Stock effected June
4, 1996, (y) assumes an initial public offering price of $16.00 per share and
(z) assumes no exercise of the Underwriters' over-allotment option. See
"Description of Capital Stock" and "Underwriting." In addition, unless the
context requires otherwise, (i) references to the Company or FactSet refer to
FactSet Research Systems Inc., a Delaware Corporation, and its subsidiaries, and
(ii) references to a fiscal year refer to the fiscal year of the Company which
ends on August 31 of each year.
THE COMPANY
OVERVIEW
FactSet is a leading provider of on-line integrated database services to the
financial community. The Company, which markets its services in the United
States, Europe and the Pacific Rim, combines multiple large-scale databases into
a single, coherent mainframe computer information system accessible from
clients' personal computer terminals. The Company's aggregated data library
provides a broad variety of financial and economic information, including
fundamental data on more than 20,000 companies worldwide. By allowing clients
the ability to simultaneously access multiple databases as if they were part of
a single database and search for and download specific data directly into their
spreadsheets and other work products, FactSet provides investment managers,
investment banks and other financial institutions with a comprehensive,
"one-stop" source for financial information and analytics. The Company's
advanced, proprietary software tools enable clients to manipulate and analyze
the data provided by the Company and present it in a wide variety of formats,
including custom reports designed by the clients. At May 31, 1996, over 400
clients with more than 4,500 authorized workstations subscribed to the Company's
services, including many leading investment managers and investment banks.
The Company was formed in 1978 and has been profitable in each of the last
15 years. For the five fiscal years ended August 31, 1995, the Company sustained
compound annual growth rates of revenue, operating income and net income of
21.8%, 23.2% and 23.8%, respectively. For the first six months of fiscal 1996,
the Company's revenue, operating income and net income increased 17.6%, 21.0%
and 23.6%, respectively, from the comparable period in fiscal 1995.
FactSet currently acquires data from 30 information providers supplying over
50 databases, including COMPUSTATTM (fundamental data on North American
corporations), Interactive Data Corporation (U.S. and Canadian securities
prices), Exshare securities prices (international securities prices), FIRST
CALLTM (U.S. and international earnings estimates), Worldscope (fundamental data
on corporations in 37 countries), I/B/E/STM (U.S. and international earnings
estimates) and Value Line (fundamental corporate data and earnings estimates).
The Company maintains its databases on continually upgraded and fully redundant
Digital Equipment Corporation AlphaTM mainframe computers, a platform that
allows for monthly, daily, hourly and real-time refreshment of data. FactSet
seeks to maintain, when possible, at least two sources for each item of data.
Unlike services that charge fees based on actual system usage time, the
Company charges fixed monthly amounts which vary among clients based on the
number of sites and workstations from which the FactSet system is available and
the number of accessible databases and specialized services to which a client
subscribes. The Company believes that this pricing policy encourages clients to
use the FactSet
3
system regularly and thus to integrate the system into their decision-making
processes. FactSet does not enter into formal contracts with clients, a practice
which the Company believes enhances its marketing efforts by allowing clients to
use the FactSet system without the requirement of a long-term commitment. The
Company enjoys excellent client retention--FactSet's overall client retention
rate (on a revenue basis) has been over 95% in each of the past six years. See
Note 7 to the Summary Consolidated Financial and Operating Data.
FACTSET'S COMPETITIVE ADVANTAGES
Management believes that FactSet has several attributes that have been
significant to its growth and profitability and provide it with competitive
advantages over other financial data providers. These include (i) its ability to
integrate financial data from over 50 third-party databases into an aggregated
data library that allows users to access all data as if from one database; (ii)
its internally developed, proprietary software that allows extensive
manipulation of data, including downloading directly to custom spreadsheets
developed by clients for use on the FactSet system; (iii) its sophisticated
system architecture that allows users to access the computing power of its
mainframe computer platform through its easy-to-use Windows(R)*-based programs;
(iv) its advanced communications infrastructure, including its wide area network
("WAN"), through which approximately 25% of its clients and 50% of its
authorized workstations are now connected to the FactSet system; (v) the
proprietary structure of its integrated databases, which facilitates speed and
efficiency in data retrieval; (vi) its superior client services, including its
ability to work closely with clients to develop customized data solutions; and
(vii) its ability to recruit, train and retain highly talented engineering and
marketing personnel, as evidenced by the Company's greater than 85% average
employee retention rate over the past five years.
GROWTH STRATEGY
The Company intends to continue to expand its operations while maintaining
attractive levels of profitability. The Company plans to introduce new service
enhancements, applications and databases designed to increase penetration of
existing clients and attract new clients. The Company has recently expanded its
marketing efforts to focus on specific industry segments, including investment
banking and portfolio management, and on geographic expansion to Europe and the
Pacific Rim, each of which the Company believes present significant
opportunities for growth. The Company will also explore strategic acquisitions
and alliances as such opportunities arise. The principal components of the
Company's growth strategy are:
. INTRODUCING NEW SERVICE ENHANCEMENTS AND APPLICATIONS. The Company
continually seeks to develop and integrate new service enhancements and
applications that make its system more useful to current clients and more
attractive to new clients. In 1993, the Company deployed a wide area data
transmission network that greatly improves the speed and quality of
throughput to client sites and significantly enhances the ability of
clients to quickly and efficiently add authorized workstations to their
service subscriptions. FactSet's graphical user interface for Windows
makes the FactSet system available in a user-friendly point-and-click
screen environment familiar to most of today's personal computer users.
FactSet has recently introduced its Alpha Testing application, which
allows clients to analyze the relationship between a single or multiple
variables and subsequent investment returns over time, and Cornerstone, a
set of applications that allows quantitative analysts to quickly and
efficiently access large amounts of data directly from the FactSet system.
The Company is currently developing an interactive workstation application
designed specifically for portfolio managers, which will allow integration
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* Windows(R) is a registered trademark of the Microsoft Corporation.
4
of data from user accounting systems into the FactSet system for manipulation
and presentation in FactSet reports.
. ATTRACTING NEW CLIENTS AND EXPANDING CLIENT RELATIONSHIPS. The Company
believes that substantial opportunities exist to both attract new clients
and increase its revenue from existing clients. While the Company has
achieved excellent penetration of the largest investment managers (84 of
the top 100 investment managers in the United States are FactSet clients),
only approximately 35% of the estimated 900 investment managers in the
United States with more than $500 million under management are FactSet
clients. In addition, while 20 of the largest investment banks in the
United States are FactSet clients, only approximately 44% of the estimated
151 securities firms in the United States with more than $20 million in
capital are FactSet clients. The Company also believes that it should be
able to increase revenue from exisiting clients through the introduction
of new applications, databases and technological innovations, many of
which are in response to client demand. In addition, the Company recently
formed an investment banking group to focus exclusively on sales and
marketing to the investment banking sector. FactSet also recently
established technical development groups focused on the development of
applications and services for specific user categories such as portfolio
managers and quantitative research analysts.
. INCREASING INTERNATIONAL PENETRATION. The Company is committed to the
international expansion of its customer base and established offices in
London in 1993 and Tokyo in 1994 to enhance its marketing efforts and its
ability to serve clients in Europe and the Pacific Rim. The Company is
supporting these efforts through the development of applications and the
addition of databases targeted at the international financial community.
The Company has been successful in the acquisition of a number of large
clients in these regions and, as a result, the annual indicated
subscription revenue from clients outside the United States increased
121.9% from $1.4 million at March 31, 1995 to $3.0 million at March 31,
1996.
. PROVIDING SUPERIOR CONSULTATIVE SERVICES. Providing superior client
support services is an integral part of the Company's business philosophy
and has contributed to a client retention rate of over 95% in each of the
past six years. The goal of the Company's 36 full-time client support
consultants is to maximize the utility of the FactSet system to clients
and thereby promote lasting and mutually-profitable client relationships.
Client support consultants work with clients, often at client sites, to
develop custom applications tailored to clients' information needs. The
Company also conducts approximately 50 training seminars across the nation
annually and maintains a client support hotline and a round-the-clock
emergency beeper service. Consulting and training services are provided to
clients free of charge.
. INTEGRATING NEW DATABASES. The Company regularly adds new databases to its
system. The integration of new databases, in addition to making the
Company's system more useful to existing clients, enables the Company to
tailor its services to the specific needs of additional user categories
and markets. Recent additions to the Company's library of databases
include EDGAR(R)* on FactSet, which provides access to continuously
updated text and data contained in EDGAR SEC filings, the Toyo Kezai
database, a source of fundamental corporate information on Japanese
companies, Morgan Stanley Capital International, which provides
performance data for non-United States stock markets and industry groups,
and Russell U.S. Equity Profiles, which provides benchmark data on company
investment styles and structure characteristics. The Company also is in
the process of providing United States security prices that are updated
within 20 minutes of their change (rather than once per day, as is the
current practice).
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* EDGAR(R) is a registered trademark of the Securities and Exchange Commission.
5
THE OFFERING
Common Stock offered (1)..................... 3,125,000 shares
Common Stock to be outstanding after the
Offering (1)(2).............................. 9,526,300 shares
Proceeds of Offering......................... The Company will not receive any of the
proceeds of the Offering. Promptly following
the completion of the Offering, one of the
Selling Stockholders will apply a portion of
the proceeds to repay in full certain loans
outstanding from the Company totalling
$3,846,703. The Company has agreed to pay
certain expenses of the Offering in an amount
estimated at $290,000.
Listing...................................... The Common Stock has been approved for
listing on the New York Stock Exchange (the
"NYSE") under the symbol "FDS."
Risk Factors................................. Prospective investors should consider
carefully the matters set forth under the
caption "Risk Factors," as well as the other
information set forth in this Prospectus.
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(1) Assumes the Underwriters do not exercise their option to purchase up to an
additional 468,750 shares of Common Stock to cover over-allotments.
(2) Excludes 1,451,000 shares of Common Stock issuable upon exercise of
outstanding stock options granted to certain employees of the Company having
an average exercise price of $2.66. In addition, the Company has reserved
950,000 shares of Common Stock for issuance in connection with options
issuable under the Company's 1996 Stock Option Plan. See
"Management--Company Stock Option Plans."
6
SUMMARY CONSOLIDATED FINANCIAL AND OPERATING DATA
YEARS ENDED AUGUST 31, SIX MONTHS ENDED
---------------------------------------------------- ----------------------------
FEBRUARY 28, FEBRUARY 29,
1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER CLIENT DATA)
STATEMENT OF INCOME
DATA:
Subscription
revenue................ $16,441 $19,279 $23,945 $29,019 $36,188 $ 17,597 $ 20,698
Expenses.............. 12,922 15,341 18,993 25,576 28,088 13,584 15,841
------- ------- ------- ------- ------- ------------ ------------
Operating income...... 3,519 3,938 4,952 3,443(1) 8,100 4,013 4,857
Other income.......... 230 313 208 251 570 241 430
------- ------- ------- ------- ------- ------------ ------------
Income before income
taxes.................. 3,749 4,251 5,160 3,694 8,670 4,254 5,287
Income taxes.......... 1,648 1,916 2,281 1,747 3,731 1,810 2,265
------- ------- ------- ------- ------- ------------ ------------
Net income............ $ 2,101 $ 2,335 $ 2,879 $ 1,947(1) $ 4,939 $ 2,444 $ 3,022
------- ------- ------- ------- ------- ------------ ------------
------- ------- ------- ------- ------- ------------ ------------
Earnings per
share(2)............... $ 0.48 $ 0.28
Weighted average
number of shares
outstanding (in
thousands)(2).......... 10,254 10,755
STATEMENT OF FINANCIAL
CONDITION DATA:
Cash, cash equivalents
and investments........ $ 5,302 $ 7,521 $ 6,173 $ 7,539 $12,725 $ 8,146 $ 11,621(3)
Total assets.......... 11,397 13,708 20,435 22,345 28,663 21,565 30,731
Total liabilities..... 2,734 2,778 6,627 6,312 7,291 3,034 5,764
Stockholders'
equity................. 8,663 10,930 13,808 16,033 21,373 18,531 24,967(3)
OPERATING DATA:
EBITDA(4)............. $ 4,931 $ 5,521 $ 6,783 $ 5,640(1) $10,520 $ 5,260 $ 6,264
EBITDA as a percentage
of revenue............. 30.0% 28.6% 28.3% 19.4%(1) 29.1% 29.9% 30.3%
Number of
clients(5)............. 260 288 316 364 387 369 412
Average revenue per
client(6).............. $65,764 $70,361 $79,288 $85,350 $96,373 $ 48,343 $ 53,483
Annual client
retention rate(7)... 95.9% 96.7% 95.4% 95.5% 96.1% n/a n/a
Number of employees... 48 56 71 85 114 94 119
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(1) Reflects the effect of special bonuses paid to certain executive officers of
the Company in 1994 in the aggregate amount of $2.5 million. Excluding the
special bonuses, operating income, net income, EBITDA and EBITDA as a
percentage of revenue for fiscal 1994 would have been approximately
$5,943,000, $3,264,000, $8,140,000, and 28.0%, respectively.
(2) See Note 2 to the Consolidated Financial Statements of the Company.
(3) On an adjusted basis, after deducting offering expenses payable by the
Company estimated at $290,000 and the repayment of certain loans by one of
the Selling Stockholders totalling $3,846,703, cash, cash equivalents and
investments and stockholders' equity at February 29, 1996 would have been
$15,177,845 and $24,676,505, respectively. See "Use of Proceeds."
Concurrently with the Offering, the Company will authorize 10,000,000 shares
of preferred stock, issuable in series.
(4) EBITDA represents operating income plus depreciation and amortization.
EBITDA is not a measure of financial performance under generally accepted
accounting principles and should not be considered an alternative to
operating or net income as an indicator of the Company's operating
performance or to net cash provided by operating activities as a measure of
liquidity.
(5) At December 31 of the given year.
(6) For each fiscal year, average revenue per client represents (i) revenue for
the fiscal year divided by (ii) the average of (x) the number of clients at
January 1 of such year and (y) the number of clients at December 31 of such
year. For the six month periods ended February 28, 1995 and February 29,
1996, average revenue per client represents (i) revenue for the period
divided by (ii) the number of clients at December 31, 1994 and 1995,
respectively.
(7) Based on calendar years ending December 31. The annual client retention rate
is determined by (i) subtracting from the aggregate indicated annual
subscription revenue as of January 1 of a given year that portion of such
revenue attributable to entities that are no longer clients as of December
31 of that year and (ii) dividing the result by the aggregate indicated
annual subscription revenue as of January 1 of such year. Indicated annual
subscription revenue for a particular client at a specified date means the
total amount of subscription revenue that would be payable to the Company by
such client over a twelve month period based on the FactSet services,
databases and authorized workstations provided to such client at such date.
7
RISK FACTORS
EFFECTS OF RAPID TECHNOLOGICAL CHANGES
The Company's industry is characterized by rapidly changing technology and
evolving industry standards. The Company's future success will depend upon its
ability to continue to enhance its system and related products and to introduce
new services and databases that adequately anticipate and address technological
and market developments and the needs of its clients. While the Company has been
successful in this regard in the past, there can be no assurance that the
Company will be successful in such efforts in the future. Any failure by the
Company to anticipate or respond adequately to technological developments and
changing client requirements could have an adverse effect on the Company's
business, operating results or financial condition. See "--Risks Inherent in
Growth Strategy and International Expansion" and "Business--Engineering and
Product Development."
RISKS INHERENT IN GROWTH STRATEGY AND INTERNATIONAL EXPANSION
The Company has experienced significant growth during its operating history.
There can be no assurance that the Company will be able to maintain the levels
of growth and profitability that it has experienced in the past. Among other
things, there can be no assurance that the Company will be as successful in its
marketing efforts aimed at the investment banking and other industry sectors as
it has been with investment managers, or that such efforts will result in
revenue growth or profit margins comparable to those that the Company has
experienced in the past.
There can also be no assurance that the Company will be as successful in
marketing its services to clients in Europe and the Pacific Rim as it has been
in the United States or that the Company will be able to provide applications
and databases that meet the particular needs of financial services companies in
those regions. Furthermore, expansion into international markets may involve
additional risks to the Company, including exposure to fluctuations in exchange
rates and inflation, currency control regulations, local protection of
proprietary technology and political and economic risks associated with
international business transactions.
In addition, there can be no assurances that, if the Company continues to
grow internally or by way of strategic acquisitions, management will be
effective in attracting and retaining additional qualified personnel, expanding
the Company's physical facilities, integrating acquired businesses and otherwise
managing growth. Any failure to effectively manage growth could have an adverse
effect on the Company's business, operating results or financial condition. See
"--Effects of Rapid Technological Change," "--Dependence on Key Personnel,"
"Management's Discussion and Analysis of Financial Condition and Results of
Operations" and "Business."
DEPENDENCE ON KEY PERSONNEL
The success of the Company's operations depend to a significant extent upon
the continued service of its executive officers and other key management, sales
and technical personnel, and on its ability to continue to attract, retain and
motivate qualified personnel. The competition for such employees is intense. The
Company has long-term employment contracts which include noncompete provisions
with Howard E. Wille, the Company's Chairman and Chief Executive Officer, and
Charles J. Snyder, its President and Chief Technology Officer. The loss of the
services of one or more of the Company's key personnel or the Company's
inability to recruit replacements for such personnel or to otherwise attract,
retain or motivate qualified personnel could have an adverse effect on the
Company's business, operating results or financial condition. The Company
maintains key-man life insurance on Mr. Wille and Mr. Snyder, and has noncompete
agreements with 19 other key employees. See "Business-- Employees" and
"Management--Executive Officers, Directors and Other Key Personnel" and
"--Employment Agreements."
8
DEPENDENCE ON FINANCIAL DATABASE SUPPLIERS
The Company makes available to its clients financial information from
multiple databases provided to the Company pursuant to agreements between the
Company and 30 current database providers. Almost all of the Company's clients
subscribe to service packages that include fundamental corporate information
supplied by COMPUSTAT, Value Line and/or Worldscope, securities prices from
Interactive Data Corporation and/or Exshare, earnings estimates from FIRST CALL,
I/B/E/S and/or Value Line, business news information supplied by Standard &
Poors, PR Newswire and/or Business Wire and economic statistics supplied by the
Conference Board, OECD and/or IMF. The Company's agreements with financial
database providers are generally for a term of one year and cancelable on one
year's notice (although the Company does not have formal agreements with all of
its database suppliers). Many of these financial database providers compete with
one another and, to some extent, with the Company. While it is the Company's
policy to maintain, when possible, contractual relationships with at least two
database providers for each type of financial data, termination of one or more
of the Company's significant database provider agreements could decrease the
financial information which the Company can offer its clients and may have an
adverse effect on the Company's business, operating results or financial
condition. See "Business--The FactSet System--Databases."
DEPENDENCE ON AND ABILITY TO PROTECT PROPRIETARY TECHNOLOGY
The Company's services are highly dependent upon proprietary technology. The
Company relies on trade secrecy laws and non-compete agreements to protect its
proprietary rights in its technology. There can be no assurance that such
measures are or will be adequate to protect the Company's proprietary
technology. In addition, there can be no assurance that the Company's
competitors or potential competitors will not independently develop technologies
that are substantially equivalent or superior to the Company's technology.
LACK OF LONG TERM CLIENT CONTRACTS; FLUCTUATIONS IN REVENUE; CREDIT
CONCENTRATION
The Company does not regularly enter into written service contracts with
clients, and clients may cancel the Company's services at any time. While the
Company believes that this practice enhances its marketing efforts by allowing
clients to subscribe to the FactSet system without the requirement of a long
term commitment, the cancellation of the services of the Company by a
significant number of clients at any one time may have an adverse effect on the
Company's business, operating results or financial condition.
Although the Company has consistently recorded year-to-year increases in
revenue and net income, the acquisition of new clients during the course of any
year has not historically followed a recurring pattern. As a result, the Company
expects that on a quarter-to-quarter basis, there may be fluctuations in the
rate of revenue growth which may not be indicative of changes in the Company's
business or operations.
In addition, because the Company receives a significant portion of its
revenue (54.3% for the six months ended February 29, 1996) in the form of
commissions paid through two brokers, Bear, Stearns & Co. and Broadcort Capital
Corp. (an affiliate of Merrill Lynch & Co.), it has a significant concentration
of credit exposure to those brokers. See Note 13 to the Company's Consolidated
Financial Statements.
COMPETITION
The financial information services industry is competitive and characterized
by rapid technological change and the entry into the field of large and
well-capitalized companies as well as smaller competitors. In a broad sense, the
Company competes or may compete directly and indirectly in the United States and
internationally with large, well-established news and information providers such
as
9
Dialog, Disclosure, Dow Jones, Lexis/Nexis, Pearson, Reuters and Thomson, market
data suppliers such as ADP, Bloomberg and Telerate as well as many of the
database providers from whom the Company obtains data for inclusion in the
FactSet system. The Company's most direct competitors include on-line and CD-ROM
database suppliers and integrators such as OneSource Inc., COMPUSTAT PC PlusTM,
Baseline, DAIS Group, IDD Information Services and Track Data Corp. primarily in
the United States, and Datastream and Randall-Helms, primarily in international
markets. Many of these competitors offer databases and applications that, in one
form or another, are similar to the databases and applications offered by the
Company, in some cases at lower prices. The Company may also encounter new
entrants, including well capitalized information services companies and other
companies, as the markets for the Company's services develop. There can be no
assurances that the Company will be able to compete successfully against its
present or future competitors or that competitive pressures will not have an
adverse effect on the Company's business, operating results or financial
condition. See "--Effects of Rapid Technological Changes," "Business--Industry
Overview" and "Business--Competition."
CONTROL BY SELLING STOCKHOLDERS
The Selling Stockholders currently own approximately 79.1% of the
outstanding Common Stock of the Company. After the Offering, the Selling
Stockholders will own approximately 46.3% of the outstanding Common Stock (or
41.4% if the Underwriters' over-allotment option is exercised in full). As a
result, the Selling Stockholders will continue to have significant influence
over the policies and affairs of the Company and the outcome of corporate
actions requiring stockholder approval, including the election of directors, the
adoption of amendments to the Company's Restated Certificate of Incorporation
and the approval of mergers and sales of the Company's assets. See "Certain
Transactions and Relationships" and "Description of Capital Stock."
BENEFITS OF OFFERING TO SELLING STOCKHOLDERS
The Selling Stockholders will receive all of the proceeds of the Offering.
The Offering will establish a public market for the Common Stock and provide
increased liquidity to the Selling Stockholders for the shares of Common Stock
they will own after the Offering. In connection with the Offering, the Selling
Stockholders will also receive certain rights to require the Company to register
shares of Common Stock held by the Selling Stockholders to permit the public
sale of such shares. See "Shares Eligible for Future Sale." Upon completion of
the Offering, the Selling Stockholders will own approximately 46.3% (41.4% if
the Underwriters' over-allotment option is exercised in full) of the outstanding
Common Stock. See "Certain Transactions and Relationships."
CERTAIN ANTI-TAKEOVER PROVISIONS
Certain provisions of the Company's Restated Certificate of Incorporation
and By-laws may have the effect, either alone or in combination with each other,
of making more difficult or discouraging a tender offer or takeover attempt that
is opposed by the Company's Board of Directors. These provisions include (1)
certain supermajority voting requirements with respect to certain specified
business combinations; (2) a provision requiring that the Company's Board be
divided into three classes, each serving a staggered term with only one class
elected each year; (3) a provision that allows for shareholder action by written
consent only on the affirmative vote of the holders of 80% of the outstanding
shares of the Company; (4) certain restrictions on the persons eligible to call
a special meeting of shareholders; (5) certain limitations on the size of the
Company's Board of Directors; (6) the ability of the Board to authorize the
issuance of preferred stock in series; and (7) certain supermajority voting
requirements with respect to amending, altering or repealing any of the
foregoing provisions. See "Description of Capital Stock--Restated Certificate of
Incorporation and By-Laws--Certain Anti-Takeover Provisions." In addition, the
employment agreements between the Company and its executive
10
officers provide for specified severance payments in the event an executive
officer is terminated following a change in control of the Company. See
"Management--Employment Agreements."
NO PRIOR PUBLIC MARKET FOR COMMON STOCK
There has been no public market for the Common Stock prior to the Offering.
Consequently, the offering price for the Common Stock has been determined by
negotiations between the Selling Stockholders and representatives of the
Underwriters. See "Underwriting" for a description of the factors considered in
determining the initial public offering price of the Common Stock. The Common
Stock has been approved for listing on the NYSE under the symbol "FDS." There
can be no assurance that an active public market will develop or that, if
developed, that it will be sustained. The market price of the Common Stock could
also be subject to significant fluctuation in response to variations in the
Company's results of operations and other factors.
SHARES ELIGIBLE FOR FUTURE SALE; REGISTRATION RIGHTS
Upon completion of the Offering, the Company will have 9,526,300 outstanding
shares of Common Stock, including 4,409,100 shares of Common Stock beneficially
owned by the Selling Stockholders (3,940,350 shares if the Underwriters'
over-allotment option is exercised in full), 363,729 shares held beneficially by
certain other employees of the Company and 787,824 shares held in connection
with the Company's Employee Stock Ownership Plan ("ESOP"). The 3,125,000 shares
of Common Stock offered hereby (3,593,750 shares if the Underwriters'
over-allotment option is exercised in full) will be eligible for sale in the
public market after the completion of the Offering. The shares of Common Stock
held by the Selling Stockholders, certain employees of the Company and the ESOP
are subject to certain restrictions pursuant to Rule 144 under the Securities
Act of 1933, as amended (the "Securities Act"). In the Underwriting Agreement,
the Company, the ESOP and certain executive officers and key personnel of the
Company have agreed (subject to certain exceptions) not to sell any shares of
Common Stock for a period of 180 days after the date of this Prospectus without
the prior written consent of the Donaldson, Lufkin & Jenrette Securities
Corporation. See "Underwriting." Immediately after the expiration (or waiver) of
the restrictions contained in the Underwriting Agreement, the shares held by the
Selling Stockholders, certain employees of the Company and the ESOP (subject to
the provisions thereunder) will be available for sale pursuant to Rule 144 under
the Securities Act. In addition, the Selling Stockholders have the right to
require the Company to register their shares of Common Stock for sale under the
Securities Act to permit the public sale of such shares. See "Certain
Transactions and Relationships--Registration Rights Agreement." Significant
sales of shares of Common Stock under a registration statement, pursuant to Rule
144 or otherwise in the future, or the prospect of such sales, may depress the
price of the Common Stock on any market that may develop, may render difficult
the sale of the Common Stock purchased by investors hereunder and may adversely
affect the Company's ability to raise capital through the issuance and sale of
Common Stock. See "Shares Eligible for Future Sale."
IMMEDIATE AND SUBSTANTIAL DILUTION
Purchasers of Common Stock in the Offering will experience immediate and
substantial dilution in the net tangible book value of the Common Stock. At an
assumed initial public offering price of $16.00 per share, purchasers of shares
in the Offering will experience dilution in net tangible book value of $13.41
per share. See "Dilution."
DIVIDEND POLICY
The Company currently intends to retain its earnings for future growth,
including growth through potential strategic acquisitions or alliances, and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future. The payment of any future dividends will be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition and capital requirements, business conditions,
corporate law requirements and other factors.
11
THE COMPANY
FactSet is a leading provider of on-line integrated database services to the
financial community. The Company, which markets its services in the United
States, Europe and the Pacific Rim, combines multiple large-scale databases into
a single, coherent mainframe computer information system accessible from
clients' personal computer terminals. The Company's aggregated data library
provides a broad variety of financial and economic information, including
fundamental data on more than 20,000 companies worldwide. By allowing clients
the ability to simultaneously access multiple databases as if they were part of
a single database and search for and download specific data directly into their
spreadsheets and other work products, FactSet provides investment managers,
investment banks and other financial institutions with a comprehensive,
"one-stop" source for financial information and analytics. The Company's
advanced, proprietary software tools enable clients to manipulate and analyze
the data provided by the Company and present it in a wide variety of formats,
including custom reports designed by the clients. At May 31, 1996, over 400
clients with more than 4,500 authorized workstations subscribed to the Company's
services, including many of the leading investment managers and investment
banks.
The Company was formed in 1978 and has been profitable in each of the last
15 years. For the five fiscal years ended August 31, 1995, the Company sustained
compound annual growth rates of revenue, operating income and net income of
21.8%, 23.2% and 23.8%, respectively. For the first six months of fiscal 1996,
the Company's revenue, operating income and net income increased 17.6%, 21.0%
and 23.6%, respectively, from the comparable period in fiscal 1995.
FactSet currently acquires data from 30 information providers supplying over
50 databases, including COMPUSTAT (fundamental data on North American
corporations), Interactive Data Corporation (U.S. and Canadian securities
prices), Exshare securities prices (international securities prices), FIRST CALL
(U.S. and international earnings estimates), Worldscope (fundamental data on
corporations in 37 countries), I/B/E/S (U.S. and international earnings
estimates) and Value Line (fundamental corporate data and earnings estimates).
The Company maintains its databases on continually upgraded and fully redundant
Digital Equipment Corporation Alpha mainframe computers, a platform that allows
for monthly, daily, hourly and real-time refreshment of data. FactSet seeks to
maintain, when possible, at least two sources for each item of data.
Unlike services that charge fees based on actual system usage time, the
Company charges fixed monthly amounts which vary among clients based on the
number of sites and workstations from which the FactSet system is available and
the number of accessible databases and specialized services to which a client
subscribes. The Company believes that this pricing policy encourages clients to
use the FactSet system regularly and thus to integrate the system into their
decision-making processes. FactSet does not enter into formal contracts with
clients, a practice which the Company believes enhances its marketing efforts by
allowing clients to use the FactSet system without the requirement of a long
term commitment. The Company enjoys excellent client retention--FactSet's
overall client retention rate (on a revenue basis) has been over 95% in each of
the past six years.
The Company's principal executive offices are located at One Greenwich
Plaza, Greenwich, Connecticut 06830. The telephone number is (203) 863-1500.
DIVIDEND POLICY
The Company currently intends to retain its earnings for future growth,
including growth through potential strategic acquisitions or alliances, and,
therefore, does not anticipate paying any cash dividends in the foreseeable
future. The payment of any future dividends will be determined by the Board of
Directors in light of conditions then existing, including the Company's
earnings, financial condition and capital requirements, business conditions,
corporate law requirements and other factors.
12
DILUTION
As of February 29, 1996, the Company's net tangible book value was
$24,966,505 or $2.62 per share. After giving effect to estimated expenses of
$290,000 payable by the Company in connection with the Offering, the net
tangible book value of the Company at February 29, 1996, would have been
$24,676,505 or $2.59 per share of Common Stock. This represents an immediate
decrease in net tangible book value of $0.03 per share to existing stockholders.
Assuming an initial public offering price of $16.00 per share of Common Stock,
there would be an immediate dilution of $13.41 per share to purchasers of the
shares of Common Stock in the Offering ("New Investors"). Dilution is determined
by subtracting adjusted net tangible book value per share after the Offering
from the amount of cash paid by a New Investor for one common share. The
following table illustrates the per share dilution:
Initial public offering price per share................... $16.00
------
Net tangible book value per share before the
Offering(1)............................................... $ 2.62
-------
Decrease in net tangible book value per share attributable
to the Offering......................................... ($ 0.03)
-------
Net tangible book value per share after the Offering...... $ 2.59
------
Dilution per share to New Investors....................... $13.41
------
------
- ------------
(1) Net tangible book value per share as of a specific date represents net
tangible assets (total tangible assets less total liabilities) divided by
the number of shares of Common Stock assumed to be then outstanding, without
giving effect to unexercised options.
As of February 29, 1996, an aggregate of 1,451,000 shares of Common Stock
were issuable upon the exercise of outstanding options at a weighted average
exercise price of $2.66 per share. If all options outstanding at February 29,
1996 were exercised, the net tangible book value per share immediately after
completion of the Offering would be $2.60. This would represent an immediate
dilution of $13.40 per share to New Investors. See "Management--Company Stock
Option Plan."
13
CAPITALIZATION
The following table sets forth at February 29, 1996, the historical
consolidated capitalization of the Company. The information set forth in the
table below should be read in conjunction with the consolidated financial
statements of the Company and the notes thereto included elsewhere in this
Prospectus.
AS OF FEBRUARY 29, 1996
-----------------------
(IN THOUSANDS)
Cash, cash equivalents and investments(1).............................. $11,621
--------
--------
Debt................................................................... --$
Stockholders' equity(1):
Preferred stock, par value $.01 per share, 10,000,000 shares
authorized,
none issued........................................................ --
Common Stock, par value $.01 per share, 40,000,000 shares authorized,
9,526,300 shares outstanding(2).................................... 96
Capital in excess of par value....................................... 1,730
Retained earnings and other(3)....................................... 23,305
Treasury stock (51,788 shares at cost)............................... (164)
--------
Total capitalization................................................... $24,967
--------
--------
- ------------
(1) On an as adjusted basis, after deducting offering expenses payable by the
Company estimated at $290,000 and the repayment of certain loans by one of
the Selling Stockholders totalling $3,846,703, cash, cash equivalents and
investments and stockholders' equity at February 29, 1996 would have been
$15,177,845 and $24,676,505, respectively.
(2) Excludes 1,451,000 shares of Common Stock issuable upon exercise of
outstanding stock options granted to certain employees of the Company. In
addition, the Company has reserved 950,000 shares of Common Stock for
issuance in connection with options issuable under the Company's 1996
Company Stock Option Plan. See "Management-- Company Stock Option Plan."
(3) Includes net unrealized gain on investments of $0.1 million.
USE OF PROCEEDS
The Selling Stockholders will receive all of the proceeds of the Offering.
Promptly following the completion of the Offering, one of the Selling
Stockholders will apply a portion of the proceeds to repay in full certain loans
outstanding from the Company totalling $3,846,703. The Company has agreed to pay
a portion of the expenses associated with the Offering. See "Certain
Transactions and Relationships."
14
SELECTED HISTORICAL CONSOLIDATED FINANCIAL INFORMATION
The following table sets forth selected consolidated statement of income and
statement of financial condition information and operating data for each of the
eight years in the period ended August 31, 1995 and the six month periods ended
February 28, 1995 and February 29, 1996. The statement of income and statement
of financial condition data have been derived from consolidated financial
statements of the Company that have been audited by Price Waterhouse LLP,
independent accountants, which, in the case of the three years ended August 31,
1995 and the six month periods ended February 28, 1995 and February 29, 1996,
have been included elsewhere in this Prospectus. The following data should be
read in conjunction with the Consolidated Financial Statements and the notes
thereto and "Management's Discussion and Analysis of Financial Condition and
Results of Operations" included elsewhere in this Prospectus.
YEARS ENDED AUGUST 31, SIX MONTHS ENDED
------------------------------------------------------------------------- --------------------------
FEBRUARY 28, FEBRUARY 29,
1988 1989 1990 1991 1992 1993 1994 1995 1995 1996
------- ------- ------- ------- ------- ------- ------- ------- ------------ ------------
(DOLLARS IN THOUSANDS, EXCEPT PER SHARE AND PER CLIENT DATA)
STATEMENT OF INCOME
DATA:
Subscription revenue:
Commissions.......... $ 7,136 $ 9,819 $11,178 $12,549 $14,035 $15,992 $17,745 $21,559 $ 10,699 $ 11,241
Fees................. 1,428 1,929 2,869 3,892 5,244 7,953 11,274 14,629 6,898 9,457
------- ------- ------- ------- ------- ------- ------- ------- ------ ------------
Total revenue....... 8,564 11,748 14,047 16,441 19,279 23,945 29,019 36,188 17,597 20,698
------- ------- ------- ------- ------- ------- ------- ------- ------ ------------
Expenses:
Employee compensation
and benefits........ 2,633 3,960 4,067 3,980 5,486 6,667 11,115(1) 11,027 5,377 6,461
Clearing fees........ 1,719 2,398 2,579 2,875 3,069 3,158 3,422 4,270 2,098 2,112
Data costs........... 673 942 1,065 1,103 1,456 2,326 2,443 3,071 1,510 1,605
Communication
costs................... 78 87 112 190 941 1,321 2,030 2,431 1,227 1,429
Computer equipment... 529 551 887 1,856 1,398 1,582 2,297 2,195 1,085 1,290
Occupancy............ 510 544 1,188 1,480 1,288 1,616 1,898 2,052 977 1,120
Promotional costs.... 420 405 430 651 991 1,384 1,384 1,870 824 1,000
Other expenses....... 346 510 771 787 712 939 987 1,172 486 824
------- ------- ------- ------- ------- ------- ------- ------- ------ ------------
Total expenses...... 6,908 9,397 11,099 12,922 15,341 18,993 25,576 28,088 13,584 15,841
------- ------- ------- ------- ------- ------- ------- ------- ------ ------------
Operating income..... 1,656 2,351 2,948 3,519 3,938 4,952 3,443(1) 8,100 4,013 4,857
Other income......... 134 218 295 230 313 208 251 570 241 430
------- ------- ------- ------- ------- ------- ------- ------- ------ ------------
Income before income
taxes................... 1,790 2,569 3,243 3,749 4,251 5,160 3,694 8,670 4,254 5,287
Income taxes........... 840 1,253 1,588 1,648 1,916 2,281 1,747 3,731 1,810 2,265
------- ------- ------- ------- ------- ------- ------- ------- ------ ------------
Net income............. $ 950 $ 1,316 $ 1,655 $ 2,101 $ 2,335 $ 2,879 $ 1,947(1) $ 4,939 $ 2,444 $ 3,022
------- ------- ------- ------- ------- ------- ------- ------- ------ ------------
------- ------- ------- ------- ------- ------- ------- ------- ------ ------------
Earnings per
share(2)................ $ 0.48 $ 0.28
Weighted average number
of shares outstanding
(in thousands)(2).... 10,254 10,755
STATEMENT OF FINANCIAL
CONDITION DATA:
Cash, cash equivalents
and investments...... $ 2,068 $ 3,684 $ 3,173 $ 5,302 $ 7,521 $ 6,173 $ 7,539 $12,725 $ 8,146 $ 11,621(3)
Total assets........... 4,439 5,881 9,077 11,397 13,708 20,435 22,345 28,663 21,565 30,731
Total liabilities...... 1,462 1,275 2,505 2,734 2,778 6,627 6,312 7,291 3,034 5,764
Stockholders'
equity(4)............... 2,977 4,606 6,572 8,663 10,930 13,808 16,033 21,373 18,531 24,967(3)
OPERATING DATA:
EBITDA(5).............. $ 2,171 $ 2,862 $ 3,848 $ 4,931 $ 5,521 $ 6,783 $ 5,640(1) $10,520 $ 5,260 $ 6,264
EBITDA as a percentage
of revenue........... 25.4% 24.4% 27.4% 30.0% 28.6% 28.3% 19.4%(1) 29.1% 29.9% 30.3%
Number of clients(6)... 197 216 240 260 288 316 364 387 369 412
Average revenue per
client(7)............... $48,798 $56,891 $61,610 $65,764 $70,361 $79,288 $85,350 $96,373 $ 48,343 $ 53,483
Annual client retention
rate(8)................. 92.9% 93.1% 95.2% 95.9% 96.7% 95.4% 95.5% 96.1% n/a n/a
Number of employees.... 22 25 35 48 56 71 85 114 94 119
(Footnotes on following page)
15
(Footnotes for preceding page)
- ------------
(1) Reflects the effect of special bonuses paid to certain executive officers of
the Company in 1994 in the aggregate amount of $2.5 million. Excluding the
special bonuses, employee compensation and benefits, operating income, net
income, EBITDA and EBITDA as a percentage of revenue for fiscal 1994 would
have been approximately $8,615,311, $5,943,000, $3,264,000, $8,140,000, and
28.0% respectively.
(2) See Note 2 to the Consolidated Financial Statements of the Company.
(3) On an as adjusted basis, after deducting offering expenses payable by the
Company estimated at $290,000 and the repayment of certain loans by one of
the Selling Stockholders totalling $3,846,703, cash, cash equivalents and
investments and stockholders' equity at February 29, 1996 would have been
$15,177,845 and $24,676,505, respectively. See "Use of Proceeds."
Concurrently with the Offering, the Company will authorize 10,000,000 shares
of preferred stock, issuable in series.
(4) No dividends were paid during the reported periods. See "Dividend Policy."
(5) EBITDA represents operating income plus depreciation and amortization.
EBITDA is not a measure of financial performance under generally accepted
accounting principles and should not be considered an alternative to
operating or net income as an indicator of the Company's operating
performance or to net cash provided by operating activities as a measure of
liquidity.
(6) At December 31 of the given year.
(7) For each fiscal year, average revenue per client represents (i) revenue for
the fiscal year divided by (ii) the average of (x) the number of clients at
January 1 of such year and (y) the number of clients at December 31 of such
year. For the six months ended February 28, 1995 and February 29, 1996,
average revenue per client represents (i) revenue for the period divided by
(ii) the number of clients at December 31, 1994 and 1995, respectively.
(8) Based on calendar years ending December 31. The annual client retention rate
is determined by (i) subtracting from the aggregate indicated annual
subscription revenue as of January 1 of a given year that portion of such
revenue attributable to entities that are no longer clients as of December
31 of that year and (ii) dividing the result by the aggregate indicated
annual subscription revenue as of January 1 of such year. Indicated annual
subscription revenue for a particular client at a specified date means the
total amount of subscription revenue that would be payable to the Company by
such client over a twelve month period based on the FactSet services,
databases and authorized workstations provided to such client at such date.
16
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION
AND RESULTS OF OPERATIONS
OVERVIEW
The Company is a leading provider of on-line integrated database services to
the financial community. The Company, which markets its services in the United
States, Europe and the Pacific Rim, was formed in 1978 and has been profitable
in each of the last 15 years. For the five fiscal years ended August 31, 1995,
the Company sustained compound annual growth rates of revenue, operating income
and net income of 21.8%, 23.2% and 23.8%, respectively. For the first six months
of fiscal 1996, the Company's revenue, operating income and net income increased
17.6%, 21.0% and 23.6%, respectively, from the comparable period in fiscal 1995.
The Company's revenue is derived from subscription charges. Solely at the
option of each client, these charges may be paid either in the form of
commissions on securities transactions (in which case subscription revenue is
recorded as Commissions) or on a cash basis (in which case subscription revenue
is recorded as Fees).
To facilitate the receipt of subscription revenue on a commission basis, the
Company's wholly owned subsidiary, FactSet Data Systems Inc. ("FDS"), is a
member of the National Association of Securities Dealers, Inc. and is a
registered broker-dealer under Section 15 of the Securities Exchange Act of
1934. FDS's only function is to facilitate the receipt of payments in respect of
subscription charges and it does not otherwise engage in the securities
business.
Subscription revenue paid in commissions is based on securities transactions
introduced and cleared on a fully disclosed basis through two clearing brokers,
Bear, Stearns & Co. and Broadcort Capital Corp. (an affiliate of Merrill Lynch &
Co.). Clearance is performed by these two brokers pursuant to annually renewable
contracts at volume discounted rates. A client paying subscription charges on a
commission basis directs the clearing broker, at the time the client executes a
securities transaction, to credit the commission on the transaction to FDS's
account.
Each client's choice of paying subscription charges through commissions or
cash is available regardless of the nature or amount of the services provided by
FactSet to such client. When a client elects to pay subscription charges in the
form of commissions, the dollar amount payable is higher than the fee that would
be payable for the same services on a cash basis because of the associated
clearing fee payable by the Company to the clearing broker on such transactions.
However, commissions net of related clearing fees are approximately equal to the
fees that would be paid by a client on a cash basis. Although the option to pay
subscription charges in the form of commissions is available to all clients, it
is impractical for clients that do not engage in securities transactions to
utilize this method of payment.
Over the last several years, there has been a trend by both existing and new
clients toward payment of subscription charges on a cash rather than commission
basis. As a percentage of total revenue, commissions represented 66.8%, 61.1%,
59.6% and 54.3%, respectively, for the three fiscal years ended August 31, 1993,
1994 and 1995, and the six month period ended February 29, 1996.
Subscription charges are quoted to clients on an annual basis, but are
earned as services are provided on a month to month basis. Subscription revenue
recorded as Commissions and subscription revenue recorded as Fees are each
recorded as earned each month, based on one-twelfth of the annual subscription
charge quoted to each client. Amounts that have been earned but not yet paid
through the receipt of commissions on securities transactions or through cash
payments are reflected on the consolidated statement of financial condition as
receivable from clients. Amounts that have been received through commissions on
securities transactions or through cash payments that are in excess of a
client's earned subscription revenue are reflected on the consolidated statement
of financial condition as deferred fees and commissions.
FactSet does not enter into formal contracts with clients, a practice which
the Company believes enhances its marketing efforts by allowing clients to use
the FactSet system without the requirement of
17
a long term commitment. The Company enjoys excellent client retention--FactSet's
overall client retention rate (on a revenue basis) has been over 95% in each of
the past six years.
The basic FactSet subscription consists of: five databases including
fundamental corporate data, securities prices, business news and economic data;
two authorized workstations and companion home passwords; a basic application
package; and client support and training. Additional databases, workstations and
computer services (including enhanced and specialized applications) are
available at additional cost. Consulting and training services are provided to
clients free of charge.
Unlike services that charge fees based on actual system usage time, the
Company charges fixed monthly amounts which vary among clients based on the
number of sites and workstations from which the FactSet system is available and
the number of accessible databases and specialized services to which a client
subscribes. The Company believes that this pricing policy encourages clients to
use the FactSet system regularly and thus to integrate the system into their
decision-making processes.
Operating expenses include employee compensation and benefits, clearing
fees, data costs, communication costs, computer equipment expenses, occupancy
expenses, promotional costs and other expenses.
Employee compensation and benefits expenses include, in addition to employee
salaries and bonuses, payroll taxes, the Company's ESOP contributions, health
insurance costs and costs associated with the Company's key-man life insurance
policies.
Clearing fees are directly related to commission revenue. Clearing fees for
executed transactions are recorded on a trade date basis as securities
transactions occur, with clearing fees related to commissions receivable
recorded simultaneously with the related receivable.
Data costs consist of fees and royalties paid by the Company to database
suppliers. Under agreements with certain database suppliers, the Company
collects database fees from clients and pays those fees to the database supplier
on the clients' behalf. In many cases, however, clients pay database suppliers
directly for access to databases. Such payments are not reflected on the
Company's financial statements.
Communication costs are charges paid by the Company for clients'
communication with the FactSet system, including long distance telephone
charges, charges associated with the Company's WAN and Internet access charges.
Computer equipment expenses consist of non-capitalized equipment acquisition
costs and depreciation expense relating to the Company's mainframe computers and
other related equipment, including communications equipment. The cost of
communications equipment provided to clients for use at client sites is
classified as an expense.
Occupancy expense includes costs related to the Company's leased facilities
in Greenwich, Connecticut, New York, New York, San Mateo, California, London,
England and Tokyo, Japan, as well as amortization expense relating to leasehold
improvements at those facilities.
Promotional expenses consist primarily of the cost of travel for the
Company's marketing personnel and consultants, costs associated with the
printing of operations manuals and promotional literature and expenses relating
to Company participation at industry trade shows and conventions.
Other expenses include professional expenses, office expenses and other
miscellaneous expenses.
Other income consists primarily of interest income.
The Company's revenue has grown in each of the last 16 fiscal years. As
discussed below, revenue for the first six months of fiscal 1996 increased 17.6%
over the comparable period in fiscal 1995. The Company's recent growth results
from the addition of new clients and growth in revenue from existing clients.
The Company's revenue from Europe and the Pacific Rim is currently growing more
rapidly on a percentage basis than revenue from the more established North
American market, and the Company
18
expects revenue from those markets--which accounted for 5.0% of the Company's
total revenue in the first six months of fiscal 1996--to constitute a larger
percentage of the Company's revenue in future periods. See "Risk Factors--Risks
Inherent in Growth Strategy." At March 31, 1996, indicated annual subscription
revenue from clients outside the United States represented 6.8% of the Company's
aggregate indicated annual subscription revenue. Indicated annual subscription
revenue for a particular client at a specified date means the total amount of
subscription revenue that would be payable to the Company by such client over a
twelve month period based on the FactSet services, databases and authorized
workstations provided to such client at such date.
Several of the Company's European and Pacific Rim clients currently pay
subscription fees to the Company in foreign currency, principally British pounds
sterling and Japanese yen, and in the event that revenue from international
operations grows to represent a significantly larger percentage of the Company's
total revenue, the Company will evaluate appropriate strategies to manage risks
associated with foreign currency exchange fluctuations.
While the Company has consistently recorded year-to-year increases in
revenue and net income, the acquisition of new clients during the course of any
year has not historically followed a recurring pattern. As a result, the Company
expects that on a quarter-to-quarter basis, there may be fluctuations in the
rate of revenue growth which may not be indicative of changes in the Company's
business or operations.
RESULTS OF OPERATIONS
The following table sets forth, for the periods indicated, certain items
derived from the Company's consolidated statement of income as a percentage of
revenue. Totals may not add due to rounding.
YEARS ENDED AUGUST 31, 6 MONTHS ENDED
----------------------- ----------------------------
FEBRUARY 28, FEBRUARY 29,
1993 1994 1995 1995 1996
----- ----- ----- ------------ ------------
Subscription revenue:
Commissions.............................. 66.8% 61.1% 59.6% 60.8% 54.3%
Fees..................................... 33.2 38.9 40.4 39.2 45.7
----- ----- ----- ----- -----
100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
Expenses:
Employee compensation and benefits....... 27.8 38.3(1) 30.5 30.6 31.2
Clearing fees............................ 13.2 11.8 11.8 11.9 10.2
Data costs............................... 9.7 8.4 8.5 8.6 7.8
Communication costs...................... 5.5 7.0 6.7 7.0 6.9
Computer equipment....................... 6.6 7.9 6.1 6.2 6.2
Occupancy................................ 6.7 6.5 5.7 5.6 5.4
Promotional costs........................ 5.8 4.8 5.2 4.7 4.8
Other expenses........................... 3.9 3.4 3.2 2.8 4.0
----- ----- ----- ----- -----
Total expenses............................. 79.3 88.1(1) 77.6 77.2 76.5
----- ----- ----- ----- -----
Operating income........................... 20.7 11.9(1) 22.4 22.8 23.5
Other income............................... 0.9 0.9 1.6 1.4 2.1
----- ----- ----- ----- -----
Income before income taxes................. 21.5 12.7(1) 24.0 24.2 25.5
Income taxes............................... 9.5 6.0 10.3 10.3 10.9
----- ----- ----- ----- -----
Net income................................. 12.0% 6.7%(1) 13.6% 13.9% 14.6%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
- ------------
(1) Reflects the effect of special bonuses paid to certain executive officers of
the Company in 1994 in the aggregate amount of $2.5 million. Excluding the
effects of these special bonuses, the percentage of revenue represented by
each of the indicated items would be the amount specified: employee
compensation and benefits, 29.7%; total operating expenses, 79.5%; operating
income, 20.5%; income before income taxes, 21.3%; and net income, 11.2%.
19
SIX MONTHS ENDED FEBRUARY 29, 1996 COMPARED WITH THE SIX MONTHS ENDED FEBRUARY
28, 1995
Subscription revenue. Subscription revenue increased from $17.6 million for
the six months ended February 28, 1995 to $20.7 million for the six months ended
February 29, 1996, or 17.6%. FactSet's revenue growth resulted from an increase
in the number of new clients as well as increased penetration among existing
clients. The number of clients increased 11.7% from 369 at February 28, 1995 to
412 at February 29, 1996. New clients consist of new international clients,
United States investment managers and United States investment banks. Average
revenue per client increased 10.6% from $48,343 in the 1995 period to $53,483 in
the 1996 period. Revenue growth from existing clients was attributable to an
increase in the number of authorized workstations and the addition of new
applications, databases and service offerings.
Employee compensation and benefits. Employee compensation and benefits
increased from $5.4 million to $6.5 million, or 20.2%, from the six months ended
February 28, 1995 to the six months ended February 29, 1996. As a percentage of
revenue, employee compensation and benefits increased from 30.6% in the 1995
period to 31.2% in the 1996 period. This increase was due to the net addition of
27 employees to support FactSet's continued growth and expansion in existing as
well as new industry segments and regions, such as Europe and the Pacific Rim,
which are in the early stages of business development. To a lesser extent, the
increase was due to increases in compensation and benefit costs for existing
personnel.
Clearing fees. Clearing fees remained relatively constant at $2.1 million
for the six months ended February 28, 1995 and six months ended February 29,
1996. Clearing fees, as a percentage of revenue, decreased from 11.9% in the
1995 period to 10.2% in the 1996 period. This decrease reflects a decrease in
clearing fees per transaction as well as a shift in payment form by clients from
a commission basis to a fee basis.
Data costs. Data costs increased from $1.5 million for the six months ended
February 28, 1995 to $1.6 million for the six months ended February 29, 1996, or
6.3%. As a percentage of revenue, data costs decreased from 8.6% in the 1995
period to 7.8% in the 1996 period. This decrease reflects improved terms from
certain database providers and economies of scale achieved from a larger client
base, partially offset by the higher data costs associated with additional
databases.
Communication costs. Communication costs increased from $1.2 million to $1.4
million, or 16.5%, from the six months ended February 28, 1995 to six months
ended February 29, 1996. Communication costs, as a percentage of revenue,
declined from 7.0% in the 1995 period to 6.9% in the 1996 period. This decline
reflects the continued cost savings associated with the implementation of the
Company's new communications network, partially offset by higher communication
costs associated with increased usage of the FactSet system and a greater
proportion of international clients.
Computer equipment. Computer equipment expenses increased from $1.1 million
to $1.3 million, or 18.9%, from the six months ended February 28, 1995 to the
six months ended February 29, 1996. The increase was primarily due to the higher
depreciation expense associated with increased capital expenditures as well as a
greater proportion of computer assets with shorter depreciable lives. As a
percentage of revenue, however, computer equipment expenses remained constant at
6.2%.
Occupancy. Occupancy costs increased from $1.0 million for the six months
ended February 28, 1995 to $1.1 million for the six months ended February 29,
1996, or 14.7%. As a percentage of revenue, occupancy costs decreased from 5.6%
to 5.4% from the 1995 period to the 1996 period. This decrease reflects improved
operating leverage from FactSet's revenue growth, partially offset by the costs
associated with the expansion of its Greenwich, Connecticut facilities to
accommodate the growth in its business and personnel.
Promotional costs. Promotional costs increased from $0.8 million to $1.0
million, or 21.4%, from the six months ended February 28, 1995 to the six months
ended February 29, 1996. Promotional costs, as a percentage of revenue,
increased slightly from 4.7% in the 1995 period to 4.8% in the 1996 period.
20
This increase was due to increased travel expenses associated with marketing to
new industry segments and geographic regions as well as the additional expenses
associated with the Company's logo change at the end of fiscal 1995.
Other expenses. Other expenses increased from $0.5 million in the six months
ended February 28, 1995 to $0.8 million in the six months ended February 29,
1996, or 69.5%. As a percentage of revenue, other expenses increased from 2.8%
in the 1995 period to 4.0% in the 1996 period. The increase was due to increases
in miscellaneous taxes and other miscellaneous expenses.
Operating income. Operating income increased from $4.0 million for the six
months ended February 28, 1995 to $4.9 million for the six months ended February
29, 1996, representing growth of 21.0%. As a percentage of revenue, operating
income increased from 22.8% in the 1995 period to 23.5% in the 1996 period.
Other income. Other income increased from $0.2 million to $0.4 million, or
78.6%, from the six months ended February 28, 1995 to the six months ended
February 29, 1996. This growth was due to higher levels of cash, cash
equivalents and investments.
Income taxes. Income taxes increased from $1.8 million to $2.3 million, or
25.2%, from the six months ended February 28, 1995 to six months ended February
29, 1996, due to higher income before income taxes and an increase in the
effective tax rate from 42.5% in the 1995 period to 42.8% in the 1996 period.
Net income. Net income increased from $2.4 million for the six months ended
February 28, 1995 to $3.0 million for the six months ended February 29, 1996, or
23.6%. As a percentage of revenue, net income increased from 13.9% in the 1995
period to 14.6% in the 1996 period.
FISCAL YEAR ENDED AUGUST 31, 1995 COMPARED WITH FISCAL YEAR ENDED AUGUST 31,
1994
Subscription revenue. Subscription revenue increased from $29.0 million for
the fiscal year ended August 31, 1994 to $36.2 million for the fiscal year ended
August 31, 1995, or 24.7%. FactSet's revenue growth resulted from an increase in
the number of new clients as well as increased penetration among existing
clients. The number of clients increased 6.3% from 364 at August 31, 1994 to 387
at August 31, 1995. New clients consist of new international clients as well as
United States investment managers and United States investment banks. Average
revenue per client increased 12.9% from $85,350 in fiscal 1994 to $96,373 in
fiscal 1995. Revenue growth from existing clients was attributable to an
increase in the number of authorized workstations and the addition of new
applications, databases and service offerings.
Employee compensation and benefits. Employee compensation and benefits
decreased slightly from $11.1 million to $11.0 million, or 0.8%, from fiscal
1994 to fiscal 1995. Excluding the one-time special executive bonus of $2.5
million granted in 1994, employee compensation and benefits increased from $8.6
million to $11.0 million, an increase of 28.0%. Excluding such bonus, as a
percentage of revenue, employee compensation and benefits increased from 29.7%
in the 1994 period to 30.5% in the 1995 period. This increase was due primarily
to an increase in the number of employees and increases in compensation and
benefit costs of existing personnel in fiscal 1995.
Clearing fees. Clearing fees increased from $3.4 million for fiscal 1994 to
$4.3 million for fiscal 1995, or 24.8%. This increase was due to the
corresponding increase in commission revenue. Clearing fees, as a percentage of
revenue, remained relatively constant at 11.8% for fiscal years 1994 and 1995.
Data costs. Data costs increased from $2.4 million for fiscal 1994 to $3.1
million for fiscal 1995, or 25.7%. As a percentage of revenue, data costs
increased slightly from 8.4% in the 1994 period to 8.5% in the 1995 period. This
increase was due to the addition of databases and the slightly higher rates
charged by data suppliers.
21
Communication costs. Communication costs increased from $2.0 million to $2.4
million, or 19.8%, from fiscal 1994 to fiscal 1995. Communication costs, as a
percentage of revenue, declined from 7.0% in the 1994 period to 6.7% in the 1995
period. This decline reflects the cost savings associated with the
implementation of the Company's new communications network, partially offset by
higher communication costs associated with increased usage of the FactSet
system.
Computer equipment. Computer equipment expenses decreased from $2.3 million
to $2.2 million, or 4.4%, from fiscal 1994 to fiscal 1995. Computer equipment
expenses, as a percentage of revenue, decreased from 7.9% in the 1994 period to
6.1% in the 1995 period. This decrease primarily reflects economies of scale
resulting from the Company's larger client base.
Occupancy. Occupancy costs increased from $1.9 million for the fiscal year
ended August 31, 1994 to $2.1 million for the fiscal year ended August 31, 1995,
representing an increase of 8.1%. As a percentage of revenue, occupancy costs
decreased from 6.5% to 5.7% from fiscal 1994 to fiscal 1995. This decrease
reflects improved operating leverage from the Company's revenue growth,
partially offset by the costs associated with expansion and opening a new office
in Tokyo.
Promotional costs. Promotional costs increased from $1.4 million to $1.9
million, or 35.1%, from fiscal 1994 to fiscal 1995. Promotional costs, as a
percentage of revenue, increased from 4.8% in the 1994 period to 5.2% in the
1995 period. This increase was due primarily to increased travel expenses
associated with marketing to new industry segments and geographic regions.
Other expenses. Other expenses increased from $1.0 million in fiscal 1994 to
$1.2 million in fiscal 1995, or 18.7%. As a percentage of revenue, other
expenses decreased from 3.4% in the 1994 period to 3.2% in the 1995 period. The
decrease was due to improved operating leverage from the Company's revenue
growth, partially offset by increases in miscellaneous taxes and other
miscellaneous expenses.
Operating income. Operating income increased from $3.4 million for the
fiscal year ended August 31, 1994 to $8.1 million for the fiscal year ended
August 31, 1995, or 135.2%. Excluding the one-time special executive bonus of
$2.5 million, operating income for fiscal 1994 was $5.9 million, and the growth
rate from fiscal 1994 to fiscal 1995 was 36.3%. Excluding the one-time bonus, as
a percentage of revenue, operating income increased from 20.5% in fiscal 1994 to
22.4% in fiscal 1995.
Other income. Other income increased from $0.3 million to $0.6 million, or
127.0%, in fiscal 1994 to fiscal 1995. This increase was due to higher levels of
cash, cash equivalents and investments, higher rates of return and the impact of
losses on investments in fiscal 1994.
Income taxes. Income taxes increased from $1.7 million to $3.7 million, or
113.5%, from fiscal 1994 to fiscal 1995. The effective tax rate decreased from
47.3% in the 1994 period to 43.0% in the 1995 period, reflecting a decrease in
non-deductible expenses, primarily premiums on executive officers' life
insurance policies.
Net income. Net income increased from $1.9 million for the fiscal year ended
August 31, 1994 to $4.9 million for the fiscal year ended August 31, 1995, or
153.7%. Excluding the one-time special executive bonus of $2.5 million, net
income for fiscal 1994 was approximately $3.3 million, and the growth rate of
net income from fiscal 1994 to fiscal 1995 was 51.3%. Excluding the one-time
bonus, as a percentage of revenue, net income increased from 11.2% in fiscal
1994 to 13.6% in fiscal 1995.
FISCAL YEAR ENDED AUGUST 31, 1994 COMPARED WITH FISCAL YEAR ENDED AUGUST 31,
1993
Subscription revenue. Subscription revenue increased from $23.9 million for
the fiscal year ended August 31, 1993 to $29.0 million for the fiscal year ended
August 31, 1994, or 21.2%. FactSet's revenue growth resulted from an increase in
the number of new clients as well as increased penetration among existing
clients. The number of clients increased 15.2% from 316 at August 31, 1993 to
364 at August 31, 1994. New clients consist of new international clients as well
as U.S. investment managers and U.S. investment banks. Average revenue per
client increased 7.6% from $79,288 in fiscal 1993 to $85,350 in fiscal 1994.
Revenue growth from existing clients was attributable to an increase in the
22
number of authorized workstations and the addition of new applications,
databases and service offerings.
Employee compensation and benefits. Employee compensation and benefits
increased from $6.7 million to $11.1 million, or 66.7%, from fiscal 1993 to
fiscal 1994. Excluding the one-time special executive bonus of $2.5 million
granted in 1994, employee compensation and benefits increased from $6.7 million
to $8.6 million, or 29.2%. Excluding such bonus, as a percentage of revenue,
employee compensation and benefits increased from 27.8% in the 1993 period to
29.7% in the 1994 period. This increase was due to an increase in the number of
employees and increases in compensation and benefits costs for existing
personnel.
Clearing fees. Clearing fees increased from $3.2 million for fiscal 1993 to
$3.4 million for fiscal 1994, or 8.4%. This increase was due to the
corresponding increase in commission revenue. Clearing fees, as a percentage of
revenue, declined from 13.2% in the 1993 period to 11.8% in the 1994 period.
This decline reflects the shift in payment form by clients from a commission
basis to a fee basis.
Data costs. Data costs increased from $2.3 million for fiscal 1993 to $2.4
million for fiscal 1994, or 5.1%. As a percentage of revenue, data costs
decreased from 9.7% in the 1993 period to 8.4% in the 1994 period. This decrease
reflects improved terms from certain database providers and economies of scale
achieved from increased revenue and clients, partially offset by the higher data
costs associated the addition of databases.
Communication costs. Communication costs increased from $1.3 million to $2.0
million, or 53.7%, from fiscal 1993 to fiscal 1994. Communication costs, as a
percentage of revenue, increased from 5.5% in the 1993 period to 7.0% in the
1994 period. The increase was due to the increased usage of the FactSet system
by its existing and new clients, particularly international clients.
Computer equipment. Computer equipment expenses increased from $1.6 million
to $2.3 million, or 45.1%, from fiscal 1993 to fiscal 1994. As a percentage of
revenue, computer equipment expenses increased from 6.6% in the 1993 period to
7.9% in the 1994 period. This increase reflects the higher depreciation expense
associated with increased capital expenditures and computer equipment costs
associated with the implementation of the WAN.
Occupancy. Occupancy costs increased from $1.6 million for the fiscal year
ended August 31, 1993 to $1.9 million for the fiscal year ended August 31, 1994,
or 17.5%. As a percentage of revenue, occupancy costs decreased from 6.7% to
6.5% from the 1993 period to the 1994 period. This decrease reflects improved
operating leverage from the Company's revenue growth, partially offset by the
costs associated with expansion and opening of new offices in London and San
Mateo.
Promotional costs. Promotional costs remained constant at $1.4 million in
fiscal 1994 and fiscal 1993. Promotional costs, as a percentage of revenue,
decreased from 5.8% in the 1993 period to 4.8% in the 1994 period. This decrease
reflects improved operating leverage from the Company's revenue growth.
Other expenses. Other expenses increased from $0.9 million in fiscal 1993 to
$1.0 million in fiscal 1994, or 5.0%. As a percentage of revenue, other expenses
decreased from 3.9% in the 1993 period to 3.4% in the 1994 period. This decrease
was due to improved operating leverage from the Company's revenue growth,
partially offset by increases in miscellaneous expenses.
Operating income. Operating income decreased from $5.0 million for the
fiscal year ended August 31, 1993 to $3.4 million for the fiscal year ended
August 31, 1994, or 30.5%. Excluding the one-time special executive bonus of
$2.5 million granted in 1994, operating income for fiscal 1994 was $5.9 million,
and the growth rate from fiscal 1993 to fiscal 1994 was 20.0%. Excluding the
one-time bonus, as a percentage of revenue, operating income decreased from
20.7% in fiscal 1993 to 20.5% in fiscal 1994.
23
Other income. Other income increased from $0.2 million to $0.3 million, or
20.6%, in fiscal 1993 to fiscal 1994. This increase was due to higher levels of
cash, cash equivalents and investments, offsetting an unrealized loss on the
investments in the limited partnership.
Income taxes. Income taxes decreased from $2.3 million to $1.7 million, or
23.4%, from fiscal 1993 to fiscal 1994 due to lower income before income taxes.
The effective tax rate increased from 44.2% in the 1993 period to 47.3% in the
1994 period due to an increase in non-deductible expenses, primarily premiums on
officers' life insurance policies.
Net income. Net income decreased from $2.9 million for the fiscal year ended
August 31, 1993 to $1.9 million for the fiscal year ended August 31, 1994, or
32.4%. Excluding the one-time special executive bonus of $2.5 million granted in
1994, net income for fiscal 1994 was approximately $3.3 million, and the growth
rate from fiscal 1993 to fiscal 1994 was 13.4%. Excluding the one-time bonus, as
a percentage of revenue, net income decreased from 12.0% in fiscal 1993 to 11.2%
in fiscal 1994.
QUARTERLY COMPARISONS
The following table sets forth certain quarterly financial information of
the Company for each quarter in fiscal 1995 and for the first two quarters of
fiscal 1996. The information has been derived from the quarterly financial
statements of the Company which are unaudited but which, in the opinion of
management, have been prepared on the same basis as the financial statements
included herein and include all adjustments (consisting only of normal recurring
items) necessary for a fair presentation of the financial results for such
periods. This information should be read in conjunction with the financial
statements and the notes thereto and other financial information appearing
elsewhere in this Prospectus. The operating results for any quarter are not
necessarily indicative of results for any future period.
THREE MONTHS ENDED
--------------------------------------------------------------
NOV. 30, FEB. 28, MAY 31, AUG. 31, NOV. 30, FEB. 29,
1994 1995 1995 1995 1995 1996
-------- -------- ------- -------- -------- --------
(DOLLARS IN THOUSANDS)
STATEMENT OF INCOME DATA:
Subscription revenue........................ $8,613 $ 8,984 $9,070 $9,521 $ 10,137 $ 10,561
Operating income............................ 1,958 2,055 1,948 2,139 2,323 2,534
Net income.................................. 1,171 1,273 1,210 1,285 1,464 1,558
AS A PERCENTAGE OF REVENUE:
Operating income............................ 22.7% 22.9% 21.5 % 22.5% 22.9% 24.0%
Net income.................................. 13.6 14.2 13.3 13.5 14.4 14.7
LIQUIDITY AND CAPITAL RESOURCES
FactSet historically has met its liquidity and capital investment needs with
cash generated from operations. At February 29, 1996, FactSet had cash, cash
equivalents and investments of $11.6 million. The Company invests primarily in
short-term investments such as money market funds and treasury bills, and has an
investment in a limited investment partnership that invests primarily in
convertible bonds and preferred stocks.
FactSet's net cash provided by operating activities was $1.7 million, $4.0
million and $7.3 million in fiscal 1993, 1994 and 1995, respectively. The
increasing trend of positive net cash generated from operations was due to
increasing profitability and decreasing receivables as a percentage of revenue.
For the six months ended February 29, 1996, net cash provided by operating
activities was $1.3 million compared to $1.4 million for the comparable period
in 1995. This slight decrease was due to an increase in accounts receivable
associated with revenue growth as well as the timing of tax payments.
The Company's net cash used in investing activities was $4.0 million, $3.8
million and $1.0 million in fiscal 1993, 1994 and 1995, respectively, and $2.6
million for the first six months of 1996. Net cash provided by investing
activities was $45,000 in the first six months of 1995. The principal uses have
been for capital expenditures, primarily computer hardware and related equipment
and office equipment.
24
The Company anticipates capital expenditures to be $5.7 million and $4.8 million
for fiscal 1996 and 1997, respectively.
The Company believes cash generated from operations will be sufficient to
satisfy working capital and capital expenditure requirements for the foreseeable
future. However, in the event the Company were to pursue strategic acquisitions
or alliances, it may require additional sources of debt or equity financing.
RECENTLY ISSUED ACCOUNTING STANDARDS
In October 1995, the Financial Accounting Standards Board issued Statement
of Financial Accounting Standards No. 123, Accounting for Stock Based
Compensation ("SFAS 123"). SFAS 123, the disclosure provisions of which must be
implemented for fiscal years beginning subsequent to December 15, 1995,
establishes a fair value based method of accounting for stock based compensation
plans, the effect of which can either be disclosed or recorded. The Company will
adopt the disclosure provisions of SFAS 123 in the fiscal year which begins on
September 1, 1996. The Company intends to retain the intrinsic value method of
accounting for stock based compensation which it currently follows.
25
BUSINESS
OVERVIEW
FactSet is a leading provider of on-line integrated database services to the
financial community. The Company, which markets its services in the United
States, Europe and the Pacific Rim, combines multiple large-scale databases into
a single, coherent mainframe computer information system accessible from
clients' personal computer terminals. The Company's aggregated data library
provides a broad variety of financial and economic information, including
fundamental data on more than 20,000 companies worldwide. By allowing clients
the ability to simultaneously access multiple databases as if they were part of
a single database and search for and download specific data directly into their
spreadsheets and other work products, FactSet provides investment managers,
investment banks and other financial institutions with a comprehensive,
"one-stop" source for financial information and analytics. The Company's
advanced, proprietary software tools enable clients to manipulate and analyze
the data provided by the Company and present it in a wide variety of formats,
including custom reports designed by the clients. At May 31, 1996, over 400
clients with more than 4,500 authorized workstations subscribed to the Company's
services, including many leading investment managers and investment banks.
The Company was formed in 1978 and has been profitable in each of the last
15 years. For the five fiscal years ended August 31, 1995, the Company sustained
compound annual growth rates of revenue, operating income and net income of
21.8%, 23.2% and 23.8%, respectively. For the first six months of fiscal 1996,
the Company's revenue, operating income and net income increased 17.6%, 21.0%
and 23.6%, respectively, from the comparable period in fiscal 1995.
INDUSTRY OVERVIEW
The worldwide market for financial information is estimated to have grown
13% in 1995 to approximately $10.0 billion. The primary users of financial
information of the type provided by the Company are investment managers and
investment banks. In the United States alone, there are currently an estimated
908 investment managers with over $500 million under management and 151
investment banks with over $20 million in capital. The market for financial
information, both in the United States and worldwide, is expected to continue to
demonstrate strong growth for the foreseeable future. Factors which the Company
believes contribute to this industry growth include (i) the underlying growth of
the investment management business with its requisite information needs; (ii)
improved technology providing end users with substantially increased analytic
capabilities and the ability to inexpensively and rapidly store, access and
transfer large amounts of data; (iii) the increasingly competitive investment
environment requiring immediate access to accurate information; (iv) the growth
of alternative investment institutions such as hedge funds and limited
partnerships; and (v) the development of complex financial instruments with
large associated information requirements.
The market for financial information services is undergoing significant
change, driven by rapid growth in the amount of available information and
increasingly competitive global capital markets. Financial services
professionals depend on a wide array of financial data including current and
historical security prices, historical and estimated future company financial
information, benchmark data and indices, general economic data and other
financial data. In addition, the Company believes that it is becoming
increasingly important for these professionals to integrate and analyze the
historical relationships between multiple types of financial information in
forming their investment decisions. Financial information is typically contained
in databases maintained by a wide variety of vendors and provided to customers
in both CD-ROM and on-line formats. In the absence of database integration, in
order to utilize data from a variety of sources, an individual user must access
and retrieve data from multiple separate databases, with data often in varied
formats, and then must manually integrate and tabulate the accumulated data to
suit his or her particular task.
Since its inception, FactSet has experienced competition from a number of
financial information providers supplying data in a variety of formats. In the
1980s, the Company's primary competitors were "time-sharing" services, which
sold financial data based on customers' on-line time. Although many of
26
these competitors were established, well-capitalized companies, the Company
believes that it was able to compete successfully due to the financial services
industry's need for a comprehensive and efficient source of financial data.
Currently, the Company competes against a variety of news and information
providers. See "--Competition." The Company believes that it will continue to
compete effectively in the market for financial information based on the
competitive advantages described below.
FACTSET'S COMPETITIVE ADVANTAGES
The FactSet system integrates financial data from over 50 separate databases
to form an aggregated data library that allows users to search, download and
manipulate all available data as if from one source without having to make
adjustments for differing formats or presentations. Management believes that
this attribute of the FactSet system, as well as the Company's (i) internally
developed, proprietary software that allows extensive manipulation of data,
including downloading directly to custom spreadsheets developed by clients for
use on the FactSet system; (ii) sophisticated system architecture that allows
users to access the computing power of its mainframe computer platform through
its easy-to-use Window-based programs; (iii) advanced communications
infrastructure, including its wide area network ("WAN"), through which
approximately 25% of its clients and 50% of its authorized workstations are now
connected to the FactSet system; (iv) proprietary integrated database structure,
which facilitates speed and efficiency in data retrieval; (v) superior client
services, including its ability to work closely with clients to develop
customized data solutions; and (vi) ability to recruit, train and retain highly
talented engineering and marketing personnel, have been significant to the
Company's growth and profitability and provide competitive advantages over other
financial data providers.
GROWTH STRATEGY
The Company intends to continue to expand its operations while maintaining
attractive levels of profitability. The Company plans to introduce new service
enhancements, applications and databases designed to increase penetration of
existing clients and attract new clients. Growth in the Company's client base is
expected to result both from an expansion of the market for financial
information and from increased market share achieved in competition with other
database providers. The Company has recently expanded its marketing efforts to
focus on specific industry segments, including investment banking and portfolio
management, and on geographic expansion to Europe and the Pacific Rim, each of
which the Company believes present significant opportunities for growth. The
Company will also explore strategic acquisitions and alliances as such
opportunities arise. The principal components of the Company's growth strategy
are:
. INTRODUCING NEW SERVICE ENHANCEMENTS AND APPLICATIONS. The Company
continually seeks to develop and integrate new service enhancements and
applications that make its system more useful to current clients and more
attractive to new clients. In 1993, the Company deployed a wide area data
transmission network that greatly improves the speed and quality of
throughput to client sites and significantly enhances the ability of
clients to quickly and efficiently add authorized workstations to their
service subscriptions. FactSet's graphical user interface for Windows
makes the FactSet system available in a user-friendly point-and-click
screen environment familiar to most of today's personal computer users.
FactSet has recently introduced its Alpha Testing application, which
allows clients to analyze the relationship between a single or multiple
variables and subsequent investment returns over time, and Cornerstone, a
set of applications that allows quantitative analysts to quickly and
efficiently access large amounts of data directly from the FactSet system.
The Company is currently developing an interactive workstation application
designed specifically for portfolio managers, which will allow integration
of data from user accounting systems into the FactSet system for
manipulation and presentation in FactSet reports. See "--Applications,"
"--System Structure" and "--Engineering and Product Development."
. ATTRACTING NEW CLIENTS AND EXPANDING CLIENT RELATIONSHIPS. The Company
believes that substantial opportunities exist to both attract new clients
and increase its revenues from existing
27
clients. While the Company has achieved excellent penetration of the
largest equity investment managers (84 of the top 100 investment managers
in the United States are FactSet clients), only approximately 35% of the
estimated 900 investment managers in the United States with more than $500
million under management are currently FactSet clients. In addition, while
20 of the largest investment banks in the United States are FactSet
clients, only approximately 44% of the estimated 151 securities firms in
the United States with more than $20 million in capital are currently
FactSet clients. The Company also believes that it should be able to
increase revenues from its existing clients through the introduction of
new applications, databases and technological innovations, many of which
are in response to client demand. In addition, The Company recently formed
an investment banking group to focus exclusively on sales and marketing to
the investment banking sector. FactSet also recently established technical
development groups focused on the development of applications and services
for specific user categories such as portfolio managers and quantitative
research analysts. See "--Sales and Marketing" and "--Engineering and
Product Development."
. INCREASING INTERNATIONAL PENETRATION. The Company is committed to the
international expansion of its customer base and established offices in
London in 1993 and Tokyo in 1994 to enhance its marketing efforts and its
ability to serve clients in Europe and the Pacific Rim. The Company is
supporting these efforts through the development of applications and the
addition of databases targeted at the international financial community.
The Company has been successful in the acquisition of a number of large
clients in these regions and, as a result, the annual indicated
subscription revenues from clients outside the United States increased
121.9% from $1.4 million at March 31, 1995 to $3.0 million at March 31,
1996. See "--Sales and Marketing."
. PROVIDING SUPERIOR CONSULTATIVE SERVICES. Providing superior consultative
services is an integral part of the Company's business philosophy and has
contributed to a client retention rate of over 95% in each of the past six
years. The goal of the Company's 36 full-time client support consultants
is to maximize the utility of the FactSet system to clients and thereby
promote lasting and mutually-profitable client relationships. Client
support consultants work with clients, often at client sites, to develop
custom applications tailored to clients' information needs. The Company
also conducts approximately 50 training seminars across the nation
annually and maintains a client support hotline and a round-the-clock
emergency beeper service. Consulting and training services are provided to
clients free of charge. See "--Client Support Services."
. INTEGRATING NEW DATABASES. The Company regularly adds new databases to its
system. The integration of new databases, in addition to making the
Company's system more useful to existing clients, enables the Company to
tailor its services to the specific needs of additional user categories
and markets. Recent additions to the Company's library of databases
include EDGAR on FactSet, which provides access to both continuously
updated text and data contained in EDGAR SEC filings, the Toyo Kezai
database, a source of fundamental corporate information on Japanese
companies, Morgan Stanley Capital International, which provides
performance data for non-United States stock markets and industry groups,
and Russell U.S. Equity Profile, which provides benchmark data on company
investment styles and structure characteristics. The Company also is in
the process of providing United States security prices that are updated
within 20 minutes of their change (rather than once per day, as is the
current practice). See "-- Databases."
APPLICATIONS
FactSet has developed advanced proprietary software tools to enable users to
create investment analyses using the Company's mainframe computer and integrated
data library. This software allows clients, utilizing easy-to-use Windows-based
programs, to access the power of the FactSet mainframe computer to manipulate
the data provided by the Company and to present that data in a wide variety of
formats, including standard FactSet reports, high-speed screening, stock price
reports and charts. Reports can be tailored to formats designed by or for
individual clients. While many of the Company's
28
competitors offer similar applications, the Company believes that none offer a
package of applications as comprehensive and user-friendly as those offered by
the Company. See "--Competition."
FACTSET'S WINDOWS INTERFACE
Recognizing the need for a Windows interface, FactSet developed a
sophisticated proprietary system, FactSet's Windows interface which makes the
FactSet system available in a user-friendly point-and-click screen environment
familiar to most of today's personal computer users. The Company believes that
FactSet's Windows interface will enable the Company to extend its client base
significantly within investment managers and investment banks.
In addition to a familiar environment, FactSet's Windows interface allows
Microsoft Excel and Lotus 1-2-3 users to access data and most FactSet
applications from within their spreadsheet without leaving the spreadsheet. The
FactSet-Excel Link, for example, allows Excel to interact seamlessly with the
FactSet system by adding the FactSet system menu to the Excel menu bar. This
pull-down menu currently enables clients to log on to the FactSet system, search
for company identifiers and download data from within the Excel environment. In
addition to saving time, this product allows the Company's clients to analyze
data using their own customized reports and to create, produce and print charts
and graphs automatically. The Company believes that client usage of the FactSet
system has increased significantly since the introduction of its Windows
interface.
DATA DOWNLOADING
Data Downloading allows clients to simultaneously access disparate sources
of information and place data in discrete and selected spreadsheet cells. Using
a combination of a personal computer spreadsheet program (Microsoft Excel or
Lotus 1-2-3) and the Company's mainframe library, clients are able to create a
complete custom report incorporating data from any FactSet database as well as
from any private databases clients maintain on the FactSet system or their own
computers.
To perform Data Downloading, a client creates a spreadsheet template
containing request codes in FactSet syntax. The client then downloads the data
into the template through the FactSet system and can then manipulate the data
locally in his spreadsheet.
In addition to downloading individual data points, the FactSet system can
perform calculations on several data items and download the result directly
rather than using a spreadsheet formula to calculate the cells of information.
This is particularly useful for calculating complex statistical functions
requiring vast amounts of data.
UNIVERSAL SCREENING
The Company's Universal Screening utility allows clients to determine,
across all the data contained in the Company's integrated data library, which
companies or particular securities meet certain fundamental or market criteria.
There are two primary applications for Universal Screening. Analysts or
portfolio managers, for example, can use the FactSet system to calculate such
indicators as the market-weighted price/earning ratios of selected industry
groups. Similarly, users can select a group of companies, such as those
comprising the S&P 500, calculate their average return on equity and then rank
companies or sectors relative to that average. In each case, the calculations
are performed by the mainframe, requiring no downloading of data.
Universal Screening is also frequently used by clients to define a universe
of companies or security issues. Beginning with the 20,000 companies for which
fundamental data is provided on the FactSet system, a client can quickly narrow
the list using a combination of parameters chosen by the client. Results can be
sorted according to one of the selected criteria, a weighting of multiple
factors or upon a set of entirely new parameters. The FactSet system also
provides a number of report writing tools that permit clients to customize the
output. Output and reports may be saved on the FactSet system and rerun
regularly or at specified later dates.
The Company also maintains a library containing thousands of pre-programmed
formulas commonly used by analysts to measure corporate size, profitability,
growth and valuation. Each of these screening items is recalculated nightly.
Clients may also create their own formulas, store them in the
29
system's Formula Library, and retrieve them using a mnemonic. In addition,
clients can save "Private Ticker Lists" to capture a particular corporate
universe.
STANDARDIZED ANALYTIC REPORTS
The Company offers three preformatted analytic reports: The Company FactSet,
the Business Segment Analysis and the Industry FactSet. Each of these reports
provides a detailed analysis of a company or industry in a brief, standardized
format.
. The Company FactSet. The Company FactSet provides financial ratio, stock
performance and capital structure analysis for an individual company for
the last twelve months and for ten prior years. Introduced in 1979, the
Company FactSet was the Company's first product.
. The Business Segment Analysis. The Business Segment Analysis displays data
on a company's reported lines of business, providing a seven year history
of sales, operating profits, assets and capital expenditures for each
segment and concluding with a composite analysis.
. The Industry FactSet. The Industry FactSet is a four page report showing
detailed financial data for the companies in a particular industry.
Individual company size, profitability and growth characteristics are
displayed in a comparative format. All income accounts, balance sheets and
profitability factors are then combined to create an industry aggregate.
The FactSet system also includes a series of pre-formatted display screens
which facilitate the examination of raw data in the various FactSet databases.
These screen reports are either unique to the particular database or common to a
class of databases (e.g., securities prices, whether from IDC or Exshare). In
most cases, a ticker symbol is all that is required for information retrieval.
INVESTMENT GRAPHICS
The Company has preprogrammed a set of charts which can be displayed
on-screen and printed. FactSet system graphs present earnings power, growth
rates and stock valuation, and include quarterly earnings and sales changes,
price/earnings and price/book ratios and relative profitability charted against
price/earning ratios. Clients can select from one or more price or valuation
charts and vary the start date, currency or scaling, display a relative price
line, add volume or moving averages or include other display options.
PRIVATE DATABASE SERVICE
The Company offers clients the ability to store their own databases on the
FactSet system and access those databases from multiple locations. Using the
Private Database Service, clients can store portfolio and investment
information, as well as subsets of the FactSet database, on the Company's
mainframe computers.
ALPHA TESTING
Alpha Testing is a service offered to clients by the Company that allows
clients to analyze the relationship between a single or multiple variables and
subsequent investment returns over time. The Company's alpha testing model
contains a large number of preprogrammed specifications and formulas, or clients
can input their own. Clients can place results directly into a variety of report
formats as well as their own spreadsheets or other work products.
CORNERSTONE
Cornerstone is a set of applications that allows quantitative analysts to
quickly and efficiently access large amounts of data directly from the FactSet
system. Cornerstone provides the tools those analysts need to specify the
sources of data and the layout of the resulting data sets. Freshly updated data
sets can then be transferred, at dates and times specified by the client,
directly to client workstations for further processing.
30
SALES AND MARKETING
SALES
The FactSet system is sold and marketed through the Company's direct sales
and marketing staff, which as of March 31, 1996, consisted of 24 full time
employees based at the Company's Greenwich, Connecticut headquarters and at its
offices in San Mateo, California, London and Tokyo. Marketing the Company's
services requires a skill set which includes knowledge of financial information,
information technology and the financial services industry. FactSet has been
successful in recruiting, training and retaining talented marketing
professionals that meet these criteria. On average, the Company's sales and
marketing personnel have been with the Company in excess of seven years and,
with few exceptions, spent their first several years in training with FactSet as
technical support consultants.
The Company believes that substantial opportunities exist to both attract
new clients and increase its revenues from existing clients. While the Company
has achieved excellent penetration of the largest equity investment managers (84
of the top 100 investment managers in the United States are FactSet clients),
only approximately 35% of the estimated 900 investment managers in the United
States with more than $500 million under management are currently FactSet
clients. In addition, while 20 of the largest investment banks in the United
States are FactSet clients, only approximately 44% of the estimated 151
securities firms in the United States with more than $20 million in capital are
currently FactSet clients. The Company believes that it should be able to
increase revenue from its existing clients through the introduction of new
applications, databases and technological innovations, many of which are in
response to client demand. The Company recently formed an investment banking
group to focus exclusively on sales and marketing to the investment banking
sector. FactSet also recently established technical development groups focused
on the development of applications and services for specific user categories
such as portfolio managers, quantitative research analysts and investment
bankers. See "-- Engineering and Product Development."
Between 1988 and 1995, average revenue per client increased from $48,798 to
$96,373. This growth resulted to a significant degree from an expansion in the
number of databases offered, the addition of new services and growth in the
number of workstations per client. As described above, the Company is continuing
to develop new applications and services, as well as focused marketing and
technical development groups, in order to increase revenues through a further
increase in the number of databases and workstations within its clients.
The Company believes that significant opportunities also exist to market its
services internationally. In 1992, the Company began adding databases to the
FactSet system--such as Extel and Worldscope--that broadened the system's
international scope and enhanced its appeal to international financial services
companies. This globalization of the FactSet system's data is ongoing.
The Company opened its London office in 1993 and, as of March 31, 1996, the
Company had 28 clients in Europe with aggregate indicated annual subscription
revenues of over $2.4 million. The London office currently includes 11
personnel, including four sales personnel and five client support consultants.
The Company's strategy for the European market is to obtain additional clients
by increasing potential clients' knowledge of the Company's services and by
adding applications and databases to the FactSet system that are particularly
suited to those clients' needs.
The Company began to market its services in the Pacific Rim (principally
Japan, Hong Kong and Singapore) in 1993 and now operates an office in Tokyo with
two sales personnel and two client support consultants. The Tokyo office is
fully linked to FactSet's global communications network, and the Company's
bilingual staff provide both telephone and on-site marketing and technical
support for the region.
The Company is focusing its marketing efforts in Japan on the international
and domestic sections of large Japanese institutional investment firms, the
Japanese divisions of non-Japanese institutional money managers and the research
departments of both Japanese and non-Japanese securities firms. The Company has
invested considerable resources in developing relationships with potential
Japanese clients and studying the particular needs of Japanese financial
services companies. Currently, FactSet has 11
31
Pacific Rim clients--including two of the four largest trust banks in
Japan--with over $800,000 in aggregate indicated annual subscription revenues.
In Hong Kong and Singapore, the Company is focusing on marketing to regional
money management and securities firms, which are often the local operations of
global entities that already have an existing relationship with FactSet.
The Company's strategy is to increase its client base in the Pacific Rim by
continuing to adapt its services to the needs of those markets. For example, the
Company recently added the Toyo Kezai database, a source of fundamental
corporate information on Japanese companies. In addition, the Company believes
it will benefit from the increasing use by Pacific Rim financial services
companies of LAN-based office computer information systems, which the Company
believes will lead to a shift from in-house mainframe environments to one where
the focus is an interactive desktop.
PRICING
The Company seeks to make its services integral to its clients' investment
decision processes. Thus, unlike services that charge fees based in whole or
part on actual system usage time, the Company charges fixed monthly amounts
which vary among clients based on the number of sites and workstations from
which the FactSet system is available and the number of accessible databases and
specialized services to which a client subscribes. The Company believes that
this pricing policy encourages clients to use the FactSet system regularly. The
Company does not enter into formal contracts with clients, a practice which the
Company believes enhances its marketing efforts by allowing clients to use the
FactSet system without the requirement of a long term commitment.
Although the Company's subscription charges are quoted to clients in annual
amounts, they are earned as services are provided on a month to month basis. The
basic FactSet subscription consists of: five databases including fundamental
corporate data, securities prices, business news and economic data; two
authorized workstations and companion home passwords; a basic application
package; and client support and training. Additional databases, passwords and
services (including enhanced and specialized applications) are available at
additional cost. Over 90% of existing FactSet clients subscribe to additional
system services. In many instances, clients must also pay access fees directly
to the database providers.
Each FactSet client has the option to pay subscription charges to the
Company either in the form of commissions on securities transactions or on a
cash basis. This choice is available regardless of the nature or amount of the
services provided by FactSet to such client. When a client elects to pay
subscription fees in the form of commissions, the dollar amount payable is
higher than the fee that would be payable on a cash basis because of the
associated clearing fees payable by the Company on such transactions. However,
commissions net of related clearing fees are approximately equal to the fees
that would be paid by a client on a cash basis. In addition, although the option
to pay subscription charges in the form of commissions is available to all
clients, it is impractical for clients that do not engage in securities
transactions to utilize this method of payment.
CLIENTS
The Company's client base consists of investment managers, investment banks
and, to a very limited extent, corporations and accounting firms. The Company
currently has over 400 clients, the substantial majority of which are located in
the United States. For fiscal 1995, average revenue per client was $96,373, with
over 30% of the Company's clients producing more than $100,000 of annual
revenue. The Company's top ten clients accounted for approximately 11% of
revenues and revenue from the largest client was approximately $900,000.
Investment managers (including the trust departments of commercial banks)
make up the Company's largest client group. As of March 31, 1996, approximately
324 of the Company's clients were investment managers, representing
approximately 79% of the Company's total client base. For the fiscal year ended
August 31, 1995, investment management clients accounted for approximately 82%
of the Company's revenue.
32
Investment banking firms and broker-dealers (as distinguished from their
asset management affiliates) constitute the Company's second largest client
group. As of March 31, 1996, approximately 71 of the Company's clients were
investment banks. While the Company has achieved moderate penetration of the
major firms in this sector, the Company believes that the investment banking
area continues to represent an opportunity for growth.
The Company's major clients have spent increasing amounts on the Company's
services. The following table sets forth the aggregate indicated annual
subscription revenue from the Company's top ten current clients (with minimum
five year history) at December 31 of each year and the compound annual growth
rate of such revenue over the period depicted.
AGGREGATE INDICATED ANNUAL SUBSCRIPTION REVENUE
FROM THE COMPANY'S TOP TEN CLIENTS
COMPOUND ANNUAL
1990 1991 1992 1993 1994 1995 GROWTH RATE
- ------ ------ ------ ------ ------ ------ ---------------
(DOLLARS IN THOUSANDS)
$1,209 $1,714 $2,026 $2,500 $3,249 $4,036 27.3%
The Company's revenue per client has sustained consistent growth, growing
from $65,764 per client at December 31, 1991 to $96,373 per client at December
31, 1995. The Company enjoys excellent client retention--FactSet's overall
client retention rate (on a revenue basis) has been over 95% in each of the past
six years.
CONSULTATIVE SERVICES
Providing superior consultative services is an integral part of the
Company's business philosophy and has contributed to a client retention rate of
over 95% in each of the past six years. The goal of the Company's 36 full-time
client support consultants is to maximize the utility of the FactSet system to
clients and thereby promote lasting and mutually-profitable client
relationships. Client support consultants work with clients, often at client
sites, to develop custom applications tailored to clients' information needs.
The Company also conducts several dozen training seminars across the nation
annually and maintains a client support hotline and a round-the-clock emergency
beeper service. Consulting and training services are provided to clients free of
charge.
SYSTEM STRUCTURE
The design of the FactSet information system is based on the Company's
belief that time sensitive information and complex searches and data
manipulations can be best managed and delivered from a mainframe hub out to
client networks and workstations. The linkage of the Company's mainframe
computer power, speed and storage capacity with client terminals and networks
results in a highly capable and efficient information delivery system.
MAINFRAME PLATFORM
The Company maintains its databases on continually upgraded and fully
redundant Digital Equipment Corporation Alpha mainframe computer platforms. To
minimize the risk of interrupted operation, the Company maintains redundant
mainframe data centers in Greenwich, Connecticut and New York City. On a
day-to-day basis, the New York data center handles New York City clients and
those clients situated west of the Mississippi, while the Greenwich data center
handles the entire East Coast except New York City. The Company has designed the
capacity of its mainframe and data storage facilities so that in the event
either data center were to cease operation, the other could immediately begin
serving all clients from a single location.
33
The Company's mainframe platform allows for monthly, daily, hourly and even
real-time refreshment of data. The Company believes that this system provides
advantages as opposed to alternative systems, including CD ROM based systems,
which generally cannot be updated with the same frequency. The Company's
databases are updated with a combination of on-line and tape input. For example,
securities prices are wire-fed from both IDC and Extel, as are newswires, EDGAR
SEC Filings and FIRST CALL Earnings Estimates. Other databases are tape feeds,
with updates conducted overnight.
The Company has developed an advanced, proprietary file structure that
allows the FactSet system to provide faster data access speeds. In addition, as
part of its database integration function, the Company continually screens for
and corrects anomalous data received from suppliers. Adjustments for corporate
actions, such as stock splits, are made across all databases to ensure
continuity of the data. All screening libraries, involving billions of
calculations, are recalculated whenever data are refreshed.
TELECOMMUNICATIONS
The Company's communications system is designed to provide a high-speed
platform for the delivery of financial and other information. The system is
capable of delivering bandwidth-consuming graphics as well as numerical data and
can be extended to serve as a distribution vehicle for other financial
information products.
Clients communicate with the Company's system via traditional dial-up
telephone modem, direct hardwire with the client, WAN or the Internet. In mid
1993, the Company put into operation a wide area network, or WAN, utilizing
frame relay protocols and the SprintNet and NYNEX telecommunications networks.
This network configuration allows higher speed data transmission to clients'
local area networks and is compatible with all standard local area network
protocols. Advantages to clients include data transfer at 56 kilobits per
second, unlimited access time without log-outs and the ability to quickly and
efficiently add authorized workstations to their service subscriptions. As of
March 31, 1996, approximately 25% of FactSet's clients (representing 50% of the
Company's authorized workstations) were linked to FactSet via the WAN.
ENGINEERING AND PRODUCT DEVELOPMENT
The Company recognizes that its continued success depends upon its ability
to enhance the FactSet system and to introduce new services that adequately
anticipate and address technological and market developments and the needs of
the Company's clients. The Company maintains an extensive staff of engineers
focusing on both new and improved software applications and system structure and
operations.
The Company is continually refining the process by which new and disparate
databases are integrated into the FactSet system. The Company is developing a
generalized integration system that it believes will significantly reduce the
lead time and costs associated with the addition of new databases. The Company
is also developing sophisticated tools for monitoring and maintaining the
quality and integrity of data in the FactSet system as such data is routinely
updated via feeds from database providers.
The Company's software engineers are developing applications designed to
enhance and leverage the success of FactSet's Windows interface. In connection
with this interface, the Company has developed sophisticated system architecture
that allows FactSet to centrally control the screen environment of and on-screen
special service options available to individual users, thereby eliminating the
need to continually upgrade FactSet software on clients' personal computers and
workstations. The Company's engineers are also focusing on the needs of the
Company's various client groups, and the product development cycle often
involves consultation with and feedback from clients. The Company is currently
developing an interactive graphics package for portfolio managers that will
allow the
34
integration of data from user accounting systems into the FactSet system so that
such data can be readily used and presented in client reports.
DATABASES
As of March 31, 1996, the Company acquired data from 30 information
providers supplying over 50 databases. The Company seeks to maintain, when
possible, at least two sources for each item of data. The Company contracts with
database vendors on either a fixed fee or royalty (per client) basis, with the
contracts generally renewable annually and cancelable on one year's notice.
FactSet is a significant distributor for many of the databases provided by the
Company.
Currently, the databases offered by the Company as part of its basic
subscription package include fundamental corporate data, securities prices,
business news and economic data.
As of March 31, 1996, 91% of the Company's clients subscribed for databases
in addition to those offered with the Company's basic service. The Company
charges clients based on a fixed annual surcharge for each additional database
to which a client desires access. For most databases, the client must also pay
an annual fee directly to the database provider.
The integration of new databases, in addition to making the FactSet system
more useful to existing clients, enables the Company to tailor its services to
the specific needs of additional user categories and markets. In 1993, the
Company added a number of new databases to its library, including earnings
estimates from I/B/E/S International, international fundamental corporate data
from GLOBAL Vantage and portfolio data from BARRA and F.T. Actuaries. Additions
in 1994 included data from Morgan Stanley Capital International and EDGAR SEC
filings. In 1995, the Company added International Finance Corporation ("IFC")
industry data. The IFC, a subsidiary of the World Bank, is a provider of indices
covering emerging markets. The Company also recently introduced the Toyo Kezai
database, a source of fundamental corporate information on Japanese companies,
CDA Signal and the Russell U.S. Equity Profile, a comprehensive four-page report
that computes attribution characteristics of selected portfolios and benchmarks.
The table below lists the universe of data sources available on the FactSet
system.
NUMBER OF
COMPANIES
DATABASE SUPPLIER OR ISSUES LENGTH OF HISTORY UPDATE CYCLE
--------------------- --------------- ---------------------- ----------------
CORPORATE AND MARKET
FINANCIAL DATA COMPUSTAT Annual 10,000 20 Years Weekly
Industrials
COMPUSTAT Quarterly 10,000 48 Quarters Weekly
Industrials
COMPUSTAT GLOBAL 11,000 Up to 12 years Biweekly/Monthly
Vantage
COMPUSTAT Business 8,000 7 Years Weekly
Segment
COMPUSTAT Geographic 8,000 7 Years Weekly
Segment
COMPUSTAT Bank 150 20 Years/40 Quarters Weekly
COMPUSTAT 100 20 Years/40 Quarters Weekly
Telecommunications
COMPUSTAT Utility 300 20 Years/40 Quarters Weekly
COMPUSTAT Research 7,700 20 Years Weekly
Annual
COMPUSTAT Research 7,700 48 Quarters Weekly
Quarterly
COMPUSTAT SIC Code 10,000 Current Weekly
COMPUSTAT Canadian 600 20 Years/20 Quarters Weekly
Annual, Quarterly,
PDE
Ford Investor Service 3,360 Since 1970 Weekly
35
NUMBER OF
COMPANIES
DATABASE SUPPLIER OR ISSUES LENGTH OF HISTORY UPDATE CYCLE
--------------------- --------------- ---------------------- ----------------
Morgan Stanley 4,200 7 years Daily/Monthly
Capital
International
Toyo Keizai Inc. 2,900 15 years Weekly
Value Line 5,000 Since 1969 Weekly
Fundamental
Databases
Worldscope Global 12,500 Since 1980 Weekly
Worldscope Emerging 2,500 Since 1990 Weekly
Markets
SECURITIES PRICES
I.D.C. Stock & Option 36,000 Since November 1984 Daily
Prices
I.D.C. Bond Prices 15,000 Since July 1987 Daily
Exshare Global Equity 30,000 Since March 1985 Daily
Prices
FactSet Historical 25,000 Since 1972 Daily
Prices
COMPUSTAT 10,000 Since January 1962 Monthly
Price/Dividends/Earnings
COMPUSTAT Research 7,700 Since January 1962 Monthly
Price/Dividend/Earnings
BUSINESS
NEWS/CORPORATE FIRST CALL Notes 5,500 Since 1993 Real-Time
DESCRIPTIONS S&P Corporation 12,000 Since 1988 Biweekly
Records
S&P Daily News 12,000 Since 1988 Daily
PR Newswire 15,000 Since 1990 Real-Time
Business Wire 10,000 Since October 1992 Real-Time
CDA/Investnet Signal 6,500 Since 1985 Weekly
II
Information Access 180,000 Since 1990 Monthly
Private Companies
SEC
INFORMATION EDGAR SEC Filings 20,000 Since April 1993 Real-Time
EARNINGS
ESTIMATES FactSet/FIRST CALL 6,500 Since June 1989 Real-Time
RTEE
I/B/E/S U.S. Earnings over 5,000 3 Years Daily
Estimates (annual &
quarterly)
I/B/E/S U.S. 10,500 20 Years Weekly
Historical Estimates
(annual & quarterly)
I/B/E/S International 11,000 3 Years Weekly
Estimates
I/B/E/S International 16,000 9 Years Weekly
Historical Estimates
Value Line 1,600 Since May 1992 Weekly
Estimates/Projections
BENCHMARK DATA
Standard & Poor's 9 Indices; Current Daily
Indices 1,500 Companies
Russell U.S. Equity 18 Indexes Since 1990 Monthly
Profiles
Russell Indexes 18 Indexes; Current Monthly
3,000 Companies
Morgan Stanley 92 Indices Up to 28 Years Daily
Capital
International
Indices
FT/S&P Actuaries 39 Indices; Up to 10 years Daily/Monthly
World Indices 2,300 Companies
IFC (Emerging 60 Indices; Since 1975 Daily/Weekly/Monthly
Markets) 1,650 Companies
FT-SE U.K. Series 5 Indices; Current Daily
950 Companies
CAC (France) 40 Companies Current Daily
DAX (Germany) 30 Companies Current Daily
FIXED
INCOME Moody's Ratings 30,000 10 Years Daily
DATA Duff & Phelps Credit 4,300 Since 1973 Daily
Ratings Co.
36
NUMBER OF
COMPANIES
DATABASE SUPPLIER OR ISSUES LENGTH OF HISTORY UPDATE CYCLE
--------------------- --------------- ---------------------- ----------------
Fitch Investor 325 Current Monthly
Services
I.D.C. Call/Put/ 18,000 Current Monthly
Sinking Fund
Features
ECONOMIC
DATA BCI Economic Series 200 Since 1945 Monthly
OECD Main Economic over 2,000 Since 1960 Monthly
Indicators
OTHER
SERVICES BARRA U.S. Equity 7,000 Current Monthly
Model
Columbine Capital 12,000 Current Weekly
Services
Invest/Net Insider 8,000 Since 1985 Daily
Trading
Trinity Multiplex 1,000 Since 1994 Monthly
Forecast
- ------------
All database names are trademarks or registered trademarks of their respective
companies.
FUNDAMENTAL CORPORATE AND MARKET FINANCIAL DATA
Fundamental corporate and market data is a core basic service of the FactSet
system. These databases allow retrieval of information as broad as the
historical price/earnings ratios of the S&P 500 or the current CPI-U deflator or
as strictly defined as the comparative returns on assets of Japanese and French
telecommunications companies. The majority of FactSet system usage comes from
clients downloading and screening the fundamental and price performance of
investment securities. The major databases integrated by the Company in this
category are:
. COMPUSTAT. The COMPUSTAT database, produced by the Standard & Poors
subsidiary of McGraw-Hill, provides financial, statistical and market
information covering more than 10,000 publicly-traded companies in North
America. COMPUSTAT's GLOBAL Vantage product, introduced in the FactSet
system in 1993, provides fundamental and market-related data for more than
11,000 industrial and financial companies in 70 countries worldwide.
. Value Line. The Value Line databases contain comprehensive annual and
quarterly income statement, balance sheet, and cash flow data for more
than 5,000 industrial, transportation, utility, retail, bank, insurance
and savings and loan companies. The Value Line database also provides a
number of pre-computed and commonly used ratios and investment ratings.
. Worldscope. The Worldscope database, produced by Disclosure/Wright
Investor Services, provides financial information on 12,000 companies in
38 developed countries and 2,500 companies in 27 emerging market
countries.
SECURITY PRICES
The FactSet system offers securities prices from the following sources:
. I.D.C. Daily Stock, Option and Bond Prices. The Company receives nightly
security pricing and related information for each trading day. The
database contains daily high, low and closing prices and volume for over
36,000 securities. In addition to common stocks, the price database
contains preferred stock, convertible bonds, convertible preferreds,
warrants, indices and options. In addition, over 15,000 corporate bond
issues, treasuries, agencies, and bond indices are updated daily.
. Exshare Global Equity Prices. Global equity prices are transmitted to the
Company daily. The database contains daily prices from January 1985 for
more than 30,000 non-U.S. securities and indices.
. FactSet Historical Prices. The Company maintains historical prices on
25,000 U.S. securities back to 1972.
37
. COMPUSTAT Monthly Price/Dividend/Earnings Database. The
Price/Dividend/Earnings data-base is a library of financial and market
information for over 10,000 industrial and non-industrial companies and
approximately 120 industry indices and composites.
BUSINESS/CORPORATE DESCRIPTIONS
The Company offers several databases which transmit corporate news or
actions:
. FIRST CALL Notes. First Call Notes provides real-time transmission of
analyst morning meeting notes, earnings announcements, industry reports
and corporate news. More than 30 investment banks, covering more than
5,000 companies, contribute to this service.
. S&P Corporation Records/S&P Daily News. This database contains corporate
descriptions and daily updated news covering over 12,000 companies.
. PR Newswire. PR Newswire is a real-time news feed containing press
releases from more than 15,000 companies. PR Newswire is included in the
basic FactSet subscription.
. Business Wire. Business Wire provides real-time corporate news including
product announcements, financial results and employee changes. Business
Wire is included in the basic FactSet subscription.
. CDA Investnet. CDA Investnet contains nightly updated transactions by more
than 100,000 individuals and 8,000 companies dating back to 1985.
Each of these databases allow the user to search for individual companies or
to create a watch list to monitor specific companies. Items can be viewed,
printed, or downloaded. With the exception of PR Newswire and Business Wire,
these databases carry a surcharge.
SEC INFORMATION
During 1994, the Company introduced EDGAR on FactSet. This service provides
access to EDGAR SEC Filings which are updated continuously. EDGAR on FactSet
provides clients with access to the latest SEC filings as well as an archive of
those documents filed through EDGAR since April 1993. EDGAR on FactSet allows
clients to view, print, download (to a spreadsheet) or capture (to a text file)
Form 10-K's, Form 10-Q's, proxy statements and Form 8-K's among other SEC
documents, keep track of that day's filing activity for any portfolio of
companies and search for SEC documents by issuer, date or full text search.
The EDGAR database is currently comprised of 10,232 companies and is
scheduled to include all U.S. publicly reporting companies as well as thousands
of trusts and mutual funds by mid-1996.
EARNINGS ESTIMATES
Earnings estimates are important to the investment decision process at many
investment managers. Earnings estimates, which are generated primarily by
brokerage research analysts, are supplied on the FactSet system by three
services.
. FactSet/FIRST CALL Real Time Earnings Estimates. FactSet/FIRST CALL
provides a chronology of nearly 200 brokers' individual estimates on over
5,000 companies, with information updated continuously throughout the day
so that the latest estimate changes are immediately available to all
subscribers. Annual and quarterly estimates are available for the current
and next fiscal year. Long-term growth rate estimates are also included.
The information is continuously updated throughout the day. Data is
available from June 1989.
. I/B/E/S U.S. Earnings Estimates. I/B/E/S International Inc. is a service
that monitors earnings estimates produced by brokerage firm analysts on
companies of interest to institutional investors. The Company receives
daily updates from I/B/E/S and maintains a database
38
comprised of more than 5,000 companies. Estimates include the annual
estimate for the current and next fiscal years, quarterly estimates for
the current and three ensuing quarters, and the long-term growth rate. The
Company provides three years of history for the annual estimate and the
long-term growth rate. In addition, I/B/E/S U.S. Historical Estimates
provides the same estimate information for over 10,500 companies
(including companies that no longer trade) annually from 1976 and
quarterly from 1984.
. I/B/E/S International Inc. I/B/E/S International delivers consensus
earnings estimates for more than 11,000 publicly traded companies in 44
countries. In addition, I/B/E/S International Historical Estimates
provides the same estimate information for over 16,000 international
companies (including companies that no longer trade) annually since 1987.
. Value Line Estimates and Projections. The Value Line Estimates and
Projections database is, with few exceptions, comprised of the same
universe of companies that Value Line follows in its historical database.
The estimates, projections and ratings contained in this database
correspond with the most recently published information in the Value Line
Investment Survey. All data is reviewed and updated at least once a
quarter. However, new earnings and dividend information is added whenever
reported by the company.
BENCHMARK DATA
Benchmark data permits clients to measure the performance of their
investments against relevant indices. The Company offers the following sources
of benchmark data:
. Standard & Poor's Indices. This database provides daily changes in
constituents and weights for the major S&P indices, including the 500
Industrials, 100 Transports, Financials, Utilities, Mid Cap, Small Cap and
Super Composite.
. Russell Equity Profiles. The Russell U.S. Equity Profiles calculates
investment style and structure characteristics for clients' portfolios,
allowing them to measure their portfolio's performance against relevant
benchmark indices.
. Morgan Stanley Capital International Indices. The Morgan Stanley Capital
International Indices are designed to measure the performance of the stock
markets around the world. Among the indices calculated daily are indices
of 46 countries, 38 industries and 8 economic sectors. Regional and global
indices are also calculated for the developed and emerging markets, and
the combination of the two.
. FT/S&P Actuaries World Indices. The FT/S&P Actuaries World Indices
provides rigorous global performance benchmarks covering 26 countries, 12
regions, 7 economic sectors, and 36 industries. More than 1,700 index
levels measure each performance category globally and by country, and
region.
. IFC (Emerging Markets). The IFC database provides emerging marked indices
and detailed market data for 27 stock markets globally.
COMPETITION
The financial information services industry is competitive and characterized
by rapid technological change and the entry into the field of large and
well-capitalized companies as well as smaller competitors. In a broad sense, the
Company competes or may compete directly and indirectly in the United States and
internationally with large, well-established news and information providers such
as Dialog, Disclosure, Dow Jones, Lexis/Nexis, Pearson, Reuters and Thomson,
market data suppliers such as ADP, Bloomberg and Telerate, as well as many of
the database providers from whom the Company obtains data for inclusion in the
FactSet system. The Company's most direct competitors
39
include on-line and CD-ROM database suppliers and integrators such as OneSource
Inc., COMPUSTAT PC Plus, Baseline, DAIS Group, IDD Information Services and
Track Data Corp. primarily in the United States and Datastream and Randall-Helms
primarily in international markets. Many of these competitors offer databases
and applications that, in one form or another, are similar to the databases and
applications offered by the Company, in some cases at lower prices. While many
of the Company's competitors offer similar applications, the Company believes
that none offer a package of applications as comprehensive and user-friendly as
those offered by the Company.
GOVERNMENT REGULATION
To facilitate the receipt of revenues on a commission basis, the Company's
wholly owned subsidiary, FDS, is a member of the National Association of
Securities Dealers, Inc. and is a registered broker-dealer under Section 15 of
the Securities and Exchange Act of 1934 (the "Exchange Act"). See "Management's
Discussion and Analysis of Financial Condition and Results of Operations--
Overview". Rule 15c3-1 under the Exchange Act requires that FDS maintain minimum
net capital equal to the greater of $5,000 or 6.67% of aggregate indebtedness
and a ratio of aggregate indebtedness to net capital of not more than 15 to 1.
FDS may be prohibited from paying cash dividends to the Company if such
dividends would result in its net capital falling below the minimum requirement
or its ratio of aggregate indebtedness to net capital exceeding 15 to 1. In
addition, Rule 15c3-1 requires that FDS notify the Securities and Exchange
Commission ("SEC") and the appropriate self-regulatory organization two business
days before a withdrawal of excess net capital if the withdrawal would exceed
the greater of $500,000 or 30% of the FDS's net capital, and two business days
after a withdrawal that exceeds the greater of $500,000 and 20% of net capital.
Finally, Rule 15c3-1 authorizes the SEC to order a freeze on the transfer of
capital if FDS plans a withdrawal of more than 30% of its excess net capital and
the SEC believes that such a withdrawal would be detrimental to the financial
integrity of FDS. Compliance with Rule 15c3-1 could limit the Company's ability
to undertake certain capital expenditures. At February 29, 1996, FDS had net
capital of $2,104,657, which was $1,788,716 in excess of its minimum net capital
requirement of $315,941, and a ratio of aggregate indebtedness to net capital of
2.25 to 1.
EMPLOYEES
The Company had 116 full time employees as of May 31, 1996. The Company's
employees are not represented by any collective bargaining organization and the
Company has never experienced a work stoppage. The Company's philosophy is to
reward employees for outstanding performance and continued service to the
Company. The Company believes that its relationships with its employees are
good.
PROPERTIES
The Company's principal executive offices are located in Greenwich,
Connecticut. The Company maintains redundant mainframe computer centers at its
Greenwich facility and at a facility in New York City. The Greenwich facility
consists of approximately 37,000 square feet of office and computer center
space, 11,000 square feet of which the Company acquired in late 1995 and is in
the process of renovating. The Company also maintains offices in San Mateo,
California, London, England and Tokyo, Japan. The Company is currently expanding
its facilities in San Mateo. The Company leases all of its facilities.
LEGAL PROCEEDINGS
The Company is not a party to any material legal proceedings.
40
MANAGEMENT
DIRECTORS, EXECUTIVE OFFICERS AND ADDITIONAL KEY PERSONNEL
Set forth below is information concerning the current executive officers and
directors of the Company. The Board of Directors currently has three members,
one of whom is not also an employee of the Company. The Company anticipates that
it will add two additional outside directors shortly after the Offering.
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
Howard E. Wille........................... 68 Chairman of the Board of Directors, Chief
Executive Officer and Director
Charles J. Snyder......................... 53 President, Chief Technology Officer and
Director
Ernest S. Wong............................ 41 Vice President and Chief Financial Officer
Joseph E. Laird, Jr....................... 50 Director
Set forth below is information concerning certain other key additional
personnel of the Company.
NAME AGE POSITION WITH THE COMPANY
---- --- -------------------------
Timothy J. Aune........................... 33 Director of Pacific Rim Operations and
President of FactSet Pacific Inc.
Jon D. Carlson............................ 29 Director of PC Software Development
Nathanial B. Day.......................... 58 Senior Sales Executive
Michael F. DiChristina.................... 33 Director of Engineering
William F. Faulkner....................... 40 Director of Product Development
Philip A. Hadley.......................... 33 Director of Sales and Marketing
Edward A. Martin.......................... 31 Director of Information Research
Kristen L. McCutcheon..................... 29 Director of Technical Support
Adelaide P. McManus....................... 40 Chief Administrative Officer
Townsend Thomas........................... 32 Director of Systems Engineering
Susan L. Warzek........................... 33 Director of Communications
Merle E. Yoder............................ 37 Director of European Operations and
Managing Director of FactSet Limited
Howard E. Wille, Chairman of the Board of Directors, Chief Executive Officer
and Director. Mr. Wille was a founder of the Company in 1978 and has held his
current positions with the Company since that time. From 1966 to 1977, Mr. Wille
was a partner and Director of Research at Faulkner Dawkins & Sullivan, a Wall
Street investment firm, and held a managerial position with Shearson Hayden
Stone after its acquisition of Faulkner Dawkins & Sullivan in 1977. He was
President and Chief Investment Officer of Piedmont Advisory Corporation from
1961 to 1966 and, prior to that time, served as a securities analyst, investment
manager and investment counselor for several firms. Mr. Wille received a B.A. in
Philosophy from the City College of New York. Mr. Wille has been a director of
the Company since its formation.
Charles J. Snyder, President, Chief Technology Officer and Director. Mr.
Snyder was a founder of the Company in 1978 and has held his current positions
with the Company since that time. From 1964 to 1977, Mr. Snyder worked for
Faulkner Dawkins & Sullivan, eventually becoming Director of Computer Research,
a position he retained with Shearson Hayden Stone after its acquisition of
Faulkner Dawkins & Sullivan in 1977. Mr. Snyder received a B.S.E. in Electrical
Engineering from Princeton University and an M.S. in Mathematics from New York
University. Mr. Snyder has been a director of the Company since its formation.
Ernest S. Wong, Vice President and Chief Financial Officer. Mr. Wong joined
the Company as Vice President and Chief Financial Officer in June 1996. Between
1991 and 1996, he held several
41
positions with Montedison, S.P.A., including Vice President, Finance and
Treasurer of Montedison U.S.A. and Director of Corporate Finance of Montedison
Corporation of America. Mr. Wong received a B.A. in Social Psychology from
Cornell University and an M.B.A. in Finance from Columbia University Graduate
School of Business.
Joseph E. Laird, Jr., Director. Mr. Laird has been a Managing Director of
Veronis, Suhler & Associates, the leading specialty investment bank exclusively
serving the media and information industries, since 1989. From 1982 to 1989, he
was an institutional equity salesman and a senior securities analyst of database
information services for Hambrecht & Quist. From 1975 to 1982, Mr. Laird was an
institutional equity salesman and then investment strategist for Paine Webber
Mitchell Hutchins. Mr. Laird has been a director of the Company since 1993.
Timothy J. Aune, Director of Pacific Rim Operations and President of FactSet
Pacific Inc. Mr. Aune joined the Company in 1987 as a sales representative and
has held his current positions since 1995. Prior to joining the Company, he was
a sales engineer with Tektronix, Inc. Mr. Aune received a B.S. in Electrical
Engineering from the Massachusetts Institute of Technology.
Jon D. Carlson, Director of PC Software Development. Mr. Carlson joined the
Company in 1988 as a technical consultant and has been Director of PC Software
Development since 1992. He received a B.S. in Mechanical Engineering from
Stanford University.
Nathanial B. Day, Senior Sales Executive. Mr. Day joined the Company in 1981
and has held his current position since 1988. Previously, he was an
institutional securities salesman with Faulkner Dawkins & Sullivan, prior to
which he was a member of the New York Stock Exchange between 1966 and 1969. Mr.
Day received a B.A. in Marketing from Lehigh University.
Michael F. DiChristina, Director of Engineering. Mr. DiChristina joined the
Company in 1986 and has held his current position since 1991. Prior to joining
the Company, he was a software engineer at Morgan Stanley & Co. Mr. DiChristina
received a B.S. in Electrical Engineering from the Massachusetts Institute of
Technology.
William F. Faulkner, Director of Product Development. Mr. Faulkner joined
the Company in 1986 and has held his current position since 1990. Previously, he
served as an analyst at Delafield Harvey Tabell, an investment management firm.
Mr. Faulkner received a B.A. in Psychology from Boston University and an M.S. in
Biopsychology from Rutgers University.
Philip A. Hadley, Director of Sales and Marketing. Mr. Hadley joined the
Company in 1985 and has held his current position since 1989. Prior to joining
the Company, he was a staff auditor for Cargill Corporation. Mr. Hadley received
a B.B.A. in Accounting from the University of Iowa and is a Chartered Financial
Analyst.
Edward A. Martin, Director of Information Research. Mr. Martin joined the
Company as a systems programmer in 1988 and has held his current position since
1995. Previously, he was a staff scientist at the Massachusetts Institute of
Technology's Lincoln Laboratory. Mr. Martin received a B.S. and an M.S. in
Digital Signal Processing from the Massachusetts Institute of Technology.
Kristen M. McCutcheon, Director of Technical Support. Ms. McCutcheon joined
the Company in 1992 and has held her current position since 1993. Previously,
she served as a financial analyst at Capricorn Management and as a research
analyst at Chemical Bank. Ms. McCutcheon received a B.A. in Economics from the
State University of New York at Binghamton and an M.B.A from the University of
Connecticut.
Adelaide P. McManus, Chief Administrative Officer. Ms. McManus joined the
Company in 1980 and has held her current position since 1985. She received a
B.A. in Economics from Marymount College and an M.B.A in Finance from Fordham
University.
42
Townsend Thomas, Director of Systems Engineering. Mr. Thomas joined the
Company in 1985 and has held his current position since 1991. He received a B.S.
in Electrical Engineering from the Massachusetts Institute of Technology.
Susan L. Warzek, Director of Communications. Ms. Warzek joined the Company
in 1989 and has held her current position since 1993. Prior to joining the
Company, she was a research associate with Wheat First, Butcher & Singer, where
she followed the retail and consumer products industries and published a weekly
analyst commentary for institutional clients. Ms. Warzek received an A.B. in
Government & Law from Lafayette College.
Merle E. Yoder, Director of European Operations and Managing Director of
FactSet Limited. Mr. Yoder joined the Company in 1983 as a Sales Representative
and has held his current positions since 1993. He received a B.S. in Electrical
Engineering from Purdue University.
ELECTION AND COMPENSATION OF DIRECTORS
The Board of Directors is divided into three classes, each class as nearly
equal in number as possible. The term of office of one class of directors
expires each year in rotation so that one class is elected at each annual
meeting of stockholders for a full three year term. Directors may be removed
only for cause by the affirmative vote of the holders of a majority of the
outstanding shares of the Company then entitled to vote generally in the
election of directors, voting as a single group at a meeting of the stockholders
called and held for that purpose. See "Description of Capital Stock."
Directors who are also employees of the Company are not separately
compensated for serving on the Board of Directors. Following the Offering,
non-employee directors will be compensated through cash payments for attendance
at Board and committee meetings and will be reimbursed for related travel
expenses. Non-employee directors will receive an annual retainer of $15,000 plus
$1,000 for attending each meeting of a committee of the Board of Directors ($500
for participating by telephone). In addition, committee chairmen will receive an
annual fee of $2,500. Mr. Laird has not in the past received any cash
compensation for his services as a director of the Company. However, Mr. Laird's
firm, Veronis, Suhler & Associates ("Veronis") has received FactSet services for
which it has not been separately charged. In 1995, the value of such services
was $93,973. In connection with the Offering, the Company is entering into a
consulting agreement with Veronis pursuant to which Veronis will receive up to
$100,000 per year of FactSet services, as requested by Veronis. In return, the
Company will be entitled to receive certain consulting and investment banking
services from Veronis.
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
During the fiscal year ended August 31, 1995, the Company had no separate
compensation committee or other committee performing similar functions.
Decisions concerning compensation of executive officers were made by the Board
of Directors which, in fiscal 1995, consisted of Messrs. Wille, Snyder and
Laird. It is expected that following the Offering, the Board of Directors will
establish a compensation committee, a majority of the members of which will
consist of outside directors.
43
COMPENSATION OF EXECUTIVE OFFICERS
The following table summarizes the compensation paid by the Company to its
executive officers for the fiscal year ended August 31, 1995.
SUMMARY COMPENSATION TABLE
ANNUAL COMPENSATION SECURITIES
--------------------------------------- UNDERLYING
OTHER COMPANY
NAME AND PRINCIPAL ANNUAL OPTIONS/SAR ALL OTHER
POSITION YEAR SALARY BONUS COMPENSATION(1) GRANTS COMPENSATION
- ------------------------- ---- -------- -------- --------------- ----------- ------------
Howard E. Wille, Chairman
and Chief Executive
Officer.................. 1995 $607,500 -- $ 71,163 -- $452,000(2)
Charles J. Snyder,
President and Chief
Technology Officer....... 1995 545,000 -- 20,516 -- 40,000(3)
John S. Gross, former
Chief Financial
Officer(4)............... 1995 141,346 $ 25,000 11,925 -- --
- ------------
(1) Represents (i) tax payments made by the Company on behalf of Messrs. Wille
and Snyder and (ii) ESOP contributions of $41,325 on behalf of all executive
officers.
(2) Includes compensation of $340,000, gross of related taxes, paid by the
Company to Mr. Wille to pay interest payable on a note due to the Company
(see Note 5 to the Company's Consolidated Financial Statements) and
approximately $112,000 representing premiums paid by the Company on key man
life insurance policies for Mr. Wille.
(3) Represents approximately $40,000 of premiums paid by the Company on key man
life insurance policies for Mr. Snyder.
(4) Effective January 3, 1995, Mr. Gross was granted options representing 30,000
shares of Common Stock under the Company's 1994 Stock Option Plan. In
February, 1996, Mr. Gross resigned from the Company, at which time he
exercised the vested portion of his options (representing 6,000 shares) and
forfeited the unvested portion (representing 24,000 shares).
Option Exercises and Holdings. The following table sets forth certain
information as of August 31, 1995 concerning exercisable and unexercisable stock
options held by the Company's executive officers. There were no option exercises
in fiscal 1995 by such executive officer.
FISCAL YEAR-END OPTION VALUES
--------------------------------------------------------------------------
NUMBER OF SECURITIES UNDERLYING
UNEXERCISED OPTIONS AT VALUE OF UNEXERCISED IN-THE-MONEY
FISCAL YEAR END OPTIONS AT FISCAL YEAR END(1)
----------------------------------- -----------------------------------
NAME EXERCISABLE UNEXERCISABLE EXERCISABLE UNEXERCISABLE
John S. Gross.................. -- 30,000 $-- $ 399,000
- -------------------
(1) The value of "in-the-money" options represents the difference between the
exercise price of such option and the assumed initial public offering price
of $16.00 per share of the Common Stock.
EMPLOYMENT AGREEMENTS
The Company has entered into employment contracts with Howard E. Wille, the
Company's Chairman and Chief Executive Officer, and Charles J. Snyder, the
Company's President and Chief Technology Officer. Under the agreements, Messrs.
Wille and Snyder will be employed in their current positions for three year
terms that renew annually and are terminable by the Company or the executive on
one year's notice. The agreements provide for annual base salaries of $300,000
for Mr. Wille and $300,000 for Mr. Snyder and entitle each to participate in any
bonus or employee benefit plans and arrangements from time to time in effect. In
the event the employment of Mr. Wille or Mr. Snyder is terminated by the Company
for reasons other than their disability or Cause, as defined in the
44
agreements, Mr. Wille or Mr. Snyder, as the case may be, will be entitled to
receive (i) a lump sum payment of three times the sum of his base salary and the
average bonus paid to him over the prior three calendar years, (ii) three years
of continuing participation in the Company's benefit plans (or, if not possible
for any reason, comparable arrangements providing substantially similar
benefits) and (iii) in the event such termination of employment is in connection
with a change of control (within the meaning of Section 280G of the Internal
Revenue Code of 1986) of the Company reimbursement for any excise taxes incurred
as a result of the termination payments described herein. Also under the
agreements, Messrs. Wille and Snyder will agree not to engage in certain
activities in competition with the Company, including directly or indirectly
owning, managing, operating, joining, controlling, employment by or
participation in or consulting for any business which is similar to or competes
with the Company or its subsidiaries, during the term of their respective
employment with the Company and for two years thereafter.
The Company has also entered into a letter agreement with Ernest S. Wong,
the Company's new Vice President and Chief Financial Officer, relating to the
terms of his employment. Under the agreement, Mr. Wong will receive a base
salary of $175,000 per year and a minimum bonus of $50,000 following his first
full year of employment. In future years, Mr. Wong's bonus will be at the
discretion of the Board of Directors. Mr. Wong will also receive a one-time
sign-on bonus of $25,000, payable in July 1997, as well as options to purchase
up to 40,000 shares of Common Stock. In addition, in the event Mr. Wong is
terminated by the Company at any time for reasons other than good cause, as set
forth in the agreement, the Company will continue to pay his base salary and
standard employment benefits for twelve months following the date of such
termination. In the event Mr. Wong is terminated for any reason within one year
following a change in control of the Company, as defined in the agreement, Mr.
Wong will be entitled to continue receiving his base salary and standard
employment benefits for two years from the date of such termination.
COMPANY STOCK OPTION PLANS
The Company's 1994 Stock Option Plan (the "1994 Plan") was adopted by the
Board of Directors on December 21, 1994 and approved by the Company's
stockholders on December 22, 1994. Under the 1994 Plan, incentive stock options
("ISOs") and non-qualified stock options to purchase up to 1,481,000 shares of
Common Stock were granted to employees of the Company. Options granted under the
1994 Plan expire not more than 10 years from the date of grant and generally
vest at a rate of 20% per year beginning one year after the grant date. As of
February 29, 1996, options to purchase 1,451,000 shares of Common Stock were
outstanding under the 1994 Plan.
The 1994 Plan is administered by the Board of Directors. Options granted
under the plan are not transferrable or assignable other than by will or the
laws of decent and distribution and may be exercised, during the grantee's
lifetime, only by the grantee. In addition, most grantees under the 1994 Plan
are subject to a noncompetition provision prohibiting the grantee from engaging
in certain acts in competition with the Company during the grantee's employment
and for two years thereafter or, if longer, such period as the grantee continues
to own stock acquired pursuant to the exercise of an option granted under the
1994 Plan.
Prior to the Offering, the Company will adopt the 1996 Stock Option Plan
(the "1996 Plan"). The 1996 Plan will be substantially similar to the 1994 Plan
and will provide for the issuance of options to purchase up to 950,000 shares of
Common Stock at the market price of the shares on the date such options are
granted. The 40,000 options to be granted pursuant to the employment agreement
between the Company and Ernest S. Wong, the Company's Vice President and Chief
Financial Officer, will be granted under the 1996 Plan.
45
EMPLOYEE STOCK OWNERSHIP PLAN
The FactSet Employee Stock Ownership Plan ("ESOP") was adopted in 1985 for
the purpose of enabling eligible employees of the Company and its subsidiaries
to acquire a proprietary interest in the Company and to provide economic
benefits to such employees upon their retirement or disability or to their
beneficiaries upon their death. Employees who have completed one "Year of
Service" (as defined in the plan) with the Company are eligible to participate
in the ESOP. As of February 29, 1996, there were 75 participants.
The ESOP, which is administered by a Plan Committee appointed by the Board
of Directors, is a defined contribution plan designed to invest primarily in the
Common Stock of the Company. Under the plan, an account is established for each
participant. The Company may contribute to the ESOP, in any "Plan Year" (defined
as the twelve-month period beginning on September 1, and ending on August 31,
i.e. the fiscal year of the Company), cash, securities of the Company or other
property of any kind as and when determined by the Board of Directors. Amounts
contributed by the Company are initially held in a trust fund (the "Trust Fund")
established by a trust agreement between the Company and a Trustee appointed by
the Board of Directors.
Company contributions to the Trust Fund with respect to any Plan Year are
allocated, as of the last day of such Plan Year, among individual accounts of
eligible participants. Such allocations are made pro rata in the proportion that
each eligible participant's compensation bears to the aggregate compensation of
all eligible participants during such Plan Year. Dividends, distributions and
other income and earnings received during a Plan Year on shares of Common Stock
or other assets credited to a participant's account are invested in shares of
Common Stock and allocated as of the last day of such Plan Year to each
participant's account in proportion to the respective balances in such accounts
as of the first day of the Plan Year, after giving effect to distributions from
such accounts made during such Plan Year.
Each participant's account generally vests in accordance with such
participant's number of years of service, with full vesting after seven years of
service. ESOP participants who leave employment with the Company prior to
complete vesting of their accounts forfeit amounts allocated to their accounts
that are not yet vested. Forfeited amounts are reallocated pro rata among other
ESOP participants based on their respective compensation amounts.
The vested interests of plan participants and former participants are
distributed in a lump sum upon such participant reaching the age of 65. A
participant who reaches the age of 65 but remains employed by the Company may
elect to receive the distribution of his or her vested interest as of the last
day in any subsequent Plan Year, provided that the distribution shall begin no
later than April 1 following the calendar year in which the participant attains
the age of 70 1/2. In the event of the death of a participant or former
participant prior to distribution, the entire balance in the participant's
account or the vested interest in a former participant's account, as of the last
day of the Plan Year in which the death occurs is distributed to the
participant's or former participant's beneficiary. In the event of the
Disability (as defined in the plan) of a participant or former participant, the
entire balance in the participant's account or the vested interest in a former
participant's account as of the last day of the Plan Year in which the
disability occurs is distributed to such participant or former participant.
Distributions of benefits under the plan may be made in whole shares of Common
Stock or in cash, or in a combination thereof, provided that a participant or
former participant has the right to demand that the distribution be made in
Common Stock.
The ESOP is intended to constitute a "qualified plan" within the meaning of
Sections 401(a) and 501(a) of the Internal Revenue Code of 1986, as amended (the
"Code"), and the Employee Retirement Income Security Act of 1974, as amended
("ERISA"), and to qualify as an "employee stock ownership plan" under Section
4975(e)(7) of the Code.
46
PRINCIPAL AND SELLING STOCKHOLDERS
The following table sets forth certain information regarding the beneficial
ownership of the Company's Common Stock as of February 29, 1996 and as adjusted
to reflect the sale of the shares offered hereby by (i) each person who is known
by the Company to own beneficially more than 5% of the outstanding shares of the
Common Stock, (ii) each director and the Named Executive Officers of the
Company, (iii) all directors and executive officers of the Company as a group
and (iv) each Selling Stockholder.
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
PRIOR TO OFFERINGS AFTER OFFERINGS
-------------------- SHARES BEING --------------------
NAME SHARES PERCENT OFFERED SHARES PERCENT
---- --------- ------- ------------ --------- -------
Howard E. Wille(1)(2)..................... 3,863,300 40.6% 1,562,500 2,300,800 24.2%
Charles J. Snyder(1)(3)................... 3,670,800 38.5 1,562,500 2,108,300 22.1
FactSet Research Systems Inc. Employee
Stock Ownership Plan(1)................... 787,824 8.3 -- 787,824 8.3
All directors and executive officers of
the Company as a Group.................. 7,534,100 79.1 3,125,000 4,409,100 46.3
- ------------
(1) The address for each of these beneficial owners is FactSet Research Systems
Inc., One Greenwich Plaza, Greenwich, CT 06830.
(2) In addition to the shares of Common Stock held beneficially by Mr. Wille,
Mr. Wille's adult children own beneficially an aggregate of 306,700 shares
of Common Stock and Adelaide P. McManus, Mr. Wille's spouse and the
Company's Chief Administrative Officer, holds options to purchase 60,000
shares of Common Stock. Mr. Wille disclaims beneficial ownership of such
shares.
(3) In addition to the shares of Common Stock held beneficially by Mr. Snyder,
Mr. Snyder's adult children own beneficially an aggregate of 499,200 shares
of Common Stock. Mr. Snyder disclaims beneficial ownership of such shares.
47
CERTAIN TRANSACTIONS AND RELATIONSHIPS
REGISTRATION RIGHTS
Pursuant to a registration rights agreement between the Selling Stockholders
and the Company (the "Registration Agreement"), the Selling Stockholders and
certain transferees (the "Sellers") have the right to require that the Company
register under the Securities Act or qualify for sale (in either case, a "demand
registration") any securities of the Company that they own, including shares of
Common Stock, and the Company is required to use reasonable efforts to cause
such registration to occur, subject to certain limitations and conditions,
including that the Company shall not be obligated to register or qualify such
securities more than two times in any 12 month period and then only if the
request is to register at least 3% of the total number of shares of Common Stock
at the time issued and outstanding. In addition, if the Company proposes to
register shares of Common Stock under the Securities Act, the Sellers have the
right to request the inclusion of their securities in such registration
statement, subject to certain limitations and conditions, among them the right
of the underwriters of such registered offering to exclude or limit the number
of their shares included in such offering. The Company will bear the entire cost
of the first three demand registrations attributable to each Selling Stockholder
and the Sellers will each bear one-half of the costs of any subsequent demand
registrations. These costs include legal fees and expenses of counsel for the
Company, registration fees, printing expenses and other related costs. The
Sellers will pay any underwriting discounts and commissions associated with the
sale of their securities and the fees and expenses of their counsel.
The Company has agreed that in the event of any registration of securities
pursuant to the Registration Agreement, it will indemnify the Sellers against
certain liabilities incurred in connection with such registration, including
liabilities under the Securities Act. The Sellers will provide a similar
indemnity for liabilities incurred as a result of information jointly identified
in writing by the Company and the Sellers as concerning the Sellers and their
security holdings in the Company and as identified for use in such registrations
statement by the Sellers.
Subject to certain limitations and conditions, the registration rights held
by the Selling Stockholders may be transferred with their securities. The
Registration Agreement also contains various covenants imposing certain
obligations upon the Company in connection with its performance under such
agreement including, among other things, furnishing copies of any prospectus to
the Selling Stockholders, entering into an underwriting agreement, listing the
securities as requested and taking such other necessary actions.
LOANS TO SELLING STOCKHOLDER
As of February 29, 1996, the Company had loans outstanding to Howard E.
Wille, the Chairman of the Board and Chief Executive Officer of the Company and
one of the Selling Stockholders, in the aggregate amount of $3,846,703. These
loans, in the form of a promissory note in the amount of $3,250,000 bearing
interest at a rate of 5.8% per anum and a non-interest-bearing advance in the
amount of $596,703, will be repaid in full promptly following the completion of
the Offering. See Note 5 to the Company's Consolidated Financial Statements.
RELATIONSHIP BETWEEN THE COMPANY AND CERTAIN UNDERWRITERS
Certain affiliates of Donaldson, Lufkin & Jenrette Securities Corporation
("DLJ") and Alex. Brown & Sons Incorporated ("Alex. Brown"), who are acting as
representatives for the underwriters in connection with the Offering, are, have
been and after the Offering will continue to be clients of the Company.
Affiliates of DLJ and Alex. Brown paid $313,767 and $57,500, respectively, in
subscription fees to the Company in the fiscal year ended August 31, 1995.
Certain of the other underwriters who will participate in the Offering or their
affiliates may also be clients of the Company.
48
DESCRIPTION OF CAPITAL STOCK
The authorized capital stock of the Company consists of 10,000,000 shares of
Preferred Stock, $.01 par value per share, and 40,000,000 shares of Common
Stock, $.01 par value per share. After the Offering there will be no shares of
Preferred Stock and 9,526,300 shares of Common Stock outstanding. In addition,
1,451,000 shares of Common Stock are reserved for issuance upon the exercise of
existing options granted under the Company's 1994 Stock Option Plan. After the
offering, the Selling Stockholders will hold 4,409,100 shares, or 46.3%, of the
outstanding Common Stock (3,940,350 shares, or 41.4%, if the Underwriters'
over-allotment option is exercised in full). See "Risk Factors--Control by
Selling Stockholders" and "Principal and Selling Stockholders." In addition,
950,000 shares will be reserved for issuance in connection with options that may
be granted under the Company's 1996 Stock Option Plan. Holders of Common Stock
are entitled to one vote per share.
COMMON STOCK
DIVIDENDS
Each share of Common Stock is entitled to receive dividends if, as and when
declared by the Board of Directors of the Company. Under the Delaware General
Corporation Law, the Company may declare and pay dividends only out of its
surplus, or in case there shall be no such surplus, out of its net profits for
the fiscal year in which the dividend is declared and/or the preceding year.
Under the Delaware General Corporation Law, surplus is defined as the excess, if
any, at any given time, of the net assets of the Company over the amount
determined to be capital. Capital represents the aggregate par value of the
Company's capital stock. No dividends may be declared, however, if the capital
of the Company has been diminished by depreciation, losses or otherwise to an
amount less than the aggregate amount of capital represented by any issued and
outstanding stock having a preference on distribution. The Company does not
presently intend to pay any dividends on the Common Stock in the foreseeable
future.
OTHER PROVISIONS
There are no preemptive rights to subscribe for any additional securities
which the Company may issue, and there are no redemption provisions or sinking
fund provisions applicable to the Common Stock subject to calls or assessments
by the Company. All outstanding shares are, and all shares to be outstanding
upon completion of the Offerings will be, legally issued, fully paid and
nonassessable.
PREFERRED STOCK
The Board of Directors has the authority to issue 10,000,000 shares of
preferred stock in one or more series and to fix the preferences, limitations
and relative rights of the shares of each such series, including dividend rates,
conversion rights, voting rights, terms of redemption and liquidation
preferences, and the number of shares constituting each such series, without any
further vote or action by the shareholders. The issuance of preferred stock
could decrease the amount of earnings and assets available for distribution to
holders of Common stock or adversely affect the rights and powers, including
voting rights, of the holder of Common Stock.
RESTATED CERTIFICATE OF INCORPORATION AND BY-LAWS: CERTAIN ANTI-TAKEOVER
PROVISIONS
Certain provisions of the Restated Certificate of Incorporation and the
By-laws may have the effect, either alone or in combination with each other, of
making more difficult or discouraging a tender offer or takeover attempt that is
opposed by the Company's Board of Directors but that a stockholder might
consider to be in its best interest. See "Risk Factors--Certain Anti-Takeover
Provisions." The Company believes that such provisions are necessary to enable
the Company to develop its business in a
49
manner that will foster its long-term growth without disruption caused by the
threat of a takeover not deemed by the Board of Directors to be in the best
interests of the Company and its stockholders. These provisions are summarized
in the following paragraphs.
CLASSIFIED BOARD
The Restated Certificate of Incorporation and the By-laws provide that the
Board of Directors will be divided into three classes of directors, each class
to be as nearly equal in number as possible. The term of office of one class of
directors expires each year in rotation so that one class is elected at each
annual meeting of stockholders for a full three year term.
NUMBER OF DIRECTORS; REMOVAL OF DIRECTORS; VACANCIES
The By-laws provide that the number of directors of the Company shall be a
number between three and 15 which shall be fixed by resolution adopted by two
thirds of the entire Board of Directors. The Restated Certificate of
Incorporation and the By-laws also provide that directors may be removed only
for cause by the affirmative vote of the holders of a majority of the
outstanding shares of the Company then entitled to vote generally in the
election of directors, voting as a single voting group at a meeting of the
stockholders called and held for that purpose.
ACTION BY WRITTEN CONSENT
The Restated Certificate of Incorporation and the By-laws provide that an
action required or permitted to be taken at an annual or special meeting of
shareholders may be taken with the written consent, setting forth the action so
taken, signed by the holders of at least 80% of the outstanding shares entitled
to vote thereon.
SPECIAL MEETING OF STOCKHOLDERS
The By-laws provide that special meetings of shareholders may be called only
by the Chairman of the Board, the President of the Company or a majority of the
Board.
SUPERMAJORITY VOTING
The Restated Certificate of Incorporation and the By-laws require the
approval of the holders of at least 80% of the voting power of all of the shares
entitled to vote to alter, amend, repeal or adopt any provision inconsistent
with or limiting the effect of provisions of certain enumerated anti-takeover
provisions in the Restated Certificate of Incorporation and By-laws. The Board
of Directors may amend, supplement or repeal the By-laws at any time, except as
limited by law.
AUTHORIZED BUT UNISSUED PREFERRED STOCK
The Restated Certificate of Incorporation grants the Board of Directors
broad power to establish the rights and preferences of authorized and unissued
preferred stock. Currently, the Board of Directors has the authority to issue
10,000,000 such shares of preferred stock in one or more series and to fix the
preferences, limitations and relative rights of the shares of each such series.
The issuance of preferred stock could decrease the amount of earnings and assets
available for distribution to holders of Common Stock or adversely affect the
rights and powers, including the voting rights, of the holders of Common Stock.
The issuance of preferred stock could have the effect of delaying, deferring or
preventing a change in control of the Company without further action by the
shareholders. The Company has no present plans to issue any preferred stock.
DELAWARE GENERAL CORPORATION LAW
Certain transactions with the Company may be subject to Section 203 of the
Delaware General Corporation Law. Section 203 prohibits certain "business
combinations" between an "interested
50
stockholder" and a corporation for three years after a stockholder becomes
interested, unless one of the statute's exceptions applies. Section 203(c)(5)
defines an interested stockholder as a person, broadly defined to include a
group, who owns at least 15% of a company's outstanding voting stock. The
statute defines business combinations expansively to include any merger or
consolidation of, with, or caused by the interested stockholder. Section 203(a)
provides three exceptions to the business combination prohibition. First, there
is no constraint if the interested stockholder obtains prior board approval for
the business combination or the transaction resulting in ownership of 15% of the
target's voting stock. Second, the statute does not apply if, in completing the
transaction that crosses the 15% threshold, the stockholder becomes the owner of
85% of the corporation's voting stock outstanding as of the time the transaction
commenced. Any shares owned by directors who are officers, and shares owned by
certain stock option plans are excluded from the calculation. This exception
applies most particularly to a tender offeror who has less than 15% of the
target's stock and receives tenders that satisfy the 85% requirement. Finally,
the statute does not apply if the interested stockholder's business combination
is approved by the board of directors and affirmed by at least 66 2/3% of the
outstanding voting stock not owned by the interested stockholder.
LISTING
The Common Stock has been approved for listing on the NYSE under the symbol
"FDS."
TRANSFER AGENT AND REGISTRAR
The transfer agent and registrar for the Common Stock is The Bank of New
York.
SHARES ELIGIBLE FOR FUTURE SALE
The shares of Common Stock sold in the Offering will be freely tradable
without restriction under the Securities Act.
The shares of Common Stock that will continue to be held by the Selling
Stockholders, certain executive officers of the Company and the Company ESOP
after the Offering constitute "restricted securities" within the meaning of Rule
144 under the Securities Act ("Rule 144") and will be eligible for sale in the
open market after the Offering, subject to the applicable requirements of Rule
144 described below. Generally, Rule 144 provides that a person who has
beneficially owned "restricted" shares of Common Stock for at least two years
will be entitled to sell on the open market in brokers' transactions within any
three-month period a number of shares that does not exceed the greater of (1) 1%
of the then outstanding shares of Common Stock, or (2) the average weekly
trading volume in the Common Stock on the open market during the four calendar
weeks preceding such sale. Sales under Rule 144 are also subject to certain
notice requirements and the availability of current public information about the
Company. A person who has beneficially owned "restricted" shares of Common Stock
for at least three years (other than affiliates) can freely trade such shares
without restriction under the Securities Act. The SEC has proposed to reduce the
holding period requirements of Rule 144 to permit sales in accordance with such
rule after two years and one year, respectively, as opposed to the three year
and two year periods currently permitted, as referenced above.
The Selling Stockholders will be able to cause the Company to register
Common Stock owned by them under the Securities Act pursuant to the Registration
Agreement described above under "Certain Transaction and Relationships," in
which event the Selling Stockholders will be able to sell such shares upon the
effectiveness of any such registration. The Selling Stockholders, the Company,
the ESOP and certain executive officers and key personnel of the Company have
agreed that, for a period of 180 days after the date of this Prospectus, they
will not offer, sell or otherwise dispose of any shares of Common Stock, in the
open market or otherwise, without the prior consent of DLJ.
51
UNDERWRITING
Subject to the terms and conditions contained in the Underwriting Agreement
(the "Underwriting Agreement"), the underwriters named below (the
"Underwriters"), for whom Donaldson, Lufkin & Jenrette Securities Corporation
and Alex. Brown & Sons Incorporated are acting as representatives (the
"Representatives"), have severally agreed to purchase from the Selling
Stockholders an aggregate of 3,125,000 shares of Common Stock. The number of
shares of Common Stock that each Underwriter has agreed to purchase is set forth
opposite its name below:
NUMBER OF
UNDERWRITERS SHARES
------------ ---------
Donaldson, Lufkin & Jenrette Securities Corporation.............
Alex. Brown & Sons Incorporated.................................
---------
Total..................................................... 3,125,000
---------
---------
The Underwriting Agreement provides that the obligations of the several
Underwriters to purchase and accept delivery of the shares of Common Stock
offered hereby are subject to approval of certain legal matters by counsel and
to certain other conditions. If any shares of Common Stock are purchased by the
Underwriters pursuant to the Underwriting Agreement, all such shares (other than
shares covered by the over-allotment option described below) must be purchased.
Prior to the Offering, there has been no established trading market for the
Common Stock. The initial price to the public for the shares of Common Stock
offered hereby will be determined by negotiation among the Selling Stockholders
and the Representatives. The factors considered in determining the initial price
to the public include the history of and the prospects for the industry in which
the Company competes, the past and present operations of the Company, the
historical results of operations of the Company, the prospects for future
earnings of the Company, the recent market prices of securities of generally
comparable companies and the general condition of the securities markets at the
time of the Offering.
The Company and the Selling Stockholders have agreed to indemnify the
Underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments that the Underwriters may be
required to make in respect thereof.
The Underwriters have advised the Company and the Selling Stockholders that
they propose to offer the shares of Common Stock to the public initially at a
price to the public set forth on the cover page of this Prospectus and to
certain dealers (who may include the Underwriters) at such price less a
concession not to exceed $ per share. The Underwriters may allow, and
such dealers may reallow, discounts not in excess of $ per share to any
other Underwriter and certain other dealers.
The Selling Stockholders have granted to the Underwriters an option to
purchase up to an aggregate of 468,750 additional shares of Common Stock, at the
initial public offering price net of underwriting discounts and commissions,
solely to cover over-allotments. Such option may be exercised at any time within
30 days after the date of this Prospectus. To the extent that the Underwriters
exercise such option, each of the Underwriters will be committed, subject to
certain conditions, to purchase a number of option shares proportionate to such
Underwriter's initial commitment as indicated in the preceding table.
52
At the request of the Company, the Underwriters have reserved 100,000 shares
of Common Stock for sale to employees of the Company at the public offering
price set forth on the cover page of this Prospectus. Any shares not so
purchased will be offered to the public at such price.
Subject to certain exceptions, the Selling Stockholders, the Company, the
ESOP and certain executive officers and key personnel of the Company have agreed
not to sell any shares of Common Stock (except for the shares offered hereby)
for a period of either 180 days after the date of this Prospectus without the
prior written consent of DLJ. See "Shares Eligible for Future Sale."
Certain affiliates of DLJ and Alex. Brown are, have been and after the
Offering will continue to be clients of the Company. Affiliates of DLJ and Alex.
Brown paid $313,767 and $57,500, respectively, in subscription fees to the
Company in the fiscal year ended August 31, 1995. Certain of the other
underwriters who will participate in the Offering or their affiliates may also
be clients of the Company.
LEGAL MATTERS
The validity of the shares of Common Stock will be passed upon for the
Company by Cravath, Swaine & Moore, New York, New York. Certain legal matters
will be passed upon for the Underwriters by Davis Polk & Wardwell, New York, New
York.
EXPERTS
The consolidated financial statements as of August 31, 1994 and 1995 and for
each of the three years in the period ended August 31, 1995 and as of February
28, 1995 and February 29, 1996 and for each of the six month periods then ended,
included in this Prospectus, have been so included in reliance on the report of
Price Waterhouse LLP, independent accountants, appearing elsewhere herein, given
upon the authority of said firm as experts in auditing and accounting.
AVAILABLE INFORMATION
The Company has filed with the Commission a registration statement (the
"Registration Statement") under the Securities Act of 1933, as amended (the
"Securities Act"), with respect to the securities offered hereby. This
Prospectus, which constitutes a part of the Registration Statement, does not
contain all of the information set forth in the Registration Statement, certain
items of which are contained in schedules and exhibits to the Registration
Statement as permitted by the rules and regulations of the Commission. While all
material terms of the Company's material contracts and agreements are summarized
in this Prospectus, statements made in this Prospectus as to the contents of any
contract, agreement or other document referred to are not necessarily complete.
With respect to each such contract, agreement or other document filed as an
exhibit to the Registration Statement, reference is made to the exhibit for a
more complete description of the matter involved, and each such statement shall
be deemed qualified in its entirety by such reference. Items of information
omitted from this Prospectus but contained in the Registration Statement may be
inspected and copied at the public reference facilities maintained by the
Commission at Room 1024, Judiciary Plaza, 450 Fifth Street, N.W., Washington,
D.C. 20549, and at the regional offices of the Commission located at Seven World
Trade Center, 13th Floor, New York, New York 10048 and Citicorp Center, 500 West
Madison Street, Suite 1400, Chicago, Illinois 60661. Copies of such material may
also be obtained from the Public Reference Section of the Commission at
Judiciary Plaza, 450 Fifth Street, N.W., Washington, D.C. 20549 at prescribed
rates.
53
INDEX TO FINANCIAL STATEMENTS
FACTSET RESEARCH SYSTEMS INC.
Report of Price Waterhouse LLP, Independent Accountants.............. F-2
Consolidated Statement of Financial Condition........................ F-3
Consolidated Statement of Income..................................... F-4
Consolidated Statement of Changes in Stockholders' Equity............ F-5
Consolidated Statement of Cash Flows................................. F-6
Notes to Consolidated Financial Statements........................... F-7
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors
and Stockholders of
FactSet Research Systems Inc.
In our opinion, the accompanying consolidated statement of financial
condition and the related consolidated statements of income, changes in
stockholders' equity and cash flows present fairly, in all material respects,
the financial position of FactSet Research Systems Inc. and its subsidiaries at
August 31, 1994 and 1995, and February 29, 1996, and the results of their
operations and their cash flows for each of the three years ended August 31,
1993, 1994 and 1995 and each of the six month periods ended February 28, 1995
and February 29, 1996 in conformity with generally accepted accounting
principles. 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 of these statements in
accordance with generally accepted auditing standards which require that we plan
and perform the audits to obtain reasonable assurance about whether the
financial statements are free of material misstatement. An audit includes
examining, on a test basis, evidence supporting the amounts and disclosures in
the financial statements, assessing the accounting principles used and
significant estimates made by management, and evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for the opinion expressed above.
PRICE WATERHOUSE LLP
New York, New York
April 26, 1996, except as to Note 2
which is as of June 4, 1996
F-2
FACTSET RESEARCH SYSTEMS INC.
CONSOLIDATED STATEMENT OF FINANCIAL CONDITION
AUGUST 31, AUGUST 31, FEBRUARY 29,
1994 1995 1996
----------- ----------- ------------
ASSETS
Current assets
Cash and cash equivalents......................... $ 5,264,792 $11,587,919 $ 10,350,216
Investments....................................... 2,274,698 1,136,723 1,270,926
Receivable from clients and clearing brokers...... 3,659,048 4,101,945 4,589,763
Receivable from officers and employees............ 3,771,038 4,182,116 4,163,728
Prepaid expenses.................................. 29,802 131,922 196,735
Prepaid taxes..................................... 131,425 - 1,288,204
Deferred taxes.................................... 1,426,085 1,599,892 1,294,286
Other assets...................................... 8,862 - 100,206
----------- ----------- ------------
Total current assets.......................... 16,565,750 22,740,517 23,254,064
Furniture, equipment and leasehold improvements,
net................................................. 5,264,635 4,945,947 6,140,686
Deferred taxes...................................... 329,900 379,442 361,395
Other assets........................................ 185,060 597,450 974,751
----------- ----------- ------------
TOTAL ASSETS.................................. $22,345,345 $28,663,356 $ 30,730,896
----------- ----------- ------------
----------- ----------- ------------
LIABILITIES AND STOCKHOLDERS' EQUITY
Current liabilities
Accounts payable and accrued expenses............. $ 1,552,734 $ 1,628,908 $ 1,867,223
Accrued compensation payable...................... 425,000 980,000 505,000
Accrued ESOP contribution......................... 400,000 480,000 290,000
Deferred fees and commissions..................... 3,333,018 2,850,847 2,550,956
Current taxes payable............................. - 768,420 -
Deferred rent..................................... 110,178 118,219 118,219
----------- ----------- ------------
Total current liabilities..................... 5,820,930 6,826,394 5,331,398
Deferred taxes...................................... - - 35,412
Deferred rent....................................... 491,348 464,202 397,581
----------- ----------- ------------
TOTAL LIABILITIES............................. 6,312,278 7,290,596 5,764,391
----------- ----------- ------------
Commitments (Note 10)
Stockholders' equity
Preferred stock, par value $.01--10,000,000 shares
authorized, none issued.............................
Common stock, par value $.01--40,000,000 shares
authorized; 9,385,000, 9,479,788 and 9,578,088
shares issued; and 9,337,600, 9,428,552 and
9,526,300 shares outstanding at August 31, 1994,
August 31, 1995 and February 29, 1996,
respectively........................................ 93,850 94,798 95,781
Capital in excess of par value.................... 836,150 1,235,202 1,730,419
Retained earnings................................. 15,249,036 20,187,802 23,209,862
Unrealized gain on investments, net of taxes...... - 16,538 94,344
----------- ----------- ------------
16,179,036 21,534,340 25,130,406
Treasury stock--47,400, 51,236 and 51,788 shares
at August 31, 1994, August 31, 1995 and February
29, 1996, respectively, at cost..................... 145,969 161,580 163,901
----------- ----------- ------------
TOTAL STOCKHOLDERS' EQUITY.................... 16,033,067 21,372,760 24,966,505
----------- ----------- ------------
TOTAL LIABILITIES AND STOCKHOLDERS' EQUITY.... $22,345,345 $28,663,356 $ 30,730,896
----------- ----------- ------------
----------- ----------- ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
FACTSET RESEARCH SYSTEMS INC.
CONSOLIDATED STATEMENT OF INCOME
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
----------------------------------------- ----------------------------
AUGUST 31, AUGUST 31, AUGUST 31, FEBRUARY 28, FEBRUARY 29,
1993 1994 1995 1995 1996
----------- ----------- ----------- ------------ ------------
SUBSCRIPTION REVENUE
Commissions............ $15,992,099 $17,744,572 $21,558,829 $ 10,698,714 $ 11,240,771
Fees................... 7,952,523 11,274,444 14,628,903 6,898,413 9,457,368
----------- ----------- ----------- ------------ ------------
23,944,622 29,019,016 36,187,732 17,597,127 20,698,139
----------- ----------- ----------- ------------ ------------
EXPENSES
Employee compensation
and benefits............. 6,667,070 11,115,311 11,027,318 5,377,179 6,461,570
Clearing fees.......... 3,158,066 3,421,863 4,270,126 2,097,660 2,111,892
Data costs............. 2,325,818 2,443,297 3,070,588 1,510,467 1,605,365
Communication costs.... 1,320,568 2,029,466 2,431,463 1,226,746 1,428,703
Computer equipment..... 1,582,455 2,296,777 2,195,256 1,085,312 1,290,313
Occupancy.............. 1,615,757 1,898,391 2,052,009 976,799 1,119,901
Promotional costs...... 1,384,128 1,384,217 1,870,218 823,707 999,850
Other expenses......... 939,541 986,592 1,171,254 485,981 823,786
----------- ----------- ----------- ------------ ------------
TOTAL EXPENSES....... 18,993,403 25,575,914 28,088,232 13,583,851 15,841,380
----------- ----------- ----------- ------------ ------------
OPERATING INCOME..... 4,951,219 3,443,102 8,099,500 4,013,276 4,856,759
Other income............. 208,445 251,333 570,588 241,138 430,702
----------- ----------- ----------- ------------ ------------
INCOME BEFORE INCOME
TAXES.................... 5,159,664 3,694,435 8,670,088 4,254,414 5,287,461
Income taxes............. 2,281,217 1,747,483 3,731,322 1,809,988 2,265,401
----------- ----------- ----------- ------------ ------------
NET INCOME........... $ 2,878,447 $ 1,946,952 $ 4,938,766 $ 2,444,426 $ 3,022,060
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
Earnings per common
share.................... $ 0.31 $ 0.21 $ 0.48 $ 0.25 $ 0.28
Weighted average common
shares used in
computing earnings per
common share............. 9,269,900 9,341,925 10,253,647 9,843,515 10,755,407
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
FACTSET RESEARCH SYSTEMS INC.
CONSOLIDATED STATEMENT OF CHANGES IN STOCKHOLDERS' EQUITY
FOR THE YEARS ENDED AUGUST 31, 1993, 1994, 1995
AND THE SIX MONTHS ENDED FEBRUARY 29, 1996
CAPITAL IN UNREALIZED TOTAL
COMMON STOCK EXCESS OF GAIN RETAINED TREASURY STOCK STOCKHOLDERS'
SHARES AMOUNT PAR VALUE ON INVESTMENTS EARNINGS SHARES AMOUNT EQUITY
--------- ------- ---------- -------------- ----------- ------ --------- -------------
Balance at August 31,
1992...................... 9,300,000 $93,000 $ 497,000 $ - $10,423,637 30,100 $ (83,879) $ 10,929,758
Net income................ - - - - 2,878,447 - - 2,878,447
--------- ------- ---------- ------ ----------- ------ --------- -------------
Balance at August 31,
1993...................... 9,300,000 93,000 497,000 - 13,302,084 30,100 (83,879) 13,808,205
--------- ------- ---------- ------ ----------- ------ --------- -------------
Additional stock issued
for ESOP.................. 85,000 850 339,150 - - - - 340,000
Repurchase of common
stock..................... - - - - - 17,300 (62,090) (62,090)
Net income................ - - - - 1,946,952 - - 1,946,952
--------- ------- ---------- ------ ----------- ------ --------- -------------
Balance at August 31,
1994...................... 9,385,000 93,850 836,150 - 15,249,036 47,400 (145,969) 16,033,067
--------- ------- ---------- ------ ----------- ------ --------- -------------
Additional stock issued
for ESOP.................. 94,788 948 399,052 - - - - 400,000
Repurchase of common
stock..................... - - - - - 3,836 (15,611) (15,611)
Unrealized gain on
investments............... - - - 16,538 - - - 16,538
Net income................ - - - - 4,938,766 - - 4,938,766
--------- ------- ---------- ------ ----------- ------ --------- -------------
Balance at August 31,
1995...................... 9,479,788 94,798 1,235,202 16,538 20,187,802 51,236 (161,580) 21,372,760
--------- ------- ---------- ------ ----------- ------ --------- -------------
Additional stock issued
for ESOP.................. 92,300 923 479,077 - - - - 480,000
Repurchase of common
stock..................... - - - - - 552 (2,321) (2,321)
Exercise of stock
options................... 6,000 60 16,140 - - - - 16,200
Change in net unrealized
gain on investments...... - - - 77,806 - - - 77,806
Net income................ - - - - 3,022,060 - - 3,022,060
--------- ------- ---------- ------ ----------- ------ --------- -------------
Balance at February 29,
1996...................... 9,578,088 $95,781 $1,730,419 $ 94,344 $23,209,862 51,788 $(163,901) $ 24,966,505
--------- ------- ---------- ------ ----------- ------ --------- -------------
--------- ------- ---------- ------ ----------- ------ --------- -------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
FACTSET RESEARCH SYSTEMS INC.
CONSOLIDATED STATEMENT OF CASH FLOWS
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
--------------------------------------- ---------------------------
AUGUST 31, AUGUST 31, AUGUST 31, FEBRUARY 28, FEBRUARY 29,
1993 1994 1995 1995 1996
----------- ----------- ----------- ------------ ------------
CASH FLOWS FROM OPERATING ACTIVITIES
Net income......................... $ 2,878,447 $ 1,946,952 $ 4,938,766 $ 2,444,426 $ 3,022,060
Adjustments to reconcile net income
to net cash provided by operating
activities
Depreciation and amortization.... 1,831,317 2,196,421 2,420,830 1,246,307 1,407,106
Deferred tax expense............. (1,182,189) (204,531) (223,349) (411,522) 371,537
(Gain) loss on investments....... -- 98,321 (18,106) -- --
(Gain) loss on disposal of
equipment........................... -- 144,855 42,295 42,295 (103,536)
----------- ----------- ----------- ------------ ------------
NET INCOME ADJUSTED FOR NON-CASH
ITEMS............................... 3,527,575 4,182,018 7,160,436 3,321,506 4,697,167
(Increase) decrease in assets:
Receivable from clients and
clearing brokers.................... (2,278,705) (225,511) (442,897) 80,865 (487,818)
Receivable from officers and
employees........................... (3,407,638) 279,297 (411,078) (209,661) 18,388
Prepaid expenses................. (18,896) 21,529 (102,120) (155,033) (64,813)
Prepaid taxes.................... -- (131,425) 131,425 131,425 (1,288,204)
Other assets..................... (16,087) (172,439) (403,528) (490,374) (477,507)
Increase (decrease) in liabilities:
Accounts payable and accrued
expenses............................ 646,269 866,405 556,174 571,192 528,315
Accrued compensation payable..... (36,000) 331,000 555,000 (105,000) (475,000)
Deferred fees and commissions.... 2,775,116 333,497 (482,171) (1,555,472) (299,891)
Current taxes payable............ 523,062 (1,481,367) 768,420 (140,180) (768,420)
Deferred rent.................... (59,041) (24,378) (19,105) (12,190) (66,621)
----------- ----------- ----------- ------------ ------------
NET CASH PROVIDED BY OPERATING
ACTIVITIES.......................... 1,655,655 3,978,626 7,310,556 1,437,078 1,315,596
----------- ----------- ----------- ------------ ------------
CASH FLOWS FROM INVESTING ACTIVITIES
Purchases of investments........... (1,780,223) (2,118,142) (870,595) (870,595) (191,689)
Proceeds from sales or maturities
of investments................... 746,270 779,076 2,043,215 1,789,794 198,399
Purchases of furniture, equipment
and leasehold improvements....... (3,003,962) (2,523,689) (2,314,539) (1,044,108) (2,813,888)
Proceeds from disposal of
equipment........................... -- 72,060 170,101 170,101 240,000
----------- ----------- ----------- ------------ ------------
NET CASH PROVIDED BY (USED IN)
INVESTING ACTIVITIES............ (4,037,915) (3,790,695) (971,818) 45,192 (2,567,178)
----------- ----------- ----------- ------------ ------------
CASH FLOWS FROM FINANCING ACTIVITIES
Repurchase of common stock from
employees........................... -- (62,090) (15,611) (6,203) (2,321)
Proceeds from exercise of stock
options............................. -- -- -- -- 16,200
----------- ----------- ----------- ------------ ------------
NET CASH PROVIDED BY (USED IN)
FINANCING ACTIVITIES............ -- (62,090) (15,611) (6,203) 13,879
----------- ----------- ----------- ------------ ------------
Net increase (decrease) in cash and
cash equivalents................... (2,382,260) 125,841 6,323,127 1,476,067 (1,237,703)
Cash and cash equivalents at
beginning of period................. 7,521,211 5,138,951 5,264,792 5,264,792 11,587,919
----------- ----------- ----------- ------------ ------------
Cash and cash equivalents at end of
period.............................. $ 5,138,951 $ 5,264,792 $11,587,919 $ 6,740,859 $ 10,350,216
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
Supplemental disclosures of cash
flow information
Cash paid during the period for
income taxes........................ $ 2,962,025 $ 3,563,226 $ 3,067,302 $ 1,393,295 $ 4,021,658
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
Supplemental disclosures of non-cash
flow information
Issuance of stock for purchase of
shares for ESOP.................. $ -- $ 340,000 $ 400,000 $ 400,000 $ 480,000
----------- ----------- ----------- ------------ ------------
----------- ----------- ----------- ------------ ------------
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
FACTSET RESEARCH SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
AUGUST 31, 1994 AND 1995 AND FEBRUARY 29, 1996
1. ORGANIZATION AND NATURE OF BUSINESS
FactSet Research Systems Inc. (the "Company") provides on-line integrated
database services to the financial community. The Company's revenue is derived
from subscription charges. Solely at the option of each client, these charges
may be paid either in commissions on securities transaction (in which case
subscription revenue is recorded as Commissions) or on a cash basis (in which
case subscription revenue is recorded as Fees).
To facilitate the receipt of subscription revenue on a commission basis, the
Company's wholly owned subsidiary, FactSet Data Systems Inc. ("FDS"), is a
member of the National Association of Securities Dealers, Inc. and is a
registered broker-dealer under Section 15 of the Securities Exchange Act of
1934. FDS's only function is to facilitate the receipt of payments in respect of
subscription charges and it does not otherwise engage in the securities
business.
Subscription revenue paid in commissions is based on securities transactions
introduced and cleared on a fully disclosed basis through two clearing brokers.
That is, a client paying subscription charges on a commission basis directs the
clearing broker, at the time the client executes a securities transaction, to
credit the commission on the transaction to FDS's account.
As stated above, each client has the option to pay subscription charges
either in the form of commissions on securities transactions or on a cash basis,
regardless of the nature or amount of the services provided by FactSet to such
client. When a client elects to pay subscription charges in the form of
commissions, the dollar amount payable is higher than the fee that would be
payable for the same services on a cash basis because of the associated clearing
fees payable by the Company to the clearing broker on such transactions.
However, commissions net of related clearing fees are approximately equal to the
fees that would be paid by a client on a cash basis.
FactSet Pacific Inc. and FactSet Limited are wholly owned subsidiaries of
the Company and are U.S. corporations with branches in Tokyo and London,
respectively.
Effective June 12, 1995, the Company changed its name from FactSet Research
Corporation.
2. ACCOUNTING POLICIES
The significant accounting policies of the Company and subsidiaries are
summarized below.
FINANCIAL STATEMENT PRESENTATION
The accompanying consolidated financial statements include the accounts of
the Company and its subsidiaries. All significant intercompany activity and
balances have been eliminated from the consolidated financial statements.
During fiscal 1995, the Company increased the number of shares of common
stock authorized from one million to five million, and on December 21, 1994,
effected a twenty-five for one stock split. Furthermore, on June 4, 1996, the
Company increased the number of shares of common stock authorized from five
million to forty million, authorized 10,000,000 shares of Preferred Stock
issuable in series and effected a four for one stock split with respect to the
Common Stock. In connection with the stock splits, the par value of the common
stock was reduced from $1.00 to $.01 per share. For purposes
F-7
FACTSET RESEARCH SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. ACCOUNTING POLICIES--(CONTINUED)
of these financial statements, all common stock and per share amounts have been
restated to reflect the stock splits.
USE OF 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
reporting period. Actual results could differ from those estimates.
REVENUE RECOGNITION
Subscription charges are quoted to clients on an annual basis, but are
earned as services are provided on a month to month basis. Subscription revenue
recorded as commissions and subscription revenue recorded as fees are each
recorded as earned each month, based on one-twelfth of the annual subscription
charge quoted to each client. Amounts that have been earned but not yet paid
through the receipt of commissions on securities transactions or through cash
payments are reflected on the consolidated statement of financial condition as
receivable from clients. Amounts that have been received through commissions on
securities transactions or through cash payments that are in excess of a
client's earned subscription revenue are reflected on the consolidated statement
of financial condition as deferred fees and commissions.
CLEARING FEES
When subscription charges are paid on a commission basis, the Company incurs
clearing fees, which are the charges imposed by the clearing brokers used to
execute and settle trades. Clearing fees for executed transactions are recorded
on a trade date basis as securities transactions occur. Clearing fees related to
accounts receivable--commissions (a component of receivable from clients) are
recorded simultaneously with the related receivable.
CASH AND CASH EQUIVALENTS
Cash and cash equivalents consists of cash, money-market investments and
certificates of deposit with original maturities of three months or less.
INVESTMENTS
Effective September 1, 1994, the Company adopted Statement of Financial
Accounting Standards No. 115 ("SFAS 115"), Accounting for Certain Investments in
Debt and Equity Securities.
Investment securities are classified as available-for-sale securities in
accordance with SFAS 115 and are reported at market value or fair value as
determined by management. Unrealized gains and losses on available-for-sale
securities are recognized as a separate component of stockholders' equity.
Prior to the adoption of SFAS 115, investment securities were recorded at
lower of cost or market.
F-8
FACTSET RESEARCH SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
2. ACCOUNTING POLICIES--(CONTINUED)
FAIR VALUE OF FINANCIAL INSTRUMENTS
The carrying value of financial instruments on the statement of financial
condition approximates fair value as determined by management of the Company.
FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Depreciation of computers and related equipment acquired before September 1,
1994 is computed using the double declining balance method over estimated useful
lives of five years. Computer and related equipment acquired after September 1,
1994 is provided on a straight-line basis over estimated useful lives of three
years. Depreciation of furniture and fixtures is computed using the double
declining balance method over estimated useful lives of five years. Leasehold
improvements are amortized on a straight-line basis over the terms of the
related leases or estimated useful lives of the improvements, whichever period
is shorter.
EARNINGS PER SHARE
The computation of earnings per share in each year is based on the weighted
average number of shares outstanding. The weighted average number of shares
outstanding includes shares issued to the ESOP at the date authorized by the
Board of Directors. Stock options are included as share equivalents using the
treasury stock method.
3. RECEIVABLE FROM CLIENTS AND CLEARING BROKERS
Receivable from clients and clearing brokers consists of the following:
AUGUST 31, AUGUST 31, FEBRUARY 29,
1994 1995 1996
---------- ---------- ------------
Accounts receivable--fees.............................. $1,166,523 $1,207,240 $ 2,362,907
Accounts receivable--commissions....................... 1,829,496 2,364,529 1,756,856
Receivable from clearing brokers....................... 663,029 530,176 470,000
---------- ---------- ------------
$3,659,048 $4,101,945 $ 4,589,763
---------- ---------- ------------
---------- ---------- ------------
Accounts receivable--fees and accounts receivable--commissions are reflected
net of aggregate allowances for doubtful accounts of $0, $250,000 and $250,000,
respectively, at August 31, 1994, August 31, 1995 and February 29, 1996.
F-9
FACTSET RESEARCH SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
4. INVESTMENTS
Investments, classified as available-for-sale securities, consist of the
following:
GROSS
COST UNREALIZED
BASIS FAIR VALUE GAINS
---------- ---------- ----------
AT AUGUST 31, 1995
Time deposits with bank, due 12/7/95..................... $ 110,869 $ 110,869 $ -
Investment limited partnership........................... 912,767 941,781 29,014
Investment in treasury bills, due 12/14/95............... 84,073 84,073 -
---------- ---------- ----------
$1,107,709 $1,136,723 $ 29,014
---------- ---------- ----------
---------- ---------- ----------
AT FEBRUARY 29, 1996
Time deposits with bank, due 12/7/96..................... $ 113,772 $ 113,772 $ -
Investment limited partnership........................... 912,767 1,078,286 165,519
Investment in treasury bills, due 12/14/96............... 78,868 78,868 -
---------- ---------- ----------
$1,105,407 $1,270,926 $ 165,519
---------- ---------- ----------
---------- ---------- ----------
The investment limited partnership invests primarily in convertible bonds
and preferred stocks.
At August 31, 1995 and February 29, 1996, there were net unrealized gains of
$16,538 and $94,344 after related deferred income taxes of $12,476 and $71,175,
respectively, which are included as a separate valuation component of
stockholders' equity.
Investments at August 31, 1994, which were recorded at lower of cost or
market, are as follows:
Time deposits with bank, due 12/7/94........................... $ 216,992
Investment limited partnership................................. 912,767
Investment in municipal bond portfolio......................... 1,066,015
Investment in treasury bills, due 12/19/94..................... 78,924
----------
$2,274,698
----------
----------
5. RECEIVABLE FROM OFFICERS AND EMPLOYEES
Receivable from officers and employees consists of the following interest
bearing and noninterest-bearing promissory notes and advances to officers and
employees of the Company:
AUGUST 31, AUGUST 31, FEBRUARY 29,
1994 1995 1996
---------- ---------- ------------
5.8% promissory note from principal stockholder........ $3,250,000 $3,250,000 $ 3,250,000
Noninterest-bearing advances to principal
stockholder............................................ 423,488 626,703 596,703
Noninterest-bearing promissory demand notes and
advances to employees.................................. 97,550 305,413 317,025
---------- ---------- ------------
$3,771,038 $4,182,116 $ 4,163,728
---------- ---------- ------------
---------- ---------- ------------
F-10
FACTSET RESEARCH SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
5. RECEIVABLE FROM OFFICERS AND EMPLOYEES--(CONTINUED)
The notes and advances outstanding to the principal stockholder are expected
to be paid in full promptly following the completion of a public offering of a
portion of the common stock owned by such stockholder from a portion of the
proceeds thereof.
6. FURNITURE, EQUIPMENT AND LEASEHOLD IMPROVEMENTS
Furniture, equipment and leasehold improvements consist of the following:
AUGUST 31, AUGUST 31, FEBRUARY 29,
1994 1995 1996
--------------- --------------- ------------
Computers and related equipment................... $ 9,063,394 $ 9,877,855 $ 11,859,249
Leasehold improvements............................ 2,363,600 2,499,217 2,538,738
Furniture, fixtures and other..................... 2,506,053 2,773,740 2,890,509
--------------- --------------- ------------
13,933,047 15,150,812 17,288,496
Less--Accumulated depreciation and amortization... (8,668,412) (10,204,865) (11,147,810)
--------------- --------------- ------------
$ 5,264,635 $ 4,945,947 $ 6,140,686
--------------- --------------- ------------
--------------- --------------- ------------
7. DEFERRED FEES AND COMMISSIONS
Deferred fees and commissions consist of the following:
AUGUST 31, AUGUST 31, FEBRUARY 29,
1994 1995 1996
---------- ---------- ------------
Deferred fees.......................................... $ 415,657 $ 568,129 $ 487,886
Deferred commissions................................... 2,917,361 2,282,718 2,063,070
---------- ---------- ------------
$3,333,018 $2,850,847 $ 2,550,956
---------- ---------- ------------
---------- ---------- ------------
8. INCOME TAXES
The provision for income taxes was as follows:
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
-------------------------------------- ----------------------------
AUGUST 31, AUGUST 31, AUGUST 31, FEBRUARY 28, FEBRUARY 29,
1993 1994 1995 1995 1996
---------- ---------- ---------- ------------ ------------
Current tax expense
U.S. federal................. $2,385,239 $1,330,515 $2,788,446 $ 954,371 $ 1,382,210
State and local.............. 1,078,167 621,499 1,178,701 422,935 582,825
---------- ---------- ---------- ------------ ------------
Total current.................. 3,463,406 1,952,014 3,967,147 1,377,306 1,965,035
---------- ---------- ---------- ------------ ------------
Deferred tax expense (benefit)
U.S. federal................. (829,059) (147,877) (173,007) 296,149 208,526
State and local.............. (353,130) (56,654) (62,818) 136,533 91,840
---------- ---------- ---------- ------------ ------------
Total deferred................. (1,182,189) (204,531) (235,825) 432,682 300,366
---------- ---------- ---------- ------------ ------------
Total provision................ $2,281,217 $1,747,483 $3,731,322 $ 1,809,988 $ 2,265,401
---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ------------ ------------
F-11
FACTSET RESEARCH SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
8. INCOME TAXES--(CONTINUED)
Deferred tax assets (liabilities) are comprised of the following:
AUGUST 31, AUGUST 31, FEBRUARY 29,
1994 1995 1996
---------- ---------- ------------
Deferred tax assets:
Current:
Deferred commission income......................... $1,248,240 $ 953,341 $ 873,770
Deferred fee income................................ 177,845 237,270 206,634
Accrued bonuses.................................... - 409,281 213,882
---------- ---------- ------------
Total current deferred taxes..................... 1,426,085 1,599,892 1,294,286
---------- ---------- ------------
Noncurrent:
Depreciation/amortization.......................... 224,502 236,837 261,357
Deferred rent...................................... 95,441 113,495 100,038
Other.............................................. 9,957 29,110 -
---------- ---------- ------------
Total noncurrent deferred taxes.................. 329,900 379,442 361,395
---------- ---------- ------------
Gross deferred tax assets.............................. 1,755,985 1,979,334 1,655,681
---------- ---------- ------------
Deferred tax liabilities:
Other................................................ - - (35,412)
---------- ---------- ------------
Deferred tax assets valuation allowance................ - - -
---------- ---------- ------------
$1,755,985 $1,979,334 $ 1,620,269
---------- ---------- ------------
---------- ---------- ------------
The provisions for income taxes differ from the amount of income tax
determined by applying the applicable U.S. statutory federal income tax rate to
pretax income as a result of the following differences:
FOR THE YEARS ENDED FOR THE SIX MONTHS ENDED
-------------------------------------- ----------------------------
AUGUST 31, AUGUST 31, AUGUST 31, FEBRUARY 28, FEBRUARY 29,
1993 1994 1995 1995 1996
---------- ---------- ---------- ------------ ------------
Tax at statutory U.S. tax
rates.......................... $1,754,286 $1,256,108 $2,947,830 $ 1,446,501 $ 1,797,736
Increase (decrease) in taxes
resulting from:
State and local taxes, net... 478,525 372,798 736,483 369,249 445,279
Other........................ 48,406 118,577 47,009 (5,762) 22,386
---------- ---------- ---------- ------------ ------------
Tax at effective tax rates..... $2,281,217 $1,747,483 $3,731,322 $ 1,809,988 $ 2,265,401
---------- ---------- ---------- ------------ ------------
---------- ---------- ---------- ------------ ------------
9. NET CAPITAL
As a registered broker-dealer, FDS is subject to Rule 15c3-1 under the
Securities Exchange Act of 1934, which requires that FDS maintain minimum net
capital equal to the greater of $5,000 or 6.67% of aggregate indebtedness and a
ratio of aggregate indebtedness to net capital of not more than 15 to 1. FDS may
be prohibited from paying cash dividends to the Company if such dividends would
result in its net capital falling below the minimum requirement or its ratio of
aggregate indebtedness to net capital exceeding 15 to 1.
F-12
FACTSET RESEARCH SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
9. NET CAPITAL--(CONTINUED)
At all times during the periods presented, FDS had net capital in excess of
its minimum net capital requirements. At February 29, 1996, FDS had net capital
of $2,104,657, which was $1,788,716 in excess of its minimum net capital
requirement of $315,941. The ratio of aggregate indebtedness to net capital was
2.25 to 1.
10. COMMITMENTS
The Company leases office space in Greenwich, Connecticut under a lease
agreement which expires in August 2000 and which contains certain escalation
clauses. The Company is required to pay minimum annual rental of $1,186,866
through the end of the lease. The total minimum rental payments associated with
the lease are being recorded as occupancy costs on a straight-line basis over
the period commencing with the occupancy of the premises in August 1990 through
the end of the lease. Deferred rent at August 31, 1994, August 31, 1995 and
February 29, 1996 includes $228,728, $271,756, and $236,202, respectively, for
recorded occupancy expenses which will be paid in future years.
The cost of certain leasehold improvements, above and beyond normal
improvements, was reimbursed to the Company by the lessor. These leasehold
improvements are included in deferred rent and are being amortized to occupancy
costs on a straight-line basis over the term of the lease. The unamortized
balance of such leasehold improvements was $372,798, $310,665 and $279,598 at
August 31, 1994, August 31, 1995 and February 29, 1996, respectively.
The Company, through its subsidiaries, has lease agreements for other office
space which expire at various dates through the period ended December 2003.
At February 29, 1996, the Company's lease commitments for office space under
leases having noncancelable lease terms in excess of one year provide for the
following minimum annual rentals:
For the six months ending August 31, 1996...................................... $ 1,068,783
For the years ending August 31,
1997......................................................................... 1,517,152
1998......................................................................... 1,474,000
1999......................................................................... 1,481,891
2000......................................................................... 1,379,025
Thereafter................................................................... 606,484
-----------
Minimum lease payments....................................................... $ 7,527,335
-----------
-----------
At February 29, 1996, the Company has standby letters of credit aggregating
approximately $261,916, which serve as security deposits for leased premises.
11. EMPLOYEE STOCK OWNERSHIP PLAN
The Company sponsors an Employee Stock Ownership Plan (the "Plan" or
"ESOP"). The Company may make optional annual contributions for the benefit of
participating employees in such amount or amounts as designated by the Board of
Directors. The Company made contributions in the amounts of $340,000, $400,000
and $480,000 for the years ended August 31, 1993, 1994 and 1995, respectively.
Such contributions are recorded in compensation expense and accrued liabilities
at the
F-13
FACTSET RESEARCH SYSTEMS INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS--(CONTINUED)
11. EMPLOYEE STOCK OWNERSHIP PLAN--(CONTINUED)
time they are authorized; issuance of the related shares occurs shortly
thereafter, generally in the following fiscal year. The principal stockholders
of the Company are the Trustees of the Plan.
Employees of the Company and its subsidiaries who have performed at least
1,000 hours of service during the year are generally able to participate in the
Plan. The Company contribution allocated to an individual account begins to vest
upon completion of the employee's third year of service at the rate of 20% each
successive year of service. Forfeited non-vested interests in the Plan are
allocated to the other participants' accounts.
The Plan owned 607,000, 696,024, and 787,824 shares of the Company's common
stock at August 31, 1994, August 31, 1995 and February 29, 1996, respectively.
The consolidated statement of financial condition at February 29, 1996
includes an accrual of $290,000 for the proportional estimate of a contribution
for the current fiscal year. Any such contribution is subject to approval of the
Board of Directors.
12. STOCK OPTION PLAN
The Company's 1994 Stock Option Plan (the "1994 Plan") was adopted by the
Board of Directors on December 21, 1994 and approved by the Company's
stockholders on December 22, 1994. Under the 1994 Plan, effective January 3,
1995 incentive stock options ("ISOs") and non-qualified stock options to
purchase up to 1,481,000 shares of common stock at prices which range from $2.50
to $2.70 per share have been granted to employees of the Company. Options
granted under the 1994 Plan expire not more than 10 years from the date of grant
and, in most cases, vest at a rate of 20% per year beginning one year after the
grant date.
The 1994 Plan is administered by the Compensation Committee of the Board of
Directors. Options granted under the plan are not transferrable or assignable
other than by will or the laws of decent and distribution and may be exercised,
during the grantee's lifetime, only by the grantee.
As of August 31, 1995, no options had been exercised under the 1994 Plan.
During the six months ended February 29, 1996, options representing 6,000 shares
of common stock were exercised, at which time unvested options representing
24,000 shares of common stock were forfeited. At February 29, 1996, options to
purchase up to 1,451,000 shares remained outstanding.
13. OFF-BALANCE SHEET RISK AND CONCENTRATIONS OF CREDIT RISK
In the normal course of business, securities transactions of customers of
FDS are introduced and cleared through correspondent brokers. Pursuant to
agreements between FDS and its correspondent brokers, the correspondents have
the right to charge FDS for unsecured losses that result from a customer's
failure to complete such transactions. The Company seeks to control the credit
risk of nonperformance by its customers by evaluating the creditworthiness of
its customers and by reviewing their trading activity on a periodic basis.
Receivable from clearing brokers represents a concentration of credit risk
and relates to securities transactions cleared through two correspondent
brokers.
F-14
- ------------------------------------------- ---------------------------------
- ------------------------------------------- ---------------------------------
NO PERSON HAS BEEN AUTHORIZED TO GIVE
ANY INFORMATION OR TO MAKE ANY 3,125,000 SHARES
REPRESENTATION IN CONNECTION WITH THIS
OFFERING BEING MADE HEREBY NOT CONTAINED
IN THIS PROSPECTUS, AND, IF GIVEN OR MADE,
SUCH INFORMATION OR REPRESENTATION MUST
NOT BE RELIED UPON AS HAVING BEEN
AUTHORIZED BY THE COMPANY, THE
UNDERWRITERS OR ANY OTHER PERSON. THIS FACTSET RESEARCH
PROSPECTUS DOES NOT CONSTITUTE SYSTEMS INC.
AN OFFER TO SELL OR A SOLICITATION OF AN
OFFER TO BUY ANY SECURITIES OFFERED
HEREBY IN ANY JURISDICTION IN WHICH IT IS
UNLAWFUL TO MAKE SUCH OFFER OR
SOLICITATION IN SUCH JURISDICTION.
NEITHER THE DELIVERY OF THIS PROSPECTUS COMMON STOCK
NOR ANY SALE MADE HEREUNDER SHALL UNDER
ANY CIRCUMSTANCES CREATE AN IMPLICATION
THAT INFORMATION CONTAINED HEREIN IS
CORRECT AS OF ANY TIME SUBSEQUENT TO THE
DATE HEREOF.
-------------------
TABLE OF CONTENTS
PAGE
---- [FACTSET LOGO]
Prospectus Summary.................. 3
Risk Factors........................ 8
The Company......................... 12
Dividend Policy..................... 12
Dilution............................ 13
Capitalization...................... 14
Use of Proceeds..................... 14 ----------------
Selected Historical Consolidated
Financial Information............. 15 PROSPECTUS
Management's Discussion and Analysis
of Financial Condition and Results ----------------
of Operations.................... 17
Business............................ 26
Management.......................... 41
Principal and Selling Stockholders.. 47 DONALDSON, LUFKIN & JENRETTE
Certain Transactions and SECURITIES CORPORATION
Relationships...................... 48
Description of Capital Stock........ 49
Shares Eligible for Future Sale..... 51
Underwriting........................ 52
Legal Matters....................... 53 ALEX. BROWN & SONS
Experts............................. 53 INCORPORATED
Available Information............... 53
Index to Financial Statements....... F-1
UNTIL , 1996 (25 DAYS
AFTER THE DATE OF THIS PROSPECTUS), ALL
DEALERS EFFECTING TRANSACTIONS IN THE
REGISTERED SECURITIES, WHETHER OR NOT , 1996
PARTICIPATING IN THIS DISTRIBUTION, MAY
BE REQUIRED TO DELIVER A PROSPECTUS. THIS
IS IN ADDITION TO THE OBLIGATION OF
DEALERS TO DELIVER A PROSPECTUS WHEN
ACTING AS UNDERWRITERS AND WITH RESPECT
TO THEIR UNSOLD ALLOTMENTS OR
SUBSCRIPTIONS.
- ------------------------------------------ ---------------------------------
- ------------------------------------------ ---------------------------------
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION
The following table sets forth the expenses incurred in connection with the
sale and distribution of the securities being registered which will be paid
solely by the Company. All the amounts shown are estimates, except the
Commission registration fee, the listing fee and the NASD filing fee.
Commission registration fee..................................... $ 20,690
NASD filing fee................................................. 6,500
NYSE listing fee................................................ 102,100
Blue sky fees and expenses...................................... 20,000
Transfer agent and registrar fees and expenses.................. 7,500
Accounting fees and expenses.................................... 185,000
Legal fees and expenses......................................... 350,000
Printing and engraving expenses................................. 175,000
Miscellaneous expenses.......................................... 3,210
--------
Total..................................................... $870,000
--------
--------
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS
Section 145 of the General Corporation Law of the State of Delaware provides
that under certain circumstances a corporation may indemnify any person who or
is a party or is threatened to be made a party any threatened, pending or
completed action, suit or proceeding, whether civil, criminal, administrative or
investigative, by reason of the fact that he is or was a director, officer,
employee or agent of the corporation or is or was serving at its request in such
capacity in another corporation or business association, against expenses
(including attorney's fees), judgments, fines and amounts paid in settlement
actually and reasonably incurred by him in connection with such action, suit or
proceeding if he acted in good faith and in a manner he reasonably believed to
be in or not opposed to the best interests of the corporation and, with respect
to any criminal action or proceeding, had no reasonable cause to believe his
conduct was unlawful.
The Certificate and By-laws of the registrant provide that (a) the
registrant shall indemnify to the full extent permitted by law any person made,
or threatened to be made, a party to any action, suit or proceeding (whether
civil, criminal, administrative or investigative) by reason of the fact that he
is or was a director, officer or employee of the registrant serving at its
request as a director, officer, employee, trustee or agent of another enterprise
and (b) the registrant shall pay the expenses, including attorney's fees,
incurred by a director or officer in defending or investigating a threatened or
pending action, suit or proceeding, in advance of the final disposition of such
action, suit or proceeding upon receipt of an undertaking by or on behalf of
such director or officer to repay such amount by the registrant. The Certificate
of Incorporation also provides that, to the extent permitted by law, the
directors of the registrant shall have no liability to the registrant or its
stockholders for monetary damages for breach of fiduciary duty as a director.
The Company intends to purchase policies of insurance under which the
registrant's directors and officers are insured, within the limits and subject
to the limitations of the policies, against certain expenses in connection with
the defense of actions, suits or proceedings, and certain liabilities which
might be imposed as a result of such actions, suits or proceedings, to which
they are parties by reason of being or having been such directors or officers.
II-1
The form of Underwriting Agreement filed a Exhibit 1.1 provides for the
indemnification of the registrant, its controlling persons, its directors and
certain of its officers by the Underwriters against certain liabilities under
the Securities Act.
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES
In February 1996, the Company sold 1,500 shares of Common Stock to John S.
Gross, the Company's former Chief Financial Officer, upon his exercise of
employee stock options granted pursuant to the Company's 1994 Stock Option Plan.
Such sale was not registered under the Securities Act of 1933 (the "Act") in
reliance upon the exemption from registration contained in Section 3(b) of the
Act and Rule 701 promulgated thereunder.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES
(a) Exhibits
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation
3.2 By-laws
4.1 Form of Certificate for Common Stock*
5.1 Opinion of Cravath, Swaine & Moore*
10.1 Form of Registration Rights Agreement among the Company, Howard E. Wille and Charles
J. Snyder
10.2 Form of Employment Agreement between the Company and Howard E. Wille and the Company
and Charles J. Snyder
10.3 Letter Agreement between the Company and Ernest S. Wong
10.4 Company Employee Stock Ownership Plan
10.5 1994 Stock Option Plan
10.6 Form of Stock Option Agreement under 1994 Stock Option Plan
10.7 Form of 1996 Stock Option Plan
21.1 Subsidiaries of the Company**
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Cravath, Swaine & Moore (appears in Exhibit 5.1)*
24.1 Powers of Attorney**
- ------------
* To be filed by amendment
** Filed previously.
ITEM 17. UNDERTAKINGS
(1) The undersigned Registrant hereby undertakes to provide to the
Underwriters at the closing specified in the Underwriting Agreement,
certificates in such denominations and registered in such names as required by
the Underwriters to permit prompt delivery to each purchaser.
(2) Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the foregoing provisions, or otherwise, the Registrant
has been advised that in the opinion of the Securities and Exchange Commission
such indemnification is against public policy as expressed in the Securities Act
and is, therefore, unenforceable. In the event that a claim for indemnification
against such liabilities (other than the payment by the Registrant of expenses
incurred or paid by a director, officer or controlling person of the Registrant
in the successful defense of any action, suit or proceeding) is asserted by such
director, officer or controlling person in connection with the securities being
registered, the Registrant will, unless in the opinion of its counsel the matter
has been settled by controlling precedent, submit to a
II-2
court of appropriate jurisdiction the question whether such indemnification by
it is against public policy as expressed in the Securities Act and will be
governed by a final adjudication of such issue.
(3) The undersigned Registrant hereby undertakes that:
(a) For purposes of determining any liability under the Securities Act,
the information omitted from the form of prospectus filed as part of this
Registration Statement in reliance upon Rule 430A and contained in the form
of prospectus filed by the Registrant pursuant to Rule 424(b)(1) or (4) or
497(h) under the Securities Act shall be deemed to be part of this
Registration Statement as of the time it was declared effective.
(b) For the purpose of determining liability under the Securities Act,
each post-effective amendment that contains a form of prospectus shall be
deemed to be a new registration statement relating to the securities offered
therein, and the offering of such securities at that time shall be deemed to
be the initial bona fide offering thereof.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the Registrant
has duly caused this Registration Statement to be signed on its behalf by the
undersigned, thereunto duly authorized, in Greenwich, Connecticut, on June 4,
1996.
FACTSET RESEARCH SYSTEMS INC.
By: /s/ HOWARD E. WILLE
..................................
Howard E. Wille
Chairman of the Board of Directors
and Chief Executive Officer
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
SIGNATURES TITLES DATES
- ------------------------------------ -------------------------------------- -----------------
/s/ HOWARD E. WILLE Chairman of the Board of Directors and June 4, 1996
.................................... Chief Executive Officer (Principal
Howard E. Wille Executive Officer)
* President and Director June , 1996
....................................
Charles J. Snyder
/s/ ERNEST S. WONG Chief Financial Officer (Principal June 4, 1996
.................................... Accounting Officer)
Ernest S. Wong
* Director June , 1996
....................................
Joseph E. Laird, Jr.
* By: /s/ HOWARD E. WILLE
.............................
Howard E. Wille
Attorney-in-fact
II-4
INDEX TO EXHIBITS
EXHIBIT NO. DESCRIPTION PAGE
- ----------- ----------- ----
1.1 Form of Underwriting Agreement
3.1 Restated Certificate of Incorporation
3.2 By-laws
4.1 Form of Certificate for Common Stock*
5.1 Opinion of Cravath, Swaine & Moore*
10.1 Form of Registration Rights Agreement among the Company, Howard E. Wille
and Charles J. Snyder
10.2 Form of Employment Agreement between the Company and Howard E. Wille and
the Company and Charles J. Snyder
10.3 Letter Agreement between the Company and Ernest S. Wong
10.4 Company Employee Stock Ownership Plan
10.5 1994 Stock Option Plan
10.6 Form of Stock Option Agreement under 1994 Stock Option Plan
10.7 Form of 1996 Stock Option Plan
21.1 Subsidiaries of the Company**
23.1 Consent of Price Waterhouse LLP
23.2 Consent of Cravath, Swaine & Moore (appears in Exhibit 5.1)*
24.1 Powers of Attorney**
- ------------
* To be filed by amendment
** Filed previously.
[FORM OF UNDERWRITING AGREEMENT]
3,125,000 Shares
FACTSET RESEARCH SYSTEMS, INC.
Common Stock
UNDERWRITING AGREEMENT
----------------------
July ___, 1996
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ALEX. BROWN & SONS INCORPORATED
As representatives of the
several underwriters
named in Schedule I hereto
c/o Donaldson, Lufkin & Jenrette
Securities Corporation
277 Park Avenue
New York, New York 10172
Dear Sirs:
Certain stockholders of FactSet Research Systems, Inc., a Delaware
corporation (the "Company"), named in Schedule II hereto, (the "Selling
Stockholders"), severally propose to sell an aggregate of 3,125,000 shares of
Common Stock, $.01 par value per share of the Company (the "Firm Shares"), to
the several underwriters named in Schedule I
hereto (the "Underwriters"). The Selling Stockholders also propose to sell to
the several Underwriters not more than 468,750 additional shares of Common
Stock, $.01 par value per share, of the Company (the "Additional Shares"), if
requested by the Underwriters as provided in Section 2 hereof. The Firm Shares
and the Additional Shares are herein collectively called the Shares. The
shares of common stock of the Company to be outstanding after giving effect to
the sales contemplated hereby are hereinafter referred to as the Common Stock.
1. Registration Statement and Prospectus. The Company has prepared
-------------------------------------
and filed with the Securities and Exchange Commission (the "Commission") in
accordance with the provisions of the Securities Act of 1933, as amended, and
the rules and regulations of the Commission thereunder (collectively called the
"Act"), a registration statement on Form S-1 including a prospectus relating to
the Shares, which may be amended. The registration statement as amended at the
time when it becomes effective, including information (if any) deemed to be part
of the registration statement at the time of effectiveness pursuant to Rule 430A
under the Act, is hereinafter referred to as the Registration Statement; and the
prospectus in the form first used to confirm sales of Shares is hereinafter
referred as the Prospectus.
2. Agreements to Sell and Purchase. On the basis of the
-------------------------------
representations and warranties contained in this Agreement, and subject to its
terms and conditions, (i) each Selling Stockholder agrees, severally and not
jointly, to sell the number of Firm Shares set forth opposite such Selling
Stockholder's name in Schedule II hereto and (ii) each Underwriter agrees,
severally and not jointly, to purchase from each Selling Stockholder at a price
per share of $______ (the "Purchase Price") the number of Firm Shares (subject
to such adjustments to eliminate fractional shares as you may determine) which
bears the same proportion to the total number of Firm Shares to be sold by such
Selling Stockholder as the number of Firm Shares set forth opposite the name of
such Underwriter in Schedule I hereto bears to the total number of Firm Shares.
2
On the basis of the representations and warranties contained in this
Agreement, and subject to its terms and conditions, (i) each Selling Stockholder
agrees, severally and not jointly, to sell up to 468,750 Additional Shares and
(ii) the Underwriters shall have the right to purchase, severally and not
jointly, up to an aggregate 468,750 Additional Shares at the Purchase Price.
Additional Shares may be purchased solely for the purpose of covering
over-allotments made in connection with the offering of the Firm Shares. The
Underwriters may exercise their right to purchase Additional Shares in whole or
in part from time to time by giving written notice thereof to the Selling
Stockholders within 30 days after the date of this Agreement. You shall give
any such notice on behalf of the Underwriters and such notice shall specify the
aggregate number of Additional Shares to be purchased pursuant to such exercise
and the date for payment and delivery thereof. The date specified in any such
notice shall be a business day (i) no earlier than the Closing Date (as
hereinafter defined), (ii) no later than ten business days after such notice has
been given and (iii) no earlier than two business days after such notice has
been given. If any Additional Shares are to be purchased, each Underwriter,
severally and not jointly, agrees to purchase from the Company the number of
Additional Shares (subject to such adjustments to eliminate fractional shares as
you may determine) which bears the same proportion to the total number of
Additional Shares to be purchased from the Company as the number of Firm Shares
set forth opposite the name of such Underwriter in Schedule I bears to the total
number of Firm Shares.
The Company and the Selling Stockholders hereby agree, severally and not
jointly, and the Company shall, concurrently with the execution of this
Agreement, deliver an agreement executed by (i) each of the directors and
officers of the Company who is not a Selling Stockholder and (ii) each
stockholder listed on Annex I hereto, pursuant to which each such person agrees
not to offer, sell, contract to sell, grant any option to purchase, or otherwise
dispose of any common stock of the Company or any securities convertible into or
exercisable or exchangeable for such common stock, or in any other manner
transfer all or a
3
portion of the economic consequences associated with the ownership of any such
common stock, except to the Underwriters pursuant to this Agreement, for a
period of 180 days after the date of the Prospectus without the prior written
consent of Donaldson, Lufkin & Jenrette Securities Corporation.
Notwithstanding the foregoing, during such period (i) the Company may grant
stock options or other stock awards pursuant to the stock option and other
incentive stock plans maintained by the Company in the ordinary course of
business, (ii) the Company may issue shares of its common stock upon the
exercise of an option or warrant or the conversion of a security outstanding on
the date hereof and (iii) the Company may sell shares of common stock to the
Company's Employee Stock Ownership Plan.
3. Terms of Public Offering. The Company and the Selling Stockholders
------------------------
are advised by you that the Underwriters propose (i) to make a public offering
of their respective portions of the Shares as soon after the effective date of
the Registration Statement as in your judgment is advisable and (ii) initially
to offer the Shares upon the terms set forth in the Prospectus.
4. Delivery and Payment. Delivery to the Underwriters of and payment
--------------------
for the Firm Shares shall be made at 10:00 A.M., New York City time, on the
third business day (the "Closing Date") following the date of the initial public
offering, at such place outside the State of New York as you shall designate.
The Closing Date and the location of delivery of and the form of payment for the
Firm Shares may be varied by agreement between you and the Selling Stockholders.
Delivery to the Underwriters of and payment for any Additional Shares to
be purchased by the Underwriters shall be made at such place as you shall
designate at 10:00 A.M., New York City time, on the date specified in the
applicable exercise notice given by you pursuant to Section 2 (an "Option
Closing Date"). Any such Option Closing Date and the location of delivery of
and the form of payment for such Additional Shares may be varied by agreement
between you and the Selling Stockholders.
4
Certificates for the Shares shall be registered in such names and issued
in such denominations as you shall request in writing not later than two full
business days prior to the Closing Date or an Option Closing Date, as the case
may be. Such certificates shall be made available to you for inspection not
later than 9:30 A.M., New York City time, on the business day next preceding the
Closing Date or an Option Closing Date, as the case may be. Certificates in
definitive form evidencing the Shares shall be delivered to you on the Closing
Date or an Option Closing Date, as the case may be, with any transfer taxes
thereon duly paid by the respective Selling Stockholders, for the respective
accounts of the several Underwriters, against payment of the Purchase Price
therefor by certified or official bank checks payable in immediately available
funds to the order of the applicable Selling Stockholders.
5. Agreements of the Company and the Selling Stockholders. The
------------------------------------------------------
Company, and where specified, each Selling Stockholder, agree with you as
follows:
(a) The Company will use its best efforts to cause the Registration
Statement to become effective at the earliest possible time.
(b) The Company (and with respect to item (iv) below, each Selling
Stockholder) will advise you promptly and, if requested by you, confirm such
advice in writing, (i) when the Registration Statement has become effective
and when any post-effective amendment to it becomes effective, (ii) of any
request by the Commission for amendments to the Registration Statement or
amendments or supplements to the Prospectus or for additional information,
(iii) of the issuance by the Commission of any stop order suspending the
effectiveness of the Registration Statement or of the suspension of
qualification of the Shares for offering or sale in any jurisdiction, or the
initiation of any proceeding for such purposes, and (iv) of the happening of
any event during the period referred to in paragraph (e) below which makes
any statement of a material fact made in the Registration Statement or the
Prospectus
5
untrue or which requires the making of any additions to or changes in the
Registration Statement or the Prospectus in order to make the statements
therein not misleading. If at any time the Commission shall issue any stop
order suspending the effectiveness of the Registration Statement, the Company
will make every reasonable effort to obtain the withdrawal or lifting of such
order at the earliest possible time.
(c) The Company will furnish to you, without charge, three signed
copies of the Registration Statement as first filed with the Commission and
of each amendment to it, including all exhibits, and to furnish to you and
each Underwriter designated by you such number of conformed copies of the
Registration Statement as so filed and of each amendment to it, without
exhibits, as you may reasonably request.
(d) The Company will not file any amendment or supplement to the
Registration Statement, whether before or after the time when it becomes
effective, or make any amendment or supplement to the Prospectus of which you
shall not previously have been advised or to which you shall reasonably
object; and to prepare and file with the Commission, promptly upon your
reasonable request, any amendment to the Registration Statement or supplement
to the Prospectus which may be necessary or advisable in connection with the
distribution of the Shares by you, and to use its best efforts to cause the
same to become promptly effective.
(e) Promptly after the Registration Statement becomes effective, and
from time to time thereafter for such period as in the opinion of counsel for
the Underwriters a prospectus is required by law to be delivered in
connection with sales by an Underwriter or a dealer, the Company will furnish
to each Underwriter and dealer as many copies of the Prospectus (and of any
amendment or supplement to the Prospectus) as such Underwriter or dealer may
reasonably request.
(f) If during the period specified in paragraph (e) any event shall
occur as a result of which, in the
6
opinion of counsel for the Underwriters it becomes necessary to amend or
supplement the Prospectus in order to make the statements therein, in the
light of the circumstances when the Prospectus is delivered to a purchaser,
not misleading, or if it is necessary to amend or supplement the Prospectus
to comply with any law, the Company will forthwith prepare and file with the
Commission an appropriate amendment or supplement to the Prospectus so that
the statements in the Prospectus, as so amended or supplemented, will not in
the light of the circumstances when it is so delivered, be misleading, or so
that the Prospectus will comply with law, and to furnish to each Underwriter
and to such dealers as you shall specify, such number of copies thereof as
such Underwriter or dealers may reasonably request.
(g) Prior to any public offering of the Shares, the Company will
cooperate with you and counsel for the Underwriters in connection with the
registration or qualification of the Shares for offer and sale by the several
Underwriters and by dealers under the state securities or Blue Sky laws of
such jurisdictions as you may request, to continue such qualification in
effect so long as required for distribution of the Shares and to file such
consents to service of process or other documents as may be necessary in
order to effect such registration or qualification.
(h) The Company will mail and make generally available to its
stockholders as soon as reasonably practicable an earnings statement covering
a period of at least twelve months after the effective date of the
Registration Statement (but in no event commencing later than 90 days after
such date) which shall satisfy the provisions of Section 11(a) of the Act,
and to advise you in writing when such statement has been so made available
(it being understood that compliance with Rule 158 under the Act shall be
deemed to be in compliance with this paragraph).
7
(i) During the period of five years after the date of this Agreement,
the Company will (i) mail as soon as reasonably practicable after the end of
each fiscal year to the record holders of its Common Stock a financial report
of the Company and its subsidiaries on a consolidated basis (and a similar
financial report of all unconsolidated subsidiaries, if any), all such
financial reports to include a consolidated balance sheet, a consolidated
statement of operations, a consolidated statement of cash flows and a
consolidated statement of shareholders' equity as of the end of and for such
fiscal year, together with comparable information as of the end of and for
the preceding year, certified by independent certified public accountants,
and (ii) mail and make generally available as soon as practicable after the
end of each quarterly period (except for the last quarterly period of each
fiscal year) to such holders, a consolidated balance sheet, a consolidated
statement of operations and a consolidated statement of cash flows (and
similar financial reports of all unconsolidated subsidiaries, if any) as of
the end of and for such period, and for the period from the beginning of such
year to the close of such quarterly period, together with comparable
information for the corresponding periods of the preceding year.
(j) During the period referred to in paragraph (i), the Company will
furnish to you as soon as available a copy of each report or other publicly
available information of the Company mailed to the holders of Common Stock or
filed with the Commission and such other publicly available information
concerning the Company and its subsidiaries as you may reasonably request.
(k) The Company will pay one-third (1/3) and the Selling Stockholders
will pay or reimburse the Company for two-thirds (2/3) of all costs,
expenses, fees and taxes incident to (i) the preparation, printing, filing
and distribution under the Act of the Registration Statement (including
financial statements and
8
exhibits), each preliminary prospectus and all amendments and supplements to
any of them prior to or during the period specified in paragraph (e), (ii)
the printing and delivery of the Prospectus and all amendments or supplements
to it during the period specified in paragraph (e), (iii) the printing and
delivery of this Agreement, the Preliminary and Supplemental Blue Sky
Memoranda and all other agreements, memoranda, correspondence and other
documents printed and delivered in connection with the offering of the Shares
(including in each case any disbursements of counsel for the Underwriters
relating to such printing and delivery), (iv) the registration or
qualification of the Shares for offer and sale under the securities or Blue
Sky laws of the several states (including in each case the fees and
disbursements of counsel for the Underwriters relating to such registration
or qualification and memoranda relating thereto), (v) filings and clearance
with the National Association of Securities Dealers, Inc. in connection with
the offering, (vi) the listing of the Shares on the New York Stock Exchange,
(vii) furnishing such copies of the Registration Statement, the Prospectus
and all amendments and supplements thereto as may be requested for use in
connection with the offering or sale of the Shares by the Underwriters or by
dealers to whom Shares may be sold and (viii) the performance by the Selling
Stockholders of their other obligations under this Agreement.
(l) The Company will use all reasonable efforts to maintain the listing
of the Common Stock on the New York Stock Exchange (or on another national
securities exchange or the NASDAQ National Market System) for a period of
five years after the effective date of the Registration Statement.
(m) The Company will use its best efforts to do and perform all things
required or necessary to be done and performed under this Agreement by the
Company prior to the Closing Date or any Option Closing Date, as the
9
case may be, and to satisfy all conditions precedent to the delivery of the
Shares.
6. Representations and Warranties of the Company and the Selling
-------------------------------------------------------------
Stockholders. Each of the Company and the Selling Stockholders severally
- ------------
represents and warrants to each Underwriter that:
(a) The Registration Statement has become effective; no stop order
suspending the effectiveness of the Registration Statement is in effect, and
no proceedings for such purpose are pending before or threatened by the
Commission.
(b) (i) Each part of the Registration Statement, when such part became
effective, did not contain and each such part, as amended or supplemented, if
applicable, will not contain any untrue statement of a material fact or omit
to state a material fact required to be stated therein or necessary to make
the statements therein not misleading, (ii) the Registration Statement and
the Prospectus comply and, as amended or supplemented, if applicable, will
comply in all material respects with the Act and (iii) the Prospectus does
not contain and, as amended or supplemented, if applicable, will not contain
any untrue statement of a material fact or omit to state a material fact
necessary to make the statements therein, in the light of the circumstances
under which they were made, not misleading, except that the representations
and warranties set forth in this paragraph (b) do not apply to statements or
omissions in the Registration Statement or the Prospectus based upon
information relating to any Underwriter furnished to the Company in writing
by such Underwriter through you expressly for use therein.
(c) Each preliminary prospectus filed as part of the registration
statement as originally filed or as part of any amendment thereto, or filed
pursuant to Rule 424 under the Act, complied when so filed in all material
respects with the Act; and did not contain an
10
untrue statement of a material fact or omit to state a material fact required
to be stated therein or necessary to make the statements therein, in the
light of the circumstances under which they were made, not misleading.
(d) The Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing under the
laws of its jurisdiction of incorporation and has the corporate power and
authority to carry on its business as it is currently being conducted and to
own, lease and operate its properties, and each is duly qualified and is in
good standing as a foreign corporation authorized to do business in each
jurisdiction in which the nature of its business or its ownership or leasing
of property requires such qualification, except where the failure to be so
qualified would not have a material adverse effect on the Company and its
subsidiaries, taken as a whole.
(e) FactSet Data Systems Inc. ("FDS") is duly registered and in good
standing as a broker-dealer under Section 15 of the Securities Exchange Act
of 1934 (the "Exchange Act") and is in full compliance with the Exchange Act
and the rules and regulations of the Commission thereunder, including, but
not limited to, net capital requirements.
(f) All of the outstanding shares of capital stock of, or other
ownership interests in, each of the Company's subsidiaries have been duly
authorized and validly issued and are fully paid and non-assessable, and are
owned by the Company, free and clear of any security interest, claim, lien,
encumbrance or adverse interest of any nature.
(g) All the outstanding shares of capital stock of the Company
(including the Shares to be sold by the Selling Stockholders) have been duly
authorized and validly issued and are fully paid, non-assessable and not
subject to any preemptive or similar rights.
11
(h) The authorized capital stock of the Company, including the Common
Stock, conforms as to legal matters to the description thereof contained in
the Prospectus.
(i) Neither the Company nor any of its subsidiaries is in violation of
its respective charter or by-laws or in default in the performance of any
obligation, agreement or condition contained in any bond, debenture, note or
any other evidence of indebtedness or in any other agreement, indenture or
instrument material to the conduct of the business of the Company and its
subsidiaries, taken as a whole, to which the Company or any of its
subsidiaries is a party or by which it or any of its subsidiaries or their
respective property is bound.
(j) This Agreement has been duly authorized, executed and delivered by
or on behalf of the Company and is the valid and binding agreement of the
Company, enforceable in accordance with its terms (except that rights to
indemnity and contribution thereunder may be limited by applicable law).
(k) The execution, delivery and performance of this Agreement,
compliance by the Company with all the provisions hereof and the consummation
of the transactions contemplated hereby will not require any consent,
approval, authorization or other order of any court, regulatory body,
administrative agency or other governmental body (except as such may be
required under the securities or Blue Sky laws of the various states) and
will not conflict with or constitute a breach of any of the terms or
provisions of, or a default under, the charter or by-laws of the Company or
any of its subsidiaries or any agreement, indenture or other instrument to
which it or any of its subsidiaries is a party or by which it or any of its
subsidiaries or their respective property is bound, or violate or conflict
with any laws, administrative regulations or rulings or court decrees
applicable to the Company, any of its subsidiaries or their respective
property,
12
except where the failure to comply with such laws, administrative regulations
or rulings or court decrees would not have a material adverse effect on the
operations of the Company.
(l) Except as otherwise set forth in the Prospectus, there are no
material legal or governmental proceedings pending to which the Company or
any of its subsidiaries is a party or of which any of their respective
property is the subject, and, to the best of the Company's knowledge, no such
proceedings are threatened or contemplated. No contract or document of a
character required to be described in the Registration Statement or the
Prospectus or to be filed as an exhibit to the Registration Statement is not
so described or filed as required.
(m) To the knowledge of the Company or the Selling Stockholders,
neither the Company nor any of its subsidiaries has violated any foreign,
federal, state or local law or regulation relating to the protection of human
health and safety, the environment or hazardous or toxic substances or
wastes, pollutants or contaminants ("Environmental Laws"), nor any federal or
state law relating to discrimination in the hiring, promotion or pay of
employees nor any applicable federal or state wages and hours laws, nor any
provisions of the Employee Retirement Income Security Act or the rules and
regulations promulgated thereunder, which in each case might result in any
material adverse change in the business, prospects, financial condition or
results of operation of the Company and its subsidiaries, taken as a whole.
(n) Except as otherwise set forth in the Prospectus or such as are not
material to the business, prospects, financial condition or results of
operation of the Company and its subsidiaries, taken as a whole, the Company
and each of its subsidiaries has good and marketable title, free and clear of
all liens, claims, encumbrances and restrictions except liens for taxes not
yet due and payable, to all property and assets
13
described in the Registration Statement as being owned by it. All leases to
which the Company or any of its subsidiaries is a party are valid and binding
and no default has occurred or is continuing thereunder, which might result
in any material adverse change in the business, prospects, financial
condition or results of operation of the Company and its subsidiaries taken
as a whole, and the Company and its subsidiaries enjoy peaceful and
undisturbed possession under all such leases to which any of them is a party
as lessee with such exceptions as do not materially interfere with the use
made by the Company or such subsidiary.
(o) The Company and each of its subsidiaries maintains reasonably
adequate insurance.
(p) Price Waterhouse LLP are independent public accountants with
respect to the Company as required by the Act.
(q) The financial statements, together with related schedules and notes
forming part of the Registration Statement and the Prospectus (and any
amendment or supplement thereto), present fairly the consolidated financial
position, results of operations and changes in financial position of the
Company and its subsidiaries on the basis stated in the Registration
Statement at the respective dates or for the respective periods to which they
apply; such statements and related schedules and notes have been prepared in
accordance with generally accepted accounting principles consistently applied
throughout the periods involved, except as disclosed therein; and the other
financial and statistical information and data set forth in the Registration
Statement and the Prospectus (and any amendment or supplement thereto) is, in
all material respects, accurately presented and prepared on a basis
consistent with such financial statements and the books and records of the
Company.
(r) The Company and each of its subsidiaries has such permits,
licenses, franchises and authorizations
14
of governmental or regulatory authorities ("permits") as are necessary to
own, lease and operate its respective properties and to conduct its business
in the manner described in the Prospectus, subject to such qualifications as
may be set forth in the Prospectus and except where the failure to have such
permits, licenses, franchises and authorizations of governmental or
regulatory authorities, would not have a material adverse effect on the
operations of the Company; the Company and each of its subsidiaries has
fulfilled and performed all of its material obligations with respect to such
permits and no event has occurred which allows, or after notice or lapse of
time would allow, revocation or termination thereof or results in any other
material impairment of the rights of the holder of any such permit, subject
in each case to such qualification as may be set forth in the Prospectus;
and, except as described in the Prospectus, such permits contain no
restrictions that are materially burdensome to the Company or any of its
subsidiaries.
(s) The Company and each of its subsidiaries has such licenses,
trademarks, patents, agreements or authorizations with respect to the usage
of technology and information ("intellectual property rights"), proprietary
and otherwise, as are necessary to own, lease and operate its respective
properties and to conduct its business in the manner described in the
Prospectus, subject to such qualifications as may be set forth in the
Prospectus; the Company and each of its subsidiaries has fulfilled and
performed all of its material obligations with respect to such intellectual
property rights and no event has occurred which allows, or after notice or
lapse of time would allow, revocation or termination of any such rights as to
technology or information that is proprietary to the Company or results in
any other material impairment thereof, subject in each case to such
qualification as may be set forth in the Prospectus and except as would not
have a material adverse effect on the operations of the Company; and, except
as described in the Prospectus, the Company's intellectual property rights
15
contain no restrictions that are materially burdensome to the Company or any
of its subsidiaries.
(t) The Company is not an "investment company" or a company
"controlled" by an "investment company" within the meaning of the Investment
Company Act of 1940, as amended.
(u) With the exception of the Selling Stockholders, no holder of any
security of the Company has any right to require registration of shares of
Common Stock or any other security of the Company.
(v) The Company has complied with all provisions of Section 517.075,
Florida Statutes (Chapter 92-198, Laws of Florida).
7. Additional Representations and Warranties of the Selling
--------------------------------------------------------
Stockholders. Each Selling Stockholder severally represents and warrants to
- ------------
each Underwriter and the Company that:
(a) Such Selling Stockholder is the lawful owner of the Shares to be
sold by such Selling Stockholder pursuant to this Agreement and has, and on
the Closing Date (and Option Closing Date, if applicable) will have, good and
clear title to such Shares, free of all restrictions on transfer, liens,
encumbrances, security interests and claims whatsoever.
(b) Upon delivery of and payment for such Shares pursuant to this
Agreement, good and clear title to such Shares will pass to the Underwriters,
free of all restrictions on transfer, liens, encumbrances, security interests
and claims whatsoever.
(c) Such Selling Stockholder has, and on the Closing Date (and Option
Closing Date, if applicable) will have, full legal right, power and authority
to enter into this Agreement and to sell, assign, transfer and deliver such
Shares in the manner provided herein and this Agreement has been duly
authorized, executed
16
and delivered by such Selling Stockholder and is a valid and binding
agreement of such Selling Stockholder enforceable in accordance with its
terms, except as rights to indemnity and contribution hereunder may be
limited by applicable law.
(d) Such Selling Stockholder has not taken, and will not take, directly
or indirectly, any action designed to, or which might reasonably be expected
to, cause or result in stabilization or manipulation of the price of any
security of the Company to facilitate the sale or resale of the Shares
pursuant to the distribution contemplated by this Agreement, and other than
as permitted by the Act, the Selling Stockholder has not distributed and will
not distribute any prospectus or other offering material in connection with
the offering and sale of the Shares.
8. Indemnification. (a) The Company and each Selling Stockholder,
---------------
jointly and severally, agree to indemnify and hold harmless each Underwriter and
each person, if any, who controls any Underwriter within the meaning of Section
15 of the Act or Section 20 of the Exchange Act, from and against any and all
losses, claims, damages, liabilities and judgments caused by any untrue
statement or alleged untrue statement of a material fact contained in the
Registration Statement or the Prospectus (as amended or supplemented if the
Company shall have furnished any amendments or supplements thereto) or any
preliminary prospectus, or caused by any omission or alleged omission to state
therein a material fact required to be stated therein or necessary to make the
statements therein not misleading, except insofar as such losses, claims,
damages, liabilities or judgments are caused by any such untrue statement or
omission or alleged untrue statement or omission based upon information relating
to any Underwriters furnished in writing to the Company by or on behalf of any
Underwriter through you expressly for use therein. Notwithstanding the
foregoing, the aggregate liability of any Selling Stockholder pursuant to the
provisions of this paragraph shall be limited to an amount equal to the
aggregate purchase price received by such Selling
17
Stockholder pursuant to Section 2 hereof, from the sale of such Selling
Stockholder's Shares hereunder.
(b) In case any action shall be brought against any Underwriter or any
person controlling such Underwriter, based upon any preliminary prospectus, the
Registration Statement or the Prospectus or any amendment or supplement thereto
and with respect to which indemnity may be sought against the Company, the
Selling Stockholders, or both, such Underwriter shall promptly notify the
Company, the Selling Stockholders, or both, as the case may be, in writing and
the Company, the Selling Stockholders, or both, as the case may be, shall assume
the defense thereof, including the employment of counsel reasonably satisfactory
to such indemnified party and payment of all fees and expenses. Any Underwriter
or any such controlling person shall have the right to employ separate counsel
in any such action and participate in the defense thereof, but the fees and
expenses of such counsel shall be at the expense of such Underwriter or such
controlling person unless (i) the employment of such counsel has been
specifically authorized in writing by the Company, the Selling Stockholders, or
both, as the case may be, (ii) the Company, the Selling Stockholders, or both,
as the case may be, shall have failed to assume the defense and employ counsel
or (iii) the named parties to any such action (including any impleaded parties)
include both such Underwriter or such controlling person and the Company or any
Selling Stockholder, as the case may be, and such Underwriter or such
controlling person shall have been advised by such counsel that there may be one
or more legal defenses available to it which are different from or additional to
those available to the Company or the Selling Stockholders, as the case may be,
(in which case the Company, the Selling Stockholders, or both, as the case may
be, shall not have the right to assume the defense of such action on behalf of
such Underwriter or such controlling person, it being understood, however, that
the Company, the Selling Stockholders, or both, as the case may be, shall not,
in connection with any one such action or separate but substantially similar or
related actions in the same jurisdiction arising out of the same general
allegations or circumstances, be liable for the fees and expenses of more
18
than one separate firm of attorneys (in addition to any local counsel) for all
such Underwriters and controlling persons, which firm shall be designated in
writing by Donaldson, Lufkin & Jenrette Securities Corporation and that all such
fees and expenses shall be reimbursed as they are incurred). The Company or
any Selling Stockholder, as the case may be, shall not be liable for any
settlement of any such action effected without the written consent of the
Company or such Selling Stockholder but if settled with the written consent of
such Selling Stockholder, such Selling Stockholder agrees to indemnify and hold
harmless any Underwriter and any such controlling person from and against any
loss or liability by reason of such settlement. Notwithstanding the immediately
preceding sentence, if in any case where the fees and expenses of counsel are at
the expense of the indemnifying party and an indemnified party shall have
requested the indemnifying party to reimburse the indemnified party for such
fees and expenses of counsel as incurred, such indemnifying party agrees that it
shall be liable for any settlement of any action effected without its written
consent if (i) such settlement is entered into more than 30 business days after
the receipt by such indemnifying party of the aforesaid request and (ii) such
indemnifying party shall have failed to reimburse the indemnified party in
accordance with such request for reimbursement prior to the date of such
settlement. No indemnifying party shall, without the prior written consent of
the indemnified party, effect any settlement of any pending or threatened
proceeding in respect of which any indemnified party is or could have been a
party and indemnity could have been sought hereunder by such indemnified party,
unless such settlement includes an unconditional release of such indemnified
party from all liability on claims that are the subject matter of such
proceeding. The Company agrees to indemnify and hold harmless each Selling
Stockholder from and against any and all losses, claims, damages, liabilities
and judgments arising hereunder.
(c) Each Underwriter agrees, severally and not jointly, to indemnify
and hold harmless the Company, its directors, its officers who sign the
Registration Statement, any person controlling the Company within the meaning of
19
Section 15 of the Act or Section 20 of the Exchange Act, each Selling
Stockholder and each person, if any, controlling such Selling Stockholder within
the meaning of Section 15 of the Act or Section 20 of the Exchange Act to the
same extent as the foregoing indemnity from the Company and the Selling
Stockholders to each Underwriter but only with reference to information relating
to such Underwriter furnished in writing by or on behalf of such Underwriter
through you expressly for use in the Registration Statement, the Prospectus or
any preliminary prospectus. In case any action shall be brought against the
Company, any of its directors, any such officer or any person controlling the
Company or any Selling Stockholder or any person controlling such Selling
Stockholder based on the Registration Statement, the Prospectus or any
preliminary prospectus and in respect of which indemnity may be sought against
any Underwriter, the Underwriter shall have the rights and duties given to the
Company and the Selling Stockholders (except that if the Company or any Selling
Stockholder shall have assumed the defense thereof) such Underwriter shall not
be required to do so, but may employ separate counsel therein and participate in
the defense thereof but the fees and expenses of such counsel shall be at the
expense of such Underwriter), and the Company, its directors, any such officers
and any person controlling the Company and the Selling Stockholders and any
person controlling such Selling Stockholders shall have the rights and duties
given to the Underwriter, by Section 8(b) hereof.
(d) If the indemnification provided for in this Section 8 is
unavailable to an indemnified party in respect of any losses, claims, damages,
liabilities or judgments referred to therein, then each indemnifying party, in
lieu of indemnifying such indemnified party, shall contribute to the amount paid
or payable by such indemnified party as a result of such losses, claims,
damages, liabilities and judgments (i) in such proportion as is appropriate to
reflect the relative benefits received by the Company and the Selling
Stockholders on the one hand and the Underwriters on the other hand from the
offering of the Shares or (ii) if the allocation provided by clause (i) above is
not permitted by applicable law, in such proportion
20
as is appropriate to reflect not only the relative benefits referred to in
clause (i) above but also the relative fault of the Company and the Selling
Stockholders on the one hand and the Underwriters on the other hand in
connection with the statements or omissions which resulted in such losses,
claims, damages, liabilities or judgments, as well as any other relevant
equitable considerations. The relative benefits received by the Company and the
Selling Stockholders, on the one hand, and the Underwriters, on the other hand,
shall be deemed to be in the same proportion as the total net proceeds from the
offering (before deducting expenses) received by the Selling Stockholders, and
the total underwriting discounts and commissions received by the Underwriters,
bear to the total price to the public of the Shares, in each case as set forth
in the table on the cover page of the Prospectus. The relative fault of the
Company, the Selling Stockholders and the Underwriters shall be determined by
reference to, among other things, whether the untrue or alleged untrue statement
of a material fact or the omission to state a material fact relates to
information supplied by the Company, the Selling Stockholders or the
Underwriters and the parties' relative intent, knowledge, access to information
and opportunity to correct or prevent such statement or omission.
The Company, the Selling Stockholders and the Underwriters agree that it
would not be just and equitable if contribution pursuant to this Section 8(d)
were determined by pro rata allocation (even if the Underwriters were treated as
one entity for such purpose) or by any other method of allocation which does not
take account of the equitable considerations referred to in the immediately
preceding paragraph. The amount paid or payable by an indemnified party as a
result of the losses, claims, damages, liabilities or judgments referred to in
the immediately preceding paragraph shall be deemed to include, subject to the
limitations set forth above, any legal or other expenses reasonably incurred by
such indemnified party in connection with investigating or defending any such
action or claim. Notwithstanding the provisions of this Section 8, no
Underwriter shall be required to contribute any amount in excess of the amount
by which the total price
21
at which the Shares underwritten by it and distributed to the public were
offered to the public exceeds the amount of any damages which such Underwriter
has otherwise been required to pay by reason of such untrue or alleged untrue
statement or omission or alleged omission. No person guilty of fraudulent
misrepresentation (within the meaning of Section 11(f) of the Act) shall be
entitled to contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations to contribute pursuant to this
Section 8(d) are several in proportion to the respective number of Shares
purchased by each of the Underwriters hereunder and not joint.
(e) Each Selling Stockholder and the Company hereby designates CT
Corporation System, 1633 Broadway, 23rd Floor, New York, New York, 10019 (a
Delaware corporation), as its authorized agent, upon which process may be served
in any action, suit or proceeding which may be instituted in any state or
federal court in the State of New York by any Underwriter or person controlling
an Underwriter asserting a claim for indemnification or contribution under or
pursuant to this Section 8, and each Selling Stockholder and the Company will
accept the jurisdiction of such court in such action, and waives, to the fullest
extent permitted by applicable law, any defense based upon lack of personal
jurisdiction or venue. A copy of any such process shall be sent or given to
each Selling Stockholder and the Company, at the address for notices specified
in Section 13 hereof.
9. Conditions of Underwriters' Obligations. The several obligations
---------------------------------------
of the Underwriters to purchase the Firm Shares under this Agreement are subject
to the satisfaction of each of the following conditions:
(a) All the representations and warranties of the Company contained in
this Agreement shall be true and correct on the Closing Date with the same
force and effect as if made on and as of the Closing Date.
(b) The Registration Statement shall have become effective not later
than 5:00 P.M., New York City time, on the date of this Agreement or at such
later date and
22
time as you may approve in writing, and at the Closing Date no stop order
suspending the effectiveness of the Registration Statement shall have been
issued and no proceedings for that purpose shall have been commenced or shall
be pending before or contemplated by the Commission.
(c)(i) Since the date of the latest balance sheet included in the
Registration Statement and the Prospectus, there shall not have been any
material adverse change, or any development involving a prospective material
adverse change, in the condition, financial or otherwise, or in the earnings,
affairs or business prospects, whether or not arising in the ordinary course
of business, of the Company, (ii) since the date of the latest balance sheet
included in the Registration Statement and the Prospectus there shall not
have been any material adverse change, or any development involving a
prospective material adverse change, in the capital stock or in the long-term
debt of the Company from that set forth in the Registration Statement and
Prospectus, (iii) the Company and its subsidiaries shall have no liability or
obligation, direct or contingent, which is material to the Company and its
subsidiaries, taken as a whole, other than those reflected in the
Registration Statement and the Prospectus and (iv) on the Closing Date you
shall have received a certificate dated the Closing Date, signed by Howard E.
Wille and Charles J. Snyder, in their capacities as the Chairman of the Board
of Directors, Chief Executive Officer and Director and President, Chief
Technology Officer and Director of the Company, confirming the matters set
forth in paragraphs (a), (b), and (c) of this Section 9.
(d) All the representations and warranties of the Selling Stockholders
contained in this Agreement shall be true and correct on the Closing Date
with the same force and effect as if made on and as of the Closing Date and
you shall have received a certificate to such effect, dated the Closing Date,
from each Selling Stockholder.
23
(e) You shall have received on the Closing Date an opinion
(satisfactory to you and counsel for the Underwriters), dated the Closing
Date, of Cravath, Swaine & Moore counsel for the Company and the Selling
Stockholders, to the effect that:
(i) the Company and each of its subsidiaries has been duly
incorporated, is validly existing as a corporation in good standing
under the laws of its jurisdiction of incorporation and has the
corporate power and authority required to carry on its business as it is
currently being conducted and to own, lease and operate its properties;
(ii) the Company and each of its subsidiaries is duly qualified and
is in good standing as a foreign corporation authorized to do business
in each jurisdiction in the United States in which the nature of its
business or its ownership or leasing of property requires such
qualification, except where the failure to be so qualified would not
have a material adverse effect on the Company and its subsidiaries,
taken as a whole;
(iii) all of the outstanding shares of capital stock of, or other
ownership interests in, each of the Company's subsidiaries have been
duly and validly authorized and issued and are fully paid and
non-assessable, and are owned by the Company, free and clear of any
security interest, claim, lien, encumbrance or adverse interest of any
nature;
(iv) all the outstanding shares of Common Stock (including the
Shares to be sold by the Selling Stockholders) have been duly authorized
and validly issued and are fully paid, non-assessable and not subject to
any preemptive or similar rights;
(v) this Agreement has been duly authorized, executed and delivered
by the Company and each of
24
the Selling Stockholders and is a valid and binding agreement of the
Company and each Selling Stockholder;
(vi) the authorized capital stock of the Company, including the
Common Stock, conforms as to legal matters to the description thereof
contained in the Prospectus;
(vii) the Registration Statement has become effective under the Act,
and, to the knowledge of such counsel, no stop order suspending its
effectiveness has been issued and no proceedings for that purpose are
pending before or contemplated by the Commission;
(viii) the statements under the captions "Business-Government
Regulation", "Management", "Certain Transactions and Relationships",
"Description of Capital Stock" and "Shares Eligible For Future Sale" in
the Prospectus and Items 14 and 15 of Part II of the Registration
Statement, insofar as such statements constitute a summary of legal
matters, documents or proceedings referred to therein, fairly present
the information called for with respect to such legal matters, documents
and proceedings;
(ix) neither the Company nor any of its subsidiaries is in violation
of its respective charter or by-laws and, to the best of such counsel's
knowledge, neither the Company nor any of its subsidiaries is in default
in the performance of any obligation, agreement or condition contained
in any bond, debenture, note or any other evidence of indebtedness or in
any other agreement, indenture or instrument material to the conduct of
the business of the Company and its subsidiaries, taken as a whole, to
which the Company or any of its subsidiaries is a party or by which it
or any of its subsidiaries or their respective property is bound;
25
(x) the execution, delivery and performance of this Agreement by
the Company and each Selling Stockholder, compliance by the Company and
each Selling Stockholder with all the provisions hereof and the
consummation of the transactions contemplated hereby will not require
any consent, approval, authorization or other order of any court,
regulatory body, administrative agency or other governmental body
(except as such may be required under the Act or other securities or
Blue Sky laws) and will not conflict with or constitute a breach of any
of the terms or provisions of, or a default under, any agreement,
indenture or other instrument to which the Company or any of its
subsidiaries or any Selling Stockholder is a party or by which the
Company or any of its subsidiaries or any Selling Stockholder or their
respective properties are bound and which is listed as an exhibit to the
Registration Statement, or violate or conflict with any law, rule or
regulation of the United States or the State of New York or the General
Corporation Law of the State of Delaware or, to such counsel's
knowledge, court decrees applicable to the Company or any of its
subsidiaries or any Selling Stockholder or their respective properties;
(xi) to such counsel's knowledge, there is no legal or governmental
proceeding pending or threatened to which the Company or any of its
subsidiaries is a party or to which any of their respective property is
subject which is required to be described in the Registration Statement
or the Prospectus and is not so described, or of any contract or other
document which is required to be described in the Registration Statement
or the Prospectus or is required to be filed as an exhibit to the
Registration Statement which is not described or filed as required;
(xii) the Company is not an "investment company" or a company
"controlled" by an
26
"investment company" within the meaning of the Investment Company Act of
1940, as amended;
(xiii) to such counsel's knowledge, no holder of any security of the
Company (other than the Selling Stockholders) has any right to require
registration of shares of Common Stock or any other security of the
Company;
(xiv) although counsel has made certain inquiries and investigations
in connection with the preparation of the Registration Statement and the
Prospectus, the limitations inherent in the role of outside counsel are
such that counsel cannot and does not assume responsibility for the
accuracy or completeness of the statements made in the Registration
Statement and Prospectus, except insofar as such statements relate to us
and except to the extent set forth in paragraph (e)(viii) above.
Subject to the foregoing, however, such counsel will advise you that
their work in connection with this matter did not disclose any
information that gave us reason to believe that: (i) the Registration
Statement, at the time the Registration Statement became effective, or
the Prospectus, as of the date hereof (except the financial statements
and other information of a statistical, accounting or financial nature
included therein, as to which we can not express any view), was not
appropriately responsive in all material respects to the requirements of
the Securities Act and the applicable rules and regulations of the
Commission thereunder, or (ii) the Registration Statement, at the time
the Registration Statement became effective, contained an untrue
statement of a material fact or omitted to state a material fact
required to be stated therein or necessary to make the statements
therein not misleading, or (iii) that the Prospectus, at the date
hereof, includes an untrue statement of a material fact or omits to
state a material fact necessary in order to make the
27
statements therein, in the light of the circumstances under which they
were made, not misleading (in each case except for the financial
statement and other information of a statistical, accounting, or
financial nature included therein as to which we do not express any
view).
(xv) immediately prior to the consummation of the transactions
described in this agreement, the Selling Stockholders were the sole
record holders of the Shares. Upon delivery of the Shares to the
Underwriters, payment therefore by the Underwriters and registration of
the certificates evidencing the Shares in the name of the Underwriters
or a nominee thereof, the Underwriters will acquire ownership of the
Shares free from any adverse claims (as such term is defined in Section
8-302 of the Uniform Commercial Code in the State of New York), assuming
that each of the Underwriters is acting in good faith and has no notice
of any adverse claim.
(xvi) FDS is duly registered and in good standing as a broker-dealer
under Section 15 of the Exchange Act and, to such counsel's knowledge,
is in full compliance with the Exchange Act and the rules and
regulations of the Commission thereunder, including, but not limited to,
net capital requirements.
In giving such opinion with respect to the matters covered by clause
(xvi) such counsel may state that their opinion and belief are based upon their
participation in the preparation of the Registration Statement and Prospectus
and any amendments or supplements thereto and review and discussion of the
contents thereof, but are without independent check or verification except as
specified.
The opinion of Cravath, Swaine & Moore described in paragraph (e) above
shall be rendered to you at the request of the Company or one or more of the
Selling
28
Stockholders, as the case may be, and shall so state therein.
(f) You shall have received on the Closing Date an opinion, dated the
Closing Date, of Davis Polk & Wardwell, counsel for the Underwriters, as to
the matters referred to in clauses (v) (but only with respect to the
Company), (vii), (viii) (but only with respect to the statements under the
captions "Description of Capital Stock" and "Underwriting") and (xiv) of the
foregoing paragraph (e). In giving such opinion with respect to the matters
covered by clause (xiv) such counsel may state that their opinion and belief
are based upon their participation in the preparation of the Registration
Statement and Prospectus and any amendments or supplements thereto and review
and discussion of the contents thereof, but are without independent check or
verification except as specified.
(g) You shall have received a letter on and as of the Closing Date, in
form and substance satisfactory to you, from Price Waterhouse LLP,
independent public accountants, with respect to the financial statements and
certain financial information contained in the Registration Statement and the
Prospectus and substantially in the form and substance of the letter
delivered to you by Price Waterhouse on the date of this Agreement.
(h) The Company and the Selling Stockholders shall not have failed at
or prior to the Closing Date to perform or comply with any of the agreements
herein contained and required to be performed or complied with by the Company
at or prior to the Closing Date.
The several obligations of the Underwriters to purchase any Additional Shares
hereunder are subject to the delivery to you on the applicable Option Closing
Date of such documents as you may reasonably request with respect to the good
standing of the Company, the due authorization and issuance
29
of such Additional Shares and other matters related to the issuance and sale of
such Additional Shares.
10. Effective Date of Agreement and Termination. This Agreement shall
-------------------------------------------
become effective upon the later of (i) execution of this Agreement and (ii) when
notification of the effectiveness of the Registration Statement has been
released by the Commission.
This Agreement may be terminated at any time prior to the Closing Date
by you by written notice to the Selling Stockholders and the Company if any of
the following has occurred: (i) since the respective dates as of which
information is given in the Registration Statement and the Prospectus, any
adverse change or development involving a prospective adverse change in the
condition, financial or otherwise, of the Company or any of its subsidiaries or
the earnings, affairs, or business prospects of the Company or any of its
subsidiaries, whether or not arising in the ordinary course of business, which
would, in your judgment, make it impracticable to market the Shares on the terms
and in the manner contemplated in the Prospectus, (ii) any outbreak or
escalation of hostilities or other national or international calamity or crisis
or change in economic conditions or in the financial markets of the United
States or elsewhere that, in your judgment, is material and adverse and would,
in your judgment, make it impracticable to market the Shares on the terms and in
the manner contemplated in the Prospectus, (iii) the suspension or material
limitation of trading in securities on the New York Stock Exchange, the American
Stock Exchange or the NASDAQ National Market System or limitation on prices for
securities on any such exchange or National Market System, (iv) the enactment,
publication, decree or other promulgation of any federal or state statute,
regulation, rule or order of any court or other governmental authority which in
your opinion materially and adversely affects, or will materially and adversely
affect, the business or operations of the Company or any Subsidiary, (v) the
declaration of a banking moratorium by either federal or New York State
authorities or (vi) the taking of any action by any federal, state or local
government or agency in respect of its monetary or fiscal affairs which in
30
your opinion has a material adverse effect on the financial markets in the
United States.
If on the Closing Date or on an Option Closing Date, as the case may be,
any one or more of the Underwriters shall fail or refuse to purchase the Firm
Shares or Additional Shares, as the case may be, which it or they have agreed to
purchase hereunder on such date and the aggregate number of Firm Shares or
Additional Shares, as the case may be, which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase is
not more than one-tenth of the total number of Shares to be purchased on such
date by all Underwriters, each non-defaulting Underwriter shall be obligated
severally, in the proportion which the number of Firm Shares set forth opposite
its name in Schedule I bears to the total number of Firm Shares which all the
non-defaulting Underwriters, as the case may be, have agreed to purchase, or in
such other proportion as you may specify, to purchase the Firm Shares or
Additional Shares, as the case may be, which such defaulting Underwriter or
Underwriters, as the case may be, agreed but failed or refused to purchase on
such date; provided that in no event shall the number of Firm Shares or
--------
Additional Shares, as the case may be, which any Underwriter has agreed to
purchase pursuant to Section 2 hereof be increased pursuant to this Section 10
by an amount in excess of one-ninth of such number of Firm Shares or Additional
Shares, as the case may be, without the written consent of such Underwriter. If
on the Closing Date or on an Option Closing Date, as the case may be, any
Underwriter or Underwriters shall fail or refuse to purchase Firm Shares, or
Additional Shares, as the case may be, and the aggregate number of Firm Shares
or Additional Shares, as the case may be, with respect to which such default
occurs is more than one-tenth of the aggregate number of Shares to be purchased
on such date by all Underwriters and arrangements satisfactory to you, the
Company and the applicable Selling Stockholders for purchase of such Shares are
not made within 48 hours after such default, this Agreement will terminate
without liability on the part of any non-defaulting Underwriter, the Company and
the applicable Selling Stockholders. In any such case which
31
does not result in termination of this Agreement, either you, the Company or the
Selling Stockholders shall have the right to postpone the Closing Date or the
applicable Option Closing Date, as the case may be, but in no event for longer
than seven days, in order that the required changes, if any, in the Registration
Statement and the Prospectus or any other documents or arrangements may be
effected. Any action taken under this paragraph shall not relieve any
defaulting Underwriter from liability in respect of any default of any such
Underwriter under this Agreement.
11. Agreements of the Selling Stockholders. Each Selling Stockholder
--------------------------------------
severally agrees with you and the Company:
(a) To pay or to cause to be paid all transfer taxes with respect to the
Shares to be sold by such Selling Stockholder; and
(b) To take all reasonable actions in cooperation with the Company and
the Underwriters to cause the Registration Statement to become effective at
the earliest possible time, to do and perform all things to be done and
performed under this Agreement prior to the Closing Date and to satisfy all
conditions precedent to the delivery of the Shares pursuant to this
Agreement.
12. Miscellaneous. Notices given pursuant to any provision of this
-------------
Agreement shall be addressed as follows: (a) if to the Company or any Selling
Stockholder, to such person at FactSet Research Systems, Inc., One Greenwich
Plaza, Greenwich, Connecticut 06830, Attn: Howard E. Wille and (b) Underwriter
or to you, to you c/o Donaldson, Lufkin & Jenrette Securities Corporation, 277
Park Avenue, New York, New York 10172, Attention: Syndicate Department, or in
any case to such other address as the person to be notified may have requested
in writing.
The respective indemnities, contribution agreements, representations,
warranties and other statements of the Selling Stockholders, the Company, its
officers and directors and of the several Underwriters set forth in or
32
made pursuant to this Agreement shall remain operative and in full force and
effect, and will survive delivery of and payment for the Shares, regardless of
(i) any investigation, or statement as to the results thereof, made by or on
behalf of any Underwriter or by or on behalf of the Company, the Selling
Stockholders or the officers or directors of the Company, (ii) acceptance of the
Shares and payment for them hereunder and (iii) termination of this Agreement.
If this Agreement shall be terminated by the Underwriters because of any
failure or refusal on the part of the Selling Stockholders to comply with the
terms or to fulfill any of the conditions of this Agreement, the Selling
Stockholders agree to reimburse the several Underwriters for all out-of-pocket
expenses (including the fees and disbursements of counsel) reasonably incurred
by them.
If this Agreement shall be terminated by the Underwriters because of any
failure or refusal on the part of the Company to comply with the terms or to
fulfill any of the conditions of this Agreement, the Company agrees to reimburse
the several Underwriters for all out-of-pocket expenses (including the fees and
disbursements of counsel) reasonably incurred by them.
Except as otherwise provided, this Agreement has been and is made solely
for the benefit of and shall be binding upon the Selling Stockholders or the
Company, the Underwriters, any controlling persons referred to herein and their
respective successors and assigns, all as and to the extent provided in this
Agreement, and no other person shall acquire or have any right under or by
virtue of this Agreement. The term "successors and assigns" shall not include a
purchaser of any of the Shares from any of the several Underwriters merely
because of such purchase.
This Agreement shall be governed and construed in accordance with the
laws of the State of New York.
This Agreement may be signed in various counterparts which together
shall constitute one and the same instrument.
33
Please confirm that the foregoing correctly sets forth the agreement
between the Company, the Selling Stockholders and the several Underwriters.
Very truly yours,
FACTSET RESEARCH SYSTEMS,INC.
By____________________________
Title:
SELLING STOCKHOLDERS:
_________________________
Howard E. Wille
_________________________
Charles J. Snyder
34
DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
ALEX. BROWN & SONS INCORPORATED
Acting severally on behalf of
themselves and the several
Underwriters named in
Schedule I hereto
By DONALDSON, LUFKIN & JENRETTE
SECURITIES CORPORATION
By__________________________
35
SCHEDULE I
----------
Number of Firm Shares
Underwriters to be Purchased
------------ ---------------------
Donaldson, Lufkin & Jenrette
Securities Corporation
Alex. Brown & Sons Incorporated
______________________
Total
36
SCHEDULE II
-----------
Selling Stockholders
--------------------
Number of Firm
Name Shares Being Sold
---- -----------------
Howard E. Wille
Charles J. Snyder
________________
Total
37
ANNEX I
-------
Required Stockholder Lock-ups
-----------------------------
Employee Stock Ownership Plan
Timothy J. Anne
Jon D. Carlson
Nathanial B. Day
Michael F. DiChristina
William F. Faulkner
Philip A. Hadley
Edward A. Martin
Kristen L. McCutcheon
Adelaide P. McManus
Townsend Thomas
Susan L. Warzek
Merle E. Yoder
38
State of Delaware
PAGE 1
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"FACTSET RESEARCH CORPORATION", FILED IN THIS OFFICE ON THE THIRD DAY OF
DECEMBER, A.D. 1987, AT 9 O'CLOCK A.M.
[STATE OF DELAWARE SEAL]
/s/ Edward J. Freel,
--------------------------------
Edward J. Freel, Secretary of
State
RESTATED CERTIFICATE OF INCORPORATION
OF
FACTSET RESEARCH CORPORATION
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
WE, THE UNDERSIGNED, CHARLES J. SNYDER and HOWARD E. WILLE, being the
Executive Vice President and Secretary, respectively, of FACTSET RESEARCH
CORPORATION, do hereby CERTIFY as follows:
1. The present name of the corporation is FACTSET RESEARCH
CORPORATION (hereinafter called the "Corporation"), which is the name under
which the Corporation was originally incorporated; and the date of filing the
original Certificate of Incorporation of the Corporation with the Secretary of
State of the State of Delaware is January 25, 1984.
2. The Certificate of incorporation of the Corporation is hereby
amended to, among other things, (a) provide for the classification of directors,
(b) increase the stockholder vote requirement for approval of certain mergers,
sales of assets and other transactions, (c) limit the ability of stockholders to
take action without a meeting, (d) implement Delaware law to limit directors'
liability, and (e) provide for the indemnification of directors and officers.
3. The provisions of the Certificate of Incorporation as hereby and
heretofore amended are hereby restated and integrated into a single instrument
as herein-after set forth which is entitled Restated Certificate of
Incorporation of FactSet Research Corporation.
4. The amendment and restatement of the Certificate of
Incorporation herein certified have been duly proposed by the Board of Directors
and adopted by the stockholders in accordance with the provisions of Sections
228, 242, and 245 of the General Corporation Law of the State of Delaware, in
the form set forth as follows:
RESTATED CERTIFICATE OF INCORPORATION
OF
FACTSET RESEARCH CORPORATION
(a Delaware corporation)
FIRST: The name of the Corporation is FACTSET RESEARCH
CORPORATION.
SECOND: The address of its registered office in the State of
Delaware is No. 229 South State Street, in the City of Dover, Kent Count. The
name of its registered agent at such address is United States Corporation
Company.
THIRD: The nature of the business of the Corporation and the
purposes to be conducted or promoted are:
1. To perform research in information systems and information
technology.
-2-
2. To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of
Delaware.
3. In general, to possess and exercise all the powers and
privileges granted by the General Corporation Law of Delaware or by
any other law of Delaware or by this Certificate of Incorporation
together with any powers incidental thereto, so far as such powers and
privileges are necessary or convenient to the conduct, promotion, or
attainment of the business or purposes of the Corporation.
FOURTH: The Corporation shall have authority to issue one million
(1,000,000) shares of common stock of the par value of $1.00 per share.
FIFTH: Whenever a compromise or arrangement is proposed between
the Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or an:, class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or of any creditor or stockholder thereof or on the
application of any receiver or receivers appointed for the Corporation under the
provisions of section 291 of Title 8 of the Delaware Code or on the application
of trustees in dissolution or of any receiver or receivers appointed for the
Corporation under the provisions of section 279 of Title B of the Delaware Code,
order a meeting of the creditors or class of creditors, and/or of the
stockholders of class of stockholders of the Corporation, as the case may be, to
be summoned in such manner as
-3-
the said court directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the Corporation as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which said application has been made, be binding on all the creditors or class
of creditors, and/or on all the stockholders or class of stockholders of the
Corporation, as the case may be, and also on the Corporation.
SIXTH: In furtherance and not in limitation of the powers
conferred by statute and except as provided here-in, the Board of Directors is
expressly authorized to make, alter or repeal the by-laws of the Corporation.
SEVENTH: The Corporation shall have perpetual existence.
EIGHTH: No holder of stock of the Corporation shall, as such
holder, have any right to purchase or subscribe for any shares of stock of the
corporation of any class, now or hereafter authorized, or any obligations or
instruments which the corporation may issue or sell that shall be convertible
into or exchangeable for or entitle the
-4-
holders thereof to subscribe for or purchase any shares of stock of the
Corporation of any class, now or hereafter authorized, other than such rights,
if any, as the Board of Directors, in its sole discretion, may determine.
NINTH: Election of directors need not by written ballot, unless
the By-laws so require.
TENTH: The Corporation reserves the right to amend, alter of repeal
any provision contained in this Certificate of Incorporation in the manner now
or hereafter prescribed by the laws of Delaware, and all rights and powers
conferred on directors and stockholders herein are granted subject to this
reservation.
ELEVENTH: A. The number of directors of the corporation shall be
such as from time to time shall be fixed by, or in the manner provided in, the
By-Laws. From and after the annual meeting of stockholders in 1987, the Board
of Directors shall be divided into three classes as nearly equal in number as
possible, with the term of office of one class expiring each year. The terms of
office of the directors elected at the annual meeting of stockholders in 1987
and initially classified shall be as follows: directors of the first class shall
hold office for a term expiring at the next succeeding annual meeting, directors
of the second class hold office for term expiring at the second
-5-
succeeding annual meeting and directors of the third class shall hold office for
a term expiring at the third succeeding annual meeting. At each annual meeting
of stockholders after the annual meeting in 1987, directors elected to succeed
the class of directors whose terms expire at such annual meeting shall be
elected to hold office for a term expiring at the third succeeding annual
meeting after their election. During the intervals between annual meetings of
stockholders, any vacancies occurring in the board of directors and any newly
created directorships resulting from an increase in the number of directors
shall be filled by a majority vote of the directors then in office, whether or
not a quorum, or by a sole remaining director, except as otherwise provided by
law. Each director chosen to fill a vacancy shall hold office for the unexpired
term in respect of which such vacancy occurred. Each director chosen to fill a
newly created directorship shall hold office for a term expiring at the annual
meeting at which the terms of the directors of the class to which such director
shall have been elected expire. when the number of directors is changed, any
newly created directorships or any decrease in directorships shall be so
apportioned among the classes as to make all classes as nearly equal in number
as possible. Each director shall hold office for the specified term and
-6-
until a successor shall be duly elected and qualified, except in the event of
death, resignation or removal. A director may be removed from office at any
time, but only for cause, by the affirmative vote of the holders of a majority
of the outstanding shares of stock entitled to vote for the election of
directors at a meeting of the stockholders called for that purpose.
B. Notwithstanding anything to the contrary contained in Article
SIXTH of this Certificate of Incorporation, the provisions of the By-Laws of the
Corporation with respect to the number, qualifications, election, classifica-
tion, terms of office, removal of directors and the filling of vacancies and
newly created directorships, and the amendment thereof, that is, sections 2, 10
and 11 of Article III and Article XII of the By-Laws may be amended or repealed
or new By-Laws affecting such provisions may be adopted only by resolution
adopted unanimously by the entire Board of Directors or by the affirmative vote
of the holders of at least 80% of the outstanding shares of stock of the
Corporation entitled to vote in elections of directors (except that if such
proposed amendment or repeal or adoption of new By-Laws shall be submitted to
the stockholders with the unanimous recommendation of the entire Board of
Directors, such provisions may be amended or repealed or such new
-7-
By-Laws may be adopted by affirmative vote of the holders of a majority of such
stock).
C. No amendment of this Certificate of Incorporation, directly or
indirectly by merger, consolidation or otherwise, shall amend, alter, change or
repeal any of the provisions oB.P. this Article ELEVENTH, unless the amendment
effecting such amendment, alteration, change or repeal shall receive the
affirmative vote of at least 80% of the outstanding shares of stock of the
Corporation entitled to vote in elections of directors; provided that this
paragraph C shall not apply to any such amendment if such amendment is submitted
to the stockholders for adoption with the unanimous recommendation of the entire
Board of Directors.
TWELFTH: A. Notwithstanding any other provision of this Certificate of
Incorporation and except as set forth in paragraph B of this Article TWELFTH,
the affirmative vote of the holders of at least 80% of the outstanding shares of
voting stock (as defined in paragraph E of this Article TWELFTH) shall be
required
(1) for the adoption of any agreement for the merger or consolidation
of the Corporation or any Subsidiary (as defined in paragraph E of this
Article TWELFTH) with or into any other person (as defined in paragraph E
of this Article TWELFTH), or
(2) to authorize any sale, lease, transfer or exchange of, or any
mortgage or pledge of or the granting of any other security interest in, or
any other disposition of, all or any substantial part of the assets of the
Corporation or any Subsidiary to or with any other
-8-
person (in a single transaction or in a series of related transactions), or
(3) to authorize the issuance or transfer by the Corporation or any
Subsidiary of any securities of the Corporation or any Subsidiary (except
securities issued or transferred pursuant to a stock option, purchase,
bonus or other plan or arrangement, for natural persons who are directors,
employees, consultants and/or agents of the Corporation or a Subsidiary, or
securities issued or transferred upon exercise of any conversion rights,
warrants or options which shall have been outstanding at the time of
adoption of this Article TWELFTH or which shall have been issued or
transferred in a transaction not in contravention of the provisions of this
Article TWELFTH) to any other person in exchange for cash, securities or
other assets or a combination thereof,
if, in the case of any of the foregoing transactions, (as of the date of any
action taken by the Board of Directors with respect to any such proposed
transaction, or as of the record date for the determination of stockholders
entitled to notice of and to vote on any such proposed transaction or
immediately prior to the consummation of any such proposed transaction) such
other person is, or at any time within the preceding 12 months has been, the
beneficial owner, directly or indirectly, of 5% or more of the outstanding
shares of voting stock of the Corporation.
B. The provisions of paragraph A of this Article TWELFTH shall not
apply to (i) any transaction described in such paragraph A if the Board of
Directors of the Corporation shall by resolution have approved a memorandum of
agreement with such person setting forth the principal terms
-9-
of such transaction and such transaction is substantially consistent therewith,
provided that a majority of those directors voting in favor of such resolution
are Continuing Directors (as defined in paragraph E of this Article TWELFTH),
(2) any transaction described in such paragraph A if the other party to such
transaction is a Major Subsidiary (as defined in paragraph E of this Article
TWELFTH) or (3) any transaction described in such paragraph A (other than a
merger or consolidation to which the Corporation would be a party) if the fair
value of the securities, assets or other consideration proposed to be issued or
transferred,in any way disposed of, or received, by the Corporation or any
Subsidiary in connection with any such transaction or any series of such
transactions which are related is less than $2,000,000.
C. Notwithstanding any other provisions of this Certificate of
Incorporation and except as set forth in paragraph D of this Article TWELFTH,
the affirmative vote of the holders of at least 80% of the outstanding shares of
voting stock of the corporation shall be required
(1) to authorize a liquidation or dissolution of the Corporation, or
(2) to authorize any offer by the Corporation to purchase shares of
its outstanding voting stock (except pursuant to redemption provisions of
any preferred stock of the Corporation), or
-10-
(3) to authorize any reclassification of securities of the Corporation,
any recapitalization or any other transaction in each case designed to
decrease the number of holders of the Corporation's voting stock,
if (as of the date of any action taken by the Board of Directors with respect to
any such proposed transaction, or as of the record date for the determination of
stockholders entitled to notice of and to vote on any such proposed transaction
or immediately prior to the consummation of. any such proposed transaction) any
other person is the beneficial owner, directly or indirectly, of 5% or more of
the outstanding voting stock of the Corporation.
D. The provisions of paragraph C of this Article TWELFTH shall not
apply to any transaction described in such paragraph C if the Board of Directors
of the Corporation shall by resolution have approved a memorandum setting forth
the principal terms of such transaction and such transaction is substantially
consistent therewith, provided that a majority of those directors voting in
favor of such resolution are Continuing Directors.
E. For the purposes of this Article TWELFTH,
(1) The "voting stock' of any corporation shall mean stock of all
classes Of such corporation entitled to vote in elections of directors,
considered as one class.
(2) Any person shall be deemed to be the "beneficial owner" of any
shares of stock of the Corporation (i) which it owns, directly or
indirectly, whether of record or not, or which it has the right to acquire
pursuant to any agreement, or upon exercise of conver-
-11-
sion rights, warrants or options, or otherwise, or (ii) which are
beneficially owned, directly or indirectly (including shares deemed owned
through application of clause (i) above), by any other person which is its
affiliate or associate (as defined in this paragraph E) or with which it or
any of its affiliates or associates has any agreement, arrangement or
understanding for the purpose of acquiring, holding, voting or disposing of
stock of the Corporation. The outstanding shares of any class of stock of
the Corporation shall be deemed to include shares deemed owned, through
application of clauses (i) and (ii) above, but shall not include any other
shares which may be issuable pursuant to any agreement, or upon exercise of
conversion rights, warrants or options, or otherwise.
(3) An "affiliate" of a specified person is any person that, directly
or indirectly, controls or is controlled by, or is under common control
with, the person specified. For the purposes of this definition, "control"
(including, with correlative meanings, the terms "controlled by" and "under
common control with"), as used with respect to any person, shall mean the
possession, directly or indirectly, of the power to direct or cause the
direction of the management and policies of the specified person, whether
through the ownership of voting securities or by contract or otherwise.
(4) The term "associate" used to indicate a relationship with any
specified person means (i) any person in which such specified person has a
significant financial interest or as to which such specified person's
relationship is such that such specified person substantially influences
its management and policies or any person having a significant financial
interest in such specified person or which substantially influences the
management and policies of such specified person, and without limitation to
the foregoing, (ii) any person of which such specified person is an
officer, director or partner or is, directly or indirectly, the beneficial
owner of 5% or more of any class of equity securities, (iii) any trust or
other estate in which such specified person has a substantial beneficial
interest or as to which such person serves as trustee or in a similar
fiduciary capacity, and (iv)any relative or spouse of such specified
person, or any relative of such spouse, who has the same home as such
specified person or who is a director or officer of such specified person
or any corporation which controls or is controlled by such specified
person.
-12-
(5) A "person" is any individual, corporation or other entity.
(6) The term "securities" shall include without limitation any stocks,
bonds, debentures, notes and evidences of indebtedness, and any warrants,
options and other rights to subscribe to or purchase any of the foregoing.
(7) A "Subsidiary" is any corporation of which at least a majority of
the outstanding shares of equity stock is owned of record or beneficially
by the Corporation and/or its Subsidiaries. A "Major Subsidiary" is any
corporation of which at least 80% of the outstanding shares of equity stock
is owned of record or beneficially by the Corporation and/or its Major
Subsidiaries.
(8) The term "Continuing Director" shall mean a person who was a duly
elected and acting director of the Corporation at the time of the adoption
of this Article TWELFTH or became a duly elected and acting director of the
Corporation prior to the time that, for the purposes of paragraphs B or D,
as the case may be, of this Article TWELFTH, such other person became a
beneficial owner, directly or indirectly, of 5% or more of the voting stock
of the Corporation, or a person designated (whether before or after
election as a director) to be a Continuing Director by a majority of the
Continuing Directors.
F. A majority of the Continuing Directors shall have the power and
duty to determine for the purposes of this Article TWELFTH, on the basis of
information known to them, whether a proposed transaction is subject to the pro-
visions of paragraph A or C of this Article TWELFTH, and in particular and
without limitation, whether (1) any person beneficially owns 5% or more of the
outstanding shares of voting stock of the Corporation, (2) any person is an "af-
filiate" or "associate" of any other person, (3) any person
-13-
has an agreement, arrangement or understanding with any other person, (4) any
proposed transaction involves a substantial part of the assets of the
Corporation or any Subsidiary, (5) the fair value of securities, assets or other
consideration referred to in paragraph B of this Article TWELFTH is less than
$2,000,000, (6) any series of transactions are related, and (7) the memorandum
referred to in paragraph B or paragraph D of this Article TWELFTH is sub-
stantially consistent with the transaction to which it relates. Any such
determination shall be conclusive and binding for all purposes of this Article
TWELFTH.
G. The affirmative vote of stockholders required by this Article
TWELFTH shall be in lieu of any lesser vote or consent of the holders of the
stock of the Corporation otherwise required by law or in any agreement to which
the Corporation is a party, and shall be in addition to any voting requirements
imposed by law or any other provisions of the Certificate of Incorporation of
the Corporation, including resolutions providing for the issuance of a class or
series of stock adopted by the Board of Directors pursuant to authority vested
in it by the provisions of the Certificate of incorporation in favor of certain
classes of stock.
-14-
H. No amendment to this Certificate of Incorporation, directly or
indirectly by merger, consolidation or otherwise, shall amend, alter, change or
repeal any of the provisions of this Article TWELFTH, unless the amendment
effecting such amendment, alteration, change or repeal shall receive the
affirmative vote of the holders of at least 80% of the outstanding shares of
stock of the Corporation entitled to vote in elections of directors; provided
that this paragraph H shall not apply to any such amendment if such amendment is
submitted to the stockholders for adoption with the unanimous recommendation of
the entire Board of Directors.
THIRTEENTH: A. NO action required to be taken or which may be taken at
any annual or special meeting of stockholders of the Corporation may be taken
without a meeting, except on written consent, setting forth the action so taken,
signed by the holders of record of all outstanding shares entitled to vote
thereon.
B. No amendment to this Certificate of incorporation, directly or
indirectly by merger, consolidation or otherwise, shall amend, alter, change or
repeal any of the provisions of this Article THIRTEENTH, Unless the amendment
effecting such amendment, alteration, change or repeal shall receive the
affirmative vote of the holders of at least 80%
-15-
of the outstanding shares of stock of the Corporation entitled to vote in
elections of directors; provided that this paragraph B shall not apply to any
such amendment if such amendment is submitted to the stockholders for adoption
with the unanimous recommendation of the entire Board of Directors.
FOURTEENTH: A. To the fullest extent that the General Corporation Law
of the State of Delaware as it exists on the date hereof or as it may hereafter
be amended permits the limitation or elimination of the liability of directors,
no director of the Corporation shall be liable to the Corporation or its
stockholders for monetary damages for breach of fiduciary duty as a director. No
amendment to this Certificate of Incorporation, directly or indirectly by
merger, consolidation or otherwise, having the effect of amending, altering,
changing or repealing any of the provisions of this paragraph A shall apply re-
or have any effect on the liability or alleged liability of any director of the
Corporation for or with respect to any acts or omissions of such director
occurring prior to such amendment or repeal, unless such amendment shall have
the effect of further limiting or eliminating such liability.
B. 1. The Corporation shall, to the fullest extent permitted by
applicable law as then in effect, indemnify any
-16-
person (the "indemnitee") who was or is involved in any manner (including,
without limitation, as a party or a witness) or was or is threatened to be made
so involved in any threatened, pending or completed investigation, claim, ac-
tion, suit or proceeding, whether civil, criminal, administrative or
investigative (including, without limitation, any action, suit or proceeding by
or in the right of the Corporation to procure a judgment in its favor) (a
"proceeding") by reason of the fact that he is or was a director or officer of
the Corporation, or is or was serving at the request of the Corporation as a
director or officer of another corporation, or of a partnership, joint venture,
trust or other enterprise (including, without limitation, service with respect
to any employee benefit plan), whether the basis of any such proceeding is
alleged action in an official capacity as a director or officer or in any other
capacity while serving as a director or officer, against all expenses, liability
add loss (including, without limitation, attorneys' fees, judgments, fines,
ERISA excise taxes or penalties and amounts paid or to be paid in settlement)
actually and reasonably incurred by him in connection with such proceeding. Such
indemnification shall continue as to a person who has ceased to be a director or
officer and shall inure to the benefit of his heirs and legal repre-
-17-
sentatives. The right to indemnification conferred in this Article FOURTEENTH
shall include the right to receive payment in advance of any expenses incurred
by the indemnitee in connection with such proceeding, consistent with applicable
law as then in effect, and shall be a contract right. The Corporation may, by
action of its Board of Directors, provide indemnification for employees, agents,
attorneys and representatives of the Corporation with up to the same scope and
extent as hereinabove provided for officers and directors. No amendment to this
Certificate of Incorporation having the effect of amending, altering, changing
or repealing any of the provisions of the sections of this paragraph B shall
remove, abridge or adversely affect any right to indemnification or other
benefits under the sections of this paragraph B with respect to any acts or
omissions occurring prior to such amendment or repeal.
2. The right of indemnification, including the right. to receive
payment in advance of expenses, conferred in this Article FOURTEENTH shall not
be exclusive of any other rights to which any person seeking indemnification may
otherwise be entitled under any provision of the Certificate of Incorporation,
By-law or agreement or otherwise.
3. In any action or proceeding relating to the right to
indemnification conferred in this Article FOUR-
-18-
TEENTH, the Corporation shall have the burden of proof that the indemnitee has
not met any standard of conduct or belief which may be required by applicable
law to be applied in connection with a determination of whether the indemnitee
is entitled to indemnity, or otherwise is not entitled to indemnity, and neither
a failure to make such a determination nor an adverse determination of
entitlement to indemnity shall be a defense of the Corporation in such an action
or proceeding or create any presumption that the indemnitee has not met any such
standard of conduct or belief or is otherwise not entitled to indemnity. If
successful in whole or in part in such an action or proceeding, the indemnitee
shall be entitled to be indemnified by the Corporation for the expenses actually
and reasonably incurred by him in connection with such action or proceeding.
C. No amendment to this Certificate of Incorporation, directly or
indirectly by merger, consolidation or otherwise, shall amend, alter, change or
repeal any of the provisions of this Article FOURTEENTH, unless the amendment
effecting such amendment, alteration, change or repeal shall receive the
affirmative vote of the holders of at least 80 percent of the outstanding shares
of stock of the Corporation entitled to vote in elections of directors, provided
that this paragraph C shall not apply to any such amendment
-19-
if such amendment is submitted to the stockholders for adoption with the
unanimous recommendation of the entire Board of Directors.
IN WITNESS WHEREOF, FACTSET RESEARCH CORPORATION has caused this
Certificate to be signed by Charles J. Snyder, its Executive Vice President, and
attested by Howard E. Wills, its Secretary, this 15th day of July 1987.
By: /s/ Charles Snyder
-------------------------
Executive Vice President
Attest
By: /s/ Howard E. Wille
---------------------------
Secretary
-20-
State of Delaware
PAGE 1
Office of the Secretary of State
-----------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FACTSET RESEARCH CORPORATION", FILED IN THIS OFFICE ON THE TWENTY-SIXTH DAY
OF APRIL, A.D. 1995, AT 4:15 O'CLOCK P.M.
[STATE OF DELAWARE SEAL]
/s/ Edward J. Freel
-----------------------------
Edward J. Freel, Secretary of
State
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FACTSET RESEARCH CORPORATION
I, the undersigned, Chairman of the Board of FACTSET RESEARCH
CORPORATION, a corporation organized and existing under the General Corporation
Law of the State of Delaware (the "Corporation"), in order to amend the
Certificate of Incorporation of the Corporation, do hereby certify as follows:
1. The name of the Corporation is FACTSET RESEARCH CORPORATION.
2. The Certificate of Incorporation of the Corporation is hereby
amended by deleting Article "FOURTH" in its entirety and substituting in lieu
thereof the following:
FOURTH: The Corporation shall have authority to issue five million
(5,000,000) shares of common stock of the par value of $1.00 per share.
3. The Certificate of Incorporation of the Corporation is hereby
amended by deleting Paragraph A of Article "THIRTEENTH" in its entirety and
substituting in lieu thereof the following:
THIRTEENTH: A. No action required to be taken or which may be taken at
any annual or special meeting of
stockholders of the Corporation may be taken without a meeting, except on
written consent, setting forth the action so taken, signed by the holders of
record of at least 80% of the outstanding shares entitled to vote thereon.
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate has been signed and affirmed as
true under penalties of perjury by the undersigned on this 26th day of April,
1995.
/s/ Howard E. Wille
----------------------------
Howard E. Wille Chairman
Attest:
/s/ Howard E. Wille
- ---------------------------
Howard E. Wille Secretary
-2-
State of Delaware
PAGE 1
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FACTSET RESEARCH CORPORATION", CHANGING ITS NAME FROM "FACTSET RESEARCH
CORPORATION" TO "FACTSET RESEARCH SYSTEMS INC.", FILED IN THIS OFFICE ON THE
TWELFTH DAY OF JUNE, A.D. 1995, AT 12:15 O'CLOCK P.M.
[STATE OF DELAWARE SEAL]
/s/ Edward J. Freel
-------------------------
Edward J. Freel, Secretary of
State
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FACTSET RESEARCH CORPORATION
I, the Undersigned, Chairman of the Board of FACTSET RESEARCH CORPORATION, a
corporation organized and existing under the General Corporation Law of the
State of Delaware (the "Corporation"), in order to amend the certificate of
Incorporation of the Corporation, do hereby certify as follows:
1. The name of the corporation is FACTSET RESEARCH
CORPORATION.
2. The Certificate of Incorporation of the Corporation is hereby
amended by deleting Article "FIRST" in its entirety and substituting in lieu
thereof the following:
FIRST: The name of the Corporation is FACTSET RESEARCH SYSTEMS INC.
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate has been signed and affirmed as true
under penalties of perjury by the undersigned on this 6th day of June , 1995
/s/ Howard E. Wille
---------------------------------
Howard E. Wille Chairman
Attest
/s/ Howard E. Wille
- ----------------------------
Howard E. Wille Secretary
State of Delaware
Office of the Secretary of State
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF AMENDMENT
OF "FACTSET RESEARCH SYSTEMS INC.", FILED IN THIS OFFICE ON THE TENTH DAY OF
JANUARY, A.D. 1996, AT 1:30 O'CLOCK P.M.
[STATE OF DELAWARE SEAL]
/s/ Edward J. Freel
-------------------------
Edward J. Freel, Secretary of State
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FACTSET RESEARCH SYSTEMS INC.
I, the undersigned, Chairman of the Board of FACTSET RESEARCH SYSTEMS
INC, a corporation organized and existing under the General Corporation Law of
the State of Delaware (the "Corporation"), in order to amend the Certificate of
Incorporation of the Corporation, do hereby certify as follows:
1. The name of the Corporation is FACTSET RESEARCH SYSTEMS INC.
2. The Certificate of Incorporation of the corporation is hereby
amended by deleting Article "FOURTH" in its entirety and substituting in lieu
thereof the following:
FOURTH: The Corporation shall have the authority to issue five million
(5,000,000) shares of common stock of the par value of $.04 per Share.
3. The amendment of the Certificate of Incorporation herein certified
has been duly adopted in accordance with the provisions of Sections 228 and 242
of the General Corporation Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate has been signed and affirmed as
true under penalties of perjury by the undersigned on this 8th, day of December,
1995.
/s/ Howard E. Wille
------------------------------
Howard E. Wille Chairman
Attest;
/s/ Howard E. Wille
- ---------------------------
Howard E. Wille Secretary
State of Delaware
PAGE 1
Office of the Secretary of State
---------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY
CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE RESTATED CERTIFICATE OF
"FACTSET RESEARCH CORPORATION", FILED IN THIS OFFICE ON THE THIRD DAY OF
DECEMBER, A.D. 1987, AT 9 O'CLOCK A.M.
[STATE OF DELAWARE SEAL]
/s/ Edward J. Freel
-------------------------
Edward J. Freel, Secretary of State
RESTATED CERTIFICATE OF INCORPORATION
OF
FACTSET RESEARCH CORPORATION
(Pursuant to Sections 242 and 245 of the
General Corporation Law of the State of Delaware)
WE, THE UNDERSIGNED, CHARLES J. SNYDER and HOWARD E. WILLE, being the
Executive Vice President and Secretary, respectively, of FACTSET RESEARCH
CORPORATION, do hereby CERTIFY as follows:
1. The present name of the corporation is FACTSET RESEARCH
CORPORATION (hereinafter called the "Corporation"), which is the name under
which the Corporation was originally incorporated; and the date of filing the
original Certificate of Incorporation of the Corporation with the Secretary of
State of the State of Delaware is January 25, !984.
2. The Certificate of Incorporation of the Corporation is hereby
amended to, among other things, (a) provide for the classification of directors,
(b) increase the stockholder vote requirement for approval of certain mergers,
sales of assets and other transactions, (c) limit the ability, of stockholders
to take action without a meeting, (d) implement Delaware law to limit directors'
liability, and (e) provide for the indemnification of directors and officers.
3. The provisions of the Certificate of Incorporation us hereby and
heretofore amended are hereby restated and integrated into a single instrument
as hereinafter set forth which is entitled Restated Certificate of
Incorporation of FactSet Research Corporation.
4. The amendment and restatement of the Certificate of
Incorporation herein certified have been duly proposed by the Board of Directors
and adopted by the stockholders in accordance with the provisions of Sections
228, 242, and 245 of the General Corporation Law of the State of Delaware, in
the form set forth as follows:
RESTATED CERTIFICATE OF INCORPORATION
OF
FACTSET RESEARCH CORPORATION
(a Delaware corporation)
FIRST: The name of the Corporation is FACTSET RESEARCH
CORPORATION.
SECOND: The address of its registered office in the state of
Delaware is No,229 South State Street, in the
City of Dover, Kent Count. The name of its registered agent at such address is
United States Corporation, Company.
THIRD: The nature of the business of the Corporation and the
purposes to be conducted or promoted are:
1. To perform research in information systems and information
technology.
-2-
2. To engage in any lawful act or activity for which
corporations may be organized under the General Corporation Law of
Delaware.
3. In general, to possess and exercise all the powers and
privileges granted by the General Corporation Law of Delaware or by
any other law of Delaware or by this Certificate of Incorporation
together with any powers incidental thereto, so far as such powers and
privileges are necessary or convenient to the conduct, promotion, or
attainment of the business or purposes of the Corporation.
FOURTH: The Corporation shall have authority to issue one million
(1,000,000) shares of common stock of the par value of $1.00 per share.
FIFTH: Whenever a compromise or arrangement is proposed between
the Corporation and its creditors or any class of them and/or between the
Corporation and its stockholders or any, class of them, any court of equitable
jurisdiction within the State of Delaware may, on the application in a summary
way of the Corporation or cf any creditor or stockholder thereof or on the
application of an.v receiver or receivers appointed for the Corporation under
the provisions of section 291 of Title 8 of the Delaware Code or on the
application of trustees in dissolution or of any receiver or receivers appointed
for the Corporation under the provisions of section 279 of Title 8 of the
Delaware Code, order a meeting of the creditors or class of creditors, and/or of
the stockholders of class of stockholders of the Corporation, as the case may
be, to be summoned in such manner as
-3-
the said court directs. If a majority in number representing three-fourths in
value of the creditors or class of creditors, and/or of the stockholders or
class of stockholders of the Corporation, as the case may be, agree to any
compromise or arrangement and to any reorganization of the Corporation as a
consequence of such compromise or arrangement, the said compromise or
arrangement and the said reorganization shall, if sanctioned by the court to
which said application has been made, be binding on all the creditors or class
of creditors, and/or on all the stockholders or class of stockholders of the
Corporation, as the case may be, and also on the Corporation.
SIXTH: In furtherance and not in limitation of the powers
conferred by statute and except as provided here-in, the Board of Directors is
expressly authorized to make, alter or repeal the by-laws of the Corporation.
SEVENTH: The Corporation shall have perpetual existence.
EIGHTH: No holder of stock of the Corporation shall, as such
holder, have any right to purchase or subscribe for any shares of stock of the
corporation of any class, now or hereafter authorized, or any obligations or
instruments which the corporation may issue or sell that shall, be convertible
into or exchangeable for or entitle the
-4-
State of Delaware
Office of the Secretary of State
--------------------------------
I, EDWARD J. FREEL, SECRETARY OF STATE OF THE STATE OF
DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT
COPY OF THE CERTIFICATE OF AMENDMENT OF "FACTSET RESEARCH
SYSTEMS INC.", FILED IN THIS OFFICE ON THE FOURTH DAY OF JUNE,
A.D. 1996, AT 12:30 O'CLOCK P.M.
A CERTIFIED COPY OF THIS CERTIFICATE HAS BEEN FORWARDED TO
THE NEW CASTLE COUNTY RECORDER OF DEEDS FOR RECORDING.
/S/ Edward J. Freel
----------------------------------
Edward J. Freel, Secretary of State
(seal)
AUTHENTICATION: 7971762
DATE: 06-04-96
CERTIFICATE OF AMENDMENT
OF
CERTIFICATE OF INCORPORATION
OF
FACTSET RESEARCH SYSTEMS INC.
I, the undersigned, Chairman of the Board of
FACTSET SYSTEMS INC., a corporation organized and
existing under the laws of the State of Delaware (the
"Corporation"), in order to amend the Certificate of
Incorporation of the Corporation, do hereby certify as
follows:
1. The name of the Corporation is FACTSET
RESEARCH SYSTEMS INC.
2. The Certificate of Incorporation of the
Corporation is hereby amended by deleting Article "FOURTH"
in its entirety and substituting in lieu thereof the
following:
FOURTH: The Corporation shall have the authority
to issue a total of fifty million (50,000,000) shares of
capital stock, consisting of (i) forty million (40,000,000)
shares of Common Stock, $ .01 par value per share, and (ii)
ten million (10,000,000) shares of Preferred Stock, $ .01 par
value per share. The Corporation's Board of Directors is
expressly authorized to provide by resolution or resolutions
from time to time for the issue of the Preferred Stock in
one or more series, the shares of each of which series may
have such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative
participating, optional or other special rights, and
qualifications, limitations or restrictions thereon, as
shall be permitted under the General Corporation Law of the
State of Delaware and as shall be stated in the resolution
or resolutions providing for the issue of such stock adopted
by the Board of Directors pursuant to the authority
expressly vested in the Board of Directors hereby.
3. The amendment of the Certificate of
Incorporation herein certified has been duly adopted in
accordance with the provisions of Sections 228 and 242 of
the General Corporations Law of the State of Delaware.
IN WITNESS WHEREOF, this Certificate has been
signed and affirmed as true under penalties of perjury by
the undersigned on this 3 day of June, 1996.
- ----
/s/ Howard E. Wille
___________________________
Howard E. Wille
Chairman
Attest:
/s/
- ---------------------
Howard E. Wille
Secretary
Exhibit 3.2
FACTSET RESEARCH CORPORATION
BY-LAWS
ARTICLE I
Offices
-------
Section 1. Registered Office. The location of the Corporation's
-------------------
registered office within the State of Delaware, the name of the registered agent
of the Corporation at such office and the post office address to which the
Secretary of State of the State of Delaware shall mail a copy of process in any
action or proceeding against the Corporation that may be served upon him, shall
be in each case as stated in the Certificate of Incorporation.
Section 2. Other Offices. The Corporation may also have offices at
---------------
such other places both within and without the State of Delaware as the Board of
Directors may from time to time determine or the business of the Corporation may
require.
ARTICLE II
Meetings of Stockholders
------------------------
Section 1. Annual Meeting. The annual meeting of the stockholders of
----------------
the Corporation for the election of directors and for the transaction of such
other business as may properly come before the meeting shall be held on such
date as may be fixed from time to time by resolution of the Board of Directors,
at such place within or without the State of Delaware as shall be designated by
the Board of Directors.
Section 2. Special Meeting. Special meetings of the stockholders, for
-----------------
any purpose or purposes, may be called at any time only by the Chairman of the
Board or the President of the Corporation or the majority of the Board of
Directors. Such meetings shall be held at such time and at such place within or
without the State of Delaware as shall be specified in the notice of the
meeting.
Section 3. Notice of Meetings. Notice Of the place, date and time of
--------------------
the holding of each annual and special meeting of the stockholders and the
purpose or purposes thereof shall be given personally or by mail in a postage
prepaid envelope to each stockholder entitled to vote at such meeting, not less
than ten nor more than sixty days before the date of such meeting, and, if
mailed, it shall be directed to such stockholder at his address as it appears on
the records of the Corporation, unless he shall have filed with the Secretary of
the Corporation a written request that notices to him be mailed to some other
address, in which case it shall be directed to him at such other address. Any
such notice for any meeting other than the annual meeting of stockholders shall
indicate that it is being issued at the direction of the Chairman of the Board,
President/or a majority of the Board of Directors, which notice shall not be
required to be given to any stockholder who shall attend such meeting in person
or by proxy and shall not, at the beginning of such meeting, object to the
transaction of any business because the meeting is not lawfully called or con-
vened, or who shall, either before or after the meeting, submit a signed waiver
of notice, in person or by proxy. Unless the Board shall fix a new record date
for an adjourned meeting, notice of such adjourned meeting need not be given if
the time and place to which the meeting shall be adjourned were announced at the
meeting at which the adjournment is taken. At the adjourned meeting the Corpora-
tion may transact any business which might have been transacted at the original
meeting. If the adjournment is for more than thirty days, or if after the
adjournment a new record date is fixed for the adjourned meeting, a notice of
the adjourned meeting shall be given to each stockholder of record entitled to
vote at the meeting.
Section 4. Quorum. Except as otherwise required by law or the
------
Certificate of Incorporation, at all meetings of the stockholders, the presence
in person or by proxy of the holders of a majority of the shares of stock of the
Corporation issued and outstanding and entitled to vote shall constitute a
quorum for the transaction of any business. In the absence of a quorum, the
holders of a majority of the shares of stock present in person or by proxy and
entitled to vote, or if no stockholder entitled to vote is present, then any
officer of the Corporation, may adjourn the meeting from time to time. At any
such adjourned meeting at which a quorum may be present, any business may be
transacted which might have been transacted at the meeting as originally called.
Section 5. Organization. At each meeting of the stockholders, the
------------
Chairman of the Board, if any, or in his absence or inability to act, the
President, or in his absence or inability to act, any person chosen by a
majority of those stockholders present or represented, shall act as chairman of
the meeting. The Secretary, or, in his absence or inability to act, an Assistant
Secretary or any other officer appointed by the chairman of the meeting, shall
act as secretary of the meeting and keep the minutes thereof.
Section 6. Order of Business. The order of business at all meetings of
-------------------
the stockholders shall be as determined by the chairman of the meeting.
Section 7. Voting. Except as otherwise provided by statute or the
--------
Certificate of Incorporation, each holder of record of shares of stock of the
Corporation having voting power shall be entitled at each meeting of the stock-
holders to one vote for every share of such stock standing in his name on the
record of stockholders of the Corporation (a) on the date fixed by the Board of
Directors as the record date for the determination of the stockholders who shall
be entitled to notice of and to vote at such meeting; or (b) if such record date
shall not have been so fixed, then at the close of business on the day next
preceding the day on which notice thereof shall be given; or (c) if notice is
waived, at the close of business on the day next preceding the day on which the
meeting is held. Each stockholder entitled to vote at any meeting of
stockholders may authorize another person or persons to act for him by a proxy
signed by such stockholder or his attorney-in-fact. Any such proxy shall be
delivered to the secretary of such meeting at or prior to the time designated in
the order of business for so delivering such proxies. No proxy shall be valid
after the expiration of three years from the date thereof, unless the proxy
provides for a longer period. Every proxy shall be revocable at the pleasure of
the stockholder executing it, except in those cases where an irrevocable proxy
is permitted by law. Except as otherwise required by law, the Certificate of
Incorporation or these ByLaws, any corporate action to be taken by vote of the
stockholders shall be authorized by a majority of the total votes cast at a
meeting of stockholders by the holders of shares present in person or
represented by proxy and entitled to vote on such action. Unless required by
statute, or determined by the chairman of the meeting to be advisable, the vote
on any question need not be by written ballot. On a vote by written ballot, each
ballot shall be signed by the stockholder voting, or by his proxy, if there be
such proxy, and shall state the number. of shares voted.
-3-
Section 8. List of Stockholders. The officer who has charge of the
----------------------
stock ledger of the Corporation shall prepare and make or cause to be prepared
and made, at least ten days before every meeting of stockholders, a complete
list of the stockholders entitled to vote at the meeting, arranged in
alphabetical order, and showing the address of each stockholder and the number
of shares registered in the name of each stockholder. Such list shall be open to
the examination of any stockholder for any purpose germane to the meeting,
during ordinary business hours, for a period of at least ten days prior to the
meeting, either at a place within the city where the meeting is to be held,
which place shall be specified in the notice of the meeting, or, if not so
specified, at the place where the meeting is to be held. The list shall also be
produced and kept at the time and place of the meeting during the whole time
thereof, and may be inspected by any stockholder who is present.
Section 9. Inspectors. The Board of Directors may, in advance of any
------------
meeting of stockholders, appoint one or more inspectors to act at such meeting
or any adjournment thereof. If inspectors shall not be so appointed or if any of
them shall fail to appear or act, the chairman of the meeting may, and on the
request of any stockholder entitled to vote thereat shall, appoint one or more
inspectors. Each inspector, before entering upon the discharge of his duties,
shall take and sign an oath faithfully to execute the duties of inspector at
such meeting with strict impartiality and according to the best of his ability.
The inspectors shall determine the number of shares outstanding, the number of
shares represented at the meeting, the existence of a quorum, the validity and
effect of proxies, and shall receive votes, ballots or consents, hear and
determine all challenges and questions arising in connection with the right to
vote, count and tabulate all votes, ballots or consents, determine the result,
and do such acts as are proper to conduct the election or vote with fairness to
all stockholders. On request of the chairman of the meeting or any stockholder
entitled to vote there at, the inspectors shall make a report in writing of any
challenge, request or matter determined by them and shall execute a certificate
of any fact found by them. No director or candidate for the office of director
shall act as inspector of an election of directors.. need not be stockholders.
RESOLVED, that Section 10 of Article II of the BY-laws of the
Corporation be amended to read as follows:
Section 10. Action Without a Meeting by Written Consent. No action
-------------------------------------------
required to be taken or which may be taken at any annual or special meeting
of stockholders of the Corporation may be taken without a meeting, except
on written consent, setting forth the action so taken, signed by the
holders of record of at least 80% of the outstanding shares entitled to
vote thereon.
ARTICLE III
Board of Directors
------------------
Section 1. General Powers. The property, business and affairs of the
----------------
Corporation shall be managed by the Board of Directors. The Board of Directors
may exercise all such authority and powers of the Corporation and do all such
lawful acts and things as are not by statute or the Certificate of Incorporation
or these By-Laws directed or required to be exercised or done by the
stockholders.
Section 2. Number, Classification, Term of Office, Qualifications and
----------------------------------------------------------
Election. The Board of Directors shall initially consist of two directors.
- --------
Thereafter, the number of directors of the Corporation shall be determined by
resolution approved by at least two-thirds of the then authorized number of
directors, but after the annual meeting of stockholders in 1987, shall not be
more than fifteen nor less than three. The Board of Directors shall be divided
into three classes as nearly equal in number as possible, with the term of
office of one class expiring each year. The terms of office of the directors
elected at the annual meeting of stockholders in 1987 and initially classified
shall be as follows: directors of the first class shall hold office for a term
expiring at the next succeeding annual meeting; directors of the second class
shall hold office for a term expiring at the second succeeding annual meeting;
and directors of the third class shall hold office for a term expiring at the
third succeeding annual meeting. At each annual meeting of stockholders after
the annual meeting in 1987, directors elected to succeed the class of directors
whose terms expire at such annual meeting shall be elected to hold office for a
term expiring at the third succeeding annual meeting after their election. When
the number of directors is changed,.any newly created director-ships or any
decrease in directorships shall be so apportioned among the classes as to make
all classes as nearly equal in number as possible. Each director shall hold of-
fice for the specified term and until his successor shall be duly elected and
qualified, or until his death, or until he shall have resigned or he shall have
been removed, as hereinafter provided in these By-Laws, or as otherwise provided
-5-
by statute or by the Certificate of Incorporation. All the directors shall be of
full age. Directors need not be stockholders. Except as otherwise required by
statute or the Certificate of Incorporation or these By-Laws, directors to be
elected at each annual meeting of stockholders shall be elected by a plurality
of the votes cast at the meeting by the holders of shares present in person or
represented by proxy and entitled to vote for the election of directors.
Section 3. Annual Meeting. The Board of Directors shall meet for the
--------------
purpose of organization, the election of officers and the transaction of other
business, as soon as practicable after each annual meeting of the stockholders,
on the same day and at the same place where such annual meeting shall be held.
Notice of such meeting need not be given. Such meeting may be held at any other
time or place (within or without the State of Delaware) which shall be specified
in a notice thereof given as hereinafter provided in section 6 of this Article
III, or in a waiver of notice thereof.
Section 4. Regular Meetings. Regular meetings of the Board of
----------------
Directors shall be held at such times and places within or without the State of
Delaware as the Board of Directors may from time to time by resolution
determine. If any day fixed for a regular meeting shall be a legal holiday at
the place where the meeting is to be held, then the meeting which would
otherwise be held on that day shall be held at the same hour on the next
succeeding business day. Notice of regular meetings of the Board of Directors
need not be given except as otherwise required by statute or these By-Laws.
Section 5. Special Meetings. Special meetings of the Board of
----------------
Directors may be called at any time by the Chairman of the Board, the President
or any two directors of the Corporation and shall be held at such time and at
such place within or without the State of Delaware as shall be specified in the
notice of meeting or waiver thereof.
Section 6. Notice of Meetings. Notice of each special meeting o~ the
------------------
Board of .Directors (and of each regular meeting for which notice shall be
required) shall be given by the Secretary as hereinafter provided in this Sec-
tion 6, in which notice shall be stated the time and place of the meeting.
Notice of each such meeting shall be delivered to each director, either
personally or by telephone, telegraph, cable, or wireless, at least twenty-four
hours before the time at which such meeting is to be held, or
-6-
shall be mailed to each director by first-class mail postage prepaid, addressed
to him at his residence or usual place of business, at least three days before
the day on which such meeting is to be held. Notice of any such meeting need not
be given to any director who shall, either before or after the meeting, submit a
signed waiver of notice or who shall attend such meeting without objecting, at
the beginning of such meeting, to the transaction of any business because the
meeting is not lawfully called or convened. Except as otherwise specifically
required by these By-Laws, a notice or waiver of notice of any regular or
special meeting of the Board of Directors need not state the purpose or purposes
of such meeting.
Section 7. Quorum and Manner of Acting. Except as provided in Section
-----------------------------
5 of Article IX of these By-Laws, a majority of the directors shall be present
in person at any meeting of the Board of Directors in order to constitute a
quorum for the transaction of business at such meeting, and, except as otherwise
expressly required by statute or the Certificate of Incorporation, the act of a
majority of the directors present at any meeting at which a quorum is present
shall be the act of the Board of Directors. In the absence of a quorum at any
meeting of the Board of Directors, a majority of the directors present thereat,
,or if no director be present, the Secretary, may adjourn such meeting to
another time and place, or such meeting, unless it be the annual meeting of the
Board of DirectOrs, need not be held. At any adjourned meeting at which a quorum
is present, any business may be transacted which might have been transacted at
the meeting as originally called. Except as provided in Section 11 of this
Article III, Article IV and Section 4 of Article IX of these By-Laws and as
otherwise specifically authorized by resolution of the Board of Directors, the
directors shall act only as a Board of Directors and the individual directors
shall have no power as such.
Section 8. Organization. At each meeting of the Board of Directors,
--------------
the Chairman of the Board, if any, or, in his absence or inability to act, the
President, or, in his absence or inability to act, another director chosen by a
majority of the directors present, shall act as chairman of the meeting and
preside thereat. The minutes of the meeting shall be recorded by any officer of
the Corporation present and designated by the chairman.
Section 9. Resignations. Any director of the corporation may resign at
--------------
any time by giving written notice of his resignation to the Board of Directors,
the Chairman
-7-
of the Board, the President or the Secretary of the Corporation. Any such
resignation shall take effect at the time specified therein, or, if the time
when it shall become effective shall not be specified therein, immediately upon
its receipt; and, unless otherwise specified therein, the acceptance of such
resignation shall not be necessary to make it effective.
Section 10. Removal of Directors. Except as otherwise provided in the
----------------------
Certificate of Incorporation or in these By-Laws, any director may be removed,
but only for cause, at any time, by the affirmative vote of the holders of a
majority of the outstanding shares of stock entitled to vote for the election of
directors of the Company at a meeting of the stockholders called and held for
that purpose.
Section 11. Vacancies. Except as otherwise required by statute or by
-----------
the Certificate of Incorporation, during the intervals between annual meetings
of stockholders, any vacancies and any newly-created directorships resulting
from an increase in the authorized number of directors shall be filled by a
majority vote of the directors then in office, whether or not a quorum, or by a
sole remaining director, and the directors so chosen shall hold office until the
next election of the class for which such directors shall have been chosen and
until their successors shall be duly elected and qualified, unless sooner dis-
placed. If there are no directors in office, then a special meeting of
stockholders for the election of directors may be called and held in the manner
provided by statute. When one or more directors shall resign from the Board of
Directors, effective at a future date, a majority of the directors then in
office, including those who have so resigned, shall have power to fill such
vacancy or vacancies, the vote thereon to take effect when such resignation or
resignations shall become effective, and each director so chosen shall hold
office as provided in this section in the filling of other vacancies.
Section 12. Compensation. The Board of Directors or a committee of the
--------------
Board designated by it shall have authority to fix the compensation, including
without limitation fees and r%imbursement of expenses, of directors for services
to the Corporation in any capacity; provided, however, that no such payment
shall preclude any director from serving the Corporation in any other capacity
and receiving compensation therefor.
-8-
Section 13. Action without Meeting. Any action required or permitted
------------------------
to be taken at any meeting of the Board of Directors or of any committee thereof
may be taken without a meeting if all members of the Board or committee, as the
case may be, consent thereto in writing, and the writing or writings are filed
with the minutes of proceedings of the Board or committee.
Section 14. Participation in Meetings by Telephone and Other
------------------------------------------------
Equipment. Members of the Board of Directors or of any committee thereof may
- -----------
participate in a meeting of the Board or committee by means of conference
telephone or similar communications equipment by means of which all persons
participating in the meeting can hear each other, and participation in a meeting
pursuant to this Section shall constitute presence in person at such meeting.
ARTICLE IV
Executive and Other Committees
------------------------------
Section 1. Executive and Other Committees. The Board of Directors may,
--------------------------------
by a resolution passed by a majority of the whole Board, designate an Executive
Committee, to consist of three or more directors of the Corporation, and one or
more other committees, each such other committee to consist of one or more of
the directors of the Corporation. The Board of Directors may designate one or
more directors as alternate members of any committee, who may replace any absent
or disqualified member at any meeting of the committee. In the absence or
disqualification of any member of the Executive Committee or such other
committee or committees, the member or members thereof present at any meeting
and not disqualified from voting, whether or not he or they constitute a quorum,
may unanimously appoint another member of the Board of Directors to act at the
meeting in the place of any such absent or disqualified member. The Executive
Committee, while the Board of Directors is not in session, shall have and may
exercise, and any such other committee to the extent provided in the resolution
of the Board of Directors, shall have and may exercise, all the powers and
authority of the Board of Directors in the management of the business and
affairs of the Corporation, and may authorize the seal of the Corporation to be
affixed to all papers which may require it; but no such committee shall have the
power or authority in reference to amending the Certificate of Incorporation,
adopting an agreement of merger or con-
-9-
solidation, recommending to the stockholders the sale, lease or exchange of all
or substantially all of the Corporation's property and assets, recommending to
the stockholders a dissolution of the Corporation or a revocation of a dis-
solution, or amending the By-Laws of the Corporation; and, unless the resolution
or By-Laws expressly so provide, no such committee shall have the power or
authority to declare a dividend or to authorize the issuance of stock. Each
committee shall keep written minutes of its proceedings and shall report such
minutes to the Board of Directors when required. All such proceedings shall be
subject to revision or alteration by the Board of Directors; provided, however,
that rights of third parties shall not be prejudiced by such revision or
alteration. The Board of Directors, by action of a majority of the entire Board,
may at any time fill vacancies in, change the membership of, or dissolve any
such committee.
Section 2. Executive Committee: General. Regular meetings of the
------------------------------
Executive Committee shall be held at such times and places, within or without
the State of Delaware, as a majority of such Committee may from time to time by
resolution determine. Special meetings of the Executive Committee may be called
at the request of any member thereof and may be held at such times and places,
within or without the State of Delaware, as such Committee may from time to time
by resolution determine or as shall be specified in the respective notices or
waivers of notice thereof. Notice of regular meetings of such Committee need not
be given except as otherwise required by statute or these By-Laws. Notice of
each special meeting of such Committee shall be given to each member of such
Committee in the manner provided for in Section 6 of Article III of these By-
Laws. Subject to the provisions of this Article IV, the Executive Committee, by
resolution of a majority of such Committee, shall fix its own rules of
procedure. A majority of the Executive Committee shall be present in person at
any meeting of the Executive Committee in order to constitute a quorum for the
transaction of business at such meeting, and the act of a majority of those
present at any meeting at which a quorum is present shall be the act of the
Executive Committee. The members of the Executive Committee shall act only as a
committee, and the individual members shall have no power as such.
Section 3. Other Committees: General. A majority of any committee may
---------------------------
fix its rules of procedure, determine its action, and fix the time and place,
within or without the State of Delaware, of its meetings, unless the Board of
-10-
Directors shall otherwise by resolution provide. Notice of such meetings shall
be given to each member of the committee in the manner provided for in Section 6
of Article III of these By-Laws. Nothing in this Article IV shall be deemed to
prevent the Board of Directors from appointing one or more committees consisting
in whole or in part of persons who are not directors of the Corporation;
provided, however, that no such committee shall have or may exercise any
authority of the Board.
ARTICLE V
Officers
--------
Section 1. Number and Qualifications. The officers of the Corporation
---------------------------
shall be a President, an Executive Vice President, one or more Vice Presidents,
a Secretary and a Treasurer. Any two or more offices may be held by the same
person. Such officers shall be elected from time to time by the Board of
Directors, each to hold office until the meeting of the Board following the next
annual meeting of the stockholders, or until his successor shall have been duly
elected and shall have qualified, or until his death, or until he shall have
resigned or until he shall have been removed, as hereinafter provided in these
By-Laws. The Board of Directors may from time to time appoint such other
officers (including a Chairman of the Board and one or more Assistant Treasurers
and Assistant Secretaries) and such agents as it may deem necessary or desirable
for the business of the Corporation. The Board of Directors may from time to
time authorize any principal officer or committee to appoint, and to prescribe
the authority and duties of, any such subordinate officers or agents. Each of
such other officers and agents shall have such authority, perform such duties,
and hold office for such period, as are provided in these By-Laws or as may be
prescribed by the Board of Directors or by the principal officer or committee
appointing such officer or agent.
Section 2. Resignations. Any officer of the Corporation may resignat
--------------
any time by giving written notice of his resignation to the Board of Directors,
the Chairman of the Board, if any, the President or the Secretary. Any such
resignation shall take effect at the time specified therein or, if the time when
it shall become effective shall not be specified therein, immediately upon its
receipt; and, unless otherwise specified therein, the acceptance of such resig-
nation shall not be necessary to make it effective.
-11-
Section 3. Removal. Any officer or agent of the Corporation may be
---------
removed, either with or without cause, at any time, by the vote of the majority
of the entire Board of Directors at any meeting of the Board, or, except in the
case of an officer or agent elected or appointed by the Board, by any principal
officer or committee upon whom such power of removal may be conferred by the
Board.
Section 4. Vacancies. A vacancy in any office, whether arising from
-----------
death, resignation, disqualification, removal or any other cause, may be filled
for the unexpired portion of the term of the office which shall be vacant, in
the manner prescribed in these By-Laws for the regular election or appointment
to such office.
Section 5. Chairman of the Board. The chairman of the Board, if
-----------------------
elected, shall, if present, preside at all meetings of the stockholders and the
Board of Directors and shall be an ex officio member of all committees of the
-- -------
Board and, in general, shall have such other powers and perform such other
duties as usually pertain to the office of the Chairman of the Board or as from
time to time may be assigned to him by the Board of Directors. At the discretion
of the Board of Directors, the Chairman of the Board, if elected,may be the
chief executive officer of the Corporation and, if so appointed by the Board of
Directors, shall have general and active supervision and direction over the
business and affairs of the Corporation and over its officers, subject, however,
to the control of the Board of Directors.
Section 6. The President. The President shall be the chief executive
---------------
officer of the Corporation and shall have general and active supervision and
direction over the business and affairs of the Corporation and over its offi-
cers, unless the Chairman of the Board, if any, is appointed to serve as chief
executive officer, in which case the President shall be the chief operating
officer of the Corporation and shall have general and active supervision and di-
rection over the ordinary business operations and affairs of the Corporation and
over its officers, subject, however, to the supervision and direction of the
chairman of the Board, if any, who is also the chief executive officer of the
Corporation, and to the control of. the Board of Directors. He shall, if
present, in the absence or inability to act of the Chairman of the Board,
preside at meetings of the stockholders and at meetings of the Board of
Directors. In general, the President shall have such other powers and perform
such other duties as usually pertain to the office of
-12-
the President and chief executive officer or chief operating officer, as the
case may be, or as from time to time may be assigned to him by the Board of
Directors or the Chairman of the Board, if any.
Section 7. Executive Vice President. The Executive Vice President
--------------------------
shall have such powers and perform such duties as from time to time may be
assigned to him by the Board of Directors, the Chairman of the Board, if any, or
the President.
Section 8. Treasurer. The Treasurer shall:
-----------
(a) have charge and custody of, and be responsible for, all the funds
and securities of the Corporation;
(b) keep full and accurate accounts of receipts and disbursements in
books belonging to the Corporation and have control of all books of account of
the Corporation;
(c) cause all moneys and other valuables to be deposited to the credit
of the Corporation in such depositaries as may be designated by the Board of
Directors;
(d) receive, and give receipts for, moneys due and payable to the
Corporation from any source whatsoever;
(e) disburse the funds of the Corporation and supervise the investment
of its funds as ordered or authorized by the Board of Directors, taking proper
vouchers therefor;
(f) render to the Chairman of the Board, if any, the President, the
Board or any committee thereof, whenever required, an account of the financial
condition of the Corporation and of his transactions as Treasurer;
(g) in general, have such other powers and perform such other duties
as usually pertain to the office of Treasurer or as from time to time may be
assigned to him by the Board of Directors, the Chairman of the Board, if any, or
by the President.
Section 9. Other Vice.Presidents. Each other Vice President shall have
-----------------------
such powers and perform such duties as usually pertain to his office or as from
time to time may be assigned to him by the Board of Directors, the Chairman of
the Board, if any, or the President.
-13-
Section 10. Assistant Treasurers. At the request of the Treasurer or
----------------------
in case of the absence or inability to act of the Treasurer, the Assistant
Treasurer, or if there be more than one, the Assistant Treasurer designated by
the Board of Directors or, in the absence of such designation, by the Chairman
of the Board, if any, or the President, shall perform all the duties of the
Treasurer, and when so acting, shall have all the powers of and be subject to
all the restrictions upon the Treasurer. In general, each Assistant Treasurer
shall have such other powers and perform such other duties as from time to time
may be assigned to him by the Board of Directors, the Chairman of the Board, if
any, the President or the Treasurer.
Section 11. Secretary. The Secretary shall:
-----------
(a) keep, or cause to be kept, in one or more books provided for the
purpose, the minutes of all meetings of the Board of Directors, of the
committees of the Board and of the stockholders;
(b) see that all notices are duly given in accordance with the
provisions of these By-Laws and as required by law;
(c) be custodian of the records and the seal of the Corporation and
affix and attest the seal to all stock certificates of the Corporation (unless
the seal of the Corporation on such certificates shall be a facsimile, as
hereinafter provided) and affix and attest the seal to all other documents to be
executed on behalf of the Corporation under its seal;
(d) see that the books, reports, statements, certificates and other
documents and records required by law to be kept and filed are properly kept and
filed; and
(e) in general, have such other powers and perform such other duties
as usually pertain to the office of Secretary or as from time to time may be
assigned to him by the Board of Directors, the Chairman of the Board, if any, or
the President.
Section 12. Assistant Secretaries. At the request of the Secretary or
-----------------------
in case of his absence or inability to act, the Assistant Secretary, or if there
be more than one, the Assistant Secretary designated by the Board of Directors
or, in the absence of such designation, by the Chairman of the Board, if any, or
the President, shall perform all the
-14-
duties of the Secretary, and when so acting, shall have all the powers of and be
subject to all the restrictions upon the Secretary. In general, each Assistant
Secretary shall have such other powers and perform such other duties as from
time to time may be assigned to him by the Board of Directors, the Chairman of
the Board, if any, the President or the Secretary.
Section 13. Officers' Bonds or Other Security. If required by the
-----------------------------------
Board of Directors, any officer of the Corporation shall give a bond for the
faithful performance of his duties and the return to the Corporation of any
property in his possession or control which is the property of the Corporation,
for such term and in such amount and with such surety or sureties as the Board
may require.
Section 14. Compensation. The compensation of the officers of the
--------------
Corporation for their services as such officers shall be fixed from time to time
by the Board of Directors or a committee of the Board designated by it, and no
officer of the Corporation shall be prevented from receiving compensation by
reason of the fact that he is also a director of the Corporation.
ARTICLE VI
Checks, Drafts, Bank. Accounts, Etc.
------------------------------------
Section 1. Checks, Drafts, etc. All checks, drafts, bills of exchange
---------------------
or other orders for the payment of money out of the funds of the Corporation,
and all notes or other evidences of indebtedness of the Corporation shall be
signed in the name and on behalf of the Corporation by such person or persons
and in such manner as shall from time to time be authorized by the Board of
Directors.
Section 2. Deposits. All funds of the Corporation not otherwise
----------
employed shall be deposited from time to time to the credit of the Corporation
in such banks, trust companies or other depositaries as the Board of Directors
may from time to time designate or as may be designated by any officer or
officers of the Corporation to whom such power of designation may from time to
time be delegated by the Board of Directors. For the purpose of deposit and for
the purpose of collection for the account of the Corporation, checks, drafts and
other orders for the payment of money which are payable to the order of the
Corporation may be
-15-
endorsed, assigned and delivered by any officer or agent of the Corporation.
Section 3. General and Special Bank Accounts. The Board of Directors
-----------------------------------
may from time to time authorize the opening and keeping of general and special
bank accounts with such banks, trust companies or other depositaries as the
Board may designate or as may be designated by any officer or officers of the
Corporation to whom such power of designation may from time to time be delegated
by the Board of Directors. The Board of Directors may make such special rules
and regulations with respect to such bank accounts, not inconsistent with
provisions of these By-Laws, as it may deem expedient.
Section 4. Proxies in Respect of Securities of Other Corporations.
-------------------------------------------------------
Unless otherwise provided by resolution adopted by the Board of Directors, the
Chairman of the Board, if any, the President or any Vice President may from time
to time appoint an attorney or attorneys or agent or agents of the Corporation
in the name and on behalf of the Corporation to cast the votes which the
Corporation may be entitled to cast as the holder of stock or other securities
in any other corporation, any of whose stock or other securities may be held by
the Corporation, at meetings of the holders of the stock or other securities of
such other corporation, or to consent in writing in the name of the Corporation
as such holder to any action by such other corporation, and may instruct the
person or persons so appointed as to the manner of casting such votes or giving
such consent, and may execute or cause to be executed in the name and on behalf
of the Corporation and under its corporate seal, or otherwise, all such written
proxies or other instruments as he may deem necessary or proper in the premises.
ARTICLE VII
Shares and Their Transfer - Examination of Books
------------------------------------------------
Section 1. Stock Certificates. Every holder of stock of the
------------------
Corporation shall be entitled to have a certificate, in such form as shall be
approved by the Board of Directors, certifying the number and class of shares of
stock of the Corporation owned by him. The certificates representing shares of
the respective classes of stock shall be numbered in order of their issue and
shall be signed in the name of the Corporation by the Chairman of the Board, if
any, or the President or a Vice President and by the Trea-
-16-
surer or an Assistant Treasurer or the Secretary or an Assistant Secretary, and
sealed with the seal of the Corporation (which seal may be a facsimile, engraved
or printed). Any or all the signatures on the certificate may be a facsimile. In
case any officer, transfer agent, or registrar who has signed or whose facsimile
signature has been placed upon a certificate shall have ceased to be such
officer, transfer agent, or registrar before such certificate is issued, it may
be issued by the Corporation with the same effect as if he were such officer,
transfer agent, or registrar at the date of issue.
Section 2. Books of Account and Record of Stockholders. The books and
-------------------------------------------
records of the Corporation may be kept at such places, within or without the
State of Delaware, as the Board of Directors may from time to time determine.
The stock record books and the blank stock certificate books shall be kept by
the Secretary or by any other officer or agent designated by the Board of
Directors.
Section 3. Transfers of Shares. Transfers of shares of stock of the
-------------------
Corporation shall be made on the stock records of the Corporation only upon
authorization by the registered holder thereof, or by his attorney thereunto
authorized by power of attorney duly executed and filed with the Secretary or
with a transfer agent or transfer clerk, and on surrender of the certificate or
certificates for such shares properly endorsed or accompanied by a duly executed
stock transfer power and the payment of all taxes thereon. Except as otherwise
provided by law, the Corporation shall be entitled to recognize the exclusive
right of a person in whose name any share or shares stand on the record of
stockholders as the owner of such share or shares for all purposes, including
without limitation the rights to receive dividends or other distributions and to
vote as such owner, and the Corporation may hold any such stockholder of record
liable for calls and assessments and the Corporation shall not be bound to
recognize any equitable or legal claim to or interest in any such share or
shares on the part of any other person, whether or not it shall have express or
other notice thereof. Whenever any transfers of shares shall be made for
collateral security and not absolutely, and both the transferor and transferee
request the Corporation to do so, such fact shall be stated in the entry of the
transfer.
Section 4. Regulations. The Board of Directors may make such
-------------
additional rules and regulations, not inconsistent with these By-Laws, as it may
deem expedient concerning the issue, transfer and registration of certificates
-17-
for shares of stock of the Corporation. It may appoint, or authorize any officer
or officers to appoint, one or more transfer agents or one or more transfer
clerks and one or more registrars and may require all certificates for shares of
stock to bear the signature or signatures of any of them.
Section 5. Lost, Destroyed or Mutilated Certificates. The holder of
-------------------------------------------
any certificate representing shares of stock of the Corporation shall
immediately notify the Corporation of any loss, destruction or mutilation of
such certificate, and the Corporation may issue a new certificate of stock in
the place of any certificate theretofore issued by it which the owner thereof
shall allege to have been lost, stolen or destroyed or which shall have been mu-
tilated, and the Board of Directors may, in its discretion, require such owner
or his legal representatives to give the Corporation and/or any agent of the
Corporation designated by it a bond in such sum, limited or unlimited, and in
such form and with such surety or sureties as the Board in its absolute
discretion shall determine, to indemnify the Corporation and/or such agent
against any claim that may be made against it on account of the alleged loss
theft, or destruction of any such certificate, or the issuance of a new
certificate. Anything herein to the contrary notwithstanding, the Board of
Directors, in its absolute discretion, may refuse to issue any such new
certificate, except pursuant to legal proceedings under the laws of the State of
Delaware.
Section 6. Stockholder's Right of Inspection. Any stockholder of
-----------------------------------
record, in person or by attorney or other agent, shall, upon written demand
under oath stating the purpose thereof, have the right during the usual hours of
business to inspect for any proper purpose the Corporation's stock ledger, a
list of its stockholders, and its other books and records, and to make copies or
extracts therefrom. A proper purpose shall mean a purpose reasonably related to
such person's interest as a stockholder. In every instance where an attorney or
other agent shall be the person who seeks the right to inspection, the demand
under oath shall be accompanied by a power of attorney or such other writing
which authorizes the attorney or other agent to so act on behalf of the
stockholder. The demand under oath shall be directed to the Corporation at its
registered office in the State of Delaware or at its principal place of
business.
Section 7. Fixing of Record Date. In order that the Corporation may
-----------------------
determine the stockholders entitled to notice of or to vote at any meeting of
stockholders or any
-18-
adjournment thereof, or to express consent to corporate action in writing
without a meeting, or entitled to receive payment of any dividend or other
distribution or allotment of any rights, or entitled to exercise any rights in
respect of any change, conversion or exchange of stock or for the purpose of any
other lawful action, the Board of Directors may fix, in advance, a record date,
which shall be not more than sixty nor less than ten days before the date of
such meeting, nor more than sixty days prior to any other action. A
determination of stockholders of record entitled to notice of or to vote at a
meeting of stockholders shall apply to any adjournment of the meeting; provided,
however, that the Board of Directors may fix a new record date for the adjourned
meeting.
ARTICLE VIII
Dividends
---------
Subject to the provisions of the Certificate of Incorporation relating
thereto, if any, dividends upon the capital stock of the Corporation may be
declared by the Board of Directors at any regular or special meeting, pursuant
to law. Subject to the provisions of the Certificate of Incorporation, dividends
may be paid in cash, in property or in shares of the capital stock of the
Corporation.
Before payment of any dividend, there may be set aside out of any
funds of the Corporation available for dividends such sum or sums as the Board
of Directors from time to time, in its absolute discretion, think proper as a
reserve or reserves to meet contingencies, or for equalizing dividends, or for
repairing or maintaining any property of the Corporation, or for such other
purpose or purposes as the Board of Directors shall determine to be in the
interest of the Corporation, and the Board of Directors may modify or abolish
any such reserve in the manner in which it was created.
ARTICLE IX
Indemnification
---------------
Section 1. Right to Indemnification. The Corporation shall, to the
--------------------------
fullest extent permitted by applicable
-19-
law as then in effect, indemnify any person (the "Indemnitee") who was or is
involved in any manner (including, without limitation, as a party or a witness)
or was or is threatened to be made so involved in any threatened, pending or
completed investigation, claim, action, suit or proceeding, whether civil,
criminal, administrative or investigative (including, without limitation, any
action, suit or proceeding by or in the right of the Corporation to procure a
judgement in its favor)(a "Proceeding") by reason of the fact that he is or was
a director or officer of the Corporation, or is or was serving at the request of
the Corporation as a director or officer of another corporation or of a
partnership, joint venture, trust or other enterprise (including, without
limitation, service with respect to any employee benefit plan), whether the
basis of any such Proceeding is alleged action in an official capacity as a
director or officer or in any other capacity while serving as a director or
officer, against all expenses, liability and loss (including, without
limitation, attorneys' fees, judgments, fines, ERISA excise taxes or penalties
and amounts paid or to be paid in settlement) actually and reasonably incurred
by him in connection with such Proceeding. The right to indemnification
conferred in this Article IX shall include the right to receive payment in
advance of any expenses incurred by the Indemnitee in connection with such
Proceeding, consistent with applicable law as then in effect. All right to
indemnification conferred in this Article IX, including such right to advance
payments and the evidentiary, procedural and other provisions of this Article
IX, shall be a contract right. The Corporation may, by action of its Board of
Directors, provide indemnification for employees, agents, attorneys and
representatives of the Corporation with up to the same scope and extent as
provided for officers and directors.
Section 2. Insurance, Contracts and Funding. The Corporation may
--------------------------------
purchase and maintain insurance to protect itself and any person who is, was or
may become an officer, director, employee, agent, attorney or representative of
the Corporation or, at the request of the Corporation, an officer, director,
employee, agent, attorney or representative of another corporation or entity,
against any expense, liability or loss asserted against.him or incurred by him
in connection with any Proceeding an any such capacity, or arising out of his
status as such, whether or not the Corporation would have the power to indemnify
him against such expense, liability or loss under the provisions of this ArtiCle
IX or otherwise. The Corporation may enter into contracts with any director,
officer, employee, agent,
-20-
attorney or representative of the Corporation, or any person serving as such at
the request of the Corporation for another corporation or entity, in furtherance
of the provisions of Article TENTH of the Certificate of Incorporation or this
Article IX and may create a trust fund, grant a security interest or use other
means (including, without limitation, a letter of credit) to ensure the payment
of such amounts as may be necessary to effect indemnification of any person
entitled thereto.
Section 3. Indemnification; Not Exclusive Right. The right of
--------------------------------------
indemnification provided in this Article IX shall not be exclusive of any other
rights to which any person seeking indemnification may otherwise be entitled
under any provision of the Certificate of Incorporation, Bylaw or agreement or
otherwise. The provisions of this Article IX shall inure to the benefit of the
heirs and legal representatives of any person entitled to indemnity under this
Article IX and shall be applicable to all Proceedings, whether arising from acts
or omissions occurring before or after the adoption of this Article IX. No
amendment or repeal of any provision of this Article IX shall remove, abridge or
adversely affect any right of indemnification or any other benefits of the
Indemnitee under the provisions of this Article IX with respect to any
Proceeding involving any act or omission which occurred prior to such amendment.
Section 4. Advancement of Expenses; Procedures; Presumptions and
-----------------------------------------------------
Effect of Certain Proceedings; Remedies. In furtherance, but not in limitation,
- -----------------------------------------
of the provisions of the Certificate of Incorporation or the foregoing
provisions of this Article IX, the following procedures, presumptions and
remedies shall apply with respect to advancement of expenses and the right to
indemnification under the Certificate of Incorporation or this Article IX:
(a) Advancement of Expenses. All reasonable expenses incurred by or on
-------------------------
behalf of the Indemnitee in connection with any Proceeding shall be advanced to
the Indemnitee by the Corporation within 20 days after the receipt by the
Corporation of a statement or statements from the Indemnitee requesting such
advance or advances from time to time, whether prior to or after final
disposition of such Proceeding. Such statement or statements reasonably shall
evidence the expenses incurred by the Indemnitee and, if required by law at the
time of such advance, shall include or be accompanied by an undertaking by or on
behalf of the Indemnitee to repay the amounts advanced if it should ultimately
be determined that the Indemnitee is not entitled
-21-
to be indemnified against such expense pursuant to this Article IX.
(b) Procedure for Determination of Entitlement to Indemnification.
--------------------------------------------------------------
(i) To obtain indemnification, an Indemnitee shall submit to the
Chairman of the Board, if any, the President or Secretary of the
Corporation a written request, including such documentation and information
as is reasonably available to the Indemnitee and reasonably necessary to
determine whether and to what extent the Indemnitee is entitled to
indemnification (the "Supporting Documentation"). The determination of the
Indemnitee's entitlement to indemnification shall be made not later than 60
days after receipt by the Corporation of the written request for
indemnification together with the Supporting Documentation. The Chairman of
the Board, if any, President or Secretary of the Corporation shall,
promptly upon receipt of such a request for indemnification, advise the
Board of Directors in writing that the Indemnitee has requested
indemnification.
(ii) The Indemnitee's entitlement to indemnification shall be
determined in one of the following ways: (A) by a majority vote of the
Disinterested Directors (as hereinafter defined) (or the Disinterested
Director, if only one); (B) by a written opinion of Independent Counsel (as
hereinafter defined) if (x) a Change of Control (as hereinafter defined)
shall have occurred and the Indemnitee so requests or (y) there is no
Disinterested Director or a majority of the Disinterested Directors (or the
Disinterested Director, if only one) so directs; (C) by the stockholders of
the Corporation (but only if a majority of the Disinterested Directors (or
the Disinterested Director, if only one) determines that the issue of
entitlement to indemnification should be submitted to the stockholders for
their determination); or (D) as provided in Section 4(c) of this Article
IX.
(iii) In the event the determination of entitlement to indemnification
is to be made by Independent Counsel pursuant to Section 4(b)(ii) of this
Article IX, a majority of the Disinterested Directors (or the Disinterested
Director, if only one) shall select the Independent Counsel, but only an
Independent Counsel to which the Indemnitee does not reasonably object;
provided, however, that if a Change of control shall have occurred, the
Indemnitee shall select such Independent
-22-
Counsel, but only an Independent Counsel to which the Board of Directors
does not reasonably object.
(c) Presumptions and Effect of Certain Proceedings. Except as
------------------------------------------------
otherwise expressly provided in this Article IX, the Indemnitee shall be
presumed to be entitled to indemnification upon submission of a request for
indemnification together with the Supporting Documentation in accordance with
Section 4(b)(i) of this Article IX, and thereafter the Corporation shall have
the burden of proof to overcome that presumption in reaching a contrary
determination. In any event, if the person or persons empowered under Section
4(b) of this Article IX to determine entitlement to indemnification shall not
have been appointed or shall not have made a determination within 60 days after
receipt by the Corporation of the request therefor together with the Supporting
Documentation, the Indemnitee shall be deemed to be entitled to indemnification.
With regard to the right to indemnification for expenses, if and to the extent
that the Indemnitee has been successful on the merits or otherwise in any
Proceeding, or if and to the extent that the Indemnitee was not a party to the
Proceeding or if a Proceeding was terminated without a determination of
liability on the part of the Indemnitee with respect to any claim, issue or
matter therein or without any payments in settlement or compromise being made by
the Indemnitee with respect to a claim, issue or matter therein, the Indemnitee
shall be deemed to be entitled to indemnification, which entitlement shall not
be diminished by any determination which may be made pursuant to Sections
(4)(b)(ii)(A), (B) or (C). In either case, the Indemnitee shall be entitled to
such indemnification, unless (A) the Indemnitee misrepresented or failed to
disclose a material fact in making the request for indemnification or in the
Supporting Documentation or (B) such indemnification is prohibited by law, in
either case as finally determined by adjudication or, at the Indemnitee's sole
option, arbitration (as provided in Section 4(d)(i) of this Article IX). The
termination of any Proceeding described in Section 1 of this Article IX, or of
any claim, issue or matter therein, by judgment, order, settlement or
conviction, or upon a plea of nolo contendere or its equivalent, shall not, of
----------------
itself, adversely affect the right of the Indemnitee to indemnification or
create any presumption with respect to any standard of conduct or belief or any
other matter which might form a basis for a determination that the Indemnitee is
not entitled to indemnification.
-23-
(d) Remedies of Indemnitee.
----------------------
(i) In the event that a determination is made pursuant to Section 4(b)
of this Article IX that the Indemnitee is not entitled to indemnification
under this Article IX, (A) the Indemnitee shall be entitled to seek an
adjudication of his entitlement to such indemnification either, at the
Indemnitee's sole option, in (x) an appropriate court of the State of
Delaware or any other court of competent jurisdiction or (y) an arbitration
to be conducted by three arbitrators (or, if the dispute involves less than
$100,000, by a single arbitrator) pursuant to the rules of the American
Arbitration Association; (B) any such judicial proceeding or arbitration
shall be de novo and the Indemnitee shall not be prejudiced by reason of
--------
such adverse determination; and (C) in any such judicial proceeding or
arbitration the Corporation shall have the burden of proof that the
Indemnitee is not entitled to indemnification under this Article IX.
(ii) If a determination shall have been made or deemed to have been
made, pursuant to Section 4(b) or (c) of this Article IX, that the
Indemnitee is entitled to indemnification, the Corporation shall be
obligated to pay the amounts constituting such indemnification within five
days after such determination has been made or deemed to have been made and
shall be conclusively bound by such determination, unless (A) the
Indemnitee misrepresented or failed to disclose a material fact in making
the request for indemnification or in the Supporting Documentation or (B)
such indemnification is prohibited by law, in either case as finally
determined by adjudication or, at the Indemnitee's sole option, arbitration
(as provided in Section 4(d)(i) of this Article IX). In the event that (C)
advancement of expenses is not timely made pursuant to Section 4(.a) of
this Article IX or (D) payment of indemnification is not made within five
days after a determination of entitlement to indemnification has been made
or deemed to have been made pursuant to Section 4(b) or (c) of this Article
IX, the Indemnitee shall be entitled to seek judicial enforcement of the
Corporation's obligation to pay to the Indemnitee such advancement of
expenses or indemnification. Notwithstanding the foregoing, the Corporation
may bring an action, in an appropriate court in the State of Delaware or
any other court of competent jurisdiction, contesting the right of the
Indemnitee to receive indemnification hereunder due to the occurrence
-24-
of an event described in subclause (A) or (B) of this clause (ii) (a
"Disqualifying Event"), provided, however, that if the Indemnitee shall
elect, at his sole option, that such dispute shall be determined by arbi-
tration (as provided in Section 4(d)(i) of this Article IX), the
Corporation shall proceed by such arbitration. In any such enforcement or
other proceeding or action in which whether a Disqualifying Event has
occurred is an issue, the Corporation shall have the burden of proving the
occurrence of such Disqualifying Event.
(iii) The Corporation shall be precluded from asserting in any
judicial proceeding or arbitration commenced pursuant to this Section 4(d)
that the procedures and presumptions of this Article IX are not valid,
binding and enforceable and shall stipulate in any such court or before any
such arbitrator or arbitrators that the Corporation is bound by all the
provisions of this Article IX.
(iv) In the event that the Indemnitee, pursuant to this Article IX,
seeks a judicial adjudication of or an award in arbitration to enforce his
rights under, or to recover damages for breach of, this Article IX, or is
otherwise involved in any adjudication or arbitration with respect to his
right to indemnification, the Indemnitee shall be entitled to recover from
the Corporation, and shall be indemnified by the Corporation against, any
expenses actually and reasonably incurred by him if the Indemnitee prevails
in such judicial adjudication or arbitration. If it shall be determined in
such judicial adjudication or arbitration that the Indemnitee is entitled
to receive part but not all of the indemnification or advancement of
expenses sought, the expenses incurred by the Indemnitee in connection with
such judicial adjudication or arbitration shall be prorated accordingly.
(e) Definitions. For purposes of this Section 4:
-------------
(i) "Change in Control" means a change in control of the Corporation
of a nature that would be required to be reported in response to Item 5(f)
of Schedule 14A of Regulation 14A promulgated under the Securities Exchange
Act of 1934 (the "Act"), whether or not the Corporation is then subject to
such reporting requirement; provided that, without limitation, such a
change in control shall be deemed to have occurred if (A) any "person" (as
such term is used in Sections 13(d) and 14(d) of the Act) is
-25-
or becomes the "beneficial owner" (as defined in Rule 13d-3 under the Act),
directly or indirectly, of securities of the Corporation representing 20
percent or more of the combined voting power of the Corporation's then
outstanding securities without the prior approval of at least two-thirds of
the members of the Board of Directors in office immediately prior to such
acquisition; (B) the Corporation is a party to a merger, consolidation,
sale of assets or other reorganization, or a proxy contest, as a
consequence of which members of the Board of Directors in office
immediately prior to such transaction or event constitute less than a
majority of the Board of Directors thereafter; or (C) during any period of
two consecutive years, individuals who at the beginning of such period
constituted the Board of Directors (including for this purpose any new
director whose election or nomination for election by the Corporation's
stockholders was approved by a vote of at least two-thirds of the directors
then still in office who were directors at the beginning of such period)
cease for any reason to constitute at least a majority of the Board of
Directors.
(ii) "Disinterested Director" means a director of the Corporation who
is not or was not a material party to the Proceeding in respect of which
indemnification is sought by the Indemnitee.
(iii) "Independent Counsel" means a law firm or a member of a law firm
that neither presently is, nor in the past five years has been, retained to
represent: (A) the Corporation or the Indemnitee in any matter or (B) any
other party to the Proceeding giving rise to a claim for indemnification
under this Article IX. Notwithstanding the foregoing, the term "Independent
Counsel" shall not include any person who, under the applicable standards
of professional conduct then prevailing under the law of the State of
Delaware, would have a conflict of interest in representing either the
Corporation or the Indemnitee in an action to determine the Indemnitee's
rights under this Article IX.
Section 5. Acts of Disinterested Directors. Disinterested Directors
---------------------------------
considering or acting on any indemnification matter under this Article IX or
otherwise may consider or take action as the Board of Directors or may consider
or take action as a committee or individually or otherwise. In the event
Disinterested Directors consider or take action as the Board of Directors, one-
third of the total number of directors shall constitute a quorum.
-26-
Section 6. Severability. If any provision or provisions of this
--------------
Article IX shall be held to be invalid, illegal or unenforceable for any reason
whatsoever: (i) the validity, legality and enforceability of the remaining pro-
visions of this Article IX (including, without limitation, all portions of any
paragraph of this Article IX containing any such provision held to be invalid,
illegal or unenforceable, that are not themselves invalid, illegal or unenforce-
able) shall not in any way be affected or impaired thereby; and (ii) to the
fullest extent possible, the provisions of this Article IX (including, without
limitation, all portions of any paragraph of this Article IX containing any such
provision held to be invalid, illegal or unenforceable, that are not themselves
invalid, illegal or unenforceable) shall be construed so as to give effect to
the intent manifested by the provision held invalid, illegal or unenforceable.
ARTICLE X
Fiscal Year
-----------
The fiscal year of the Corporation shall be fixed by resolution of the
Board of Directors.
ARTICLE XI
Seal
----
The Board of Directors shall provide a corporate seal, which shall be
circular in form and bear the name of the Corporation and the words and figures
denoting its organization under the laws of the State of Delaware and the year
thereof.
ARTICLE XII
Amendments
----------
These By-Laws may be amended or repealed, or new By-Laws may be adopted,
except as provided in Section 3 of Article IX of these By-Laws, (a) at any
annual or special meeting of the stockholders, by a majority of the total votes
of the stockholders or when stockholders are entitled
-27-
to vote by class, by a majority of the appropriate class, present in person or
represented by proxy and entitled to vote on such action; provided, however,
that the notice of such meeting shall have been given as provided in these By-
Laws, which notice shall mention that amendment or repeal of these By-Laws or
the adoption of new By-Laws is one of the purposes of such meeting, or (b) by
the Board of Directors at any meeting thereof; provided, however, that notice of
such meeting shall have been given as provided in these ByLaws, which notice
shall mention that amendment or repeal of the By-Laws or the adoption of new By-
Laws is one of the purposes of such meeting; provided, further, that By-Laws
adopted by the Board of Directors may be amended or repealed by the stockholders
as hereinabove provided; provided, further, that the stockholders may limit the
power of the Board of Directors to make, amend, alter or repeal the ByLaws of
the Company. Notwithstanding the foregoing, the provisions of these By-Laws with
respect to the number, classification, term of office, qualifications, election
and removal of directors and the filling of vacancies and newly created
directorships, and the amendment thereof, that is, Sections 2, 10 and 11 of
Article III and this Article XII, may be amended or repealed or new By-Laws
affecting such provisions may be adopted only with the unanimous approval of the
entire Board of Directors or by the affirmative vote of the holders of at least
80% of the outstanding shares of stock of the Corporation entitled to vote in
elections of directors (except that if such proposed amendment or repeal or
adoption of new By-Laws shall be submitted to the stockholders with the
unanimous recommendation of the entire Board of Directors, such provisions may
be amended or repealed or such new By-Laws may be adopted by the affirmative
vote of the holders of a majority of such stock).
-28-
Exhibit 10.1
[Form of Registration Rights Agreement]
REGISTRATION RIGHTS AGREEMENT dated as of June ,
1996, between each of HOWARD E. WILLE and CHARLES J. SNYDER,
(herein referred to collectively as the "Stockholders" and
individually as a "Stockholder"), and FACTSET RESEARCH
SYSTEMS INC. (the "Company").
The Stockholders are the beneficial owners of certain shares of
Common Stock, par value $.01 per share, of the Company (the "Common
Stock"). In connection with the execution and delivery of this Agreement,
the Stockholders are selling in an underwritten public offering a number of
shares of Common Stock (the "Initial Public Offering"). At any time and
from time to time hereafter, the Stockholders may acquire other classes of
securities or additional shares of Common Stock (all such securities of the
Company, including the Common Stock, being included in the term the
"Securities", which term has the meaning assigned thereto in Section 8(c)
hereof).
In consideration of the foregoing and in order to specify certain
provisions relating to the sale by means of domestic or foreign public
offerings of Securities owned by the Stockholders, the parties agree as
follows:
1. Registration and Listing Rights.
-------------------------------
(a) Registration. If a Stockholder shall, at any time and
------------
2
from time to time, request the Company in writing to register under the
Securities Act of 1933 (the "Act") any Securities held by it (whether for
purposes of a public offering, an exchange offer or otherwise), the Company
shall use all reasonable efforts to cause the prompt registration of all
Securities specified in such request, and in connection therewith shall
prepare and file on such appropriate form as the Company, in its reasonable
discretion, shall determine, a registration statement under the Act to
effect such registration and shall take such actions as shall be necessary
or appropriate, in the Company's reasonable discretion, to have such
Securities listed or approved for trading on any securities exchange or
through any facility on which or through which Securities of such class are
already traded. If a Stockholder shall so request, the Company will
register such Securities for offering on a delayed or continuous basis
pursuant to Rule 415 (or any successor rule or rules to similar effect)
under the Act. Notwithstanding the foregoing, the Company shall be
entitled to postpone for a reasonable period of time, but not in excess of
90 calendar days, the filing of any registration statement otherwise
required to be prepared and filed by it under this paragraph (a) if (i) the
Company determines in good faith that the filing of such
3
registration statement would interfere with any pending financing,
acquisition, corporate reorganization or any other corporate development
involving the Company or any of its subsidiaries or would require premature
disclosure thereof and (ii) the Company so notifies the requesting Stock-
holder within 10 days after the Stockholder so requests.
(b) Other Offers and Sale. If a Stockholder shall, at any time
----------------------
and from time to time, request the Company in writing to take such actions
as shall be necessary or appropriate to permit any Securities held by it to
be publicly or privately offered and sold in compliance with the securities
laws or other relevant laws or regulations of any foreign jurisdiction, the
Company shall use all reasonable efforts to take such actions in any such
foreign jurisdiction (including listing such Securities on any foreign
securities exchange on which such listing is requested by the Stockholder
and on which Securities of the same class are already traded) and shall
otherwise cooperate in a timely manner in such offering. Any request under
this paragraph (b) may be made separately or in conjunction with any
request under paragraph (a). Notwithstanding the foregoing, the Company
shall be entitled to postpone for a reasonable period of time, but not in
excess of 90 calendar
4
days, the taking of any actions otherwise required under this paragraph (b)
if (i) the Company determines in good faith that the filing of such
registration statement would interfere with any pending financing,
acquisition, corporate reorganization or any other corporate development
involving the Company or any of its subsidiaries or would require premature
disclosure thereof and (ii) the Company so notifies the requesting Stock-
holder within 10 days after the Stockholder so requests.
(c) Written Notice. Any request by a Stockholder pursuant to
---------------
paragraph (a) or (b) of this Section 1 shall (i) specify the number and
class of shares or the principal amount, as the case may be, of Securities
which the Stockholder intends to offer and sell, (ii) express the intention
of the Stockholder to offer or cause the offering of such Securities,
(iii) describe the nature or method of the proposed offer and sale thereof
and state whether such offer shall be made domestically or abroad, or both,
and, if abroad, the country or countries in which such offer shall be made,
(iv) specify any securities exchange or trading facility on which or
through which the Stockholder requests that such Securities be listed or
approved for trading, (v) contain the undertaking of the Stockholder to
provide all such information regarding its holdings and the proposed
5
manner of distribution thereof as may be required in order to permit the
Company to comply with all applicable laws and regulations, foreign or
domestic, and all requirements of the Securities and Exchange Commission
(the "SEC"), any other applicable United States or foreign regulatory or
self regulatory body and any other body having jurisdiction and any
securities exchange or trading facility on which or through which the
Securities are to be listed or traded and to obtain acceleration of the
effective date of any registration statement filed in connection therewith
and (vi) in the case of an underwritten public offering made domestically
or abroad, or both, specify the managing underwriter or underwriters of
such Securities, which shall be selected by the requesting Stockholder.
(d) Condition to Exercise of Rights. The obligations of the
--------------------------------
Company under paragraphs (a) and (b) of this Section 1 shall be subject to
the limitations that the Company shall not be obligated to register, take
other specified actions with respect to, or cooperate in the offering of,
Securities upon the request of a Stockholder, (i) more than twice in any
12-month period and (ii) unless, in the case of a class of equity
Securities, the number of shares specified in such request pursuant to Sec-
tion 1(c)(i) shall be greater than 3% of the total number of shares of
6
such class at the time issued and outstanding (provided that a stockholder
owing less than 3% of the total number of shares of a class outstanding may
request the registration of all shares the held by such stockholder), or,
in the case of a class of debt Securities, the principal amount specified
in such request pursuant to Section 1(c)(i) shall be at least $1,000,000.
Notwithstanding the foregoing, the failure of a Stockholder to own the
minimum number or percent or principal amount of Securities referred to in
the preceding sentence at any time shall not affect the ability of the
Stockholder to exercise its rights under this Agreement at any subsequent
time when the Stockholder again owns such minimum number or percent or
principal amount.
(e) Incidental Registration. If the Company shall, at any time
------------------------
and from time to time after the Initial Public Offering, propose an
underwritten offering for cash of any Securities, whether pursuant to a
registration statement under the Act or otherwise, the Company shall give
written notice as promptly as practicable of such proposed registration or
offering to the Stockholders and shall use its best efforts to include in
such offering and, if such offering is pursuant to a registration statement
under the Act, in such registration, any of the same class of such
Securities held by a Stockholder as a Stockholder shall re-
7
quest within 20 calendar days after the giving of such notice, upon the
same terms (including the method of distribution) as such offering;
provided, however, that (i) the Company shall not be required to give such
- -------- -------
notice or include any such Securities in any offering pursuant to a
registration statement filed on Form S-8 or Form S-4 (or such other form or
forms as shall be prescribed under the Act for the same purposes as such
forms) or any registration statement for a dividend reinvestment or
employee stock purchase plan and (ii) the Company may at any time prior to
the effectiveness of any such registration statement or commencement of any
such offering not pursuant to a registration statement, in its sole
discretion and without the consent of Stockholders, abandon the proposed
offering in which a Stockholder had requested to participate.
Notwithstanding the foregoing, the Company shall not be obligated to
include such Securities in such offering if the Company is advised in
writing by its managing underwriter or underwriters (with a copy to each
requesting Stockholder within 5 days after the delivery of any such request
pursuant to this paragraph (e) that such offering would in its or their
opinion be materially adversely affected by such inclusion; provided,
--------
however, that the Company shall in any case be obligated to include such
- -------
number or amount of
8
Securities in such offering as such managing underwriter or underwriters
shall determine will not materially adversely affect such offering.
2. Covenants of the Company. In connection with any offering of
------------------------
Securities pursuant to this Agreement, the Company shall:
(a) furnish to a Stockholder such number of copies of any
prospectus (including any preliminary prospectus), registration statement,
offering memorandum or other offering document (including any exhibits
thereto or documents referred to therein) as a Stockholder may reasonably
request and a copy of any and all transmittal letters or other
correspondence with the SEC or any other governmental agency or
self-regulatory body or other body having jurisdiction (including any
securities exchange or trading facility) relating to such offering of
Securities;
(b) take such reasonable action as may be necessary to qualify
such Securities for offer and sale under the securities, "blue sky" or
other similar laws of such jurisdictions (including any foreign country or
political subdivision thereof) as a Stockholder or any underwriter shall
request;
(c) enter into an underwriting agreement (or equivalent document
in any foreign jurisdiction) containing
9
representations, warranties, indemnities, contribution provisions and
agreements then customarily included by an issuer in underwriting
agreements (or such equivalent documents) in the form customarily used by
the lead underwriter with respect to secondary distributions;
(d) furnish unlegended certificates representing ownership of the
Securities being sold in such denominations as shall be requested by a
Stockholder or the lead underwriter;
(e) in the case of any offering of equity Securities, instruct
the transfer agent and registrar to release any stop transfer orders with
respect to the equity Securities being sold;
(f) promptly inform each requesting Stockholder (i) in the case
of any domestic offering of Securities in respect of which a registration
statement is filed under the Act, of the date on which such registration
statement or any post-effective amendment thereto becomes effective (and,
in the case of an offering abroad of Securities, of the date when any
required filing under the securities and other laws of such foreign
jurisdictions shall have been made and when the offering may be commenced
in accordance with such laws) and (ii) of any request by the SEC, any
securities exchange, government agency, self-regulatory body or other body
having
10
jurisdiction for any amendment of or supplement to any registration
statement or preliminary prospectus or prospectus included therein or any
offering memorandum or other offering document relating to such offering;
(g) upon any registration statement becoming effective pursuant
to any registration under the Act pursuant to this Agreement, file any
necessary amendments or supplements to such registration statement and
otherwise use its best efforts to keep such registration statement current
for such period as a Stockholder shall request;
(h) take such reasonable actions as may be necessary to have such
Securities listed on or traded through any securities exchange or trading
facility on which or through which a Stockholder shall request such listing
or approval pursuant to the notice delivered by the Stockholder under
Section 1(c) hereof;
(i) promptly notify each requesting Stockholder of the happening
of any event as a result of which any registration statement or any
preliminary prospectus or prospectus included therein or any offering
memorandum or other offering document includes an untrue statement of a
material fact or omits to state any material fact required to be stated
therein or necessary to make the statements therein not misleading in the
light of the circumstances
11
then existing, and prepare and furnish to such Stockholders as many copies
of a supplement to or amendment of such offering document which shall
correct such untrue statement or eliminate such omission, as such
Stockholders shall reasonably request;
(j) appoint a trustee or fiscal agent (in the case of debt
Securities) and any transfer agent, registrar, depositary, authentication
agent or other agent as may be reasonably requested by a Stockholder; and
(k) take such other actions and execute and deliver such other
documents as may be necessary or reasonably requested by a Stockholder in
order to give full effect to the rights of the Stockholder under this
Agreement.
3. Expenses. (a) In connection with the first three exercises
---------
by a Stockholder of his rights under Section 1(a) or (b), the Company shall
pay all expenses incurred in complying with Section 1(a) or (b) hereof,
including, without limitation, all registration and filing fees (including
all expenses incident to any filing with the National Association of
Securities Dealers, Inc. or listing on or approval for trading through any
securities exchange or trading facility), fees and expenses of complying
with securities and "blue sky" laws (including those of counsel retained to
effect such compliance), printing expenses and
12
any stamp, duty or transfer tax (collectively, "Registration Expenses").
In connection with each subsequent exercise by a Stockholder of his rights
under Section 1(a) or (b), the Company and the Stockholder shall each pay
one-half of the Registration Expenses. Notwithstanding the foregoing,
(i) a Stockholder shall pay all underwriting discounts and commissions,
(ii) the Company shall pay (x) the fees and disbursements of its
independent public accountants (including any such fees and expenses
incurred in performing any special audits required in connection with any
such offering and incurred in connection with the preparation of pro forma
financial statements and comfort letters for any such offering),
(y) transfer agents', trustees', fiscal agents', depositories' and
registrars' fees and the fees of any other agent appointed in connection
with such offering and (z) all security engraving and printing expenses and
(iii) each party shall pay the fees and expenses of its counsel.
(b) All expenses incurred in complying with Section 1(e) hereof,
including, without limitation, any Registration Expenses, shall be paid by
the Company, except that (i) a Stockholder shall pay all underwriting
discounts, commissions and expenses specifically attributable to the
inclusion in the offering under said Section 1(e) of the
13
Securities being sold by such Stockholder and (ii) each party shall pay the
fees and expenses of its counsel.
4. Indemnification. (a) Company Indemnity. In the case of any
---------------- ------------------
offering or sale of Securities covered by this Agreement, the Company shall
indemnify and hold harmless the Stockholders, and each person affiliated
with or retained by the Stockholders and who may be subject to liability
under any applicable foreign securities laws, against any and all losses,
claims, damages or liabilities to which they or any of them may become
subject under the Act or any other statute or common law of the United
States of America or any other country or political subdivision thereof, or
otherwise, including any amount paid in settlement of any litigation
commenced or threatened (including any amounts paid pursuant to or in
settlement of claims made under the indemnification or contribution
provisions of any underwriting or similar agreement entered into by the
Stockholders in connection with any offering or sale of Securities covered
by this Agreement), and shall promptly reimburse them, as and when
incurred, for any legal or other expenses incurred by them in connection
with investigating any claims and defending any actions, insofar as any
such losses, claims, damages, liabilities or actions shall arise out of or
shall be based upon any untrue statement or alleged untrue state-
14
ment of a material fact contained in the registration statement (or in any
preliminary or final prospectus included therein) or in any offering
memorandum or other offering document relating to the offering and sale of
such Securities, or the omission or alleged omission to state therein a
material fact required to be stated therein or necessary to make the
statements therein not misleading or any violation or alleged violation by
the Company of the Act, any "blue sky" laws, securities laws or other
applicable laws of any jurisdiction relating to any actual or alleged
action or inaction required of the Company in connection with such
offering; provided, however, that the indemnification agreement contained
-------- -------
in this Section 4 shall not apply to such losses, claims, damages,
liabilities or actions to the extent that such losses, claims, damages,
liabilities or actions shall arise out of or shall be based upon any such
untrue statement or alleged untrue statement, or any such omission shall
have been made in reliance upon and in conformity with information jointly
identified in writing by the Company and a Stockholder as concerning such
Stockholder and its security holdings in the Company and so identified for
use in connection with the preparation of the registration statement or any
preliminary prospectus or prospectus contained in the registration
statement, any
15
offering memorandum or other offering document, or any amendment thereof or
supplement thereto. Notwithstanding the foregoing, no underwriter or
selling or placement agent shall be entitled to indemnification under this
Agreement if such person shall have entered into a separate underwriting,
agency or indemnification agreement with the Company that pertains to the
same transaction.
(b) Stockholder Indemnity. In the case of each offering or sale
----------------------
of Securities covered by this Agreement, the requesting Stockholder shall,
in the same manner and to the same extent as set forth in paragraph (a) of
this Section 4, indemnify and hold harmless the Company and each person, if
any, who controls the Company within the meaning of Section 15 of the Act,
and each person affiliated with or retained by the Company and who may be
subject to liability under any applicable foreign securities laws, its
directors and those officers of the Company who shall have signed any
registration statement, offering memorandum or other offering document with
respect to any statement in or omission from such registration statement,
any preliminary prospectus or prospectus contained in such registration
statement or from such offering memorandum or other offering document, as
amended or supplemented, if such statement or omission shall have been made
in reliance upon and in conformity with
16
information jointly identified in writing by the Company and the
Stockholder as concerning the Stockholder and its security holdings in the
Company and so identified for use in connection with the preparation of
such registration statement, any preliminary prospectus or prospectus
contained in such registration statement, any offering memorandum or other
offering document, or any amendment thereof or supplement thereto.
(c) Procedure for Indemnification. Each party indemnified under
------------------------------
paragraph (a) or (b) of this Section 4, or under Section 8(f) hereof,
shall, promptly after receipt of notice of the commencement of any action
against such indemnified party in respect of which indemnity may be sought,
notify the indemnifying party in writing of the commencement thereof. The
omission of any indemnified party so to notify an indemnifying party of any
such action shall not relieve the indemnifying party from any liability in
respect of such action which it may have to such indemnified party on
account of the indemnity agreement contained in paragraph (a) or (b) of
this Section 4, or under Section 8(f) hereof, except to the extent that the
indemnifying party was prejudiced by such omission, and in no event shall
relieve the indemnifying party from any other liability which it may have
to such indemnified party. In case any such action
17
shall be brought against any indemnified party and such indemnified party
shall notify an indemnifying party of the commencement thereof, the
indemnifying party shall be entitled to participate therein and, to the
extent that it may wish, jointly with any other indemnifying party
similarly notified, to assume the defense thereof, with counsel
satisfactory to such indemnified party. If the indemnifying party so
assumes the defense thereof, it may not agree to any settlement of any such
action as the result of which any remedy or relief, other than monetary
damages for which the indemnifying party shall be responsible hereunder,
shall be applied to or against the indemnified party, without the prior
written consent of the indemnified party. If the indemnifying party does
not assume the defense thereof, it shall be bound by any settlement to
which the indemnified party agrees, irrespective of whether the indem-
nifying party consents thereto. If any settlement of any claim is effected
by the indemnified party prior to commencement of any action relating
thereto, the indemnifying party shall be bound thereby only if it has
consented in writing thereto. In any action hereunder, the indemnified
party shall continue to be entitled to participate in the defense thereof,
with counsel of its own choice, even if the indemnifying party has assumed
the defense thereof, and the
18
indemnifying party shall not be relieved of the obligation hereunder to
reimburse the indemnified party for the costs thereof.
5. Transfer of Rights. (a) Subject to paragraph (b) below, the
-------------------
rights of a Stockholder under this Agreement with respect to any Security
may be transferred to any one or more transferee of such Security if such
transferee (i) is the estate or personal representative of such
Stockholder, (ii) is controlled by such Stockholder or (iii) acquires,
either individually or when aggregated with other transferees, at least 25%
of the aggregate number of shares of any class of equity Securities held by
such Stockholder on the date the Stockholder first acquired any of such
equity Securities (which for purposes of the Common Stock shall be the time
immediately after the initial public offering by the Company of the Common
Stock) or 25% in principal amount of any issue of debt Securities held by
such Stockholder at the date the Stockholder first acquired any of such
debt Securities. Any transfer of registration rights pursuant to this
Section 5 shall be effective only upon receipt by the Company of written
notice from the Stockholder stating the name and address of any transferee
and identifying the Securities with respect to which the rights under this
Agreement are being transferred.
19
(b) The rights of a transferee under paragraph (a) above shall
be the same rights granted to a Stockholder under this Agreement, except
that (i) such transferee shall only have the right to make one request
under paragraph (a) or (b) of Section 1, which may be a simultaneous
request under paragraphs (a) and (b), and two requests under paragraph (e)
of Section 1, (ii) all rights referred to in the foregoing clause (i) with
respect to any particular Securities shall expire on the third anniversary
of the receipt of such Securities by the transferee and (iii) such
transferee shall be required to pay all (or in the case of a request under
Paragraph 1(e) such transferee's proportionate share of) the stamp, duty or
transfer taxes and underwriting discounts and commissions.
6. Termination of Obligations. Section 1 of this Agreement
---------------------------
shall terminate and cease to be of any force and effect in respect of a
Stockholder at such time as the Stockholder shall first cease beneficially
to own any of the outstanding Common Stock (the "Termination Date");
provided, however, that such termination shall not affect the rights of any
- -------- -------
transferee under Section 5 with regard to any Securities transferred prior
to the Termination Date.
20
7. Representations and Warranties. As an inducement to enter
-------------------------------
into this Agreement, (a) the Company represents and warrants that:
(i) it is a corporation duly organized, validly existing and
in good standing under the laws of the State of Delaware and has
all requisite corporate power to own, lease and operate its
properties, to carry on its business as presently conducted and
to carry out the transactions contemplated by this Agreement;
(ii) it has duly and validly taken all corporate action
necessary to authorize the execution, delivery and performance of
this Agreement and the consummation of the transactions
contemplated hereby;
(iii) this Agreement has been duly executed and delivered by
it and constitutes its legal, valid and binding obligation
enforceable in accordance with its terms (subject, as to the
enforcement of remedies, to applicable bankruptcy, reorganiza-
tion, insolvency, moratorium or other similar laws affecting the
enforcement of creditors' rights generally from time to time in
effect, and subject
21
to equitable limitations on the availability of the remedy of
specific performance); and
(iv) none of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby or the
compliance with any of the provisions of this Agreement will
(x) conflict with or result in a breach of any provision of its
corporate charter or by-laws, (y) breach, violate or result in a
default under any of the terms of any agreement or other instru-
ment or obligation to which it is a party or by which it or any
of its properties or assets may be bound, or (z) violate any
order, writ, injunction, decree, statute, rule or regulation
applicable to it or affecting any of its properties or assets;
and (b) each Stockholder represents and warrants that:
(i) this Agreement has been duly executed and delivered by
such Stockholder and constitutes a legal, valid and binding
obligation of the Stockholder enforceable in accordance with its
terms (subject, as to the enforcement of remedies, to applicable
bankruptcy, reorganization, insolvency, moratorium or other
similar laws affecting the enforcement of creditors' rights
generally from
22
time to time in effect, and subject to equitable limitations on
the availability of the remedy of specific performance); and
(ii) none of the execution and delivery of this Agreement,
the consummation of the transactions contemplated hereby or the
compliance with any of the provisions of this Agreement will
(x) breach, violate or result in a default under any of the terms
of any agreement or other instrument or obligation to which such
Stockholder is a party or by which such Stockholder or such
Stockholder's properties or assets may be bound or (y) violate
any order, writ, injunction, decree, statute, rule or regulation
applicable to such Stockholder or affecting any of its properties
or assets.
8. Certain Agreements and Definitions.
-----------------------------------
(a) Calculation of Amounts. For purposes of this Agreement, the
----------------------
amount of any Securities outstanding at any time (and the amount of any
Securities then beneficially owned by a Stockholder or any other person)
shall be calculated on the basis of the information contained in the
Company's most recent report filed with the SEC. For purposes of calcu-
lating the amount of Securities outstanding at
23
any time (and the amount of Securities then beneficially owned by a
Stockholder or any other person) all outstanding securities convertible
into or exchangeable for such Securities shall be deemed to have been fully
converted at such time.
(b) "person"; "affiliate". As used in this Agreement, the term
----------------------
"person" shall mean any individual, partnership, corporation, trust or
other entity. As used in this Agreement, the term "affiliate" shall mean,
with respect to any specified person, any other person that directly, or
indirectly through one or more intermediaries, controls, or is controlled
by, or is under common control with, such specified person.
(c) "Securities". As used in this Agreement, the term
-------------
"Securities" shall include any security of the Company now owned or
hereafter acquired by the Stockholders, whether acquired in any transaction
with the Company or another person, in any recapitalization of the Company,
as a dividend or other distribution, as a result of any "split" or "reverse
split", upon conversion or exercise of another security of the Company or
any other person, or otherwise.
(d) No Legend. No Security held or to be sold by a Stockholder
----------
shall bear any legend, nor shall the Company cause or permit any transfer
agent or registrar appointed by
24
the Company with respect to such Security to refuse or fail to effect a
transfer or registration with respect to such Security, provided that the
Stockholder provides to the Company a certificate of such Stockholder in
connection with such transfer or registration to the effect that such
transfer or registration is not in violation of any applicable securities
or other law.
(e) Stock Books. Except as otherwise provided by law for all
------------
holders of securities, the Company will not close its stock books or other
registries against the transfer of any Security held by a Stockholder.
(f) Securities Exchange Act of 1934. The Company shall at all
--------------------------------
times timely file such information, documents and reports as the SEC may
require or prescribe under the Securities Exchange Act of 1934 (the
"Exchange Act") and shall provide each Stockholder with two copies of each
thereof or any other communication with or from the SEC. The Company
shall, whenever requested by a Stockholder, notify such Stockholder in
writing whether the Company has, as of the date specified by the
Stockholder, complied with the Exchange Act reporting requirements to which
it is subject for such period to such date as shall be specified by the
Stockholder. The Company acknowledges and agrees that one of the purposes
of the requirements contained in
25
this Section 8(f) is to enable the Stockholders to comply with the current
public information requirements contained in Paragraph (c) of Rule 144
under the Act (or any corresponding rule hereafter in effect) should a
Stockholder ever wish to dispose of any Securities without registration
under the Act in reliance upon Rule 144. In addition, the Company shall
take such other measures and file such other information, documents and
reports as shall hereafter be required by the SEC as a condition to the
availability of Rule 144. The Company covenants, represents and warrants
that all such information, documents and reports filed with the SEC shall
not contain any untrue statement of a material fact or fail to state
therein a material fact required to be stated therein or necessary to make
the statements contained therein not misleading, and the Company shall
indemnify and hold each Stockholder and each broker, dealer, underwriter or
other person acting for a Stockholder (and any controlling person of any of
the foregoing) harmless from and against any and all claims, liabilities,
losses, damages, expenses and judgments and shall promptly reimburse them,
as and when incurred, for any legal or other expenses incurred by them in
connection with investigating any claim and defending any actions insofar
as such claims, liabilities, losses, damage expenses and judgments arise
out of or based upon any breach
26
of the foregoing covenants, representations or warranties. The procedure
for indemnification set forth in Section 4(c) hereof shall apply to the
indemnification provided under this Section 8(f).
(g) Listing. Once initially listed or approved for trading, the
--------
Company shall maintain in effect any listing of Securities on any
securities exchange or approved for trading through a trading facility,
shall make all filings and take all other actions required under the rules
of such exchange or facility and any applicable agreement, shall provide
each Stockholder with two copies of each such filing or any other
communication with such exchange or facility at the time at which such
filing is made, and shall notify each Stockholder of any proceeding or
other action taken by such exchange or facility or any other person which
might have the effect of terminating or otherwise changing the status of
such listing, forthwith upon the occurrence thereof. Notwithstanding the
foregoing, the Company shall be entitled at any time to terminate any
securities exchange listing or approval for trading through any trading
facility for the entirety of any class of Securities.
(h) Limitation on Other Securities To Be Registered. In case of
------------------------------------------------
any registration, offering or sale contemplated by paragraph (a) or (b) of
Section 1, the
27
Company shall not, without the consent of the requesting Stockholder,
include in such registration, offering or sale any Securities other than
those beneficially owned by such Stockholder. In case of any registration,
offering or sale contemplated by paragraph (e) of Section 1, the Company
shall be entitled to include in such registration, offering or sale any
Securities other than those being offered by the Company and a Stockholder,
pro rata, on the basis of the amounts of securities covered by all requests
of stockholders received by the Company. In the case of a transferee under
Section 5, the Company shall be entitled to include in any registration,
offering or sale contemplated by Section 1, all transferees making a
request under such section and at the option of the Company other persons
making similar requests, pro rata, on the basis of the number of shares or
principal amount of securities covered by any such request.
9. Miscellaneous. (a) Severability. If any term, provision,
-------------- ------------
covenant or restriction of this Agreement is held by a court of competent
jurisdiction to be invalid, void, or unenforceable, the remainder of the
terms, provisions, covenants and restrictions set forth herein shall remain
in full force and effect and shall in no way be affected, impaired or
invalidated, and the parties hereto
28
shall use their best efforts to find and employ an alternative means to
achieve the same or substantially the same result as that contemplated by
such term, provision, covenant or restriction. It is hereby stipulated and
declared to be the intention of the parties that they would have executed
the remaining terms, provisions, covenants and restrictions without
including any of such which may be hereafter declared invalid, void or
unenforceable.
(b) Assignment. Except as provided otherwise in Section 5
-----------
hereof, and except by operation of law or in connection with the sale of
all or substantially all the assets of a party hereto, this Agreement shall
not be assignable, in whole or in part, directly or indirectly, by either
party hereto without the prior written consent of the other, and any
attempt to assign any rights or obligations arising under this Agreement
without such consent shall be void; provided, however, that the provisions
-------- -------
of this Agreement shall be binding upon, inure to the benefit of and be en-
forceable by the Stockholders and the Company (including, solely for
purposes of Section 4 hereof, their officers and directors) and their
respective successors and permitted assigns.
(c) Further Assurances. Subject to the specific terms of this
------------------
Agreement, each of the Stockholders and the
29
Company shall make, execute, acknowledge and deliver such other instruments
and documents, and take all such other actions, as may be reasonably
required in order to effectuate the purposes of this Agreement and to
consummate the transactions contemplated hereby. Subject to the specific
terms of this Agreement, each of the Stockholders and the Company shall, in
connection with entering into this Agreement, performing its obligations
hereunder and taking any and all actions relating hereto, comply with all
applicable laws, regulations, orders and decrees, obtain all required con-
sents and approvals and make all required filings with any governmental
agency, other regulatory or administrative agency, commission or similar
authority and promptly provide the other with all such information as the
other may reasonably request in order to be able to comply with the provi-
sions of this sentence.
(d) Parties in Interest. Except as herein otherwise
--------------------
specifically provided, nothing in this Agreement expressed or implied is
intended or shall be construed to confer any right or benefit upon any
person, firm or corporation other than the Stockholders and the Company and
their respective successors and permitted assigns.
(e) Waivers, Etc. No failure or delay on the part of a
-------------
Stockholder or the Company in exercising any power
30
or right hereunder shall operate as a waiver thereof, nor shall any single
or partial exercise of any such right or power, or any abandonment or
discontinuance of steps to enforce such a right or power, preclude any
other or further exercise thereof or the exercise of any other right or
power. No modification or waiver of any provision of this Agreement nor
consent to any departure by a Stockholder or the Company therefrom shall in
any event be effective unless the same shall be in writing, and then such
waiver or consent shall be effective only in the specific instance and for
the specific purpose for which given.
(f) Setoff. All payments to be made by either party under this
-------
Agreement shall be made without setoff, counterclaim or withholding, all of
which are expressly waived.
(g) Changes of Law. If, due to any change in applicable law or
---------------
regulations or the interpretation thereof by any court of law or other
governing body having jurisdiction subsequent to the date of this
Agreement, performance of any provision of this Agreement or any
transaction contemplated hereby shall become impracticable or impossible,
the parties hereto shall use their best efforts to find and employ an
alternative means to achieve the same or
31
substantially the same result as that contemplated by such provision.
(h) Confidentiality. Subject to any contrary requirement of law
----------------
and the right of a party to enforce its rights hereunder in any legal
action, each party shall keep strictly confidential and shall cause its
employees and agents to keep strictly confidential, any information which
it or any of its agents or employees may acquire pursuant to, or in the
course of performing its obligations under, any provision of this
Agreement; provided, however, that such obligations to maintain
-------- -------
confidentiality shall not apply to information which (i) at the time of
disclosure was in the public domain not as a result of acts by the
receiving party or (ii) was in the possession of the receiving party at the
time of disclosure.
(i) Entire Agreement. This Agreement contains the entire
-----------------
understanding of the parties with respect to the transactions contemplated
hereby.
(j) Headings. Descriptive headings are for convenience only and
---------
shall not control or affect the meaning or construction of any provision of
this Agreement.
(k) Counterparts. For the convenience of the parties, any
-------------
number of counterparts of this Agreement may be executed by the parties
hereto, and each such executed
32
counterpart shall be, and shall be deemed to be, an original instrument.
(l) Notices. All notices, consents, requests, instructions,
--------
approvals and other communications provided for herein shall be validly
given, made or served, if in writing and delivered personally, by telegram
or sent by registered mail, postage prepaid, to:
the Company at: One Greenwich Plaza
Greenwich, CT 06830
the Stockholders at: One Greenwich Plaza
Greenwich, CT 06830
Attention of Mr. Howard E. Wille
or
One Greenwich Plaza
Greenwich, CT 06830
Attention of Mr. Charles J. Snyder
or to such other address as any party may, from time to time, designate in
a written notice given in a like manner. Notice given by telegram shall be
deemed delivered when received by the recipient. Notice given by mail as
set out above shall be deemed delivered five calendar days after the date
the same is mailed.
(n) Governing Law. This Agreement shall be governed by and
--------------
construed and enforced in accordance with
33
the laws of the State of Connecticut applicable to contracts made and to be
performed therein.
IN WITNESS WHEREOF, the Stockholder and the Company have duly
executed this Agreement as of the day and year first above written.
------------------------------
HOWARD E. WILLE
------------------------------
CHARLES J. SNYDER
FACTSET RESEARCH SYSTEM INC.,
by
------------------------
Name:
Title:
Exhibit 10.2
EMPLOYMENT AGREEMENT
--------------------
AGREEMENT made this day of [June] 1996,
between FactSet Research Systems Inc.,
a Delaware corporation (the "Company"), and [Howard E.
Wille] [Charles J. Snyder] (the "Executive").
The Executive is presently employed by the Company as [Chairman
of the Board of Directors and Chief Executive Officer] [President and Chief
Technology Officer].
The Board of Directors of the Company (the "Board") recognizes
that the Executive's contribution to the growth and success of the Company
has been substantial. The Board desires to provide for the continued
employment of the Executive and to make certain changes in the Executive's
employment arrangements with the Company which the Board has determined
will reinforce and encourage the continued attention and dedication to the
Company of the Executive as a member of the Company's management, in the
best interest of the Company and its shareholders. The Executive is
willing to commit himself to continue to serve the Company, on the terms
and conditions herein provided.
In order to effect the foregoing, the Company and the Executive
wish to enter into an employment agreement on the terms and conditions set
forth below. Accordingly, in consideration of the premises and the
respective covenants and agreements of the parties herein contained, and
intending to be legally bound hereby, the parties hereto agree as follows:
SECTION 1. Employment. The Company hereby agrees to continue to
-----------
employ the Executive, and the Executive hereby agrees to continue to serve
the Company, on the terms and conditions set forth herein.
SECTION 2. Term. The employment of the Executive by the Company
-----
as provided in Section 1 will commence on the date hereof and end on [June
30], 1999, unless further extended or sooner terminated as hereinafter
provided. Commencing on [July 1], 1999, and each [July 1] thereafter, the
term of the Executive's employment shall automatically be extended for one
additional year to, respectively [June 30], 2000, and each [June 30]
thereafter, unless, not later than one year prior to the end of the term
(as may be
2
extended for one-year additional periods as provided herein), either party
hereunder shall have given notice to the other party that it does not wish
to extend this Agreement. If the Company gives the Executive notice that
it does not wish to extend this Agreement, the Executive shall be entitled
to the termination benefits provided in Section 8(d) hereof.
SECTION 3. Position and Duties. The Executive shall serve as
--------------------
[Chairman of the Board and Chief Executive Officer] [President and Chief
Technology Officer] of the Company and shall have such responsibilities,
duties and authority as he may have as of the date hereof (or any position
to which he may be promoted after the date hereof) and as may from time to
time be assigned to the Executive by the Board that are consistent with
such responsibilities, duties and authority. The Executive shall devote
substantially all his working time and efforts to the business and affairs
of the Company.
SECTION 4. Place of Performance. In connection with the
---------------------
Executive's employment by the Company, the Executive shall be based at the
principal executive offices of the Company in the New York City
Metropolitan area (including, but not limited to, Greenwich, Connecticut),
except for required travel on the Company's business to an extent
substantially consistent with present business travel obligations.
SECTION 5. Compensation and Related Matters. (a) Salary.
--------------------------------- -------
During the period of the Executive's employment hereunder, the Company
shall pay to the Executive an annual base salary at a rate of $500,000,
such salary to be paid in substantially equal installments in accordance
with the Company's payroll practices for its executives. This salary may
be increased from time to time in accordance with normal business practices
of the Company and, if so increased, shall not thereafter during the term
of this Agreement be decreased. Compensation of the Executive by salary
payments shall not be deemed exclusive and shall not present the Executive
from participating in any other compensation or benefit plan of the
Company. The salary payments (including any increased salary payments)
hereunder shall not in any way limit or reduce any other obligation of the
Company hereunder, and no other compensation, benefit or payment hereunder
shall in any way limit or reduce the obligation of the Company to pay the
Executive's salary hereunder.
3
(b) Bonus Compensation. The Executive shall be entitled to
-------------------
receive annual bonus compensation in an amount determined by the Board in
its discretion; provided, however, that if any such bonus (or portion
thereof) will fail to be deductible by the Company by reason of
section 162(m) of the Internal Revenue Code of 1986, as amended (the
"Code"), the payment of such bonus (or portion thereof) will be deferred
until the first date that the payment of such bonus can be paid without
failing to be deductible by the Company.
(c) Expenses. During the term of the Executive's employment
---------
hereunder, the Executive shall be entitled to receive prompt reimbursement
for all reasonable and customary expenses incurred by the Executive in
performing services hereunder, including all expenses of travel and living
expenses while away from home on business or at the request of and in the
service of the Company, provided that such expenses are incurred and
accounted for in accordance with the policies and procedures established by
the Company.
(d) Other Benefits. The Company shall maintain in full force
---------------
and effect, and the Executive shall be entitled to continue to participate
in, all of the employee benefit plans and arrangements in effect on the
date hereof in which the Executive participates or plans or arrangements
providing the Executive with at least equivalent benefits thereunder
(including, without limitation, each retirement plan, supplemental and
excess retirement plans, employee stock ownership plans' annual and long-
term incentive compensation plans, stock option and purchase plans, group
life insurance and accident plan, medical and dental insurance plans, and
disability plan), provided that the Company shall not make any changes in
such plans or arrangements that would adversely affect the Executive's
rights or benefits thereunder; provided, however, that, such a change may
be made, including termination of such plans or arrangements if it occurs
pursuant to a program applicable to all executives of the Company and does
not result in a proportionately greater reduction in the rights of or
benefits to the Executive as compared with any other executive of the
Company. The Executive shall be entitled to participate in or receive
benefits under any employee benefit plan or arrangement made available by
the Company in the future to its executives and key management employees,
subject to and on a basis consistent with the terms, conditions and overall
administration of such plans and arrangements. Nothing paid to the
Executive under any plan
4
or arrangement presently in effect or made available in the future shall be
deemed to be in lieu of the salary payable to the Executive pursuant to
paragraph (a) of this Section. Any payments or benefits payable to the
Executive hereunder in respect of any calendar year during which the
Executive is employed by the Company for less than the entire such year
shall, unless otherwise provided in the applicable plan or arrangement be
prorated in accordance with the number of days in such calendar year during
which he is so employed.
(e) Vacations. The Executive shall be entitled to no less than
----------
the number of vacation days in each calendar year, and to compensation in
respect of earned but unused vacation days, determined in accordance with
the Company's vacation policy as in effect on the date hereof. The
Executive shall also be entitled to all paid holidays and personal days
given by the Company to its executives.
(f) Services Furnished. The Company shall furnish the Executive
-------------------
with office space, stenographic assistance and such other facilities and
services as shall be suitable to the Executive's position and adequate for
the performance of his duties as set forth in Section 3 hereof.
SECTION 6. Offices. Subject to Sections 3 and 4, the Executive
--------
agrees to serve without additional compensation, if elected or appointed
thereto, as a director of the Company and any of its subsidiaries and in
one or more executive offices of any of the Company's subsidiaries,
provided that the Executive is indemnified for serving in any and all such
capacities on a basis no less favorable than is currently provided by the
Company to any other director of the Company or any of its subsidiaries.
SECTION 7. Termination. The Executive's employment hereunder
------------
may be terminated without any breach of this Agreement only under the
following circumstances:
(a) Death. The Executive's employment hereunder shall terminate
------
upon his death.
(b) Disability. If, as a result of the Executive's incapacity
-----------
due to physical or mental illness, the Executive shall have been
absent from his duties hereunder on a full-time basis for the entire
period of six consecutive months, and within thirty (30) days after
written notice of termination is given (which may occur before or
after the end of such six
5
month period) shall not have returned to the performance of his duties
hereunder on a full-time basis, the Company may terminate the
Executive's employment hereunder.
(c) Cause. The Company may terminate the Executive's employment
------
hereunder for Cause. For purposes of this Agreement, the Company
shall have "Cause" to terminate the Executive's employment hereunder
upon (i) the willful and continued failure by the Executive to
substantially perform his duties hereunder (other than any such
failure resulting from the Executive's incapacity due to physical or
mental illness or any such actual or anticipated failure after the
issuance of a Notice of Termination, as defined in Section 7(e), by
the Executive for Good Reason, as defined in Section 7(d)(ii)), after
demand for substantial performance is delivered by the Company that
specifically identifies the manner in which the Company believes the
Executive has not substantially performed his duties, or (ii) the
willful engaging by the Executive in misconduct which is materially
injurious to the Company, monetarily or otherwise (including, but not
limited to, conduct that constitutes Competitive Activity, as defined
in Section 10). For purposes of this paragraph, no act, or failure to
act, on the Executive's part shall be considered "willful" unless
done, or omitted to be done, by him not in good faith and without
reasonable belief that his action or omission was in the best interest
of the Company. Notwithstanding the foregoing, the Executive shall
not be deemed to have been terminated for Cause without (1) reasonable
notice to the Executive setting forth the reasons for the Company's
intention to terminate for Cause, (2) an opportunity for the
Executive, together with his counsel, to be heard before the Board,
and (3) delivery to the Executive of a Notice of Termination, as
defined in subsection (e) hereof, from the Board finding that in the
good faith opinion of three-quarters (3/4) of the Board the Executive
was guilty of conduct set forth above in clause (i) or (ii) hereof,
and specifying the particulars thereof in detail.
(d) Termination by the Executive. (i) The Executive may
-----------------------------
terminate his employment hereunder (A) for Good Reason or (B) if his
health should become impaired to an extent that makes his continued
perfor-
6
mance of his duties hereunder hazardous to his physical or mental
health or his life, provided that the Executive shall have furnished
the Company with a written statement from a qualified doctor to such
effect and provided, further, that, at the Company's request, the
Executive shall submit to an examination by a doctor selected by the
Company and such doctor shall have concurred in the conclusion of the
Executive's doctor.
(ii) For purposes of this Agreement, "Good Reason" shall
mean (A) a failure by the Company to comply with any material
provision of this Agreement which has not been cured within ten
(10) days after notice of such noncompliance has been given by
the Executive to the Company, or (B) any purported termination of
the Executive's employment which is not effected pursuant to a
Notice of Termination satisfying the requirements of
paragraph (e) hereof (and for purposes of this Agreement no such
purported termination shall be effective).
(e) Notice of Termination. Any termination of the Executive's
----------------------
employment by the Company or by the Executive (other than termination
pursuant to subsection (a) hereof) shall be communicated by written
Notice of Termination to the other party hereto in accordance with
Section 12. For purposes of this Agreement, a "Notice of Termination"
shall mean a notice which shall indicate the specific termination
provision in this Agreement relied upon and shall set forth in
reasonable detail the facts and circumstances claimed to provide a
basis for termination of the Executive's employment under the
provision so indicated.
(f) Date of Termination. "Date of Termination" shall mean
--------------------
(i) if the Executive's employment is terminated by his death, the date
of his death, (ii) if the Executive's employment is terminated
pursuant to subsection (b) above, thirty (30) days after Notice of
Termination is given (provided that the Executive shall not have
returned to the performance of his duties on a full-time basis during
such thirty (30)-day period), (iii) if the Executive's employment is
terminated pursuant to subsection (c) above, the date specified in the
Notice of Termination, and (iv) if the Executive's
7
employment is terminated for any other reason, the date on which a
Notice of Termination is given; provided, however, that, if within
thirty (30) days after any Notice of Termination is given the party
receiving such Notice of Termination notifies the other party that a
dispute exists concerning the termination, the Date of Termination
shall be the date on which the dispute is finally determined, either
by mutual written agreement of the parties, by a binding and final
arbitration award or by a final judgment, order or decree of a court
of competent jurisdiction (the time for appeal therefrom having
expired and no appeal having been perfected).
SECTION 8. Compensation Upon Termination or During Disability.
---------------------------------------------------
(a) During any period that the Executive fails to perform his duties
hereunder as a result of incapacity due to physical or mental illness
("disability period"), the Executive shall continue to receive his full
salary at the rate then in effect for such period until his employment is
terminated pursuant to Section 7(b) hereof, provided that payments so made
to the Executive during the first 180 days of the disability period shall
be reduced by the sum of the amounts, if any, payable to the Executive at
or prior to the time of any such payment under disability benefit plans of
the Company or under the Social Security disability insurance program, and
which amounts were not previously applied to reduce any such payment.
(b) If the Executive's employment is terminated by his death,
the Company shall pay any amounts due to the Executive under Section 5
through the date of his death in accordance with Section 11(b).
(c) If the Executive's employment shall be terminated by the
Company for Cause or by the Executive for other than Good Reason, the
Company shall pay the Executive his full salary through the Date of
Termination at the rate in effect at the time Notice of Termination is
given and the Company shall have no further obligations to the Executive
under this Agreement.
(d) If (A) in breach of this Agreement, the Company shall
terminate the Executive's employment other than for disability pursuant to
Section 7(b) or for Cause (it being understood that a purported termination
for disability pursuant to Section 7(b) or for Cause which is disputed and
finally determined not to have been proper
8
shall be a termination by the Company in breach of this Agreement),
including any failure by the Company to extend the term of this Agreement
for any additional one year period as provided in Section 2 hereof, or
(B) the Executive shall terminate his employment for Good Reason, then
(i) the Company shall pay the Executive his full salary through
the Date of Termination at the rate in effect at the time Notice of
Termination is given and all other unpaid amounts, if any, to which
the Executive is entitled as of the Date of Termination under any
compensation plan or program of the Company, at the time such payments
are due;
(ii) in lieu of any further salary payments to the Executive for
periods subsequent to the Date of Termination, the Company shall pay
as liquidated damages to the Executive an amount equal to three times
the sum of (1) the Executive's annual salary rate in effect as of the
Date of Termination and (2) the highest annual amount payable to the
Executive under the Company's annual and long-term incentive
compensation plans during the three calendar years which are the
calendar year prior to the year in which such Date of Termination
occurs and the immediately preceding two calendar years; such payment
to be made in a lump sum on or before the fifth day following the Date
of Termination;
(iii) if termination of the Executive's employment arises out of a
breach by the Company of this Agreement, the Company shall pay all
other damages to which the Executive may be entitled as a result of
such breach, including damages for any and all loss of benefits to the
Executive under the Company's employee benefit plans which the
Executive would have received if the Company had not breached this
Agreement and had the Executive's employment continued for the full
term provided in Section 2 hereof, and including all legal fees and
expenses incurred by him as a result of such termination, including
the fees and expenses of enforcing the terms of this Agreement.
(e) If the Executive shall terminate his employment under
clause (B) of subsection 7(d)(i) hereof, the Company shall pay the
Executive his full salary through the Date of Termination at the rate in
effect at the time Notice of Termination is given.
9
(f) Unless the Executive is terminated for Cause, the Company
shall maintain in full force and effect, for the continued benefit of the
Executive for the greater of the number of years (including partial years)
remaining in the term of employment hereunder or the number three (3), all
employee benefit plans and programs in which the Executive was entitled to
participate immediately prior to the Date of Termination provided that the
Executive's continued participation is possible under the general terms and
provisions of such plans and programs. In the event that the Executive's
participation in any such plan or program is barred, the Company shall
arrange to provide the Executive with benefits substantially similar to
those which the Executive would otherwise have been entitled to receive
under such plans and programs from which his continued participation is
barred.
(g) In the event that the Executive becomes entitled to the
payments provided in clauses (i)-(iii) of Section 8(d) (the "Severance
Payments"), if any of the Severance Payments will be subject to the excise
tax imposed under section 4999 of the Code (the "Excise Tax"), the Company
shall pay to the Executive an additional amount (the "Gross-Up Payment")
such that the net amount retained by the Executive, after deduction of any
Excise Tax on the Severance Payments and any Federal, state and local
income and employment tax and Excise Tax upon the payment provided for by
this Section 8(g), shall be equal to the Severance Payments. For purposes
of determining whether any of the Severance Payments will be subject to the
Excise Tax and the amount of such Excise Tax, (i) any other payments or
benefits received or to be received by the Executive in connection with a
change in ownership or control (within the meaning of section 280G of the
Code and the regulations promulgated thereunder) of the Company or the
Executive's termination of employment (whether pursuant to the terms of
this Agreement or any other plan, arrangement or agreement with the
Company, any person whose actions result in a change in control or any
Person affiliated with the Company or such Person) shall be treated as
"parachute payments" within the meaning of section 280G(b)(2) of the Code,
and all "excess parachute payment" within the meaning of section 280G(b)(1)
of the Code shall be treated as subject to the Excise Tax, unless in the
opinion of tax counsel selected by the Company's independent auditors and
reasonably acceptable to the Executive such other payments or benefits (in
whole or in part) do not constitute parachute payments, including by reason
of
10
Section 280G(b)(4)(A) of the Code, or such excess parachute payments (in
whole or in part) represent reasonable compensation for services actually
rendered, within the meaning of section 280G(b)(4)(B) of the Code, in
excess of the "base amount" allocable to such reasonable compensation, or
are otherwise not subject to the Excise Tax, (ii) the amount of the
Severance Payments which shall be treated as subject to the Excise Tax
shall be equal to the lesser of (A) the total amount of the Severance
Payments or (B) the amount of excess parachute payments within the meaning
of section 280(G)(b)(1) of the Code (after applying clause (i), above), and
(iii) the value of any non-cash benefits or any deferred payment or benefit
shall be determined by the Company's independent auditors in accordance
with the principles of sections 280G(d)(3) and (4) of the Code. For
purposes of determining the amount of the Gross-Up Payment, the Executive
shall be deemed to pay Federal income taxes at the highest marginal rate of
Federal income taxation in the calendar year in which the Gross-Up Payment
is to be made and state and local income taxes at the highest marginal rate
of taxation in the state and locality of the Executive's residence on the
Date of Termination, net of the maximum reduction in Federal income taxes
which could be obtained from deduction of such state and local taxes.
SECTION 9. No Mitigation. The Executive shall have no duty to
--------------
mitigate damages by seeking other employment. The Company shall have no
right of offset hereunder with respect to any compensation or benefits
received by the Executive from or in connection with any employment
subsequent to his employment termination with the Company.
SECTION 10. Noncompetition. During the period of the
---------------
Executive's employment hereunder and for two years thereafter, the
Executive shall not, directly or indirectly, own, manage, operate, join or
control, be employed by or participate in the ownership, management,
operation or control of, or be a consultant to or connected in any other
manner with, any business, firm or corporation which is similar to or
competes with a principal business of the Company or its subsidiaries (a
"Competitive Activity"). For these purposes, the Executive's ownership of
securities or a public company not in excess of one percent of any class of
such securities shall not be considered to be competition with the Company
or its subsidiaries.
11
SECTION 11. Successors; Binding Agreement. (a) The Company
------------------------------
will require any successor (whether direct or indirect, by purchase,
merger, consolidation or otherwise) to all or substantially all of the
business and/or assets of the Company, by agreement in form and substance
satisfactory to the Executive, to expressly assume and agree to perform
this Agreement in the same manner and to the same extent that the Company
would be required to perform it if no such succession had taken place.
Failure of the Company to obtain such assumption and agreement prior to the
effectiveness of any such succession shall be a breach of this Agreement
and shall entitle the Executive to compensation from the Company in the
same amount and on the same terms as he would be entitled to hereunder if
he terminated his employment for Good Reason, except that for purposes of
implementing the foregoing, the date on which any such succession becomes
effective shall be deemed the Date of Termination. As used in this
Agreement, "Company" shall mean the Company as herein before defined and
any successor to its business and/or assets as aforesaid which executes and
delivers the agreement provided for in this Section 11 or which otherwise
becomes bound by all the terms and provisions of this Agreement by
operation of law.
(b) This Agreement and all rights of the Executive hereunder
shall inure to the benefit of and be enforceable by the Executive's
personal or legal representatives, executors, administrators, successors,
heirs, distributees, devisees and legatees. If the Executive should die
while any amounts would still be payable to him hereunder if he had
continued to live, all such amount unless otherwise provided herein, shall
be paid in accordance with the terms of this Agreement to the Executive's
devisee, legatee, or other designee or, if there be no such designee, to
the Executive's estate.
SECTION 12. Notice. For the purposes of this Agreement,
-------
notices, demands and all other communications provided for in this
Agreement shall be in writing and shall be deemed to have been duly given
when delivered or (unless otherwise specified) mailed by United States
certified or
12
registered mail, return receipt requested, postage prepaid, addressed as
follows:
If to the Executive:
[Wille/Snyder address]
If to the Company:
FactSet Research Corporation
One Greenwich Plaza
Greenwich, CT [06830]
Attn: [Corporate Secretary]
or to such other address as any party may have furnished to the others in
writing in accordance herewith, except that notices of change of address
shall be effective only upon receipt.
SECTION 13. Miscellaneous. No provisions of this Agreement may
--------------
be modified, waived or discharged unless such waiver, modification or
discharge is agreed to in writing signed by the Executive and such officer
of the Company as may be specifically designated by the Board. No waiver
by either party hereto at any time of any breach by the other party hereto
of, or compliance with, any condition or provision of this Agreement to be
performed by such other party shall be deemed a waiver of similar or
dissimilar provisions or conditions at the same or at any prior or
subsequent time. No agreements or representations, oral or otherwise,
express or implied, with respect to the subject matter hereof have been
made by either party which are not set forth expressly in this Agreement.
The validity, interpretation, construction and performance of this
Agreement shall be governed by the laws of the State of Connecticut without
regard to its conflicts of law principles.
SECTION 14. Validity. The invalidity or unenforceability of any
---------
provision or provisions of this Agreement shall not affect the validity or
enforceability of any other provision of this Agreement, which shall remain
in full force and effect.
SECTION 15. Counterparts. This Agreement may be executed in one
-------------
or more counterparts, each of which shall be
13
deemed to be an original but all of which together will constitute one and
the same instrument.
SECTION 16. Arbitration. Any dispute or controversy arising
------------
under or in connection with this Agreement shall be settled exclusively by
arbitration, conducted before a panel of three arbitrators in [New York,
New York,] in accordance with the rules of the American Arbitration
Association then in effect. Judgment may be entered on the arbitrator's
award in any court having jurisdiction; provided, however, that the Company
shall be entitled to seek a restraining order or injunction in any court of
competent jurisdiction to prevent any continuation of any violation of the
provisions of Section 10 of the Employment Agreement and the Executive
hereby consents that such restraining order or injunction may be granted
without the necessity of the Company's posting any bond, and provided
further that the Executive shall be entitled to seek specific performance
of his right to be paid until the Date of Termination during the pendency
of any dispute or controversy arising under or in connection with this
Agreement. The expense of such arbitration shall be borne by the Company.
SECTION 17. Entire Agreement. This Agreement sets forth the
-----------------
entire agreement of the parties hereto in respect of the subject matter
contained herein and supercedes all prior agreements, promises, covenants,
arrangements, communications, representations or warranties, whether oral
or written, by any officer, employee or representative of any party hereto;
and any prior agreement of the parties hereto in respect of the subject
matter contained herein is hereby terminated and cancelled.
IN WITNESS WHEREOF, the parties have executed this Agreement on
the date and year first above written.
FACTSET RESEARCH SYSTEMS INC.
by _________________________
Name:
Title:
14
EXECUTIVE
_________________________
[Howard E. Wille]
[Charles J. Snyder]
Attest:
by _____________________
Exhibit 10.3
[FACTSET LETTERHEAD]
May 8, 1996
Mr. Ernest S. Wong [FACTSET LOGO]
121 North Chatsworth Avenue
Larchmont, New York 10538
Dear Ernest:
We are delighted that you are joining us. I am convinced that you will fit
comfortably into the FactSet culture and will make an important contribution to
the growth and the management of the Company. I am therefore pleased to confirm
our offer of employment to you for the position of Vice President and Chief
Financial Officer for FactSet Research Corporation. Barring unforseen problems
we would expect you to start on June 1, 1996.
Your gross annual base salary will be $175,000 to be paid at a bi-weekly rate of
$6,730.77. You will be eligible to participate in the Company's annual bonus
plan as well as its incentive stock option plan. For the first twelve months of
your employment we guarantee a minimum bonus of $50,000 payable no later than
May 31, 1997. In all subsequent years, payment will be contingent upon FactSet's
meeting its performance goals and upon our appraisal of your contribution to
FactSet.
FactSet should like to extend to you a one-time sign-on bonus of $25,000,
payable on July 1, 1997.
In addition, we should like to extend to you options on 10,000 shares of
FactSet's current stock at the forthcoming public offering price. These shares
will soon be split 4-for-1 so that your options will cover 40,000 shares. We
also expect to continue the firm's ESOP program for which you will qualify.
You and your dependents will be eligible for our standard employee benefits
program immediately upon your joining the firm. To comply with federal law, you
will be asked to provide proof of U.S. citizenship.
If FactSet terminates your employment against your will for any reason other
than your failure substantially to perform your duties, your being adjudged
guilty of a felony by a court of last resort from which there is no appeal, or
your material breach of your fiduciary duties to FactSet, FactSet will continue
to pay your base salary and standard employee benefits for twelve months from
the date of such termination.
If any change in control takes place during your employment with FactSet, and
within one year from the date of such change of control your employment is
terminated, FactSet will continue to pay your base salary and benefits ratably
for two years. A change of control would have taken place for this purpose if
any one stockholder owns more FactSet stock than Howard E. Wille and Charles J.
Snyder and their respective estates or heirs collectively own; and such
shareholder exercizes managerial control of the Company.
Sincerely,
/s/ H. E. Wille
Howard E. Wille
Chairman
/s/ Ernest S. Wong
- --------------------
Agreement
Ernest S. Wong
Exhibit 10.4
FACTSET RESEARCH SYSTEMS INC.
EMPLOYEE STOCK OWNERSHIP PLAN
Effective as of September 1, 1995
Amended Effective as of September 1, 1988
Amended Effective as of September 1, 1989
RESTATED
--------
TABLE OF CONTENTS
Article Title Page
----- ----
I General . . . . . . . . . . . . . . . . . . . . . . . . . . . 1
II Definitions . . . . . . . . . . . . . . . . . . . . . . . . . 2
III Eligibility . . . . . . . . . . . . . . . . . . . . . . . . . 9
IV Participation . . . . . . . . . . . . . . . . . . . . . . . 10
V Employer Contributions . . . . . . . . . . . . . . . . . . . 12
VI The Trust Fund . . . . . . . . . . . . . . . . . . . . . . . 16
VII Allocation of Employer Contributions
and Accrual or Benefits . . . . . . . . . . . . . . . . . . 28
VIII Vesting and Accrual of Participants'
Accounts. . . . . . . . . . . . . . . . . . . . . . . . . . 40
IX Forfeitures . . . . . . . . . . . . . . . . . . . . . . . . 47
X Distributions and Benefits. . . . . . . . . . . . . . . . . 48
XI Distributions of Shares. . . . . . . . . . . . . . . . . . . 65
XII Administration of the Plan . . . . . . . . . . . . . . . . . 66
XIII Valuation of Shares of Common Stock
and Other Assets. . . . . . . . . . . . . . . . . . . . . . 72
XIV Amendment and Termination of the Plan. . . . . . . . . . . . 74
XV Participating Subsidiaries. . . . . . . . . . . . . . . . . 76
XVI Miscellaneous. . . . . . . . . . . . . . . . . . . . . . . . 77
XVII Special Rules in the Event the Plan
Is a Top Heavy Plan . . . . . . . . . . .. . . . . . . . . . 82
ARTICLE I
General
-------
1.1 The purpose of the FactSet Research System Inc. Employee
Stock Ownership Plan is to enable eligible employees of FactSet Research
Systems Inc., a Delaware corporation, and of the Company's designated
subsidiaries, if any, to acquire a proprietary interest in the Company and
to provide economic benefits to such employees upon their retirement or
disability or to their beneficiaries upon their death.
1.2 The Plan is intended to constitute a "qualified plan" within
the meaning of Sections 401(a) and 501(a) of the Internal Revenue Code of
1986, as amended (the "Code"), and of the Employee Retirement Income
Security Act of 1974, as amended ("ERISA"), and is intended to qualify as
an "employee stock ownership plan" within the meaning of Section 4975(e)(7)
of the Code. The provisions of the Plan shall, accordingly, be construed
so as to extend and/or limit eligibility and participation in a manner
consistent, and so as to otherwise comply, with the requirements of the
Code and ERISA.
1.3 Eligibility and participation in the Plan shall give any
employee only such rights as are set forth in the Plan and any amendments
hereto and shall in no way
2
affect or in any manner limit the Employer's right to discharge the
employee, which right is expressly reserved hereby, or impair the authority
of the Plan Committee to limit the employee's rights, claims, or causes, as
provided in the Plan.
ARTICLE II
Definitions
-----------
The following words and phrases, when used in the Plan, shall
have the following respective meanings, unless the context clearly
indicates otherwise:
"Beneficiary": The beneficiary or beneficiaries of a Participant
-----------
or Former Participant either by designation or otherwise, as provided in
Article X.
"Board of Directors": Prior to September 1, 1986, the Board of
------------------
Directors of FactSet Data Systems, Inc. Subsequent to August 31, 1986, the
Board of Directors of FactSet Research Corporation.
"Break in Service": An eligibility computation period of
----------------
12-consecutive months during which an employee fails to complete more than
500 Hours of Service for the Employer.
"Common Stock": Prior to September 1, 1986, the Common Stock,
------------
par value $.0l per share, of FactSet Data Systems, Inc. Subsequent to
August 31, 1986, the Common
3
Stock, par value $1.00 per share, of FactSet Research Corporation, or the
securities adjusted or substituted therefor pursuant to Article XI.
"Company": Prior to September 1, 1986, FactSet Data Systems,
-------
Inc., a Delaware corporation. Subsequent to August 31, 1986, FactSet
Research Corporation or its successor or successors.
"Disability": A disability as defined in Section 10.3.
----------
"Effective Date of the Plan": September 1, 1985.
--------------------------
"Employer": The Company or any subsidiary which shall become a
--------
party to the Plan by being designated by the Board of Directors and by
adopting the Plan as provided in Article XV.
"Employer securities": Common Stock or other securities of the
-------------------
Company which are permissible investments under the Internal Revenue Code
or ERISA.
"ERISA": The Employee Retirement Income Security Act of 1974, as
-----
amended from time to time, and applicable rules and regulations issued
thereunder.
"Former Participant": A person who has ceased to be a
------------------
Participant, but who has a vested interest in his Participant's Account
which has not been distributed.
4
"Hour of Service": Each employee will be credited with an hour
---------------
of service for:
(1) Each hour for which an employee is directly or indirectly
paid or entitled to payment by the Employer for the performance of
duties. These hours shall be credited to the employee for the
computation period or periods in which the duties are performed; and
(2) Each hour (up to a maximum of 501 hours per Plan Year) for
which an employee is directly or indirectly paid or entitled to
payment by the Employer for reasons (such as vacation, sickness or
disability) other than for performance of duties. These hours shall
be credited to the employee for the computation period or periods in
which payment is made or amounts payable to the employee become due;
and
(3) Each hour for which back pay, irrespective of mitigation of
damages, has been either awarded or agreed to by the Employer. These
hours shall be credited to the employee 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.
5
(4) Notwithstanding any provision to the contrary herein
contained, computation and creditation of an Hour of Service shall
follow the guidelines set forth in the Department of Labor Regulations
2530.200(b)-2(b), (c) and (f).
(5) Notwithstanding anything to the contrary herein,
(i) In the case of each Participant who is absent from work for
any period by reason of the pregnancy of the Participant, by reason of the
birth of a child of the Participant, by reason of the placement of a child
with the Participant in connection with the adoption of such child by such
Participant, or for purposes of caring for such child for a period
beginning immediately following such birth or placement, the Plan shall
treat as Hours of Service, solely for purposes of determining whether a
1-year break in service has occurred, the hours described in clause (ii).
(ii) The hours described in this clause are
(I) the hours of service which otherwise would normally have
been credited to such Participant but for such absence, or
(II) in any case in which the Plan is unable to determine the
hours described in subclause (I), 8 hours of service per day of
absence, except that the total
6
number of hours treated as Hours of Service under this clause by
reason of any such pregnancy or placement shall not exceed 501
hours per Plan Year.
(iii) The hours described in clause (ii) shall be treated as
hours of service as provided in this subparagraph only in the year in which
the absence from work begins, if a Participant would be prevented from
incurring a 1-year break in service in such year solely because the period
of absence is treated as Hours of Service as provided in clause (i); or in
any other case, in the immediately following year.
(iv) For purposes of this paragraph, the term "year" means a
Year of Service.
(v) No credit will be given pursuant to this paragraph unless
the Participant furnishes to the Plan Committee such timely information as
the Plan may reasonably require to establish that the absence from work is
for reasons referred to in clause (i), and the number of days for which
there was such an absence.
"Internal Revenue Code": The Internal Revenue Code of 1986, as
---------------------
amended from time to time, and applicable Treasury Department rules and
regulations issued thereunder.
"Normal Retirement": Retirement of a Participant upon or after
-----------------
attaining the "Normal Retirement Age" of sixty-five (65) years.
---------------------
7
"Participant": An eligible employee who participates in the Plan
-----------
in accordance with the provisions of Articles III and IV.
"Participant's Account": A Participant's or Former Participant's
---------------------
allocable portion of contributions made by the Employer or property
purchased therewith, as adjusted to reflect income, gains and losses,
expenses, forfeitures and all other applicable transactions, as provided in
the Plan.
"Participating Subsidiary": Any present or future Subsidiary of
------------------------
the Company which is designated by the Board of Directors and elects to
adopt the Plan in accordance with Article XV.
"Plan": The Company's Employee Stock Ownership Plan set forth
----
herein, as amended from time to time in accordance with the provisions of
Article XIV.
"Plan Committee": The committee provided for in Article XII to
--------------
administer the Plan.
"Plan Year": The twelve-month period beginning September 1, and
---------
ending August 31, being the fiscal year of the Company.
"Subsidiary": Any corporation at least a majority of the
----------
outstanding voting stock of which is at the time
8
owned by the Company or by one or more Subsidiaries or by the Company and
one or more Subsidiaries.
"Termination of a Participant's Employment": cessation of
-----------------------------------------
employment of the employee by the Employer (other than as a result of
Normal Retirement, death or Disability) including, but not limited to
resignation, quitting, firing and, after the layoff of an employee (a) the
employee's failure to return to work with the Employer within ten days'
written notice of recall to work at a pay position similar to the one
previously held by such employee, or (b) the expiration of one year from
the date of layoff without being recalled to work to such a position (or,
if shorter, a period from the date of layoff which is equal to the
employee's length of service with the Employer prior to such layoff).
"Trustee": The trustee or trustees or any successor trustee or
--------
trustees appointed and acting as such pursuant to Article VI.
"Trust Fund": The trust fund established and maintained pursuant
----------
to Article VI.
"Year of Service": A Year of Service as defined in Section 8.1.
---------------
9
ARTICLE III
Eligibility
-----------
3.1 Any employee (including any officer) of the Employer shall
be eligible to participate in the Plan if:
(1) the employee has performed 1,000 or more Hours of Service for
the Employer during the twelve-month period commencing on the date of
his employment or during any Plan Year commencing after the date of
his employment; and
(2) the employee is not included in a unit of employees covered
by a collective bargaining agreement in connection with which
retirement benefits were the subject of negotiations, unless such
agreement expressly provides for participation in the Plan by
employees in such unit.
3.2 Notwithstanding anything to the contrary contained in
Section 3.1, an employee shall not be eligible to participate in the Plan
if such employee is a non-resident alien receiving no earned income from
sources within the United States from any participating Employer or
Participating Subsidiary, for United States federal income tax purposes,
unless such non-resident alien is designated by the Board of Directors of
the Company individually, or
10
indirectly by reference to a class of which he is a member, as an employee
eligible to participate in the Plan.
ARTICLE IV
Participation
-------------
4.1 Each employee who on the Effective Date was employed by the
Employer shall commence participation in the Plan and be deemed a
"Participant" as of the Effective Date. Each other employee of the
Employer after the Effective Date shall become a Participant on the date on
which he becomes eligible to participate in the Plan in accordance with
Article III as of the first day of such Plan Year in which said eligibility
occurs. Notwithstanding the foregoing, no employee shall become a
Participant until he has delivered to the Plan Committee a signed statement
in the form prescribed by the Plan Committee, and within a reasonable time
from the date of receipt of such form from the Plan Committee, signifying
his acceptance of participation in the Plan. The Plan Committee shall
furnish such employee, within 30 days after the employee becomes so
eligible to participate in the Plan, with such a form which will enable him
to signify his acceptance of participation in the Plan.
4.2 After becoming a Participant, an employee shall continue to
be a Participant in the Plan for so long as he is eligible to participate
in the Plan or until the
11
termination of his employment with the Employer. If a person who ceased to
be a Participant by reason of the termination of his employment with the
Employer is re-employed by the Employer, he may again become a Participant
in accordance with the provisions of Sections 3.1 and 4.1; provided that:
(a) If no Break in Service has occurred as a result of the
cessation of employment by the Employer, he shall continue to be a
Participant as if his employment had not ceased;
(b) If he has a vested interest under the Plan at the time he
has incurred a Break in Service, he shall again become a Participant
as of the date of his re-employment if he meets the requirements for
eligibility in accordance with the provisions in Section 3.1 within
the 12-month period beginning with the date of such re-employment.
(c) In the event that an employee who has no vested interest
under the Plan has incurred a Break in Service and does not meet such
eligibility requirements within the 12-month period immediately
following his re-employment, his Years of Service before any period of
consecutive 1-year Breaks in Service shall not be required to be taken
into account if the number of
12
consecutive 1-year Breaks in Service within such periods equals or
exceeds the greater of (i) 5 or (ii) the aggregate number of Years of
Service before such period, and such an employee must meet the
eligibility requirements of Sections 3.1 and 4.1 as if he were a new
employee.
Where Years of Service are not required to be taken into account
by reason of a period of Breaks in Service, such Years of Service shall not
be taken into account with respect to any subsequent period of Breaks in
Service.
ARTICLE V
Employer Contributions
----------------------
5.1 For any Plan Year, the Employer shall contribute to the
Trust Fund, for allocation to Participants' Accounts in accordance with
Article VII, an amount, as and when determined by its Board of Directors by
resolution, on or before the due date prescribed by law (including any
extension thereof) for the filing of the Employer's federal income tax
return for its fiscal year ending concurrently with such Plan Year. The
Employer may also commit to make contributions in future Plan Years in
connection with any indebtedness incurred by the Trustee to purchase Common
Stock in accordance with the Plan. Employer
13
contributions may be made in cash, Employer securities, or other property
of any kind or any combination thereof, as the Board of Directors may from
time to time determine. Any shares of Common Stock contributed by the
Employer shall be valued at their fair market value. In no event shall the
Employer's contributions for a Plan Year be in excess of the amount which,
when added to the Employer's contributions under any other plans qualified
under Section 401(a) of the Internal Revenue Code (including carryovers of
underpayments and overpayments), exceeds the amount that can be taken as a
deduction by the Employer under Section 404 of the Internal Revenue Code in
the Employer's fiscal year ending with or within the Plan Year. In
addition, no contribution shall exceed an amount which would result in an
allocation to the Accounts of all Participants in excess of the limits in
Section 7.5 of Article VII. The foregoing limitations shall not apply with
respect to any payments of interest by the Employer on any loan described
in Section 4975(d)(3) of the Internal Revenue Code.
Cash contributions shall be treated as contributions of Employer
securities if the cash is contributed no later than 30 days after, and the
Employer securities are purchased or released from the Suspense Account no
later than 60 days after, the due date, including
14
extensions, for filing the Company's federal income tax return for its
fiscal year for which the contribution is made. The amount of the Employer
contribution, if any, to the Plan for each Plan Year shall be communicated
to the Participants as soon as practicable after the adoption of the
resolution authorizing such contribution.
5.2 The determination of the Board of Directors of the amount,
if any, of the Employer's contribution to the Trust Fund for any Plan Year
shall be final and conclusive and binding upon all Participants, the
Trustee and the Employer. Notwithstanding any other provisions of the
Plan, however, all contributions made by the Employer to the Trust Fund
prior to a determination by the Commissioner of Internal Revenue or his
duly authorized representative as to whether the Plan is qualified under
Section 401 of the Internal Revenue Code, shall, if so directed by the
Employer, be refunded to the Employer if, but only if, the Commissioner or
his said representative, upon such initial determination, rules or
determines that the Plan is not a qualified plan under Section 401 of the
Internal Revenue Code.
15
5.3 Contributions made by the Employer to the Trust Fund shall
be returned to the Employer under the following additional circumstances:
(a) All contributions made to the Plan are conditioned upon the
Employer obtaining a deduction under Code Section 404(a) in an equal amount
for the Employer's taxable year ending with or within the Plan Year for
which the contribution is made. If all or any portion of the Employer's
contribution is not deductible under Code Section 404(a), for such year,
the amount so determined to be non-deductible shall be returned to the
Employer within one year of the disallowance of the deduction by the
Internal Revenue Service.
(b) At the direction of the Employer, a contribution made by the
Employer due to a mistake of fact shall be returned promptly to the
Employer if the Plan Committee determines that such mistake existed at the
time of the contribution, provided that such contribution shall be returned
within 12 months of the date it was made.
(c) All contributions made to the Trust Fund are conditioned
upon the continuing qualification of the Plan under Code Section 401. If
the Plan fails to qualify under Code Section 401, all amounts contributed
during the time the Plan failed to qualify shall be returned to the
Employer
16
within one year after the date of the denial of qualification of the Plan
by the Internal Revenue Service.
5.4 Nothing contained in the Plan shall be construed to impose
upon the Employer any obligation to make any contribution to the Trust Fund
with respect to any Plan Year. The amount, if any, of the contribution by
the Employer shall be in the sole discretion of the Board of Directors,
subject to the provisions of Section 5.1.
5.5 Participants shall not be entitled to make any contributions
under the Plan.
ARTICLE VI
The Trust Fund
--------------
6.1 All contributions by the Employer under the Plan shall be
paid into, and all benefits provided for in the Plan shall be distributed
from, a Trust Fund established by a trust agreement between the Company and
a Trustee appointed by the Board of Directors of the Company. The trust
agreement shall be in such form and shall contain such provisions as the
Board of Directors shall deem appropriate, which provisions shall include,
but not be limited to, provisions with respect to the powers and authority
of the Trustee, the authority of the Company to amend the trust agreement,
and the authority of the Plan Committee to settle the accounts of the
Trustee on behalf of all persons having
17
an interest in the Trust Fund. The Trustee shall have exclusive authority
and discretion to manage and control the assets of the Trust Fund, except
to the extent that the Plan expressly provides that the Trustee is subject
to the direction of the Plan Committee, and in such cases the Trustee shall
be subject to the directions of the Plan Committee which are made in
accordance with the terms of the Plan and which are not contrary to ERISA.
All rights and benefits that may accrue to any person under the Plan shall
be subject to all the terms and provisions of the trust agreement.
6.2 The Trustee shall hold the Trust Fund, as constituted from
time to time, for the exclusive benefit of Participants, Former
Participants and Beneficiaries under the Plan, and (except as otherwise
provided for in Sections 5.2 and 5.3) no part of the Trust Fund shall be
recoverable by the Employer or used for or diverted to purposes other than
for the exclusive benefit of such Participants, Former Participants and
Beneficiaries and for defraying the reasonable expenses of administering
the Plan and the Trust Fund.
6.3 Employer contributions made in cash and other cash received
by the Trust Fund shall be applied primarily to the purchase of Common
Stock or other securities from the
18
Company or from any stockholder of the Company, in private transactions or
on the open market, or to the satisfaction of obligations of the Trust Fund
incurred in connection with the purchase of shares of Common Stock. In
general, assets of the Trust Fund shall be invested primarily in shares of
Common Stock. Notwithstanding the foregoing, assets of the Trust Fund may
be invested in investments other than shares of Common Stock to the extent
permitted for a qualified "employee stock ownership plan" under ERISA and
the Internal Revenue Code, provided, however, that at least 51% of the fair
market value of all assets of the Trust Fund shall be invested in Common
Stock. All investments by the Trustee of the assets of the Trust Fund
shall be made at the direction of the Plan Committee.
6.4 All shares of Common Stock purchased by the Trustee at the
direction of the Plan Committee shall be purchased at prices which, in the
judgment of the Plan Committee, do not exceed the fair market value of such
shares determined in accordance with the provisions of Article XIII.
Shares of Common Stock may be acquired by the Trustee for a consideration
consisting of cash, property or evidences of indebtedness or any
combination thereof. The Trustee, at the written direction of the Plan
Committee, may incur indebtedness to any person (including the Employer)
19
and pay reasonable interest thereon to purchase shares of Common Stock or
for any other purpose consistent with the purposes of the Plan, and may
issue its promissory note as Trustee as evidence of such indebtedness. Any
such indebtedness shall be non-recourse with respect to the assets of the
Trust Fund, other than the shares of Common Stock for whose purchase such
indebtedness was incurred (and any securities issued in respect thereof),
and any such indebtedness shall be repayable only out of the amounts of
Employer contributions or, as directed by the Plan Committee, out of
dividends, distributions and other income and earnings on shares of Common
Stock not allocated to any Participants' Accounts. The Plan Committee, in
its sole discretion, shall determine whether any dividend paid in cash on
Common Stock to the Plan shall be (a) distributed in cash to the
Participants, Former Participants and Beneficiaries, (b) used to make
payments of either principal or interest on a loan described in
Section 404(a)(9) of the Internal Revenue Code, or (c) retained in the
Participants' Accounts of the Participants, Former Participants or Bene-
ficiaries. In the event that the Plan Committee determines said dividend
paid to the Plan shall in whole or part be so distributed, such amount of
said dividend so determined shall be distributed in cash to the
Participants, Former
20
Participants and Beneficiaries, in accordance with their respective
Participants' Accounts at the close of the Plan Year, not later than
90 days after the close of the Plan Year in which said dividend was paid.
The Employer shall contribute to the Trust Fund amounts sufficient to
enable the Trust Fund to pay any fixed installments of principal and
interest on any such indebtedness on or before the date any such
installment is due. The Trustee, at the direction of the Plan Committee,
in order to secure indebtedness incurred in connection with the purchase of
shares of Common Stock, may pledge such shares of Common Stock and may
assign any rights to future contributions. Any shares of Common Stock so
pledged shall be held in a "suspense account" as provided for in Treasury
Regulation Sec. 54.4975-11(c), as amended from time to time, and shall be
released therefrom in accordance with this Article and Treasury
Regulation Sec. 54.4975-7(b)(8) and Sec. 54.4975-7(b)(15), as amended from time
to time.
6.5 Any shares of Common Stock purchased and paid for by
delivery of evidences of indebtedness shall not be allocated to
Participants' Accounts until the indebtedness representing the purchase
price for such shares has been discharged. Any Employer contribution used
to reduce or discharge such indebtedness shall be deemed to have been
21
applied to the payment of the original purchase price for whole shares of
Common Stock on the date of such reduction or discharge. Any such shares
shall be released as collateral, if previously pledged, and shall be
allocated to Participants' Accounts as of the last day of the Plan Year for
which such Employer's contribution was made.
6.6 Pending the investment of assets of the Trust Fund in shares
of Common Stock, or the application of such assets toward the satisfaction
of obligations incurred to purchase shares of Common Stock, such funds may
be held in cash or the Trustee may, at the direction of the Plan Committee,
invest such funds temporarily in savings accounts, certificates of deposit,
short term securities of the United States or other cash equivalents, as
determined by the Plan Committee. To the extent permitted for a qualified
"employee stock ownership plan" under ERISA and the Internal Revenue Code,
shares of Common Stock held in the Trust Fund may be sold and the proceeds
of such sale invested in assets qualifying under ERISA, other than shares
of Common Stock, at the direction of the Plan Committee, provided that at
least 51% of the fair market value of all assets of the Trust Fund shall be
invested in Common Stock.
6.7(a) Each Participant (or, in the event of his death, his
Beneficiary) is, for purposes of this Section,
22
designated a "named fiduciary", within the meaning of Section 403(a)(1) of
ERISA, and shall have the right to direct the Trustee as to the manner in
which shares of Common Stock allocated to his Participant's Account (the
"Allocated Shares"), and his proportionate share of (i) any shares of
Common Stock not allocated to any Participant's Account ("Unallocated
Shares") and (ii) the Allocated Shares credited to the Participants'
Accounts of other Participants who fail to direct the Trustee, are to be
voted on each matter brought before an annual or special stockholders'
meeting of the Company. Before each such meeting of stockholders, the Plan
Committee shall cause to be furnished to each Participant (or Beneficiary)
a copy of the proxy solicitation material, together with a form requesting
confidential directions on how such Participant's Allocated Shares shall be
voted on each such matter. Upon timely receipt of such directions, the
Trustee shall on each such matter vote as directed by Participants the
number of such Participants' respective Allocated Shares (including
fractional shares). The Trustee shall vote both Participants' Allocated
Shares for which it has not received timely direction, as well as
Unallocated Shares, in the same proportion as directed Participants'
Allocated Shares are voted. The instructions received by the Trustee from
23
Participants shall be held by the Trustee in strict confidence and shall
not be divulged or released to any person, including officers or employees
of the Company or any Subsidiary; provided, however, that, to the extent
necessary for the operation of the Plan, such instructions may be layed by
the Trustee to a recordkeeper, auditor or other person providing services
to the Plan.
(b) Each Participant (or, in the event of his death, his
Beneficiary) is, for purposes of this Section, designated a "named
fiduciary," within the meaning of Section 403(a)(1) of ERISA, and shall
have the right, to the extent of the number of Allocated Shares credited to
his Participant's Account and his proportionate share of the Unallocated
Shares, to direct the Trustee in writing as to the manner in which to
respond to a tender or exchange offer with respect to shares of Common
Stock. The Plan Committee shall use its best efforts to timely distribute
or cause to be distributed to each Participant (or Beneficiary) such
information as will be distributed to stockholders of the Company in
connection with any such tender or exchange offer. Upon timely receipt of
such instructions, the Trustee shall respond as instructed by Participants
with respect to their respective Participants' Allocated Shares. If the
Trustee shall not receive timely instruction from a
24
Participant (or Beneficiary) as to the manner in which to respond to such a
tender or exchange offer, the Trustee shall not tender or exchange any
Participant's Allocated Shares with respect to which such Participant has
the right of direction. Unallocated Shares shall be tendered or exchanged
by the Trustee in the same proportion as Participants' Allocated Shares
with respect to which Participants (or Beneficiaries) have the right of
direction are tendered or exchanged. The instructions received by the
Trustee from Participants shall be held by the Trustee in strict confidence
and shall not be divulged or released to any person, including officers or
employees of the Company or any Subsidiary; provided, however, that, to the
extent necessary for the operation of the Plan, such instructions may be
relayed by the Trustee to a recordkeeper, auditor or other person providing
services to the Plan.
6.8 The Trustee shall make a determination of the value of the
assets of the Trust Fund as of the last day of each Plan Year in accordance
with the provisions of Article XIII. The Plan Committee, from time to
time, may direct the Trustee to value the assets of the Trust Fund as of
any other date if, in the sole discretion of the Plan Committee, such
interim valuation is necessary or desirable for the administration or
implementation of the Plan.
25
6.9 Diversification of Investments. The following provisions
-------------------------------
shall be effective with respect to Employer securities acquired after
December 31, 1986, and Plan Years beginning after December 31, 1986.
(a) The Plan Committee shall choose, in its sole discretion, one
of the following alternatives to comply with the requirements of
Section 401(a)(28) of the Internal Revenue Code. It may institute
procedures in accordance with the rules and regulations thereunder
permitting a "qualified Participant" to elect that a percentage of such
portion of his Participant's Account which shall consist of Employer
securities acquired after December 31, 1986, which percentage shall be
fixed by the Plan Committee and shall be at least 25% thereof, be invested
under the Plan in accordance with at least 3 investment options as
described in Section 401(a)(28)(B)(ii)(II) of the Internal Revenue Code.
(b) Alternatively, the Plan Committee may institute procedures
in accordance with Section 401(a)(28) of the Internal Revenue Code
permitting a "qualified Participant" to elect that an amount equal to 25%
of the number of shares of Employer securities acquired by or contributed
to the Plan after December 31, 1986 which have been allocated to his
Participant's Account be distributed
26
to the Participant within 90 days after the period during which the
election may be made. In the event the aggregate value of the interest in
the Account of a "qualified participant" exceeds $3,500 no such
distribution shall be permitted under this Plan without the written consent
thereto of his spouse filed with the Plan committee, in form and substance
satisfactory to the Plan Committee.
(c) A "qualified Participant" is a Participant who is an
employee of the Employer and has both attained the age of 55 and has
completed 10 or more Years of Service as a Participant. Said election
shall be made within 90 days after the close of the Plan Year in which the
Participant first became a qualified Participant, and thereafter within 90
days after the close of each of the next succeeding four Plan Years. If so
elected, each said investment or each said distribution shall be made
within 180 days following the close of each of said Plan Years. As elected
by said Participant in each said succeeding Plan Year, an additional amount
shall be so invested or distributed to the extent necessary to insure that,
in the case of an investment, the total amount so invested under this
Section 6.9 as of that Plan Year totals at least 25% (50% with respect to
the last such Plan Year) of said portion of his Participant's Account, or
that, in the case of a distribution, the total
27
amount so distributed under this Section 6.9 as of that Plan Year equals
25% (50% with respect to the last such Plan Year) of the number of shares
of Employer securities acquired by or contributed to the Plan after
December 31, 1986 which have been allocated to his Participant's Account
less the number of shares of Employer securities previously so distributed
pursuant to such an election. No such investments or distributions will be
made after such fifth Plan Year.
(d) Where the fair market value (determined at the Plan
valuation date immediately preceding the first day on which a qualified
participant is eligible to make a diversification election) of Employer
securities acquired by or contributed to this Plan after December 31, 1986,
and allocated to a qualified participant's account is $500 or less, then
such employer securities will be considered to constitute a de minimis
amount of employer securities that is not subject to the diversification of
investments requirement of this Plan and Section 401(a)(28) of the Code.
Where the fair market value of the Employer securities acquired by or
contributed to the Plan after December 31, 1986, and allocated to the
account of a qualified participant exceeds the de minimis amount for any
year of a participant's qualified election period, then all shares
28
allocated to the account of a qualified participant which were acquired or
contributed after December 31, 1986, shall be subject to the
diversification requirements of this Plan and Section 401(a)(28) of the
Code in each remaining year of a participant's qualified election period.
ARTICLE VII
Allocation of Employer
Contributions and Accrual of Benefits
-------------------------------------
7.1 The Plan Committee shall cause to be established and
maintained for each Participant a Participant's Account in the name of such
Participant to which there shall be credited the Participant's allocable
portion of Common Stock (including fractional shares) contributed by the
Employer or purchased and fully paid for by the Trust Fund and all other
amounts allocated to such Participant pursuant to the provisions of this
Article VII. The establishment of separate Participants' Accounts shall
not require a segregation of the assets of the Trust Fund, and no
Participant or Former Participant shall, as a result of the allocations
made pursuant to this Article VII, acquire any right to or interest in any
specific asset of the Trust Fund.
7.2 (a) Employer contributions to the Trust Fund with respect
to any Plan Year (as adjusted for any net
29
income, gains and losses on the investment thereof prior to allocation)
shall, as of the last day of such Plan Year, be allocated among the
accounts of the Participants who have performed not less than 1,000 Hours
of Service for the Employer during such Plan Year, except those whose
employment by the Employer terminated prior to the last day of such Plan
Year for any reason other than death, Disability or Normal Retirement.
Such allocation of a contribution by the Employer to a Participant's
Account for a Plan Year shall be made in the proportion that each such
Participant's Eligible Compensation during such Plan Year bears to the
aggregate Eligible Compensation of all such Participants during such Plan
Year. In the event (i) of a loan to the Employer after July 18, 1984 with
respect to Employer securities transferred by the Employer to the Plan
after October 22, 1986, and (ii) the Employer notifies the Plan Committee
that said loan is intended to be a "securities acquisition loan" under
Section 133 of the Internal Revenue Code, the Employer shall transfer
Employer securities to the Plan within 30 days of said loan in an amount
equal to the proceeds of said loan, and said Employer securities shall be
allocated among those Participants otherwise eligible for an allocation
under this paragraph within one year after the date of said loan, as
provided for
30
in Section 133(b)(1)(B) of the Internal Revenue Code. Any loan by the
Employer to the Plan of the proceeds of a "securities acquisition loan"
made under said Section 133 shall comply in all respects with the
requirements of Section 133(b)(3) of the Internal Revenue Code and the
regulations thereunder.
(b) For the purposes of this Section 7.2, the "Eligible
Compensation" of any Participant for any Plan Year shall mean and include
all wages and salaries (including overtime compensation), commissions and
bonuses paid in cash by the Employer to such Participant for the period of
such Plan Year during which he was eligible to be a Participant, but
excluding (i) reimbursement for expenses; (ii) any amounts contributed by
the Employer for any group life insurance, accidental death or injury, or
any other health, medical, hospitalization or similar employee benefit
plan; (iii) any amounts contributed by the Employer to the Trust Fund, and
any benefits therefrom distributed to or realized by a Participant, under
the Plan; (iv) any amounts contributed by the Employer to, and any benefits
distributed to or realized by, a Participant under any profit sharing,
retirement or pension or similar plan, any stock bonus or stock option plan
or any other employee benefit plan; and (v) all other forms of deferred
compensation and other
31
remuneration. Compensation in excess of $120,000 shall not be included in
Eligible Compensation.
In addition to other applicable limitations set forth in this
Plan, and notwithstanding any other provision of this Plan to the contrary,
for Plan Years beginning on or after January 1, 1994, the annual
compensation of each Employee taken into account under this Plan in any
event shall not exceed the annual compensation limit as provided for in the
Omnibus Budget Reconciliation Act of 1993 ("OBRA '93"). The OBRA '93
annual compensation limit is $150,000, as adjusted by the Commissioner of
Internal Revenue for increases in the cost of living in accordance with
section 401(a)(17)(B) of the Internal Revenue 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 ("the
determination period") beginning in such calendar year. If a determination
period consists of fewer than 12 months, the OBRA '93 annual compensation
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 Internal Revenue
Code shall mean the OBRA '93 annual
32
compensation limit set forth in this provision. If compensation for any
prior determination period is taken into account in determining a
Participant'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 from 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.
(c) A Participant's allocable share of any cash contribution or
shares of Common Stock contributed by the Employer or shares of Common
Stock otherwise allocable to him shall be credited to his Participant's
Account held pursuant to Article VII. Except to the extent that the Plan
Committee directs the distribution of cash dividends on common stock
pursuant to Section 6.4 of Article VI and Section 10.10 of Article X, all
dividends, distributions and other income and earnings received during a
Plan Year on shares of Common Stock or on other assets credited to a
Participant's Account shall be invested in shares of Common Stock, or other
assets which qualify under ERISA to the extent permitted under Sections 6.3
and 6.6 of Article VI, and be added to the Participant's Account as of the
last day
33
of such Plan Year. Each Participant's Account shall segregate that portion
of the Account held in Common Stock from the portion held in other
investments. All other dividends, distributions, net income and earnings
(other than those applied to the repayment of indebtedness in accordance
with Section 6.4 and those specified in Section 7.2(a)) of the Trust Fund
during a Plan Year shall be invested in shares of Common Stock, or other
assets which qualify under ERISA to the extent permitted under Sections 6.3
and 6.6 of Article VI, and be allocated as of the last day of such Plan
Year to the Participant's Account of each Participant or Former Participant
in proportion to the respective balances in such Accounts as of the first
day of the Plan Year, after giving retroactive effect to any distributions
from any such Participants' Accounts made during such Plan Year.
(d) In allocating shares of Common Stock received as
contributions or purchased by the Trust Fund to Participants' Accounts,
allocations of fractional shares shall be made to the nearest fourth
decimal place.
7.3 The assets, if any, forfeited as of the last day of any Plan
Year in accordance with the provisions of Article IX shall, as of such last
day of such Plan Year, be allocated among the Participants' Accounts of the
34
Participants entitled to share in any Employer contribution as of that date
in proportion to the balances in their respective Participants' Accounts as
of the first day of such Plan Year; provided, however, that if such
allocation of the forfeitures for any Plan Year would cause the Plan to
fail to meet the requirements of Section 415 of the Internal Revenue Code
with respect to a particular Participant, the amount of such unclaimed
amounts otherwise allocable to such Participant, to the extent it exceeds
the limitations set forth in Section 415 of the Internal Revenue Code,
shall be reallocated to the Participants' Accounts of other Participants,
in accordance with the directions of the Plan Committee, in the same manner
as set forth in this Section 7.3.
7.4 The assets, if any, deemed unclaimed as of the last day of
any Plan Year, in accordance with the provisions of Section 10.6, shall, as
of such last day of such Plan Year, be allocated among the Participants'
Accounts of Participants entitled to share in any Employer contributions as
of such date in proportion to the balances in their respective
Participants' Accounts as of the first day of such Plan Year; provided,
however, that if such allocation of the unclaimed assets for any Plan Year
would cause the Plan to fail to meet the requirements of
35
Section 415 of the Internal Revenue Code with respect to a particular
Participant, the amount of such unclaimed amounts otherwise allocable to
such Participant, to the extent it exceeds the limitations set forth in
Section 415 of the Internal Revenue Code, shall be reallocated to the
Participants' Accounts of other Participants, in accordance with the
directions of the Plan Committee, in the same manner as set forth in this
Section 7.4.
7.5 (a) Anything herein to the contrary notwithstanding, the
aggregate maximum "annual addition" to a Participant's Account hereunder
and under any other defined contribution plan maintained by the Employer
and qualified under Section 401(a) of the Internal Revenue Code for any
Plan Year (which is the Employer's "limitation year" for purposes of
Section 415 of the Internal Revenue Code) shall not exceed the lesser of:
(i) $30,000 or, if greater, one-fourth of the dollar limitation
in effect under Section 415(b)(1)(A) of the Internal Revenue Code; or
(ii) 25% of the Participant's compensation for such year.
The term "annual addition" means the sum for any such year of
Employer contributions, employee contributions,
36
without respect to any rollover contributions, and forfeitures.
(b) The limitation contained in clause (i) of paragraph (a)
above will not apply in any Plan Year in which less than one-third of the
Employer's contribution is allocated to employees who are highly
compensated, within the meaning of Section 414(q) of the Internal Revenue
Code. For such a year, the maximum contributions or other additions with
respect to a Participant will be the lesser of: (x) the amount specified
in clause (ii) of paragraph (a); or (y) the amount specified in clause (i)
of paragraph (a), plus the lesser of the amount specified in clause (i) of
paragraph (a) or the amount of employer securities contributed, or
purchased with cash contributed, to the Plan in that year.
(c) For any Plan Year in which less than one-third of the
Employer's contribution is allocable to employees who are highly
compensated, within the meaning of Section 414(q) of the Internal Revenue
Code, the limitations imposed by this Section 7.5(a) and (b) shall not
apply to the following, and the following shall not be included in the
computation of the "annual addition" to a Participant's Account for the
purposes of Section 7.5(a):
37
(i) Forfeitures of Common Stock and Employer securities acquired
with the proceeds of a loan incurred to purchase Common Stock pursuant
to Section 6.4; and
(ii) Employer contributions which are deductible under
Section 404(a)(9)(B) of the Internal Revenue Code and are charged
against the Participant's Account.
(d) The Trustee shall, pursuant to Plan Committee direction,
reallocate the excess of a Participant's annual addition in a Plan Year
over the limitations set forth in this section, as if such excess were an
Employer contribution for such year, to the Accounts of all other
Participants for whom such additional allocation does not create a similar
excess.
(e) In the event that any Participant is a Participant under any
other defined contribution plan (as such term is defined in the Internal
Revenue Code) maintained by the Employer, the total amount of annual
credits for the account of the Participant from all such defined
contribution plans shall not exceed the limitations set forth in
Section 415(c) of the Internal Revenue Code. If it is determined that, as
a result of such limitations, the allocation to a Participant's Account
must be reduced,
38
such reduction shall be effected as provided in Sections 7.3 and 7.4 of the
Plan.
(f) If an employee participates in both a defined benefit plan
and a defined contribution plan maintained by the Employer or any member of
a controlled group of which the Employer is a member, the sum of the
defined benefit plan fraction and the defined contribution plan fraction
for each limitation year may not exceed 1.0. For purposes of this section,
the defined benefit plan fraction for each limitation year is a fraction
the numerator of which is the projected annual benefit of the employee
pursuant to the Plan (determined as of the close of the year) and the
denominator of which is the lesser of (x) 125% of the dollar limitation
imposed upon such benefits by the Internal Revenue Code for such Plan Year
or (y) 140% of the Participant's average Eligible Compensation for the
three consecutive limitation years (determined pursuant to Section 415 of
the Internal Revenue Code) during which he both participated in the defined
benefit plan and received the highest compensation from the Employer. For
purposes of this section, the defined contribution plan fraction for each
limitation year is a fraction the numerator of which is the sum of the
annual additions to the Participant's Account as of the close of the year
and the denominator of which is
39
the sum of an amount determined for each of such years as the lesser of:
(i) 125% of the limit determined pursuant to
Section 7.5(a)(i) above, or
(ii) 140% of the limit determined pursuant to
Section 7.5(a)(ii) above.
In the event the foregoing limitations would be exceeded, the Participant's
allocation under this Plan shall be reduced to the extent necessary to
comply with the limitations.
7.6 The Plan Committee shall establish accounting procedures for
the purpose of making the allocations to and valuations of Participants'
Accounts provided for in this Article VII.
7.7 The fact that allocations shall be made and credited to a
Participant's Account shall not vest any right, title, or interest in the
assets in such Participant except at the time or times and upon the terms
and conditions provided in the Plan.
7.8 As of the last day of each Plan Year the Plan Committee
shall determine the value of each Participant's Account and, as soon as
practicable after the end of such Plan Year, shall furnish to each
Participant a written statement describing the assets held in his
Participant's
40
Account and setting forth the value as of such date of his Participant's
Account, which statement shall also set forth the amount of his
Participant's Account which has vested and the earliest date on which
forfeitable amounts shall become vested.
ARTICLE VIII
Vesting and Accrual
of Participants' Accounts
-------------------------
8.1 (a) Each allocation of a contribution by the Employer to a
Participant's Account for a particular Plan Year in accordance with
Section 7.2(a) and any earnings thereon shall, for Plan Years prior to the
Plan Year beginning September 1, 1989, become vested in the Participant
during his Years of Service in accordance with the following schedule:
Years of Service After the Plan Year Percentage
with Respect to Which Contribution Was Made Vested
------------------------------------------- -----------
1 Year of Service or more, but less than 2 . . . . 20%
2 Years of Service or more, but less
than 3 . . . . . . . . . . . . . . . . . . . . . 40%
3 Years of Service or more, but less
than 4 . . . . . . . . . . . . . . . . . . . . . 60%
4 Years of Service or more, but less
than 5 . . . . . . . . . . . . . . . . . . . . . 80%
5 Years of Service or more . . . . . . . . . . . . 100%
(b) Commencing with the Plan Year beginning September 1, 1989,
the following vesting schedule shall apply with respect to Participants who
perform at least one
41
Hour of Service on or after September 1, 1989, and a Participant's Account
with respect to contributions for the Plan Year commencing September 1,
1989 and for each Plan Year thereafter shall become vested in the
Participant during his Years of Service in accordance therewith:
Percentage
Years of Service Vested
---------------- -------
Less than 3 years of Service . . . . . . . . . . . 0%
3 Years of Service or more, but less
than 4 . . . . . . . . . . . . . . . . . . . . . 20%
4 Years of Service or more, but less
than 5 . . . . . . . . . . . . . . . . . . . . . 40%
5 Years of Service or more, but less
than 6 . . . . . . . . . . . . . . . . . . . . . 60%
6 Years of Service or more, but less
than 7 . . . . . . . . . . . . . . . . . . . . . 80%
7 Years of Service or more . . . . . . . . . . . . 100%
(c) For purposes of this Section 8.1 a "Year of Service" shall
mean a Plan Year during which an employee performed not less than
1,000 Hours of Service for the Employer. In determining a Participant's
"Years of Service", all service with the Employer shall be taken into
account except that:
(i) Years of Service with the Employer prior to age 18
shall not be taken into account.
(ii) Where an employee has a 1-year Break in Service, Years
of Service prior to such Break in Service shall not be taken into
account until the employee has completed a Year of Service after his
re-
42
employment. In the event of such re-employment in any Plan Year prior
to the Plan Year commencing June 1, 1985: (A) if the employee did not
have a vested interest under the Plan at the time of such Break and
his consecutive Breaks in Service were equal to or greater than his
number of Years of Service prior to his Break in Service, such prior
Years of Service shall not be taken into account; and (B) whether or
not the employee did not have a vested interest under the Plan at the
time of such break, any service after such Break in Service shall not
increase the Participant's vested percentage in his Participant's
Account which accrued prior to such Break in Service. In the case of
such re-employment in any Plan Year subsequent to the Plan Year
commencing June 1, 1984: (A) where an employee has 5 consecutive
1-year Breaks in Service, Years of Service after such 5-year period
shall not take into account for the purpose of increasing said vested
percentage Years of Service prior to said 5-year period and (B) in the
case of any employee who does not have a vested interest under the
Plan at the time he incurs a 1-year Break in Service, Years of Service
before any period of consecutive 1-year Breaks in Service shall not be
taken into account if the number of consecutive
43
1-year Breaks in Service within such period equals or exceeds the
greater of 5 or the aggregate number of Years of Service before such
period. Where Years of Service are not so required to be taken into
account by reason of a period of Breaks in Service, such Years of
Service shall not be taken into account with respect to any subsequent
period of Breaks in Service.
(iii) Years of Service as an employee of a Participating
Subsidiary prior to the effective date on which the Participating
Subsidiary became a Subsidiary of the Employer shall not be taken into
account.
(d) For the purposes of this Section 8.1, Years of Service shall
be determined by assuming full-time employment during all of the following
periods if, on the day prior to commencement of any such period, the
employee was employed by the Employer:
(i) Service in the Armed Forces of the United States or any
of its Allies during a period of declared national emergency or in the
time of war, or in the compulsory military service of the United
States whether during time of war or otherwise; provided, however,
that the employee returns to work within the period during which his
employment rights are
44
guaranteed by applicable Federal law following his discharge or
severance from such service.
(ii) Period of employment by an affiliate of the Employer
(that is, a firm or corporation which, directly or indirectly,
controls or is controlled by or is under common control with the
Employer), at the request of the Employer.
(iii) Leaves of absence granted by the Employer in writing
and in a non-discriminatory manner, before or after commencement of
the absence, for any purpose including but not limited to sickness,
accident or for the convenience of the Employer; provided, however,
that the employee returns to work before or at the expiration of such
leave or any extension thereof.
(iv) Notwithstanding anything to the contrary herein,
(I) In the case of each Participant who is absent from work
for any period by reason of the pregnancy of the Participant, by
reason of the birth of a child of the Participant, by reason of
the placement of a child with the Participant in connection with
the adoption of such child by such Participant, or for purposes
of caring for such child for a period beginning immediately
following
45
such birth or placement, the Plan shall treat as Hours of Service,
solely for purposes of determining whether a 1-year break in service
has occurred, the hours described in clause (II).
(II) The hours described in this clause are
(a) the hours of service which otherwise would
normally have been credited to such Participant but for
such absence, or
(b) in any case in which the Plan Committee is unable
to determine the hours described in subclause (A)
8 hours of service per day of absence, except that the
total number of hours treated as Hours of Service under
this clause by reason of any such pregnancy or
placement shall not exceed 501 hours.
(III) The hours described in clause (B) shall be treated as
Hours of Service as provided in this subparagraph only in the
year in which the absence from work begins, if a Participant
would be prevented from incurring a 1-year Break in Service in
such year solely because the period of absence is treated as
Hours of Service as provided in
46
clause (A); or in any other case, in the immediately following
year.
(IV) For purposes of this paragraph, the term "year" means a
Year of Service.
(V) No credit will be given pursuant to this paragraph (iv)
unless the Participant furnishes to the Committee such timely
information as the Plan may reasonably require to establish that
the absence from work is for reasons referred to in clause (I),
and the number of days for which there was such an absence.
Except as expressly provided herein, if any employee who was formerly a
Participant in the Plan shall be re-employed by the Employer after his
employment by the Employer has terminated, he shall not be entitled to
credit for, and he shall not have any interest in, any part of the Trust
Fund which had not vested in him in accordance with this Article VIII prior
to his re-employment.
(e) For purposes of this Section 8.1, when an employee of an
affiliate (as defined in Section 8.1(c)(ii)) becomes an employee of the
Employer, Years of Service with such affiliate during the period of
affiliation shall be taken into account.
47
8.2 Notwithstanding anything to the contrary contained in this
Article VIII, a Participant's Account shall become fully vested in the
event of the Normal Retirement or the attaining of Normal Retirement Age by
the Participant, or the death or Disability of the Participant, while the
Participant is still in the employ of the Employer.
8.3 In the event of any termination of the Plan for any reason
as provided in Article XIV of this Plan, each Participant's Account shall
become fully vested, provided that such Participant is in the employ of the
Employer at the time of such termination of the Plan.
ARTICLE IX
Forfeitures
-----------
9.1 Upon the payment of the vested portion of a Participant's
Account to the Participant or, if earlier, when the Participant has a Break
in Service, the non-vested portion of a Participant's Account will become a
forfeiture. If the Participant resumes his employment with the Employer
prior to accruing a Break in Service of five consecutive years, his entire
Participant's Account shall be reinstated if he repays to the Plan the
amount distributed prior to having a Break in Service of five consecutive
years. The amount to be reinstated for any year shall first be derived
48
from forfeitures for the year and then from income. If the amount of
forfeitures and the amount of income for the year are not sufficient to
cover said reinstatement, the Employer shall contribute the balance. The
Employer may, at its discretion, contribute an amount for this purpose in
lieu of utilizing such forfeitures and income.
9.2 The forfeited, non-vested interests in a Participant's
Account shall be allocated in accordance with the provisions of Section 7.3
among the Participants' Accounts of other Participants or Former
Participants as of the last day of the Plan Year in which a Break in
Service occurs.
ARTICLE X
Distributions and Benefits
--------------------------
10.1 Upon the Normal Retirement of a Participant, or upon a
Former Participant's attaining Normal Retirement Age, the vested interest
in his Participant's Account as of the last day of the Plan Year in which
the Normal Retirement of the Participant occurs or the Former Participant
attains Normal Retirement Age shall be distributed to him in accordance
with Section 10.5 of this Article X. A Participant who has attained Normal
Retirement Age and remains in the employ of the Employer may elect to have
distributed to him his vested interest in his Participant's Account as of
the last day of such Plan Year or any
49
subsequent Plan Year in which his election is made. Such election shall be
delivered to the Plan Committee in writing and in such form as the Plan
Committee in its sole discretion shall determine. In the event a
Participant who has attained Normal Retirement Age and remains in the
employ of the Employer does not so elect, his Participant's Account shall
continue to be credited with allocations of Employer contributions and
forfeitures in accordance with Article VII of the Plan; and the balance in
his Participant's Account shall be distributed to him by no later than the
earlier of (a) the close of the calendar year in which he attains age
70-1/2 or (b) the close of the calendar year in which he retires from
service with the Employer. In the case of a Participant who is a "5%
owner" as defined in Section 416(i)(1)(B)(i) of the Internal Revenue Code
with respect to the calendar year in which he attains age 70-1/2, the
distribution of his vested interest in his Participant's Account must,
under all circumstances, commence not later than April 1 of the next
succeeding calendar year even if said Participant remains in the employ of
the Employer. Effective September 1, 1989, except as provided under
transition rules under Section 401(a)(9) of the Internal Revenue Code,
distribution of a Participant's Account shall
50
begin no later than April 1 following the calendar year in which the
Participant attains age 70-1/2.
10.2 In the event of the death of a Participant or Former
Participant prior to the distribution of his Participant's Account, the
entire balance in the Participant's Account or the vested interest in a
Former Participant's Account as of the last day of the Plan Year in which
his death occurs shall be distributed in accordance with Section 10.5 to
his Beneficiary who shall be his surviving spouse unless said spouse has
consented in writing, filed with the Plan Committee, to the Participant's
designation of another beneficiary or beneficiaries; if there be no
surviving spouse or other designated Beneficiary, then said distribution
shall be made to such Participant's issue (as defined in such Participant's
last will and testament, or in the absence of such definition, as
determined in accordance with the law of the domicile of such Participant),
or, if there be none, the parents of such Participant equally or the
survivor of such parents or, if there be none, such Participant's executors
or administrators. Each Participant and Former Participant shall have the
right, by written notice to the Plan Committee and with the written consent
of his spouse filed with the Plan Committee, to designate or to change the
51
designation of the beneficiary or beneficiaries who are to receive the
balance of the Participant's Account. Any designation of a Beneficiary
shall be made in writing and filed with the Plan Committee. A deceased
Participant's Account shall be distributed to his Beneficiary no later than
5 years after the date of the Participant's death.
10.3 In the event of the Disability of a Participant or Former
Participant prior to the distribution of his Participant's Account, the
entire balance in the Participant's Account or the vested interest in the
Former Participant's Account, as of the last day of the Plan Year in which
such Disability occurred shall be distributed to such Participant or Former
Participant in accordance with Section 10.5. For the purposes of the Plan,
the term "Disability" shall mean a physical or mental disability or
incapacity which, in the opinion of a physician selected by the Plan
Committee, can be expected to result in death or has lasted or can be
expected to last for a continuous period of at least 12 months and which
renders the Participant or Former Participant unable to engage in any
substantial gainful employment.
10.4 Distributions of benefits under the Plan shall be made
either in whole shares of Common Stock or in cash, or a combination
thereof, in the sole discretion of
52
the Plan committee, provided, however, that a Participant shall have the
right to demand that the Participant's benefits to be distributed shall be
in the form of Common Stock. Where the distribution of benefits under the
Plan shall be made in Common Stock, any balance in a Participant's Account
representing cash or any other asset other than shares of Common Stock
shall be applied to purchase whole shares of Common Stock at the fair
market value thereof, and any balance in the Participant's Account
representing a fractional share and/or any cash insufficient to purchase a
whole share of Common Stock shall be distributed in cash.
10.5 (a)(1) Except as provided in Sections 10.1, 10.5(b) and
10.8, all distributions from Participants' Accounts to Participants, Former
Participants and Beneficiaries pursuant to this Article X shall be made, in
a single lump sum distribution, at such date as the Plan Committee in its
discretion shall determine, each such distribution shall be made when
administratively feasible but shall begin not later than the 60th day after
the close of the Plan Year in which the Participant or Former Participant
became entitled to such distribution by reason of the Normal Retirement of
the Participant or the attaining of Normal Retirement Age by a Former
Participant, and at
53
least within one year after the close of the Plan Year in which the
Participant, Former Participant or Beneficiary became entitled to such
distribution by reason of the death or Disability of the Participant or
Former Participant, as the case may be.
(2)(i) Direct Rollovers. This section applies to distributions
----------------
made on or after January 1, 1993. Notwithstanding any provision of this
Plan to the contrary that would otherwise limit a distributee's election
under this Section 10.5(a)(2), a distributee may elect, at the time and in
the manner prescribed by the Plan Committee, to have any portion of an
eligible rollover distribution paid directly to an eligible retirement plan
specified by the distributee in a direct rollover, subject to such
limitations and rules as may be properly imposed by the Plan Committee in
accordance with applicable regulations and rulings promulgated from time to
time under the Internal Revenue Code.
(ii) Definitions.
-----------
(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
54
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 Internal Revenue 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 Internal
Revenue Code, an individual retirement annuity described in section 408(b)
of the Internal Revenue Code, an annuity plan described in Section 403(a)
of the Internal Revenue Code, or a qualified trust described in
Section 401(a) of the Internal Revenue Code, that accepts the distributee's
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.
55
(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 Internal Revenue 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.
(e) If a distribution is one to which Sections 401(a)(11) and
417 of the Internal Revenue Code do not apply, such distribution may
commence less than 30 days after the notice required under
Section 1.411(a)-11(c) of the Income Tax Regulations is given, provided
that:
(1) the Plan Committee clearly informs the Participant that the
Participant has a right to a period of at least 30 days after
receiving the notice to consider the decision of whether or not to
elect a distribution (and, if applicable, a particular distribution
option), and
(2) the Participant, after receiving the notice, affirmatively
elects a distribution.
56
(b) With respect to distributions attributable to Common Stock
acquired after December 31, 1986, distributions to Former Participants who
terminated employment for reasons other than Normal Retirement, death or
Disability, shall begin no later than one year after the close of the Plan
Year which is the fifth Plan Year following the Plan Year in which said
Former Participant terminated employment, unless the Former Participant
elects otherwise and provided he is not reemployed by the Employer before
such year. In addition, unless said Former Participant elects otherwise,
distribution of his Participant's Account shall be in substantially equal
periodic payments (not less frequently than annually) over a period to
extend not longer than the greater of:
(i) five years, or
(ii) in the event his Participant's Account balance is in excess
of $500,000 (as adjusted pursuant to Section 409(o)(2) of the Internal
Revenue Code), five years plus one additional year (but not more than
five additional years) for each $100,000 (as adjusted pursuant to
Section 409(o)(2) of the Internal Revenue Code) or fraction thereof by
which such balance exceeds $500,000.
57
For the purposes of this Section 10.5(b), the balance of a Participant's
Account shall not include any Employer securities acquired with the
proceeds of a loan described in Section 404(a)(9) of the Internal Revenue
Code until the close of the Plan Year in which such loan is repaid in full.
10.6 The amount of any Participant's Account not distributed in
accordance with this Article X because of the Plan Committee's inability,
after reasonable search, to locate a Participant or Former Participant or
any Beneficiary legally entitled to receive such Participant's or Former
Participant's vested interest in such Participant's Account within a period
of seven years following the date of the first distribution (or if there
were no distributions, following the date which would have been the first
distribution date of such Participant, Former Participant or Beneficiary),
shall be deemed an unclaimed amount and shall be allocated to Participants'
Accounts in accordance with provisions of Article VII. For the purposes
hereof, the sending of a registered letter, return receipt requested, to
the last known (after reasonable inquiry) address of a Participant, Former
Participant or the known Beneficiary, if any, of such Participant or Former
Participant during each of such seven years shall be sufficient to
constitute a "reasonable search". However,
58
reinstatement of the benefit for a "lost beneficiary" as defined under
Treasury Regulation Section 1.411(a)-4(b)(6) shall be made if a claim is
made by the participant or Beneficiary for the forfeited benefit.
10.7 Upon the written request of a Participant who remains in
the employ of the Employer after attaining Normal Retirement Age without
having elected to have distributed to him his vested interest in his
Participant's Account pursuant to Section 10.1 hereof, the Plan Committee
may, in its sole discretion, if it determines that such payments are
necessary or appropriate for the support, maintenance or health of such
Participant, or to enable such Participant to meet an emergency, or that
such payment is a matter of financial necessity to such Participant,
distribute to the Participant all or a part of the vested amount of the
Participant's Account. For purposes of this Section 10.7, the term
"financial necessity" shall include, without limitation, financial need
resulting from illness, the acquisition of a home or educational expenses
of the Participant's children or dependents.
10.8 Notwithstanding anything to the contrary contained in the
Plan, in the event of the termination of a Participant's employment other
than as a result of Normal Retirement, death or Disability, a distribution
of the
59
Participant's Account, in whole or in part, may be made either in cash or
Common Stock in the sole discretion of the Plan Committee, to such Former
Participant in accordance with the following provisions, provided, however,
such distribution is in accordance with the requirements of this Plan, the
Internal Revenue Code and ERISA and, further provided, a Former Participant
shall have the right to demand that the Former Participant's benefits so
distributed be in the form of Common Stock:
(a) In the event that the aggregate value of a Former
Participant's interests in his Account under this Plan is not more than
$3,500, the Plan Committee shall direct the Trustee to distribute to a
Former Participant, who is no longer employed by the Employer, under
circumstances constituting a Break in Service or circumstances from which
it reasonably appears to the Plan Committee that a Break in Service shall
occur, the vested interest in the Participant's Account as of the last day
of the Plan Year in which a Break in Service shall have occurred, or if it
reasonably appears to the Plan Committee that a Break in Service shall
occur, as of the last day of any earlier Company fiscal quarter selected by
the Plan Committee in its sole discretion.
60
(b) In the event that the aggregate value of a Former
Participant's interests in his Account under this Plan exceeds $3,500, upon
the election in writing of the Former Participant (with the written consent
thereto of his spouse filed with the Plan Committee) before the end of the
Plan Year in which he has a Break in Service, in form and substance
satisfactory to the Plan Committee, the Former Participant may elect to
receive up to an aggregate of $3,500 from his Account under this Plan and,
upon such election, the Plan Committee shall direct the Trustee to
distribute to a Former Participant who is no longer employed by the
Employer under circumstances constituting a Break in Service or
circumstances from which it reasonably appears to the Plan Committee that a
Break in Service shall occur, the amount so elected by him to be
distributed from this Plan, out of the vested interest in the Participant's
Account as of the last day of the Plan Year in which a Break in Service
shall have occurred, or if it reasonably appears to the Plan Committee that
a Break in Service shall occur, as of the last day of any earlier Company
fiscal quarter selected by the Plan Committee in its sole discretion.
(c) A distribution pursuant to Section 10.8(a) or 10.8(b) of the
Plan shall be made when administratively feasible, but at least within one
year after the end of the
61
Plan Year in which a Break in Service shall have occurred. If a
distribution is made under circumstances in which it reasonably appears to
the Plan Committee that a Break in service shall occur, such distribution
shall be made when administratively feasible, but at least within one year
after the last day of the earlier Company quarter selected by the Plan
Committee to determine the Participant's vested interest in his Account. A
distribution pursuant to Section 10.8(c) of the Plan shall be made no later
than 90 days subsequent to the second anniversary of the date on which such
termination of employment occurred or 90 days subsequent to the receipt by
the Plan Committee of the signed election and signed spousal consent
provided for therein, whichever is later. Notwithstanding the foregoing,
Section 10.5(b) shall govern distributions with respect to Common Stock and
Employer securities acquired after December 31, 1986.
10.9 (a) All claims for distributions of benefits under the
Plan shall be submitted to the Plan Committee. Claims for benefits shall
be in writing on forms prescribed for such purpose by the Plan Committee
and shall be signed by the Participant or Former Participant, or in the
event of the death of the Participant or Former Participant, by the
Beneficiary or the legal representative
62
of such deceased Participant or Former Participant. The Plan Committee
shall have the right to require a Participant or Former Participant to
furnish satisfactory proof of his age prior to the processing of any claim
for the distribution of benefits.
(b) Each claim for distribution under the Plan shall be approved
or disapproved by the Plan Committee within 30 days following receipt
thereof. In the event of the denial by the Plan Committee of any such
claim, it shall notify the claimant in writing of such denial and of the
claimant's right to a review of such denial. Such notification shall set
forth, in a manner calculated to be understood by the claimant, the
specific reasons for such denial, specific references to the provisions of
the Plan upon which the denial is premised, a description of any additional
information or material necessary for the claimant to perfect his claim for
review, an explanation of why such information or material is necessary and
an explanation of the Plan's review procedure and the method of appeal from
the decision. The claimant may by written notice to the Plan Committee
request a review of the Plan Committee's decision. Such request may
include a request to review any pertinent documents. Any requests for
review of a decision denying a claim must be submitted within 90 days
63
after the claimant receives the written notice of denial. The Plan
Committee's decision on review must be given within 60 days after the
request if no Plan Committee hearing is held or, in the event that such a
hearing is deemed necessary by the Plan Committee, within 120 days after
the request. The decision on review must be in writing, must set forth the
reasons for the decision, and must refer to the Plan provisions on which
the decision is based.
10.10 The Plan Committee, in its sole discretion as exercised in
a uniform and nondiscriminatory manner, may distribute cash dividends on
shares of Common Stock or Employer securities allocated to the
Participants' Accounts of Participants and Former Participants to
Participants, Former Participants or their Beneficiaries; provided,
however, that such distribution shall only be made with respect to Common
Stock or Employer securities held by the Plan as of the record date for the
dividend; provided further, however, that such dividend shall be
distributed in cash to Participants, Former Participants or their
Beneficiaries not later than 90 days after the close of the Plan Year in
which the dividend is paid on the Common Stock or Employer securities held
by the Plan; and provided further, however, that no such distributions
shall be made if not permitted under, or shall exceed any other
64
limitations established under, the provisions of ERISA or the Internal
Revenue Code. If such dividends are not distributed Pursuant to this
Section, they shall be allocated in accordance with the provisions of
Section 7.2(c) of Article VII.
10.11 Except as provided in Section 10.1, 10.5(b), 10.7, 10.8 or
10.10, no Participant or Former Participant nor any other person shall be
entitled to any payment, withdrawal or distribution prior to the death or
Disability of the Participant or Former Participant, the Normal Retirement
of the Participant or the Participant's or Former Participant's attaining
Normal Retirement Age.
10.12 The Plan Committee shall, when making an "eligible
rollover distribution" within the meaning of Section 402(f) of the Internal
Revenue Code, provide to the recipient thereof a written explanation of the
statutory provisions under which such distribution will not be subject to
tax if transferred to an eligible retirement plan within 60 days after the
date of receipt of the distribution, and the availability of forward
averaging treatment and capital gains treatment, if applicable.
65
ARTICLE XI
Distributions of Shares
-----------------------
11.1 Any shares of Common Stock received by the Trustee as a
stock dividend or stock split or as the result of a reorganization or other
recapitalization of the Company shall be allocated to Participants'
Accounts in proportion to the shares in the respective Participants'
Accounts to which such additional shares of Common Stock are attributable.
11.2 Shares of Common Stock held or distributed by the Trustee
shall include such legend restrictions on transferability as the Company
may reasonably require in order to assure compliance with applicable
Federal and state securities laws. Except as otherwise provided herein, no
shares of Common Stock held or distributed by the Trustee may be subject to
a put, call or other option, or buy-sell or similar arrangement. The
provisions of this Section shall continue to be applicable to Common Stock
even if the Plan ceases to be an employee stock ownership plan under
Section 4975(e)(7) of the Code.
66
ARTICLE XII
Administration of the Plan
--------------------------
12.1 The Plan shall be administered by a Plan Committee, which
is hereby designated as the Named Fiduciary of the Plan within the meaning
of the applicable provisions of ERISA. The Plan Committee shall be
comprised of not less than one (1) nor more than three (3) members who
shall be appointed by, and may be removed by, the Board of Directors, and
one of whom shall be designated by the Board of Directors as Chairman of
the Plan Committee. Within these limits the Board of Directors shall have
the power to fix and alter the number of members of the Plan Committee, and
to fill any vacancy which may occur. The Plan Committee may consist of
members of the Board of Directors, officers or other employees of the
Employer, or any other individuals designated by the Board, including a
certified public accountant or attorney retained by the Employer; provided,
however, that at least one member of the Plan Committee shall be an officer
of the Company.
12.2 Unless otherwise determined by the Board of Directors, the
members of the Plan Committee and officers of the Employer acting on behalf
of the Plan Committee shall serve without additional compensation for their
services. All expenses in connection with the administration of the
67
Plan, including, but not limited to, clerical, legal and accounting fees,
and other costs of administration, may be paid by the Employer.
12.3 The Plan Committee shall select a Secretary who need not be
a member of the Plan Committee. The Secretary, or in his absence, any
member of the Plan Committee designated by the chairman, shall keep the
minutes of the proceedings of the Plan Committee and maintain all data,
records and documents relating to the administration of the Plan by the
Plan Committee.
12.4 A quorum of the Plan Committee shall be such number as the
Plan Committee shall from time to time determine, but shall not be less
than a majority of the entire Plan Committee. The act of a majority of the
members of the Plan Committee present at any meeting at which a quorum is
presented shall be the act of the Plan Committee. Members of the Plan
Committee may participate in a meeting by means of conference telephone or
similar communications equipment by means of which all persons
participating in the meeting can hear each other, and such participation in
a meeting shall constitute presence in person at such meeting. A member of
the Plan Committee, if a Participant or Former Participant in the Plan,
shall not be entitled to vote on any matter which relates solely to his
individual rights and
68
benefits under the Plan, but may be counted in determining the presence of
a quorum at a meeting of the Plan Committee at which such matter is
considered. The Plan Committee may take action without a meeting if such
action is evidenced by a writing signed by at least a majority of the
entire Plan Committee.
12.5 The Plan Committee, by an instrument in writing, may
delegate to one or more of its members or to an officer or officers of the
Company any of its powers and its authority under the Plan (other than
discretionary authority conferred upon the Plan Committee pursuant to
Sections 12.6, 12.80, 12.9 or 12.11), including the execution and delivery
on its behalf of instruments, instructions and other documents. The
Trustee, once notified of this delegation, may accept and rely upon any
document executed by any such designated member or officer as representing
action by the Plan Committee until such time as the Plan Committee shall
file with the Trustee a written revocation of such designation.
12.6 The Plan Committee shall have the sole, exclusive duty and
full and exclusive discretionary authority to interpret and construe the
provisions of the Plan, to decide any disputes which may arise with regard
to the status, eligibility, and rights of employees under the
69
terms of the Plan and any other persons claiming an interest under the
terms of the Plan, to give data, instructions, and directions to the
Trustee and, in general, to direct the administration of the Plan. Without
limiting the foregoing, the Plan Committee shall determine all questions
relating to the eligibility of employees to become Participants in the Plan
and the amount of benefits to which any Participant, Former Participant or
Beneficiary is entitled under the Plan. Decisions of the Plan Committee
shall be subject to Court review only to determine whether such decisions
are an abuse of discretion hereunder.
12.7 The Plan Committee shall from time to time furnish to each
Participant and Former Participant, and each Beneficiary who is to receive
benefits under the Plan, a summary Plan description and such other
information or reports as the Plan Committee shall deem necessary or
desirable.
12.8 The Plan Committee may adopt, and from to time amend, such
rules and regulations, consistent with the purposes and provisions of this
Plan, as it deems necessary or advisable to carry out and administer the
Plan. The Plan Committee may correct any error or supply any omission or
reconcile any inconsistency in the Plan in such manner and to such extent
as it shall deem necessary to effectuate the
70
purpose of the Plan and to comply with the requirements of the Internal
Revenue Code and ERISA.
12.9 The Plan Committee shall advise the Trustee in writing with
respect to all benefits which may become payable to Participants, Former
Participants and Beneficiaries under the terms of the Plan and shall direct
the Trustee as to the payment of all such benefits.
12.10 The Plan Committee may engage, on behalf of Participants,
Former Participants and Beneficiaries an independent public accountant, who
may be an independent public accountant of the Employer, to conduct such
examinations of the financial statements, books and records and financial
affairs of the Plan and the Trust Fund and to render such reports and
opinions as may be necessary to comply with Section 103 and other
provisions of ERISA.
12.11 In addition to its general authority and such other powers
as may be conferred upon it under the Plan, the Plan Committee shall have
the following powers:
(a) If the Plan Committee shall determine that by reason of
illness, incapacity or any other reason it is undesirable to make any
payment to a Participant, Former Participant or any other person entitled
thereto, the Plan Committee shall be entitled to direct the application of
any amount so payable to the use or benefit of such person in
71
any manner that it may deem advisable. The Plan Committee may also direct
that any payment under the Plan due to any person under legal disability be
made to a representative competent to receive such payment in his behalf.
(b) The Plan Committee may shorten, lengthen (but not beyond
60 days) or waive the time required by the Plan for filing any notice or
other form.
12.12 The discretionary powers granted hereunder to the Plan
Committee shall in no event be exercised in any manner that will
discriminate in favor of employees who are shareholders, officers, or
highly compensated employees of the Employer.
12.13 The Plan Committee shall be entitled to rely upon all
information furnished to it by the Employer and upon all opinions of laws
given by any duly appointed counsel (who may be counsel to the Employer or
the Company) and shall be fully protected in respect of any act done or
permitted or determination made in good faith in reliance upon such
information or opinion.
12.14 The Trustee and the members of the Plan Committee shall be
free from all liability for their acts and conduct in the administration of
the Plan and the Trust Fund except for acts of willful misconduct;
provided, however, that the foregoing shall not relieve any of them
72
from liability for any responsibility, obligation or duty that they may
have pursuant to ERISA.
ARTICLE XIII
Valuation of Shares of
Common Stock and Other Assets
-----------------------------
13.1 Whenever it is necessary to determine the "fair market
value" of a share of Common Stock or other security or asset, such
determination shall be made as follows:
(a) If the security is then listed on a national securities
exchange, the "fair market value" shall be the closing price for the
security on such exchange on the date in question, or, if there has been no
sale of such security on that date, the closing price for the security on
such exchange on the last preceding business day on which such security was
traded.
(b) If the security is then not listed on a national securities
exchange, the "fair market value" shall be the mean of the bid and asked
prices for the security in the over-the-counter market as reported in the
National Association of Securities Dealers Automatic Quotation System
("NASDAQ") on that date, or, if there be no such quotation on that date,
such prices on the last preceding business day on which there was such a
quotation.
73
(c) If the security is then not listed on a national securities
exchange or quoted on NASDAQ, the "fair market value" shall be an amount
not less favorable than the offering price of the security as established
by the current bid and asked prices quoted by persons independent of the
issuer, the Employer if other than the issuer, and of any other party in
interest.
(d) In the case of an asset other than a security for which
there is a generally recognized market, the "fair market value" of the
asset shall be an amount determined pursuant to an appraisal made by a
qualified appraiser, designated by the Plan Committee, who shall be
independent of the issuer, the Employer if other than the issuer, and of
any other party in interest. In the sole discretion of the Plan Committee,
more than one independent appraiser may be engaged for this purpose, and in
such event, the "fair market value" shall be the arithmetic mean of all
such appraisals.
(e) All valuations of Employer securities, which are acquired by
the Plan after December 31, 1986 and are not readily tradeable on an
established securities market, shall be determined by an independent
appraiser. For purposes of this subsection (e), an "independent appraiser"
shall mean any appraiser meeting requirements similar to the
74
requirements of the regulations prescribed under Section 170(a)(1) of the
Internal Revenue Code.
ARTICLE XIV
Amendment and Termination of the Plan
-------------------------------------
14.1 (a) The Plan may be amended by the Employer at any time or
from time to time by action of the Board of Directors; provided however,
that no such amendment shall
(i) make available any portion of the Trust Fund (other than any
expenses and taxes properly charged to the Plan or the Agreement of
Trust provided for in Article VI) for any purposes other than for the
benefit of Participants, Former Participants and their Beneficiaries;
(ii) reduce the accrued benefits of any Participant or Former
Participant or change any vesting schedule so as to lengthen the
period of service required for vesting under the Plan for an existing
Participant;
(iii) result in discrimination in favor of shareholders, officers
or other highly compensated employees of the Employer; or
(iv) increase the duties, obligations, responsibilities or
liabilities of the Trustee without the written consent of the Trustee.
75
(b) Notwithstanding the foregoing limitations on the Employer's
right to amend the Plan, the Plan may be amended retroactively at any time
to conform to the provisions of the Internal Revenue Code with respect to
such qualified plans and to the provisions of ERISA, and no such amendment
shall be considered prejudicial to the rights of any Participant, Former
Participant or Beneficiary.
(c) Any amendment of the Plan in accordance with this
Article XIV shall be communicated to the Trustee by the execution by a duly
authorized officer of the Employer of a written instrument of such
amendment and the delivery thereof to the Trustee.
14.2 The Plan may be terminated at any time by the Company by
written instrument of such termination, executed by a duly authorized
officer of the Company and delivered to the Trustee. Furthermore, the
adjudication of the Company as a bankrupt, an assignment for the benefit of
the creditors of the Company, the dissolution or liquidation of the Company
or the permanent discontinuance of the Employer contributions shall effect
the termination of the Plan. Upon such termination, and in the event that
a successor to the Company (by operation of law or by the acquisition of
its assets) shall not elect to continue the
76
Plan, each Participant's Account shall become fully vested and shall be
distributed to the person entitled thereto.
14.3 In the event of a merger or consolidation of the Plan with,
or transfer of the assets or liabilities to, any other plan, each
Participant, Former Participant and Beneficiary shall, immediately after
such merger, consolidation or transfer, be entitled to receive (if such
other plan were to terminate at such time) a benefit equal to or greater
than the benefit he would be entitled to receive immediately prior to such
merger, consolidation or transfer (if the Plan were then terminated).
ARTICLE XV
Participating Subsidiaries
--------------------------
15.1 Any Subsidiary of the Company may, with the consent of the
Board of Directors of the Company, adopt the Plan for its employees and
thereby become a Participating Subsidiary as of the date specified in the
resolution adopting the Plan. Upon and after the effective date of such
participation, the Plan Committee shall administer the Plan on behalf of
any Participants who are employees of such Participating Subsidiary. Any
amendments to the Plan made pursuant to Article XIV by the Board of
Directors of the Company subsequent to the adoption of the Plan by a
Participating Subsidiary shall be binding upon such
77
Participating Subsidiary, subject to the right of each Participating
Subsidiary to withdraw from the Plan in accordance with the provisions in
Section 15.2.
15.2 Any Participating Subsidiary may withdraw from the Plan by
giving written notice to the Plan Committee and the Trustee, and
(i) terminate the Plan with respect to Participants who are employees of
such Participating Subsidiary, in which case each such Participant shall
have a nonforfeitable right to the entire balance in his account as set
forth in Section 8.3 as though the entire Plan had then terminated and
distribution shall be made to him as set forth in Article X, or
(ii) continue the Plan as a separate plan or establish a different plan for
Participants who are employees of such Participating Subsidiary, which
separate plan or different plan shall meet the requirements of Section 401
of the Internal Revenue Code, in which case the Committee shall direct the
Trustee to transfer the entire balances in such Participants' Accounts to
the trustee under such separate or different plan.
ARTICLE XVI
Miscellaneous
-------------
16.1 The addresses of the Employer, the Plan Committee and the
Trustee for the purposes of the Plan and
78
of all notices and communications thereunder and with respect thereto shall
be as to:
(a) The Employer:
FactSet Data Systems, Inc. (prior to
September 1, 1986)
FactSet Research Corporation (subsequent to
August 31, 1986)
One Greenwich Plaza
Greenwich, Connecticut 06830
Attention: Mr. Howard E. Wille
(b) The Plan Committee:
FactSet Data Systems, Inc. (prior to
September 1, 1986)
Fact Research Corporation (subsequent to
August 31, 1986)
Employee Stock Ownership Plan Committee
One Greenwich Plaza
Greenwich, Connecticut 06830
(c) The Trustees:
such address as shall be specified
by the Trustees
Such addresses may be changed from time to time by registered mail, return
receipt requested, by the Employer's or the Plan Committee's notice to the
Trustee and by the Trustee's notice to the Employer and the Plan Committee.
16.2 (a) To the fullest extent permitted by law, none of the
benefits, payments, proceeds, claims, or rights of any Participant, Former
Participant or Beneficiary under the Plan shall be subject to any claim of
any creditor of any such Participant, Former Participant or Beneficiary and
79
in particular the same shall not be subject to execution, attachment,
garnishment, levy or other legal or equitable process by any creditor of
any such Participant, Former Participant or Beneficiary nor shall any such
Participant, Former Participant or Beneficiary have any right to sell,
assign, transfer, alienate, anticipate, commute, pledge, encumber, any of
the benefits or payments or proceeds which he may expect to receive,
contingently or otherwise under the Plan. Any sale, assignment, transfer,
mortgage, pledge, anticipation, hypothecation, commutation or other
disposition of a right to receive a distribution or benefits under the Plan
attempted contrary to this Section 16.2, or any attempt to subject such a
right to execution, attachment, garnishment, levy or other such process
shall be null and void and without effect.
(b) (1) Notwithstanding Section 16.2(a), in the case of any
"domestic relations order", as defined by Section 414(p) of the Internal
Revenue Code, received by the Plan:
(i) the Plan Committee shall promptly notify the Participant and
any other alternate payee (as hereinafter defined) of the receipt of
such order and the Plan's procedures for determining the qualified
status of domestic relations orders, and
80
(ii) within a reasonable period after receipt of such order, the
Plan Committee shall determine whether such order is a "qualified
domestic relations order", as defined by Section 414(p) of the
Internal Revenue Code, and notify the Participant and each alternate
payee of such determination.
(2) During any period in which the issue of whether a domestic
relations order is a qualified domestic relations order is being determined
(whether by the Plan Committee, by a court of competent jurisdiction, or
otherwise), the Plan Committee shall segregate in a separate account under
the Plan or in an escrow account the amounts which would have been payable
to the alternate payee during such period if the order had been determined
to be a qualified domestic relations order.
If within 18 months the order (or modification thereof) is
determined to be a qualified domestic relations order, the Plan Committee
shall pay the segregated amounts (plus any interest thereon) to the person
or persons entitled thereto. If within 18 months:
(i) it is determined that the order is not a qualified domestic
relations order, or
(ii) the issue as to whether such order is a qualified domestic
relations order is not resolved,
81
then the Plan Committee shall pay the segregated amounts (plus any
interest thereon) to the person or persons who would have been
entitled to such amounts if there had been no order. Any
determination that an order is a qualified domestic relations order
which is made after the close of the 18-month Period shall be applied
prospectively only. The term "alternate payee" means any spouse,
former spouse, child or other dependent of participant who is
recognized by a domestic relations order as having a right to receive
all, or a portion of, the benefits payable under the Plan with respect
to such Participant.
(c) The Plan Committee shall consult, as it deems necessary or
desirable to effectuate the provisions of this subsection and the Internal
Revenue Code relating to domestic relations orders, with counsel in order
to determine the qualified status of domestic relations orders and to
administer distributions under such qualified orders.
16.3 All questions pertaining to the validity, construction,
regulation, and the effect of the Plan and of any of the provisions hereof
shall, to the extent not governed by Federal law, be determined under and
according to the laws of the State of New York.
82
ARTICLE XVII
Special Rules in the Event
the Plan Is a Top Heavy Plan
----------------------------
17.1 GENERAL RULES
Notwithstanding any other provision of this Plan to the contrary
or inconsistent herewith, if in any Plan Year this Plan is a "top heavy
plan" under the provisions of Section 416 of the Internal Revenue Code,
then, in that event, for the first Plan Year of the Plan if the Plan is a
"top heavy Plan" for such first Plan Year, or for any following Plan Year,
if the Plan is a "top heavy Plan" for a year other than the first Plan Year
of the Plan, the provisions of this Article shall govern the Plan and its
operations.
17.2 VESTING
In determining the vested portion of any Participant's Account
under Section 8.1(a), there shall be applied, instead of the class-year
vesting schedule there appearing, the following vesting schedule which
shall apply to the Participant's Account in its entirety:
Percentage
Years of Service Vested
---------------- ----------
Less than 2 Years of Service . . . . . . . . . . . . . 0%
2 Year of Service or more, but less than 3 . . . . . . 20%
3 Years of Service or more, but less
than 4 . . . . . . . . . . . . . . . . . . . . . . . 40%
4 Years of Service or more, but less
than 5 . . . . . . . . . . . . . . . . . . . . . . . 60%
83
5 Years of Service or more, but less
than 6 . . . . . . . . . . . . . . . . . . . . . . . 80%
6 Years of Service or more . . . . . . . . . . . . . . 100%
17.3 MINIMUM BENEFITS
The Employer contributions allocated to the Account of any Participant
who is not a "Key Employee" shall be the lesser of the following
percentages of such "Participant's compensation" as that term is defined in
Section 415 of the Internal Revenue Code: (a) three percent (3%); or
(b) if no "Key Employee" has a contribution allocated to his account which
is three percent (3%) or more of the Participant's compensation, then such
percentage which is the same as the percentage for the Key Employee for
whom such percentage is the highest for the year. The determination of the
percentage in the foregoing clause "(b)" shall be made by dividing the
contributions for each Key Employee by his total of such compensation not
in excess of $150,000.
17.4 COMPENSATION TAKEN INTO ACCOUNT
A Participant's compensation for the purpose of Plan benefits shall
not exceed any amount provided for in Treasury Regulations promulgated
under Section 416 of the Internal Revenue Code.
17.5 In determining and applying the provisions of Sections 17.2 and
17.3 of this Plan, there shall not
84
be taken into account contributions or benefits under chapter 2 (relating
to tax on self-employment income) or chapter 21 (relating to Federal
Insurance Contributions Act) of the Internal Revenue Code, Title II of the
Social Security Act, or any other Federal or State law.
17.6 COORDINATION WHERE TWO OR MORE PLANS
In the event this Plan and any other Plan of the Company shall be
subject to Treasury Regulations promulgated under Section 416(f) of the
Internal Revenue Code, the requirements set forth in such Treasury
Regulations are hereby incorporated by reference into this Plan, included
herein and made a part hereof.
17.7 SECTION 415 LIMITS
In the event any Participant is a participant in both a defined
benefit plan and a defined contribution plan of the Employer, the sum of
the defined benefit plan fraction and the defined contribution plan
fraction for any year may not exceed 1.0, within the meaning of
Section 415(e) of the Internal Revenue Code.
17.8 DEFINITIONS
(a) "Top Heavy Plan". This Plan will be a "top heavy plan" in any
Plan Year if on the last day of the
85
preceding Plan Year (or the last day of the Plan Year
in the event of the first year of the Plan), the
aggregate of the accounts of the Key Employees under
the Plan exceeds sixty percent (60%) of the aggregate
of the accounts of all employees under the Plan. For
this purpose, each plan of the Employer required to be
in an aggregation group shall be treated as a top heavy
plan if the aggregation group is a top heavy group.
(i) "Aggregation Group" - means each (1) plan of the Employer in
which a Key Employee is a Participant, and (2) each other plan of the
Employer which enables the Plan to meet the requirements of
Section 401(a)(4) or 410 of the Internal Revenue Code. For purposes of
determining an "aggregation group", the Employer may treat any plan not
required to be included in an aggregation group under the preceding
sentence as being part of the group if the group would continue to meet
the requirements of Sections 401(a)(4) and 410 of the Internal Revenue
Code with such plan being taken into account.
(ii) "Top Heavy Group" - means any aggregation group if on the last
day of the preceding Plan Year (or in the case of the first year of the
Plan, the last day of the Plan Year) the sum of the present
86
value of the cumulative accrued benefits for Key Employees under all
defined benefit plans included in such group, and the aggregate of the
accounts of Key Employees under all defined contribution plans included
in such group, exceeds sixty percent (60%) of a sum of all such amounts
determined for all employees.
(iii) Special Rules:
(a) For purposes of determining the present value of the cumulative
accrued benefit for any employee, or the amount of the account of any
employee, such present value or amount shall be increased by the
aggregate distributions made with respect to such employee under the
Plan during the five (5) year period ending on the last day of the
preceding Plan Year or the last day of the Plan Year in the event of
the first year of the Plan.
(b) Except to the extent provided in Treasury Regulations promulgated
pursuant to Section 416(g)(4)(A) of the Internal Revenue Code, any
rollover contribution (or similar transfer) initiated by the employee
and made after December 31, 1983 to the Plan shall not be taken into
account for purposes of determining if the
87
Plan is a "top heavy plan" (or whether any "aggregation group" which
includes the Plan is a "top heavy group").
(c) If any individual is a non-key Employee with respect to the Plan for
any Plan Year, but such individual was a Key Employee with respect to
the Plan for any prior Plan Year, any account of such employee shall
not be taken into account in determining whether the Plan is a top
heavy plan.
(d) If any individual has not received any compensation from any employer
maintaining the Plan (other than benefits under the Plan at any time
during the 5-year period ending on the last day of the preceding Plan
Year, any accrued benefit for such individual (and the account of such
individual) shall not be taken into account.
(b) "Key Employee". The term "Key Employee" means a Participant who,
at any time during the Plan Year or any of the preceding Plan Years, is
(i) an officer of the Employer having annual compensation greater than 150%
of the amount in effect under Section 415(c)(1)(A) for any such Plan Year,
(ii) one of the ten employees having annual compensation from the Employer
of more than the limitation in effect
88
under Section 415(c)(1)(A) of the Internal Revenue Code and owning (or
considered as owning within the meaning of Section 318 of the Internal
Revenue Code) the largest interests in the Employer, (iii) any person who
owns (or is considered as owning within the meaning of Section 318 of the
Internal Revenue Code) more than five percent (5%) of the outstanding stock
of the Employer, or stock possessing more than five percent (5%) of the
total combined voting power of all stock of the Employer, or (iv) any
person (1) who owns (or is considered as owning within the meaning of
Section 318 of the Internal Revenue Code) more than one percent (1%) of the
outstanding stock of the Employer or stock possessing more than one percent
(1%) of the total combined voting power of all stock of the Employer and
(2) who has an annual compensation from the Employer of more than one
Hundred Fifty Thousand Dollars ($150,000). For purposes of describing a
"Key Employee", subparagraph (C) of Section 318(a)(2) of the Internal
Revenue Code shall be applied by substituting "5 percent" for "50 percent"
and subsections (b), (c) and (m) of Section 414 of the Internal Revenue
Code shall not apply for purposes of determining ownership in the Employer.
For the purposes of clause "(i)"
89
above, no more than 50 employees (or if lesser the greater of 3 or 10% of
the employees) shall be treated as officers. For the purposes of
clause (ii), above, if 2 employees have the same interest in the Employer,
the employee having the greater annual compensation from the Employer shall
be treated as having a larger interest.
EXHIBIT 10.5
FACTSET RESEARCH CORPORATION
1994 STOCK OPTION PLAN
EFFECTIVE NOVEMBER 1, 1994
FACTSET RESEARCH CORPORATION
1994 STOCK OPTION PLAN
TABLE OF CONTENTS
ARTICLE I. PURPOSE . . . . . . . . . . . . . . . . . . . . . . 1
ARTICLE II. DEFINITIONS . . . . . . . . . . . . . . . . . . . 1
ARTICLE III. SCOPE OF THE PLAN . . . . . . . . . . . . . . . . 3
ARTICLE IV. ADMINISTRATION . . . . . . . . . . . . . . . . . . 4
ARTICLE V. ELIGIBILITY . . . . . . . . . . . . . . . . . . . . 5
ARTICLE VI. GRANT OF OPTIONS . . . . . . . . . . . . . . . . . 5
ARTICLE VII. EXERCISE OF OPTIONS . . . . . . . . . . . . . . . 7
ARTICLE VIII. MISCELLANEOUS . . . . . . . . . . . . . . 10
FACTSET RESEARCH CORPORATION
1994 STOCK OPTION PLAN
FactSet Research Corporation (the "Company") hereby establishes the FactSet
Research Corporation 1994 Stock Option Plan (the "Plan") effective November 1,
1994, subject to the approval of the Plan by the holders of a majority of the
shares of the Stock present in person or by proxy and voting at a duly called
meeting of the stockholders of the Company.
ARTICLE I. PURPOSE
The primary purpose of the Plan is to provide a means by which key employees of
the Company and its Subsidiaries (as defined herein) can acquire and maintain
stock ownership, thereby strengthening their commitment to the success of the
Company and its Subsidiaries and their desire to remain employed by the Company
and its Subsidiaries. The Plan also is intended to attract, employ and retain
key employees and to provide such employees with additional incentive and reward
opportunities designed to encourage them to enhance the profitable growth of the
Company and its Subsidiaries.
ARTICLE II. DEFINITIONS
The following words and phrases, when used herein, unless their context clearly
indicates otherwise, shall have the following respective meanings:
2.1 "Board" means the board of directors of the Company.
2.2 "Cause" means discharge of a Grantee (i) on account of fraud,
embezzlement or other unlawful or tortious conduct, whether or not involving or
against the Company or any subsidiary or affiliate, (ii) for
1
violation of a policy of the Company or any Subsidiary or affiliate, (iii) for
serious and willful acts of misconduct detrimental to the business or reputation
of the Company or any subsidiary or affiliate or (iv) for "cause" or any like
term as defined in any written employment contract with the Grantee. The
determination of whether a discharge of a Grantee is for cause shall be
determined in good faith by the Committee whose decision shall be final and
binding.
2.3 "Change of Control" means a change in the ownership or control of the
Company in accordance with Section 280G of the Internal Revenue Code and the
regulations promulgated thereunder. Notwithstanding the preceding sentence, a
Change of Control of the Company shall be deemed not to have occurred (a) with
respect to any Grantee, if such Grantee is, by written agreement executed prior
to such Change of Control, a participant in such Change of Control and (b) if
the ownership of the Company shall change solely as a result of an initial
public offering of Stock by the Company.
2.4 "Committee" means the committee of the Board appointed pursuant to
Section 4.1.
2.5 "Company" means FactSet Research Corporation, a Delaware corporation.
2.6 "Disability" means a disability of a nature that would qualify the
Grantee for long-term benefits under the Company's long-term disability plan.
2.7 "Disinterested Person" means a person who has not, during the one year
prior to service on the Committee, or at any time during such service, been
granted or awarded any stock or stock-based derivative security (within the
meaning of SEC Rule 16a-1 (c)) pursuant to the Plan or any other plan of the
Company or its Subsidiaries, except as provided in SEC Rule 16b-3(c)(2)(i).
2.8 "Effective Date" means November 1, 1994.
2
2.9 "Fair Market Value" of any share of Stock, as of any applicable date,
means the fair market value of a share of Stock on such date as determined in
good faith by the board of directors of the Company.
2.10 "Grant Date" means the date of grant of an Option determined in
accordance with Section 6.1 (a).
2.11 "Grantee" means an individual who has been granted an Option.
2.12 "Internal Revenue Code" means the Internal Revenue Code of 1986, as
amended, and any succeeding Internal Revenue Code, and references to sections
herein shall be deemed to include any such section as amended, modified or
renumbered.
2.13 "1993 Act" means the Securities Act of 1933, as amended.
2.14 "1934 Act" means the Securities Exchange Act of 1934, as amended.
2.15 "Option" means any incentive stock option or nonqualified stock option
granted under the Plan.
2.16 "Option Agreement" has the meaning specified in Section 4.2(e).
2.17 "Option Price" means the per share purchase price of Stock subject to
an Option.
2.18 "Parent" means any corporation (other than the Company) in an unbroken
chain of corporations ending with the employer corporation if, at the time of
granting an option, each of the corporations other than the employer corporation
owns stock possessing fifty percent (50%) or more of the total combined voting
power of all classes of stock in one of the other corporations in such chain.
3
2.19 "Plan" means the FactSet Research Corporation 1994 Stock Option Plan
as set forth herein and as may from time to time be amended.
2.20 "SEC" means the Securities and Exchange Commission.
2.21 "Section 16 Grantee" means a person subject to potential liability
under Section 16(b) of the 1934 Act with respect to transactions involving
equity securities of the Company.
2.22 "Stock" means the common stock of the Company, par value $1.00 per
share.
2.23 "Subsidiary" means a corporation as defined in Section 424(f) of the
Internal Revenue Code with the Company being treated as the employer corporation
for purposes of this definition.
2.24 "10% Owner" means a person who owns stock (including stock treated as
owned under Section 424(d) of the Internal Revenue Code) possessing more than
10% of the total combined voting power of all classes of stock of the Company.
2.25 "Termination of Employment" occurs on the last day an individual is
employed by the Company or any of its Subsidiaries or any Parent;
notwithstanding the foregoing, for an individual who is an employee of a
Subsidiary, the individual shall be deemed to have a Termination of Employment
on the last day the Company owns voting securities possessing at least 50% of
the aggregate voting power of such Subsidiary's outstanding voting securities.
ARTICLE III. SCOPE OF THE PLAN
An aggregate of 15,000 shares (375,000 shares after the contemplated 25 for 1
stock split) of Stock is hereby made available and is reserved for delivery on
4
account of the exercise of Options. In no event shall any employee be granted
more than 5,000 (125,000 after the split) Options pursuant to this Plan. Subject
to the foregoing limit, shares of Stock held as treasury shares may be used for
or in connection with Options. If and to the extent an Option shall expire or
terminate for any reason without having been exercised in full, or shall be
forfeited, the shares of Stock associated with such Option shall become
available for other Options.
ARTICLE IV. ADMINISTRATION
4.1 Administrative Committee. The Plan shall be administered by the
--------------------------
Compensation Committee of the Board, which shall consist of not less than two
persons who are directors of the Company. If the Company becomes subject to the
1934 Act, membership on the Committee shall be subject to such limitations as
the Board deems appropriate to permit transactions in Stock pursuant to the Plan
to be exempt from liability under Section 16(b) of the 1934 Act.
4.2 Authority of the Committee. The Committee shall have full and final
----------------------------
authority, in its discretion, but subject to the express provisions of the Plan,
as follows:
(a) to grant Options,
(b) to determine (1) when Options may be granted and (2) whether or
not specific Options will be incentive stock options or nonqualified stock
options,
(c) to interpret the Plan and to make all determinations necessary or
advisable for the administration of the plan,
(d) to prescribe, amend, and rescind rules relating to the Plan,
5
(e) to determine, subject to the terms of the Plan, the terms and
provisions of the written agreements by which all Options shall be granted
("Option Agreements") and, with the consent of the Grantee, to modify any such
Option Agreement at any time, and
(f) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Options as the Committee
may, before or concurrently with the grant thereof, deem appropriate.
6
The determination of the Committee on all matters relating to the Plan or any
Option or Option Agreement shall be conclusive and final. No member of the
Committee shall be liable for any action or determination made in good faith
with respect to the Plan or any Option.
ARTICLE V. ELIGIBILITY
Options may be granted to any employee of the Company or any employee of its
Subsidiaries. In selecting the individuals to whom Options may be granted, in
determining the number of shares of Stock subject to each Option, and in
determining the other terms and conditions applicable to each Option, the
Committee shall take into consideration such factors as it deems relevant in
promoting the purposes of the Plan.
ARTICLE VI. GRANT OF OPTIONS
6.1 General Conditions.
-------------------
(a) The Grant Date of an Option shall be the date on which the
Committee grants the Option or such later date as specified in advance by the
Committee.
(b) The term of each Option shall be a period of not more than
10 years from the Grant Date, and shall be subject to earlier termination as
- --------
herein provided.
(c) A Grantee may, if otherwise eligible, be granted additional
Options.
6.2 Option Price. No later than the Grant Date of any Option, the
--------------
Committee shall determine the Option Price of such Option. Subject to Section
6.3 with respect to incentive stock options, the Option Price of an Option shall
be at such price (which may be less than 100% of the Fair Market Value of the
Stock on the
7
Grant Date), as the Committee, in its discretion, shall determine.
6.3 Grant of Incentive Stock Options. At the time of the grant of any
----------------------------------
Option, the Committee may designate that such Option shall be made subject to
additional restrictions to permit it to qualify as an incentive stock option
under the requirements of Section 422 of the Internal Revenue Code. Any Option
designated as an incentive stock option:
(a) shall have an Option Price of (1) not less than 100% of the Fair
Market Value of the Stock on the Grant Date or (2) in the case of a 10% Owner,
not less than 110% of the Fair Market Value of the Stock on the Grant Date;
(b) shall be for a period of not more than 10 years (5 years, in the
case of a 10% Owner) from the Grant Date, and shall be subject to earlier
termination as provided herein or in the applicable Option Agreement;
(c) shall not have an aggregate Fair Market Value (determined for each
incentive stock option at its Grant Date) of Stock with respect to which
incentive stock options are exercisable for the first time by such Grantee
during any calendar year (under the Plan and any other employee stock option
plan of the Grantee's employer or any parent or subsidiary thereof ("Other
Plans")), determined in accordance with the provisions of Section 422 of the
Internal Revenue Code, which exceeds $100,000 (the "$100,000 Limit");
(d) shall, if the aggregate Fair Market Value of Stock (determined on
the Grant Date) with respect to all incentive stock options previously granted
under the Plan and any Other Plans ("Prior Grants") and any incentive stock
options under such grant (the "Current Grant") which are exercisable for the
first time during any calendar year would exceed the $100,000 Limit, be
exercisable as follows:
8
(1) the portion of the Current Grant exercisable for the first
time by the Grantee during any calendar year which would, when added to any
portions of any Prior Grants, be exercisable for the first time by the
Grantee during such calendar year with respect to stock which would have an
aggregate Fair Market Value (determined as of the respective Grant Date for
such incentive stock options) in excess of the $100,000 Limit shall,
notwithstanding the terms of the Current Grant, be exercisable for the first
time by the Grantee in the first subsequent calendar year or years in which
it could be exercisable for the first time by the Grantee when added to all
Prior Grants without exceeding the $100,000 Limit; and
(2) if, viewed as of the date of the Current Grant, any portion
of a Current Grant could not be exercised under the provisions of the
immediately preceding provision during any calendar year commencing with
the calendar year in which it is first exercisable through and including
the last calendar year in which it may by its terms be exercised, such
portion of the Current Grant shall not be an incentive stock option, but
shall be exercisable as a separate non-qualified stock option at such date
or dates as are provided in the Current Grant;
(e) shall be granted within 10 years from the earlier of the date the
Plan is adopted or the date the Plan is approved by the stockholders of the
Company; and
(f) shall require the Grantee to notify the Committee of any
disposition of any Stock issued pursuant to the exercise of the incentive stock
option under the circumstances described in Section 421 (b) of the Internal
Revenue Code (relating to certain disqualifying dispositions), within 10 days of
such disposition.
9
Notwithstanding the foregoing and Section 4.2(e), the Committee may, without the
consent of the Grantee, at any time before the exercise of an Option (whether or
not an incentive stock option), take any action necessary to prevent such Option
from being treated as an incentive stock option.
6.4 Nontransferability. Each Option granted hereunder shall by its terms not
--------------------
be assignable or transferable other than by will or the laws of descent and
distribution and may be exercised, during the Grantee's lifetime, only by the
Grantee.
ARTICLE VII. EXERCISE OF OPTIONS
7.1 Exercise of Options. Subject to Sections 4.2(f), 7.4, and 7.5 and such
---------------------
terms and conditions as the Committee may impose, each Option shall be
exercisable in such manner as the Committee, in its discretion, shall determine
as set forth "in the option agreement evidencing the grant of such option. Each
Option shall be exercised by delivery to the Company of a written notice of
intent to purchase (in such form as prepared by the Committee) a specific number
of shares of Stock subject to the Option. The Option Price of any shares of
Stock shall be paid in full at the time of the exercise.
7.2 Payment of Option Price. In the discretion of the Committee, a Grantee
-------------------------
may pay the Option Price payable upon the exercise of an Option in cash,
previously acquired Stock valued at its Fair Market Value on the business day
next preceding the date of exercise, or any combination thereof, and may be
effected in whole or in part (a) with monies received from the Company at the
time of exercise as a compensatory cash payment, or (b) with monies borrowed
from the Company pursuant to repayment terms and conditions as shall be
determined from time to time by the Committee, in its discretion, separately
with respect to each exercise of options and each Grantee; provided, however,
that each such method
10
and time for payment and each such borrowing and terms and conditions of
repayment shall be permitted by and be in compliance with applicable law, and
provided further, in the event the Option Price is paid with monies borrowed
from the Company, such fact shall be noted conspicuously on the certificate for
such shares in accordance with applicable law.
7.3 Tax Withholding.
----------------
(a) Mandatory Tax Withholding.
--------------------------
(1) Whenever under the Plan, shares of Stock are to be delivered
upon exercise of an Option, the Company shall be entitled to require as a
condition of delivery (i) that the Grantee remit an amount sufficient to
satisfy all federal, state, and local withholding tax requirements related
thereto, (ii) the withholding of such sums from compensation otherwise due
to the Grantee or from any shares of Stock due to the Grantee under the
Plan, or (iii) any combination of the foregoing; or
(2) If any disqualifying disposition described in Section 6.3(f)
is made with respect to shares of Stock acquired under an incentive stock
option granted pursuant to the Plan, then the person making such
disqualifying disposition shall remit to the Company an amount sufficient to
satisfy all federal, state, and local withholding taxes thereby incurred;
provided that, in lieu of or in addition to the foregoing, the Company shall
have the right to withhold such sums from compensation otherwise due to the
Grantee or from any shares of Stock due to the Grantee under the Plan.
(b) Elective Share Withholding.
---------------------------
(1) Subject to Section 7.3(b)(2), a Grantee may elect the
withholding ("Share Withholding") by the Company of a portion of the
11
shares of Stock otherwise deliverable to such Grantee upon the exercise of
an Option ("Taxable Event") having a Fair Market Value equal to:
(i) the minimum amount necessary to satisfy required
federal, state, or local withholding tax liability attributable to the
Taxable Event; or
(ii) with the Committee's prior approval, a greater amount,
not to exceed the estimated total amount of such Grantee's tax
liability with respect to the Taxable Event.
(2) Each Share Withholding election by a Grantee shall be subject
to the following restrictions:
(i) any Grantee's election shall be subject to the
Committee's right to revoke such election of Share Withholding by such
Grantee at any time before the Grantee's election if the Committee has
reserved the right to do so in the Option Agreement;
(ii) if the Grantee is a Section 16 Grantee, such Grantee's
election shall be subject to the disapproval of the Committee at any
time, whether or not the Committee has reserved the right to do so;
(iii) the Grantee's election must be made before the date
(the "Tax Date") on which the amount of tax to be withheld is
determined;
(iv) the Grantee's election shall be irrevocable;
(v) a Section 16 Grantee may not elect Share Withholding
within six months after the grant of the related Option (except if
12
the Grantee dies or incurs a Disability before the end of the six-
month period); and
(vi) a Section 16 Grantee must elect Share Withholding
either six months before the Tax Date or during the ten business day
period beginning on the third business day after the release of the
Company's quarterly or annual summary statement of sales and earnings.
7.4 Effects of a Change of Control. Notwithstanding any other provisions
--------------------------------
of the Plan or any option agreement, upon the occurrence of a Change of Control
or an initial public offering of Stock by the Company, the Committee may in its
sole discretion make a determination that (i) all Options granted under the Plan
to a Grantee which have not been exercised or which have not expired by their
terms shall immediately be fully exercisable for the remainder of their
respective terms or (ii) such options be immediately terminated in which case
the Grantee will be paid an amount in cash in respect of each option equal to
the difference between the fair market value of a share of Stock and the
exercise price of such Option.
7.5 Termination of Employment.
--------------------------
(a) Termination for Cause. If the Grantee has a Termination of
-----------------------
Employment for Cause, any unexercised Option shall terminate immediately upon
the Grantee's Termination of Employment.
(b) Termination other than for Cause. If the Grantee has a Termination
----------------------------------
of Employment for any reason other than Cause, then any unexercised Option, to
the extent exercisable on the date of the Grantee's Termination of Employment,
may be exercised as follows:
(1) Death. If the Grantee's Termination of Employment is caused
-------
by the death of the Grantee,
13
then any unexercised Option to the extent exercisable on the date of the
Grantee's death, may be exercised, in whole or in part, at any time within one
year after the Grantee's death by the Grantee's personal representative or by
the person to whom the Option is transferred by will or the applicable laws of
descent and distribution;
(2) Disability. If the Grantee's Termination of Employment is on
------------
account of the Disability of the Grantee, then any unexercised Option to the
extent exercisable at the date of such Termination of Employment, may be
exercised, in whole or in part, at any time within one year after the date
of such Termination of Employment; provided that, if the Grantee dies after
such Termination of Employment and before the end of such one year period,
such Option may be exercised by the deceased Grantee's personal
representative or by the person to whom the Option is transferred by will or
the applicable laws of descent and distribution within one year after the
Grantee's Termination of Employment, or, if later, within 180 days after the
Grantee's death; and
(3) Other. If the Grantee's Termination of Employment is for any
-------
reason other than Cause, death or Disability, then any unexercised Option,
to the extent exercisable at the date of such Termination of Employment, may
be exercised, in whole or in part, at any time within three months after
such Termination of Employment.
7.6 Noncompetition. During the period of the Grantee's employment and for
----------------
two years thereafter or, if longer, such period as the Grantee shall own Stock
acquired pursuant to the exercise of an Option, the Grantee shall not, directly
or indirectly, own, manage, operate, join or control, be employed by or
participate in the ownership, management, operation or control of, or be a
consultant to or connected in any other manner with, any business, firm or
corporation which is similar to or competes with a principal business of
14
the Company or its Subsidiaries (a "Competitive Activity"). For these purposes,
the Grantee's ownership of securities or a public company not in excess of one
percent of any class of such securities shall not be considered to be
competition with the Company or its Subsidiaries.
If the Grantee shall engage in a Competitive Activity, as determined by the
Committee in good faith, (a) all Options then held by the Grantee shall expire
as of the date that the Grantee first engaged in such Competitive Activity, (b)
the Company shall have the right to acquire any shares of Stock then owned by
the Grantee as the result of the exercise of an Option at a price equal to the
lesser of (i) the Fair Market Value of such shares or (ii) the aggregate
exercise price paid therefore by the Grantee, and (c) the Company shall have the
right to require the Grantee to return to the Company any other gain (whether or
not realized) the Grantee had on the exercise of any Options granted under this
Stock Option Plan (that is, the amount by which, at the time of the exercise of
any Option, the Fair Market Value of the shares to be received was greater than
the aggregate exercise price paid therefor by the Grantee).
ARTICLE VIII. MISCELLANEOUS
8.1 Substituted Options. If the Committee cancels any Option (granted
---------------------
under this Plan, or any plan of any entity acquired by the Company or any of its
Subsidiaries), and a new Option is substituted therefor, then the Committee may,
in its discretion, determine the terms and conditions of such new Option and
may, in its discretion, provide that the grant date of the canceled option shall
be the date used to determine the earliest date or dates for exercising the new
substituted Option under Section 7.1 hereof so that the Grantee may exercise the
substituted Option at the same time as if the Grantee had held the substituted
Option since the grant date of the canceled option; provided that no Option
shall be canceled without the consent of the Grantee if the terms and conditions
of the new Option to be
15
substituted are not at least as favorable as the terms and conditions of the
option to be canceled.
8.2 Securities Law Matters.
-----------------------
(a) If the Committee deems necessary to comply with the 1933 Act, the
Committee may require a written investment intent representation by the Grantee
and may require that a restrictive legend be affixed to certificates for shares
of Stock.
(b) If based upon the opinion of counsel for the Company, the
Committee determines that the exercise or nonforfeitability of, or delivery of
benefits pursuant to, any Option would violate any applicable provision of (1)
federal or state securities law or (2) the listing requirements of any
securities exchange on which are listed any of the Company's equity securities,
then the Committee may postpone any such exercise, nonforfeitability or
delivery, as the case may be, but the Company shall use its best efforts to
cause such exercise, nonforfeitability or delivery to comply with all such
provisions at the earliest practicable date. The Committee's authority under
this Section 8.2(b) shall expire on the date of any Change of Control.
8.3 Funding. Benefits payable under the Plan to any person shall be paid
---------
directly by the Company. The Company shall not be required to fund, or otherwise
segregate assets to be used for, benefits under the Plan.
8.4. No Employment Rights. Neither the establishment of the Plan nor the
----------------------
granting of any Option shall be construed to (a) give any Grantee the right to
remain employed by the Company or any of its Subsidiaries or to any benefits not
specifically provided by the Plan or (b) in any manner modify the right of the
Company or any of its Subsidiaries to modify, amend, or terminate any of its
employee benefit plans.
16
8.5 Rights as a Stockholder. A Grantee shall not, by reason of any Option
-------------------------
have any right as a stockholder of the Company with respect to the shares of
Stock which may be deliverable upon exercise of such Option until such shares
have been delivered to him. As a condition of exercise, a Grantee will be
required to execute a stockholder agreement if any such agreement is then in
effect with respect to the Stock.
8.6 Nature of Payments. Any and all grants or deliveries of shares of
--------------------
Stock hereunder shall constitute special incentive payments to the Grantee and
shall not be taken into account in computing the amount of salary or
compensation of the Grantee for the purposes of determining any pension,
retirement, death or other benefits under (a) any pension, retirement, profit-
sharing, bonus, life insurance or other employee benefit plan of the Company or
any of its Subsidiaries or (b) any agreement between the Company or any
Subsidiary, on the one hand, and the Grantee, on the other hand, except as such
plan or agreement shall otherwise expressly provide.
8.7 Nonuniform Determinations. Neither the Committee's nor the Board's
--------------------------
determinations under the Plan need be uniform and may be made by the Committee
or the Board selectively among persons who receive, or are eligible to receive,
Options (whether or not such persons are similarly situated). Without limiting
the generality of the foregoing, the Committee shall be entitled, among other
things, to make non-uniform and selective determinations and to enter into non-
uniform and selective Option Agreements as to (a) the identity of the Grantees,
(b) the terms and provisions of Options, and (c) the treatment, under Section
7.5, of Terminations of Employment. Notwithstanding the foregoing, the
Committee's interpretation of Plan provisions shall be uniform as to similarly
situated Grantees.
8.8 Adjustments. The Committee shall make equitable adjustment of:
------------
17
(a) the aggregate numbers of shares of Stock available under
Article III,
(b) the number of shares of Stock covered by an Option, and
(c) the Option Price of any Option,
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, asset spin-off,
reorganization, or similar event, of or by the Company.
8.9 Amendment of the Plan. The Board may from time to time in its
-----------------------
discretion amend or modify the Plan without the approval of the stockholders of
the Company, except as such stockholder approval may be required (a) to permit
transactions in Stock pursuant to the Plan to be exempt from liability under
Section 16(b) of the 1934 Act or (b) under the listing requirements of any
securities exchange on which are listed any of the Company's equity securities.
8.10 Termination of the Plan. The Plan shall terminate on the tenth (10th)
-------------------------
anniversary of the Effective Date or at such earlier time as the Board may
determine. Any termination, whether in whole or in part, shall not affect any
Option or Option Agreement then outstanding under the Plan.
8.11 No Illegal Transactions. The Plan and all Options granted pursuant to
-------------------------
it are subject to all laws and regulations of any governmental authority which
may be applicable thereto; and notwithstanding any provision of the Plan, or any
Option, Grantees shall not be entitled to exercise Options or receive the
benefits thereof and the Company shall not be obligated to deliver any Stock or
pay any benefits to a Grantee if such exercise, delivery, receipt or payment of
benefits would constitutes a violation by the Grantee or the Company of any
provision of any such law or regulation.
18
8.12 Severability. If all or any part of the Plan is declared by any court
-------------
or governmental authority to be unlawful or invalid, such unlawfulness or
invalidity shall not serve to invalidate any portion of the Plan not declared to
be unlawful or invalid. Any Section or part of a Section so declared to be
unlawful or invalid shall, if possible, be construed in a manner which will give
effect to the terms of such Section or part of a Section to the fullest extent
possible while remaining lawful and valid.
8.13 Headings. The headings of Articles and Sections are included solely
----------
for convenience of reference, and if there is any conflict between such headings
and the text of this Plan, the text shall control.
8.14 Number and Gender. When appropriate the singular as used in this Plan
-------------------
shall include the plural and vice versa, and the masculine shall include the
feminine.
8.15 Controlling Law. The laws of the State of Connecticut, except its laws
-----------------
with respect to choice of laws, shall be controlling in all matters relating to
the Plan.
19
EXHIBIT 10.6
FACTSET RESEARCH CORPORATION
STOCK OPTION PLAN
INCENTIVE STOCK OPTION AGREEMENT
THIS AGREEMENT is made this day of 199 by and
---------- ----------- --
between FactSet Research Corporation a Delaware corporation ("Company"), and
("Grantee"), a resident of the State of .
- ---------------------- ---------------
Grantee is employed by Company or one of its subsidiaries. By granting this
incentive stock option to Grantee, Company desires to carry out the purpose of
the FactSet Research Corporation 1994 Stock Option Plan (the "Plan"), a copy of
which together with a copy of the Plan's prospectus, if any, have been or are
being furnished Grantee. Unless otherwise specified, all capitalized terms in
this Agreement have the same meaning as have such terms in the Plan.
Company and Grantee hereby covenant and agree as follows:
1. Grant. Effective , 199 ("Grant Date"), Company grants
----- ---------- --
to Grantee an incentive stock option to purchase shares (the "Shares") of
-----
Company's common stock, par value $1.00 per share (the "Stock"), at a price of
$ per share (the "Option Price"), subject to all of the terms, conditions,
-----
and restriction of this Agreement and the Plan. The Option Price shall not be
less than 100% of the Fair Market Value of Stock on the Grant Date or, in the
case of a 10% Owner, not less than 110% of the Fair Market Value of the Stock on
Grant Date.
2. Exercise - Options
------------------
(a) In General. Subject to the provisions of Section 7.4 and Section
----------
7.5 of the Plan, this option may be exercised, in whole or in part, as follows:
PERCENTAGE OF SHARES
YEARS AFTER GRANT DATE EXERCISABLE(1)
---------------------- --------------------
less than one year 0%
one year but less than two years 20%
two years but less than three years 40%
three years but less than four years 60%
four years but less than five years 80%
five years or more 100%
(b) Effects of a Change of Control. Notwithstanding any other
------------------------------
provisions of the Plan or this Agreement, upon the occurrence of a Change of
Control or an initial public offering of Stock by the Company, the Committee may
in its sole discretion make a determination that (i) all Options granted under
the Plan to a Grantee which have not been exercised or which have not expired by
their terms shall immediately be fully exercisable for the remainder of their
respective terms or (ii) such options be immediately terminated in which case
the Grantee will be paid an amount in cash in respect of each option equal to
the difference between the fair market value of a share of Stock and the
exercise price of such Option.
(c) Procedures. Each exercise shall be for an integral multiple of
----------
the Shares or all Shares then subject to this Agreement. Exercise shall be made
by delivery to Company of written notice of intent to purchase a specific number
of Shares. The Option Price of such Shares shall be paid in full at the time of
the exercise. Payment may, at the election of the Grantee, be made in:
(i) cash,
(ii) Stock valued at its Fair Market Value on the business day
next preceding the date of exercise, or
(iii) any combination thereof.
- -----------------------------
(1)Or such other exercisability schedule or criteria as the Committee shall
determine if the Plan so permits. See Section 7.1 of the Plan.
-2-
Any shares of Stock to be used for payment of the Option Price shall be
represented by stock certificates duly endorsed for transfer.
3. Disqualifying Disposition. Grantee shall notify the Committee of any
-------------------------
disposition of Stock issued pursuant to the exercise of this Option under the
circumstances described in Section 421(b) of the Internal Revenue Code (relating
to certain disqualifying dispositions), within 10 days of such disposition and
Grantee shall remit to the Company the amount of any taxes required to be
withheld because of such disqualifying disposition.
4. Tax Withholding.
---------------
(a) Mandatory Withholding Taxes. If any applicable taxes are required
---------------------------
to be withheld at the time of grant or exercise of this option, the Grantee (i)
agrees to pay to the Company, or (ii) agrees to have withheld from compensation
otherwise due to Grantee or, in accordance with Section 4(b), from any shares of
Stock due to the Grantee under the Plan, the amount of any such taxes, including
United States, state, and local, required to be withheld or collected in respect
to the grant or exercise of this option as is determined by the Company. The
Grantee's tax withholding liability may be satisfied by a combination of the
methods described in clauses (i) and (ii) of this Section 4(a).
(b) Elective Share Withholding. The Grantee may elect the withholding
--------------------------
by the Company of a portion of the Shares purchased upon exercise having a Fair
Market Value equal to the minimum amount necessary to satisfy the Grantee's
required United States, state and local withholding tax liability attributable
to the Taxable Event, or, with prior approval of the Committee, a greater amount
not to exceed the Grantee's tax liability with respect to the Taxable Event.
An election by the Grantee to have Shares withheld will be subject to
the following restrictions:
(a) the Committee may disapprove the election at any time;
(b) the election must be made prior to the date that the amount of
tax to be withheld is determined (the "Tax Date");
(c) the election will be irrevocable;
(d) if the Grantee is a Section 16 Grantee, the Grantee's election
may not be made within six months after the Grant Date (except that this
limitation will not apply in the event the death or Disability of the Grantee
occurs prior to the expiration of the six-month period), and
(e) if the Grantee is a Section 16 Grantee, the Grantee's election
must be made either at least six months before the Tax Date or during the ten
business day period beginning on the third business day after the release of the
Company's quarterly or annual summary statement of sales and earnings.
-3-
5. No Right to Employment. No obligation of Company (or its subsidiaries)
----------------------
as to Grantee's continued employment or length of Grantee's employment shall be
implied by the term of this Agreement or the Plan, and Company and its
subsidiaries reserve the same rights to terminate the employment of Grantee as
existed before the date of this Agreement.
6. Noncompetition. During the period of Grantee's employment and for two
--------------
years thereafter or, if longer, such period as Grantee shall own Stock acquired
pursuant to the exercise of an Option, Grantee shall not, directly or
indirectly, own, manage, operate, join or control, be employed by or participate
in the ownership, management, operation or control of, or be a consultant to or
connected in any other manner with, any business, firm corporation which is
similar to or competes with a principal business of Company or its Subsidiaries
(a "Competitive Activity"). For these purposes, Grantee's ownership of
securities of a public company not in excess of one percent of any class of such
securities shall not be considered to be competition with Company or its
Subsidiaries.
If Grantee shall engage in a Competitive Activity, as determined by the
Committee in good faith, (a) all Options then held by Grantee shall expire as of
the date that Grantee first engaged in such Competitive Activity, (b) Company
shall have the right to acquire any shares of Stock then owned by Grantee as the
result of the exercise of an Option at a price equal to the lesser of (i) the
Fair Market Value of such shares or (ii) the aggregate exercise price paid
therefore by Grantee, and (c) Company shall have the right to require Grantee to
return to Company any other gain (whether or not realized) Grantee had on the
exercise of any Options granted under the Plan (that is, the amount by which, at
the time of the exercise of any Option, the Fair Market Value of the shares to
be received was greater than the aggregate exercise price paid therefor by
Grantee).
7. Term. The options granted by this Agreement shall expire 10 years from
----
Grant Date (5 years, in the case of a 10% Owner), subject to earlier expiration
as provided in the Plan, including expiration upon Grantee's Termination of
Employment as provided in Section 7.5 of the Plan.
8. Adjustment. The aggregate numbers of shares of Stock available under
----------
the Plan, the numbers of Shares covered by this Agreement, and the Option Price
of the Agreement shall be equitably adjusted as determined by the Committee to
reflect any stock dividend, stock split, reverse stock split, share combination,
recapitalization, merger, consolidation, asset spin-off, reorganization, or
similar event, of or by Company, provided, however, no fractional shares shall
be issued by Company and any adjustment resulting in a fractional share shall
be reduced by the previous whole number.
9. Nontransferability. The option is nonassignable and nontransferable
------------------
other than by will or the laws of descent and distribution, and is exercisable,
during Grantee's lifetime, only by Grantee.
10. Stockholder Rights. Grantee shall not have any rights a stockholder of
------------------
Company with respect to the shares of Stock which may be deliverable pursuant to
this Agreement.
-4-
until such shares have been delivered to Grantee. As a condition of exercise,
Grantee will be required to execute a stockholder agreement if any such
agreements are then in effect with respect to the Stock.
11. The Plan and Amendments. The option granted under this Agreement shall
-----------------------
be subject to the Plan as it may be amended from time to time, provided that no
amendment adopted after Grant Date that would decrease any of Grantee's rights
with respect to the option shall be effective for purposes of the option.
12. No Illegal Transactions. Notwithstanding the foregoing, Grantee shall
-----------------------
not be entitled to exercise an option or receive the benefits thereof, and
Company shall not deliver any Stock or pay benefits to a Grantee if such
exercise, delivery, receipt or payment benefits would constitute a violation by
Grantee or Company of any provision of any law or regulation of any governmental
authority which may be applicable to the Plan or this Agreement.
13. Controlling Law. The laws of the State of Connecticut, except its laws
---------------
with respect to choice of laws, shall be controlling in all matters relating to
this Agreement and the option granted hereunder.
IN WITNESS WHEREOF, Company and Grantee have executed this Agreement as of
the day and year first above written.
FACTSET RESEARCH CORPORATION
By:
-------------------------------
Its:
---------------------------
-----------------------------------
Grantee
-5-
Exhibit 10.7
===========================================================================
FACTSET RESEARCH SYSTEMS INC.
1996 STOCK OPTION PLAN
Effective [June __], 1996
===========================================================================
TABLE OF CONTENTS
Page
----
ARTICLE I
Purpose . . . . .
-------
ARTICLE II
Definitions . . . .
-----------
ARTICLE III
Scope of the Plan . .
-----------------
ARTICLE IV
Administration . . .
--------------
SECTION 4.01. Administrative Committee . . . . . .
SECTION 4.02. Authority of the Committee . . . . .
ARTICLE V
Eligibility . . . . . . . .
-----------
ARTICLE VI
Grant of Options . . . . . .
----------------
SECTION 6.01. General Conditions . . . . . . . . .
SECTION 6.02. Option Price . . . . . . . . . . . .
SECTION 6.03. Grant of Incentive Stock Options . .
SECTION 6.04. Nontransferability . . . . . . . . .
ii
Page
----
ARTICLE VII
Exercise of Options
-------------------
SECTION 7.01. Exercise of Options . . . . . . . . .
SECTION 7.02. Payment of Option Price . . . . . . .
SECTION 7.03. Tax Withholding . . . . . . . . . . .
SECTION 7.04. Effects of a Change of Control . . .
SECTION 7.05. Termination of Employment . . . . . .
SECTION 7.06. Noncompetition . . . . . . . . . . .
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Substituted Options . . . . . . . . .
SECTION 8.02. Securities Laws Matters . . . . . . .
SECTION 8.03. Funding . . . . . . . . . . . . . . .
SECTION 8.04. No Employment Rights . . . . . . . .
SECTION 8.05. Rights as a Stockholder . . . . . . .
SECTION 8.06. Nature of Payments . . . . . . . . .
SECTION 8.07. Nonuniform Determinations . . . . . .
SECTION 8.08. Adjustments . . . . . . . . . . . . .
SECTION 8.09 Amendment of the Plan . . . . . . . .
SECTION 8.10. Termination of the Plan . . . . . . .
SECTION 8.11. No Illegal Transactions . . . . . . .
SECTION 8.12. Severability . . . . . . . . . . . .
SECTION 8.13. Headings . . . . . . . . . . . . . .
SECTION 8.14. Number and Gender . . . . . . . . . .
SECTION 8.15. Controlling Law . . . . . . . . . . .
Factset Research Systems Inc.
1996 Stock Option Plan
FactSet Research Systems Inc. (the "Company") hereby establishes
the FactSet Research Systems Inc. 1996 Stock Option Plan (the "Plan")
effective [June __], 1996, subject to the approval of the Plan by the
holders of a majority of the shares of the Stock present in person or by
proxy and voting at a duly called meeting of the stockholders of the
Company.
ARTICLE I
Purpose
-------
The primary purpose of the Plan is to provide a means by which
key employees of the Company and its Subsidiaries (as defined herein) can
acquire and maintain stock ownership, thereby strengthening their
commitment to the success of the Company and its Subsidiaries and their
desire to remain employed by the Company and its Subsidiaries. The Plan
also is intended to attract, employ and retain key employees and to provide
such employees with additional incentive and reward opportunities designed
to encourage them to enhance the profitable growth of the Company and its
Subsidiaries.
ARTICLE II
Definitions
-----------
The following words and phrases, when used herein, unless their
context clearly indicates otherwise, shall have the following respective
meanings:
"Board" means the board of directors of the Company.
"Cause" means discharge of a Grantee (i) on account of fraud,
embezzlement or other unlawful or tortious conduct, whether or not
involving or against the Company or any subsidiary or affiliate, (ii), for
violation of a policy of the Company or any Subsidiary or affiliate,
(iii) for serious and wilful acts of misconduct detrimental to the
2
business or reputation of the Company or any subsidiary or affiliate or
(iv) for "cause" or any like term as defined in any written employment
contract with the Grantee. The determination of whether a discharge of a
Grantee is for cause shall be determined in good faith by the Committee
whose decision shall be final and binding.
"Change of Control" means, prior to the date that an initial
public offering of stock is made by the Company, a change in the ownership
or control of the Company in accordance with Section 280G of the Internal
Revenue Code and the regulations promulgated thereunder. Notwithstanding
the preceding sentence, a Change of Control of the Company shall be deemed
not to have occurred (i) with respect to any Grantee, if such Grantee is,
by written agreement executed prior to such Change of Control, a
participant in such Change of Control and (ii) if the ownership of the
Company shall change solely as a result of an initial public offering of
Stock by the Company. Following an initial public offering of stock by the
Company, Change of Control means that either of the following events shall
have occurred: (a) a person, partnership, joint venture, corporation or
other entity, or two or more of any of the foregoing acting as a group (or
a "person" within the meaning of Sections 13(d)(3) of the 1934 Act, other
than the Company, a majority-owned subsidiary of or an employee benefit
plan (or related trust) of the Company or such subsidiary, become(s) the
"beneficial owner" (as defined in Rule 13(d)(3) under the 1934 Act) of 20%
or more of the then outstanding voting stock of the Company; or (b) during
any period of two consecutive years, individuals who at the beginning of
such period constitute the Board (together with any new director whose
election by the Board or whose nomination for election by the Company's
stockholders, was approved by a vote of at least two-thirds of the
directors then still in office who either were directors at the beginning
of such period or whose election or nomination for election was previously
so approved) cease for any reason to constitute a majority of the directors
then in office.
"Committee" means the committee of the Board appointed pursuant
to Section 4.01.
"Company" means FactSet Research Systems Inc., a Delaware
corporation.
3
"Disability" means a disability of a nature that would qualify
the Grantee for long-term benefits under the Company's long-term disability
plan.
"Disinterested Person" means a person who has not, during the one
year prior to service on the Committee, or at any time during such service,
been granted or awarded any stock or stock-based derivative security
(within the meaning of SEC Rule 16a-1(c)) pursuant to the Plan or any other
plan of the Company or its Subsidiaries, except as provided in SEC
Rule 16b-3(c)(2)(i).
"Effective Date" means November 1, 1994.
"Fair Market Value" of any share of Stock, as of any applicable
date, means (i) if shares of Stock are then listed on a national securities
exchange, the "fair market value" shall be the closing price for a share of
Stock on such exchange on the date in question, or, if there has been no
sale of such security on that date, the closing price for a share of Stock
on such exchange on the last preceding business day on which such security
was traded; (ii) if shares of Stock are then not listed on a national
securities exchange, the "fair market value" shall be the mean of the bid
and asked prices for a share of Stock in the over-the-counter market as
reported in the National Association of Securities Dealers Automatic
Quotation System ("NASDAQ") on that date, or, if there be no such quotation
on that date, such prices on the last preceding business day on which there
was such a quotation; or (iii) if shares of Stock are then not listed on a
national securities exchange or quoted on NASDAQ, the "fair market value"
shall be an amount not less favorable than the offering price of the
security as established by the current bid and asked prices quoted by
persons independent of the issuer, the Company if other than the issuer,
and of any other party in interest.
"Grant Date" means the date of grant of an Option determined in
accordance with Section 6.01(a).
"Grantee" means an individual who has been granted an Option.
"Internal Revenue Code" means the Internal Revenue Code of 1986,
as amended, and any succeeding Internal Revenue Code, and references to
sections herein shall be deemed to include any such section as amended,
modified or renumbered.
4
"1933 Act" means the Securities Act of 1933, as amended.
"1934 Act" means the Securities Exchange Act of 1934, as amended.
"Option" means any incentive stock option or nonqualified stock
option granted under the Plan.
"Option Agreement" has the meaning specified in Section 4.02(e).
"Option Price" means the per share purchase price of Stock
subject to an Option.
"Parent" means any corporation (other than the Company) in an
unbroken chain of corporations ending with the employer corporation if, at
the time of granting an option, each of the corporations other than the
employer corporation owns stock possessing 50% or more of the total
combined voting power of all classes of stock in one of the other
corporations in such chain.
"Plan" means the FactSet Research Systems Inc. 1996 Stock Option
Plan as set forth herein and as it may from time to time be amended.
"SEC" means the Securities and Exchange Commission.
"Section 16 Grantee" means a person subject to potential
liability under Section 16(b) of the 1934 Act with respect to transactions
involving equity securities of the Company.
"Stock" means the common stock of the Company, par value $0.01
per share.
"Subsidiary" means a corporation as defined in Section 424(f) of
the Internal Revenue Code with the Company being treated as the employer
corporation for purposes of this definition.
"10% Owner" means a person who owns stock (including stock
treated as owned under Section 424(d) of the Internal Revenue Code)
possessing more than 10% of the total combined voting power of all classes
of stock of the Company.
5
"Termination of Employment" occurs on the last day an individual
is employed by the Company or any of its Subsidiaries or any Parent;
notwithstanding the foregoing, for an individual who is an employee of a
Subsidiary, the individual shall be deemed to have a Termination of
Employment on the last day the Company owns voting securities possessing at
least 50% of the aggregate voting power of such Subsidiary's outstanding
voting securities.
ARTICLE III
Scope of the Plan
-----------------
An aggregate of 950,000 shares of Stock is hereby made available
and is reserved for delivery on account of the exercise of Options. In no
event shall any employee be granted more than [250,000] Options in the
aggregate (including, for this purpose, any Options granted hereunder which
are subsequently cancelled for any reason) during the term of this Plan.
Subject to the foregoing limit, shares of Stock held as treasury shares may
be used for or in connection with Options. If and to the extent an Option
shall expire or terminate for any reason without having been exercised in
full, or shall be forfeited, the shares of Stock associated with such
Option shall become available for other Options.
ARTICLE IV
Administration
--------------
SECTION 4.01. Administrative Committee. The Plan shall be
-------------------------
administered by the Compensation Committee of the Board, which shall
consist of not less than three persons who are directors of the Company,
each of whom shall qualify as (i) an "outside director" within the meaning
of Section 162(m) of the Internal Revenue Code and (ii) a Disinterested
Person.
SECTION 4.02. Authority of the Committee. The Committee shall
---------------------------
have full and final authority, In its discretion, but subject to the
express provisions of the Plan, as follows:
(a) to grant Options;
6
(b) to determine (l) when Options may be granted and (2) whether
or not specific Options will be incentive stock options or
nonqualified stock options;
(c) to interpret the Plan and to make all determinations
necessary or advisable for the administration of the plan;
(d) to prescribe, amend, and rescind rules relating to the Plan;
(e) to determine, subject to the terms of the Plan, the terms and
provisions of the written agreements by which all Options shall be
granted ("Option Agreements") and, with the consent of the Grantee, to
modify any such Option Agreement at any time; and
(f) to impose such additional conditions, restrictions, and
limitations upon the grant, exercise or retention of Options as the
Committee may, before or concurrently with the grant thereof, deem
appropriate.
The determination of the Committee on all matters relating to the Plan or
any Option or Option Agreement shall be conclusive and final. No member of
the Committee shall be liable for any action or determination made in good
faith with respect to the Plan or any Option.
ARTICLE V
Eligibility
-----------
Options may be granted to any employee of the Company or any
employee of its Subsidiaries. In selecting the individuals to whom Options
may be granted, in determining the number of shares of Stock subject to
each Option, and in determining the other terms and conditions applicable
to each Option, the Committee shall take into consideration such factors as
it deems relevant in promoting the purposes of the Plan.
7
ARTICLE VI
Grant of Options
----------------
SECTION 6.01. General Conditions. (a) The Grant Date of an
-------------------
Option shall be the date on which the Committee grants the Option or such
later date as specified in advance by the Committee.
(b) The term of each Option shall be a period of not more than
10 years from the Grant Date, and shall be subject to earlier termination
as herein provided.
(c) A Grantee may, if otherwise eligible, be granted additional
Options.
(d) No Option may be granted more than 10 years from the earlier
of the date the Plan is adopted or the date the Plan is approved by the
Stockholders of the Company.
SECTION 6.02. Option Price. No later than the Grant Date of any
-------------
Option, the Committee shall determine the Option Price of such Option.
Subject to Section 6.03 with respect to incentive stock options, the Option
Price of an Option shall be at such price (which may be less than 100% of
the Fair Market Value of the Stock on the Grant Date), as the Committee, in
its discretion, shall determine.
SECTION 6.03. Grant of Incentive Stock Options. At the time of
---------------------------------
the grant of any Option, the Committee may designate that such Option shall
be made subject to additional restrictions to permit it to qualify as an
incentive stock option under the requirements of Section 422 of the
Internal Revenue Code. Any Option designated as an incentive stock option:
(a) shall have an Option Price of (1) not less than 100% of the
Fair Market Value of the Stock on the Grant Date or (2) in the case of
a 10% Owner, not less than 110% of the Fair Market Value of the Stock
on the Grant Date;
(b) shall be for a period of not more than 10 years (5 years, in
the case of a 10% Owner) from the Grant Date, and shall be subject to
earlier termination as provided herein or in the applicable Option
Agreement;
8
(c) shall not have an aggregate Fair Market Value (determined for
each incentive stock option at its Grant Date) of Stock with respect
to which incentive stock options are exercisable for the first time by
such Grantee during any calendar year (under the Plan and any other
employee stock option plan of the Grantee's employer or any Parent or
Subsidiary thereof ("Other Plans")), determined in accordance with the
provisions of Section 422 of the Internal Revenue Code, which exceeds
$100,000 (the "$100,000 Limit");
(d) shall, if the aggregate Fair Market Value of Stock
(determined on the Grant Date) with respect to all incentive stock
options previously granted under the Plan and any Other Plans ("Prior
Grants") and any incentive stock options under such grant (the
"Current Grant") which are exercisable for the first time during any
calendar year would exceed the $100,000 Limit, be exercisable as
follows:
(1) the portion of the Current Grant exercisable for the
first time by the Grantee during any calendar year which would,
when added to any portions of any Prior Grants, be exercisable
for the first time by the Grantee during such calendar year with
respect to stock which would have an aggregate Fair Market Value
(determined as of the respective Grant Date for such incentive
stock options) in excess of the $100,000 Limit shall,
notwithstanding the terms of the Current Grant, be exercisable
for the first time by the Grantee in the first subsequent
calendar year or years in which it could be exercisable for the
first time by the Grantee when added to all Prior Grants without
exceeding the $100,000 Limit; and
(2) if, viewed as of the date of the Current Grant, any
portion of a Current Grant could not be exercised under the
provisions of the immediately preceding provision during any
calendar year commencing with the calendar year in which it is
first exercisable through and including the last calendar year in
which it may by its terms be exercised, such portion of the
Current Grant shall not be an incentive stock option, but shall
be exercisable as a separate non-qualified stock
9
option at such date or dates as are provided in the Current
Grant;
(e) shall be granted within 10 years from the earlier of the date
the Plan is adopted or the date the Plan is approved by the
stockholders of the Company; and
(f) shall require the Grantee to notify the Committee of any
disposition of any Stock issued pursuant to the exercise of the
incentive stock option under the circumstances described in
Section 421(b) of the Internal Revenue Code (relating to certain
disqualifying dispositions), within 10 days of such disposition.
Notwithstanding the foregoing and Section 4.02(e), the Committee may,
without the consent of the Grantee, at any time before the exercise of an
Option (whether or not an incentive stock option), take any action
necessary to prevent such Option from being treated as an incentive stock
option.
SECTION 6.04. Nontransferability. Unless the Committee shall
-------------------
otherwise determine, each Option granted hereunder shall by its terms not
be assignable or transferable other than by will or the laws of descent and
distribution and may be exercised, during the Grantor's lifetime, only by
the Grantee.
ARTICLE VII
Exercise of Options
-------------------
SECTION 7.01. Exercise of Options. Subject to Sections 4.02(f),
--------------------
7.04. and 7.05 and such terms and conditions as the Committee may impose,
each Option shall be exercisable in such manner as the Committee, in its
discretion, shall determine as set forth in the Option Agreement. Each
Option shall be exercised by delivery to the Company of a written notice of
intent to purchase (in such form as prepared by the Committee) a specific
number of shares of Stock subject to the Option. The Option Price of any
shares of Stock shall be paid in full at the time of the exercise.
10
SECTION 7.02. Payment of Option Price. In the discretion of the
------------------------
Committee, a Grantee may pay the Option Price payable upon the exercise of
an Option in cash, previously acquired Stock valued at its Fair Market
Value on the business day next preceding the date of exercise, or any
combination thereof, and may be effected in whole or in part (a) with
monies received from the Company at the time of exercise as a compensatory
cash payment, or (b) with monies borrowed from the Company pursuant to
repayment terms and conditions as shall be determined from time to time by
the Committee, in its discretion, separately with respect to each exercise
of options and each Grantee; provided, however, that each such method and
-------- -------
time for payment and each such borrowing and terms and conditions of
repayment shall be permitted by and be in compliance with applicable law
and provided further, in the event the Option Price is paid with monies
borrowed from the Company, such fact shall be noted conspicuously on the
certificate for such shares in accordance with applicable law.
SECTION 7.03. Tax Withholding.
----------------
(a) Mandatory Tax Withholding.
-------------------------
(1) Whenever under the Plan, shares of Stock are to be
delivered upon exercise of an Option that is a nonqualified stock option,
the Company shall be entitled to require as a condition of delivery
(i) that the Grantee remit an amount sufficient to satisfy all federal,
state, and local withholding tax requirements related thereto, (ii) the
withholding of such sums from compensation otherwise due to the Grantee or
from any shares of Stock due to the Grantee under the Plan, or (iii) any
combination of the foregoing; or
(2) If any disqualifying disposition described in
Section 6.03(f) is made with respect to shares of Stock acquired under an
incentive stock option granted pursuant to the Plan, then the person making
such disqualifying disposition shall remit to the Company an amount
sufficient to satisfy all federal, state, and local withholding taxes
thereby incurred; provided that, in lieu of or in addition to the
foregoing, the Company shall have the right to withhold such sums from
compensation otherwise due to the Grantee or from any shares of Stock due
to the Grantee under the Plan.
11
(b) Elective Share Withholding.
---------------------------
(1) Subject to Section 7.03(b)(2), a Grantee may elect the
withholding ("Share Withholding") by the Company of a portion of the shares
of Stock otherwise deliverable to such Grantee upon the exercise of an
Option ("Taxable Event") having a Fair Market Value equal to:
(i) the minimum amount necessary to satisfy required
federal, state, or local withholding tax liability
attributable to the Taxable Event; or
(ii) with the Committee's prior approval, a greater
amount, not to exceed the estimated total amount of such
Grantee's tax liability with respect to the Taxable Event.
(2) Each Share Withholding election by a Grantee shall be
subject to the following restrictions:
(i) any Grantee's election shall be subject to the
Committee's right to revoke such election of Share
Withholding by such Grantee at any time before the Grantee's
election if the Committee has reserved the right to do so in
the Option Agreement;
(ii) if the Grantee is a Section 16 Grantee, such
Grantee's election shall be subject to the disapproval of
the Committee at any time, whether or not the Committee has
reserved the right to do so;
(iii) the Grantee's election must be made before the date
(the "Tax Date") on which the amount of tax to be withheld
is determined;
(iv) the Grantee's election shall be irrevocable;
(v) a Section 16 Grantee may not elect Share
Withholding within six months after the grant of the related
Option (except if the Grantee dies or incurs a Disability
before the end of the six-month period); and
12
(vi) (A) a Section 16 Grantee must elect Share
Withholding either six months before the Tax Date or
(B) such election must either be made or take effect during
the ten business day period beginning on the third business
day after the release of the Company's quarterly or annual
summary statement of sales and earnings.
SECTION 7.04. Effects of a Change of Control. Notwithstanding
-------------------------------
any other provisions of the Plan or any Option Agreement, upon the
occurrence of a Change of Control, (i) all Options granted under the Plan
to a Grantee which have not been exercised or which have not expired by
their terms shall immediately be fully exercisable for the remainder of
their respective terms and (ii) the Committee may, in its sole discretion,
determine that such options be immediately terminated in which case the
Grantee will be paid an amount in cash in respect of each Option equal to
the difference between the Fair Market Value of a share of Stock and the
Option Price of such Option.
SECTION 7.05. Termination of Employment.
--------------------------
(a) Termination for Cause. If the Grantee has a Termination of
----------------------
Employment for Cause, any unexercised Option shall terminate immediately
upon the Grantee's Termination of Employment.
(b) Termination other than for Cause. If the Grantee has a
---------------------------------
Termination of Employment for any reason other than Cause, then any
unexercised Option, to the extent exercisable on the date of the Grantee's
Termination of Employment, may be exercised as follows:
(i) Death. If the Grantee's Termination of Employment is caused
------
by the death of the Grantee, then any unexercised Option to the extent
exercisable on the date of the Grantee's death, may be exercised in
whole or in part, at any time within one year after the Grantee's
death by the Grantee's personal representative or by the person to
whom the Option is transferred by will or the applicable laws of
descent and distribution,but in no event beyond the scheduled
expiration of the Option;
(ii) Disability. If the Grantee's Termination of Employment is on
----------
account of the Disability of the
13
Grantee, then any unexercised Option to the extent exercisable at the
date of such Termination of Employment, may be exercised, in whole or
in part, at any time within one year after the date of such
Termination of Employment; provided that, if the Grantee dies after
such Termination of Employment and before the end of such one year
period, such Option may be exercised by the deceased Grantee's
personal representative or by the person to whom the Option is
transferred by will or the applicable laws of descent and distribution
within one year after the Grantee's Termination of Employment, or, if
later, within 180 days after the Grantee's death, but in no event
beyond the scheduled expiration of the Option; and
(iii) Other. If the Grantee's Termination of Employment is for any
------
reason other than Cause, death or Disability, then any unexercised
Option, to the extent exercisable at the date of such Termination of
Employment, may be exercised, in whole or in part, at any time within
three months after such Termination of Employment; provided, however,
-------- -------
that if the Grantee dies within such three-month period following such
termination of Employment, such Option may be exercised by the
deceased Grantee's personal representative or by the person to whom
the Option is transferred by will or the applicable laws of descent
and distribution within 180 days of the Grantee's death, but in no
event beyond the scheduled expiration of the Option.
SECTION 7.06. Noncompetition. During the period of the
---------------
Grantee's employment and for two years thereafter, the Grantee shall not,
directly or indirectly, own, manage, operate, join or control, be employed
by or participate in the ownership, management, operation or control of, or
be a consultant to or connected in any other manner with, any business,
firm or corporation which is similar to or competes with a principal
business of the Company or its Subsidiaries (a "Competitive Activity").
For these purposes, the Grantee's ownership of securities of a public
company not in excess of one percent of any class of such securities shall
not be considered to be competition with the Company or its Subsidiaries.
If the Grantee shall engage in a Competitive Activity, as determined by the
Committee in good faith (a) all Options then held by the Grantee shall
expire as of the date that the Grantee first engaged in such Competitive
Activity, (b) the Company shall have the right to acquire any shares of
Stock then owned by
14
the Grantee as the result of the exercise of an Option at a price equal to
the lesser of (i) the Fair Market Value of such shares or (ii) the
aggregate Option Price paid therefor by the Grantee, and (c) the Company
shall have the right to require the Grantee to return to the Company any
other gain (whether or not realized) the Grantee had on the exercise of any
Options granted under this Stock Option Plan (that is, the amount by which,
at the time of the exercise of any Option, the Fair Market Value of the
shares to be received was greater than the aggregate Option Price paid
therefor by the Grantee).
ARTICLE VIII
Miscellaneous
-------------
SECTION 8.01. Substituted Options. If the Committee cancels any
--------------------
Option granted under this Plan, or any plan of any entity acquired by the
Company or any of its Subsidiaries), and a new Option is substituted
therefor, then the Committee may, in its discretion, determine the terms
and conditions of such new Option and may, in its discretion, provide that
the grant date of the canceled option shall be the date used to determine
the earliest date or dates for exercising the new substituted Option under
Section 7.01 hereof so that the Grantee may exercise the substituted Option
at the same time as if the Grantee had held the substituted Option since
the grant date of the canceled option; provided that no Option shall be
canceled without the consent of the Grantee if the terms and conditions of
the new Option to be substituted are not at least as favorable as the terms
and conditions of the option to be canceled.
SECTION 8.02. Securities Law Matters. (a) If the Committee
-----------------------
deems it necessary to comply with the 1933 Act and there is not in effect a
registration statement under the 1933 Act relating to the shares to be
acquired pursuant to the Option, the Committee may require a written
investment intent representation by the Grantee and may require that a
restrictive legend be affixed to certificates for shares of Stock.
(b) If based upon the opinion of counsel for the Company, the
Committee determines that the exercise or nonforfeitability of, or delivery
of benefits pursuant to, any Option would violate any applicable provision
of
15
(1) federal or state securities law or (2) the listing requirements of any
securities exchange on which are listed any of the Company's equity
securities, then the Committee may postpone any such exercise,
nonforfeitability or delivery, as the case may be, but the Company shall
use its best efforts to cause such exercise, nonforfeitability or delivery
to comply with all such provisions at the earliest practicable date. The
Committee's authority under this Section 8.02(b) shall expire on the date
of any Change of Control.
SECTION 8.03. Funding. Benefits payable under the Plan to any
--------
person shall be paid directly by the Company. The Company shall not be
required to fund, or otherwise segregate assets to be used for, benefits
under the Plan.
SECTION 8.04. No Employment Rights. Neither the establishment
---------------------
of the Plan nor the granting of any Option shall be construed to (i) give
any Grantee the right to remain employed by the Company or any of its
Subsidiaries or to any benefits not specifically provided by the Plan or
(ii) in any manner modify the right of the Company or any of its
Subsidiaries to modify, amend, or terminate any of its employee benefit
plans.
SECTION 8.05. Rights as a Stockholder. A Grantee shall not, by
------------------------
reason of any Option have any right as a stockholder of the Company with
respect to the shares of Stock which may be deliverable upon exercise of
such Option until such shares have been delivered to him. As a condition
of exercise, a Grantee will be required to execute a stockholder agreement
if any such agreement is then in effect with respect to the Stock.
SECTION 8.06. Nature of Payments. Any and all grants or
-------------------
deliveries of shares of Stock hereunder shall constitute special incentive
payments to the Grantee and shall not be taken into account in computing
the amount of salary or compensation of the Grantee for the purposes of
determining any pension, retirement, death or other benefits under (i) any
pension, retirement, profit-sharing, bonus, life insurance or other
employee benefit plan of the Company or any of its Subsidiaries or (ii) any
agreement between the Company or any Subsidiary, on the one hand, and the
Grantee, on the other hand, except as such plan or agreement shall
otherwise expressly provide.
16
SECTION 8.07. Nonuniform Determinations. Neither the
--------------------------
Committee's nor the Board's determinations under the Plan need be uniform
and may be made by the Committee or the Board selectively among persons who
receive, or are eligible to receive, Options (whether or not such persons
are similarly situated). Without limiting the generality of the foregoing,
the Committee shall be entitled, among other things, to make non-uniform
and selective determinations and to enter into non-uniform and selective
Option Agreements as to (a) the identity of the Grantees, (b) the terms and
provisions of Options, and (c) the treatment, under Section 7.05, of
Terminations of Employment. Notwithstanding the foregoing, the Committee's
interpretation of Plan provisions shall be uniform as to similarly situated
Grantees.
SECTION 8.08. Adjustments. (a) The Committee shall make
------------
equitable adjustment of:
(i) the aggregate numbers of shares of Stock available under
Article III;
(ii) the number of shares of Stock covered by an Option; and
(iii) the Option Price of any Option;
to reflect a stock dividend, stock split, reverse stock split, share
combination, recapitalization, merger, consolidation, asset spin-off,
reorganization, or similar event, of or by the Company.
(b) In the event of a change in the Stock as presently
constituted, the shares resulting from any such change shall be deemed to
be the Stock within the meaning of the Plan.
(c) Any adjustment made by the Committee pursuant to this
Section 8.08 shall be final, binding and conclusive, Any fractional shares
resulting from such adjustment shall be eliminated.
SECTION 8.09. Amendment of the Plan. The Board may from time to
----------------------
time in its discretion amend or modify the Plan without the approval of the
stockholders of the Company, except as such stockholder approval may be
required (a) to permit transactions in Stock pursuant to the Plan to be
exempt from liability under Section 16(b) of the 1934 Act
17
or (b) under the listing requirements of any securities exchange on which
are listed any of the Company's equity securities.
SECTION 8.10. Termination of the Plan. The Plan shall terminate
------------------------
on the tenth anniversary of the Effective Date or at such earlier time as
the Board may determine. Any termination, whether in whole or in part,
shall not affect any Option or Option Agreement then outstanding under the
Plan.
SECTION 8.11. No Illegal Transactions. The Plan and all Options
------------------------
granted pursuant to it are subject to all laws and regulations of any
governmental authority which may be applicable thereto; and notwithstanding
any provision of the Plan or any Option, Grantees shall not be entitled to
exercise Options or receive the benefits thereof and the Company shall not
be obligated to deliver any Stock or pay any benefits to a Grantee if such
exercise, delivery, receipt or payment of benefits would constitute a
violation by the Grantee or the Company of any provision of any such law or
regulation.
SECTION 8.12. Severability. If all or any part of the Plan is
-------------
declared by any court or governmental authority to be unlawful or invalid,
such unlawfulness or invalidity shall not serve to invalidate any portion
of the Plan not declared to be unlawful or invalid. Any Section or part of
a Section so declared to be unlawful or invalid shall, if possible, be
construed in a manner which will give effect to the terms of such Section
or part of a Section to the fullest extent possible while remaining lawful
and valid.
SECTION 8.13. Headings. The headings of Articles and Sections
---------
are included solely for convenience of reference, and if there is any
conflict between such headings and the text of this Plan, the text shall
control.
SECTION 8.14. Number and Gender. When appropriate the singular
------------------
as used in this Plan shall include the plural and vice versa, and the
masculine shall include the feminine.
SECTION 8.15. Controlling Law. The laws of the State of
----------------
Connecticut, except its laws with respect to choice of laws, shall be
controlling in all matters relating to the Plan.
Exhibit 23.1
CONSENT OF INDEPENDENT ACCOUNTANTS
We hereby consent to the use in the Prospectus constituting part of this
Registration Statement on Form S-1 of our report dated April 26, 1996, except
as to Note 2 which is as of June 4, 1996, relating to the financial statements
of FactSet Research Systems Inc., which appears in such Prospectus. We also
consent to the references to us under the headings "Experts" and "Selected
Historical Consolidated Financial Information" in such Prospectus. However,
it should be noted that Price Waterhouse LLP has not prepared or certified such
"Selected Historical Consolidated Financial Information."
/s/ Price Waterhouse LLP
PRICE WATERHOUSE LLP
New York, New York
June 4, 1996