<PAGE>
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)
------------------
<TABLE>
<S> <C> <C>
DELAWARE 7389 54-1242469
(State or other (Primary Standard (I.R.S.
jurisdiction of Industrial Employer
incorporation or Classification Code Identification
organization) Number) No.)
</TABLE>
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:
<TABLE>
<S> <C>
LELAND E. HUTCHINSON VICTOR A. HEBERT
TERRENCE R. BRADY TIMOTHY G. HOXIE
WINSTON & STRAWN HELLER EHRMAN
35 WEST WACKER DRIVE WHITE &
CHICAGO, ILLINOIS 60601 MCAULIFFE
(312) 558-5600 333 BUSH STREET
SAN FRANCISCO,
CALIFORNIA 94104
(415) 772-6000
</TABLE>
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
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.
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
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.
<TABLE>
<CAPTION>
ITEM LOCATION OR HEADING IN PROSPECTUS
- -------------------------------------------------------------- ---------------------------------------------------
<S> <C> <C>
1. Forepart of Registration Statement and Outside
Front Cover Page of Prospectus..................... Registration Statement Cover Page; Outside Front
Cover Page of Prospectus
2. Inside Front and Outside Back Cover Pages of
Prospectus......................................... Inside Front Cover Page; Available Information;
Outside Back Cover Page
3. Summary Information, Risk Factors and Ratio of
Earnings to Fixed Charges.......................... Prospectus Summary; Risk Factors; Business
4. Use of Proceeds.................................... Prospectus Summary; Use of Proceeds
5. Determination of Offering Price.................... Underwriting
6. Dilution........................................... Dilution
7. Selling Security Holders........................... Not Applicable
8. Plan of Distribution............................... Outside Front Cover Page of Prospectus;
Underwriting
9. Description of Securities to Be Registered......... Description of Capital Stock
10. Interest of Named Experts and Counsel.............. Not Applicable
11. Information with Respect to the Registrant......... Prospectus Summary; Risk Factors; Dividend Policy;
Dilution; Use of Proceeds; Capitalization;
Selected Consolidated Financial Data; Unaudited
Pro Forma Consolidated Financial Data;
Management's Discussion and Analysis of Financial
Condition and Results of Operations; Business;
Management; Principal Stockholders; Certain
Transactions; Description of Capital Stock; Shares
Eligible for Future Sale; Experts; Available
Information; Consolidated Financial Statements
12. Disclosure of Commission Position on
Indemnification for Securities Act Liabilities..... Not Applicable
</TABLE>
<PAGE>
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.
<PAGE>
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
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.
<TABLE>
<CAPTION>
PRICE TO UNDERWRITING PROCEEDS TO
PUBLIC DISCOUNT (1) COMPANY (2)
<S> <C> <C> <C>
Per Share................................. $ $ $
Total(3).................................. $ $ $
</TABLE>
(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
<PAGE>
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
<PAGE>
PROSPECTUS SUMMARY
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
<PAGE>
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
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
<TABLE>
<S> <C>
Common Stock offered by the Company............... 5,500,000 Shares
Common Stock to be outstanding after the
Offering.......................................... 22,026,800 Shares(1)
Use of Proceeds................................... To repay certain bank debt of CCC that
has been guaranteed by the Company and
to redeem a portion of the Redeemable
Preferred Stock. See "Use of Proceeds."
Nasdaq National Market Symbol..................... CCCG
</TABLE>
- ------------------------------
(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
<PAGE>
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.
<TABLE>
<CAPTION>
YEAR ENDED DECEMBER 31, SIX MONTHS ENDED JUNE 30,
---------------------------------------------------------------- -------------------------------
PRO PRO
FORMA FORMA
1991 1992 1993 1994(1) 1995 1995(2) 1995 1995(2) 1996
--------- --------- --------- --------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................... $ 38,859 $ 45,805 $ 51,264 $ 91,917 $ 115,519 $ 115,519 $ 56,624 $ 56,624 $ 63,325
Expenses:
Operating expenses.......... 35,938 41,429 44,233 84,094 104,697 104,697 51,507 51,507 53,272
Purchased research and
development................ -- -- -- 13,791 -- -- -- -- --
Loss on lease termination... -- -- 3,802 -- -- -- -- -- --
Litigation settlements...... -- -- -- 1,750 4,500 4,500 4,500 4,500 --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Operating income (loss)....... $ 2,921 $ 4,376 $ 3,229 $ (7,718) $ 6,322 $ 6,322 $ 617 $ 617 $ 10,053
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing
operations................... $ (5,946) $ (7,260) $ (5,774) $ (13,159) $ 1,286 $ 3,538 $ (1,107) $ (97) $ 6,691
Income (loss) from
discontinued operations, net
of income taxes.............. (194) 409 (4,357) 1,006 -- -- -- -- --
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss)............. (6,140) (6,851) (10,131) (12,153) 1,286 3,538 (1,107) (97) 6,691
Dividends and accretion on
mandatorily redeemable
preferred stock.............. -- -- -- (1,518) (3,003) (991) (1,455) (480) (1,604)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) applicable
to common stock.............. $ (6,140) $ (6,851) $ (10,131) $ (13,671) $ (1,717) $ 2,547 $ (2,562) $ (577) $ 5,087
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
PER SHARE DATA:
Income (loss) from:
Continuing operations....... $ (0.67) $ (0.77) $ (0.60) $ (0.98) $ 0.07 $ 0.16 $ (0.06) $ (0.01) $ 0.38
Discontinued operations..... (0.02) 0.04 (0.46) 0.07 -- -- -- -- --
Dividends and accretion on
mandatorily redeemable
preferred stock.............. -- -- -- (0.11) (0.17) (0.05) (0.09) (0.02) (0.09)
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Net income (loss) applicable
to common stock.............. $ (0.69) $ (0.73) $ (1.06) $ (1.02) $ (0.10) $ 0.11 $ (0.15) $ (0.03) $ 0.29
--------- --------- --------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- --------- --------- ---------
Weighted average common shares
outstanding.................. 8,946 9,355 9,519 13,364 17,187 22,687 16,814 22,314 17,720
<CAPTION>
PRO
FORMA
1996(2)
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues...................... $ 63,325
Expenses:
Operating expenses.......... 53,272
Purchased research and
development................ --
Loss on lease termination... --
Litigation settlements...... --
---------
Operating income (loss)....... $ 10,053
---------
---------
Income (loss) from continuing
operations................... $ 7,520
Income (loss) from
discontinued operations, net
of income taxes.............. --
---------
Net income (loss)............. 7,520
Dividends and accretion on
mandatorily redeemable
preferred stock.............. (529)
---------
Net income (loss) applicable
to common stock.............. $ 6,991
---------
---------
PER SHARE DATA:
Income (loss) from:
Continuing operations....... $ 0.32
Discontinued operations..... --
Dividends and accretion on
mandatorily redeemable
preferred stock.............. (0.02)
---------
Net income (loss) applicable
to common stock.............. $ 0.30
---------
---------
Weighted average common shares
outstanding.................. 23,220
</TABLE>
5
<PAGE>
<TABLE>
<CAPTION>
JUNE 30, 1996
--------------------------
ACTUAL AS ADJUSTED (3)
--------- ---------------
<S> <C> <C>
BALANCE SHEET DATA:
Cash.................................................................................. $ 4,690 $ 4,774
Working capital....................................................................... (14,483) (6,631)
Total assets.......................................................................... 44,609 43,374
Current portion of long-term debt..................................................... 8,151 1,151
Long-term debt, excluding current maturities.......................................... 21,386 1,208
Mandatorily redeemable preferred stock................................................ 35,729 11,791
Stockholders' deficit................................................................. (51,125) (116)
</TABLE>
- ------------------------------
(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
<PAGE>
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.
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
<PAGE>
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."
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
<PAGE>
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
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:
<TABLE>
<S> <C> <C>
Assumed initial public offering price per share............................. $ 11.00
Net negative tangible book value per share before the Offering............ $ 3.81
Less increase per share attributable to new investors..................... 3.46
---------
Net negative tangible book value per share after the Offering(1)............ 0.35
---------
Dilution per share to new investors......................................... $ 11.35
---------
---------
</TABLE>
- ------------------------------
(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:
<TABLE>
<CAPTION>
SHARES OF COMMON STOCK TOTAL
ACQUIRED CONSIDERATION
------------------------ --------------------------- AVERAGE PRICE
NUMBER PERCENT AMOUNT PERCENT PER SHARE
------------ ---------- --------------- ---------- -------------
<S> <C> <C> <C> <C> <C>
Existing stockholders.......................... 16,526,800 75.0% $ 10,097,000(1) 14.3% $ 0.61
New investors.................................. 5,500,000 25.0 60,500,000 85.7 11.00
------------ ----- --------------- -----
Total........................................ 22,026,800 100.0% $ 70,597,000 100.0% $ 3.21
------------ ----- --------------- -----
------------ ----- --------------- -----
</TABLE>
- ------------------------------
(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
<PAGE>
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
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).
<TABLE>
<CAPTION>
AS OF JUNE 30, 1996
----------------------
ACTUAL AS ADJUSTED
--------- -----------
(IN THOUSANDS)
<S> <C> <C>
Current portion of long-term debt........................................................ $ 8,151 $ 1,151
--------- -----------
Long-term debt:
Term loan.............................................................................. 15,250 --
Revolving credit facility.............................................................. 5,500 572
Other.................................................................................. 636 636
--------- -----------
Total long-term debt................................................................. 21,386 1,208
--------- -----------
Mandatorily redeemable preferred stock................................................. 35,729 11,791
--------- -----------
Stockholders' deficit:
Common stock ($.10 par value, 30,000,000 shares authorized and, 16,526,800 shares
issued and outstanding as of June 30, 1996)(1)........................................ 1,653 2,203
Additional paid-in capital............................................................. 12,370 67,013
Accumulated deficit.................................................................... (64,962) (69,146)
Treasury stock, at cost................................................................ (186) (186)
--------- -----------
Total stockholders' deficit.......................................................... (51,125) (116)
--------- -----------
Total capitalization............................................................... $ 14,141 $ 14,034
--------- -----------
--------- -----------
</TABLE>
- ------------------------
(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
<PAGE>
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
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.
<TABLE>
<CAPTION>
SIX
MONTHS
ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
----------------------------------------------------- ---------
1991 1992 1993 1994(1) 1995 1995
--------- --------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................ $ 38,859 $ 45,805 $ 51,264 $ 91,917 $ 115,519 $ 56,624
Expenses:
Operating expenses.................................... 35,938 41,429 44,233 84,094 104,697 51,507
Purchased research and development.................... -- -- -- 13,791 -- --
Loss on lease termination............................. -- -- 3,802 -- -- --
Litigation settlements................................ -- -- -- 1,750 4,500 4,500
--------- --------- --------- --------- --------- ---------
Operating income (loss)................................. 2,921 4,376 3,229 (7,718) 6,322 617
Equity in loss of Joint Venture......................... (2,057) (6,713) (3,564) (615) -- --
Interest expense........................................ (9,575) (9,606) (6,945) (7,830) (5,809) (3,110)
Other income (expense), net............................. 519 232 (311) 316 482 334
--------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations before income
taxes.................................................. (8,192) (11,711) (7,591) (15,847) 995 (2,159)
Income tax (provision) benefit.......................... 2,246 4,451 1,817 2,688 291 1,052
--------- --------- --------- --------- --------- ---------
Income (loss) from continuing operations................ (5,946) (7,260) (5,774) (13,159) 1,286 (1,107)
Income (loss) from discontinued operations, net of
income taxes........................................... (194) 409 (4,357) 1,006 -- --
--------- --------- --------- --------- --------- ---------
Net income (loss)....................................... (6,140) (6,851) (10,131) (12,153) 1,286 (1,107)
Dividends and accretion on mandatorily redeemable
preferred stock........................................ -- -- -- (1,518) (3,003) (1,455)
--------- --------- --------- --------- --------- ---------
Net income (loss) applicable to common stock............ $ (6,140) $ (6,851) $ (10,131) $ (13,671) $ (1,717) $ (2,562)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
PER SHARE DATA:
Income (loss) from:
Continuing operations................................. $ (0.67) $ (0.77) $ (0.60) $ (0.98) $ 0.07 $ (0.06)
Discontinued operations............................... (0.02) 0.04 (0.46) 0.07 -- --
Dividends and accretion on mandatorily redeemable
preferred stock........................................ -- -- -- (0.11) (0.17) (0.09)
--------- --------- --------- --------- --------- ---------
Net income (loss) applicable to common stock............ $ (0.69) $ (0.73) $ (1.06) $ (1.02) $ (0.10) $ (0.15)
--------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- ---------
Weighted average common shares outstanding.............. 8,946 9,355 9,519 13,364 17,187 16,814
<CAPTION>
1996
---------
<S> <C>
STATEMENT OF OPERATIONS DATA:
Revenues................................................ $ 63,325
Expenses:
Operating expenses.................................... 53,272
Purchased research and development.................... --
Loss on lease termination............................. --
Litigation settlements................................ --
---------
Operating income (loss)................................. 10,053
Equity in loss of Joint Venture......................... --
Interest expense........................................ (1,982)
Other income (expense), net............................. 293
---------
Income (loss) from continuing operations before income
taxes.................................................. 8,364
Income tax (provision) benefit.......................... (1,673)
---------
Income (loss) from continuing operations................ 6,691
Income (loss) from discontinued operations, net of
income taxes........................................... --
---------
Net income (loss)....................................... 6,691
Dividends and accretion on mandatorily redeemable
preferred stock........................................ (1,604)
---------
Net income (loss) applicable to common stock............ $ 5,087
---------
---------
PER SHARE DATA:
Income (loss) from:
Continuing operations................................. $ 0.38
Discontinued operations............................... --
Dividends and accretion on mandatorily redeemable
preferred stock........................................ (0.09)
---------
Net income (loss) applicable to common stock............ $ 0.29
---------
---------
Weighted average common shares outstanding.............. 17,720
</TABLE>
17
<PAGE>
<TABLE>
<CAPTION>
DECEMBER 31,
-----------------------------------------------------
1991 1992 1993 1994 1995
--------- --------- --------- --------- ---------
<S> <C> <C> <C> <C> <C>
BALANCE SHEET DATA:
Cash.............................................................. $ 11,320 $ 3,756 $ 375 $ 5,702 $ 3,895
Working capital................................................... 7,692 969 (11,004) (15,549) (17,953)
Total assets...................................................... 61,380 40,423 40,058 52,232 44,093
Current portion of long-term debt................................. 7,887 4,522 7,857 5,340 7,660
Long-term debt, excluding current maturities...................... 60,187 61,585 56,624 35,753 27,220
Mandatorily redeemable preferred stock............................ -- -- -- 31,122 34,125
Stockholders' deficit............................................. (37,368) (43,291) (53,416) (54,729) (56,420)
<CAPTION>
JUNE 30, 1996
----------------------
AS
ACTUAL ADJUSTED(2)
--------- -----------
<S> <C> <C>
BALANCE SHEET DATA:
Cash.............................................................. $ 4,690 $ 4,774
Working capital................................................... (14,483) (6,631)
Total assets...................................................... 44,609 43,374
Current portion of long-term debt................................. 8,151 1,151
Long-term debt, excluding current maturities...................... 21,386 1,208
Mandatorily redeemable preferred stock............................ 35,729 11,791
Stockholders' deficit............................................. (51,125) (116)
</TABLE>
- ------------------------------
(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
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
<PAGE>
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.
<TABLE>
<CAPTION>
YEAR ENDED SIX MONTHS ENDED SIX MONTHS ENDED
DECEMBER 31, 1995 JUNE 30, 1995 JUNE 30, 1996
---------------------- ---------------------- ----------------------
PRO PRO PRO
ACTUAL FORMA ACTUAL FORMA ACTUAL FORMA
---------- ---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C> <C>
STATEMENT OF OPERATIONS DATA:
Revenues......................................... $ 115,519 $ 115,519 $ 56,624 $ 56,624 $ 63,325 $ 63,325
Expenses:
Operating expenses............................. 104,697 104,697 51,507 51,507 53,272 53,272
Litigation settlement(1)....................... 4,500 4,500 4,500 4,500 -- --
---------- ---------- ---------- ---------- ---------- ----------
Operating income................................. 6,322 6,322 617 617 10,053 10,053
Interest expense(2).............................. (5,809) (2,914) (3,110) (1,665) (1,982) (578)
Other income, net................................ 482 482 334 334 293 293
---------- ---------- ---------- ---------- ---------- ----------
Income before income taxes....................... 995 3,890 (2,159) (714) 8,364 9,768
Income tax (provision) benefit(3)................ 291 (352) 1,052 617 (1,673) (2,248)
---------- ---------- ---------- ---------- ---------- ----------
Net income....................................... 1,286 3,538 (1,107) (97) 6,691 7,520
Dividends and accretion on mandatorily redeemable
preferred stock(4).............................. (3,003) (991) (1,455) (480) (1,604) (529)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to common stock..... $ (1,717) $ 2,547 $ (2,562) $ (577) $ 5,087 $ 6,991
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
PER SHARE DATA:
Net income....................................... $ 0.07 $ 0.16 $ (0.06) $ (0.01) $ 0.38 $ 0.32
Dividends and accretion on mandatorily redeemable
preferred stock................................. (0.17) (0.05) (0.09) (0.02) (0.09) (0.02)
---------- ---------- ---------- ---------- ---------- ----------
Net income (loss) applicable to common stock..... $ (0.10) $ 0.11 $ (0.15) $ (0.03) $ 0.29 $ 0.30
---------- ---------- ---------- ---------- ---------- ----------
---------- ---------- ---------- ---------- ---------- ----------
Weighted average common shares
outstanding..................................... 17,187 22,867 16,814 22,314 17,720 23,220
</TABLE>
- ------------------------------
(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
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF
FINANCIAL CONDITION AND RESULTS OF OPERATIONS
RESULTS OF CONTINUING OPERATIONS
The Company's results from continuing operations, for the periods indicated,
are set forth below:
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- ---------- --------- ---------
<S> <C> <C> <C> <C> <C>
Revenues................................................. $ 51,264 $ 91,917 $ 115,519 $ 56,624 $ 63,325
Expenses:
Operating Expenses:
Production and customer support...................... 15,108 25,123 32,261 16,346 15,520
Commissions, royalties and license fees.............. 1,091 7,153 11,720 5,559 6,660
Selling, general and administrative.................. 22,908 33,426 36,279 17,730 19,043
Depreciation and amortization........................ 2,158 8,331 9,572 4,854 3,972
Product development and programming.................. 2,968 10,061 14,865 7,018 8,077
Purchased research and development..................... -- 13,791 -- -- --
Loss on lease termination.............................. 3,802 -- -- -- --
Litigation settlements................................. -- 1,750 4,500 4,500 --
--------- --------- ---------- --------- ---------
Operating income (loss).................................. 3,229 (7,718) 6,322 617 10,053
Equity in loss of Joint Venture.......................... (3,564) (615) -- -- --
Interest expense......................................... (6,945) (7,830) (5,809) (3,110) (1,982)
Other income (expense), net.............................. (311) 316 482 334 293
--------- --------- ---------- --------- ---------
Income (loss) from continuing operations before income
taxes................................................... (7,591) (15,847) 995 (2,159) 8,364
Income tax (provision) benefit........................... 1,817 2,688 291 1,052 (1,673)
--------- --------- ---------- --------- ---------
Income (loss) from continuing operations................. $ (5,774) $ (13,159) $ 1,286 $ (1,107) $ 6,691
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
</TABLE>
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
<PAGE>
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.
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
<PAGE>
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
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
<PAGE>
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:
<TABLE>
<CAPTION>
SIX MONTHS ENDED JUNE
YEAR ENDED DECEMBER 31, 30,
---------------------------------- ----------------------
1993 1994 1995 1995 1996
---------- ---------- ---------- ---------- ----------
<S> <C> <C> <C> <C> <C>
Revenues...................................................... 100.0% 100.0% 100.0% 100.0% 100.0%
----- ----- ----- ----- -----
Expenses:
Operating Expenses:
Production and customer support........................... 29.5 27.3 27.9 28.9 24.5
Commissions, royalties and license fees................... 2.1 7.8 10.1 9.8 10.5
Selling, general and administrative....................... 44.7 36.4 31.4 31.3 30.1
Depreciation and amortization............................. 4.2 9.1 8.3 8.6 6.3
Product development and programming....................... 5.8 10.9 12.9 12.4 12.7
Purchased research and development.......................... -- 15.0 -- -- --
Loss on lease termination................................... 7.4 -- -- -- --
Litigation settlements...................................... -- 1.9 3.9 7.9 --
----- ----- ----- ----- -----
Operating income (loss)....................................... 6.3 (8.4) 5.5 1.1 15.9
Equity in loss of Joint Venture............................... (7.0) (0.7) -- -- --
Interest expense.............................................. (13.5) (8.5) (5.0) (5.5) (3.1)
Other income (expense), net................................... (0.6) 0.3 0.4 0.6 0.4
----- ----- ----- ----- -----
Income (loss) from continuing operations before income
taxes........................................................ (14.8) (17.2) 0.9 (3.8) 13.2
Income tax (provision) benefit................................ 3.5 2.9 0.3 (1.8) (2.6)
----- ----- ----- ----- -----
Income (loss) from continuing operations...................... (11.3)% (14.3)% 1.1% (2.0)% 10.6%
----- ----- ----- ----- -----
----- ----- ----- ----- -----
</TABLE>
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
<PAGE>
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
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
<PAGE>
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.
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
<PAGE>
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.
<TABLE>
<CAPTION>
1994 1995 1996
-------------------------------------- ----------------------------------- -------
FIRST (1) SECOND THIRD FOURTH FIRST SECOND THIRD FOURTH FIRST
--------- -------- ------- ------- ------- ------- ------- -------- -------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C> <C> <C> <C>
Revenues.................................... $13,344 $ 24,652 $26,712 $27,209 $28,012 $28,612 $28,817 $ 30,078 $31,369
Expenses:
Operating expenses........................ 13,056 23,148 24,036 23,854 25,106 26,401 26,394 26,796 27,031
Purchased research and development (2).... -- 13,791 -- -- -- -- -- -- --
Litigation settlements (3)................ 1,750 -- -- -- -- 4,500 -- -- --
--------- -------- ------- ------- ------- ------- ------- -------- -------
Operating income (loss)..................... (1,462) (12,287) 2,676 3,355 2,906 (2,289) 2,423 3,282 4,338
Equity in loss of Joint Venture............. (615) -- -- -- -- -- -- -- --
Interest expense (4)........................ (1,855) (2,499) (1,778) (1,698) (1,610) (1,500) (1,422) (1,277) (1,032)
Other income (expense), net................. 373 (248) 11 180 82 251 68 81 53
--------- -------- ------- ------- ------- ------- ------- -------- -------
Income (loss) from continuing operations
before income taxes........................ (3,559) (15,034) 909 1,837 1,378 (3,538) 1,069 2,086 3,359
Income tax (provision) benefit.............. 383 3,377 (318) (754) (511) 1,564 (243) (519) (775)
--------- -------- ------- ------- ------- ------- ------- -------- -------
Income (loss) from continuing operations.... (3,176) (11,657) 591 1,083 867 (1,974) 826 1,567 2,584
Income (loss) from discontinued operations,
net of income taxes........................ (1,427) (1,214) 3,647 -- -- -- -- -- --
--------- -------- ------- ------- ------- ------- ------- -------- -------
Net income (loss)........................... (4,603) (12,871) 4,238 1,083 867 (1,974) 826 1,567 2,584
Dividends and accretion on mandatorily
redeemable preferred stock................. -- (106) (698) (714) (715) (740) (765) (783) (793)
--------- -------- ------- ------- ------- ------- ------- -------- -------
Net income (loss) applicable to common
stock...................................... $(4,603) $(12,977) $ 3,540 $ 369 $ 152 $(2,714) $ 61 $ 784 $ 1,791
--------- -------- ------- ------- ------- ------- ------- -------- -------
--------- -------- ------- ------- ------- ------- ------- -------- -------
<CAPTION>
SECOND
-------
<S> <C>
Revenues.................................... $31,956
Expenses:
Operating expenses........................ 26,241
Purchased research and development (2).... --
Litigation settlements (3)................ --
-------
Operating income (loss)..................... 5,715
Equity in loss of Joint Venture............. --
Interest expense (4)........................ (950)
Other income (expense), net................. 240
-------
Income (loss) from continuing operations
before income taxes........................ 5,005
Income tax (provision) benefit.............. (898)
-------
Income (loss) from continuing operations.... 4,107
Income (loss) from discontinued operations,
net of income taxes........................ --
-------
Net income (loss)........................... 4,107
Dividends and accretion on mandatorily
redeemable preferred stock................. (811)
-------
Net income (loss) applicable to common
stock...................................... $ 3,296
-------
-------
</TABLE>
- ------------------------------
(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
<PAGE>
<TABLE>
<CAPTION>
1994 1995
--------------------------------------------- ---------------------------------
FIRST(1) SECOND THIRD FOURTH FIRST SECOND THIRD
--------- --------- --------- --------- --------- --------- ---------
(IN PERCENTAGES)
<S> <C> <C> <C> <C> <C> <C> <C>
Revenues............................... 100.0 % 100.0% 100.0% 100.0% 100.0% 100.0% 100.0%
Expenses:
Operating expenses................... 97.8 93.9 90.0 87.7 89.6 92.3 91.6
Purchased research and development
(2)................................. -- 55.9 -- -- -- -- --
Litigation settlements (3)........... 13.1 -- -- -- -- 15.7 --
--------- --------- --------- --------- --------- --------- ---------
Operating income (loss)................ (11.0 ) (49.8) 10.0 12.3 10.4 (8.0) 8.4
Equity in loss of Joint Venture........ (4.6 ) -- -- -- -- -- --
Interest expense (4)................... (13.9 ) (10.1) (6.7) (6.2) (5.7) (5.2) (4.9)
Other income (expense), net............ 2.8 (1.0) 0.0 0.7 0.3 0.9 0.2
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing
operations before income taxes........ (26.7 ) (61.0) 3.4 6.8 4.9 (12.4) 3.7
Income tax (provision) benefit......... 2.9 13.7 (1.2) (2.8) (1.8) 5.5 (0.8)
--------- --------- --------- --------- --------- --------- ---------
Income (loss) from continuing
operations............................ (23.8 ) (47.3) 2.2 4.0 3.1 (6.9) 2.9
Income (loss) from discontinued
operations, net of income taxes....... (10.7 ) (4.9) 13.7 -- -- -- --
--------- --------- --------- --------- --------- --------- ---------
Net income (loss)...................... (34.5 ) (52.2) 15.9 4.0 3.1 (6.9) 2.9
Dividends and accretion on mandatorily
redeemable preferred stock............ -- (0.4) (2.6) (2.6) (2.6) (2.6) (2.7)
--------- --------- --------- --------- --------- --------- ---------
Net income (loss) applicable to common
stock................................. (34.5 )% (52.6)% 13.3% 1.4% 0.5% (9.5)% 0.2%
--------- --------- --------- --------- --------- --------- ---------
--------- --------- --------- --------- --------- --------- ---------
<CAPTION>
1996
---------------------
FOURTH FIRST SECOND
--------- --------- ---------
<S> <C> <C> <C>
Revenues............................... 100.0% 100.0% 100.0%
Expenses:
Operating expenses................... 89.1 86.2 82.1
Purchased research and development
(2)................................. -- -- --
Litigation settlements (3)........... -- -- --
--------- --------- ---------
Operating income (loss)................ 10.9 13.8 17.9
Equity in loss of Joint Venture........ -- -- --
Interest expense (4)................... (4.2) (3.3) (3.0)
Other income (expense), net............ 0.3 0.2 0.7
--------- --------- ---------
Income (loss) from continuing
operations before income taxes........ 6.9 10.7 15.6
Income tax (provision) benefit......... (1.7) (2.5) (2.8)
--------- --------- ---------
Income (loss) from continuing
operations............................ 5.2 8.2 12.8
Income (loss) from discontinued
operations, net of income taxes....... -- -- --
--------- --------- ---------
Net income (loss)...................... 5.2 8.2 12.8
Dividends and accretion on mandatorily
redeemable preferred stock............ (2.6) (2.5) (2.5)
--------- --------- ---------
Net income (loss) applicable to common
stock................................. 2.6% 5.7% 10.3%
--------- --------- ---------
--------- --------- ---------
</TABLE>
- ------------------------------
(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
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
<PAGE>
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
<PAGE>
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
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.
<TABLE>
<CAPTION>
SERVICES AND
PRODUCTS DESCRIPTION TARGET MARKET BENEFITS
<S> <C> <C> <C>
INSURANCE SERVICES AND PRODUCTS
TOTAL LOSS (1980) - Local market, passenger - Independent valuation with
and light truck valuation speed of automation, more
based on inspected local accurate values, fraud
market dealer inventory protection and regulatory
compliance
COMMERCIAL/ - Local market, vehicle -Physical damage claims
RECREATIONAL valuation of heavy departments
VEHICLE VALUATION equipment, small marine
(1985) craft, mobile homes and
motor cycles
COMPUTERIZED - Replacement rental car - Consolidates rental
AUTOMOBILE RENTAL reservation, management providers for volume contract
SYSTEM (1994) and billing system negotiation, controls
unauthorized rental
extension and
consolidates/audits billing
ACCESS (1995) - Outsourced appraisal and - Insurance companies - Fast, economical
vehicle restoration with heavy independent appraisal/repair process with
management services appraiser usage high customer satisfaction
utilizing a network of
Company-certified,
fully-equipped repair
facilities
PATHWAYS WORKFLOW - Integration software for - Rapid learning and
MANAGER (1996) a variety of claims introduction of new
applications, with a applications; more
workflow orientation to efficient claims processing
assist in managing all
aspects of a field
appraiser's duties
PATHWAYS - Windows-based collision - Insurance field - Accurate estimates based on
COLLISION estimating software appraisers better decisions
ESTIMATING (1996) using P-page logic which -Increases and eases the
Upgrade: provides up-to-date selection of more economical
RECYCLED PART pricing; interactive recycled/salvaged parts
VALUATION decision support;
automated forms
-Provides statistically
valid, local market
pricing of available
recycled parts that can
be automatically inserted
into an estimate
GUIDEPOST (1996) - Executive information - Physical damage claims - Management information
system departments
ACCLAIM (1996) - Outsourced soft-tissue - Bodily injury claims -Lower legal and indemnity
litigation defense departments costs
management
</TABLE>
34
<PAGE>
<TABLE>
<CAPTION>
SERVICES AND
PRODUCTS DESCRIPTION TARGET MARKET BENEFITS
<S> <C> <C> <C>
INSURANCE & COLLISION REPAIR SERVICES AND PRODUCTS
EZEST (1991) - Interactive PC-based - Insurance field - Provides a complete,
collision estimating appraisers and collision professional estimate.
software using P-page repair facilities Automatically defaults to
logic which provides agreed-upon estimating
Upgrade: up-to-date pricing, guidelines when used in
marketing letters and conjunction with EZNet
interactive decision
support
RECYCLED PART - Provides statistically - Insurance field - Increases and eases the
VALUATION (1993) valid, local market appraisers selection of more economical
pricing of available recycled/salvage parts
recycled parts that can
be automatically
inserted into an
estimate
EZFOCUS (1996) - Software based, digital - Insurance companies - Economical documentation of
imaging system and collision repair vehicle damage that speeds
facilities repair approval, increases
process control and reduces
reinspections
EZNET (1992) -A value-added -Insurance companies -Process control and
communications network to utilizing automated management information
send claim assignment staff appraisers and
Upgrades: information and retrieve DRPs and collision
completed file data repair facilities
ELECTRONIC -A file-by-file electronic -Insurance companies -Real-time exception
APPRAISAL REVIEW audit of DRP estimates utilizing DRP networks reporting to target
(1993) re-inspections and improve
management control of DRP
networks
RECYCLED PART -Location of all available -Insurance companies -Increases and eases the
LOCATION (1994) recycled parts for a utilizing DRP networks selection of more economical
particular vehicle in a recycled/salvaged parts
local market
COLLISION REPAIR SERVICES AND PRODUCTS
EZWORKS (1996) - Job costing, job - Improves workflow,
scheduling, accounting and increases financial control,
payroll software labor efficiency and asset
utilization
PATHWAYS WORK - Integration software for - Collision repair - Rapid learning and
FLOW MANAGER a variety of applications, facilities introduction of new
(expected late with a workflow applications; more
1996) orientation efficient management
process
PATHWAYS - Windows-based collision - Provides a complete,
COLLISION estimating software professional estimate.
ESTIMATING--COLLISION using P-page logic which Automatically defaults to
REPAIR (expected provides up-to-date agreed-upon estimating
late 1996) pricing marketing guidelines when used in
letters capability and conjunction with EZNet
interactive decision
support
OTHER SERVICES AND PRODUCTS
AUTOSEARCH (1981) - Used vehicle location - Consumers - Fast location of
and pricing service replacement vehicle
CONSUMER PRODUCTS - Local market passenger - Market data for use in
(1989) and light truck valuation buying or selling a new or
used car
DEALER - Advertising for car - New/used car dealers - Highly targeted advertising
SERVICES--TAIL dealers to consumers
(1990) recently involved in a
total loss
</TABLE>
35
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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,
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
<PAGE>
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
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
<PAGE>
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.
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
<PAGE>
MANAGEMENT
EXECUTIVE OFFICERS AND DIRECTORS
The following table sets forth certain information with respect to the
executive officers and directors of the Company:
<TABLE>
<CAPTION>
NAME AGE POSITION
- --------------------------- --- -------------------------------------------------------------------------------
<S> <C> <C>
David M. Phillips 57 Chairman, President and Chief Executive Officer
J. Laurence Costin, Jr. 55 Vice Chairman
Githesh Ramamurthy 35 Chief Technology Officer and President--Strategic Client Division
John Buckner 50 President--Sales and Services Division
Blaine R. Ornburg 50 Executive Vice President--New Market Development
Leonard L. Ciarrocchi 43 Executive Vice President--Chief Financial Officer
Donald J. Hallagan 37 Vice President--Controller
Gerald P. Kenney 44 Vice President, Secretary and General Counsel
John J. Byrne(1) 64 Director
Morgan Davis(1) 45 Director
Thomas L. Kempner(1) 69 Director
Gordon S. Macklin(1) 68 Director
Robert T. Marto(1) 50 Director
Michael R. Stanfield(1) 46 Director
</TABLE>
- ------------------------
(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
<PAGE>
BLAINE R. ORNBURG joined the Company in April 1995 as Executive Vice
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
<PAGE>
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.
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
<TABLE>
<CAPTION>
NAME AGE POSITION
- ------------------------------ --- ----------------------------------------------------------------------------
<S> <C> <C>
Stephen E. Applebaum.......... 51 Senior Vice President--ACCLAIM Litigation Management
Samuel B. Barash.............. 58 Executive Vice President--New Product Development
Nancy T. Borghesi............. 48 Senior Vice President--Consulting Services
Michael J. D'Onofrio.......... 39 Vice President--Treasurer
William R. Geen............... 43 Senior Vice President--Total Loss Operations
T. Scott Leisher.............. 37 Senior Vice President--Strategic Accounts
Rick L. Mansel................ 43 Senior Vice President--Product Management
Martin G. McGrath............. 38 Senior Vice President--Marketing and Planning
Jack Rozint................... 41 Senior Vice President--ACCESS Claims Services
Richard L. Rumple............. 41 Senior Vice President--Product Engineering
</TABLE>
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
<PAGE>
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.
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
<PAGE>
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
<TABLE>
<CAPTION>
LONG-TERM
COMPENSATION
--------------------
COMMON STOCK
OTHER ANNUAL UNDERLYING
NAME AND PRINCIPAL POSITION(1) SALARY BONUS COMPENSATION OPTIONS(2)
- ----------------------------------------------------- ---------- --------- ------------- --------------------
<S> <C> <C> <C> <C>
David M. Phillips.................................... $ 448,008 -- -- --
Chairman, President and Chief
Executive Officer
J. Laurence Costin, Jr............................... 259,031 $ 75,000 -- --
Vice Chairman
Githesh Ramamurthy................................... 231,180 -- -- 133,600
Chief Technology Officer and President-- Strategic
Client Division
John Buckner......................................... 208,340 31,625 -- 104,000
President--Sales and Services Division
Blaine R. Ornburg.................................... 131,046 -- $ 50,000 80,000
Executive Vice President--New Market Development
</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 $0, respectively.
(2) Represents the number of shares of Common Stock issuable upon exercise of
options granted pursuant to the Stock Option Plan.
47
<PAGE>
The following tables set forth certain information regarding options/stock
appreciation rights granted to the Named Executive Officers:
OPTION GRANTS IN LAST FISCAL YEAR
<TABLE>
<CAPTION>
POTENTIAL REALIZABLE
INDIVIDUAL GRANTS VALUE AT ASSUMED
-------------------------------------------------------------- ANNUAL RATES OF
NUMBER OF PERCENT OF TOTAL STOCK PRICE
SECURITIES OPTIONS/ SARS APPRECIATION FOR
UNDERLYING GRANTED TO EXERCISE OR OPTION TERM (1)
OPTIONS/SARS EMPLOYEES IN BASE PRICE EXPIRATION --------------------
NAME GRANTED (#) FISCAL YEAR ($/SHARE) DATE 5%($) 10%($)
- ------------------------------------- --------------- ----------------- ------------- ----------- --------- ---------
<S> <C> <C> <C> <C> <C> <C>
David M. Phillips.................... -- -- -- -- -- --
Chairman, President and Chief
Executive Officer
J. Laurence Costin, Jr............... -- -- -- -- -- --
Vice Chairman
Githesh Ramamurthy................... 73,600 5.9 $ 1.75 2/1/00 $ 35,590 $ 78,630
Chief Technology Officer and
President-- 60,000 4.8 4.375 12/12/00 72,520 160,260
Strategic Client Division
John Buckner......................... 20,000 1.6 1.75 2/1/00 9,670 21,370
President--Sales and Services
Division 24,000 1.9 2.125 6/28/00 14,090 31,140
60,000 4.8 4.375 12/12/00 72,520 160,260
Blaine R. Ornburg.................... 80,000 6.4 1.75 4/17/00 38,680 85,470
Executive Vice President--New Market
Development
</TABLE>
- ------------------------------
(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
<TABLE>
<CAPTION>
VALUE OF UNEXERCISED
NUMBER OF SECURITIES IN-THE-MONEY OPTIONS
UNDERLYING UNEXERCISED AT FY-END ($)
SHARES ACQUIRED VALUE REALIZED OPTIONS AT FY-END (#) EXERCISABLE/UNEXERCISABLE
NAME ON EXERCISE (#) ($) EXERCISABLE/UNEXERCISABLE (1)
- ------------------------- --------------- ---------------- ----------------------- --------------------------
<S> <C> <C> <C> <C>
David M. Phillips........
Chairman, President and
Chief Executive Officer -- -- -- --
J. Laurence Costin,
Jr......................
Vice Chairman -- -- 134,176/57,584 $1,291,444/$554,246
Githesh Ramamurthy.......
Chief Technology Officer
and President--Strategic
Client Division -- -- 138,880/168,320 $1,295,200/$1,454,000
John Buckner.............
President--Sales and
Services Division -- -- 27,200/92,800 $220,700/$728,800
Blaine R. Ornburg........
Executive Vice
President-- New Market
Development -- -- 16,000/64,000 $148,000/$592,000
</TABLE>
- ------------------------------
(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
<PAGE>
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
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
<PAGE>
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.
<TABLE>
<CAPTION>
BENEFICIAL OWNERSHIP BENEFICIAL OWNERSHIP
OF COMMON STOCK OF COMMON STOCK
PRIOR TO THE OFFERING (1) AFTER THE OFFERING (1)
--------------------------- ---------------------------
NO. OF PERCENT NO. OF PERCENT
NAME OF BENEFICIAL OWNER SHARES OF CLASS SHARES OF CLASS
- --------------------------------------------------------------- ------------- ------------ ------------- ------------
<S> <C> <C> <C> <C>
David M. Phillips(2)........................................... 927,760 5.6 927,760 4.2
J. Laurence Costin, Jr.(3)..................................... 185,728 1.0 185,728 *
Blaine R. Ornburg(4)........................................... 54,000 * 54,000 *
Githesh Ramamurthy(5).......................................... 233,600 1.4 233,600 1.1
John Buckner(6)................................................ 60,920 * 60,920 *
John J. Byrne(7)............................................... -- -- -- --
Morgan Davis(8)................................................ -- -- -- --
Thomas L. Kempner(9)........................................... 3,724,674 22.6 3,724,674 17.0
Gordon S. Macklin(10).......................................... 8,584,564 51.9 8,584,564 39.0
Robert T. Marto(11)............................................ 8,584,564 51.9 8,584,564 39.0
Michael R. Stanfield(12)....................................... -- -- -- --
Loeb Entities(13).............................................. 3,457,315 21.0 3,457,315 15.7
61 Broadway
24th Floor
New York, New York 10006
White River Ventures, Inc...................................... 8,584,564 51.9 8,584,564 39.0
777 Westchester Ave.
Suite 201
White Plains, New York 10604
All directors and executive officers as a group (11 persons)... 13,088,558 80.1 13,088,558 59.5
</TABLE>
- ------------------------------
* 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
<PAGE>
(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,
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
<PAGE>
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.
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
<PAGE>
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
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
<PAGE>
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:
<TABLE>
<CAPTION>
NUMBER
NAME OF SHARES
- ---------------------------------------------------------------------------------- ----------
<S> <C>
Hambrecht & Quist LLC.............................................................
Lazard Freres & Co. LLC ..........................................................
Raymond James & Associates, Inc...................................................
----------
Total.............................................................................
----------
----------
</TABLE>
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
<PAGE>
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
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
<PAGE>
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
<PAGE>
INDEX TO CONSOLIDATED FINANCIAL STATEMENTS
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
<TABLE>
<CAPTION>
PAGE(S)
-----------------
<S> <C>
Report of Independent Accountants................................................................... F-2
Consolidated Financial Statements:
Consolidated Statement of Operations.............................................................. F-3
Consolidated Balance Sheet........................................................................ F-4
Consolidated Statement of Cash Flows.............................................................. F-5
Consolidated Statement of Stockholders' Deficit................................................... F-6
Notes to Consolidated Financial Statements........................................................ F-7 to F-19
</TABLE>
CCC DEVELOPMENT COMPANY
<TABLE>
<CAPTION>
PAGE(S)
-----------------
<S> <C>
Report of Independent Accountants................................................................. F-20
Financial Statements:
Statement of Operations......................................................................... F-21
Statement of Cash Flows......................................................................... F-22
Statement of Partners' Deficit.................................................................. F-23
Notes to Financial Statements................................................................... F-24-25
</TABLE>
F-1
<PAGE>
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
<PAGE>
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
-------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- ---------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Revenues................................................. $ 51,264 $ 91,917 $ 115,519 $ 56,624 $ 63,325
Expenses:
Production and customer support........................ 15,108 25,123 32,261 16,346 15,520
Commissions, royalties and license fees................ 1,091 7,153 11,720 5,559 6,660
Selling, general and administrative.................... 22,908 33,426 36,279 17,730 19,043
Depreciation and amortization.......................... 2,158 8,331 9,572 4,854 3,972
Product development and programming.................... 2,968 10,061 14,865 7,018 8,077
Purchased research and development..................... -- 13,791 -- -- --
Loss on lease termination.............................. 3,802 -- -- -- --
Litigation settlements................................. -- 1,750 4,500 4,500 --
--------- --------- ---------- --------- ---------
Operating income (loss).................................. 3,229 (7,718) 6,322 617 10,053
Equity in loss of Joint Venture.......................... (3,564) (615) -- -- --
Interest expense......................................... (6,945) (7,830) (5,809) (3,110) (1,982)
Other income (expense), net.............................. (311) 316 482 334 293
--------- --------- ---------- --------- ---------
Income (loss) from continuing operations before income
taxes................................................... (7,591) (15,847) 995 (2,159) 8,364
Income tax (provision) benefit........................... 1,817 2,688 291 1,052 (1,673)
--------- --------- ---------- --------- ---------
Income (loss) from continuing operations................. (5,774) (13,159) 1,286 (1,107) 6,691
Income (loss) from discontinued operations, net of income
taxes................................................... (4,357) 1,006 -- -- --
--------- --------- ---------- --------- ---------
Net income (loss)........................................ (10,131) (12,153) 1,286 (1,107) 6,691
Dividends and accretion on mandatorily redeemable
preferred stock......................................... -- (1,518) (3,003) (1,455) (1,604)
--------- --------- ---------- --------- ---------
Net income (loss) applicable to common stock............. $ (10,131) $ (13,671) $ (1,717) $ (2,562) $ 5,087
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
Income (loss) per common share from
Continuing operations.................................. $ (0.60) $ (0.98) $ 0.07 $ (0.06) $ 0.38
Discontinued operations................................ (0.46) 0.07 -- -- --
Dividends and accretions on mandatorily redeemable
preferred stock......................................... -- (0.11) (0.17) (0.09) (0.09)
--------- --------- ---------- --------- ---------
Net income (loss) applicable to common stock............. $ (1.06) $ (1.02) $ (0.10) $ (0.15) $ 0.29
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
Weighted average common shares outstanding............... 9,519 13,364 17,187 16,814 17,720
--------- --------- ---------- --------- ---------
--------- --------- ---------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-3
<PAGE>
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED BALANCE SHEET
(IN THOUSANDS)
ASSETS
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- --------- JUNE 30,
1996
-----------
(UNAUDITED)
<S> <C> <C> <C>
Cash.......................................................................... $ 5,702 $ 3,895 $ 4,690
Accounts receivable, net...................................................... 8,627 9,899 11,210
Income taxes receivable....................................................... 118 1,079 --
Other current assets.......................................................... 3,686 2,877 3,288
--------- --------- -----------
Total current assets...................................................... 18,133 17,750 19,188
Equipment and purchased software, net of accumulated depreciation of $16,958,
$23,695 and $20,312 (unaudited) at December 31, 1994 and 1995 and June 30,
1996, respectively........................................................... 11,750 7,310 6,884
Goodwill, net of accumulated amortization of $7,331, $7,548 and $8,220
(unaudited) at December 31, 1994 and 1995 and June 30, 1996, respectively.... 13,921 12,575 11,902
Deferred income taxes......................................................... 5,468 3,810 4,556
Other assets.................................................................. 2,960 2,648 2,079
--------- --------- -----------
Total Assets.............................................................. $ 52,232 $ 44,093 $ 44,609
--------- --------- -----------
--------- --------- -----------
LIABILITIES, MANDATORILY REDEEMABLE PREFERRED STOCK
AND STOCKHOLDERS' DEFICIT
Accounts payable and accrued expenses......................................... $ 13,749 $ 18,656 $ 16,377
Accrued interest.............................................................. 709 996 879
Income taxes payable.......................................................... -- -- 2,577
Current portion of long-term debt............................................. 5,340 7,660 8,151
Deferred revenues............................................................. 3,751 5,063 4,482
Current portion of contract funding........................................... 10,133 3,328 1,205
--------- --------- -----------
Total current liabilities................................................. 33,682 35,703 33,671
Long-term debt................................................................ 35,753 27,220 21,386
Contract funding.............................................................. 3,430 135 --
Deferred revenue.............................................................. -- 597 1,813
Other liabilities............................................................. 2,974 2,733 3,135
Commitments and contingencies (Note 14)
--------- --------- -----------
Total liabilities......................................................... 75,839 66,388 60,005
--------- --------- -----------
Mandatorily redeemable preferred stock ($1.00 par value, 100,000 shares
authorized, 39,000 designated and outstanding for all periods presented)..... 31,122 34,125 35,729
--------- --------- -----------
Common stock ($0.10 par value, 30,000,000 shares authorized for all periods
presented, 16,297,200, 16,316,400 and 16,526,800 (unaudited) shares issued
and outstanding at December 31, 1994 and 1995 and June 30, 1996,
respectively)................................................................ 1,630 1,632 1,653
Additional paid-in capital.................................................... 11,655 11,679 12,370
Accumulated deficit........................................................... (67,802) (69,519) (64,962)
Treasury stock, at cost....................................................... (212) (212) (186)
--------- --------- -----------
Total stockholders' deficit............................................... (54,729) (56,420) (51,125)
--------- --------- -----------
Total Liabilities, Mandatorily Redeemable Preferred Stock and
Stockholders' Deficit.................................................. $ 52,232 $ 44,093 $ 44,609
--------- --------- -----------
--------- --------- -----------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-4
<PAGE>
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
SIX MONTHS ENDED
YEAR ENDED DECEMBER 31, JUNE 30,
------------------------------- --------------------
1993 1994 1995 1995 1996
--------- --------- --------- --------- ---------
(UNAUDITED)
<S> <C> <C> <C> <C> <C>
Operating Activities:
Net income (loss).......................................... $ (10,131) $ (12,153) $ 1,286 $ (1,107) $ 6,691
Adjustments to reconcile net income (loss) to net cash
provided by (used for) operating activities:
Loss (income) from discontinued operations, net of income
taxes................................................... 4,357 (1,006) -- -- --
Purchased research and development....................... -- 13,791 -- -- --
Equity in loss of Joint Venture.......................... 3,564 615 -- -- --
Depreciation and amortization of equipment and purchased
software................................................ 710 6,770 8,154 4,089 3,281
Amortization of goodwill................................. 1,165 1,380 1,346 673 672
Deferred income taxes.................................... 1,278 (2,885) 1,659 2,683 (746)
Contract funding proceeds................................ -- 4,995 149 157 --
Contract funding revenue amortization.................... -- (12,989) (10,249) (6,594) (2,258)
Other, net............................................... 118 560 559 240 264
Changes in:
Accounts receivable, net............................... (1,489) 185 (1,272) (906) (1,310)
Other current assets................................... 347 853 339 128 (411)
Other assets........................................... (67) (21) (149) 55 (191)
Accounts payable and accrued expenses.................. 3,792 (1,904) 4,907 4,065 (2,277)
Accrued interest....................................... 3,689 1,135 287 18 (117)
Current income taxes................................... (5,567) (827) (961) (3,264) 3,662
Deferred revenues...................................... (77) 971 1,312 875 635
Other liabilities...................................... 4,286 547 356 89 851
--------- --------- --------- --------- ---------
Net cash provided by (used for) operating activities:
Continuing operations...................................... 5,975 17 7,723 1,201 8,746
Discontinued operations, net............................... 488 (4,169) -- -- --
--------- --------- --------- --------- ---------
Net cash provided by (used for) operating activities......... 6,463 (4,152) 7,723 1,201 8,746
--------- --------- --------- --------- ---------
Investing Activities:
Purchases of equipment and software........................ (875) (5,220) (3,003) (1,245) (1,827)
Acquisition of Joint Venture, net of cash acquired......... -- (4,519) -- -- --
Purchase of Faneuil ISG stock.............................. -- (530) -- -- --
Proceeds from sale of discontinued operations, net of
expenses.................................................. -- 5,728 500 500 --
Other, net................................................. 198 (643) 48 176 24
--------- --------- --------- --------- ---------
Net cash used for investing activities....................... (677) (5,184) (2,455) (569) (1,803)
--------- --------- --------- --------- ---------
Financing Activities:
Principal payments on long-term debt....................... (4,539) (15,842) (11,101) (3,456) (16,181)
Proceeds from issuance of long-term debt................... -- 30,793 4,000 2,000 9,750
Proceeds from issuance of common stock..................... 2 1 26 1 283
Payment of equity and debt issue costs..................... -- (1,802) -- -- --
Advances (to) from Joint Venture, net...................... (4,635) 1,511 -- -- --
Other, net................................................. 5 2 -- (1) --
--------- --------- --------- --------- ---------
Net cash provided by (used for) financing activities......... (9,167) 14,663 (7,075) (1,456) (6,148)
--------- --------- --------- --------- ---------
Net increase (decrease) in cash.............................. (3,381) 5,327 (1,807) (824) 795
Cash:
Beginning of period........................................ 3,756 375 5,702 5,702 3,895
--------- --------- --------- --------- ---------
End of period.............................................. $ 375 $ 5,702 $ 3,895 $ 4,878 $ 4,690
--------- --------- --------- --------- ---------
--------- --------- --------- --------- ---------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-5
<PAGE>
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
CONSOLIDATED STATEMENT OF STOCKHOLDERS' DEFICIT
(IN THOUSANDS, EXCEPT NUMBER OF SHARES)
<TABLE>
<CAPTION>
OUTSTANDING
COMMON STOCK TREASURY STOCK
----------------------- ADDITIONAL ---------------------- TOTAL
NUMBER OF PAID-IN ACCUMULATED NUMBER OF STOCKHOLDERS'
SHARES PAR VALUE CAPITAL DEFICIT SHARES COST DEFICIT
------------ --------- ----------- ------------ ----------- --------- ------------
<S> <C> <C> <C> <C> <C> <C> <C>
December 31, 1992............ 9,244,640 $ 925 $ -- $ (44,000) 111,920 $ (212) $ (43,287)
Stock options exercised...... 1,080 -- 2 -- -- -- 2
Net loss..................... -- -- -- (10,131) -- -- (10,131)
------------ --------- ----------- ------------ ----------- --------- ------------
December 31, 1993............ 9,245,720 925 2 (54,131) 111,920 (212) (53,416)
Stock issuance............... 7,050,840 705 11,652 -- -- -- 12,357
Preferred stock accretion.... -- -- -- (936) -- -- (936)
Preferred stock dividends
accrued..................... -- -- -- (582) -- -- (582)
Stock options exercised...... 640 -- 1 -- -- -- 1
Net loss..................... -- -- -- (12,153) -- -- (12,153)
------------ --------- ----------- ------------ ----------- --------- ------------
December 31, 1994............ 16,297,200 1,630 11,655 (67,802) 111,920 (212) (54,729)
Preferred stock accretion.... -- -- -- (1,931) -- -- (1,931)
Preferred stock dividends
accrued..................... -- -- -- (1,072) -- -- (1,072)
Stock options exercised...... 19,200 2 24 -- -- -- 26
Net income................... -- -- -- 1,286 -- -- 1,286
------------ --------- ----------- ------------ ----------- --------- ------------
December 31, 1995............ 16,316,400 1,632 11,679 (69,519) 111,920 (212) (56,420)
Preferred stock accretion
(unaudited)................. -- -- -- (1,069) -- -- (1,069)
Preferred stock dividends
accrued (unaudited)......... -- -- -- (535) -- -- (535)
Stock options exercised
(unaudited)................. 196,800 20 263 -- -- -- 283
Treasury stock issuance
(unaudited)................. 13,600 1 21 -- (13,600) 26 48
Investment security
distribution (unaudited).... -- -- -- (530) -- -- (530)
Other (unaudited)............ -- -- 407 -- -- -- 407
Net income (unaudited)....... -- -- -- 6,691 -- -- 6,691
------------ --------- ----------- ------------ ----------- --------- ------------
June 30, 1996 (unaudited).... 16,526,800 $ 1,653 $ 12,370 $ (64,962) 98,320 $ (186) $ (51,125)
------------ --------- ----------- ------------ ----------- --------- ------------
------------ --------- ----------- ------------ ----------- --------- ------------
</TABLE>
The accompanying notes are an integral part of these consolidated financial
statements.
F-6
<PAGE>
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 1 -- DESCRIPTION OF BUSINESSES AND ORGANIZATION
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
<PAGE>
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
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
<PAGE>
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.
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
<PAGE>
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:
<TABLE>
<CAPTION>
PRO
ACTUAL FORMA
1994 1994
---------- ----------
<S> <C> <C>
Revenues $ 91,917 $ 102,181
Operating expenses
Production and customer support......................................................... 25,123 27,062
Commissions, royalties and license fees................................................. 7,153 8,938
Selling, general and administrative..................................................... 33,426 37,638
Depreciation and amortization........................................................... 8,331 10,198
Product development and programming..................................................... 10,061 11,222
Purchased research and development...................................................... 13,791 --
Litigation settlements.................................................................. 1,750 1,750
---------- ----------
Operating income (loss)................................................................... (7,718) 5,373
Equity in loss of Joint Venture........................................................... (615) --
Interest expense.......................................................................... (7,830) (8,549)
Other income, net......................................................................... 316 16
---------- ----------
Loss from continuing operations before income taxes....................................... (15,847) (3,160)
Income tax (provision) benefit............................................................ 2,688 (823)
---------- ----------
Income (loss) from continuing operations.................................................. $ (13,159) $ (3,983)
---------- ----------
---------- ----------
</TABLE>
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
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
<PAGE>
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:
<TABLE>
<CAPTION>
1993 1994
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Revenues......................................................................... $ 36,171 $ 25,137
--------- ---------
--------- ---------
Loss before income taxes......................................................... $ (5,115) $ (5,171)
Income tax benefit............................................................... 758 2,536
--------- ---------
Loss from operations............................................................. (4,357) (2,635)
--------- ---------
Gain on sale..................................................................... -- 4,650
Income tax provision............................................................. -- (1,009)
--------- ---------
Net gain on sale................................................................. -- 3,641
--------- ---------
Income (loss) from discontinued operations..................................... $ (4,357) $ 1,006
--------- ---------
--------- ---------
</TABLE>
NOTE 6 -- INCOME TAX BENEFIT
Income taxes applicable to continuing operations consisted of the following
(provision) benefit:
<TABLE>
<CAPTION>
1993 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
Current:
Federal................................................................. $ 2,686 $ (193) $ 1,792
State................................................................... 435 73 134
International........................................................... (26) (77) 24
--------- --------- ---------
Total current......................................................... 3,095 (197) 1,950
--------- --------- ---------
Deferred:
Federal................................................................. (1,090) 1,910 (1,668)
State................................................................... (188) 975 9
--------- --------- ---------
Total deferred.......................................................... (1,278) 2,885 (1,659)
--------- --------- ---------
Total income tax benefit................................................ $ 1,817 $ 2,688 $ 291
--------- --------- ---------
--------- --------- ---------
</TABLE>
The Company's effective income tax rate applicable to continuing operations
differs from the federal statutory rate as follows:
<TABLE>
<CAPTION>
1993 1994 1995
---------------------- ---------------------- ----------------------
(IN THOUSANDS)
<S> <C> <C> <C> <C> <C> <C>
Federal income (tax) benefit at statutory rate... $ 2,581 34.0% $ 5,388 34.0% $ (338) (34.0)%
State and local taxes, net of federal benefit and
before deferred tax valuation allowances........ 216 2.8 960 6.1 60 6.0
International taxes.............................. (162) (2.1) (132) (0.8) 12 1.2
Goodwill amortization............................ (186) (2.5) (337) (2.1) (494) (49.6)
Change in valuation allowance.................... (471) (6.2) (2,630) (16.6) 1,260 126.6
Non deductible expenses.......................... (118) (1.6) (48) (--) (242) (24.3)
Other, net....................................... (43) (0.5) (513) (3.6) 33 3.3
--------- --- --------- ----- --------- -----------
Income tax benefit............................... $ 1,817 23.9% $ 2,688 17.0% $ 291 29.2%
--------- --- --------- ----- --------- -----------
--------- --- --------- ----- --------- -----------
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Deferred income tax assets:
Deferred revenue................................................................. $ 6,563 $ 2,394
Litigation settlement............................................................ 439 1,145
Accrued compensation............................................................. 654 1,127
Depreciation and amortization.................................................... 487 990
Rent............................................................................. 385 980
Bad debt expense................................................................. 396 568
Lease termination................................................................ 960 440
Long-term receivable............................................................. 1,003 150
Net operating loss carryforward.................................................. 1,293 110
Other, net....................................................................... 1,652 1,121
--------- ---------
Subtotal......................................................................... 13,832 9,025
Valuation allowance.............................................................. (6,223) (4,963)
--------- ---------
Total deferred income tax asset.................................................... 7,609 4,062
--------- ---------
Deferred income tax liabilities:
Purchased software............................................................... (1,552) (252)
Other, net....................................................................... (589) --
--------- ---------
Total deferred income tax liability................................................ (2,141) (252)
--------- ---------
Net deferred income tax asset.................................................... $ 5,468 $ 3,810
--------- ---------
--------- ---------
</TABLE>
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
<PAGE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Prepaid data royalties............................................................... $ 1,026 $ 1,138
Computer inventory................................................................... 456 522
Prepaid equipment maintenance........................................................ 748 444
Escrow receivable.................................................................... 500 --
Prepaid commissions.................................................................. 315 259
Unremitted contract funding proceeds................................................. 321 141
Other, net........................................................................... 320 373
--------- ---------
Total.............................................................................. $ 3,686 $ 2,877
--------- ---------
--------- ---------
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Computer equipment............................................................... $ 16,674 $ 19,997
Purchased software, licenses and databases....................................... 9,377 8,007
Furniture and other equipment.................................................... 2,612 2,814
Leasehold improvements........................................................... 45 187
--------- ---------
Total, gross................................................................... 28,708 31,005
Less accumulated depreciation.................................................... (16,958) (23,695)
--------- ---------
Total, net..................................................................... $ 11,750 $ 7,310
--------- ---------
--------- ---------
</TABLE>
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:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Capital leases......................................................................... $ 588 $ 574
Less accumulated depreciation.......................................................... (137) (240)
--------- ---------
Total, net........................................................................... $ 451 $ 334
--------- ---------
--------- ---------
</TABLE>
F-13
<PAGE>
CCC INFORMATION SERVICES GROUP INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (CONTINUED)
NOTE 9 -- GOODWILL
Goodwill consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
LIFE 1994 1995
--------- --------- ---------
(IN THOUSANDS)
<S> <C> <C> <C>
CCC acquisition (1988)................................................. 20 years $ 16,458 $ 16,458
UCOP acquisition (1994)................................................ 7 years 3,665 3,665
CCC Canada acquisition (1991).......................................... 3 years 1,129 --
--------- ---------
Total, gross......................................................... 21,252 20,123
Less accumulated amortization.......................................... (7,331) (7,548)
--------- ---------
Total, net........................................................... $ 13,921 $ 12,575
--------- ---------
--------- ---------
</TABLE>
NOTE 10 -- ACCOUNTS PAYABLE AND ACCRUED EXPENSES
Accounts payable and accrued expenses consisted of the following:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Accounts payable.................................................................. $ 3,757 $ 5,464
Litigation settlement............................................................. -- 2,956
Compensation...................................................................... 3,433 2,799
Professional fees................................................................. 1,369 2,586
Sales tax......................................................................... 1,910 1,501
Lease termination................................................................. 1,061 1,136
Commissions....................................................................... 704 1,015
Health insurance.................................................................. 752 957
Other, net........................................................................ 763 242
--------- ---------
Total........................................................................... $ 13,749 $ 18,656
--------- ---------
--------- ---------
</TABLE>
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
<PAGE>
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
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:
<TABLE>
<CAPTION>
DECEMBER 31,
--------------------
1994 1995
--------- ---------
(IN THOUSANDS)
<S> <C> <C>
Senior bank term loan................................................... $ 30,000 $ 25,500
Senior bank revolving credit facility................................... 9,500 8,000
Equipment financing obligations......................................... 1,137 985
Capital lease obligations............................................... 456 395
--------- ---------
Total debt............................................................ 41,093 34,880
Due within one year..................................................... (5,340) (7,660)
--------- ---------
Due after one year...................................................... $ 35,753 $ 27,220
--------- ---------
--------- ---------
</TABLE>
Aggregate minimum principal repayments of long-term debt in each of the five
years subsequent to December 31, 1995 are as follows:
<TABLE>
<S> <C>
(In thousands)
1996............................................................... $ 7,660
1997............................................................... 7,341
1998............................................................... 12,379
1999............................................................... 7,500
2000............................................................... --
---------
Total.............................................................. $ 34,880
---------
---------
</TABLE>
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
<PAGE>
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
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
<PAGE>
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.
<TABLE>
<CAPTION>
WEIGHTED
AVERAGE
SHARES PRICE
---------- -----------
<S> <C> <C>
TOTAL OPTIONS:
Outstanding as of December 31, 1992..................................................... 1,455,320 $ 1.92
Granted................................................................................. 977,360 1.38
Exercised............................................................................... (1,080) 1.38
Surrendered or terminated............................................................... (119,147) 6.25
----------
Outstanding as of December 31, 1993..................................................... 2,312,453 1.46
Granted................................................................................. 269,680 1.38
Exercised............................................................................... (640) 1.38
Surrendered or terminated............................................................... (388,414) 1.75
----------
Outstanding as of December 31, 1994..................................................... 2,193,079 1.40
Granted................................................................................. 1,247,521 2.64
Exercised............................................................................... (19,200) 1.38
Surrendered or terminated............................................................... (465,360) 1.39
----------
Outstanding as of December 31, 1995..................................................... 2,956,040 1.93
----------
----------
Granted (unaudited)..................................................................... 210,800 11.20
Exercised (unaudited)................................................................... (196,800) 1.44
Surrendered or terminated (unaudited)................................................... (390,280) 2.44
----------
Outstanding as of June 30, 1996 (unaudited)............................................. 2,579,760 2.64
----------
----------
VESTED OPTIONS:
Outstanding as of December 31, 1992..................................................... 982,501 $ 1.94
Vested.................................................................................. 345,208 1.40
Exercised............................................................................... (1,080) 1.38
Surrendered or terminated............................................................... (100,027) 7.18
----------
Outstanding as of December 31, 1993..................................................... 1,226,602 1.46
Vested.................................................................................. 507,395 1.39
Exercised............................................................................... (640) 1.38
Surrendered or terminated............................................................... (90,054) 2.90
----------
Outstanding as of December 31, 1994..................................................... 1,643,303 1.43
Vested.................................................................................. 463,936 2.06
Exercised............................................................................... (19,200) 1.38
Surrendered or terminated............................................................... (393,040) 1.38
----------
Outstanding as of December 31, 1995..................................................... 1,694,999 1.60
Vested (unaudited)...................................................................... 173,768 4.02
Exercised (unaudited)................................................................... (196,800) 1.44
Surrendered or terminated (unaudited)................................................... (73,120) 2.47
----------
Outstanding as of June 30, 1996 (unaudited)............................................. 1,598,847 1.85
----------
----------
</TABLE>
F-17
<PAGE>
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:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1996....................................................... $ 2,802
1997....................................................... 2,045
1998....................................................... 2,469
1999....................................................... 2,933
2000....................................................... 2,234
Thereafter................................................. 18,532
---------
Total.................................................. $ 31,015
---------
---------
</TABLE>
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:
<TABLE>
<CAPTION>
(In thousands)
<S> <C>
1996........................................................ $ 2,546
1997........................................................ 1,073
---------
Total................................................... $ 3,619
---------
---------
</TABLE>
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
<PAGE>
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
<PAGE>
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
Chicago, Illinois
F-20
<PAGE>
CCC DEVELOPMENT COMPANY
STATEMENT OF OPERATIONS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR
ENDED
DECEMBER 31,
1993
------------- QUARTER
ENDED
MARCH 29,
1994
-----------
(UNAUDITED)
<S> <C> <C>
Revenues.............................................................................. $ 34,087 $ 11,358
Expenses:
Production and customer support..................................................... 7,723 1,939
Commissions, royalties and license fees............................................. 9,305 2,879
Selling, general and administrative................................................. 12,577 4,212
Depreciation and amortization....................................................... 4,738 1,084
Product development and programming................................................. 3,753 1,161
------------- -----------
Operating income (loss)............................................................... (4,009) 83
Interest expense...................................................................... (3,239) (1,013)
Other income (expense), net........................................................... 120 (300)
------------- -----------
Net loss.............................................................................. $ (7,128) $ (1,230)
------------- -----------
------------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statemments
F-21
<PAGE>
CCC DEVELOPMENT COMPANY
STATEMENT OF CASH FLOWS
(IN THOUSANDS)
<TABLE>
<CAPTION>
YEAR ENDED
DECEMBER 31,
1993
------------- QUARTER
ENDED MARCH
29, 1994
-----------
(UNAUDITED)
<S> <C> <C>
Operating Activities:
Net loss............................................................................ $ (7,128) $ (1,230)
Adjustments to reconcile net loss to net cash provided by operating activities:
Depreciation and amortization of equipment and purchased software................. 5,278 1,655
Contract funding proceeds......................................................... 19,543 6,197
Contract funding revenue amortization............................................. (15,034) (4,964)
Other, net........................................................................ (718) 337
Changes in:
Accounts receivable, net........................................................ 546 501
Other current assets............................................................ (2,280) 102
Other assets.................................................................... -- (31)
Accounts payable and accrued expenses........................................... 1,736 (638)
Accrued interest................................................................ (77) --
Deferred revenues............................................................... 1,134 1,233
------------- -----------
Net cash provided by operating activities............................................. 3,000 3,162
------------- -----------
Investing Activities:
Purchases of equipment and software................................................. (4,812) (1,544)
------------- -----------
Net cash used for investing activities................................................ (4,812) (1,544)
------------- -----------
Financing Activities:
Principal payments on long-term debt................................................ (1,070) (230)
Advances (to) from the Company...................................................... 4,268 (608)
------------- -----------
Net cash provided by (used for) financing activities.................................. 3,198 (838)
------------- -----------
Net increase in cash.................................................................. 1,386 780
Cash:
Beginning of period................................................................. 40 1,426
------------- -----------
End of period....................................................................... $ 1,426 $ 2,206
------------- -----------
------------- -----------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-22
<PAGE>
CCC DEVELOPMENT COMPANY
STATEMENT OF PARTNERS' DEFICIT
(IN THOUSANDS)
<TABLE>
<CAPTION>
TOTAL
PARTNERS' ACCUMULATED PARTNERS'
CAPITAL DEFICIT DEFICIT
----------- ------------ ---------
<S> <C> <C> <C>
December 31, 1992............................................................. $ 2,000 $ (19,726) $ (17,726)
Net loss...................................................................... -- (7,128) (7,128)
----------- ------------ ---------
December 31, 1993............................................................. 2,000 (26,854) (24,854)
Net loss (unaudited).......................................................... -- (1,230) (1,230)
----------- ------------ ---------
March 29, 1994 (unaudited).................................................... $ 2,000 $ (28,084) $ (26,084)
----------- ------------ ---------
----------- ------------ ---------
</TABLE>
The accompanying notes are an integral part of these financial statements.
F-23
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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."
<PAGE>
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
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
<TABLE>
<CAPTION>
PAGE
-----
<S> <C>
Prospectus Summary................................... 3
Risk Factors......................................... 7
Dividend Policy...................................... 14
Dilution............................................. 14
Use of Proceeds...................................... 16
Capitalization....................................... 16
Selected Consolidated Financial Data................. 17
Unaudited Pro Forma Consolidated Financial Data...... 19
Management's Discussion and Analysis of Financial
Condition and Results of Operations................. 20
Business............................................. 29
Management........................................... 43
Principal Stockholders............................... 50
Certain Transactions................................. 52
Description of Capital Stock......................... 53
Shares Eligible for Future Sale...................... 57
Underwriting......................................... 58
Legal Matters........................................ 59
Experts.............................................. 59
Available Information................................ 59
Index to Consolidated Financial Statements........... F-1
</TABLE>
----------------
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
LAZARD FRERES & CO. LLC
RAYMOND JAMES &
ASSOCIATES, INC.
AUGUST , 1996
- ------------------------------------------------
------------------------------------------------
- ------------------------------------------------
------------------------------------------------
<PAGE>
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:
<TABLE>
<S> <C>
SEC Registration Fee.......................................... $ 30,344.83
NASD Filing Fee............................................... 9,300.00
NASDAQ Listing Fee............................................ *
Blue sky fees and expenses.................................... *
Accounting fees and expenses.................................. *
Legal fees and expenses....................................... *
Printing and engraving........................................ *
Transfer Agent and Registrar Fees............................. *
Miscellaneous................................................. *
------------
TOTAL....................................................... $1,072,000.00
------------
------------
</TABLE>
- ------------------------
* 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.
The Company maintains directors' and officers' liability insurance.
II-1
<PAGE>
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:
<TABLE>
<CAPTION>
NUMBER OF
DATE PURCHASER SHARES PURCHASED
- --------------------- ------------------------------ ----------------
<C> <S> <C>
8/2/93 Steven L. Telaroli 800
10/30/93 Lewis Ballington 267
6/16/94 White River Ventures, Inc. 7,050,851
12/10/94 Daniel Chen 640
1/18/95 Daniel O'Hara 640
8/31/95 David Wu 160
9/7/95 Glen Tullman 2,000
11/9/95 Jeff Chen 8,400
12/15/95 Peter Urbain 8,000
2/23/96 Robert Millman 6,400
5/1/96 Edward Cheskis 190,400
</TABLE>
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
<TABLE>
<S> <C>
1 Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation
3.2 Form of Amended and Restated By-laws
4.1 Specimen Common Stock Certificate
4.2 Stockholders' Agreement dated as of June 16, 1994 by and among the Company,
White River Ventures, Inc. and the other stockholders named therein
4.3 Regulatory Contingency Agreement dated as of June 16, 1994 by and among the
Company and White River Ventures, Inc.
4.4 Series C Preferred Stock Designation
4.5 Series D Preferred Stock Designation
4.6 Series E Preferred Stock Designation
5 Opinion of Winston & Strawn re legality
10.1 Stock Option Plan of the Company adopted May 1988 and amended in November
1994
10.2 Lease between LaSalle National Trust, N.A., as trustee and CCC dated as of
May 7, 1993
10.3 License between Motor Books Division, a unit of Hearst Business Publishing,
Inc. and the Company dated as of May 1, 1992
11 Amended Statement re computation of per share earnings
21 Subsidiaries of the registrant
23.1 Form of Consent of Price Waterhouse LLP, independent accountants
23.2 Consent of Winston & Strawn (contained in the opinion filed as Exhibit 5)
24 *Powers of attorney
27 **Financial Data Schedule
</TABLE>
- ------------------------
*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
<PAGE>
(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
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
<PAGE>
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.
<TABLE>
<CAPTION>
SIGNATURE TITLE
- -------------------------------------- ----------------------------------------
<C> <S>
/s/ DAVID M. PHILLIPS Chairman, President and Chief Executive
- -------------------------------------- Officer
David M. Phillips
* Executive Vice President -- Chief
- -------------------------------------- Financial Officer (Principal Financial
Leonard L. Ciarrocchi Officer)
* Vice President -- Controller (Principal
- -------------------------------------- Accounting Officer)
Donald J. Hallagan
*
- -------------------------------------- Director
John J. Byrne
*
- -------------------------------------- Director
Morgan Davis
*
- -------------------------------------- Director
Thomas L. Kempner
*
- -------------------------------------- Director
Gordon S. Macklin
*
- -------------------------------------- Director
Robert T. Marto
*
- -------------------------------------- Director
Michael R. Stanfield
*By: /s/ DAVID M.
PHILLIPS
- --------------------------------------
David M.
Phillips
ATTORNEY-IN-FACT
</TABLE>
II-4
<PAGE>
CCC INFORMATION SERVICES GROUP INC.
SUPPLEMENTAL FINANCIAL STATEMENT SCHEDULES
SCHEDULE II -- VALUATION AND QUALIFYING ACCOUNTS
<TABLE>
<CAPTION>
BALANCE AT CHARGED TO CHARGE TO BALANCE AT
BEGINNING OF COSTS AND OTHER END OF
DESCRIPTION PERIOD EXPENSES ACCOUNTS DEDUCTIONS PERIOD
- -------------------------------------------------- ------------- ----------- ----------- ------------ -----------
<S> <C> <C> <C> <C> <C>
1993 Allowance for Doubtful Accounts $ 253 $ 51 -- $ (44)(b) $ 260
1994 Allowance for Doubtful Accounts 260 727 $ 497(a) (541)(b) 943
1995 Allowance for Doubtful Accounts 943 2,257 -- (1,735)(b) 1,465
1993 Deferred Income Tax Valuation Allowances 1,254 2,296 -- -- 3,550
1994 Deferred Income Tax Valuation Allowances 3,550 1,701 972(a) -- 6,223
1995 Deferred Income Tax Valuation Allowances 6,223 -- -- (1,260)(c) 4,963
</TABLE>
- ------------------------------
(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
<PAGE>
LIST OF EXHIBITS
<TABLE>
<CAPTION>
EXHIBIT
NUMBER DESCRIPTION PAGE
- ----------- ------------------------------------------------------------------------------------------------- ---------
<C> <S> <C>
1 Form of Underwriting Agreement
3.1 Form of Amended and Restated Certificate of Incorporation
3.2 Form of Amended and Restated By-laws
4.1 Specimen Common Stock Certificate
4.2 Stockholders' Agreement dated as of June 16, 1994 by and among the Company, White River Ventures,
Inc. and the other stockholders named therein
4.3 Regulatory Contingency Agreement dated as of June 16, 1994 by and among the Company and White
River Ventures, Inc.
4.4 Series C Preferred Stock Designation
4.5 Series D Preferred Stock Designation
4.6 Series E Preferred Stock Designation
5 Opinion of Winston & Strawn re legality
10.1 Stock Option Plan of the Company adopted May 1988 and amended in November 1994
10.2 Lease between LaSalle National Trust, N.A., as trustee and CCC dated as of May 7, 1993
10.3 License between Motor Books Division, a unit of Hearst Business Publishing, Inc. and the Company
dated as of May 1, 1992
11 Amended Statement re computation of per share earnings
21 Subsidiaries of the registrant
23.1 Form of Consent of Price Waterhouse LLP, independent accountants
23.2 Consent of Winston & Strawn (contained in the opinion filed as Exhibit 5)
24 *Powers of attorney
27 **Financial Data Schedule
</TABLE>
- ------------------------
*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.
<PAGE>
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.
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.
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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
"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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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.
(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-
<PAGE>
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.
(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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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.
-12-
<PAGE>
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
-13-
<PAGE>
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
-14-
<PAGE>
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.
-15-
<PAGE>
(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.
-16-
<PAGE>
(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.
(a) The Company agrees to indemnify and hold harmless each
Underwriter and each person (including each partner
-17-
<PAGE>
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
hereof shall remain operative and in full force and effect regardless of any
investigation made by
-18-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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
contribution from any person who was not guilty of such fraudulent
misrepresentation. The Underwriters' obligations in this paragraph (d) to
contribute
-21-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
(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
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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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.
-28-
<PAGE>
SCHEDULE I
UNDERWRITERS
Number of
Shares
to be
Underwriters Purchased
- ------------------------------------------------------------ -----------
Hambrecht & Quist LLC . . . . . . . . . . . . . . . . . . . .
Lazard Freres & Co. LLC . . . . . . . . . . . . . . . . . . .
Raymond James & Associates, Inc.. . . . . . . . . . . . . . .
Total . . . . . . . . . . . . . . .
-----------
-----------
-29-
<PAGE>
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
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-
<PAGE>
(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
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-
<PAGE>
(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.]
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-
<PAGE>
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
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,
<PAGE>
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
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-
<PAGE>
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
(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-
<PAGE>
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-
<PAGE>
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
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
<PAGE>
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.
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-
<PAGE>
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.
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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
ARTICLE V
CERTIFICATES OF STOCK AND THEIR TRANSFER
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
-8-
<PAGE>
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.
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-
<PAGE>
(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
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-
<PAGE>
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
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-
<PAGE>
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-
<PAGE>
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.
<PAGE>
- --------------------------------------------------------------------------------
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
- -------------------------------------------------------------------------------
<PAGE>
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
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
<PAGE>
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-
<PAGE>
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
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
<PAGE>
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.
"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-
<PAGE>
"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.
"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-
<PAGE>
"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
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-
<PAGE>
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.
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-
<PAGE>
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
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-
<PAGE>
(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,
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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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
(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-
<PAGE>
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
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-
<PAGE>
(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;
(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-
<PAGE>
(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.
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-
<PAGE>
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.
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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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
Acquisition Agreement dated as of March 30, 1994 among White River and the
Sellers referred to therein.
-18-
<PAGE>
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
/s/D. M. Phillips
--------------------------
David M. Phillips
-19-
<PAGE>
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
<PAGE>
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
AUTHENTICATION: 7141265
DATE: 06-06-94
<PAGE>
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
<PAGE>
(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
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-
<PAGE>
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
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-
<PAGE>
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
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
<PAGE>
- 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
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
<PAGE>
- 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.
-- 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
<PAGE>
- 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
therein. Attendance of a person at a meeting of stockholders shall
constitute a waiver
<PAGE>
- 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,
<PAGE>
- 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
<PAGE>
- 7 -
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
<PAGE>
- 8 -
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.
<PAGE>
- 9 -
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
<PAGE>
-10-
papers which may require it. In the absence or disqualification of any member
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.
<PAGE>
-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,
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.
<PAGE>
-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
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
<PAGE>
-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.
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
<PAGE>
-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
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,
<PAGE>
- 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
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
<PAGE>
- 16 -
any section, subsection, paragraph or sentence are severable and shall remain
enforceable to the fullest extent permitted by law.
<PAGE>
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.
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
<PAGE>
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.
<PAGE>
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."
<PAGE>
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."
<PAGE>
EXHIBIT D
INVESTMENT BANKS
Goldman, Sachs & Co.
The First Boston Corporation
Hambrecht & Quist Incorporated
Lazard Freres & Co.
Lehman Brothers
Morgan Stanley & Co. Incorporated
Salomon Brothers Inc
Smith Barney Shearson Inc.
<PAGE>
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
<PAGE>
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.
-2-
<PAGE>
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,
-3-
<PAGE>
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
-4-
<PAGE>
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
-5-
<PAGE>
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
-6-
<PAGE>
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
-7-
<PAGE>
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.
-8-
<PAGE>
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
Telecopy: 312-853-7036
-9-
<PAGE>
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-
<PAGE>
IN WITNESS WHEREOF, the parties have executed this Agreement as of the date
first above written.
INFOVEST CORPORATION
By /S/ [Illegible]
--------------------------------
Name:
Title: Executive Vice President
WHITE RIVER VENTURES, INC.
By /s/ John P. Corrigan
--------------------------------
Name:
Title:
-11-
<PAGE>
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
cumulative Redeemable Preferred Stock, par value $1.00 per share (the "Series E
Preferred Stock"), and any other capital
<PAGE>
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
-2-
<PAGE>
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
-3-
<PAGE>
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
-4-
<PAGE>
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
-5-
<PAGE>
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
-6-
<PAGE>
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
consummation of such
-7-
<PAGE>
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
-8-
<PAGE>
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
-9-
<PAGE>
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
-10-
<PAGE>
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
-11-
<PAGE>
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-
<PAGE>
"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-
<PAGE>
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 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-
<PAGE>
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. Bjarnson
Title: Assistant Secretary
-15-
<PAGE>
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
<PAGE>
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
-2-
<PAGE>
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.
-3-
<PAGE>
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,
-4-
<PAGE>
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-
<PAGE>
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-
<PAGE>
(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 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-
<PAGE>
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 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-
<PAGE>
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
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-
<PAGE>
(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
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-
<PAGE>
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
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-
<PAGE>
"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, (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-
<PAGE>
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" 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-
<PAGE>
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
-14-
<PAGE>
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
<PAGE>
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
-2-
<PAGE>
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
-3-
<PAGE>
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-
<PAGE>
Votes per share = A/B
and
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-
<PAGE>
(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
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-
<PAGE>
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 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-
<PAGE>
remaining to be paid or distributed, and the holders of the Series E Preferred
Stock shall not be 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 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-
<PAGE>
(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
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-
<PAGE>
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
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-
<PAGE>
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.
(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-
<PAGE>
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
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-
<PAGE>
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.
"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-
<PAGE>
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 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-
<PAGE>
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. Bjarnson
Title: Assistant Secretary
-15-
<PAGE>
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.
<PAGE>
CCC Information Services Group Inc.
August 5, 1996
Page 2
We do not find it necessary for the purposes of this opinion to cover,
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
<PAGE>
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.
<PAGE>
(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.
(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 -
<PAGE>
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
(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 -
<PAGE>
(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,
and
- 4 -
<PAGE>
(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-
<PAGE>
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.
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-
<PAGE>
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
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-
<PAGE>
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-
<PAGE>
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
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-
<PAGE>
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
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-
<PAGE>
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,
-11-
<PAGE>
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-
<PAGE>
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.
* * * * *
-13-
<PAGE>
Exhibit 10.2
OFFICE LEASE
THE MERCHANDISE MART
CHICAGO, ILLINOIS
TENANT: CCC INFORMATION SERVICES INC.
DATE: MAY 7, 1993
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
(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
specifically
6
<PAGE>
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
<PAGE>
(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
<PAGE>
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
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
<PAGE>
(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
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
<PAGE>
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.
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
(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
operations, accessibility and barrier removal, and that such requirements may or
may not apply to the Premises and the Building
15
<PAGE>
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
16
<PAGE>
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
<PAGE>
the temperature otherwise maintained by Landlord in the Premises, or whenever
the electrical load in the Premises exceeds the designated electrical load
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
25
<PAGE>
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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:
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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,
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
<PAGE>
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
Responsible Premises and Tenant's contents, furniture, fixtures, equipment and
other personal property located
35
<PAGE>
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
<PAGE>
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
<PAGE>
(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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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.
(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
<PAGE>
(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
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
<PAGE>
(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.
(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
<PAGE>
(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.
45
<PAGE>
(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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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)
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
<PAGE>
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
<PAGE>
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.
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
<PAGE>
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
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
<PAGE>
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).
(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
<PAGE>
(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.
(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
<PAGE>
(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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
64
<PAGE>
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
<PAGE>
Landlord or Tenant may submit the question to arbitration in accordance
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
(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.
(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
<PAGE>
(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
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
<PAGE>
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
all persons claiming by, through or under Tenant.
72
<PAGE>
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
<PAGE>
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
--------------------------------------
Assistant Secretary
74
<PAGE>
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
<PAGE>
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
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.
<PAGE>
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%).
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
<PAGE>
EXHIBIT C
RENT ADJUSTMENTS
Page 1 of 2
TENANT:
BASE YEAR: 1993
CURRENT OPERATING YEAR: 1994
- --------------------------------------------------------------------------------
TENANT'S PROPORTIONATE SHARE
<TABLE>
<CAPTION>
Applicable Increase Proportionate Proportionate
from page 2 of 2 Share Percentage Share Amount
-------------------- ---------------- -------------
<S> <C> <C> <C>
Real estate tax $ $
------------
Operating expenses
wages
non-wage items
Utilities
Insurance
------------
Total operating expenses
------------
Tenant cleaning 100.00%
------------ -----------
Total rent adjustment
Monthly installment amount
previously billed ( )
------------
Additional amount due $
------------
------------
</TABLE>
<PAGE>
RENT ADJUSTMENTS
Page 2 of 2
TENANT:
BASE YEAR: 1993
CURRENT OPERATING YEAR: 1994
- --------------------------------------------------------------------------------
<TABLE>
<CAPTION>
Increase-
Current
Real Estate Taxes Base Current Over Base
- ----------------- ---- ------- ---------
<S> <C> <C> <C>
Taxes Paid $
Plus outside services
Less refunds received
---------
Total tax $ $ $
----------- ---------- ------------
----------- ---------- ------------
Operating Expenses
- ------------------
Administration $ $ $
General cleaning
Repairs and maintenance
Security
----------- ---------- ------------
sub-totals
----------- ---------- ------------
----------- ---------- ------------
----------- ---------- ------------
Utilities
Insurance
Total operating expenses $ $ $
----------- ---------- ------------
----------- ---------- ------------
Tenant Cleaning $ $ $
- --------------- ----------- ---------- ------------
----------- ---------- ------------
</TABLE>
<PAGE>
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:
- 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
<PAGE>
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.
- 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
<PAGE>
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.).
- 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
<PAGE>
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.
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
<PAGE>
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
<PAGE>
EXHIBIT "E"
(Supplement)
CCC 4TH FLOOR SPACE
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
<PAGE>
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
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
<PAGE>
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 -
<PAGE>
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.
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 -
<PAGE>
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.
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 -
<PAGE>
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.
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 -
<PAGE>
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 -
<PAGE>
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 -
<PAGE>
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
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 -
<PAGE>
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
(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 -
<PAGE>
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 -
<PAGE>
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 -
<PAGE>
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
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 -
<PAGE>
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;
(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 -
<PAGE>
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.
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 -
<PAGE>
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 -
<PAGE>
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
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 -
<PAGE>
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
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 -
<PAGE>
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
--------------------------- ----------------------------
InfoVest Corporation
By: /s/
---------------------------
Date: 4/23/92
---------------------------
- 17 -
<PAGE>
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
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.
<PAGE>
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.
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
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
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
<PAGE>
EXHIBIT A (CONTINUED)
- -------------------------------------------------------------------------------
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
<PAGE>
EXHIBIT A (CONTINUED)
- -------------------------------------------------------------------------------
5.0 OEM PARTS PRICING DATABASE
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
PROCESS BEGIN: DEVELOPMENT OF NEW 1993 MODEL CHAPTERS
PROCESS COMPLETE: ON-GOING, INFORMATION DEVELOPED FOR EACH NEW CHAPTER
GOING FORWARD.
- -------------------------------------------------------------------------------
6
<PAGE>
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.
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
<PAGE>
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.
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
<PAGE>
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%
EUROPEAN VEHICLES OCTOBER 4 11%
DECEMBER 5 24%
FEBRUARY 1 27%
APRIL 13 62%
JUNE 14 100%
----------
207
- -------------------------------------------------------------------------------
1
<PAGE>
EXHIBIT 11
CCC INFORMATION SERVICES GROUP, INC.
STATEMENT RE: COMPUTATION OF NET INCOME (LOSS) PER SHARE
<TABLE>
<CAPTION>
Actual Year Ended
-----------------------------------------------------------------------
12/31/91 12/31/92 12/31/93 12/31/94 12/31/95
----------- ----------- ----------- ----------- -----------
<S> <C> <C> <C> <C> <C>
Net income (loss) per share from continuing operations:
Net income (loss) from continuing operations ($5,946,000) ($7,260,000) ($5,774,000) ($13,159,000) $1,286,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 8,671,639 9,081,073 9,245,043 13,089,926 16,318,126
Shares to be issued in proposed offering -- -- -- -- --
Shares attributable to common stock equivalents
outstanding -- -- -- -- 594,760
Shares attributable to options pursuant to
Staff Accounting Bulletin No. 83 273,880 273,880 273,880 273,880 273,880
----------- ----------- ----------- ----------- -----------
8,945,519 9,354,953 9,518,923 13,363,806 17,186,766
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per share from continuing
operations ($0.67) ($0.77) ($0.60) ($0.98) $0.07
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per share from discontinued operations:
Net income (loss) from discontinued operations $ (194,000) $ 409,000 ($4,357,000) $1,006,000 --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 8,671,639 9,081,073 9,245,043 13,089,926 --
Shares to be issued in proposed offering -- -- -- -- --
Shares attributable to common stock equivalents
outstanding -- -- -- -- --
Shares attributable to options pursuant to
Staff Accounting Bulletin No. 83 273,880 273,880 273,880 273,880 --
----------- ----------- ----------- ----------- -----------
8,945,519 9,354,953 9,518,923 13,363,806 --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per share from discontinued
operations ($.02) $.04 ($0.46) $0.07 --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Per share dividends and accretion:
Dividends and accretion -- -- -- ($1,518,000) ($3,003,000)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding -- -- -- 13,089,926 16,318,126
Shares to be issued in proposed offering -- -- -- -- --
Shares attributable to common stock equivalents
outstanding -- -- -- -- 594,760
Shares attributable to options pursuant to
Staff Accounting Bulletin No. 83 -- -- -- 273,880 273,880
----------- ----------- ----------- ----------- -----------
-- -- -- 13,363,806 17,186,766
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Per share dividends and accretion -- -- -- ($0.11) ($0.17)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income per share applicable to common stock:
Net income (loss) applicable to common stock ($6,140,000) ($6,851,000) ($10,131,000) ($13,671,000) ($1,717,000)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 8,671,639 9,081,073 9,245,043 13,089,926 16,318,126
Shares to be issued in proposed offering -- -- -- -- --
Shares attributable to common stock equivalents
outstanding -- -- -- -- 594,760
Shares attributable to options pursuant to
Staff Accounting Bulletin No. 83 273,880 273,880 273,880 273,880 273,880
----------- ----------- ----------- ----------- -----------
8,945,519 9,354,953 9,518,923 13,363,806 17,186,766
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per share applicable
to common stock ($.69) ($.73) ($1.06) ($1.02) ($0.10)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
<CAPTION>
Pro Forma
Pro forma Actual Six Months Ended Six Months Ended
Year Ended -------------------------- -------------------------
12/31/95 6/30/95 6/30/96 6/30/95 6/30/96
----------- ----------- ----------- ----------- -----------
<C> <C> <C> <C> <C>
Net income per share from continuing operations:
Net income (loss) from continuing operations $3,538,000 ($1,107,000) $6,691,000 ($97,000) $7,520,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 16,318,126 16,197,209 16,344,885 16,197,209 16,344,885
Shares to be issued in proposed offering 5,500,000 -- -- 5,500,000 5,500,000
Shares attributable to common stock equivalents
outstanding 594,760 342,880 1,101,240 342,880 1,101,240
Shares attributable to options pursuant to
Staff Accounting Bulletin No. 83 273,880 273,880 273,880 273,880 273,880
----------- ----------- ----------- ----------- -----------
22,686,766 16,813,969 17,720,005 22,313,969 23,220,005
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per share from continuing
operations $0.16 ($0.06) $0.38 ($0.01) $0.32
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income per share from discontinued operations:
Net income from discontinued operations -- -- -- -- --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding -- -- -- -- --
Shares to be issued in proposed offering -- -- -- -- --
Shares attributable to common stock equivalents
outstanding -- -- -- -- --
Shares attributable to options pursuant to
Staff Accounting Bulletin No. 83 -- -- -- -- --
----------- ----------- ----------- ----------- -----------
-- -- -- -- --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per share from discontinued
operations -- -- -- -- --
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Per share dividends and accretion:
Dividends and accretion ($991,000) ($1,455,000) ($1,604,000) ($480,000) ($529,000)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 16,318,126 16,197,209 16,344,885 16,197,209 16,344,885
Shares to be issued in proposed offering 5,500,000 -- -- 5,500,000 5,500,000
Shares attributable to common stock equivalents
outstanding 594,760 342,880 1,101,240 342,880 1,101,240
Shares attributable to options pursuant to
Staff Accounting Bulletin No. 83 273,880 273,880 273,880 273,880 273,880
----------- ----------- ----------- ----------- -----------
22,686,766 16,813,969 17,720,005 22,313,969 23,220,005
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Per share dividends and accretion ($0.05) ($0.09) ($0.09) ($0.02) ($0.02)
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per share applicable to common stock:
Net income (loss) applicable to common stock $2,547,000 ($2,562,000) $5,087,000 ($577,000) $6,991,000
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Weighted average common shares outstanding:
Shares attributable to common stock outstanding 16,318,126 16,197,209 16,344,885 16,197,209 16,344,885
Shares to be issued in proposed offering 5,500,000 -- -- 5,500,000 5,500,000
Shares attributable to common stock equivalents
outstanding 594,760 342,880 1,101,240 342,880 1,101,240
Shares attributable to options pursuant to
Staff Accounting Bulletin No. 83 273,880 273,880 273,880 273,880 273,880
----------- ----------- ----------- ----------- -----------
22,686,766 16,813,969 17,720,005 22,313,969 23,220,005
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
Net income (loss) per share applicable
to common stock $0.11 ($0.15) $0.29 ($0.03) $0.30
----------- ----------- ----------- ----------- -----------
----------- ----------- ----------- ----------- -----------
</TABLE>
<PAGE>
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.)
<PAGE>
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
