SECURITIES AND EXCHANGE COMMISSION
FORM S-1/A General form of registration statement for all companies including face-amount certificate companies [amend]
Filing Date: 1996-08-05 SEC Accession No. 0000912057-96-016254
(HTML Version on secdatabase.com)
FILER CCC INFORMATION SERVICES GROUP INC Business Address WORLD TRADE CENTER CIK:1017917| IRS No.: 541242469 | State of Incorp.:DE | Fiscal Year End: 1231 CHICAGO Type: S-1/A | Act: 33 | File No.: 333-07287 | Film No.: 96604056 444 MERCHANDISE MART SIC: 7370 Computer programming, data processing, etc. CHICAGO IL 60654 3122224636
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document AS FILED WITH THE SECURITIES AND EXCHANGE COMMISSION ON AUGUST 5, 1996
REGISTRATION NO. 333-07287
------
SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 ------
AMENDMENT NO. 2
TO FORM S-1 REGISTRATION STATEMENT UNDER THE SECURITIES ACT OF 1933 ------CCC INFORMATION SERVICES GROUP INC. (EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER) ------
WORLD TRADE CENTER CHICAGO 444 MERCHANDISE MART CHICAGO, ILLINOIS 60654 (312) 222-4636
(Address, including zip code and telephone number, including area code, of Registrant's principal executive offices) ------
GERALD P. KENNEY SECRETARY AND GENERAL COUNSEL CCC INFORMATION SERVICES GROUP INC. WORLD TRADE CENTER CHICAGO 444 MERCHANDISE MART CHICAGO, ILLINOIS 60654 (312) 222-4636 (Name, address, including zip code and telephone number, including area code, of agent for service) ------
COPIES TO:
APPROXIMATE DATE OF COMMENCEMENT OF THE PROPOSED SALE OF THE SECURITIES TO THE PUBLIC: AS SOON AS PRACTICABLE AFTER THIS REGISTRATION STATEMENT BECOMES EFFECTIVE.
If the securities being registered on this Form are being offered on a delayed or continuous basis pursuant to Rule 415 under the Securities Act of 1933, check the following box: / /
If this Form is filed to register additional securities for an offering pursuant to Rule 462(b) under the Securities Act of 1933, please check the following box and list the Securities Act registration number of the earlier effective registration statement for the same offering: / /
If this Form is a post-effective amendment filed pursuant to Rule 462(c) under the Securities Act of 1933, check the following box and list the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Securities Act registration statement number of the earlier effective registration statement for the same offering: / /
If delivery of the prospectus is expected to be made pursuant to Rule 434, please check the following box: / /
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 THIS REGISTRATION STATEMENT SHALL BECOME EFFECTIVE ON SUCH DATE AS THE SECURITIES AND EXCHANGE COMMISSION, ACTING PURSUANT TO SAID SECTION 8(A), MAY DETERMINE.
------
CCC INFORMATION SERVICES GROUP INC.
Cross Reference Sheet Pursuant to Rule 404(a) of the Securities Act of 1933 and Item 501(b) of Regulation S-K, Showing the Location or Heading in the Prospectus of the Information Required by Part I of Form S-1.
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.
SUBJECT TO COMPLETION, DATED AUGUST 5, 1996
PROSPECTUS
5,500,000 SHARES
[LOGO] CCC INFORMATION SERVICES GROUP INC.
COMMON STOCK
All of the 5,500,000 shares of Common Stock offered hereby are being sold by the Company. Prior to this Offering, there has been no public market for the Common Stock of the Company. It is currently estimated that the initial public
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document offering price will be between $10.00 and $12.00 per share. See "Underwriting" for a discussion of the factors to be considered in determining the initial public offering price. The Common Stock of the Company has been approved for quotation on the Nasdaq National Market under the symbol "CCCG".
------
THE SHARES OFFERED HEREBY INVOLVE A HIGH DEGREE OF RISK. SEE "RISK FACTORS" BEGINNING ON PAGE 7.
------
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.
(1) See "Underwriting" for indemnification arrangements with the several Underwriters.
(2) Before deducting expenses payable by the Company estimated at $1,072,000.
(3) The Company has granted to the Underwriters a 30-day option to purchase up to 825,000 additional shares of Common Stock solely to cover over-allotments, if any. If all such shares are purchased, the total Price to Public, Underwriting Discount and Proceeds to Company will be $ , $ and $ , respectively. See "Underwriting."
------
The shares of Common Stock are offered by the several Underwriters subject to prior sale, receipt and acceptance by them and subject to the right of the Underwriters to reject any order in whole or in part and certain other conditions. It is expected that certificates for such shares will be available for delivery on or about August , 1996 at the office of the agent of Hambrecht & Quist LLC in New York, New York.
HAMBRECHT & QUIST
LAZARD FRERES & CO. LLC
RAYMOND JAMES & ASSOCIATES, INC.
August , 1996
CLAIMS WORKFLOW MANAGEMENT
CCC INFORMATION SERVICES IS A LEADING SUPPLIER OF AUTO CLAIMS INFORMATION AND PROCESSING, CLAIMS MANAGEMENT SOFTWARE AND VALUE-ADDED COMMUNICATIONS. CCC'S PATHWAYS WORKFLOW MANAGEMENT SOFTWARE IS DESIGNED TO INTEGRATE CCC'S SOFTWARE AND INFORMATION OFFERINGS IN A STANDARD ARCHITECTURE WITH A COMMON USER INTERFACE. CCC'S SERVICES AND PRODUCTS IMPROVE THE EFFICIENCY OF THE AUTO CLAIMS PROCESS.
THE INSIDE COVER CONSISTS OF A SCHEMATICS SHOWING THE GRAPHICAL USER INTERFACE OF THE PATHWAYS SOFTWARE AND IDENTIFYING LABELS DEPICTING APPLICATION OF THE SYSTEM WITH A FOLD-OUT PAGE BEHIND THE INSIDE FRONT COVER DEPICTING THE AUTO CLAIMS PROCESS.
[INSIDE COVER PAGE]
------
IN CONNECTION WITH THIS OFFERING, THE UNDERWRITERS MAY OVER-ALLOT OR EFFECT TRANSACTIONS WHICH STABILIZE OR MAINTAIN THE MARKET PRICE 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 NASDAQ NATIONAL MARKET OR OTHERWISE. SUCH STABILIZING, IF COMMENCED, MAY BE DISCONTINUED AT ANY TIME.
2
PROSPECTUS SUMMARY
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document THE FOLLOWING SUMMARY IS QUALIFIED IN ITS ENTIRETY BY THE MORE DETAILED INFORMATION AND CONSOLIDATED FINANCIAL STATEMENTS, INCLUDING NOTES THERETO, APPEARING ELSEWHERE IN THIS PROSPECTUS. AS USED HEREIN, THE "COMPANY" MEANS CCC INFORMATION SERVICES GROUP INC., TOGETHER WITH ITS CONSOLIDATED SUBSIDIARIES, UNLESS THE CONTEXT OTHERWISE REQUIRES. "CCC" REFERS TO CCC INFORMATION SERVICES INC. AND ITS CONSOLIDATED SUBSIDIARIES, WHICH CONSTITUTE THE OPERATING SUBSIDIARIES OF THE COMPANY. "CCCDC" OR THE "JOINT VENTURE" REFERS TO CCC DEVELOPMENT COMPANY. UNLESS OTHERWISE SPECIFIED, THE PROSPECTUS ASSUMES (I) THE COMPLETION OF A 40 FOR 1 SPLIT OF COMMON STOCK OF THE COMPANY IMMEDIATELY PRIOR TO THE TIME THE REGISTRATION STATEMENT OF WHICH THIS PROSPECTUS IS A PART BECOMES EFFECTIVE, (II) THE REDEMPTION OF 3,350 SHARES OF THE OUTSTANDING SERIES C CUMULATIVE REDEEMABLE PREFERRED STOCK (THE "SERIES C PREFERRED STOCK") AND 22,780 SHARES OF THE OUTSTANDING SERIES D CUMULATIVE REDEEMABLE PREFERRED STOCK (THE "SERIES D PREFERRED STOCK") OF THE COMPANY (COLLECTIVELY, THE "REDEEMABLE PREFERRED STOCK") WHICH WILL OCCUR SIMULTANEOUSLY WITH THE CONSUMMATION OF THE OFFERING, AND (III) NO EXERCISE OF THE UNDERWRITERS' OVER-ALLOTMENT OPTION. A GLOSSARY OF TECHNICAL TERMS BEGINS ON PAGE 41 OF THIS PROSPECTUS.
THE COMPANY
The Company is a leading supplier of automobile claims information and processing, claims management software and value-added communication services. The Company's customers include each of the 50 largest U.S. automobile insurance companies, over 250 other automobile insurance companies and more than 8,500 collision repair facilities. The Company's technology-based services and products improve efficiency, manage costs and increase consumer satisfaction in the management of automobile claims and restoration. The Company believes that its core competencies include the efficient collection and processing of claims and automobile valuation and repair data, development of advanced client-server, object-oriented claims software products, management of a value-added communications network, understanding the workflow processes of automobile claims and marketing through a customer-oriented field sales and service organization.
The Company's services and products automate the process of evaluating and settling both total loss and repairable automobile claims. The Company's TOTAL LOSS services and products provide insurance companies the ability to effect total loss settlements on the basis of market-specific vehicle values. The Company's collision estimating services and products provide insurance appraisers and collision repair facilities with up-to-date pricing, interactive decision support and computer-assisted logic to produce accurate collision repair estimates. Communication services offered by the Company connect insurers, appraisers and collision repair facilities, providing the information required to make appropriate and timely decisions. The Company also provides a wide variety of related services and products intended to facilitate the overall management of the automobile claims process. The Company's PATHWAYS workflow management software is designed to integrate each of the Company's product offerings on a common platform with a common graphical user interface, facilitating the learning of new applications while providing the Company's customers with a broader tool set for claims completion. The Company's services and products are an integrated solution that combines reliable information, advanced claims management software and value-added, secure communication systems to improve the efficiency of the automobile claims process.
The Company markets its services and products to the key participants in the automobile claims industry, including over 400 insurance companies and approximately 20,000 to 25,000 collision repair facilities. The Company sells its services and products to insurance companies through a 125 person direct sales force. The Company contracts with 85 independent sales representatives to sell its products to collision repair facilities. Over half of the Company's revenue for 1995 was for services and products sold pursuant to contracts, which generally have a two to three year term. A substantial portion of the Company's remaining revenue represented sales to customers that have been doing business with the Company for at least ten years. The Company's services and products are sold either on a monthly subscription or a per transaction basis.
Insurance companies paid approximately $35 billion for automobile damage and loss claims in 1994, of which the Company believes $19 billion was paid to collision repair facilities and $13 billion was paid for total loss claims. Competitive pressures and resistance by policy holders and regulators to premium increases are causing insurance companies to focus on both customer satisfaction and cost control. At the same time, the costs to operate a collision repair facility have risen substantially over the past decade. Modern automobile designs coupled with extensive environmental regulations are forcing collision repair facilities to make significant capital
3 investments in increasingly sophisticated equipment and better training. Automobile insurance companies are seeking to reduce the costs of adjusting claims through better and more timely flows of information and to increase consumer satisfaction through faster, more efficient claims handling procedures. Collision repair facilities are seeking to obtain a steady supply of customers through greater connectivity with insurance companies and through improved
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document operating efficiency, business management and repair processing.
The Company's objective is to enhance its position as a leading provider of business solutions to the automobile claims industry. The Company intends to grow its installed user base and to offer new and enhanced services and products. The Company focuses resources on leading insurance companies because these customers drive new product innovation and influence the systems decisions of other participants in the claims process. The Company has also committed substantial resources to develop and program class libraries and claims workflow objects and intends to leverage this technology asset to develop new services and enhancements rapidly. The Company plans to expand its appraisal and restoration outsourcing solution as an alternative to high cost independent adjusters. The Company also plans to expand the scope of its service and product offerings beyond automobile physical damage solutions to include claims involving bodily injury and to offer selected insurance company customers a total claims outsourcing solution.
Underlying each of the Company's principal services and products are value-added databases which the Company's customers access using workflow-oriented software and the Company's communications network. The Company's proprietary database of valuation data used in connection with its total loss services and products is built through the Company's own data collection network. The Company offers its collision estimating services and products through a personal computer-based, open systems approach utilizing an object-oriented design which is readily integrated with customer legacy systems and which enables rapid introduction of additional application modules. The Company's product engineering activities focus on improving speed to market of new products, services and enhancements, and reducing development costs.
CCC entered the vehicle total loss valuation market in 1980 when it introduced the first computerized vehicle valuation system based on market-specific conditions and physically inspected dealer inventories. The Company was incorporated in Delaware in 1983. Its principal executive office is located at 444 Merchandise Mart, Chicago, Illinois 60654. Its telephone number is (312) 222-4636.
THE OFFERING
------(1) Excludes 2,579,760 shares of Common Stock issuable upon the exercise of stock options outstanding at June 30, 1996 at a weighted average exercise price of $2.64 per share.
CCC-TM-, Pathways-TM-, EZEst-TM-, EZNet-TM-, ACCESS-TM-, ACCLAIM-TM-, GuidePost-TM-, EZFocus-TM-, EZWorks-TM-, VINguard-TM- and AutoSearch-TM- are trademarks of the Company. All other trademarks, service marks, or trade names referred to in this Prospectus are the property of the respective owners.
4
SUMMARY CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
The following summary consolidated statement of operations data, per share data, pro forma data and balance sheet data should be read in connection with the consolidated financial statements, the notes related thereto and the unaudited pro forma consolidated financial data included elsewhere in this Prospectus. The information as of and for the three years ended December 31, 1995 is derived from the audited consolidated financial statements of the Company. The information presented as of and for the two years ended December 31, 1992 and the six months ended June 30, 1995 and 1996 and all pro forma data is derived from the unaudited consolidated financial information of the Company. With respect to the unaudited financial information, the Company is of the opinion that all material adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the Company's interim and pro forma results of operations and financial condition, have been included. The results of operations presented below should not be regarded as necessarily indicative of results that may be expected in any future period.
5
------(1) The Company accounted for its interest in the Joint Venture under the equity method of accounting prior to acquiring the remaining interest in the Joint Venture, effective March 30, 1994.
(2) Pro forma data gives effect to the Offering (at an assumed initial offering price of $11.00) as of January 1, 1995, including: (i) redemption of a portion of the Redeemable Preferred Stock, (ii) elimination of interest expense associated with repayment of a portion of the Company's existing indebtedness under the 1994 bank credit facility, elimination of amortization associated with the write-off of deferred debt issue costs as a result of the early retirement of debt and (iii) the tax effects of the interest-related adjustments described above. See "Unaudited Pro Forma Consolidated Financial Data" presented elsewhere in this Prospectus.
(3) Adjusted to reflect (i) receipt by the Company of the net proceeds to be received from the sale of Common Stock offered hereby at an assumed initial public offering price of $11.00 per share and (ii) the application of the net proceeds of the Offering to repay existing indebtedness under the Company's 1994 bank credit facility in the principal amount of approximately $27.2 million (or approximately 98% of the principal amount outstanding), plus accrued interest of approximately $0.4 million and to redeem Redeemable Preferred Stock with a stated value of approximately $26.1 million (or approximately 67% of the stated value outstanding), plus accrued dividends of approximately $1.5 million. With regard to redemption of the Redeemable Preferred Stock, the adjustments reflect acceleration of the unaccreted portion of the original preferred stock discount as a charge to stockholders' equity (deficit). There is no income tax benefit associated with the accelerated accretion. With regard to repayment of a portion of the 1994 bank credit facility, the adjustments reflect deferred debt issue costs, net of related income tax benefits, as a charge to stockholders' equity (deficit). The deferred debt issue cost write-off will be charged against earnings, as an extraordinary item, net of tax, in the period in which a portion of the 1994 bank credit facility is repaid. Based on an assumed public offering price of $11.00 per share, this charge is estimated to be $0.9 million before income taxes.
6
RISK FACTORS
THIS PROSPECTUS CONTAINS FORWARD-LOOKING STATEMENTS THAT INVOLVE RISKS AND UNCERTAINTIES. ACTUAL RESULTS COULD DIFFER MATERIALLY FROM THOSE DISCUSSED IN THE FORWARD-LOOKING STATEMENTS AS A RESULT OF CERTAIN FACTORS, INCLUDING THOSE SET FORTH BELOW AND ELSEWHERE IN THIS PROSPECTUS. THE FOLLOWING FACTORS SHOULD BE CONSIDERED CAREFULLY IN ADDITION TO THE OTHER INFORMATION CONTAINED IN THIS PROSPECTUS BEFORE PURCHASING THE COMMON STOCK OFFERED HEREBY.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document HISTORY OF OPERATING LOSSES; UNCERTAINTY OF FUTURE PROFITABILITY
The Company has an accumulated net deficit from inception of approximately $65.0 million through June 30, 1996. Losses have resulted principally from costs incurred in product acquisition and development, from servicing of debt and from general and administrative costs. These costs have exceeded the Company's revenues, which have been derived primarily from the sale of its TOTAL LOSS product and its collision estimating product, EZEST. Most of the Company's other products are relatively new and, with the exception of EZNET, the Company's communications service, have not yet produced significant revenue. Although the Company has recorded substantial revenue growth in each of the years ended December 31, 1993, 1994 and 1995, and net income before dividends and accretion on preferred stock of $1.3 million in the year ended December 31, 1995, there can be no assurance that the Company will be able to sustain such growth or achieve or maintain profitability in future periods. Despite its accumulated deficit, as of December 31, 1995, the Company's net operating loss carryforwards totaled only $0.3 million. This disparity is attributable to the lack of tax basis for certain past operating charges. Since inception, the Company has charged against earnings: (i) goodwill amortization related to acquired businesses in the amount of approximately $32.5 million, (ii) purchased in- process research and development software projects of approximately $13.8 million and (iii) purchased software amortization of approximately $4.6 million. The Offering will not result in a change in control for income tax purposes that would limit the use of the net operating loss carryforwards. In addition, as of December 31, 1995, the Company had no research investment credit carryforwards. The Company has established deferred income tax asset valuation allowances because of its history of operating losses and an inability to project future taxable income with certainty. Such valuation allowances have been and will continue to be released to income if and to the extent the Company is able to successfully achieve a recapitalization through the Offering and demonstrate a predictable pattern of profitability. See "Management's Discussion and Analysis of Financial Condition and Results of Operations."
FINANCIAL POSITION; NEGATIVE WORKING CAPITAL; POTENTIAL FINANCING NEEDS
At June 30, 1996, the Company's stockholders' deficit was $51.1 million. The net proceeds from the sale of Common Stock offered hereby will enable the Company to improve substantially its financial position by repaying a portion of the 1994 bank credit facility, under which CCC is the primary obligor and the Company is guarantor, and redeeming a portion of the Redeemable Preferred Stock. Historically, the Company's business has operated with a negative working capital. At June 30, 1996, negative working capital was $14.5 million, and the ratio of current assets to current liabilities was .57 to 1. The Company has the ability to operate with a negative working capital because it receives substantial payments from customers for services and products in advance of the costs incurred to provide such services and products and the availability of bank lines of credit. Assuming application of the net proceeds from the sale of Common Stock offered hereby as described herein as of June 30, 1996, the Company would have pro forma adjusted negative working capital as of June 30, 1996 of $6.6 million. The Company believes that cash flows from operations and available bank lines of credit will be sufficient to fund working capital needs for at least one year. However, the continued availability of bank lines of credit will require compliance with bank covenants. It is possible that circumstances could arise in the operation of the Company's business that would reduce cash flows substantially or would cause the Company not to be in compliance with bank covenants. The Company is currently in compliance with the covenants of its lending agreements. Failure to comply with bank covenants could cause indebtedness to become due immediately or render lines of credit not to be available when needed. In such event the Company may need to seek alternate sources of financing, including the potential issuance of debt or equity securities, at a time and on terms that may not be favorable to the Company. Issuance of additional equity securities could result in substantial dilution to
7 stockholders. There can be no assurance that such future financing will be available on terms acceptable to the Company or at all. Due to the Company's stockholders' deficit and negative working capital, new investors will experience immediate and substantial dilution. See "Dilution."
RELIANCE ON MAJOR CUSTOMERS
The Company derives a substantial portion of its revenues from sales to large insurance companies, including State Farm Mutual Automobile Insurance Company ("State Farm"). State Farm accounted for approximately 12.4% of the Company's revenue in 1995. Any loss of or material decrease in the business from any large insurer, and in particular from State Farm, could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Customers."
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document TECHNOLOGICAL CHANGE AND NEW PRODUCT DEVELOPMENT
The markets in which the Company competes are increasingly characterized by technological change. The introduction of competing services or products incorporating new technologies could render some or all of the Company's services and products unmarketable. The Company believes that its future success depends on its ability to enhance its current services and products and to develop new services and products that address the increasingly sophisticated needs of its customers. As a result, the Company has in the past and intends to continue to commit substantial resources to product development and programming. Over the two years ended December 31, 1995, the Company expended approximately $24.9 million for product development and programming. The development of new products may result in unanticipated expenditures and capital costs which may not be recovered in the event of an unsuccessful product. Development projects can be lengthy and are subject to changing market requirements and unforseen factors which can result in delays. The failure of the Company to develop and introduce new or enhanced services and products in a timely and cost-effective manner in response to changing technologies or customer requirements would have a material adverse effect on the Company's business, financial condition and results of operations.
FLUCTUATIONS IN QUARTERLY OPERATING RESULTS
The Company has experienced, and in the future may continue to experience, significant quarter to quarter fluctuations in its results of operations. Quarterly results of operations may fluctuate as a result of a variety of factors, including the introduction of new or upgraded services and products by the Company or its competitors, customer acceptance of new services and products, product development expenses, the timing of significant orders, the volume of usage of the Company's services and products, competitive conditions in the industry and general economic conditions. Many of these factors are beyond the Company's control. Further, the Company's contracts generally involve significant customer commitments (for each appraisal work station, customers are required to invest approximately $4,000 in computers and related peripherals) and may require time-consuming authorization procedures within the customer's organization; the sales cycles for the Company's services and products to the automobile insurance industry are therefore typically lengthy (generally between 6 and 18 months) and subject to a number of factors outside of the Company's control. For these and other reasons the overall revenues of the Company are difficult to forecast, and the Company believes that period-to-period comparisons of results of operations are not necessarily meaningful or indicative of the results that the Company may achieve for any subsequent quarter or a full year. Such fluctuations may result in volatility in the price of the Common Stock, and it is possible that in future quarters the Company's operating results will be below the expectations of public market analysts and investors. Such an event could have a material adverse effect on the price of the Common Stock. In addition, the principal payment obligations and the restrictive covenants of the Company's 1994 bank credit facility have continued to constrain the Company's operating activities. During the first half of 1996, the Company did not incur certain operating expenditures and make certain investments that it would have made in the absence of the 1994 bank credit facility covenants. As a result, from a staff training and infrastructure perspective, the Company is currently less prepared than it otherwise would have been to service new software subscription customers, should such customers license the Company's products. See "Management's Discussion and Analysis of Financial Condition and Results of Operations--Selected Quarterly Financial Results."
8
COMPETITION
The markets for the Company's services and products are highly competitive. Over the past few years, the Company has experienced competitive price pressure, particularly in the collision estimating market, and expects such trend to continue. The Company's principal competitors are divisions of two well-capitalized, multinational firms, Automated Data Processing, Inc. ("ADP") and Thomson Corporation ("Thomson"), both of which have greater financial, marketing, technical and other resources than the Company. The Company intends to address competitive price pressures by providing high quality, feature enhanced products and services to its clients. The Company intends to continue to develop user friendly claims products and services incorporating its comprehensive proprietary inventory of data. The Company expects that the PATHWAYS workflow manager will provide the necessary position with its insurance customers to effectively compete against competitive price pressures.
At times, insurance companies have entered into agreements with service
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document providers (including ADP, Thomson and CCC) wherein the agreement provides, in part, that the insurance company will either use the product or service of that vendor on an exclusive basis or designate the vendor as a preferred provider of that product or service. If it is an exclusive agreement, the insurance company mandates that collision repair facilities, independent appraisers and regional offices use the particular product or service. If the vendor is a preferred provider, the collision repair facilities, appraisers and regional offices, are encouraged to use the preferred product, but may still choose another vendor's product or service. Additionally, some insurance companies mandate that all products be tested and approved at the companies' national level before regional levels can purchase such products. The benefits of being an endorsed product or on the approved list of an insurance company include immediate customer availability and a head start over competitors who may not be so approved. With respect to those insurance companies that have endorsed ADP or Thomson, but not CCC, the Company will be at a competitive disadvantage. In addition, in connection with the Company's strategy to provide outsourced claims processing services, the Company will compete with other third-party service providers, some of whom may have more capital and greater resources than the Company. There can be no assurance that the Company will be able to compete successfully against current or future competitors or that competitive pressures will not have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Competition."
DEPENDENCE ON KEY PERSONNEL
The Company's continued success will depend largely on the efforts and abilities of its executive officers and upon certain key technical, managerial and sales employees. The loss of the services of any of the Company's key employees could have a material adverse effect on the Company's business, financial condition and results of operations. The Company believes that it will need to hire additional technical personnel in order to enhance its existing products and to develop new products. The Company's success also depends in large part upon its ability to attract and retain highly-skilled managerial, sales and marketing personnel. If the Company is unable to hire the necessary personnel, the development and sale of product enhancements and new products would likely be delayed or prevented. Competition for highly skilled technical, managerial, sales and marketing personnel is intense. Certain of the Company's senior management personnel have recently joined the Company. There can be no assurance that the Company will be successful in retaining its key personnel and in attracting the personnel it requires to continue its growth strategy. See "Business--Competition," "--Employees" and "Management."
USE OF LICENSED INFORMATION
The Company's success depends to a substantial degree on its ability to provide customers access to a breadth of data from many different sources. A substantial portion of the data utilized in the Company's collision estimating products is derived from the Motor Crash Estimating Guide, a publication of a subsidiary of The Hearst Corporation. The Company has a license to use the Motor Crash Estimating Guide data under an agreement which expires on April 30, 2002. The license is automatically renewed on a year-to-year basis after April 30, 2002 unless either party furnishes the other with two years' prior notice of nonrenewal. There can be no assurance that the Company will be able to renew the Hearst license on economic terms that are beneficial to the Company or at all. The Company does not believe that it has access to an alternative database that would
9 provide comparable information. Any interruption of the Company's access to the Motor Crash Estimating Guide data could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Technology."
DEPENDENCE ON PROPRIETARY RIGHTS; RISKS OF INFRINGEMENT
The Company regards the technology underlying its services and products as proprietary. The Company relies primarily on a combination of intellectual property laws, patents, trademarks, confidentiality agreements and contractual provisions to protect its proprietary rights. The Company has registered certain of its trademarks. The Company's TOTAL LOSS calculation process is not patented; however, the underlying methodology and processes are trade secrets of the Company and are essential to the Company's TOTAL LOSS business. Existing trade secrets and copyright laws afford the Company limited protection. Despite the Company's efforts to protect its proprietary rights, unauthorized parties may attempt to copy aspects of the Company's software or to obtain and use information that the Company regards as proprietary. Policing unauthorized use of the Company's software is difficult. There can be no assurance that the obligations to maintain the confidentiality of the Company's trade secrets and proprietary information will effectively prevent disclosure of the Company's
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document confidential information or provide meaningful protection for the Company's confidential information, or that the Company's trade secrets or proprietary information will not be independently developed by the Company's competitors. There can be no assurance that the Company's trade secrets or proprietary information will provide competitive advantages or will not be challenged or circumvented by its competitors. Litigation may be necessary for the Company to defend against claims of infringement, to protect its intellectual property rights and could result in substantial cost to, and diversion of efforts by, the Company. There can be no assurance that the Company would prevail in any such litigation. If the Company is unable to protect its proprietary rights in its intellectual property, it could have a material adverse effect on the Company's business, financial condition and results of operations.
The Company is not aware that any of its software, trademarks or other proprietary rights infringe the proprietary rights of third parties. However, the Company has been involved previously in intellectual property litigation the resolution of which resulted in substantial payments by the Company. There can be no assurance that third parties will not assert infringement claims against the Company in the future. Any such claims, with or without merit, can be time consuming and expensive to defend or can require the Company to enter into royalty or licensing agreements or cease the infringing activities. The failure to obtain such royalty agreements, if required, and the Company's involvement in such litigation could have a material adverse effect on the Company's business, financial condition and results of operations. See "Business--Intellectual Property."
CONTROL BY EXISTING STOCKHOLDER
White River Ventures, Inc. ("White River") will continue to control the Company after the Offering, subject to the terms of a stockholders agreement (the "Stockholders Agreement") entered into by the Company, White River, and certain other stockholders. See "Principal Stockholders--Stockholders Agreement."
Upon consummation of the Offering, White River will beneficially own or control an aggregate of 39.0% of the outstanding shares of Common Stock (or approximately 37.6% if the Underwriters' over-allotment option is exercised in full). In addition, White River and its affiliates will beneficially own or control an aggregate of 1,589 shares of the Series C Preferred Stock and 10,794 shares of the Series D Preferred Stock, which will constitute approximately 96.2% of the outstanding shares of each such series.
Under the terms of the Series C Preferred Stock, for so long as White River and its affiliates own at least 50% of the outstanding shares of Series C Preferred Stock, the holders of a majority of such shares may elect a majority of the board of directors of the Company in the event of a dividend default or a redemption default. See "Description of Capital Stock--The Redeemable Preferred Stock." In connection with the recapitalization of the Company in 1994 and to help ensure that White River Corporation, the parent of White River, avoid registration as an investment company under the Investment Company Act of 1940, White River and the Company have also entered into an agreement (the "White River Agreement") whereby the Company has agreed, upon receipt of notice from White River that it owns less than 50% of the outstanding shares of Common Stock, to exchange 500 shares of the outstanding Series D Preferred Stock for 500 shares of new Series E Cumulative Redeemable Preferred Stock, par value $1.00 (the "Series E Preferred Stock"), which carries
10 certain voting rights if it is held by White River or any of its affiliates. The Series E Preferred Stock votes according to a formula, the effect of which is to cause White River and its affiliates, through their ownership of shares of Series E Preferred Stock, to have 51% of the votes to be cast on any matter to be voted upon by the holders of Common Stock, provided all of the shares of such Series E Preferred Stock are issued, outstanding and held by White River and its affiliates. To the extent White River also owns shares of Common Stock, such Series E Preferred Stock will only provide an additional voting percentage that, when added together with the vote from White River's shares of Common Stock, will provide White River with a maximum of 51% of the votes.
Pursuant to the terms of the Certificate of Designations for the Series E Preferred Stock, the voting power of the outstanding shares of Series E Preferred Stock is reduced according to a formula to the extent that outstanding shares of Series E Preferred Stock are either redeemed by the Company or no longer owned by White River and its affiliates. If White River and its affiliates were to continue to hold 39.0% of the outstanding shares of Common
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Stock, the Series E Preferred Stock voting power combined with the voting power of the Common Stock held by White River would be less than a majority when 393 (or 78.6%) of the 500 shares of Series E Preferred Stock had been so redeemed or are no longer so owned. The outstanding shares of Series E Preferred Stock are redeemable pro rata with the outstanding shares of Series C and Series D Preferred Stock and other parity stock, if any. White River has informed the Company of its present intention to exchange 500 shares of Series D Preferred Stock for 500 shares of Series E Preferred Stock sometime after the consummation of the Offering. When properly notified in writing of such request, the Company will issue, within three business days, such 500 shares of Series E Preferred Stock to White River. See "Description of Capital Stock-- The Series E Preferred Stock."
The Stockholders Agreement provides that certain stockholders affiliated with management (the "Management Stockholders") may nominate three of seven directors while the Stockholders Agreement remains in effect. In addition, the directors designated by the Management Stockholders have been delegated the authority of the board of directors, to the extent permitted by applicable law and subject to the fiduciary duties of the other directors, to determine the timing, price and terms of future offerings of Common Stock and of certain business combinations. See "Principal Stockholders--Stockholders Agreement" for a detailed description of the Stockholders Agreement.
Because of its ownership of shares of Common Stock and Series C Preferred Stock, and its ability to acquire shares of Series E Preferred Stock, White River will be able to elect a majority of the board of directors after the Offering and will be in control of the Company. When shares of the Series E Preferred Stock are issued to White River or its affiliates pursuant to the White River Agreement, White River will have a majority of the votes on any matter brought to a vote of the stockholders, regardless of the number of shares of Common Stock owned by White River and its affiliates. White River and its affiliates will retain the Series E Preferred Stock majority voting power until sufficient shares of Series E Preferred Stock have been redeemed by the Company or transferred to non-affiliates of White River to reduce the Series E Preferred Stock voting power below a majority. This may render more difficult or tend to discourage unsolicited mergers, acquisitions, tender offers, proxy contests or assumptions of control and changes of incumbent management, even when stockholders other than White River consider such a transaction to be in their best interest. Accordingly, stockholders may be deprived of an opportunity to sell their shares at a premium over the market price of the shares. See "Principal Stockholders -- Stockholders Agreement" and "Certain Transactions."
BENEFITS TO EXISTING STOCKHOLDERS
Approximately $27.6 million of the net proceeds from the sale by the Company of the Common Stock offered hereby will be used to redeem a portion of the Redeemable Preferred Stock, of which 96.2% is owned by White River and 3.8% is owned by affiliates of Hambrecht & Quist LLC, a representative of the Underwriters. See "Certain Transactions", "Description of Capital Stock" and "Underwriting."
DEPENDENCE ON TRANSMISSION SERVICES AND DATA OPERATIONS
The Company maintains its TOTAL LOSS database on a mainframe computer which has been outsourced to a data center service provider for the past ten years. The Company's operations are dependent on its ability to protect its computer equipment and the information stored in the third party service bureau against damage that may be caused by fire, power loss, telecommunications failures, unauthorized intrusion and other events. The
11 service bureau data center consists of an IBM compatible mainframe processor, disk storage, a tape library, printer output capability, communications facilities and mini-computers. The data center is protected by an uninterruptible power supply system with short term battery back-up and security and authorization procedures. Software and related data files are backed-up regularly and stored off-site and the Company and service bureau also have a contingency and disaster recovery plan that is designed to reduce the risk of extended interruption of the Company's services in the event of damage to, or other failure of, its data center. There can be no assurance that these measures will be sufficient to eliminate the risk of extended interruption in the Company's operations due to interference or disruptions to the Company's access to the information maintained at the data center. Any such interruption could have a material adverse effect on the Company's business, financial condition and results of operations.
Certain of the Company's data services are transmitted using transmission methods which are not within the control of the Company. The Company relies on several companies to provide dial-up access to the Company's services. Any
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document damage or failure that causes interruption in these services could have a material adverse effect on the Company's business, financial condition and results of operations.
Although the Company has implemented a contingency plan for the interruption of transmission service and data operations, the Company does not maintain any business interruption insurance.
GOVERNMENT REGULATION
The insurance industry is subject to extensive state regulation. Because the Company markets and sells its products and services to participants in the insurance industry, particular aspects of the Company's business are affected by such regulation, including the methodology implemented to calculate total loss valuations, restrictions or prohibitions on the ability of an insurance company to direct or suggest insureds to use selected repair facilities and the monitoring and licensing of claim adjusters and appraisers. Due to the state-by-state regulation of the insurance industry, the Company's services and products may be affected by varying regulations which may increase costs to the Company in complying with such regulations. Changes in regulations which adversely affect the Company's existing and potential clients could have a material adverse effect on the Company's business, financial condition and results of operations.
SHARES ELIGIBLE FOR FUTURE SALE
Future sales of substantial amounts of the Company's Common Stock after this Offering could adversely affect the market price of the Common Stock. Several of the Company's principal stockholders hold a significant portion of the Company's outstanding Common Stock, including White River which holds 8,584,564 shares representing 39.0% of the outstanding shares of the Common Stock after the Offering (37.6% if the Underwriters' over-allotment option is exercised in full), and a decision by one or more of these stockholders to sell their shares could adversely affect the market price of the Common Stock. Upon consummation of the Offering, the Company will have 22,026,800 shares of Common Stock outstanding (22,851,800 shares assuming exercise in full of the Underwriters' over-allotment option). Of these shares, all shares sold in this Offering and 808,000 shares held by certain stockholders not affiliated with the Company will be freely tradeable immediately following this Offering. Of the remaining shares, 14,911,500 shares of Common Stock are subject to lock-up agreements with representatives of the Underwriters. Such lock-up agreements restrict transfers of such shares, without the written consent of Hambrecht & Quist LLC, until 180 days after the date of this Prospectus. Beginning 180 days after the date of this Prospectus, approximately 15,563,900 shares will be eligible for sale pursuant to Rule 144 under the Securities Act of 1933, as amended (the "Securities Act"), of which 13,050,800 shares are held by affiliates of the Company. As of June 30, 1996, options to purchase an aggregate of 2,579,800 shares of Common Stock were outstanding under the Company's Stock Option Plan, and 1,577,700 of these shares which are acquired upon exercise of options within 180 days of this Prospectus are subject to the 180 day lock-up described above. See "Management--Stock Option Plan." Following the closing of this Offering, the Company intends to register on Form S-8 under the Securities Act shares of Common Stock issuable under the Stock Option Plan. Such registration will be effective upon its filing. See "Shares Eligible For Future Sale."
BLANK CHECK PREFERRED STOCK
Pursuant to the Certificate of Incorporation, additional shares of preferred stock may be issued in the future by the Company without stockholder approval and upon such terms and conditions, and having such rights,
12 privileges and preferences, as the Board may determine in the exercise of its business judgment. The rights of the holders of Common Stock will be subject to, and may be adversely affected by, any preferred stock that may be issued in the future. The issuance of additional preferred stock, while providing desirable flexibility in connection with possible acquisitions, financings and other corporate transactions, could have the effect of discouraging, or making more difficult, a third party's acquisition of a majority of the Company's outstanding voting stock. The Company has no present plans to issue any additional shares of preferred stock. See "Control by Existing Stockholder" and "Description of Capital Stock--Preferred Stock."
NO PRIOR PUBLIC MARKET; DETERMINATION OF PUBLIC OFFERING PRICE; POSSIBLE VOLATILITY OF STOCK PRICE
Prior to the Offering, there has been no public market for the Common Stock, and there can be no assurance given as to (i) the liquidity of the trading
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document market for the Common Stock, (ii) whether an active public market will develop for the Common Stock or (iii) whether the Common Stock will trade in the public market subsequent to the Offering at or above the initial public offering price. If an active public market for the Common Stock does not develop, the market price and liquidity of the Common Stock may be materially and adversely affected. The initial public offering price of the Common Stock offered hereby was determined by negotiations among the Company and the Underwriters and may not be indicative of the market price for the Common Stock after the Offering. See "Underwriting." The trading price of the Common Stock could be subject to wide fluctuations in response to variations in the Company's quarterly operating results, changes in earnings estimates by securities analysts, conditions in the Company's businesses or general market or economic conditions. In addition, in recent years the stock market has experienced extreme price and volume fluctuations. These fluctuations have had a substantial effect on the market prices for many emerging growth companies, often unrelated to the operating performance of the specific companies. Such market fluctuations could have a material adverse effect on the market price of the Common Stock.
DILUTION TO NEW INVESTORS
Investors purchasing shares of Common Stock in the Offering will experience immediate and substantial dilution in net tangible book value. Prior to this Offering each outstanding share of Common Stock has a negative net tangible book value of $3.81, and after the Offering will have a negative net tangible book value of $0.35. The net tangible book value dilution to purchasers of Common Stock in this Offering will be $11.35 per share. See "Dilution." To the extent outstanding options to purchase the Company's Common Stock are exercised, there will be further dilution. See "Management--Stock Option Plan."
HOLDING COMPANY STRUCTURE
The Company is a holding company with no business operations of its own. The Company's only material asset is all of the outstanding capital stock of CCC, which is pledged pursuant to a guaranty of the 1994 bank credit facility. Accordingly, the Company will be dependent on dividends and distributions from CCC to pay its expenses and to pay any cash dividends or distributions on the Common Stock that may be authorized by the Board of Directors of the Company. There can be no assurance that CCC will generate sufficient cash flow to pay dividends or distribute funds to the Company or that applicable state law and contractual restrictions, including negative covenants contained in the debt instruments of CCC, will permit such dividends or distributions.
13
DIVIDEND POLICY
The Company has never declared or paid any cash dividends on its Common Stock. The Company currently intends to retain any future earnings for funding growth and, therefore, does not anticipate paying any cash dividends in the foreseeable future. Furthermore, covenants in the 1994 bank credit facility prohibit the payment of cash dividends on Common Stock.
As of June 30, 1996, dividends in the approximate amount of $2.2 million at a rate of 2.75% had accrued on the Redeemable Preferred Stock. Redeemable Preferred Stock totalling $27.6 million, including accrued dividends thereon of $1.5 million, is being redeemed with a portion of the proceeds of this Offering. The interest rate represented by the accrued dividends and accretion is approximately 9%. So long as any shares of Redeemable Preferred Stock remain outstanding, the Company cannot declare and pay dividends on the Common Stock.
On June 6, 1996 the Board of Directors of the Company approved a distribution to stockholders of record of the Company of 40,000 shares and options to purchase 50,000 additional shares of the common stock of Faneuil ISG, Inc., which shares and options had been received by the Company in partial consideration of the sale by the Company to Faneuil ISG, Inc. of certain business assets in August 1994. The distributed shares and options were recorded on the books of the Company at cost with a carrying value of $530,000. Purchasers of Common Stock offered hereby will not participate in this distribution.
14
DILUTION
The net tangible book value of the Company at June 30, 1996, was a negative $63.0 million, or a negative $3.81 per share. "Net tangible book value per share" represents the amount of total tangible assets less total liabilities divided by the number of shares of Common Stock outstanding. Without taking into account any other changes in the net tangible book value after June 30, 1996, other than to give effect to the receipt by the Company of the net proceeds from the sale of 5,500,000 shares of Common Stock offered hereby at an assumed
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document initial public offering price of $11.00 per share, the net tangible book value of the Company at June 30, 1996 would have been negative $7.8 million or a negative $0.35 per share. This represents an immediate increase of net tangible book value of $3.46 per share to existing stockholders and an immediate dilution of $11.35 per share to new investors. The following table illustrates this per share dilution:
------
(1) If the Underwriters' over-allotment option is exercised in full, the net tangible book value per share would be approximately $0.03, resulting in dilution to new investors in this Offering of $10.97 per share.
The following table summarizes, on a pro forma basis as of June 30, 1996, the differences between existing stockholders and new investors purchasing shares of Common Stock in the Offering (at an assumed initial public offering price of $11.00 per share) with respect to the number of shares of Common Stock purchased from the Company, the total consideration paid and the average price per share paid:
------
(1) Excludes certain transactions totalling $3,926,000 not involving stockholder cash consideration.
The computations in the above table are determined before deducting the underwriting discount and estimated offering expenses payable by the Company. Both tables set forth in this section assume no exercise of outstanding stock options. At June 30, 1996, options to purchase 2,579,760 shares of Common Stock were outstanding with a weighted average exercise price of $2.64 per share. To the extent outstanding options are exercised, there will be further dilution to new investors. See "Management--Stock Option Plan."
15
USE OF PROCEEDS
The net proceeds from the sale by the Company of the Common Stock offered hereby will be approximately $55.2 million (or approximately $63.6 million if the Underwriters' over-allotment option is exercised in full) based on an assumed initial public offering price of $11.00 per share and after deducting underwriting discounts and commissions and estimated offering expenses. The Company intends to use approximately $27.6 million of such net proceeds to repay a portion of the outstanding indebtedness of CCC under the 1994 bank credit facility of which the Company is the guarantor. The agent lender under the 1994 bank credit facility is Canadian Imperial Bank of Commerce. The Company also intends to use the remaining net proceeds of approximately $27.6 million of such net proceeds to redeem a portion of the Redeemable Preferred Stock.
At June 30, 1996 there was $27.8 million outstanding under the 1994 bank credit facility (a $22.3 million term loan and a $5.5 million revolving loan). Loans under the 1994 bank credit facility bear interest at either (i) a base rate (set by the bank from time to time) plus 1.5%, or (ii) the Eurodollar rate
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document plus 3.0%, as chosen from time to time by CCC. The average interest rate in effect during the year ended December 31, 1995 was 9.15% for the term loan and 9.03% for the revolving credit facility; at June 30, 1996, the rates in effect for these facilities were 8.6% and 8.8%, respectively. The obligations under the 1994 bank credit facility mature in March 1999 (with respect to the term loan) and in April 1999 (with respect to the revolving loan) and are guaranteed by the Company.
The Company is considering the refinancing of that portion of the indebtedness under the 1994 bank credit facility not repaid with the proceeds of this Offering on or prior to the closing of the Offering by causing CCC to enter into a new bank credit facility with Signet Bank. See "Management's Discussion and Analysis of Financial Condition and Results of Operations -- Liquidity and Capital Resources."
CAPITALIZATION
The following table sets forth the consolidated capitalization of the Company as of June 30, 1996, and as adjusted to reflect (i) the net proceeds to be received by the Company from the sale of Common Stock offered hereby at an assumed initial public offering price of $11.00 per share and (ii) the application of the net proceeds of the Offering to redeem a portion of the Redeemable Preferred Stock (at stated value plus accrued dividends thereon) and to repay a portion of the Company's existing indebtedness under the 1994 bank credit facility (including accrued interest).
------
(1) Excludes 2,777,920 shares reserved for issuance under the Stock Option Plan pursuant to which options have been granted covering 2,579,760 shares and 198,160 shares are available for issuance at a weighted average exercise price of $2.64 per share.
16
SELECTED CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
The selected consolidated financial data presented below as of and for each of the three years ended December 31, 1995 are derived from the consolidated financial statements of the Company, which have been audited by Price Waterhouse LLP, independent certified public accountants. The consolidated financial statements as of December 31, 1994 and 1995, and for each of the years in the three years ended December 31, 1995, together with the Price Waterhouse LLP report thereon, are included elsewhere in this Prospectus. The selected consolidated financial data presented below as of and for the years ended December 31, 1991 and 1992, and as of and for the six months ended June 30, 1995
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and 1996 are unaudited but have been prepared on the same bases as the audited financial statements and, in the opinion of management, contain all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the results of operations and financial condition for such periods. The results of operations presented below are not necessarily indicative of results to be expected for any future period. The selected consolidated financial data should be read in conjunction with Management's Discussion and Analysis of Financial Condition and Results of Operations, the consolidated financial statements and notes thereto, and the unaudited pro forma consolidated financial data included elsewhere in this Prospectus.
17
------
(1) The Company accounted for its interest in the Joint Venture under the equity method of accounting prior to acquiring the remaining interest in the Joint Venture, effective March 30, 1994.
(2) Adjusted to reflect (i) receipt by the Company of the net proceeds to be received from the sale of Common Stock offered hereby at an assumed initial public offering price of $11.00 per share and (ii) the application of the net proceeds of the Offering to repay existing indebtedness under the Company's 1994 bank credit facility in the principal amount of approximately $27.2 million (or approximately 98% of the principal amount outstanding), plus accrued interest of approximately $0.4 million and to redeem Redeemable Preferred Stock with a stated value of approximately $26.1 million (or approximately 67% of the stated value outstanding), plus accrued dividends of approximately $1.5 million. With regard to redemption of the Redeemable Preferred Stock, the adjustments reflect acceleration of the unaccreted portion of the original preferred stock discount as a charge to stockholders' equity (deficit). There is no income tax benefit associated with the accelerated accretion. With regard to repayment of a portion of the 1994 bank credit facility, the adjustments reflect deferred debt issue costs, net of related income tax benefits, as a charge to stockholders' equity (deficit). The deferred debt issue cost write-off will be charged against earnings, as an extraordinary item, net of tax, in the period in which a portion of the 1994 bank credit facility is
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document repaid. Based on an assumed public offering price of $11.00 per share, this charge is estimated to be $0.9 million before income taxes.
18
UNAUDITED PRO FORMA CONSOLIDATED FINANCIAL DATA (IN THOUSANDS, EXCEPT PER SHARE DATA)
The following table sets forth statement of operations data and per share data of the Company for the year ended December 31, 1995 and for the six months ended June 30, 1995 and 1996, and as adjusted to reflect, as if occurring on January 1, 1995, (i) receipt by the Company of the net proceeds from the sale of Common Stock offered hereby at an assumed initial public offering price of $11.00 per share and (ii) the application of the net proceeds of the Offering to repay a portion of the Company's existing indebtedness under the 1994 bank credit facility and to redeem a portion of the Redeemable Preferred Stock.
------
(1) The litigation settlement had an after tax value of $2.8 million.
(2) Pro forma interest expense gives effect to the Offering as of January 1, 1995 and the associated elimination of interest expense of $2.5 million, $1.2 million and $1.2 million for the periods ending December 31, 1995, June 30, 1995 and June 30, 1996, respectively, resulting from the repayment of a portion of the Company's existing indebtedness under the 1994 bank credit facility of $27.6 million. Pro forma interest expense also reflects the elimination of amortization associated with the write-off of deferred debt issue costs as a result of the early retirement of debt amounting to $0.4 million, $0.2 million and $0.2 million respectively, for such periods.
(3) Pro forma income taxes gives effect to the tax effect of the interest rate adjustments described in Note 2.
(4) Pro forma dividends and accretion on Redeemable Preferred Stock reflects the pro rata elimination of such dividends and accretion.
19
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF CONTINUING OPERATIONS
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Company's results from continuing operations, for the periods indicated, are set forth below:
OVERVIEW
The Company is a leading supplier of automobile claims information and processing, claims management software and value-added communication services. The Company's customers include each of the 50 largest U.S. automobile insurance companies, over 250 other automobile insurance companies and more than 8,500 collision repair facilities. The Company's technology-based services and products improve efficiency, manage costs and increase consumer satisfaction in the management of automobile claims and restoration.
The Company sells its products to two primary customer markets: insurance companies (approximately 70% of revenue in 1995) and collision repair facilities. In addition, certain Company products and services are aimed at improving the efficiency of both markets by enabling the two groups to communicate electronically. The Company's principal products for the insurance market are its TOTAL LOSS vehicle valuation services, used to estimate the value of unrepairable vehicles, and its EZEST collision estimating software, used to estimate the cost of repairing vehicles. The Company also offers insurers access to EZNET, its communications network. The Company has recently introduced its PATHWAYS workflow management software, which integrates the Company's information and software products into a total workflow management solution for insurance field appraisal staffs. The Company offers insurers its ACCESS claims service, an integrated appraisal and restoration management service. The Company's principal product for collision repair facilities is its EZEST collision estimating software.
TOTAL LOSS services, generally obtained through direct dial-up access to the Company's host-based valuation system, are billed to insurance companies on a per valuation basis or under contract terms that specify fixed fees for a prescribed number of transactions. Volume discounts affect pricing. PATHWAYS collision estimating and EZEST customer subscriptions are billed monthly in advance. EZNET communication services are generally priced on a per transaction basis. ACCESS services are billed monthly to insurance companies and collision repair facilities on a per transaction basis. Monthly subscription and transaction rates for all products and
20 services are established under negotiated contracts or pricing agreements. In general, customer account balances are settled monthly. Under the terms of certain contracts involving quarterly or annual prepayments, deferred revenues are recorded and subsequently recognized over the periods in which related revenues are earned.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document For the year ended December 31, 1995, approximately $59.8 million, or 52%, of the Company's revenues were earned under contracts with customers that specify minimum purchase requirements. Contracts are generally for two to three years. A substantial portion of the Company's remaining revenue represented sales to customers that have been doing business with the Company for more than 10 years. Use of multi-year contracts is common practice within the industry, making it difficult to take customers from competitors during the contract term.
A substantial portion of the Company's production and customer support and general and administrative expense is fixed in nature. Sales commissions, royalties, license fees and certain selling expenses generally vary with revenue.
As a result of debt incurred in connection with the Company's 1988 acquisition of CCC, the Company became highly leveraged. The Company's ability to invest in new product development and conduct its business in accordance with its business plan was constrained by the limitations imposed by its acquisition borrowings. The Company formed CCCDC to develop the EZEST collision estimating software. To finance EZEST development and marketing efforts, the Company relied on the sale of revenue streams from certain end-user collision estimating contracts. These contract funding transactions provided essential liquidity until June 1994, when the Company completed a recapitalization. In connection with this recapitalization, White River acquired $39 million of Redeemable Preferred Stock, and 7,050,850 shares of Common Stock, and CCC entered into the 1994 bank credit facility which is guaranteed by the Company. White River immediately resold $1,462,000 of the Redeemable Preferred Stock (3.8% of the outstanding Redeemable Preferred Stock) and 264,407 shares of the Common Stock (1.4% of the total outstanding Common Stock) to two investment partnerships affiliated with Hambrecht & Quist LLC. See "Underwriting." Prior to April 1994 the Company accounted for its interest in CCCDC under the equity method. In 1994, the Company acquired the 50% of CCCDC that it did not previously own. Since the acquisition, the Company has consolidated CCCDC.
The Redeemable Preferred Stock includes certain rights set forth in detail in "Description of Capital Stock--The Redeemable Preferred Stock" and "--The Series E Preferred Stock." In particular, the Series C Preferred Stock includes the rights (i) to elect a majority of directors of the Company in the event of a default in a redemption or dividend payment obligation, if White River and its affiliates then own at least 50% of the outstanding Series C Preferred Stock and (ii) in the event that the Company or a subsidiary fails to pay when due or during any applicable grace period or in the event that notice of acceleration of the maturity or required prepayment and demand for payment is received by the Company or any subsidiary, in either case with respect to indebtedness in the aggregate amount in excess of $500,000, the right on the part of the holders of a majority of the then outstanding Series C Preferred Stock to determine in their sole discretion the action to be taken on behalf of the Company with respect to such indebtedness. The Series E Preferred Stock, if and when issued to and held by White River and its affiliates, will permit White River to cast 51% of the votes to be cast on any matter to be voted on by the holders of Common Stock, subject to reductions in the event that either the Company redeems part of the outstanding Series E Preferred Stock or White River and its affiliates no longer hold all of such stock.
The principal payment obligations and the restrictive covenants of the 1994 bank credit facility have continued to constrain the Company's operating activities. During the first half of 1996, the Company did not incur certain operating expenditures and make certain investments that it would have made in the absence of the 1994 bank credit facility covenants. As a result of these delayed expenditures, the Company believes that its operating income increased during the first half of 1996 by between $0.8 million and $1.0 million. As a result, from a staff training and infrastructure perspective, the Company is currently less prepared than it otherwise would have been to service new software subscription customers should such customers buy the Company's services and products.
21
Depreciation expense includes depreciation attributable to certain software acquired through the Company's acquisition of the joint venture interest in CCCDC. In the purchase price allocation for the CCCDC acquisition, $5.2 million was assigned to purchased software with a two year life, $13.8 million was assigned to in-process research and development software projects, $6.6 million was assigned to acquired tangible assets and the balance of $3.7 million was assigned to goodwill. The amount assigned to in-process research and development was charged against operating results at the time of the acquisition. As a result of expiration of the purchased software's two year life as of March 31, 1996, purchased software depreciation of approximately $2.6 million in 1995 will
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document decline to approximately $0.7 million in 1996.
Research and development expense, which is principally the design and development of new software and information products, is expensed as incurred. Software development costs, if material, are capitalized when sufficient evidence exists that technological feasibility has been established. There were no significant software development costs subject to capitalization during the three years ended December 31, 1995 or during the six months ended June 30, 1996. The Company believes that its future success depends on its ability to enhance its current services and products and to develop new services and products that address the needs of its customers. As a result, the Company has in the past and intends to continue to commit substantial resources to product development and programming. Over the past two years ended December 31, 1995 the Company expended approximately $24.9 million for product development and programming.
The Company has offset the income tax benefit attributable to a portion of the Company's future income tax deductions with tax valuation allowances because of the Company's recent history of operating losses and an inability to project future taxable income with certainty. This treatment increased the Company's overall effective income tax rate in the years the deferred income tax valuation allowances were provided. Such valuation allowances, $5.0 million at December 31, 1995, have been and will continue to be released to income and therefore reduce the effective tax rate if and to the extent the Company is able to successfully achieve a recapitalization through the Offering and demonstrate a predictable pattern of profitablity.
Despite its accumulated deficit, as of December 31, 1995, the Company's net operating loss carryforwards totaled only $0.3 million. This disparity is attributable to the lack of tax basis for certain past operating charges. Since inception, the Company has charged against earnings: (i) goodwill amortization related to acquired businesses in the amount of approximately $32.5 million, (ii) purchased in-process research and development software projects of approximately $13.8 million and (iii) purchased software amortization of approximately $4.6 million. The Offering will not result in a change in control for income tax purposes that would limit the use of the net operating loss carryforwards. In addition, as of December 31, 1995, the Company had no research investment credit carryforwards.
22
RESULTS OF CONTINUING OPERATIONS AS A PERCENTAGE OF REVENUE
The Company's results from continuing operations, as a percentage of revenue for the periods indicated, are set forth below:
SIX MONTHS ENDED JUNE 30, 1996 COMPARED WITH SIX MONTHS ENDED JUNE 30, 1995
REVENUES. Total revenues increased by $6.7 million, or 11.8%, due primarily to higher revenues from collision estimating software licensing, from EZNET and from ACCESS claims services which offset lower revenues from the Company's TOTAL LOSS services. Collision estimating software licensing revenue increased primarily because of an increase in the number of software licenses principally to collision repair facilities. This volume increase more than offset a reduction in prices caused by competitive pressures. The increase in EZNET revenue was due to additional EZNET network and recycled part locator transactions, both at a slightly higher average price per transaction. The increase in ACCESS claims services was due primarily to higher transaction volume. The decrease in TOTAL LOSS revenue resulted from a reduction in transaction volume offset in part by a higher average price per transaction.
PRODUCTION AND CUSTOMER SUPPORT. Production and customer support decreased from $16.3 million, or 28.9% of revenues, to $15.5 million, or 24.5% of revenues, due primarily to the Company's efforts to reduce production costs.
COMMISSIONS, ROYALTIES AND LICENSE FEES. Commissions, royalties and license fees increased from $5.6 million, or 9.8% of revenues, to $6.7 million, or 10.5% of revenues. The increase in such expenses as a percent of revenues was due primarily to higher revenues from the licensing of collision estimating software which generates both a sales commission and a data royalty.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative increased from $17.7 million, or 31.3% of revenues, to $19.0 million, or 30.1% of revenues. In the first half of 1996, the Company incurred a charge of approximately $0.9 million related to the severance of a former senior executive. During this same period, the Company did not incur certain operating expenditures and make certain investments that it would have made in the absence of the 1994 bank credit facility covenants. These actions substantially offset the recorded severance charge.
23
PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and programming increased from $7.0 million, or 12.4% of revenues, to $8.1 million, or 12.7% of revenues. The increase was due primarily to greater investment in product development and wage pressure associated with hiring and retaining software engineers.
INTEREST EXPENSE AND INCOME TAXES. Interest expense declined from $3.1 million to $2.0 million, due primarily to lower average borrowings outstanding. The effective income tax rate for the 1996 period was 20.0%, resulting primarily from the release of certain deferred income tax valuation allowances. See Note 6 to the Consolidated Financial Statements.
1995 COMPARED WITH 1994
REVENUES. Total revenues increased by $23.6 million, or 25.7%. The total revenue increase includes the effect of consolidating CCCDC for a full year in 1995, versus use of the equity method during the first quarter of 1994 when CCCDC recorded revenues of $11.4 million. Had CCCDC been consolidated for all of 1994, the 1995 over 1994 revenue increase would have been $13.3 million, or 13.0%. This increase in revenue was primarily attributable to higher revenues from collision estimating software licensing, from EZNET and from ACCESS claims services. Collision estimating software licensing revenue increased primarily because of an increase in the number of software licenses, particularly in the collision repair facility market. TOTAL LOSS valuation service revenues were down slightly, reflecting lower volume. In addition, sales of other products increased, reflecting new product introductions. The increase in EZNET revenues was due to additional EZNET network and recycled part locator transactions, with EZNET at a slightly higher average price per transaction. The increase in revenues for ACCESS claims services was due primarily to higher transaction volume.
COMMISSIONS, ROYALTIES AND LICENSE FEES. Commissions, royalties and license fees increased from $7.2 million, or 7.8% of revenues, to $11.7 million, or 10.1% of revenues. This increase in such expenses as a percent of revenues was due primarily to a change in the mix of products sold, including higher revenues from the licensing of collision estimating software, which generates both a sales commission and a data royalty. The increase in revenue from licenses of collision estimating software resulted from higher volume together with the effect of consolidating CCCDC for all of 1995.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative increased from $33.4 million, or 36.4% of revenues, to $36.3 million, or 31.4% of revenues. This increase is attributable primarily to higher salaries and
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document travel expense associated with the Company's sales force. The decline in expense as a percentage of revenue is due to the increase in revenues, including the effect on revenues of consolidating CCCDC for all of 1995, and the fixed nature of certain general and administrative expenses.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from $8.3 million, or 9.1% of revenues, to $9.6 million, or 8.3% of revenues, due primarily to the acquisition of CCCDC, effective March 30, 1994. As a result of the acquisition, purchased software amortization, goodwill amortization and depreciation expense increased $0.7 million, $0.1 million and $1.1 million, respectively.
PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and programming increased from $10.1 million, or 10.9% of revenues, to $14.9 million, or 12.9% of revenues. The increase was due predominantly to greater investment in product development, relating in large part to the Company's PATHWAYS software, and wage pressure associated with hiring and retaining software engineers. The increase in these expenses as a percent of revenues also reflects the effect of consolidating CCCDC for all of 1995.
PURCHASED RESEARCH AND DEVELOPMENT. In the CCCDC purchase price allocation, $13.8 million was assigned to in-process research and development projects. The amount assigned to in-process research and development software projects was charged against operating results at the time of the acquisition. See Note 4 to the Consolidated Financial Statements.
INTEREST EXPENSE AND INCOME TAXES. Interest expense declined from $7.8 million to $5.8 million, due primarily to lower average borrowings outstanding, reflecting the Company's June 1994 recapitalization, including the White River transaction. The income tax benefit attributable to continuing operations declined from $2.7 million to $0.3 million, due primarily to improvements in results from continuing operations. See Note 6 to the Consolidated Financial Statements.
24
LITIGATION SETTLEMENT. The litigation settlement charge of $4.5 million was recorded to provide for resolution of litigation involving a corporate publisher of used car valuation books. This matter was settled in April 1996, however, the original settlement charge was sufficient to provide for the ultimate settlement. In June 1994 litigation involving an independent corporate provider of guidebook data was settled. Under the settlement agreement the Company agreed to pay the provider $1.75 million. See Note 15 to the Consolidated Financial Statements.
1994 COMPARED WITH 1993
REVENUES. Total revenues increased by $40.7 million, or 79.3%, due primarily to higher revenues from collision estimating software licensing and the effect of consolidating CCCDC for the last three quarters of 1994. CCCDC revenues for the last three quarters of 1994 totaled $39.3 million, of which $31.3 million was attributable to collision estimating software licensing. Increased volume in collision estimating software licensing was offset in part by continuing competitive price pressures. In addition, revenues from total loss valuation services increased, reflecting increased volume. Increased revenues from sales of other products also contributed to growth in revenues.
PRODUCTION AND CUSTOMER SUPPORT. Production and customer support increased from $15.1 million, or 29.5% of revenues, to $25.1 million, or 27.3% of revenues. The increase in these expenses reflects principally the effect of consolidating CCCDC for the last three quarters of 1994.
COMMISSIONS, ROYALTIES AND LICENSE FEES. Commissions, royalties and license fees increased from $1.1 million, or 2.1% of revenues, to $7.2 million, or 7.8% of revenues. This increase was due primarily to a change in the mix of products sold, including higher revenues from the licensing of collision estimating software and the effect of consolidating CCCDC. Collision estimating revenue generates both a sales commission and a data royalty.
SELLING, GENERAL AND ADMINISTRATIVE. Selling, general and administrative increased from $22.9 million, or 44.7% of revenues, to $33.4 million, or 36.4% of revenues, reflecting primarily the growth in the Company's revenues, including the effect of consolidating CCCDC revenues for the last three quarters of 1994.
DEPRECIATION AND AMORTIZATION. Depreciation and amortization increased from $2.2 million, or 4.2% of revenues, to $8.3 million or 9.1% of revenues, due primarily to the acquisition of CCCDC, effective March 30, 1994. As a result of the acquisition, purchased software amortization, goodwill amortization and depreciation expense increased $2.0 million, $0.4 million and $3.4 million, respectively.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document PRODUCT DEVELOPMENT AND PROGRAMMING. Product development and programming increased from $3.0 million, or 5.8% of revenues, to $10.1 million, or 10.9% of revenues. The increase was due primarily to expenditures related to the Company's PATHWAYS product line, and wage pressure associated with retaining software engineers. This increase also reflected the effect of consolidating CCCDC during the last three quarters of 1994.
PURCHASED RESEARCH AND DEVELOPMENT. In the CCCDC purchase price allocation, $13.8 million was assigned to in-process research and development projects. The amount assigned to in-process research and development software projects was charged against operating results at the time of the acquisition. See Note 4 to the Consolidated Financial Statements.
LOSS ON LEASE TERMINATION. Loss on lease termination represents the present value of future minimum lease payments under the Company's prior corporate office lease and other related expenses.
LITIGATION SETTLEMENT. In June 1994 the litigation involving an independent corporate provider of guidebook data was settled. Under the settlement agreement the Company agreed to pay the provider $1.75 million. See Note 15 to the Consolidated Financial Statements.
EQUITY IN LOSS OF CCCDC. Equity in loss of CCCDC declined from $3.6 million to $0.6 million. This decrease reflects both the effect of consolidating CCCDC for the last three quarters of 1994 and improvements in results of operations of CCCDC.
25
INTEREST EXPENSE AND INCOME TAXES. Interest expense increased from $6.9 million to $7.8 million, due primarily to higher average borrowings outstanding. This increase results primarily from interest expense attributable to contract funding operations by CCCDC which was consolidated for the last three quarters of 1994, offset in part by lower average borrowings reflecting the Company's June 1994 recapitalization, including the White River transaction. The income tax benefit attributable to continuing operations increased from $1.8 million to $2.7 million, due primarily to an increase in losses from continuing operations. See Note 6 to the Consolidated Financial Statements.
SELECTED QUARTERLY FINANCIAL RESULTS
The following table sets forth unaudited consolidated statements of operations for the ten quarters ended June 30, 1996, as well as such data expressed as a percentage of the Company's total revenues for the periods indicated. These quarterly statements of operations have been prepared on a basis consistent with the audited financial statements contained elsewhere in this Prospectus. They include all adjustments, consisting only of normal recurring adjustments, necessary for a fair presentation of the quarterly results of operations, when such results are read in conjunction with the audited financial statements and notes thereto appearing elsewhere in this Prospectus. The operating results for any quarter are not necessarily indicative of results for any future period.
------(1) The Company accounted for its interest in the Joint Venture under the equity method of accounting prior to acquiring the remaining interest, effective March 30, 1994.
(2) See Note 4 to the Consolidated Financial Statements.
(3) See Note 15 to the Consolidated Financial Statements.
(4) Interest expense in the second quarter of 1994 includes loan origination points of $0.3 million related to the bridge loan used to acquire the Joint Venture interest.
26
------(1) The Company accounted for its interest in the Joint Venture under the equity method of accounting prior to acquiring the remaining interest, effective March 30, 1994.
(2) See Note 4 to the Consolidated Financial Statements.
(3) See Note 15 to the Consolidated Financial Statements.
(4) Interest expense in the second quarter of 1994 includes loan origination points of $0.3 million related to the bridge loan used to acquire the Joint Venture interest.
The increase in quarterly operating expenses as a percentage of revenues over the last two quarters of 1995 versus the same quarters in 1994 is attributable primarily to an increase in systems development and programming and a change in mix of products sold. The decline in operating expenses as a percentage of revenues in the first half of 1996 versus the first half of 1995 is attributable to higher revenues and deferral of certain planned operating expenditures that the Company would have made in the absence of the 1994 bank credit facility covenants.
The Company's revenues and operating results have fluctuated in the past and are expected to continue to fluctuate in the future, on both an annual and quarterly basis. This fluctuation is attributable to a number of factors, including, but not limited to: demand for the Company's products and services, including new and enhanced products and services, the mix of products and services sold, the hiring and compensation of employees, the timing of promotional expenditures and competitive conditions. Many of these factors are beyond the Company's control.
LIQUIDITY AND CAPITAL RESOURCES
The Company's principal liquidity requirements are for working capital to fund investments in equipment and software, and to repay indebtedness. For the six months ended June 30, 1996, net cash provided by operating activities was $8.7 million. This amount was net of $2.3 million of contract funding revenue amortization. The Company applied $1.8 million to purchase equipment and software and $6.4 million to reduce outstanding debt. For the year ended December 31, 1995, net cash provided by operating activities was $7.7 million. This amount was net of $10.1 million of net contract funding revenue
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document amortization. The Company applied $3.0 million to purchase equipment and software and $7.1 million to reduce debt. For the year ended December 31, 1994, net cash provided by continuing operations was nominal, net of $8.0 million of net contract funding revenue amortization. Net cash proceeds from borrowing were $15.0 million. The Company applied
27 cash from these sources to purchase $5.2 million of equipment and software. The Company's proceeds from the sale of discontinued operations, net of cash used by discontinued operations, was $1.6 million. In connection with the acquisition of the 50% joint venture interest in CCCDC that it did not previously own, the Company used $4.5 million in cash, net of cash acquired, and assumed liabilities in the amount of $22.4 million. For the year ended December 31, 1993, net cash provided by continuing operations was $6.0 million. The Company applied cash from continuing operations to principal payments of long-term debt of $4.5 million and the balance of $1.5 million to advances to the Joint Venture. The remainder of the Joint Venture advances were funded from available cash balances. The Company anticipates that its purchase of equipment and software will be approximately $6.1 million in 1996.
CCC entered into a bank credit facility arrangement with Canadian Imperial Bank of Commerce as agent in June 1994 in connection with a recapitalization of the Company. The Company has guaranteed CCC's obligations under the 1994 credit facility, which is secured by a lien on CCC's assets and stock. The 1994 bank credit facility is structured as a $30 million term loan and a $10 million revolving credit facility. The interest rate under the 1994 bank credit facility is a base rate (approximating the prime rate) plus 1.5% or the Eurodollar rate plus 3.0%, as selected by the borrower. The Company is negotiating a new credit facility with Signet Bank to replace the 1994 bank credit facility. The new credit facility would provide CCC with the ability to borrow under a $20 million revolving line of credit and give CCC the option to borrow up to $15 million under a term loan, provided that the gross proceeds of this Offering are not less than $50 million nor greater than $70 million. The Company intends to use the proceeds of this borrowing to repay a portion of the 1994 credit facility. If the new credit facility is not consummated by CCC, the 1994 bank credit facility will remain in place. The Company will guarantee CCC's obligations under the new credit facility, which will be secured by a lien on CCC's assets and stock. The interest rate under the new bank credit facility is the prime rate from time to time in effect or the Libor rate plus 1.5%, as selected by CCC.
In 1994 White River acquired $39.0 million of the Company's Redeemable Preferred Stock in connection with the Company's recapitalization. A portion of the Redeemable Preferred Stock will be redeemed from the proceeds of this Offering at its stated value plus accrued dividends.
The Company continues to review various financing alternatives. The Company believes that cash flows from operations and available bank lines of credit will be sufficient to meet its liquidity needs in the next year. There can be no assurance, however, that the Company will be able to satisfy its liquidity needs in the future without engaging in financing activities beyond those described above. See "Risk Factors -- Financial Position; Negative Working Capital; Potential Financing Needs."
28
BUSINESS
GENERAL
The Company is a leading supplier of automobile claims information and processing, claims management software and value-added communication services. The Company's customers include each of the 50 largest U.S. automobile insurance companies, over 250 other automobile insurance companies and more than 8,500 collision repair facilities. The Company's technology-based services and products improve efficiency, manage costs and increase consumer satisfaction in the management of automobile claims and restoration. The Company believes that its core competencies include the efficient collection and processing of claims and automobile valuation and repair data, development of advanced client-server, object-oriented claims software products, management of a value-added communications network, understanding the workflow processes of automobile claims and marketing through a customer-oriented field sales and service organization.
The Company's services and products automate the process of evaluating and settling both total loss and repairable automobile claims. The Company's TOTAL LOSS services and products provide insurance companies the ability to effect total loss settlements on the basis of market-specific vehicle values. The Company's collision estimating services and products provide insurance appraisers and collision repair facilities with up-to-date pricing, interactive decision support and computer-assisted logic to produce accurate collision repair estimates. Communication services offered by the Company connect
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document insurers, appraisers and collision repair facilities, providing the information required to make appropriate and timely decisions. The Company also provides a wide variety of related services and products intended to facilitate the overall management of the automobile claims process. The Company's PATHWAYS workflow management software is designed to integrate each of the Company's product offerings on a common platform with a common graphical user interface, facilitating the learning of new applications while providing the Company's customers with a broader tool set for claims completion. The Company's services and products are an integrated solution that combines reliable information, advanced claims management software and value-added, secure communication systems to improve the efficiency of the automobile claims process.
The Company markets its services and products to the key participants in the automobile claims industry, including over 400 insurance companies and approximately 20,000 to 25,000 collision repair facilities. The Company sells its services and products to insurance companies through a 125 person direct sales force. The Company contracts with 85 independent sales representatives to sell its products to collision repair facilities. Over half of the Company's revenue for 1995 was for services and products sold pursuant to contracts, which generally have a two to three year term. A substantial portion of the Company's remaining revenue represented sales to customers that have been doing business with the Company for at least ten years. The Company's services and products are sold either on a monthly subscription or a per transaction basis.
OVERVIEW OF THE AUTOMOBILE INSURANCE CLAIMS PROCESS
Insurance premiums for U.S. private passenger automobiles totalled approximately $98 billion in 1994. The Company estimates that about 11 percent of automobile policy holders file claims each year on a total of approximately 20 million vehicles. In 1994 these claims resulted in payments totalling approximately $75 billion. Of this amount, approximately $35 billion was paid for automobile damage and loss claims, of which the Company estimates that $19 billion was paid to collision repair facilities, $13 billion was paid for total loss claims, and the remainder was paid for other comprehensive losses, for damage to other property and for settlement costs. These claims also resulted in payments for personal injuries of approximately $40 billion, including medical costs, lost wages, compensation for pain and suffering, attorney fees and settlement costs.
Automobile claims generally involve three types of participants: automobile insurance companies, service providers such as collision repair facilities and attorneys, and consumers. The interaction among these parties in the processing of a claim is referred to in this Prospectus as the "automobile claims industry." The Company believes that the claims process has historically been inefficient and contentious for the participating parties due in part to the lack of independently verifiable claims data and inefficient communications networks.
29
THE AUTOMOBILE INSURANCE INDUSTRY
Of the approximately 400 companies offering private passenger automobile insurance in the United States, the twenty largest providers account for over 60% of all automobile insurance premiums. Insurance companies compete principally on the basis of price, marketing, consumer satisfaction and claims paying ability. State agencies closely regulate the product offerings, claims processes and the premium structure of insurance companies. In addition, the laws of many states require motorists to carry liability insurance at specified minimum levels.
The automobile insurance industry is changing rapidly. The automobile insurance marketplace is experiencing price constraints as a result of increasing competition and regulatory activity. At the same time, policy holders are demanding ever higher levels of customer service. The growing complexity and sophistication of automobile design and engineering is increasing the actual repair cost (referred to in the industry as "severity") of collision claims. In addition, the personal injury component of automobile insurance claims is rising in part as a result of the increasing frequency of, and magnitude of, claims involving alleged bodily injury, including soft-tissue claims. Competitive pressures and resistance by policy holders and regulators to premium increases are causing insurance companies to focus on managing costs.
The Company believes that the insurance industry's focus on cost management has been accompanied by an increasing recognition that it is easier and more cost effective to retain an existing policy holder than to lure a new customer away from a competitor. Dissatisfaction with the claims handling process is a frequently cited cause of policy non-renewal.
THE COLLISION REPAIR INDUSTRY
The collision repair industry, which historically has been extremely fragmented, is consolidating. Approximately 63,500 collision repair facilities
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document were listed in telephone book advertisements in 1995, down from 71,000 such listings in 1992. Most collision repair facilities are owner-operated, single-location businesses which focus on a local market. The Company estimates that 20,000 to 25,000 collision repair facilities have annual revenues in excess of $300,000. These facilities tend to be larger, better capitalized and increasingly rely on professional and sophisticated management who are adopting new technology and wholesale marketing techniques to compete.
The costs to operate a collision repair facility have risen substantially over the past decade. Modern automobile designs coupled with extensive environmental regulations are forcing repair facilities to make significant capital investments in increasingly sophisticated equipment and better training. At the same time, insurance companies are looking to collision repair facilities to assist in cost containment.
Of the approximately $22 billion in total revenue earned by U.S. collision repair facilities in 1994, $19 billion, or 86%, was paid by insurance companies. Because so much of their revenue is derived from insurers, collision repair facility owners are increasingly shifting their marketing efforts from consumer-oriented advertising to wholesale marketing and insurance company referrals. For example, many collision repair facilities are seeking to capitalize on insurance industry-driven trends such as the growth in direct repair programs. A direct repair program, or DRP, allows an insured whose automobile is involved in a collision to have the repair performed within a pre-screened network of approved repair facilities. In order to participate in DRPs with major insurance companies, collision repair facilities must meet minimum standards for equipment, training and facilities. To ensure continued satisfaction at both the referring insurance company and consumer level, collision repair facilities must seek ways to improve productivity and optimize the workflow of the automobile repair process. In order to achieve these goals, collision repair facilities are making substantial investments in capital equipment and computer technology.
THE AUTOMOBILE CLAIMS PROCESS
Insurance companies generally handle automobile physical damage claims in one of three ways: through in-house staff appraisals, through direct repair programs and through independent adjustments.
STAFF APPRAISAL. The insurance industry employs staff appraisers and claims representatives who, the Company estimates, handle 70% to 75% of all automobile claims. Staff appraisers handle a broad range of claims
30 tasks, including appraisal, claims supplements, police reporting, total loss files, salvage processing and settlement payments. Based on the Company's internal estimates, staff appraisers typically handle twelve or more claims per day when in a drive-in facility and three to five claims per day when in the field. The Company believes that approximately 90% of insurance company staff appraisers use collision estimating software to prepare collision repair estimates. The Company estimates that the cost of a staff appraisal ranges from $50 to $65 and that the average severity of a staff-appraised claim in 1995 was $1,990.
DIRECT REPAIR PROGRAMS. Sixteen of the top twenty automobile insurers, including each of the five largest, offer a direct repair program. The Company estimates that 8% to 12% of all automobile claims are handled through a DRP, the fastest-growing method for handling automobile claims. The Company believes that DRPs present significant opportunities to both insurance companies and collision repair facilities to increase the satisfaction of their customers. Surveys demonstrate that DRPs result in higher consumer satisfaction than either of the other claims handling methods. In addition, by eliminating several days from the claims process, insurers utilizing DRPs reduce replacement rental car expense and eliminate the costs associated with dispatching an adjuster to appraise each vehicle. An automated DRP ensures accurate estimates, facilitates the use of alternate replacement parts and increases the productivity of auditors and reinspectors. The Company estimates that adjusters who formerly completed only three to five estimates per day under a staff appraisal program can review 20 to 25 claims per day under a DRP. Participating collision repair facilities gain volume and efficiency and reduce disputes with consumers and insurance companies. The Company believes that the cost of a DRP appraisal ranges from $10 to $15 and that the average severity of a DRP-appraised claim in 1995 was $2,029.
INDEPENDENT ADJUSTMENT. The Company estimates that independent claims adjusters handle 15% to 22% of all automobile claims. Independent adjusters offer their appraisal skills to a variety of insurance companies in a specific geographic location. Insurers typically outsource claims to independent adjusters where their market coverage does not justify hiring local staff or when the volume of work exceeds local capacity. The Company estimates that fewer than 10% of independent adjusters use automated collision estimating systems. The absence of automation, coupled with the lack of management reports and efficient inspection processes among independent adjusters, typically results in both the highest average severity per claim and the highest average claims
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document handling expense. The Company estimates that the cost of an independent appraisal ranges from $70 to $95 and that the average severity of an independently-appraised claim in 1995 was $2,320.
NEEDS AND OPPORTUNITIES IN THE AUTOMOBILE CLAIMS PROCESS
The Company believes trends in the automobile insurance industry create several identifiable needs. First, automobile insurers need to increase consumer satisfaction through faster, more efficient claims handling procedures. Second, insurance companies need to improve working relationships with their primary service providers through the exchange of auditable data and improved communication. Third, insurers need to integrate emerging technologies into their legacy mainframe hardware and software systems. Finally, smaller insurance companies need to become cost competitive with the major insurers by adopting solutions which provide benefits of economies of scale.
Trends in the collision repair industry also present collision repair facilities with several needs and opportunities. First, repair facilities need to secure a steady supply of customers through efficient marketing and greater connectivity to insurance companies. Second, repair facilities need to improve their operating efficiency, business management and repair processing through affordable information and decision making tools.
The Company believes there is also a need and market opportunity for improved management of bodily injury claims, the largest component of automobile claims settlement. In 1994 the cost of the 8.3 million claims for personal injuries totalled approximately $40 billion. These claims resulted in approximately 1.6 million lawsuits, of which 640,000 involved claims for soft tissue damage.
The Company believes that improvements in the automobile claims process will require that participants have ready access to data, decision making tools and efficient communications. As a result, there is a need for integrated, efficient solutions in the appraisal, repair and settlement processes which will speed repairs, assure consumer satisfaction and save money.
31
THE CCC SOLUTION
The Company's services and products are an integrated solution that combines proprietary information, advanced claims management software and value-added, secure communication systems to improve the efficiency of the automobile claims process. The Company's customers use its services and products to improve efficiency, control costs and increase consumer satisfaction in the handling of automobile claims. Connecting people, processes and information, the Company's technology-based services and products facilitate decision making among more than 300 insurance companies, more than 8,500 collision repair facilities and a wide range of business partners in the claims settlement process, including approximately 4,000 automobile dealers, 100 independent appraisal companies, parts suppliers, rental car agencies, fraud prevention agencies, salvage pools and recyclers. The Company's services and products aid claims industry participants in satisfying the consumer wherever settlement takes place, however the workflow is designed and whoever is managing the task. The Company provides these benefits through:
- efficient collection and processing of proprietary claims data
- advanced client-server architecture and object-oriented software applications
- value-added communications through its flexible network
- comprehensive knowledge of workflow processes in the automobile claims industry
- an aggressive market-driven field sales and service organization
INSURANCE INDUSTRY SOLUTIONS
The Company offers innovative solutions that provide insurance companies with decision control information and workflow tools to manage the process of adjusting and settling total losses and repairable collision claims. These solutions reduce claims costs, streamline claims processing and increase consumer satisfaction. The Company believes it is the leading provider of computerized claims-handling data and software to the insurance company total loss valuation and automobile physical damage collision estimating markets.
The Company's solutions automate each of the three major claims handling methods. To improve the staff appraisal process, the Company offers workflow management software which allows the insurance company to integrate any or all of the Company's specific claims management applications with the insurer's own legacy applications. To improve the direct repair process, the Company offers a suite of software and communication tools that automate the fastest-growing claims handling methodology and provide insurers management control of their
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document DRPs. To improve the outsourced appraisal process, the Company offers an alternative to independent adjusters which automates the assignment, collision estimate and management of the entire claims and restoration process.
COLLISION REPAIR INDUSTRY SOLUTIONS
The Company offers the collision repair industry a value-added, secure communications network which connects insurance companies and collision repair facilities in a cooperative and efficient partnership to satisfy consumer needs. The Company believes that its communication services and collision estimating software permit its customers to increase business flow, improve decision making, and increase operating efficiency. The process-control applications in the Company's network, which processed more than $2 billion in repairable automobile claims in 1995, improves and streamlines the automobile repair process. The Company also offers modular collision repair facility management software applications which enhance productivity and improve asset utilization.
THE CCC STRATEGY
The Company's objective is to enhance its position as a leading provider of business solutions to the automobile claims industry by pursuing the following business strategies:
GROW AND LEVERAGE INSTALLED USER BASE. The Company intends to enhance its leadership in the physical damage segment of the automobile insurance industry. The Company plans to increase market share by integrating new and existing applications into its workflow management software and by the continued emphasis on proactive field service and customer support.
32
The Company also intends to grow its presence in the collision repair industry by continuing to develop service and product offerings tailored to the needs of collision repair facilities. Specifically, the Company plans to enhance and expand its connectivity tools to facilitate the collision repair process and to grow the volume of repairs settled through both insurance company DRPs and through the Company's own claims management programs.
FOCUS ON LEADING INSURANCE COMPANIES. The Company believes that the leading automobile insurance carriers drive new product innovation and influence the buying decisions of participants in the claims process. Therefore the Company focuses resources on twenty of the leading automobile insurance carriers, which account for over 60% of total automobile insurance premiums and which have different needs from those of smaller insurers. The Company believes that the extent to which its services and products are widely accepted among the leading insurance companies will grow the Company's network of collision repair facility customers, which in turn will enhance the Company's relationships with other insurance companies.
CAPITALIZE ON TECHNOLOGY LEADERSHIP. The Company has made a substantial investment during the past two years in the development of an object-oriented software framework which includes several hundred reusable business and system objects. The PATHWAYS application suite is built on this framework. The Company intends to maintain its technology leadership in the claims adjustment and collision repair markets by continuing the evolution of its released applications into object-oriented software modules and by maintaining the quality and independence of its proprietary databases.
OFFER ALTERNATIVE TO INDEPENDENT ADJUSTER CLAIMS PROCESS. The Company believes that independent claims adjustment, which carries the highest severity and loss adjustment costs, presents a significant opportunity for an outsourced claims management solution. The Company intends to offer its appraisal and restoration management outsourcing solution as an alternative to independent adjustment to insurers seeking higher levels of consumer satisfaction, together with process and severity benefits.
BROADEN SCOPE OF CLAIMS MANAGEMENT SOLUTIONS. The Company intends to capitalize on its strong network of insurance company relationships, proprietary databases and technology tools by expanding the scope of its services to other areas of the automotive claims industry, including the processing and management of litigation alleging bodily injury arising from automobile collisions.
OFFER TOTAL OUTSOURCING SOLUTION. The Company intends to use its claims process management tools, together with the Company's growing network of service providers, to create an outsourced claims solution for insurance companies. The Company intends to offer its total outsourcing solution to small insurers which lack the size and scale to process claims efficiently.
33
SERVICES AND PRODUCTS
The Company's services and products are organized into the following product families: Insurance, Collision Repair and Other. The Company's services and products are integrated for use with one another across multiple platforms. The
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Company's services and products are designed for ease of use by the thousands of people involved in the automobile claims process on a daily basis. Approximately 70% of the Company's consolidated revenue for 1995 was from the sale of services and products to insurance companies with the remainder sold to collision repair facilities and other customers. Sales of total loss and related services and products accounted for 38.2%, and sales of collision estimating services and products accounted for 43.0%, of the Company's consolidated 1995 revenue.
34
35
TOTAL LOSS SERVICE. The Company's TOTAL LOSS service provides insurance companies the ability to effect total loss settlements on the basis of market-specific values based upon physically inspected used car inventories. The Company believes that its up-to-date vehicle database, which contains detailed information about millions of vehicles physically inventoried on over 4,000 dealer lots, or recently advertised, is the most comprehensive in North America. The Company uses its proprietary database and valuation software to provide insurance companies with independent, current, local, market-values and vehicle identification data. Each total loss valuation includes a vehicle identification search under VINGUARD, the Company's vehicle identification number fraud protection program which matches current claims against the Company's database of 15.5 million previously totaled or stolen vehicles. The Company processes about 1.5 million TOTAL LOSS claims per year.
EZEST COLLISION ESTIMATING. EZEST was the first stand-alone, PC-based collision estimating system utilizing P-page logic to automate the process of eliminating repair activity overlaps and automating all included operations and ancillary repair work in preparing an estimate. EZEST provides automobile insurers with fast and reliable estimates at a low cost. EZEST runs on any IBM-compatible laptop or desktop computer and contains all nine volumes of the Motor Crash Estimating Guide and other data necessary to build a quality estimate. The Company licenses the Motor Crash Estimating Guide data from a
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document subsidiary of The Hearst Corporation. A unique feature of EZEST is its recycled part valuation upgrade which will display and can automatically insert into the estimate a predicted price of those recycled or salvage automotive parts statistically known to be available in the local market in which the estimate is written. Approximately two-thirds of EZEST'S insurance users have purchased this upgrade. The EZEST software, Motor Crash Estimating Guide database and other associated databases are updated via a monthly CD-ROM. EZEST is sold on a monthly subscription basis to both insurers and collision repair facilities under multi-year contracts. The Company has approximately 13,000 units installed.
EZNET COMMUNICATIONS NETWORK. EZNET connects insurers with their appraisers and repair network partners. EZNET'S process management capabilities provide the information required to make appropriate and timely decisions, regardless of location or settlement process. EZNET is used principally for the complete electronic communication of work files and estimates to staff appraisers or DRP partners and for the receipt of auditable estimate data. EZNET is the only secure communications network tailored to provide value-added automated communication service to participants in the automobile physical damage claim process, including: mailboxing, library, messaging, intelligent routing, assignment tracking and third party gateways. A unique feature of EZNET is the electronic appraisal review feature which provides real-time exception reporting to target re-inspections and improves management control of DRP networks. EZNET also facilitates the management of car rental and salvage disposition. EZNET processes approximately 400,000 automobile physical damage claims each month. EZNET is sold both on a per transaction basis and on a monthly subscription basis.
PATHWAYS APPRAISER WORKSTATION SOFTWARE. In April 1996, the Company began delivery of PATHWAYS, its Windows-based appraiser workstation software designed to better serve the overall workflow needs of insurance field staffs. PATHWAYS offers a common, graphical user interface across all applications which organizes claims in tabbed, electronic workfiles and reduces the time required to learn or develop new software functions or applications. PATHWAYS includes a workflow manager which assists users in managing all aspects of their day-to-day activities, including receipt of new assignments, communication of completed activity, electronic file notes and reports as well as the automatic logging of key events in the claims process. The Company intends to integrate all of its existing field applications into this platform and develop all future field applications on PATHWAYS. PATHWAYS is fully integrated with the Company's value-added communications network, allowing adjusters to operate in the field, and thereby reduce office and other expenses. The initial PATHWAYS application is PATHWAYS COLLISION ESTIMATING which provides all of the functionality of the EZEST product while adding the functionality of total loss and settlement processing, claim payment, salvage disposal and custom electronic forms. The Company believes that the PATHWAYS system can reduce the field handled automobile claims process by about one day. The Company currently has 140 installations. PATHWAYS is sold on a monthly subscription basis under multi-year contracts.
ACCESS CLAIMS SERVICES. ACCESS is an outsourced vehicle appraisal and restoration management service. Insurance companies use ACCESS to appraise and settle claims without hiring either additional staff or independent appraisers. ACCESS uses a network of Company certified, fully equipped repair facilities and the
36
Company's claims management tools to provide fast, low cost claims settlement with high customer satisfaction. In addition, the Company provides reinspection and restoration management staff for quality assurance. ACCESS is sold on a per claim basis under multi-year agreements. The Company is currently processing 5,000 ACCESS claims per month.
EZFOCUS DIGITAL IMAGING. The EZFOCUS computerized digital photo imaging system allows automobile insurers and collision repairers to visually document vehicle damage and electronically communicate the image. This reduces claims cycle time while eliminating film cost and saving travel and overnight delivery expense.
GUIDEPOST DECISION SUPPORT. The Company recently added GUIDEPOST, an executive information and data navigation software package to its tool set. GUIDEPOST allows managers to electronically evaluate results, format reports, drill down for subject or personnel review and compare performance to industry and regional indices. GUIDEPOST is offered on a monthly CD and development for network delivery is underway. While introduced as an element of the Company's suite of electronic DRP and collision estimating tools, GUIDEPOST will be made available for all the Company's products, extending the integration of a multi-channel claims process.
ACCLAIM LITIGATION MANAGEMENT. ACCLAIM is an outsourcing service offered to insurance companies for the processing and management of defined soft-tissue bodily injury claims. ACCLAIM uses the Company's licensed case management software and information management tools in connection with a national network of lawyers to defend and dispose of lawsuits filed against insureds. ACCLAIM
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document services are sold to insurance companies on a fixed fee, per claim basis. ACCLAIM is currently in pilot program status.
CUSTOMERS
The Company's business is based on establishing close long-term relationships with the two primary users of the Company's services: automobile insurance companies and collision repair facilities. Over 300 automobile insurance carriers, including each of the top 50 insurance companies in the United States, are customers of the Company. Most of the Company's insurance customers are large, well capitalized businesses. State Farm, the Company's largest customer, accounted for 12.4%, 16.1% and 27.1% of the Company's total revenues for the three years ended December 31, 1995, 1994 and 1993, respectively.
Since first entering the collision repair market in 1992, the Company has secured over 8,500 collision repair facility customers. The Company has collision repair customers in all 50 states and in most major metropolitan markets. Many of these customers use the Company's services and products as a means to participate in insurance DRP programs, thereby making the use of the Company's services and products important to the customer's business growth.
Over half of the Company's revenue for 1995 was for services and products sold pursuant to contracts, which generally have a two to three year term. A substantial portion of the Company's remaining revenue represented sales to customers that have been doing business with the Company for at least ten years. The Company's services and products are sold either on a monthly subscription or a per transaction basis.
SALES AND MARKETING
The Company utilizes four different sales organizations to market and sell its services and products.
STRATEGIC CLIENT DIVISION. The Strategic Client Division comprises 34 national account managers ("NAMs") and 31 client service managers ("CSMs") who focus on the Company's overall relationships with the home and regional offices of twenty leading insurance companies. NAMs are experienced sales professionals charged with meeting customers' business needs with a consultative approach. NAMs are responsible for home office relationships through which most major and all company-wide contracts are signed and renewed. The CSMs were recruited from a variety of major consulting firms with backgrounds in workflow/process management and business systems analysis. The CSMs play a critical role in reviewing customer business practices to benchmark current operations and to identify opportunities for improvement. This serves the dual role of assisting customers in the operation of their businesses, while concretely validating the value of the Company's services and products when they are implemented. CSMs often work closely with customer MIS staffs to assure smooth implementation of more technically complicated and customized service offerings.
37
NATIONAL SALES GROUP. The 26 national sales account managers in the National Sales group market the Company's services and products to the home offices of large and medium-sized insurance companies outside of the top 20 ranking. Managers in the National Sales group typically call on the president or claims vice president and director of management information services of the customer. The sales cycle for transactions in this division is normally shorter than in the Strategic Client Division. Most ACCESS sales are made in the National Sales division.
CLAIMS OFFICE ACCOUNT EXECUTIVES. A total of 78 claims office account executives are deployed geographically with responsibility for individual claims offices of all of the Company's insurance company clients. These employees are charged with on-going field training and support for the Company's transaction-based businesses. The Company believes that its field service organization is a competitive strength as its account executives assist claim managers with the training of high turnover personnel, program result analysis and problem resolution.
COLLISION REPAIR REPRESENTATIVES. The Company contracts with 85 independent sales representatives to sell its products to collision repair facilities across the country. These representatives are assigned geographic territories and often employ sub-reps to increase presence in particular areas. The Company's representatives are charged with calling on the approximately 20,000 to 25,000 targeted repair facilities with annual revenue over $300,000. The representatives are highly experienced within the collision repair industry and typically assist customers in dealing with a variety of business issues. The Company also employs 5 sales managers who manage the sales representatives.
The Company's marketing efforts for the automobile insurance market are conducted through three principal means. The Company believes that most claims executives and managers learn about new technologies and solutions through sales personnel, so the majority of the Company's insurance marketing dollars is devoted to developing professional collateral materials for use by the sales
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document force. The Company sponsors an annual industry conference for senior claims industry executives. The Company's senior managers are frequent speakers at industry gatherings and are frequent authors of articles published in industry and national print media.
The Company's marketing efforts for the automobile repair market are conducted through participation in national and regional trade shows, lead generating direct marketing programs, collateral materials and trade advertising.
TRAINING AND SUPPORT
Field appraisers, claim representatives and collision repair facility owners are dependent upon the Company's tools and information to make proper decisions at the right time for high consumer satisfaction and managed restoration costs. The Company believes its customer support is a competitive advantage in the marketplace. The Company addresses its customer service needs through a customer support staff which provides centralized hotline telephone support and field implementation and training. The Company's support staff consists of individuals with technical knowledge and experience relating not only to application software, operating systems and network communications but also to the new and used car automobile markets and collision repair. As of May 31, 1996, the Company had 165 employees engaged in field and central customer support.
In addition to its customer support staff, the Company maintains the industry's largest staff of professional field trainers who implement every new sale. The Company's collision estimating support staff can diagnose most software issues over the telephone and has the ability to download an appraiser's entire hard drive telephonically if the problem proves significant. The Company's total loss support staff can make modifications to claims, provide regulatory information or additional backup for a valuation to facilitate settlement. The Company routinely analyzes call type to modify products or training and, whenever necessary, will dispatch a field representative to provide process assistance.
TECHNOLOGY
Underlying each of the Company's principal services and products are value-added databases which customers access using workflow-oriented software and the Company's value-added communications network.
38
TOTAL LOSS SERVICES AND PRODUCTS. The Company's proprietary database of valuation data used in connection with its TOTAL LOSS services and products is built through the Company's own data collection network. This network includes detailed used car inventory and sales data from 4,000 automobile dealers in 192 metropolitan areas throughout the United States and Canada, as well as data from local newspaper advertisements and prior transactions. The database includes more than 15 million prior valuations, including theft data. The Company maintains its total loss database on a mainframe computer which customers directly access using the Company's proprietary communications network or by telephone or facsimile.
PATHWAYS ENVIRONMENT. Over the past two years, the Company has built and completed class libraries consisting of approximately 1,000 business and system objects that serve as the foundation of its PATHWAYS product line. These objects were designed with a work flow orientation and are used in a framework to manage databases, maintain model persistence, create electronic workfiles, and facilitate communications. These elements are used in conjunction with a common graphical user interface for all applications. This approach is intended to offer many advantages to the Company's customers, including ease of integration of complementary systems and legacy applications. In addition, the graphical user interface and object-oriented foundation of these services and products is designed to enable faster introduction of additional application modules with greater product quality assurance as well as easy integration with customer-developed software applications. It is the Company's intent to build all new products within this framework and to migrate existing products to it. The Company believes this environment provides a competitive development advantage.
COLLISION ESTIMATING SERVICES AND PRODUCTS. The Company offers its collision estimating services and products through a personal computer-based, open systems approach using its object-oriented design. The Company's principal database for its collision estimating products is the Motor Crash Estimating Guide published by a subsidiary of The Hearst Corporation. The Company licenses this database under an agreement that grants to the Company a license to publish the database electronically. This agreement includes the exclusive license for P-page logic, the integral component of collision estimating software.
EZNET COMMUNICATIONS NETWORK. The Company's communications network, EZNET, transmits and processes both staff and direct repair claims data. EZNET'S Transport Layer provides reliable, secure data transmission. EZNET'S Workflow Layer routes claims information and status updates to multiple recipients according to insurance company preference and provides storage through network
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document mailboxes maintained by the Company. EZNET supports all major communications protocols, including X25, SNA, ISDN and TCP/IP, as well as industry standards such as CIECA.
PRODUCT DEVELOPMENT AND PROGRAMMING
The Company recognizes that its ability to maintain and grow its position in the claims industry is dependent upon expansion of its products and services. Investments in development are therefore critical to obtaining new customers and renewals from existing customers. The Company's product development and programming efforts principally consist of software development, development of enhanced communication protocols and custom user interfaces, and database design and enhancement. The Company employs approximately 160 people in its product development organization. This group is comprised of database analysts, software engineers, business systems analysts, product managers and quality assurance employees responsible for client systems, server systems, data warehousing and distribution systems. Product engineering activities focus on improving speed to market of new products, services, and enhancements, adding new business functions without affecting existing services and products, and reducing development costs. The Company uses its class library of objects, knowledge of its clients' workflows and its automated testing tools to deliver quality workflow-oriented solutions to the marketplace quickly. These efforts provide a significant competitive advantage to the Company in the development of new services and products. The Company develops products in close collaboration with its clients based on specific needs. The Company's total product development and programming expense was $3.0 million, $10.1 million and $14.9 million for the twelve months ended December 31, 1993, 1994 and 1995, respectively.
INTELLECTUAL PROPERTY
The Company relies primarily on a combination of contracts, intellectual property laws, confidentiality agreements and software security measures to protect its proprietary technology. The Company distributes its
39 products under written license agreements, which grant end-users a license to use the Company's services and products and which contain various provisions intended to protect the Company's ownership and confidentiality of the underlying technology. The Company also requires all of its employees and other parties with access to its confidential information to execute agreements prohibiting the unauthorized use or disclosure of the Company's technology.
The Company has trademarked virtually all of its services and products. These marks are used by the Company in the advertising and marketing of the Company's services and products. EZEST and CCC are well-known marks within the automobile insurance and collision repair industries. The Company has patents for its collision estimation product pertaining to the comparison and analysis of the "repair or replace" and the "new or used" parts decisions. While the total loss calculation process is not patented, the methodology and processes are trade secrets of the Company and are essential to the Company's total loss business. Despite these precautions, the Company believes that existing laws provide only limited protection for the Company's technology and that it may be possible for a third party to misappropriate the Company's technology or to independently develop similar technology.
Certain data used in the Company's services and products is licensed from third parties for which they receive royalties. The Company does not believe that the Company's services and products are significantly dependent upon licensed data, other than the Motor Crash Estimating Guide data, because the Company believes it can find alternative sources for such data. The Company does not believe that it has access to an alternative database that would provide comparable information. Any interruption of the Company's access to the Motor Crash Estimating Guide data could have a material adverse effect on the Company's business, financial condition and results of operations.
The Company is not engaged in any material disputes with other parties with respect to the ownership or use of the Company's proprietary technology. However, the Company has been involved previously in intellectual property litigation, the resolution of which resulted in substantial payments by the Company. There can be no assurance that other parties will not assert technology infringement claims against the Company in the future. The litigation of such a claim may involve significant expense and management time. In addition, if any such claim were successful, the Company could be required to pay monetary damages and may also be required to either refrain from distributing the infringing product or obtain a license from the party asserting the claim (which license may not be available on commercially reasonable terms).
COMPETITION
The market for the Company's products is highly competitive. The Company competes primarily on product differentiation, customer service and price. The Company's principal competitors are small divisions of two well capitalized,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document multinational firms, ADP and Thomson. ADP offers both a PC-based collision estimating system and a total loss product to the insurance industry. It offers a different collision estimating system and a hardware-based digital imaging system to the collision repair industry. Thomson publishes crash guides for both the insurance and automobile collision repair industries and markets collision estimating, shop management and imaging products. In addition, there are several very small, collision estimating programs sold into the market which do not use P-page logic. The Company has experienced steady competitive price pressure, particularly in the collision estimating market, over the past few years and expects that trend to continue. The strength of this trend may cause the Company to alter its mix of services, features and prices.
The Company intends to address competitive price pressures by providing high quality, feature enhanced products and services to its clients. The Compay intends to continue to develop user friendly claims products and services incorporating its comprehensive proprietary inventory of data. The Company expects that the PATHWAYS workflow manager will provide the necessary position with its insurance customers to effectively compete against competitive price pressures.
At times, insurance companies have entered into agreements with service providers (including ADP, Thomson and CCC) wherein the agreement provides, in part, that the insurance company will either use the product or service of that vendor on an exclusive basis or designate the vendor as a preferred provider of that product or service. If it is an exclusive agreement, the insurance company mandates that collision repair
40 facilities, independent appraisers and regional offices use the particular product or service. If the vendor is a preferred provider, the collision repair facilities, appraisers and regional offices, are encouraged to use the preferred product, but may still choose another vendor's product or service. Additionally, some insurance companies mandate that all products be tested and approved at the companies' national level before regional levels can purchase such products. The benefits of being an endorsed product or on the approved list of an insurance company include immediate customer availability and a head start over competitors who may not be so approved. With respect to those insurance companies that have endorsed ADP or Thomson, but not CCC, the Company will be at a competitive disadvantage.
In connection with the Company's strategy to provide outsourced claims processing services, the Company will compete with other third-party service providers, some of whom may have more capital and greater resources than the Company.
The Company currently processes the vast majority of insurer-to-collision repair facility repair assignment and estimate retrieval for DRPs through its EZNET communications network. The Company believes there is a wide range of prospective competitors in this service area, many of which have greater resources than the Company.
EMPLOYEES
As of May 31, 1996, the Company had 878 full-time employees of whom 192 were employed in sales and marketing functions, 164 were employed in customer support functions, 165 in product development and quality assurance functions, 208 in operations and 95 in finance and administration. The Company regularly seeks to identify skilled software engineers and other potential employee candidates, and has found that competition for personnel in the software industry is intense. The Company believes its ability to recruit and retain highly skilled technical and other management personnel will be critical to execute its business plans. The Company's employees are not represented by any collective bargaining agreement or organization. The Company believes that its relationships with its employees are good.
FACILITIES
The Company's corporate headquarters are located in Chicago, Illinois where the Company leases approximately 125,000 square feet of a multi-tenant facility under a lease expiring in November, 2008. The Company also leases approximately 30,000 square feet in Glendora, California where a satellite development center is housed, under a lease expiring in April, 1999. The Company believes that its existing facilities and additional or alternative space available to it are adequate to meet its requirements for the foreseeable future.
LEGAL PROCEEDINGS
There are no pending legal proceedings other than routine litigation arising
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document in the ordinary course of business. The Company does not believe that the results of such litigation, even if the outcome were unfavorable to the Company, would have a material adverse effect on its financial position.
GLOSSARY OF TERMS
BUSINESS AND SYSTEM OBJECT LIBRARIES -- Objects are reuseable pieces of software that perform specific programming functions. Business objects perform business tasks such as check writing, transfer of customer information, etc. System objects perform computer tasks such as opening a file, adding data to a particular field, etc. Objects are stored or housed in libraries.
CIECA -- The Collision Industry Electronic Commerce Association is a group of information companies, repair facility owners and insurance company management information systems professionals. CIECA's role is to promote data communication standards for electronic commerce between collision repair facilities and insurance companies.
DATA NAVIGATION SOFTWARE -- Software written to facilitate organizing, selecting, viewing, finding or analyzing a portion of a larger volume of electronic data or information.
DATA WAREHOUSING -- The function of storing vast amounts of electronic data or information that can be accessed by software.
41
DIRECT REPAIR PROGRAM (DRP) -- An automobile insurance settlement process whereby an insurer offers a consumer the option of bringing their vehicle directly to a particular repair facility who will fix the car and bill the insurer directly, without the involvement or need of an insurance adjuster.
GRAPHICAL USER INTERFACE -- The type of screen used for computer programs that relies on pictures and images, in addition to character-based text.
LEGACY APPLICATIONS -- Pre-existing computer systems, dated in both technology and functionality.
OBJECT ORIENTED SOFTWARE -- Software written with pieces of reuseable software that perform specific programming functions. Business objects perform business tasks such as check writing, transfer of customer information, etc. System objects perform computer tasks such as opening a file, adding data to a particular field, etc.
P-PAGE LOGIC -- Crash estimating guides contain procedure pages, known as p-pages, that detail the steps involved in repairing various parts of a damaged vehicle depending on where and how extensive the damage is. When automated in software form, they are often referred to as computer assisted P-page logic.
SEVERITY -- An insurance term of art referring to actual cost of fixing a vehicle, replacing a vehicle, medical bills or legal fees that do not include the administrative expenses of settling the claim.
SOFT TISSUE CLAIM -- A claim arising from a non-verifiable injury to a person's soft tissue (muscles, skin, nervous system).
SOFTWARE PLATFORM -- A term used to describe the underlying design of a computer system that links together various processing applications.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document TRANSPORT LAYER -- A term used to describe the collection of functions in a data network that includes the movement of information as opposed to a workflow layer, which refers to the management of information.
WORKFLOW MANAGEMENT SOFTWARE -- Computer programs written to facilitate the defined steps of a particular process.
42
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the executive officers and directors of the Company:
------(1) Member of Audit Committee and Compensation Committee.
DAVID M. PHILLIPS has served as Chairman, President and Chief Executive Officer since founding the Company in 1983. Prior to joining the Company, Mr. Phillips served in a number of capacities at Citicorp including Senior Vice President from 1975 to 1982. During his tenure he was controller of the operating group; he was responsible for Citicard implementation; he led a team that developed a national consumer strategy; and implemented the credit card portion of the consumer strategy increasing the consumer card holders from approximately 200,000 to over 10 million. Subsequently, he was responsible for the Latin American Consumer Businesses that included banks; life insurance companies; finance companies and credit cards. Mr. Phillips previously served as Director of Special Markets and Division Controller at Polaroid Corporation.
J. LAURENCE COSTIN, JR. joined the Company in February 1983 as Executive Vice President responsible for the Company's sales and client field service organization. He currently serves as Vice Chairman, a position he has held since May 1993. Prior to joining the Company, Mr. Costin was Senior Vice President and General Manager for the Midwest region of Seligman & Latz, Inc., a Fortune 500 company which managed department store concessions.
GITHESH RAMAMURTHY joined the Company in July 1992 as Executive Vice President-Product Engineering and Chief Technology Officer. In January 1996, he assumed the position of President-Strategic Client Division while retaining the position of Chief Technology Officer. Prior to joining the Company, Mr. Ramamurthy was a founding member of Sales Technologies, Inc., a field sales automation software company. Sales Technologies sold to a long list of Fortune 100 clients in the United States and Europe before it was acquired by Dun & Bradstreet in 1989. Mr. Ramamurthy directed product development activities for that company.
JOHN BUCKNER joined the Company in January 1994 as Senior Vice President-AutoBody Division. Mr. Buckner was promoted to Executive Vice President-Sales and Services Division and currently serves as President-Sales and Services Division. Prior to joining the Company, Mr. Buckner was Vice President and General Manager of U.S. Automotive Operations at Sun Electric Corporation. Previously, Mr. Buckner held a variety of senior sales and new market development positions at Reynolds & Reynolds.
43
BLAINE R. ORNBURG joined the Company in April 1995 as Executive Vice
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document President-New Market Development. In January 1996, he assumed the additional responsibilities of Acting Chief Financial Officer, a position he held until June, 1996. Prior to joining the Company, Mr. Ornburg served as Senior Vice President of First Data Corporation. Mr. Ornburg joined First Data Corporation upon its purchase of Anasazi, Inc., a software and networking company Mr. Ornburg founded in 1987. Previously, Mr. Ornburg was Vice President-Point of Transaction Systems for VISA International.
LEONARD L. CIARROCCHI joined the Company in June 1996 as Executive Vice President and Chief Financial Officer. Prior to joining the Company, Mr. Ciarrocchi was Vice President and Treasurer of White River Corporation from 1993 to 1996 and Manager of Finance of Fund American Enterprises, Inc. from 1991 to 1993. Mr. Ciarrocchi was Manager of Finance for Fund American Enterprises Holdings, Inc. ("Fund American") from 1989 to 1991.
DONALD J. HALLAGAN joined the Company in August 1993 as Controller and was promoted to Vice President--Controller in June 1996. Prior to joining the Company he spent two years as Controller for Pollenex Corporation and two years on the corporate staff of Santa Fe Pacific Corporation as Assistant Controller. Previously, Mr. Hallagan served eight years on the professional staff of Price Waterhouse LLP.
GERALD P. KENNEY joined the Company in March 1995 as Vice President, Secretary and General Counsel. Prior to joining the Company, he served eleven years as General Counsel for NEC Technologies Inc. Mr. Kenney's primary areas of concentration are intellectual property law, sales and distribution and other matters relating to the high-tech and information industries. He is the past chair of the Electronic Industries Association (EIA), Government Affairs Counsel and former member of the Board of Directors of the Consumer Electronics Group of EIA.
JOHN J. BYRNE has served as a Director of the Company since 1994. Mr. Byrne has been Chairman of the Board of Directors and Chief Executive Officer of Fund American since 1985 and President of Fund American since 1990. Mr. Byrne has also been Chairman of the Board of Directors and a director of Financial Security Assurance Holdings Ltd. since May 1994. From 1989 through 1990, Mr. Byrne was Chairman of the Board of Directors of Fireman's Fund Insurance Company. Prior to joining Fireman's Fund Insurance Company, Mr. Byrne was Chairman and Chief Executive Officer of GEICO Corporation from 1976 to 1985. Mr. Byrne is an advisory director of Lehman Brothers Holdings, Inc.
MORGAN DAVIS has served as a Director of the Company since 1995. He has also served since 1995 as the President and Chief Executive Officer of White Mountains Insurance Company, a wholly owned subsidiary of Fund American. From 1992 to 1994, Mr. Davis was self-employed as a private investor in a number of entrepreneurial enterprises. From 1987 to 1992, he served as President of Fireman's Fund Commercial Insurance. Mr. Davis is currently a Director of White Mountain Holdings and Valley Insurance Group.
THOMAS L. KEMPNER has served as a Director of the Company since 1983. Since 1979 he has served as Chairman and Chief Executive Officer of Loeb Holding Corporation, an investment banking, registered broker/ dealer and registered investment advisory firm. He also serves as a director of the following companies: Alcide Corporation; The Arlen Corporation; Energy Research Corporation; IGENE BioTechnology, Inc.; Intermagnetics General Corporation; Northwest Airlines, Inc.; and Silent Radio, Inc.
GORDON S. MACKLIN has served as a Director of the Company since 1994. Mr. Macklin has been Chairman of White River Corporation since 1993. From 1987 to 1992, he was Chairman of Hambrecht & Quist, LLC. Mr. Macklin served as President of The National Association of Securities Dealers, Inc. from 1970 to 1987, and was formerly a partner and Member of the Executive Committee of McDonald & Company, an investment banking firm, from 1950 to 1970. Mr. Macklin is a director, trustee, or managing general partner, as the case may be, of 53 of the investment companies in the Franklin/Templeton Group, and a Director of Fund American, MCI Communications Corporation, Fusion Systems Corp., MedImmune, Inc., Source One Mortgage Services Corp. and Shoppers Express Inc.
ROBERT T. MARTO has served as a Director of the Company since 1994. He currently serves as President and Chief Executive Officer of White River Corporation. From 1990 to 1993, he was President of Fund American Enterprises, Inc., and an Executive Vice President and Chief Financial Officer of Fund American. From 1977 to
44
1989, he held executive officer positions with Fireman's Fund Corporation and Fireman's Fund Life Insurance Company. Mr. Marto is also a director of Vicorp Restaurants, Inc., White River Corporation and Zurich Reinsurance Centre, Inc.
MICHAEL R. STANFIELD has served as a Director of the Company since 1995. He has been Managing Director of Loeb Partners Corporation since 1993. From 1990 to 1993, Mr. Stanfield was self-employed as an independent consultant.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document For their services as directors, the members of the Board of Directors who are not employees of the Company, White River or affiliates of White River (other than Mr. Byrne) are paid $5,000 per meeting. All directors are reimbursed for reasonable expenses associated with their attendance at meetings of the Board of Directors. All directors are elected by the stockholders at the annual meeting and serve as directors until the next annual meeting.
All of the directors were elected pursuant to provisions of the Stockholders Agreement. Pursuant to this agreement, Messrs. Phillips, Kempner and Stanfield were designated directors by the Management Stockholders, Messrs. Marto and Macklin were designated directors by White River and Messrs. Byrne and Davis were nominated by White River subject to the approval of the Management Stockholders. See "Principal Stockholders--Stockholders Agreement."
EMPLOYMENT AGREEMENTS
The Company has entered into employment agreements with each of Mr. Buckner, Mr. Ramamurthy, Mr. Ornburg, Mr. Ciarrocchi and Mr. Costin. Mr. Buckner's employment agreement provides for an annual salary of $250,000 plus bonus, and terminates April 30, 2001. Mr. Ramamurthy's employment agreement provides for an annual salary of $275,000 plus bonus and terminates June 30, 2001. Mr. Ornburg's employment agreement provides for an annual salary of $200,000 plus bonus and terminates June 30, 2001. Mr. Ciarrocchi's employment agreement provides for an annual salary of $200,000 plus bonus and terminates June 30, 2001. Mr. Costin's employment agreement provides for an annual salary of $230,000 and terminates April 30, 1999. Messrs. Buckner's, Ramamurthy's, Ciarrocchi's and Ornburg's employment agreements each contain a non-compete and a change of control provision.
OTHER SIGNIFICANT MANAGEMENT PERSONNEL
STEPHEN E. APPLEBAUM joined the Company in July 1987 as Vice President-Business Development, was promoted to Senior Vice President-Business Development, and currently serves as Senior Vice President-- ACCLAIM Litigation Management, a position he has held since October 1994. Prior to joining the Company, Mr. Applebaum was a management consultant and venture capitalist in Toronto, Canada.
45
SAMUEL B. BARASH joined the Company in August 1985 as Chief Operating Officer and served in that capacity until 1987. Since that time, he has served as Executive Vice President of New Product Development. Prior to joining the Company, Mr. Barash was President of Diversified Food Services, a national food service provider within the retail industry.
NANCY T. BORGHESI joined the Company in January 1986 as Vice President-Systems. She became Vice President-Product Engineering and currently serves as Senior Vice President-Consulting Services, a position she has held since March 1995. Prior to joining the Company, Ms. Borghesi was a Systems and Business Process Consultant for Arthur Young & Co.
MICHAEL J. D'ONOFRIO joined the Company in November 1992 as Treasurer and was promoted to Vice President--Treasurer in June 1996. Prior to joining the Company he spent six years as Group Manager of Claims Processing for Central States Health and Welfare and Pension Funds. Mr. D'Onofrio previously served four years on the professional staff of Arthur Young & Co.
WILLIAM R. GEEN joined the Company in March 1981 as Director of Operations. He was promoted to Vice President--Dealer Services and currently serves as Senior Vice President--Total Loss Operations, a position he has held since August 1989. Prior to joining the Company, Mr. Geen worked seven years in the retail auto industry.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document T. SCOTT LEISHER began his career with the Company in January 1986 as an Account Executive. He advanced through the sales ranks of the Company as a Region Manager, Group Vice President-East Zone and Group Vice President-National Accounts. Mr. Leisher currently serves as Senior Vice President-Strategic Accounts, a position he has held since February 1995.
RICK L. MANSEL joined the Company in April 1995 as Senior Vice President-Product Management. Prior to joining the Company he was Manager of Worldwide Market Development for SSA, a financial and manufacturing systems software company. Mr. Mansel previously served as Director of North American Operations for Wang Laboratories.
MARTIN G. MCGRATH joined the Company in September 1992 as Director-New Business Development. He was promoted to Vice President-Product Management and currently serves as Senior Vice President-Marketing and Planning, a position he has held since February 1995. Prior to joining the Company, Mr. McGrath was General Manager of AT&T's Network Management Services Group.
JACK ROZINT joined the Company in April 1992 as Director-Product Planning for the AutoBody Division. He was promoted to Vice President-AutoBody Sales and Marketing and currently serves as Senior Vice President-ACCESS Claims Services, a position he has held since October 1994. Prior to joining the Company, Mr. Rozint was Director of Software Development at Akzo Systems Inc., a division of Akzo Nobel.
RICHARD L. RUMPLE joined the Company in July 1990 as Manager-Product Engineering. He was promoted to Vice President-Product Engineering and currently serves as Senior Vice President-Product Engineering, a position he has held since October 1995. Prior to joining the Company, Mr. Rumple served as Manager of Distribution Systems at Baxter Healthcare.
46
EXECUTIVE COMPENSATION
The following table sets forth certain information regarding the compensation paid during 1995 to the Company's Chief Executive Officer and the other four most highly compensated executive officers (collectively, the "Named Executive Officers") whose total salary and bonus in 1995 exceeded $100,000:
SUMMARY COMPENSATION TABLE
------(1) This table excludes Edward J. Cheskis, former President--Claims Service Division, whose 1995 salary, bonus and other compensation was $273,292, $45,142 and $0, respectively.
(2) Represents the number of shares of Common Stock issuable upon exercise of options granted pursuant to the Stock Option Plan.
47
The following tables set forth certain information regarding options/stock appreciation rights granted to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
------
(1) The potential realizable value is calculated based on the term of the option at its time of grant (5 years) and is calculated by assuming that the stock price on the date of grant as determined by the Board of Directors appreciates at the indicated annual rate compounded annually for the entire term of the option and that the option is exercised and sold on the last day of its term for the appreciated price. The 5% and 10% assumed rates of appreciation are derived from the rules of the Securities and Exchange Commission and do not represent the Company's estimate or projection of the future Common Stock price.
AGGREGATED OPTION EXERCISES IN LAST FISCAL YEAR AND FISCAL YEAR OPTION VALUES
------
(1) At an assumed offering price of the Common Stock of $11 per share, minus the exercise price, multiplied by the number of shares underlying the option.
48
COMPENSATION COMMITTEE INTERLOCKS AND INSIDER PARTICIPATION
Each member of the Board of Directors (except David M. Phillips) served as a member of the Compensation Committee of the Company in 1995. The Company has
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document entered into certain transactions with the Loeb Entities, of which Thomas L. Kempner is an affiliate, and with White River, of which Messrs. Byrne, Macklin and Marto are affiliates. For further discussion of such transactions, see "Certain Transactions."
The Compensation Committee has established salary and bonus levels for the executive officers of the Company, including the Chief Executive Officer, based on a combination of objective and subjective criteria. With respect to salary levels, such levels are set subsequent to the Committee's determination of the executive officer's contribution, progress and development. Bonuses, which may be up to 50% of an officer's salary, are awarded based on profit growth of the Company (calculated using an EBIT formula) and based on the subjective criteria used in establishing salary levels.
STOCK OPTION PLAN
The Stock Option Plan was adopted by the Board of Directors in 1988 and was most recently amended in November 1994 in order to advance the interests of the Company by affording key executives and employees an opportunity to acquire a proprietary interest in the Company and thus to stimulate increased personal interest in such persons in the success and future growth of the Company. The Stock Option Plan is administered by the Compensation Committee of the Board of Directors. Pursuant to stock option agreements executed in connection with the Stock Option Plan, Messrs. Ramamurthy, Buckner, Ornburg and Costin, were granted stock options (the "Options") to purchase shares of Common Stock of the Company pursuant to the terms set forth in the various stock option agreements. A total of 2,777,920 shares of Common Stock have been reserved for issuance pursuant to all options issued under the Stock Option Plan. The Options are exercisable at per share prices ranging from $1.38 to $11.20. The Options are exercisable annually in 20% increments beginning on the date of issuance. Messrs. Ramamurthy, Buckner, Ornburg and Costin have been granted Options to purchase 307,200, 170,000, 130,000 and 191,760 shares of Common Stock, respectively. The Options may be exercised solely by the grantees, or in the case of such grantee's death or incapacity, by the grantee's executors, administrators, guardians or other legal representatives and are not assignable or transferable by such grantee.
49
PRINCIPAL STOCKHOLDERS
The following table sets forth the number and percentage (if more than 1%) of the outstanding shares of Common Stock owned beneficially as of the date of the Offering by (i) each director of the Company, (ii) each Named Executive Officer, (iii) all directors and executive officers as a group, and (iv) each person who, to the knowledge of the Company, beneficially owned more than 5% of the Common Stock as of the date of this Prospectus.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ------* Less than one percent of the outstanding Common Stock. (1) Beneficial ownership is determined in accordance with the rules of the Securities and Exchange Commission and generally includes voting or investment power with respect to securities. (2) Includes 400,000 shares of Common Stock held by Ruth Ann Phillips, Mr. Phillips' wife. Mr. Phillips is a director of the Company and his address is 444 Merchandise Mart, Chicago, Illinois 60654. (3) Includes 164,528 shares of Common Stock issuable upon exercise of outstanding options which are exercisable within 60 days of August 1, 1996. (4) Includes 26,000 shares of Common Stock issuable upon exercise of outstanding options which are exercisable within 60 days of August 1, 1996. (5) Includes 173,600 shares of Common Stock issuable upon exercise of outstanding options which are exercisable within 60 days of August 1, 1996.
(6) Includes 49,200 shares of Common Stock issuable upon exercise of outstanding options which are exercisable within 60 days of August 1, 1996.
(7) Mr. Byrne is a director of the Company. (8) Mr. Davis is a director of the Company.
50
(9) Includes 3,457,315 shares of Common Stock held by the Loeb Entities. Mr. Kempner, a director of the Company, is the managing general partner or the general partner of the general partner of each of the Loeb Entities. Mr. Kempner disclaims beneficial ownership of the shares held by the Loeb Entities, except to the extent of his pecuniary interests therein. Also includes 267,360 shares of Common Stock issuable upon exercise of outstanding options which are exercisable within 60 days of August 1, 1996.
(10) Includes 8,584,564 shares of Common Stock held by White River. Mr. Macklin, a director of the Company, is Chairman of the Board of Directors of White River and disclaims beneficial ownership of the shares held by White River, except to the extent of his pecuniary interests therein. (11) Includes 8,584,564 shares of Common Stock held by White River. Mr. Marto, a director of the Company, is President and Chief Executive Officer of White River and disclaims beneficial ownership of the shares held by White River, except to the extent of his pecuniary interests therein. (12) Mr. Stanfield is a director of the Company.
(13) Includes Loeb Investors Co. XV, Loeb Investors Co. XIII and Loeb Investors Co. 108.
STOCKHOLDERS AGREEMENT
David M. Phillips and the Loeb Entities, of which Thomas L. Kempner is an affiliate (collectively, the "Management Stockholders"), White River and the Company have entered into a Stockholders Agreement dated June 16, 1994, pursuant to which the Management Stockholders and White River have agreed to certain provisions regarding the corporate governance of the Company, including the election of directors. The Stockholders Agreement terminates upon the first to occur of (i) the written agreement of the parties, (ii) the liquidation or dissolution of the Company, (iii) the Redemption Date (as defined below) or (iv) June 16, 1999.
After completion of the Offering, White River and its affiliates will hold 1,589 shares of Series C Preferred Stock and 10,794 shares of Series D Preferred Stock. From the date of the closing of the Offering until the first day on which there are no shares of Series C, or Series D, or Series E Preferred Stock outstanding (the "Redemption Date"), the following provisions are in effect, among others:
The Management Stockholders and White River shall take all actions necessary to cause the nomination and election to the board of directors of (i) a number of persons (which shall not be less than two) designated by White River which the board of directors determines to be appropriate taking into account the aggregate voting power and economic interest of White River and its affiliates in the Company and (ii) three persons designated by a majority of shares of Common Stock held by the Management Stockholders. The number of directors shall be seven while the Stockholders Agreement is in effect. The Management Stockholders and White River shall act to cause vacancies on the board of directors to be filled by successors designated by the stockholder group that designated the prior incumbent and shall not act to remove a director without the consent of the stockholder group that designated such director except after consultation with such stockholder group and after a determination that the director to be removed has breached his fiduciary duties to the Company.
In addition, the Management Stockholders and White River have agreed that,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document prior to the voluntary resignation from the board of directors, disability or death of David M. Phillips, a majority of the directors designated by the Management Stockholders shall be delegated, to the extent permitted by applicable law, the authority of the board to determine the timing, price and other terms of certain business combinations where the consideration to be received is cash, cash equivalents or publicly traded securities, subject to the fiduciary duties of the directors not designated by the Management Stockholders and subject to the receipt of a fairness opinion from one of a list of specified investment banks (which includes Hambrecht & Quist and Lazard Freres). Following the voluntary resignation from the board of directors, death or disability of David M. Phillips, the Management Stockholders and White River have agreed to cause the directors respectively elected by them to approve certain business combinations recommended by the other party, subject to receipt of a fairness opinion and subject to the fiduciary duties of such directors.
The Management Stockholders and White River have also agreed that a majority of the directors designated by the Management Stockholders shall be delegated, to the extent permitted by applicable law and subject to the fiduciary duties of the other directors, the authority of the board of directors with respect to the timing, price, and other terms of each offering of Common Stock subsequent to the Offering, provided, however, that the Company shall not consummate any such subsequent offering (i) unless the Company can demonstrate to the reasonable satisfaction of White River that after giving effect to such subsequent offering the Company
51 would have funds legally available to redeem shares of the Redeemable Preferred Stock in accordance with its terms and (ii) without the unanimous approval of the members of the board of directors in the event that David M. Phillips shall voluntarily resign from the board of directors, die, or become disabled.
Pursuant to the Stockholders Agreement, the directors elected by the Management Stockholders have been delegated the authority of the board to determine the timing, price and other terms of this Offering, subject to the fiduciary duties of the other members of the board of directors not designated by the Management Stockholders provided that the Company has been required to demonstrate to the reasonable satisfaction of White River that after giving effect to the Offering, the Company will have funds legally available to redeem shares of the Redeemable Preferred Stock in accordance with its terms.
CERTAIN TRANSACTIONS
In connection with a reorganization agreement (the "Reorganization Agreement") dated as of June 16, 1994, White River contributed to the Company all of its right, title and interest in, to and under (i) the Company's 12% Subordinated Notes due October 31, 1996, (ii) the Company's 12% Subordinated Payment-in-Kind Notes due October 31, 1996, (iii) the Company's 12% Junior Subordinated Payment-in-Kind Notes due October 31, 1996 and (iv) the Company's Series A, Series B, and Series C Warrants. White River had previously acquired all of such notes and warrants from the holders thereof for net cash consideration of $39 million. Pursuant to the Reorganization Agreement, the Company issued White River 5,000 shares of the Series C Preferred Stock, 34,000 shares of the Series D Preferred Stock, and 7,050,340 shares of the Common Stock. The Company and White River also entered into certain other agreements, including the Stockholders Agreement. See "Principal Stockholders" and "Description of Capital Stock". White River also entered into a registration rights agreement providing White River up to two demand registrations after June 16, 1999.
In July 1993, a subsidiary of the Company, Phone Base Systems, Inc. ("Phone Base") repaid Mr. Phillips and the Loeb Entities (of which Mr. Kempner is an affiliate) a total of $1.65 million that had been previously loaned to Phone Base by them. Phone Base continued thereafter to experience liquidity problems, and Mr. Phillips and the Loeb Entities advanced a further $1.5 million to Phone Base, which has not been repaid. White River also advanced $150,000 to Phone Base. All of these advances were secured by a royalty participation agreement with Phone Base. White River also loaned Phone Base $200,000 represented by a promissory note bearing interest at the rate of 9% per annum. In May 1994, White River purchased for $550,000 from Sprint Communications L.P. ("Sprint") all of Sprint's right, title and interest in a purchase agreement between Sprint and Phone Base relating to certain telecommunications equipment supplied to Phone Base by Sprint. In late 1994, White River transferred to the Company all of its right, title and interest in the Sprint purchase agreement, the royalty participation agreement, and the $200,000 promissory note for $900,000 in cash plus interest at the rate of 9% per annum.
In November 1994, a subsidiary of the Company transferred for $500 all of the stock of Phone Base to Loeb Investors Co. 119 ("Loeb 119") of which Mr.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Kempner is an affiliate. In addition, the Company transferred to Loeb 119 all of its right, title and interest in certain obligations of Phone Base to the Company. In consideration of these transfers, Loeb 119 paid the Company $124,500 in cash and a subsidiary of Phone Base issued an installment note in the principal amount of $550,000. As of the date of this Prospectus, $222,000 in principal amount remains outstanding with respect to the promissory note.
In March 1994, White River acquired from a third party a 50% joint venture interest in CCCDC for a purchase price of $6.8 million. In connection therewith, White River entered into a call agreement with the Company pursuant to which the Company had the right to purchase the joint venture interest from White River at its cost plus interest at the rate of 9% per annum. The Company exercised its right to purchase in 1994 for an aggregate price of $6.9 million in cash.
During 1993 and 1994, the Loeb Entities, which own 21.0% of the shares of Common Stock prior to the Offering and with which Mr. Kempner is affiliated, purchased certain contracts from CCCDC at prices determined by discounting the anticipated cash flow from these contracts. The gross proceeds and related discount values for contracts purchased in 1993 were $5.2 million and $0.7 million, respectively, and for
52 contracts purchased in 1994 were $0.9 million and $0.2 million, respectively. In addition, the Loeb Entities advanced $3.1 million of the bridge loan proceeds used to acquire the remaining interest in CCCDC, effective March 30, 1994. See Note 4 to the Consolidated Financial Statements.
DESCRIPTION OF CAPITAL STOCK
As of the date of this Prospectus, the authorized capital stock of the Company consists of 30,000,000 shares of Common Stock, par value $.10 per share of which 22,026,800 shares shall be outstanding following the Offering, and 100,000 shares of Preferred Stock, $1.00 par value per share (the "Preferred Stock") of which 12,870 shares shall be outstanding immediately following the Offering. Of the Preferred Stock, 5,000 shares have been designated as Series C Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series C Preferred Stock"), 34,000 shares have been designated as Series D Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series D Preferred Stock"), and 500 shares have been designated as Series E Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series E Preferred Stock"). The following summary of the Company's capital stock is qualified in its entirety by reference to the Company's Amended and Restated Certificate of Incorporation and Bylaws, each of which is filed as an exhibit to the registration statement of which this Prospectus is a part.
COMMON STOCK
The holders of Common Stock are entitled to one vote for each share on all matters voted upon by stockholders, including the election of directors. The holders of a majority of the outstanding Common Stock have agreed to certain provisions regarding corporate governance, including the election of directors, in the Stockholders Agreement, which will remain in effect after the completion of the Offering. See "Principal Stockholders--Stockholders Agreement."
Subject to the rights of any then outstanding shares of Preferred Stock, the holders of the Common Stock are entitled to such dividends as may be declared in the discretion of the Board of Directors out of funds legally available therefor. See "Dividend Policy." Holders of Common Stock are entitled to share ratably in the net assets of the Company upon liquidation after payment or provision for all liabilities and any preferential liquidation rights of the Preferred Stock then outstanding. The holders of Common Stock have no preemptive rights to purchase shares of stock in the Company. Shares of Common Stock are not subject to any redemption provisions and are not convertible into any other securities of the Company. All outstanding shares of Common Stock are, and the shares of Common Stock to be issued by the Company pursuant to the Offering will be, upon payment therefor, fully paid and non-assessable.
PREFERRED STOCK
The Preferred Stock may be issued from time to time by the Board of Directors as shares of one or more classes or series. Subject to the provisions of the Company's Amended and Restated Certificate of Incorporation and limitations prescribed by law, the Board of Directors is expressly authorized to adopt resolutions to issue the shares, to fix the number of shares and to change the number of shares constituting any series, and to provide for or change the voting powers, designations, preferences and relative, participating, optional or other special rights, qualifications, limitations or restrictions thereof, including dividend rights (including whether dividends are cumulative), dividend rates, terms of redemption (including sinking fund provisions), redemption prices, conversion rights and liquidation preferences of the shares constituting
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document any class or series of the Preferred Stock, in each case without any further action or vote by the stockholders. The Company has no current plans to issue any additional shares of Preferred Stock of any class or series.
One of the effects of undesignated Preferred Stock may be to enable the Board of Directors to render more difficult or to discourage an attempt to obtain control of the Company by means of a tender offer, proxy contest, merger or otherwise, and thereby to protect the continuity of the Company's management. The issuance of shares of the Preferred Stock pursuant to the Board of Directors' authority described above may adversely affect the rights of the holders of Common Stock. For example, Preferred Stock issued by the Company may rank prior to the Common Stock as to dividend rights, liquidation preference or both, may have full or limited voting rights
53 and may be convertible into shares of Common Stock. Accordingly, the issuance of shares of Preferred Stock may discourage bids for the Common Stock or may otherwise adversely affect the market price of the Common Stock.
THE REDEEMABLE PREFERRED STOCK
In June 1994, the Company issued 5,000 shares of the Series C Preferred Stock and 34,000 shares of the Series D Preferred Stock to White River. The terms of the Series C Preferred Stock and the Series D Preferred Stock are generally the same, except as provided below in "Redemption" and "Series C Default Rights." Each share of the Redeemable Preferred Stock has a stated value of $1,000.
DIVIDENDS. On the first dividend payment date (defined as November 30, February 28, May 31, and August 31 of each year) following June 16, 1998 (the fourth anniversary of the original issue date), the holders of shares of the Redeemable Preferred Stock shall be entitled to receive cash dividends, when and as declared, at the dividend rate applicable from time to time as set forth below, PROVIDED, HOWEVER, in the event the Company fails to redeem shares of the Redeemable Preferred Stock as required following the consummation of the Company's initial public offering of Common Stock, dividends shall be payable commencing on the first dividend payment date following the 90th day following the consummation of such initial public offering. Dividends on parity stock must be declared to be paid either in full or else PRO RATA among all shares of parity stock issued and outstanding. While any shares of Redeemable Preferred Stock are outstanding, no dividends or distributions may be declared or paid with respect to any stock (including the Common Stock) junior to the Redeemable Preferred Stock, nor may any junior stock or parity stock (other than the Series E Preferred Stock) be redeemed, purchased, or otherwise acquired for consideration by the Company.
Dividends accrue from June 16, 1994 (the original issue date). The dividend rate is applicable to the stated value of each outstanding share of the Redeemable Preferred Stock. The dividend rate is 2.75% per annum from the original issue date to and including the earlier of the date of consummation of this Offering or June 16, 1998, and shall be 8.0% per annum thereafter, subject to the following adjustments: (i) if the Company makes the required redemptions of the Redeemable Preferred Stock from the proceeds of this Offering, then the dividend rate shall be 0% from the date of the consummation of this Offering to June 16, 1998; and (ii) if prior to the date of mandatory redemption of the Redeemable Preferred Stock, the Company makes a good faith offer to purchase all or any of the Redeemable Preferred Stock at a price equal to the stated value plus accrued but unpaid dividends to and including the date set for repurchase, and the holders of shares of Redeemable Preferred Stock refuse such offer with respect to any shares subject to such offer, then the applicable dividend rate with respect to such shares of the Redeemable Preferred Stock shall, after the date fixed for repurchase, be the lesser of 1% per annum and the rate applicable to such shares pursuant to clause (i) above.
REDEMPTION. Unless earlier redeemed pursuant to the redemption provisions described below, the Redeemable Preferred Stock shall be redeemed on June 16, 1999 at the stated value plus all accrued and unpaid dividends to (and including) the redemption date. Redemptions are to be made PRO RATA between the Series C, Series D and Series E Preferred Stock and any other parity stock.
Concurrently with the consummation of an initial public offering of Common Stock having proceeds to the Company in excess of $40,000,000, the Company is obligated to redeem the lesser of (i) the number of shares of Redeemable Preferred Stock then outstanding or (ii) the number of shares of Redeemable Preferred having an aggregate stated value plus accrued but unpaid dividends equal to 50% of the net proceeds to the Company from the initial public offering of Common Stock. Similar provisions apply if the Company is required to make loan payments from the proceeds or if the Company fails to make the required redemptions.
The Company also may be required to redeem the Redeemable Preferred Stock (i) in the event that the Company or a subsidiary fails to pay any principal or
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document interest on indebtedness when due or during an applicable grace period or (ii) in the event that notice of acceleration of the maturity or required prepayment and demand for payment is received, in either case with respect to indebtedness in an aggregate amount in excess of $500,000. In such event, the holders of a majority of the then outstanding Series C Preferred Stock shall have the sole discretion to determine the action to be taken on behalf of the Company with respect to such indebtedness.
54
For so long as White River or its affiliates own any shares of the Series C Preferred Stock, the Company may not engage in certain business combinations unless all of the shares of the Series C Preferred Stock have been redeemed.
VOTING. Except as described below in "Series C Default Rights" and except as required by the Delaware General Corporation Law, none of the holders of issued and outstanding Redeemable Preferred Stock shall have voting rights, PROVIDED, HOWEVER, that the affirmative vote of the holders of at least 66 2/3% of each series of the Redeemable Preferred Stock, voting separately as a class, shall be necessary (i) to authorize, create or increase the authorized or issued number of shares of, or issue any shares of any class or series of parity stock or senior stock or (ii) amend, alter or repeal any of the provisions of the Certificate of Incorporation of the Company or the applicable certificate of designations that would materially and adversely affect any right, preference, privilege or voting power of the respective series of Redeemable Preferred Stock or the holders thereof. In the event of an issuance of shares of Series E Preferred Stock in exchange for shares of Series D Preferred Stock as described in "The Series E Preferred Stock" below, shares of the Series E Preferred Stock would have the voting rights described below.
SERIES C DEFAULT RIGHTS. So long as White River or its affiliates beneficially own at least 50% of the issued and outstanding Series C Preferred Stock, if the Company shall fail (i) to discharge its obligation to redeem shares of Series C Preferred Stock (a "Redemption Default") or (ii) to declare and pay in full the dividends on the Series C Preferred Stock within 90 days after the Company is required to do so (a "Dividend Default") the number of directors shall be increased by the number of directors necessary to constitute a majority of the directors of the Company, and the holders of the Series C Preferred Stock, voting separately as a class, shall be entitled to elect directors to fill such newly created directorships. In the case of a Redemption Default, such directors and voting rights shall continue until White River and its affiliates shall cease to own at least 50% of the shares of issued and outstanding Series C Preferred Stock. In the case of a Dividend Default, such additional directors and voting rights shall continue until such time as the Dividend Default no longer exists. If the number of directors cannot be increased as provided above, the Company shall take all actions necessary to implement the intent of these provisions, including causing the resignation of directors to create vacancies to be filled by the action of the holders of the outstanding Series C Preferred Stock.
THE SERIES E PREFERRED STOCK
The Company and White River have entered into the White River Agreement that provides that the Company, within three days following receipt of written notification from White River to the effect that the number of shares of Common Stock owned by White River represents less than a majority of the issued and outstanding shares of Common Stock, will issue to White River 500 shares of the Series E Preferred Stock in exchange for 500 Shares of the Series D Preferred Stock. The White River Agreement was entered into in connection with the recapitalization of the Company in 1994 and to help ensure that White River Corporation avoid registration as an investment company under the Investment Company Act of 1940. White River has informed the Company of its present intention to exchange 500 shares of Series D Preferred Stock for 500 shares of Series E Preferred Stock sometime after the consummation of the Offering. When properly notified in writing of such request, the Company will issue, within three business days, such 500 shares of Series E Preferred Stock to White River.
The terms of the Series E Preferred Stock and the Series D Preferred Stock are generally the same, except that outstanding shares of the Series E Preferred Stock carry certain voting rights if they are beneficially owned by White River or any of its affiliates. In such circumstances, White River and its affiliates that own any shares of Series E Preferred Stock shall be entitled to vote together with the holders of Common Stock and all other securities entitled to vote on all matters voted on by holders of Common Stock. The number of votes which each share of Series E Preferred Stock may cast is determined according to a formula, the effect of which is to cause White River and its affiliates, through their ownership of shares of Series E Preferred Stock, to have 51% of the votes to be cast on any matter to be voted upon by the holders of the Common Stock for so long as all of the shares of Series E Preferred Stock are issued, outstanding and held by White River and its affiliates. Therefore, for so long
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document as all of the outstanding shares of the Series E Preferred Stock were held by White River or its affiliates, White River would be able to control 51% of the votes cast with respect to any matter to be voted upon
55 by holders of the Common Stock regardless of the actual number of shares of Common Stock held by White River. To the extent White River also owns shares of Common Stock, such Series E Preferred Stock will only provide an additional voting percentage that, when added together with the vote from White River's shares of Common Stock, will provide White River with a maximum of 51% of the votes.
Pursuant to the terms of the Certificate of Designations for the Series E Preferred Stock, the voting power of the outstanding shares of Series E Preferred Stock is reduced according to a formula to the extent that outstanding shares of Series E Preferred Stock are either redeemed by the Company or no longer owned by White River and its affiliates. If White River and its affiliates were to continue to hold 39.0% of the outstanding shares of Common Stock, the Series E Preferred Stock voting power combined with the voting power of the Common Stock held by White River would be less than a majority when 393 (or 78.6%) of the 500 shares of Series E Preferred Stock had been so redeemed or are no longer so owned. The outstanding shares, if any, of Series E Preferred Stock are redeemable pro rata with the outstanding shares of Series C and Series D Preferred Stock and other parity stock, if any.
SPECIAL PROVISIONS OF THE CERTIFICATE OF INCORPORATION, BYLAWS AND DELAWARE LAW
The Certificate of Incorporation provides that no director of the Company shall be personally liable to the Company or its stockholders for monetary damages for breach of duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or that involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware Law or (iv) for any transaction from which the director derived an improper personal benefit. The effect of these provisions is to eliminate the rights of the Company and its stockholders (through stockholders' derivative suits on behalf of the Company) to recover monetary damages against a director for breach of fiduciary duty as a director (including breaches resulting from grossly negligent behavior), except in the situations described above.
The Bylaws provide that the Company will indemnify its directors and officers to the fullest extent permissible under the Delaware Law. These indemnification provisions require the Company to indemnify such persons against certain liabilities and expenses to which they may become subject by reason of their service as a director or officer of the Company. The provision also set forth certain procedures, including the advancement of expenses, that apply in the event of a claim for indemnification.
DELAWARE ANTI-TAKEOVER LAW. The Company will not be subject to the provisions of Section 203 of the Delaware Law ("Section 203"). Section 203 provides, with certain exceptions, that a Delaware corporation may not engage in any of a broad range of business combinations with a person or an affiliate, or associate of such person, who is an interested stockholder for a period of three years from the date that such person became an interested stockholder.
A corporation may, at its option, exclude itself from the coverage of Section 203 by amending its certificate of incorporation or bylaws, by action of its stockholders to exempt itself from coverage, provided that such bylaw or certificate of incorporation amendment shall not become effective until twelve months after the date it is adopted. In its amended and restated Certificate of Incorporation to be filed upon the completion of this Offering, the Company will exclude itself from the coverage of Section 203.
TRANSFER AGENT AND REGISTRAR
The Company's transfer agent and registrar for the Common Stock is The First National Bank of Chicago.
56
SHARES ELIGIBLE FOR FUTURE SALE
Prior to this Offering, there has been no market for the Common Stock of the Company. Future sales of substantial amounts of Common Stock in the public market could adversely affect market prices prevailing from time to time. Several of the Company's principal stockholders hold a significant portion of the Company's outstanding Common Stock, including White River which holds 8,584,564 shares representing 39.0% of the outstanding shares of the Common
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Stock after the Offering (37.6% if the Underwriters' over-allotment option is exercised in full) and a decision by one or more of these stockholders to sell their shares could adversely affect the market price of the Common Stock. The Stockholders Agreement provides that in connection with a public offering subsequent to this Offering the Management Stockholders may not sell more than a number of shares of Common Stock which exceeds either 10% of the then total number of shares of Common Stock outstanding or 50% of the total shares of Common Stock then being offered without the written consent of the White River Stockholders.
Upon completion of this Offering, the Company will have outstanding 22,026,800 shares of Common Stock (22,851,800 shares if the Underwriters' over-allotment option is exercised in full). Of these shares, the shares sold in this offering will be freely tradeable without restriction under the Securities Act, unless purchased by "affiliates" of the Company as that term is defined in Rule 144 under the Securities Act. Of the remaining 16,526,800 shares, 808,000 shares which are not held by affiliates and not subject to the lock-up agreements described below will also be freely tradeable.
The remaining 15,718,800 shares held by existing stockholders will be "restricted securities" as that term is defined in Rule 144 under the Securities Act ("Restricted Shares"). Restricted Shares may be sold in the public market only if registered under the Securities Act or if they qualify for an exemption from registration under Rule 144 promulgated under the Securities Act, which is summarized below. Sales of the Restricted Shares in the public market, or the availability of such shares for sale, could adversely affect the market price of the Common Stock.
Holders of 14,911,500 shares of Common Stock of the Company have entered into contractual lock-up agreements providing that they will not sell, contract to sell or grant any option to purchase or otherwise dispose of the shares of Common Stock owned by them or that could be purchased by them through the exercise of options to purchase Common Stock of the Company for 180 days after the effective date of this Prospectus without the prior written consent of Hambrecht & Quist LLC. As a result of these contractual restrictions, notwithstanding possible earlier eligibility for sale under the provisions of Rule 144, shares subject to lock-up agreements will not be saleable until the agreements expire.
In general, under Rule 144 as currently in effect, a person (or persons whose shares are aggregated) who has beneficially owned Restricted Shares for at least two years (including the holding period of any prior owner except an affiliate) would be entitled to sell within any three-month period a number of shares that does not exceed the greater of (i) one percent of the number of shares of Common Stock then outstanding (approximately 220,300 shares immediately after this Offering), or (ii) the average weekly trading volume of the Common Stock during the four calendar weeks preceding the filing of a Form 144 with respect to such sale. Sales under Rule 144 are also subject to certain manner of sale provisions and notice requirements and to the availability of current public information about the Company. Under Rule 144(k), a person who is not deemed to have been an affiliate of the Company at any time during the 90 days preceding a sale, and who has beneficially owned the shares proposed to be sold for at least three years (including the holding period of any prior owner except an affiliate), is entitled to sell such shares without complying with the manner of sale, public information, volume limitation or notice provisions of Rule 144.
Shortly after this Offering, the Company intends to file a registration statement on Form S-8 under the Securities Act covering shares of Common Stock reserved for issuance under the Company's Stock Option Plan. Based on the number of shares reserved for issuance, such registration statement would cover approximately 2,777,900 shares. Such registration statement will automatically become effective upon filing. Accordingly, shares registered under such registration statement will, subject to Rule 144 volume limitations applicable to affiliates, be available for sale in the open market, unless such shares are subject to vesting restrictions with the Company or the lock-up agreements described above.
57
UNDERWRITING
Subject to the terms and conditions of the Underwriting Agreement, the Underwriters named below, through their Representatives, Hambrecht & Quist LLC, Lazard Freres & Co. LLC, and Raymond James & Associates, Inc., have severally agreed to purchase from the Company the following respective numbers of shares of Common Stock:
The Underwriting Agreement provides that the obligations of the Underwriters are subject to certain conditions precedent, including the absence of any material adverse change in the Company's business and the receipt of certain certificates, opinions and letters from the Company and its counsel and independent auditors. The nature of the Underwriters' obligation is such that they are committed to purchase all shares of Common Stock offered hereby if any of such shares are purchased.
The Underwriters propose to offer the shares of Common Stock directly to the public at the initial public offering price set forth on the cover page of this Prospectus and to certain dealers at such price less a concession not in excess of $ per share. The Underwriters may allow and such dealers may reallow a concession not in excess of $ per share to certain other dealers. The Underwriters have informed the Company that they do not intend to confirm sales to any accounts over which they exercise discretionary authority. After the initial public offering of the shares, the offering price and other selling terms may be changed by the Representatives of the Underwriters.
The Company has granted to the Underwriters an option, exercisable no later than 30 days after the date of this Prospectus, to purchase up to 825,000 additional shares of Common Stock at the initial public offering price, less the underwriting discount, set forth on the cover page of this Prospectus. To the extent the Underwriters exercise this option, each of the Underwriters will have a firm commitment to purchase approximately the same percentage thereof which the number of shares of Common Stock to be purchased by it shown in the above table bears to the total number of shares of Common Stock offered hereby. The Company will be obligated, pursuant to the option, to sell shares to the Underwriters to the extent the option is exercised. The Underwriters may exercise such option only to cover over-allotments made in connection with the sale of Common Stock offered hereby.
The offering of the shares is made for delivery when, as and if accepted by the Underwriters and subject to prior sale and to withdrawal, cancellation or modification of the offering without notice. The Underwriters reserve the right to reject an order for the purchase of shares in whole or in part.
The Company has agreed to indemnify the Underwriters against certain liabilities, including liabilities under the Securities Act, and to contribute to payments the Underwriters may be required to make in respect thereof.
The Company and certain stockholders, including all of the Company's executive officers and directors, who own in the aggregate 14,911,500 shares of Common Stock, have agreed that they will not, without the prior written consent of Hambrecht & Quist LLC, offer, sell or otherwise dispose of any shares of Common Stock, options, rights or warrants to acquire shares of Common Stock, or securities exchangeable for or convertible into
58 shares of Common Stock during the 180-day period commencing on the date of this Prospectus, except that the Company may grant additional options under its Stock Option Plan, provided that, without the prior written consent of Hambrecht & Quist LLC, such additional options shall not be exercisable during such period.
Two entities affiliated with Hambrecht & Quist LLC, H&Q CCC Investors L.P. ("Investors L.P.") and H&Q London Ventures (together with Investors L.P., the "Hambrecht & Quist Stockholders") are stockholders of the Company. The Hambrecht & Quist Stockholders currently hold 1,462 shares of Redeemable Preferred Stock (3.8% of the total outstanding Redeemable Preferred Stock) and 264,407 shares of Common Stock (1.4% of the total outstanding Common Stock). The Hambrecht & Quist Stockholders acquired these shares in June 1994 contemporaneously with the investment in the Company by White River. The predecessor of Hambrecht & Quist LLC acted as financial advisor to the Company in connection with that transaction and received a fee of $1.8 million. A portion of the shares of Redeemable Preferred Stock held by the Hambrecht & Quist Stockholders will be redeemed from the proceeds of the Offering on the same terms as will those of White River. Further, a Managing Director of Lazard Freres & Co. LLC, one of the Representatives, is the son of a member of the Company's Board of Directors and beneficially owns indirectly 45,778 shares of Common Stock of the Company.
Prior to this Offering, there has been no public market for the Common Stock. The initial public offering price for the Common Stock will be determined by negotiation among the Company and the Representatives. Pursuant to the terms of the Stockholders Agreement Messrs. Kempner, Phillips and Stanfield have been delegated authority of the board of directors of the Company to negotiate the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document timing, price and other terms of this Offering. See "Principal Stockholders -- Stockholders Agreement." Among the factors to be considered in determining the initial public offering price are prevailing market and economic conditions, revenues and earnings of the Company, market valuations of other companies engaged in activities similar to the Company, estimates of the business potential and prospects of the Company, the present state of the Company's business operations, the Company's management and other factors deemed relevant. The estimated initial public offering price range set forth on the cover of this Prospectus is subject to change as a result of market conditions and other factors.
LEGAL MATTERS
The validity of the shares of securities offered hereby will be passed upon for the Company by Winston & Strawn, Chicago, Illinois. Certain matters will be passed upon for the Underwriters by Heller Ehrman White & McAuliffe, San Francisco, California.
EXPERTS
The consolidated financial statements of the Company and its subsidiaries at December 31, 1995 and 1994, and for each of the three years in the period ended December 31, 1995 included in this Prospectus have been audited by Price Waterhouse LLP, independent public accountants, and are included in reliance upon the report of Price Waterhouse LLP given on their authority as experts in accounting and auditing. The financial statements of CCCDC for the year in the period ended December 31, 1993 included in this Prospectus have been audited by Price Waterhouse LLP, independent public accountants, and are included in reliance upon the report of Price Waterhouse LLP, given on their authority as experts in accounting and auditing.
AVAILABLE INFORMATION
The Company has filed with the Securities and Exchange Commission (the "Commission"), a Registration Statement on Form S-1 under the Securities Act with respect to the shares of Common Stock offered hereby. This Prospectus does not contain all the information set forth in the Registration Statement and the exhibits and schedules thereto. For further information with respect to the Company and such Common Stock, reference is made to the Registration Statement and to the exhibits and schedules filed therewith. Statements contained in this Prospectus as to the contents of any contracts or other document referred to are not necessarily complete, and in each instance reference is made to the copy of such contract or other document filed as an exhibit to the Registration Statement, each such statement being qualified in all respects by such reference. A copy of the Registration Statement may be inspected by anyone without charge at the Commission's principal office in
59
Washington, D.C., and copies of all or any part of the Registration Statement may be obtained from the Public Reference Section of the Commission, 450 Fifth Street, N.W. Washington, D.C. 20549, upon payment of certain fees prescribed by the Commission. The Commission maintains an internet world wide web site that contains reports, proxy and information reports and other materials that are filed through the Commission's Electronic Data Gathering, Analysis and Retrieval System. The site can be accessed at http:\\www.sec.gov.
The Company intends to distribute to the holders of its shares of Common Stock annual reports containing consolidated financial statements audited by independent accountants and quarterly reports containing unaudited consolidated financial information for the first three quarters of each year.
60
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CCC DEVELOPMENT COMPANY
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document
F-1
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Stockholders of CCC Information Services Group Inc.
The stock split described in Note 17 to the consolidated financial statements has not been consummated at June 30, 1996. When it has been consummated, we will be in a position to furnish the following report:
"In our opinion, the accompanying consolidated balance sheet and the related consolidated statements of operations and stockholders' deficit and of cash flows present fairly, in all material respects, the financial position of CCC Information Services Group Inc. (formerly known as InfoVest Corporation) (a subsidiary of White River Ventures, Inc.) and its subsidiaries at December 31, 1995 and 1994, and the results of their operations and their cash flows for each of the three years in the period ended December 31, 1995, 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 audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, 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 January 30, 1996, except for Note 17 which is as of , 1996 Chicago, Illinois
F-2
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
The accompanying notes are an integral part of these consolidated financial statements.
F-3
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS
The accompanying notes are an integral part of these consolidated financial statements.
F-4
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
The accompanying notes are an integral part of these consolidated financial statements.
F-5
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
The accompanying notes are an integral part of these consolidated financial statements.
F-6
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESSES AND ORGANIZATION
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document CCC Information Services Group Inc. (Company) (formerly known as InfoVest Corporation), through its wholly owned subsidiary CCC Information Services Inc. (CCC), is a leading supplier of automobile claims information and processing, claims management software and value-added communication services. The Company's technology-based services and products enable more than 300 automobile insurance company customers and more than 8,500 collision repair facility customers to improve efficiency, manage costs and increase consumer satisfaction in the management of automobile claims and restoration.
After the disposition of certain subsidiaries, as described in Note 5, and through April 30, 1995, the Company consisted of two primary operating entities: CCC and CCC Development Company (Joint Venture). The Company acquired its former partner's 50% interest in the Joint Venture, through the acquisition of UCOP, Inc. (UCOP), effective March 30, 1994. As a result of this acquisition, in combination with its original 50% interest in the Joint Venture, the Company acquired a 100% equity ownership interest in the Joint Venture. Prior to its acquisition of UCOP, the Company accounted for its 50% interest in the Joint Venture under the equity method. CCC also operates a subsidiary in Canada, CCC of Canada, Ltd. (CCC Canada).
As of December 31, 1995, White River Ventures, Inc. (White River) held approximately 52% of the total outstanding common stock of the Company. White River is a wholly owned subsidiary of White River Corporation.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
BASIS OF CONSOLIDATION
The accompanying consolidated financial statements include the accounts of the Company and its subsidiaries, all of which are currently wholly owned.
REVENUE RECOGNITION
Revenues are recognized as services are provided. Of total Company revenues in the years 1993, 1994 and 1995, 88%, 79% and 70%, respectively, were attributable to revenues from insurance companies. In addition, revenues attributable to one national multi-line insurance company in the years 1993, 1994 and 1995 totaled $13.9, $14.8 and $14.3 million, respectively.
ACCOUNTS RECEIVABLE
Accounts receivable as presented in the accompanying consolidated balance sheet are net of reserves for customer credits and doubtful accounts. As of December 31, 1994 and 1995, and June 30, 1996, reserves of $0.9 million, $1.5 million, and $1.5 million (unaudited), respectively, have been applied as a reduction of accounts receivable. Of total accounts receivable, net of reserves, at December 31, 1994 and 1995, $6.9 million and $8.4 million, respectively, were due from insurance companies.
INTERNAL SOFTWARE DEVELOPMENT COSTS
Research and development expenses, principally the design and development of software products, are expensed as incurred. Software costs, if material, are capitalized when sufficient evidence exists that technological feasibility has been established. Technological feasibility is established upon completion of both a product design and a working model, and confirmation of the model's consistency with the design through detailed testing. For the years 1993, 1994 and 1995, research and development expenses of approximately $1.5 million, $2.8 million and $3.5 million, respectively, are reflected in the accompanying consolidated statement of operations. There were no significant software development costs subject to capitalization during the three years ended December 31, 1995.
EQUIPMENT AND PURCHASED SOFTWARE
Equipment is stated at cost, net of accumulated depreciation. Depreciation of equipment is provided on a straight-line basis over estimated useful lives ranging from 2 to 15 years.
F-7
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Purchased software to be marketed is stated at cost and amortized in proportion to anticipated future revenues or on a straight-line basis over the estimated economic life of the purchased software, whichever provides the greater rate of amortization. In 1994 and 1995, amortization of purchased software to be marketed was $2.0 million and $2.6 million, respectively.
GOODWILL
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The excess of purchase price paid over the estimated fair value of identifiable tangible and intangible net assets of acquired businesses is capitalized and amortized on a straight-line basis over periods of 7 or 20 years. Goodwill is periodically reviewed to determine recoverability by comparing its carrying value to expected undiscounted future cash flows.
DEBT ISSUE COSTS
Debt issues costs are capitalized and amortized over the life of CCC's commercial bank debt. As of December 31, 1994 and 1995, deferred debt issue costs, net of accumulated amortization, of $1.7 million and $1.3 million, respectively, were included in other assets.
CONTRACT FUNDING
Future revenue streams under certain end-user collision estimating contracts (Contracts) have been discounted and sold to various investors. Cash proceeds from a sold Contract equals the Contract's future revenue stream, discounted at an annual rate of approximately 14%, less, for certain Contracts, investor reserves for customer nonperformance under the Contracts. Sales proceeds, which are remitted directly to the investors in these Contracts, and related interest expense are recognized in the accompanying consolidated statement of operations as revenue and interest expense, respectively, over the life of the Contract.
PER SHARE INFORMATION
Earnings per share are based on the weighted average number of shares of common stock outstanding and common stock equivalents using the treasury stock method for stock options in accordance with Staff Accounting Bulletin No. 83 of the Securities and Exchange Commission.
FAIR VALUE OF FINANCIAL INSTRUMENTS
As of December 31, 1995, the carrying amount of the Company's financial instruments approximates their estimated fair value based upon market prices for the same or similar type of financial instruments.
PERVASIVENESS 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 amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the consolidated financial statements, and that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
INTERIM FINANCIAL STATEMENTS (UNAUDITED)
The interim consolidated financial statements presented as of and for the six months ended June 30, 1996 and 1995 are unaudited. With respect to the unaudited interim consolidated financial statements, the Company is of the opinion that all material adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the Company's interim results of operations and financial condition, have been included. The results of operations for the six months ended June 30, 1996 and 1995 should not be regarded as necessarily indicative of the results of operations for any future period.
NEW ACCOUNTING PRONOUNCEMENTS
The Company adopted Statement of Financial Accounting Standard (SFAS) No. 121, "Accounting for Impairment of Long-Lived Assets and for Long-Lived Assets to be Disposed of" in the first quarter of 1996. This
F-8
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) Statement establishes a new standard for accounting for the impairment of long-lived assets and certain identifiable intangibles. The adoption of SFAS No. 121 was not material to the Company's financial position or results of operations (unaudited).
The Financial Accounting Standards Board has also issued SFAS No. 123, "Accounting for Stock-Based Compensation," which became effective January 1, 1996. This Statement establishes an alternative to the Company's current method of accounting for compensation associated with stock issued to employees. Management does not intend to adopt the alternative method allowed by SFAS No. 123. Accordingly, adoption of this Statement will only require additional financial statement footnote disclosures to describe the Company's stock-based compensation.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document NOTE 3 -- NONCASH INVESTING AND FINANCING ACTIVITIES The Company directly charges accumulated deficit for preferred stock accretion and preferred stock dividends accrued. During 1993, 1994 and 1995, these amounts totaled $0.0 million, $1.5 million and $3.0 million, respectively.
In addition to amounts reported as purchases of equipment in the consolidated statement of cash flows, the Company has directly financed certain noncash capital expenditures. During 1993, 1994 and 1995, these noncash capital expenditures totaled $0.5 million, $0.4 million and $0.9 million, respectively.
In June 1994, as part of a reorganization and recapitalization of the Company, debt and equity issue costs of $1.1 million and $0.5 million, respectively, were paid on behalf of the Company by its commercial bank. See Notes 11 and 12.
NOTE 4 -- ACQUISITION OF PARTNER'S INTEREST IN JOINT VENTURE On March 30, 1994, White River acquired the stock of UCOP. Also on March 30, 1994, the Company entered into a Call Agreement with White River to purchase the stock of UCOP from White River within 180 days. On May 31, 1994, using cash generated through a commercial bank bridge loan, the Company completed the acquisition of UCOP's interest in the Joint Venture by purchasing the stock of UCOP from White River for $6.9 million.
As of the date of its acquisition, UCOP's only business was its 50% investment in the Joint Venture. The purchase price of $6.9 million, plus liabilities assumed of $22.4 million, have been allocated to the estimated fair value of tangible and intangible assets acquired. In the purchase price allocation, $5.2 million was assigned to purchased software, $13.8 million was assigned to in-process research and development software projects, $6.6 million was assigned to acquired tangible assets and the balance of $3.7 million was assigned to goodwill. The amount assigned to in-process research and development was charged against operating results at the time of the acquisition.
F-9
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 4 -- ACQUISITION OF PARTNER'S INTEREST IN JOINT VENTURE (CONTINUED) Pro forma information, as if the acquisition of UCOP had occurred on January 1, 1994, is as follows:
The pro forma statement of operations above reflects: (a) additional first quarter 1994 depreciation and goodwill amortization of $0.8 million arising from the acquisition, (b) elimination of the charge for purchased research and development of $13.8 million, (c) elimination of interest expense of $0.3 million related to the bridge loan used to acquire UCOP and (d) adjustment of income taxes attributable to the pro forma adjustments. The above pro forma information is not necessarily indicative of what actual results would have been had the acquisition, in fact, occurred on January 1, 1994.
NOTE 5 -- DISCONTINUED OPERATIONS On August 25, 1994, the Company sold (a) the net operating assets of Credit Card Service Corporation, which had previously been accounted for as a discontinued operation and (b) all the capital stock of Original Research II
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Corporation (ORC), GIS Information Systems, Inc. (GIS) and Equitel Corporation. Net cash proceeds from the sale of these businesses totaled $6.2 million. In conjunction with the sale, the Company acquired, for $530 thousand, a 4.5% common equity interest in Faneuil ISG, a Canadian Corporation that will conduct the future operations of these businesses. As of December 31, 1995, this investment is carried at cost as a component of other assets. Final cash proceeds from the sale of $500 thousand were received from escrow in March of 1995. On June 6, 1996, the Board of Directors of the Company approved a distribution of the Faneuil ISG investment to stockholders. In November 1994, the Company completed the planned sale of its investment in Phone Base Systems Inc. Both the gain and cash proceeds from the sale were not material.
F-10
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 5 -- DISCONTINUED OPERATIONS (CONTINUED) Revenues and income from discontinued operations were as follows:
NOTE 6 -- INCOME TAX BENEFIT Income taxes applicable to continuing operations consisted of the following (provision) benefit:
The Company's effective income tax rate applicable to continuing operations differs from the federal statutory rate as follows:
During 1993 and 1994, the Company made income tax payments, net of refunds, of $2.5 million and $1.6 million, respectively. During 1995, the Company received income tax refunds, net of payments, of $1.0 million.
F-11
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 6 -- INCOME TAX BENEFIT (CONTINUED) The approximate income tax effect of each type of temporary difference giving rise to deferred income tax assets and deferred income tax liabilities were as follows:
The Company has established deferred income tax asset valuation allowances because of its history of operating losses and an inability to project future taxable income with certainty. Such valuation allowances will be released to income if and to the extent the Company is able to successfully achieve a recapitalization and demonstrate a predictable pattern of profitability.
Net operating loss carryforwards totaled $322 thousand as of December 31, 1995. These net operating loss carryforwards expire in 2005.
Prior to the current calendar year, the Company's fiscal year-end was April 30. The Internal Revenue Service (IRS) is currently examining the Company's income tax returns for fiscal years 1992 through 1994. All Company income tax returns for fiscal years prior to 1992 are closed to further examination by the IRS.
F-12
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 7 -- OTHER CURRENT ASSETS Other current assets consisted of the following:
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document
Unremitted contract funding proceeds represents investor reserves for nonperformance under certain contracts that the Company believes will exceed actual losses.
NOTE 8 -- EQUIPMENT AND PURCHASED SOFTWARE Equipment and purchased software consisted of the following:
Purchased software, licenses and databases includes software of $5.2 million acquired through the acquisition of its former partner's interest in the Joint Venture. As of December 31, 1994 and 1995, this acquired software had a net asset value of $3.3 million and $0.7 million, respectively.
As of December 31, 1994 and 1995, computer equipment, net of accumulated depreciation, that is on lease to certain customers under operating leases of $4.1 million and $2.5 million, respectively, is included in computer equipment. Future minimum rentals under noncancelable customer leases aggregate approximately $2.0 million and $0.6 million in years 1996 and 1997, respectively.
Furniture and other equipment includes equipment under capital leases as follows:
F-13
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document NOTE 9 -- GOODWILL Goodwill consisted of the following:
NOTE 10 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES Accounts payable and accrued expenses consisted of the following:
NOTE 11 -- LONG-TERM DEBT Term loan and revolving credit facility interest is based on either of two interest rates selected periodically by the Company: a base rate plus 1.5% or the Eurodollar Rate plus 3.0%. The base rate must be the highest of three alternative rates that all generally approximate prime rate. The average interest rate in effect during the years ended December 31, 1994 and 1995 for the term loan and revolving credit facility was 8.3% and 8.4%, and 9.15% and 9.03%, respectively. Through a separate transaction, interest on the term loan has been capped at 12% through May 1996. The timing of interest payments on both the term loan and revolving credit facility vary depending on the applicable interest rate selected by the Company. Generally, however, interest payments are made quarterly. In addition, the Company pays an annual bank agent's fee of $50 thousand and a commitment fee of 0.5% on any unused portion of the revolving credit facility. The term loan is repayable in installments through 1999. The revolving credit facility is reduced to $5 million in 1998 and terminates in 1999.
The loans are secured by the stock and assets of CCC. In addition, the Company has guaranteed CCC's performance under the loan agreement. Effective April 29, 1995, the loan agreement was amended to adjust certain restrictive covenants. Under the amended agreement, CCC must, among other things, maintain quarterly debt service and interest coverage ratios, limit its capital expenditures. In addition, the Company is prohibited from: (a) declaring cash dividends, (b) incurring nonpermitted indebtedness and (c) making nonpermitted investments. In addition, CCC may not absorb more than $1.5 million of corporate expenses allocated from its parent. Beginning in 1997, CCC would be permitted to declare cash dividends in an amount
F-14
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 11 -- LONG-TERM DEBT (CONTINUED) sufficient for the Company to pay the preferred stock dividends described in Note 12 below. Under the term loan, a mandatory principal repayment is required
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document in an amount equal to: (a) 50% of net proceeds from an initial public offering of Company common stock (IPO) or (b) excess cash as defined under the loan agreement.
Long-term debt consisted of the following:
Aggregate minimum principal repayments of long-term debt in each of the five years subsequent to December 31, 1995 are as follows:
The Company made cash interest payments of $1.7 million, $3.3 million and $4.1 million during the year ended December 31, 1993, 1994 and 1995.
NOTE 12 -- MANDATORILY REDEEMABLE PREFERRED STOCK On June 16, 1994, pursuant to a reorganization and recapitalization, the Company issued: (a) 5,000 shares of its preferred stock, par value $1.00, designated as Series C Cumulative Redeemable Preferred Stock (Series C Preferred Stock), (b) 34,000 shares of its preferred stock, par value $1.00, designated as Series D Cumulative Redeemable Preferred Stock (Series D Preferred Stock) and (c) 176,271 shares of its common stock, par value $0.10, to White River in exchange for the Company's subordinated debt and Series A, B and C warrants acquired from the original subordinated debtholders by White River on April 15, 1994. At the date of exchange, the subordinated debt consisted of a principal balance of $41.7 million and accrued interest of $2.7 million. In recording the exchange, $3.9 million and $25.7 million were assigned to the Series C and Series D Preferred Stock, respectively. The balance of $14.8 million, less certain transaction costs of $2.4 million, was assigned to common stock and credited to paid-in capital. During the years ended December 31, 1994 and 1995 and the six months ended June 30, 1996, the original discount on the Series C and Series D Preferred Stock accreted $0.9 million, $1.9 million and $1.1 million (unaudited), respectively, and dividends of $0.6 million, $1.1 million and $0.5 million (unaudited), respectively, were accrued.
The Series C Preferred Stock and Series D Preferred Stock (collectively, Preferred Stock) have a stated value of $1 thousand per share and accrue cumulative dividends at a rate of 2.75% annually through the earlier of: (a) an IPO of the Company's common stock or (b) June 16, 1998. If the Company completes an IPO before June 16, 1998 and redeems Preferred Stock in accordance with its terms, Preferred Stock dividends from the
F-15
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 12 -- MANDATORILY REDEEMABLE PREFERRED STOCK (CONTINUED) IPO through June 16, 1998 would be eliminated. If the Company fails to redeem Preferred Stock in accordance with its terms, the Preferred Stock dividend rate would increase to 8%. No dividends are payable in cash until the earlier of (a) June 16, 1998 or (b) the failure of the Company to meet the prescribed redemption obligations following consummation of an IPO. The Preferred Stock is
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document mandatorily redeemable, at stated value plus accrued dividends, on June 16, 1999.
NOTE 13 -- STOCK OPTION PLAN In May 1988, the Company's Board of Directors adopted a nonqualified stock option plan. Under the plan, as amended in 1992, options may be granted at a per share price of not less than the greater of $55 or the fair market value as of the date of grant, as determined by the Compensation Committee of the Board of Directors (Committee). Options are generally exercisable within 5 years from the date of grant, subject to vesting schedules determined at the discretion of the Committee. In general, however, option grants vest over 4 years. As a result of the Company's June 1994 reorganization and recapitalization, under an agreement with White River, the number of incremental options that may be granted under the plan subsequent to June 16, 1994 has been limited to 3% of outstanding stock on June 16, 1994 or 488,880 shares.
F-16
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 13 -- STOCK OPTION PLAN (CONTINUED) Option activity during 1993, 1994, 1995 and six months ended June 30, 1996 is summarized below.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document F-17
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 14 -- COMMITMENTS AND CONTINGENCIES The Company leases facilities, computers, telecommunications and office equipment under the terms of noncancelable operating lease agreements which expire at various dates through 2008. As of December 31, 1995, future minimum cash lease payments were as follows:
During 1993, 1994 and 1995, operating lease expense was $2.3 million, $3.2 million and $2.9 million, respectively.
In conjunction with the sale of the Faneuil Group, CCC entered into a contract with GIS, under which GIS is to provide certain computer services to CCC through June 1999 at approximately market rates. The contract prescribes that CCC make minimum payments to GIS through June 1997 and provides an option under which CCC can elect to extend the contract for certain services through June 1999. As of December 31, 1995, future minimum payments due GIS under the contract were as follows:
During 1994 and 1995, CCC incurred charges from GIS for computer services of $3.7 million and $3.2 million, respectively.
CCC has guaranteed the payment of certain ORC lease obligations. As of December 31, 1995, future ORC lease payments guaranteed by CCC total $448 thousand in 1996. The Company does not expect to sustain any loss as a result of these guarantees.
NOTE 15 -- LEGAL PROCEEDINGS On June 10, 1994, the litigation involving an independent corporate provider of guidebook data was settled. In this matter, the plaintiff alleged copyright infringement, among other things. Under the settlement agreement CCC has paid the plaintiff $1.75 million. The parties also entered into a five year agreement under which CCC is licensing the guidebook data at market rates. The settlement charge is reported under litigation settlements in the accompanying consolidated statement of operations for the year ended December 31, 1994.
In April 1995, the Company recorded a litigation settlement charge of $4.5 million in connection with the litigation involving an independent corporate publisher of used car valuation books. In December 1995, substantive settlement discussions were held. As a result of those discussions, the parties conditionally agreed to a settlement structure that would resolve all outstanding disputes.
All conditions precedent to the settlement agreement were satisfied in 1996. As a result, all issues arising out of the litigation between the parties have been fully and completely settled and each civil action had been dismissed with prejudice. The settlement amount approximated the settlement charge previously recorded. In conjunction with the settlement agreement, the Company received a three year license to the publisher's used car valuation book data at market rates (unaudited).
F-18
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 15 -- LEGAL PROCEEDINGS (CONTINUED) The Company is a party to various other legal proceedings in the ordinary course of business. The Company believes that the ultimate resolution of these other matters will not have a material effect on the Company's financial position.
NOTE 16 -- RELATED PARTY TRANSACTIONS Prior to the June 1994 recapitalization, certain Joint Venture Contracts were discounted and sold to a major stockholder of the Company. As of December 31, 1994 and 1995, $2.0 million and $0.6 million was payable by Company customers to the stockholder. The discount rate applied to these Contracts was approximately the same as the rate applied to Contracts purchased by unrelated entities.
During May and June 1994, under two separate note agreements, a major stockholder of the Company loaned Phone Base a total of $375 thousand. The notes bear interest at 16% and are secured by Phone Base accounts receivable. Subsequently, Phone Base repaid the stockholder $87 thousand in principal plus accrued interest. On July 1, 1994, the Company purchased this stockholder's rights under these notes for a purchase price of $288 thousand.
During June 1993, Phone Base entered into a royalty agreement with a third-party computer system manufacturer under which Phone Base is to receive royalties from sales of computer systems incorporating certain Phone Base software technology. Subsequently, two Company directors, one of whom is also a Company officer, and White River collectively purchased from Phone Base $1.6 million of participation interests in these royalties. The royalty participation interests entitle the parties to 64% of all future royalties paid to Phone Base under the agreement. To date, no royalties have been paid to Phone Base. On August 26, 1994, the Company acquired the White River royalty participation interest of $150 thousand at face value plus accrued interest at 9% through the date of purchase.
On May 5, 1994, under an unsecured promissory note, White River loaned $200 thousand to Phone Base. The note is due upon demand and bears interest at 9%. On August 26, 1994, the Company purchased the Phone Base indebtedness from White River at face value plus accrued interest at 9% through the date of purchase.
On May 9, 1994, White River executed an assumption agreement under which it purchased from a third-party creditor $6.5 million of Phone Base indebtedness for a purchase price of $550 thousand. On August 26, 1994, the Company purchased White River's interest under the assumption agreement for $550 thousand plus accrued interest at 9% through the date of purchase.
In November 1994, Phone Base was sold to a major stockholder of the Company. On August 25, 1994, the Faneuil Group was sold to an investor group that included a former Company director and certain former Company employees. See Note 5 -- Discontinued Operations.
NOTE 17 -- SUBSEQUENT EVENTS On July 22, 1996, the Company's Board of Directors authorized the filing of a registration statement with the Securities and Exchange Commission for an initial public offering of the Company's common stock. In addition, on July 22, 1996, the Company's Board of Directors authorized a 40 for 1 split of the common stock of the Company, which was effective . All per share and stock option information has been restated to reflect the split.
F-19
REPORT OF INDEPENDENT ACCOUNTANTS
To the Board of Directors and Partners of CCC Development Company
In our opinion, the accompanying statement of operations, of partners' deficit and of cash flows present fairly, in all material respects, the financial position of CCC Development Company for the year in the period ended December 31, 1993, 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 audit. We conducted our audit of these statements in accordance with generally accepted auditing standards which require that we plan and perform the audit to obtain reasonable assurance about whether the financial statements are free of material misstatement. An audit includes examining, on a test basis, evidence supporting the amounts and disclosures in the financial statements, assessing the accounting principles used and significant estimates made by management, and evaluating the overall financial statement presentation. We believe that our audit provides a reasonable basis for the opinion expressed above.
PRICE WATERHOUSE LLP July 22, 1996
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Chicago, Illinois
F-20
CCC DEVELOPMENT COMPANY STATEMENT OF OPERATIONS (IN THOUSANDS)
The accompanying notes are an integral part of these financial statemments
F-21
CCC DEVELOPMENT COMPANY
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
The accompanying notes are an integral part of these financial statements.
F-22
CCC DEVELOPMENT COMPANY
STATEMENT OF PARTNERS' DEFICIT
(IN THOUSANDS)
The accompanying notes are an integral part of these financial statements.
F-23
CCC DEVELOPMENT COMPANY (AN EQUITY INVESTEE OF CCC INFORMATION SERVICES GROUP INC.) NOTES TO FINANCIAL STATEMENTS
NOTE 1 -- ORGANIZATION AND DESCRIPTION OF BUSINESS In September 1989, CCC Information Services Group Inc. (Company) (formerly InfoVest Corporation), through a wholly owned subsidiary, and UCOP Inc. (UCOP), an unrelated corporation, formed CCC Development Company (CCCDC or Joint Venture), a partnership whose purpose was to develop a personal computer based collision repair estimating system for automobiles. In November 1990, the Company and UCOP executed a Joint Venture and Distribution Agreement, under which both partners established their 50% interests in the Joint Venture.
As a result of a series of transactions involving White River Ventures, Inc. (White River), the Company acquired its former partner's 50% interest in CCCDC, through the acquisition of UCOP, Inc. (UCOP), effective March 30, 1994. These transactions are more fully described in Note 4 below. As a result of this acquisition, in combination with its original 50% interest in CCCDC, the Company acquired a 100% equity ownership interest in CCCDC and succeeded to all of CCCDC's former operations and directly assumed all of CCCDC's assets and liabilities.
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES
REVENUE RECOGNITION
Revenues are recognized as services are provided. Of total Joint Venture revenues in 1993, and the quarter ended March 29, 1994, 60% and 53% (unaudited), respectively, were attributable to revenues from insurance companies.
INTERNAL SOFTWARE DEVELOPMENT COSTS
Research and development expenses, principally the design and development of software products, are expensed as incurred. Software costs, if material, are capitalized when sufficient evidence exists that technological feasibility has been established. Technological feasibility is established upon completion of both a product design and a working model, and confirmation of the model's consistency with the design through detailed testing. For the year 1993 and the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document quarter ended March 29, 1994, research and development expenses, of approximately $1.0 million and $0.3 million (unaudited), respectively, are reflected in the accompanying statement of operations. There were no significant software development costs subject to capitalization during either of these periods.
EQUIPMENT AND PURCHASED SOFTWARE
Equipment is stated at cost, net of accumulated depreciation. Depreciation of equipment is provided on a straight-line basis over estimated useful lives ranging from 2 to 15 years.
CONTRACT FUNDING
Future revenue streams under certain end-user collision estimating contracts (Contracts) have been discontinued and sold to various investors. Cash proceeds from a sold Contract equals the Contract's future revenue stream, discounted at an annual rate of approximately 14%, less, for certain Contracts, investor reserves for customer nonperformance under the Contracts. Sales proceeds, which are remitted directly to the investors in these contracts, and related interest expense are recognized as revenue and interest expense, respectively, over the life of the Contract.
PERVASIVENESS 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 amount of assets and liabilities and disclosure of contingent assets and liabilities as of the date of the financial statements, and that affect the reported amounts of revenues and expenses during the reporting period. Actual results could differ from these estimates.
F-24
CCC DEVELOPMENT COMPANY (AN EQUITY INVESTEE OF CCC INFORMATION SERVICES GROUP INC.) NOTES TO FINANCIAL STATEMENTS
NOTE 2 -- SIGNIFICANT ACCOUNTING POLICIES (CONTINUED) INTERIM FINANCIAL INFORMATION (UNAUDITED)
The information presented for the quarter ended March 29, 1994 is unaudited. With respect to the unaudited interim financial statements, management is of the opinion that all material adjustments, consisting only of normal recurring adjustments necessary for a fair presentation of the Joint Venture's interim results of operations, have been included. The results of operations for the quarter ended March 29, 1994 should not be regarded as necessarily indicative of the results of operations for any future period.
NOTE 3 -- NONCASH INVESTING AND FINANCING ACTIVITIES In addition to amounts reported as purchases of equipment in the consolidated statement of cash flow, the Joint Venture has directly financed certain noncash capital expenditures.
NOTE 4 -- ACQUISITION OF PARTNERS' INTEREST IN JOINT VENTURE On March 30, 1994, White River acquired the stock of UCOP. Also on March 30, 1994, the Company entered into a call agreement with White River to purchase the stock of UCOP from White River within 180 days. On May 31, 1994, using cash generated through a commercial bank bridge loan, the Company completed the acquisition of UCOP's interest in CCCDC by purchasing the stock of UCOP from White River. The Company began consolidating Joint Venture operating results effective March 30, 1994.
NOTE 5 -- INCOME TAXES Because the Joint Venture was a partnership, taxable income passed through to its partners. Accordingly, income taxes were not recorded on the books of CCCDC.
NOTE 6 -- LEGAL PROCEEDINGS The Joint Venture and the Company were involved in legal proceedings with the lessor of certain personal computer equipment. When the lessor failed to fulfill certain financial obligations to the equipment vendors, the Joint Venture advanced funds to those vendors on the lessor's behalf. In 1993, uncollectible advances of $1.1 million were charged against Joint Venture operating results. In October 1993, the lessor filed a legal action against the Company seeking payments due under certain master license agreements, including: rents, sales and use tax and interest. In addition, the lessor asserted that it was the sole owner of all right, title and interest in certain Contracts, including renewals. This matter was settled in the first quarter of 1994. Under the settlement agreement, the Company paid the lessor $400 thousand and in exchange received clear title to certain personal computer equipment.
NOTE 7 -- RELATED PARTY TRANSACTIONS During 1993 and the first quarter of 1994, Contracts with future sales proceeds of $5.2 million and $0.3 million, respectively, were discounted and
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document sold to a major stockholder of the Company. The discount rate applied to these Contracts was approximately the same as the rate applied to Contracts purchased by unrelated entities.
F-25
The inside back cover consists of a drawing depicting nine different participants in the automobile claims industry with the following caption: "CCC's Transaction Processing and Outsourcing Services Connect all Partners In the Auto Claims Process."
------
NO DEALER, SALESPERSON OR OTHER PERSON HAS BEEN AUTHORIZED TO GIVE ANY INFORMATION OR TO MAKE ANY REPRESENTATIONS 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 OR THE UNDERWRITERS. THIS PROSPECTUS DOES NOT CONSTITUTE AN OFFER TO SELL OR A SOLICITATION OF ANY OFFER TO BUY TO ANY PERSON IN ANY JURISDICTION IN WHICH SUCH OFFER OR SOLICITATION WOULD BE UNLAWFUL OR TO ANY PERSON TO WHOM IT IS UNLAWFUL. NEITHER THE DELIVERY OF THIS PROSPECTUS NOR ANY OFFER OR SALE MADE HEREUNDER SHALL, UNDER ANY CIRCUMSTANCES, CREATE ANY IMPLICATION THAT THERE HAS BEEN NO CHANGE IN THE AFFAIRS OF THE COMPANY OR THAT THE INFORMATION CONTAINED HEREIN IS CORRECT AS OF ANY TIME SUBSEQUENT TO THE DATE HEREOF.
------
TABLE OF CONTENTS
------
UNTIL , 1996 (25 DAYS AFTER THE DATE OF THIS PROSPECTUS) ALL DEALERS EFFECTING TRANSACTIONS IN THE COMMON STOCK OFFERED HEREBY, WHETHER OR NOT 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.
5,500,000 SHARES
[LOGO]
CCC INFORMATION SERVICES GROUP INC.
COMMON STOCK
------PROSPECTUS ------
HAMBRECHT & QUIST
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document LAZARD FRERES & CO. LLC
RAYMOND JAMES & ASSOCIATES, INC.
AUGUST , 1996
------
PART II INFORMATION NOT REQUIRED IN PROSPECTUS
ITEM 13. OTHER EXPENSES OF ISSUANCE AND DISTRIBUTION.
Set forth below is an itemized statement of all expenses in connection with the sale and distribution of the securities being registered by this Registration Statement, other than underwriting discounts and commissions. All amounts are estimated except the SEC registration fee and the NASD filing fee. All such expenses shall be paid by the Company:
------* To be filed by amendment.
ITEM 14. INDEMNIFICATION OF DIRECTORS AND OFFICERS.
The Company is incorporated under the laws of the State of Delaware. Section 145 of the Delaware Law ("Section 145") provides that a Delaware corporation may indemnify any persons who are, or are threatened to be made, parties to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (other than an action by or in the right of such corporation), by reason of the fact that such person was an officer, director, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees), judgments, fines, and amounts paid in settlement actually and reasonably incurred by such person in connection with such action 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, had no reasonable cause to believe that his conduct was illegal. A Delaware corporation may indemnify any persons who are, or are threatened to be made, a party to any threatened, pending or completed action or suit by or in the right of the corporation by reason of the fact that such person was a director, officer, employee or agent of another corporation or enterprise. The indemnity may include expenses (including attorneys' fees) actually and reasonably incurred by such person in connection with the defense or settlement of such action or suit, provided such person acted in good faith and in a manner he reasonably believed to be in or not opposed to the corporation's best interests except that no indemnification is permitted without judicial approval if the officer or director is adjudged to be liable to the corporation. Where an officer or director is successful on the merits or otherwise in the defense of any action referred to above, the corporation must indemnify him against the expenses which such officer or director has actually and reasonably incurred.
The Company's Certificate of Incorporation and Bylaws provide for the indemnification of directors and officers of the Company to the fullest extent permitted by Section 145.
As permitted by Delaware Law, the Certificate of Incorporation provides that directors of the Company shall have no personal liability to the Company or its stockholders for monetary damages for breach of fiduciary duty as a director, except (i) for any breach of a director's duty of loyalty to the Company or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or knowing violations of law, (iii) under Section 174 of the Delaware Law, or (iv) for any transaction from which a director derived an improper personal benefit.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The Company maintains directors' and officers' liability insurance.
II-1
ITEM 15. RECENT SALES OF UNREGISTERED SECURITIES.
Since January 1, 1993, the Company has issued the following securities that were not registered under the Act:
The Company believes that all of the foregoing transactions were exempt from registration pursuant to Section 4(2) of the Act.
ITEM 16. EXHIBITS AND FINANCIAL STATEMENT SCHEDULES.
(a) Exhibits
------
*Previously filed pursuant to the Company's Registration Statement (Registration No. 333-07287), filed June 28, 1996.
**Previously filed pursuant to the Company's Amendment No. 1 to Registration Statement (Registration No. 333-07287), filed July 25, 1996.
II-2
(b) Financial Statement Schedules
Schedule II Valuation and Qualifying Accounts (included as Page S-1)
All other schedules for which provision is made in the applicable accounting regulations of the Securities and Exchange Commission are not required under the related instructions, are inapplicable or not material, or the information
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document called for thereby is otherwise included in the consolidated financial statements and therefore has been omitted.
ITEM 17. UNDERTAKINGS.
The Company hereby undertakes to provide 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.
The Company hereby undertakes that:
(1) For purpose of determining any liability under the Securities Act, the information omitted from the form of prospectus files as part of this registration statement in reliance upon Rule 430(A) and contained in a form of prospectus filed by the Company 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.
(2) For the purpose of determining any 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.
(3) Insofar as indemnification for liabilities arising under the Securities Act may be permitted to directors, officers and controlling persons of the Company pursuant to the provisions set forth in Item 14 above, or otherwise, the Company has been advised in the opinion of the Securities and Exchange Commission such indemnification is against public policy as expressed in the Act and is, therefore, unenforceable. In the event that a claim for indemnification against such liabilities (other than the payment by the Company expenses incurred or paid by a director, officer or controlling person of the Company 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 Company will, unless in the opinion of its counsel the matter has been settled by controlling precedent, submit to a court of appropriate jurisdiction the question whether such indemnification by it is against public policy as expressed in the Securities Act and the Company will be governed by the final adjudication of such issue.
II-3
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, as amended, the Registrant has duly caused this Amendment No. 2 to Registration Statement to be signed on its behalf by the undersigned thereunto duly authorized, in the City of Chicago, State of Illinois on August 5, 1996.
CCC INFORMATION SERVICES GROUP INC.
By: /s/ DAVID M. PHILLIPS ------David M. Phillips CHAIRMAN, PRESIDENT AND CHIEF EXECUTIVE OFFICER
Pursuant to the requirements of the Securities Act, this Amendment No. 2 to Registration Statement has been signed by the following persons in the capacities indicated on August 5, 1996.
II-4
CCC INFORMATION SERVICES GROUP INC. SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
------(a) Purchase of remaining 50% interest in the Joint Venture, effective March 30, 1994. (b) Accounts receivable write-offs, net of recoveries. (c) Reversal of deferred tax valuation allowances.
S-1
LIST OF EXHIBITS
------
*Previously filed pursuant to the Company's Registration Statement (Registration No. 333-07287), filed June 28, 1996.
**Previously filed pursuant to the Company's Amendment No. 1 to Registration Statement (Registration No. 333-07287), filed July 25, 1996.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document EXHIBIT 1
CCC INFORMATION SERVICES GROUP INC.
5,500,000 Shares*
Common Stock
FORM OF UNDERWRITING AGREEMENT ------
______, 1996
HAMBRECHT & QUIST LLC LAZARD FRERES & CO. LLC RAYMOND JAMES & ASSOCIATES, INC. c/o Hambrecht & Quist LLC One Bush Street San Francisco, CA 94104
Ladies and Gentlemen:
CCC Information Services Group Inc., a Delaware corporation (the "Company"), proposes to issue and sell 5,500,000 shares (the "Underwritten Stock") of its authorized but unissued Common Stock, $0.10 par value (the "Common Stock"). The Company proposes to grant to the Underwriters (as hereinafter defined) an option to purchase up to 825,000 additional shares of Common Stock (the "Option Stock" and with the Underwritten Stock the "Stock"). The Common Stock is more fully described in the Registration Statement and the Prospectus hereinafter mentioned.
The Company hereby confirms the agreements made with respect to the purchase of the Stock by the several underwriters for whom you are acting named in Schedule I hereto (the "Underwriters," which term shall also include any underwriter purchasing Stock pursuant to Section 3(b) hereof). You represent and warrant that you have been authorized by each of the other Underwriters to enter into this Agreement on its behalf and to act for it in the manner herein provided.
1. REGISTRATION STATEMENT. The Company has filed with the Securities and Exchange Commission (the "Commission") a Registration Statement on Form S-1 (No. 333-07287), including the related preliminary prospectus, for the registration under the Securities Act of 1933, as amended (the "Securities Act") of the Stock. Copies of such Registration Statement and of each amendment thereto, if any, including the related preliminary prospectus (meeting the requirements of Rule 430A of the rules and regulations of the Commission) heretofore filed by the Company with the Commission have been delivered to you.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The term "Registration Statement" as used in this agreement shall mean the registration statement referred to above,
------
* Plus an option to purchase from the Company up to 825,000 additional shares to cover overallotments.
including all exhibits and financial statements, all information omitted therefrom in reliance upon Rule 430A and contained in the Prospectus referred to below, in the form in which it became effective, and any registration statement filed pursuant to Rule 462(b) of the rules and regulations of the Commission (the "Rules and Regulations") with respect to the Stock (a "Rule 462(b) Registration Statement"), and, in the event of any amendment thereto after the effective date of such registration statement (the "Effective Date"), shall also mean (from and after the effectiveness of such amendment) such registration statement as so amended (including any Rule 462(b) Registration Statement). The term "Prospectus" as used in this Agreement shall mean the prospectus, including the documents incorporated by reference therein, relating to the Stock first filed with the Commission pursuant to Rule 424(b) and Rule 430A (or if no such filing is required, as included in the Registration Statement) and, in the event of any supplement or amendment to such prospectus after the Effective Date, shall also mean (from and after the filing with the Commission of such supplement or the effectiveness of such amendment) such prospectus as so supplemented or amended. The term "Preliminary Prospectus" as used in this Agreement shall mean each preliminary prospectus included in such registration statement prior to the time it becomes effective.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY.
The Company hereby represents and warrants as follows:
(a) The Registration Statement and Prospectus (including each amendment thereto) have been properly filed in compliance with the Securities Act and comply as of the date hereof with the requirements of the Securities Act. The Registration Statement has been declared effective under the Securities Act and no post-effective amendment to the Registration Statement has been filed as of the date of this Agreement. Any amendment to the Registration Statement or Prospectus will comply with the requirements of the Securities Act. No order suspending the effectiveness of the Registration Statement or preventing or suspending the issue of any Preliminary Prospectus or the Prospectus has been issued and no proceedings for that purpose are pending or, to the best knowledge of the Company, threatened or contemplated by the Commission; no order suspending the sale of the Stock in any jurisdiction has been issued and no proceedings for that purpose are pending or, to the best knowledge of the Company, threatened or contemplated, and any request of the Commission for additional information (to be included in the Registration Statement, any
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Preliminary Prospectus or the Prospectus or otherwise) has been complied with. When any Preliminary Prospectus was filed with the Commission it (A) contained all statements required to be contained therein and complied in all respects with the requirements of the Securities Act, the Rules and Regulations, the Securities Exchange Act of 1934, as amended (the "Exchange Act"), and the rules and regulations of the
-2-
Commission thereunder (the "Exchange Act Rules and Regulations") except that the Preliminary Prospectus dated July 25, 1996 did not contain financial statements of CCC Development Company and (B) did not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. When the Registration Statement or any amendment thereto was or is declared effective, it (A) contained or will contain all statements required to be contained therein and complied or will comply in all respects with the requirements of the Securities Act, the Rules and Regulations, the Exchange Act and the Exchange Act Rules and Regulations and (B) did not or will not include any untrue statement of a material fact or omit to state any material fact necessary to make the statements therein not misleading. When the Prospectus or any amendment or supplement to the Prospectus is filed with the Commission pursuant to Rule 424(b) (or, if the Prospectus or such amendment or supplement is not required to be so filed, when the Registration Statement or the amendment thereto containing such amendment or supplement to the Prospectus was or is declared effective) and at all times subsequent thereto up to and including the Closing Date (defined below) and any date on which Option Stock is to be purchased, the Prospectus, as amended or supplemented at any such time, (A) contained or will contain all statements required to be contained therein and complied or will comply in all respects with the requirements of the Securities Act, the Rules and Regulations, the Exchange Act and the Exchange Act Rules and Regulations and (B) did not or will not include any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading. The foregoing provisions of this paragraph (iii) do not apply to statements or omissions made in any Preliminary Prospectus, the Registration Statement or any amendment thereto or the Prospectus or any amendment or supplement thereto in reliance upon and in conformity with written information furnished to the Company by any Underwriter through the Representative specifically for use therein.
(b) Each of the Company and its subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, has full power (corporate and other) and authority to own or lease its properties and conduct its business as described in the Registration Statement and the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus) and as currently being conducted and proposed to be conducted by it and is duly qualified as a foreign corporation and in good standing in all jurisdictions in which the character of the property owned or leased or the nature of the business transacted by
-3-
it makes qualification necessary (except where the failure to be so qualified would not have a material effect on the business, properties, condition (financial or otherwise), results of operations or prospects of the Company and its subsidiaries taken as a whole). Each of the Company and each of its subsidiaries are in possession of and operating in compliance with all authorizations, licenses, certificates, consents, orders and permits from federal, state, local, foreign and other governmental or regulatory authorities that are material to the conduct of its business, all of which are valid and in full force and effect. Except as disclosed in the Registration Statement, the Company owns all of the outstanding capital stock of each of its subsidiaries, free and clear of any pledge, lien, security interest, encumbrance, claim or equitable interest of any type, kind or nature. Other than CCC Information Systems, Inc., none of the subsidiaries of the Company is a "significant subsidiary" as such term is defined in Rule 405 under the Securities Act. As used in this Agreement, the word "subsidiary" means any corporation, partnership, limited liability company or other entity of which the Company directly or indirectly owns 50% or more of the equity or that the Company directly or indirectly controls. The Company does not have any subsidiaries that are not corporations.
(c) Since the respective dates as of which information is given in the Registration Statement and the Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus), there has not been any material loss or interference with the business of the Company or any of its subsidiaries from fire, explosion, flood, earthquake or other calamity, whether or not covered by insurance, or from any court or governmental action, order or decree, or any changes in the capital stock or long-term debt of the Company or any of its subsidiaries, or any dividend or distribution of any kind declared, paid or made on the capital stock of the Company, or any material change, or a development known to the Company that might cause or result in a material change, in or affecting the business, properties, condition (financial or otherwise), results of operation or prospects of the Company and its subsidiaries taken as a whole, whether or not arising from transactions in the ordinary course of business, in each case other than as may be set forth in the Registration Statement and the Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus), and since such dates, except in the ordinary course of business, neither the Company nor any of its subsidiaries has entered into any material transaction not described in the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Registration Statement and the Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus).
(d) There is no agreement, contract, license, lease or other document required to be described in the Registration
-4-
Statement or the Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus) or to be filed as an exhibit to the Registration Statement which is not described or filed as required. All contracts described in the Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus), if any, are in full force and effect on the date hereof, and neither the Company nor any of its subsidiaries nor, to the best knowledge of the Company, any other party thereto is in material breach of or default under any such contract.
(e) The authorized and outstanding capital stock of the Company is set forth in the Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus), and the description of the Common Stock and Preferred Stock therein conforms with and accurately describes the rights set forth in the instruments defining the same. The shares of the Stock have been duly and validly authorized and, when issued and delivered against payment therefor as provided herein, will be duly and validly issued, fully paid and nonassessable, and the issuance of the Stock is not subject to any preemptive or similar rights.
(f) All of the outstanding shares of Common Stock and Preferred Stock of the Company have been duly authorized and validly issued and are fully paid and nonassessable, have been issued in compliance with all applicable federal and state securities laws and were not issued in violation of or subject to any preemptive rights or other rights to subscribe for or purchase securities. All of the issued shares of each subsidiary of the Company have been duly and validly authorized and issued, are fully paid and nonassessable and are owned by the Company, free and clear of all liens or encumbrances except for liens and encumbrances described in the Registration Statement. The description of the Company's stock option plan and the options or other rights granted or exercised thereunder, set forth in the Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus), accurately and fairly present the information required to be shown with respect to such plans, arrangements, options and rights. Other than this Agreement and the options to purchase the Common Stock described in the Prospectus, there are no options, warrants or other rights outstanding to subscribe for or purchase any shares of the Company's capital stock. There are no preemptive rights applicable to any shares of capital stock of the Company. The partial redemption of the Company's Series C Cumulative Redeemable Preferred Stock and Series D Cumulative Redeemable Preferred Stock (collectively, the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document "Redeemable Preferred Stock") was duly and validly authorized by the Board of Directors of the Company in accordance with the applicable requirements of Delaware General Corporation Law relating to the redemption of capital stock by a corporation. The partial redemption
-5-
of the Redeemable Preferred Stock by the Company will be in compliance with applicable provisions of Delaware General Corporation Law.
(g) This Agreement has been duly authorized, executed and delivered by, and constitutes the valid and binding obligation of, the Company, enforceable against it in accordance with its terms, except as rights to indemnification hereunder may be limited by applicable federal or state securities laws. Other than the registration rights described in the Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus) there are no rights for or relating to the registration of any capital stock of the Company. The filing of the Registration Statement does not give rise to any rights, other than those which have been waived, for or relating to the registration of any capital stock of the Company.
(h) Neither the Company nor any of its subsidiaries is, or with the giving of notice or lapse of time or both would be, in violation of or in default under, nor will the execution or delivery of this Agreement or the completion of the transactions contemplated by this Agreement result in a violation of or constitute a breach of or a default (including without limitation with the giving of notice, the passage of time or otherwise) under, the certificate or articles of incorporation, bylaws or other governing documents of the Company or any of its subsidiaries or any material obligation, agreement, covenant or condition contained in any bond, debenture, note or other evidence of indebtedness or in any contract, indenture, mortgage, deed of trust, loan agreement, lease, license, joint venture or other agreement or instrument to which the Company or any of its subsidiaries is a party or by which any of its or their properties may be bound or affected. The Company has not incurred any liability, direct or indirect, for any finders' or similar fees payable on behalf of the Company or the Underwriters in connection with the transactions contemplated by this Agreement. The performance by the Company of its obligations under this Agreement will not violate any law, ordinance, rule or regulation, or any order, writ, injunction, judgment or decree of any governmental agency or body or of any court having jurisdiction over the Company, its subsidiaries or any of their respective properties, or result in the creation or imposition of any lien, charge, claim or encumbrance upon any property or asset of the Company or any of its subsidiaries. Except for permits and similar authorizations required under the Securities Act, the Exchange Act or under other securities or Blue Sky laws of certain jurisdictions and for such permits and authorizations that have been
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document obtained, no consent, approval, authorization or order of any court, governmental agency or body, financial institution or any other person is required in connection
-6-
with the completion of the transactions contemplated by this Agreement.
(i) The Company and each of its subsidiaries owns, or has valid rights to use, all items of real and personal property which are material to the business of the Company and its subsidiaries taken as a whole and free and clear of all liens, encumbrances and claims that might materially interfere with the business, properties, condition (financial or otherwise), results of operations or prospects of the Company and its subsidiaries taken as a whole.
(j) Each of the Company and each of its subsidiaries owns or possesses adequate rights to use all material patents, patent rights, inventions, trade secrets, know-how, trademarks, service marks, trade names and copyrights described or referred to in the Registration Statement and the Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus) as owned by or used by any of them, or which are necessary for the conduct of their business as described in the Registration Statement and the Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus); and neither the Company nor any of its subsidiaries has received any notice of infringement of or conflict with asserted rights of others with respect to any patents, patent rights, inventions, trade secrets, know-how, trademarks, service marks, tradenames or copyrights which, singly or in the aggregate, if the subject of an unfavorable decision, ruling or finding, might have a material effect on the business, properties, condition (financial or otherwise), results of operations or prospects of the Company and its subsidiaries taken as a whole.
(k) There is no litigation or governmental proceeding to which the Company or any of its subsidiaries is a party or to which any property of the Company or any of its subsidiaries is subject which is pending or, to the best knowledge of the Company, is threatened or contemplated against the Company or any of its subsidiaries that might have a material effect on the business, properties, condition (financial or otherwise), results of operations or prospects of the Company and its subsidiaries taken as a whole, that might prevent consummation of the transactions contemplated by this Agreement or that are required to be disclosed in the Registration Statement or Prospectus (or, if the Prospectus is not in existence, in the most recent Preliminary Prospectus) and are not so disclosed.
(l) Neither the Company nor any of its subsidiaries is in violation of, and neither the Company nor any of its subsidiaries has received any
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document notice or claim from any governmental agency or third party that any of them is in violation of, any law, order, ordinance, rule or regulation, or any order, writ, injunction, judgment or decree of any
-7-
agency or body or of any court, to which it or its properties (whether owned or leased) may be subject, which violation might have a material effect on the business, properties, condition (financial or otherwise), results of operations or prospects of the Company and its subsidiaries taken as a whole.
(m) The Company has not taken and shall not take, directly or indirectly, any action designed to cause or result in, or which has constituted or which might reasonably be expected to cause or result in, under the Exchange Act, the Exchange Act Rules and Regulations or otherwise, the stabilization or manipulation of the price of any security of the Company to facilitate the sale or resale of the Stock. No bid or purchase by the Company and, to the best knowledge of the Company, no bid or purchase that could be attributed to the Company (as a result of bids or purchases by an "affiliated purchaser" within the meaning of Rule 10b-6 under the Exchange Act) for or of the Stock, the Common Stock, any securities of the same class or series as the Common Stock or any securities convertible into or exchangeable for or that represent any right to acquire the Common Stock is now pending or in progress or will have commenced at any time prior to the completion of the distribution of the Stock.
(n) Price Waterhouse LLP, whose reports appear in the Registration Statement and the Prospectus, are, and during the periods covered by their reports in the Registration Statement were, independent accountants as required by the Securities Act and the Rules and Regulations. The financial statements and schedules included in the Registration Statement, each Preliminary Prospectus and the Prospectus present fairly (or, if the Prospectus has not been filed with the Commission, as to the Prospectus, will present fairly) the financial condition, results of operations, cash flow and changes in stockholders' equity and the financial statements and schedules included in the Registration Statement present fairly the information required to be stated therein. Such financial statements and schedules have been prepared in accordance with generally accepted accounting principles applied on a consistent basis throughout the periods presented. The selected and summary financial and statistical data included in the Registration Statement and the Prospectus present fairly (or, if the Prospectus has not been filed with the Commission, as to the Prospectus, will present fairly) the information shown therein and have been compiled on a basis consistent with the audited financial statements presented therein. No other financial statements or schedules are required to be included in the Registration Statement.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (o) The books, records and accounts of the Company and each of its subsidiaries accurately and fairly reflect, in reasonable detail, the transactions in and dispositions of
-8-
the assets of the Company and each of its subsidiaries. The systems of internal accounting controls maintained by the Company and each of its subsidiaries are sufficient to provide reasonable assurances that: (A) transactions are executed in accordance with management's general or specific authorization; (B) transactions are recorded as necessary (x) to permit preparation of financial statements in conformity with generally accepted accounting principles and (y) to maintain accountability for assets; (C) access to assets is permitted only in accordance with management's general or specific authorization; and (D) the recorded accountability for assets is compared with the existing assets at reasonable intervals and appropriate action is taken with respect to any differences.
(p) No labor disturbance by the employees of the Company or any of its subsidiaries exists, is imminent or, to the best knowledge of the Company, is contemplated or threatened; and the Company is not aware of an existing, imminent or threatened labor disturbance by the employees of any principal suppliers, contract manufacturing organizations, manufacturers, authorized dealers or distributors that might be expected to result in any material change in the business, properties, condition (financial or otherwise), results of operations or prospects of the Company and its subsidiaries taken as a whole. No collective bargaining agreement exists with any of the Company's or any of the Company's subsidiaries' employees and, to the best knowledge of the Company, no such agreement is imminent.
(q) Each of the Company and each of its subsidiaries has filed all federal, state, local and foreign tax returns that are required to be filed or has requested extension thereof and has paid all taxes, including withholding taxes, penalties and interest, assessments, fees and other charges to the extent that the same have become due and payable. No tax assessment or deficiency has been made or proposed against the Company or any of its subsidiaries nor has the Company or any of its subsidiaries received any notice of any proposed tax assessment or deficiency.
(r) Except as set forth in the Prospectus (or if the Prospectus is not in existence, the most recent Preliminary Prospectus) there are no outstanding loans, advances or guaranties of indebtedness by the Company to or for the benefit of any of (i) its "affiliates," as such term is deemed in the Rules and Regulations, (ii) any of the officers or directors of any of its subsidiaries or (iii) any of the members of the families of any of them.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (s) Neither the Company nor any of its subsidiaries has, directly or indirectly, at any time: (A) made any contributions to any candidate for political office in violation of law; (B) made any payment to any local, state,
-9-
federal or foreign governmental officer or official, or other person charged with similar public or quasi-public duties; or (C) violated any provision of the Foreign Corrupt Practices Act of 1977, as amended.
(t) Neither the Company nor any of its subsidiaries has any liability, absolute or contingent, relating to: (A) public health or safety; (B) worker health or safety; (C) product defect or warranty; or (D) except as may be disclosed in the Registration Statement and Prospectus (or, if the Prospectus is not in existence, the most recent Preliminary Prospectus) pollution, damage to or protection of the environment, including, without limitation, relating to damage to natural resources, emissions, discharges, releases or threatened releases of hazardous materials into the environment (including, without limitation, ambient air, surface water, groundwater, land surface or subsurface strata) or otherwise relating to the manufacture, processing, use, treatment, storage, generation, disposal, transport or handling of any hazardous materials. As used herein, "hazardous material" includes chemical substances, wastes, pollutants, contaminants, hazardous or toxic substances, constituents, materials or wastes, whether solid, gaseous or liquid in nature.
(u) The Company has not distributed and will not distribute prior to the Closing Date or on or prior to any date on which the Option Stock is to be purchased, as the case may be, any prospectus or other offering material in connection with the offering and sale of the Stock other than the Preliminary Prospectus, the Prospectus, the Registration Statement and any other material which may be permitted by the Securities Act and the Rules and Regulations.
(v) The Stock has been approved for inclusion for listing on the Nasdaq National Market, subject only to official notice of issuance.
(w) The Company is not now, and intends to conduct its affairs in the future in such a manner so that it will not become, an investment company within the meaning of the Investment Company Act of 1940, as amended.
(x) The Company is in compliance in all material respects with all presently applicable provisions of the Employee Retirement Income Security Act of 1974, as amended, including the regulations and published interpretations thereunder ("ERISA"); no "reportable event" (as defined in ERISA) for which the Company would have any liability has occurred; the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Company has not incurred and does not expect to incur liability under (A) Title IV of ERISA with respect to termination of, or withdrawal from, any "pension plan" or (B) Sections 412 or 4971 of the Internal Revenue Code of 1986, as amended, including the regulations and published
-10-
interpretations thereunder (the "Code"); and each "pension plan" for which the Company would have any liability that is intended to be qualified under Section 401(a) of the Code is so qualified in all material respects and nothing has occurred, whether by action or by failure to act, which would cause the loss of such qualification.
3. PURCHASE OF THE STOCK BY THE UNDERWRITERS.
(a) On the basis of the representations and warranties and subject to the terms and conditions herein set forth, the Company agrees to issue and sell 5,500,000 shares of the Underwritten Stock to the several Underwriters and each of the Underwriters agrees to purchase from the Company the respective aggregate number of shares of Underwritten Stock set forth opposite its name in Schedule I. The price at which such shares of Underwritten Stock shall be sold by the Company and purchased by the several Underwriters shall be $_____ per share. The obligation of each Underwriter to the Company shall be to purchase from the Company that number of shares of the Underwritten Stock which represents the same proportion of the total number of shares of the Underwritten Stock to be sold by the Company pursuant to this Agreement as the number of shares of the Underwritten Stock set forth opposite the name of such Underwriter in Schedule I hereto represents of the total number of shares of the Underwritten Stock to be purchased by all Underwriters pursuant to this Agreement, as adjusted by you in such manner as you deem advisable to avoid fractional shares. In making this Agreement, each Underwriter is contracting severally and not jointly; except as provided in paragraphs (b) and (c) of this Section 3, the agreement of each Underwriter is to purchase only the respective number of shares of the Underwritten Stock specified in Schedule I.
(b) If for any reason one or more of the Underwriters shall fail or refuse (otherwise than for a reason sufficient to justify the termination of this Agreement under the provisions of Section 8 or 9 hereof) to purchase and pay for the number of shares of the Stock agreed to be purchased by such Underwriter or Underwriters, the Company shall immediately give notice thereof to you, and the non-defaulting Underwriters shall have the right within 24 hours after the receipt by you of such notice to purchase, or procure one or more other Underwriters to purchase, in such proportions as may be agreed upon between you and such purchasing Underwriter or Underwriters and upon the terms herein set forth, all or any part of the shares of the Stock which such defaulting Underwriter or Underwriters agreed to purchase. If the non- defaulting Underwriters fail so to make such arrangements with respect to all such shares, the number of shares of the Stock which each non-defaulting
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Underwriter is otherwise obligated to purchase under this Agreement shall be automatically increased on a pro rata basis to absorb the remaining shares which the defaulting Underwriter or Underwriters agreed to purchase; PROVIDED, HOWEVER, that the non-defaulting Underwriters shall not be obligated to purchase the shares which the
-11-
defaulting Underwriter or Underwriters agreed to purchase if the aggregate number of such shares of the Stock exceeds 10% of the total number of shares of the Stock which all Underwriters agreed to purchase hereunder. If the total number of shares of the Stock which the defaulting Underwriter or Underwriters agreed to purchase shall not be purchased in accordance with the two preceding sentences, the Company shall have the right, within 24 hours next succeeding the 24-hour period above referred to, to make arrangements with other underwriters or purchasers satisfactory to you for purchase of such shares on the terms herein set forth. In any such case, either you or the Company shall have the right to postpone the Closing Date determined as provided in Section 5 hereof for not more than seven business days after the date originally fixed as the Closing Date pursuant to said Section 5 in order that any necessary changes in the Registration Statement, the Prospectus or any other documents or arrangements may be made. If neither the non-defaulting Underwriters nor the Company shall make arrangements within the 24-hour periods stated above for the purchase of all the shares of the Stock which the defaulting Underwriter or Underwriters agreed to purchase hereunder, this Agreement shall be terminated without further act or deed and without any liability on the part of the Company to any non-defaulting Underwriter and without any liability on the part of any non-defaulting Underwriter to the Company. Nothing in this paragraph (b), and no action taken hereunder, shall relieve any defaulting Underwriter from liability in respect of any default of such Underwriter under this Agreement.
(c) On the basis of the representations, warranties and covenants herein contained, and subject to the terms and conditions herein set forth, the Company grants an option to the several Underwriters to purchase, severally and not jointly, up to 825,000 shares in the aggregate of the Option Stock from the Company at the same price per share as the Underwriters shall pay for the Underwritten Stock. Said option may be exercised only to cover over-allotments in the sale of the Underwritten Stock by the Underwriters and may be exercised in whole or in part at any time (but not more than once) on or before the thirtieth day after the date of this Agreement upon written or telegraphic notice by you to the Company setting forth the aggregate number of shares of the Option Stock as to which the several Underwriters are exercising the option. Delivery of certificates for the shares of Option Stock, and payment therefor, shall be made as provided in Section 5 hereof. The number of shares of the Option Stock to be purchased by each Underwriter shall be the same percentage of the total number of shares of the Option Stock to be purchased by the several Underwriters as such Underwriter is purchasing of the Underwritten Stock, as adjusted by you in such manner as you deem advisable to avoid fractional shares.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -12-
4. OFFERING BY UNDERWRITERS.
(a) The terms of the initial public offering by the Underwriters of the Stock to be purchased by them shall be as set forth in the Prospectus. The Underwriters may from time to time change the public offering price after the closing of the initial public offering and increase or decrease the concessions and discounts to dealers as they may determine.
(b) The information set forth in the last paragraph on the front cover page and under "Underwriting" in the Registration Statement, any Preliminary Prospectus and the Prospectus relating to the Stock filed by the Company (insofar as such information relates to the Underwriters) constitutes the only information furnished by the Underwriters to the Company for inclusion in the Registration Statement, any Preliminary Prospectus, and the Prospectus, and you on behalf of the respective Underwriters represent and warrant to the Company that the statements made therein are correct.
5. DELIVERY OF AND PAYMENT FOR THE STOCK.
(a) Delivery of certificates for the shares of the Underwritten Stock and the Option Stock (if the option granted by Section 3(c) hereof shall have been exercised not later than 7:00 A.M., San Francisco time, on the date two business days preceding the Closing Date), and payment therefor, shall be made at the office of Winston & Strawn, at 7:00 a.m., San Francisco time, on the fourth business day after the date of this Agreement, or at such time on such other day, not later than seven full business days after such fourth business day, as shall be agreed upon in writing by the Company and you. The date and hour of such delivery and payment (which may be postponed as provided in Section 3(b) hereof) are herein called the Closing Date.
(b) If the option granted by Section 3(c) hereof shall be exercised after 7:00 a.m., San Francisco time, on the date two business days preceding the Closing Date, delivery of certificates for the shares of Option Stock, and payment therefor, shall be made at the office of Winston & Strawn at 7:00 a.m., San Francisco time, on the third business day after the exercise of such option.
(c) Payment for the Stock purchased from the Company shall be made to the Company or its order by one or more certified or official bank check or checks in same day funds (and the Company agrees not to deposit any such check in the bank on which drawn until the day following the date of its delivery to the Company). Such payment shall be made upon delivery of certificates for the Stock to you for the respective accounts of the several Underwriters against receipt therefor signed by you. Certificates for the Stock to be delivered to you shall be registered in such name or names and shall be in such denominations as you may request at least one business day before
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -13-
the Closing Date, in the case of Underwritten Stock, and at least one business day prior to the purchase thereof, in the case of the Option Stock. Such certificates will be made available to the Underwriters for inspection, checking and packaging at the offices of Lewco Securities Corporation, 2 Broadway, New York, New York 10004 on the business day prior to the Closing Date or, in the case of the Option Stock, by 3:00 p.m., New York time, on the business day preceding the date of purchase.
It is understood that you, individually and not on behalf of the Underwriters, may (but shall not be obligated to) make payment to the Company for shares to be purchased by any Underwriter whose check shall not have been received by you on the Closing Date or any later date on which Option Stock is purchased for the account of such Underwriter. Any such payment by you shall not relieve such Underwriter from any of its obligations hereunder.
6. FURTHER AGREEMENTS OF THE COMPANY. The Company covenants and agrees as follows:
(a) The Company will (i) prepare and timely file with the Commission under Rule 424(b) a Prospectus containing information previously omitted at the time of effectiveness of the Registration Statement in reliance on Rule 430A and (ii) not file any amendment to the Registration Statement or supplement to the Prospectus of which you shall not previously have been advised and furnished with a copy or to which you shall have reasonably objected in writing or which is not in compliance with the Securities Act or the rules and regulations of the Commission.
(b) The Company will promptly notify each Underwriter in the event of (i) the request by the Commission for amendment of the Registration Statement or for supplement to the Prospectus or for any additional information, (ii) the issuance by the Commission of any stop order suspending the effectiveness of the Registration Statement, (iii) the institution or notice of intended institution of any action or proceeding for that purpose, (iv) the receipt by the Company of any notification with respect to the suspension of the qualification of the Stock for sale in any jurisdiction, or (v) the receipt by it of notice of the initiation or threatening of any proceeding for such purpose. The Company will make every reasonable effort to prevent the issuance of such a stop order and, if such an order shall at any time be issued, to obtain the withdrawal thereof at the earliest possible moment.
(c) The Company will (i) on or before the Closing Date, deliver to you a signed copy of the Registration Statement as originally filed and of each amendment thereto filed prior to the time the Registration Statement becomes effective and, promptly upon the filing thereof, a signed copy of each post- effective amendment, if any, to the Registration Statement (together with, in each case, all exhibits thereto unless
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -14-
previously furnished to you) and will also deliver to you, for distribution to the Underwriters, a sufficient number of additional conformed copies of each of the foregoing (but without exhibits) so that one copy of each may be distributed to each Underwriter, (ii) as promptly as possible deliver to you and send to the several Underwriters, at such office or offices as you may designate, as many copies of the Prospectus as you may reasonably request, and (iii) thereafter from time to time during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, likewise send to the Underwriters as many additional copies of the Prospectus and as many copies of any supplement to the Prospectus and of any amended prospectus, filed by the Company with the Commission, as you may reasonably request for the purposes contemplated by the Securities Act.
(d) If at any time during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer any event relating to or affecting the Company, or of which the Company shall be advised in writing by you, shall occur as a result of which it is necessary, in the opinion of counsel for the Company or of counsel for the Underwriters, to supplement or amend the Prospectus in order to make the Prospectus not misleading in the light of the circumstances existing at the time it is delivered to a purchaser of the Stock, the Company will forthwith prepare and file with the Commission a supplement to the Prospectus or an amended prospectus so that the Prospectus as so supplemented or amended will not contain any untrue statement of a material fact or omit to state any material fact necessary in order to make the statements therein, in the light of the circumstances existing at the time such Prospectus is delivered to such purchaser, not misleading. If, after the initial public offering of the Stock by the Underwriters and during such period, the Underwriters shall propose to vary the terms of offering thereof by reason of changes in general market conditions or otherwise, you will advise the Company in writing of the proposed variation, and, if in the opinion either of counsel for the Company or of counsel for the Underwriters such proposed variation requires that the Prospectus be supplemented or amended, the Company will forthwith prepare and file with the Commission a supplement to the Prospectus or an amended prospectus setting forth such variation. The Company authorizes the Underwriters and all dealers to whom any of the Stock may be sold by the several Underwriters to use the Prospectus, as from time to time amended or supplemented, in connection with the sale of the Stock in accordance with the applicable provisions of the Securities Act and the applicable rules and regulations thereunder for such period.
(e) Prior to the filing thereof with the Commission, the Company will submit to you, for your information, a copy of any post-effective amendment to the Registration Statement and any supplement to the Prospectus or any amended prospectus proposed to be filed.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -15-
(f) The Company will cooperate, when and as requested by you, in the qualification of the Stock for offer and sale under the securities or blue sky laws of such jurisdictions as you may designate and, during the period in which a prospectus is required by law to be delivered by an Underwriter or dealer, in keeping such qualifications in good standing under said securities or blue sky laws; PROVIDED, HOWEVER, that the Company shall not be obligated to file any general consent to service of process or to qualify as a foreign corporation in any jurisdiction in which it is not so qualified. The Company will, from time to time, prepare and file such statements, reports, and other documents as are or may be required to continue such qualifications in effect for so long a period as you may reasonably request for distribution of the Stock.
(g) During a period of five years commencing with the date hereof, the Company will furnish to you, and to each Underwriter who may so request in writing, copies of all periodic and special reports furnished to stockholders of the Company and of all information, documents and reports filed with the Commission (including the Report on Form SR required by Rule 463 of the Commission under the Securities Act).
(h) Not later than the 45th day following the end of the fiscal quarter first occurring after the first anniversary of the Effective Date, the Company will make generally available to its securityholders an earnings statement in accordance with Section 11(a) of the Securities Act and Rule 158 thereunder.
(i) The Company agrees to pay all costs and expenses incident to the performance of its obligations under this Agreement, including all costs and expenses incident to (i) the preparation, printing and filing with the Commission and the National Association of Securities Dealers, Inc. ("NASD") of the Registration Statement, any Preliminary Prospectus and the Prospectus, (ii) the furnishing to the Underwriters of copies of any Preliminary Prospectus and of the several documents required by paragraph (c) of this Section 6 to be so furnished, (iii) the printing of this Agreement and related documents delivered to the Underwriters, (iv) the preparation, printing and filing of all supplements and amendments to the Prospectus referred to in paragraph (d) of this Section 6, (v) the furnishing to you and the Underwriters of the reports and information referred to in paragraph (g) of this Section 6 and (vi) the printing and issuance of stock certificates, including the transfer agent's fees.
(j) The Company agrees to reimburse you, for the account of the several Underwriters, for blue sky fees and related disbursements (including counsel fees and disbursements and cost of printing memoranda for the Underwriters) paid by or for the account of the Underwriters or their counsel in qualifying the Stock under state securities or blue sky laws and in the review of the offering by the NASD.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -16-
(k) The provisions of paragraphs (i) and (j) of this Section are intended to relieve the Underwriters from the payment of the expenses and costs which the Company hereby agrees to pay and shall not affect any agreement which the Company may make, or may have made, for the sharing of any such expenses and costs.
(l) The Company hereby agrees that, without the prior written consent of Hambrecht & Quist LLC on behalf of the Underwriters, the Company will not, for a period of 180 days following the commencement of the public offering of the Stock by the Underwriters, directly or indirectly, (i) sell, offer, contract to sell, make any short sale, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or warrant to purchase or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exchangeable or exercisable for or any rights to purchase or acquire Common Stock or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences or ownership of Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock or such other securities, in cash or otherwise. The foregoing sentence shall not apply to (A) the Stock to be sold to the Underwriters pursuant to this Agreement, (B) shares of Common Stock issued by the Company upon the exercise of options granted under the stock option plans of the Company (the "Option Plans"), as described in footnote one to the table under the caption "Capitalization" in the Preliminary Prospectus, and (C) options to purchase Common Stock granted under the Option Plans.
(m) If at any time during the [25]-day period after the Registration Statement becomes effective any rumor, publication or event relating to or affecting the Company shall occur as a result of which in your opinion the market price for the Stock has been or is likely to be materially affected (regardless of whether such rumor, publication or event necessitates a supplement to or amendment of the Prospectus), the Company will, after written notice from you advising the Company to the effect set forth above, forthwith prepare, consult with you concerning the substance of, and disseminate a press release or other public statement, reasonably satisfactory to you, responding to or commenting on such rumor, publication or event.
(n) The Company is familiar with the Investment Company Act of 1940, as amended, and has in the past conducted its affairs, and will in the future conduct its affairs, in such a manner to ensure that the Company was not and will not be an "investment company" or a company "controlled" by an "investment company" within the meaning of the Investment Company Act of 1940, as amended, and the rules and regulations thereunder.
7. INDEMNIFICATION AND CONTRIBUTION.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (a) The Company agrees to indemnify and hold harmless each Underwriter and each person (including each partner
-17-
or officer thereof) who controls any Underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified parties or any of them may become subject under the Securities Act, the Exchange Act or the common law or otherwise, and the Company agrees to reimburse each such Underwriter and controlling person for any legal or other expenses (including, except as otherwise hereinafter provided, reasonable fees and disbursements of counsel) incurred by the respective indemnified parties in connection with defending against any such losses, claims, damages or liabilities or in connection with any investigation or inquiry of, or other proceeding which may be brought against, the respective indemnified parties, in each case arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (including the Prospectus as part thereof and any Rule 462(b) Registration Statement) or any post-effective amendment thereto (including any Rule 462(b) Registration Statement), 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 (ii) any untrue statement or alleged untrue statement of a material fact contained in any Preliminary Prospectus or the Prospectus (as amended or as supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereto) or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading; PROVIDED, HOWEVER, that (1) the indemnity agreement of the Company contained in this paragraph (a) shall not apply to any such losses, claims, damages, liabilities or expenses if such statement or omission was made in reliance upon and in conformity with information furnished as herein stated or otherwise furnished in writing to the Company by or on behalf of any Underwriter for use in any Preliminary Prospectus or the Registration Statement or the Prospectus or any such amendment thereof or supplement thereto and (2) the indemnity agreement contained in this paragraph (a) with respect to any Preliminary Prospectus shall not inure to the benefit of any Underwriter from whom the person asserting any such losses, claims, damages, liabilities or expenses purchased the Stock which is the subject thereof (or to the benefit of any person controlling such Underwriter) if at or prior to the written confirmation of the sale of such Stock a copy of the Prospectus (or the Prospectus as amended or supplemented) was not sent or delivered to such person and the untrue statement or omission of a material fact contained in such Preliminary Prospectus was corrected in the Prospectus (or the Prospectus as amended or supplemented) unless the failure is the result of noncompliance by the Company with paragraph (c) of Section 6 hereof. The indemnity agreement of the Company contained in this paragraph (a) and the representations and warranties of the Company contained in Section 2
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document hereof shall remain operative and in full force and effect regardless of any investigation made by
-18-
or on behalf of any indemnified party and shall survive the delivery of and payment for the Stock.
(b) Each Underwriter severally agrees to indemnify and hold harmless the Company, each of its officers who signs the Registration Statement on his own behalf or pursuant to a power of attorney, each of its directors each other Underwriter and each person (including each partner or officer thereof) who controls the Company or any such other Underwriter within the meaning of Section 15 of the Securities Act from and against any and all losses, claims, damages or liabilities, joint or several, to which such indemnified parties or any of them may become subject under the Securities Act, the Exchange Act or the common law or otherwise and to reimburse each of them for any legal or other expenses (including, except as otherwise hereinafter provided, reasonable fees and disbursements of counsel) incurred by the respective indemnified parties in connection with defending against any such losses, claims, damages or liabilities or in connection with any investigation or inquiry of, or other proceeding which may be brought against, the respective indemnified parties, in each case arising out of or based upon (i) any untrue statement or alleged untrue statement of a material fact contained in the Registration Statement (including the Prospectus as part thereof and any Rule 462(b) Registration Statement) or any post-effective amendment thereto (including any Rule 462(b) Registration Statement) 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 (ii) any untrue statement or alleged untrue statement of a material fact contained in the Prospectus (as amended or as supplemented if the Company shall have filed with the Commission any amendment thereof or supplement thereto) or the omission or alleged omission to state therein a material fact necessary in order to make the statements therein, in the light of the circumstances under which they were made, not misleading, if such statement or omission was made in reliance upon and in conformity with information furnished as herein stated or otherwise furnished in writing to the Company by or on behalf of such indemnifying Underwriter for use in the Registration Statement or the Prospectus or any such amendment thereof or supplement thereto. The indemnity agreement of each Underwriter contained in this paragraph (b) shall remain operative and in full force and effect regardless of any investigation made by or on behalf of any indemnified party and shall survive the delivery of and payment for the Stock.
(c) Each party indemnified under the provision of paragraphs (a) and (b) of this Section 7 agrees that, upon the service of a summons or other initial legal process upon it in any action or suit instituted against it or upon its receipt of written notification of the commencement of any investigation or inquiry of, or proceeding against, it in respect of which
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document indemnity may be sought on account of any indemnity agreement contained in such paragraphs, it will promptly give written notice (the "Notice") of such service or notification to the
-19-
party or parties from whom indemnification may be sought hereunder. No indemnification provided for in such paragraphs shall be available to any party who shall fail so to give the Notice if the party to whom such Notice was not given was unaware of the action, suit, investigation, inquiry or proceeding to which the Notice would have related and was prejudiced by the failure to give the Notice, but the omission so to notify such indemnifying party or parties of any such service or notification shall not relieve such indemnifying party or parties from any liability which it or they may have to the indemnified party for contribution or otherwise than on account of such indemnity agreement. Any indemnifying party shall be entitled at its own expense to participate in the defense of any action, suit or proceeding against, or investigation or inquiry of, an indemnified party. Any indemnifying party shall be entitled, if it so elects within a reasonable time after receipt of the Notice by giving written notice (the "Notice of Defense") to the indemnified party, to assume (alone or in conjunction with any other indemnifying party or parties) the entire defense of such action, suit, investigation, inquiry or proceeding, in which event such defense shall be conducted, at the expense of the indemnifying party or parties, by counsel chosen by such indemnifying party or parties and reasonably satisfactory to the indemnified party or parties; PROVIDED, HOWEVER, that (i) if the indemnified party or parties reasonably determine that there may be a conflict between the positions of the indemnifying party or parties and of the indemnified party or parties in conducting the defense of such action, suit, investigation, inquiry or proceeding or that there may be legal defenses available to such indemnified party or parties different from or in addition to those available to the indemnifying party or parties, then counsel for the indemnified party or parties shall be entitled to conduct the defense to the extent reasonably determined by such counsel to be necessary to protect the interests of the indemnified party or parties and (ii) in any event, the indemnified party or parties shall be entitled to have counsel chosen by such indemnified party or parties participate in, but not conduct, the defense. If, within a reasonable time after receipt of the Notice, an indemnifying party gives a Notice of Defense and the counsel chosen by the indemnifying party or parties is reasonably satisfactory to the indemnified party or parties, the indemnifying party or parties will not be liable under paragraphs (a) through (c) of this Section 7 for any legal or other expenses subsequently incurred by the indemnified party or parties in connection with the defense of the action, suit, investigation, inquiry or proceeding, except that (A) the indemnifying party or parties shall bear the legal and other expenses incurred in connection with the conduct of the defense as referred to in clause (i) of the proviso to the preceding sentence and (B) the indemnifying party or parties shall bear such other expenses as it or they have authorized to be incurred by the indemnified party or parties. If, within a reasonable time after receipt of the Notice, no
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Notice of Defense has been given, the indemnifying party or parties shall be responsible for any legal or other expenses incurred by the indemnified party or
-20-
parties in connection with the defense of the action, suit, investigation, inquiry or proceeding.
(d) If the indemnification provided for in this Section 7 is unavailable or insufficient to hold harmless an indemnified party under paragraph (a) or (b) of this Section 7, 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 the losses, claims, damages or liabilities referred to in paragraph (a) or (b) of this Section 7 (i) in such proportion as is appropriate to reflect the relative benefits received by each indemnifying party from the offering of the Stock or (ii) if the allocation provided by clause (i) above is not permitted by applicable law, in such proportion as is appropriate to reflect not only the relative benefits referred to in clause (i) above but also the relative fault of each indemnifying party in connection with the statements or omissions that resulted in such losses, claims, damages or liabilities, or actions in respect thereof, as well as any other relevant equitable considerations. The relative benefits received by the Company on the one hand and the Underwriters on the other shall be deemed to be in the same respective proportions as the total net proceeds from the offering of the Stock received by the Company and the total underwriting discount received by the Underwriters, as set forth in the table on the cover page of the Prospectus, bear to the aggregate public offering price of the Stock. Relative fault shall be determined by reference to, among other things, whether the untrue or alleged untrue statement of a material fact or the omission or alleged omission to state a material fact relates to information supplied by each indemnifying party and the parties' relative intent, knowledge, access to information and opportunity to correct or prevent such untrue statement or omission.
The parties agree that it would not be just and equitable if contributions pursuant to this paragraph (d) were to be 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 into account the equitable considerations referred to in the first sentence of this paragraph (d). The amount paid by an indemnified party as a result of the losses, claims, damages or liabilities, or actions in respect thereof, referred to in the first sentence of this paragraph (d) shall be deemed to include any legal or other expenses reasonably incurred by such indemnified party in connection with investigation, preparing to defend or defending against any action or claim which is the subject of this paragraph (d). Notwithstanding the provisions of this paragraph (d), no Underwriter shall be required to contribute any amount in excess of the underwriting discount applicable to the Stock purchased by such Underwriter. No person guilty of fraudulent misrepresentation (within the meaning of Section 11(f) of the Securities Act) shall be entitled to
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document contribution from any person who was not guilty of such fraudulent misrepresentation. The Underwriters' obligations in this paragraph (d) to contribute
-21-
are several in proportion to their respective underwriting obligations and not joint.
Each party entitled to contribution agrees that upon the service of a summons or other initial legal process upon it in any action instituted against it in respect of which contribution may be sought, it will promptly give written notice of such service to the party or parties from whom contribution may be sought, but the omission so to notify such party or parties of any such service shall not relieve the party from whom contribution may be sought from any obligation it may have hereunder or otherwise (except as specifically provided in paragraph (c) of this Section 7).
(e) The Company will not, without the prior written consent of each Underwriter, settle or compromise or consent to the entry of any judgment in any pending or threatened claim, action, suit or proceeding in respect of which indemnification may be sought hereunder (whether or not such Underwriter or any person who controls such Underwriter within the meaning of Section 15 of the Securities Act or Section 20 of the Exchange Act is a party to such claim, action, suit or proceeding) unless such settlement, compromise or consent includes an unconditional release of such Underwriter and each such controlling person from all liability arising out of such claim, action, suit or proceeding.
8. TERMINATION. This Agreement may be terminated by you at any time prior to the Closing Date by giving written notice to the Company if after the date of this Agreement trading in the Common Stock shall have been suspended, or if there shall have occurred (i) the engagement in hostilities or an escalation of major hostilities by the United States or the declaration of war or a national emergency by the United States on or after the date hereof, (ii) any outbreak of hostilities or other national or international calamity or crisis or change in economic or political conditions if the effect of such outbreak, calamity, crisis or change in economic or political conditions in the financial markets of the United States would, in the Underwriters' reasonable judgment, make the offering or delivery of the Stock impracticable, (iii) suspension of trading in securities generally or a material adverse decline in value of securities generally on the New York Stock Exchange, the American Stock Exchange, or The Nasdaq Stock Market, or limitations on prices (other than limitations on hours or numbers of days of trading) for securities on either such exchange or system, (iv) the enactment, publication, decree or other promulgation of any federal or state statute, regulation, rule or order of, or commencement of any proceeding or investigation by, any court, legislative body, agency or other governmental authority which in the Underwriters' reasonable opinion materially and adversely affects or will materially or adversely affect
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the business or operations of the Company, (v) 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
-22-
which in the Underwriters' reasonable opinion has a material adverse effect on the securities markets in the United States. If this Agreement shall be terminated pursuant to this Section 8, there shall be no liability of the Company to the Underwriters and no liability of the Underwriters to the Company; PROVIDED, HOWEVER, that in the event of any such termination the Company agrees to indemnify and hold harmless the Underwriters from all costs or expenses incident to the performance of the obligations of the Company under this Agreement, including all costs and expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
9. CONDITIONS OF UNDERWRITERS' OBLIGATIONS. The obligations of the several Underwriters to purchase and pay for the Stock shall be subject to the performance by the Company of all their respective obligations to be performed hereunder at or prior to the Closing Date or any later date on which Option Stock is to be purchased, as the case may be, and to the following further conditions:
(a) The Registration Statement shall have become effective; and no stop order suspending the effectiveness thereof shall have been issued and no proceedings therefor shall be pending or threatened by the Commission.
(b) The legality and sufficiency of the sale of the Stock hereunder and the validity and form of the certificates representing the Stock, all corporate proceedings and other legal matters incident to the foregoing, and the form of the Registration Statement and of the Prospectus (except as to the financial statements contained therein), shall have been approved at or prior to the Closing Date by Heller Ehrman White & McAuliffe, counsel for the Underwriters.
(c) You shall have received from Winston & Strawn counsel for the Company an opinion, addressed to the Underwriters and dated the Closing Date, covering the matters set forth in Annex A hereto, and if Option Stock is purchased at any date after the Closing Date, additional opinions from each such counsel, addressed to the Underwriters and dated such later date, confirming that the statements expressed as of the Closing Date in such opinions remain valid as of such later date.
(d) You shall have received from ______, Delaware counsel for the Company, an opinion addressed to the Underwriters and dated the Closing Date to the effect that the redemption of the Redeemable Preferred Stock was duly and validly authorized by the Company, and that such redemption, if
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document consummated as described in the Prospectus will have been consummated in compliance with the relevant provisions of the Delaware General Corporation Law.
(e) You shall be satisfied that (i) as of the Effective Date, the statements made in the Registration Statement and the Prospectus were true and correct and neither the
-23-
Registration Statement nor the Prospectus omitted to state any material fact required to be stated therein or necessary in order to make the statements therein, respectively, not misleading, (ii) since the Effective Date, no event has occurred which should have been set forth in a supplement or amendment to the Prospectus which has not been set forth in such a supplement or amendment, (iii) since the respective dates as of which information is given in the Registration Statement in the form in which it originally became effective and the Prospectus contained therein, there has not been any material adverse change or any development involving a prospective material adverse change in or affecting the business, properties, financial condition or results of operations of the Company and its subsidiaries, taken as a whole, whether or not arising from transactions in the ordinary course of business, and, since such dates, except in the ordinary course of business, neither the Company nor any of its subsidiaries has entered into any material transaction not referred to in the Registration Statement in the form in which it originally became effective and the Prospectus contained therein, (iv) neither the Company nor any of its subsidiaries has any material contingent obligations which are not disclosed in the Registration Statement and the Prospectus, (v) there are not any pending or known threatened legal proceedings to which the Company or any of its subsidiaries is a party or of which property of the Company or any of its subsidiaries is the subject which are material and which are not disclosed in the Registration Statement and the Prospectus, (vi) there are not any franchises, contracts, leases or other documents which are required to be filed as exhibits to the Registration Statement which have not been filed as required, (vii) the representations and warranties of the Company herein are true and correct in all material respects as of the Closing Date or any later date on which Option Stock is to be purchased, as the case may be, and (viii) there has not been any material change in the market for securities in general or in political, financial or economic conditions from those reasonably foreseeable as to render it impracticable in your reasonable judgment to make a public offering of the Stock, or a material adverse change in market levels for securities in general (or those of companies in particular) or financial or economic conditions which render it inadvisable to proceed.
(f) You shall have received on the Closing Date and on any later date on which Option Stock is purchased a certificate, dated the Closing Date or such later date, as the case may be, and signed by the President, the Chief Financial Officer and Controller of the Company, stating that the respective signers of said certificate have carefully examined the Registration Statement in the form
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document in which it originally became effective and the Prospectus contained therein and any supplements or amendments thereto, and that the statements included in clauses (i) through (vii) of paragraph (e) of this Section 9 are true and correct.
-24-
(g) You shall have received from Price Waterhouse LLP, a letter or letters, addressed to the Underwriters and dated the Closing Date and any later date on which Option Stock is purchased, confirming that they are independent public accountants with respect to the Company within the meaning of the Securities Act and the applicable published rules and regulations thereunder and based upon the procedures described in their letter delivered to you concurrently with the execution of this Agreement (the "Original Letter"), but carried out to a date not more than three business days prior to the Closing Date or such later date on which Option Stock is purchased (i) confirming, to the extent true, that the statements and conclusions set forth in the Original Letter are accurate as of the Closing Date or such later date, as the case may be, and (ii) setting forth any revisions and additions to the statements and conclusions set forth in the Original Letter which are necessary to reflect any changes in the facts described in the Original Letter since the date of the Original Letter or to reflect the availability of more recent financial statements, data or information. The letters shall not disclose any change, or any development involving a prospective change, in or affecting the business or properties of the Company or any of its subsidiaries which, in your sole judgment, makes it impractical or inadvisable to proceed with the public offering of the Stock or the purchase of the Option Stock as contemplated by the Prospectus.
(h) You shall have received from Price Waterhouse LLP a letter stating that their review of the Company's system of internal accounting controls, to the extent they deemed necessary in establishing the scope of their examination of the Company's financial statements as at December 31, 1995, did not disclose any weakness in internal controls that they considered to be material weaknesses.
(i) You shall have been furnished evidence in usual written or telegraphic form from the appropriate authorities of the several jurisdictions, or other evidence satisfactory to you, of the qualification referred to in paragraph (f) of Section 6 hereof.
(j) Prior to the Closing Date, the Stock to be issued and sold by the Company shall have been duly authorized for listing by the Nasdaq National Market upon official notice of issuance.
(k) You shall have received from all directors, officers, and beneficial holders of Common Stock of the Company agreements in a form reasonably satisfactory to Hambrecht & Quist LLC, stating that without the prior
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document written consent of Hambrecht & Quist LLC on behalf of the Underwriters, such person or entity will not, for a period of 180 days following the commencement of the public offering of the Stock by the Underwriters, directly or indirectly, (i) sell, offer, contract to sell, make any short sale, pledge, sell any option or contract to purchase, purchase any option or contract to sell, grant any option, right or
-25-
warrant to purchase or otherwise transfer or dispose of any shares of Common Stock or any securities convertible into or exchangeable or exercisable for or any rights to purchase or acquire Common Stock or (ii) enter into any swap or other agreement that transfers, in whole or in part, any of the economic consequences or ownership of Common Stock, whether any such transaction described in clause (i) or (ii) above is to be settled by delivery of Common Stock, or such other securities, in cash or otherwise.
All the agreements, opinions, certificates and letters mentioned above or elsewhere in this Agreement shall be deemed to be in compliance with the provisions hereof only if Heller Ehrman White & McAuliffe, counsel for the Underwriters, shall be satisfied that they comply in form and scope.
In case any of the conditions specified in this Section 9 shall not be fulfilled, this Agreement may be terminated by you by giving notice to the Company. Any such termination shall be without liability of the Company to the Underwriters and without liability of the Underwriters to the Company; PROVIDED, HOWEVER, that (i) in the event of such termination, the Company agrees to indemnify and hold harmless the Underwriters from all costs or expenses incident to the performance of the obligations of the Company under this Agreement, including all costs and expenses referred to in paragraphs (i) and (j) of Section 6 hereof, and (ii) if this Agreement is terminated by you because of any refusal, inability or failure on the part of the Company to perform any agreement herein, to fulfill any of the conditions herein, or to comply with any provision hereof other than by reason of a default by any of the Underwriters, the Company will reimburse the Underwriters severally upon demand for all out- of-pocket expenses (including reasonable fees and disbursements of counsel) that shall have been incurred by them in connection with the transactions contemplated hereby.
10. CONDITIONS OF THE OBLIGATION OF THE COMPANY. The obligation of the Company to deliver the Stock shall be subject to the conditions that (a) the Registration Statement shall have become effective and (b) no stop order suspending the effectiveness thereof shall be in effect and no proceedings therefor shall be pending or threatened by the Commission.
In case either of the conditions specified in this Section 10 shall not be fulfilled, this Agreement may be terminated by the Company by giving notice to you. Any such termination shall be without liability of the Company
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document to the Underwriters and without liability of the Underwriters to the Company; PROVIDED, HOWEVER, that in the event of any such termination the Company agrees to indemnify and hold harmless the Underwriters from all costs or expenses incident to the performance of the obligations of the Company under this
-26-
Agreement, including all costs and expenses referred to in paragraphs (i) and (j) of Section 6 hereof.
11. REIMBURSEMENT OF CERTAIN EXPENSES. In addition to its other obligations under Section 7 of this Agreement, the Company hereby agrees to reimburse on a quarterly basis the Underwriters for all reasonable legal and other expenses incurred in connection with investigating or defending any claim, action, investigation, inquiry or other proceeding arising out of or based upon any statement or omission, or any alleged statement or omission, described in paragraph (a) of Section 7 of this Agreement, notwithstanding the absence of a judicial determination as to the propriety and enforceability of the obligations under this Section 11 and the possibility that such payments might later be held to be improper; PROVIDED, HOWEVER, that (i) to the extent any such payment is ultimately held to be improper, the persons receiving such payments shall promptly refund them and (ii) such persons shall provide to the Company, upon request, reasonable assurances of their ability to effect any refund, when and if due.
12. PERSONS ENTITLED TO BENEFIT OF AGREEMENT. This Agreement shall inure to the benefit of the Company and the several Underwriters and their respective personal representatives, successors and assigns. Nothing in this Agreement is intended or shall be construed to give to any other person, firm or corporation any legal or equitable remedy or claim under or in respect of this Agreement or any provision herein contained. The term "successors and assigns" as herein used shall not include any purchaser, as such purchaser, of any of the Stock from any of the several Underwriters.
13. NOTICES. Except as otherwise provided herein, all communications hereunder shall be in writing or by telegraph and, if to the Underwriters, shall be mailed, telegraphed or delivered to Hambrecht & Quist LLC, One Bush Street, San Francisco, California 94104; and if to the Company, shall be mailed, telegraphed or delivered to it at its office, World Trade Center Chicago, 444 Merchandise Mart, Chicago, Illinois 60654, Attention: General Counsel. All notices given by telegraph shall be promptly confirmed by letter.
14. MISCELLANEOUS. The reimbursement, indemnification and contribution agreements contained in this Agreement and the representations, warranties and covenants in this Agreement shall remain in full force and effect regardless of (a) any termination of this Agreement, (b) any investigation made by or on behalf of any Underwriter or controlling person thereof, or by or on behalf of the Company or its directors or officers, and (c) delivery and payment for the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Stock under this Agreement; PROVIDED, HOWEVER, that if this Agreement is terminated prior to the Closing Date, the provisions of paragraphs (l), (m) and (n) of Section 6 hereof shall be of no further force or effect.
-27-
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
This Agreement shall be governed by, and construed in accordance with, the laws of the State of California.
Please sign and return to the Company the enclosed duplicates of this letter, whereupon this letter will become a binding agreement among the Company and the several Underwriters in accordance with its terms.
Very truly yours,
CCC INFORMATION SERVICES GROUP INC.
By: ______David M. Phillips Chief Executive Officer
The foregoing Agreement is hereby confirmed and accepted as of the date first above written.
HAMBRECHT & QUIST LLC LAZARD FRERES & CO. LLC RAYMOND JAMES & ASSOCIATES, INC.
By:______
Title:______
Acting on behalf of the several Underwriters, including themselves, names in Schedule I hereto.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -28-
SCHEDULE I
UNDERWRITERS
Number of Shares to be Underwriters Purchased ------
Hambrecht & Quist LLC ......
Lazard Freres & Co. LLC ......
Raymond James & Associates, Inc......
Total ...... ------
-29-
ANNEX A
MATTERS TO BE COVERED IN THE OPINION OF WINSTON & STRAWN COUNSEL FOR THE COMPANY
(i) The Company and its subsidiaries has been duly incorporated and is validly existing as a corporation in good standing under the laws of the jurisdiction of its incorporation, is duly qualified as a foreign corporation and in good standing in each state of the United States of America in which its ownership or leasing of property requires such qualification, and has full corporate power and authority to own or lease its properties and conduct its business as described in the Registration Statement; all the issued and outstanding capital stock of each of the subsidiaries of the Company has been duly authorized and validly issued and is fully paid and nonassessable, and except for the pledge to the bank under the credit facility is owned by the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Company free and clear of all liens, encumbrances and security interests, and to the best of such counsel's knowledge, no options, warrants or other rights to purchase, agreements or other obligations to issue or other rights to convert any obligations into shares of capital stock or ownership interests in such subsidiaries are outstanding;
(ii) the authorized capital stock of the Company consists of ______shares of Preferred Stock, of which there are ______shares of Series C Cumulative Redeemable Preferred Stock and ______shares of Series D Cumulative Redeemable Preferred Stock outstanding and of which there will be ______shares of Series C Cumulative Preferred Stock and ______shares of Series D Cumulative Preferred Stock outstanding upon payment by the Company of the redemption price therefor as described in the Prospectus, and ______shares of Common Stock, $.10 par value, of which there are outstanding ______shares (including the Underwritten Stock plus the number of shares of Option Stock issued on the date hereof); proper corporate proceedings have been taken validly to authorize such authorized capital stock; all of the outstanding shares of such capital stock (including the Underwritten Stock and the shares of Option Stock issued, if any) have been duly and validly issued and are fully paid and nonassessable; any Option Stock purchased after the Closing Date, when issued and delivered to and paid for by the Underwriters as provided in the Underwriting Agreement, will have been duly and validly issued and be fully paid and nonassessable; and no preemptive rights of, or rights of refusal in favor of, stockholders exist with respect to the Stock, or the issue and sale thereof, pursuant to the Certificate of Incorporation or Bylaws of the Company and, to the knowledge of such counsel, there are no contractual preemptive rights that have not been waived, rights of first refusal or rights of co-sale which exist with respect to the issue and sale of the Stock;
-30-
(iii) the Registration Statement has become effective under the Securities Act and, to the best of such counsel's knowledge, no stop order suspending the effectiveness of the Registration Statement or suspending or preventing the use of the Prospectus is in effect and no proceedings for that purpose have been instituted or are pending or contemplated by the Commission;
(iv) the Registration Statement and the Prospectus (except as to the financial statements and schedules and other financial data contained therein, as to which such counsel need express no opinion) comply as to form in all material respects with the requirements of the Securities Act, the Exchange Act and with the rules and regulations of the Commission thereunder;
(v) the information required to be set forth in the Registration Statement in answer to Item 10 (insofar as it relates to such counsel) of Form S-1 and under the headings "Risk Factors - Use of Licensed Information", "Risk Factors - Control by Existing Stockholders", "Risk Factors - Shares Eligible for Future Sale", "Risk Factors - Blank Check Preferred", "Risk Factors - Holding
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Company Structure", "Business - Legal Proceedings", "Capitalization", "Management Stock Option Plan" "Management - Employment Agreements", " - Certain Transactions", " - Stockholders Agreement", "Description of Capital Stock" and "Shares Eligible for Future Sale" is to the best of such counsel's knowledge accurately and adequately set forth therein in all material respects or no response is required with respect to such Items, and the description of the Company's stock option plan and the options granted and which may be granted thereunder and the options granted otherwise than under such plan set forth in the Prospectus accurately and fairly presents the information required to be shown with respect to said plan and options to the extent required by the Securities Act and the rules and regulations of the Commission thereunder;
(vi) such counsel does not know of any franchises, contracts, leases, documents or legal proceedings, pending or threatened, which in the opinion of such counsel are of a character required to be described in the Registration Statement or the Prospectus or to be filed as exhibits to the Registration Statement, which are not described and filed as required;
(vii) the Underwriting Agreement has been duly authorized, executed and delivered by the Company;
(viii) the issue and sale by the Company of the shares of Stock sold by the Company as contemplated by the Underwriting Agreement will not conflict with, or result in a breach of, the Certificate of Incorporation or Bylaws of the Company or any of its subsidiaries or any agreement or instrument known to such counsel to which the Company or any of its subsidiaries is a party or any applicable law or regulation, or so far as is known to such counsel, any order, writ, injunction or decree, of any jurisdiction, court or governmental instrumentality;
-31-
(ix) Such counsel knows of no registration rights with respect to the shares of Common Stock other than the registration rights held by White River Ventures, Inc. under the Registration Rights Agreement dated June 16, 1994;
(x) no consent, approval, authorization or order of any court or governmental agency or body is required for the consummation of the transactions contemplated in the Underwriting Agreement, except such as have been obtained under the Securities Act and such as may be required under state securities or blue sky laws in connection with the purchase and distribution of the Stock by the Underwriters; and
(xi) the Stock issued and sold by the Company will be duly authorized for listing by the Nasdaq National Market upon official notice of issuance.
[Additional Opinions to be discussed.]
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Counsel rendering the foregoing opinion may rely as to questions of law not involving the laws of the United States or of the State of Illinois, upon opinions of local counsel satisfactory in form and scope to counsel for the Underwriters. Copies of any opinions so relied upon shall be delivered to the Representative and to counsel for the Underwriters and the foregoing opinion shall also state that counsel knows of no reason the Underwriters are not entitled to rely upon the opinions of such local counsel.
In addition to the matters set forth above, counsel rendering the foregoing opinion shall also include a statement to the effect that no facts have come to the attention of such counsel that cause them to believe that the Registration Statement (except as to the financial statements and schedules and other financial data contained or incorporated by reference therein, as to which such counsel need not express any opinion or belief) at the Effective Date contained any 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 that the Prospectus (except as to the financial statements and schedules and other financial data contained or incorporated by reference therein, as to which such counsel need not express any opinion or belief) as of its date or at the Closing Date (or any later date on which Option Stock is purchased), contained or contains any untrue statement of a material fact or omitted or omits to state a material fact necessary in order to make the statements therein, in light of the circumstances under which they were made, not misleading.
-32-
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document FORM OF AMENDED AND RESTATED CERTIFICATE OF INCORPORATION
OF
CCC INFORMATION SERVICES GROUP INC.
ARTICLE 1
The name of the Corporation is:
CCC INFORMATION SERVICES GROUP INC.
ARTICLE 2
The address of the Corporation's registered office in the State of Delaware is 229 South State Street, in the City of Dover, County of Kent. The name of the Corporation's registered agent at that address is Prentice-Hall Corporation System, Inc.
ARTICLE 3
The purpose of the corporation is to engage in any lawful act or activity for which a corporation may be organized under the Delaware General Corporation Law (the "DELAWARE LAW").
ARTICLE 4
4.1 The total number of shares of stock which the Corporation shall have authority to issue is 30,000,000 shares of Common Stock, having a par value of $.10 per share (the "COMMON STOCK"), and 100,000 shares of Preferred Stock, having a par value of $1.00 per share (the "PREFERRED STOCK").
4.2 Each holder of record of shares of the Common Stock shall be entitled to vote at all meetings of the stockholders and shall have one (1) vote for each share held by him of record.
4.3 Subject to all of the rights of the holders of all classes or series of stock at the time outstanding having prior rights as to dividends, the holders of the Common Stock shall be entitled to receive dividends at such times and in such amounts as may be determined by the Board of Directors of the Corporation.
4.4 The Board of Directors is expressly authorized to provide for the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document issuance of all or any shares of the Preferred Stock in one or more classes or series, and to fix for each such class or series such voting powers, full or limited, or no voting powers, and such distinctive designations,
preferences and relative, participating, optional or other special rights and such qualifications, limitations or restrictions thereof, as shall be stated and expressed in the resolution or resolutions adopted by the Board of Directors providing for the issuance of such class or series and as may be permitted by the Delaware Law.
4.5 In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, the holders of the Common Stock shall be entitled, after payment or provision for payment of the debts and other liabilities of the Corporation and the amount to which the holders of any class or series of the Preferred Stock shall be entitled, to share ratably in the remaining net assets of the Corporation.
ARTICLE 5
The following provisions are inserted for the management of the business and the conduct of the affairs of the Corporation, and for further definition, limitation and regulation of the powers of the Corporation and of its directors and stockholders:
(a) The business and affairs of the Corporation shall be managed by or under the direction of the Board of Directors.
(b) The number of directors of the Corporation shall be not less than three (3) nor more than seven (7) and shall be fixed in accordance with the By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-Laws so provide.
(c) Subject to the rights, if any, of holders of any series of the Preferred Stock then outstanding, any vacancy on the Board of Directors that results from an increase in the number of directors may be filled by a majority of the Board of Directors then in office, provided that a quorum is present, and any other vacancy occurring in the Board of Directors may be filled by a majority of the directors then in office, even if less than a quorum. Any director elected to fill a vacancy not resulting from an increase in the number of directors shall have the same remaining term as that of his predecessor.
(d) No director shall be personally liable to the Corporation or any of its stockholders for monetary damages for breach of fiduciary duty as a director, except for liability (i) for any breach of the director's duty of loyalty to the Corporation or its stockholders, (ii) for acts or omissions not in good faith or which involve intentional misconduct or a knowing violation of law, (iii) pursuant to Section 174 of the Delaware Law or (iv) for any transaction from which the director derived an improper personal
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document benefit.
(e) In addition to the powers and authority hereinbefore or by statute expressly conferred upon them, the directors are hereby empowered to exercise all such powers and do all such acts and things as may be exercised or done by the Corporation, subject, nevertheless, to the provisions of the Delaware Law, this Amended and Restated Certificate of
-2-
Incorporation, and any By-Laws adopted by the stockholders; provided, however, that no By-Laws hereafter adopted by the stockholders shall invalidate any prior act of the directors which would have been valid if such By-Laws had not been adopted.
ARTICLE 6
The Corporation shall indemnify, in accordance with and to the full extent now or hereafter permitted by law, any person who was or is a party or is threatened to be made a party to any threatened, pending or completed action, suit or proceeding, whether civil, criminal, administrative or investigative (including, without limitation, an action by or in the right of the Corporation), by reason of his acting as a director of the Corporation (and the Corporation, in the discretion of the Board of Directors, may so indemnify a person by reason of the fact that he is or was an officer or employee of the Corporation or is or was serving at the request of the Corporation in any other capacity for or on behalf of the Corporation) against any liability or expense actually or reasonably incurred by such person in respect thereof; PROVIDED, HOWEVER, that the Corporation shall not be obligated to indemnify any such person: (i) with respect to proceedings, claims or actions initiated or brought voluntarily without the authorization or consent of the Corporation by such person and not by way of defense; or (ii) for any amounts paid in settlement of an action effected without the prior written consent of the Corporation to such settlement. Such indemnification is not exclusive of any other right of indemnification provided by law, agreement or otherwise.
ARTICLE 7
No amendment to or repeal of Articles 5(d) or 6 of this Amended and Restated Certificate of Incorporation shall apply to or have any effect on the rights of any individual referred to in Articles 5(d) or 6 for or with respect to acts or omissions of such individual occurring prior to such amendment or repeal.
ARTICLE 8
Meetings of stockholders may be held within or without the State of Delaware, as the By-Laws may provide. The books of the Corporation may be kept
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (subject to any provision contained in the Delaware Law) outside the State of Delaware at such place or places as may be designated from time to time by the Board of Directors or in the By-Laws of the Corporation. Election of directors need not be by written ballot unless the By-laws of the Corporation shall so provide.
ARTICLE 9
No stockholder of the Corporation shall by reason of holding shares of any class of stock have any pre-emptive or preferential right to purchase or subscribe to any shares of any class of stock of the Corporation, now or hereafter to be authorized, or any notes, debentures, bonds, or other securities convertible into or carrying options or warrants to purchase shares of any class of
-3-
such stock, now or hereafter to be authorized, whether or not the issuance of any such shares, or such notes, debentures, bonds or other securities would adversely affect the dividend or voting rights of such stockholder, other than such rights, if any, as the Board of Directors, in its discretion from time to time, may grant and at such price as the Board of Directors in its discretion may fix; and the Board of Directors may issue shares of any class of stock of the Corporation, or any notes, debentures, bonds or other securities convertible into or carrying options or warrants to purchase shares of any class of such stock, without offering any such shares of any class, either in whole or in part, to the existing stockholders of any class of such stock.
ARTICLE 10
The By-laws may be altered, amended or repealed or new By-laws may be adopted by the holders of at least 50% of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors, considered for the purposes of this Article 10 as one class, at any regular meeting of the stockholders, or at any special meeting of the stockholders if notice of such alteration, amendment, repeal or adoption of new By-laws be contained in the notice of such special meeting.
ARTICLE 11
The Corporation is hereby exempt from the applicability and coverage of Section 203 of the Delaware Law.
-4-
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document FORM OF
SECOND AMENDED AND RESTATED BY-LAWS
OF
CCC INFORMATION SERVICES GROUP INC. (A Delaware Corporation)
ARTICLE I OFFICES
The registered office of the Corporation shall be in the City of Dover, County of Kent, State of Delaware. 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 STOCKHOLDERS
Section 1. TIME AND PLACE OF MEETINGS. All meetings of the stockholders for the election of directors or for any other purpose shall be held at such time and place, within or without the State of Delaware, as shall be designated by the Board of Directors. In the absence of a designation of a place for any such meeting by the Board of Directors, each such meeting shall be held at the principal office of the Corporation.
Section 2. ANNUAL MEETINGS. An annual meeting of stockholders shall be held for the purpose of electing directors and transacting such other business as may properly be brought before the meeting. The date of the annual meeting shall be determined by the Board of Directors.
Section 3. SPECIAL MEETINGS. Special meetings of the stockholders, for any purpose or purposes, unless otherwise prescribed by the Amended and Restated Certificate of Incorporation, as amended from time to time (the "CERTIFICATE OF INCORPORATION"), or by law, may be called by the Chairman of the Board or the President and shall be called by the Secretary at the direction either of a majority of the Board of Directors or stockholders holding not less than twenty- five percent of the stock issued and outstanding and entitled to vote at such meeting.
Section 4. NOTICE OF MEETINGS. Written notice of each meeting of the stockholders stating the place, date and time of the meeting shall be given not less than ten (10) nor more than sixty (60) days before the date of the meeting, to each stockholder entitled to vote at such meeting. The notice of any special meeting of stockholders shall state the purpose or purposes for which the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document meeting is called. Business transacted at any special meeting of stockholders shall be limited to the purposes stated in the notice. Neither the business to be transacted at, nor the purpose of, an annual or special meeting of stockholders need be specified in any written waiver of notice.
Section 5. QUORUM; ADJOURNMENTS. The holders of a majority of the stock issued and outstanding and entitled to vote thereat, present in person or represented by proxy, shall constitute
a quorum at all meetings of the stockholders for the transaction of business, except as otherwise required by these By-laws, the Certificate of Incorporation, or the Delaware General Corporation Law as from time to time in effect (the "DELAWARE LAW"). If a quorum is not represented, the holders of the stock present in person or represented by proxy at the meeting and entitled to vote thereat shall have power, by the affirmative vote of the holders of a majority of such stock, to adjourn the meeting to another time and/or place, without notice other than announcement at the meeting, except as hereinafter provided, until a quorum shall be present or represented. At such adjourned meeting, at which a quorum shall be present or represented, any business may be transacted which might have been transacted at the original meeting. If the adjournment is for more than thirty (30) 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. Withdrawal of stockholders from any meeting shall not cause the failure of a duly constituted quorum at such meeting.
Section 6. VOTING. (a) At all meetings of the stockholders, each stockholder shall be entitled to vote, in person, or by proxy appointed in an instrument in writing subscribed by the stockholder or otherwise appointed in accordance with Section 212 of the Delaware Law, each share of voting stock owned by such stockholder of record on the record date for the meeting. Each stockholder shall be entitled to one vote for each share of voting stock held by such stockholder, unless otherwise provided in the Delaware Law or the Certificate of Incorporation (including, without limitation, in any certificate of designations setting forth the terms of any preferred stock of the Corporation outstanding at any time).
(b) When a quorum is present at any meeting, the affirmative vote of the holders of at least fifty percent (50%) of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors present in person or represented by proxy and voting shall decide any question brought before such meeting, unless the question is one upon which, by express provision of law or of the Certificate of Incorporation, a different vote is required, in which case such express provision shall govern and control the decision of such question. Any stockholder who is in attendance at a meeting of stockholders either in person or by proxy, but who abstains from the vote on any matter, shall not be deemed present or represented at such meeting for purposes of the preceding sentence with respected to such vote, but shall be deemed present or represented at such meeting for all other purposes.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Section 7. ORGANIZATION. At every meeting of the stockholders, the Chairman of the Board, if there be one, or in the case of a vacancy in the office or absence of the Chairman of the Board, one of the following persons present in the order stated: the Vice Chairman, if one has been appointed, the President, the Vice Presidents in their order or rank, a chairman designated by the Board of Directors or a chairman chosen by the stockholders entitled to cast a majority of the votes which all stockholders present in person or by proxy are entitled to cast, shall act as chairman, and the Secretary, or, in his absence, an Assistant Secretary, or in the absence of the Secretary and the Assistant Secretaries, a person appointed by the chairman, shall act as secretary of the meeting.
-2-
Section 8. STOCKHOLDERS ACTION WITHOUT MEETINGS. Any action required to be taken, or any action which may be taken, at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
ARTICLE III DIRECTORS
Section 1. GENERAL POWERS. The business and affairs of the Corporation shall be managed and controlled by or under the direction of its Board of Directors, which may exercise all such powers of, and do all such acts and things as may be done by, the Corporation and do all such lawful acts and things as are not by law or by the Certificate of Incorporation or by these By-laws directed or required to be exercised or done by the stockholders.
Section 2. NUMBER, QUALIFICATION AND TENURE. The number of directors shall be determined from time to time by resolution of the Board of Directors adopted by a majority of the total number of authorized directors (whether or not there exist any vacancies in the previously authorized directorships at the time any such resolution is presented to the Board of Directors for adoption), subject to the provisions of the Certificate of Incorporation. The directors shall be elected at the annual meeting of the stockholders, except as provided in the Certificate of Incorporation or SECTION 3 of this Article, and each director elected shall hold office until his or her successor is elected and qualified or until his or her earlier death, termination, resignation or removal from office. Directors need not be stockholders.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Section 3. VACANCIES AND NEWLY-CREATED DIRECTORSHIPS. Vacancies and newly-created directorships resulting from any increase in the number of directors may be filled by a majority of the directors then in office, although less than a quorum, or by a sole remaining director, and each director so chosen shall hold office until his or her successor is elected and qualified or until his or her earlier death, termination, resignation, retirement, disqualification or removal from office. If there are no directors in office, then an election of directors may be held in the manner provided by law.
Section 4. REMOVAL. Any director may be removed from the Board of Directors for or without cause by the holders of shares of stock having a majority of the voting power of the Corporation, and the office of such director shall forthwith become vacant.
Section 5. PLACE OF MEETINGS. The Board of Directors may hold meetings, both regular and special, either within or without the State of Delaware.
-3-
Section 6. MEETINGS. The Board of Directors shall hold a regular meeting, to be known as the annual meeting, immediately following each annual meeting of the stockholders. Other regular meetings of the Board of Directors shall be held at such time and place as shall from time to time be determined by the Board. No notice of regular meetings need be given, other than by announcement at the immediately preceding regular meeting. Special meetings of the Board may be called by the President or by the Secretary on the written request of a majority of the Board of Directors. Notice of any special meeting of the Board shall be given at least two (2) days prior thereto, either in writing, or telephonically if confirmed promptly in writing, to each director at the address shown for such director on the records of the Corporation.
Section 7. WAIVER OF NOTICE; BUSINESS AND PURPOSE. Notice of any meeting of the Board of Directors may be waived in a writing signed by the person or persons entitled to such notice either before or after the time of the meeting. The attendance of a director at any meeting shall constitute a waiver of notice of such meeting, except where a director attends a meeting for the express purpose of objecting to the transaction of any business because the meeting is not lawfully called or convened and at the beginning of the meeting records such objection with the person acting as secretary of the meeting and does not thereafter vote on any action taken at the meeting. Neither the business to be transacted at, nor the purpose of, any regular or special meeting of the Board of Directors need be specified in the notice or waiver of notice of such meeting, unless specifically required by the Delaware Law.
Section 8. QUORUM AND MANNER OF ACTING. At all meetings of the Board of Directors a majority of the total number of directors shall constitute a quorum for the transaction of business. If a quorum shall not be present at any
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document meeting of the Board of Directors, the directors present thereat may adjourn the meeting from time to time, without notice other than announcement at the meeting, until a quorum shall be present. The act of a majority of the directors present at any meeting at which there is a quorum shall be the act of the Board of Directors, except as may be otherwise specifically provided by the Delaware Law or by the Certificate of Incorporation.
Section 9. ORGANIZATION. The Chairman of the Board, if elected, shall act as chairman at all meetings of the Board of Directors. If the Chairman of the Board is not elected or, if elected, is not present, a director chosen by a majority of the directors present shall act as chairman at such meeting of the Board of Directors.
Section 10. COMMITTEES. The Board of Directors, by resolution adopted by a majority of the whole Board of Directors, may create one or more other committees and appoint one or more directors to serve on such committee or committees. Each director appointed to serve on any such committee shall serve, unless the resolution designating the respective committee is sooner amended or rescinded by the Board of Directors, until the next annual meeting of the Board of Directors or until their respective successors are designated. The Board of Directors, by resolution adopted by a majority of the whole Board of Directors, may also designate additional directors as alternate members of any committee to serve as members of such committee in the place and stead of any regular member or members thereof who may be unable to attend a meeting or otherwise unavailable
-4-
to act as a member of such committee. In the absence or disqualification of a member and all alternate members designated to serve in the place and stead of such member, the member or members thereof present at any meeting and not disqualified from voting, whether or not such member or members constitute a quorum, may unanimously appoint another director to act at the meeting in the place and stead of such absent or disqualified member.
A committee of the Board of Directors may exercise the power and authority of the Board of Directors to the extent specified by the resolution establishing such committee, or the Certificate of Incorporation or these By-laws; PROVIDED, HOWEVER, that no committee may take any action that is expressly required by the Delaware Law or the Certificate of Incorporation or these By-laws to be taken by the Board of Directors and not by a committee thereof. Each committee shall keep a record of its acts and proceedings, which shall form a part of the records of the Corporation in the custody of the Secretary, and all actions of each committee shall be reported to the Board of Directors at the next meeting of the Board.
Meetings of committees may be called at any time by the Chairman of the Board, if any, the President or the chairman of the respective committee. A
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document majority of the members of the committee shall constitute a quorum for the transaction of business and, except as expressly limited by this section, the act of a majority of the members present at any meeting at which there is a quorum shall be the act of such committee. Except as expressly provided in this section or in the resolution designating the committee, a majority of the members of any such committee may select its chairman, fix its rules of procedure, fix the time and place of its meetings and specify what notice of meetings, if any, shall be given.
Section 11. ACTION WITHOUT MEETING. Unless otherwise specifically prohibited by the Certificate of Incorporation or these By-laws, 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 of Directors or such committee, as the case may be, execute a consent thereto in writing setting forth the action so taken, and the writing or writings are filed with the minutes of proceedings of the Board of Directors or such committee.
Section 12. ATTENDANCE BY TELEPHONE. Members of the Board of Directors, or any committee thereof, may participate in and act at any meeting of the Board of Directors, or such committee, as the case may be, through the use of a conference telephone or other communications equipment by means of which all persons participating in the meeting can hear each other. Participation in such meeting shall constitute attendance and presence in person at the meeting of the person or persons so participating.
Section 13. COMPENSATION. By resolution of the Board of Directors, irrespective of any personal interest of any of the members, the directors may be paid their reasonable expenses, if any, of attendance at each meeting of the Board of Directors and may be paid a fixed sum of attendance at meetings or a stated salary as directors. These payments shall not preclude any director from serving the Corporation in any other capacity and receiving compensation therefor.
-5-
ARTICLE IV OFFICERS
Section 1. ENUMERATION. The officers of the Corporation shall be chosen by the Board of Directors and shall include a President, one or more Vice Presidents, a Treasurer and a Secretary. The Board of Directors may also elect a Chairman of the Board, a Chief Financial Officer, a Chief Executive Officer, one or more Assistant Secretaries and Assistant Treasurers, and such other officers and agents as it may deem appropriate. Any number of offices may be held by the same person.
Section 2. TERM OF OFFICE. The officers of the Corporation shall be
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document elected at the annual meeting of the Board of Directors and shall hold office until their successors are elected and qualified, or until their earlier death, termination, resignation or removal from office. Any officer or agent of the Corporation may be removed at any time by the Board of Directors, with or without cause. Any vacancy in any office because of death, resignation, termination, removal, disqualification or otherwise, may be filled by the Board of Directors for the unexpired portion of the term.
Section 3. CHAIRMAN OF THE BOARD. The Chairman of the Board, when and if elected, shall preside at meetings of the Board of Directors and of stockholders and shall have such other functions, authority and duties as customarily appertain to the office of the Chairman of a business corporation or as may be prescribed by the Board of Directors. The Chairman of the Board, if any, shall be a member of the Board of Directors of the Corporation.
Section 4. CHIEF EXECUTIVE OFFICER. The Chief Executive Officer, when and if elected, shall have general supervision, direction and control of the business and affairs of the Corporation, subject to the control of the Board of Directors, and shall have such other functions, authority and duties as customarily appertain to the office of Chief Executive Officer of a business corporation or as may be prescribed by the Board of Directors.
Section 5. CHIEF FINANCIAL OFFICER. The Chief Financial Officer shall have general supervision, direction and control over the treasury and the finances of the Company, including but not limited to the authority over finance, treasury and accounting personnel and functions of the Company, to act as agent for the Company in respect of its dealings with creditors and stockholders on financial matters, and the authority to negotiate all financial matters of the Company on its behalf, subject to the control of the Board of Directors. The Chief Financial Officer shall have such other functions, authority and duties as customarily appertain to the office of the Chief Financial Officer of a business corporation or as may be prescribed by the Board of Directors.
Section 6. PRESIDENT. The President shall be the chief operating officer of the Corporation and shall have such functions, authority and duties as may be prescribed by the Board of Directors.
-6-
Section 7. VICE PRESIDENT. Each Vice President, if any, shall perform such duties and have such other powers as may from time to time be prescribed by the Board of Directors, the Chairman of the Board, or the President.
Section 8. SECRETARY. The Secretary shall: (a) keep a record of all proceedings of the stockholders, the Board of Directors and any committees thereof in one of more books provided for that purpose; (b) give, or cause to be given, all notices that are required by law or these By-laws to be given by the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Secretary; (c) be custodian of the corporate records and, if the Corporation has a corporate seal, of the seal of the Corporation; (d) have authority to affix the seal of the Corporation to all instruments the execution of which requires such seal and to attest such affixing of the seal; (e) keep a register of the post office address of each stockholder which shall be furnished to the Secretary by such stockholder; (f) sign, with the Chairman of the Board, President or any Vice President, or any other officer thereunto authorized by the Board of Directors, any certificates for shares of the Corporation, or any deeds, mortgages, bonds, contracts or other instruments which the Board of Directors has authorized to be executed by the signature of more than one officer; (g) have general charge of the stock transfer books of the Corporation; (h) have authority to certify as true and correct, copies of the By-laws, or resolutions of the stockholders, the Board of Directors and committees thereof, and of other documents of the Corporation; and (i) in general, perform the duties incident to the office of secretary and such other duties as from time to time may be prescribed by the Board of Directors, the Chairman of the Board or the President. The Board of Directors may give general authority to any other officer to affix the seal of the Corporation and to attest such affixing of the seal.
Section 9. TREASURER. The Treasurer shall have the care and custody of the corporate funds, and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the Corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the Corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the Corporation as may be ordered by the Board of Directors, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the Board of Directors, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the Corporation. If required by the Board of Directors, the Treasurer shall give the Corporation a bond for such term in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of his office and for the restoration to the Corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the Corporation.
Section 10. OTHER OFFICERS AND AGENTS. Any officer or agent who is elected or appointed from time to time by the Board of Directors and whose duties are not specified in these By-laws shall perform such duties and have such powers as may from time to time be prescribed by the Board of Directors, the Chairman of the Board or the President.
-7-
ARTICLE V CERTIFICATES OF STOCK AND THEIR TRANSFER
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Section 1. FORM. The shares of the Corporation shall be represented by certificates. Each certificate for shares shall be consecutively numbered or otherwise identified. Certificates of stock in the Corporation shall be signed by or in the name of the Corporation by the Chairman of the Board or the President and by the Secretary of the Corporation. Where a certificate is countersigned by a transfer agent, other than the Corporation or an employee of the Corporation, or by a registrar, the signatures of one or more officer of the Corporation may be facsimiles. 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, the certificate may be issued by the Corporation with the same effect as if such officer, transfer agent or registrar were such officer, transfer agent or registrar at the date of its issue.
Section 2. TRANSFER. Upon surrender to the Corporation or the transfer agent of the Corporation of a certificate for shares duly endorsed or accompanied by proper evidence of succession, assignment or authority to transfer, it shall be the duty of the Corporation to issue a new certificate of stock or uncertificated shares in place of any certificate theretofore issued by the Corporation to the person entitled thereto, cancel the old certificate and record the transaction in its stock transfer books.
Section 3. REPLACEMENT. In case of the loss, destruction, mutilation or theft of a certificate for any stock of the Corporation, a new certificate of stock or uncertificated shares in place of any certificate theretofore issued by the Corporation may be issued upon the surrender of the mutilated certificate or, in the case of loss, destruction or theft of a certificate, upon satisfactory proof of such loss, destruction or theft and upon such terms as the Board of Directors may prescribe. The Board of Directors may in its discretion require the owner of the lost, destroyed or stolen certificate, or his legal representative, to give the Corporation a bond, in such sum and in such form and with such surety or sureties as it may direct, to indemnify the Corporation against any claim that may be made against it with respect to the certificate alleged to have been lost, destroyed or stolen.
ARTICLE VI INDEMNIFICATION OF DIRECTORS, OFFICERS, EMPLOYEES AND AGENTS
Section 1. THIRD PARTY ACTIONS. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action, suit or proceeding, whether civil, criminal, administrative, or investigative, including all appeals (other than an action, suit or proceeding by or in the right of the Corporation) by reason of the fact that he is or was a director or officer of the Corporation (and the Corporation, in the discretion of the Board of Directors, may so indemnify a person by reason of the fact that he is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation in any other capacity for or on behalf of the Corporation), against expenses (including attorneys' fees), judgments, decrees, fines, penalties, and amounts paid in settlement actually and reasonably incurred by him in connection with
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -8-
such action, suit or proceeding if he acted in good faith and in a manner which 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; PROVIDED, HOWEVER, the Corporation shall be required to indemnify an officer or director in connection with an action, suit or proceeding initiated by such person only if such action, suit or proceeding was authorized by the Board of Directors. The termination of any action, suit or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendere or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith or in a manner which 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 reasonable cause to believe that his conduct was unlawful.
Section 2. ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The Corporation shall indemnify any person who was or is a party or is threatened to be made a party to any threatened, pending, or completed action of suit, including all appeals, by or in the right of the Corporation to procure a judgment in its favor by reason of the fact that he is or was a director or officer of the Corporation (and the Corporation, in the discretion of the Board of Directors, may so indemnify a person by reason of the fact that he is or was an employee or agent of the Corporation or is or was serving at the request of the Corporation in any other capacity for or on behalf of the Corporation), against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit 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, except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been finally adjudged to be liable for negligence or misconduct in the performance of his duty to the Corporation unless and only to the extent that the court in which such action or suit was brought, or any other court of competent jurisdiction, shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses as such court shall deem proper. Notwithstanding the foregoing, the Corporation shall be required to indemnify an officer or director in connection with an action, suit or proceeding initiated by such person only if such action, suit or proceeding was authorized by the Board of Directors.
Section 3. INDEMNITY IF SUCCESSFUL. To the extent that a director, officer, employee or agent of the Corporation has been successful on the merits or otherwise in defense of any action, suit or proceeding referred to in SECTION 1 or 2 of this Article, or in defense of any claim, issue or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Section 4. STANDARD OF CONDUCT. Any indemnification under SECTION 1 and 2 of this Article (unless ordered by a court) shall be made by the Corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in SECTION 1 or 2, as applicable, of this Article. Such determination shall be made (i) by a majority vote of the directors who are not parties to such action, suit or proceeding, even though less than a quorum, or
-9-
(ii) if there are no such directors, or if such directors so direct, by independent legal counsel in a written opinion, or (iii) by the stockholders.
Section 5. EXPENSES. Expenses (including attorneys' fees) incurred by an officer or director in defending any civil, criminal, administrative or investigative action, suit or proceeding or threat thereof shall be paid by the Corporation 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 if it shall ultimately be determined that he is not entitled to be indemnified by the Corporation as authorized in this Article. Such expenses (including attorneys' fees) incurred by other employees and agents may be so paid upon the receipt of the aforesaid undertaking and such terms and conditions, if any, as the Board of Directors deems appropriate.
Section 6. NONEXCLUSIVITY. The indemnification and advancement of expenses provided by, or granted pursuant to, other Sections of this Article shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may now or hereafter be entitled under any law, by-law, agreement, vote of stockholders or directors who are not parties to the action, suit or proceeding or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.
Section 7. INSURANCE. The Corporation may purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the Corporation, or is or was serving at the request of the Corporation as a director, officer, employee or agent of another Corporation, partnership, joint venture, trust or other enterprise against any liability asserted against him and incurred by him in 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 liability under the provisions of the Delaware Law.
Section 8. DEFINITIONS. For purposes of this Article, references to "the Corporation" shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document have had the power and authority to indemnify any or all of its directors, officers, employees and agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation in any other capacity, shall stand in the same position under the provisions of this Article with respect to the resulting or surviving corporation as such person would have had with respect to such constituent corporation if its separate existence had continued.
For purposes of this Article, references to "other capacities" shall include serving as a trustee or agent for any employee benefit plan; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the Corporation" shall include any service as a director, officer, employee or agent of the Corporation which imposes duties on, or involves services by such director, officer, employee, or agent with respect to an employee benefit plan, its participants, or beneficiaries; and a person who acted in good
-10-
faith and in a manner he or she reasonably believed to be in the best interests of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the Corporation" as referred to in this Article.
Section 9. SEVERABILITY. If any provision hereof is invalid or unenforceable in any jurisdiction, the other provisions hereof shall remain in full force and effect in such jurisdiction, and the remaining provisions hereof shall be liberally construed to effectuate the provisions hereof, and the invalidity of any provision hereof in any jurisdiction shall not affect the validity or enforceability of such provision in any other jurisdiction.
Section 10. AMENDMENT. The right to indemnification conferred by this Article shall be deemed to be a contract between the Corporation and each person referred to therein until amended or repealed, but no amendment to or repeal of these provisions shall apply to or have any effect on the right to indemnification of any person with respect to any liability or alleged liability of such person for or with respect to any act or omission of such person occurring prior to such amendment or repeal.
ARTICLE VII GENERAL PROVISIONS
Section 1. FISCAL YEAR. The fiscal year of the Corporation shall be fixed from time to time by resolution of the Board of Directors.
Section 2. CORPORATION SEAL. The corporate seal, if any, of the Corporation shall be in such form as may be approved from time to time by the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Board of Directors. The seal may be used by causing it or a facsimile thereof to be impressed or affixed or in any other manner reproduced.
Section 3. NOTICES AND MAILING. Except as otherwise provided in the Act, the Certificate of Incorporation or these By-laws, all notices required to be given by any provision of these By-laws shall be deemed to have been given (i) when received, if given in person, (ii) on the date of acknowledgment of receipt, if sent by telex, facsimile or other wire transmission, (iii) one day after delivery, properly addressed, to a reputable courier for same day or overnight delivery or (iv) three (3) days after being deposited, properly addressed, in the U.S. Mail, certified or registered mail, postage prepaid.
Section 4. WAIVER OF NOTICE. Wherever any notice is required to be given under the Delaware Law or the provisions of the Certificate of Incorporation or these By-laws, a waiver thereof in writing, signed by the person or persons entitled to said notice, whether before or after the time stated therein, shall be deemed equivalent to notice.
-11-
Section 5. INTERPRETATION. In these By-laws, unless a clear contrary intention appears, the singular number includes the plural number and VICE VERSA, and reference to either gender includes the other gender.
ARTICLE VIII AMENDMENTS
These By-laws may be altered, amended or repealed or new By-laws may be adopted by the holders of at least 50% of the total voting power of all shares of stock of the Corporation entitled to vote in the election of directors, considered for the purposes of this Article VIII as one class, at any regular meeting of the stockholders or at any special meeting of the stockholders if notice of such alteration, amendment, repeal or adoption of new By-laws be contained in the notice of such special meeting.
-12-
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 4.1 Specimen Common Stock Certificate of the Company
The specimen certificate contains the logo of the Company above the name of the Company and the Company's CUSIP number (12487Q 10 9), as well as the name of the Company. The specimen certificate is signed by Gerald P. Kenney, Secretary, and David M. Phillips, Chairman of the Board, Chief Executive Officer and President, of the Company. The specimen certificate contains the following language:
This certifies that ______is the owner of ______fully paid and nonassessable shares of the Common Stock, par value $.10 per share, of CCC Information Services Group Inc. transferable on the books of the Corporation by the holder hereof in person or by duly authorized attorney upon surrender of this certificate properly endorsed. This certificate is not valid unless countersigned and registered by the Transfer Agent and Registrar. Witness the facsimile seal of the Corporation and the facsimile signature of its duly authorized officers.
In the lower right-hand corner of the specimen certificate, there is a place for the signature of The First National Bank of Chicago, transfer agent and registrar.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ------
Exhibit 4.2
STOCKHOLDERS' AGREEMENT
by and among
INFOVEST CORPORATION,
WHITE RIVER VENTURES, INC.,
and
THE INSIDE STOCKHOLDERS OF INFOVEST IDENTIFIED ON EXHIBIT A HERETO
dated as of June 16, 1994
------
TABLE OF CONTENTS ------
Page
1. Definitions...... 1
2. Representations and Warranties ...... 5 2.1. Authority, Etc...... 5 2.2. Ownership...... 5 2.3. Capital, Charter and By-Laws ...... 5
3. Corporate Governance ...... 6 3.1. Board of Directors ...... 6 3.2. Vacancies...... 7 3.3. Covenant to Vote ...... 7
4. Conduct of Business...... 8 4.1. General...... 8 4.2. Control of Certain Extraordinary Transactions. . . . 8 4.3. Control of IPO ...... 9 4.4. Control of Subsequent Offerings...... 9 4.5. Additional Covenant to Vote...... 9 4.6. Expenses ...... 9
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 5. Consents for Certain Corporate Actions ...... 9 5.1. General...... 9 5.2. Prior to Closing of the IPO...... 10
6. Restrictions on Transfer ...... 12 6.1. General Restrictions ...... 12 6.2. Permitted Transfers by Outside Stockholders. . . . . 13 6.3. Permitted Transfers by Inside Stockholders . . . . . 13 6.4. Permitted White River Solicitations...... 14
7. Share Certificates ...... 14 7.1. Restrictive Endorsement...... 14
8. After Acquired Equity Securities ...... 14
9. Miscellaneous...... 15 9.1. Termination...... 15 9.2. Stop Order ...... 15 9.3. Notices...... 15 9.4. Amendment...... 16 9.5. Assignment ...... 16 9.6. GOVERNING LAW; CONSENT TO JURISDICTION ...... 16 9.7. Severability ...... 16 9.8. Entire Agreement; Headings ...... 16 9.9. Counterparts ...... 17 9.10. Further Assurances ...... 17 9.11. Specific Performance ...... 17 9.12. Relationship of the Parties...... 17 9.13. Nature of Obligations...... 18 9.14. Expenses ...... 18
EXHIBITS ------
EXHIBIT A List of Stockholders EXHIBIT B Certificate of Incorporation of InfoVest EXHIBIT C By-Laws of InfoVest EXHIBIT D List of Investment Banks
-ii-
STOCKHOLDERS' AGREEMENT
STOCKHOLDERS' AGREEMENT (this "Agreement"), dated as of June 16, 1994, by and among InfoVest Corporation, a Delaware corporation (the "Company"), White River Ventures, Inc., a Delaware corporation ("White River"), and the Inside
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Stockholders of InfoVest identified on Exhibit A hereto (collectively, the "Initial Inside Stockholders").
The Company and White River are participating in the Reorganization (as defined below). In connection with the Reorganization, the Company and White River have entered into a Reorganization Agreement, dated as of June 16, 1994 (the "Reorganization Agreement"), providing for the parties' exchange and transfer of certain debt and equity securities of the Company, all upon the terms and subject to the conditions set forth in the Reorganization Agreement. In order to induce White River to participate in the Reorganization and to enter into the Reorganization Agreement, the Company and the Initial Inside Stockholders have agreed to enter into this Agreement. The execution and delivery of this Agreement is a condition to the closing of the transactions contemplated by the Reorganization Agreement.
The parties hereto agree as follows:
1. DEFINITIONS. As used herein, unless the context otherwise requires, the following terms have the following respective meanings:
"AFFILIATE" means, with respect to the Company or any Subsidiary, any Person that (at the time when the determination is to be made) directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, that other Person. As used in the foregoing sentence, the terms "control" (including, with correlative meaning, the terms "controlling," "controlled by" and "under common control with") means the possession, directly or indirectly, of the power to direct or cause the direction of the management and policies of a Person, whether through the ownership of voting securities, by contract or otherwise.
"BASE SALARY" means the annual base salary paid on a periodic basis by the Company to any Person excluding any bonus, stock option, warrant and other incentive compensation.
"BOARD OF DIRECTORS" means the Company's board of directors.
"CAPITAL LEASE" means, as applied to the Company or any Subsidiary, any lease of any property (whether real, personal or mixed) by the Company or such Subsidiary as lessee which, in conformity with generally accepted accounting principles, is
accounted for as a capital lease on the balance sheet of the Company or such Subsidiary; PROVIDED, HOWEVER, any such lease which is non-recourse to the Company or such Subsidiary shall not constitute a Capital Lease.
"COMPENSATION" means any Base Salary, wage, commission, bonus, stock option, warrant or other consideration extended by the Company to any Person.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document "COMMISSION" means the Securities and Exchange Commission or any other Federal Agency at the time administering the Securities Act.
"COMMON STOCK" means the Company's Common Stock, $.10 par value per share.
"COMMON STOCK EQUIVALENTS" means all options, warrants and other rights to acquire Common Stock or securities convertible into or exchangeable for Common Stock without taking into account the exercise price of any such options, warrants or other rights.
"CONTINGENT OBLIGATION" means any contractual obligation, contingent or otherwise, of one Person with respect to any Indebtedness, obligation or liability of another, including, without limitation, direct or indirect guaranties, endorsements (except for collection or deposit in the ordinary course of business), notes co-made or discounted, recourse agreements, keep-well agreements, agreements to purchase or repurchase such Indebtedness, obligation or liability or any security therefor or to provide funds for the payment or discharge thereof, agreements to maintain solvency, assets, level of income, or other financial condition, and agreements to make payment other than for value received.
"CONTRACT FUNDING TRANSACTIONS" means transactions pursuant to which discounted future revenue streams under licensing contracts for the use of end- user collision estimating software products are sold.
"DISABILITY" means a physical or mental condition which, in the opinion of a physician selected by White River and reasonably satisfactory to the Company, totally and permanently prevents the Inside Stockholder from engaging in any gainful employment. An individual shall not be considered to have a disability unless and until the condition and the incapacity had continued for at least six continuous months.
"DISPOSE" (including, with correlative meaning, the term "Disposition") means any sale, assignment, transfer, pledge, encumbrance or other disposition.
-2-
"EXCHANGE ACT" means the Securities Exchange Act of 1934, as amended, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. Reference to a particular section of the Securities Exchange Act of 1934, as amended, shall include a reference to the comparable section, if any, of such similar Federal statute.
"INSIDE STOCKHOLDERS" means and includes the Initial Inside Stockholders and any Permitted Transferees of the Initial Inside Stockholders who are bound hereby.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document "INDEBTEDNESS" means with respect to the Company or any Subsidiary, at any time, (a) all indebtedness, obligations or other liabilities of the Company or any Subsidiary (i) for borrowed money or evidenced by debt securities debentures, acceptances, notes or other similar instruments, (ii) with respect to letters of credit issued for the Company's or any Subsidiary's account, (iii) in respect of Capital Leases and (iv) which are Contingent Obligations, (b) all indebtedness, obligations or other liabilities of the Company or any Subsidiary or others secured by a Lien on any property of the Company or any Subsidiary, whether or not such indebtedness, obligations or liabilities are assumed by the Company or any Subsidiary, all as of such time, (c) all indebtedness, obligations or other liabilities owed by the Company or any Subsidiary in respect of Interest Rate Contracts and currency hedging agreements, net of liabilities owed to the Company or any Subsidiary by the counterparts hereon, and (d) all preferred stock of the Company (other than the Preferred Stock) which is subject (upon the occurrence of any contingency or otherwise) to mandatory redemption.
"IPO" means the initial public offering of the Common Stock of the Company underwritten on a firm commitment basis pursuant to an effective registration statement under the Securities Act.
"INTEREST RATE CONTRACTS" means interest rate exchange collar or cap or similar agreements providing interest rate protection.
"LIEN" means any mortgage, deed of trust, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction in connection with any of the foregoing).
"OUTSIDE STOCKHOLDERS" means and includes White River and any Permitted Transferees of White River who are bound hereby.
-3-
"PERMITTED TRANSFEREE" means any Person who is the recipient of Common Stock or Common Stock Equivalents in a Disposition made by any Inside Stockholder to any spouse, parent, child, brother or sister of such Inside Stockholder, issue of any of the foregoing individuals (including individuals legally adopted into the line of descent), charitable trust established pursuant to Section 501 of the Internal Revenue Code of 1986, as amended, trust for the benefit of any of the foregoing individuals or estate of any of the foregoing individuals.
"PERSON" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company or any other entity or organization, including a government or political
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document subdivisions or any agency or instrumentality thereof.
"PREFERRED STOCK" means shares of the Series C Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series C Preferred Stock"), Series D Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series D Preferred Stock", and, to the extent issued and outstanding, the Series E Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series E Preferred Stock").
"REDEMPTION DATE" means the first say on which shares of the Preferred Stock are no longer issued and outstanding.
"REGISTRATION RIGHTS AGREEMENT" means the Registration Rights Agreement, dated as of the date hereof, between the Company and White River.
"REORGANIZATION" means the tax-free reorganization of the Company pursuant to Section 368(a)(1)(E) of the Internal Revenue Code of 1986, as amended.
"SECURITIES ACT" means the Securities Act of 1933, as amended, or any similar Federal statute, and the rules and regulations of the Commission thereunder, all as the same shall be in effect from time to time. Reference to a particular section of the Securities Act of 1933, as amended, shall include a reference to the comparable section, if any, of such similar Federal statutes.
"STOCKHOLDER" means any Inside Stockholder or Outside Stockholder.
"SUBSEQUENT OFFERING" means a sale of Common Stock or any Common Stock Equivalent in a public offering (other than an IPO) pursuant to an effective registration statement under the Securities Act.
"SUBSIDIARY" means (i) any Person of which 50% or more of the securities having an ordinary voting power for the election
-4-
of directors are at the time owned directly or indirectly by the Company ro any Subsidiary thereof, (ii) any Person of which 50% or more of the joint venture, limited partnership or partnership interest are at the time owned directly or indirectly by the Company or any Subsidiary thereof or (iii) any Person which is a limited partnership in which the Corporation or any Subsidiary is at the time the general partner or at the time owns 50% or more of the general partner of such Person.
"VOTING STOCK" means (i) the Common Stock and (ii), to the extent issues and outstanding, the Series E Preferred Stock.
2. REPRESENTATIONS AND WARRANTIES.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2.1. AUTHORITY, ETC. Each of the parties hereto represents and warrants to the other parties that: (i) it has full right, power and authority to enter into this Agreement and to perform its obligations hereunder; (ii) this Agreement has been duly authorized, executed and delivered by it and, assuming the due authorization, execution and delivery of this Agreement by the other parties hereto, constitutes the legal, valid and binding obligation of such party, enforceable against it in accordance with its terms; (iii) no consent, approval or authorization of any Person is required to be obtained by or with respect to such party in connection with the execution and delivery by it of this Agreement or the performance by it of its obligations hereunder; and (iv) neither the execution nor the delivery of this Agreement by such party not the performance by it of its obligations hereunder will conflict with or result in a breach or violation of (A) its organizational documents (if any), (B) any contract, agreement or any arrangement to which it is a party or by which it or any of its properties or assets is bound or (C) any order, decree, law, rule or regulation applicable to it or any of its properties or assets.
2.2. OWNERSHIP. Each of the Stockholders represents and warrants to each other and to the Company that: (i) it is the legal holder and beneficial owner of the number of shares of Common Stock set forth opposite its name on Exhibit A hereto, free and clear of all Liens; (ii) it has sole voting power with respect to such shares of Common Stock; and (iii) it had full right, power and authority to acquire such shares of Common Stock at the time of such acquisition.
2.3. CAPITAL, CHARTER AND BY-LAWS. The Company represents and warrants to each of the Stockholders that: (i) the authorized capital stock of the Company consists, or will consist immediately prior to the closing of the transactions contemplated by the Reorganization Agreement of (A) 100,000 shares of preferred stock, of which 500 shares have been designated Series A Preferred Stock, par value $1.00 per share, 150 shares have been designated Series B Preferred Stock, par value $1.00 per share, 5,000 shares have been designated Series C
-5-
Cumulative Redeemable Preferred Stock, par value $1.00 per share, 34,000 shares have been designated Series D Cumulative Redeemable Preferred Stock, par value $1.00 per share and 500 shares have been designated Series E Cumulative Redeemable Preferred Stock, par value $1.00 per share, none of which are issued and outstanding and (B) 750,000 shares of Common Stock, of which 231,143.12 shares are issued and outstanding; (ii) except as set forth in Section 8 and on Schedule 2.3 hereto, it has not granted or issued or agreed to grant or issue as of the date hereof any warrants, options or similar rights to acquire or receive any of the authorized but unissued shares of its capital stock or any securities or other property convertible into shares of its capital stock; (iii) attached hereto as Exhibit B is a true, correct and complete copy of the Certificate of Incorporation of the Company (together with all amendments thereto) as of the date hereof; (iv) attached hereto as Exhibit C is a true, correct and complete copy of the By-laws of the Company (together with all amendments thereof) as of
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the date hereof.
3. CORPORATE GOVERNANCE.
3.1. BOARD OF DIRECTORS. (a) The Stockholders hereby agree that from the date hereof to (and including) the earlier of (i) the date of the consummation of the IPO or (ii) the Redemption Date, the Stockholders shall take all actions necessary to cause the Board of Directors to approve and appoint the following designees as members of the Board of Directors: (i) two (2) individuals designated by White River; (ii) two (2) additional individuals who are not directors, officers or employees of White River which individuals shall be nominated by White River subject to the approval of a majority of the members of the Board of Directors designated by the Inside Stockholders (which approval shall not be unreasonably withheld); and (iii) three (3) individuals designated by the holders (voting as a class) of a majority of the shares of Common Stock held by the Inside Stockholders. The rights of White River and the Inside Stockholders to designate directors pursuant to the preceding sentence shall terminate on the date of the consummation of the IPO and, from the date of the consummation of the IPO to (and including) the Redemption Date, in lieu of such rights, the Stockholders shall take all actions necessary to cause the Board of Directors to approve and appoint the following designees as members of the Board of Directors: (i) a number of individuals (which shall not be less than two (2)) designated by White River which the Board of Directors determines to be appropriate taking into account the aggregate voting power and economic interest of White River and its Affiliates in the Company as of the date of determination and (ii) three (3) individuals designated by the holders (voting as a class) of a majority of the shares of Common Stock held by the Inside Stockholders.
-6-
(b) The Stockholders hereby agree that (i) from the date hereof until the Redemption Date, the Board of Directors shall consist solely of seven (7) directors designated pursuant to Section 3.1(a).
(c) The Stockholders hereby agree to take all actions necessary to cause the Board of Directors to establish as soon as practicable after the date hereof a compensation committee (the "Compensation Committee") which shall be responsible (i) for establishing guidelines with respect to all compensation matters involving the Company and its Subsidiaries and (ii) authorizing all compensation arrangements between the Company and its Subsidiaries and their respective directors, officers, employees and consultants involving the payment by the Company or any of its Subsidiaries to any of such individuals of Base Salary equal to or greater than $125.000. The Compensation Committees shall consist of members of the Board of Directors who are not officers or employees of the Company or any of its Subsidiaries.
3.2. VACANCIES. In the event that a vacancy shall exist or occur on the Board of Directors at any time by reason of a member's death, disability,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document retirement, resignation, removal (with or without cause) or otherwise, each Stockholder hereby agrees to cause the members designated by or on behalf of it to vote for that individual designated (and approved, if required) pursuant to Section 3.1(a) to fill such vacancy and serve as a member by whichever of the Stockholders that had designated (and received approval, if required) pursuant to Section 3.1(a) the member whose death, disability, retirement, resignation or removal (with or without cause) resulted in such vacancy on the Board of Directors. Each Stockholder hereby agrees to cause the members designated by or on behalf of it not to vote for the removal without cause of a member designated (or approved) pursuant to Section 3.1(a) by another Stockholder without such other Stockholder's prior written consent. Each Stockholder hereby agrees to cause the members designated (or approved) pursuant to Section 3.1(a) by another Stockholder unless (i) such Stockholder has consulted such other Stockholder and (ii) such member has breached his fiduciary duties to the Company (as determined in good faith by an affirmative vote of a majority of the Board of Directors).
3.3. COVENANT TO VOTE. Each Stockholder hereby agrees to take all actions within its power necessary to call, or cause the Company and the appropriate officers and directors of the Company to call, special or annual meetings of stockholders of the Company and to vote all shares of Voting Stock owned or held of record by such Stockholder at any such annual or special meeting in favor of, or take all actions by written consent in lieu of any such meeting necessary to cause, the election as members of the Board of Directors of those individuals so designated in accordance with, and to otherwise effect the intent
-7-
of this Article 3. In addition, each Stockholder agrees to vote the shares of Voting Stock owned by such Stockholder upon any other matter arising under this Agreement submitted to a vote of the Stockholders in a manner so as to implement the terms of this Agreement.
4. CONDUCT OF BUSINESS
4.1. GENERAL. The Stockholders and the Company confirm that it is their intention that the business and affairs of the Company and its Subsidiaries will continue to be directed by its board of Directors in the best interests of the Company and its Subsidiaries, taken as a whole. In furtherance of the foregoing, each of the Stockholders agrees that, after the date hereof, it will not, not will it permit any of its Affiliates to, enter into any written or oral contract, agreement or arrangement to engage in business or enter into any transaction with the Company or any of its Subsidiaries unless the terms and provisions of such contact, agreement or arrangement or the terms on which such business or transaction is conducted, as the case may be, are fair to the Company as determined by the Board of Directors after review of each such transaction.
4.2. CONTROL OF CERTAIN EXTRAORDINARY TRANSACTIONS. Prior to the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document voluntary resignation from the Board of Directors, death or Disability of David M. Phillips, a majority of the directors designated by the Inside Stockholders pursuant to Section 3.1(a) shall, to the extent permitted by applicable law and subject to the fiduciary duties of the members of the Board of Directors who were not designated by the Inside Stockholders, be delegated the authority of the Board of Directors which respect to the timing, price and other terms of a merger, consolidation or sale of all of the shares of Common Stock or assets of InfoVest Corporation; PROVIDED, HOWEVER, that the Company shall not consummate any such merger, consolidation or sale unless (i) if so requested by the Outside stockholders, the Board of Directors shall have received an opinion from one of the investment banking firms set forth on Exhibit D hereto selected by the Outside Stockholders (and compensated by the Company) that the consideration to be paid in connection with any such transaction is fair to the holders of shares of the Common Stock and (ii) the consideration to be paid in connection with such transaction is fair to the holders of shares of the Common Stock and (ii) the consideration to be paid in connection with such transactions shall consist solely of cash, cash equivalents or publicly traded securities. Following the voluntary retirement from the Board of Directors, death or Disability of David M. Phillips, the Inside stockholders or the Outside Stockholders (each a "Recommending Party") shall have the right to recommend to the Board of Directors the timing, price and other terms of a merger, consolidation or sale of all shares of Common Stock or assets of the Company, and, if requested by the party other than the Recommending Party, subject to the receipt of an opinion, addressed to the Board of Directors, of an investment banking firm set forth on Exhibit D hereto and selected by the party
-8-
other than the Recommending Party (and compensated by the Company) confirming that the consideration to be paid in connection with any such transaction is fair to the holders of Common Stock, the members of the Board of Directors designated by the parties hereto shall to the extent permitted by applicable law and subject to their fiduciary duties, approve such merger, consolidation or sale.
4.3. CONTROL OF IPO. A majority of the directors designated by the Inside Stockholders pursuant to Section 3.1(a) shall, to the extent permitted by applicable law and subject to the fiduciary duties of the members of the Board of Directors who were not designated by the Inside Stockholders, be delegated the authority of the Board of Directors with respect to the timing, price and other terms of the IPO; PROVIDED, HOWEVER, the Company shall not consummate the IPO unless the Company can demonstrate to the reasonable satisfaction of White River that after giving effect to the IPO the Company would have funds legally available to redeem shares of the Preferred Stock in accordance with the terms of the Preferred Stock.
4.4. CONTROL OF SUBSEQUENT OFFERINGS. (a) A majority of directors designated by the Inside Stockholders pursuant to Section 3.1(a) shall, to the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document extent permitted by applicable law and subject to the fiduciary duties of the members of the Board of Directors who were not designated b the Inside Stockholders, be delegated the authority of the Board of Directors with respect to the timing, price and other terms of each Subsequent Offering; PROVIDED, HOWEVER, the Company shall not consummate a Subsequent Offering (i) unless the Company can demonstrate to the reasonable satisfaction of White River that after giving effect to the Subsequent Offering the Company would have funds legally available to redeem shares of the Preferred Stock in accordance with the terms of the Preferred stock and (ii) without the unanimous approval of the members of the Board of Directors in the event that David M. Phillips shall voluntarily resign from the Board of Directors, die or become Disabled.
4.5. ADDITIONAL COVENANT TO VOTE. White River agrees that in the event any of the matters described in Sections 4.2, 4.3 and 4.4 require the approval of the holders of shares of Common Stock, it will bote the shares of Voting Stock owned by it in accordance with the recommendation of the Board of Directors.
4.6. EXPENSES. The Company shall pay the fees and expenses of any investment banking firm retained pursuant to this Section 4.
5. CONSENTS FOR CERTAIN CORPORATE ACTIONS
5.1. GENERAL. In addition to the limitations set forth in Section 6, from the date hereof to (and including) the
-9-
Redemption Date, in addition to any vote of the shares of holders of the Company's capital stock required by law, the Company and the Stockholders shall not take (or agree to take) any of the following actions, without the written consent of the holders of a majority of the issued and outstanding shares of the Series C Preferred Stock:
(a) the sale of shares of Common Stock in a Subsequent Offering by the Inside Stockholders to the extent that the shares to be so sold by the Inside Stockholders in the aggregate exceed 10% of the then outstanding shares of Common Stock; and
(b) the sale of shares in a Subsequent Offering by the Inside Stockholders to the extent that the shares to be so sold by the Inside Stockholders in the aggregate exceed 50% of the total shares of Common Stock being offered in such Subsequent Offering.
5.2. PRIOR TO CLOSING OF THE IPO. From the date hereof to (and including) the date of the closing of the IPO, in addition to the limitation set forth in Section 5.1 and in addition to any vote of the holders of the Company's capital stock required by law, the Company and the Stockholders shall not take
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (or agree to take) and the Company shall cause its Subsidiaries not to take (or agree to take) any of the following actions, without the written consent of the holders of a majority of the issued and outstanding shares of Series C PREFERRED Stock:
(a) Except as otherwise provided in Section 4.2, any merger or consolidation involving the Company or any of its Subsidiaries (other than transactions involving the merger or consolidation of a Subsidiary of the Company with or into the Company or with or into a wholly owned Subsidiary of the Company);
(b) Except as otherwise provided in Sections 4.2, 4.3 and 4.4, any sale , lease, exchange, transfer or other disposition, directly or indirectly, in a single transaction or series of related transactions, of all or substantially all, or a material part, of the assets of, or of any shares of the capital stock of, the Company or any of its subsidiaries to or with any Person other than to or with the Company or wholly owned Subsidiary of the Company;
(c) Except as otherwise provided in Sections 4.2, 4.3 and 4.4, any increase or reduction of any class of the Company's authorized capital stock or the creation of any additional class of capital stock or the Company, or the sale or issuance of shares of capital stock of the Company or any of its Subsidiaries other than Phone Base Systems, Inc. ("Phone Base") (or warrants, options, or rights to acquire or receive shares of capital stock or any securities or other property convertible into shares of capital stock), EXCEPT (i) the sale or issuance of shares of
-10-
capital stock of a wholly owned Subsidiary of the Company to the Company or to another wholly owned Subsidiary of the Company, (ii) any shares of Common Stock to be allocated to any employee benefit plan of the Company or any of its Subsidiaries, which shares of Common Stock shall not exceed 3% of the total shares of Common Stock outstanding immediately following the closing of the transactions contemplated by the Reorganization Agreement and the allocation of which shall have been approved by the Compensation Committee and (iii) the issuance of shares of Common Stock upon the exercise of options outstanding on the date of this Agreement;
(d) Except as otherwise provided in Sections 4.2, 4.3 and 4.4, any amendment, modification or supplement to, or repeal of any provision of, the Company's Certificate of Incorporation or By-laws;
(e) Any increase or reduction of any class or series of Preferred Stock or the creation of any class of capital stock of the Company having rights senior to the Preferred Stock with respect to dividend rights and with respect to the distribution of assets upon the liquidation, dissolution or
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document winding up, whether voluntary or involuntary, of the Company ("Senior Stock") or the sale or issuance of shares of the Senior Stock (or warrants, options or rights to acquire or receive shares of Senior Stock or any securities or other property convertible into shares of Senior Stock);
(f) Any amendment, modification or supplement to, or repeal of any provision of, the certificate of Designations for any class or series of Preferred Stock;
(g) The dissolution of the Company or any of its Subsidiaries; the adoption of a plan of liquidation of the Company or any of its Subsidiaries; any action by the Company or any of its Subsidiaries to commence any suit, case, proceeding or other action (i) under any existing or future law of any jurisdiction relating to bankruptcy, insolvency, reorganization or relief of debtors seeking to have an order for relief entered with respect to it, or seeking to adjudicate it a bankrupt or insolvent, or seeking reorganization, arrangement, adjustment, winding-up, liquidation, dissolution, composition or other relief with respect to it or (ii) seeking appointment of a receiver, trustee, custodian or other similar official for it or for all or any substantial part of its assets, or making a general assignment for the benefit of its creditors;
(h) The redemption, repurchase or other offer to purchase made by the Company or any of its Subsidiaries for any equity securities of the Company, except as permitted or required pursuant to the Certificate of Designations for the Preferred Stock;
-11-
(i) The maintenance at any time of more than $45 million aggregate principal amount of Indebtedness (excluding Phone Base's current obligations and any additional Indebtedness of Phone Base which is non-recourse to the Company or any of its Subsidiaries, not including Phone Base, not in excess of $2.0 million); PROVIDED THAT Contract Funding Transactions consummated prior to the date hereof shall not constitute Indebtedness for purposes of this clause (i) (it being acknowledged and understood that all Contract Funding Transactions consummated after the date hereof shall constitute Indebtedness for purposes of this clause (i));
(j) The payment of any dividends on any Stock of any class of the Company or any of its Subsidiaries, except the payment of any dividends from any Subsidiary of the Company to the Company or to any wholly owned Subsidiary of the Company, except as permitted or required pursuant to the Certificates of Designations for the Preferred Stock;
(k) The making of any investment in any Person that is not now a wholly owned Subsidiary of the Company;
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (l) The making of any capital contributions to any wholly owned Subsidiary of the Company that, individually or in the aggregate, will exceed $1 million per fiscal year;
(m) The increasing of the Compensation paid to the officers of the Company or any of its Subsidiaries by more than a reasonable amount as determined by the Compensation Committee in any fiscal year; and
(n) Any change in the fundamental business purpose or business organization of the company or any of its Subsidiaries.
6. RESTRICTIONS ON TRANSFER.
6.1. GENERAL RESTRICTIONS. During the term of this Agreement, none of (i) the Common Stock Equivalents owned as of the close of business on June 10, 1994, (ii) the shares of Common Stock and Preferred Stock received by the Outside Stockholder pursuant to the Reorganization Agreement, (iii) the Common Stock Equivalents acquired after the close of business on June 10, 1994, (iv) the shares of Common Stock owned as of the close of business on June 10, 1994 and (v) the shares of Common Stock hereafter received upon the conversion or exchange of the Common Stock Equivalents described in clauses (i) and (iii) by any of the Stockholders may be Disposed of by any of the Stockholders unless:
(a) such Disposition shall be in accordance with the requirements of Sections 6.2 and 6.3 of this Agreement;
-12-
(b) the proposed recipient of such shares (other than a recipient in a Subsequent Offering or in a Disposition under Rule 144 under the Securities Act) shall deliver to the Company a written acknowledgment that the shares to be received in such proposed Disposition are subject to this Agreement and the proposed recipient and his or its successors in interest are bound hereby; and
(c) such Disposition shall be made pursuant to an effective registration statement under the Securities Act and any applicable state securities laws, or an exemption from such registration, and prior to any such Disposition the Stockholder proposing to Dispose such shares shall give the Company (i) notice describing the manner and circumstances of the proposed Disposition and (ii) if reasonably requested by the Company, a written opinion of legal counsel, who shall be reasonably satisfactory to the Company, such opinion to be in form and substance reasonably satisfactory to the Company, to the effect that the proposed Disposition may be effected without registration under the Securities Act and any applicable state securities laws.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Any attempted Disposition of shares of Common Stock or Common Stock Equivalents referred to in Section 6.1 other than in accordance with this Agreement shall be null and void and neither the Company nor any transfer agent of such shares shall give any effect to such attempted Disposition in its Stock records.
6.2. PERMITTED TRANSFERS BY OUTSIDE STOCKHOLDERS. Other than as described in Section 6.1, an Outside Stockholder may Dispose of any shares of Common Stock or Common Stock Equivalents at any time, including dispositions in connection with the redemption by the Company of shares of Preferred Stock.
6.3. PERMITTED TRANSFERS BY INSIDE STOCKHOLDERS. (a) No Inside Stockholder shall Dispose of any shares of Common Stock except for Dispositions by : (i) such Inside Stockholder to Permitted Transferees; (ii) such Inside Stockholder to White River in connection with any solicitation; (iii) such Inside Stockholder in connection with any merger, consolidation or sale effected in accordance with the terms of Section 4.2 and the mandatory redemption provisions contained in the Certificates of Designations for the Preferred Stock; and (iv) by an Inside Stockholder after the IPO pursuant to a Disposition that meets all of the following requirements: (A) such Disposition occurs after the third anniversary of the date of the execution of this Agreement; (B) such Disposition is made pursuant to a Subsequent Offering or in a sale pursuant to Rule 144 under the Securities Act; (C) such Dispositions results in no "person" or "group (within the meaning of Section 13(d) of the Exchange Act) becoming the "beneficial owner" (as defined in Rule 13(d) under the Exchange Act) of more than 10% of the shares of Common Stock then outstanding; and (D) such Disposition occurs after the
-13-
Company's net sales and operating profits for the immediately preceding fiscal year equal at least 75% of the corresponding amounts shown in the "Five-Year Projections" of the Company dated July 22, 1993, which projections have been provided to White River prior to the date hereof.
(b) Notwithstanding anything in Section 6.3(a) to the contrary, in the event of the death or Disability of an Inside Stockholder who is an officer, director or employee of the Company, the shares of Common Stock owned by such Inside Stockholder may be disposed of at any time and from time to time during each calendar year provided that the aggregate number of shares of Common Stock disposed of in any calendar year shall not exceed 33-1/3% of the aggregate number of shares of Common Stock owned by such Inside Stockholder on the date such Inside Stockholder dies or becomes disabled.
6.4. PERMITTED WHITE RIVER SOLICITATIONS. Until the first anniversary of the date of this Agreement, White River shall have the right to solicit the purchase of, and to purchase, any shares of Common Stock owned as of the date hereof by any Person who is not an Inside Stockholder.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 7. SHARE CERTIFICATES.
7.1. RESTRICTIVE ENDORSEMENT. Until the termination of this Agreement pursuant to Section 9.1, in addition to any other legend that the Company may deem advisable under the Securities Act and certain state securities laws, the certificates representing all (i) Common Stock Equivalents owned as of the close of business on June 10, 1994, (ii) the shares of Common Stock and Preferred Stock received by the Outside Stockholder pursuant to the Reorganization Agreement, (iii) the Common Stock Equivalents acquired after the close of business on June 10, 1994, (iii) the shares of Common Stock owned as of the close of business on June 10, 1994 and (iv) the shares of Common Stock hereafter received upon the conversion or exchange of the Common Stock Equivalents described in clauses (i) and (iii), by a Stockholder shall be endorsed as follows:
THIS CERTIFICATE IS SUBJECT TO, AND IS TRANSFERABLE ONLY UPON COMPLIANCE WITH, THE PROVISION OF THE STOCKHOLDERS' AGREEMENT, DATED AS OF JUNE 16, 1994, BY AND AMONG INFOVEST CORPORATION AND CERTAIN OF ITS STOCKHOLDERS. A COPY OF THE ABOVE REFERENCED AGREEMENT IS ON FILE AT THE OFFICES OF INFOVEST CORPORATION.
8. AFTER ACQUIRED EQUITY SECURITIES. (a) If, prior to the consummation of the IPO, any of the parties hereto becomes aware of any equity securities of the Company that have become available for purchase (the "Offered Shares"), such party must
-14-
give each other party hereto written notice setting forth the name of the selling stockholder, the number of Offered Shares and, if applicable, the proposed purchase price per Offered Share.
(b) Notwithstanding anything in this Agreement to the contrary, any additional shares of Voting Stock acquired by a party to this Agreement after the date of this Agreement ("After Acquired Shares"), other than After Acquired Shares acquired (i) by any party hereto (other than White River) from an Inside Stockholder or transferee of and Inside Stockholder, (ii) shares of the Series E Preferred Stock and (iii) shares of Common Stock acquired pursuant to the exchange or conversion of a Common Stock Equivalent, shall not be subject to this Agreement.
9. MISCELLANEOUS.
9.1. TERMINATION. This Agreement shall terminate upon the first to occur of: (i) the mutual written Agreement of the parties hereto or their respective successors, assigns, heirs and administrators; (ii) the liquidation or dissolution of the Company; (iii) the Redemption Date or (iv) the fifth
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document anniversary of the date hereof.
9.2. STOP ORDER. Each Stockholder agrees that a stop order shall be placed in the Stock transfer records of the Company against the transfer of shares of Voting Stock and Common Stock Equivalents subject to this Agreement.
9.3. NOTICES. Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified by hand or professional courier service, upon confirmation of telex tor telecopy, five days after deposit with the United States Post Office, by registered or certified mail postage prepaid or upon the next day following deposit with a nationally recognized overnight air courier, address as follows:
(a) if to a Stockholder, to the address set forth in the record books of the Company; or
(b) if to the Company, to the address ser forth in the Reorganization Agreement, or at such other address as the Company shall have furnished to each Stockholder at the time outstanding.
Any party may by notice given in accordance with this Section 9.3 to the other party to this Agreement designate another address or person for receipt of notice hereunder.
-15-
9.4. AMENDMENT. This Agreement may not be amended except by an instrument in writing signed by all of the paries hereto.
9.5. ASSIGNMENT. Neither this Agreement, nor any right, remedy, obligation or liability arising hereunder or by reason hereof shall be assignable by the Company or any Stockholder except concurrently with a transfer of the Voting Stock and Common Stock Equivalents in accordance with the provisions hereof. Subject to the foregoing, this Agreement shall be binding upon and inure to the benefit of the paries hereto and their respective successors, assigns, heirs and administrators.
9.6. GOVERNING LAW; CONSENT TO JURISDICTION. THIS AGREEMENT SHALL BE CONSTRUED AND ENFORCED IN ACCORDANCE WITH AND GOVERNED BY THE LAW OF THE STATE OF NEW YORK WITHOUT GIVING EFFECT TO THE CONFLICTS OF LAWS PRINCIPLES THEREOF. IF ANY ACTION OR PROCEEDING SHALL BE BROUGHT BY ANY PARTY IN ORDER TO ENFORCE ANY RIGHT OR REMEDY UNDER THIS AGREEMENT, EACH OTHER PARTY HEREBY CONSENTS AND WILL SUBMIT TO THE JURISDICTION OF ANY STATE OR FEDERAL COURT OF COMPETENT JURISDICTION SITTING WITHIN THE AREA COMPRISING THE SOUTHERN DISTRICT OF NEW YORK ON THE DATE OF THIS AGREEMENT.
9.7. SEVERABILITY. If any term or other provision of this Agreement
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document is invalid, illegal or incapable of being enforced by any rule of law, or public policy, all other provisions of this Agreement shall nevertheless remain in full force and effect so long as the economic or legal substance of the transactions contemplated hereby is not affected in any manner materially adverse to any party.
9.8. ENTIRE AGREEMENT; HEADINGS. This Agreement contains the entire understanding of the parties hereto with respect to its subject matter and supersedes all prior agreements and understandings, oral or written, with respect thereto; PROVIDED, HOWEVER, that nothing in this Agreement shall limit, modify or otherwise affect any rights of White River relating to, arising under or in connection with (i) the representations and warranties of the Company contained in (A) the Letter Agreement dated as of March 31, 1994 by and among White River, the Company and other parties referred to therein and (B) the Letter Agreement dated as of April 15, 1994 by and among White River, the Company and the other paries referred to therein, (ii) Sections 1, 3, 4, 5 and 6 of the Letter Agreement dated as of May 9, 1994 by and between White River and the Company, (iii) Section 6 of the Call Agreement dated as of March 30, 1994 by and between the Contributor and the Company and (iv) Section 2 of the Novation Agreement dated as of March 31, 1994 among the Contributor, the Company and the other parties referred to therein. The parties hereto acknowledge and agree that nothing in this Agreement shall limit, modify or otherwise affect any of
-16-
the rights of White River and its Permitted Transferees under the Reorganization Agreement, the Registration Rights Agreement, the Certificate of Designations of the Series C Preferred Stock, the Certificate of Designations of the Series D Preferred Stock, the Certificate of Designations of the Series E Preferred Stock, the First Lockup Agreement, dated as of June 10, 1994, by and among the company, White River and the other parties referred to therein, the Second Lockup Agreement, dated as of June 10, 1994 by and among the Company White River and the parties referred to therein or any other agreement or instrument referred to herein or therein. The headings in this Agreement are for reference purposes only and shall not limit or otherwise affect the meaning or interpretation of this Agreement.
9.9. COUNTERPARTS. This Agreement may be executed in any number of counterparts, each of which shall be deemed to be an original, but all of which together shall constitute one instrument.
9.10. FURTHER ASSURANCES. Each party hereto shall do and perform or cause to be done and performed all further acts and things and shall execute and deliver all other agreements, certificates, instruments, and documents as any other party hereto reasonably may request in order to carry out the intent and accomplish the purposes of this Agreement.
9.11. SPECIFIC PERFORMANCE. The parties hereto agree that money
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document damages or other remedy at law would not be sufficient or adequate remedy for any breach or violation of, or a default under, this Agreement by them and that, in addition to all other remedies available to them, each of them shall be entitled to an injunction restraining such breach, violation or default or threatened breach, violation or default and to any other equitable relief, including without limitation specific performance, without bond or other security being required.
9.12. RELATIONSHIP OF THE PARTIES. This Agreement relates to the governance of the Company, restrictions and/or conditions of share transfers by the Inside Stockholders and the Outside Stockholders and certain other matters expressed herein. The relationship of the Inside Stockholders and the Outside Stockholders herein is limited to that of respective stockholders. Nothing in this Agreement shall be construed as permitting or obligating the Outside Stockholders to act as financial or business advisors or consultants to the Inside Stockholders or the Company, as creating any fiduciary obligation on the Outside Stockholders to the Inside Stockholders or the Company or creating any joint venture, agency or other relationship between or among the paries other than as expressly specified in this Agreement. While each of the Outside Stockholders could have elected to enter into an agreement with the Inside Stockholders and the Company independently, they agreed to negotiate and enter into this single Agreement
-17-
together, in order to expedite the mechanics thereof and shall not be deemed acting in concert, nor shall any Outside Stockholder be held accountable or liable for any acts or omissions of any other Outside Stockholder, the obligations and undertakings of the Outside Stockholders hereunder being in each case several and not joint, and no decision, action or omission by any Outside Stockholder in connection with or arising out of this Agreement shall impair or prejudice the rights or remedies of any other Outside Stockholder, except as otherwise expressly provided herein.
9.13. NATURE OF OBLIGATIONS. The obligations and rights of each Stockholder under this Agreement are several and not joint.
9.14. EXPENSES.
(a) The Company will pay promptly the reasonable out-of-pocket expenses of White River (including, without limitation, the fees and disbursements of counsel to White River) incurred in connection with the transactions contemplated by (i) this Agreement, (ii) the Reorganization Agreement dated as of the date hereof between the Company and White River, (iii) the Regulatory Contingency Agreement dated as of the date hereof between the Company and White River, (iv) the Purchase Agreement dated as of April 15, 1994 among White River and the Sellers referred to therein, (v) the Letter Agreement dated as of Many 9, 1994 by and between White River and the Company and (vi) the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Acquisition Agreement dated as of March 30, 1994 among White River and the Sellers referred to therein.
-18-
IN WITNESS WHEREOF, the parties hereto have duly executed and delivered this Agreement as of the date first above written.
INFOVEST CORPORATION
By /s/D. M. Phillips ------Name: D. M. Phillips Title: Chairman
WHITE RIVER VENTURES, INC.
By /s/ John P. Corrigan ------Name: Title:
LOEB INVESTORS CO. XV
By /s/Thomas L. Kempner ------Name: Thomas L. Kempner Title: Managing Partner
LOEB INVESTORS CO. XIII
By /s/Thomas L. Kempner ------Name: Thomas L. Kempner Title: Managing Partner
LOEB INVESTORS CO. 108
By /s/Thomas L. Kempner ------Name: Thomas L. Kempner Title: Managing Partner
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document /s/D. M. Phillips ------David M. Phillips
-19-
EXHIBIT A
STOCKHOLDERS
Shares of Inside Stockholders Common Stock ------
David M. Phillips ...... 28,159 Loeb Investors Co. XV...... 76,740 Loeb Investors Co. XIII...... 2,169 Loeb Investors Co. 108 ...... 7,523.87
Shares of Outside Stockholder Common Stock ------
White River Ventures, Inc...... 210,440.26
EXHIBIT B
[LETTERHEAD]
PAGE 1
I, WILLIAM T. QUILLEN, SECRETARY OF STATE OF THE STATE OF DELAWARE, DO HEREBY CERTIFY THE ATTACHED IS A TRUE AND CORRECT COPY OF THE CERTIFICATE OF INCORPORATION OF "FINANCIAL PROTECTION SERVICES, INC.", FILED IN THIS OFFICE ON THE TWENTY-EIGHTH DAY OF APRIL, A.D. 1983, AT 9 O'CLOCK A.M.
[SEAL] /s/ William T. Quillen
------William T. Quillen, Secretary of State
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document AUTHENTICATION: 7141265
DATE: 06-06-94
CERTIFICATE OF INCORPORATION
OF
FINANCIAL PROTECTION SERVICES, INC.
The undersigned, a natural person, for the purpose of organizing a corporation for conducting the business and promoting the purposes hereinafter stated, under the provisions and subject to the requirements of the laws of the State of Delaware (particularly Chapter 1, Title 8 of the Delaware Code and the acts amendatory thereof and supplemental thereto, and known, identified and referred to as the "General Corporation Law of the State of Delaware") hereby certifies that:
FIRST: The name of this corporation (hereinafter called the "corporation") is Financial Protection Services, Inc.
SECOND: The address, including street, number, city and county, of the registered office of the corporation in the State of Delaware is 229 South State Street, City of Dover, County of Kent (zip code 19901); and the name of the registered agent of the corporation in the State of Delaware at such address is The Prentice-Hall Corporation System, Inc.
THIRD: The nature of the business and of the purposes to be conducted and promoted by the corporation are to conduct any lawful business, to promote any lawful purpose, and to engage in any lawful act or activity for which corporations may be organized under the General Corporation Law of the State of Delaware.
FOURTH: The corporation shall have authority to issue the following classes of stock:
(1) a total of five hundred thousand (500,000) shares of Common Stock, each of such shares of Common Stock with a par value of ten cents ($.10); and
(2) a total of one hundred thousand (100,000) shares of Preferred Stock, each of such shares of Preferred Stock with a par value of one dollar ($1.00) to be issued (i) in such series and with such designations, powers, preferences, rights, and such qualifications, limitations of restrictions thereof as the Board of Directors shall fix by resolution or resolutions which are permitted by Section 151 of the Delaware Corporation Law for any such series of Preferred Stock, and (ii) in such number of
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shares in each series as the Board of Directors shall, by resolution, fix provided that the aggregate number of all shares of Preferred Stock issued does not exceed the number of shares of Preferred Stock authorized hereby.
FIFTH: The name and mailing address of the incorporator are as follows:
James L. Barns Stroock & Stroock & Lavan 61 Broadway New York, New York 10006
SIXTH: Whenever a compromise or arrangement is proposed between this corporation and its creditors or any class of them and or between this 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 this corporation or any creditor or stockholder thereof or on the application of any receiver or receivers appointed for this 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 this 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 or class of stockholders of this corporation, as the case may be, to be summoned in such manner as 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 this corporation, as the case may be, agree to any
-2-
compromise or arrangement and to any reorganization of this 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 the 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 this corporation, as the case may be, and also on this corporation.
SEVENTH: The original By-Laws of the corporation shall be adopted by the incorporator. Thereafter, the power to make, alter, or repeal the By-Laws, and to adopt any new By-Law, shall be vested in the Board of Directors.
EIGHTH: The corporation shall, to the fullest extent permitted by Section 145 of the General Corporation law of the State of Delaware, as the same may be amended and supplemented, or by any successor thereto, indemnify any and all persons whom it shall have power to indemnify under said section from and against any and all of the expenses, liabilities or other matters referred to in or covered by said section. Such right to indemnification shall continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors and administrators of such a
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document person. The indemnification provided for herein shall not be deemed exclusive of any other rights to which those seeking indemnification may be entitled under any By-Law, agreement, vote of stockholders or disinterested directors or otherwise.
Executed at New York, New York on April 26, 1983.
/s/James L. Burns ------James L. Burns, Incorporator
-3-
EXHIBIT C
RESTATED BY-LAW ------
OF
INFOVEST CORPORATION ------(a Delaware Corporation)
______
ARTICLE I ------
STOCKHOLDER ------
1. CERTIFICATE OF REPRESENTING STOCK. Every holder of stock in the corporation shall be entitled to have a certificated signed in the name of the corporation by the Chairman of the Board of Directors or by the President or a Vice -President and by the Treasurer or an Assistant Treasurer or the Secretary or an Assistant Secretary of the corporation certifying the number of shares owned by him in the corporation. If such certificate is countersigned by a transfer agent other than the corporation or its employee, any other signature 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.
Whenever the corporation shall be authorized to issue more than one
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document class of stock or more than one series of any class of stock, and whenever the corporation shall issue any shares of its stock as partly paid stock, the certificates representing shares of any such class or series or of any such partly paid stock shall set forth thereon the statements prescribed by the General Corporation Law. Any restrictions or the transfer or registration of transfer of any shares of stock of any class or series shall be noted conspicuously on the certificate representing such shares.
The corporation may issue a new certificate of stock in place of any certificate theretofore issued by it, alleged to have been lost, stolen, or destroyed, and the Board of Directors may require the owner of any lost, stolen, or destroyed certificate, or his legal representative, to give the
- 2 - corporation a bond sufficient to indemnify the corporation 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 any such new certificate.
2. FRACTIONAL SHARE INTERESTS. The corporation may, but shall not be required to, issue fractions of a share. In lieu thereof it shall either pay in cash the fair value of fractions of a shares, as determined by the Board of Directors, to those entitled thereto or issue scrip or fractional warrants in registered or bearer form over the manual or facsimile signature of an officer of the corporation or of its agent, exchangeable as therein provided for full shares, but such scrip or fractional warrants shall not entitle the holder to any rights of a shareholder except as therein provided. Such scrip or fractional warrants may be issued subject to the condition that the same shall become void if not exchanged for certificates representing full shares of stock before a specified date, or subject to the condition that the shares of stock for which such scrip or fractional warrants are exchangeable may be sold by the corporation and the proceeds thereof distributed to the holders od such scrip or fractional warrants, or subject to any other conditions which the Board of Directors may determine.
3. STOCK TRANSFERS. Upon compliance with provisions restricting the transfer or registration of transfer o shares of stock, if any, transfers or registration of transfer of shares of stock of the corporation shall be made only on the stock ledger of the corporation by the registered holder thereof, or by his attorney thereunto authorized by power of attorney duly executed and filed with the Secretary of the corporation of with a transfer agent or a registrar, if any, and on surrender of the certificate or certificates for such shares of stock properly endorsed and the payment of all taxes due thereon.
4. RECORD DATE FOR STOCKHOLDERS. For the purpose of determining the stockholders entitled to notice of or to vote at any meeting of
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document stockholders or any adjournment thereof, or to express consent to or dissent from any corporate action in writing without a meeting, or for the purpose or determining stockholders entitled to receive payment of any dividend or other distribution or the 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 directors may fix, in advance, a date as the record date for any such determination of stockholders. Such date shall not be more than sixty days nor less than ten days before the date of such meeting, nor more than sixty days prior to any
- 3 - other action. If no record date is fixed, the record date for the determination of stockholders entitled to notice of or to vote at a meeting of stockholder shall be at the close of business on the day next preceding the day on which notice is given, or, if notice is waived, at the close of business on the day next preceding the day of which the meeting is held; the record date for determining stockholders for any other purpose shall be at the close of business on the day on which the Board of Directors adopts the resolution relating thereto. When a determination of stockholders of record entitled to notice of or to vote at any meeting of stockholders has been made as provided in this paragraph, such determination shall apply to any adjournment thereof; provided, however, that the Board of Directors may fix a new record date for the adjourned meeting.
5. MEANING OF CERTAIN TERMS. As used herein in respect of the right to notice of a meeting of stockholders or a waiver thereof or to participate or vote thereat or to consent or dissent in writing in lieu of a meeting, as the case may be, the term "share" or "shares" or "share of stock" or "shares of stock" or "stockholder" or "stockholders" refers to an outstanding share or shares of stock and to a holder or holders of record or outstanding shares of stock when the corporation is authorized to issue only one class of shares of stock, and said reference is also intended to include any outstanding share or shares of stock and any holder or holders of record of outstanding shares of stock of any class upon which or upon whom the certificate of incorporation confers such rights where there are two or more classes or series of shares of stock or upon which or upon whom the general corporation Law confers such rights notwithstanding that the certificate of incorporation may provide for more than one class or series of shares of stock,one or more of which are limited or denied such rights thereunder; provided, however, that no such right shall vest in the event of an increase or a decrease in the authorized number of shares of stock of any class or series which is otherwise denied voting rights under the provisions of the certificate of incorporation, including any Preferred Stock which is denied voting rights under the provisions of the resolution or resolutions adopted by the Board of Directors with respect to the issuance thereof.
6. STOCKHOLDER MEETINGS.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -- TIME. The annual meeting shall be held on the date and at the time fixed, form time to time, by the directors, provided, that the first annual meeting shall be held on a date within thirteen months after the organization of the corporation, and each successive annual meeting shall be held on a date within thirteen months after the date of the
- 4 - preceding annual meeting. A special meeting shall be held on the date and at the time fixed by the person or entity calling such meeting, at this or its sole discretion.
-- PLACE. Annual meetings and special meetings shall be held at such place, within or without the State of Delaware, as the Chairman of the Board or Directors, or in his absence the President, at their sole discretion may, from time to time, fix. Whenever they shall fail to fix such place, the meeting shall be held at the headquarters office of the corporation.
-- CALL. Annual meetings and special meetings may be called by any one of the Chairman of the Board of Directors, the President, the Board of Directors, or by the holders of not less than one-fifth of all the outstanding shares of the Corporation.
-- NOTICE OR WAIVER OF NOTICE. Written notice of all meetings shall be given, stating the place, date, and hour of the meeting. The notice of an annual meeting shall state that the meeting is called for the election of directors and for the transaction of other business which may properly come before the meeting, and shall (if any other action which could be taken at a special meeting is to be taken at such annual meeting), state such other action or actions as are known at the time of such notice. The notice of a special meeting shall in all instances state the purpose or purposed to be taken which would, if taken, entitle stockholders to receive payment for their shares of stock, the notice shall include a statement of that purpose and to that effect. Except as otherwise provided by the General Corporation Law, a copy of the notice of any meeting shall be given, personally or by mail, not less than ten days nor more than sixth days before the date of the meeting, unless the lapse of the prescribed period of time shall have been waived, and directed to each stockholder at his record address or at such other address which he may have furnished for such purpose in written got the Secretary of the corporation. Notice by mail shall be deemed to be given when deposited, with postage thereon prepaid, in the United States mail. If a meeting is adjourned to another time, not more than thirty days hence, and/or to another place, and if an announcement of the adjourned time and/or place is made at the meeting, it shall not be necessary to give notice of the adjourned meeting unless the directors, after adjournment, fix a new record date for the adjourned meeting. Notice need not be given to any stockholder who submits a written waiver of notice by him before or after the time stated
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document therein. Attendance of a person at a meeting of stockholders shall constitute a waiver
- 5 - of notice of such meeting, except when the stockholder attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened. Neither the business to be transacted at, nor the purpose of, any regular or special meeting or the stockholders need be specified in any written waiver of notice.
-- STOCKHOLDER LIST. There shall be prepared and made, at least ten days before every meeting of stockholders, a complete list of the stockholders, 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 or other municipality or community 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. The stock ledger shall be the only evidence as to who are the stockholders entitled to examine the stock ledger, the list required by this section or the books of the corporation, or the vote at any meeting of stockholders.
-- CONDUCT OF MEETINGS. Meetings of the stockholders shall be presided over by one of the following officers in the order of seniority and if present and acting -- the Chairman of the Board, the President, a Vice- President, a chairman for the meeting chosen by the Board of Directors, or, if none of the foregoing is in office and present and acting, by a chairman to be chosen by the stockholders. The Secretary of the corporation, or in his absence, an Assistant Secretary,, shall act as secretary of every meeting, but if neither the Secretary nor an Assistant Secretary is present the Chairman for the meeting shall appoint a secretary of the meeting.
-- PROXY REPRESENTATION. Every stockholder may authorize another person or persons to act for him by proxy in all matters in which a stockholder is entitled to participate, whether by waiving notice of any meeting, voting or participating at a meeting, or expressing consent or dissent without a meeting. Every proxy must be signed by the stockholder or by his attorney-in-fact. No proxy shall be voted or acted upon after three years form its date unless such proxy provides for a longer period. A duly executed proxy shall be irrevocable if it states that it is irrevocable and, if, and only as long as,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document - 6 - it is coupled with an interest sufficient in law to support an irrevocable power. A proxy may be made irrevocable regardless of whether the interest with which it is coupled is an interest in the stock itself or an interest in the corporation generally.
-- INSPECTORS AND JUDGES. The directors, in advance of any meeting, may, but need not, appoint one or more inspectors of election or judges of the vote, as the case may be, to act at the meting or any adjournment thereof. If an inspector or inspectors or judge or judges are not appointed, the person presiding at the meeting may, but need not, appoint one or more inspectors or judges. In case any person who may be appointed as an inspector or judge fails to appear or act, the vacancy may e filled by appointment made by the person presiding thereat. Each inspector or judge, if any, for entering upon the discharge of his duties, shall take and sign an oath faithfully to execute the duties of inspector or judge at such meeting with strict impartiality and according to the best of his ability. The inspectors or judges, if any, shall determine the number of shares of stock outstanding and the voting power of each, the shares of stock represented at the meeting, the existence of a quorum, the validity and effect of proxies, and shall receive votes, ballot 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 person presiding at the meeting, the inspector or inspector or judge or judges, if any, shall make a report in writing of any challenge, question or matter determined by him or them and execute a certificate of any fact found by him or them.
-- QUORUM. Except as the General Corporation Law or these By- Laws may otherwise provide, the holders of a majority of the outstanding shares of stock entitled to vote shall constitute a quorum at a meeting of stockholders for the transaction of any business. The stockholders present may adjourn the meeting despite the absence of a quorum. When a quorum is once present to organize a meeting. It is not broken by the subsequent withdrawal of any shareholders.
-- VOTING. Each stockholder entitled to vote in accordance with the terms of the Certificate of Incorporation and of these By-Laws, or, with respect to the issuance of Preferred Stock, in accordance with the terms of a resolution or resolutions of the Board of Directors, shall be entitled to one vote, in person or by proxy, for share of stock each entitled to vote held by such stockholder. In the election of
- 7 -
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document directors, a plurality of the votes cast shall elect. Any other action shall be authorized by a majority of the votes cast except where the Certificate of Incorporation or the General Corporation Laws prescribes a different percentage of votes and/or different exercise of voting power. Voting by ballot shall not be required for corporate action except as otherwise provided by the General Corporation Law.
7. STOCKHOLDER ACTION WITHOUT MEETINGS. Any action required to be taken, or any action which amy be taken, at any annual or special meeting of stockholders, may be taken without a meeting, without prior notice and without a vote, if a consent in writing, setting forth the action so taken, shall be signed by the holders of the outstanding stock having not less than the minimum number of votes that would be necessary to authorize or take such action at a meeting at which all shares entitled to vote thereon were present and voted. Prompt notice of the taking of the corporate action without a meeting by less than unanimous written consent shall be given to those stockholders who have not consented in writing.
ARTICLE II ------
DIRECTORS ------
1. FUNCTIONS AND DEFINITION. The business of the corporation shall be managed by the Board of Directors of the corporation. The use of the phrase "whole board" herein refers to the total number of directors which the corporation would have if there were no vacancies.
2. QUALIFICATIONS AND NUMBER. (1) Each director shall hold office until the next annual meeting of stockholder or until his successors shall have ben duly elected and qualified. Directors need not be residents of Delaware or stockholders of the corporation.
3. ELECTION AND TERM. The first Board of Directors, unless the members thereof shall have been named in the certificate of incorporation, shall be elected by the incorporator or incorporators and shall hold office until the first annual meeting or stockholders and until their successor have been elected and qualified or until their earlier resignation or removal. Any director may resign at any time upon written notice to the corporation. Thereafter, director who are elected at an annual meting of stockholders, and directors who are elected in the interim to fill vacancies an
(1) The number of directors of the corporation shall be fixed by resolution of the Board of Directors. amended 1/18/90
- 8 -
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document newly created directorships, shall hold office until the next annual meeting of stockholders and until their successors have been elected and qualified or until their earlier resignation or removal. In the interim between annual meetings of stockholders or of special meetings of stockholders called for the election of directors and/or for the removal of one or more directors and for the filling of any vacancies in the Board of Directors, including vacancies resulting from the removal of directors for cause or without cause, any vacancy in the Board of Directors may be filled by the vote of a majority of the remaining directors then if office, although less than a quorum, or by the sole remaining director.
4. MEETINGS. ------
-- TIME. Meetings shall be held at such time as the Board shall fix.
-- FIRST MEETINGS. The first meeting of each newly elected Board may be held immediately after each annual meeting of the stockholders at the same place at which the meeting is held, and no notice of such meeting shall be necessary to the meeting, provided a quorum shall be present. In the event such first meeting is not so held immediately after the annual meeting of the stockholders, it may be held at such time and place as shall be specified in the notice given as hereinafter provided for special meetings of the Board of Directors, or at such time and place as shall be fixed by the consent in writing of all the directors.
-- PLACE. Meetings, both regular and special, shall be held at such place within or without the State of Delaware as shall be fixed by the Board.
-- CALL. No call shall be required for regular meetings for which the time and place have been fixed. Special meetings may be called by or at the direction of the Chairman of the Board, or the President, or of a majority of the directors in office.
-- NOTICE OF ACTUAL OR CONSTRUCTIVE WAIVER. No notice shall be required for regular meetings for which the time and place have been fixed. Written, oral, or any other mode of notice of the time and place shall be given of special meetings in sufficient time for the convenient assembly of the directors thereat. The notice of any meeting need not specify the purpose of the meeting. Any requirements of furnishing a notice shall be waived by any director who signs a written waiver of such notice before or after the time stated therein.
- 9 -
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Attendance of a director at a meeting of the Board shall constitute a waiver of notice of such meeting, except when the director attends a meeting for the express purpose of objecting, at the beginning of the meeting, to the transaction of any business because the meeting is not lawfully called or convened.
-- QUORUM AND ACTION. A majority of the whole Board shall constitute a quorum except when a vacancy or vacancies prevents such majority, whereupon a majority of the directors in office shall constitute a quorum, provided that such majority shall constitute at least one-third (1/3) of the whole Board. Any director may participate in a meeting of the Board by means of a conference telephone or similar communications equipment by means of which all directors participating in the meeting can hear each other, and such participation in a meeting of the Board shall constitute presence in person at such meeting. A majority of the directors present, whether or not a quorum is present, may adjourn a meeting to another time and place. Except as herein otherwise provided, and except as otherwise provided by the General Corporation Law, the act of the Board shall be the act by vote of a majority of the directors present at a meeting, a quorum being present. The quorum and voting provisions herein stated shall both be construed as conflicting with any provisions of the General Corporation Law and these By- Laws which govern a meeting of directors held to fill vacancies and newly created directorships in the Board.
-- CHAIRMAN OF THE MEETING. The Chairman of the Board shall preside at all meetings. Otherwise, the President, if present and acting, or any other director chosen by the Board, shall preside.
5. REMOVAL OF DIRECTORS. Any or all of the directors may be removed for cause or without cause by the stockholders. One or more of the directors may be removed for cause by the Board of Directors.
6. COMMITTEES. The Board of Directors may, be resolution passed by a majority of the whole Board, designate one or more committees, each committee to consist of one or more of the directors of the corporation. The Board 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. Any such committee, to the extent provided in the resolution of the Board, shall have and may exercise the powers 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
-10- papers which may require it. In the absence or disqualification of any member
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of any such committee or committees, the member or members thereof present at any meeting and not qualified 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 place of any such absent or disqualified member.
7. ACTION IN WRITING. Any action required or permitted to be taken at any meeting of the Board of Directors or 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.
ARTICLE III
OFFICERS
1. EXECUTIVE OFFICERS. The directors may elect or appoint a Chairman, a President, one or more Vice Presidents (one or more of whom may be denominated "Executive Vice President"), a Secretary, one or more Assistant Secretaries, a Treasurer, one or more Assistant Treasurers, and such other officers as they may determine. Any number of offices may be held by the same person.
2. TERM OF OFFICE; REMOVAL. Unless otherwise provided in the resolution of election or appointment, each officer shall hold office until the meeting of the Board of Directors following the next annual meeting of shareholders and until his successor has been elected and qualified. The Board of Directors may remove any officer for cause or without cause.
3. AUTHORITY AND DUTIES. All officers, as between themselves and the corporation, shall have such authority and perform such duties in the management of the corporation as may be provided in these By-Laws, or, to the extent not so provided, by the Board of Directors.
4. THE CHAIRMAN OF THE BOARD OF DIRECTORS. The Chairman of the Board of Directors is present and acting, shall preside at all meetings, of the Board of Directors, otherwise, the President, if present shall preside, or if the President does not so preside, any other director chosen by the Board shall preside.
-11-
5. THE PRESIDENT. The President shall be the chief executive officer of the corporation, unless otherwise provided by resolution of the Board of Directors.
6. VICE PRESIDENTS. Any Vice President that may have been appointed,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document in the absence or disability of the President, shall perform the duties and exercise the powers of the President, in the order of their seniority, and shall perform such other duties as the Board of Directors shall prescribe.
7. THE SECRETARY. The Secretary shall keep in safe custody the seal of the corporation and affix it to any instrument when authorized by the Board of Directors, and shall perform such other duties as may be prescribed by the Board of Directors.
8. THE TREASURER. The Treasurer shall have the care and custody of the corporate funds, and other valuable effects, including securities, and shall keep full and accurate accounts of receipts and disbursements in books belonging to the corporation and shall deposit all moneys and other valuable effects in the name and to the credit of the corporation in such depositories as may be designated by the Board of Directors. The Treasurer shall disburse the funds of the corporation as may be ordered by the Board, taking proper vouchers for such disbursements, and shall render to the President and directors, at the regular meetings of the Board, or whenever they may require it, an account of all his transactions as Treasurer and of the financial condition of the corporation. If required by the Board of Directors, the Treasurer shall give the corporation a bond for such term, in such sum and with such surety or sureties as shall be satisfactory to the Board for the faithful performance of the duties of his office and for the restoration to the corporation, in case of his death, resignation, retirement or removal from office, of all books, papers, vouchers, money and other property of whatever kind in his possession or under his control belonging to the corporation.
-12-
ARTICLE IV
CORPORATE SEAL
AND
CORPORATE BOOKS
The corporate seal shall be in such form as the Board of Directors shall prescribe.
The books of the corporation may be kept within or without the State of Delaware, at such place or places as the Board of Directors may, from time to time, determine.
ARTICLE V
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document FISCAL YEAR
The fiscal year of the corporation shall be fixed, and shall be subject to change, by the Board of Directors.
ARTICLE VI
CONTROL OVER BY-LAWS
These By-Laws may be altered, amended or repealed and new By-Laws may be adopted at any meeting of the Board of Directors of the corporation by a majority of the directors present at the meeting, subject to the power of the stockholders to alter or repeal By-Laws made by the Board of Directors.
ARTICLE VII
INDEMNIFICATION AND INSURANCE
1. INDEMNIFICATION IN ACTIONS OTHER THAN THOSE BY OR IN THE RIGHT OF THE CORPORATION. The corporation shall indemnify any person who was or is a party or who is threatened to be made a party to any threatened, pending, or completed action, suit, or proceeding, whether civil, criminal, administrative, or investigative (other than an action by or in
-13- the right of the corporation), 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 the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' 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 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 termination of any action, suit, or proceeding by judgment, order, settlement, conviction, or upon a plea of nolo contendre or its equivalent, shall not, of itself, create a presumption that the person did not act in good faith and in a manner which 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 reasonable cause to believe that his conduct was unlawful.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2. INDEMNIFICATION IN ACTIONS BY OR IN THE RIGHT OF THE CORPORATION. The corporation shall indemnify any person who was or is a party or who is threatened to be made a party to any threatened, pending, or completed action or suit by, or in the right of, the corporation to procure a judgment in its favor by reason of the fact he is or was a director, officer, employee or agent of the corporation or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, against expenses (including attorneys' fees) actually and reasonably incurred by him in connection with the defense or settlement of such action or suit 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 except that no indemnification shall be made in respect of any claim, issue or matter as to which such person shall have been adjudged to be liable to the corporation, unless and only to the extent that the Court of Chancery or the court in which such action or suit was brought shall determine upon application that, despite the adjudication of liability but in view of all the circumstances of the case, such person is fairly and reasonably entitled to indemnity for such expenses which the Court of Chancery or other such court shall deem proper.
3. MANDATORY INDEMNIFICATION OF EXPENSES IN SUCCESSFUL DEFENSES. To the extent that a director, officer employee, or agent of the corporation has been successful, on the merits or otherwise, in defense of any action, suit, or
-14- proceeding referred to in Section 1 or Section 2 hereof, or in defense of any claim, issue, or matter therein, he shall be indemnified against expenses (including attorneys' fees) actually and reasonably incurred by him in connection therewith.
4. AUTHORIZATION FOR INDEMNIFICATION. Any indemnification under Section 1 or Section 2 hereof (unless ordered by a court) shall be made by the corporation only as authorized in the specific case upon a determination that indemnification of the director, officer, employee or agent is proper in the circumstances because he has met the applicable standard of conduct set forth in Section 1 or Section 2 hereof, as the case may be. Such determination shall be made (1) by the board of directors by a majority vote of a quorum consisting of directors who were not parties to such action, suit, or proceeding, or (2) if such a quorum is not obtainable, or, even if obtainable, a quorum of disinterested directors so directs, by independent legal counsel in a written opinion.
5. ADVANCEMENT OF EXPENSES. Expenses incurred by a director or officer of the corporation in defending a civil or criminal action, suit or proceeding shall be paid by the corporation in advance of the final disposition of such action, suit or proceeding upon receipt of an undertaking by or on behalf of the director or officer to repay such amount if it shall ultimately be
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document determined that he is not entitled to be indemnified by the corporation as authorized in this Article VIII. Such expenses incurred by other employees and agents of the corporation may be so paid upon such terms and conditions, if any, as the board of directors deems appropriate.
6. NON-EXCLUSIVITY OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSE. The indemnification and advancement of expenses provided by, or granted pursuant to, the other subsections of this Article VIII shall not be deemed exclusive of any other rights to which those seeking indemnification or advancement of expenses may be entitled under any by-law, agreement, vote of disinterested directors or otherwise, both as to action in his official capacity and as to action in another capacity while holding such office.
7. INSURANCE. The corporation shall have the power to purchase and maintain insurance on behalf of any person who is or was a director, officer, employee or agent of the corporation, or is or was serving at the request of the corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise against any liability asserted against him and incurred by him in any such capacity, or arising out of his status as such,
- 15 - whether or not the corporation would have power to indemnify him against such liability under this Article VIII.
8. MEANING OF "CORPORATION" FOR PURPOSES OF ARTICLE. For purposes of this Article VIII, references to "the corporation' shall include, in addition to the resulting corporation, any constituent corporation (including any constituent of a constituent) absorbed in a consolidation or merger which, if its separate existence had continued, would have had power and authority to indemnify its directors, officers, and employees or agents, so that any person who is or was a director, officer, employee or agent of such constituent corporation, or is or was serving at the request of such constituent corporation as a director, officer, employee or agent of another corporation, partnership, joint venture, trust, or other enterprise, shall stand in the same position under the provision of this Article VIII with respect to the resulting or surviving corporation as he would have with respect to such constituent corporation of its separate existence had continued.
9. DEFINITIONS. For purposes of this Article VIII, references to "other enterprises" shall include employee benefit plans; references to "fines" shall include any excise taxes assessed on a person with respect to an employee benefit plan; and references to "serving at the request of the corporation" shall include any service as a director, officer, employee or agent of the corporation which imposes duties on, or involves services by, such director, officer, employee, or agent with respect to an employee benefit plan, its
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document participants, or beneficiaries; and a person who acted in good faith and in a manner he reasonably believed to be in the interest of the participants and beneficiaries of an employee benefit plan shall be deemed to have acted in a manner "not opposed to the best interests of the corporation" as referred to in this Article VIII.
10. SURVIVAL OF INDEMNIFICATION AND ADVANCEMENT OF EXPENSES. The indemnification and advancement of expenses provided by, or granted pursuant to, this Article VIII shall, unless otherwise provided when authorized or ratified, continue as to a person who has ceased to be a director, officer, employee or agent and shall inure to the benefit of the heirs, executors, and administrators of such a person.
11. SEVERABILITY. In the event that any of the provisions of this Article (including any provision within any section, subsection, paragraph or sentence) is held by a court of competent jurisdiction to be invalid, void or otherwise unenforceable, the remaining provisions of this Article or of
- 16 - any section, subsection, paragraph or sentence are severable and shall remain enforceable to the fullest extent permitted by law.
February 4, 1991
FURTHER RESOLVED, that the bylaws of the Corporation shall be, and hereby are, revised by the addition of a FINAL ARTICLE to read as follows:
FINAL ARTICLE
Notwithstanding any other provision or article of these Bylaws:
1. For purposes of these Bylaws, any action by stockholders purporting to elect, remove or replace any director of the Corporation or to change the size of or otherwise to create vacancies on the Board of Directors of the Corporation or amend the Certificate of Incorporation or Bylaws of this Corporation shall be referred to herein as "Restricted Stockholder Action."
2. No Restricted Stockholder Action shall be effective until written notice of such action has been provided to the Secretary of the Corporation and the Secretary has thereafter been afforded reasonable opportunity, but no more than 48 hours during consecutive business days, to review such action and determine its validity under these Bylaws, the Certificate of Incorporation and the General Corporation Law of Delaware.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3. Upon receipt of notice as provided in section 2, the Secretary shall confirm the date of such Restricted Stockholder Action and whether such action was taken by at least the minimum number of votes necessary to authorize or take such action. In the event of a consent of stockholders in lieu of meeting the Secretary shall further confirm the signatures of each stockholder ad the dates of signature. Upon completion of
said review the Secretary shall promptly certify to the stockholders and to the Board of Directors whether or not the action taken is valid. Upon certification of validity the action shall become effective.
4. The taking of any Restricted Stockholder Action which does not conform to the provisions of this Article of the Bylaws shall be null and void and without effect.
AMENDMENT ADOPTED BY WRITTEN CONSENT OF THE BOARD OF DIRECTORS DATED APRIL 15, 1994
RESOLVED, that pursuant to Article IV of the By-Laws the Board hereby amends Paragraph 2 of Article II of the By-Laws by deleting the first sentence thereof in its entirety and substituting in lieu thereof the following:
"The number of directors of the Corporation shall be seven."
AMENDMENT ADOPTED AT A MEETING OF THE BOARD OF DIRECTORS ON JUNE 15, 1994
RESOLVED, that Section 6, "Voting," of ARTICLE I of the Company's By-Laws be amended so that the first sentence thereof is deleted in its entirety and replaced with the following:
"Each holder of common stock entitled to vote in accordance with the terms of the Certificate of Incorporation or these By-Laws shall be entitled to one vote, in person or by proxy, for each share of stock entitled to vote held by such holder. Each holder of preferred stock entitled to vote in accordance with the terms of the Certificate of Incorporation or these By-Laws shall be entitled to that number of votes, in person or by proxy, set forth in the instrument creating or designating the preferred stock."
EXHIBIT D
INVESTMENT BANKS
Goldman, Sachs & Co.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The First Boston Corporation
Hambrecht & Quist Incorporated
Lazard Freres & Co.
Lehman Brothers
Morgan Stanley & Co. Incorporated
Salomon Brothers Inc
Smith Barney Shearson Inc.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 4.3
REGULATORY CONTINGENCY AGREEMENT
THIS REGULATORY CONTINGENCY AGREEMENT (this "Agreement") is made as of June 16, 1994, by and between InfoVest Corporation, a Delaware corporation (the "Company"), and White River Ventures, Inc., a Delaware corporation ("White River").
White River is a wholly owned subsidiary of White River Corporation, a Delaware corporation ("WRC"). WRC owns indirectly a majority of the issued and outstanding shares of the Company's common stock, $.10 par value per share (the "Common Stock"). Pursuant to an exemptive order (the "Exemptive Order") of the Securities and Exchange Commission WRC has been granted a two-year exemption from the registration requirements of the Investment Company Act of 1940. The Exemptive Order, among other things, requires WRC to reduce its ownership of "investment securities" as a percentage of its total assets. The beneficial ownership of less than a majority of the issued and outstanding shares of Common Stock by WRC would be detrimental to the WRC's ability to comply with the terms of the Exemptive Order. Accordingly, in order to enhance WRC's ability to comply with the terms of the Exemptive Order, upon the occurrence of certain events the Company has agreed to issue and sell to White River and White River has agreed to purchase from the Company a series of voting preferred stock, all upon the terms and subject to the conditions of this Agreement.
The parties hereto agree as follows:
1. EXCHANGE OF SECURITIES
1.1. EXCHANGE AND ISSUANCE OF SECURITIES.
1.1.1. The Company shall adopt and file with the Secretary of State of the State of Delaware on or before the date hereof a Certificate of Designations with respect to the Series E Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series E Preferred Stock"), in the form attached hereto as Exhibit A (the "Series E Certificate of Designations").
1.1.2. The Company agrees that on or prior to the third Business Day following its receipt of a written notification from White River to the effect that the number of shares of the Common Stock owned by White River represents less than a majority of the issued and outstanding shares of Common Stock, the Company will issue to White River 500 shares of Series E Preferred Stock in consideration for, the exchange and transfer by White River to the Company of 500 shares of the Series D Cumulative Redeemable Preferred Stock, par value $1.00 per share, of the Company. A "Business Day" means any day other than a Saturday, Sunday or a
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
2. REPRESENTATIONS AND WARRANTIES OF THE COMPANY
The Company hereby represents and warrants to White River that:
2.1. ORGANIZATION; GOOD STANDING; QUALIFICATION
The Company is a corporation duly organized, validly existing, and in good standing under the laws of the State of Delaware, has all requisite corporate power and authority to own and operate its properties and assets and to carry on its business as now conducted and as proposed to be conducted, to execute and deliver this Agreement, to issue and exchange the Series E Preferred Stock, and to carry out the provisions of this Agreement and the Series E Certificate of Designations. The Company is duly qualified as a foreign corporation to do business and is in good standing in each jurisdiction in which the failure so to qualify would have a material adverse effect on the business, operations, condition (financial or other), results of operations or assets, properties or prospects of the Company ("Material Adverse Effect").
2.2. AUTHORIZATION
All corporate action on the part of the Company, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement, the performance of all obligations of the Company hereunder, and the authorization, issuance (or reservation for issuance), exchange and delivery of the shares of the Series E Preferred Stock to be exchanged hereunder has been taken, and this Agreement has been duly executed and delivered by the Company and constitutes a valid and legally binding obligation of the Company, enforceable in accordance with its respective terms. Prior to the date hereof, the Series E Certificate of Designations will have been filed with the Secretary of State of the State of Delaware in accordance with the Delaware General Corporation Law.
2.3. VALID ISSUANCE OF SERIES E PREFERRED STOCK
The Series E Preferred Stock to be acquired by White River hereunder, when issued, exchanged, and delivered in accordance with the terms of this Agreement for the consideration expressed herein, will be duly and validly issued, fully paid, and nonassessable, and will be free and clear of all liens, pledges, security interests, options, rights of first refusal, encumbrances, claims, preemptive rights and other third party rights other than restrictions on transfer under applicable state and federal securities laws.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -2-
2.4. GOVERNMENTAL CONSENTS
No consent, approval, qualification, order or authorization of, or declaration or filing with, any local, state, or federal governmental authority ("Consents") is required on the part of the Company in connection with the Company's valid execution, delivery, or performance of this Agreement and the offer, exchange, issuance or delivery of the Series E Preferred Stock by the Company, except (i) the filing of the Series E Certificate of Designations with the Secretary of State of the State of Delaware, and (ii) such Consents as have been made prior to the date hereof, except that any notices required to be filed with the Securities and Exchange Commission under Regulation D of the Securities Act of 1933, as amended (the "Securities Act"), or such postclosing filings as may be required under applicable state securities laws, any of which will be timely filed within the applicable periods therefor.
2.5. DISCLOSURE
Neither this Agreement nor any certificate referred to herein furnished to White River by or on behalf of the Company in connection with the transactions contemplated hereby contains any untrue statement of a material fact or omits to state a material fact necessary in order to make the statements contained herein and therein not misleading. There is no fact peculiar to the Company which the Company has not disclosed to White River in writing which has a Material Adverse Effect or, so far as the Company can now reasonably foresee, will materially affect adversely the ability of the Company to perform this Agreement or its obligations in respect of the Series E Preferred Stock.
2.6. COMPLIANCE WITH OTHER INSTRUMENTS
Except as set forth on Schedule 2.6 hereto, the Company is not in violation or default (i) of any provision of its Charter or Bylaws, (ii) in any provision of any mortgage, indenture, agreement, instrument, or contract to which it is a party or by which it is bound other than such violations or defaults which, individually or in the aggregate, do not have a Material Adverse Effect or (iii) of any judgment, order, writ, decree, statute, rule, or regulation applicable to the Company. Neither the execution and delivery of this Agreement, nor the execution and filing of the Series E Certificate of Designations, nor the issuance of the Series E Preferred Stock hereunder, nor fulfillment of nor compliance with the terms and provisions hereof or thereof, nor the payment of dividends on the Series E Preferred Stock as contemplated by the Series E Certificate of Designations out of funds legally available therefor, nor the redemption thereof will conflict with or result in a breach of the terms, conditions or provisions of, or give rise to a right of termination under, or constitute a default under, or result in any violation of, the Charter or Bylaws of the Company, or any mortgage, agreement, instrument, order, judgment, decree,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -3-
statute, law, rule or regulation to which the Company or any of its property is subject other than breaches, defaults or violations which, individually or in the aggregate, do not have a Material Adverse Affect or materially adversely affect the ability of the Company to perform its obligations under this Agreement and the Series E Certificate of Designations.
3. REPRESENTATIONS AND WARRANTIES OF WHITE RIVER
3.1. REPRESENTATIONS AND WARRANTIES OF WHITE RIVER
White River hereby represents and warrants to the Company that all corporate action on the part of White River, its officers, directors and stockholders necessary for the authorization, execution and delivery of this Agreement and the performance of all obligations of White River hereunder has been taken, and this Agreement has been duly executed and delivered by White River and constitutes a valid and legally binding obligation of White River, enforceable in accordance with its respective terms.
4. COVENANTS OF THE COMPANY
4.1. LOST, STOLEN, DESTROYED OR MUTILATED STOCK CERTIFICATES
Upon receipt of evidence satisfactory to the Company of the loss, theft, destruction or mutilation of any certificate representing shares of the Series E Preferred Stock, in the case of loss, theft or destruction, upon delivery of an indemnity reasonably satisfactory to the Company, or, in the case of mutilation, upon surrender and cancellation thereof, the Company will issue a new certificate of like tenor for a number of shares of Series E Preferred Stock equal to the number of shares of such stock represented by the certificate lost, stolen, destroyed or mutilated.
4.2. STATUS OF DIVIDENDS
4.2.1. The Company agrees that in the event shares of the Series E Preferred Stock are issued and outstanding (i) in no Federal income tax return or claim for refund of Federal income tax or other submission to the Internal Revenue Service will it claim a deduction for dividends paid on the Series E Preferred Stock whether as interest, or pursuant to any other statutory provision or regulation now in effect or hereafter enacted or adopted, except to the extent that any such deduction shall not operate to jeopardize the availability to White River of the dividends received deduction provided by Section 243(a)(1) of the Internal Revenue Code of 1986, as amended (the "Code"), or any successor provision, in the opinion of counsel satisfactory to White River, and (ii) except as provided in clause (i) above and other than pursuant to this Agreement or the Series E Preferred Stock it will take no action which would result in the dividends
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -4- paid by the Company on the Series E Preferred Stock out of the Company's current or accumulated earnings and profits for Federal income tax purposes being ineligible for the dividends received deduction provided by Section 243(a)(1) of the Code, or any successor provision. In the event that White River has reasonable cause to believe that dividends paid by the Company on the Series E Preferred Stock out of the Company's current or accumulated earnings and profits will not be treated as eligible for the dividends received deduction provided by Section 243(a)(1) of the Code, or any successor provision, the Company will, at White River's request, join with White River in the submission to the Internal Revenue Service of a request for a ruling that any dividends paid on the Series E Preferred Stock will be so eligible for Federal income tax purposes. In addition to the extent not contrary to any provision of the Code or regulations promulgated thereunder or otherwise as provided herein, the Company will cooperate with White River in any litigation, appeal or other proceeding challenging or contesting any ruling, technical advice, finding or determination of the Internal Revenue Service' that dividends paid on the Series E Preferred Stock out of the Company's current or accumulated earnings and profits are not eligible for the dividends received deduction provided by Section 243(a)(1) of the Code, or any successor provision. The expenses of each party incurred in connection with any such submission, litigation, appeal or other proceeding will be borne by such party, except that the Company agrees that it will pay all expenses reasonably incurred in connection with any such submission, litigation, appeal or other proceeding necessitated or caused by a breach of this Agreement by the Company.
4.2.2. The Company also agrees that in the event shares of the Series E Preferred Stock are issued and outstanding the Company will not, without prior approval of White River, undertake any action not specifically provided for by the terms of this Agreement with respect to the Series E Preferred Stock, which would cause White River to be treated as having received an increase in its proportionate interest in the earnings and profits or assets of the Company within the meaning of Section 305(c) of the Code and result in White River being treated as having received a distribution of property to which Section 301 of the Code applies (within the meaning of Section 305(b) of the Code). If the Company fails to obtain prior approval from White River for any such action, it agrees to indemnify White River for any Federal income taxes or state taxes, including any interest and penalties imposed thereon, caused by such action.
4.3. LIMITATION ON PAYMENT RESTRICTIONS
The Company agrees that so long as White River or any of its "Affiliates" (as such term is defined in Rule 12b-2 under the Securities Exchange Act of 1934) shall hold any of the Series E Preferred Stock, unless White River otherwise consents in writing, the Company will not, and will not permit any of its
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -5-
subsidiaries to, enter into any loan or other agreement containing a dividend limitation which restricts the ability of the Company to pay dividends on the Series E Preferred Stock in accordance with the Series E Certificate of Designations.
5. INDEMNIFICATION
5.1. INDEMNIFICATION BY THE COMPANY
5.1.1. The Company hereby agrees to indemnify and hold harmless White River (including its officers, directors and employees) and its Affiliates against any and all losses, damages, liabilities, claims, demands, judgments, settlements, costs and expenses of any nature whatsoever (including reasonable attorneys' fees) (collectively, "Losses") resulting from or arising out of the inaccuracy of any representation or warranty or the breach or non-performance of any covenant or agreement of the Company contained in this Agreement.
5.1.2. If any action, proceeding or claim shall be brought or asserted against White River (including its officers, directors and employees) or its Affiliates (each, a "White River Indemnified Party") by any third party, which action, proceeding or claim, if determined adversely to the interest of White River Indemnified Party, would entitle White River Indemnified Party to indemnity pursuant to this Section 5.1, White River Indemnified Party shall promptly but in no event later than 30 days from the date that such White River Indemnified Party shall become aware of such action, proceeding or claim, notify the Company of the same in writing specifying in detail the basis of such claim and the facts pertaining thereto, and the Company shall be entitled to assume the defense thereof and have the sole control of the defense and settlement thereof, including the employment of counsel and the payment of all expenses; PROVIDED, HOWEVER, that White River Indemnified Party shall have the right to employ counsel separate from counsel employed by the Company in any such action and to participate in the defense thereof, and the fees and expenses of such counsel shall be at the expense of White River Indemnified Party unless (i) (1) the employment thereof has been specifically authorized by the Company in writing or (2) the use of counsel chosen by the Company to represent White River Indemnified Party would present such counsel with a conflict of interest or (ii) the Company has failed to assume the defense and to employ counsel. The Company shall not be liable for any settlement of any such action or proceeding effected without the written consent of the Company (unless such consent is unreasonably withheld by the Company), but if settled with the written consent of the Company, or if there shall be a final judgment for plaintiff in any such action, the Company agrees to indemnify and hold harmless White River Indemnified Party from and against any and all Losses by reason of such settlement or judgment. Notwithstanding the foregoing, without the written consent of White River Indemnified Party, the Company shall not be entitled to settle any nonmonetary claim involving the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -6- business, operations or assets of White River Indemnified Party if such settlement would impose on it any obligation which cannot be satisfied by the payment of money. The Company agrees to indemnify and hold harmless White River Indemnified Party from any and all legal expenses reasonably incurred by such White River Indemnified Party in connection with the successful enforcement of its rights, in whole or in part, to indemnity under this Section 5.1.
5.2. INDEMNIFICATION BY WHITE RIVER
5.2.1. White River hereby agrees to indemnify and hold harmless the Company against any and all Losses resulting from or arising out of the inaccuracy of any representation or warranty or the breach or non- performance of any covenant or agreement of White River contained in this Agreement.
5.2.2. If any action, proceeding or claim shall be brought or asserted against the Company (including its officers, directors and employees) or its Affiliates (each a "Company Indemnified Party") by any third party, which action, proceeding or claim, if determined adversely to the interests of the Company Indemnified Party, would entitle the Company Indemnified Party to indemnity pursuant to this Section 5.2, the Company Indemnified Party shall promptly, but in no event later than 30 days from the date that such Company Indemnified Party shall become aware of such action, proceeding or claim, notify White River of the same in writing specifying in detail the basis of such claim and the facts pertaining thereto, and White River shall be entitled to assume the defense thereof and have sole control of defense and settlement thereof, including the employment of counsel and the payment of all expenses; PROVIDED, HOWEVER, that the Company Indemnified Party shall have the right to employ counsel separate from counsel employed by White River in any such action and to participate in the defense thereof, and the fees and expenses of such counsel employed by the Company Indemnified Party shall be at the expense of the Company Indemnified Party unless (i) (1) the employment thereof has been specifically authorized by White River in writing or (2) the use of counsel chosen by White River to represent the Company Indemnified Party would present such counsel with a conflict of interest or (ii) White River has failed to assume the defense and to employ counsel. White River shall not be liable for any settlement of any such action or proceeding effected without the written consent of White River (unless such consent is unreasonably withheld by White River), but if settled with the written consent of White River or if there shall be a final judgment for the plaintiff in any such action, White River agrees to indemnify and hold harmless the Company Indemnified Party against any and all Losses by reason of such settlement or judgment. Notwithstanding the foregoing, without the written consent of the Company Indemnified Party, White River shall not be entitled to settle any nonmonetary claim involving the business, operations or assets of the Company Indemnified Party if such settlement would impose on the Company
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -7-
Indemnified Party any obligation which cannot be satisfied by the payment of money. White River agrees to indemnify and hold harmless the Company Indemnified Party from any and all legal expenses reasonably incurred by the Company Indemnified Party in connection with the successful enforcement of its rights, in whole or in part, to indemnity under this Section 5.2.
6. MISCELLANEOUS
6.1. ENTIRE AGREEMENT
This Agreement and the documents referred to herein constitute the entire agreement among the parties and no party shall be liable or bound to any other party in any manner by any warranties, representations, or covenants except as specifically set forth herein or therein.
6.2. EXPIRATION OF WARRANTIES
The warranties and representations of the Company and White River contained in or made pursuant to this Agreement shall in no way be affected by an investigation of the subject matter thereof made by or on behalf of the Company or White River and shall expire three years from the date of the Closing and be of no further force and effect on such date except that the representations and warranties contained in Sections 2.1, 2.2 and 2.3 shall survive the date hereof and continue indefinitely.
6.3. SUCCESSORS AND ASSIGNS
Except as otherwise provided herein, the terms and conditions of this Agreement shall inure to the benefit of and be binding upon the respective successors and assigns of the parties. Nothing in this Agreement, express or implied, is intended to confer upon any party other than the parties hereto or their respective successors and assigns any rights, remedies, obligations, or liabilities under or by reason of this Agreement, except as expressly provided in this Agreement.
6.4. GOVERNING LAW
THIS AGREEMENT SHALL BE GOVERNED BY AND CONSTRUED AND ENFORCED UNDER THE LAWS OF THE STATE OF NEW YORK WITHOUT REFERENCE TO THE PRINCIPLES OF THE CONFLICTS OF LAWS THEREOF.
6.5. COUNTERPARTS
This Agreement may be executed in two or more counterparts, each of which shall be deemed an original, but all of which together shall constitute one and the same instrument.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -8-
6.6. TITLES AND SUBTITLES
The titles and subtitles used in this Agreement are used for convenience only and are not to be considered in construing or interpreting this Agreement.
6.7. NOTICES
Unless otherwise provided, any notice required or permitted under this Agreement shall be given in writing and shall be deemed effectively given upon personal delivery to the party to be notified by hand or professional courier service, upon confirmation of telex or telecopy, five days after deposit with the United States Post Office, by registered or certified mail, postage prepaid or upon the next day following deposit with a nationally recognized overnight air courier, addressed as follows:
(a) if to White River, to:
White River Ventures, Inc. 777 Westchester Avenue Suite 201 White Plains, New York 10604 Attention: Robert T. Marto Telecopy: 914-251-0313
With a copy to: Alexander M. Dye LeBoeuf, Lamb, Greene & MacRae 125 West 55th Street New York, New York 10019 Telecopy: 212-424-8500
(b) if to the Company, to:
InfoVest Corporation World Trade Center Chicago 444 Merchandise Mart Chicago, Illinois 60654 Attention: David M. Phillips Telecopy: 312-527-2298
With a copy to:
Leland E. Hutchinson Sidley & Austin One First National Plaza Chicago, Illinois 60603
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Telecopy: 312-853-7036
-9-
Any party may by notice given in accordance with this Section 6.7 to the other party to this Agreement designate another address or person for receipt of notice hereunder.
6.8. AMENDMENTS AND WAIVERS
Any term of this Agreement may be amended and the observance of any term of this Agreement may be waived (either generally or in a particular instance and either retroactively or prospectively), only with the written consent of the parties hereto.
6.9. SEVERABILITY
If one or more provisions of this Agreement are held to be unenforceable under applicable law, such provision shall be excluded from this Agreement and the balance of the Agreement shall be interpreted as if such provision were so excluded and shall be enforceable in accordance with its terms.
6.10. SPECIFIC ENFORCEMENT
White River, on the one hand, and the Company, on the other hand, acknowledge and agree that irreparable damage would occur in the event that any of the provisions of this Agreement were not performed in accordance with their specific terms or were otherwise breached. It is accordingly agreed that the parties shall be entitled to an injunction or injunctions to prevent breaches of the provisions of this Agreement and to enforce specifically the terms and provisions hereof in any court of the United States or any state thereof having jurisdiction, this remedy being in addition to any other remedy to which they may be entitled at law or equity.
-10-
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date first above written.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document INFOVEST CORPORATION
By /S/ [Illegible] ------Name: Title: Executive Vice President
WHITE RIVER VENTURES, INC.
By /s/ John P. Corrigan ------Name: Title:
-11-
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 4.4
CERTIFICATE OF DESIGNATIONS
of
SERIES C CUMULATIVE REDEEMABLE PREFERRED STOCK
of
INFOVEST CORPORATION
(Pursuant to Section 151 of the Delaware General Corporation Law)
______
InfoVest Corporation, a corporation organized and existing under the General corporation Law of the State of Delaware (the "Corporation"), hereby certifies that the following resolution was adopted by vote of the Board of Directors of the Corporation at a nesting held on June 15, 1994.
RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (the "Board of Directors") in accordance with the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of preferred stock, par value $1.00 per share, of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences and limitations thereof as follows:
Series C Cumulative Redeemable Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock") and the number of shares constituting the Series C Preferred Stock shall be 5,000 shares. The stated value of each share of Series C Preferred Stock (the "Stated Value") shall be $1,000. The Series C Preferred Stock shall rank prior to the common stock, par value $0.10 per share (the "Common Stock") and any other capital stock of the Corporation which by its terms is junior to the Series C Preferred Stock with respect to dividend rights and with respect to the distribution of assets upon liquidation, dissolution or winding up, whether voluntary or involuntary, of the Corporation ("Junior Stock") and on a parity with the Series D Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series D Preferred Stock"), the Series E
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series E Preferred Stock"), and any other capital
stock subsequently issued by the Corporation which by its terms is on a parity with the Series C Preferred Stock with respect to dividend rights and with respect to the distribution of assets upon the liquidation, dissolution or winding up, whether voluntary or involuntary, of the Corporation ("Parity Stock").
Section 2. DIVIDENDS. (a) GENERAL. Commencing on the first Dividend Payment Date (as defined below) to occur following the fourth anniversary of the Original Issue Date (the "Dividend Rate Adjustment Date"), the holders of shares of the Series C Preferred Stock shall be entitled to receive cash dividends, when and as declared by the Board of Directors or by a duly authorized committee of said Board of Directors, out of assets legally available for such purpose, at the Dividend Rate set forth below in Section 3 applied to the Stated Value. Such dividends shall be cumulative from the date of original issue of such shares (the "Original Issue Date"), whether or not there shall have been net profits or net assets of the Corporation legally available for the payment of dividends at the time such dividends were payable, and shall be payable quarterly, when and as declared by the Board of Directors of the Corporation or by a duly authorized committee of said Board of Directors, on November 30, February 28, May 31 and August 31 of each year (each such date being hereinafter referred to as a "Dividend Payment Date"), commencing on the Dividend Rate Adjustment Date; PROVIDED; HOWEVER, in the event the Corporation shall fail to redeem shares of the Series C Preferred Stock in accordance with Section 7(b)(ii), dividends shall be payable commencing on the first Dividend Payment Date following the 90th day after the consummation of the IPO (as defined in Section 9). Bach such dividend shall be payable to the holders of record of shares of the Series C Preferred Stock as they appear on the stock register of the Corporation on such record date, not more than 60 days preceding the payment date thereof, as shall be fixed by the Board of Directors or by a duly authorized committee of said Board of Directors, PROVIDED THAT such record date shall not precede the date upon which the resolution fixing the record date is adopted. Dividends on account of arrears for any past Dividend Periods (as defined in Subsection (b) of this Section 2) may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such record date, not exceeding 60 days preceding the payment date thereof, as may be fixed by the Board of Directors or a duly authorized committee of said Board of Directors.
(b) DIVIDEND PERIODS. Dividend periods (hereinafter called "Dividend Periods") shall commence on December 1, March 1, June 1 and September 1 of each year and shall end on and include the calendar day next preceding the first day of the next Dividend Period (other than the initial Dividend Period which shall commence on the original issue Date and shall end on and include the Dividend Rate Adjustment Date). The amount of dividends payable for each Dividend Period or portion thereof for the Series C
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -2-
Preferred Stock shall be computed by multiplying the Stated Value by a traction, (i) the numerator of which is (A) the applicable Dividend Rate multiplied by (B) the number of calendar days elapsed during such Dividend Period or portion thereof and (ii) the denominator of which is 365. If more than one Dividend Rate applies to any Dividend Period or portion thereof, the calculation in the preceding sentence shall be applied for each period of time during which a given Dividend Rate is applicable. The dividend payable to each holder of Series C Preferred Stock shall be rounded to the nearest one cent with $.005 being rounded upward.
(c) DIVIDENDS ON PARITY STOCK. So long as any shares of the Series C Preferred Stock are outstanding, no full dividends shall be declared on any Parity Stock for any period unless full cumulative dividends have been or contemporaneously are declared on the Series c Preferred Stock for all Dividend Periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not declared to be paid in full, as described above, upon the shares of the Series C Preferred Stock and any Parity Stock, all dividends declared upon shares of the Series C Preferred Stock and any Parity Stock shall be declared pro rata so that the amount of dividends declared per share on the Series C Preferred Stock and such Parity Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Series C Preferred Stock and such Parity Stock bear to each other.
(d) DIVIDENDS ON JUNIOR STOCK. So long as any shares of the Series C Preferred Stock are outstanding, no dividend (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of Junior Stock) shall be declared or paid or set aside for payment or other distribution declared or made upon any Junior Stock, or upon any Parity Stock except as provided in Subsection (c) of this Section 2, nor shall any Junior Stock or Parity Stock (other than the Series D Preferred Stock and the Series E Preferred Stock) be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for Junior Stock).
(e) NO ADDITIONAL DIVIDENDS. Holders of shares of the Series C Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Series C Preferred Stock. No interest, or sum of -money in lieu of interest, shall be payable in respect to any dividend payment or payments on the Series C Preferred Stock.
Section 3. DIVIDEND RATE. The Dividend Rate on the shares of Series C Preferred Stock shall be 2.75% per annum for the period from the original Issue Date to and including the EARLIER of
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -3-
the (i) date of the consummation of the IPO or (ii) the Dividend Rate Adjustment Date and shall be 8.0% per annum for each Dividend Period or portion thereof thereafter occurring, subject to adjustment as follows:
(a) If the Corporation consummates an IPO prior to the Dividend Rate Adjustment Date and redeems the Series C Preferred Stock in accordance with the terms set forth in Section 7(b) (i) or 7 (b) (ii),, then the Dividend Rate shall be O% per annum from the date of consummation of the IPO to the Dividend Rate Adjustment Date.
(b) If, prior to the date for mandatory redemption of all outstanding shares of Series C Preferred Stock established pursuant to Section 7(a), 7(b)(i) or 7(b)(ii), the Corporation offers in good faith to repurchase on a pro rata basis all or a portion of the outstanding shares of each of the Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock at a repurchase price per share equal to at least the Stated value, together with accrued and unpaid dividends thereon to (and including) the date fixed for such repurchase, the Dividend Rate applicable to the shares of Series c Preferred Stock which the Corporation offered to repurchase and which the holders thereof refused such offer to repurchase shall, after the date fixed for such repurchase of the Series C Preferred Stock, be the LESSER of It and any Dividend Rate calculated pursuant to Subsection (a) of this Section 3.
Section 4. VOTING RIGHTS.
(a) The holders of the Series C Preferred Stock shall not have any voting rights, except as required by the Delaware General Corporation Law; PROVIDED, HOWEVER, that the affirmative vote of the holders of at least 66-2/3% of the outstanding shares of the Series C Preferred Stock, voting separately as a class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, shall be necessary to (i) authorize, create or increase the authorized or issued number of shares of, or issue (including on conversion or exchange of any convertible or exchangeable securities or by reclassification) any shares of any class or classes or series of Parity Stock or the capital stock of the Corporation having rights senior to the Series C Preferred Stock with respect to dividend rights and with respect to the distribution of assets upon the liquidation, dissolution or winding up, whether voluntary or involuntary of the Corporation ("Senior Stock") or (ii) amend, alter or repeal (whether by merger, consolidation or otherwise) any of the provisions of the Certificate of incorporation of the Corporation or the certificate of Designations of the Series C Preferred Stock which would materially and adversely affect any right, preference, privilege or voting power of the Series C Preferred Stock or the holders thereof; PROVIDED, HOWEVER, that the creation and issuance of any
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -4-
junior Stock, shall not be deemed to materially and adversely affect such rights, preferences or voting powers. For the taking of any action as provided in this paragraph (a) by the holders of shares of the Series C Preferred Stock, each such holder shall have one vote for each share of Series C Preferred Stock standing in his or her name on the transfer books of the corporation as of any record date fixed for such purpose or, if no such date has been fixed, at the close of business on the Business Day (as defined in Section 9) next preceding the day on which notice is given, or if notice is waived, at the close of business on the Business Day next preceding the day on which the meeting is held. At each meeting of stockholders at which the holders of shares of the Series C Preferred Stock shall have the right, voting separately as a single class, to take any action pursuant to this paragraph (a), the presence in person or by proxy of the holders of record of 50% of the total number of shares of the series C Preferred Stock then outstanding and entitled to vote on the matter shall be necessary and sufficient to constitute a quorum. At any such meeting or at any adjournment thereof, (i) the absence of a quorum of the holders of shares of any other class or series of capital stock of the Corporation shall not prevent the taking of any action as provided in this paragraph (a) and (ii) in the absence of a quorum of the holders of shares of the Series C Preferred Stock, the holders of a majority of such shares present in person or by proxy shall have the power to adjourn the meeting as to the actions to be taken by the holders of shares of the Series C Preferred Stock from time to time and place to place without notice other than announcement at the meeting until a quorum shall be present.
(b) So long as white River Ventures, Inc. ("White River") or any of its Affiliates (as defined in Section 9) beneficially owns at least fifty percent of the issued and outstanding shares of Series C Preferred Stock, if the Corporation shall fail (i) to discharge its obligation to redeem shares of the Series C Preferred Stock pursuant to Section 7 (a "Redemption Default") or (ii) to declare and pay in full the dividends on the Series C Preferred Stock with respect to a Dividend Period pursuant to Section 2 and such dividends have not been declared and paid within 90 days after the end of such Dividend Period (such failure to declare and pay being hereinafter referred to as a "Dividend Default"), the number of directors constituting the Board of Directors shall, without further action, be increased by a number of directors sufficient to permit the directors elected to fill such newly created directorships to constitute a majority of the directors of the Corporation and shall thereafter be increased by a number of directors sufficient to permit the directors elected to fill all such newly created directorships to continue to constitute a majority of the directors of the corporation, and the holders of the Series C Preferred Stock shall have, in addition to the other voting rights set forth herein, the exclusive right, voting separately as a single class, to elect the directors of the Corporation to fill such newly created directorships, the remaining
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -5-
directors to be elected by the other classes and series of stock entitled to vote therefor, at each meeting of stockholders held for the purpose of electing directors. In the case of a Redemption Default, such additional directors shall continue as directors and such additional voting rights shall continue until such time as White River and its Affiliates shall cease to own at least fifty percent of the issued and outstanding shares of the Series C Preferred Stock, at which tame such additional directors shall cease to be directors and such additional voting rights of the holders of the Series C Preferred Stock shall terminate. In the case of a Dividend Default, such additional directors shall continue as directors and such additional voting rights shall continue until such time as a Dividend Default no longer exists, at which time such additional directors shall cease to be directors and such additional voting rights of the Series C Preferred Stock shall terminate subject to revesting in the event of each and every subsequent Dividend Default. In the event that for any reason the number of directors constituting the Board of Directors cannot be increased sufficiently to permit the implementation of this Subsection (b), the Corporation shall take all actions necessary to implement the intent of this Subsection (b), including, without limitation, causing a number of directors to resign from the Board of Directors sufficient to permit directors elected pursuant to this Subsection (b) to fill the resulting vacancies and constitute a majority of the Board of Directors.
(c) The foregoing rights of holders of shares of the Series C Preferred Stock to take any actions as provided in this section 4 may be exercised at any annual meeting of stockholders or at a special meeting of stockholders held for such purpose or at any adjournment thereof, or by the written consents delivered to the Secretary of the Corporation, of the holders of the minimum number of shares required to take such action.
Section 5. REACQUIRED SHARES. Any shares of Series C Preferred Stock redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock, par value $1.00 per share, of the Corporation and may be reissued as part of another series of preferred stock, par value $1.00 per share, of the Corporation subject to the conditions or restrictions on authorizing or creating any class or series, or any shares of any class or series as set forth herein.
Section 6. LIQUIDATION, DISSOLUTION OR WINDING-UP. (a) In the event of any liquidation, dissolution or winding up of the corporation, whether voluntary or involuntary, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of shares of any series or class or classes of Junior Stock, the holders of the shares of the Series C Preferred Stock shall be
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -6-
entitled to receive the Stated Value per share plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment, if, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of the Series C Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payment on any Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of series C Preferred Stock and any Parity Stock ratably in accordance with the respective amounts which would be payable on such shares of Series C Preferred Stock and any Parity stock if all amounts payable thereon were paid in full. For the purposes of this section 6, a consolidation or merger of the Corporation with one or more corporations shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary.
(b) Subject to the rights of the holders of shares of any series or class or classes of Parity Stock or Senior Stock, upon any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of the Series C Preferred Stock as provided in this Section 6, but not prior thereto, any series or class or classes of Junior Stock shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series C Preferred Stock shall not he entitled to share therein.
Section 7. REDEMPTION.
(a) MANDATORY FIVE YEAR REDEMPTION. Unless redeemed pursuant to Sections 7(b), 7(c) and 7(d) prior to June 26, 1999, the Corporation shall, on such date and to the extent the Corporation has funds legally available therefor, redeem all shares of Series C Preferred Stock then outstanding at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest.
(b) MANDATORY REDEMPTION EVENTS. (i) Concurrent with the consummation of an IPO having net proceeds to the Corporation less than or equal to $40,000,000, the corporation shall, to the extent the Corporation has funds legally available therefor, redeem the LESSER of (A) the number of shares of Series C Preferred Stock then outstanding and (B) that number of shares of Series C Preferred Stock having an aggregate Stated Value and accrued and unpaid dividends equal to $2,564,103 at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% on the portion to be so redeemed for the period from the date of the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document consummation of such
-7-
IPO to (and including) such redemption date; PROVIDED, HOWEVER, that to the extent the Corporation after giving effect to any required payments under the Loan Agreement (as defined in Section 9) from the net proceeds of the IPO would not have sufficient funds available to so redeem shares of Series C Preferred Stock-in accordance with this subsection (b)(i) and any Parity Stock entitled to redemption in accordance with the terms of such Parity stock, the corporation shall redeem concurrent with the consummation of the IPO that number of shares of Series C Preferred Stock and Parity Stock entitled to redemption having an aggregate Stated Value equal to the balance of the net proceeds of the IPO remaining after any such payments under the Loan Agreement and shall redeem the remaining shares of Series C Preferred Stock to be redeemed pursuant to this Section (b)(i) and any Parity Stock entitled to redemption within 120 calendar days after the consummation of the IPO; PROVIDED, FURTHER, that to the extent that all shares of Series C Preferred Stock to be redeemed pursuant to this Subsection (b)(i) have not been redeemed within such 120 calendar day period, the Corporation shall, to the extent the Corporation has funds legally available therefor, redeem all shares of Series C Preferred Stock then outstanding at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% for the period from the date of the consummation of the IPO to (and including) such redemption date.
(ii) Concurrent with the consummation of an IPO having net proceeds to the Corporation in excess of $40,000,000, the Corporation shall, to the extent the Corporation has funds legally available therefor, redeem the LESSER of (1) the number of shares of Series C Preferred Stock then outstanding and (2) the number of shares of Series C Preferred Stock having an aggregate Stated Value and accrued and unpaid dividends at least equal to 6.424 of the net proceeds to the Corporation from the IPO at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% for the period from the date of the consummation of such IPO to (and including) such redemption date; PROVIDED, HOWEVER, that to the extent the Corporation after giving effect to any required payments under the Loan Agreement would not have sufficient funds available to so redeem shares of Series C Preferred Stock in accordance with this Subsection (b)(ii) and any Parity Stock entitled to redemption in accordance with the terms of such Parity Stock, the Corporation shall redeem concurrent with the consummation of the IPO that number of shares of Series C Preferred Stock and Parity Stock entitled to redemption having an aggregate Stated Value equal to the balance of the net proceeds of the IPO remaining after any such payments under the Loan Agreement and shall redeem the remaining shares of Series C Preferred Stock to be redeemed pursuant to this Subsection (b)(ii) and any Parity Stock
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -8-
entitled to redemption within 90 calendar days after the consummation of the IPO; PROVIDED, FURTHER, that to the extent that shares of the Series C Preferred Stock to be redeemed pursuant to this Subsection (b)(ii) having an aggregate Stated Value and accrued and unpaid dividends of at least $2,564,103 have not been redeemed within such 90 calendar day period, the Corporation shall, to the extent the Corporation has funds legally available therefor redeem all shares of Series C Preferred Stock then outstanding at a redemption price per share equal to the Stated Value; together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% for the period from the date of the consummation of the IPO to (and including) such redemption date and; PROVIDED, FURTHER, to the extent that the Corporation has redeemed shares of the Series C Preferred Stock to be redeemed pursuant to this subsection (b)ii) having an aggregate Stated Value and accrued and unpaid dividends of at least $2,564,103, but less than the full amount of shares of Series C Preferred Stock required by this Subsection (b)(ii), the Corporation shall on June 15, 1998, to the extent the Corporation has funds legally available therefor, redeem all shares of Series C Preferred Stock then outstanding at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest.
(iii) In the event that the Corporation fails to use at least 6.41% of the net proceeds received by the Corporation from any Subsequent Offering (as defined in Section 9) to redeem any outstanding shares of series C Preferred Stock on the date of the consummation of such Subsequent Offering, the Series C Preferred Stock shall be subject to redemption, in whole or in part, in cash, at the option of the holder thereof from time to time and at any time as determined by the holders of a majority of the outstanding shares of the Series C Preferred Stock (with written notice thereof being delivered to the corporation) at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) the redemption date, without interest. On the redemption date, the Corporation shall redeem all shares of Series C Preferred Stock tendered for redemption pursuant to this Subsection (b)(iii).
(c) REDEMPTION IN THE EVENT OF ACCELERATION OF INDEBTEDNESS. In the event that the Corporation or any Subsidiary shall fail to perform or observe any term, covenant or condition related to any Indebtedness (as defined in section 9) of the Corporation or any Subsidiary (other than any Indebtedness of Phone Base Systems, Inc. ("Phone Base") which is non-recourse to the Corporation or any subsidiary, other than Phone Base) and the effect of such failure to perform or observe is (i) a failure by the Corporation or any Subsidiary to pay any principal or interest on any indebtedness when due or during any applicable grace period therefor or (ii) receipt of notice by the Corporation or any
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -9-
Subsidiary of the acceleration of the maturity or required prepayment (other than by a regularly scheduled required prepayment) prior to the stated maturity of any Indebtedness and demand for payment with respect thereto, in either case with respect to Indebtedness in an aggregate amount in excess of $500,000 (the "Accelerated Redemption Event"), (A) the Series C Preferred Stock shall be subject to redemption, in whole or in part, in cash at the option of the holder thereof from time to time and at any time as determined by the holders of a majority of the outstanding shares of the Series C Preferred Stock (with written notice thereof being delivered to the Corporation) after the Accelerated Redemption Event at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) the redemption date, without interest and (B) notwithstanding Section 4(b), the holders of a majority of the outstanding series c Preferred Stock shall have the sole discretion to determine on behalf of the Corporation any and all actions to be taken by the Corporation or any Subsidiary with respect to any Indebtedness related to the Accelerated Redemption Event so long as any such actions permit all holders of the Common Stock to participate on a proportionate basis in any actions to be effected by the holders of the Common Stock. On the redemption date, the Corporation shall redeem all shares of Series C Preferred Stock tendered for redemption pursuant to this Subsection (c).
(d) REDEMPTION IN THE EVENT OF CERTAIN BUSINESS COMBINATIONS. For so long as White River or any of its Affiliates shall own any shares of Series C Preferred Stock (A) neither the Corporation nor any of its Material Subsidiaries (as defined in section 9) shall engage in any merger, reorganization or consolidation (other than transactions involving the merger, reorganization or consolidation of a subsidiary of the Corporation with or into the Corporation or with or into a wholly owned Subsidiary of the Corporation) and (B) the Corporation shall not sell or otherwise transfer, in a single transaction or series of transactions, all or substantially all or a material part of the assets or shares of the Common Stock of the Corporation to or with any Person (as defined in section 9) other than in connection with the sale of the Paneuil Group or to or with the Corporation or a wholly owned subsidiary of the Corporation unless on or prior to the consummation of the transactions described in clauses (A) and (B) all shares of the Series C Preferred Stock shall have been redeemed at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest.
(e) RIGHTS OF SERIES C PREFERRED STOCK FOLLOWING REDEMPTION. On and after any date fixed for redemption, PROVIDED THAT the redemption price (including any accrued and unpaid dividends to (and including) the date fixed for redemption) has been duly paid or segregated and held in trust by a duly authorized independent paying agent for the benefit of the Persons entitled
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -10-
thereto, dividends shall cease to accrue on the Series C Preferred Stock called for redemption, such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as stockholders of the Corporation shall cease and the right to receive the moneys payable upon such redemption, without interest thereon, upon surrender of the certificates evidencing such shares.
(f) NOTICE OF REDEMPTION. Notice of any redemption be given to the holders of shares of Series C Preferred Stock not less than 30 nor more than 60 days prior to the date fixed for redemption. Notice of redemption shall be given by first class mail to such holders, respective addresses as shown on the stock books of the corporation and will specify (h) the date fixed for redemption, (B) the applicable redemption price and (C) in the case of a partial redemption, the number of shares of Series C Preferred Stock to be redeemed and the aggregate number of shares of Series C Preferred Stock which will be outstanding after such redemption. If less than all shares of Series C Preferred Stock then outstanding are to be redeemed, the shares of Series c Preferred stock will be redeemed pro rata from among the holders of shares of Series C Preferred Stock then outstanding.
(g) FINAL REDEMPTION OBLIGATION. If the Corporation shall fail any time to discharge its obligation to redeem shares of Series C Preferred Stock pursuant to this Section 7 (the "Final Redemption Obligation"), such Final Redemption obligation shall be discharged as soon as the Corporation is able to discharge such Final Redemption Obligation using funds legally available therefor. Notwithstanding anything in this Section 7 to the contrary, in the event the Corporation fails to discharge its obligation to redeem shares of series c Preferred Stock as and when such shares are tendered for redemption pursuant to Section 7 for any reason whatsoever (including, without limitation, the failure of the Corporation to have funds legally available therefor), such failure shall constitute a failure by the Corporation to discharge its obligation to redeem shares of the Series C Preferred Stock for purposes of Section 4(b).
(h) REDEMPTION OF PARITY STOCK PRO-RATA. If upon the occurrence of any event requiring redemption of the shares of Series C Preferred Stock pursuant to this Section 7, the assets of the Corporation, or net proceeds thereof, shall be insufficient to redeem in full the applicable amount of Series C Preferred Stock and any Parity Stock required to be redeemed by the Corporation, then the Corporation shall redeem shares of Series C Preferred Stock and any Parity Stock ratably in accordance with the respective amounts which would be redeemable if the Series C Preferred Stock and the Parity Stock required to be redeemed by the Corporation were redeemed in full.
Section 8. CERTAIN COVENANTS. Any registered holder of the Series C Preferred Stock may proceed to protect and enforce
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -11-
its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
Section 9. DEFINITIONS. For the purposes of this Certificate of Designations of Series C Redeemable Preferred Stock, the following terns shall have the meanings indicated:
"Affiliate" means a Person that directly or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another Person.
"Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
"Capital Lease" means any lease of any property (whether real, personal or mixed) by the Corporation or any of the Subsidiaries as lessee which, in conformity with generally accepted accounting principles, is accounted for as a capital lease on the balance sheet of the Corporation or any of the Subsidiaries; PROVIDED, HOWEVER, any such lease which is nonrecourse to the Corporation or any of the Subsidiaries shall not constitute a Capital Lease.
"Common Stock Equivalents" awns all options, warrants and other rights to acquire Common Stock or securities convertible into or exchangeable for Common Stock.
"Contingent Obligation" means any contractual obligation, contingent or otherwise, of one Person with respect to any Indebtedness, obligation or liability of another, including, without limitation, direct or indirect guaranties,, endorsements (except for collection or deposit in the ordinary course of business), notes co-made or discounted, recourse agreements, keep-well agreements, agreements to purchase or repurchase such indebtedness, obligation or liability or any security therefor or to provide funds for the payment or discharge thereof, agreements to maintain solvency, assets, level of income, or other financial condition, and agreements to make payment other than for value received.
"Faneuil Group" means GIS Information Systems, Inc., an Illinois corporation, Equitel Corp., a Virginia corporation, Original Research II Corporation, a Delaware corporation, and Credit Card Service Corporation, a Delaware corporation, collectively.
-12-
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document "Indebtedness" means, with respect to the Corporation or any of the Subsidiaries, at any time, (a) all indebtedness, obligations or other liabilities of the Corporation or any of the Subsidiaries (i) for borrowed money or evidenced by debt securities, debentures, acceptances, notes or other similar instruments, (") with respect to letters of credit issued for the Corporation's or any of the Subsidiaries, account, (iii) in respect of capital Leases and (iv) which are Contingent Obligations, (b) all indebtedness, obligations or other liabilities of the corporation or any of the Subsidiaries or others secured by a Lien on any property of the Corporation or any of the Subsidiaries, whether or not such indebtedness, obligations or liabilities are assumed by the Corporation or any of the subsidiaries, all as of such time, (c) all indebtedness, obligations or other liabilities of the Corporation or any of the Subsidiaries in respect of Interest Rate Contracts and currency hedging agreements, net of liabilities owed to the Corporation or any of the Subsidiaries by the counterparties thereon, and (d) all preferred stock subject (upon the occurrence of any contingency or otherwise) to mandatory redemption, other than the Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock.
"Interest Rate Contracts" weans interest rate exchange, collar or cap or sijmi2ar agreements providing interest rate protection.
"IPO" means the initial public offering of Common Stock on a firs commitment basis pursuant to an effective registration statement under the Securities Act.
"Lien" means any mortgage, deed of trust, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial code of any jurisdiction in connection with any of the foregoing).
"Loan Agreement" means (i) the Loan Agreement, dated as of April 29, 1994, among CCC Information Services Inc. and CCC Development company, as Borrowers, the Financial Institutions Party Thereto, as Lenders and Canadian Imperial Bank of Commerce, as Agent, (ii) the Security Agreement, dated as of April 29, 1994, among CCC Information Services Inc., Canadian Imperial Bank of Commerce, as Agent and Canadian Imperial Bank of Commerce, as Collateral Agent, (iii) the Guaranty, dated as of April 29, 1994, made by the Corporation in favor of the Lenders Party to the Loan Agreement and Canadian Imperial Bank of Commerce, as Agent, (iv) the Pledge and Security Agreement, dated as of April 29, 1994, among the Corporation, Canadian Imperial sank of Commerce, as Agent and Canadian Imperial Bank of commerce, as Collateral Agent and (v)
-13-
each other agreement, document or instrument delivered in connection with the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document foregoing.
"Material Subsidiary" means any Subsidiary which produces or represents 20% or more of (i) consolidated not assets of the Corporation, (ii) consolidated gross revenues of the Corporation or (iii) consolidated net income of the Corporation.
"Person" means an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company or any other entity or organization, including a government or political subdivision or agency or instrumentality thereof.
"Public Offering" means a sale of any of the Corporation's securities pursuant to an effective registration statement under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsequent Offering" means a sale of Common Stock or any Common Stock Equivalent of the Corporation in a Public offering after an IPO.
"Subsidiary" beans (i) any Person of which 50% or more of the securities having ordinary voting power for the election of directors are at the time owned directly or indirectly by the Corporation or any Subsidiary thereof, (ii) any Person of which 50% or more of the joint venture, limited partnership or partnership interests are at the time owned directly or indirectly by the Corporation or any Subsidiary thereof or (iii) any Person which is a limited partnership in which the corporation or any Subsidiary is at the time the general partner or at the time owns 50% or more of the general partner of such Person.
-14-
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its President and attested by its Assistant Secretary as of this 16th day of June, 1994.
INFOVEST CORPORATION, a Delaware corporation
By: ______Name: David M. Phillips Title: President
ATTEST:
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ______Name: Gary L. Bjarnson Title: Assistant Secretary
-15-
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 4.5
CERTIFICATE OF DESIGNATIONS
of
SERIES D CUMULATIVE REDEEMABLE PREFERRED STOCK
of
INFOVEST CORPORATION
(Pursuant to Section 151 of the Delaware General Corporation Law)
______
InfoVest Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies that the following resolution was adopted by vote of the Board of Directors of the Corporation at a meeting held on June 15, 1994.
RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (the "Board of Directors") in accordance with the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of preferred stock, par value $1.00 per share, of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences and limitations thereof as follows:
Series D Cumulative Redeemable Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as Series D Cumulative Redeemable Preferred Stock (the "Series D Preferred Stock") and the number of shares constituting the Series D Preferred Stock shall be 34,000 shares. The stated value of each share of Series D Preferred Stock (the "Stated Value") shall be $1,000. The series D Preferred Stock shall rank prior to the common stock, par value $0.10 per share (the "Common Stock"), and any other capital stock of the Corporation which by its terms is junior to the Series D Preferred Stock with respect to dividend rights and with respect to the distribution of assets upon liquidation, dissolution or winding up, whether voluntary or involuntary, of the Corporation ("Junior Stock") and on a parity with the corporation's Series C Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document C Preferred Stock"), Series E Cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series E Preferred Stock"), and any other Capital stock subsequently issued by the corporation which by its terms is on a parity with the Series B Preferred Stock with respect to dividend rights and with respect to the distribution of assets upon the liquidation, dissolution or winding up, whether voluntary or involuntary, of the Corporation ("Parity Stock").
Section 2. DIVIDENDS. (a) GENERAL. Commencing on the First Dividend Payment Date (as defined below) to occur following the fourth anniversary of the Original Issue Date (the "Dividend Rate Adjustment Date"), the holders of shares of the Series D Preferred stock shall be entitled to receive cash dividends, when and as declared by the Board of Directors or by a duly authorized committee of said Board of Directors, out of assets legally available for such purpose, at the Dividend Rate set forth below in Section 3 applied to the Stated Value. Such dividends shall be cumulative from the date of original issue of such shares (the "Original Issue Date"), whether or not there shall have been net profits or net assets of the Corporation legally available for the payment of dividends at the time such dividends were payable, and shall be payable quarterly, when and as declared by the Board of Directors of the Corporation or by a duly authorized committee of said Board of Directors, on November 30, February 28, May 31 and August 31 of each year (each such date being hereinafter referred to as a "Dividend Payment Date"), commencing on the Dividend Rate Adjustment Date; PROVIDED, HOWEVER, in the event the Corporation shall fail to redeem shares of the Series D Preferred Stock in accordance with Section 7(b)(ii), dividends shall be payable commencing on the first Dividend Payment Date following the 90th day after the consummation of the IPO (as defined in Section 9). Each such dividend shall be payable to the holders of record of shares of the Series D Preferred Stock as they appear on the stock register of the Corporation on such record date, not more than 60 days preceding the payment date thereof, as shall be fixed by the Board of Directors or by a duly authorized committee of said Board of Directors, PROVIDED THAT such record date shall not precede the date upon which the resolution fixing the record date is adopted. Dividends on account of arrears for any past Dividend Periods (as defined in Subsection (b) of this Section 2) may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such record date, not exceeding 60 days preceding the payment date thereof, as may be fixed by the Board of Directors or a duly authorized committee of said Board of Directors.
(b) DIVIDEND PERIODS. Dividend periods (hereinafter called "Dividend Periods") shall commence on December 1, March 1, June 1 and September 1 of each year and shall end on and include the calendar day next preceding the first day of the next Dividend Period (other than the initial Dividend Period which shall commence
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -2-
on the Original Issue Date and shall and on and include the Dividend Rate Adjustment Date). The amount of dividends payable for each Dividend Period or portion thereof for the Series D Preferred Stock shall be computed by multiplying the Stated Value by a fraction, (i) the numerator of which is (A) the applicable Dividend Rate multiplied by (B) the number of calendar days elapsed during such Dividend Period or portion thereof and (ii) the denominator of which is 365. If more than one Dividend Rate applies to any Dividend Period or portion thereof, the calculation in the preceding sentence shall be applied for each period of time during which a given Dividend Rate is applicable. The dividend payable to each holder of Series D Preferred Stock shall be rounded to the nearest one cent with $.005 being rounded upward.
(c) DIVIDENDS ON PARITY STOCK. So long as any shares of the Series D Preferred Stock are outstanding, no full dividends shall be declared on any Parity Stock for any period unless full cumulative dividends have been or contemporaneously are declared on the Series D Preferred Stock for all Dividend periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not declared to be paid in full, as described above, upon the shares of the Series D Preferred Stock and any Parity Stock, all dividends declared upon shares of the Series D Preferred Stock and any Parity Stock shall be declared pro rata so that the amount of dividends declared per share on the Series D Preferred Stock and such Parity Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Series D Preferred Stock and such Parity Stock of the Corporation bear to each other.
(d) DIVIDENDS ON JUNIOR STOCK. So long as any shares of the Series D Preferred Stock are outstanding, no dividend (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of Junior Stock) shall be declared or paid or set aside for payment or other distribution declared or made upon any Junior stock, or upon any Parity Stock (other than the Series D Preferred Stock and the Series E Preferred Stock) except as provided in Subsection (c) of this Section 2, nor shall any Junior Stock or Parity Stock (other than the Series C Preferred Stock and the Series E Preferred Stock) be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for Junior Stock).
(e) NO ADDITIONAL DIVIDENDS. Holders of shares of the Series D Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Series D Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect to any dividend payment or payments on the Series D Preferred Stock.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -3-
Section 3. DIVIDEND RATE. The Dividend Rate on the shares of Series D Preferred Stock shall be 2.75% per annum for the period from the Original Issue Date to and including the EARLIER of the (i) date of the consummation of the IPO or (ii) the Dividend Rate Adjustment Date and shall be 8.0% per annum for each Dividend Period or portion thereof thereafter occurring, subject to adjustment as follows:
(a) If the Corporation completes an IPO prior to the Dividend Rate Adjustment Date and redeems the Series D Preferred stock, in accordance with the terms set forth in Section 7(b)(i) or (b)(ii), then the Dividend Rate shall be 0% per annum from the date of closing of the IPO to the Dividend Rate Adjustment Date.
(b) If, prior to the date for mandatory redemption of all outstanding shares of Series D Preferred Stock established pursuant to Section 7(a), 7(b)(i) or (b)(ii), the Corporation offers in good faith to repurchase on a pro rata basis all or a portion of the outstanding shares of each of the Series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock at a repurchase price per share equal to at least the Stated Value, together with accrued and unpaid dividends thereon to (and including) the date fixed for such repurchase, the Dividend Rate applicable to the shares of Series D Preferred Stock which the corporation offered to repurchase and which the holders thereof refused such offer to repurchase shall, after the date fixed for such repurchase of the series D Preferred Stock, be the LESSER of 1% and any Dividend Rate calculated pursuant to Subsection (a) of this Section 3.
Section 4. VOTING RIGHTS.
(a) The holders of the Series D Preferred Stock shall not have any voting rights, except as required by the Delaware General Corporation Law; PROVIDED, HOWEVER, that the affirmative vote of the holders of at least 66-2/3% of the outstanding shares of the Series D Preferred Stock, voting separately as a class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, shall be necessary to (i) authorize, create, increase the authorized or issued number of shares of, or issue (including on conversion or exchange of any convertible or exchangeable securities or by reclassification) any shares of any class or classes or series of Parity Stock or the corporation's capital stock having rights senior to or on a parity with the Series D Preferred Stock with respect to dividend rights and with respect to the distribution of assets upon the liquidation, dissolution or winding up, whether voluntary or involuntary, of the Corporation ("Senior Stock") or (ii) amend, alter or repeal (whether by merger, consolidation or otherwise) any of the provisions of the Certificate Of incorporation of the Corporation or the certificate of Designations of the Series D Preferred Stock which would materially and adversely affect any right, preference,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -4-
privilege or voting power of the Series D Preferred stock or the holders thereof; PROVIDED, HOWEVER, that the creation and issuance of any Junior Stock, shall not be deemed to materially and adversely affect such rights, preferences or voting powers. For the taking of any action as provided in this paragraph (a) by the holders of shares of the series D Preferred Stock, each such holder shall have one vote for each share of Series D Preferred Stock standing in his or her name on the transfer books of the Corporation as of any record date fixed for such purpose or, if no such date has been fixed, at the close of business on the Business Day (as defined in Section 9) next preceding the day on which notice is given, or it notice is waived, at the close of business on the Business Day next preceding the day on which the meeting is held. At each meeting of stockholders at which the holders of shares of the Series D Preferred Stock shall have the right, voting separately as a single class, to take any action pursuant to this paragraph (b), the presence in person or by proxy of the holders of record of 50% of the total number of shares of the Series D Preferred Stock then outstanding and entitled to vote on the matter shall be necessary and sufficient to constitute a quorum. At any such meeting or at any adjournment thereof, (i) the absence of a quorum of the holders of sharers of any other class or series of capital stock of the Corporation shall not prevent the taking of any action an provided in this paragraph (b) and (ii) in the absence of a quorum of the holders of shares of the Series D Preferred Stock, the holders of a majority of such shares present in person or by proxy shall have the power to adjourn the meeting as to the actions to be taken by the holders of shares of the Series D Preferred Stock from time to time and place to place without notice other than announcement at the meeting until a quorum shall be present.
(b) The foregoing rights of holders of shares of the Series D Preferred Stock to take any actions as provided in this Section 4 may be exercised at any annual meeting of stockholders or at a special meeting of stockholders held for such purpose or at any adjournment thereof, or by the written consent, delivered to the Secretary of the Corporation, of the holders of the minimum number of shares required to take such action.
Section 5. REACQUIRED SHARES. Any shares of Series D Preferred Stock redeemed, purchased or otherwise acquired by the Corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stocks par value $1.00 per share, of the Corporation and may be reissued as part of another series of preferred stock, par value $1.00 per share, of the Corporation subject to the conditions or restrictions on authorizing or creating any class or series, or any shares of any class or series as set forth herein.
-5-
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Section 6. LIQUIDATION, DISSOLUTION OR WINDING UP.
(a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary, and subject to the rights of the holders of shares of any series or class or classes of Senior stocks before any payment or distribution Of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of shares of any series or class or classes of Junior Stock, the holders of the shares of the Series D Preferred Stock shall be entitled to receive the Stated Value per share plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the corporation, or proceeds thereof, distributable among the holders of the shares of the Series D Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payment on any Parity Stock, then such assets; or the proceeds thereof, shall be distributed among the holders of shares of Series D Preferred Stock and any Parity Stock ratably in accordance with the respective amounts which would be payable on such shares of Series D Preferred Stock and any Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 6, a consolidation or merger of the corporation with one or more corporations shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary.
(b) Subject to the rights of the holders of shares of any series or class or classes of Parity Stock or Senior Stock, up. on any liquidation, dissolution or winding up of the Corporation, after payment shall have been made in full to the holders of the Series D Preferred Stock as provided in this Section 6, but not prior thereto any other series or class or classes of Junior Stock shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets remaining to be paid or distributed, and the holders of the Series D Preferred Stock shall not be entitled to share therein.
Section 7. REDEMPTION.
(a) MANDATORY FIVE YEAR REDEMPTION. Unless redeemed pursuant to Sections 7(b) and 7(c), prior to June 16, 1999, the corporation shall, on such date and to and to the extent the Corporation has funds legally available therefor, redeem all shares of Series D Preferred Stock then outstanding at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest.
-6-
(b) MANDATORY REDEMPTION EVENTS. (i) Concurrent with the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document consummation of an IPO having net proceeds to the Corporation less than or equal to $40,000,000, the Corporation shall, to the extent the Corporation has funds legally available therefor, redeem the LESSER of (A) the number of shares of Series D Preferred Stock then outstanding and (B) that number of shares of Series D Preferred Stock having an aggregate Stated Value and accrued and unpaid dividends equal to (1) $17,435,897 or (2) in the event that any shares of the Series E Preferred Stock are issued and outstanding on the date of the closing of the IPO, $17,179,487, at a redemption price per share equal to the Stated Value, together with accrued and un aid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% on the portion to be so redeemed for the period from the date of the consummation of such IPO to (and including) such redemption date; PROVIDED, HOWEVER, that to the extent that the Corporation after giving effect to any required payments under the Loan Agreement (as defined in Section 9) from the net proceeds of the IPO would not have sufficient funds available to so redeem shares of Series D Preferred Stock in accordance with this Subsection (b)(i) and any Parity Stock entitled to redemption in accordance with the terms of such Parity Stock, the Corporation shall red"n concurrent with the closing of the IPO that number of shares of Series D Preferred Stock and any Parity Stock entitled to redemption having an aggregate Stated Value equal to the balance of the net proceeds of the IPO remaining after any such payments under the Loan Agreement and shall redeem the remaining shares of Series D Preferred Stock to be redeemed pursuant to this Subsection (b)(i) within 120 calendar days after the consummation of the IPO; PROVIDED, FURTHER, that to the extent that all shares of Series D Preferred Stock to be redeemed pursuant to this Subsection (b)(i) have not been redeemed within such 120 calendar day period, the corporation shall; to the extent the Corporation has funds legally available therefor, redeem all shares of Series D Preferred Stock then outstanding at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% for the period from the date of the closing of the IPO to (and including) such redemption date.
(ii) Concurrent with the closing of an IPO having net proceeds to the Corporation in excess of $40,000,000, the Corporation shall, to the extent the Corporation has funds legally available therefor, redeem the LESSER of (1) the number of shares of Series D Preferred Stock then outstanding and (2) the number of shares of Series D Preferred Stock having an aggregate Stated Value and accrued and unpaid dividends at least equal to (I) 43.59% of the net proceeds to the Corporation from the IPO or (II) in the event that any shares of the Series 9 Preferred Stock are issued and outstanding on the date of the consummation of the IPO, 42.95% of the proceeds to the Corporation from the IPO, at a redemption price per share equal to the Stated Value, together with accrued
-7-
and unpaid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% for the period from the date of the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document closing of such IPO to (and including) such redemption date; PROVIDED, HOWEVER, that to the extent that the Corporation after giving effect to any required payments under the Loan Agreement would not have sufficient funds available to so redeem shares of Series D Preferred Stock in accordance with this Subsection (b)(ii) and any Parity Stock entitled to redemption in accordance with the terms of such Parity Stock, the Corporation shall redeem concurrent with the consummation of the IPO that number of shares of Series D Preferred Stock and any Parity stock entitled to redemption having an aggregate Stated Value equal to the balance of the net proceeds of the IPO remaining after any such payments under the Loan Agreement and shall redeem the remaining shares of Series D Preferred Stock to be redeemed pursuant to this Subsection (b)(ii) and any Parity Stock entitled to redemption within 90 calendar days after the consummation of the IPO; PROVIDED, FURTHER, that to the extent the shares of the Series i) Preferred Stock to be redeemed pursuant to this Subsection (b)(ii) having an aggregate Stated Value and accrued and unpaid dividends of at least (1) $17,435,897 or (2) in the event that any shares of the Series B Preferred Stock are issued and outstanding on the date of the closing of the IPO, $17,179,487, have not been redeemed within such 90 calendar day period, the Corporation shall, to the extent the Corporation has funds legally available therefore redeem all shares of Series D Preferred Stock then outstanding at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and Including) such redemption date, without interest, employing a Dividend Rate of 8.0% for the period from the date of the consummation of the IPO to (and including) such redemption date and; PROVIDER, FURTHER, to the extent that the Corporation has redeemed shares of the Series D Preferred Stock to be redeemed pursuant to this Subsection (b)(ii) having an aggregate Stated Value and accrued and unpaid dividends of at least (1) $17,435,897 or (2) in the event that any shares of the Series E Preferred Stock are issued and outstanding on the date of the closing of the IPO, $l7,l79,487, but less than the full amount of shares of Series D Preferred Stock required by this Subsection (b)(ii), the Corporation shall on June 15, 1998, to the extent the Corporation has funds legally available therefor, redeem all shares of Series D Preferred Stock then outstanding at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest.
(iii) In the event that the Corporation fails to use at least (1) 43.59% of the net proceeds received by the Corporation from any Subsequent Offering (as defined in Section 9) or (2) in the event that any shares of the series B Preferred Stock are issued and outstanding on the date of the closing of such Subsequent Offering, 42.95% of such proceeds, to redeem any outstanding shares of Series D Preferred Stock on date of the
-8-
consummation of such Subsequent Offering, the Series D Preferred Stock shall be subject to redemption, in whole or in part, in cash, as determined by the holders of a majority of the outstanding shares of the Series C Preferred Stock
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document at a redemption price per share equal to the Stated Value, to ether with accrued and unpaid dividends thereon to (and including) the redemption date, without interest. On the redemption date, the corporation shall redeem all shares of Series D Preferred Stock tendered for redemption pursuant to this Subsection (b)(iii).
(c) REDEMPTION IN THE EVENT OF ACCELERATION OF INDEBTEDNESS. In the event that the Corporation or any Subsidiary shall fail to perform or observe any tern, covenant or condition related to any indebtedness (as defined in Section 9) of the Corporation or any Subsidiary (other than any Indebtedness of Phone Base Systems, Inc. ("Phone Base") which is non-recourse to the Corporation or any Subsidiary, other than Phone Base) and the effect of such failure to perform or observe is (i) a failure by the Corporation or any Subsidiary to pay any principal or interest on any Indebtedness when due or during any applicable grace therefor or (ii) receipt of notice by the Corporation or any Subsidiary of the acceleration of the maturity or required prepayment (other than by a regularly scheduled required prepayment) prior to the stated maturity of any Indebtedness and demand payment with respect thereto, in either case with respect to Indebtedness in an aggregate amount in excess of $50b,ooo (the "Accelerated Redemption Date"), the series D Preferred Stock shall be subject to redemption, in whole or in part, in cash, as determined by the holders of a majority of the outstanding shares of the Series C Preferred Stock after the Accelerated Redemption Date at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) the redemption date, without interest. on the redemption date, the Corporation shall redeem all shares of Series D Preferred Stock tendered for redemption pursuant to this Subsection (c).
(d) REDEMPTION IN THE EVENT OF CERTAIN BUSINESS COMBINATIONS. For so long as White River or any of its Affiliates shall own any shares of Series D Preferred Stock (A) neither the corporation nor any of its Material Subsidiaries (as defined in Section 9) shall engage in any merger, reorganization or consolidation (other than transactions involving the merger, reorganization or consolidation of a Subsidiary of the corporation with or into the corporation or with or into a wholly owned Subsidiary of the Corporation) and (B) the Corporation shall not sell or otherwise transfer, in a single transaction or series of transactions, all or substantially all or a material part of the assets or shares of the Common Stock of the corporation to or with any Person (as defined in Section 9) other than in connection with the sale of the Faneuil Group or to or with the Corporation or a wholly owned Subsidiary of the Corporation unless on or prior to the consummation of the transactions described in clauses (A) and
-9-
(B) all shares of the Series D Preferred Stock shall have been redeemed at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document interest.
(e) RIGHTS OF SERIES D PREFERRED STOCK FOLLOWING REDEMPTION. On and after any date fixed for redemption, PROVIDED THAT the redemption price (including any accrued and unpaid dividends to (and including) the date fixed for redemption) has been duly paid or segregated and hold in trust by a duly authorized independent paying agent for the benefit of the Persons entitled thereto, dividends shall cease to accrue on the Series D Preferred Stock called for redemption, such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as stockholders of the corporation shall cease and the right to receive the moneys payable upon such redemption, without interest thereon, upon surrender of the certificates evidencing such shares.
(f) NOTICE OF REDEMPTION. Notice of any redemption pursuant to Section 7(a) shall be given to the holders of shares of Series D Preferred Stock not less than 30 nor more than 60 days prior to the date fixed for redemption. Notice of redemption shall be given by first class mail to such holders, respective addresses as shown on the stock books of the corporation and will specify (A) the date fixed for redemption, (B) the applicable redemption price and (C) in the case of a partial redemption, the number of shares of Series D Preferred Stock to be redeemed and the aggregate number of shares of Series D Preferred Stock which will be outstanding after such redemption. If less than all shares of Series D Preferred Stock then outstanding are to be redeemed, the shares of Series D Preferred Stock will be redeemed pro rata from among the holders of shares of Series D Preferred Stock then outstanding.
(g) FINAL REDEMPTION OBLIGATION. If the Corporation shall fail at any time to discharge its obligation to redeem shares of Series D Preferred Stock pursuant to this Section 7 (the "Final Redemption Obligation"), such Final Redemption obligation shall be discharged as soon as the Corporation is able to discharge such Final Redemption Obligation using funds legally available therefore.
(h) REDEMPTION OF PARITY STOCK PRO-RATA. If upon the occurrence of any event requiring redemption of the shares of Series D Preferred Stock pursuant to this Section 7, the assets of the Corporation, or proceeds thereof, shall be insufficient to redeem in full the applicable amount of Series D Preferred Stock and any Parity Stock required to be redeemed by the Corporation, then the Corporation shall redeem shares of Series D Preferred Stock and any Parity Stock ratably in accordance with the respective amounts which would be redeemable if the Series D Preferred Stock and the Parity Stock required to be redeemed by the Corporation were redeemed in full.
-10-
Section 8. CERTAIN COVENANTS. Any registered holder of the Series D Preferred Stock way proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document protect and enforce any add-h rights, whether for the specific enforcement of any provision or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
Section 9. DEFINITIONS. For the purposes of this Certificate of Designations of Series D Redeemable Preferred Stock, the following terms shall have the meanings indicated:
"Affiliate" means a Person that directly, or indirectly through one or more intermediaries, controls, or is, controlled by, or is under common control with, another Person.
"Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
"Capital Lease" means any lease of any property (whether real, personal or mixed) by the corporation or any of the subsidiaries as lessee which, in conformity with generally accepted accounting principles, is accounted for as a capital lease on the balance sheet of the Corporation or any of the Subsidiaries; PROVIDED, HOWEVER, any such lease which is nonrecourse to the Corporation or any of the Subsidiaries shall not constitute a Capital Lease.
"Common Stock Equivalents" means all options, warrants and other rights to acquire Common Stock or securities convertible into or exchangeable for Common Stock.
"Contingent Obligation" means any contractual obligation, contingent or otherwise, of one Person with respect to any Indebtedness, obligation or liability of another, including, without limitation, direct or indirect guaranties, endorsements (except for collection or deposit in the ordinary course of business), notes co-made or discounted, recourse agreements, keep-well agreements, agreements to purchase or repurchase such Indebtedness, obligation or liability or any security therefor or to provide funds for the payment or discharge thereof, agreements to maintain solvency, assets, level of income, or other financial condition, and agreements to make payment other than for value received.
Faneuil Group" means GIS Information Systems, Inc., an Illinois corporation, Equitel Corp., a Virginia corporation, Original Research II Corporation, a Delaware corporation, and Credit Card Service Corporation, a Delaware corporation, collectively.
-11-
"Indebtedness" means, with respect to the Corporation or any of the Subsidiaries, at any time, (a) all indebtedness, obligations or other liabilities of the Corporation or any of the Subsidiaries (i) for borrowed money
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document or evidenced by debt securities, debentures, acceptances, notes or other similar instruments, (ii) with respect to letters of credit issued for the Corporation's or any of the subsidiaries, account, (iii) in respect of Capital Leases and (iv) which are Contingent obligations, (b) all indebtedness, obligations or other liabilities of the Corporation or any of the Subsidiaries or others secured by a Lien on any property of the Corporation or any of the Subsidiaries whether or not such indebtedness, obligations or liabilities are assumed by the Corporation or any of the subsidiaries, all as of such time, (a) all indebtedness, obligations or other liabilities of the Corporation or any of the subsidiaries in respect of Interest Rate Contracts and currency hedging agreements, net of liabilities owed to the Corporation or any of the Subsidiaries by the counterparties thereon, and (d) all preferred stock subject (upon the occurrence of any contingency or otherwise) to mandatory redemption, other than Series C Preferred stock, Series D Preferred Stock and Series B Preferred Stock.
"Interest Rate Contracts" means interest rate exchange, collar or cap or similar agreements providing interest rate protection.
"IPO" means the initial public offering of Common Stock on a firm commitment basis pursuant to an effective registration statement under the Securities Act.
"Lien" means any mortgage, deed of trust, pledge, security interest, encumbrance, lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform commercial Code of any jurisdiction in connection with any of the foregoing).
"Loan Agreement" means (i) the Loan Agreement, dated as of April 29, 1994, among CCC information Services Inc. and CCC Development Company, as Borrowers, the Financial Institutions Party Thereto, as Lenders and Canadian Imperial Bank of Commerce, as Agent; (ii) the Security Agreement, dated as of April 29, 1994, among CCC Information Services Inc., Canadian imperial Bank of Commerce, as Agent and Canadian imperial Bank of Commerce, as Collateral Agent, (iii) the Guaranty, dated as of April 29, 1994, made by the Corporation in favor of the Lenders Party to the Loan Agreement and Canadian Imperial Bank of Commerce, as Agent, (iv) the Pledge and Security Agreement, dated as of April 29, 19941 among the Corporation, Canadian Imperial sank of Commerce, as Agent and Canadian Imperial Bank of Commerce, as Collateral Agent and (v)
-12-
each other agreement, document or instrument delivered in connection with the foregoing.
"Material Subsidiary" means any Subsidiary which produces or represents 20%, or more of (i) consolidated net assets of the Corporation, (ii)
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document consolidated gross revenues of the Corporation or (iii) consolidated net income of the Corporation.
"Person" meant an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company or any other entity or organization, including a government or political subdivision or agency or instrumentality thereof.
"Public Offering" means a sale of any of the corporation's securities pursuant to an effective registration statement under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsequent Offering" means a sale of Common Stock or any Common Stock Equivalent of the Corporation in a Public offering after an IPO.
"Subsidiary" means (i) any Person of which 50% or more of the securities having ordinary voting power for the election of directors are at the time owned directly or indirectly by the Corporation or any Subsidiary thereof, (ii) any person of which 50% or more of the joint venture, limited partnership or partnership interests are at the time owned directly or indirectly by the Corporation or any Subsidiary thereof or (iii) any Person which is a limited partnership in which the Corporation or any Subsidiary is at the time the general partner or at the time owns 50% or more of the general partner of such Person.
-13-
IN WITNESS WHEREOF, this Certificate Of Designations is executed on behalf of the corporation by its President and attested by its Assistant Secretary as of this 16th day of June, 1994.
INFOVEST CORPORATION, a Delaware Corporation
By:______Name: David M. Phillips Title: President
ATTEST:
______Name: Gary L. Bjarson Title: Assistant Secretary
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -14-
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 4.6
CERTIFICATE OF DESIGNATIONS
of
SERIES E CUMULATIVE REDEEMABLE PREFERRED STOCK
of
INFOVEST CORPORATION
(Pursuant to Section 151 of the Delaware General Corporation Law)
______
InfoVest Corporation, a corporation organized and existing under the General Corporation Law of the State of Delaware (the "Corporation"), hereby certifies that the following resolution was adopted by vote of the Board of Directors of the Corporation at a meeting held on June 15, 1994.
RESOLVED, that pursuant to the authority granted to and vested in the Board of Directors of this Corporation (the "Board of Directors") in accordance with the provisions of the Certificate of Incorporation, the Board of Directors hereby creates a series of preferred stock, par value $1.00 per share, of the Corporation and hereby states the designation and number of shares, and fixes the relative rights, preferences and limitations thereof as follows:
Series E Cumulative Redeemable Preferred Stock:
Section 1. DESIGNATION AND AMOUNT. The shares of such series shall be designated as Series E Cumulative Redeemable Preferred Stock (the "Series E Preferred Stock") and the number of shares constituting the Series E Preferred Stock shall be 500 shares. The stated value of each share of Series E Preferred Stock (the "Stated Value") shall be $1,000. The Series E Preferred Stock shall rank prior to the common stock, par value $0.10 per share (the "Common Stock"), and any other capital stock of the Corporation which by its terms is junior to the Series E Preferred Stock with respect to dividend rights and with respect to the distribution of assets upon liquidation, dissolution or winding up, whether voluntary or involuntary, of the Corporation ("Junior Stock") and on a parity with the Corporation's Series C Cumulative Redeemable Preferred Stock (the "Series C Preferred Stock"), Series D Cumulative Redeemable Preferred Stock (the "Series D Preferred Stock") and any other capital stock subsequently issued by the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Corporation which by its terms is on a parity with the Series E Preferred Stock with respect to dividend rights and with respect to the distribution of assets upon the liquidation, dissolution or winding up, whether voluntary or involuntary, of the Corporation ("Parity Stock").
Section 2. DIVIDENDS. (a) GENERAL. Commencing on the first Dividend Payment Date (as defined below) to occur following the fourth anniversary of the Original Issue Date (the "Dividend Rate Adjustment Date"), the holders of shares of the Series E Preferred Stock shall be entitled to receive cash dividends, when and as declared by the Board of Directors or by a duly authorized committee of said Board of Directors, out of assets legally available for such purpose, at the Dividend Rate set forth below in Section 3 applied to the Stated Value. Such dividends shall be cumulative from the date of original issue of such shares (the "Original Issue Date"), whether or not there shall have been not profits or net assets of the Corporation legally available for the payment of dividends at the time such dividends were payable, and shall be payable quarterly, when and as declared by the Board of Directors of the Corporation or by a duly authorized committee of said Board of Directors, on November 30, February 29, May 31 and August 31 of each year (each such date being hereinafter referred to as a "Dividend Payment Date"), commencing on the Dividend Rate Adjustment Date; PROVIDED, HOWEVER, in the event the Corporation shall fail to redeem shares of the Series E Preferred Stock in accordance with Section 7(b)(ii), dividends shall be payable commencing on the first Dividend Payment Date following the 90th day after the consummation of the IPO (as defined in Section 9). Each such dividend shall be payable to the holders of record of shares of the Series E Preferred Stock as they appear on the stock register of the Corporation on such record date, not more than 60 days preceding the payment date thereof, as shall be fixed by the Board of Directors or by a duly authorized committee of said Board of Directors, PROVIDED THAT such record date shall not precede the date upon which the resolution fixing the record date is adopted. Dividends on account of arrears for any past Dividend Periods (as defined in Subsection (b) of this Section 2) may be declared and paid at any time, without reference to any regular Dividend Payment Date, to holders of record on such record date, not exceeding 60 days preceding the payment date thereof, as may be fixed by the Board of Directors or a duly authorized committee of said Board of Directors.
(b) DIVIDEND PERIODS. Dividend periods (hereinafter called "Dividend Periods") shall commence on December 1, March 1, June 1 and September 1 of each year and shall end on and include the calendar day next preceding the first day of the next Dividend Period (other than the initial Dividend Period which shall commence on the original Issue Date and shall end on and include the Dividend Rate Adjustment Date). The amount of dividends payable for each Dividend Period or portion thereof for the Series E
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -2-
Preferred Stock shall be computed by multiplying the Stated Value by a fraction, (i) the numerator of which is (A) the applicable Dividend Rate multiplied by (B) the number of calendar days elapsed during such Dividend Period or portion thereof and (ii) the denominator of which is 365. If more than one Dividend Rate applies to any Dividend Period or portion thereof, the calculation in the preceding sentence shall be applied for each period of time during which a given Dividend Rate is applicable. The dividend payable to each holder of Series E Preferred stock shall be rounded to the nearest one cant with $.005 being rounded upward.
(c) DIVIDENDS ON PARITY STOCK. So long as any shares of the Series E Preferred Stock are outstanding, no full dividends shall be declared on any Parity Stock for any period unless full cumulative dividends have been or contemporaneously are declared on the Series E Preferred Stock for all Dividend Periods terminating on or prior to the date of payment of such full cumulative dividends. When dividends are not declared to be paid in full, as described above, upon the shares of the Series E Preferred Stock and any Parity Stock, all dividends declared upon shares of the Series E Preferred Stock and any Parity Stock shall be declared pro rata so that the amount of dividends declared per share on the Series E Preferred Stock and such Parity Stock shall in all cases bear to each other the same ratio that accrued dividends per share on the shares of the Series E Preferred Stock and such Parity Stock of the Corporation bear to each other.
(d) DIVIDENDS ON JUNIOR STOCK. So long as any shares of the Series E Preferred Stock are outstanding, no dividend (other than dividends or distributions paid in shares of, or options, warrants or rights to subscribe for or purchase shares of Junior Stock) shall be declared or paid or set aside for payment or other distribution declared or made upon any Junior Stock, or upon any Parity stock except as provided in Subsection (c) of this Section 2, nor shall any Junior Stock or Parity Stock (other than the Series C Preferred Stock and the Series D Preferred Stock) be redeemed, purchased or otherwise acquired for any consideration (or any monies be paid to or made available for a sinking fund for the redemption of any shares of any such stock) by the Corporation (except by conversion into or exchange for Junior Stock).
(e) NO ADDITIONAL DIVIDENDS. Holders of shares of the Series E Preferred Stock shall not be entitled to any dividends, whether payable in cash, property or stock, in excess of full cumulative dividends, as herein provided, on the Series E Preferred Stock. No interest, or sum of money in lieu of interest, shall be payable in respect to any dividend payment or payments on the Series E Preferred Stock.
Section 3. DIVIDEND RATE. The Dividend Rate on the shares of Series E Preferred Stock shall be 2.75% per annum for the period from the Original Issue Date to and including the EARLIER of
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -3-
the (i) date of the consummation of the IPO or (ii) the Dividend Rate Adjustment Date and shall be 8.0% per annum for each Dividend Period or portion thereof thereafter occurring, subject to adjustment as follows:
(a) If the corporation completes an IPO prior to the Dividend Rate Adjustment Date and redeems the Series E Preferred Stock, in accordance with the terms set forth in Section 7(b)(i) or (b)(ii), then the Dividend Rate shall be 0% per annum from the date of consummation of the IPO to the Dividend Rate Adjustment Date.
(b) If, prior to the date for mandatory redemption of all outstanding shares of Series E Preferred Stock established pursuant to Section 7(a), 7(b)(i) or (b)(ii), the Corporation offers in good faith to repurchase on a pro rata basis all or a portion of the outstanding shares of each of the Series C Preferred Stock, the Series D Preferred Stock and the Series E Preferred Stock at a repurchase price per share equal to at least the Stated Value, together with accrued and unpaid dividends thereon to (and including) the date fixed for such repurchase, the Dividend Rate applicable to the shares of Series E Preferred Stock which the Corporation offered to repurchase and which the holders thereof refused such offer to repurchase shall, after the date fixed for such repurchase of the Series E Preferred Stock, be the LESSER of 1% and any Dividend Rate calculated pursuant to Subsection (a) of this Section 3.
Section 4. VOTING RIGHTS. In addition to any voting rights provided by law, the holders of shares of the series E Preferred Stock shall have the following voting rights:
(a) So long as any shares of the series E Preferred Stock are outstanding, each share of Series E Preferred Stock beneficially owned by White River Ventures, Inc., a Delaware corporation ("White River") or any Affiliate thereof, shall entitle the holder thereof to vote together with the holders of Common Stock and all other securities entitled to vote on all matters voted on by holders of Common stock at all meetings of the stockholders of the Corporation. With respect to any such vote, each share of Series E Preferred Stock beneficially owned by White River or any Affiliate thereof shall entitle the holder thereof to cast the number of votes determined pursuant to the following formula:
-4-
Votes per share = A/B
and
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document A = [(C - (C * D))/(l - (E + D))] - C
and
E = (B/F * .51) - G
and
G = [(B/F * .51) + D] - .51
Where:
A is equal to: The total number of votes the Series E Preferred Stock may exercise in any vote with the Common Stock.
B is equal to: The number of shares of Series E Preferred Stock beneficially owned by White River and its Affiliates on a particular record date.
C is equal to: The total number of shares of Common Stock outstanding on a particular record date.
D is equal to: The percentage (expressed as a fraction) of the Corporation's outstanding shares of Common Stock beneficially owned by White River and its Affiliates on a particular record date.
E is equal to: The percentage (expressed as a fraction which cannot be greater than .51 or less than 0) of the Company's total voting Power attributable to the aggregate number of shares of the Series E Preferred Stock beneficially owned by white River and its Affiliates on a particular record date; PROVIDED, HOWEVER, such voting percentage shall automatically be 0% if White River together with its Affiliates already beneficially owns at least 51% of the outstanding shares of Common Stock on such record date.
F is equal to: The total number of shares of Series E Preferred stock originally issued.
G is equal to: The automatic voting reduction percentage (expressed as a fraction which cannot be less than 0) necessary if White River and its Affiliates beneficially own shares of Common Stock.
-5-
(b) In addition to any class votes required by law, the affirmative vote of the holders of at least 66-2/3% of the outstanding shares of the Series
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document E Preferred Stock, voting separately as a class, in person or by proxy, at a special or annual meeting of stockholders called for the purpose, shall be necessary to (i) authorize, create, increase the authorized or issued number of shares of, or issue (including on conversion or exchange of any convertible or exchangeable securities or by reclassification), any shares of any class or classes or series of Parity Stock or the Corporation's capital stock having rights senior to or on a parity with the Series E Preferred Stock with respect to dividend rights and with respect to the distribution of assets upon the liquidation, dissolution or winding up, whether voluntary or involuntary, of the Corporation ("Senior stock,) or (ii) amend, alter or repeal (whether by merger, consolidation or otherwise) any of the provisions of the Certificate of Incorporation of the Corporation or the Certificate of Designations of the Series E Preferred Stock which would materially and adversely affect any right, preference, privilege or voting power of the Series E Preferred Stock or the holders thereof; PROVIDED, HOWEVER, that the creation and issuance of any Junior Stock, shall not be deemed to materially and adversely affect such rights, preferences or voting powers. For the taking of any action as provided in this paragraph (b) by the holders of shares of the Series E Preferred stock, each such holder shall have one vote for each share of Series E Preferred Stock standing in his or her name on the transfer books of the Corporation as of any record date fixed for such purpose or, if no such date has been fixed, at the close of business on the Business Day (as defined in Section 9) next preceding the day on which notice is given, or if notice is waived, at the close of business on the Business Day next preceding the day on which the meeting is held. At each meeting of stockholders at which the holders of shares of the Series E Preferred Stock shall have the right, voting separately as a single class, to take any action pursuant to this paragraph (b), the presence in person or by proxy of the holders of record of 50% of the total number of shares of the Series 9 Preferred Stock then outstanding and entitled to vote on the matter shall be necessary and sufficient to constitute a quorum. At any such meeting or at any adjournment thereof, (i) the absence of a quorum of the holders of shares of any other class or series of capital stock of the Corporation shall not prevent the taking of any action as provided in this paragraph (b) and (ii) in the absence of a quorum of the holders of shares of the Series E Preferred Stock, the holders of a majority of such shares present in person or by proxy shall have the power to adjourn the meeting as to the actions to be taken by the holders of shares of the Series E Preferred Stock from time to time and place to place without notice other than announcement at the meeting until a quorum shall be present.
(c) The foregoing rights of holders of shares of the Series E Preferred Stock to take any actions as provided in this
-6-
Section 4 may be exercised at any annual meeting of stockholders or at a special meeting of stockholders held for such purpose or at any adjournment thereof, or by the written consent, delivered to the Secretary of the corporation, of the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document holders of the minimum number of shares required to take such action.
Section 5. REACQUIRED SHARES. Any shares of Series E Preferred Stock redeemed, purchased or otherwise acquired by the corporation in any manner whatsoever shall be retired and canceled promptly after the acquisition thereof. All such shares shall upon their cancellation become authorized but unissued shares of preferred stock, par value $1.00 per share, of the corporation and may be reissued as part of another series of preferred stock, par value $1.00 per share, of the Corporation subject to the conditions or restrictions on authorizing or creating any class or series, or any shares of any class or series as set forth herein.
Section 6. LIQUIDATION, DISSOLUTION, WINDING UP. (a) In the event of any liquidation, dissolution or winding up of the Corporation, whether voluntary or involuntary and subject to the rights of the holders of shares of any series or class or classes of Senior Stock, before any payment or distribution of the assets of the Corporation (whether capital or surplus) shall be made to or set apart for the holders of shares of any series or class or classes of Junior Stock, the holders of the shares of the Series E Preferred Stock shall be entitled to receive the Stated Value per share plus an amount equal to all dividends (whether or not earned or declared) accrued and unpaid thereon to the date of final distribution to such holders; but such holders shall not be entitled to any further payment. If, upon any liquidation, dissolution or winding up of the Corporation, the assets of the Corporation, or proceeds thereof, distributable among the holders of the shares of the Series E Preferred Stock shall be insufficient to pay in full the preferential amount aforesaid and liquidating payment on any Parity Stock, then such assets, or the proceeds thereof, shall be distributed among the holders of shares of Series E Preferred Stock and any Parity Stock ratably in accordance with the respective amounts which would be payable on such shares of Series E Preferred Stock and any Parity Stock if all amounts payable thereon were paid in full. For the purposes of this Section 6, a consolidation or merger of the Corporation with one or more corporations shall not be deemed to be a liquidation, dissolution or winding up, voluntary or involuntary.
(b) Subject to the rights of the holders of shares of any series or class or classes of Parity Stock or Senior Stock, upon any liquidation, dissolution or winding up of the corporation, after payment shall have been made in full to the holders of the Series E Preferred Stock as provided in this Section 6, but not prior thereto, any other series or class or classes of Junior Stock shall, subject to the respective terms and provisions (if any) applying thereto, be entitled to receive any and all assets
-7-
remaining to be paid or distributed, and the holders of the Series E Preferred Stock shall not be entitled to share therein.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Section 7. REDEMPTION.
(a) MANDATORY FIVE YEAR REDEMPTION. Unless redeemed pursuant to Sections 7(b), 7(c) and 7(d) prior to June 16, 1999, the Corporation shall, on such date and to the extent the Corporation has funds legally available therefor, redeem all shares of Series E Preferred Stock then outstanding at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest.
(b) MANDATORY REDEMPTION EVENTS. (i) Concurrent with the consummation of an IPO having net proceeds to the Corporation less than or equal to $40,000,000, the Corporation shall, to the extent the Corporation has funds legally available therefor redeem the LESSER of (A) the number of shares of Series E Preferred Stock then outstanding and (B) that number of shares of Series E Preferred Stock having an aggregate Stated Value and accrued and unpaid dividends equal to $256,410 at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% on the portion to be so redeemed for the period from the date of the consummation of such IPO to (and including) such redemption date; PROVIDED, HOWEVER, that to the extent that the Corporation after making any required payments under the Loan Agreement (as defined in Section 9) from the net proceeds of the IPO shall not have sufficient funds available to so redeem shares of Series E Preferred Stock in accordance with this Subsection (b)(i) and any Parity Stock entitled to redemption in accordance with the terms of couch Parity Stock,, the Corporation shall redeem concurrent with the consummation of the IPO that number of shares of Series E Preferred Stock and Parity Stock entitled to redemption having an aggregate Stated Value equal to the balance of the net proceeds of the IPO remaining after any such payments under the Loan Agreement and shall redeem the remaining shares of Series E Preferred Stock to be redeemed pursuant to this Subsection (b)(i) and Parity Stock entitled to redemption within 120 calendar days after the consummation of the IPO; PROVIDED, FURTHER, that to the extent that all shares of Series E Preferred Stock to be redeemed pursuant to this subsection (b)(i) have not been redeemed within such 120 calendar day period, the Corporation shall, to the extent the Corporation has funds legally available therefor, redeem all shares of Series N Preferred Stock then outstanding at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% for the period from the date of the consummation of the IPO to (and including) such redemption date.
-8-
(ii) Concurrent with the consummation of an IPO having not proceeds to the Corporation in excess of $40,000,000, the Corporation shall, to the extent the Corporation has funds legally available therefor, redeem the LESSER of (1) the number of shares of Series E Preferred Stock then outstanding
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and (2) the number of shares of Series E Preferred Stock having an aggregate Stated Value and accrued and unpaid dividends at least equal to .64% of the net proceeds to the Corporation from the IPO, at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% for the period from the date of the consummation of such IPO to (and including) such redemption date; PROVIDED, HOWEVER, that to the extent that the Corporation after giving effect to any required payments under the Loan Agreement would not have sufficient funds available to so redeem shares of Series E Preferred Stock in accordance with this Subsection (b)(ii) and any Parity Stock entitled to redemption in accordance with the terms of such Parity Stock, the Corporation shall redeem concurrent with the consummation of the IPO that number of shares of Series E Preferred Stock and Parity Stock entitled to redemption having an aggregate stated value equal to the balance of the net proceeds of the IPO remaining after any such payments under the Loan Agreement and shall redeem the remaining shares of Series E Preferred Stock to be redeemed pursuant to this Subsection (b)(ii) and Parity Stock entitled to redemption within 90 calendar days after the consummation of the IPO; PROVIDED, FURTHER, that to the extent that shares of the Series 9 Preferred Stock to be redeemed pursuant to this Subsection (b)(ii) having an aggregate Stated Value and accrued and unpaid dividends of at least $256,410 have not been redeemed within such 90 calendar day period, the corporation shall, to the extent the Corporation has funds legally available therefor redeem all shares of Series E Preferred Stock then outstanding at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest, employing a Dividend Rate of 8.0% for the period from the date of the consummation of the IPO to (and including) such redemption date and; PROVIDED, FURTHER, to the extent that the Corporation has redeemed shares of the Series E Preferred Stock to be redeemed pursuant to this Subsection (b)(ii) having an aggregate stated Value and accrued and unpaid dividends of at least $256,410, but less than the full amount of shares of Series E Preferred Stock required by this Subsection (b)(ii), the Corporation shall on June 15, 1998, to the extent the Corporation has funds legally available therefor, redeem all shares of Series E Preferred stock then outstanding at a redemption price per share equal to the Stated Value together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest.
(iii) In the event that the Corporation fails to use at least .64% of the net proceeds received by the corporation from
-9-
any Subsequent Offering (as defined in Section 9) to redeem any outstanding shares of Series B Preferred Stock on the date of the consummation of such Subsequent Offering, the Series E Preferred Stock shall be subject to redemption, in whole or in part, in cash, as determined by the holders of a majority of the outstanding shares of the Series C Preferred Stock at a
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) the redemption date, without interest. On the redemption date, the Corporation shall redeem all shares of Series E Preferred Stock tendered for redemption pursuant to this Subsection (b)(iii).
(c) REDEMPTION IN THE EVENT OF ACCELERATION OF INDEBTEDNESS. In the event that the Corporation or any Subsidiary shall fail to perform or observe any term, covenant or condition related to any Indebtedness (as defined in Section 9) of the Corporation or any Subsidiary (other than any Indebtedness of Phone Bass Systems, Inc. ("Phone Base") which is non-recourse to the Corporation or any Subsidiary, other than Phone Base) and the effect of such failure to perform or observe is (i) a failure by the Corporation or any Subsidiary to pay any principal or interest on any Indebtedness when due or during any applicable grace period therefor or (ii) receipt of notice by the Corporation or any Subsidiary of the acceleration of the maturity or required prepayment (other than by a regularly scheduled required prepayment) prior to the stated maturity of any Indebtedness and demand for payment with respect therefor, in respect to Indebtedness in an aggregate amount in excess of $500,000 (the "Accelerated Redemption Date"), the Series E Preferred Stock shall be subject to redemption, in whole or in part, in cash, as determined by the holders of a majority of the outstanding shares of the Series C Preferred Stock after Redemption Date at a redemption price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) the redemption date, without interest. On the redemption date, the Corporation shall redeem all shares of Series E Preferred Stock tendered for redemption pursuant to this Subsection (c).
(d) REDEMPTION IN THE EVENT OF CERTAIN BUSINESS COMBINATION. For so long as White River or any of its Affiliates shall own any shares of Series E Preferred Stock (A) neither the Corporation nor its Material Subsidiaries (as defined in Section 9) shall engage in any merger, reorganization or consolidation (other than transactions involving the merger, reorganization or consolidation of a Subsidiary of the Corporation with or into the Corporation or with or into a wholly owned Subsidiary of the Corporation) and (B) the Corporation shall not sell or otherwise transfer, in a single transaction or series of transactions, all or substantially all or a material part of the assets or shares of the Common Stock of the Corporation to or with any Person (as defined in Section 9) other than in connection with the sale of the Faneuil Group or to or with the Corporation or a wholly owned Subsidiary of
-10-
the Corporation unless on or prior to the consummation of the transactions described in clauses (A) and (B) all shares of the Series E Preferred Stock shall have been redeemed at a redemption Price per share equal to the Stated Value, together with accrued and unpaid dividends thereon to (and including) such redemption date, without interest.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (e) RIGHTS OF SERIES E PREFERRED STOCK FOLLOWING REDEMPTION. On and after any date fixed for redemption, PROVIDED THAT the redemption price (including any accrued and unpaid dividends to (and including) the date fixed for redemption) has been duly paid or segregated and held in trust by a duly authorized independent paying agent for the benefit of the Persons entitled thereto, dividends shall cease to accrue on the Series E Preferred Stock called for redemption, such shares shall no longer be deemed to be outstanding and all rights of the holders of such shares as stockholders of the Corporation shall cease and the right to receive the moneys payable upon such redemption, without interest thereon, upon surrender of the certificates evidencing such shares.
(f) NOTICE OF ANY REDEMPTION. Notice of any redemption pursuant to Section 7(e) shall be given to the holders of shares of Series E Preferred Stock not less than 30 nor more than 60 days prior to the redemption. Notice of redemption shall be given by first class mail to such holders' respective addresses as shown on the stock books of the Corporation and will specify (A) the date fixed for redemption, (B) the applicable redemption price and (C) in the case of a partial redemption, the number of shares of Series E Preferred Stock to be redeemed and the aggregate number of shares of Series E Preferred Stock which will be outstanding after such redemption. If less than all shares of Series E Preferred Stock then outstanding are to be redeemed, the shares of Series E Preferred Stock will be redeemed pro rata from among the holders of shares of Series E Preferred Stock then outstanding.
(g) FINAL REDEMPTION OBLIGATIONS. If the Corporation shall fail at any time to discharge its obligation to redeem shares of Series E Preferred Stock pursuant to this Section 7 (the "Final Redemption Obligation"), such Final Redemption Obligation shall be discharged as soon as the Corporation is able to discharge such Final Redemption Obligation using funds legally available therefor.
(h) REDEMPTION OF PARITY STOCK PRO-RATA. If, upon the occurrence of any event requiring redemption of the shares of Series E Preferred Stock pursuant to this Section 7, the assets of the Corporation, or net proceeds thereof, shall be insufficient to redeem in full the applicable amount of Series E Preferred Stock and any Parity Stock required to be redeemed by the Corporation, then the Corporation shall redeem shares of Series E Preferred Stock and any Parity Stock ratably in accordance with the respective amounts which would be redeemable if the Series E
-11-
Preferred Stock and the Parity Stock required to be redeemed by the Corporation were redeemed in full.
(i) REDEMPTION EXCEPTION. Notwithstanding anything in this Certificate of Designation to the contrary, at least one share of the Series E
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Preferred Stock shall remain issued and outstanding until such time as no shares of the Series C Preferred Stock remain issued and outstanding.
Section 8. CERTAIN COVENANTS. Any registered holder of the Series E Preferred Stock may proceed to protect and enforce its rights and the rights of such holders by any available remedy by proceeding at law or in equity to protect and enforce any such rights, whether for the specific enforcement of any provision or in aid of the exercise of any power granted herein, or to enforce any other proper remedy.
Section 9. DEFINITION. For the purposes of this Certificate of Designations of Series E Redeemable Preferred Stock, the following terms shall have the meanings indicated:
"Affiliate" means a Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with, another Person.
"Business Day" means any day other than a Saturday, Sunday or a day on which banking institutions in the State of New York are authorized or obligated by law or executive order to close.
"Capital Lease" means any lease of any property (whether real, personal or mixed) by the Corporation or any of the Subsidiaries as lessee which, in conformity with generally accepted accounting principles, is accounted for as a capital lease on the balance sheet of the Corporation or any of the subsidiaries; PROVIDED, HOWEVER, any such lease which is nonrecourse to the Corporation or any of the Subsidiaries shall not constitute a Capital Lease.
"Common Stock Equivalents" means all options, warrants and other rights to acquire Common Stock or securities convertible into or exchangeable for common Stock.
"Contingent Obligation" means any contractual obligation, contingent or otherwise, of one Person with respect to any Indebtedness, obligation or liability of another, including, without limitation; direct or indirect guaranties, endorsements (except for collection or deposit in the ordinary course of business), notes co-made or discounted, recourse agreements, keep-well agreements, agreements to purchase or repurchase such indebtedness, obligation or liability or any security therefor or to provide funds for the payment or discharge thereof, agreements
-12-
to maintain solvency, assets, level of income, or other financial condition, and agreements to make payment other than for value received.
"Faneuil Group" means GIS Information Systems, Inc., an Illinois
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document corporation, Equitel Corp., a Virginia corporation, Original Research II Corporation, a Delaware corporation, and Credit Card Service Corporation, a Delaware corporation, collectively.
"Indebtedness" means, with respect to the Corporation or any of the Subsidiaries, at any time, (a) all indebtedness, obligations or other liabilities of the Corporation or any of the Subsidiaries (i) for borrowed money or evidenced by debt securities, debentures, acceptances, notes or other similar instruments, (ii) with respect to letters of credit issued for the Corporation's or any of the Subsidiaries' account, (iii) in respect of Capital Leases and (iv) which are contingent obligations, (b) all indebtedness, obligations or other liabilities of the Corporation or any of the Subsidiaries or others secured by a Lien on any property of the Corporation or any of the Subsidiaries, whether or not such indebtedness, obligations or liabilities are assumed by the Corporation or any of the Subsidiaries, all as of such time, (c) all indebtedness, obligations or other liabilities of the Corporation or any of its subsidiaries in respect of Interest Rate Contracts and currency hedging agreements, net of liabilities owed to the Corporation or any of the Subsidiaries by the counterparties thereon, and (d) all preferred stock subject (upon the occurrence of any contingency or otherwise) to mandatory redemption, other than the series C Preferred Stock, Series D Preferred Stock and Series E Preferred Stock.
"Interest Rate Contracts" means interest rate exchange, collar or cap or similar agreements providing interest rate protection.
"IPO" means the initial public offering of Common Stock on a firm commitment basis pursuant to an effective registration statement under the securities Act.
"Lien" means any mortgage, deed of trust, pledge, security interest, encumbrancer lien or charge of any kind (including any agreement to give any of the foregoing, any conditional sale or other title retention agreement, any lease in the nature thereof, and the filing of or agreement to give any financing statement under the Uniform Commercial Code of any jurisdiction in connection with any of the foregoing).
"Loan Agreement" means (i) the Loan Agreement, dated as of April 29, 1994, among CCC Information Services Inc. and CCC Development Company, as Borrowers, the financial Institutions Party Thereto, as Lenders and Canadian Imperial Bank of Commerce, as
-13-
Agent, (ii) the Security Agreement, dated as of April 29, 1994, among CCC Information Services Inc., Canadian Imperial Bank of Commerce, as Agent and Canadian Imperial Bank of Commerce, as Collateral Agent, (iii) the Guaranty, dated as of April 29, 1994, made by the corporation in favor of the Lenders Party to the Loan Agreement and Canadian Imperial Bank of Commerce, as Agent,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iv) the Pledge and Security Agreement; dated an of April 29, 1994, among the Corporation, Canadian Imperial Bank of Commerce, as Agent and Canadian Imperial Bank of Commerce, as Collateral Agent and (v) each other agreement, document or instrument delivered in connection with the foregoing.
"Material Subsidiary, means any subsidiary which produces or represents 20% or more of (i) consolidated net assets of the corporation, (ii) consolidated gross revenues of the corporation or (iii) consolidated net income of the corporation.
"Person" beans an individual or a corporation, partnership, trust, incorporated or unincorporated association, joint venture, joint stock company or any other entity or organization, including a government or political subdivision or agency or instrumentality thereof.
"Public Offering" means a sale of any of the Corporation's securities pursuant to an effective registration statement under the Securities Act.
"Securities Act" means the Securities Act of 1933, as amended.
"Subsequent Offering" means a sale of Common Stock or any Common Stock Equivalent of the Corporation in a Public Offering after an IPO.
"Subsidiary" means (i) any Person of which 50% or more of the securities having ordinary voting power for the election of directors are at the time owned directly or indirectly by the Corporation or any Subsidiary thereof (ii) any Person of which 50% or more of the joint venture, limited partnership or partnership interests are at the time owned directly or indirectly by the Corporation or any Subsidiary thereof or (iii) any Person which is a limited Partnership in which the corporation or any Subsidiary in at the time the general partner or at the time owns 50% or more of the general partner of such Person.
-14-
IN WITNESS WHEREOF, this Certificate of Designations is executed on behalf of the Corporation by its President and attested by its Assistant Secretary as of this 16th day of June, 1994.
INFOVEST CORPORATION, a Delaware corporation
By:______Name: David M. Phillips Title: President
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ATTEST:
______Name Gary L. Bjarnson Title: Assistant Secretary
-15-
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document EXHIBIT 5 August 5, 1996
CCC Information Services Group Inc. World Trade Center Chicago 444 Merchandise Mart Chicago, IL 60654
Re: 6,325,000 Shares of Common Stock, $0.10 par value, of CCC Information Services Group Inc. ------
Dear Sir or Madam:
We refer to the Registration Statement on Form S-1, Registration No. 333-07287 (the "Registration Statement"), filed by CCC Information Services Group Inc. (the "Company") with the Securities and Exchange Commission under the Securities Act of 1933, as amended, relating to the registration of 6,325,000 shares of Common Stock, $0.10 par value (the "Shares"), of the Company.
As set forth in the Registration Statement, the Company intends to take the following actions (the "Corporate Actions") immediately prior to the consummation of the offering of the Shares: (i) file amended and restated articles of incorporation in Delaware; (ii) complete a 40 for one stock split in the form of a stock dividend with respect to each of its issued and outstanding shares; (iii) make appropriate adjustments in outstanding options as a result of the stock split; and (iv) cause all required actions of directors and stockholders to accomplish the foregoing to be taken.
Based on the foregoing, we are of the opinion that:
1. The Company is duly incorporated and validly existing in the State of Delaware.
2. Assuming that all of the Corporate Actions have been completed, the Shares will be legally issued, fully paid, and non-assessable when the Shares shall have been delivered to the purchasers thereof against payment of the agreed consideration therefor.
CCC Information Services Group Inc. August 5, 1996 Page 2
We do not find it necessary for the purposes of this opinion to cover,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and accordingly we express no opinion as to, the application of the securities or blue sky laws of the various states to the sale of the Shares.
We hereby consent to the filing of this opinion as an Exhibit to the Registration Statement and to all references to our Firm included in or made a part of the Registration Statement.
Very truly yours,
/s/ Winston & Strawn ------WINSTON & STRAWN
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 10.1
INFOVEST CORPORATION STOCK OPTION PLAN
1. PURPOSE
The purpose of this Stock Option Plan (the "Plan") is to promote the growth and general prosperity of InfoVest Corporation, a Delaware corporation ("InfoVest") and its direct and indirect subsidiaries, including CCC Information Services Inc., a Delaware corporation ("CCC"), and subsidiaries of CCC (collectively the "InfoVest Companies"). Under the Plan, certain employees of the InfoVest Companies will be eligible to receive grants of options to purchase shares of InfoVest common stock as an incentive to contribute to the success of the InfoVest Companies.
2. DEFINITIONS
Unless the context clearly indicates otherwise, the following terms, when used in the Plan, shall have the meanings set forth in this Section 2. Wherever used in the Plan, words in the masculine gender shall be deemed to refer to females as well as males, and unless the context clearly indicates otherwise, words in the singular shall be deemed to refer also to the plural.
(a) "Commencement Date" shall mean the date on which an Option is granted.
(b) "Committee" means the Compensation Committee of the Board of Directors of InfoVest or such other committee as the Board by resolution shall designate.
(c) "Common Stock" means the $. 10 par value per share common stock of InfoVest.
(d) "Disabled" means "permanently and totally disabled" as defined in Section 105(d) of the Internal Revenue Code of 1986.
(e) "Employee" means an employee of at least one of the InfoVest Companies.
(f) "Exercise Price" means either, as the context requires, the price per Share (not less than the greater of $55.00 or fair market value as of the date an Option is granted as determined by the Committee) that shall be tendered to InfoVest upon exercise of the Option, or the aggregate price that shall be tendered to InfoVest in payment for Shares upon exercise of an Option or a portion of the Option.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (g) "Grantee" means an individual to whom an Option is granted under the Plan.
(h) "Option" means a right granted to purchase Shares under the Plan.
(i) "Stock Option Agreement" means the written instrument embodying an agreement between InfoVest and a Grantee, as provided in the Plan, evidencing the grant of an Option to the Grantee.
(j) "Plan" means the InfoVest Corporation Stock Option Plan as set forth herein, as may be amended from time to time.
(k) "Shares" means shares of Common Stock.
3. ADMINISTRATION
The Plan shall be administered by the Committee. Subject to the provisions of the Plan, the Committee shall have authority to do everything necessary or appropriate to administer the Plan including, without limitation, interpreting the Plan. The Committee may take action only upon the agreement of a majority of its members then in office. Any action taken by the Committee through a written instrument signed by a majority of its members then in office shall be effective as though taken at a meeting duly called and held. All decisions, determinations, and interpretations of the Committee shall be final and binding on all concerned.
- 2 -
4. SHARES OF COMMON STOCK ELIGIBLE FOR ISSUANCE UNDER THE PLAN
Subject to the provisions of Section 10, the aggregate number of Shares that may be issued upon the exercise of Options granted under the Plan shall be 75,000. Such Shares may be either authorized, but unissued Shares, or Shares issued and thereafter reacquired by InfoVest.
5. ELIGIBILITY
Options shall be granted for Shares in the amounts, at the Exercise Price, and to the Employees as determined in the sole discretion of the Committee.
6. EFFECTIVE DATE AND DURATION OF THE PLAN
The Plan shall become effective upon its adoption by resolution of the holders of the majority of securities entitled to vote of InfoVest. It shall continue in effect until it is terminated under Section 13.
7. DURATION OF OPTION
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (a) The proper officers of InfoVest shall execute and deliver to each Grantee a written Stock Option Agreement which shall be executed by the Grantee and which shall state the total number of Shares subject to the Option, the Exercise Price for such Shares, any provisions relating to vesting of the Option and such other provisions as the Committee in each instance shall deem appropriate and not inconsistent with any of the provisions of the Plan.
(b) The maximum term of each Option granted under the Plan shall not exceed 10 years commencing on the date set forth in the Stock Option Agreement (the "Commencement Date"). Notwithstanding the maximum 10-year term, all Options granted under the Plan shall expire sooner as follows:
- 3 -
(i) If the employment of a Grantee is terminated for any reason other than as specified in subparagraphs (ii), (iii) or (iv) hereof, then the Option will expire on the thirtieth (30th) day after the date of such termination.
(ii) Subject to subparagraphs (iii) and (iv) hereof, if the Grantee retires from the InfoVest Companies at an age at which such Grantee would be eligible to receive benefits under the Federal Social Security Act or retires with the consent of the Board of Directors of InfoVest, the Option will expire three (3) months after the date of termination.
(iii) Subject to subparagraph (iv) hereof, if a Grantee becomes Disabled while serving in his capacity as an Employee, the Option will expire twelve (12) months after the date of termination of the Employee's employment as the result of having become Disabled.
(iv) If a Grantee dies while serving as an Employee, or if the Grantee dies within twelve (12) months after termination of service in accordance with subparagraph (iii) hereof, or if the Grantee shall die within three (3) months after termination of service in accordance with subparagraph (ii) hereof, the Option will expire twelve (12) months after the date of death.
Following termination of employment for any reason, no Option shall become exercisable except to the extent such Option was exercisable on the date of such termination.
8. EXERCISE OF OPTION
(a) Options shall be exercised by delivering or mailing at the time of exercise to the Committee:
(1) A notice, in the form and manner prescribed by the Committee, specifying the number of shares to be purchased under an Option,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document and
- 4 -
(2) Payment in full of the Exercise Price for the Shares so purchased by (i) a money order, cashiers check or certified check payable to InfoVest, (ii) shares of Common Stock owned by the Grantee (duly endorsed), or (iii) such other form of payment as shall be determined by the Committee to be acceptable. Any shares delivered to InfoVest as payment for Shares upon exercise of the Option shall be valued at their fair market value as of the date of exercise of the Option as determined by (A) reference to prices quoted on a public exchange for the Common Stock or, (B) if no such quotation exists, as determined by the Committee in its sole discretion.
(b) All Options granted under the Plan shall be subject to a vesting schedule, which shall be determined in the discretion of the Committee, except that each Option granted under the Plan shall be immediately exercisable on the Commencement Date with respect to such percentage of the Shares subject to each Option as shall be determined at the discretion of the Committee.
(c) No Option shall be exercisable in whole or in part and no certificates representing Shares subject to the Option shall be delivered at any time that InfoVest shall determine that the satisfaction of withholding tax or other withholding liabilities is necessary or desirable, unless and until such withholding shall have been effected.
(d) Options shall be exercisable only with respect to whole Shares and shall not be exercisable with respect to fractional Shares.
9. EFFECT OF MERGER OR OTHER REORGANIZATION
If InfoVest shall be involved in a merger, consolidation or other reorganization, a Grantee shall be entitled, whether or not InfoVest is the surviving corporation, to receive an option to purchase the same number of shares (or a fraction of a share) in the surviving corporation that a
-5- holder of a number of Shares equal to the total number of Shares that a Grantee could purchase, in accordance with the provisions relating to vesting as referenced in Sections 7 and 8, would be entitled to receive under the terms of the merger or consolidation. Options granted under this Section 9 shall be deemed granted on the date the original Options were granted for purposes of Section 8(b). If InfoVest is not the surviving corporation, the surviving corporation (the "Successor") shall succeed to the rights and obligations of InfoVest under this Plan, including, without limitation, Section 16.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 10. ADJUSTMENT PROVISIONS
If any subdivision or combination of shares of Common Stock or any stock dividend occurs after the adoption of the Plan, the Committee shall make such proportionate adjustments as are appropriate in the number of shares of Common Stock that may be issued under Section 4 and in the Exercise Price of, and the number of Shares underlying, outstanding Options in order to prevent the dilution or enlargement of the rights of any Grantee.
11. ISSUANCE OF SHARES OF COMMON STOCK
Upon receipt of the notice of exercise and payment of the Exercise Price, InfoVest shall, subject to the provisions of Section 8(c), promptly issue to the Grantee a certificate or certificates for the Shares purchased, without charge to him for issue or transfer tax. Until the issuance of such certificates, no right to vote or receive dividends or other distributions nor any other rights as a stockholder of InfoVest shall exist with respect to Shares receivable notwithstanding the exercise of the Option. Except as provided in Section 10, no adjustment shall be made for distribution or other rights for which the record date is prior to the date a Common Stock certificate is issued.
-6-
12. NONASSIGNABILITY
Options shall be exercisable only by the Grantee or, in the case of the Grantee's death or incapacity, the Grantee's executors, administrators, guardians or other legal representatives and shall not be assignable or transferable by him, and no other person shall acquire rights therein.
13. AMENDMENT OR TERMINATION OF THE PLAN
(a) The Committee may amend the Plan from time to time in such respects as the Committee may deem advisable. Any such amendment may apply to any Options that were granted before the date such amendment is adopted, but that have not been exercised as of the date such amendment is adopted, provided that no such amendment shall change the number of Shares subject to, or the Exercise Price of, any such Option. No such amendment shall affect any Option that has been exercised before the date such amendment is adopted.
(b) The Committee may at any time terminate the Plan. Any such termination of the Plan shall not affect Options previously granted and such Options shall remain in full force and effect as if the Plan had not been terminated.
14. AGREEMENT AND REPRESENTATIONS OF GRANTEE
As a condition to the exercise of any portion of an Option, InfoVest may
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document require the person exercising such Option to represent and warrant at the time of any such exercise that the Shares are being purchased only for investment and without any present intention to sell or otherwise distribute such Shares. The Shares shall not be offered, sold, transferred, pledged or otherwise disposed of by the person exercising the Option in the absence of registration, or the availability of an exemption from registration, under the Securities Act of 1933. No such offer, sale, transfer, pledge or other
-7-
disposition may be made without prior written opinion of counsel for InfoVest that such offer, sale, transfer, pledge or other disposition will not violate the Securities Act of 1933 or other applicable securities law, rule or regulation of any jurisdiction. The foregoing restriction shall be indicated by legend on the certificates representing such shares of Common Stock.
15. RIGHT OF FIRST REFUSAL AND CERTAIN RESTRICTIONS
(a) InfoVest shall have a right of first refusal to purchase the Shares issued to the Grantee pursuant to the exercise of any Option (hereinafter the "Grantee Shares") if the Grantee subsequently obtains a bona fide offer from a third party for the sale, transfer or assignment of the Grantee Shares and desires to sell, transfer or assign such Shares. Grantee may not sell, transfer or assign the Grantee Shares except pursuant to such a bona fide offer and as provided herein. In such event, the Grantee shall first make an offer (referred to in this paragraph (a) as the "Offer") to sell, transfer or assign such Shares (referred to in this paragraph (a) as the "Offered Shares") to InfoVest. Such Offer shall be upon the same terms and conditions as the offer from the third party. The Grantee shall provide InfoVest written notice of the Offer (hereinafter the "Grantee's Notice"). The Grantee's Notice shall state the amount of the Offered Shares, the terms and conditions of the Offer and of the third party's offer and the name of the third party (together with a copy of all correspondence between the third party and the Grantee necessary to establish the terms of the third party's offer).
InfoVest shall have the right to acquire, or arrange for another person to acquire, the Offered Shares, which right shall be exercisable by written notice to the Grantee given within thirty (30) days after receipt of the Grantee's Notice. Unless InfoVest elects to acquire (or arrange for another person to acquire) all of the Offered Shares, the Grantee may sell, transfer or assign, subject to the provisions hereof, all of the offered Shares (but not less than all) to a third party on the same terms and -8- conditions as the Offer to InfoVest; PROVIDED, HOWEVER, that if such sale, transfer or assignment is not consummated within sixty (60) days after the date of the Grantee's Notice, the restrictions imposed by paragraph (a) of this Section 15 shall apply once again to the Grantee and no sale, transfer or
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document assignment of such Shares may be made thereafter without again offering the same to InfoVest in accordance with the provisions thereof.
(b) If an "Involuntary Transfer", as defined in paragraph (c) of this Section 15, of any Shares issued to a Grantee pursuant to the exercise of an Option shall occur, InfoVest shall have the right to purchase, or arrange for another person to purchase, any or all of such Shares (the "Transferred Shares"), which right shall be exercisable by written notice by InfoVest to the involuntary transferee thereof (a "Purchaser Notice"). If InfoVest fails to provide a Purchaser Notice within thirty (30) days after the date that InfoVest receives written notice of such Involuntary Transfer from the involuntary transferee, InfoVest shall be deemed to have declined its right to purchase the Transferred Shares. The purchase price per Share of the Transferred Shares shall be the fair market value of a Share (as determined, at the Committee's sole discretion, as (i) the Exercise Price plus net income (or minus net loss) per Share for the period from the beginning of the fiscal year at the time the Option is granted through the end of the most recent fiscal year ending prior to the Involuntary Transfer, or (ii) the fair market value per share as determined by an independent investment bank selected by the Committee) at the time of InfoVest's purchase. If InfoVest does not elect to purchase such Shares from the involuntary transferee, upon agreement of the involuntary transferee evidenced by a signed writing delivered to InfoVest within 30 days after expiration of InfoVest's right to deliver a Purchaser Notice, InfoVest shall have a right of first refusal, if the involuntary transferee subsequently obtains a bona fide offer from a third party for the sale, transfer or assignment of the Transferred Shares and desires to sell, transfer or assign such Shares, in which event the involuntary
-9- transferee shall first make an offer (referred to in this paragraph (b) as the "Offer") to sell, transfer or assign such Shares (referred to in this paragraph (b) as the "Offered Shares") to InfoVest. Such Offer shall be upon the same terms and conditions as the offer from the third party. The involuntary transferee shall provide InfoVest written notice of the Offer (hereinafter the "Involuntary Transferee's Notice"). The Involuntary Transferee's Notice shall state the number of the Offered Shares, the terms and conditions of the Offer and of the third party's offer, and the name of the third party (together with a copy of all correspondence between the third party and the involuntary transferee necessary to establish the terms of the third party's offer).
InfoVest shall have the right to acquire, or arrange for another person to acquire, any or all of the Offered Shares, which right shall be exercisable by written notice to the involuntary transferee given within thirty (30) days after receipt of the Involuntary Transferee's Notice. Unless InfoVest elects to acquire all of the Offered Share, the involuntary transferee may sell, transfer or assign, subject to the provisions hereof, all of the Offered Shares (but not less than all) to a third party on the same terms and conditions as the Offer to InfoVest; PROVIDED, HOWEVER, that if such sale, transfer or assignment is not
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document consummated within sixty (60) days after the date of the Involuntary Transferee's Notice, the restrictions imposed by paragraph (b) of this Section 16 shall apply to the involuntary transferee, and no sale, transfer or assignment of such Shares may be made thereafter without the written consent of InfoVest to such sale, transfer or assignment or without again offering the same to InfoVest in accordance with the provisions hereof.
(C) "Involuntary Transfer" shall mean any transfer, proceeding or action by or in which a stockholder of InfoVest who is or was a Grantee, or an involuntary transferee of a Grantee, shall be deprived or divested of any right, title or interest in or to any of the Shares, including, without limitation, any seizure under levy of attachment or execution, any transfer in connection with
-10- bankruptcy (whether pursuant to the filing of a voluntary or an involuntary petition under the Federal Bankruptcy Code of 1978, or any modification or revision thereto) or other court proceeding to a debtor in possession, trustee in bankruptcy or receiver or other officer or agency, any transfer to a state or to a public officer or agency pursuant to any statue pertaining to escheat or abandoned property, any transfer pursuant to any separation agreement or the entry of a final court order in a divorce proceeding from which there is no further right of appeal, any transfer upon or occasioned by the death of any stockholder who is a Grantee, or any involuntary transferee of a Grantee, or any transfer to a legal representative of any such stockholder or involuntary transferee.
(d) The provisions hereof shall be binding upon any and all transfers by a Grantee of Shares acquired pursuant to the exercise of an Option, notwithstanding the termination of the Plan before or after such transfer(s).
(e) A Grantee of an Option under the Plan shall, as a condition of the exercise of an Option, consent to the placement of a legend on the shares of Common Stock issued stating that such shares are subject to a right of first refusal in favor of InfoVest or its successor.
(f) Neither a Grantee, nor any purchaser, transferee or assignee of Shares issued to a Grantee pursuant to exercise of an Option shall in no event sell, assign, transfer or in any manner whatsoever convey any interest in any or all of the Shares to (A) any Person who is or has been at any time engaged in competition with any of the InfoVest Companies in the businesses of direct mail marketing of consumer services including credit card or personal property registration services, or collection and dissemination of automobile valuation data (including but not limited to Safecard Services, Inc. (or any successor in interest thereto) or John P. Ferry), or (B) any Affiliate of such Person (such Persons as are described in Clauses (A) and (B) above are hereinafter referred to as "Prohibited Transferees"). For purposes of this paragraph, the term "Person" means any individual,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -11-
corporation, partnership, association, joint stock company, trust, unincorporated organization or similar business organization, and the term "Affiliate" means with respect to a specified Person, any Person that directly, or indirectly through one or more intermediaries, controls, or is controlled by, or is under common control with the Person specified.
16. TAX CONSIDERATIONS
All options granted under the Plan are not intended to qualify, and shall not be treated as, "incentive stock options" as such term is defined in Section 422 of the Internal Revenue Code of 1986.
17. RESERVATION OF SHARES
InfoVest, during the term of this Plan, shall at all times reserve and keep available, and shall seek or obtain from any regulatory body having jurisdiction any requisite authority in order to sell, such number of Shares as shall be sufficient to satisfy the requirements of the Plan. Inability of InfoVest to obtain from any regulatory body having jurisdiction the authority deemed by InfoVest's counsel to be necessary for the lawful sale of any Shares hereunder shall relieve InfoVest of any liability in respect of the failure to sell such Shares as to which such requisite authority shall not have been obtained.
18. NOTICE
All notices delivered pursuant to the Plan shall be in writing, delivered by hand or by first class certified mail, return receipt requested, postage prepaid as specified in the Stock Option Agreement.
-12-
19. GOVERNING LAW
The Plan shall be construed and its provisions enforced and administered in accordance with the laws of the State of Delaware, except to the extent that such laws may be superseded by any Federal law.
* * * * *
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document -13-
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 10.2
OFFICE LEASE
THE MERCHANDISE MART
CHICAGO, ILLINOIS
TENANT: CCC INFORMATION SERVICES INC.
DATE: MAY 7, 1993
OFFICE LEASE
THE MERCHANDISE MART
CHICAGO, ILLINOIS
TENANT: CCC INFORMATION SERVICES INC.
a Delaware corporation
TABLE OF CONTENTS
1. DEMISED PREMISES; TERM ...... 1
2. USE...... 2
3. BASE RENT...... 3
4. RENT ADJUSTMENTS ...... 4
5. CONDITION OF PREMISES...... 11
6. POSSESSION ...... 12
7. REPAIRS...... 12
8. ALTERATIONS...... 14
9. SERVICES ...... 17
10. COVENANT AGAINST LIENS ...... 21
11. WAIVER OF CLAIMS ...... 22
12. ASSIGNMENT AND SUBLETTING...... 23
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 13. EXPENSES OF ENFORCEMENT...... 27
14. STORAGE SPACE...... 27
15. LANDLORD'S REMEDIES...... 28
16. SURRENDER OF POSSESSION...... 29
17. HOLDOVER ...... 30
18. [Intentionally Omitted.] ...... 30
i
19. NOTICE ...... 30
20. NO SOLICITATION...... 32
21. CONDEMNATION ...... 32
22. NONWAIVER...... 32
23. WAIVER OF NOTICE ...... 33
24. FIRE OR CASUALTY ...... 33
25. INSURANCE...... 35
26. CERTAIN RIGHTS RESERVED BY LANDLORD...... 37
27. RULES AND REGULATIONS...... 40
28. MISCELLANEOUS...... 43
29. ATTORNMENT ...... 46
30. ESTOPPEL CERTIFICATE ...... 46
31. BROKERS...... 47
32. SECURITY DEPOSIT ...... 47
33. PARKING...... 47
34. OPTIONS TO EXPAND...... 48
35. LANDLORD'S CONTRIBUTION...... 54
36. IMPROVEMENT WORK ...... 55
37. OPTIONS TO EXTEND TERM ...... 62
38. FAIR MARKET RENT; ARBITRATION PROCEDURES ...... 65
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 39. RIGHT OF FIRST OFFER ...... 67
40. TENANT EQUIPMENT/FURNITURE LEASE...... 68
41. 640 NORTH LASALLE STREET LEASE ...... 68
42. COVENANT OF QUIET ENJOYMENT; MORTGAGEE'S APPROVAL...... 71
43. ENTIRE AGREEMENT ...... 72
44. TRUSTEE CLAUSE ...... 72
ii
EXHIBITS
EXHIBIT A PLAN OF PREMISES EXHIBIT A-1 EXPANSION SPACES EXHIBIT B DESCRIPTION OF ALLOCATION BETWEEN RETAIL CENTER AND NON-RETAIL SECTION OF THE BUILDING EXHIBIT C EXAMPLE STATEMENT REGARDING OPERATING EXPENSES AND OWNERSHIP TAXES EXHIBIT D JANITORIAL SPECIFICATIONS EXHIBIT E SHELL AND CORE WORK EXHIBIT F RATES FOR LANDLORD'S SUPERVISION AND GENERAL CONDITIONS EXHIBIT G LIST OF APPROVED CONTRACTORS
iii
THE MERCHANDISE HART
This Lease made as of May 7, 1993 between LASALLE NATIONAL TRUST, N.A., as successor trustee to LASALLE NATIONAL BANK, not individually but as Trustee under a Trust Agreement dated May 27, 1981, and known as Trust No. 104000 ("Landlord") and CCC INFORMATION SERVICES INC., a Delaware corporation ("Tenant").
Witnesseth
1. DEMISED PREMISES; TERM. Landlord does hereby demise and lease to Tenant, and Tenant accepts that certain space shown hatched on Exhibit "All which is attached hereto and made a part hereof, consisting of approximately 106,730 rentable square feet and commonly described as a portion of the fourth (4th) floor ("Premises") of The Merchandise Mart, a building located at Merchandise Mart Plaza ("Building") constructed on property bounded by West Kinzie Street, North Orleans Street, the Chicago River, and North Wells Street in Chicago, Illinois (such land and Building hereinafter referred to, together with all present and future easements, additions, improvements and other rights appurtenant thereto, as the "Property"), for a term beginning on the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Commencement Date (as hereinafter defined) and ending on the last day of the fifteenth (15th) Lease Year (as hereinafter defined) thereafter, unless sooner terminated as provided herein and subject to extensions as provided herein (the "Term"), subject to the terms, covenants and agreements herein contained. In addition, Tenant shall have the non-exclusive right to use the elevators, docks, corridors and other common areas of the Building, exclusive of any premises leased exclusively to other tenants of the Building, in common with all other tenants, their employees, agents, customers and invitees, subject to any reasonable rules and regulations adopted by Landlord and applicable thereto.
The Commencement Date shall be the earlier of (i) December 1, 1993, or (ii) the date on which the Shell and Core Work (as defined in Article 36(A) hereof) and Tenant's Work (as defined in Article 36(B) hereof) are substantially complete, so that the Premises are reasonably suitable for occupancy so that Tenant can reasonably perform its normal business operations therein, provided, however: (1) the Commencement Date shall be (a) subject to extension on account of delays in the completion of Tenant's Work caused by Force Majeure (as defined in Article 36) and (b) subject to extension on account of delays in the completion of Tenant's Work caused by Landlord Delays as provided in Article 36; and (2) without limitation on or by the foregoing clause (1), if Tenant's Work or the Shell and Core Work is not substantially complete on or before December 1, 1993 due to a Landlord Delay or Force Majeure or due to the act or failure to act of Tenant's contractor or any subcontractor or vendor of Tenant's contractor (and not due to the act or failure to act of Tenant, its employees and agents and which delay was beyond the reasonable control of Tenant to prevent) and provided that Tenant's contractor is one of those specifically
listed in Exhibit G attached hereto and made a part hereof or is a contractor which in Landlord's sole judgment is of comparable reputation and quality as those listed on Exhibit G, then the Commencement Date shall, at the option of Tenant, be extended to a date not later than February 15, 1994.
For purposes of this Lease, "Lease Year" shall mean a period of twelve (12) consecutive calendar months, the first of which shall commence on the Commencement Date if the Commencement Date shall be the first day of a calendar month, or on the first day of the first calendar month following the Commencement Date if the Commencement Date shall be other than on the first day of a calendar month, and shall end on the last day of the twelfth (12th) calendar month thereafter. Each successive Lease Year shall be a twelve (12) calendar month period commencing on the anniversary of the commencement of the first Lease Year - Any portion of the Term commencing prior to the first full Lease Year or after the final full Lease Year shall be treated on a proportionate basis and shall be deemed a partial Lease Year.
2. USE. Tenant will use and occupy the Premises for general office purposes and other uses ancillary thereto and for no other use or purpose. Tenant will not use or permit upon the Premises anything that will invalidate any policies of insurance now or hereafter carried on the Building or that will increase the rate of insurance on the Premises or on the Building; provided that the foregoing shall not prohibit the use stated in the first sentence of this Article 2. Tenant will pay all extra insurance premiums on the Building which may be caused by the use which Tenant shall make of the Premises (other than a use stated in the first sentence of this Article 2). Tenant will not (a) use or permit upon the Premises anything that may be dangerous to life or limb; (b) in
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document any manner deface or injure the Building or any part thereof or overload the floors of the Premises; or (c) do anything or permit anything to be done upon the Premises in any way creating a nuisance or tending to injure the reputation of the Building. Tenant shall further not carry-on or permit any activities which might: (1) involve the storage, use or disposal of medical or hazardous waste substances or the creation of an environmental hazard other than such substances in such amounts customarily used in normal office operations; or (2) impair or interfere with (i) the structure of the Building or the operation of Building systems, (ii) the character, reputation or appearance of the Building as a first-class building, (iii) the furnishing of services (including utilities, telephone and communications) to any portion of the Building, or (iv) the enjoyment by any other occupants of the Building or the benefits of such occupancy (for example, free of noise, odors or vibration emanating from the Premises) . The Premises shall not be used for the purposes of any so called "office suites", schools, employment agencies, medical treatment facilities or any retail or wholesale activities; provided Tenant may conduct private training seminars for its employees, agents and clients in the Premises from time to time and Tenant may operate
2
a daycare facility in the Premises for the care of children of employees of Tenant and not for use by the general public so long as (i) such facility is at all times in compliance with all governmental requirements, (ii) Tenant pays any costs incurred by Landlord as a result of or in connection with such facility, including without limitation any costs incurred in connection with any required alterations to the Building, (iii) Tenant complies with any reasonable rules and regulations which Landlord may from time to time impose in connection with any such daycare facility and (iv) Tenant shall not be permitted to operate such a daycare facility in the Premises if Landlord shall at any time grant to another tenant or occupant of the Building or of the building known as The Apparel Center the right to operate a daycare facility in the Building or The Apparel Center; provided, however, if Landlord shall grant such a right to another tenant or occupant of the Building or The Apparel Center at any time after Tenant has commenced to operate, or made a substantial financial commitment for, such a daycare facility in the Premises, then Tenant shall be permitted to continue to operate its daycare facility in the Premises for a period of three (3) years after the date such other daycare facility in the Building or The Apparel Center commences operations. Tenant will fully and promptly comply, and operate the Premises (except to the extent such obligation is specifically designated to Landlord hereunder) in conformity, with all applicable federal, state and municipal laws, ordinances, codes, regulations and requirements respecting the Premises or Tenant's use or occupancy thereof, and activities therein provided, however, Tenant shall not be responsible for assuring that the "Building Systems" (as defined in Article 7 hereof), other than any Building Systems constructed or installed by Tenant, are in compliance with such laws, ordinances, codes, regulations or requirements. Tenant will not use the Premises for lodging or sleeping purposes, nor knowingly conduct or permit to be conducted on the Premises any business or activity which is contrary to the provisions of this Lease or to any applicable governmental laws, ordinances, codes, regulations and requirements. Tenant shall promptly pay all taxes of whatever kind which are imposed upon Tenant but which are to be collected by Landlord. Except for any vending machines permitted pursuant to Article 26 (F) , Tenant shall at no time sell food on or from the Premises. Tenant shall at no
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document time sell (within the meaning of the Illinois Liquor Control Act, as now or hereafter amended) alcoholic liquor on or from the Premises, provided, however, that Tenant may occasionally give complimentary food and alcoholic liquor to its guests on the Premises, on condition that Tenant shall comply with all applicable governmental requirements, and on further condition that, prior to the giving of such alcoholic liquor, Tenant shall procure and maintain continuously thereafter (or cause to be procured and maintained continuously thereafter) in force a policy of or endorsement for host liquor liability insurance, as set forth in Article 25 hereof.
3. BASE RENT. Tenant shall pay to Landlord an annual base rent ("Base Rent") for the Premises as shown below for each
3
Respective period in equal monthly installments during each respective period as follows:
Base Rent Lease Per Rentable Annual Monthly Base Year Square-foot Base Rent Rent Installment ------
1 $10.97 $1,135,395.00 $ 94,616.25 2 $10.68 $1,105,380.00 $ 92,115.00 3 $10.46 $1,082,610.00 $ 90,217.50 4 $16.68 $1,726,380.00 $143,865.00 5 $23.07 $2,387,745.00 $198,978.75 6 $28.70 $2,970,450.00 $247,537.50 7 $21.56 $2,231,460.00 $185,955.00 8 $19.50 $2,018,250.00 $168,187.50 9 $19.92 $2,061,720.00 $171,810.00 10 $20.35 $2,106,225.00 $175,518.75 11 $22.84 $2,363,940.00 $196,995.00 12 $23.35 $2,416,725.00 $201,393.75 13 $23.86 $2,469,510.00 $205,792.50 14 $24.39 $2,524,365.00 $210,363.75 15 $24.94 $2,581,290.00 $215,107.50
It is acknowledged that the Annual Base Rent and the Monthly Base Rent Installment shown in the above schedule are calculated on the basis of the Base Rent Per Rentable Square Foot shown above and an agreed deemed area of the initial Premises, for purposes of this Base Rent calculation, of 103,500 rentable square feet, although the actual area of the initial Premises demised hereby is represented by Landlord to be approximately 106,730 rentable square feet. If Tenant exercises any option to extend the Term pursuant to Article 37, then for the purposes of any "Extended Term" (as defined in said Article 37), the rentable area of the Premises shall be recomputed in accordance with Building Owners and Managers Association International Standard for Measuring Floor Area in office Buildings known AS American National Standard ANS1 Z65.11980 (reaffirmed 1989), approved June 21, 1989 by American National Standards Institute, Inc. ("BOMA Standards") .
Tenant shall pay each installment of Base Rent in advance on the first day
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of every calendar month of the Term. All such payments shall be made payable to Landlord or Landlord's agent and shall be made at the office of the building or at such other places and to such other parties as Landlord shall from time to time by written notice appoint. Base rent shall be payable without any prior demand therefor and without any deductions or set-offs whatsoever. If the term commences on a day other than the first day of the calendar month, or ends on a day other than the last day of the calendar month, the Base Rent for such fractional month shall be prorated on the basis of 1/365th of the annual Base Rent for each day of such fractional month.
4. RENT ADJUSTMENTS. Landlord AND Tenant Agree that the following rent adjustments shall be made with respect to each calendar year of the term, or portion thereof, including the calendar year in which the Term of this Lease begins and the
4
calendar year in which the Term of this Lease terminates, after the Base Year (which Base Year for purposes of this Lease shall be the calendar year ending on December 31, 1993). For purposes of such rent adjustments, Tenant's Proportionate Share is agreed to be 3.410%, calculated by dividing the rentable square feet of the Premises by 3,129,892, being the rentable square feet in the NonRetail Section of the Building (as hereinafter defined).
For purposes hereof, the "Non-Retail Section" of the Building means the entire Building exclusive of the "Retail Center." The "Retail Center" consists of the first and second floors of the Building, excluding those portions of the first and second floors of the Building occupied by (a) the cores for elevators and stairways and (b) areas utilized by structural columns and all utility lines and other installations required to service other components of the Building, including common loading dock and receiving areas (except those areas specifically set aside for use by tenants in the Retail Center).
It is expressly understood and agreed that in determining the Ownership Taxes and Operating Expenses with respect to the Non-Retail Section of the Building in accordance with the provisions of this Article 4, Landlord shall make an allocation, in accordance with Exhibit B attached hereto and made a part hereof, between the Non-Retail Section of the Building and the Retail Center of those items which pertain to the entire Building or which are shared or purchased on a Building-wide basis, which allocation shall be made in accordance with a system of accounts and accounting practices applied consistently year to year.
(A) Tenant shall pay to Landlord as additional rent an amount equal to Tenant's Proportionate Share of the amount by which ownership Taxes (as hereinafter defined) with respect to the Non-Retail Section of the Building paid in any calendar year during the Term after the Base Year exceed Ownership Taxes with respect to the Non-Retail Section of the Building paid in the Base Year. "Ownership Taxes" shall mean all taxes, assessments, impositions and governmental charges of every kind and nature which Landlord shall pay in a calendar year because of or in any way connected with the ownership, leasing, management, and operation of the Building and the Property, subject to the following, and Ownership Taxes with respect to the Non-Retail Section of the Building shall mean all Ownership Taxes other than those Ownership Taxes
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document allocated to the Retail Center:
(1) the amount of ad valorem real and personal property taxes against Landlord's real and personal property to be included in ownership Taxes shall be the amount shown by the latest available tax bills required to be paid in the calendar year in respect of which Ownership Taxes are being determined. The amount of any tax refunds including any interest thereon shall be deducted from Ownership Taxes in the calendar year they are received by Landlord;
5
(2) the amount of special taxes and special assessments to be included shall be limited to the amount of the installments (plus any interest, other than penalty interest, payable thereon) of such special tax or special assessment required to be paid during the calendar year in respect of which ownership Taxes are being determined;
(3) there shall be excluded from Ownership Taxes all income taxes [except for a specific tax or excise on rents or other income from the Property (or on the value of leases thereon) or a specific gross receipts tax or excise on rents or other income from the Property (or on the value of leases thereon)], excess profit taxes, franchise, capital stock and inheritance or estate taxes, succession, transfer, gift or corporate taxes and personal property replacement taxes (such as the Illinois Personal Property Replacement Tax), and any penalties, fines or interest for late payment or non-payment of taxes, except to the extent that any such tax is in lieu of or in substitution for, in whole or in part, any tax included in Ownership Taxes;
(4) Ownership Taxes shall also include, in the calendar year paid, all reasonable fees, costs and expenses (including reasonable attorneys' fees) incurred by Landlord in contesting or attempting to reduce or limit any Ownership Taxes, regardless of whether any such reduction or limitation is obtained; provided that if such fees, costs and expenses are paid in one year in respect of Ownership Taxes for more than one year, such fees, costs and expenses (except for any fees for appraisals) shall be reasonably allocated to the years in respect of which the Ownership Taxes were reduced, limited or contested.
(B) (i) Tenant shall also pay to Landlord as additional rent an amount equal to Tenant's Proportionate Share of the amount by which Operating Expenses with respect to the Non-Retail Section of the Building for any calendar year during the Term after the Base Year exceed Operating Expenses with respect to the Non-Retail Section of the Building for the Base Year. Operating Expenses shall mean all expenses, costs and disbursements of every kind and nature paid, incurred, or otherwise arising in respect of a calendar year because of or in any way connected with the ownership, management, maintenance, repair, and operation of the Building and the Property except as hereinafter provided; and Operating Expenses with respect to the Non-Retail Section of the Building shall mean all Operating Expenses other than those allocated to the Retail Center.
(ii) There shall be excluded from Operating Expenses: (1) costs of alterations of tenant spaces; (2) depreciation and amortization except as specifically provided herein; (3) principal and interest payments on mortgages, and financing or refinancing expenses; (4) return on investment; (5) Ownership Taxes described in the preceding paragraph (A) and any other taxes
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document specifically
6
excluded from the above definition of Ownership Taxes; (6) the cost of capital improvements, capital repairs in the nature of capital replacements, and capital equipment, except as provided in clause (iii) below with respect to capital items resulting in a reduction or limitation in Operating Expenses or required to comply with governmental requirements; (7) ground lease or master lease rents or costs in connection therewith; (8) real estate brokers' leasing commissions or compensation and any other expenses incurred in leasing space or procuring tenants; (9) any costs for which Landlord has received reimbursement (other than reimbursements from tenants under operating expense escalation clauses) , whether from insurance or condemnation proceeds; (10) attorneys' fees, costs and disbursements and other expenses incurred in connection with negotiation or enforcement of leases with tenants or prospective tenants of the Building; (11) expenses in connection with any service or other benefits of a type which are not provided to Tenant but which are provided to another tenant or occupant of the Building; (12) overhead and profit increment paid to parents, subsidiaries or affiliates of Landlord or its beneficiary for services on or to the Building to the extent only that the costs of such services exceed the competitive costs of such services were they not so rendered by such parent, subsidiary or affiliate (subject, however, to the proviso in clause (15) below as to management fees)#, (13) any compensation paid to clerks, attendants or other persons in commercial concessions operated by Landlord or Landlord's beneficiary or any affiliate of either; (14) advertising, marketing and promotional expenditures; (15) management fees to the extent such fees exceed similar costs incurred in comparable office buildings in the area; provided, however, that in any event Tenant agrees that there may be included in operating Expenses a management fee, whether paid to an affiliate of Landlord's beneficiary or an unrelated third party, in an amount up to 3% of gross revenues derived from the Building; (16) wages, salaries or other compensation paid to any employees of Landlord or Landlord's beneficiary or management agent above the grade of building manager; (17) the costs of complying with the 0 & M Program (as defined in Article 8) and the costs incurred in connection with the removal, containment or other remediation of any asbestos containing materials in the Building; (18) any costs, fines or penalties incurred due to violations by Landlord of any governmental rule or authority; (19) land trust fees; (20) attorneys' fees and accountants' fees relating to the preparation of the income tax returns of Landlord's beneficiary; (21) attorneys' fees relating to the organization and maintenance of Landlord's beneficiary and not relating to the operation of the Property; (22) any operating costs (not including real estate taxes) directly and primarily incurred in the operation of any parking facility used by, for or in connection with the Property and which are reasonably identifiable, without special record keeping by Landlord, and separable from other operating expenses of the Property; and (23) any insurance deductibles in excess of those customarily maintained by prudent owners of first-class office buildings in downtown Chicago.
7
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (iii) In the event Landlord makes any capital improvement or any capital repair in the nature of a capital replacement or installs any capital equipment during the Term hereof which (a) results in a reduction or limitation in Operating Expenses, or (b) is required to comply with any governmental rules, regulations or requirements applicable from time to time to the Building or to the Property and enacted or initially enforced with respect to the Building or the Property after the date of execution hereof, the costs thereof, as amortized in each case on a straight-line basis (unless otherwise required by generally accepted accounting principles) over the useful life of the item so capitalized, may be included in Operating Expenses; provided, however, that the amount paid by Tenant for any calendar year or portion thereof which falls within the Term of this Lease on account of a capital item described in clause (a) above shall not exceed the actual reduction in Tenant's Proportionate Share of Operating Expenses with respect to such calendar year or portion thereof by reason of such capital item. If the Building shall not have been fully occupied by tenants at any time during the Base Year or any succeeding calendar year, the Operating Expenses which vary with occupancy for such year may be equitably adjusted to reflect the operating Expenses as though the Building had been fully occupied throughout such year.
(C) [Intentionally Deleted]
(D) In order to provide for current payments on account of increases in Ownership Taxes with respect to the Non-Retail Section of the Building and Operating Expenses with respect to the NonRetail Section of the Building over the Base Year, Tenant agrees, at Landlord's request, to pay on account to Landlord for each calendar year of the Term or portion thereof including the calendar year in which the Commencement Date occurs, Tenant's share of adjustments due for such calendar year or portion thereof, as reasonably estimated by Landlord from time to time, in equal monthly installments, commencing on the first day of the month following the month in which Landlord notifies Tenant of the amount of such estimated rent adjustments or revisions thereto. The installments of reasonably estimated rent adjustments payable for each month of the current calendar year prior to the date of receipt of Landlord's estimate shall be due and payable within thirty (30) days after the receipt of such estimate. If, as finally determined (whether in the succeeding calendar year at the time of delivery of the statement provided for in paragraph (E) hereof, or in the current calendar year when the final amount of any portion of Ownership Taxes becomes known to Landlord), such rent adjustments shall be greater than or less than the aggregate of all installments so paid on account to Landlord prior to receipt of an invoice from Landlord, then Tenant upon receipt of such invoice shall pay to Landlord within ten (10) days immediately following such notification the amount of such underpayment, or, Landlord shall credit Tenant for the amount of such overpayment
8
against rent next coming due until exhausted, as the case may be (or in the event of the expiration of the Term, Landlord shall promptly refund any excess of any such overpayment over any sums due Landlord under this Lease in cash after the expiration of the Term) . It is the intention hereunder to estimate from time to time the amount of increases in Ownership Taxes and Operating Expenses for each calendar year over Ownership Taxes and Operating Expenses for
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the Base Year and then to finally determine such rent adjustments at the end of such calendar year or as soon thereafter as possible based upon actual increases in Ownership Taxes and operating Expenses for such calendar year.
(E) Landlord agrees to keep books and records showing the ownership Taxes and Operating Expenses in accordance with a system of accounts and generally accepted accounting principles consistently maintained on a year-to-year basis in compliance with such provisions of this Lease as may affect such accounts. Landlord shall deliver to Tenant after the close of each calendar year (including the calendar year in which this Lease begins and the calendar year in which this Lease terminates), a statement certified by an officer of Landlord's agent substantially in the form of the sample statement attached hereto and made a part hereof as Exhibit C. Failure or delay in delivering any such statement or accompanying invoice, or failure or delay in computing the rent adjustments pursuant to this Article 4, shall not be deemed a waiver by Landlord of its right to deliver such items nor shall any such failure or delay be deemed a release of Tenant's obligations with respect to any such statement or invoice, or constitute a default hereunder. The statement delivered by Landlord to Tenant pursuant to this Paragraph (E) shall be final, conclusive and binding on Landlord and Tenant ' subject, however, to the provisions of Paragraph (G) below. All rent adjustments payable hereunder shall be made without any deductions or set-offs whatsoever.
(F) The obligations of Landlord and Tenant with respect to the payment, credit or refund of Base Rent and rent adjustments due hereunder shall survive the expiration or termination of this Lease. Any payment, refund, or credit made pursuant to this Article shall be made without prejudice to any right of Tenant to dispute, or of Landlord to correct, any items as billed pursuant to the provisions hereof. In the event that the Term of this Lease shall have been in effect for less than the full calendar year immediately preceding Tenant's receipt of the invoices provided for in paragraphs (D) and (E) hereof or if the Term shall end on a day other than the last day of a calendar year, the rent adjustment shall be pro rata on a per them basis. In no event shall any rent adjustment result in a decrease in the Base Rent payable from time to time hereunder.
(G) In the event that Tenant disputes the accuracy of the statement, or the information therein contained, furnished by Landlord to Tenant pursuant to Paragraph (E) above, Tenant may require upon delivering notice in writing within one hundred twenty
9
(120) days after submission of such statement that Ownership Taxes and Operating Expenses and the allocation thereof between the Retail Center and the Non-Retail Section be audited by an independent, nationally-recognized public accounting firm selected by Tenant and satisfactory to Landlord, at Tenant's expense, except as hereinafter provided. If as finally determined Tenant's Proportionate Share of actual Operating Expenses and Ownership Taxes for any calendar year is ninety-seven percent (97%) or less of Tenant's Proportionate Share of Operating Expenses and ownership Taxes as shown in the statement furnished by Landlord to Tenant pursuant to Paragraph (E) , Landlord shall pay the reasonable costs and expenses incurred by Tenant in engaging such public accounting firm to render such statement (which costs and expenses as so incurred by Landlord shall not
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document for purposes of this Lease be includable in Operating Expenses for any calendar year of the Term) and if it is finally determined that Tenant has overpaid for Tenant's Proportionate Share of Operating Expenses or Ownership Taxes as a result of an error by Landlord, Landlord shall credit to Tenant the amount of such overpayment in the manner provided above in Paragraph (D) ; provided, further, that if as finally determined Tenant's Proportionate Share of actual operating Expenses or actual Ownership Taxes for any calendar year is greater than Tenant's Proportionate Share of Operating Expenses or ownership Taxes as shown in such statement furnished by Landlord to Tenant, Landlord in such instance reserves the right to issue to Tenant an amended invoice adjusting the amount of Tenant's Proportionate Share payable by Tenant to Landlord for such year. The statement rendered by such public accounting firm shall be final, binding and conclusive upon Landlord and Tenant.
(H) In the event Tenant selects such firm of nationallyrecognized certified public accountants to examine Landlord's books and records for any calendar year, such firm shall promptly conduct such examination in accordance with generally accepted accounting principles consistently applied and, as soon as practicable, render to Landlord and Tenant a report stating such accountants' determination of the Operating Expense and Ownership Tax increase or decrease for such year over the Base Year and, if such determination is inconsistent with Landlord's statement of Operating Expense or Ownership Tax increase furnished to Tenant by Landlord, a reasonably-detailed basis for the determination and explanation of each discrepancy.
Such accountants engaged by Tenant may inspect, audit, review, copy and examine (and Landlord agrees to make the same available for such purposes) in Chicago, Illinois only such of Landlord's books and records as are directly related to the preparation of Landlord's statement of Operating Expense and ownership Tax increase, and such accountants engaged by Tenant may examine none of Landlord's books and records with respect to any property other than the Property, except to the extent Landlord has elected to include in Operating Expenses an allocable portion of costs related to another property, in which case such accountants shall also have
10
access to the books and records of such other property as are directly related to such costs.
Landlord shall not be obligated to permit any individual to examine Landlord's books and records unless such individual and such individual's employer first execute and deliver to Landlord a written acknowledgement affirming that (i) such individual's examinations of Landlord's books and records shall be strictly confidential, and (ii) the results thereof and information derived therefrom or obtained in the course thereof shall not be (a) disclosed by such parties to any person other than such individual's direct supervisor and Tenant's employees who have a position within Tenant requiring them to know such information and other individuals to whom disclosure is required by law or governmental rule or regulation, or (b) used by such parties for any purpose other than in preparing the report to be rendered to Landlord and Tenant; provided, however, such results and information from the accountant's examination may be used by Landlord and Tenant in enforcing their respective rights and obligations hereunder.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Tenant hereby covenants and agrees with Landlord that any examination of any information relating to Operating Expenses or ownership Taxes furnished by Landlord to Tenant and any examination of Landlord's books and records by Tenant, its employees or agents shall be confidential in accordance with the provisions of this Paragraph (H) and the results of such examinations and information derived therefrom or obtained in the course thereof shall not be disclosed to anyone or used for any purpose other than as permitted pursuant to this Article 4.
5. CONDITION OF PREMISES. Tenant's entry into possession of all or any part of the Premises at the commencement of the Term shall be conclusive evidence as against Tenant that such part of the Premises was in good order and satisfactory condition when Tenant took possession, except for (a) any latent defects in the structure of the Building (including the exterior of the Building and exterior windows of the Building), or (b) any latent defects in the electrical, plumbing, RVAC or other common systems of the Building, excluding items of damage caused by Tenant, its agents, contractors and suppliers, or (c) any incomplete Shell and Core Work which shall be identified by Landlord and Tenant prior to Tenant's entering into possession of the Premises for the purpose of conducting its business therein. Tenant acknowledges that no promise of Landlord or its agents to alter, remodel or improve the Premises or the Building and no representation respecting the condition of the Premises or the Building have been made by Landlord or its agents to Tenant other than as may be contained herein.
11
6. POSSESSION.
A. In the event that possession of the Premises shall not be delivered to Tenant on the date above fixed for the commencement of the Term, this Lease shall nevertheless continue in full force and effect, and no liability shall arise against Landlord out of any such delay beyond the abatement of rent as provided in Article 36 and any remedies or rights provided Tenant in Article 36(B)(5).
B. Tenant shall have the right from time to time to enter into possession of all or any part of the Premises prior to the Commencement Date for the purpose of conducting its business therein. All of the covenants and conditions of this Lease (including, without limitation, Landlord's provision of services as described in Article 9 hereof) shall be binding upon the parties hereto in respect of such pre-Term possession the same as if the first day of the Term had been fixed as of the date when Tenant entered such possession, except that Tenant shall not be obligated to pay any Base Rent or any rent adjustments pursuant to Article 4 hereof for the period prior to the Commencement Date, but Tenant shall be responsible for the payment of electricity pursuant to Article 9(C) from and after the date that Tenant so enters into possession.
7. REPAIRS. Tenant will, at its own expense and subject to the provisions of Article 8 of this Lease, keep the "Tenant Responsible Premises" (as defined below in this Article 7) in good repair and tenantable condition, subject to Force Majeure, at all times during the Term of this Lease, and Tenant shall promptly and adequately repair all damages to the Tenant Responsible
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Premises (except for reasonable wear and tear and as otherwise provided in Article 25 of this Lease) and replace or repair all damaged or broken interior glass (including any glass demising walls and signs thereon), fixtures and appurtenances, under the direct supervision and with the approval of Landlord, and within any reasonable period of time specified by Landlord. If Tenant does not do so, after written notice from Landlord, Landlord may, but need not, make such repairs or replacements and the amount paid by Landlord for such repairs and replacements (including Landlord's overhead and profit and the cost of general conditions at Landlord's then published rates) shall be deemed additional rent reserved under this Lease due and payable within thirty (30) days after delivery of a bill therefor by Landlord. Landlord may, but shall not be required so to do, enter the Premises at all reasonable times to make such repairs or alterations, improvements and additions, including but not limited to ducts and all other facilities for air conditioning service, as Landlord shall desire or deem necessary for the safety, preservation or improvement of the Premises or the Building or any equipment located in the Building, or as Landlord may be required to do by the City of Chicago or by the order or decree of any court or by any other governmental authority, provided that Landlord gives Tenant prior notice (except in cases of an emergency) of any
12
such repairs, alterations, improvements and additions in the Premises, and (except in cases of an emergency) so long as the performance of such work during ordinary business hours does not interfere with Tenant's ability to conduct its business in the Premises.
In the event Landlord or its agents or contractors shall elect or be required to make repairs, alterations, improvements or additions to the Premises or the Building or any equipment located in the Building, Landlord shall be allowed to take into and upon the Premises all material that may be required to make such repairs, alterations, improvements or additions and, during the continuance of any of said work, to temporarily close doors, entryways, public space and corridors in the Building and to interrupt or temporarily suspend Building services and facilities without being deemed or held guilty of eviction of Tenant or for damages to Tenant's property, business or person, and the rent reserved herein shall in no way abate while said repairs, alterations, improvements or additions are being made (except as otherwise expressly provided in Article 9 below), and Tenant shall not be entitled to maintain any set-off or counterclaim for damages of any kind against Landlord by reason thereof. Landlord may, at its option, make all repairs, alterations, improvements and additions in and about the Building and the Premises during ordinary business hours, so long as (except in case of an emergency) the performance of such work during ordinary business hours does not interfere (other than in a de minimis way) with Tenant's access to the Premises or Tenant's ability to conduct its business in the Premises, and if such work during ordinary business hours is not of an emergency nature and does not interfere (other than in a de minimis way) with Tenant's access to the Premises or Tenant's ability to conduct its business in the Premises and Tenant nonetheless desires to have the same done during any other hours Tenant shall pay for all overtime and additional expenses resulting therefrom.
As used herein, "Tenant Responsible Premises" shall mean all alterations, additions and improvements in and to the Premises at any time or from time to
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document time existing, whether constructed by Landlord or Tenant, including but not limited to all items of work constructed in the Premises in preparation for Tenant's initial occupancy thereof, but excluding all "Building Systems" (as defined below in this Article 7).
Subject to Force Majeure events, Landlord shall keep in good order and repair (and the cost thereof may be included in operating Expenses, except as otherwise provided in Subparagraph B(ii) of Article 4 hereof) the following items ("Building Systems") : (i) the structural components and common areas of the Building serving the Premises; (ii) the mechanical, electrical, plumbing, heating, ventilation, and air cooling systems serving the Premises; (iii) HVAC ducts in the Premises, but excluding variable air volume (VAV) boxes, reheats, in-duct fans and other equipment and devices in or
13
attached to the ducts; and (iv) the Building sprinkler system serving the Premises, including piping up to the Premises but excluding any piping and apparatus within the Premises.
Any liability of Tenant or Landlord for the performance of their respective obligations under this Article 7 shall be subject to the provisions of Articles 11 and 25 hereof.
8. ALTERATIONS. Tenant shall not, without the prior written consent of Landlord in each instance obtained, make any repairs, replacements, alterations, improvements or additions (collectively "Improvements") to the Premises, the performance of which affects the Building structure, Building Systems, common areas or other tenants' premises. Tenant shall give Landlord reasonable prior notice of all Improvements during the Term whether or not Landlord's consent thereto is required. To the extent Landlord's consent is required for any Improvements, such consent shall not be unreasonably withheld or delayed, but such consent may be conditioned upon such requirements regarding such Improvements as Landlord deems appropriate, including without limitation, the submission of detailed plans and specifications, and such Improvements to the extent they affect the Building structure, Building systems or common areas shall be of a quality equal to or better than the standards of the Building Systems. At the time that Landlord gives its consent to any such Improvements, Landlord must designate any items which Landlord reserves the right to require Tenant to remove upon the expiration of the Term or upon any termination of this Lease or Tenant's right to possession hereunder. Neither approval of any plans and specifications nor supervision of any Improvements by Landlord or its agents shall constitute a representation or warranty by Landlord or its agents that such plans or wbrk either (i) are complete or suitable for their intended purpose, or (ii) comply with applicable laws, ordinances, codes and regulations, it being expressly agreed by Tenant that Landlord assumes no responsibility or liability whatsoever to Tenant or to any other person or entity for such completeness, suitability or compliance. All such Improvements shall be done at Tenant's expense by employees or agents of Landlord or contractors hired by Landlord except to the extent Landlord gives its prior written consent to Tenant hiring its own contractors (which contractors must be reputable and financially responsible, maintain proper insurance and preserve labor harmony), and, in either event, Tenant shall pay to Landlord or its agent a charge for supervision, general conditions, overhead, Landlord's profit and other costs and
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document expenses incurred by Landlord in connection with such work, as established by Landlord from time to time. The billing for such employees' time and general conditions shall be based upon the rates set forth in Exhibit "F" attached hereto and made a part hereof, as the same may be reasonably adjusted by Landlord from time to time.
In the event that Tenant uses its own contractors for the Improvements Landlord may, without limitation, require Tenant to:
14
(a) comply with such construction standards or procedures as may be applicable from time to time for construction activities in the Building; (b) give assurances reasonably satisfactory to Landlord that the construction of such Improvements will not jeopardize labor harmony; (c) submit satisfactory insurance certificates; (d) obtain all necessary permits; (e) furnish satisfactory security for the payment of all costs to be incurred in connection with the Improvements; and (f) upon completing any such Improvements, furnish Landlord with contractors' affidavits and full and final waivers of lien and receipted bills covering all labor and material expended and used and furnish Landlord with final construction drawings (marked up as constructed) for any such Improvements.
There are some asbestos-containing materials ("ACM") in some areas of the Building. Landlord has adopted and implemented an abatement and operations and maintenance program ("O & M Program"), a copy of which is available for review by Tenant, which sets forth certain procedures to be followed in connection with any Improvements to be made in the Building, in order to prevent disturbance to any ACM that may be encountered. Tenant acknowledges, and hereby expressly agrees to cause its agents, employees and contractors to comply at all times with the O & M Program (as amended from time to time; provided, however, no such amendment shall impose upon Tenant the obligation to remove, contain or otherwise remediate any ACM in the Building, except to the extent such ACM is placed in the Premises by Tenant's employees, agents, contractors, invitees or anyone claiming through Tenant ). Landlord has delivered to Tenant a summary of the 0 & M Program in effect as of the date hereof setting forth the requirements which are necessary for Tenant's compliance with the O & M Program, and Landlord agrees to deliver to Tenant written notice of any amendments made from 1:ime to time to the 0 & M Program affecting Tenant or its operations; provided that the delivery of such summary and such notices of amendments shall not relieve Tenant of its responsibility to comply and to cause its agents, employees and contractors to comply with the full provisions of the O & M Program. Tenant shall not be responsible for any failure by it or its contractors to comply with any amendment to the O & M Program of which Landlord has not delivered written notice to Tenant. Landlord, at its expense, shall remove, contain or otherwise remediate any ACM (except to the extent such ACM is placed in the Premises by Tenant or by Tenant's employees, agents, contractors, invitees or anyone claiming through Tenant) in accordance with the O & M Program and applicable governmental requirements.
Landlord and Tenant acknowledge that the Americans With Disabilities Act of 1990 (42 U.S.C. Section 12101 ET SEQ.) and regulations and guidelines promulgated thereunder, as all of the same may be amended and supplemented from time to time (collectively "ADA") , establish requirements for business
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document operations, accessibility and barrier removal, and that such requirements may or may not apply to the Premises and the Building
15
depending on, among other things, whether: (1) Tenant's business is deemed a "public accommodation" or "commercial facility", (2) such requirements are "readily achievable", and (3) a given alteration affects a "primary function area" or triggers "path of travel" requirements. The parties hereby agree that (a) Landlord shall be responsible for ADA Title III compliance in the common areas of the Building, except as provided below, (b) Tenant shall be responsible for ADA Title III compliance in the Premises, including direct access into the Premises and any leasehold improvements or other work to be performed in the Premises under or in connection with this Lease, and (c) Landlord may perform, or require that Tenant perform, and Tenant shall be responsible for the cost of, ADA Title III "path of travel" requirements triggered by alterations in the Premises other than the Shell and Core Work and the Tenant's Work to be performed in connection with Tenant's initial occupancy of the Premises. Tenant shall be solely responsible for requirements under Title I of the ADA relating to Tenant's employees.
All Improvements shall comply with all insurance requirements and with all applicable governmental laws, requirements, codes, ordinances and regulations. All Improvements shall be constructed in a good and workmanlike manner and only good grades of material shall be used. Except for the negligence or wilful misconduct of Landlord, its beneficiary or their respective agents, Tenant shall protect, defend, indemnify and hold Landlord, the Building and the Property, Landlord's beneficiaries, and their respective officers, directors, beneficiaries, partners, agents and employees harmless from any and all liabilities of every kind and description which may arise out of or in connection with such Improvements.
All Improvements made by Landlord or Tenant in or upon the Premises whether temporary or permanent in character, including but not limited to wall coverings, carpeting and other floor covering, lighting installations, built-in or attached shelving, cabinetry, and mirrors, shall become Landlord's property and shall remain upon the Premises at the termination of this Lease by lapse of time or otherwise without compensation to Tenant (excepting only Tenant's movable office furniture, movable partitions, trade fixtures (other than permanently attached or installed lighting equipment or track lighting), and office equipment]; provided, however, that Landlord shall have the right to require Tenant to remove at Tenant's sole cost and expense in accordance with the provisions of Article 16 of this Lease such Improvements which are so identified by Landlord at the time of its approval of the Plans pursuant to Article 36; any and all hazardous materials installed or placed in the Premises by Tenant; any equipment installed by Tenant on the roof of the Building or elsewhere outside the Premises, and any cabling and wiring and other facilities located outside the Premises and serving or intended to serve the Premises; and any items which Landlord previously designated for possible removal, at the time Landlord granted its consent to such Improvements, as provided above in this Article S. Except as
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 16
otherwise expressly provided in this Article 8, Tenant shall have no obligation to remove any Improvements upon termination of the Term hereof.
All cabling, wiring and equipment installed at any time by or on behalf of Tenant outside of the Premises on the Property, whether as part of the initial Tenant's Work or otherwise (which installation shall in all cases be subject to Landlord's consent in its absolute discretion), shall be operated and maintained at Tenant's sole cost and expense in a manner which does not disturb improvements on the Property or the operation thereof or interfere with the operations of, or services provided to, tenants in the Building. Any such installation, operation, and maintenance shall be in accordance with any reasonable rules and regulations established by the Landlord from time to time, shall be at Tenant's sole risk, and shall be subject to the Tenant insurance requirements of Article 25 hereof and the provisions of Article 11 hereof. All such cabling, wiring and equipment shall be appropriately identified by color code, identification plate and/or other means reasonably specified by Landlord at the time of installation if initially installed by Tenant, and Tenant shall provide Landlord with plans and drawings locating and identifying such items in such detail as may be reasonably requested by Landlord.
From time to time as reasonably required by Tenant during the Term of this Lease, Landlord shall, in accordance with prudent building operations, make available to Tenant for Tenant's reasonable wiring and cabling needs relating to the conduct of its business operations in the Premises a reasonable amount of any then available vertical shaft or riser space within the common areas of the Building. All costs and expenses incurred to make any such shaft or riser space available and usable shall be the responsibility of Tenant, and Tenant shall promptly reimburse Landlord for any such costs and expenses advanced by Landlord.
9. SERVICES. Landlord shall provide the following services on all days during the Term of this Lease excepting Sundays and holidays (which holidays are New Year's Day, Memorial Day, Independence Day, Labor Day, Thanksgiving Day and Christmas Day), unless otherwise stated:
(A) Adequate elevator service will be furnished daily consistent with current Building practices and adequate freight elevator service in common with other tenants of the Building will also be furnished.
(B) Conditioned air for heating, ventilating and cooling when necessary for normal comfort in the Premises as further specified in Exhibit "E" attached hereto and made a part hereof will be provided from 8:00 A.M. to 6:00 P.M. Monday through Friday, and 9:00 A.M. and 1:00 P.M. Saturday. Whenever heat-generating machines, equipment or lighting fixtures installed by Tenant affect
17
the temperature otherwise maintained by Landlord in the Premises, or whenever the electrical load in the Premises exceeds the designated electrical load
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document specif ied in Exhibit "E", Landlord shall be relieved of responsibility for maintaining air conditioning in the Premises in accordance with the specifications set forth in such Exhibit "E", and in such event Landlord shall continue to supply air conditioning in the Premises in a manner that would be adequate to satisfy the specifications set forth in Exhibit "E" in the absence of such heat-generating machines and such excess electrical load, and Landlord further reserves the right at its option to (1) require Tenant to discontinue use of such excessive electrical load, or (2) install supplementary air conditioning units in the Premises, the cost, installation, operation and maintenance of which shall be paid by Tenant to Landlord at such rates as Landlord charges from time to time in the Building. Tenant agrees that at all times it will cooperate with Landlord and abide by all regulations and requirements which Landlord may reasonably prescribe for the proper functioning of the ventilating and air conditioning systems.
Landlord agrees that it shall make available to Tenant after hours HVAC service at the expense of Tenant at times other than those identified above in this Paragraph (B), provided that if Tenant desires any such service on Mondays through Fridays (holidays described above excepted), it shall request such service from Landlord on or before 4:00 p.m. on the day for which such service is requested, and in the event Tenant desires such service on Saturdays or Sundays or holidays (as described above), it shall request such service from Landlord no later than 4:00 p.m. on Friday (for service on Saturday or Sunday) and by 4:00 p.m. on the day preceding any holiday (in the case of any such service requested for a holiday). Tenant shall pay for all such after hours HVAC services at Landlord's published rates in effect in the Building from time to time (the published rates currently in effect being $85/hour per fan for water chilled air and $65/hour per fan for circulating air). Tenant may request such after-hours HVAC service by zone (determined by the respective areas served by separate fan rooms); and if another tenant has also specifically requested such after-hours service in the same zone during the same time period as requested by Tenant, Landlord shall reasonably allocate the charge for such service between Tenant and such other tenants so requesting such service.
(C) Electricity will be furnished by Landlord so long as Landlord shall furnish electric current for light or power to all tenants of the Building during the Term of this Lease. Tenant agrees to purchase such electric current from Landlord only, and to pay Landlord for such electric current consumed (measured by a meter or meters installed by Landlord) at the charges from time to time customary in the Building. The charges shall be based upon the amount of current consumed and also the maximum demand of Tenant, both measured and computed in the manner from time to time customary in the Building. Notwithstanding the foregoing, the
18
total charges shall not exceed the total charges which Commonwealth Edison Company (or the then current supplier of electricity to the Building) would charge Tenant as a commercial office user in downtown Chicago having the same level of demand for electricity if Tenant purchased electricity directly from Commonwealth Edison Company (or the then current supplier of electricity to the Building). Landlord, upon giving Tenant not less than thirty (30) days' prior written notice, may discontinue supplying electric current to Tenant upon
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document connecting the Premises with another source of supply of electric current so as not to interrupt the furnishing of electricity to the Premises. Tenant shall not install or operate any electrical equipment or fixtures that exceed the designated electrical load for the Premises specified in Exhibit "El".
(D) Janitorial services, as specified on Exhibit "D" attached hereto and made a part hereof, shall be provided at the sole cost and expense of Landlord, except that commencing on January 1, 1994, all increases in the costs of providing such janitorial services to Tenant in any calendar year in excess of Landlord's annualized cost per rentable square foot of providing such services to Tenant in calendar year 1993 (or, if such services are not actually provided to Tenant in 1993, then the annualized cost per rentable square foot for such services as negotiated by Landlord with a cleaning contractor prepared to provide such services in 1993) shall be paid by Tenant on an estimated basis in monthly installments subject to final year-end adjustment in the same manner as provided for the payment of Operating Expense adjustments in Article 4 hereof. Tenant may from time to time procure directly from Landlord's cleaning contractor at Tenant's expense such additional cleaning services as are desired by Tenant.
(E) Lobby Building directory identification of a reasonable number of listings for Tenant, its departments and key employees.
(F) Additional services may be provided on terms and conditions as may be mutually agreed upon by Landlord and Tenant. Subject to Force Majeure, Tenant and its employees and invitees shall have access to the Premises twenty-four (24) hours a day, seven (7) days a week, fifty-two (52) weeks a year. At times other than normal business hours (i.e. 8 A.M. to 6 P.M. Monday through Friday) access shall be available through limited entrances and subject to regulations and procedures in place in the Building from time to time, including the furnishing of proper employee identification or authorization and the registering of a person's name, room number and time of entry and departure in a register furnished by Landlord and placed in the lobby of the Building.
Tenant shall apply to the applicable utility company or municipality for gas, telephone and all other utility services, other than those provided by Landlord, required by Tenant for use in the Premises in accordance with Article 2 hereof and, subject
19
to Article 8 hereof, Tenant shall be responsible for the connection and installation of same.
All charges for any services shall be deemed rent reserved under this Lease and shall be due and payable at the same time as the installment of rent with which they are billed, or, if billed separately, shall be due and payable within thirty (30) days after such billing. In the event Tenant shall be in default in the payment of Base Rent or rent adjustments or shall fail to make payment for any services not included in Base Rent, Landlord may, in addition to all other remedies which Landlord may have for the non-payment of rent and without notice to Tenant, discontinue any or all services not included in Base Rent, and such discontinuance shall not be held or pleaded as an eviction or as a disturbance in any manner whatsoever of Tenant's possession, or relieve Tenant from the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document payment of rent when due, or vary or change any other provision of this Lease or render Landlord liable for damages of any kind whatsoever; provided, however: (i) Landlord shall not discontinue the furnishing of electricity except as permitted by law, and (ii) during the pendency of any good faith dispute by Tenant (but for not more than 60 days) as to the charges for any additional service, Landlord shall continue to provide such service so long as Tenant is not otherwise in monetary default under the terms hereof and Tenant pays the charges for such service to the extent (or up to the amount) that such charges are not reasonably subject to dispute.
Tenant agrees that, to the extent permitted by law, neither Landlord nor its beneficiaries nor any of their respective agents, partners or employees, shall be liable to Tenant, or any of Tenant's employees, agents, customers or invitees or anyone claiming through, by or under Tenant, for any damages, injuries, losses, expenses, claims or causes of action, because of any interruption, diminution, delay or discontinuance at any time in the furnishing of any of the above services (including access to the Premises as described above in this Article 9) or operating, maintaining, repairing or supervising the Property when such interruption, diminution, delay or discontinuance is occasioned, in whole or in part, by repairs, renewals, improvements or additions, by any strike, lockout or other labor trouble, by inability to secure gas, electricity, water or other fuel at the Building, by any accident or casualty whatsoever, by act or default of Tenant or other parties, or by any other cause beyond Landlord's reasonable control; nor shall any such interruption, diminution, delay or discontinuance be deemed an eviction or disturbance of Tenant's use or possession of the Premises or any part thereof; nor shall any such interruption, diminution, delay or discontinuance relieve Tenant from full performance of Tenant's obligations under this Lease, except as otherwise expressly provided herein. Notwithstanding the foregoing, in the event that any interruption or discontinuance of services (including access to the Premises as described above) required to be provided pursuant to this Article 9 which was within the reasonable control of Landlord to prevent
20
continues beyond three (3) consecutive days after written notice to Landlord and materially and adversely affects Tenant's ability to conduct business in the Premises, and on account of such interruption or discontinuance Tenant ceases doing business in the Premises, Rent shall abate thereafter and for so long as Tenant remains unable to conduct its business in the Premises. Landlord agrees to use reasonable efforts to restore such interrupted or discontinued service as soon as reasonably practicable.
Subject to Landlord's reasonable right to access to the Premises as set forth in this Lease, Landlord agrees that Tenant at its sole cost and expense may control access to the Premises from time to time by installing a magnetic key card or other security system therein, so long as any such installation complies in full with all applicable governmental codes, rules, regulations and requirements and so long as Tenant delivers to Landlord for use by Landlord's security personnel or in the event of any emergency, fire or other casualty at least two (2) cards or other devices which permit such access to the Premises.
Tenant, at its option and its cost and expense, may integrate its alarm system into the Building's system so long as such installation complies in full
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document with all governmental codes, rules, regulations and requirements and does not adversely affect the operation of the Building's system.
10. COVENANT AGAINST LIENS. Tenant agrees to pay when due for any work done or materials furnished by or on behalf of Tenant in or about the Premises or to all or any part of the Property and nothing in this Lease contained shall authorize or empower Tenant to do any act which shall in any way encumber the title of Landlord in and to the Premises or to the Property, nor shall the interest or estate of Landlord therein be in any way subject to any claims by way of lien or encumbrance whether claimed by operation of law or by virtue of any express or implied contract of Tenant, and any claim to a lien upon the Premises or the Property arising from any act or omission of Tenant shall accrue only against Tenant and shall in all respects be subordinate to the title and rights of Landlord to the Premises and the Property. Tenant covenants and agrees not to suffer or permit any lien or encumbrance to be placed against the Premises, the Building or the Property with respect to work or services claimed to have been performed for or materials claimed to have been furnished to Tenant or the Premises at the request of Tenant and, in case of any such lien or encumbrance attaching, or claim thereof being asserted, Tenant agrees to cause it to be immediately released and removed of record, or to provide security as hereinafter provided. If Tenant has not removed any such lien or encumbrance or provided Landlord with a title indemnity bond or such other security as is reasonably satisfactory to Landlord within thirty (30) days after notice to Tenant by Landlord, such failure shall constitute a default hereunder and, in addition to all other remedies available herein, Landlord may, but shall not be obligated to, pay the amount necessary to remove
21
the lien or encumbrance, without being responsible for making any investigation as to the validity thereof, and the amount so paid together with all costs and expenses, including reasonable attorneys' fees, incurred in connection therewith shall be deemed additional rent reserved under this Lease due and payable forthwith.
Tenant covenants and agrees that it shall not voluntarily grant, permit or create any security interest in or pledge of any interest of Tenant in the Premises, any Improvements or fixtures attached to or forming part of the Premises, or any furniture, fixtures or equipment which Tenant acquires or causes to be acquired with any portion of Landlord's Contribution (as defined in Article 35) or pursuant to the Operating Lease (as defined in Article 40).
11. WAIVER OF CLAIMS. Subject to the provisions of Article 25 hereof, and except as otherwise expressly provided in this Article 11, Tenant agrees that Landlord, Landlord's beneficiaries and their respective officers, directors, beneficiaries, partners, agents, and employees shall not be liable to Tenant for (subject, however, to the provisions of Article 9 as to the abatement of rent for interruption of services) any direct or consequential damage (including, without limitation, damages claimed for actual or constructive eviction) either to person or property sustained by Tenant or any other person, due to the Building, the Property, or any part thereof or any appurtenances thereof becoming out of repair, or due to the happening of any accident in or about the Building or the Property, or due to any act or neglect of any tenant or occupant of the Building or the Property, or any other person, except to the extent that
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document any such damage is caused by the negligence or intentional acts of Landlord, its beneficiaries or their respective agents, contractors, servants or employees. The foregoing provision, subject in all events to the provisions of Article 25 as stated above, shall apply particularly (but not exclusively) to damage caused by fire, explosion, water, snow, frost, steam, sewerage, illuminating gas, sewer gas or odors, or by the bursting or leaking of pipes, plumbing fixtures, or sprinkler system. Tenant further agrees that all personal property upon the Premises or brought or caused to be brought within the Building by Tenant shall be at the risk of Tenant and that Landlord shall not be liable for any damage thereto or any theft thereof, except to the extent caused by the negligence or intentional acts of Landlord, its beneficiaries or their respective agents, contractors, servants or employees, subject in all events, however, to the provisions of Article 25. Subject to the provisions of Article 25 hereof, and except for the negligence or intentional acts of Landlord, its beneficiaries or their respective agents, contractors, servants or employees, Tenant shall protect, indemnify, defend and save Landlord, its beneficiaries and their respective officers, directors, agents, beneficiaries, partners, and employees harmless from and against any and all liabilities, damages, costs, claims, obligations and expenses (a) arising out
22
of or in connection with Tenant's use or occupancy of the Premises and relating to any third party claim or (b) arising from any wrongful act or negligence of Tenant or its agents, contractors, servants or employees.
Subject to the provisions of Articles 9 and 25 hereof, and except for the negligence or intentional acts of Tenant, its agents, contractors, servants or employees, Landlord shall protect, indemnify defend and save Tenant, its officers, directors, agents, beneficiaries, partners and employees harmless from and against any and all liabilities, damages, costs, claims, obligations and expenses (a) arising out of (and to the extent caused by) any wrongful act or negligence of Landlord, its beneficiaries or their respective agents, contractors, servants or employees or (b) arising out of or in connection with Landlord's operation of the Building or Landlord's activities in or about the Building or the Property and relating to any third party claim for injury to person occurring in or about the Building or the Property other than the Premises and not caused by the act of Tenant, its officers, directors, agents, beneficiaries, partners or employees.
12. ASSIGNMENT AND SUBLETTING. Tenant shall not, without the prior written consent of Landlord, (a) assign, convey, mortgage, pledge or otherwise transfer this Lease, or any part thereof, or any interest hereunder; (b) permit any assignment of this Lease, or any part thereof, by operation of law; (c) sublet the Premises or any part thereof; or (d) permit the use of the Premises, or any part thereof, by any parties other than Tenant, its agents and employees.
Tenant shall, by notice in writing, advise Landlord of its desire from, on and after a stated date (which shall not be less than thirty (30) days after the date of Tenant's notice), to assign this Lease, or any part thereof, or to sublet any part or all of the Premises for the balance or any part of the Term. Tenant's notice shall: state the name and address of the proposed assignee or subtenant; provide financial information in reasonable detail concerning the proposed assignee or subtenant (subject to Tenant's obligation to provide such
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document additional information concerning the financial condition of the proposed assignee or subtenant as may be reasonably requested by Landlord); designate the space to be assigned or sublet; and specify all the material terms of the proposed assignment or sublease (whether contained in such assignment or sublease or in separate agreements) and state the consideration therefor and the financial aspects thereof.
In the event Tenant delivers such notice, and if Tenant is not in default under the terms of this Lease, Landlord will not unreasonably withhold its consent to Tenant's assignment of the Lease or subletting such space to the party identified in Tenant's notice and upon the terms set forth in Tenant's notice; and Landlord agrees to notify Tenant of Landlord's grant or denial of its consent to such assignment or subletting within twenty (20)
23
days after receipt of such notice from Tenant; provided, however, that in the event Landlord consents to any such assignment or subletting, and as a condition thereto, Tenant shall pay to Landlord fifty per cent (50%) of all profit derived by Tenant from such assignment or subletting. For purposes of the foregoing, profit shall be deemed to include, but shall not be limited to, the amount paid or payable to Tenant or any other party to effect or to induce Tenant or any third party to enter into any such transaction, and the amount of all rent and other consideration of whatever nature payable by such assignee or sublessee or a third party in excess of the Base Rent and rent adjustments payable by Tenant under this Lease, after deducting therefrom Tenant's reasonable expenses incurred in connection with such sublease or assignment, including advertising expenses, brokerage commissions, rent concessions, tenant improvement allowances, other financial concessions, and legal fees. If a part of the consideration for such assignment or subletting shall be payable other than in cash, the payment to Landlord of its share of such non-cash consideration shall be in such form as is satisfactory to Landlord. At the request of Landlord, Tenant shall require, and so provide in the sublease or instrument of assignment, that any subtenant or assignee of Tenant make all payments of rent and other consideration in respect of such sublease or assignment directly to Landlord (and such direction shall not be changed except with the written consent of Landlord), and Landlord shall allocate and apply such funds to Tenant's obligations under this Lease in accordance with the terms hereof.
Tenant shall and hereby agrees that it will furnish to Landlord upon request from Landlord a complete statement, certified by the chief financial officer of Tenant, setting forth in detail the computation of all profit derived and to be derived from such assignment or subletting, such computation to be made in accordance with generally accepted accounting principles. Tenant agrees that Landlord or its authorized representatives shall be given access at all reasonable times to the books, records and papers of Tenant relating to revenue, expenses and the computation of profit with respect to any such assignment or subletting, and Landlord shall have the right to make copies thereof. The percentage of profit due Landlord hereunder shall be paid to Landlord within thirty (30) days of receipt of each payment of profit made from time to time by such assignee or sublessee to Tenant.
For purposes of the foregoing, (a) if Tenant is a partnership, any change in the partners of Tenant resulting in a change in the control of such
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document partnership, or (b) if Tenant is a corporation the voting stock of which is not listed on a nationally recognized security exchange or the National Association for Securities Dealers Automated Quotations (NASDAQ) or its equivalent, any transfer of any or all of the shares of stock of Tenant by sale, assignment, operation of law or otherwise resulting in a change in the present control of such corporation, or (c) the transfer of all or substantially all of the assets of Tenant, shall be deemed to
24
be an assignment within the meaning of this Article 12. Notwithstanding the foregoing, clause (b) of this grammatical paragraph shall not prohibit or restrict (1) any issuance of capital shares to the public by Tenant, (2) any transfer of capital shares of Tenant by gift, inheritance, sale or otherwise by any individual shareholder to such shareholder's spouse or descendants or trusts for such spouse or descendants, (3) any transfer or sale of capital shares of Tenant to employees of Tenant for a business related purpose, or (4) the sale or transfer of all or substantially all of the stock of Tenant to an entity that continues after such transaction to conduct substantially the same business operations in the Premises as previously conducted by Tenant; provided that with respect to any transfer described in clause (1), (3) or (4), the net worth of Tenant, after giving effect to such transaction, shall be equal to or greater than the net worth of Tenant at the time of the execution of this Lease as disclosed by Tenant to Landlord, and with respect to any transfer described in clause (4) Tenant shall comply with the same requirements as applicable to an assignment or sublease to a Successor (as defined below) and described in the immediately succeeding grammatical paragraph; and clause (c) of this grammatical paragraph shall not prohibit or restrict an assignment or sublease to a Successor or Affiliate (as defined below) in accordance with the provisions of the immediately succeeding grammatical paragraph.
Notwithstanding anything set forth above to the contrary, Tenant shall have the right without the prior consent of Landlord, except as provided below, to assign this Lease or sublet the Premises or any part thereof to any Successor or Affiliate, as hereinafter defined, of Tenant, on the following conditions: (a) Tenant shall notify Landlord in writing of such assignment or subletting not less than thirty (30) days prior to the effective date thereof and furnish to Landlord such information (including the most recent financial statement) regarding the identity, business, reputation and financial condition of such Affiliate or Successor as Landlord may reasonably require; (b) Tenant shall deliver to Landlord evidence reasonably satisfactory to Landlord that such Affiliate or Successor satisfies the requirements of this Article 12 and that such Affiliate or Successor has agreed in a form satisfactory to Landlord to comply with and be bound by (and in the case of an assignment, to assume) all of the terms, covenants, conditions and provisions of this Lease to the extent of the space sublet or assigned and Tenant shall deliver to Landlord an executed copy of such an agreement of compliance by any such Affiliate or Successor; (c) any such subletting or assignment shall not release or discharge Tenant of or from any liability whether past, present or future, under this Lease and Tenant shall continue fully liable hereunder; and (d) the creditworthiness of such Successor or Affiliate shall be reasonably acceptable to Landlord, taking into account the financial condition of all parties then liable for Tenant's obligations under this Lease. "Successor" is defined as any corporation or entity resulting from
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 25
a merger or consolidation with Tenant or any corporation or entity succeeding to substantially all of the business and assets of Tenant; and "Affiliate" is defined as any corporation that through one or more intermediaries, controls or is controlled by, or is under common control with, Tenant ("control" meaning the possession of the power to direct or cause the direction of the management and policies of an entity, whether through the ownership of voting securities, by contract or otherwise). Without limiting the foregoing, it is acknowledged and agreed that if, after giving effect to any such assignment or subletting to a Successor or Affiliate and any merger, consolidation, reorganization or transfer of assets in connection therewith, the aggregate net worth of the assigning Tenant (remaining liable on the Lease) and the assignee or sublessee would not be substantially the same as or greater than the net worth of the Tenant (and any Affiliate or Successor previously liable on the Lease) immediately prior to such assignment or sublease (and any merger, consolidation, reorganization or transfer of assets in connection therewith), then Landlord shall not be deemed to be acting unreasonably in determining the creditworthiness of the Successor or Affiliate not to be acceptable.
Landlord's consent to any assignment or sublease shall not operate as a consent to any subsequent assignment or sublease or as a waiver of Landlord's right to require Tenant to seek Landlord's approval of all subsequent assignments and subleases. Any subletting or assignment hereunder shall not release or discharge Tenant of or from any liability, whether past, present or future, under this Lease, and Tenant shall continue fully liable hereunder. Any subtenant or assignee shall agree in a form satisfactory to Landlord (or in the case of an assignment or sublease to an Affiliate or Successor in the absence of a separate assumption document shall be deemed by operation of law) to comply with and be bound by all of the terms, covenants, conditions, provisions and agreements of this Lease to the extent of the space sublet or assigned, and Tenant shall deliver to Landlord promptly within ten (10) days after execution, a fully executed copy of each such sublease or assignment and all other agreements related thereto and an agreement of compliance by each such subtenant or assignee. Tenant agrees to pay to Landlord, on demand, all reasonable costs incurred by Landlord (including reasonable attorneys' fees) in connection with any request by Tenant for Landlord to consent to any assignment or subletting by Tenant. Any sale, assignment, mortgage, transfer, or subletting of this Lease which is not in compliance with the provisions of this Article shall be of no effect and void. Notwithstanding any requirement for Landlord to consider, solicit or obtain a sublease or assignment, whether statutory or otherwise, Landlord and Tenant expressly agree that Landlord's obligation with respect to such sublease or assignment shall arise only when Tenant submits such sublease or assignment to Landlord in the manner set out in this Article 12.
26
13. EXPENSES OF ENFORCEMENT. Tenant shall pay all reasonable attorneys' fees and expenses of Landlord incurred in successfully enforcing any of the obligations of Tenant under this Lease. Landlord shall pay all reasonable
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document attorneys' fees and expenses of Tenant incurred in successfully enforcing any of the obligations of Landlord under this Lease.
14. STORAGE SPACE. In addition to the Premises described in Article 1, Tenant shall lease from Landlord and Landlord shall demise to Tenant, in "as is" condition, throughout the Term, including any Extended Term (but subject to termination in whole or in part as provided below), 2,000 rentable square feet of space to be used by Tenant for storage purposes and no other use or purpose whatsoever (the "Storage Space"), provided such Storage Space may be occupied by such person or persons responsible for the materials being stored in such Storage Space. The Storage Space shall be demised by Landlord to Tenant subject to all of the terms, covenants and conditions of this Lease except as otherwise provided in this Article 14. Landlord agrees to provide with respect to the Storage Space HVAC and electrical capacity suitable for general storage purposes, and Landlord shall not be required to provide any other services with respect to the Storage Space. The Storage Space shall be lockable, secure space with lighting in the Building. The exact location of the Storage Space shall be determined by Landlord and subject to Tenant's reasonable approval.
Tenant shall pay rent ("Storage Space Rent") for such Storage Space at an initial rate, to be in effect at the commencement of the Term, equal to Ten and 00/100 Dollar ($10.00) per rentable square foot. Thereafter the Storage Space Rent shall be increased from time to time throughout the initial Term to reflect increases in the rent generally charged by Landlord to other tenants of the Building for storage space; and the Storage Space Rent during any Extended Term of this Lease shall be the Fair Market Rent (as defined in Article 38 hereof) of the Storage Space for any Extended Term; provided that such determination of Fair Market Rent shall take into account the use of the Storage Space for storage purposes only and the limited services provided to the Storage Space. The Storage Space Rent shall be payable at the same time and in the same manner as Base Rent as provided in Article 3 hereof. The Storage Space Rent shall be subject to rent adjustments in respect of Operating Expenses and Ownership Taxes pursuant to Article 4 in the same manner as provided for the Premises, and Tenant's Proportionate Share shall be adjusted based on the rentable area of the Storage Space.
At any time after November 30, 1996, Tenant shall have the right exercisable from time to time, upon thirty (30) days prior written notice to Landlord, to terminate Tenant's lease of all or a portion of the Storage Space and in the event of any such termination, Tenant agrees to remove all of Tenant's property from such Storage Space so terminated and surrender such space to Landlord prior to the effective date of such termination.
27
15. LANDLORD'S REMEDIES. If default shall be made in the payment of the rent or any installment thereof or in the payment of any other sum required to be paid by Tenant under this Lease, or under the terms of any other lease or agreement between Landlord and Tenant, and such default shall continue for ten (10) days after written notice to Tenant or if default shall be made in the performance of any of the other covenants or conditions which Tenant is required to observe and perform hereunder or under any other lease or agreement between Landlord and Tenant and such default shall continue for thirty (30) days after written notice to Tenant (or if any such default not involving a hazardous or
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document dangerous condition and not involving Tenant's failure to comply with the provisions of Article 25 hereof cannot be cured within such 30-day period, so long as Tenant has promptly commenced to cure such default during such initial 30-day period and thereafter diligently pursues such cure to completion within a reasonable period of time and in all events within an additional one hundred twenty (120) days after the expiration of said 30-day period) or if the interest of Tenant in this Lease shall be levied on under execution or other legal process (and such levy is not dismissed within sixty (60) days) , or if any petition shall be filed by or against Tenant to declare Tenant a bankrupt (and is not dismissed within sixty (60) days) or to delay, reduce or modify Tenant's debts or obligations, or if Tenant be declared insolvent according to law or if any assignment of Tenant's property shall be made for the benefit of creditors or if a receiver or trustee is appointed for Tenant or its property or if Tenant shall abandon or vacate the Premises for more than thirty (30) days during the Term of this Lease (other than during the last year of the Term, as extended by any delivery of a binding notice under Article 37), then Landlord may treat the occurrence of any one or more of the foregoing events as a breach of this Lease, and thereupon at its option may, without further notice or further demand of any kind to Tenant or any other person, have any one or more of the following described remedies in addition to all other rights and remedies provided at law or in equity:
(a) Landlord may terminate this Lease and the Term created hereby, in which event Landlord may forthwith repossess the Premises by forcible entry and detainer suit or otherwise and be entitled to recover forthwith as damages a sum of money equal to the present value of the rent provided to be paid by Tenant for the balance of the stated Term of the Lease, less the present value of the fair rental value of the Premises for such period, and any other sum of money and damages owed by Tenant to Landlord.
(b) Landlord may terminate Tenant's right of possession and may repossess the Premises by forcible entry and detainer suit, or otherwise, without further demand or notice of any kind to Tenant and without terminating this Lease, in which event Landlord shall reasonably attempt to mitigate its damages as required by law. Landlord in such instances expressly reserves the right to
28
relet all or any part of the Premises for such rent and upon such terms as shall be satisfactory to Landlord (including the right to relet the Premises for a term greater or lesser than that remaining under the Term of this Lease and the right to relet the Premises as a part of a larger area and the right to change the character or use made of the Premises). For the purpose of such reletting, Landlord may make such repairs, changes, alterations or additions in or to the Premises as may be necessary or convenient. If Landlord shall fail to relet the Premises, then Tenant shall pay to Landlord as damages a sum equal to the amount of the rent reserved in this Lease for such period or periods. If the Premises are relet and a sufficient sum shall not be realized from such reletting after paying all of the costs and expenses of such repairs, changes, alterations and additions and the expense of such reletting and the collection of the rent accruing therefrom, to satisfy the rent above provided to be paid, Tenant shall satisfy and pay any such deficiency upon demand therefor from time to time; and Tenant agrees that Landlord may file suit to recover any sums falling due under the terms of this paragraph from time to time and that any suit or recovery of
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document any portion due Landlord hereunder shall be no defense to any subsequent action brought for any amount not theretofore reduced to judgment in favor of Landlord.
16. SURRENDER OF POSSESSION. On or before the date this Lease and the Term hereby created terminate, or on or before the date Tenant's right of possession terminates, whether by lapse of time or at the option of Landlord, Tenant will: (a) remove those alterations, improvements and additions installed by Tenant which Tenant is required to remove pursuant to Article 8 hereof and restore the Tenant Responsible Premises to the same condition they were in upon completion of Tenant's Work and any Improvements approved by Landlord (except for reasonable wear and tear and as otherwise provided in Article 25 of this Lease) and repair any damage to the Tenant Responsible Premises or the Building caused by Tenant's removal of those alterations, improvements or additions removed pursuant to this clause (a), (b) remove from the Premises and the Building all of Tenant's trade fixtures and personal property; and (c) surrender possession of the Premises to Landlord. If Tenant shall fail or refuse to restore the Premises to the above-described condition on or before the above- specified date, Landlord may upon notice to Tenant enter into and upon the Premises and put the Premises in such condition, and recover from Tenant Landlord's cost of so doing. If Tenant shall fail or refuse to comply with Tenant's duty to remove all trade fixtures and personal property from the Premises and the Building on or before the above-specified date, the parties hereto agree and stipulate that Landlord may, as its election: (1) treat such failure or refusal as an offer by Tenant to transfer title to such trade fixtures and personal property to Landlord, in which event title hereto shall thereupon pass under this Lease as a bill of sale to and vest in Landlord absolutely without any cost either by set-off, credit allowance or otherwise, and Landlord may remove, sell, retain, donate, destroy, store, discard, or otherwise dispose of all or any
29
part of said personal property in any manner that Landlord shall choose; or (2) treat such failure or refusal as conclusive evidence, on which Landlord and any third party shall be entitled absolutely to rely and act, that Tenant has forever abandoned such trade fixtures and personal property, and without accepting title thereto, Landlord may at Tenant's expense enter into and upon the Premises and remove, sell, retain, donate, destroy, store, discard or otherwise dispose of all or any part thereof in any manner that Landlord shall choose without incurring liability to Tenant or to any other person. In no event shall Landlord ever become or accept or be charged with the duties of a bailee (either voluntary or involuntary) of any personal property or trade fixtures; and the failure of Tenant to remove all personal property and trade fixtures from the Premises and the Building shall forever bar Tenant from bringing any action or from asserting any liability against Landlord with respect to any such property which Tenant fails to remove. If Tenant shall fail or refuse to surrender possession of the Premises to Landlord on or before the above-specified date, Landlord may forthwith re-enter the Premises and repossess itself thereof as of its former state and remove all persons and effects therefrom, using such force as may be necessary, without being guilty of any manner of trespass or forcible entry or detainer.
17. HOLDOVER. Tenant will pay to Landlord an amount equal to the sum of one hundred fifty percent (150%) of the annual Base Rent plus one hundred
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document percent (100%) of rent adjustments and in addition thereto, all actual damages, whether direct or consequential, sustained by Landlord, for all the time Tenant shall retain possession of the Premises or any part thereof after the termination of this Lease, whether by lapse of time or otherwise, but the provisions of this Article shall not operate as a waiver by the Landlord of any right of re-entry hereinbefore provided. Landlord agrees that, upon receipt of written request from Tenant during the last one hundred twenty (120) days of the Term, Landlord will use reasonable efforts to estimate the nature and scope of the damages that Landlord would anticipate incurring if Tenant failed to vacate the Premises promptly upon expiration of the Term of this Lease. At the option of Landlord, expressed in a written notice to Tenant and not otherwise, such holding over shall constitute a renewal of this Lease for a period of month-to-month with the rental for such period in an amount equal to the greater of the holdover rental specified above in this Article 17 or the then prevailing rental rates for similar space in the Building.
18. [INTENTIONALLY OMITTED.]
19. NOTICE. In every case where it shall be necessary or desireable for Tenant to give or serve upon Landlord any notice or demand, Tenant shall give the requisite notice either (a) by delivering or causing to be delivered to Landlord a written or printed copy of such notice or demand, or (b) by sending a written or printed copy of such notice or demand by either (i) Federal
30
Express or similar commercial overnight delivery service, or (ii) certified or registered mail, return receipt requested, postage prepaid, addressed to Landlord at:
Merchandise Mart Properties, Inc. 222 The Merchandise Mart Suite 470 Chicago, Illinois 60654 Attention: President
with a copy to:
Merchandise Mart Properties, Inc. 222 The Merchandise Mart Suite 470 Chicago, Illinois 60654 Attention: Legal Department
In every case where under the provisions of this Lease it shall be necessary or desireable for Landlord to give or serve upon Tenant any notice or demand it shall be sufficient either (a) to deliver or cause to be delivered to Tenant a written or printed copy of such notice or demand, or (b) to send a written or printed copy of said notice or demand by either (i) Federal Express or similar commercial overnight delivery service, or (ii) certified or registered mail, return receipt requested, postage prepaid, addressed to Tenant, at:
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document CCC Information Services Inc. 222 Merchandise Mart Plaza 4th Floor Chicago, Illinois 60654 Attention: President
with a copy to:
CCC Information Services Inc. 222 Merchandise Mart Plaza 4th Floor Chicago, Illinois 60654 Attention: Legal Department
Prior to commencement of the Term hereof, any notices which may be necessary or desirable for Landlord to give or serve upon Tenant shall be addressed to Tenant at CCC Information Services Inc., 640 North LaSalle Street, Chicago, Illinois 60610, and addressed to the attention of those corporate titles set forth above.
Any such notice served upon Landlord or Tenant in accordance with the foregoing shall be deemed served effective upon receipt or upon refusal to accept delivery. Landlord and Tenant may designate alternative addressees or addresses for notice by
31
delivery of notice in accordance with the provisions of this Article 19; provided that the number of addressees/addresses to which notices to either party must be sent shall not exceed three (3).
20. NO SOLICITATION. Tenant shall not by itself or through any officer, salesman, employee, agent, advertisement or otherwise solicit business in the vestibules, entrances, elevator lobbies, corridors, hallways, elevators or other common areas of the Building.
21. CONDEMNATION. If the whole or any substantial part of the Premises or Building shall be taken or condemned by any competent authority for any public use or purpose or if any adjacent property or street shall be condemned or improved in such manner as to require the use of any part of the Premises or a substantial part of the Building, the Term of this Lease, at the option of Landlord, shall end upon the date when the possession of the part so taken shall be required for such use or purpose and Landlord shall be entitled to receive the entire award, if any, without any payment to Tenant. Current rent shall be apportioned as of the date of such termination. Notwithstanding the foregoing, Tenant may, to the extent permitted by law, seek a separate award in a separate proceeding for the value of Tenant Responsible Premises and its trade fixtures and other personal property and moving and relocation expenses, so long as Tenant does not materially interfere with the proceedings being conducted by Landlord or otherwise reduce the award to which Landlord is entitled. Notwithstanding the foregoing, Landlord shall not have the right to terminate this Lease if a substantial part of the Building, but not a substantial part of the Premises, is taken or condemned, unless Landlord elects generally to terminate all leases in the Building which Landlord is entitled to terminate on
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document account of such condemnation or taking or Landlord elects to demolish the portion of the Building not taken or condemned.
22. NONWAIVER. No waiver of any condition expressed in this Lease shall be implied by any neglect of Landlord or Tenant to enforce any remedy on account of the violation of such condition if such violation be continued or repeated subsequently, and no express waiver shall affect any condition other than the one specified in such waiver and that one only for the time and in the manner specifically stated. The receipt and acceptance by Landlord or Tenant of a sum of money which is less than the amount due and owing shall not, regardless of any endorsements or instructions to the contrary, constitute an accord and satisfaction. No receipt of moneys by Landlord from Tenant after the termination in any way of the Term hereof or of Tenant's right of possession hereunder or after the giving of any notice shall reinstate, continue or extend the Term or affect any notice given to Tenant prior to the receipt of such moneys, it being agreed that after the service of notice or the commencement of a suit or after final judgment for possession of the Premises Landlord may receive and collect any rent due,
32
and the payment of such rent shall not waive or affect such notice, suit or judgment.
23. WAIVER OF NOTICE. To the extent that the notice provided in Article 15 hereof satisfies the requirements, if any, for service of notice or demand prescribed by any applicable statute or law, Tenant hereby expressly waives the service of any other notice of intention to terminate this Lease or to re-enter the Premises and waives the service of any demand for payment of rent or for possession and waives the service of any other notice or demand prescribed by any statute or other law.
24. FIRE OR CASUALTY. If the Premises or any part of the Building shall be damaged by fire or other casualty and if such damage does not render all or a substantial portion of the Premises or the Building untenantable (and for purposes of this Article 24, the Premises shall be deemed untenantable if there is a substantial impairment of the reasonable means of access thereto), then Landlord shall proceed to repair and restore the Building Systems (including the Building Systems in the Premises) and the reasonable means of access to the Premises with reasonable promptness, given the nature of the damage to be repaired, subject to reasonable delays for insurance adjustments and delays caused by matters beyond Landlord's control. If any such damage renders all or a substantial portion of the Premises or the Building untenantable, Landlord shall, with reasonable promptness after the occurrence of such damage, but in all events within forty-five (45) days after such damage occurred, obtain, at no cost to Tenant, an opinion of an independent architect, engineer or other qualified licensed professional, estimating the length of time that will be required to substantially complete the repair and restoration of the Building Systems (including the reasonable means of access to the Premises) and the Tenant Responsible Premises (stating separate estimated time periods for the repair and restoration of the Building Systems, including those in the Premises, and the repair and restoration of the Tenant Responsible Premises) and by written notice advise Tenant of such estimate (such notice being referred to herein as the "Repair Estimate Notice") . If it is so estimated that the amount
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of time required to substantially complete such repair and restoration of both the Building Systems (including those in the Premises and the reasonable means of access to the Premises) and the Tenant Responsible Premises will exceed two hundred forty (240) days, then either Landlord or Tenant (but as to Tenant, only if all or a substantial portion of the Premises are rendered untenantable) shall have the right to terminate this Lease as of the date of such damage upon giving notice to the other at any time within twenty (20) days after Landlord delivers the Repair Estimate Notice to Tenant (it being understood that Landlord may, if it elects to do so, also give such notice of termination together with the Repair Estimate Notice). Notwithstanding the foregoing, if such damage renders untenantable a substantial portion of the Building but does not render untenantable a substantial portion of the Premises, Landlord shall not have the right to
33
terminate this Lease on account of such damage, unless Landlord elects generally to terminate all leases in the Building which Landlord is entitled to terminate on account of such damage or Landlord elects to demolish all or a substantial portion of the Building, and any such termination of this Lease shall be effective as of a date, specified by Landlord, not less than sixty (60) days after the delivery of such termination notice.
Unless this Lease is terminated as provided in the preceding paragraph, Landlord shall proceed with reasonable promptness to repair and restore the Building Systems, including Building Systems in the Premises and the reasonable means of access to the Premises, subject to reasonable delays for insurance adjustments and delays caused by matters beyond Landlord's reasonable control, and also subject to zoning laws and applicable building codes then in effect. When the repair and restoration of the Building Systems is completed to a degree making the Premises suitably available for Tenant's repair and restoration of the Tenant Responsible Premises, Tenant shall proceed with reasonable promptness to repair and restore the Tenant Responsible Premises, subject to reasonable delays for insurance adjustments and delays caused by matters beyond Tenant's reasonable control and applicable building codes then in effect. Landlord shall have no liability to Tenant, and Tenant shall not be entitled to terminate this Lease (except as hereinafter provided) if such repair and restoration of the Building Systems is not in fact completed within the time period specified in the Repair Estimate Notice. If the Building Systems are not repaired and restored within the number of days equal to one hundred fifty percent (150%) of the number of days specified in the Repair Estimate Notice for completion of the repair and restoration of the Building Systems, measured from the date of delivery of the Repair Estimate Notice (provided, however, such number of days may be extended up to an additional one hundred twenty (120) days due to Force Majeure events), then either party (but as to Landlord, only if Landlord has diligently commenced and pursued such repair and restoration) may terminate this Lease, effective as of the date of such fire or other casualty, by written notice to the other party delivered not later than thirty (30) days after the expiration of said period but prior to substantial completion of such repair or restoration.
Notwithstanding anything to the contrary herein set forth, (a) Landlord shall have no obligation to repair or restore any of the Tenant Responsible Premises or Tenant's office furniture, trade fixtures, office equipment,
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document merchandise or any other items of Tenant's property in the Premises or the Building; (b) if any such damage rendering all or a substantial portion of the Premises or the Building untenantable shall occur during the last one (1) year of the Term, and provided Tenant has not delivered a binding notice under Article 37 to extend the Term of this Lease beyond the then current Term (or Extended Term), each of Landlord and Tenant shall have the option to terminate this Lease by giving written notice to the other within sixty (60) days after the date such damage
34
occurred, and if such option is so exercised, this Lease shall terminate as of a date not less than sixty (60) days after the delivery of such notice; and (c) Landlord shall have the right to terminate this Lease by giving written notice to Tenant within sixty (60) days of the date such damage occurred if Landlord elects to terminate all tenant leases in the Building which Landlord is entitled to terminate on account of such damage or to demolish the Building, and if such right is so exercised, this Lease shall terminate as of a date, specified by Landlord, not less than sixty (60) days after the delivery of such notice.
In the event any such fire or casualty damage renders the Premises or any part thereof untenantable and if this Lease shall not be terminated pursuant to the foregoing provisions of this Article 24 by reason of such damage, then all rent (including, without limitation, Base Rent and rent adjustments) payable pursuant to this Lease with respect to the Premises or such portion so rendered untenantable shall abate during the period beginning with the date of such damage and ending with the date that Tenant substantially completes the repair and restoration of the Tenant Responsible Premises (or such portion rendered untenantable) or commences substantial use of the Premises (or such portion rendered untenantable) for the conduct of its business, whichever is earlier, but in all events not later than the number of days equal to one hundred fifty percent (150%) of the number of days specified in the Repair Estimate Notice for completion of the repair and restoration of the Tenant Responsible Premises, measured from the date that the Building Systems are repaired and restored to a degree making the Premises suitably available for Tenant to commence and continue without unreasonable interruption Tenant's repair and restoration of the Tenant Responsible Premises, provided, however, such number of days may be extended up to an additional one hundred twenty (120) days due to Force Majeure events. Such abatement shall be in an amount bearing the same ratio to the total amount of all rent (including rent adjustments) payable pursuant to this Lease for such period as the portion of the Premises rendered and remaining untenantable due to such fire or casualty from time to time bears to the entire Premises. In the event of termination of this Lease pursuant to this Article 24, all rent (including, without limitation, Base Rent and rent adjustments) payable pursuant to this Lease (to the extent not abated pursuant to the foregoing) shall be apportioned on a per diem basis and be paid to the date of termination.
25. INSURANCE. In consideration of the leasing of the Premises at the rental stated in Articles 3 and 4, Landlord and Tenant agree to provide insurance and allocate the risk of loss as follows:
Tenant, at its sole cost and expense, agrees to purchase and keep in force and effect during the Term hereof (a) Property Insurance on the Tenant
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Responsible Premises and Tenant's contents, furniture, fixtures, equipment and other personal property located
35
in the Building, protecting Landlord and Tenant from damage or other loss caused by those perils customarily covered by an all risk policy, and in any event including without limitation, fire or other casualty, vandalism, theft, sprinkler leakage, water damage (however caused), explosion, malfunction and failures of heating and cooling or similar apparatus, perils covered by extended coverage, and other similar perils in amounts not less than the full insurable replacement value of such property with a commercially reasonable deductible amount and (b) broad form Commercial General Liability Insurance, including blanket contractual liability, host liquor liability (if alcoholic liquor within the meaning of the Illinois Liquor Control Act will be given to guests), personal injury liability, and broad form property damage liability coverages, with limits of not less than Two Million Dollars ($2,000,000) for personal injury, bodily injury, sickness, disease or death or for damage or injury to or destruction of property (including the loss of use thereof) for any one occurrence. Tenant's Property Insurance policy shall provide that it is specific and not contributory and shall contain a clause pursuant to which the insurance carrier waives all rights of subrogation against Landlord and Landlord's beneficiary, and its partners, trustees, officers, directors, agents and employees with respect to losses payable under such policy. If the potential for host liquor liability shall arise due to Tenant's activities pursuant to Article 2 of this Lease, the Tenant shall procure and maintain a policy, or endorsement for, liability insurance before undertaking such activities. Tenant's Property Insurance policy, its Commercial General Liability policy and, if required, its host liquor liability policy or endorsement, shall each name Landlord, its beneficiaries, and their respective officers, directors, beneficiaries, partners, agents, and employees as additional insureds. All such insurance shall be provided by commercial insurers of recognized responsibility.
Landlord agrees to purchase and keep in force and effect insurance on the Building and Building Systems against fire and such other risks as may be included in extended coverage insurance from time to time available in an amount sufficient to prevent Landlord from becoming a co-insurer under the terms of the applicable policies and shall contain a clause pursuant to which the insurance carriers waive all rights of subrogation against the Tenant, its agents, officers, directors, and employees, with respect to losses payable under such policies.
Tenant shall from time to time upon request from the Landlord but not more frequently than once each calendar year (except in the case of any change in coverage or any change in insurer, in any of which events Tenant agrees to provide Landlord written notice of such change within thirty (30) days of its occurrence), deliver to Landlord certificates of insurance evidencing the insurance coverage required by this Article 25, with a notation on such certificates as to the waiver of subrogation provided above.
36
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document By this Article, Landlord and Tenant intend that the risk of loss or damage to property (including personal property and equipment used in connection with the Building and also including any automobile or other vehicles from time to time parked in any parking spaces which Landlord may from time to time lease to Tenant), as described above be borne by responsible insurance carriers to the extent above provided and Landlord and Tenant hereby release each other and agree to look solely to, and seek recovery only from, their respective insurance carriers in the event of a loss of a type described above to the extent that such coverage is agreed to be provided hereunder. For this purpose any applicable deductible amount shall be treated as though it were recoverable under such policies. Landlord and Tenant agree that all moneys collected from the property insurance maintained by Landlord on the Building and Building Systems as described above and by Tenant on the Tenant Responsible Premises and Tenant's contents as described above shall be used toward full compliance with the respective obligations of Landlord and Tenant under this Lease and under the Operating Lease (as defined in Article 40) in connection with damage resulting from fire or other casualty.
26. CERTAIN RIGHTS RESERVED BY LANDLORD. Landlord shall have the following rights, exercisable without notice, except as otherwise stated, and without liability to Tenant for damages or injury to property, person or business and without effecting an eviction, constructive or actual, or disturbance of Tenant's use or possession or giving rise to any claim for set-off or abatement of rent except as otherwise expressly provided herein:
(A) To change the Building's name or street address. Landlord agrees to give Tenant one hundred eighty (180) days prior notice of such change of street address (except where Landlord is required to change the street address by any governmental authority).
(B) To install, affix and maintain any and all signs on the exterior and interior of the Building, except on any windows located in the Premises, and provided that signage on the fourth (4th) floor of the Building shall be consistent with the quality and character of the Building and the other existing uses on that floor (so long as such uses shall continue). Notwithstanding anything in this Lease to the contrary, Tenant shall be permitted to place identification and directional signage in an elevator lobby area on the fourth (4th) floor of the Building for the sole purpose of directing Tenant's visitors to the Premises, provided, however, that the size, material, content, location and color of such signage shall be subject to Landlord's prior written approval (which shall not be unreasonably withheld or delayed); and further provided that Tenant shall maintain such signage in a clean and sightly manner, including replacements as Landlord deems reasonably necessary from time to time.
37
(C) To designate and approve, prior to installation by Tenant, all types of window shades, blinds, drapes, awnings, window ventilators and other similar equipment, and to reasonably control all internal lighting that may be visible from the exterior of the Building so as to promote the uniformity or harmony of appearance of the exterior of the Building.
(D) Except as provided otherwise in this Lease, to reserve to Landlord the
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document exclusive right to designate, limit, restrict and control any business or any service in or to the Building and its tenants; provided such right shall not prohibit Tenant from selecting a vendor for telephone and telecommunication service in accordance with Article 27 (E).
(E) To grant to anyone the exclusive right to conduct any business or render any service in or to the Building, provided such exclusive right shall not operate to exclude Tenant from the use expressly permitted herein or increase the costs therefor to Tenant and further provided such right shall not prohibit Tenant from selecting a vendor for telephone and telecommunication service in accordance with Article 27(E).
(F) To impose reasonable rules and regulations regarding the placing of vending or dispensing machines of any kind in or about the Premises, it being agreed that Tenant may provide convenience vending areas (not designed for full food service) in or about the Premises for use by Tenant's employees and invitees and not for use by the general public, subject to any reasonable rules and regulations imposed by Landlord from time to time.
(G) To show the Premises to prospective tenants at reasonable hours by appointment during the last twelve (12) months of the Term, as it may be extended.
(H) To reasonably approve the weight, size and location of safes and other heavy equipment and bulky articles in and about the Premises and the Building (so as not to exceed the legal live load), and to require all such items and furniture and similar items to be moved into and out of the Building and Premises only at such times and in such manner as Landlord shall reasonably direct in writing. Subject to the provisions of Articles 11 and 25, any damages done to the Building or to other tenants in the Building by taking in or taking out safes, furniture, and other articles or from overloading the floor beyond specified load limits in any way shall be paid by Tenant. Furniture, boxes, merchandise or other bulky articles shall be transported within the Building only upon or by vehicles equipped with rubber tires and shall be carried only in a freight elevator when such service is available. Movements of Tenant's property into or out of the Building and within the Building are entirely at the risk and responsibility of Tenant and Landlord reserves the right to require registration before allowing any such property to be moved into or out of the Building. Landlord reserves the right to reasonably regulate the
38
movement of, and to inspect, all property and packages brought into or out of the Building to enforce compliance with the terms of this Lease and to reasonably regulate delivery and service of supplies and the usage of loading docks, receiving areas and freight elevators. Landlord shall not discriminate against Tenant in its right to use such loading docks, receiving areas and freight elevators in conjunction with other tenants.
(I) To have access for Landlord to any mail chutes located on the Premises according to the rules of the United States Postal Service.
(J) To close the Building after regular working hours and on Saturdays, Sundays and holidays established by Landlord (subject to the limitations set
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document forth herein) from time to time subject, however, to Tenant's right to admittance under such reasonable regulations as Landlord may prescribe from time to time, which may include, by way of example but not of limitation, that persons entering or leaving the Building identify themselves to a security officer by registration or otherwise and that said persons comply with Landlord's regulations concerning their entering and leaving the Building (Landlord agrees to furnish to Tenant prior notice in the case of any scheduled Building shutdown when Tenant shall not be able to gain access to the Premises provided such notice shall not limit or affect any rights granted to Tenant in Article 9 hereof).
(K) To change the arrangement, configuration, size or location of entrances, passageways, doors and doorways, corridors, stairs, toilets and other public service portions of the Building and the Property not contained within the Premises or any part thereof (subject to Tenant's consent, which shall not be unreasonably withheld, for any change in the corridor configuration of the fourth (4th) floor of the Building after the commencement of the Term), so long as Landlord uses reasonable efforts to give Tenant prior notice in the event of any changes to common areas of the Building directly and materially serving the Premises and so long as any such change does not materially and adversely affect Tenant's ability to conduct its business in the Premises or Tenant's access to the Premises.
(L) To change the character or use of any part of the Building or the Property.
(M) To use for itself the roof, the exterior portions of the Premises and such areas within the Premises (so long as the useable area of the Premises is not reduced other than in a de minimis way) required for structural columns and their enclosures and the installation of utility lines, Building systems and other installations required to service the Building, the Property or tenants or occupants thereof and to maintain and repair same, no rights being hereby conferred upon Tenant, and, unless otherwise specifically provided herein, to exercise for itself any rights to the land and
39
improvements below the floor level of the Premises or the air rights above the Premises and to the land and improvements located on and within the public areas. Neither Tenant nor its employees, invitees, guests and agents shall, without obtaining in each instance the prior written consent of Landlord (which consent shall not be unreasonably withheld or delayed, and shall be conditioned upon such requirements as Landlord deems appropriate) (1) go above or through suspended ceilings, (2) remove any ceiling tiles or affix anything thereto, remove anything therefrom or cut into or alter the same in any way, (3) enter fan rooms or other mechanical spaces, or (4) open doors or remove panels providing access to utility lines, Building systems or other installations required to service tenants.
27. RULES AND REGULATIONS. Subject to the rights expressly granted to Tenant elsewhere in this Lease, Tenant agrees to observe the reservations to Landlord in Article 26 hereof and agrees to comply and to use reasonable business efforts to have its employees, agents, and servants to observe and comply, at all times, with the following rules and regulations and with such
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document reasonable modifications thereof and additions thereto as Landlord may make for the Building (so long as Landlord has delivered to Tenant prior notice of any such modifications and additions and that same are reasonable), and that failure to observe and comply with such reservations, rules and regulations, after written notice of such failure and an opportunity to cure as provided in Section 15 hereof, shall constitute a default under this Lease:
(A) No sign, picture, advertisement or notice, typewritten or otherwise, shall be displayed, inscribed, painted or affixed on any part of the outside or inside of the Building, or on or about the Premises in any location visible from outside the Premises, except on glass of the doors and windows of the Premises and on the directory board of the Building and then only of such nature, color, size, style and material as shall be first approved by Landlord in writing, which approval shall not be unreasonably withheld.
(B) Tenant shall not, without Landlord's prior written consent, install or operate any heating device or air conditioning equipment, steam or internal combustion engine, boiler, stove, machinery, or mechanical devices (other than as otherwise provided in this Lease or used in connection with Tenant's business in the Premises) upon the Premises or carry on any mechanical or manufacturing business thereon, or use or permit to be brought into the Building flammable fluids such as gasoline, kerosene, benzene, or naphtha (except in such small quantities as customarily used by office tenants for general office use in compliance with applicable legal requirements) or use any illumination other than electric lights. All equipment, fixtures, lamps and bulbs shall be compatible with, and not exceed the capacity of, the Building's electrical system. No explosives, firearms, radioactive or toxic or hazardous substances or materials, or other articles deemed extra
40
hazardous to life, limb or property shall be brought into the Building or the Premises.
(C) Any person or persons employed by Tenant to do janitor work or care for the Premises shall be subject to and under the reasonable control and direction of the building manager (in such manner and to such extent as generally applicable to persons employed by Building tenants) while in the Building and outside of the Premises, but not as agent of Landlord. Tenant shall be responsible, at its sole cost and expense, for the removal of refuse and rubbish from the Premises to the designated collection areas in the Building. Such refuse and rubbish shall be stored and transported in containers reasonably acceptable to Landlord and shall be deposited in locations acceptable to Landlord and consistent with policies established by Landlord for the Building generally.
(D) Tenant shall at its expense provide artificial light for employees of Landlord while doing work and making repairs or alterations in the Premises after the construction of the initial improvements to the Premises pursuant to Article 36 below.
(E) The location and manner of installation of all telegraph, telephone, communication, signal and electric connections, cabling and wiring (other than
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document connections, wiring or cabling located exclusively within the Premises and not affecting the Building structure, Building Systems, common areas or other tenants' premises) shall be subject to the reasonable approval of Landlord and any work in connection therewith shall be subject to the direction of Landlord. Tenant shall give Landlord reasonable prior notice of the installation of all such telegraph, telephone, communication, signal and electric connections, cabling and wiring whether or not Landlord's approval thereto and direction thereof is required. Landlord reserves the right to designate and control the entity or entities providing telephone wire installation, repair and maintenance in the Building to the Building telephone closets on the various floors and to reasonably restrict and control access to such Building telephone closets. In the event Landlord designates a particular vendor or vendors to provide such telephone wire installation, repair and maintenance up to the Building telephone closets, Tenant agrees to abide by and participate in such program. Tenant may select the vendor or vendors and service providers with respect to the installation, repair and maintenance of other communication and signal cabling and wiring subject to the general direction of Landlord and such reasonable rules and regulations as may be established by Landlord for the protection of the Building and its efficient, high-quality and harmonious operation.
(F) Tenant must list all furniture and fixtures to be taken from the Building at any time and from time to time prior to the expiration of the Term hereof upon a form furnished by Landlord. Such list shall be presented at the office of the Building for
41
registration (or if closed, to the security officer) before acceptance by the security officer or elevator operator.
(G) Tenant, its licensees, agents, servants, and employees and guests shall not encumber or obstruct sidewalks, entrances, passages, courts, corridors, vestibules, halls, elevators, stairways or other common areas in or about the Building.
(H) No bicycle or other vehicle and no animal (except seeing eye dogs) shall be allowed in the showrooms, offices, halls, corridors or any other parts of the Building.
(I) Tenant shall not allow anything to be placed against or near the glass in the partitions between the Premises and the halls or corridors of the Building which shall diminish the light in the halls or corridors.
(J) Tenant shall not allow anything to be placed on the outer window ledges of the Premises, nor shall anything be thrown by Tenant or its employees out of the windows of the Building. Tenant shall keep all windows closed.
(K) No additional locks shall be placed upon any entry doors to the Premises and no locks shall be changed without the prior written consent of Landlord, which shall not be unreasonably withheld. Upon termination of this Lease, Tenant shall surrender all keys and key cards of the Premises and of the Building and give to Landlord the explanation of the combination of all locks on safes or vault doors in the Premises.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (L) The building manager shall at all times keep a pass key and be allowed admittance to the Premises to cover any emergency, fire or other casualty that may arise and in other appropriate instances. Landlord and Landlord's agents shall have the right to enter the Premises at all reasonable hours to examine the same.
(M) Unless otherwise advised by Landlord, neither Tenant nor its employees shall undertake to regulate the radiator controls or thermostats. Tenant shall report to the office of the Building whenever such thermostats or radiator controls are not working properly or satisfactorily.
(N) If Tenant desires shades or venetian blinds for outside windows (other than those included in the Shell and Core Work), they must be furnished and installed at the expense of Tenant, and must be of such type, color and material as may reasonably be prescribed by Landlord.
(O) Tenant assumes full responsibility for protecting its space from theft, robbery and pilferage, which includes keeping doors locked and other means of entry into the Premises closed and secured.
42
(P) Tenant shall not peddle, canvass, solicit or distribute handbills or flyers on or about the Property except as specifically authorized by Landlord.
(Q) Tenant shall not sell food of any kind or cook in the Building, unless in coffee-makers or microwave or similar ovens installed and maintained by Tenant for use by its employees and invitees, and subject to any reasonable applicable Building rules and regulations and applicable laws, and except for any vending areas pursuant to Article 26(F) above. Tenant may serve complimentary foods to its guests provided that it shall first comply with all applicable laws, ordinances, codes and regulations.
(R) Water in the Premises shall not be wasted by Tenant or its employees by tying or wedging back the faucets of the washbowls or otherwise.
(S) Tenant shall use neither the name of the Building (except as the address of its business) nor pictures of the Building in advertising or other publicity or for any other purpose without Landlord's prior written consent, which consent shall not be unreasonably withheld.
(T) In the event Tenant designates non-smoking areas in the Premises, Tenant shall also designate sufficient smoking areas within the Premises for its employees, so long as Landlord shall impose a substantially similar requirement in all office leases entered into after the date hereof for any space on the fourth (4th) floor containing more than 5,000 rentable square feet; and Tenant shall use all reasonable efforts, in dealing with its employees, to cooperate with and enforce Landlord's policies prohibiting the use of the public areas of the Building as smoking areas.
Landlord reserves the right upon prior notice to Tenant to make such other and further reasonable rules and regulations as in Landlord's reasonable judgment may from time to time be needed for the safety, care and cleanliness of the Premises and the Building and for the preservation of good order therein so
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document long as such further rules and regulations do not diminish any rights heretofore expressly granted to Tenant in this Lease or increase any obligation of Tenant or decrease any obligation of Landlord. Landlord agrees that all such rules and regulations shall be enforced in a manner that does not singularly target Tenant and no other tenants similarly situated or engaged in conduct similar to that of Tenant. In the event any of the rules and regulations set forth in this Article 27 conflict with any of the other terms and provisions of this Lease, such other terms or provisions of this Lease shall control.
28. MISCELLANEOUS. Tenant and Landlord further covenant with each other that:
43
(A) All rights and remedies of Landlord and Tenant under this Lease shall be cumulative, and none shall exclude any other rights and remedies allowed by law.
(B) The word "Tenant" wherever used herein shall be construed to mean tenants in all cases where there is more than one tenant, and the necessary grammatical changes required to make the provisions hereof apply either to corporations or individuals, men or women, shall in all cases be assumed as though in each case fully expressed. If there is more than one tenant, all obligations and liabilities hereunder imposed upon Tenant shall be joint and several.
(C) This Lease and the rights of Tenant hereunder shall be and are subject and subordinate at all times to any ground leases or master leases and to the lien of any mortgages or deeds of trust now or hereafter in force against the Property or the Building, or both of them, and to all advances made or hereafter to be made upon the security thereof, and to all renewals, modifications, amendments, consolidations, replacements and extensions thereof. Any mortgagee or beneficiary under a deed of trust, however, may elect to have this Lease be superior to its mortgage or deed of trust. This provision is self-operative and no further instrument of subordination or priority shall be required. In confirmation of such subordination or priority, Tenant shall promptly execute such further instruments as may be reasonably requested by Landlord and in the event Tenant fails to do so within twenty (20) days after demand in writing by certified or registered mail, Landlord shall deliver to Tenant a further written request specifying in BOLD PRINT the consequences if Tenant fails to respond in a timely manner and if Tenant fails to execute and deliver such instruments within five (5) business days after receipt of such further notice from Landlord, Tenant hereby irrevocably appoints Landlord as attorney-in-fact for Tenant with full power and authority to execute and deliver in the name of Tenant any such instruments.
Landlord agrees to use reasonable efforts to provide Tenant, after execution and delivery of this Lease, with a non-disturbance agreement in form and substance reasonably satisfactory to Tenant from the current mortgagee for the Property (a "Non-Disturbance Agreement") and as a condition to Tenant's obligation to subordinate its interests in this Lease to any future mortgage, deed of trust or ground lease, Landlord shall obtain a similar Non-Disturbance Agreement in form and substance reasonably satisfactory to Tenant.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (D) Each of the provisions of this Lease shall extend to and shall, as the case may require, bind or inure to the benefit of, not only Landlord and Tenant, but also their respective heirs, legal representatives, successors and assigns, provided, this clause shall not permit any assignment contrary to the provisions of Article 12 hereof.
44
(E) All of the representations and obligations of Landlord and Tenant are contained herein and no modification, waiver or amendment of this Lease or any of its conditions or provisions shall be binding upon Landlord unless in writing signed by a duly authorized officer of Landlord's agent or upon Tenant unless in writing and signed by a duly authorized officer of Tenant.
(F) All amounts due and payable from Tenant under this Lease or under any work order or other agreement relating to the Premises shall be considered as rent and, if unpaid when due, shall bear interest from such date until paid at the maximum legal rate of interest available, provided such rate of interest shall not exceed two percent (2%) per annum plus the Prime Rate as announced by the Northern Trust Bank in Chicago, Illinois and in effect on the first day of each calendar quarter, determined and subject to change as of the first day of each calendar quarter.
(G) Submission of this instrument for examination shall not bind Landlord or Tenant in any manner, and no lease or obligation on Landlord or Tenant shall arise until this instrument is signed and delivered by Landlord and Tenant.
(H) No rights to light or air over any property, whether belonging to Landlord or any other persons, are granted to Tenant by this Lease.
(I) The laws of the State of Illinois shall govern the validity, performance and enforcement of this Lease. The invalidity or unenforceability of any provision of this Lease shall not affect or impair any other provision.
(J) Landlord's title is and always shall be paramount to the title of Tenant. Nothing herein contained shall empower Tenant to commit or engage in any act which can, shall or may encumber the title of Landlord.
(K) In case Landlord or any successor owner of the Property or the Building shall convey or otherwise dispose of any portion thereof to another person, such other person shall in its own name thereupon be and become Landlord hereunder and shall assume fully in writing and be liable upon all liabilities and obligations of this Lease to be performed by Landlord which first arise after the date of conveyance, and such original Landlord or successor owner shall, from and after the date of conveyance, be free of all liabilities and obligations not then incurred.
(L) Neither this Lease, nor any memorandum, affidavit or other writing with respect thereto, shall be recorded by Tenant or by anyone acting through, under or on behalf of Tenant, and the recording thereof in violation of this provision shall constitute a material breach of this Lease.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 45
(M) Nothing contained in this Lease shall be deemed or construed by the parties hereto or by any third party to create the relationship of principal and agent, partnership, joint venture or any association or relationship between Landlord and Tenant other than that of landlord and tenant.
(N) Landlord shall have the right to apply payments received from Tenant pursuant to this Lease (regardless of Tenant's designation of such payments) to satisfy any obligations of Tenant hereunder, in such order and amounts as Landlord in its sole discretion may elect, subject, however, to the provisions of Article 9(F).
(O) All indemnities, covenants and agreements of Tenant contained herein which inure to the benefit of Landlord shall be construed to inure also to the benefit of Landlord's beneficiaries, and their respective officers, directors, beneficiaries, partners, agents and employees.
(P) Until otherwise notified in writing by Landlord, Tenant may rely upon notices and directions from officers of Merchandise Mart Properties, Inc., Landlord's beneficiary's management agent for the Building and Property, as the authorized action of Landlord.
29. ATTORNMENT. Upon request of the holder of any note secured by a mortgage or deed of trust on the Building or Property, Tenant will agree in writing that no action taken by such holder to enforce said mortgage or deed of trust shall terminate this Lease or invalidate or constitute a breach of any of the provisions hereof and Tenant will attorn to such mortgagee or holder, or to any purchaser of the Property or Building, at any foreclosure sale or sale in lieu of foreclosure, for the balance of the Term of this Lease and on all other terms and conditions herein set forth, provided that, in the case of any mortgage or trust deed imposed upon the Property after the date hereof, as a condition to such attornment by Tenant, such mortgagee or holder shall deliver a Non-Disturbance Agreement to Tenant.
30. ESTOPPEL CERTIFICATE. Tenant agrees that from time to time (but not more frequently than once each year and also upon commencement of the Term and in connection with any sale or refinancing of the Building and upon any request by Landlord's lender) upon not less than fifteen (15) days' prior written request by Landlord, Tenant or Tenant's duly authorized representative having knowledge of the following facts shall deliver to Landlord a statement in writing certifying (a) that this Lease is unmodified and in full force and effect (or if there have been modifications that the Lease as modified is in full force and effect); (b) the dates to which the Base Rent, rent adjustments and other sums payable under this Lease have been paid; (c) that to the best of Tenant's knowledge, neither Landlord nor Tenant is in default under any provision of this Lease, or, if in default, the nature thereof
46
in reasonable detail; (d) that to the best of Tenant's knowledge, there are no offsets or defenses to the payment of Base Rent, additional rent or any other
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document sums payable under this Lease, or if there are any such offsets or defenses, specifying such in reasonable detail; and (e) such other matters relating to the status of the Lease as may be reasonably requested. In the event Tenant fails to deliver such statement to Landlord within such 15-day period, Landlord shall deliver to Tenant by certified or registered mail a further written request specifying in BOLD PRINT the consequences if Tenant fails to respond in a timely manner and if Tenant fails to execute and deliver such statement within five (5) business days after receipt of such further notice from Landlord, Tenant hereby irrevocably appoints Landlord as attorney-in-fact for Tenant with full power and authority to execute and deliver in the name of Tenant in accordance with clauses (a) through (e) inclusive of this Article 30 any such statement, which statement shall be binding upon Tenant and may be relied upon by Landlord and any third party.
Landlord agrees that from time to time (but not more frequently than once each year) upon not less than fifteen (15) days prior written request by Tenant, Landlord or Landlord's duly authorized representative having knowledge of the following facts shall deliver to Tenant a statement in writing certifying (a) that this Lease is unmodified and in full force and effect (or if there have been modifications that the Lease, as modified, is in full force and effect); (b) the dates to which the Base Rent, rent adjustments and other sums payable under this Lease have been paid; (c) that to the best of Landlord's knowledge, neither Landlord nor Tenant is in default under any provision of this Lease, or, if in default, the nature thereof in reasonable detail; and (d) such other matters relating to the status of the Lease as may be reasonably requested.
31. BROKERS. Tenant represents and warrants to Landlord that neither it nor its officers or agents nor anyone acting on its behalf has dealt with any real estate broker other than Goldie B. Wolfe & Co. and Cushman & Wakefield of Illinois, Inc. in the negotiation or making of this Lease, and Tenant agrees to indemnify and hold harmless Landlord from the claim or claims of any broker or brokers claiming to have interested Tenant in the Building or Premises or claiming to have caused Tenant to enter into this Lease. Landlord shall be responsible for the commission or other compensation of Goldie B. Wolfe & Co. and Cushman & Wakefield of Illinois, Inc. payable pursuant to separate agreements between Landlord and such brokers.
32. SECURITY DEPOSIT. (Intentionally Omitted]
33. PARKING. Landlord agrees to cause to be made available to Tenant during the initial Term, ten (10) automobile parking spaces in a parking lot located in the Building (the "Building Parking Spaces"), to be designated by Landlord from time to time.
47
Four (4) of the Building Parking Spaces shall be individual parking spaces and six (6) of the Building Parking Spaces will be tandem parking spaces (i.e., a parking space designed to hold two automobiles parked bumper to bumper). Access to the Building Parking Spaces shall be provided twenty four (24) hours a day, seven (7) days a week, subject to Force Majeure events and to temporary and necessary interruptions due to required repairs and maintenance. Tenant shall have the right from time to time upon three (3) months written notice to Landlord to reduce the number of Building Parking Spaces made available to
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Tenant by one or more spaces.
During the first five (5) Lease Years Tenant shall have no obligation to pay any fees or charges for such Building Parking Spaces, and thereafter commencing on the first day of the sixth (6th) Lease Year, Tenant shall pay rent with respect to the Building Parking Spaces at the then prevailing rates in effect from time to time for parking spaces in the Building. Tenant agrees to comply with all regulations in effect from time to time at the facilities in which the Building Parking Spaces are located. Tenant agrees that its use, and the use by its agents, employees and invitees, of the Building Parking Spaces shall be entirely at Tenant's own risk and responsibility; and Tenant further agrees that, subject to the provisions of Article 25 hereof, Landlord, Landlord's beneficiaries and their respective officers, directors, partners, agents and employees shall not, except as otherwise provided by law, be liable for any injury to persons or damage to property occurring in, on or around the Building Parking Spaces.
34. OPTIONS TO EXPAND.
(A) Effective as of a date selected by Landlord and occurring during the respective Lease Years as designated by Tenant in accordance with the terms of this Article 34 (each effective date is herein referred to as an "Effective Expansion Date") , Tenant shall have and is hereby granted options (herein referred to collectively as the "Expansion Options" and individually as Expansion Option A, Expansion Option B, Expansion Option C-1, Expansion Option C-2, and Expansion Option D) to add to the Premises, in accordance with the terms of this Article 34, during the respective periods described below the additional spaces located on the fourth (4th) floor of the Building (herein referred to collectively as the "Expansion Spaces" and individually as Expansion Space A, Expansion Space B, Expansion Space C-1, Expansion Space C-2, and Expansion Space D) described below and depicted on Exhibit A-1 attached herewith and made a part hereof:
Expansion Lease Rentable Option/Space Year Area (S.F.) ------
A 1 through 7 27,723 B 2,4,7 6,789 C-1 4,7 8,388 C-2 4,7 3,242 D 8 5,285
48
Each Expansion Option shall be exercisable by Tenant upon delivery of written notice to Landlord, specifying the respective Expansion Space desired by Tenant, on or before six (6) months prior to the commencement of the respective Lease Year during which such Expansion Option is available. The Effective Expansion Date shall be determined by Landlord on or before six (6) months prior to the respective Effective Expansion Date for any Expansion Space. The rentable area of each Expansion Space shown on the table above is an estimate only. Each Expansion Space shall include, as reasonably determined by Landlord, any adjoining corridors or common areas not required or used for other tenants
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document on the fourth (4th) floor, and each Expansion Space shall be measured in accordance with BOMA Standards. Tenant's election to exercise or not to exercise any Expansion Option shall not affect Tenant's right to exercise or not exercise any other Expansion Option; provided, however, that Tenant may not exercise Expansion Option C-2 unless Tenant has previously exercised or shall simultaneously exercise Expansion Option C-1. Tenant may exercise more than one Expansion Option at the same time; and in the event Tenant does so, Landlord need not designate the same Effective Expansion Date for all Expansion Options exercised at the same time, except that Landlord shall designate the same Effective Expansion Date for Expansion Options C-1 and C-2 if Tenant exercises said options simultaneously. Each of the Expansion Spaces shall be added to the Premises on all of the terms, covenants and conditions of this Lease except for Articles 35, 36, 40 and 41 hereof and at the rental rate described in Paragraph (B) below.
In the event Tenant exercises Expansion Option A and Tenant has previously exercised Expansion Option B, then Tenant shall have the right exercisable at the time Tenant delivers written notice to Landlord of Tenant's exercise of Expansion Option A to delete Expansion Space B from the Premises demised hereunder. Such deletion of Expansion Space B shall be effective on the Effective Expansion Date applicable to Expansion Option A and Base Rent and rent adjustments due under this Lease shall be adjusted to reflect such deletion of Expansion Space B from the Premises. In the event Tenant so elects to delete Expansion Space B from the Premises, then, notwithstanding anything to the contrary contained herein, Expansion Options C-1, C-2 and D (to the extent not previously exercised) shall be null and void as of the date of Tenant's notice of its exercise of its right to delete Expansion Space B from the Premises and Tenant shall have no further expansion rights under this Paragraph (A).
(B) The Base Rent for each Expansion Space shall be as follows:
49
Annual Base Rent Per Rentable Square Foot Period of Expansion Space ------
1st Lease Year through 5th Lease Year $15.00 6th Lease Year $21.56 7th Lease Year $21.56 8th Lease Year $19.50 9th Lease Year $19.92 10th Lease Year $20.35 11th Lease Year $22.84 12th Lease Year $23.35 13th Lease Year $23.86 14th Lease Year $24.39 15th Lease Year $24.94
Rent adjustments as provided in Article 4 hereof (and calculated upon the Base Year as provided in Article 4 hereof) shall be payable with respect to each
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Expansion Space.
(C) Notwithstanding anything in this Lease to the contrary, Tenant agrees to accept each Expansion Space in an "as is" broom clean condition (excluding furniture and equipment) as existing on the date such space is added to the Premises; provided, however, Landlord agrees that to make available to Tenant, at Tenant's option, an improvement allowance ("Expansion Improvement Allowance") in an amount not to exceed to (i) with respect to Expansion Space A, $15.00 per rentable square foot of such Expansion Space A, subject to escalation as provided below, and (ii) with respect to each of Expansion Spaces B, C-1, C-2 and D, $30.00 per rentable square foot of such Expansion Space, subject to escalation in either case as provided below, to be applied toward the payment of costs of alterations, additions, improvements, fixtures, furnishings and equipment furnished to or installed in or used in connection with such Expansion Space by Tenant (including, without limitation, fees for design, architectural and engineering drawings). Landlord shall disburse such Expansion Improvement Allowance to or on behalf of Tenant on the same terms and conditions as applicable to the disbursement of Landlord's Contribution with respect to Tenant's original construction of the Premises as provided in Article 35 hereof. As a condition to payment of any of such Expansion Improvement Allowances, Tenant shall provide adequate security to Landlord, as determined in Landlord's sole and absolute discretion, for the repayment of such Expansion Improvement Allowance. Tenant agrees to repay each such Expansion Improvement Allowance to Landlord as additional rent assuming amortization of such Expansion Improvement Allowance over a period commencing on the respective Effective Expansion Date and ending on the last day of the initial Term, at a level monthly payment with an interest factor equal to nine percent (9.00%) per annum. Such monthly installments shall be due
50
and payable at the same time and in the same manner as Base Rent pursuant to Article 3 above.
If the Consumer Price Index for All Urban Consumers (All Items And Commodity Groups-Chicago-Gary-Lake County, IL-IN-WI) (1982-84=100) ("CPI-U"), for the calendar month in which this Lease is executed ("Base CPI") shall be less than the CPI-U for the calendar month in which Tenant delivers notice to Landlord of Tenant's exercise of any Expansion Option, the applicable Expansion Improvement Allowance shall be increased by an amount equal to the product obtained by multiplying the Expansion Improvement Allowance by the percentage by which the CPI-U for such month during which the notice is given exceeds the Base CPI.
If the manner in which the CPI-U is determined by the Department of Labor shall be substantially revised and the effect of such revision can be reasonably determined or approximated, adjustment shall be made to produce results equivalent, as nearly as possible, to those which would have been attained if such CPI-U had not been so revised, and if the CPI-U shall become unavailable to the public because publication is discontinued, or otherwise, Landlord and Tenant, by mutual agreement, shall substitute therefor a comparable index based on changes in the cost of living or purchasing power of the consumer dollar published by any other governmental agency or, if no such index shall then be available, a comparable index published by a major bank or other financial
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document institution or by a university or a recognized financial publication.
(D) In addition to Expansion Options A, B, C-1, C-2 and D specifically provided by Paragraph (A) above, effective as of the respective dates selected by Landlord (within the limitations described below) and occurring during each of the second (2nd) Lease Year, the fourth (4th) Lease Year, the seventh (7th) Lease Year, the tenth (10th) Lease Year, and the thirteenth (13th) Lease Year (each of said dates as selected by Landlord is referred to herein as a "Supplemental Expansion Date") , Tenant shall have and is hereby granted the option (each of said options being referred to as a "Supplemental Expansion Option") to add to the Premises during such period additional space containing not less than 2,000 rentable square feet nor more than 10,000 rentable square feet, the actual amount of which space shall be determined by Tenant subject to Landlord's right to adjust the size of such space as described below. (Each such space is referred to herein as a "Supplemental Expansion Space".)
Each Supplemental Expansion Option shall be exercisable by Tenant upon delivery of written notice to Landlord, specifying the size of the Supplemental Expansion Space desired by Tenant, on or before six (6) months prior to the commencement of the Lease Year during which such Supplemental Expansion Option is available. The final location, configuration, rentable area and the Supplemental Expansion Date shall be determined by Landlord on the terms and
51
conditions hereinafter provided, within ninety (90) days after Tenant's delivery of such notice to Landlord. Tenant shall have the right to rescind its exercise of any Supplemental Expansion Option by delivery of written notice to Landlord within fifteen (15) days after delivery of Landlord's notice of the final location, configuration and rentable area of the Supplemental Expansion Space. If Tenant rescinds its exercise of a Supplemental Expansion Option, then all rights of Tenant to such Supplemental Expansion Option shall terminate.
The Supplemental Expansion Date shall be no earlier than twelve (12) months and no later than eighteen (18) months after the date of delivery of Tenant's notice to Landlord exercising such Supplemental Expansion Option, unless otherwise mutually agreed. Each Supplemental Expansion Space shall be located on only one (1) floor and will be a contiguous area (but not necessarily contiguous to then existing Premises) ; provided the various Supplemental Expansion Spaces may be located on different floors. The final configuration of each Supplemental Expansion Space as determined by Landlord shall be a reasonable and appropriate leasing configuration; and with respect to Landlord's final determination of the size of each Supplemental Expansion Space, Landlord may add or subtract an amount of space not to exceed fifteen percent (15%) from the size of each Supplemental Expansion Space initially requested by Tenant solely to achieve a reasonable and appropriate leasing configuration. Each Supplemental Expansion Space shall be added to the Premises on the same terms, covenants and conditions of this Lease, except for Articles 35, 36, 40 and 41 hereof and except that the calculation of Base Rent with respect thereto shall be the same as provided in Paragraph (B) above with respect to the Expansion Spaces. Tenant agrees to accept each Supplemental Expansion Space in "as is" broom clean condition (excluding furniture and equipment) as existing on the respective Supplemental Expansion Date. Rent adjustments as provided in Article 4 hereof (and calculated upon the Base Year as provided in Article 4 hereof)
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shall be payable with respect to the Supplemental Expansion Space.
(E) In addition to the Expansion Options described in Paragraph (A) and the Supplemental Expansion Options described in Paragraph (D), Landlord agrees that (i) if Landlord's beneficiary or its managing agent is occupying all or any portion of Expansion Space A at the time Tenant delivers its non-binding and binding notices to extend the Term for either of the Extended Terms pursuant to Article 37 (and provided Landlord has not previously entered into a lease with a third party with respect to such space), then Tenant may, by so stating in its non-binding and binding notices, include in its option to extend the Term, and there shall be added to the Premises for such Extended Term, so much of Expansion Space A as Landlord's beneficiary or its managing agent is then occupying, or (ii) if Landlord's beneficiary or its managing agent is occupying all or any portion of Expansion Space A as of the date which is six (6) months prior to the commencement of the tenth (10th) Lease Year (and provided Landlord has not
52
previously entered into a lease with a third party with respect to such space), then Tenant may, upon delivery of written notice to Landlord on or before six (6) months prior to the commencement of the tenth (10th) Lease Year add to the Premises so much of Expansion Space A as Landlord's beneficiary or its managing agent is then occupying effective during the tenth (10th) Lease Year on a date to be determined by Landlord on or before six (6) months prior to such effective expansion date and the calculation of Base Rent with respect thereto shall be the same as provided in Paragraph (B) above. Tenant agrees to accept such Space in "as is" broom clean condition (excluding furniture and equipment) as existing on the commencement of the respective Extended Term or effective expansion date during the tenth (10th) Lease Year, as the case may be.
(F) If, as a result of the addition to the Premises of any Expansion Space or any Supplemental Expansion Space or any space on the fourth (4th) floor added pursuant to the right of first offer provided in Article 39 ("first offer space"), any then existing common areas on the fourth (4th) floor are no longer required for use or useable by other tenants on the fourth (4th) floor, such common areas shall be added to and included in the Expansion Space, Supplemental Expansion Space, or first offer space then being added to the Premises. In addition, if as a result of the addition to the Premises of any combination of any Expansion Space, any Supplemental Expansion Space or any first offer space, either Tenant or Tenant and Chicago Teachers Union at any time lease the entire fourth (4th) floor of the Building, then the rentable area of the Premises on the fourth (4th) floor shall be recomputed in accordance with BOMA Standards, and for the balance of the initial Term Base Rent under Article 3 shall be calculated on the basis of the rentable area of the Premises, as so recomputed in accordance with BOMA Standards, less 3,230 rentable sq. ft.
(G) It shall be a condition of Tenant's right to exercise any option provided for in this Article 34 that Tenant is not in monetary default or in default under any of the other material terms, covenants or conditions of this Lease at the time that Tenant notifies Landlord of the exercise of such option or upon the effective date of such option, unless Landlord, in its absolute discretion, elects in writing to waive such condition to the effective exercise of the option (provided, however, the foregoing will not affect or limit
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Landlord's rights to enforce any defaults of Tenant pursuant to Article 15 hereof). Notwithstanding the foregoing, if the existence of any such default shall, pursuant to the foregoing, make ineffective the exercise of such option, such exercise shall nevertheless become effective as of the originally scheduled date if such default is cured within the earlier of (i) any applicable cure or grace period specified in Article 15 hereof or (ii) thirty (30) days after delivery of notice of such default by Landlord to Tenant.
53
Any termination of this Lease or termination of Tenant's right of possession shall terminate all rights hereunder. The options to expand granted pursuant to this Article 34 are personal to CCC and any Successor or Affiliate to which this entire Lease has been assigned in compliance with Article 12) and may not be exercised by or for the benefit of any other party; nor may any option to expand be exercised by Tenant at any time that more than 20,000 rentable square feet of the Premises then demised hereby are subject to an assignment or sublease. In the event Tenant exercises any of its options under this Article 34, Tenant agrees in each such case to enter into a lease amendment setting forth the terms of such option within ninety (90) days after exercise of such option by Tenant.
35. LANDLORD'S CONTRIBUTION.
(A) As an inducement for Tenant to enter into this Lease, Landlord agrees to pay to, or make available for, Tenant an allowance (the "Landlord's Contribution") in the amount of Four Million Dollars ($4,000,000.00). The Landlord's Contribution shall be applied towards the payment of costs incurred in connection with (i) the alterations, additions and improvements furnished or installed in the Premises by Tenant in accordance with Article 36 hereof, including, without limitation, fees for design, architectural and engineering drawings and telecommunication costs, (ii) the cost of purchasing and installing furnishings, fixtures and equipment (provided title to such furnishings, fixtures and equipment shall at all times remain vested in Landlord and Tenant shall have the right to use such items during the Term hereof so long as Tenant is not in default hereunder beyond any applicable notice and cure periods), and (iii) costs incurred in connection with the relocation of Tenant's principal offices to the Premises. The Landlord's Contribution shall be applicable only in connection with the initial preparation for occupancy of the Premises. With respect to all furniture, fixtures and equipment purchased with any portion of the Landlord's Contribution, Tenant shall have the same responsibility as to maintenance, insurance and risk of loss as Tenant has with respect to furniture and equipment leased to Tenant under the Operating Lease (described in Article 40).
In the event Tenant does not utilize the entire Landlord's Contribution for the foregoing purposes, then the monthly Base Rent payable by Tenant pursuant to Article 3 hereof for the first (1st) through fifth (5th) Lease Years shall be reduced by an amount equal to $.02076 for every One Dollar ($1.00) of Landlord's Contribution which Tenant does not utilize.
(B) It shall be a condition of Landlord's obligation to pay any installment of the Landlord's Contribution for work performed by any contractor or supplier, other than those engaged by Landlord, that Tenant shall provide or
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document cause to be provided to Landlord (to the extent customarily required by title insurance companies) contractor's affidavits and waivers of lien covering all
54
labor and material used and expended for which contractors are requesting payment, and (if applicable) invoices establishing the actual cost of items purchased, all in form and content reasonably satisfactory to Landlord; provided, however, after execution of this Lease, Landlord agrees to directly pay from the Landlord's Contribution any architects, engineers or other consultants hired by Tenant who have performed services for Tenant in connection with Tenant's Work as contemplated below in Article 36 upon receipt of invoices and waivers of lien in form and content reasonably satisfactory to Landlord. It shall be a further condition to Landlord's obligation to pay or credit any amount of Landlord's Contribution at any time that Tenant is not then in monetary default or in default under any of the other material terms, covenants and conditions of this Lease. Landlord shall pay or credit such amounts at the direction of Tenant subject to, and within thirty (30) days after, Tenant's satisfaction of all conditions hereunder for the making of such payment or credit.
36. IMPROVEMENT WORK.
In connection with the preparation of the Premises for initial occupancy, and subject to the terms, covenants and conditions of Article 8 hereof (to the extent not contrary to or inconsistent with the provisions of this Article 36), Landlord and Tenant agree that the following shall apply:
A. SHELL AND CORE WORK.
1. Landlord shall substantially complete at its sole cost and expense all of the additional base building work included in the Shell and Core Work as described in Exhibit "E" attached hereto and made a part hereof (the "Shell and Core Work") on or before the Commencement Date (said date, as it may be so extended, is herein referred to as the "Shell and Core Work Completion Date") .
2. In the event Landlord shall fail to substantially complete the Shell and Core Work on or before the Shell and Core Work Completion Date, or shall fail to substantially complete any individual component of the Shell and Core Work on or before the applicable completion date for such component as set forth in Schedule I attached to Exhibit "E", for reasons other than the fault of Tenant, its agents or contractors, then, such failure shall constitute a Landlord Delay to the extent it delays the completion of Tenant's Work beyond the Commencement Date, and the Commencement Date shall be extended one (1) day for each day that any Landlord Delay delays completion of Tenant's Work. Tenant shall notify Landlord in writing as promptly as possible as to the nature and extent of any claimed Landlord Delay.
55
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3. In the event Landlord shall fail to make available to Tenant that portion of the Premises which is occupied by the Chicago Transit Authority as of the date of execution hereof on or before August 15, 1993 demolished and in a condition suitable for the commencement of Tenant's Work therein or in the event Landlord shall fail to make available to Tenant that portion of the Premises which is occupied by Merrill Lynch as of the date of execution hereof on or before September 17, 1993 demolished and in a condition suitable for the commencement of Tenant's Work therein, then, such failure shall constitute a Landlord Delay to the extent it delays the completion of Tenant's Work beyond the Commencement Date, and the Commencement Date shall be extended one (1) day for each day that any such Landlord Delay delays completion of Tenant's Work.
4. Substantial completion of the Shell and Core Work shall mean completion of such Work with the exception of minor and insubstantial details of construction or mechanical adjustment, the incompletion of which will not unreasonably interfere with Tenant's use of the Premises or the construction of Tenant's Work (the "Punchlist Items").
5. As used herein, "Force Majeure" events shall mean fire, casualty, emergencies, lockouts, strikes, labor disputes, war, governmental action, acts of God, labor or material shortages, transportation delays, and other causes beyond the reasonable control of the respective party to prevent, of which the respective party has notified the other party within ten (10) days after the notifying party becomes aware of the occurrence of such a cause, but excluding insufficiency of funds or inability to obtain financing or disbursement of loans.
6. In the event Landlord shall be delayed in substantially completing the Shell and Core Work as a result of any fault of Tenant or its agents or representatives in connection with any of the obligations of Tenant set forth in this Lease, including, without limitation, any delay in Tenant's approval of any plans or specifications or other materials submitted by Landlord to Tenant for Tenant's review and approval (hereinafter "Tenant Delays"), then the Shell and Core Work Completion Date shall be extended one (1) day for each day of such Tenant Delay. Landlord shall notify Tenant in writing as promptly as possible as to the nature and extent of any claimed Tenant Delay.
7. Landlord and Tenant agree that their respective construction representatives will cooperate with each other to prepare a construction schedule with the objective of substantially completing the Shell and Core
56
Work and Tenant's Work by November 30, 1993, if possible. Landlord and Tenant agree to cooperate and coordinate with each other in good faith in order that the Shell and Core Work and Tenant's Work may both be performed expeditiously and concurrently in a harmonious manner.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 8. Landlord further agrees, at Landlord's cost and expense, at some time during the first five (5) Lease Years of the Term, to upgrade the existing public washrooms on the fourth (4th) floor of the Building to materially comply with all applicable requirements of the Americans with Disabilities Act.
B. TENANT'S WORK. Tenant shall be responsible for the construction of all improvements in the Premises beyond the Shell and Core Work, subject to the terms and conditions hereinafter provided:
1. PLANS AND SPECIFICATIONS.
(a) Tenant has heretofore caused to be prepared and delivered to Landlord preliminary plans dated February 23, 1993 prepared by The DePalma Group (the "Preliminary Plans") for all improvements Tenant desires to have completed in the Premises in connection with Tenant's initial occupancy of the Premises ("Tenant's Work"), which Preliminary Plans Landlord has heretofore approved in concept, and Tenant shall cause to be prepared by The DePalma Group and by reputable and qualified engineers, the following final plans and specifications ("Plans") for Tenant's Work, which Plans shall not be materially altered from the Preliminary Plans without Landlord's prior consent:
(i) Architectural drawings (consisting of floor construction plan, ceiling lighting and layout, power, and telephone plan).
(ii) Mechanical drawings (consisting of HVAC, electrical, telephone and plumbing).
(iii) Finish drawings and schedule (consisting of wall finishes and floor finishes and miscellaneous details).
All such Plans shall be submitted to Landlord in a state ready for Landlord's review and approval, which shall not be unreasonably withheld or delayed, on an interim basis when available from time to time. Tenant shall deliver to Landlord seven (7) sets of all Plans provided for Landlord's review. Landlord shall approve or disapprove of such Plans within six (6) business days after its receipt thereof (and in the case of disapproval, state its reasons for such disapproval), so long as Tenant or its architect have at least on a regular
57
basis consulted with Landlord in connection with preparation of such Plans and delivered to Landlord preliminary drafts of all such Plans as they become available from time to time. Landlord shall not withhold its approval of any improvements which do not affect Building Systems, the structural or member components of the Building, common areas of the Building or operations in and around the Building, and Landlord shall inform Tenant at or before the time of its approval of the final Plans of any items contained in Tenant's Work which Landlord will require Tenant to remove upon expiration of the Term in accordance with Articles 8 and 16 hereof. Landlord and Tenant agree to cooperate and consult with each other on a regular basis in connection with the preparation of such Plans and
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document during construction of the Tenant's Work. If Landlord fails to provide such approval or fails to notify Tenant of the reasons for Landlord's disapproval within the foregoing six-day review period, Landlord shall be deemed to have approved all such Plans.
(b) All Plans shall comply with all (1) applicable statutes, ordinances, regulations, laws, and codes, and (2) the requirements of Landlord's fire insurance underwriters. Neither review nor approval by Landlord of the Plans shall constitute a representation or warranty by Landlord that such Plans either (i) are complete or suitable for their intended purpose, or (ii) comply with applicable laws, ordinances, codes and regulations, it being expressly agreed by Tenant that Landlord assumes no responsibility or liability whatsoever to Tenant or to any other person or entity for such completeness, suitability or compliance, except to the extent that any such work is performed specifically at and in accordance with the specific direction of Landlord or its management agent. Tenant shall not make any material changes in the Plans without Landlord's prior written approval, which approval shall not be unreasonably withheld. Landlord shall approve or disapprove any such changes within six (6) business days after its receipt thereof (and in the case of disapproval, state its reasons for such disapproval).
2. PERFORMANCE OF TENANT'S WORK.
(a) Tenant may select its own contractors, subcontractors and/or suppliers for the performance of the Tenant's Work provided, however, that Landlord may require Tenant to give assurances reasonably satisfactory to Landlord that all such contractors, subcontractors and suppliers are reputable, financially responsible and will not jeopardize labor harmony. Landlord may also require Tenant to comply to the extent not inconsistent with this Lease with such construction standards or procedures as may be applicable from time to time for construction activities in the Building (a set of such standards and procedures currently in effect having been delivered by Landlord to Tenant in a book entitled
58
CONSTRUCTION STANDARDS, PROCEDURES AND SPECIFICATIONS. REVISED: DECEMBER, 1992) and to submit reasonably satisfactory insurance certificates to Landlord.
(b) Subject to approval of Tenant's Plans as provided by Paragraph B.1 above and after the filing of the Plans with the appropriate governmental agencies, Tenant shall, at Tenant's sole cost and expense, except as otherwise provided herein and subject to the timely availability of Landlord's Contribution, cause the contractors employed by it to commence, as soon as reasonably practicable, to construct and install and pursue to completion in the Premises the Tenant's Work in accordance with the Plans. Tenant agrees that it shall be responsible for all contractors, subcontractors and suppliers engaged by Tenant, and that all work performed by such parties shall be performed and completed in a good, diligent and workmanlike manner, with no unreasonable noise or interference with Landlord's and other tenants' operations in the Building (taking into account the nature, extent and time schedule for Tenant's Work).
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (c) Such license to enter upon the Premises prior to the Commencement Date for the performance of Tenant's Work is conditioned upon Tenant and Tenant's agents, contractors, workmen, mechanics, suppliers and invitees working in harmony and not interfering with Landlord or Landlord's contractors or agents in doing any work in or about the Building, or with other tenants, invitees and occupants of the Building. If at any time such entry shall cause such disharmony or interference or, in Landlord's reasonable judgment, such disharmony or interference is imminent, Landlord shall have the right to withdraw such license upon twenty-four (24) hours' written notice to Tenant. When, in Landlord's reasonable judgment, the cause of such disharmony or interference or imminent potential disharmony or interference ceases to be present, Landlord shall then promptly again grant such license to enter upon the Premises.
Tenant agrees that any such entry into and occupation of the Premises shall be deemed to be under all of the terms, covenants, conditions and provisions of this Lease except as to the covenants to pay rent.
To the extent Tenant employs any contractors from time to time to do work in the Premises, Tenant shall cause such contractors to secure and pay for Worker's Compensation, Employers Liability Insurance, and Comprehensive General Liability Insurance in customary forms and amounts reasonably acceptable to Landlord. All policies shall be endorsed to include Landlord and its employees and agents as additional insured parties. Certificates of such insurance shall be delivered to Landlord prior to Tenant commencing any work in the Premises.
59
(d) In connection with the performance of Tenant's Work, Landlord shall provide Tenant with the following (subject to Tenant's compliance with the reasonable rules and regulations regarding the use thereof) in connection with the construction of Tenant's Work at no cost to Tenant: (i) coordination and plan review, (ii) ventilation and construction sewer services, (iii) truck dock space at the Building's loading docks, (iv) trash removal services from the loading docks of the Building, and (v) any items which Landlord has agreed to provide to Tenant at no cost pursuant to Exhibit "E" attached hereto and made a part hereof. Any other general conditions which Landlord may provide shall be provided to Tenant at "Landlord's cost" which shall be without any mark-up or profit over Landlord's actual costs (including overhead) of supplying the foregoing general conditions. Landlord's schedule of costs for general conditions as of the date of execution hereof is included in Exhibit "F" attached hereto and made a part hereof; such charges may be revised from time to time to reflect Landlord's increased costs for supplying such items. Tenant shall have the right to supply any general conditions (except to the extent such general conditions are part of the normal operation of the Building and such operation would be disrupted if such general conditions were provided by another party) by itself or through its contractors rather than rely upon or be required to use any services supplied by Landlord, provided, however, in exercising such right, Tenant shall not interfere with the operation of the Building.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (e) Landlord and Tenant acknowledge that Landlord and its contractors will be performing portions of the Shell and Core Work at the same time that Tenant and its contractors will be performing Tenant's Work. Landlord and Tenant agree to cooperate with each other and to coordinate their respective work, and to use their best efforts to cause their respective contractors to so cooperate and coordinate, so that both the Shell and Core Work and Tenant's Work may proceed expeditiously, as more fully described in subparagraph 5 ("Contractor Cooperation Standards") below.
3. DELAYS IN COMPLETION OF TENANT'S WORK. The number of days of delay beyond the Commencement Date in substantially completing Tenant's Work arising out of or on account of any of the following events, except to the extent such events are caused by the act or failure to act of Tenant, shall constitute "Landlord Delays" and the outside date for the Commencement Date as set forth in Article 1 hereof shall be extended one (1) day for each day that any Landlord Delay delays completion of Tenant's Work:
(i) Any delay resulting from Landlord's failure to approve the Plans in a timely manner as required by this Article 36; or
60
(ii) Any delay resulting from Landlord's failure to perform in a timely manner the Shell and Core Work pursuant to Paragraph (A) of this Article 36; or
(iii) Provided Tenant and its contractors have used all reasonable efforts to comply with the provisions of this Article 36(B), any delay resulting from Landlord's revocation of the license under subparagraph B.2(c) of this Article 36 for Tenant's contractors to enter upon the Premises for the construction of Tenant's Work; or
(iv) Any other fault of Landlord or its agents, contractors, or representatives in connection with any of the obligations of Landlord set forth in this Article 36 (provided Tenant notifies Landlord in writing within ten (10) days after Tenant first learns of any such delay).
4. TENANT'S MOVE-IN. In connection with Tenant's initial occupancy of the Premises after substantial completion of Tenant's Work, Tenant shall have the right to reserve reasonable portions of the Building's loading docks and freight elevators, subject to scheduling to the mutual reasonable satisfaction of Landlord and Tenant. Such reservation and use of the elevators and loading docks in connection with Tenant's move-in shall be without charge to Tenant, except that Tenant shall pay the cost of any after-hours elevator service (i.e. other than 4:00 a.m. to 8:00 p.m. on weekdays) at Landlord's actual cost (including overhead) in accordance with the rates included in Exhibit F.
5. CONTRACTOR COOPERATION STANDARDS.
(i) Landlord shall afford Tenant and the contractor engaged by Tenant in Tenant's Work ("Tenant's Contractor") the same opportunity for the introduction and storage of their materials and equipment and the execution of their work as given to the contractor engaged by Landlord for
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document the Shell and Core Work ("Landlord's Contractor"), and Landlord and Tenant shall connect and coordinate work performed by or on behalf of Landlord with work performed by or on behalf of Tenant as required by the Plans.
(ii) Landlord and Tenant each understand that there will be concurrent work by both the Landlord's Contractor on the Shell and Core Work and Tenant's Contractor on Tenant's Work.
(iii) Tenant's Contractor and Landlord's Contractor shall on reasonable advance notice furnish all reasonably necessary information in order to coordinate construction activities and diligently complete the work on dates specified in the Lease.
(iv) Tenant's Contractor and Landlord's Contractor shall schedule all work with and fit their work to the work
61
performed by other contractors and shall give the other contractors every reasonable opportunity to perform their work, to deliver and store equipment and materials and to fit their work to the work of other contractors toward the end of achieving coordinated construction progress.
(v) Any cost caused by defective or ill-timed work shall be borne by the party responsible therefor. Should Landlord's Contractor or Tenant's Contractor wrongfully cause damage to the work or property of the other party, or to other work on the site, the party causing such damage shall promptly remedy such damage.
(vi) Should Landlord's Contractor or Tenant's Contractor wrongfully cause damage to the work or property of any separate contractor, the party causing such damage shall upon due notice promptly attempt to settle with such other contractor by agreement, or otherwise to resolve the dispute.
(vii) Due care shall be exercised by Tenant's Contractor and Landlord's Contractor during all operations of the work to protect and restore the work and work of other contractors along with all other property of Landlord, Tenant and other contractors from all damage, including, but not limited to, caulking, patching and painting.
(viii) Landlord's Contractor and Tenant's Contractor shall reasonably cooperate and work with the architects, consultants and space planners engaged by Landlord and Tenant and coordinate their work pursuant to the Lease with all of said parties as may be reasonably necessary for the timely progress and proper completion of the project.
(ix) If any part of Landlord's Contractor's work depends for proper execution or results upon the work of Tenant's Contractor, Landlord shall upon discovery promptly report to Tenant's designated representative any apparent discrepancies or defects in such work that renders it unsuitable for such proper execution and results. If any part of Tenant's Contractor's work depends for proper execution or results upon the work of Landlord's Contractor, Tenant shall upon discovery promptly report to Landlord's designated representative any apparent discrepancies or defects
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document in such work that renders it unsuitable for such proper execution and results.
37. OPTIONS TO EXTEND TERM. Subject to the terms of this Article 37, the Term may be extended, at the option of Tenant, for two (2) successive periods of five (5) years each, each such period being herein sometimes referred to as an "Extended Term" (and constituting part of the "Term"), as follows:
(A) Each option to extend the Term for an Extended Term must be exercised by Tenant by (1) delivery to Landlord, not more than
62
thirty (30) months and not less than twenty-four (24) months prior to the commencement of the applicable Extended Term, of a non-binding written notice of Tenant's good faith intent to exercise such option and (2) delivery to Landlord of a binding written notice exercising such option no less than eighteen (18) months prior to the commencement of the applicable Extended Term; provided, however, in no event shall such binding written notice be required to be delivered earlier than fifteen (15) days after the final determination of Extension Term Rent pursuant to Paragraph (D) below and, if applicable, Article 38 hereof. Tenant shall not have the right to extend the Term beyond the last day of the three hundredth (300th) full calendar month of the Term (as extended pursuant to this Article 37). Any termination of this Lease or any termination of Tenant's right of possession hereunder during the initial Term hereof or during an Extended Term shall terminate all rights to extend granted hereunder. If Tenant shall fail to give Landlord timely notice of its exercise of an option herein contained (or, in the case of the second option to extend, if Tenant shall fail to exercise such first option to extend), Tenant shall be deemed to have waived such option to extend the Term hereof and such option and subsequent option, if any, shall thereupon become null and void.
(B) Each Extended Term shall be on the same terms, covenants and conditions of this Lease, except for the provisions of Articles 33, 34, 35, 36, 40, and 41 hereof, and except for the determination of Base Rent as hereinafter provided. Article 4 hereof, providing for the payment of rent adjustments with respect to increases in Operating Expenses and Ownership Taxes, shall be applicable to any Extended Term, provided that the Base Year used in the calculation of such rent adjustments in any Extended Term shall be the calendar year in which such Extended Term begins.
(C) The Base Rent during any Extended Term (herein referred to as "Extension Term Rent") shall be at a rate equal to ninety five percent (95%) of the Fair Market Rent (as defined in Article 38 hereof) during each Extended Term, which Fair Market Rent shall be calculated in advance but as of the first day of the applicable Extended Term rather than as of the date such calculation is made; provided, however, that the calculation so made shall be final and shall not be remade on the first day of any such Extended Term. The calculation shall reflect the full length of the Extended Term, and shall be recalculated for any subsequent Extended Term.
(D) Landlord shall provide Tenant with Landlord's calculation of Fair Market Rent, and the resulting percentage thereof to be paid by Tenant pursuant to the preceding Paragraph (C) during the succeeding Extended Term, no later
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document than one month after delivery of Tenant's non-binding written notice under Paragraph (A) above. If Tenant notifies Landlord in writing within ten (10) days after delivery of Landlord's calculation of the Fair Market Rent that Tenant contests Landlord's calculation and the parties cannot within ten (10) days after delivery of such notice by Tenant ("the
63
Negotiation Period") reach agreement on the Fair Market Rent payable during any such Extended Term, then the Fair Market Rent shall be determined in accordance with the procedures set forth in Article 38 hereof.
(E) Tenant may extend the Term either as to all of the Premises as are demised to Tenant on the date of Tenant's exercise of such applicable option to extend or only as to the portion of the Premises located on the fourth (4th) floor of the Building; provided that Tenant may add to the Premises in connection with the extension of the Term so much of Expansion Space A as is then occupied by Landlord's beneficiary or its managing agent, subject to and in accordance with the provisions of Article 34(E). Tenant's non-binding notice and binding notice of exercise of any option shall specify the area and location of the Premises as to which Tenant desires to extend the Term.
(F) Tenant's rights to exercise its option to extend the Term of this Lease for any Extended Term are subject to the condition that Tenant is not in monetary default or in default under any of the other material terms, covenants or conditions of this Lease at the time that Tenant delivers its written notice to Landlord of the exercise of any such option to extend for an Extended Term, or upon the commencement of such Extended Term unless Landlord, in its absolute discretion, elects in writing to waive such condition to the effective exercise of the option (provided the foregoing shall not affect or limit Landlord's rights to enforce any defaults of Tenant pursuant to Article 15 hereof). Notwithstanding the foregoing, if the existence of any such default shall, pursuant to the foregoing, make ineffective the exercise of such option, such exercise shall nevertheless become effective as of the originally scheduled date if such default is cured within the earlier of (i) any applicable cure or grace period specified in Article 15 hereof or (ii) thirty (30) days after delivery of notice of such default by Landlord to Tenant.
(G) In the event Tenant exercises any option pursuant to this Article 37, Tenant shall accept the Premises in "as is" condition.
(H) In the event Tenant exercises any option pursuant to this Article 37, Tenant and Landlord agree to enter into an amendment to this Lease setting forth the terms applicable to such Extended Term within ninety (90) days after the date Tenant gives binding notice of its exercise of an option to extend the Term of this Lease for an Extended Term.
(I) The options to extend granted pursuant to this Article 37 are personal to CCC (and any Successor or Affiliate to whom this entire Lease has been assigned in compliance with Article 12) and may not be exercised by or for the benefit of any other party. Any termination of this Lease or of Tenant's right to possession under
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 64
this Lease shall extinguish and cancel all rights of Tenant under this Article 37.
38. FAIR MARKET RENT; ARBITRATION PROCEDURES.
(A) "Fair Market Rent" for the Premises with respect to any Extended Term shall mean the fair rental, as of the date for which such Fair Market Rent is being calculated, per annum per rentable square foot for comparable space for a comparable term, by reference to comparable space in the Building, and in other buildings comparable to the Building in quality and location, but excluding those leases where the tenant has an equity interest in the property. The Fair Market Rent shall be determined on the basis of a fixed base rent per square foot without rent adjustments of any kind (other than rent adjustments with respect to increases in Operating Expenses and Ownership Taxes as provided in Article 4 hereof and, with respect to Fair Market Rent for any Extended Term, using as a Base Year the calendar year in which the respective Extended Term commences), whether in the nature of CPI adjustments, step increases or otherwise (the economic value of any such adjustments then customarily applicable in the market to be reflected instead in the determination of such base rent), and taking into account in the calculation of such base rent (as a decrease in the otherwise applicable base rent) any then market tenant improvement allowance or concession, free rent concession, or other concessions, allowances or inducements (other than tenant equity interests in the property) of any kind then customarily available in the market (such concessions, allowances or inducements not to be separately stated or paid with respect to any Extended Term).
(B) In the event Tenant disagrees with Landlord's determination of Fair Market Rent at any time and the parties thereafter reach agreement on such Fair Market Rent (and resulting Extension Term Rent) during any Negotiation Period described in Article 37 hereof, such Fair Market Rent (and resulting Extension Term Rent) shall be reflected in the lease amendment required to be executed by Landlord and Tenant pursuant to Article 37 hereof.
(C) In the event Landlord and Tenant are unable to reach agreement on the calculation of Fair Market Rent during any Negotiation Period described in Article 37 hereof, then in any such event the Fair Market Rent shall be determined in accordance with the following arbitration procedures:
(i) Within five (5) days after the expiration of any such Negotiation Period, Landlord and Tenant shall each simultaneously submit to the other in a sealed envelope its good faith estimate of the Fair Market Rent. If the higher of such estimate is not more than one hundred five percent (105%) of the lower of such estimates, then the Fair Market Rent shall be the average of the two estimates. Otherwise, within five (5) days after such exchange of estimates, either
65
Landlord or Tenant may submit the question to arbitration in accordance
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document with clause (ii) below.
(ii) If Landlord and Tenant are unable to agree upon the Fair Market Rent by exchange of estimates or otherwise, then either party may, by written notice to the other delivered within five (5) days after such exchange, require that the dispute be resolved by arbitration. Within seven (7) days after receipt of such notice, Landlord and Tenant shall select, to act as an arbitrator, an independent MAI appraiser with experience in real estate activities, including at least ten (10) years' experience in appraising office space in the downtown Chicago area. If the parties cannot agree on such an appraiser, each party shall then within a period of seven (7) days thereafter select an independent MAI appraiser meeting the previously-described criteria, and within a third period of seven (7) days after the appointment of the last of the two appraisers to be appointed, the two appointed appraisers shall select a third appraiser meeting the aforementioned criteria, and all three of such appraisers shall independently determine the Fair Market Rent (each such independent determination of the Fair Market Rent shall be called an "Appraised Rent"). If one party shall fail to make an appointment of an appraiser within the foregoing seven (7) day period, then the appraiser chosen by the other party shall choose the other two appraisers.
(iii) Once the appraiser (or appraisers if the parties cannot agree on a single appraiser) has been selected as provided in clause (ii) above, then, as soon thereafter as practicable but in any case within fourteen (14) days after the selection of such appraiser (or the last of such appraisers, as the case may be) the single appraiser's Appraised Rent or the average of the two closest Appraised Rents (in the case of more than one appraiser) shall be calculated in accordance with the criteria described in Paragraph (A) of this Article 38 (such average shall be called the "Average Appraised Rent") and the appraiser (or appraisers, as the case may be) shall select one of the two estimates of Fair Market Rent submitted by Landlord and Tenant pursuant to Article 38(C)(i), which shall be the one that is closer to the Appraised Rent or Average Appraised Rent, as the case may be. Landlord and Tenant agree that the estimates submitted by Landlord and Tenant to each other shall not be furnished to the appraiser(s) until the appraisers have informed Landlord and Tenant of the Appraised Rent or Average Appraised Rent, as the case may be, as determined by them. The value so selected shall be the Fair Market Rent (which shall be adjusted pursuant to Article 37(C) to reflect the Extended Term Rent payable with respect to the option then exercised by Tenant). The decision of the appraiser(s) as to the Fair Market Rent shall be submitted in writing to, and be final and binding on, Landlord and Tenant. Landlord and
66
Tenant shall share equally the costs of the appraisers who participated in the foregoing procedure. Any fees of any counsel engaged directly by Landlord or Tenant, however, shall be borne by the party obtaining such counsel.
39. RIGHT OF FIRST OFFER. In the event that from time to time at any time during the Term, including any Extended Term, any space on the fourth (4th) floor of the Building becomes available for leasing by third parties, Tenant
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document shall have and is hereby granted the right to add such space to the Premises demised hereunder, subject, however, to any option, first refusal rights or other rights, then existing of other tenants with respect to any such space and also subject to Landlord's right to offer any such space for renewal to Chicago Teachers Union (with respect to the space currently leased to it) or for renewal to any tenant then occupying any portion of the fourth (4th) floor which is included in Expansion Spaces B, C-1, C-2 and D (with respect to any portion of such Expansion Spaces). Landlord shall notify Tenant in writing of the availability of such space from time to time and the rental rate and other economic terms and conditions at which Landlord is prepared to offer such space to a third party in good faith (including all rent concessions and other allowances and assuming that the space were to be taken "as is") . Tenant shall have thirty (30) days from receipt of such notice from Landlord within which to notify Landlord in writing of its acceptance of such offer to add such space to the Premises at the rental and on the economic terms and conditions set forth in Landlord's notice to Tenant; provided that the time period for which such space shall be added to the Premises on such terms and conditions shall expire not later than the date as of which such space is added to the Premises pursuant to an expansion option under Article 34. In the event Tenant does not so notify Landlord within said 30-day period of its acceptance of such offer and thereafter promptly enter into a lease amendment which adds such space to the Premises on such terms, Landlord may thereafter lease such space to any other third party and Tenant shall have no further right or interest in such space during the term of such third party lease (except to the extent of the rights granted to Tenant in Article 34 above) . If such space again becomes available (as described in the first sentence of this Article 39), Landlord shall again offer such space to Tenant in accordance with the foregoing provisions. Notwithstanding anything in this Lease to the contrary, Tenant agrees to accept any space offered to Tenant pursuant to this Article 39 in an "as is" condition as existing on the date such space is to be added to the Premises, subject to any allowances for improvements included in the offer to lease the space.
Any termination of this Lease or of Tenant's right to possession under this Lease shall extinguish and cancel all rights of Tenant under this Article 39. The right of first offer granted pursuant to this Article 39 is personal to CCC (and any Successor or Affiliate to which this entire Lease has been assigned in compliance with Article 12) and may not be exercised by or for the
67
benefit of any other party; nor may this right be exercised by Tenant at any time that more than 20,000 rentable square feet of the Premises then demised hereby are subject to an assignment or sublease. In the event Tenant exercises any right under this Article 39, Tenant agrees in each case to enter into a lease amendment setting forth the terms thereof within ninety (90) days after exercise of such right by Tenant.
40. TENANT EQUIPMENT/FURNITURE LEASE. Landlord hereby agrees, at the request of Tenant, to acquire and lease to Tenant, pursuant to an operating lease (the "Operating Lease") on terms and conditions (including, without limitation, default and acceleration provisions) satisfactory to Landlord consistent with commercial practice, furniture and equipment for use in the Premises in an amount, measured by cost to the Landlord, not to exceed Five Hundred Thousand Dollars ($500,000.00). The Operating Lease shall be for a term
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of five (5) years and shall provide for an option to purchase by Tenant upon the expiration of the lease term at a purchase price equal to the then fair market value of the leased furniture and equipment. The monthly lease payment under the Operating Lease shall be $9,502.33 per month; provided, however, in the event the cost to Landlord of the furniture and equipment acquired by Landlord and leased to Tenant is less than $500,000.00, then the monthly lease payment under the Operating Lease shall be reduced by an amount equal to $.02142 for every One Dollar ($1.00) by which the cost of such furniture and equipment is less than $500,000.00; provided, further, however, that in no event shall the monthly lease payment be reduced below $1.00. The Operating Lease shall further require Tenant to maintain the leased items in a reasonable condition and to maintain commercially reasonable property insurance on the leased items, which insurance shall designate Landlord as an additional insured; and Tenant shall bear all risk of loss with respect to loss of or damage to the leased items. A default under this Lease shall constitute a default under the Operating Lease, and a default under the Operating Lease shall constitute a default under this Lease. At the election of Landlord, either the monthly lease payment will be increased to account for any City of Chicago and other lease taxes applicable to the Operating Lease or, if permitted by law, Tenant shall pay any such tax directly to the taxing authority.
If Tenant applies a portion of the Landlord's Contribution under Article 35 to the acquisition of furniture and equipment and also requests Landlord to enter into the Operating Lease, Landlord shall have the right, subject to the reasonable business requirements of Tenant, to select which furniture and equipment shall be acquired by Landlord and leased to Tenant pursuant to the Operating Lease.
41. 640 NORTH LASALLE STREET LEASE.
(A) Pursuant to various leases dated as of October 28, 1985; November 25, 1986; December 15, 1986; January 23, 1987; October 30,
68
1987; and July 17, 1990, as amended from time to time between Tenant and MAC Management Co., Inc., as agent for the sole beneficiary of Amalgamated Trust & Savings Bank, as Trustee under Trust Agreement dated May 1, 1987 and known as Trust No. 5261 (as assignee of Trust No. 3724), Tenant is currently leasing certain space consisting of approximately 59,016 rentable square feet (the "LaSalle Street Space") in the building known as 640 North LaSalle Street, Chicago, Illinois for a term expiring on November 30, 1996 (the "LaSalle Street Lease"). Tenant covenants and agrees to perform all obligations of the tenant under the LaSalle Street Lease and to maintain the LaSalle Street Lease in good standing and full force and effect for the balance of the term thereof. Subject to the provisions of the LaSalle Street Lease, Landlord is hereby granted the right to market such space to procure an assignment or sublease of the LaSalle Street Lease. Landlord shall be responsible for any costs of such subleasing or assignment, including brokers' fees, allowances, improvements and similar expenses. Tenant agrees to cooperate with Landlord and any broker engaged by Landlord in connection with such assignment or subleasing, including reasonable financial approval of any proposed assignee or sublessee, and agrees to execute any documents necessary to effect such assignment or sublease or to effect a cancellation
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of all or any portion of the LaSalle Street Lease. In connection with such assignment and subleasing activities, Tenant further agrees to act in a reasonable manner as if Tenant were subletting or assigning such LaSalle Street Space for its own account and Tenant agrees to prepare a form of sublease for use in subletting the LaSalle Street Space which sublease form shall be subject to Landlord's reasonable approval. Subject to the provisions of this Paragraph (A) and Paragraph (D) below, any revenues derived from any assignment or sublease of the LaSalle Street Space shall be paid to Landlord, at Landlord's direction, either directly by such assignee or sublessee or promptly by Tenant upon Tenant's receipt of such sums. Landlord does not hereby assume and shall have no obligation to perform, any of Tenant's obligations (including without limitation the payment of rent) under the LaSalle Street Lease. Landlord agrees that Tenant shall not incur any additional financial obligations in excess of those specified in the LaSalle Street Lease due to any acts of any such subtenant or assignee [other than Tenant's affiliate described below in Paragraph (D)] and Landlord shall protect, indemnify, defend and save Tenant, its officers, directors, agents, beneficiaries, partners and employees harmless from and against any and all liabilities, costs, claims, damages, obligations and expenses arising out of any sublease or assignment entered into pursuant to this Article 41 [except for the sublease to the affiliate of Tenant described below in Paragraph (D)]; provided, however, such indemnity obligation of Landlord shall in no event exceed and is limited to the extent of any net revenues received by Landlord from such assignee or subtenant pursuant to this Article 41.
69
(B) Tenant agrees to make available for sublease or assignment the LaSalle Street Space and to move its business operations to the Premises within ten (10) calendar days of the Commencement Date (as determined in accordance with Article 1). If Tenant fails to make available for sublease or assignment the LaSalle Street Space and to move its business operations to the Premises within ten (10) calendar days of the Commencement Date (subject to extension for not more than thirty (30) calendar days on account of Force Majeure events preventing the accomplishment of Tenant's move from the LaSalle Street Space to the Premises) (such date, as so extended, is referred to herein as the "Final Availability Date") , then Tenant (in addition to Tenant's obligation to pay rent with respect to the Premises pursuant to the terms of this Lease) shall pay Landlord rental for the LaSalle Street Space for such period after the Final Availability Date that Tenant continues to fail to make such space available for sublease or assignment and to move its business operations to the Premises at the rate of (i) $1,639.33 per day for the first fifteen (15) calendar days following the Final Availability Date, (ii) $24,590 in advance for the next fifteen (15) calendar day period or portion thereof, and (iii) thereafter, $49,180 in advance for each thirty (30) calendar day period or portion thereof; and Tenant shall indemnify Landlord for any loss, cost and expense incurred by Landlord (net of the rental paid to Landlord by Tenant for the LaSalle Street Space pursuant to this sentence) on account of Landlord's inability to sublet or assign, or delay in such subletting or assignment, to a third party due to Tenant's failure to make the LaSalle Street Space available for sublease or assignment as provided herein. Tenant represents that it is not Tenant's intent to abandon the LaSalle Street Space and agrees to take commercially reasonable steps to avoid the making of such space available for subleasing or assignment an abandonment thereof.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (C) Tenant represents and warrants that: the copy of the LaSalle Street Lease previously delivered by Tenant to Landlord is a true and complete copy thereof; there are no other agreements relating to the LaSalle Street Space between Tenant and any subtenant or assignee of Tenant (except as disclosed pursuant to the following Paragraph (D) as to occupancy by an affiliate of Tenant); and the LaSalle Street Lease is in full force and effect and Tenant is not in default in the performance of its obligations thereunder. Tenant agrees to use reasonable efforts to deliver to Landlord within thirty (30) days after the date of execution of this Lease, an estoppel certificate executed by the landlord under the LaSalle Street Lease, in the form described above in Article 30, with respect to the LaSalle Street Lease. Landlord agrees not to exercise any option of Tenant under the LaSalle Street Lease to extend the term thereof or expand the LaSalle Street Space unless Landlord obtains a release of Tenant's obligations under the LaSalle Street Lease with respect to such extension term or expansion space, as the case may be.
70
(D) Landlord and Tenant acknowledge and agree that GIS Information Systems, Inc., an affiliate of Tenant, currently occupies approximately 2,000 rentable square feet of the LaSalle Street Space and Tenant agrees that Tenant shall either cause such affiliate to make the space occupied by it available for subleasing at the same time and in the same manner as the balance of the LaSalle Street Space is made available for subleasing pursuant to this Article 41 or, in the alternative, if such affiliate intends to continue to occupy such space after the balance of the LaSalle Street Space is made available for subleasing, then within thirty (30) days after the date of execution hereof, such affiliate shall enter into a written sublease with Tenant for such space on terms and conditions reasonably satisfactory to Landlord, which sublease shall be for a term determined by Tenant and such affiliate; provided that such sublease shall provide that it may be terminated by Landlord at any time upon ninety (90) days written notice to Tenant that Landlord is discussing with a prospect the sublease or assignment of any or all of the LaSalle Street Space. Such sublease shall also provide that such affiliate shall cooperate with Landlord in all reasonable ways in making the LaSalle Street Space available for showing to prospective subtenants and assignees. Any revenues derived from any such sublease may be retained by Tenant. At Landlord's direction, in accordance with the terms and conditions of this Article 41, all or any part of the LaSalle Street Space may be sublet or assigned, and possession of such space given to an assignee or subtenant, prior to the termination of such affiliate's sublease (but subject to such affiliate's rights as to the space sublet to it), and in such event Tenant shall separate and secure such affiliate's space from the balance of the LaSalle Street Space in a manner reasonably satisfactory to Landlord.
42. COVENANT OF QUIET ENJOYMENT; MORTGAGEE'S APPROVAL.
(A) Landlord covenants that Tenant, upon paying the Base Rent, rent adjustments and other payments provided for herein, and upon keeping, observing and performing all other terms, covenants, conditions and agreements herein contained on the part of Tenant to be kept, observed and performed, shall, during the Term, as extended, peaceably and quietly have, hold and enjoy the Premises subject to the rights of any mortgagee and the terms, covenants, conditions and agreements hereof free from hinderance by
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Landlord or any other person claiming by, through or under Landlord.
(B) This Lease is subject to the approval of the current mortgagee for the Property. Landlord agrees to use reasonable efforts to obtain approval of this Lease from such mortgagee as promptly as possible. Any delay in obtaining such consent beyond sixty (60) days after the date of execution and delivery of this Lease shall constitute a Landlord Delay to the extent it delays the completion of Tenant's Work beyond the otherwise applicable Commencement Date, and the Commencement Date shall be extended one (1) day for each day that any such Landlord Delay delays completion
71
of Tenant's Work. If such mortgagee fails to approve this Lease or raises objections to this Lease within such sixty (60) day period, and Landlord and Tenant have not negotiated changes to this Lease satisfactory to such mortgagee or otherwise satisfied the objections of such mortgagee within ninety (90) days after execution and delivery of this Lease, then either party may terminate this Lease by delivery of written notice to the other party; provided, however, that Landlord shall have such right only if it has used reasonable efforts to obtain the approval of such mortgagee.
43. ENTIRE AGREEMENT.
Except as expressly otherwise provided herein, this Agreement, together with all of the exhibits attached hereto, constitutes the entire understanding between Landlord and Tenant as to the subject matter hereof and supersedes all prior agreements between the parties hereto about such matters, and all of the representations and obligations of Landlord and Tenant are contained herein.
44. TRUSTEE CLAUSE. It is expressly understood and agreed that this Lease is executed on behalf of LASALLE NATIONAL TRUST, N.A., not personally but as Trustee aforesaid, in the exercise of the power and authority conferred upon and invested in it as such Trustee, and under the direction of the beneficiaries of a certain Trust Agreement dated May 27, 1981, and known as Trust No. 104000. It is further expressly understood and agreed that LASALLE NATIONAL TRUST, N.A., as Trustee aforesaid, has no right or power whatsoever to manage, control or operate said real estate in any way or to any extent and is not entitled at any time to collect or receive for any purpose, directly or indirectly, the rents, issues, profits or proceeds of said real estate or any lease or sale or any mortgage or any disposition thereof. Nothing in this Lease contained shall be construed as creating any personal liability or personal responsibility of the Trustee or any of the beneficiaries of the Trust, or any of their respective officers, directors, beneficiaries, partners, agents, and employees, and in particular, without limiting the generality of the foregoing, there shall be no personal liability to pay any indebtedness accruing hereunder or to perform any covenant, either expressly or impliedly herein contained, or to keep, preserve or sequester any property of said Trust or for said Trustee to continue as said Trustee; and that so far as the parties herein are concerned the owner of any indebtedness or liability accruing hereunder shall look solely to and attempt to collect solely from the trust estate from time to time subject to the provisions of said Trust Agreement for payment thereof, Tenant hereby expressly waiving and releasing said personal liability and personal responsibility of the Trustee and any of the beneficiaries of the Trust, and any of their respective officers, directors, beneficiaries, partners, agents and employees on behalf of itself and
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document all persons claiming by, through or under Tenant.
72
IN TESTIMONY WHEREOF, the parties hereto have caused this instrument to be executed as of the day and year first above written.
LANDLORD:
LASALLE NATIONAL TRUST, N.A., as successor trustee to LASALLE NATIONAL BANK, not individually but as Trustee under a Trust Agreement dated May 27, 1981, and known as Trust No. 104000, as aforesaid.
By: /s/ ------Sr. Vice President
TENANT:
CCC INFORMATION SERVICES INC., a Delaware corporation
By: /s/ ------Its: Vice Chairman and Chief Financial Officer ------
73
CERTIFICATE (If Tenant is a Corporation)
I, Margaret A. Williford, Assistant Secretary of CCC Information Services Inc., Tenant, hereby certify that the foregoing Lease has been authorized by all necessary corporate action on behalf of Tenant, the officer(s) executing the foregoing Lease on behalf of Tenant was/were duly authorized to act in his/their capacities as Vice Chairman and Chief Financial Officer and his/their action(s) are the action of Tenant.
(Corporate Seal)
/s/ Margaret A. Williford
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document ------Assistant Secretary
74
SCHEDULE OF EXHIBITS
EXHIBIT A PLAN OF PREMISES
EXHIBIT A-1 EXPANSION SPACES
EXHIBIT B DESCRIPTION OF ALLOCATION BETWEEN RETAIL CENTER AND NON-RETAIL SECTION OF THE BUILDING
EXHIBIT C EXAMPLE STATEMENT REGARDING OPERATING EXPENSES AND OWNERSHIP TAXES
EXHIBIT D JANITORIAL SPECIFICATIONS
EXHIBIT E SHELL AND CORE WORK
EXHIBIT F RATES FOR LANDLORD'S SUPERVISION AND GENERAL CONDITIONS
EXHIBIT G LIST OF APPROVED CONTRACTORS
EXHIBIT B
Merchandise Mart Retail Cost Allocation Guidelines
Accounting guidelines for charging direct retail costs and allocating common building costs between retail and non-retail components of the building are as follows:
DIRECT RETAIL COSTS
Costs directly associated with and exclusively benefiting the retail mall are fully absorbed by the retail component of the building. These cost include Shops At The Mart administrative offices, mall promotion, retail leasing, food court cleaning and retail freight elevators.
In lieu of allocating the operating cost of the passenger elevators/escalators between retail and non-retail, the cost of operating the escalators between the first and second floors* is fully absorbed by the retail component and the cost of operating the passenger elevators along with the cost of operating the escalator between second and third floor are charged to the nonretail component of the building (unless the third floor is ever converted to retail in which case the escalator between the second and
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document third floor shall be charged to retail). *including the escalator serving only the first floor
DIRECT RETAIL COSTS PARTIALLY ALLOCATED TO NON-RETAIL
These costs are directly associated with the first and second floors but benefit all of the floors of the building. This category of costs includes security, after hours staffing of concierge desk (after 5 pm and weekends), cleaning and maintenance of the first and second floors. 40.3% of these costs are allocated to the non-retail component of the building. 40.3% is the percentage relationship between the first and second floor common area requirement assuming a non-retail use and the existing retail common area on the first and second floors.
COMMON BUILDING COSTS
These costs are allocated between retail and non-retail using one of the following two allocation methodologies:
- Useable square feet with retail representing 8.5% of the total building useable area. Cost allocated using this allocation percentage include: general building lighting, common area water consumption, concierge desk staffing - regular business hours, exterior maintenance, window cleaning - floors 3 through 25 and loading dock.
Merchandise Mart Retail Cost Allocation Guidelines
COMMON BUILDING COSTS (CONT'D)
- Rentable square feet with retail representing 10.8% of the total building rentable area. Cost allocated on a rentable square foot basis are those originally derived using rentable square feet and include security alarm and liability insurance costs. Since rentable square feet by definition includes common areas, 40.3% of these costs are reallocated to non-retail component of the building.
HEATING, VENTILATION AND AIR CONDITIONING
Heating costs are allocated between retail and non-retail components of the building based upon rentable square feet. Ventilation and air conditioning costs are allocated based upon air volume requirements measured in cubic feet per minute ("CFM").
REAL ESTATE TAXES
Real estate taxes are allocated between the retail and non-retail components of the building using the same methodology that is adopted by the tax assessor's office in determining the building's overall assessed valuation; the income approach. If the assessor's office ever changes the methodology, Landlord agrees that the allocation of total building taxes to the retail shall not be less than the retail's proportionate share of the total building useable area (8.5%).
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document The assessor's office requires The Merchandise Mart to submit two independent appraisals. The appraisals provide the ability to segregate retail from the balance of the building in order to establish the allocation base. Historically the appraisals have been very close and the assessment has reflected these appraisals. In the event there is a discrepancy the appraisal closest to the assessment will be used.
While employing this approach a percentage relationship between "retail income before real estate taxes" and "total building income before real estate taxes" is developed. This percentage is used to allocate a portion of the building real estate taxes to the building's retail component. Changes in the percentage coincide with the any tax reassessment.
B - 2
EXHIBIT C
RENT ADJUSTMENTS Page 1 of 2
TENANT: BASE YEAR: 1993 CURRENT OPERATING YEAR: 1994 ------
TENANT'S PROPORTIONATE SHARE
RENT ADJUSTMENTS Page 2 of 2
TENANT: BASE YEAR: 1993 CURRENT OPERATING YEAR: 1994 ------
EXHIBIT D
JANITORIAL SERVICES
I. NIGHTLY: Monday through Friday (Holidays excluded)
- Dust mop, using a treated mop, all vinyl asphalt, rubber, and similar types of flooring. This includes removal of gum and other similar substances using a scraping device.
- Vacuum all common carpeted areas within tenant space.
- Remove spots from carpeted areas, if possible.
- Hand dust and wipe clean with a chemically treated cloth furniture, file cabinets, cleared desk tops, counter tops, and horizontal surfaces.
- Remove spots from all painted surfaces, entrance doors, glass walls, and wall covering (except fabric) as necessary.
- Remove all gum and foreign matter in sight.
- Empty all waste receptacles and remove waste paper and waste materials to a designated area.
- Spot mop floors for spillages, etc.
- Empty and damp wipe all ash trays.
- Upon completion of work, all slop sinks are to be thoroughly cleaned and cleaning equipment and supplies stored neatly in locations designated by Building Manager's Office.
- Clean elevator cabs, including floors.
- Sweep clean loading dock areas.
- In corridors and lobby, dust and wipe clean mail chutes, mail depository door glass, metal door knobs, kick plates, and directional signs.
II. WEEKLY:
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document - Completely vacuum all carpeted areas.
- Dust all baseboards, low level ledges, sills and moldings (under 8 ft.).
- Damp mop high traffic resilient tile areas.
- Wash all glass entrance doors side panels and glass walls inside and out.
III. MONTHLY:
- Dust all picture frames, charts, and venetian blinds which are not reached in nightly cleaning.
- Buff all tile floor areas.
10/91
D-1
IV. QUARTERLY:
- Dust exterior of lighting fixtures.
- Vacuum all air conditioning vents, grills, etc.
- Vacuum upholstered furniture.
V. SEMI-ANNUALLY:
- Vacuum all vertical partitions and fabric.
LAVATORIES
I. NIGHTLY: Monday through Friday
- Clean and sanitize all toilet bowls, urinals, and wash basins.
- Clean and polish all chrome and stainless steel fittings.
- Clean and sanitize toilet seats.
- Clean and polish all glass and mirrors.
- Empty trash receptacles and insert new liners where required.
- Wash and sanitize counter tops and exteriors of all trash receptacles.
- Spot clean all partitions and remove graffiti.
- Spot clean walls, doors, and trim.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document - Damp mop and sanitize tile floors.
- Refill all dispensers to normal limits.
II. QUARTERLY:
- Machine scrub tile floors.
- Wash partitions.
- Dust or vacuum all vents and grills.
- Wash ceramic tile walls.
- Clean high level ledges and sills.
III. ANNUALLY:
- Strip, seal and refinish.
10/91
D-2
LOBBIES, CORRIDORS, STAIRWELLS & ELEVATORS
I. NIGHTLY: Monday through Friday
- Vacuum all carpeted areas, including edges.
- Remove spots from carpet, if possible.
- Spot clean all doors, trim, and walls.
- Clean and sanitize drinking fountains.
- Spot clean and vacuum/mop all elevators.
- Damp mop all hard surface floors.
- Clean Directories.
- Dust low level ledges, sills and moldings.
- Empty trash receptacles and remove waste to designated area.
- Empty ash trays.
II. WEEKLY:
- Spray and buff all hard floor surfaces.
- Dust high level ledges, sills and molding (under 8 ft.).
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document - Completely clean glass doors, partitions and trim.
III. QUARTERLY:
- Dust/vacuum vents and grills.
MISCELLANEOUS
- Cleaning of kitchens (appliances, utensils, dishes and above standard cleaning) and computer rooms is the responsibility of the tenant.
- Sidewalks, roadways which service The Mart Center, and parking entrances will be kept clear of ice and snow.
- Sidewalks, entrances and loading docks to be kept clear of debris.
- Lobby floor mats to be put out in lobby during inclement weather.
- Window washing of the inside and outside of those windows in the Building's perimeter walls which are situated in the Premises at intervals to be determined by Landlord, but not less than three times per year.
1/93
D-3
EXHIBIT E
CCC OFFICE SPACE MERCHANDISE MART - 4TH FLOOR SHELL CONDITION
Separate and apart from the Tenant Improvement Allowance, Landlord shall, at its cost, provide the following which may be constructed simultaneously with the Tenant Improvements and are in accordance with discussions with CCC's representatives:
1. DEMOLITION - Removal of existing construction, including walls, ceilings, finishes and systems. Existing sprinkler system and ductwork identified by Tenant as being salvaged will not be removed.
2. WINDOWS - Replace all existing north elevation exterior wood windows with new aluminum clad double pane windows to match those installed on the east and south elevations.
3. HVAC - Existing perimeter heating will be modified with new controls. The fan systems located on the 4th floor serving the area to be occupied by CCC will be renovated to provide adequate cooling for an 80% diversified average electrical load of 4.5 watts/square foot. New controls and coils will be installed, valves, and drip pans will be replaced. The fan systems will be cleaned. Landlord will clean existing ductwork that is to remain. Balance of ductwork is CCC's responsibility.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 4. LIFE SAFETY - Exit stair doors, frames and hardware will be modified, if necessary, to comply with applicable codes.
5. Landlord will provide within the Tenant space riser cables to which the Tenant may connect its Life Safety System.
6. Floors will be leveled to 1/2 inch in ten feet. At transition areas, the floor slope may be greater. Transition areas are defined as adjacent to the building core elements including, stairwells, restrooms, elevators, fan rooms, closets and shafts.
7. Landlord will provide at the exterior walls primed metal convection covers, drywall pilasters taped and sanded and standard window blinds.
8. New demising partitions will be metal studs with drywall on the side away from the Tenant space. Existing demising partitions will remain in existing condition.
E - 1
EXHIBIT E
CCC OFFICE SPACE MERCHANDISE MART - 4TH FLOOR SHELL CONDITION
9. Landlord has provided an operational sprinkler system, with mains and branches. Tenant is responsible for all modifications to the system.
10. Landlord will allow Tenant to use freight elevators at no cost. Tenant will try to schedule all freight elevator usage during regular operation, which is from 6:30 a.m. to 6:00 p.m. on Weekdays and on Saturdays from 8:00 a.m. to 2:30 p.m.
11. Landlord will pay cost of electrical and water service during construction.
12. Landlord will abate asbestos from the premises in accordance with Landlord protocol.
3/11/93
E - 2
EXHIBIT "E" (Supplement)
CCC 4TH FLOOR SPACE
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document A. LIGHTING AND RECEPTACLE ALLOWANCE. Maximum available combined lighting and receptacle allowance is an average of 4.5 watts/ft. (squared) of rentable area. The allowance has been adjusted to reflect a code required safety factory of 20%. Service is 120/240 volt; 1 phase, 3 wire.
B. EMERGENCY POWER. A Class II EPS system has been installed that supplies emergency power to elevators (1 per bank simultaneously), and emergency lighting to stairwells and public corridors. Tenant has emergency power in existing public corridors available for its use at .125 watts per square foot.
C. HVAC. Landlord will provide heating, ventilating and cooling systems for the premises as follows:
Heating shall be provided by the existing radiators on the perimeter of the Building. The radiators are provided with low pressure steam (10 psig) or hot water which is generated in the Building boiler room. Thermostatically controlled radiator valves will be provided on each accessible radiator for local comfort control.
The HVAC systems located in fan rooms will provide ventilating and cooling. The existing constant volume fan systems serving the premises will be upgraded (including installation of direct digital temperature controls and other key components) and will be capable of cooling the conditioned area with an average 4.5 watts per square foot total connected electrical load (with 80% diversity factor). All ductwork to be by Tenant.
Chilled water will be used for cooling and is seasonably available during the period of May 15 through October 15; and if the chilled water system is operational at other times, chilled water cooling will be made available at Tenant's request. Outside air will be used for temperature control between October 15 and May 15. The fan system operates during normal business hours, 8:00 A.M. to 6:00 P.M. Monday through Friday, and 9:00 A.M. to 1:00 P.M. Saturday.
D. HVAC DESIGN CRITERIA.
1. OUTDOOR CONDITIONS:
Winter (DB): -10 degrees F Summer (DB/WB): 95 degrees F/78 degrees F
E - 3
EXHIBIT "E" (Supplement)
CCC 4TH FLOOR SPACE
2. INDOOR CONDITIONS:
Winter: 70 degrees F to 72 degrees F Summer: 72 degrees F to 76 degrees F
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 3. AVERAGE AIR CIRCULATION: Minimum of .6 CFM/square foot
4. HVAC LOADS:
Lights & Equipment: Combined total load of 4.5 watts/sq.ft. People Load: 125 sq.ft./person
E. Condenser water is available at one point on the 4th floor to handle supplemental cooling requirements. Landlord has installed a cooling tower at Landlord's cost to furnish condenser water to tenants on a 24-hour basis. Tenant shall provide pumping capacity for such condenser water. Tenant shall reimburse Landlord for its share of electricity and other operating costs (after allocation to other tenants for their usage) reasonably incurred in connection with the operation of the cooling tower for Tenant's actual usage. Currently, the annual charge is $200 per ton.
F. HVAC power shall be provided by Landlord, except for supplemental power that Tenant may require for supplemental HVAC.
G. Temperature control compressed air and power shall be provided by Landlord.
H. Current after-hour ventilating and air cooling charges are:
$85/Hr/Fan - Summer $65/Hr/Fan - Winter (ventilation only)
I. SOUND LEVEL: Ambient noise levels will be a function of the materials used by tenant to build-out the space.
3/93
E - 4
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 10.3
MOTOR CRASH ESTIMATING GUIDES DATABASE LICENSE AGREEMENT
AGREEMENT made as of this 1st day of May, 1992, between Motor Books Division, a unit of Hearst Business Publishing, Inc., a Delaware corporation, with offices at 5600 Crooks Road, Suite 200, Troy, Michigan 48098 (hereinafter "Licensor") CCC Development Company, a Delaware partnership, with offices at 640 North LaSalle Street, Chicago, Illinois 60610, and its General Partner CCC Vehicle Damage Estimators, Inc., a Delaware corporation, having offices at 640 North LaSalle Street, Chicago, Illinois 60610 (CCC Development Company and CCC Vehicle Damage Estimators, Inc. each hereinafter "CCC"), CCC Information Services Inc. ("CCCIS"), a Delaware corporation, with offices at 640 North LaSalle Street, Chicago, Illinois 60610, and InfoVest Corporation, formerly known as Financial Protection Services, Inc. ("InfoVest"), a Delaware corporation having its offices at 640 North LaSalle Street, Chicago, Illinois 60610 (CCC, CCCIS and InfoVest hereinafter jointly and severally "Licensee") .
WHEREAS, Licensor, as the successor to Motor Publications, a unit of The Hearst Corporation, has title to and ownership of printed Motor Crash Estimating Guides (the "Periodicals") and electronic database versions which contain the data and illustrations set forth in the Periodicals (the "Databases"), exclusive of any datum which is not the subject of a copyright in favor of Licensor, and
WHEREAS, CCC Development Company and Licensor's predecessor entered into a Database License Agreement as of June 18, 1990, and
WHEREAS, Licensor and Licensee now desire to amend and restate the June 18, 1990 Database License Agreement in order to grant Licensee a non-exclusive restricted license to use the Databases and to sublicense the Databases to certain duly licensed value added remarketers ("VARS") and through such VARS, or directly, to duly licensed automotive industry and/or insurance industry businesses (the "End-Users") to enable them to access
- 1 -
the Database information on a computer with Licensee's EZEst Software program (the "Software") in order to electronically estimate collision costs.
NOW, THEREFORE, in consideration of the premises and the terms and conditions hereinafter set forth, the parties hereby agree as follows:
1. Licensor hereby grants Licensee a non-exclusive license to use the Databases listed in Schedule A attached.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2. Licensor shall provide Licensee with one (1) magnetic tape copy of each Database selected and in lieu of a subscription, one (1) hard copy edition of the corresponding Periodical. Licensor agrees to replace the magnetic tape copy of each Database selected with updated versions thirty (30) days prior to printing the corresponding Periodical issues, and Licensor agrees to furnish the corresponding Periodical issues for each Database selected, as and when published. Licensor shall replace, within forty-eight (48) hours of notification, any copies of the Databases it provides to Licensee which are defective or damaged as a result of ordinary wear and tear. Licensee shall promptly return to Licensor, postage prepaid, all prior copies of each Database tape upon receipt of updated versions or replacement copies.
Attached as Exhibit A is a list of proposed enhancements and modifications to the Databases which the parties agree will improve their quality and marketability, from a competitive standpoint. Licensor agrees to use its best efforts to make the changes set forth in Exhibit A within the respective time periods set forth for completion. Unless the Licensor has substantially and materially failed or refused to perform, a failure to complete the changes within the time limits shall not be a breach of this Agreement, however Licensor shall continue to work to make the Exhibit A changes to the Databases. Licensee shall give Licensor thirty (30) days notice to cure any alleged failure or refusal to complete the Exhibit A changes before seeking a remedy for the alleged breach. Twice a year, during the term of this Agreement, the parties will meet to review and evaluate the
- 2 -
contents of the Databases to ensure that the Databases are "up to industry standards", based on assessments by automobile industry and insurance industry responses and critiques, it being the intent of the parties that the Licensor respond to changes in the industry, technological developments, trends, and industry criticisms; provided, however, that at all times Licensor shall be entitled to maintain the editorial integrity of the Databases and shall, therefor, have the right to make any and all final editorial decisions. Consistent with and subject to the foregoing objectives and guidelines, Licensor agrees to do the following:
a) With respect to promotion, Licensor will form its own advisory board comprised of knowledgeable industry people from the insurance and repair facility industries, as well as Licensee, and meet at least annually to accept input and keep board members apprised of changes.
b) At least one Licensor technical editor will attend Licensee's EZEst Advisory Board meetings.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document c) Licensor will attend all Licensee and other key industry, and insurance end-user meetings with at least one senior level technical person who can respond to Database and strategic direction questions.
d) Licensor will install, staff, and promote an 800 number to handle Database inquiries. The "hotline" will be manned by a live operator during Licensor's work days from 9:00 a.m. to 8:00 p.m., Eastern Standard Time.
e) Licensor will contribute $50,000 annually to industry night sponsorship on a matching basis with Licensee to promote "EZEst/Motor" and Licensor shall be entitled to simultaneously promote its printed Periodicals. This amount will increase or decrease based on the percentage change in royalties, the $50,000 being calculated at the rate of five percent (5%) of $1,000,000 in sales and two and one-half percent (2.5%) on any excess, not to exceed a total contribution of $200,000 by Licensor. In the event Industry Nights are discontinued, the funds will be applied to other promotional projects to be mutually decided upon.
- 3 -
f) Within twelve (12) weeks after execution of this Agreement, Licensor will produce a short video on how to use the Crash Guide Databases for inclusion in EZEst training. Licensor will consult with Licensee on the video, however Licensor shall have the right to control all of the content.
g) Licensor will conduct no less than twenty-four (24) field time studies annually to enable Licensor and Licensee to promote verifiability of the data. Licensor will initiate the first time study within forty-five (45) days of execution of this Agreement.
h) Licensor will include, without charge to Licensee, a full page ad each month, so long as the Database is used exclusively by Licensee, on cover #2 or 3 in one (1) of the Periodicals selected by Licensor.
It is acknowledged that Licensor may provide substantially similar promotion and customer support services for its other VAR licensees.
It is further understood and agreed that in order to achieve long-term success to the mutual benefit of Licensor and Licensee, it is the good faith intention of the parties to develop additional databases to be included under amendments to this Agreement to be negotiated, namely a Canadian electronic database, and paint and materials electronic databases in accordance with the time schedule set forth in Exhibit A, and any other databases which the parties mutually agree upon.
In order to help Licensor market its Periodicals, Licensee agrees to supply two qualified representatives with data processing equipment to demonstrate the Software at Licensor's booth at the annual NACE trade show.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Furthermore, Licensor may, from time to time, reasonably request and Licensee shall use its best efforts to provide a Licensee representative to attend Licensor's sales meetings or other functions.
3. Licensee acknowledges that the Databases and corresponding Periodicals are confidential, proprietary material owned and copyrighted by Licensor. Licensee agrees that the Licensor shall retain exclusive ownership of the Databases and Periodicals, new
- 4 -
editions, updates, new releases and all modifications and enhancements, versions, and derivative works thereof, all of which will be deemed included in the terms "Databases" and "Periodicals", and such ownership rights of Licensor shall include all literary property rights, copyrights, trademarks, trade secrets, trade names or service marks, including goodwill relating thereto.
4. The Databases are intended for use solely by Licensee for conversion to machine readable form, and for marketing, demonstration, sub-licensing and distribution of authorized copies on any electronic medium to duly licensed End-Users for use with the Software as an alternative electronic information source of the data contained in Licensor's Periodicals. In the event that the Software permits an End-User to manually or automatically override the Databases, Licensee's system will mark all estimates and invoices with an asterisk to denote any elements of the estimate or invoice which are not exactly as on the Database information provided by Licensor. Any manual overrides, deviations from or additions to the overlap/included operations in the Database will be clearly marked with an asterisk as required above in estimates and invoices. Except as expressly permitted in this Agreement, Licensee agrees not to copy, modify, sublicense, assign, transfer or resell the Databases, in whole or in part. Licensee further agrees not to download/upload the Databases, in whole or in part, or to establish a network or service bureau utilizing the Databases without the consent of Licensor. Licensee is authorized to grant each End-User the right to establish a network of no more than one CPU and seven (7) estimating work stations per End-User, provided it is in a dealership or body-shop environment with a "network" of terminals which may have multiple databases/users, but the Databases are only available and accessible for estimates in the "network" at no more than seven (7) of the terminals. Licensee agrees to use its best efforts to restrict access to the Databases to duly licensed End-Users and designated employees and to use its best efforts to prevent violation of these restrictions by agents,
- 5 -
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document employees, and others, taking such steps and security precautions as may reasonably be necessary. In the event that Licensee discovers any breach by an End-User of any of the restrictions on use of the Databases, Licensee shall take immediate steps to terminate such End-User's license. Licensee agrees to encrypt, compile, or otherwise secure each End-User file to prevent the use of the file after either a given date or after the authorized number of estimates have been used, as appropriate under the terms of the End-User license. Licensee further agrees to use reasonable efforts to monitor compliance by End-Users and VARS with the restrictions on the use of the Database and cooperate with Licensor and take necessary and appropriate legal action in asserting any and all claims against an End-User or VAR for the unauthorized use of the Databases, it being understood that Licensor will pay the costs of such legal action except if the End-User or VAR has also infringed the Software, in which event the costs will be shared.
5. Licensee agrees to submit to the Licensor, for approval in advance, all advertising copy and promotional material regarding the Databases, and to identify the Licensor as the copyright owner and trademark registrant in such copy and material, and to label all copies distributed to End-Users and VARS accordingly. Licensee shall promote the Databases and identification of Licensor in substantially all advertising and promotional material identifying the Software and Licensor shall promote the Software and identification of Licensee as exclusively using the Databases. Any objection of the Licensor to the Licensee's advertising or promotional material must be reasonable and must be made in writing within thirty (30) days from the date that such material is submitted by the Licensee to the Licensor for review. Licensor agrees that as long as it is true, Licensor will endorse the EZEst Software as the only application software system that fully automates the Databases' "Guide to Estimating". For any application software system automating the "Guide to Estimating" to receive Licensor's endorsement, it must meet criteria to be established solely by Licensor within sixty (60)
- 6 -
days following execution of this Agreement (it being agreed by Licensor that the Licensee's current automated "Guide to Estimating" shall be the standard for the criteria to be established). Licensee shall be accorded the same right of pre-approval of Licensor's advertising of Licensee's software as Licensor has with respect to Licensee's advertising and promotional material regarding the Databases.
6. Licensee shall require that all End-Users sign the EZEst/Motor Software and Database License Agreements (body shop/insurance industry - with or without equipment), attached hereto as Exhibits I (a-d), (each the "End-User Agreement") or, if appropriate, a Licensor approved form of Evaluation Agreement prior to End-Users receiving copies of the Databases. Licensee shall be free to establish End-User Agreement fees, however, Licensee shall obtain the prior written consent of the Licensor to any other
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document proposed change in terms and conditions of End-User Agreements pertaining to the Databases and any alternative form of End-User Agreement or Evaluation Agreement to be offered to End-Users containing other provisions regarding the Databases shall be approved in advance by Licensor. Licensee agrees to send the Licensor copies of each Evaluation Agreement and End-User Agreement within ten (10) days of Licensee's receipt of an executed Agreement. If Periodicals are ordered by End-Users, Licensor shall be responsible for providing, in the regular course of business, each such licensed End-User with the printed Periodical issues, as and when published, for the term of the End-User's Agreement without additional cost, provided the Licensee has paid the license fees and royalties due hereunder. Licensee shall be responsible for reproducing and/or distributing to duly licensed End-Users copies of the Databases in machine readable form and for replacing defective or damaged copies. Licensee shall maintain records of all database/licensing transactions with End-Users and shall provide Licensor with access to such records for review at any time during normal business hours. In addition, Licensor, its agents and representatives, shall be entitled, at any time on notice to Licensee, to audit the books
- 7 -
and records of Licensee solely to verify Licensee and End-Users' compliance with this Agreement. Licensee will not be obligated to reimburse Licensor's costs in conducting any such audit unless Licensor discovers noncompliance with this Agreement.
7. Upon execution of this License Agreement, Licensee shall pay Licensor the initial annual licensee fees for the Databases and Illustrations set forth in Schedule A. Licensee shall continue to pay to Licensor the annual license fees for the Databases and Illustrations set forth in Schedule A. License fees for renewal periods shall be due and payable in advance, at least fifteen (15) days prior to each anniversary renewal date of this License Agreement. In addition, Licensee shall pay Licensor the annual royalty fee set forth in Schedule A for each duly licensed End-User site, which shall be due and payable within thirty (30) days after receipt of each End-User Agreement and each anniversary renewal date until termination or expiration thereof. Licensee also agrees to pay any and all taxes which may now or hereafter be assessed upon the rental, license, possession and/or use of the Databases by Licensee excluding taxes based on Licensor's income.
All of the License fees and royalties set forth in this Agreement will remain in effect through April 30, 1994, and on May 1, 1994 and on each May 1 thereafter, during the initial term and each renewal period, they will be increased by a percentage equal to the annual percentage increase in the then most recent Consumer Price Index ("CPI"), All Items standard reference base 1982-84 = 100, U.S. Department of Labor, publicly available on each such May 1, provided, however, that the adjustment shall not exceed five percent
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (5%) in any one (1) year. Licensor agrees to consider market conditions and competitive pricing faced by Licensee in deciding whether to increase prices hereunder. In the event Licensor does not increase prices for such reasons, Licensor may subsequently increase its prices by the amount deferred, plus any increase subsequently permitted hereunder, provided, however, that in no event shall the increase exceed ten percent (10%) in any one (1) year.
- 8 -
8. In addition to the right to grant sublicenses to End-Users directly, Licensor grants Licensee a limited right to sublicense the Databases to VARS that desire to sublicense the Databases and the Software as a system to End-Users, provided the VARS and their End-Users are bound by the terms and conditions and restrictions on use set forth in this Agreement, and further provided that Licensee pays Licensor the End-User fees and royalties in Schedule A for each End-User which receives a sublicense from any such VAR. Accordingly Licensee shall require that all such VARS sign the Distribution Agreement, attached as Exhibit II, (the "VAR Agreement") and Licensee shall further require that such VARS enter into End-User agreements in substantially the same form as the End-User Agreement or, if appropriate, a Licensor approved form of Evaluation Agreement prior to VARS' End-Users receiving copies of the Databases. All references throughout this Agreement to End-Users shall include VARS' End-Users and all references to obligations and covenants of Licensee with respect to the Databases shall be equally applicable to VARS.
9. The initial term of this license will expire on April 30, 2002. The term of this Agreement shall be automatically renewed from year to year thereafter for successive renewal periods of one (1) year (twelve months) each unless either party gives written notice to the other party of its termination of the Agreement at least two (2) years (twenty-four months) prior to the expiration of the initial term or renewal period, as the case may be. Within thirty (30) days following termination of this License Agreement, Licensee shall return, postage prepaid, all copies of the tapes for update Databases. Continued use of the Databases or any information contained therein or supplied under this Agreement after termination or expiration of this Agreement is expressly prohibited.
Notwithstanding the stated term of this Agreement, this Agreement may be terminated (a) by Licensor (i) upon the failure of the Licensee to make prompt payment of license fees and royalties due hereunder, (ii) in accordance with the provisions
- 9 -
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document of Section 15, if Licensee or any parent, subsidiary or affiliate of Licensee or such parent is owned by, owns, or is commonly owned with (in each case whether directly or indirectly and whether in whole or in part), or controlled by a company which produces and/or sells a crash/ collision estimating database which competes with any of the Databases; or (b) by either party (i) upon the failure of the other party to comply with the terms and conditions of this Agreement, or to perform any of its material obligations hereunder for a period of thirty (30) days after notice thereof, (ii) upon the bankruptcy or insolvency of the other party, however evidenced, resulting in an inability or failure to perform hereunder or inability or failure to perform any other material obligation or agreement or (iii) two (2) years (twenty-four months) following notice to the other party of its intention to discontinue or abandon, as distinguished from a sale of, publication of the Periodicals and Databases, as to Licensor, or marketing and distributing the EZEst Software or other similar system, as to Licensee. In the event of such "abandonment" or "discontinuance" by either Licensor or Licensee, the parties shall negotiate in good faith to reach mutually agreeable terms for the abandoning or discontinuing party to sell, transfer and assign to the other party the business and assets being abandoned or discontinued in order for the other party to continue its business and carry out the purposes of this Agreement. The above rights of termination are in addition to such other rights as the parties may have hereunder or as otherwise provided by law.
All End-User Agreements and agreements with VARS and their agreements with End-Users shall be co-terminus with this Agreement.
10. Licensor warrants its ownership rights in and to the Databases and agrees to defend, or settle at its option, any action against Licensee, or End-Users arising from a claim that a Licensee's, or End-Users use of the Databases under this Agreement or the End-User Agreement infringes any rights of any third party. LICENSOR MAKES NO OTHER WARRANTY, EXPRESS OR IMPLIED, INCLUDING, BUT NOT LIMITED TO, THE ACCURACY OF THE DATABASES, THE
- 10 -
MERCHANTABILITY AND FITNESS OF THE DATABASES FOR A PARTICULAR PURPOSE, NOR THE COMPATIBILITY OF THE DATABASES WITH LICENSEE'S, OR END-USER'S COMPUTER HARDWARE AND/OR SOFTWARE SYSTEM.
11. Licensee's sole and exclusive remedy for any damage or loss in any way connected with the Databases furnished hereunder, whether by the Licensor's breach of warranty, negligence, or any breach of any other duty, shall be, at Licensor's option, replacement of the Databases or return or credit of an appropriate portion of any payment made by Licensee with respect to such Databases. Unless otherwise expressly agreed to in writing, under no circumstances shall Licensor be liable to Licensee, End-Users, or any other
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document person for any indirect, special or consequential damages of any kind, including, without limitation, damages for loss of goodwill, work stoppage, computer failure or malfunction or any and all other commercial damages or losses.
12. This is a non-exclusive license and Licensor expressly reserves the right to enter into Database license agreements with other VARS and to offer the Databases directly to End-Users who have their own application software. In consideration for the Licensee's covenant of exclusivity and non-compete agreement Licensor agrees that: (i) it will not grant any new licenses to VARS for the right to market and distribute the Databases to insurance industry End- Users and will restrict any new VARS to selling to automotive industry-body shop End-Users, and in the event Licensor sublicenses the Databases to new VARS, the "Databases" will by definition expressly exclude the "Guide to Estimating", and (ii) it will not develop its own estimating product to compete with the EZEst Software, provided Licensee achieves the following minimum levels of sales of the EZEst Software and Database system during each of the contract years set forth below:
5/1/92 - 4/30/93 $ 300,000 5/1/93 - 4/30/94 $ 500,000 5/1/94 - 4/30/95 $1,000,000 5/1/95 - 4/30/96 $1,250,000 5/1/96 - 4/30/97 $1,500,000
- 11 -
5/1/97 - 4/30/98 $1,750,000 5/1/98 - 4/30/99 $2,000,000 5/1/99 - 4/3O/00 $2,500,000 5/1/00 - 4/30/01 $3,000,000 5/1/01 - 4/30/02 $3,500,000
During the term of this Agreement, Licensee, its parent and their subsidiaries and affiliates agree that the EZEst Software and all derivative works and systems using the Software will be distributed solely and exclusively with the Databases, the EZEst Software will not be licensed for use with any other crash/collision estimating database, and no other crash/collision estimating database will be licensed or distributed for use with EZEst Software by Licensee, or its parent company or any subsidiary or affiliate of Licensee or its parent company, directly or indirectly, to any VARS or End-Users. This covenant to market and distribute the Databases exclusively with the EZEst Software and system is conditional on the following conditions being satisfied:
(a) Licensor shall leave substantially and materially completed the changes set forth in Exhibit A within the respective time periods set forth for completion;
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document (b) Licensor shall maintain minimum market penetration standards based on a formula which the parties in good faith will mutually agree upon within thirty (30) days following execution of this Agreement;
(c) Licensor has not endorsed the application software system of any other VAR, unless it has met the criteria set forth in Section 13 below and the criteria for automating the "Guide to Estimating" to be established by Licensor pursuant to Section 5; and
(d) Licensor shall have continued to publish the Periodicals and Databases.
In the event any of the conditions listed in (a), (c) and (d) are not satisfied or in the event the condition listed in (b) above is not satisfied, after the formula has been agreed upon, for two (2) successive calendar or fiscal years of this Agree-
- 12 -
ment, Licensee may, at its option, market and distribute a database of an unaffiliated third party with the EZEst Software and system provided Licensee continues to offer the Databases and shall continue to be bound by all the other terms and conditions of this Agreement. If Licensee exercises its option to market and distribute the EZEst Software and system with the database of an unaffiliated third party, Licensor shall be relieved of its covenants of exclusivity set forth in the first paragraph of this Section 12; provided however, that Licensor shall not be relieved of its exclusivity covenant if Licensor has willfully failed and refused to satisfy the condition listed in (a) above. As an additional inducement for the Licensor to enter into this Agreement, the Licensee represents and agrees that now and during the term of this Agreement, neither it nor its parent, subsidiaries or affiliates, shall, directly or indirectly, for itself, or as agent of, or on behalf of, or in conjunction with, any person, firm or corporation, or as partner of any partnership or joint venture, or as shareholder of any corporation, own, manage, acquire, operate, control or participate in any manner in the development, ownership, license, marketing, distribution, operation or control of, or be associated with, or otherwise connected in any manner with, any database(s) which compete with any of the Databases, except that the Network to be established for the purpose of transferring estimates electronically from body shops to insurance companies may permit access to database(s) which compete with the Databases. Licensor and Licensee agree that the remedy at law for any breach by it of this Agreement, including the provisions on exclusivity and non-compete, may be inadequate and that in the event of any alleged breach or threatened breach, Licensor or Licensee, as the case may be, shall, in addition to all other remedies available to it at law or equity, be entitled to seek injunctive relief therefor.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 13. Licensee guarantees exclusive use of the Databases and no competing databases and the annual payment to Licensor of no less than Two Hundred Thousand Dollars ($200,000) in End-User
- 13 -
royalties in consideration for receiving from Licensor the following rights and benefits:
(a) attendance at VAR Advisory Board Meetings [Section 2(b)]; (b) promotional efforts [Section 2(e)]; (c) promotional video [Section 2(f)]; (d) endorsement of automated "Guide to Estimating" [Section 5]; and (e) mid-cycle price updates [Exhibit A, Paragraphs 8.2, 8.3 and 8.4]; and (f) one (1) free ad [Section 2 (h)].
The foregoing rights and benefits shall be accorded exclusively to Licensee unless another VAR guarantees the payment of no less than $200,000 in End-User royalties and agrees to only use the Databases, and no competing database.
14. In the event of a material default, breach or failure to perform by Licensee of this Agreement, any VAR or End-User Agreement, the Purchase and Sale Agreement dated as of February 12, 1992, or Royalty or other agreement thereunder, or in the event of the bankruptcy or insolvency of Licensee resulting in the failure or inability of Licensee to perform any of its material obligations or agreements, or resulting in a liquidation or sale of assets of the Licensee, Licensor shall have an option, exercisable as set forth below, to purchase all of the Licensees' rights, title and interest in and to the EZEst Software system and End-User and VAR Agreements in effect at the time (the "Assets"). Licensee shall give Licensor written notice of the occurrence of any of such events and Licensor shall have thirty (30) days, following receipt of an appraisal of the Assets, to notify Licensee that it is electing to purchase the Assets. The purchase price payable by Licensor shall be determined by a nationally recognized independent appraisal firm selected by agreement of Licensor, Licensee and/or a committee of Licensees' largest creditors.
- 14 -
15. This Agreement shall be binding upon and inure to the benefit of the respective successors and permitted assigns of the parties. Neither party may assign this Agreement or the performance of its obligations hereunder without the prior written consent of the other party. A reorganization by either party which does not result in a change in control
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document is permitted, provided the other party is given prior written notice thereof. In the event of a sale of the stock or substantially all of the assets of either party which results in a change in control, the other party shall be entitled to sixty (60) days prior written notice. In the case of such a sale of stock or assets of Licensor by Licensor or its parent, Licensee shall be entitled to require Licensor or its parent to assign and transfer this Agreement to the successor, by giving the Licensor written notice within thirty (30) days after the date of Licensor's notice. This Database License Agreement shall not be transferred or assigned by operation of law or otherwise to any Licensee entity or affiliate of Licensee or any other party unless all rights, title and interest in and to the EZEst Software is owned and operated by the same legal entity as this Agreement is to be transferred or assigned to. In the case of such a proposed sale of stock or assets of Licensee by Licensee or its parent, Licensor shall be entitled to require Licensee or its parent to assign and transfer this Agreement to the successor, or if the proposed sale is to a competitor or to an affiliate of a competitor of Licensor, Licensee shall be entitled, upon written notice to Licensor ninety (90) days prior to such sale to terminate this Agreement, effective two (2) years (twenty-four months) following the effective date of sale (the successor fully complying with this Agreement for such period) and further provided that the successor pays Licensor a termination fee equal to the two (2) years (twenty-four months) fees and royalties payments to Licensor in the two (2) years (twenty-four months) immediately preceding termination. Licensor shall also be entitled in the event of a proposed sale to a competitor to terminate this Agreement, if Licensee fails to do so, upon the effective date of such sale by
- 15 -
giving Licensee written notice within six (6) months after the date of Licensee's notice, in which event Licensee shall be required to pay Licensor a termination fee equal to the two (2) prior years of fees and royalties paid to Licensor hereunder.
16. This Agreement is the complete and exclusive statement of the understanding between the parties, with respect to the subject matter, superseding all prior agreements, representations, statements and proposals, oral or written.
17. All amendments to this Agreement shall be in writing, signed by both parties. Notice hereunder shall be delivered to the following addresses by hand, or by certified mail, return receipt requested:
Licensor: Motor Books Division Hearst Business Publishing, Inc. 5600 Crooks Road Suite 200 Troy Michigan 48098 Attention: Mr. Kevin F. Carr
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Vice President - Publisher
Licensee: CCC Development Company or CCC Vehicle Damage Estimators, Inc. or CCC Information Services Inc. or InfoVest Corporation 640 North LaSalle Street Chicago, Illinois 60610 Attention: President
18. No term or provision hereof shall be deemed waived and no breach excused, unless such waiver or consent shall be in writing and signed by the party claimed to have waived or consented. Any consent by any party to, or waiver of, a breach by the other, whether express or implied, shall not constitute a consent to, waiver of, or excuse for any other different or subsequent breach.
- 16 -
19. This Agreement shall be governed by the internal laws of the State of New York, without regard to conflicts of law principles thereof.
20. This Agreement may be executed in two (2) or more counterparts, each of which shall be deemed an original, and all of which together shall constitute one and the same instrument.
IN WITNESS WHEREOF, the parties hereto have executed this Agreement as of the day and year first written above.
MOTOR BOOKS DIVISION, CCC Development Company Hearst Business Publishing, Inc.
By: /s/ Kevin F. Carr By: /s/ David B. Mullen ------Date: 4/27/92 Date: 4/23/92 ------
CCC Vehicle Damage Estimators Inc. CCC Information Services Inc.
By: /s/ David B. Mullen By: /s/ David B. Mullen ------Date: 4/23/92 Date: 4/23/92 ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document InfoVest Corporation
By: /s/ ------Date: 4/23/92 ------
- 17 -
MOTOR CRASH ESTIMATING GUIDES DATABASE LICENSE AGREEMENT DATED MAY 1, 1992
SCHEDULE A
Annual Database License Fee: $5,500.00 Annual Illustration License Fee: $5,000.00 Databases Include: Domestic Crash Estimating Guides Imported Crash Estimating Guides Early Model Crash Estimating Guides
------Annual End-User License Fees Single CPU, Single Site Without Books Monthly # of Estimates (Volume) "Estimate of Record" 1-500 501-750 751-1,000 1,000+ ------1 - 500 $550 $475 $425 $375 ------Annual End-User License Fees Single CPU, Single Site With Books Monthly # of Estimates (Volume) "Estimate of Record" 1-500 501-750 751-1,000 1,000+ ------1 - 500 $950 $875 $825 $775 ------
- The Annual Database and Illustration License fees shall be a non-refundable advance against royalties payable by Licensee for End-User Database
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document sublicense fees. - This schedule shall pertain to one user with one central processing unit, at a single site. A single site is understood to be one physical location, with no more than seven (7) estimating terminals. A multiple terminal fee (for estimating terminals 2-7) for a single site End-User with a single CPU may be assessed by Licensor and shall be payable by Licensee if competitive circumstances warrant. - Licensor will not rebate licensee for unused estimates. - Limitation on number of estimates does not apply during evaluation period. - Licensor will not offer a lower price to other licensees with comparable or less volume. - No royalty will be due for Database Sublicenses during term of Evaluation Agreement. - Estimate of Record is defined as estimate which is printed and treated as final by End-User. - Volume refers to total number of Database subscriptions per year. - With books add $400.00. - Estimate quantities of more than 500 to be negotiated.
EXHIBIT A
------
0.0 PREMISE
0.1 This document is intended to be a "living" agreement between MOTOR and CCCIS. It is understood items may be added, dropped or priorities modified when mutually acceptable to both organizations.
0.2 MOTOR CEG database is defined as all chapters contained in the following MOTOR Crash Estimating Guide Titles: 1. General Motors Crash Estimating Guide 2. Chrysler Jeep/Eagle Crash Estimating Guide 3. Ford Motor Company Crash Estimating Guide 4. Asian Imported Car Crash Estimating Guide 5. European Imported Car Crash Estimating Guide 6. Early Model and Obsolete Model Chapters relating to the maintenance of existing illustrations, part numbers and part pricing.
0.3 Unless otherwise noted, all items assigned specific project "Begin" and "Complete" dates will progress through the entire database, at a relatively even pace, until completed. Modifications will be included with regularly scheduled database distribution.
0.4 Information content standards applied to existing chapters will be incorporated in new chapters as those chapters are developed.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1.0 LABOR DATA DEVELOPMENT
1.1 DEVELOPMENT OF LKQ - SALVAGE COMPONENTS, R&R LABOR OPERATION TIMES
1. Bumpers 2. Hoods 3. Fenders 4. Doors 5. Deck lids 6. Tailgates 7. Liftgates
PROCESS BEGIN: IN PROGRESS PROCESS COMPLETE: 7/31/92
PROCESS DESCRIPTION: INITIAL DEVELOPMENT WILL ENCOMPASS ABOVE MENTIONED BOLTED ON COMPONENTS ONLY. UPON SUFFESSFUL COMPLETION OF THIS TASK, MOTOR WILL WORK WITH CCCIS TO DEVELOP A MUTUALLY ACCEPTABLE TIMETABLE FOR DEVELOPMENT OF LABOR OPERATION TIMES COVERING WELDED COMPONENTS.
------
1
EXHIBIT A (CONTINUED) ------
1.2 DEVELOPMENT OF BLOCK (ZONE) REFINISH OPERATION TIMES
MOTOR will provide the required data record access to develop block area refinish times for specific models in accordance with paint procedures as outlined in the Crash Estimating Guides. Precise timing for implementation of this feature will be forthcoming after specific technical aspects are resolved. MOTOR will work with CCCIS to accommodate their requirements. It is expected these implementation requirements will be resolved during the month of May.
1.3 ADDITIONAL R&I LABOR OPERATION TIMES
1. Front & Rear Suspensions. One Side & Both Sides. 2. Road Wheels. 3. Fuel Tanks. 4. Major Components. I.E.; Bumpers, Hoods, Fenders, Doors, Decklids, Tailgates and Liftgates.
PROCESS BEGIN: IN PROGRESS PROCESS COMPLETE: 6/31/92
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1.4 ADDITIONAL OVERHAUL LABOR OPERATION TIMES
1. Front & Rear Suspensions. One Side & Both Sides.
PROCESS BEGIN. IN PROGRESS PROCESS COMPLETE: 6/31/92
1.5 NEW OVERLAP LABOR OPERATION TIMES
1. Front Corner Outer Panels. I.E. fender, bumper, header panel. 2. Front Corner Inner Panels. I.E.; rad support to fender apron & rafis
PROCESS BEGIN: 5/1/92 PROCESS COMPLETE: 12/31/92
1.6 ADDITIONAL SECTIONING PROCEDURES OPERATIONAL TIMES
1. Frame Rails & Door Pillars when factory recommendations available.
PROCESS BEGIN: 5/1/92 PROCESS COMPLETE: 12/31/92
1.7 ADDITIONAL SECTIONING PROCEDURES OPERATIONAL TIMES
1. 2-door Quarter Panel sectioning through quarter glass opening and below back window.
PROCESS BEGIN: 5/1/92 PROCESS COMPLETE: 12/31/92
------
2
EXHIBIT A (CONTINUED) ------
1.8 ADDITIONAL LABOR OPERATION FOOTNOTES
1. Replace "after bolted on parts removed" with specific listing of major parts not included. 2. Define considerations when publishing labor times for water pumps & timing covers.
PROCESS BEGIN: 7/1/92 PROCESS COMPLETE: 12/31/92
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 1.9 EVALUATION OF ADHESIVE MOLDING INSTALLATION PROCEDURES
1. Time allocation based upon molding size and/or multiple components.
PROCESS BEGIN: DEVELOPMENT OF NEW 1993 MODEL CHAPTERS, UNLESS THIS FEATURE IS INCORPORATED INTO REVISION OF THE GTE PAGES. PROCESS COMPLETE: ON-GOING, INFORMATION DEVELOPED FOR EACH NEW CHAPTER GOING FORWARD.
1.10 ADDITIONAL R&R LABOR OPERATION TIMES
1. Continue to assign labor operation times to all applicable parts and procedures (competitive quantity analysis).
PROCESS BEGIN: EXISTING PROGRAM PROCESS COMPLETE: ON-GOING, INFORMATION DEVELOPED FOR EACH NEW CHAPTER GOING FORWARD.
1.11 ADDITIONAL O.E.M REPAIR PROCEDURE INFORMATION AND CAUTIONS
1. Service procedure cautions for Supplemental Restraint Systems. 2. Service procedure cautions of Front/Rear suspensions. 3. Unique service cautions for specific components.
PROCESS BEGIN: 7/1/92 PROCESS COMPLETE: 12/31/92
1.12 IDENTIFICATION OF PAINTED / NON-PAINTED / STONE GUARD PROTECTED COMPONENTS
PROCESS BEGIN: 7/1/92 PROCESS COMPLETE: 12/31/92 ON HIGH VOLUME VEHICLES AND GOING FORWARD ON NEW MODEL CHAPTERS.
------
3
EXHIBIT A (CONTINUED) ------
2.0 DATA FORMAT MODIFICATIONS
2.1 UNIFORM GROUP TITLE NOMENCLATURE
1. Dedicated group number assignments 2. Develop Group Title Library incorporated into edit program.
PROCESS BEGIN: IN PROGRESS
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document PROCESS COMPLETE: 12/31/92
2.2 UNIFORM TEXT FOOTNOTES & HEADNOTE
1. Dedicated footnote/headnote number assignments. 2. Develop Footnote Library incorporated into edit program.
PROCESS DESCRIPTION: THESE TWO OBJECTIVES ARE IN DIRECT OPPOSITION OF PREVIOUSLY STATED OBJECTIVES PROVIDING ADDITIONAL CLARIFICATION OF PRECISE OPERATION PROCEDURE DESCRIPTIONS AND FOOTNOTES. MOTOR WILL WORK WITH CCCIS TO IDENTIFY AND CONSOLIDATE THOSE AREAS WHICH CAN BE STANDARDIZED.
2.3 ADD UNIQUE DATA CODES TO ALL RECORDS
PROCESS BEGIN: WHEN CCCIS NEEDS ARE CLEARLY DEFINED. PROCESS DESCRIPTION: MOTOR WILL EXCLUSIVELY SUPPLY CCCIS DATA RECORD CODES FOR ALL NON-LINCKCODE RECORDS BEGINNING 6 MONTHS AFTER CCCIS NEEDS ARE DEFINED.
2.4 UNIFORM TEXT DATA INDENT LEVELS
1. Develop standard for indenting.
PROCESS BEGIN: 1993 NEW MODEL CHAPTERS PROCESS DESCRIPTION: MOTOR WILL DEVELOP ALL NEW CHAPTERS IN ACCORDANCE WITH A MUTUALLY ACCEPTABLE INDENTATION FORMAT BEGINNING WITH THE 1993 MODEL YEAR. MOTOR WILL WORK WITH CCCIS TO DEVELOP A TARGET LIST OF ESTABLISHED CHAPTERS WHICH REQUIRE ADJUSTMENT.
2.5 UNIFORM PARTS NOMENCLATURE
1. MOTOR and CCCIS agree to jointly identify and develop a list common automotive nomenclature for standardization consideration. A mutually acceptable implementation strategy and time table will be developed following 9/1/92.
PROCESS BEGIN: 5/1/92 PROCESS COMPLETE: 9/1/92 (PHASE ONE)
------
4
EXHIBIT A (CONTINUED) ------
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 2.6 UNIFORM PARTS LOCATION
1. Component name added to "assembly" description field.
PROCESS BEGIN: IN PROGRESS PROCESS COMPLETE: 6/1/93
2.7 UNIFORM PRESENTATION OF ASSOCIATED PARTS LISTED IN RELATIONSHIP WITH MAIN PARTS
1. Antenna located with major panel. Add line to Electrical Group directing user to appropriate panel. 2. Ignition switch, lock, cylinder & keys located in Steering Column sub-section. Add line to Electrical Group directing user to appropriate group. 3. Footnote precise location of Computer Module when available.
PROCESS BEGIN: IN PROGRESS PROCESS COMPLETE: 7/1/92
2.8 DATA FORMAT REVISION AND NOTIFICATION PROCEDURE
1. MOTOR will provide to CCCIS 60 day advance notification of specific revisions in data record use and/or layout. Notice will include a revised Record Layout document if required.
3.0 PRODUCT SUPPORT
3.1 DEVELOP PRODUCT SUPPORT COMMUNICATION SYSTEM DEVELOP PRODUCT SUPPORT PROCESS PROCEDURES
PROCESS DESCRIPTION: THIS IS A JOINT PROJECT FOR TOTAL DATABASE AND EZEST PRODUCT SUPPORT INVOLVING BOTH MOTOR AND CCCIS.
4.0 PAINT & MATERIAL ESTIMATING GUIDE
4.1 PAINT SYSTEM DATABASE DEVELOPMENT
PROCESS DESCRIPTION: AGREED TO BE A JOINT PROJECT INVOLVING MOTOR and CCCIS.
------
5
EXHIBIT A (CONTINUED) ------
5.0 OEM PARTS PRICING DATABASE
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 5.1 USA OEM PARTS PRICING UPDATE
1. MOTOR will update all applicable OEM pricing information into the MOTOR CEG/ICEG/E-MCEG database within 72 hours of receipt of valid, machine readable manufacturer magnetic data tape. Exception to include data processing system failure. Price update lead time varies considerably between vehicle manufacturers and therefore specific dates cannot be established.
5.2 CANADIAN OEM PARTS PRICING
1. Canadian pricing overlay of current CEG data files for electronic distribution purposes only.
PROCESS BEGIN: IN PROGRESS. PROCESS COMPLETE: 6/1/92 (80% BARRING INFORMATION PROCUREMENT DIFFICULTIES).
6.0 PARTS DATA DEVELOPMENT
6.1 VEHICLE MAKE, MODEL AND YEAR COVERAGE
1. Database to include a minimum vehicle content level covering domestic and import vehicles sold into the USA market, and equal to competing database content for model years 1975 and later. MOTOR will develop specific older model chapters on an "as needed" basis for mutually agreed selected high utilization vehicles.
2. Each year, on or about September 1, MOTOR will provide CCCIS with a confidential timetable guideline which projects new model year update task progress. CCCIS will at that time have an opportunity to suggest adjustments to the timetable. MOTOR will make every effort to perform in accordance with this established guideline throughout the update process. It is agreed some model variance may occur due to availability of OEM information and/or market needs. It is further agreed, the basic quantity of chapters updated monthly by MOTOR will not substantially or materially change from EXHIBIT B.
6.2 COMPLETE PART LISTINGS
Parts listings increased to include all small parts such as special fasteners, spacers, gaskets, etc., regardless of retail price, in the following areas.
1. Front Bumper 2. Grille & Header Panel 3. Front Lamps 4. Wheels, Wheel Covers & Wheel Trim 5. Instrument Panels 6. Steering Column 7. Rear Lamps 8. Rear Bumper
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document PROCESS BEGIN: DEVELOPMENT OF NEW 1993 MODEL CHAPTERS PROCESS COMPLETE: ON-GOING, INFORMATION DEVELOPED FOR EACH NEW CHAPTER GOING FORWARD.
------
6
EXHIBIT A (CONTINUED) ------
6.3 ILLUSTRATION HANDLING
1. All components listed in parts text are illustrated. 2. Assembly availability is indicated in illustration. 3. Develop and implement illustration technique for fasteners.
PROCESS BEGIN: DEVELOPMENT OF NEW 1993 MODEL CHAPTERS PROCESS COMPLETE: ON-GOING, INFORMATION DEVELOPED FOR EACH NEW CHAPTER GOING FORWARD.
7.0 GUIDE TO ESTIMATING PAGES
7.1 1992 GENERAL REVISION
PROCESS BEGIN: IN PROGRESS PROCESS COMPLETE: 7/1/92
7.2 GTE REVISION AND NOTIFICATION PROCEDURE
1. MOTOR will provide to CCCIS 30 day advance notification of planned changes to the Guide To Estimating Procedure Pages. 2. 14 day advance release of revised GTE data file. In the event revisions require extensive EZEst system modifications and 14 days does not allow sufficient time to perform required modifications, then MOTOR will work with CCCIS to determine a mutually acceptable release date, not to exceed 90 days.
8.0 DATA DISTRIBUTION
8.1 SCHEDULES 1. MOTOR will provide CCCIS with 32 text data updates per year. 2. CCCIS will be kept current with revisions to all production schedules involving MOTOR CEG, ICEG and EMCEG. A facsimile transmission of revised production schedules will be performed within 24 hours of revision, with a follow up copy mailed to CCCIS. 3. Magnetic data tapes and/or floppy disks will be shipped to CCCIS (subject to Carrier pickup scheduling) via Overnight, Next Morning Delivery.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 8.2 TEXT DATA 1. TEXT data will be shipped from the data center within a 72 hour period encompassing the scheduled production date. Exceptions to include non- availability of O.E.M. pricing data and data processing system failures. CCCIS will contact MOTOR'S production department the day before scheduled release date to confirm actual shipping date. 2. MOTOR will provide CCCIS exclusively with advance release of newly developed or updated CEG vehicle model text chapters (less illustrations) within 3 working days of it's completion.
------
7
EXHIBIT A (CONTINUED) ------
8.3 ILLUSTRATIONS 1. Graphics data will be shipped from the data center within a 72 hour period encompassing the 25th day of each month. Exception to include data processing system failures.
8.4 PRICING DATA 1. All pricing data revised during the previous week will be extracted from the MOTOR CEG data base on Wednesdays and delivered exclusively to CCCIS. a. Data files containing fewer than 10,000 update records will be electronically transmitted to CCCIS within 48 hours. b. Data files containing more than 10,000 update records will be shipped to CCCIS on magnetic tape within 48 hours.
Exception to include data processing system failure.
9.0 INFORMATION CONTENT STANDARDS
9.1 BASELINE MODEL CHAPTER DEVELOPMENT
Ongoing development and maintenance of a high performance, Automotive Service Data Base is a priority. MOTOR will work with CCCIS to incorporate data required for the EZEst system.
1. MOTOR and CCCIS will conduct a semi-annual "Information Content Review Meeting" in which all information content issues raised by representatives of CCCIS will be addressed and incorporated into the reviewed chapter if found practical and mutually beneficial to CCCIS, MOTOR and the marketplace. A "bench mark" chapter will be developed to serve as a basis for all future chapter development. These information review meetings will take place in January and June each year.
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document 9.2 MOTORLINK DATABASE INFORMATION CONTENT ANALYSIS
Information content of the MOTORLINK database will be evaluated on an annual basis by representatives from MOTOR and CCCIS. This evaluation process will take place as part of the June meeting mentioned above. It will involve identification and analysis of the top 30 referenced chapters over the previous 12 months and encompass the evaluation of the following items. ALL analyzed areas found lacking will upgraded during the next 12 month period.
1. Competitive Comparison. 2. Part Number Quantity. 3. Discontinued Exterior Body Parts Quantity. 4. Invalid Part Number Quantity. 5. Not Listed or Not Serviced Parts Quantity. 6. Illustrated Component Quantity. 7. Labor Operation Times Quantity. 8. Refinish Times Quantity.
------
8
EXHIBIT B ------
NEW MODEL YEAR UPDATE TIMETABLE
TITLE MONTH UPDATED CHAPTERS PERCENT ------GENERAL MOTORS OCTOBER 12 25% DECEMBER 14 54% FEBRUARY 10 75% APRIL 12 100%
FORD MOTOR COMPANY NOVEMBER 4 17% JANUARY 4 35% MARCH 15 100%
CHRYSLER / JEEP EAGLE OCTOBER 9 33% JANUARY 5 52% APRIL 13 100%
ASIAN VEHICLES SEPTEMBER 5 7% NOVEMBER 15 28% JANUARY 8 39% MARCH 24 72% MAY 20 100%
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document EUROPEAN VEHICLES OCTOBER 4 11% DECEMBER 5 24% FEBRUARY 1 27% APRIL 13 62% JUNE 14 100% ------207
------
1
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document EXHIBIT 11
CCC INFORMATION SERVICES GROUP, INC. STATEMENT RE: COMPUTATION OF NET INCOME (LOSS) PER SHARE
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document Exhibit 21
SUBSIDIARIES
(i) CCC Information Services Inc., a Delaware corporation (wholly-owned subsidiary of the Registrant)
(ii) Credit Card Services Corporation, a Delaware corporation (wholly-owned subsidiary of the Registrant)
(iii) Certified Collateral Corporation of Canada, Ltd., a Canadian corporation (wholly-owned subsidiary of CCC Information Services Inc.)
(iv) CCC Vehicle Damage Estimators, Inc., a Delaware corporation (wholly- owned subsidiary of CCC Information Services Inc.)
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document EXHIBIT 23.1
FORM OF 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 January 30, 1996, except for Note 17 which is as of , 1996 relating to the consolidated financial statements of CCC Information Services Group Inc., which appears in such Prospectus. We also consent to the application of such report to the Financial Statement Schedule for the three years ended December 31, 1995 listed under Item 16(b) of this Registration Statement when such schedule is read in conjunction with the consolidated financial statements referred to in our report. The audits referred to in such report also included this schedule. We also consent to the use of our report dated July 22, 1996 relating to the financial statements of CCC Development Company which appears in the Prospectus constituting part of this Registration Statement on Form S-1. We also consent to the references to us under the headings "Experts" and "Selected Financial Data" in such Prospectus. However, it should be noted that Price Waterhouse LLP has not prepared or certified such "Selected Financial Data."
Price Waterhouse LLP
Chicago, Illinois July 25, 1996
Copyright © 2012 www.secdatabase.com. All Rights Reserved. Please Consider the Environment Before Printing This Document