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STRICT AAlKANSAS

CAULEY & GELLER, LLPSTEVEN E. CAULEYSCOTT E. POYNTERGINA M. COTHERN11311 Arcade Drive , Suite 201Li ttle Rock, AR 72212Telephone : 501/312-8500

MILBERG WEISS BERSHADHYNES & LERACH LLP

WILLIAM S . LERACHHELEN J. HODGESAMBER L . ECK600 West Broadway , Suite 1800San Diego , CA 92101Telephone : 619/231-105 8

Co-Lead Counsel for Plaintiffs

[Additional counsel appear on signature page .]

APR 1 "7 ; ►~?(lr

JAMES W. McCORNIACK, CLER KBy:_°'"' P

SCHIFFRIN & BARROWAY, LLPANDREW L . BARROWAYSTUART L. BERMANThree Bala Plaza East, Suite 400Bala Cynwyd, PA 19004Telephone: 610/667-770 6

UNITED STATES DISTRICT COUR T

EASTERN DISTRICT OF ARKANSA S

WESTERN DIVISION

In re ACXIOM CORPORATIONSECURITIES LITIGATIO N

This Document Relates To :

ALL ACTIONS .CONSOLIDATED COMPLAINT FORVIOLATION OF THE SECURITIESACT OF 193 3

Master File No. LR-C-99-673

CLASS ACTION

Judge James M . MoodyMagistrate Judge Jones

rq

INTRODUCTION AND OVERVIEW

1 . This is a securities class action on behalf of all purchasers of Acxiom

Corporation ("Acxiom" or the "Company") stock in connection with and traceable to

Acxiom's $146 million common stock Offering on July 23, 1999 . The claims asserted herein

arise under the Securities Act of 1933 and involve claims of strict liability .

2 . Acxiom provides information management solutions using consumer an d

business data to create mailing lists of potential customers for vendors . On July 23, 1999,

Acxiom completed a secondary offering of 5,421,000 shares of stock (the "Offering")

pursuant to a Registration Statement/Prospectus . The Offering, which included 1 .5 million

shares sold by Acxiom and 3 .921 million shares sold by the Pritzker Foundation, was priced

at $27 per share for total proceeds of $146 .37 million. In fact, the Registration

Statement/Prospectus was false and misleading because it contained false financial results

and failed to describe the significance of its recent contract renewal with its largest customer,

Allstate .

3 . On August 16, 1999 , Acxiom began to reveal information that showed that the

positive statements it made in its Registration Statement/Prospectus less than three weeks

earlier were false when made. August 16, 1999 , Acxiom filed its Form 10-Q for the 1 stQ of

F2000' which made it evident: ( 1) that Acxiom was only able to make Its first qua rter

numbers by reversing $2.3 million of its employee benefits accrual ; (2) that despite a $30

million increase in accounts receivable and increase in days sales outstanding, Acxiom

decreased its allowance for doubtful accounts from $5 .6 million to $5 .2 million ; and (3) that

the 5-year contract Acxiom had entered into with its largest customer , Allstate , had less

favorable terms and had already adversely affected its first quarter revenues .

4 . In addition , shortly after the Offe ring , Acxiom's internal e-mai l' s show that top

Acxiom executives knew that "record results " publicly reported just before the Offering and

' Acxiom's fiscal year ends on March 3 L Thus, the first quarter of fiscal year 2000ended on June 30, 1999 .

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adopted in the Prospectus were misleading . These e-mails reveal a 45% increase in salary

and benefits expense over the previous year although the Prospectus reported only a 31 %

increase. This dramatic increase in payroll, omitted from the Prospectus, caused the

Company to miss making incentive payments to its employees and eventually led to a

significant lay-off of employees .

5 . On August 29, 1999, Acxiom announced it was reducing its work force by 5 %

and laying off 250 employees . Then, on August 30, 1999, Barron's published a very negative

article concerning Acxiom, indicating that some observers following the Company believed

that Acxiom had disseminated misleading financial results and that the Company was

suffering stiff competition and was lowering prices which would have a very negative impact

on future earnings.

6 . Acxiom's stock price reacted swiftly and negatively to these revelations, falling

to as low as $17-3/16 on huge volume of 5 million shares on August 31, 1999, and later

falling again to as low as $16-1/8 on September 9, 1999, wiping out more than $55 million

of value in the shares purchased just six weeks earlier .

JURISDICTION AND VENUE

7. The claims asserted arise under §§11 and 15 of the Securities Act of 1933

("1933 Act") . Jurisdiction is conferred by §22 of the 1933 Act . Venue is proper pursuant

to §22 of the 1933 Act .

THE PARTIE S

8. On July 23, 1999, lead plaintiff Larry R . Romine purchased. 250 shares of

Acxiom common stock at $27 per share in the Offering and was damaged thereby . This

information is detailed in the attached certification .

9. On July 23, 1999, lead plaintiff Ray Gagne purchased 150 shares of Acxiom

common stock at $27 per share in the Offering and was damaged thereby . This information

is detailed in the attached certification .

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10. On July 23, 1999, lead plaintiff David Cox purchased 50 shares of Acxio m

common stock at $27 per share in the Offering and was damaged thereby . This information

is detailed in the attached certification .

11 . Defendant Acxiom is headquartered in Little Rock, Arkansas .

12. (a) Defendant Charles D . Morgan ("Morgan") was Chairman, President and

Principal Executive Officer of Acxiom and is referred to in the Prospectus as the "Company

Leader ." Morgan signed the false and misleading Registration Statement pursuant to the July

23, 1999 Offering .

(b) Defendant Robert S. Bloom ("Bloom") was Chief Financial Officer of

Acxiom. Bloom signed the false and misleading Registration Statement pursuant to the Jul y

23, 1999 Offering .

(c) Defendant Rodger S . Kline ("Kline") was Chief Operating Officer ,

Treasurer and a director of Acxiom . Kline signed the false and misleading Registration

Statement pursuant to the July 23, 1999 Offering .

(d) Defendant Robert A. Pritzker ("Pritzker") was a director of Acxiom.

Pritzker is also a director of the Pritzker Foundation which sold 3,921,000 shares of Acxiom

stock (100% of its Acxiom holdings) in the Offering . Pritzker signed . the false and

misleading Registration Statement pursuant to the July 23, 1999 Offering .

13 . The individuals in ¶12 are the "Individual Defendants ." They are each liabl e

for the false statements pleaded in ¶¶ 24, 34 because they signed the false and misleadin g

Registration Statement . The Individual Defendants and Acxiom are referred to herein as the

"Defendants ."

BACKGROUND

14 . Acxiom is a direct marketing services company with data integration

capabilities . Acxiom uses consumer and business data to create mailing HAS of potential

customers for vendors . Most of its projects are for members of the Fortune 1000, particularly

credit-card and insurance companies, as well as retailers, magazine publishers and

telecommunications firms . For example, Acxiorn has amassed 135 million consumer

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telephone numbers - including about 20 million that are unlisted (about : half of all the

unlisted numbers in the nation) - to help identify and profile people who call toll-free

numbers. When someone calls the toll-free number of a client of Acxiom, the telemarketing

agent can learn who the caller is, where he or she lives, the kind of home the caller lives in,

the types of cars the people in the household drive, whether they exercise, and even whether

they own a cat - all before they even answer the call .

15 . Founded in 1969, Acxiom went public in 1983, and the Company rapidly

expanded in the 1990s through both internal growth and strategic acquisitions . Presently,

Acxiom has four principal operating units :

• Services (27% of 1998 sales ) . This division consists of Acxiom's core dataintegration business . Operations include the development and maintenance ofdatabases as well as data enhancement services such as data overlay, n. erge/purge andlist sortation . This division also provides software support . Revenues from Acxiom'slargest customer , Allstate (more than 10% of F99 sales ), are included in this unit .

• Alliances (26% of 1998 sales ) . This division provides outsourcing/facilitiesmanagement services . It also provides the data inte gration services , typicallyperformed in the Services division , for customers in the financial services indust ry .

• Data Products (23% of 1998 sales ) . The division provides list services (sellingof lists ) from the Company ' s shared Infobase database, DataQuick database and DirectMedia (a list brokerage subsidiary , which owns Smartbase a database of cataloginformation) .

• International (6% of 1998 sales ) . This division provides all of the servicesdescribed above in the UK and has expanded operations into Malaysia .

16. Also, in September of 1998, Acxiom acquired May & Speh, a provider of

technology-based information management services which focus on direct marketing and

information -technology outsourcing services .

17. From June 30 , 1997 through March 31 , 1999, Acxiom repo rted steady growth

with quarterly revenues increasing from less than $130 million to more than $215 million,

and net earnings increasing from less than $8 .5 million to nearly $20 million . However, by

the beginning of calendar year 1999, Acxiom was facing severe and increasing competition .

This threatened the Company's revenue growth and operating margins . In late March of

1999, Acxiom signed a new five-year contract with its largest customer, Allstate . In May of

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1999, Acxiom acquired Computer Graphics for 1 .87 million shares of Acxiom stock with its

stock trading at approximately $27 per share .

18. The Offering was important to the Company not only to allow the Pritzker

Foundation to cash out, but to raise much needed cash for the Company .

19. By June 30, 1999, Acxiom was low on cash with only $393,000 in cash an d

cash equivalents compared to $12 .6 million at March 31, 1999 and $115 .5 million at March

31, 1998. In May of 1999, the Company was able to secure a $25 million temporary increase

in its revolving line of credit which was set to expire July 31, 1999 (i.e., after the Offering) .

As of June 30, 1999, Acxiom was in violation of certain restricted covenants under its

revolving credit agreements for which Acxiom obtained waivers . Thus, the Offering was

extremely important to the Company .

20. In preparation for the Offering, Acxiom reported favorable 1 stQ F2000 results

immediately before the Offering. On July 20, 1999, Acxiom reported its 1 stQ F2000 results

in a press release which stated :

ACXIOM CORPORATION REPORTS RECORD RESULTS FOR . FIRSTQUARTER

Acxiom Corporation (Nasdaq:ACXM) today repo rted record revenueand earnings for the first qua rter ended June 30, 1999 .

Consolidated revenues for the first quarter ended June 30 , 1999 were$211,506,000 , up 29 percent from revenues of $164 , 512,000 for the samequarter a year ago . Net earnings for the quarter were $ 15,749 ,000 ($.18diluted earnings per share), an increase of 34 percent compared to net ea rningsin the previous year's first quarter of $ 11,737,000 ($ . 14 diluted ea rn ings pershare) .

Acxiom reported strong revenue growth for the qua rter by each of itsbusiness segments . The Services segment reported revenues of $130 . 1 millionfor the quarter, up 3 8 percent over the p rior year. The Information TechnologyManagement segment reported revenues of $45 .3 million , up 30 percent overthe prior year . The Data Products segment repo rted revenues of $47 .9 million,up 11 percent over the prior year .

"We delivered another great qua rter ," said Charles D. Morgan,Chairman and Company Leader . "We enjoyed our 32nd consecutive quarterof achieving record revenue and earnings and each of our business segmentscontributed solid performance . The Acxiom Data Network (SM) also madegreat strides in gaining acceptance as the industry standard for integratingconsumer and business data .'

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21 . This pre-offering press release was misleading because it did not disclose : (1 )

that Acxiom was only able to make its first quarter numbers by reversing $2 .3 million of its

employee benefits accrual ; (2) that although revenues had increased 29%, the quarter was

internally viewed as a bad quarter because Acxiom's salary and benefit expense had increased

45%; (3) that despite a $30 million increase in accounts receivable and increase in days sales

outstanding, Acxiom decreased its allowance for doubtful accounts from $5 .6) million to $5 .2

million; and (4) that the 5-year contract Acxiom had entered into with Allstate, its largest

customer, had less favorable terms and had already adversely affected revenues in the first

quarter ended June 30, 1999 .

22 . The $ . 18 earn ings per share ("EPS") Acxiom reported was in line with analyst

expectations . The press release contained an income statement but no balance sheet .

DEFENDANTS' FALSE STATEMENTS IN THEREGISTRATION STATEMENT/PROSPECTUS

23 . As a result of defendants' favorable publicity about Acxiom, Acxiom stock hi t

$28-1/16 on July 23, 1999 . The defendants completed the 5,421,000 share Offering o f

Acxiom stock at $27 per share on July 23, 1999, selling the following shares :

Price MinusShares Underwriters' % of Shares

Seller Sold Fees Proceeds Owned Sold

Acxiom 1,500,000 $25 .85 $38,775,000 N/APritzker 3,921,000 $25 .85 101,357,850 100%

Foundation

TOTALS : 5,421,000 25 .85 $140,132,85 0

24. The July 23, 1999 Offering was accomplished via a Registration Statement and

Prospectus filed with the Securities and Exchange Commission ("SEC") and effective on Jul y

23, 1999. Each Individual Defendant signed the Registration Statement . Morgan, Bloom ,

Kline and the underwriters wrote the Registration Statement and Prospectus . The Prospectus

stated :

On July 20 , 1999 , we announced our results of operations for the firstquarter ended June 30,1999 . We increased our revenue 29% to $211 . 5 millionfor the qua rter ended June 30, 1999 from $ 164 .5 million for the same quartera year ago . Over the same period, our net earnings were $15 .7 million ($0 .1 8

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diluted earn ings per share ) which represented an increase of 34% compared tonet earnings in the p rior year of $11 .7 million ($0.14 diluted earnings pershare) . Our year-over-year growth was driven by growth in each of ourbusiness segments . The Services segment reported revenues of $130 . 1 million,up 38% over the p rior year . The Information Technology Managementsegment repo rted revenues of $45 .3 million, up 30% over the p rior year andour Data Products segment re ported revenues of $47 .9 million, up l I%, overthe p rior year. The Data Products sold to Services customers included in theabove totals were $11 .8 million and $7 .9 million, respectively, for the quarterended June 30, 1999 and June 30, 1998 .

Clients

Our clients are primarily in the financial services, insurance,information services, publishing, retail and telecommunications industries .Our ten largest clients represented approximately 40% of our revenues in fiscal1999. Our largest client, Allstate, represented approximately 10 .9% of ourrevenues over the same period .

We seek to maintain long-term relationships with our clients . Many ofour clients typically o perate under long-term contracts (defined as contractswith initial terms of at least three years in length) . In fiscal 1.999,approximately 51% of our revenue was de rived from long-term contracts .

Representative clients by the industries we serve include :

InformationFinancial Services Insurance ServicesBank of America Allstate ADPCitibank Physicians Mutual IBMDiscover Financial Services Prudential PolkFirst USA Bank Trans UnionGeneral Electric

Sales and Marketing

We have two separate sales forces . One is dedicated to our Servicesand Information Technology Management lines of business and the other isfocused on Data Products. We maintain separate sales forces to allow oursales representatives to concentrate on particular services, technologies andclient demands.

Our Serv ices and Information Technology Management sales force isdecentralized and organized by industry . Our largest clients have their owndedicated sales personnel . Sales to these and other large accounts typicallyinvolve business unit leaders , group leaders and other members of our seniormanagement . Most major contracts are negotiated with the highest levels ofour clients ' organizations and therefore necessitate the involvement of oursenior executives .

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25 . Each of these statements relating to Acxiom's favorable financial results and

relationship with its customers made in the July 23, 1999 Registration Statement/Prospectus

was false or misleading when issued. The true but concealed facts were:

(a) Acxiom's salary and benefits expense had increased 45% from the

previous year. Although the income statement provided by Acxiom in the Prospectu s

showed only a 31 % increase in payroll, the defendants knew it had actually increased 45% .

On or about August 17, 1999, Acxiom revealed in an internal e-mail that :

(i) Acxiom employees would not receive their incentivepayments because the "outcome for Q 1 is not good; "

(ii) It may seem "confusing" as to how record results couldbe reported and not fund the incentive payment, but the"salary and benefits run rate is at a 45 percent increaseover last year, with revenue growth at 30%" ; and

(iii) Defendant Morgan knew Q l results were bad eventhough he had publicly said on July 20, 1999, that "Wedelivered another great quarter ." Indeed , defendantMorgan told Acxiom employees "we can't change the Q 1results . What we can do is put this quarter to bed . . . . "

(b) Acxiom's favorable or "record" results for the quarter ended June 30 ,

1999 were the result of its improper accounting for employee benefit accruals which added

$0 .02 to reported EPS which was not disclosed and could not be ascertained by the public

because neither Acxiom's press release of July 20, 1999 nor the Registration

Statement/Prospectus contained a balance sheet as of June 30, 1999 ;

(c) Acxiom's 1 stQ F2000 results were overstated by an additional $0 .01 by

unjustifiably reducing its allowance for doubtful accounts receivable even as total receivable s

skyrocketed ;

(d) Acxiom's financial results were materially misstated with its reporte d

EPS overstatement by $0.03, or 20%, and presented in violation of Generally Accepted

Accounting Principles ("GAAP") due to its improper accounting for its reserves an d

improper revenue recognition practices, as described in ¶¶ 33 -51 ;

(e) The Allstate contract had been renegotiated in 3/99 for an additional fiv e

years and would result in lower pricing for traditional services performed by Acxiom ; and

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(f) The new Allstate contract represented a negative trend for Acxiom i n

that the price reductions were reflective of the adverse competitive environment in whic h

Acxiom was working .

26. On August 16, 1999, Acxiom filed its Form 10-Q reporting its 1 stQ F200 0

results with the SEC, which contained several surprises for investors :

• From March 31, 1999 to June 30, 1999, net accounts receivable increased 17%from $184.8 million to $215 .9 million, even as revenues for the quarter ended June30, 1999 declined to $211 .5 million when compared to $215 .6 million for quarterended March 31, 1999, raising doubts as to the legitimacy of Ac:xiom's reportedrevenues .

• Despite the $30 million increase in accounts receivable, and an increase in dayssales outstanding, Acxiom had, without explanation , decreased its allowance fordoubtful accounts from $5 .6 million to $5 .2 million .

• The June 30 , 1999 results had been favorably impacted by an adjustment tosala ries expense which was reduced by approximately $2.3 million during the quarter .

• Acxiom's cash flows from operations were horrible , with a cash decline fromoperations of $25 . 1 million compared to Acxiom's net income of $15 .7 million .

• Acxiom's reported results had benefitted from a decline in Accrued Ex pensesfrom $25 .7 million at March 31 , 1999 to $9 .4 million at June 30, 1999, a decline inAccrual Payroll and Related Expenses from $18 . 2 million at March 21, 1.999 to $9 .6million at June 30, 1999 , and from a decline in Deferred Revenue from $7 .2 millionat March 31, 1999 to $6 .2 million at June 30, 1999 .

• The new Allstate contract had adversely affected revenues in the 1 . stQ F2000 ."Services segment revenues Frew 34% when compared to the first quarter in the prioryear . Allstate , the Company s largest customer generated revenues of $19 .7 million,a 5% decrease from the prior year, principally due to the revised pricing under therecently signed five-year contract under which pricing has been 'unbundled' whichresulted in lower pricing for the traditional services performed by the Company insuppo rt of the underwriting area. "

27. These factors indicated that Acxiom's favorable June 30, 1999 results were no t

so much the result of strong sales and operations, but the result of accounting adjustments

and manipulations .

28 . Similarly, although Acxiom stated in a July 20, 1999 press release, before it s

July 23, 1999 secondary offering that Acxiom "reported record revenue and earnings for the

first quarter ended June 30, 1999," Acxiom executive officer and division leader C . Alex

Dietz stated in an internal e-mail dated August 17, 1999 entitled "Alex's Communication "

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that internally, Q1 was viewed as a bad quarter . Dietz explained that overall results were

disappointing due to an increase in expenses :

Unfortunately, the outcome for Q1 is not good . There will not be anincentive payout for the first quarter which means no gain sharing, keyassignment or leadership incentives As Charles [Morgan] said in hiscomments, it may seem confusing as to how we could report record financialresults and not be able to fund our incentive plan . But it's not just aboutrevenue. You also have to look at expenses . . . [a]nd our expenses aren'twhere they need to be . Our salary and benefits run rate is at a 45 percentincrease over last year with revenue growth at 30% . . . . Unfortunately, its notthe right balance .

(Emphasis added .)

29. On August 29,1999, Acxiom issued a press release announcing ; plans to reduce

its number of employees . The release stated in part :

Acxiom Corp. said it plans to reduce its workforce by 5 percent in mid--September .

Acxiom spokesman Dale Ingram said the cuts will come from acrossthe company's divisions .

"It will be our lowest contributors . We realize we have set the bar high,but that is why we are a successful company," Ingram said .

"No departments are being eliminated," he added. "We are also lookingat other areas to improve our efficiency . We have a responsibility to ourstockholders . "

30. Then, on August 30, 1999, Barron's published an article on A .cxiom, written

by Barry Henderson, entitled "Day of Reckoning for Acxiom ? Critics call its accounting too

frisky ." This article stated that "some aggressive maneuvers have begun to show up on

[Acxiom's] balance sheet , suggesting . . . that Acxiom may have reso rted to questionable

tactics to make its earnings numbers at the end of the June qua rter ." The article cited

Acxiom's new contract with Allstate as evidence of its increasing competition :

Observers say the company is facing stiff new p ricing pressure fromcompetitors . They point to tell -tale signs that the company has been strainingits balance sheet to keep up with the earnings growth that it's been promisingWall Street . Proof of that p ricing pressure, they say , can be found in a newcontract with Allstate , the company's single largest customer.

The terms of this contract , which were mentioned in a March 25conference call, make it clear that the company 's business with Allstate won'tbe as profitable as it has been . Here's why : Since 1992, Acxiom has helpedAllstate decide how much to charge individuals for their auto-insuranc e

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policies . The company did this by combining information , like Department ofMotor Vehicle records and credit reports , with Allstate 's data , producing ascoring system for drivers . This was much faster and less costly than anythingthat Allstate could do by itself. Under the old agreement, Acxiom kept 50%,of the cost savings . Under the new deal , that percentage has dropped to 40% .

In addition , under the old contract , Acxiom received a 5% markup onany third-party data it had to purchase for its Allstate work . (Example : If a listfrom the DMV cost $1,000 , Acxiom would buy it and then charge Allstate$ 1,050 .) In the new contract, that markup dropped to 3 .5%.

31 . The Barron's article also stated that Acxiom may have improperly reverse d

$2 .3 million of an employee benefits accrual to make its first quarter numb,,-rs :

[A]cxiom may have resorted to questionable tactics to make its earningsnumbers at the end of the June quarter. One of the first things observers point.to is the company's decision to reverse a po rtion of a liability on its balancesheet, which boosted earn ings by two cents a share in the quarter . Like manycompanies , Acxiom periodically records a liability on its balance sheet foremployee-benefit plans . And as is customary, when the company adds to thisbenefits accrual, it records an expense on the income statement. In the Junequarter, however, Acxiom reversed $2 .3 million of an accrual that already hadbeen recorded.

An August 24 research repo rt prepared by Howard Schilit's Center forFinancial Research and Anal ysis in Rockville, Mary land , notes that withoutthis reversal , net income would have fallen b y $1 . 5 million , or nearly 10 01%, to$14.2 million . If earnings per share were adjusted downward to reflect thischange , they would have come in at 16 cents per share, two cents lower thanthe consensus earnings estimate . That leads some investors to conclude thatAcxiom reversed the accrual to make its number . Acxiom executives stronglydeny this , explaining that the change in accruals was related to last year'sacquisition of May & Speh , a small information -technology outsourcingcompany. They say the timing of the accrual was st rictly coincidental .

32. Finally, the Barron's article explained that Acxiom's Days Sales Outstandin g

("DSO") ratio had increased, which reflected problems on their balance sheet, and that the y

may be extending more favorable credit terms to their customers :

{T]he short-sellers say there are further clues that the increased competitionas forced the company to make other aggressive financial moves . In

particular, they say the company has been giving its customers more favorableterms on its purchases over the past several quarters .

How do they fi gure that? They look at something called "days salesoutstanding," a ratio of accounts receivable to sales . Investors like to use thisyardstick because it helps them understand how fast its customers are payingtheir bills . DSOs are calculated by dividing accounts receivable by sales andmultiplying that by the number of days in the qua rter . In the June quarter, theDSO number came in at 89, up from 80 in the previous qua rter .

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Some investors like to dig even deeper . They examine net DSOs, whichtake into account everything on the balance sheet that can be considered anaccount receivable , including unbilled and long-term receivables . They alsosubtract any deferred revenues the company has recorded . Net DSOs lookeven worse for Acxiom. In the March quarter , they were 98 days, and in thelatest quarter they were more than 108 . Compare that with September of 1997,when they were still at 43 days . Any way you slice it , the company looks likeit's granting better terms to customers to buy its products .

CFO Bloom acknowledges that the company hasn't done as well as itshould in collecting money from customers . He says there's a renewed focuson the problem and some managers' incentive bonuses will be partly tied toimproving the accounts receivable situation .

The company's critics maintain, however, that once Acxiom beginstightening its credit terms, it's going to be more difficult for it to reach the salesand earnings targets Wall Street expects it to hit . In the near term, that couldput pressure on the stock, according to people who are betting against thecompany. They say it could ramp down in the coming months as the problemson the balance sheet start to show up on the income statement .

ACXIOM'S FALSE FINANCIAL REPORTIN G

33 . Acxiom violated GAAP and SEC rules by improperly accounting for it s

reserves, improperly accelerating revenue recognition and underreporting its salary an d

benefits expense , causing its 1 stQ F2000 results to be materi ally overstated .

34 . Acxiom reported the following financial results in its Registratio n

Statement/Prospectus :

Qtr-end6/30/99

Revenues $211 .5MSalaries & Benefits Expense $ 83 .7MNet Earnings $ 15.7MEPS $ 0.1 8

35 . These financial results and the statements about them in the Registratio n

Statement/Prospectus were false and misleading, as such financial information was not

prepared in conformity with GAAP, nor was the financial information a fair presentation of

the Company's operations due to the Company's improper accounting for revenues and

accruals, in violation of GAAP and SEC rules .

36. GAAP are those principles recognized by the accounting profession as th e

conventions, rules and procedures necessary to define accepted accounting practice at a

part icular time . Regulation S-X (17 C.F .R. §210.4-01(a)(1)) states that financial statements

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filed with the SEC which are not prepared in compliance with GAAP are presumed to be

misleading and inaccurate . Regulation S-X requires that interim financial statements must

also comply with GAAP, with the exception that interim financial statements need not

include disclosure which would be duplicative of disclosures accompanying annual financial

statements . 17 C .F.R. §210.10-01(a) .

Acxiom 's Reversal of its Employee Benefit Accruals Violated GAAP and Was NotDisclosed in its Prospectus

37. GAAP, as set forth in FASB Statement of Financial Accounting Standard

("SFAS") No . 5, requires that companies recognize a loss when the loss is probable and the

amount of the loss can be reasonably estimated . See SFAS No . 5, ¶8 .

38 . Pursuant to GAAP, as set forth in SFAS No . 5, the Company 'was required to

accrue only the reserve necessary and to maintain the reserve as long as the loss was probable

and could be reasonably estimated . Contrary to GAAP, Acxiom improperly accounted for

its reserve for employee benefits to inflate the Company's earnings in the Registration

Statement/Prospectus by reversing $2 .3 million previously accrued and failing to adequately

accrue for liabilities which were probable and the amount of which Acxiom could. reasonably

estimate. This caused the Company's EPS to be overstated by $0.02 . In addition, Acxiom's

Prospectus was misleading and violated § 11, because it failed to disclose that Acxiom was

only able to make its first quarter numbers by reversing $2.3 million of its employee benefits

accrual . Moreover, according to an internal e-mail to employees, Acxiom's salary and benefit

expense had increased 45% in the 1 stQ F2000 whereas, according to the amounts Acxiom

reported, this increase was only 31 %. Acxiom's salary expenses were thus increasing much

more than publicly reported by the defendants .

Acxiom's Decrease of its Allowance for Doubtful Accounts Violated GAAP and WasNot Disclosed in its Prospectu s

39. In further violation of § 11, Acxiom's Prospectus was misleading because it

failed to disclose that despite a $30 million increase in accounts receivable and an increase

in days sales outstanding, Acxiom decreased its allowance for doubtful accounts from $5 .6

million to $5 .2 million .

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40. Contrary to later assert ions by defendants that the receivables had increased

due to the changes in lengths in contracts , Acxiom President and Chairman Charles Morgan

himself admitted in an inte rnal e-mail entitled "Morgan 's Minutes for 9.2 .99" dated

September 2, 1999 that DSOs had increased to an unacceptable level due to Acxiom 's "poor

execution" :

A common way to measure accounts receivable is by Days SalesOutstanding (DSO). Our DSO was at 80 at the end of last year. Wetold the analysts we would bring it down to 72 - a 10 percentimprovement . We busted it . We were at 89 days at the end of Ql .That's completely unacceptable and in fact just poor execution onour part .

41 . GAAP, as set forth in SFAS No. 5,1122-23, also requires companies to record

losses to reflect uncollectible receivables .

42 . Acxiom's 1 stQ F2000 EPS were overstated by $0 .01 due to the Company' s

failure to record adequate reserves for uncollectible receivables . As described above,

Acxiom did not increase its reserve or allowance for doubtful receivables even as its

receivables increased and its exposure to uncollectible receivables increased . On the

contrary, Acxiom's allowance was decreased in the 1 stQ F2000 from the 4thQ F 1999 .

Acxiom 's Improper Accounting for Revenue s

43 . Much of Acxiom's revenue growth was generated by giving customers more

favorable terms on purchases over the past several quarters . Moreover, the 1 stQ F2000 Form

10-Q revealed the following :

• From March 31,1999 to June 30,1999, net accounts receivable increased 17%from $184 .8 million to $215.9 million even as revenues for the quarter ended June 30,1999 declined to $211 .5 million when compared to $215 .6 million for quarter endedMarch 31, 1999.

• Including unbilled and long-term receivables, days sales outstanding exceeded108 days at June 30, 1999 as compared to 43 days at September 30, 1997 .

44 . GAAP, as set forth in FASB Statement of Concepts No . 5, ¶¶33-84, requires

that revenues not be recognized until the revenue is collectible and has been earned .

45 . When these items were revealed, Acxiom's stock dropped well below the price

of the Offering .

-14-

46 . Due to these accounting improprieties, the Company presented its financial

results in a manner which violated GAAP, including the following fundamental accounting

principles :

(a) The principle that interim financial reporting should be based upon the

same accounting principles and practices used to prepare annual financial statements (APB

No. 28, ¶10) ;

(b) The principle that financial reporting should provide information that

is useful to present and potential investors and creditors and other users in making rational

investment, credit and similar decisions was violated (FASB Statement of Concepts No . 1,

¶34) ;

(c) The principle that financial reporting should provide information about

the economic resources of an enterprise, the claims to those resources, and. effects of

transactions, events and circumstances that change resources and claims to those resources

was violated (FASB Statement of Concepts No . 1, ¶40) ;

(d) The principle that financial reporting should provide information about

how management of an enterprise has discharged its stewardship responsibility to owners

(stockholders) for the use of enterprise resources entrusted to it was violated, To the extent

that management offers securities of the enterprise to the public, it voluntarily accepts wider

responsibilities for accountability to prospective investors and to the public in general (FASB

Statement of Concepts No . 1, ¶50) ;

(e) The principle that financial reporting should provide information abou t

an enterprise's financial performance during a period was violated . Investors and creditors

often use information about the past to help in assessing the prospects of an enterprise . Thus,

although investment and credit decisions reflect investors' expectations about future

enterprise performance, those expectations are commonlybased at least partly on evaluations

of past enterprise performance (FASB Statement of Concepts No . 1, ¶42) ;

(f) The principle that financial reporting should be reliable in that it

represents what it purports to represent was violated . That information should be reliable a s

-15-

well as relevant is a notion that is central to accounting (FASB Statement of Concepts No .

2, ¶¶58-59) ;

(g) The principle of completeness, which means that nothing is left out of

the information that may be necessary to insure that it validly represents underlying events

and conditions was violated (FASB Statement of Concepts No . 2, ¶79) ; and

(h) The principle that conservatism be used as a prudent reaction t o

uncertainty to try to ensure that uncertainties and risks inherent in business situations are

adequately considered was violated . The best way to avoid injury to investors is to try to

ensure that what is reported represents what it purports to represent (FASB Statement of

Concepts No. 2, ¶¶95, 97) .

47 . Further, the adverse information which was not disclosed in the Registratio n

Statement/Prospectus is the type of information which, because of SEC regulations,

regulations of the national stock exchanges and customary business practice., is expected by

investors and securities analysts to be disclosed and is known by corporate of lcials and their

legal and financial advisors to be the type of information which is expected to be and must

be disclosed .

Events Subsequent to 1Q FY2000 Confirm Acxiom 's Manipulations of its June 30,1999Results

48 . Events subsequent to the June 30, 1999 quarter have confirmed Acxiom' s

manipulations to its June 30, 1999 results . Although Acxiom reduced its allowance for

doubtful accounts prior to the offering, despite a dramatic increase in gross accounts

receivable, Acxiom then increased its allowance for doubtful accounts again after the

offering, on September 30, 1999, and again on December 31, 1999 . As a percentage of gross

receivables, the allowance reached its lowest level at June 30, 1999 and has subsequently

been returned to historical levels even as receivable growth has ceased :

-16-

Acxiom Corp .Gross Receivables/ Allowance Rati o

$230,000

4.80 %$220,00 0

$210,000 4.30 %

C-.) U

$200,000 3 .80% Xr N

N$190,000 03 .30%

a $180,000 C

$170,0002 .80% o

a$160,000 -2 .30 %

09130/98 03/31/99 09/30/9 9

Gross Accounts Receivable

Allowance for Doubtful Accts/ Recbls

49. Moreover, Acxiom's allowance for doubtful accounts receivable was reduced

in the same quarter that days sales outstanding (a measure of the time it takes a company to

collect a receivable - as measured here by ending gross receivables to quarterly revenues)

was skyrocketing above prior (and subsequent) levels :

Acxiom Corp .Days' Sates Outstanding - Ending A/R

96 . 0

94 .0

92 .0

90 .0

88 .0

86 .0

84 .0

82 .0

80 .0

76 .009/30/98 12/31/98 03/31/99 06/30/99 09/30/99 12/31 /9 9

-17-

50. Acxiom's accrual for other expenses which was dramatically reduced at June

30, 1999 has also returned to the levels it was prior to the June 30, 1999 quarter . A

comparison of the account Other Accrued Liabilities to Total Assets (or Total Liabilities &

Equity) shows that compared to the overall growth ofAcxiom, the accrual for other expenses

was significantly out of line at June 30, 1999 :

Acxiom Corp .Other Accrued Liabilites/Total Assets

3 .00%-

2,50%--

2 .00%--

1 .50%--

1 .00%--

0 .50%-09/30/98 12/31/98 03/31/99 06/30/99 09/30/99 12/31/9 9

51 . As a result of these accounting improprieties, Acxiom's June 30, 1999 results

were much more favorable than they would otherwise have been . These improprieties have

been corrected in quarters after the Secondary Offering was completed .

CLASS ACTION ALLEGATIONS

52 . Plaintiffs bring this suit under Federal Rules of Civil Procedure 23(a) and

(b)(3) on behalf of themselves and a class of purchasers of Acxiom stock issued in and

traceable to the July 23, 1999 Offering, excluding defendants, members of the defendants'

immediate families, and any entity controlled by Acxiom or any other defendant (the

"Class") .

53 . The members of the Class are so numerous that joinder of all members is

impracticable . While the exact number of class members is unknown to plaintiffs at this

time, over 5 .4 million shares of stock were sold in the July 23, 1999 Offering .

-18-

54. Common questions of law and fact exist as all members of the Class and those

common questions predominate over any questions affecting solely individual class

members. Among the questions of law and fact common to the Class are :

(a) whether the Securities Act was violated by defendants' acts as alleged

herein;

(b) whether the Registration Statement/Prospectus misrepresented or

omitted material facts ; and

(c) the extent of and appropriate measure of damages .

55. Plaintiffs' claims are typical of the claims of the Class as plaintiffs and all class

members sustained damage arising from defendants' violation of the Securities Act .

56. Plaintiffs will fairly and adequately protect the interests of the members of the

Class and have retained counsel competent and experienced in class and securities litigation .

57 . A class action is superior to other available methods for the fair and efficien t

adjudication of this controversy since joinder of all members of the Class is impracticable .

Furthermore, because the damages suffered by individual class members may be relatively

small, the expense and burden of individual litigation make it impossible for class members

individually to redress the wrongs done to them . There will be no difficulty in the

management of this action as a class action .

CLAIM FOR RELIE F

For Violations Of §11 of the 1933 Act Against All Defendantsand §15 of the 1933 Act Against Defendant Morga n

58 . Plaintiff incorporates ¶¶1-57 . Plaintiffs expressly disavow any allegation of

fraud, knowledge, intent or scienter .

59. The Individual Defendants each signed and issued Acxiom's Offering

Registration Statement and Prospectus .

60. On July 23, 1999, the defendants named in this Claim for Relief completed a

5,421,000 share Offering of Acxiom stock at $27 per share , selling the following shares :

-19-

Price MinusShares Underwriters ' % of Shares

Seller Sold Fees Proceeds Owned Sold

Acxiom 1 ,500,000 $25 . 85 $38 ,775,000 N/APritzker 3 ,921,000 $25 .85 101,357,850 100%Foundation

TOTALS : 5,421,000 2$ 5 .85 $140 , 132,850

61 . Each of the statements alleged in ¶24 relating to Acxiom's favorable financial

results and relationship with its customers made in the July 23, 1999 Prospectus was false

or misleading when issued. The true facts were :

(a) Acxiom's favorable or "record" results for the quarter ended June 30 ,

1999 were the result of its reversing $2 .3 million of employee benefit accruals which added

$0.02 to reported EPS which was not disclosed and could not be ascertained by the public

because neither Acxiom's press release of July 20, 1999 nor the Prospectus contained a

balance sheet as of June 30, 1999 ;

(b) Acxiom's 1 stQ F2000 results were overstated by an additional $0.01 by

unjustifiablyreducing its allowance for doubtful accounts receivable even as total receivables

skyrocketed, which was not disclosed and could not be ascertained ;

(c) Acxiom's financial results were materially misstated with its reporte d

EPS overstatement by $0 .03, or 20%, and presented in violation of GAAP due to the reserves

and revenue recognition practices as described in ¶¶33-57 ;

(d) The Allstate contract had been renegotiated in early March 1999 for an

additional five years and would result in lower pricing for traditional services performed by

Acxiom; and

(e) The new Allstate contract represented a negative trend for Acxiom i n

that the price reductions were reflective of the adverse competitive environment in whic h

Acxiom was working .

62 . All defendants named in this Claim for Relief, with the exception of Acxiom ,

the issuer (whose liability for the misstatements is absolute), owed to the purchasers of the

stock, including plaintiff and the Class, the duty to make a reasonable and diligent

-20-

investigation of the statements contained in the Registration Statement at the time it became

effective, and in the Prospectus, to assure that those statements were true and that there was

no omission to state material facts required to be stated in order to make the statements

contained therein not misleading .

63 . The officers and directors of Acxiom who were signatories to the Registration

Statement were responsible for the preparation of the Prospectus and the Registration

Statement. By virtue of the material misrepresentations contained in the Registration

Statement and Prospectus, plaintiffs and the Class have been damaged .

64. None of the Individual Defendants named herein made a reasonable

investigation or possessed reasonable grounds for the belief that the statements contained in

the Registration Statement were true, did not omit any material fact and were not misleading .

65 . Each of the defendants issued, caused to be issued and participated in th e

issuance of materially false and misleading written statements to the investing public which

were contained in the Registration Statement, which misrepresented or failed to disclose,

inter alia, the facts set forth above . As a direct and proximate result of defendants' acts and

omissions in violation of the 1933 Act, the market price of Acxiom stock was artificially

inflated in the Offering, and plaintiffs and the Class suffered substantial damage in

connection with the purchase of Acxiom common stock .

66 . At the times they purchased Acxiom shares, plaintiffs and other members o f

the Class were without knowledge of the facts concerning the false or misleading statements

or omissions alleged herein . Less than one year has elapsed from the time that plaintiffs

discovered or reasonably could have discovered the facts upon which this Complaint is based

to the time that plaintiffs filed the original Complaint . Less than three years have elapsed

from the time that the securities from which this claim for relief is brought were bona fide

offered to the public and the time plaintiffs filed the original Complaint .

67. By reason of the conduct herein alleged, each defendant named in this Claim

for Relief violated § 11 of the 1933 Act . Morgan, by reason of his stock ownership and

- -) i -

positions with Acxiom, was a controlling person of Acxiom and is liable under § 15 of the

1933 Act .

PRAYER

WHEREFORE, plaintiffs pray for judgment as follows : declaring this action to be a

proper class action ; awarding damages, including interest, attorneys fees and expenses o f

litigation, and such other relief as the Court may deem proper .

JURY DEMAND

Plaintiffs demand a trial by jury .

DATED : April 14, 2000 CAULEY & GELLER, LLPSTEVEN E . CAULEYSCOTT E. POYNTERGINA M. COTHERN11311 Arcade Drive , Suite 201Little Rock , AR 72212Telephone : 501/312-8500

MILBERG WEISS BERSHADHYNES & LERACH LLP

WILLIAM S . LERACHHELEN J. HODGESAMBER L . ECK

SCOTT E. POY TER

600 West Broadway, Suite 1800San Diego, CA 92101Telephone : 619/231-1058

SCHIFFRIN & BARROWAY, LLPANDREW L . BARROWAYSTUART L. BERMANThree Bala Plaza East , Suite 400Bala Cynwyd, PA 19004Telephone : 610/667-7706

Co-Lead Counsel for Plaintiff s

-22-

FINKELSTEIN THOMPSON & LOUGHRANDON ENRIGHTThe Foundry Bldg ., Suite 6011055 Thomas Jefferson St ., NWWashington , DC 20007Telephone : 202/337-8000

Attorneys for Plaintiffs

A :\DLM81708 .cpt

-23-

DECLARATION OF SERVICE BY MAIL

I, the undersigned, declare :

That declarant is and was, at all times herein mentioned, a citizen ofthe United

States and a resident of the County of San Diego, over the age of 18 years, and not a part y

to or interest in the within action; that declarant's business address is 600 West Broadway,

Suite 1800, San Diego, California 92101 .

2. That on April 14, 2000, declarant served the CONSOLIDATED COMPLAINT

FOR VIOLATION OF THE SECURITIES ACT OF 1933 by depositing a true copy thereof

in a United States mailbox at San Diego, California in a sealed envelope with postage thereo n

fully prepaid and addressed to the parties listed on the attached Service List _

3 . That there is a regular communication by mail between the place of mailin g

and the places so addressed .

I declare under penalty of perjury that the foregoing is true and correct. Executed thi s

14th day of April, 2000, at San Diego, California.

~,CJM. Gorman ~

UUUNS I~L l.Uk L LA1Nl'1 F1' (6 )

Andrew L . BarrowaySCHIFFRIN & BARROWAY,Three Bala Plaza East,Bala Cynwyd, PA 1900 4

610/667-7706610/667-7056 (fax )

Don EnrightFINKELSTEIN THOMPSON &The Foundry Building,1055 Thomas JeffersonWashington, DC 2000 7

202/337-8000202/337-8090 (fax )

COUNSEL FOR DEFENDANTS

Steven E . CauleyLLP Scott E. PoynterSuite 400 Gina M. Cothern

CAULEY & GELLER, LLP11311 Arcade Drive,. Suite 201Little Rock, AR 72212

501/312-850 0501/312-8505 (fax )

William S . LerachLOUGHRAN Helen J. HodgesSuite 601 Amber L. EckStreet, N .W . MILBERG WEISS BERSHAD HYNES &

LERACH LLP600 West Broadway, Suite 1800San Diego, CA 92101-5050

619/231-105 8619/231-7423 (fax )

Bruce G . VanyoDouglas J . ClarkGidon M . CaineWILSON SONSINI GOODRICH &

ROSATI, P .C . *650 Page Mill RoadPalo Alto, CA 94304-1050

650/493-9300650/565-5100 (fax )

'' Via Federal Express

DAVE COX ("Plaintiff ') declares:

1 . Plaintiff has reviewed a complaint and authorized its filing .Plaintiff did not acquire the security that is the subject of this action at the

direction of plaintiffs counsel or in order to participate in this private action or

any other litigation under the federal securities laws .

2. Plaintiff is willing to serve as a representative party on behalf of th e

class, including providing testimony at deposition and trial, if necessary .

Plaintiff has made no transaction(s) during the Class Period in the debt or equity

securities that are the subject of this action except those set forth below:

Acquired shares on July 23, 1999 at $27 .00 per share.

3 . During the three years prior to the date of this Certificate, Plaintiff

has sought to serve or served as a representative party for a class in the

following actions filed under the federal securities laws :

4. The Plaintiff will not accept any payment for serving as a

representative party on behalf of the class beyond the Plaintiffs pro rata shar e

of any recovery, except such reasonable costs and expenses (including lost

wages) directly relating to the representation of the class as ordered or approved

by the court .

I declare under penalty of perjury that the foregoing is true and correct .

Executed this day of / , 1999.

DA'V C-0- X

CERTIFICATION OF NAMED PLAINTIFFP SUANT To FED B IT1E

(`Plaintiff') , declares as to the claims asserted under the federal securities laws, that :

1 . Plaintiff has reviewed the Acxiom complaint and authorized its filing .

2. Plaintiff did not purchase the security that is the subject of this action at the direction of Plaintiffscounsel or in order to participate in this private action or any other litigati,an under the federalsecurities laws.

3. Plaintiff is willing to serve as a representative party on behalf of the class, including providingtestimony at deposition and trial, if necessary,

4. Plaintiffhas made no transaction(s) during the Class Period in the debt or equity securities that arethe subject of this action except those set forth below:

Pricec ly . ' saction A EM, ShILe

Common Stock Purchased 15Q shares i3 _~19 s a~A r- xipsi

S. During the three years p rior to the date of this Certificate , Plaintiff has sought to serve or served asa representative party for a class in the following actions filed under the federal securities laws :

NV0 Nt-

6. The Plaintiff will not accept any payment for serving as a representative party on behalf of the classbeyond the Plaintiffs pro rata share of any recovery, except such reasonable costs and expensed(mcluding lost wages) directly relating to the representation of the class as ordered or approved bythe court.

I declare under penalty of perjury that the foregoing is true and correct . Executed this , day ofja4cnAE& 1999.

MWURV P TED ,AME

CMMU"TION Or NAMED 2'zArt WFPS ] stMNT AT. Am 1'kt'y'mY.e LAM,

zy It Itamim C?I It t W'), daclITra as bo tlb claims ss i1oaim,dmr the fo&s] s*~ ttu* laws, than

1. Phintiff h s iaviswcd the Ai m cornpWnt m3 suthorized its filing .

~. PIsi did not putctiaw tlre sect ty tht Is tba tubjed arthis s j at the 4fmC 1ian of Pwadwigas 8D I or is ocdac to p page !ti Ibis pdvsia acti+a i ar my oth Edgdiom i undar the Mana.Minas UW9.

3. PlaWdl'ts Milling to taws as a topremaWvv puW on behalf of the clus. iraludiag prov din&ta, annay at depoeition and tdaI ifaocos :my-

A. Plainhffh u tsde w cdo~ra) daft the Clan ParioW in die debtor aquigr `ocu itles that arathe subject oftiaa action except *Ole wt faa'thbohxw.

Prkco.

Qo ,.m stack Pa rcbaI5d 250 tbarest 7123/99 S274)O

S. Ta+ingtbe fires yam pxkw to *v date aft is Cerfificsta Pla[adffhU'sougbi to ilwvs or .ervad asa zaveautatIvc psz y for a class in tho MMAowfn actions Gkd wader the federal securities uses!

RMWp t 1 . .9i Ong VNIMI.Ing.ct'J . LT.SM.C. NOCdWm Dial CN. M9943537 Zvi

6. The ?Wntltiw1ll not &a=pt my paYnw* f s i vatg as ar tive psny aatbi i if of tho dmboyand the ?lsiiiia's pto tom. share of no t eccv y, axagt avah eoaaonal+t= aaata srd cicpcx cd(mcludthg lost wages) &Metly relsting to the rep c tlon of the clis as std red or approved bytbo oatat ,

I declare under penalty of peomy that the f oint is true mci contact . Ela=ted Iks _ day of1999.

1

SIGNATUIM Lamy IL Romine

09/20/99 12:00 T1/lX N0 .2687 P.002 m