<PAGE>
As filed with the Securities and Exchange Commission on April 12, 2000
Registration No. 333-
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SECURITIES AND EXCHANGE COMMISSION
Washington, D.C. 20549
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FORM S-3
REGISTRATION STATEMENT
Under
The Securities Act of 1933
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Comdisco, Inc.
(Exact Name of Registrant as Specified in its Charter)
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Delaware 36-2687938
(State or Other Jurisdiction of (I.R.S. Employer
Incorporation or Organization) Identification Number)
6111 North River Road
Rosemont, Illinois 60018
(847) 698-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
--------------
JEREMIAH M. FITZGERALD, Esq.
Vice President and Chief Legal Officer
Comdisco, Inc.
6111 North River Road
Rosemont, Illinois 60018
(847) 698-3000
(Name, address, including zip code, and telephone number, including area code,
of agent for service)
Copies to:
LOLA M. HALE, Esq. ROBERT J. DONATUCCI, Esq.
MICHAEL J. BOLAND, Esq. Brown & Wood LLP
McBride Baker & Coles One World Trade Center, 58th Floor
500 West Madison, 40th Floor New York, New York 10048
Chicago, Illinois 60661 (212) 839-5300
(312) 715-5700
--------------
Approximate date of commencement of proposed sale to the public: as soon as
practicable after the effective date of this registration statement.
If the only securities being registered on this Form are being offered pursuant
to dividend or interest reinvestment plans, please check the following box. [_]
If any of the securities being registered on this Form are to be offered on a
delayed or continuous basis pursuant to Rule 415 under the Securities Act of
1933, other than securities offered only in connection with dividend or
interest reinvestment plans, 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, please check the following
box and list the Securities Act registration statement 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, 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. [_]
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CALCULATION OF REGISTRATION FEE
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<TABLE>
<CAPTION>
Proposed
maximum
Title of each class of securities to be aggregate Amount of
registered offering price registration fee
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<S> <C> <C>
Comdisco, Inc.--Comdisco Ventures Stock, par
value $0.10 per share....................... $150,000,000 $39,600(1)
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Rights to purchase Preferred Stock, Series D,
par value $0.10 per share(2)................ N/A N/A
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Comdisco Stock, par value $0.10 per
share(3).................................... N/A N/A
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Rights to purchase Preferred Stock, Series C,
par value $0.10 per share(4)................ N/A N/A
</TABLE>
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(1) Estimated solely for the purpose of calculating the registration fee in
accordance with Rule 457(o) under the Securities Act of 1933.
(2) Prior to the occurrence of certain events, the rights will not be evidenced
or traded separately from the Comdisco Ventures Stock. Value, if any, of
the rights is reflected in the market price of the Comdisco Ventures Stock.
Accordingly, no separate fee is paid.
(3) Registered solely because the shares of Comdisco Ventures Stock registered
under this Registration Statement may be converted, at the option of the
Registrant, into shares of Comdisco Stock in accordance with the terms of
the Comdisco Ventures Stock. No additional consideration would be paid by
the holders of Comdisco Ventures Stock upon a conversion of the Comdisco
Ventures Stock into Comdisco Stock. Accordingly, no separate fee is paid.
(4) Prior to the occurrence of certain events, the rights will not be evidenced
or traded separately from the Comdisco Stock. Value, if any, of the rights
is reflected in the market price of the Comdisco Stock. Accordingly, no
separate fee is paid.
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The Registrant hereby amends this Registration Statement on such date or dates
as may be necessary to delay its effective date until the Registrant shall file
further amendment which specifically states that this Registration Statement
shall thereafter become effective in accordance with Section 8(a) of the
Securities Act of 1933 or until the Registration Statement shall become
effective on such date as the commission, acting pursuant to such Section 8(a),
may determine.
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<PAGE>
EXPLANATORY NOTE
This Registration Statement contains two forms of prospectus: one to be
used in connection with a U.S. and Canadian offering of the Comdisco Ventures
Stock of the registrant and one to be used in a concurrent international
offering of the Comdisco Ventures Stock. The international prospectus will be
identical to the U.S. prospectus except that it will have a different front
cover page, underwriting section and back cover page. The U.S. prospectus is
included herein and is followed by the alternate front cover page, underwriting
section and back cover page to be used in the international prospectus, each of
which has been labeled "Alternative Page for International Prospectus."
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This preliminary prospectus +
+is not an offer to sell these securities and it is not soliciting an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 12, 2000
PROSPECTUS
Shares
[LOGO]
Comdisco Ventures Stock
Comdisco, Inc. is a Delaware corporation. Our principal executive office is
6111 North River Road, Rosemont, Illinois 60018. Our telephone number is (847)
698-3000.
This is our initial public offering of Comdisco Ventures Stock, a new
series of our common stock intended to reflect the performance of Comdisco
Ventures, our venture financing business. The U.S. underwriters are offering
shares in the U.S. and Canada and the international managers are
offering shares outside the U.S. and Canada.
We anticipate that the price to the public will be between $ and $
per share. Currently, no public market exists for Comdisco Ventures Stock. We
intend to list our Comdisco Ventures Stock on the Nasdaq National Market, under
the symbol "CDOV."
Investing in Comdisco Ventures Stock involves risks. See "Risk Factors,"
beginning on page 8.
<TABLE>
<CAPTION>
Per Share Total
--------- -----
<S> <C> <C>
Public offering price............................ $ $
Underwriting discount............................ $ $
Proceeds, before expenses, to Comdisco........... $ $
</TABLE>
The U.S. underwriters may also purchase up to an additional
shares of Comdisco Ventures Stock at the public offering
price, less the underwriting discount, within 30 days from the date of this
prospectus to cover over-allotments. The international managers may similarly
purchase up to an additional shares.
The shares of Comdisco Ventures Stock will be ready for delivery on or
about , 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Merrill Lynch & Co.
The date of this prospectus is , 2000.
<PAGE>
TABLE OF CONTENTS
<TABLE>
<CAPTION>
Page
----
<S> <C>
Prospectus Summary....................................................... 2
Risk Factors............................................................. 8
Special Note Regarding Forward Looking Statements........................ 19
Use of Proceeds.......................................................... 20
Dividend Policy.......................................................... 20
Capitalization........................................................... 21
Dilution................................................................. 22
Selected Historical Financial Data....................................... 23
Management's Discussion and Analysis of Financial Condition and Results
of Operations of Comdisco Ventures...................................... 25
Business of Comdisco Ventures............................................ 32
Description of Comdisco Capital Stock.................................... 52
Certain Management and Allocation Policies............................... 70
Material U.S. Federal Income Tax Considerations.......................... 77
Underwriting............................................................. 80
Legal Matters............................................................ 84
Experts.................................................................. 84
Where You Can Find More Information...................................... 84
Incorporation of Information Comdisco Files With the SEC................. 85
Annex I--Illustration of Terms of Comdisco Ventures Stock................ I-1
Comdisco Ventures Financial Statements................................... F-1
</TABLE>
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You should rely only on the information contained or incorporated by
reference in this prospectus. We have not, and the underwriters have not,
authorized any other person to provide you with different information. If
anyone provides you with different or inconsistent information, you should not
rely on it. We are not, and the underwriters are not, making an offer to sell
these securities in any jurisdiction where the offer or sale is not permitted.
You should assume that the information appearing in this prospectus is accurate
only as of the date on the front cover of this prospectus. Our business,
financial condition, results of operations and prospects may have changed since
that date.
This prospectus contains trademarks and tradenames of other companies.
1
<PAGE>
PROSPECTUS SUMMARY
This summary may not contain all of the information that is important to
you in making an investment decision. To better understand the offering, you
should read this entire prospectus carefully, as well as those additional
documents to which we refer you. See "Where You Can Find More Information," on
page 84. All references to "we," "our," or "us" in this prospectus are to
Comdisco, Inc. All references to fiscal years are to Comdisco's fiscal years
ended September 30, unless otherwise indicated.
Comdisco
Comdisco provides global technology infrastructure solutions to help its
customers maximize their technology's reliability, efficiency and flexibility.
From an accounting standpoint, we have separated our venture financing
business--which we call Comdisco Ventures--from the rest of our businesses--
which we call Comdisco Group. We intend our Comdisco Ventures Stock to reflect
the economic performance of Comdisco Ventures, and we intend our Comdisco Stock
to reflect the economic performance of Comdisco Group. We have allocated all of
our consolidated assets, liabilities, revenue, expenses and cash flows between
Comdisco Group and Comdisco Ventures.
Comdisco Group includes:
. our technology services businesses, including: continuity services,
managed network services, desktop management solutions and web
hosting and availability services;
. our global leasing and remarketing businesses in areas such as
electronics, communications, laboratory and scientific and
industrial automation equipment;
. our interest in Prism Communication Services, Inc., a majority-owned
subsidiary through which we provide integrated communications
services; and
. our retained interest in Comdisco Ventures, which is currently 100%.
This retained interest will decline to reflect the initial issuance
of Comdisco Ventures Stock as well as any future issuances.
Our principal executive offices are located at 6111 North River Road,
Rosemont, Illinois 60018. Our telephone number is (847) 698-3000. Our Web site
address is www.comdisco.com. The information on our Web site is not part of
this prospectus.
Comdisco Ventures
Comdisco Ventures is a leading provider of venture leases, venture debt
and direct equity financing to venture capital-backed companies. Comdisco
Ventures' relationships with leading venture capital firms help it identify
what it believes are the best positioned companies in the most attractive high-
growth industries. Comdisco Ventures offers a broad range of innovative equity-
linked financing products, which complement equity from venture capital firms
and debt from venture-oriented banks and asset-based lenders. Comdisco Ventures
also plans to offer a number of additional services to its network of
customers. During the last two years, some of Comdisco Ventures' notable
customers include Ariba, Ask Jeeves, Be Free, Copper Mountain Networks,
Critical Path, E-Loan, E.piphany, eToys, Extreme Networks, Gadzoox Networks,
Inktomi, NextCard, Niku, Northpoint Communications, Siara Systems and
StratumOne Communications.
Comdisco Ventures provides its customers with financing "commitments"--
agreements to provide up to a stated dollar amount of financing over a stated
period of time. Comdisco Ventures was
2
<PAGE>
formed in 1987, and since that time, has committed over $2 billion in venture
leases, venture debt and direct equity financings, including $738 million in
fiscal 1999 and $310 million in the first quarter of fiscal 2000. Of the 740
companies Comdisco Ventures has helped finance, over 170 have gone public and
over 120 have been acquired.
Historically, two primary sources of capital for start-up companies have
been venture capitalists and venture-oriented banks and asset-based lenders.
While the availability of venture capital has increased along with the volume
of start-up activity, venture capital generally represents the most dilutive
and intrusive type of financing. Venture capitalists generally require
substantial ownership and exercise substantial control when they make an
investment in a company. Typically these positions are reflected in significant
equity holdings, contractual shareholder rights and representation on the
company's board of directors. In addition, while financings from venture-
oriented banks and asset-based lenders generally result in no or minimal
dilution of the ownership of existing equity holders, they typically involve
high monthly cash disbursements, limitations on the use of funds and adherence
to restrictive financial covenants.
Comdisco Ventures believes these two primary sources of capital do not
optimize the capital needs of start-up companies in the current economic
environment. Additionally, their disadvantages highlight the need for less
costly and less dilutive financing sources, creating opportunities for
alternative capital providers, like Comdisco Ventures.
Comdisco Ventures' Solution
Comdisco Ventures believes it provides significant value to entrepreneurs
and their venture capital investors through flexible financing products and
services which allow entrepreneurs to build their companies quickly, while
minimizing the dilution of their equity ownership positions.
Comdisco Ventures has proven its ability to understand the capital needs
of its customers and to develop and customize attractive financings to meet
those needs. Currently, Comdisco Ventures' primary financing products are
venture leases, venture debt and direct equity financings. Venture leases are
leases with warrants that compensate Comdisco Ventures for providing the leases
at more attractive financing terms than leases without warrants. Venture debt
is a high-risk loan with warrants or a conversion-to-equity feature with more
flexible terms and security conditions than more traditional debt financing.
The warrants or conversion feature of venture leases and venture debt generally
provide Comdisco Ventures the ability to buy equity at a price based on the
price paid by venture capitalists. The opportunity to realize higher returns
from the exercise of the warrants or from the conversion feature enables
Comdisco Ventures to offer more flexible financing and security terms. Direct
equity financings involve Comdisco Ventures' purchase of convertible preferred
stock and common stock from its customers. Comdisco Ventures also provides
other ancillary financings, including convertible debt, bridge loans, expansion
loans, acquisition financings and landlord guarantees.
Comdisco Ventures' Strategy
Comdisco Ventures intends to expand its position as a leading provider of
venture leases and venture debt and to introduce complementary services to
venture capital-backed companies. Its strategy is to continue to leverage its
management experience and resources to capitalize on the growing demand for
financing by venture capital-backed companies. Components of Comdisco Ventures'
strategy include:
. leveraging relationships with leading venture capitalists;
. providing capital through innovative products;
. maintaining a diversified customer base;
. expanding funding sources;
. capitalizing on the Comdisco affiliation and resources; and
3
<PAGE>
. developing complementary service offerings that respond to the
changing needs of venture capital-backed companies.
Comdisco Ventures expects to generate future revenues from:
. the sale of common stock holdings in public companies;
. the disposition of current equity holdings in private companies,
through the sale of common stock following initial public offerings
or in connection with a merger, acquisition or other liquidity
event;
. returns it receives from ownership interests in alternative funding
sources, such as limited partnership funds;
. lease payments, interest payments on venture debt and related
proceeds from its customers; and
. fees or equity components received in connection with its service
offerings.
The Distribution
The Comdisco Ventures Stock we will issue in this initial public offering
will reflect only a percentage interest in the economic performance of Comdisco
Ventures. Comdisco Group will continue to hold an interest in Comdisco Ventures
that reflects the balance of the economic performance of Comdisco Ventures in
the form of a retained interest. We currently intend to follow this initial
public offering with a distribution of newly issued shares of Comdisco Ventures
Stock to holders of Comdisco Stock. These newly issued shares would represent
Comdisco Group's retained interest in Comdisco Ventures. We expect to make this
distribution of newly issued shares by means of either a split-off, where the
holders of Comdisco Stock may exchange shares of Comdisco Stock for new shares
of Comdisco Ventures Stock, or a spin-off, where we would distribute newly
issued Comdisco Ventures Stock to all holders of Comdisco Stock as a dividend.
The exact method and timing of this distribution has not yet been determined.
Following such distribution, we expect that the outstanding shares of Comdisco
Ventures Stock would reflect 100% of the economic performance of Comdisco
Ventures. There is no guarantee, however, that a distribution of Comdisco
Group's retained interest will ever occur or occur in the manner described
above.
Selected Rights and Terms of Comdisco Ventures Stock
Voting Rights. On all matters as to which all series of our common stock
vote together as a single class, each outstanding share of Comdisco Ventures
Stock will have one vote prior to the 31st trading day after the effective date
of our restated charter. For each vote of stockholders on or after that day,
each share of Comdisco Ventures Stock will have a number of votes equal to the
ratio of the average market value of one share of Comdisco Ventures Stock to
the average market value of one share of Comdisco Stock over a specified 20
trading day period prior to the record date of that vote; provided, however,
that outstanding Comdisco Ventures Stock will in no event represent more than
35% of the total voting power of all outstanding shares of our capital stock.
Dividends. Provided that we have sufficient assets to pay a dividend under
applicable law, Comdisco may declare and pay dividends on Comdisco Ventures
Stock up to an "available dividend amount." This amount is designed to be
equivalent to the amount that would legally be available for dividends on that
stock if Comdisco Ventures were a stand-alone corporation. We do not, however,
expect to pay dividends on Comdisco Ventures Stock.
4
<PAGE>
Rights on Disposition of the Assets of Comdisco Ventures. If we dispose of
all or substantially all of the assets of Comdisco Ventures, and the
disposition is not an exempt disposition, as described beginning on page 55, we
would be required to choose one of the following alternatives:
. pay a dividend to the holders of Comdisco Ventures Stock in an
amount equal to the net proceeds of the disposition (net of
corresponding amounts allocated to Comdisco Group in respect of its
retained interest in Comdisco Ventures);
. if the disposition involves all of the assets of Comdisco Ventures,
redeem all outstanding shares of Comdisco Ventures Stock in exchange
for an amount equal to the net proceeds of the disposition (net of
corresponding amounts allocated to Comdisco Group in respect of its
retained interest in Comdisco Ventures);
. if the disposition involves substantially all, but not all, of the
assets of Comdisco Ventures, redeem a number of whole shares of
Comdisco Ventures Stock in exchange for an amount equal to the net
proceeds of the disposition (net of corresponding amounts allocated
to Comdisco Group in respect of its retained interest in Comdisco
Ventures); or
. convert each share of Comdisco Ventures Stock into a number of
shares of Comdisco Stock equal to 115% of the ratio of the average
market value of one share of Comdisco Ventures Stock to the average
market value of one share of Comdisco Stock, calculated during a
specified 20-day trading period prior to the disposition.
Conversion of Comdisco Ventures Stock at Option of Comdisco. We will have
the right, at any time, to convert shares of Comdisco Ventures Stock into a
number of shares of Comdisco Stock initially equal to 125% of the ratio of the
average market value of one share of Comdisco Ventures Stock to the average
market value of one share of Comdisco Stock over a specified 20-day trading
period prior to the mailing of the conversion notice for conversions occurring
in the first quarter after we first issue Comdisco Ventures Stock. The
percentage applied to the ratio of market values will decline ratably each
quarter over a period of ten quarters to 115%.
Notwithstanding the conversion provisions outlined above, if an adverse
tax law change identified beginning on page 56 were to take place, we will have
the right to convert shares of Comdisco Ventures Stock into a number of shares
of Comdisco Stock equal to % of the ratio of their average market values,
regardless of when the adverse tax law change takes place.
Risk Factors
See "Risk Factors" beginning on page 8 for a discussion of risk factors
relating to the business of Comdisco Ventures and an investment in the Comdisco
Ventures Stock offered through this prospectus.
The Offering
Unless we specifically state otherwise, the information in this prospectus
does not take into account the possible issuance of up to
additional shares of Comdisco Ventures Stock, which the underwriters have the
option to purchase from us solely to cover over-allotments. If the underwriters
exercise this option in full, there will be shares of Comdisco
Ventures Stock outstanding following this offering.
5
<PAGE>
<TABLE>
<S> <C>
Comdisco Ventures Stock offered:
U.S. and Canadian offering....... shares
International offering........... shares
Total.......................... shares
Comdisco Ventures Stock to be
outstanding after this offering... shares
Equivalent shares of Comdisco
Ventures Stock represented by
Comdisco Group's retained
interest.......................... shares
Total Comdisco Ventures Stock and
equivalent shares of Comdisco
Ventures Stock to be outstanding
after this offering............... shares
Use of proceeds.................... The proceeds from this offering, after
expenses, will be used by Comdisco Ventures
to repay inter-group loans to Comdisco
Group and for general corporate purposes.
Comdisco Group will use those funds it
receives from Comdisco Ventures for general
corporate purposes. See "Use of Proceeds,"
on page 20.
Preferred share purchase rights.... As part of Comdisco's stockholder rights
plan, one preferred share purchase right
will be attached to each share of Comdisco
Ventures Stock sold in the offering and
thus the rights are also being offered
hereby. See "Description of Comdisco
Capital Stock--Amended and Restated Rights
Agreement," beginning on page 64.
Proposed Nasdaq National Market
symbol............................ "CDOV"
</TABLE>
The number of shares of Comdisco Ventures Stock to be outstanding after
this offering does not include shares of Comdisco Ventures Stock underlying
stock-based awards that we expect to issue to senior executives of Comdisco
Ventures under the Management Incentive Plan. See "Business of Comdisco
Ventures--Management--Management Incentive Plan," beginning on page 49.
Following the initial public offering and before the distribution (if
any), the remaining interest not represented by Comdisco Ventures Stock issued
in the offering will be reflected in the financial statements of Comdisco Group
as a "retained interest" in Comdisco Ventures.
Summary Financial Data of Comdisco Ventures
The following summary financial data should be read in conjunction with
Comdisco Ventures' financial statements and the notes thereto, and
"Management's Discussion and Analysis of Financial Condition and Results of
Operations of Comdisco Ventures," beginning on page 25 of contained elsewhere
in this prospectus. You should also review the audited financial information of
Comdisco provided in Comdisco's Form 10-K, as amended by Form 10-K/A, for
fiscal 1999, and the unaudited financial information of Comdisco provided in
Comdisco's Form 10-Q, as amended by Form 10-Q/A, for the quarter ended December
31, 1999. The summary statements of operations data for fiscal 1999, 1998 and
1997 are derived from audited financial statements of Comdisco Ventures which
are included elsewhere in this prospectus. The summary income statement data
for the three months ended December 31, 1999 and 1998 and the balance sheet
data as of December 31, 1999 and 1998 are derived from unaudited financial
statements of Comdisco Ventures which are also included elsewhere in this
prospectus. The unaudited summary financial data reflects all adjustments
(consisting of normal recurring accruals) which are, in the opinion of
management, necessary for a fair presentation of the results of the interim
periods. The operating results for the three months ended December 31, 1999 and
1998 are not necessarily indicative of the results to be expected for any other
interim period or any future fiscal year.
6
<PAGE>
COMDISCO VENTURES
SUMMARY HISTORICAL FINANCIAL DATA
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended
December 31, Years Ended September 30,
---------------- -------------------------
1999 1998 1999 1998 1997
-------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue:
Leasing............................ $ 37,993 $25,515 $118,403 $ 85,086 $68,620
Sales.............................. 2,318 1,269 6,142 7,136 6,942
Interest income on notes........... 11,759 2,314 22,580 6,655 3,139
Warrant sale proceeds and capital
gains............................. 88,725 7,000 80,731 14,938 16,435
Other.............................. 408 151 683 483 195
-------- ------- -------- -------- -------
Total revenue....................... 141,203 36,249 228,539 114,298 95,331
-------- ------- -------- -------- -------
Costs and expenses:
Leasing............................ 28,294 18,405 88,114 60,363 46,355
Sales.............................. 1,008 1,036 4,460 3,980 4,423
Selling, general & administrative.. 18,422 1,562 18,166 5,793 5,436
Interest........................... 10,791 4,014 23,373 10,835 7,670
Bad debt expense................... 21,800 800 23,200 4,786 6,250
-------- ------- -------- -------- -------
Total costs and expenses............ 80,315 25,817 157,313 85,757 70,134
-------- ------- -------- -------- -------
Earnings before income taxes........ 60,888 10,432 71,226 28,541 25,197
Income taxes........................ 23,685 4,160 28,402 11,381 10,047
-------- ------- -------- -------- -------
Net earnings........................ $ 37,203 $ 6,272 $ 42,824 $ 17,160 $15,150
======== ======= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
December 31, September 30,
------------------- -----------------
1999 1998 1999 1998
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Equity securities......................... $ 423,280 $ 52,884 $197,335 $ 16,995
Receivables, net.......................... 413,815 132,811 341,061 66,425
Net leased assets......................... 330,807 206,590 288,347 189,747
Total assets.............................. 1,190,205 402,215 845,574 281,243
Inter-group payable....................... 638,299 282,353 533,297 189,281
Division equity........................... 351,007 93,726 199,649 71,080
</TABLE>
7
<PAGE>
RISK FACTORS
You should carefully consider the risks described below, as well as the
other information included in this prospectus, before making a decision to buy
Comdisco Ventures Stock. The risks described below are not the only ones facing
Comdisco Ventures. Additional risks not presently known to us or that we
currently deem immaterial may also impair Comdisco Ventures' business
operations. Comdisco Ventures' business, financial condition or results of
operations could be materially adversely affected by any of these risks. The
trading price of Comdisco Ventures Stock could decline due to any of these
risks, and you may lose all or part of your investment.
Risks Relating to the Business of Comdisco Ventures
Comdisco Ventures' customers typically consist of venture capital-backed
companies. Providing financings to these companies involves a high degree of
business and financial risk, which can result in substantial losses, and
accordingly, an investment in Comdisco Ventures should be considered
speculative
Comdisco Ventures' customers often have yet to generate revenues and
often need substantial additional capital to expand, compete or even meet
current obligations. Typically, these venture capital-backed companies are in a
start-up development stage and may be more vulnerable to changes in economic
conditions, particularly changes that would adversely affect their ability to
raise necessary capital. If changes in economic conditions--a rise in interest
rates, for example--make it more difficult and costly for these companies to
raise the capital they require, their businesses would be adversely affected.
Additionally, these customers may have substantial variations in operating
results from period to period, face intense competition, and experience
failures or substantial declines in value at any stage. All of these factors
will affect Comdisco Ventures' customers' ability to meet their obligations to
Comdisco Ventures, and will affect the fair market value of any of their equity
securities held by Comdisco Ventures. At the time that Comdisco Ventures
provides financing, a customer may lack one or more key attributes (e.g.,
proven technology, marketable product, complete management team, or strategic
alliances) necessary for success, and may never achieve these attributes. In
certain cases, returns on financings will be long term in nature and may
require many years from the date of initial financing before they can be
achieved, if at all.
Market conditions, along with contractual and regulatory restrictions, may
affect Comdisco Ventures' ability to dispose of its equity positions in the
most economically advantageous manner
Comdisco Ventures generates a significant part of its revenues and
profits when it sells the public equity securities it holds in its customers
who have had their initial public offering or have merged with or been acquired
by a public company. The current economic environment has accelerated the
ability of Internet-based and other high-technology companies to position
themselves for a public offering, merger, acquisition or other liquidity event.
Continuation of these favorable economic conditions is beyond our control.
Historically, Comdisco Ventures' general policy has been to sell its equity
positions in an orderly manner as soon as reasonably possible after a liquidity
event. In most cases, securities law restrictions on transfer and contractual
lock-up provisions restrict Comdisco Ventures' ability to sell its equity
positions for several months after a liquidity event. Comdisco Ventures'
management consults with its outside asset manager on at least a quarterly
basis and has adjusted its general policy on occasion to respond to market
conditions. However, Comdisco Ventures' policy, with respect to disposition of
its equity holdings is not intended to, and does not, assure that Comdisco
Ventures will maximize its return on any particular holding. The public market
for high-technology and other emerging growth companies is extremely volatile.
This volatility may adversely affect both the ability of Comdisco Ventures to
dispose of those equity securities and the value of those equity securities
prior to the dates on which they are disposed. See "Business of Comdisco
Ventures--Overview of Financing Commitments and Equity Holdings of Comdisco
Ventures--Equity Holdings--Public Equity Holdings," beginning on page 40.
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The market price of Comdisco Ventures Stock may fluctuate because the value of
some of Comdisco Ventures' assets fluctuates
A significant portion of Comdisco Ventures assets may include the equity
securities of both publicly traded and non-publicly traded companies. The
market price and valuations of the securities that Comdisco Ventures holds in
these and other companies may fluctuate significantly due to market conditions
and other conditions over which Comdisco Ventures has no control. Fluctuations
in the market price and valuations of the securities that Comdisco Ventures
holds in other companies may result in fluctuations in the market price of
Comdisco Ventures Stock.
Fluctuations in future periods may be greater than those experienced in
past periods as a result of Comdisco Ventures' focus on Internet-related,
communications and other high-technology companies. The market prices of equity
securities of companies in these industries can fluctuate significantly. We
expect the market price of Comdisco Ventures Stock to be particularly
susceptible to such volatility, because Comdisco Ventures may be valued in the
future in part on the basis of a number of interests it holds in public and
private Internet-related, communications and other high-technology companies.
Therefore, fluctuations in the valuations of any of Comdisco Ventures'
customers may cause the market price of Comdisco Ventures Stock to fluctuate.
The trading prices of many public Internet-related, communications and other
high-technology companies have reached historical highs since January 1999 and
have reflected relative valuations substantially above historical levels.
During the same period, these companies' stocks have also been highly volatile
and have recorded lows well below these historical highs. In addition, for
those customers whose securities are not publicly traded, the realizable value
of Comdisco Ventures' interests may prove to be lower than the carrying value
reflected in Comdisco Ventures' financial statements.
The value of the warrants that Comdisco Ventures generally receives in
connection with its venture leases and venture debt is dependent on the value
of the equity securities for which the warrants can be exercised. The value of
those securities is dependent primarily on the success of the underlying
company's business strategy, but also depends on general economic and equity
market conditions. The prospects for achieving consistent profitability in the
case of many companies to which Comdisco Ventures provides financing are
speculative. The warrants and equity securities for which the warrants can be
exercised generally will be restricted securities that cannot readily be sold
for some period of time. If the value of the equity securities underlying a
warrant does not increase above the exercise price during the life of the
warrant, Comdisco Ventures would permit the warrant to expire unexercised and
the warrant would then have no value.
The market price of Comdisco Ventures Stock may fluctuate or decline due to an
inability to predict future earnings and substantial variation in earnings from
quarter-to-quarter and year-to-year
A substantial portion of Comdisco Ventures' income comes from the sale of
the equity interests that it holds in its customers. Profits are recognized
upon those sales.
The sales of these equity interests are dependent on the sale, merger, or
initial public offering of the customer as well as the sales price of the
equity interest. Comdisco Ventures has no control over the sale, merger,
initial public offering or market price of its customers. Moreover, whether or
not a sale, merger or initial public offering takes place depends on both
general market conditions as well as the success of Comdisco Ventures'
customers. Adverse market conditions may prevent or deter sales, mergers and
initial public offerings from taking place. These factors, when combined with
Comdisco Ventures' practice of disposing of equity interests in an orderly way
as soon as reasonably and legally possible, mean that income and profits from
the sale of equity interests can and will vary substantially from quarter-to-
quarter and year-to-year. This will make it difficult or impossible to project
future performance based on past results.
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Fluctuations in earnings and uncertainty about future earnings may result
in a lower and more volatile price for Comdisco Ventures Stock than would be
achieved with predictable, steadily growing earnings.
If Comdisco Ventures is unable to maintain its strong relationships with the
venture capital community its ability to identify and evaluate financing
opportunities would be impaired
Comdisco Ventures has established working relationships with leading
venture capital organizations. These venture capital organizations serve as
referral sources utilized by Comdisco Ventures to broaden its customer base.
There can be no assurance that these relationships can be maintained or
sustained. To the extent that Comdisco Ventures is unable to maintain these
relationships, its ability to identify potential customers may be substantially
impaired.
Comdisco Ventures' venture debt and direct equity financing products are new
and Comdisco Ventures has no reliable loss history with these products. We
cannot assure you that those products will continue to be accepted by venture
capital-backed companies as an attractive source of capital
Comdisco Ventures has provided its venture debt and direct equity
financing products for a short period of time. While Comdisco Ventures has
experienced substantial growth in originations of these products, we cannot
assure you that this growth will continue. Furthermore, there has not been a
long enough period of time in which to assess the potential loss history of
these products. Finally, Comdisco Ventures cannot predict how a change in
current favorable economic conditions would affect the market for, or
performance of, these financing products.
If the current favorable economic conditions that have encouraged the growth of
early-stage companies and investment in these companies change, it could
materially affect Comdisco Ventures' business
The current economic environment has been sustained over a number of
years and is currently the longest continuous period of economic growth in the
last thirty years. This environment has encouraged entrepreneurs to conceive,
develop and bring to market new products and services, especially in high-
technology industries. Comdisco Ventures targets those early-stage companies
that have been able to attract venture capital financing to their businesses.
Any adverse change in the current economic environment could materially affect
the market in which Comdisco Ventures operates.
Many of the companies to which Comdisco Ventures provides financing are
dependent on third parties for liquidity. Venture capitalists have been able to
raise significant funds for investment in Internet-related, communications and
other high-technology companies. Additionally, a number of public companies
have funds available for investments in these industries as part of their
strategic plans. Any significant change in the availability of these funds
would have a material impact on Comdisco Ventures' customer base, and,
potentially, Comdisco Ventures' ability to collect on its venture leases and
venture debt, as well as the fair market value of its equity holdings.
If Comdisco Ventures cannot raise additional capital on acceptable terms from
alternative funding sources, it may not be able to grow its business
Historically, Comdisco Ventures has funded its financings out of cash
flow from operations and by borrowing funds from Comdisco. To take advantage of
the increased market and demand for its venture financing products, Comdisco
Ventures must substantially increase its funding levels. To do so, it intends
to identify and raise alternative sources of funds with acceptable economic
terms, such as the formation of limited partnership funds. If Comdisco Ventures
cannot do so, its business would be limited to whatever growth could be funded
by cash flow, additional sales of Comdisco Ventures Stock to the public or
borrowings from Comdisco, which is not under any current obligation to provide
those borrowings. If Comdisco Ventures is unable to expand its funding sources,
its growth may be limited. See "Business of Comdisco Ventures--Funding
Sources," beginning on page 44.
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Any adverse changes in the current favorable economic environment would
impact potential investors in any alternative funding source Comdisco Ventures
may use, and this in turn, would have a material impact on Comdisco Ventures'
liquidity and access to funds.
Conflicts could occur between Comdisco Ventures and any alternative funding
source it establishes over the use of resources and financing decisions
As Comdisco Ventures establishes alternative funding sources, or
"funds," we anticipate that
. senior management of Comdisco Ventures would be involved in the
management of these funds; and
. Comdisco Ventures would provide these funds with support and other
administrative services using Comdisco Ventures' employees and
resources.
Conflicts may occur between Comdisco Ventures and these funds over the
allocation of management time, support and administrative resources.
Additionally, Comdisco Ventures and any fund it establishes may be both asked
to provide financing products to the same customer. Financing decisions for
Comdisco Ventures and its funds likely will be made by the same persons.
However, decisions with respect to different financing products are made on
different criteria. For example, a decision to provide a customer venture
lease financing by Comdisco Ventures will involve a different financial and
credit analysis than a decision to provide the same customer direct equity
financing by a fund. A decision by Comdisco Ventures or a fund not to provide
financing to a customer could adversely affect the other's relationship with
that customer. In some circumstances, financing could also be provided to a
"joint" customer of Comdisco Ventures or a fund where it would not have been
provided if that joint relationship did not exist. If Comdisco Ventures and a
fund both provide financing products to the same customer, actions taken by
one of them with respect to the customer could adversely affect the other's
ability to collect amounts due from the customer or otherwise adversely affect
the other's relationship with the customer.
Intense competition to provide capital to start-up companies could adversely
impact Comdisco Ventures' financial performance
Comdisco Ventures faces intense competition, including competition from
venture capital firms, companies with acquisition and collaborative business
network strategies, venture-oriented banks and other asset-based lenders,
leasing companies and other capital providers, to provide capital to start-up
companies. Many of these competitors have greater financial and management
resources, brand name recognition or industry contacts than Comdisco Ventures.
Also, the barriers to entry for companies wishing to provide capital and other
resources to entrepreneurs and their emerging technology companies are
minimal. Comdisco Ventures expects that competition from both private and
public companies with business models based on providing capital to Internet-
based, communications and other high-technology companies will intensify. In
order to compete effectively, Comdisco Ventures may be required to provide
financing under terms which would result in lower returns than it has
historically obtained.
Comdisco Ventures depends on certain important employees, and the loss of any
of these employees may harm Comdisco Ventures' business
Comdisco Ventures' performance is substantially dependent of the
performance of its executive officers and other key employees. The familiarity
of senior management with the venture capital industry makes them important to
Comdisco Ventures' future business prospects. The loss of the services of any
of Comdisco Ventures' executive officers or key employees may harm its
business.
Comdisco Ventures' growth places strains on its managerial, operational and
financial resources
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Comdisco Ventures' rapid growth has placed, and is expected to continue
to place, a significant strain on its managerial, operational and financial
resources. Furthermore, if we are successful in expanding Comdisco Ventures'
funding sources through the organization and participation in limited
partnership funds and other entities, it is anticipated that those entities
would utilize Comdisco Ventures' managerial and operational resources. Further
growth of Comdisco Ventures will increase this strain on Comdisco Ventures'
managerial, operational and financial resources, which could inhibit Comdisco
Ventures' ability to implement its business plan. Comdisco Ventures' continued
success will depend on its ability to attract, train, retain and motivate high-
quality personnel, especially for its management team. The demand for these
kinds of persons in a growing venture capital market is high, and Comdisco
Ventures cannot assure you that it will be able to obtain and retain the
necessary personnel to meet its needs.
If Comdisco Ventures' management fails to identify properly and to select
financing opportunities appropriately, it will adversely affect the business of
Comdisco Ventures
Identifying and participating in attractive financing opportunities is
difficult. Comdisco Ventures' success depends on the ability of its management
to identify desirable businesses, to propose financings and to successfully
negotiate the terms of those financings. Management will have sole and absolute
discretion in identifying and selecting these companies. There is generally no
publicly available information about potential financing customers, and
Comdisco Ventures must rely on the diligence of its employees and business
contacts to obtain information in connection with Comdisco Ventures' financing
decisions. You will not be able to evaluate the merits of providing financing
to any particular company before Comdisco Ventures provides financing.
The collateral for Comdisco Ventures' venture leases and venture debt may not
be adequate or available to Comdisco Ventures if a customer defaults
Comdisco Ventures' venture leases and venture debt are typically secured
by a lien on the underlying equipment. This collateral may not be of adequate
value to protect Comdisco Ventures in the event of a customer's default, either
as a result of the depreciating value of that collateral over the life of the
venture lease or venture debt or, in the case of some venture leases, because
the value of the venture lease includes items in addition to the equipment
collateral (e.g., software) for which no security is provided. Additionally,
more of Comdisco Ventures' venture debt financings are being made on a basis
subordinated to the customer's senior creditors or on an unsecured basis. In
those cases, Comdisco Ventures' right to liquidate the collateral in the event
of a default by a customer will be subject to the superior rights of the
customer's senior creditors. There can be no assurance that the collateral for
a venture lease or for venture debt will be available to satisfy a customer's
obligations to Comdisco Ventures or, if available, will be sufficient to
satisfy those obligations. See "Business of Comdisco Ventures--Comdisco
Ventures' Products," beginning on page 35 and "Management's Discussion and
Analysis of Financial Condition and Results of Operations of Comdisco
Ventures--Liquidity and Capital Resources," beginning on page 30.
Comdisco may incur significant costs to avoid investment company status and
Comdisco Ventures may suffer adverse consequences if Comdisco is deemed an
investment company
Certain investment positions we hold through Comdisco Ventures may be
considered "investment securities" under the Investment Company Act of 1940.
Generally, any company that owns investment securities with a value exceeding
40% of its total assets (excluding cash items and government securities) is an
"investment company" subject to registration under, and compliance with, the
1940 Act unless a particular exemption or safe harbor applies. While the
current value of investment securities held by Comdisco is less than 15% of
Comdisco's total assets, if the dramatic and broad-based appreciation in the
market values of Internet-related businesses continues, it is possible that at
some point in the future, the value of the investment securities Comdisco holds
through Comdisco Ventures and
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otherwise may exceed the 40% threshold. The 1940 Act, however, provides a
company that has a bona fide intent to be primarily engaged in a business other
than that of investing or trading in securities with one year to reduce the
value of its investment securities assets to a level below 40%. If we are ever
required to reduce the value of investment securities we hold we may accomplish
this by selling investment securities or increasing our other assets. As a
result, we may be obligated to dispose of assets sooner than we otherwise would
at prices which could be lower than they otherwise might be. We will also incur
tax liabilities in connection with any asset dispositions. In addition, we may
be forced to forego an opportunity to purchase an investment security that
would be important to our core operating strategy. Accordingly, the investment
security dispositions and asset purchases may harm our business and results of
operations.
Regardless of the 40% test, we could also be deemed an investment company
if we were judged to be, or hold ourselves out as, being primarily engaged in
the business of investing in, reinvestment in, or trading in securities.
If Comdisco were deemed to be in violation of the 1940 Act, we would be
prohibited from engaging in business or selling our securities and could be
subject to civil and criminal actions for doing so. Therefore, classification
as an investment company would harm our business and results of operations.
Risks Relating to Ownership of Comdisco Ventures Stock
Holders of Comdisco Ventures Stock will be common stockholders of Comdisco and
will not have any legal rights relating to specific assets of Comdisco Ventures
Comdisco Ventures will not be a separate legal entity but rather will be
a part of Comdisco. Accordingly, holders of Comdisco Ventures Stock will be
common stockholders of Comdisco. As a result, stockholders will continue to be
subject to all of the risks of an investment in Comdisco and all of our
businesses, assets and liabilities, including those of Comdisco Group. The
issuance of Comdisco Ventures Stock, and the allocation of assets and
liabilities and stockholders' equity between Comdisco Group and Comdisco
Ventures will not result in a distribution or spin-off to stockholders of any
of our assets or liabilities and will not affect ownership of our assets or
responsibility for our liabilities or those of our subsidiaries, and will not
affect the rights of the holders of any debt of Comdisco or its subsidiaries.
The assets we attribute to Comdisco Ventures will be subject to the liabilities
of Comdisco Group, whether those liabilities arise from lawsuits, contracts or
indebtedness that we attribute to Comdisco Group. If we are unable to satisfy
one group's liabilities out of the assets we attribute to it, we may be
required to satisfy those liabilities with assets we have attributed to another
group. Furthermore, holders of Comdisco Ventures Stock will only have the
rights specified in our restated charter, and will not have any legal rights
related to specific assets of any specific group.
Financial performance of Comdisco Group could adversely affect Comdisco
Ventures
The financial performance of Comdisco Group will affect Comdisco's
consolidated results of operations and financial condition and could affect the
results of operations or financial condition of Comdisco Ventures and the
market price of Comdisco Ventures Stock. In addition, net losses of either
group and dividends and distributions on, or repurchases of, any series of
common stock or repurchases of preferred stock at a price per share greater
than par value will reduce the funds we can pay on each series of common stock
under Delaware law. For these reasons, you should read Comdisco's consolidated
financial information in addition to the financial information we provide for
each group.
Holders of Comdisco Ventures Stock will vote together with holders of Comdisco
Stock as a single class and will have limited separate voting rights
Holders of Comdisco Ventures Stock will vote together with holders of
Comdisco Stock as a single class, except in certain limited circumstances
required by Delaware General Corporation Law or New York Stock Exchange or
Nasdaq Stock Market rules. In addition to the approval of the holders of a
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majority of the voting power of all shares of Comdisco common stocks voting
together as a single class, the approval of a majority of the outstanding
shares of Comdisco Stock and Comdisco Ventures Stock, each voting as a separate
class, would be required under Delaware law to approve any amendment to our
restated charter that would change the par value of the shares of the series or
alter or change the powers, preferences or special rights of the shares of the
series so as to affect them adversely.
Limits exist on voting power of Comdisco Ventures Stock and, as a result, the
holders of Comdisco Stock will be able to control majority votes
The aggregate voting power of all of the outstanding shares of Comdisco
Ventures Stock is limited to 35% of the total voting power of all of the
outstanding shares of all series of Comdisco common stock. Consequently, the
aggregate voting power of all of the outstanding shares of Comdisco Ventures
Stock will never represent a majority of the outstanding voting power of all of
the outstanding shares of all series of Comdisco common stock. Currently, if
matters come before the stockholders of Comdisco which require a majority vote,
the holders of Comdisco Stock, if they vote in a similar manner, will be able
to control the vote. These matters may include mergers or other extraordinary
transactions. In addition, the issuance or repurchase of shares of either
series of common stock could cause changes in the relative voting power of the
groups, subject to the 35% limitation on the voting power of the Comdisco
Ventures Stock described above. In particular, if a substantial number of
additional shares of Comdisco Ventures Stock are issued, for example in
connection with the distribution of Comdisco Group's retained interest in
Comdisco Ventures, this 35% limitation is more likely to limit the voting power
of Comdisco Ventures Stock, including Comdisco Ventures Stock purchased in this
initial public offering.
Conversion of Comdisco Ventures Stock into Comdisco Stock may adversely affect
the holders of Comdisco Ventures Stock
At any time, the board of directors, in its sole discretion and without
stockholder approval, could choose to convert shares of Comdisco Ventures Stock
into shares of Comdisco Stock, including a conversion at a time when either or
both series of our common stock may be considered to be overvalued or
undervalued. Any conversion would preclude holders of Comdisco Ventures Stock
from retaining their investment in a security that is intended to reflect the
separate performance of Comdisco Ventures. It would also give holders of shares
of Comdisco Ventures Stock a greater or lesser premium than any premium that
might be paid by a third-party buyer of all or substantially all of the assets
of Comdisco Ventures.
Having multiple series of common stock could create conflicts between the
interests of the holders of each series, and our board of directors could
resolve those conflicts in a manner that adversely affects holders of Comdisco
Ventures Stock
Having multiple series of common stock could give rise to occasions when
the interests of holders of Comdisco Ventures Stock might diverge or appear to
diverge from the interests of holders of the remaining series. In addition,
given the inter-group relationships between Comdisco Ventures and Comdisco
Group, there will likely be inherent conflicts of interest between the groups.
Inter-group issues that could give rise to conflicts of interest include:
. whether to allocate the proceeds of issuances (or the costs of
repurchases) of Comdisco Ventures Stock to Comdisco Group in
respect of its retained interest in Comdisco Ventures, on the one
hand, or to the equity of Comdisco Ventures on the other;
. how to allocate consideration received in connection with a merger
involving Comdisco among holders of each series of common stock;
. whether and when to issue Comdisco Stock in exchange for Comdisco
Ventures Stock;
. whether or when to approve dispositions of assets of either group;
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. how to allocate available cash between Comdisco Group and Comdisco
Ventures and decisions as to whether and how to make transfers of
funds from one group to another;
. how to allocate assets and resources, such as management time,
between the groups;
. how to allocate costs and expenses between Comdisco Group and
Comdisco Ventures; and
. whether and to what extent the groups compete with each other and
how corporate opportunities are allocated between the groups.
Our board of directors has adopted certain policies relating to
management and allocations between Comdisco Ventures and Comdisco Group. For a
more comprehensive description of these policies, see "Certain Management and
Allocation Policies," beginning on page 70. We cannot assure you that the
policies determined by our board of directors are as favorable to the holders
of Comdisco Ventures Stock as policies that could be set by Comdisco Ventures
if it were a separate company. Our board of directors will make operational and
financial decisions concerning the groups and implement these policies in a
manner that may affect these businesses differently, potentially favoring one
group at the expense of the other. Our board of directors will be required to
make any decision relating to these matters in the good faith business
judgement that the decision is in the best interests of Comdisco and all of our
stockholders as a whole. Although it has no present intention to do so, the
board of directors also may, in the exercise of its business judgment in
accordance with the directors' fiduciary duties to Comdisco and our
stockholders, modify, rescind or add to any of these policies. A decision to
modify or rescind these policies, or adopt additional policies, could have
different effects on the holders of either Comdisco Ventures Stock or Comdisco
Stock, or could adversely affect the holders of one series of common stock
compared to the other.
If directors own disproportionate interests (in percentage or value
terms) in Comdisco Stock or Comdisco Ventures Stock, that disparity could
create, or appear to create, potential conflicts of interest when those
directors are faced with decisions that could affect the holders of one series
of common stock differently than the holders of the other series.
Principles of Delaware law may protect decisions of our board of directors that
have a disparate impact upon holders of Comdisco Ventures Stock
Delaware law provides that a board of directors owes an equal duty to all
stockholders regardless of class or series and does not have separate or
additional duties to the holders of any particular class or series of stock.
Recent cases in Delaware involving tracking stocks have established that
decisions by directors or officers involving differing treatment of tracking
stocks may be judged under the "business judgment rule." Under these principles
of Delaware law and the "business judgment rule," you may not be able to
challenge board of directors' decisions that have a disparate impact upon
holders of Comdisco Ventures Stock, if the board of directors is adequately
informed with respect to those decisions and acts in good faith and in the
honest belief that it is acting in the best interest of our stockholders and
does not have a conflict of interest.
Holders of Comdisco Ventures Stock have no right to vote on how to allocate
consideration received in connection with a merger of Comdisco
Our restated charter does not contain any provisions governing how
consideration received in connection with a merger or consolidation involving
Comdisco is to be allocated among the holders of Comdisco Ventures Stock and
Comdisco Stock. None of the holders of Comdisco Ventures Stock or Comdisco
Stock will have a separate class vote in any merger or consolidation so long as
we divide the type and amount of consideration among these holders in a manner
we determine, in our sole discretion, to be fair. As a result, depending on our
allocation decision, the consideration to be received by holders of Comdisco
Ventures Stock in these mergers or consolidations may be materially less
valuable than the
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consideration they would have received if Comdisco Ventures had been sold
separately or if a separate class vote on the merger or consolidation occurred.
We may dispose of assets of Comdisco Ventures without your approval
Delaware law requires stockholder approval only for a sale or other
disposition of all or substantially all of the assets of Comdisco. Any
disposition requiring stockholder approval would require a vote of all Comdisco
stockholders voting as a single class. As long as the assets attributed to
Comdisco Ventures represent less than substantially all of our assets, we may
approve sales and other dispositions of any amount of the assets of Comdisco
Ventures without stockholder approval. If we dispose of all or substantially
all of the assets attributed to Comdisco Ventures, we would be required, if the
disposition is not an exempt disposition under the terms of our restated
charter, to choose one of the following three alternatives:
. declare and pay a dividend to holders of Comdisco Ventures Stock;
. redeem the outstanding shares of Comdisco Ventures Stock; or
. convert shares of Comdisco Ventures Stock into outstanding shares
of Comdisco Stock.
Holders of Comdisco Ventures Stock may receive less value for their
shares than the value that a third-party buyer might pay for all or
substantially all of the assets attributed to Comdisco Ventures. The board of
directors will decide, in its sole discretion, how to proceed and is not
required to select the option that would result in the highest value to holders
of Comdisco Ventures Stock.
Corporate-level income taxes may be incurred on a sale of Comdisco Ventures'
assets that would not be incurred if Comdisco Ventures were a separate
corporation
Comdisco may incur a tax liability upon a sale of the assets of Comdisco
Ventures, which would be allocated to Comdisco Ventures and reduce the amount
available for distribution to the holders of Comdisco Ventures Stock. By
contrast, if Comdisco Ventures were a separate corporation whose stock was held
directly by those holders, they could sell their stock directly to the buyer,
in which case no corporate-level tax would be incurred. Consequently, the
holders of Comdisco Ventures Stock could receive less upon a disposition of
Comdisco Ventures than they would if they held stock of a separate corporation.
We do not intend to pay dividends on Comdisco Ventures Stock, and even if we
decide to do so, are not required to pay dividends equally on Comdisco Ventures
Stock and Comdisco Stock
We do not intend to pay cash dividends in the foreseeable future on
Comdisco Ventures Stock. Under our restated charter, however, if our board of
directors decides to pay dividends on Comdisco Ventures Stock, we are not
required to pay dividends on that stock in amounts equal to any dividends we
pay on Comdisco Stock or any other authorized series of common stock. This
decision would not necessarily have to reflect:
. the financial performance of any group;
. the amount of assets available for dividends on any series of
common stock; or
. the amount of prior dividends declared on any series of common
stock.
Having multiple series of common stock may inhibit or prevent acquisition bids
for Comdisco or Comdisco Ventures
If Comdisco Ventures were a separate company, any person interested in
acquiring it without negotiating with management could seek control of Comdisco
Ventures by obtaining control of its outstanding voting stock by means of a
tender offer or proxy contest. Although we intend Comdisco Ventures Stock to
reflect the separate performance of Comdisco Ventures, a person interested in
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acquiring Comdisco Ventures without negotiation with Comdisco's management
could obtain control of Comdisco Ventures only by obtaining control of the
outstanding voting stock of Comdisco.
The existence of multiple series of common stock could present
complexities and could in certain circumstances pose obstacles, financial and
otherwise, to an acquiring person. The existence of multiple series of common
stock could, under certain circumstances, prevent stockholders from profiting
from an increase in the market value of their shares as a result of a change in
control of Comdisco by delaying or preventing that change in control.
In addition, some of the provisions of our restated charter, bylaws, and
Delaware law may inhibit changes of control not approved by the board of
directors. For additional anti-takeover constraints, see "Description of
Comdisco Capital Stock--Anti-Takeover Considerations," on page 69.
The market price of Comdisco Ventures Stock could decline if we issue more
Comdisco Ventures Stock
In addition to any distribution of Comdisco Ventures Stock representing
Comdisco Group's retained interest in Comdisco Ventures, our board of directors
may issue additional Comdisco Ventures Stock to, among other things:
. raise capital;
. pay stock dividends or provide for stock splits;
. acquire companies or businesses; or
. provide compensation or benefits to employees.
Under Delaware law, the board of directors would not need your approval
for these issuances. We do not intend to seek your approval for any of these
issuances unless NYSE or Nasdaq Stock Market regulations or other applicable
law require approval, or the board of directors deems it advisable. These
issuances could cause the market price of Comdisco Ventures Stock to decline as
more stock becomes available.
The IRS could assert that an exchange of Comdisco Ventures Stock is taxable to
you or us
There are no court decisions or other authorities that control the tax
treatment of tracking stock such as Comdisco Ventures Stock. In addition, the
IRS has announced that it will not issue rulings on the characterization of
stock with characteristics similar to Comdisco Ventures Stock. It is possible,
therefore, that the IRS could successfully assert that the sale of Comdisco
Ventures Stock by Comdisco is taxable to Comdisco, or that any subsequent
conversion of Comdisco Ventures Stock into Comdisco Stock could be taxable to
you or Comdisco. See "Material U.S. Federal Income Tax Considerations,"
beginning on page 77.
A recent Clinton Administration proposal, if enacted, could result in taxation
on issuances of tracking stock
In February 2000, the Clinton Administration proposed legislation that
would tax stockholders on the receipt of tracking stock as a distribution on or
in exchange for their existing stock, and grant the IRS authority to treat
tracking stock as nonstock or stock of another entity. While this proposal, if
enacted, would not directly apply to Comdisco Ventures Stock sold pursuant to
this offering prior to the date of enactment, it could impede Comdisco's
ability to distribute or sell Comdisco Ventures Stock after it is enacted. The
enactment of the Clinton Administration proposal could be a "Tax Event" that
would entitle Comdisco to convert each outstanding share of Comdisco Ventures
Stock into a number of shares of Comdisco Stock equal to % of the ratio of
the average market values of Comdisco Ventures Stock and the Comdisco Stock
over a specified trading period prior to such conversion. See "Material U.S.
Federal Income Tax Considerations," beginning on page 77, and "Description of
Comdisco Capital Stock--Description of Comdisco Ventures Stock," beginning on
page 53.
17
<PAGE>
The market price of Comdisco Ventures Stock may fluctuate widely, and this
volatility could result in stockholder lawsuits
We will determine the initial public offering price for Comdisco Ventures
Stock through negotiations with the underwriters and that price may not be
indicative of the market price that will prevail after this offering. For a
description of the factors that will be taken into account to determine the
offering price, please see "Underwriting," on page 80. We believe the following
factors could cause the market price of Comdisco Ventures Stock to fluctuate
widely and could possibly cause Comdisco Ventures Stock to trade at a price
below the initial public offering price:
. announcements of financing transactions by us or our competitors;
. announcements of new services, products, technological
innovations, acquisitions or strategic relationships by our
customers;
. trends or conditions in the Internet-related, communications and
other high-technology industries;
. changes in valuation estimates by securities analysts and in
analysts' recommendations;
. failure to meet or exceed expectations of analysts or investors;
. changes in the stock prices of our customers that are publicly
traded;
. changes in market valuations of other capital and service
providers for Internet-related, communications and other high-
technology companies;
. changes in interest rates;
. changes in the public equity markets for initial public offerings;
and
. general political, economic and market conditions.
Many of these factors are beyond our control. These factors may decrease
the market price of Comdisco Ventures Stock regardless of the operating
performance of Comdisco Ventures.
In the past, following periods of volatility in the market price of a
company's securities, securities class action litigation has often been
instituted against that company. If any securities litigation is initiated
against us as a result of fluctuations in the trading prices of Comdisco
Ventures Stock, we could incur substantial costs and our and Comdisco Ventures'
management's attention and resources could be diverted from its business.
You will suffer immediate dilution in the book value of your Comdisco Ventures
Stock and may suffer further dilution in the future
Investors purchasing shares in this offering will incur immediate and
substantial dilution in net tangible book value per share. To the extent
outstanding options to purchase Comdisco Ventures Stock are exercised, there
will be further dilution. In addition, other elements of our employee
compensation arrangements may cause dilution to investors in Comdisco Ventures
Stock. We may issue shares of Comdisco Ventures Stock in the future to raise
capital or make acquisitions to carry out Comdisco Ventures' business strategy.
These issuances may cause further dilution to Comdisco Ventures' stockholders.
For additional information regarding this dilution, see "Dilution," on page 22,
and "Business of Comdisco Ventures--Management--Management Incentive Plan,"
beginning on page 49.
18
<PAGE>
SPECIAL NOTE REGARDING FORWARD LOOKING STATEMENTS
Statements in this prospectus that are not historical facts are hereby
identified as "forward-looking statements" for the purpose of the safe harbor
provided by Section 21E of the Securities Exchange Act of 1934 and Section 27A
of the Securities Act of 1933. These forward-looking statements, including,
without limitation, those relating to the future business prospects, revenues,
working capital, liquidity, capital needs, interest or other costs and income,
in each case, relating to Comdisco, Comdisco Group and Comdisco Ventures,
wherever they occur in this prospectus, are necessarily estimates reflecting
the best judgment of our senior management and involve a number of risks and
uncertainties that could cause actual results to differ materially from those
suggested by the forward-looking statements. These forward-looking statements
should, therefore, be considered in light of various important factors,
including those set forth in this prospectus. Important factors that could
cause actual results to differ materially from estimates or projections
contained in the forward-looking statements include, without limitation, those
factors set forth under "Risk Factors," beginning on page 8 in this prospectus.
The words "estimate," "project," "intend," "expect," "believe" and
similar expressions are intended to identify forward-looking statements. These
forward-looking statements are found at various places throughout this
prospectus and throughout other documents incorporated herein by reference,
including, but not limited to, Comdisco's 1999 Annual Report on Form 10-K, as
amended by Form 10-K/A, and Comdisco's Form 10-Q, as amended by Form 10-Q/A,
for the quarter ended December 31, 1999. Readers are cautioned not to place
undue reliance on these forward-looking statements, which speak only as of the
date of the filing in which the statement appears, unless otherwise specified.
Comdisco undertakes no obligation to publicly release any revisions to these
forward-looking statements to reflect the occurrence of unanticipated events.
Moreover, in the future, Comdisco and its officers may make forward-looking
statements about the matters described in the prospectus or other matters
concerning Comdisco, Comdisco Ventures or Comdisco Group.
19
<PAGE>
USE OF PROCEEDS
The net proceeds from this offering, estimated to be $ ,
after deducting underwriting discounts and commissions and estimated offering
expenses of approximately $ , will be used by Comdisco Ventures to
repay $ of inter-group loans to Comdisco Group and for general corporate
purposes. As of , 2000 this indebtedness was approximately $ million,
with a weighted average maturity of approximately days and bearing a
weighted average interest rate of approximately % per annum. Comdisco Group
will use the funds it receives from Comdisco Ventures for general corporate
purposes.
DIVIDEND POLICY
We do not expect to pay any dividends for the foreseeable future on
Comdisco Ventures Stock. However, should we decide to pay dividends on Comdisco
Ventures Stock, we may do so (and transfer corresponding amounts to Comdisco
Group in respect of its retained interest in Comdisco Ventures) out of the
assets of Comdisco legally available for the payment of dividends under
Delaware law. The limit on any dividends we desire to pay will generally be
that amount that would be legally available for the payment of dividends under
Delaware law if Comdisco Ventures was a single, separate Delaware corporation.
We call this the "available dividend amount" for Comdisco Ventures in this
prospectus.
We expect that a decision to pay dividends on Comdisco Ventures would be
based primarily upon Comdisco Ventures' financial condition, results of
operations, regulatory and business capital requirements, any restrictions
contained in financing or other agreements binding upon Comdisco Ventures or us
and other factors that our board of directors deems relevant.
20
<PAGE>
CAPITALIZATION
Comdisco, Inc.
The following table sets forth the total capitalization of Comdisco, Inc.
at December 31, 1999 and as adjusted to reflect (1) the sale of
newly-issued shares of Comdisco Ventures Stock pursuant to this offering and
(2) the re-classification of the existing common stock of Comdisco into
Comdisco Stock. This table should be read in conjunction with the consolidated
financial statements of Comdisco and Notes thereto appearing in Comdisco's 1999
Annual Report on Form 10-K, as amended by Form 10-K/A, that is incorporated by
reference into this prospectus.
<TABLE>
<CAPTION>
December 31, 1999
-------------------
Actual As Adjusted
------ -----------
(in millions,
except for per
share data)
<S> <C> <C>
Interest bearing liabilities
Notes payable and term notes.......................... $1,609
Senior notes.......................................... 3,686
Other................................................. 546
Preferred stock, $.10 par value; authorized 100,000,000
shares; issued 0 shares................................ --
Comdisco Stock, $.10 par value; authorized 750,000,000
shares; issued 223,007,939 shares...................... 22
Comdisco Ventures Stock, $.10 per value per share;
authorized 750,000,000 shares; issued shares; and
notional shares in respect of Comdisco Group's
retained interest (1).................................. --
Additional paid-in capital.............................. 337
Accumulated other comprehensive income.................. 182
Retained earnings....................................... 1,172
------ ------
1,713
Common stock held in treasury, at cost.................. (485)
------ ------
Total stockholders' equity............................ 1,228
------ ------
Total capitalization................................ $7,069
====== ======
</TABLE>
- --------
(1) The number of shares of Comdisco Ventures stock outstanding excludes
shares of Comdisco Ventures Stock that have been reserved for
issuance under the Management Incentive Plan, and we anticipate we will grant
options to purchase approximately shares of Comdisco Ventures Stock
under this plan immediately after completion of this offering. See "Business of
Comdisco Ventures--Management--Management Incentive Plan," beginning on page
49.
Comdisco Ventures
The following table sets forth as of December 31, 1999 the total
capitalization of Comdisco Ventures as adjusted to give effect to the issuance
of newly-issued shares of Comdisco Ventures Stock and the use of
proceeds from this offering as described above in "Use of Proceeds." This table
should be read in conjunction with the historical financial information we
include elsewhere in this prospectus, and assumes no exercise of the
underwriters' options to purchase additional shares that are described under
"Underwriting," beginning on page 80.
<TABLE>
<CAPTION>
December 31, 1999
--------------------
Actual As Adjusted
-------- -----------
(in thousands)
<S> <C> <C>
Inter-group payable.................................... $638,299 $
Division equity........................................ 351,007
-------- --------
Total capitalization................................. $989,306 $
======== ========
</TABLE>
21
<PAGE>
DILUTION
At December 31, 1999, Comdisco Ventures had a net tangible book value of
approximately $ or $ per share equivalent. Net
tangible book value per share equivalent at any date represents the amount of
Comdisco Ventures' total tangible assets minus total liabilities divided by the
total number of notional shares of Comdisco Ventures Stock deemed outstanding.
After giving effect to the sale of newly-issued shares of
Comdisco Ventures Stock offered hereby at the initial public offering price of
$ per share and the application of the estimated net proceeds by
Comdisco Ventures, the pro forma net tangible book value of Comdisco Ventures
would be approximately $ or $ per share equivalent. Thus,
under these assumptions, purchasers of Comdisco Ventures Stock offered by this
prospectus will pay $ per share and will receive shares with a net
tangible book value per share equivalent of $ , which represents an
immediate dilution of $ per share.
The following table illustrates this per share dilution:
<TABLE>
<S> <C>
Initial public offering price per share......................... $
Net tangible book value per share equivalent at December 31,
1999...........................................................
Increase in pro forma net tangible book value per share
equivalent attributable to new investors.......................
Pro forma net tangible book value per share equivalent after the
offering.......................................................
Dilution per share to new investors............................. $
</TABLE>
The foregoing computation of dilution excludes an aggregate of
approximately shares of Comdisco Ventures Stock purchasable at
$ per share upon the exercise of outstanding employee stock options
under the Management Incentive Plan. See "Business of Comdisco Ventures--
Management--Management Incentive Plan," beginning on page 49.
22
<PAGE>
SELECTED HISTORICAL FINANCIAL DATA
This information is only a summary and you should read it together with
the financial information we include elsewhere in this prospectus or
incorporate by reference in this prospectus. For copies of the financial
information we incorporate by reference, see "Where You Can Find More
Information," on page 84.
Comdisco Ventures
The following selected financial information should be read in
conjunction with Comdisco Ventures' financial statements and the notes thereto,
and "Management's Discussion and Analysis of Financial Condition and Results of
Operations of Comdisco Ventures" contained elsewhere in this prospectus. The
selected statements of operations data for fiscal 1999, 1998 and 1997 are
derived from Comdisco Ventures' audited financial statements which are included
elsewhere in this prospectus. The selected income statement data for the three
months ended December 31, 1999 and 1998 and the balance sheet data as of
December 31, 1999 and 1998 are derived from Comdisco Ventures' unaudited
financial statements which are also included elsewhere in this prospectus. The
unaudited selected financial information reflects all adjustments (consisting
of normal recurring accruals) which are, in the opinion of management,
necessary for a fair presentation of the results of the interim periods. The
operating results for the three months ended December 31, 1999 and 1998 are not
necessarily indicative of the results to be expected for any other interim
period or any future fiscal year. Generally accepted accounting principles
require that Comdisco Ventures be consolidated with Comdisco Group. The
selected financial data should be read in conjunction with the financial
information of Comdisco Ventures contained elsewhere in this prospectus as well
as the audited financial information of Comdisco, Inc. provided in Comdisco's
Form 10-K, as amended by Form 10-K/A, for fiscal 1999.
23
<PAGE>
COMDISCO VENTURES
SELECTED HISTORICAL FINANCIAL DATA
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended December
31, Years Ended September 30,
---------------- -------------------------
1999 1998 1999 1998 1997
-------- ------- -------- -------- -------
<S> <C> <C> <C> <C> <C>
Income Statement Data:
Revenue:
Leasing............................ $ 37,993 $25,515 $118,403 $ 85,086 $68,620
Sales.............................. 2,318 1,269 6,142 7,136 6,942
Interest income on notes........... 11,759 2,314 22,580 6,655 3,139
Warrant sale proceeds and capital
gains............................. 88,725 7,000 80,731 14,938 16,435
Other.............................. 408 151 683 483 195
-------- ------- -------- -------- -------
Total revenue..................... 141,203 36,249 228,539 114,298 95,331
-------- ------- -------- -------- -------
Costs and expenses:
Leasing............................ 28,294 18,405 88,114 60,363 46,355
Sales.............................. 1,008 1,036 4,460 3,980 4,423
Selling, general & administrative.. 18,422 1,562 18,166 5,793 5,436
Interest........................... 10,791 4,014 23,373 10,835 7,670
Bad debt expense................... 21,800 800 23,200 4,786 6,250
-------- ------- -------- -------- -------
Total costs and expenses.......... 80,315 25,817 157,313 85,757 70,134
-------- ------- -------- -------- -------
Earnings before income taxes........ 60,888 10,432 71,226 28,541 25,197
Income taxes........................ 23,685 4,160 28,402 11,381 10,047
-------- ------- -------- -------- -------
Net earnings........................ $ 37,203 $ 6,272 $ 42,824 $ 17,160 $15,150
======== ======= ======== ======== =======
</TABLE>
<TABLE>
<CAPTION>
December 31, September 30,
------------------- -----------------
1999 1998 1999 1998
---------- -------- -------- --------
<S> <C> <C> <C> <C>
Balance Sheet Data:
Equity securities......................... $ 423,280 $ 52,884 $197,335 $ 16,995
Receivables, net.......................... 413,815 132,811 341,061 66,425
Net leased assets......................... 330,807 206,590 288,347 189,747
Total assets.............................. 1,190,205 402,215 845,574 281,243
Inter-group payable....................... 638,299 282,353 533,297 189,281
Division equity........................... 351,007 93,726 199,649 71,080
</TABLE>
24
<PAGE>
MANAGEMENT'S DISCUSSION AND ANALYSIS OF FINANCIAL CONDITION AND
RESULTS OF OPERATIONS OF COMDISCO VENTURES
This discussion should be read along with the Comdisco Ventures'
financial statements included in this prospectus. Historical results and
percentage relationships may not necessarily be indicative of operating results
for any future periods. The financial statements of Comdisco Ventures include
the balance sheets, statements of earnings and division equity, and cash flows
of our venture financing business.
Comdisco Ventures' financial statements and Comdisco Group's financial
statements comprise all of the accounts included in the consolidated financial
statements of Comdisco. The separate business financial statements give effect
to all allocation and related party transaction policies as adopted by the
board of directors of Comdisco. These policies are described in the Notes to
Financial Statements of Comdisco Ventures beginning on page F-6 in this
prospectus. Comdisco Ventures' financial statements have been prepared in a
manner which management believes is reasonable and appropriate. These financial
statements include the financial position, results of operations and cash flows
of Comdisco Ventures, presented to give effect to the accounting principles
applicable to Comdisco's tracking stock capital structure.
Comdisco will provide to the holders of Comdisco Ventures Stock separate
financial statements, financial reviews, descriptions of the business, and
other relevant financial information for Comdisco Ventures and Comdisco Group
as well as consolidated financial information for Comdisco. Notwithstanding the
allocation of assets and liabilities, including contingent liabilities, between
Comdisco Ventures and Comdisco Group for the purposes of preparing their
respective financial statements, this allocation and the change to a tracking
stock capital structure by Comdisco will not result in the distribution or
spin-off to stockholders of any of Comdisco's assets and liabilities and will
not affect ownership of its assets or responsibility for its liabilities or
those of its subsidiaries. Holders of Comdisco Ventures Stock are common
stockholders of Comdisco. The assets attributed to one business will be subject
to the liabilities of the other business, even if these liabilities arise from
lawsuits, contracts or indebtedness that are attributed to the other business.
If Comdisco is unable to satisfy one business's liabilities out of the assets
attributed to it, Comdisco may be required to satisfy those liabilities with
assets Comdisco has attributed to the other business. Furthermore, holders of
Comdisco Ventures Stock and Comdisco Stock will have no legal rights related to
specific assets of either business and in any liquidation will receive a fixed
share of the net assets of Comdisco, which may not reflect the actual trading
prices, if any, of the respective businesses at such time.
Financial effects from one business that affect Comdisco's consolidated
results of operations or financial condition could affect the results of
operations or financial condition of the other business and the market price of
the stock relating to the other business. In addition, net losses of either
business and dividends and distributions on, or repurchases of, either series
of common stock or repurchases of preferred stock at a price per share greater
than par value will reduce the funds we can pay on each class of common stock
under Delaware law. Accordingly, Comdisco Ventures' financial statements should
be read in conjunction with Comdisco's audited consolidated financial
information contained in Comdisco's 1999 Annual Report on Form 10-K, as amended
by Form 10-K/A, incorporated by reference into this prospectus.
Overview
Comdisco Ventures is a leading provider of venture leases, venture debt
and direct equity financing to venture capital-backed companies. Comdisco
Ventures' relationships with leading venture capital firms help it identify
what it believes are the best positioned companies in the most attractive high
growth industries. Comdisco Ventures offers a broad range of innovative equity-
linked financing products, which complement equity from venture capital firms
and debt from venture-oriented banks and asset-based lenders. Comdisco Ventures
also plans to offer a number of additional services to its network of
customers. Comdisco Ventures is a division of Comdisco.
25
<PAGE>
On April 20, 2000, the stockholders of Comdisco, at a special meeting,
approved the authorization of a new series of Comdisco common stock, "Comdisco
Ventures Stock," that is intended to track the economic performance of Comdisco
Ventures.
Revenue
Currently, Comdisco Ventures' revenues are derived primarily from
leasing, interest income on venture debt and the sale of public equity
holdings.
. Lease revenue: Comdisco Ventures leases almost all types of
equipment from all manufacturers. Although these leases are "full
payout" leases, Comdisco Ventures records these transactions as
operating leases in accordance with FAS 13, "Accounting for
Leases" which requires operating lease accounting where the
collectability of the lease payments is not assured. As part of
the lease transaction, Comdisco Ventures receives warrants to
purchase an equity interest in the borrower at a stated exercise
price based on the price paid by venture capitalists.
. Interest income: Venture debt is generally structured as an
equipment loan or a subordinated loan. The debt bears fixed
interest rates with coupons currently ranging from 8.0% to 13.0%
per annum, although the effective rate may be greater. In
addition, fees may be paid at closing. As part of the transaction,
Comdisco Ventures receives warrants to purchase an equity interest
in its customer, or a conversion option, in each case at a stated
exercise price based on the price paid by venture capitalists.
. Sale of equity holdings: Comdisco Ventures also provides financing
to its customers by purchasing convertible preferred stock or
common stock. Comdisco Ventures generates capital gains when the
equity is sold. In addition, Comdisco Ventures records the
proceeds from the sale of warrants received in conjunction with
its lease and loan transactions as income when received.
Historically, Comdisco Ventures' general policy has been to sell
its equity positions in an orderly manner as soon as reasonably
possible after a liquidity event. In most cases, securities law
restrictions on transfer and contractual lock-up provisions
restrict Comdisco Ventures' ability to sell its equity position
for several months after a liquidity event. Comdisco Ventures'
management consults with its outside asset manager on at least a
quarterly basis and has adjusted its general policy on occasion to
respond to market conditions. However, Comdisco Ventures' policy
with respect to disposition of its equity holdings is not intended
to, and does not, assure that Comdisco Ventures will maximize its
return on any particular holding. Furthermore, because the
creation of a public market or an acquisition/merger (collectively
referred to as a "liquidity event") is beyond Comdisco Ventures'
control and is difficult, if not impossible, to predict, Comdisco
Ventures' operating results are subject to significant and
material quarterly fluctuations. Fluctuations in future quarters
may be greater than those experienced in past quarters as a result
of the growth in the number of direct equity financings made by
Comdisco Ventures, market volatility for emerging growth companies
and as a result of Comdisco Ventures' focus on Internet-related,
communications and other high-technology companies. For those
securities without a public trading market, the realizable value
of Comdisco Ventures' interests may prove to be lower than the
carrying value currently reflected in the financial statements.
Comdisco Ventures also generates revenue from buy/sell activities and
from selling equipment at lease termination, generally to the original lessee.
Comdisco Ventures expects continued growth in all revenue sources in
fiscal 2000. In addition, the valuation of Comdisco Ventures' warrant and
equity holdings has increased significantly during the last eighteen months,
primarily as a result of strong equity markets for these securities.
Accordingly, Comdisco Ventures expects, based upon current stock market
valuations, an increase in revenue and earnings contributions from its equity
holdings in fiscal 2000. See "Risk Factors--Risks Relating to the Business of
Comdisco Ventures," beginning on page 8.
26
<PAGE>
Costs and Expenses
Leasing: Costs and expenses are principally depreciation of equipment.
Depreciation is recognized on a straight-line basis over the lease term to
Comdisco Ventures' estimate of the equipment's fair market value at lease
termination. In addition to depreciation, initial direct costs related to
operating leases, primarily salespersons' commissions, are capitalized and
amortized over the lease term.
Selling, general and administrative: Comdisco Ventures' selling, general
and administrative expenses consist primarily of costs relating to management
compensation, personnel, customer service, finance, billing, administrative
services, recruiting, insurance, legal services and depreciation expense.
Comdisco has provided to Comdisco Ventures finance, billing, administrative
services, insurance, budgeting, legal services and other functions through a
shared services program and going forward will provide these services under a
master inter-group agreement. As part of its business plan, Comdisco Ventures
has hired and expects to continue to hire additional employees. As a result,
Comdisco Ventures expects these expenses to increase as the number of employees
increases. In addition, since management compensation is based upon pretax
earnings of Comdisco Ventures, compensation expenses are expected to increase
in fiscal 2000, primarily as a result of higher earnings contributions from the
sale of equity holdings.
Interest: Comdisco Ventures funds its business with cash flow from
operations and with inter-group loans from Comdisco. See "--Liquidity and
Capital Resources," on page 30. Interest on inter-group loans is computed
monthly based on the average inter-group balance.
Bad debt expense: Comdisco Ventures records an expense for credit losses
based on management's estimate of the amounts expected to be lost on specific
accounts and for losses on other as-of-yet unidentified accounts included in
the venture lease and venture debt portfolio.
Results of Operations
Three Months Ended December 31, 1999 Compared to Three Months Ended December
31, 1998
The first quarter of fiscal 2000 was a record quarter for Comdisco
Ventures, with record revenues from leasing, interest income on venture debt
and the sale of equity holdings. Total revenue of approximately $141.2 million
in the three months ended December 31, 1999 and $36.2 million in the three
months ended December 31, 1998, represented increases of 290% and 24%,
respectively over the prior year quarterly periods.
Lease revenue: Total leasing revenue of $38.0 million for the quarter
ended December 31, 1999 represented an increase of 49% over $25.5 million
recorded for the quarter ended December 31, 1998. Total leasing revenue was
$34.7 million in the fourth quarter of fiscal 1999. Cost of equipment placed on
lease was $79.2 million during the quarter ended December 31, 1999, compared to
$38.1 million and $57.5 million during the quarters ended December 31, 1998 and
September 30, 1999, respectively. These increases are the result of increases
in both number of customers and average lease size.
Operating lease revenue minus operating lease cost (the "Operating Lease
Margin") was $9.6 million, or 25.3% of operating lease revenue, and $6.9
million, or 27.3% of operating lease revenue, in the three months ended
December 31, 1999 and 1998, respectively. The Operating Lease Margin was $8.2
million, or 24.3% in the quarter ended September 30, 1999. The decrease in the
Operating Lease Margin in the current year period compared to the prior year
period is due to an increase in the lease volume. Generally, new leases written
have lower margins in their initial quarter compared to future quarters.
Interest income: Interest income on venture debt was $11.8 million in the
quarter ended December 31, 1999 compared to $2.3 million and $9.8 million
during the quarters ended December 31, 1998 and September 30, 1999,
respectively. During the quarter ended December 31, 1999, Comdisco
27
<PAGE>
Ventures funded loans totaling $128.6 million, compared to $67.4 million and
$95.2 million in the quarters ended December 31, 1998 and September 30, 1999,
respectively.
Sale of equity holdings: Revenue from the sale of equity holdings
(warrant sale proceeds and capital gains) for the quarter ended December 31,
1999 and 1998 were as follows:
<TABLE>
<CAPTION>
Three months ended December 31,
-------------------------------
1999 1998
---------------- ---------------
(in millions)
<S> <C> <C>
Proceeds from sale of equity
securities........................... $ 55.8 $ --
Less: Cost of equity securities....... (3.3) --
---------------- --------------
Capital gains......................... 52.5 --
Warrant sale proceeds................. 36.2 7.0
---------------- --------------
Total................................. $ 88.7 $ 7.0
================ ==============
</TABLE>
Revenue from the sale of equity holdings was $43.7 million in the quarter
ended September 30, 1999.
During the quarter ended December 31, 1999, Comdisco Ventures funded
equity financings totaling $36.2 million, compared to $3.6 million and $19.4
million in the quarters ended December 31, 1998 and September 30, 1999,
respectively.
The increase in revenue from the sale of equity holdings in the current
quarter compared to the prior year period is due to an increase in the number
of companies in which Comdisco Ventures has equity holdings that have
experienced liquidity events, which impacts the number of securities available
for sale. Market valuations from an initial public offering can also
significantly affect the revenue from the sale of equity investments. During
the quarter ended December 31, 1999, approximately 35 companies were
acquired/merged or completed an initial public offering, compared to 4
companies in the year earlier period.
The valuation of Comdisco Ventures' warrant and other equity holdings has
increased significantly during the last twelve months, primarily as a result of
strong equity markets for these securities. Accordingly, Comdisco Ventures
expects, based on current stock market valuations, an increase in revenue and
earnings contributions from its equity holdings in fiscal 2000. See "Risk
Factors," beginning on page 8 for a discussion of the factors that may affect
proceeds from the sale of warrants and capital gains.
Total costs and expenses for the quarter ended December 31, 1999 were
$80.3 million compared to $25.8 million in the prior year period. Total costs
and expenses were $66.0 million in the quarter ended September 30, 1999. The
increase in total costs and expenses in the current quarter compared to the
prior year's quarter is due to the increase in venture lease and venture debt
activities, and higher selling, general and administrative expenses related to
increased personnel costs and higher incentive compensation expenses.
Selling, general and administrative: Selling, general and administrative
expenses totaled $18.4 million in the quarter ended December 31, 1999 compared
to $1.6 million in the quarter ended December 31, 1998 and $9.4 million in the
quarter ended September 30, 1999. The principal reason for the increase in the
current year quarter compared to the year earlier period is an increase in
incentive compensation expenses as a result of higher revenue from the sale of
equity holdings.
Interest: Interest expense for the three months ended December 31, 1999
was $10.8 million compared to $4.0 million in the prior year period and $8.2
million in the quarter ended September 30, 1999. The increase in the current
quarter compared to the prior year period and prior quarter is due to higher
average daily inter-group borrowings resulting from the growth in Comdisco
Ventures' business.
28
<PAGE>
Bad debt expense: Bad debt expense for the three months ended December
31, 1999 totaled $21.8 million compared to $0.8 million in the quarter ended
December 31, 1998 and $20.8 million in the quarter ended September 30, 1999.
The increase in the current quarter compared to the prior year period reflects
the increase in the reserve related to increased venture lease, venture debt
and direct equity financing volume.
Income taxes: The effective income tax rate was 39% in the quarter ended
December 31, 1999 compared to 40% in the quarters ended December 31, 1998 and
September 30, 1999. The effective income tax rate approximates the statutory
rate.
Fiscal 1999 compared to Fiscal 1998 and Fiscal 1998 compared to Fiscal 1997
Total revenue of approximately $228.5 million and $114.3 million in
fiscal 1999 and 1998, respectively represent increases of 100% and 20%,
respectively over the prior year periods. The increases were due to higher
total leasing revenue and interest income on venture debt and, in fiscal 1999,
an increase in the sale of equity holdings.
Lease revenue: Total leasing revenue of $118.4 million for fiscal 1999
represented an increase of 39% compared to the prior year. Total leasing
revenue of $85.1 million in fiscal 1998 represented an increase of 24% over
fiscal 1997 total leasing revenue of $68.6 million.
Leasing volume increased in both fiscal 1999 and 1998 as compared to the
prior years. Lease volume in the last fiscal year was the highest annual volume
in Comdisco Ventures' history. Cost of equipment placed on lease was $204.2
million in fiscal 1999 compared to cost of equipment placed on lease of $116.1
million and $92.0 million in fiscal 1998 and 1997, respectively.
The Operating Lease Margin was $28.8 million, or 24.7% of operating lease
revenue and $23.3 million, or 28.0% of operating lease revenue in fiscal 1999
and 1998, respectively. This decrease in the Operating Lease Margin in fiscal
1999 versus fiscal 1998 is due to an increase in the lease volume. Comdisco
Ventures expects the Operating Lease Margin to remain at approximately 25% of
operating lease revenue in fiscal 2000.
Interest income: Interest income on venture debt was $22.6 million in
fiscal 1999 compared to $6.7 million and $3.1 million in fiscal 1998 and 1997,
respectively. During fiscal 1999, Comdisco Ventures funded loans totaling
$323.9 million, compared to $57.2 million in fiscal 1998 and $34.3 million in
fiscal 1997. See Note 3 of Notes to Financial Statements beginning on page F-8
for information concerning Comdisco Ventures' notes receivable and "Risk
Factors," beginning on page 8, for a discussion of factors that may affect
earnings contributions from notes receivable and Comdisco Ventures' financial
condition.
Sale of equity holdings: Warrant sale proceeds and capital gains for
fiscal 1999, 1998 and 1997 were as follows:
<TABLE>
<CAPTION>
Fiscal Year Ended
September 30,
-------------------
1999 1998 1997
----- ----- -----
(in millions)
<S> <C> <C> <C>
Proceeds from sale of equity securities................. $10.9 $ 2.0 $ 3.9
Less: Cost of equity securities......................... (5.7) (.6) (.5)
----- ----- -----
Capital gains........................................... 5.2 1.4 3.4
Warrant sale proceeds................................... 75.5 13.5 13.0
----- ----- -----
Total................................................. $80.7 $14.9 $16.4
===== ===== =====
</TABLE>
29
<PAGE>
During fiscal 1999, approximately 60 companies were acquired or merged or
completed an initial public offering, compared to approximately 30 companies in
fiscal 1998.
Total costs and expenses were $157.3 million, $85.8 million and $70.1
million in fiscal 1999, 1998 and 1997, respectively. The increase in fiscal
1999 and 1998 compared to the prior years is primarily due to the growth in
leasing volume and loan originations including higher interest and bad debt
expense and increased leasing costs related to increased operating lease
revenue.
Selling, general and administrative expenses: Selling, general and
administrative expenses totaled $18.2 million in fiscal 1999, $5.8 million in
fiscal 1998, and $5.4 million in fiscal 1997. Charges for shared services from
Comdisco were $3.0 million, $1.0 million and $1.0 million in fiscal 1999, 1998
and 1997. The primary reason for the increase in selling, general and
administrative expenses in fiscal 1999 compared to 1998 was higher incentive
compensation expenses. Management incentive compensation is based upon pretax
earnings of Comdisco Ventures, which increased 150% in fiscal 1999 compared to
fiscal 1998. The increase in fiscal 1998 compared to fiscal 1997 is primarily
due to increased personnel costs.
Interest: Interest expense for fiscal 1999 totaled $23.4 million in
comparison to $10.8 million in fiscal 1998 and $7.7 million in fiscal 1997. The
increases in fiscal 1999 and 1998 compared to the prior year is due to higher
average daily borrowings resulting from the Comdisco Ventures' larger lease and
venture debt portfolios. Interest rates on inter-group loans from Comdisco were
7.5% in fiscal 1999, 1998 and 1997.
Bad debt expense: Bad debt expense for fiscal 1999 totaled $23.2 million
compared to $4.8 million in fiscal 1998 and $6.3 million in fiscal 1997. The
increase in fiscal 1999 compared to the prior year reflects the increase in the
reserve related to increased venture lease, venture debt and direct equity
financing volume.
Income taxes: The effective income tax rate was 40% in each of fiscal
1999, 1998 and 1997. The effective income tax rate approximates the statutory
rate.
Liquidity and Capital Resources
Comdisco Ventures' operating activities during fiscal 1999, including
capital expenditures for equipment and venture debt originations, were funded
primarily by inter-group loans from Comdisco. Total net cash provided (used) by
Comdisco was $295.7 million in fiscal 1999, compared to $32.9 million in fiscal
1998 and ($1.9) million in fiscal 1997. The increase in fiscal 1999 is
primarily due to increased business opportunities in venture leases, venture
debt and direct equity financings. In order to continue to be able to pursue
these increased opportunities, Comdisco Ventures is pursuing alternative means
of funding its activities, including, but not limited to, the establishment of
limited partnerships to raise funds from third parties, in addition to Comdisco
Ventures. One or more limited partnerships could become a significant source of
capital for Comdisco Ventures for fiscal 2000.
The first of these alternate funding sources, Hybrid Fund, was
established in October 1999 to act as a funding vehicle for origination of
venture debt and direct equity financings. The general partner of Hybrid Fund
is entitled to be paid a management fee for managing and investing the
partnership funds and also will participate in the earnings of the partnership.
Comdisco Ventures is a non-managing member of the general partner entitled to
participate in the profits and losses of the general partner.
As of September 30, 1999, Comdisco Ventures estimates that future
contractual cash flows from venture leases and venture debt could generate
gross cash receipts of approximately $724 million, including approximately $262
million in fiscal 2000.
30
<PAGE>
Comdisco Ventures' capital requirements may vary based upon the timing
and the success of implementation of its business plan and as a result of
competitive developments or if:
. demand for Comdisco Ventures' services or its cash flow from
operations is less than or more than expected;
. development plans or projections change or prove to be inaccurate;
. Comdisco Ventures makes any acquisitions or commitments in excess
of the current plan; or
. Comdisco Ventures accelerates or otherwise alters the schedule or
targets of its business plan implementation.
While Comdisco has been the primary source of funds for Comdisco
Ventures, Comdisco has made no formal commitments about its ability or
willingness to continue to provide funds beyond fiscal year 2000. There can be
no assurance that Hybrid Fund, or subsequent funds formed by Comdisco
Ventures, will be funded at levels that will permit Comdisco Ventures to
effectively pursue its business strategy. If Comdisco Ventures were otherwise
unable to obtain funding, from Comdisco or otherwise, on acceptable terms,
Comdisco Ventures' ability to fund its expansion or respond to competitive
pressures would be significantly impaired.
Risk Factors that May Affect Liquidity and Future Results
See "Risk Factors," beginning on page 8.
Qualitative Information About Market Risk
Comdisco Ventures' primary market risk exposures are interest rate risk
and market price risk.
Comdisco Ventures' interest rate risk is primarily related to its
interest-bearing obligations to Comdisco. Comdisco Ventures' leased assets and
notes receivable are at fixed rates, whereas its interest-bearing obligations
to Comdisco are floating. For new venture lease or venture debt transactions,
the effects of higher or lower borrowing costs would be reflected in the rates
on these transactions. However, for the existing venture lease and venture
debt portfolio at September 30, 1999, a hypothetical increase of 1% in
prevailing interest rates would result in a decrease in net earnings of
approximately $3 million.
Comdisco Ventures' holdings of equity securities are subject to market
price risk. A 10% decrease in market values would reduce the September 30,
1999 market value of the Comdisco Ventures' publicly traded equity securities
by $20 million. Many of these equity securities are highly volatile stocks.
31
<PAGE>
BUSINESS OF COMDISCO VENTURES
Overview
Comdisco Ventures is a leading provider of venture leases, venture debt
and direct equity financing to venture capital-backed companies. Comdisco
Ventures' relationships with leading venture capital firms help it identify
what it believes are the best positioned companies in the most attractive high
growth industries. Comdisco Ventures offers a broad range of innovative equity-
linked financing products, which complement equity from venture capital firms
and debt from venture-oriented banks and asset-based lenders. Comdisco Ventures
also plans to offer a number of additional services to its network of
customers. During the last two years, some of Comdisco Ventures' notable
customers include Ariba, Ask Jeeves, Be Free, Copper Mountain Networks,
Critical Path, E-Loan, E.piphany, eToys, Extreme Networks, Gadzoox Networks,
Inktomi, NextCard, Niku, Northpoint Communications, Siara Systems and
StratumOne Communications.
Comdisco Ventures provides its customers with financing "commitments"--
agreements to provide up to a stated dollar amount of financing over a stated
period of time. Comdisco Ventures was formed in 1987, and since that time, has
committed approximately $2 billion in venture leases, venture debt and direct
equity financings, including $738 million in fiscal 1999 and $310 million in
the first quarter of fiscal 2000. Of the 740 companies Comdisco Ventures has
helped finance, over 170 have gone public and over 120 have been acquired.
Net earnings increased 150% to $42.8 million for fiscal 1999, as compared
to $17.2 million for fiscal 1998, and were $37.2 million in the first quarter
of fiscal 2000.
The Market for Venture Financing
The emergence of Internet-related, communications and other high-
technology companies has been unprecedented in the last few years. The need for
capital to support the growth of these industries has likewise been
unprecedented. Due to changing dynamics in the marketplace, venture capital-
backed companies are currently facing substantial challenges in building their
companies. Primary among these challenges are:
. compressed timeframes (6-24 months) within which to establish
themselves as a leader in a new category; and
. increased capital requirements for expenditures such as product
and brand development, information technology infrastructure and
sales force expansion.
According to the National Venture Capital Association and Venture
Economics, venture capital firms invested a record $48.3 billion in portfolio
companies in 1999, representing a 151.6% increase over the $19.2 billion they
invested in 1998. Additionally, those same sources report the number of
companies receiving financing increased 25.6% in 1999 to 3,649 while the
average venture capital investment per company has also increased
significantly, to $13.2 million in 1999 from $6.6 million in 1998.
Historically, two primary sources of capital for start-up companies have
been venture capitalists and venture-oriented banks and asset-based lenders.
While the availability of venture capital has increased along with the volume
of start-up activity, venture capital generally represents the most dilutive
and intrusive type of financing. Venture capitalists generally require
substantial ownership and exercise substantial control when they make an
investment in a company. Typically these positions are reflected in significant
equity holdings, contractual shareholder rights and representation on the
company's board of directors.
Start-up companies also turn to venture-oriented banks and asset-based
lenders for financing. While these financings generally result in no or minimal
dilution of ownership of existing equity holders, they typically involve high
monthly cash disbursements, limitations on the use of funds and adherence to
restrictive financial covenants.
32
<PAGE>
Comdisco Ventures believes these two primary sources of capital do not
optimize the capital needs of start-up companies in the current economic
environment. Additionally, their disadvantages highlight the need for less
costly and less dilutive financing sources, creating opportunities for
alternative capital providers, like Comdisco Ventures.
Comdisco Ventures' Solution
Comdisco Ventures believes it provides significant value to entrepreneurs
and their venture capital investors through flexible financing products and
services which allow entrepreneurs to build their companies quickly, while
minimizing the dilution of their equity ownership positions.
Comdisco Ventures has proven its ability to understand the capital needs
of its customers and to develop and customize attractive financings to meet
those needs. Currently, Comdisco Ventures' primary financing products are
venture leases, venture debt and direct equity financings. Venture leases are
leases with warrants that compensate Comdisco Ventures for providing the leases
at more attractive financing terms than leases without warrants. Venture debt
is a high-risk loan with warrants or a conversion-to-equity feature with more
flexible terms and security conditions than more traditional debt financing.
The warrants or conversion feature of venture leases and venture debt generally
provide Comdisco Ventures the ability to buy equity at a price based on the
price paid by venture capitalists. The opportunity to realize higher returns
from the exercise of the warrants or from the conversion feature enables
Comdisco Ventures to offer more flexible financing and security terms. Direct
equity financings involve Comdisco Ventures' purchase of convertible preferred
stock and common stock from its customers. Comdisco Ventures also provides
other ancillary financings, including convertible debt, bridge loans, expansion
loans, acquisition financings and landlord guarantees.
Venture leases and venture debt can be utilized at various stages of a
company's development and for various purposes including the following:
. early stage capital to supplement the initial venture capital
raised and support growth requirements;
. expansion capital between venture capital rounds to enable an
emerging company to reach milestones and increase the prospect of
raising future capital at higher valuations; and
. late stage capital to provide financial flexibility to deal with
the uncertainty of a liquidity event such as an initial public
offering or the sale of the company.
As a result of the specialized nature of venture leases and venture debt,
Comdisco Ventures must have expertise in technology-related industry sectors,
access to capital, the ability to assess risk, relationships with venture
capital firms, access to deal flow, and the ability to structure transactions
appropriately.
In the future, Comdisco Ventures plans to offer a number of services to
its network of customers. These services will be designed to save Comdisco
Ventures' customers' time, effort and money as they race to build their
businesses.
Comdisco Ventures' Strategy
Comdisco Ventures intends to expand its position as a leading provider of
venture leases and venture debt and introduce complementary services to venture
capital-backed companies. Its strategy is to continue to leverage its
management experience and resources to capitalize on the growing demand for
financing by venture capital-backed companies. Components of Comdisco Ventures'
strategy include:
. leveraging relationships with leading venture capitalists;
. providing capital through innovative products;
. maintaining a diversified customer base;
. expanding funding sources;
33
<PAGE>
. capitalizing on the Comdisco affiliation and resources; and
. developing complementary service offerings that respond to the
changing needs of venture capital-backed companies.
Leveraging Comdisco Ventures' relationships with leading venture capitalists
Comdisco Ventures believes that, increasingly, the best deals are awarded
to leading venture capitalists. Comdisco Ventures has developed long-term
relationships with many of these firms, which affords it access to attractive
financing opportunities. Comdisco Ventures believes that these venture
capitalists view it as an important financial partner for their customers, both
at the initial and subsequent stages of growth, due to Comdisco Ventures'
financial resources, innovative financing products and industry expertise.
Providing capital through innovative products
Comdisco Ventures currently offers a broad range of innovative financing
alternatives. The success of Comdisco Ventures has been fueled, in part, by its
ability to understand the capital needs of its customers and to develop and
customize attractive financings to meet those needs. Currently, Comdisco
Ventures' primary financing products are venture leases, venture debt and
direct equity financings through the purchase of convertible preferred stock
and common stock. See "--Comdisco Ventures' Products," beginning on page 35.
Maintaining a diversified customer base
Comdisco Ventures provides financing products to customers diversified
across many industry sectors. This diversification reduces the impact to
Comdisco Ventures should there be a downturn in any sector. The following chart
illustrates customer industry sector diversification by aggregate commitments
from October 1, 1996 through December 31, 1999.
[LOGO FOR COMDISCO SERVICES]
Comdisco Ventures often provides financings to several venture capital-
backed companies in a specific emerging industry sector in order to increase
the likelihood of aligning itself with the most successful venture capital-
backed companies within that sector. Because most venture capitalists have
significant equity ownership, board representation and strategic alignment with
management of the companies in which they invest, they can be limited in their
abilities to invest in multiple companies within a single industry sector.
Comdisco Ventures, due to its limited ownership and lack of strategic
involvement (e.g. typically no board representation) generally avoids these
kinds of conflict limitations.
34
<PAGE>
This allows Comdisco Ventures to diversify its financings across several
start-ups within an industry sector.
Expanding Comdisco Ventures' funding sources
Historically, Comdisco Ventures has funded its financing activities
through cash flows from its operations, as well as inter-group borrowings from
Comdisco. As demand for its financing products has grown, Comdisco Ventures
has explored possible additional sources of funds for its financing
activities. With this in mind, Comdisco Ventures formed Hybrid Fund in October
1999 to offer venture debt and direct equity financing products. Comdisco
Ventures committed $250 million as a limited partner to Hybrid Fund, all of
which has been invested in, or committed to, customers. Comdisco Ventures has
closed Hybrid Fund and it will not seek additional capital commitments. Hybrid
Fund began funding direct equity financings in the second quarter of fiscal
2000 and venture debt during the third quarter of fiscal 2000. Comdisco
Ventures sold those venture debt transactions it originated in the second
quarter of fiscal 2000 to Hybrid Fund once Hybrid Fund began funding these
types of transactions. Comdisco Ventures may, depending on market conditions,
form additional funding vehicles. For a more detailed description of Hybrid
Fund and its relationship to Comdisco Ventures' business, see "--Funding
Sources--Hybrid Fund," beginning on page 44.
Comdisco Ventures intends to continue to fund venture leases and
equipment loans directly.
Capitalizing on the Comdisco affiliation and resources
As a division of Comdisco, Comdisco Ventures is able to bring a number
of benefits to its customers:
. Equipment Procurement. As a result of our experience in leasing
and remarketing equipment and our equipment purchasing power,
Comdisco Ventures is able to offer its customers an equipment
procurement service designed to save them time, effort and money.
. Technology Services. Comdisco Ventures offers a range of
Comdisco's technology services to its customers in order to help
them build their businesses more quickly. These services include
continuity services, web availability and other hosting services,
and managed network services.
. Post-Venture Stage Services. Comdisco Ventures can also introduce
Comdisco as a potential customer for, or partner, to a customer as
the customer evolves beyond the start-up stage.
Developing complementary service offerings that respond to the changing needs
of venture capital-backed companies
In addition to financing products, Comdisco Ventures intends to provide
value-added services to its network of customers in the future. These services
will be designed to save Comdisco Ventures' customers' time, effort and money
as they race to build their businesses. These services will also be designed
to allow Comdisco Ventures' customers to take advantage of opportunities
provided by the other members of Comdisco Ventures' network of customers.
Comdisco Ventures' Products
Typically, Comdisco Ventures' products are structured as commitments by
it to provide financing in one or more advances during a specified period of
time. The total commitment made available to a customer may or may not be
drawn upon and used by that customer over the life of the commitment, although
Comdisco Ventures generally must keep those committed but undrawn amounts
available for the customer. Comdisco Ventures also may receive the right, as
part of a commitment, to
35
<PAGE>
purchase a specific amount of equity in a planned future equity round of its
customer. Comdisco Ventures usually receives a fee for providing its financing
commitment based on the original amount committed. Comdisco Ventures'
commitment to finance is typically subject to the absence of any material
adverse change or any default under the loan or lease and compliance by its
customers with other loan or lease requirements.
Comdisco Ventures generally will receive warrants to purchase equity
securities or the right to convert some of its debt into equity securities of
its customers in connection with the commitment. Warrants typically represent
less than 5% of the customer's ownership at the date of origination. The terms
of the warrants or equity conversion, including the expiration date, exercise
price and terms of the equity security for which the warrant may be exercised,
will be negotiated individually with each customer, and will likely be affected
by the price and terms of securities issued by the customer to its venture
capitalists and other holders. Based upon Comdisco Ventures' experience, it is
anticipated that most warrants will be exercisable for a term of three to ten
years. The equity securities for which the warrant will be exercised generally
will be convertible preferred stock or common stock.
Venture Leases
Comdisco Ventures' venture leasing activities consist primarily of the
direct origination of non-cancelable, full-payout leases. These leases cover a
variety of equipment including information technology, scientific hardware,
production equipment and software. The rental rate and all other transaction
terms are individually negotiated with Comdisco Ventures' customers.
Substantially all equipment leases that Comdisco Ventures originates have
specified non-cancelable initial terms ranging from 2 to 5 years. The general
terms and conditions of all of these leases are substantially similar and are
embodied in a master lease agreement. For each lessee, the lease term, rent
interval, lease rate factor and other specific terms for each piece of leased
equipment are set forth on equipment schedules, which also incorporate the
terms and conditions of our master lease agreement. The lessee is also required
to provide to Comdisco Ventures monthly and annual financial information.
Comdisco Ventures may also structure transactions as a loan secured by
the underlying equipment, and Comdisco Ventures considers these kinds of
arrangements as part of its venture equipment financing activities.
During fiscal 1999 and 1998, Comdisco Ventures originated leases through
approximately 230 and 180 separate transactions, respectively, representing
total commitments of approximately $332 million and $221 million, respectively.
In the three months ended December 31, 1999, Comdisco Ventures'
originated leases through approximately 80 separate transactions, representing
total commitments of approximately $136 million.
Venture Debt
Historically, Comdisco Ventures' venture debt activities have consisted
primarily of the direct origination of debt financings to customers pursuant to
subordinated, secured loan agreements. These loans bear fixed interest rates
over the prime rate and are usually repaid in 36 monthly installments.
Typically, the customer makes several months of interest-only payments, the
balance being amortizing installments of principal and interest. In addition,
fees may be paid to Comdisco Ventures at closing.
These subordinated loans typically have been secured by a lien on all of
the customer's assets, which, in most cases, is subordinated to the lien of the
customer's senior lenders. Comdisco Ventures' loan documents usually contain
cross-default provisions and may have specific provisions governing future
financing or pledging of assets. More recently, Comdisco Ventures has been
making venture debt financings on an unsecured basis as well.
36
<PAGE>
During fiscal 1999 and 1998, Comdisco Ventures originated subordinated
loans through approximately 145 and 30 separate transactions, respectively,
representing total commitments of approximately $367 million and $68 million,
respectively.
In the three months ended December 31, 1999, Comdisco Ventures originated
subordinated loans through approximately 45 separate transactions, representing
total commitments of approximately $140 million.
Hybrid Fund began funding subordinated loan financings in the third
quarter of fiscal 2000. Comdisco Ventures sold those subordinated loan
financings it originated in the second quarter of fiscal 2000 to Hybrid Fund
once Hybrid Fund began funding these types of transactions. Comdisco Ventures
will participate in the returns generated by the fund as a limited partner and
as a member of the general partner of Hybrid Fund. See "--Funding Sources--
Hybrid Fund," on page 44.
Direct Equity Financings
Through December 31, 1999, Comdisco Ventures provided equity financing to
its customers by directly purchasing common or convertible preferred stock.
Comdisco Ventures generally purchases equity at a valuation based on the most
recent previous financing round to venture capitalists or, as applicable, a
current or contemplated financing round.
During fiscal 1999 and 1998, Comdisco Ventures made direct equity
investments with approximately 90 and 35 customers, representing approximately
$39 million and $7 million, respectively.
In the three months ended December 31, 1999, Comdisco Ventures made
direct equity investments with approximately 60 customers, representing
approximately $36 million. As of December 31, 1999, Comdisco Ventures has made
total direct investments with an original investment value of approximately $97
million.
Hybrid Fund began funding direct equity financings beginning in the
second fiscal quarter of 2000. Comdisco Ventures will participate in the
returns generated by the fund as a limited partner and as a member of the
general partner of Hybrid Fund. See "--Funding Sources--Hybrid Fund," on page
44.
Overview of Financing Commitments and Equity Holdings of Comdisco Ventures
Comdisco Ventures believes that it is one of the largest sources of
venture leases and venture debt in its market.
New Lease, Debt and Equity Commitments
The following table illustrates total new lease, debt and direct equity
commitments made by Comdisco Ventures during each of the last five fiscal years
and the first quarter of fiscal 2000.
Total New Commitments By Fiscal Year
1995-Current
(Dollars in Millions)
<TABLE>
<CAPTION>
1st
Quarter
1995 1996 1997 1998 1999 2000
----- ------ ------ ------ ------ -------
<S> <C> <C> <C> <C> <C> <C>
Leases................................ $77.3 $103.5 $144.3 $220.6 $332.1 $135.8
Debt.................................. 2.5 7.5 19.5 67.7 367.1 139.5
Equity................................ 1.6 3.1 3.7 7.4 39.0 34.7
----- ------ ------ ------ ------ ------
Total............................... $81.4 $114.1 $167.5 $295.7 $738.2 $310.0
===== ====== ====== ====== ====== ======
</TABLE>
37
<PAGE>
The following table lists Comdisco Ventures' 15 largest commitments
provided through December 31, 1999.
15 Largest Commitments Provided Through December 31, 1999
Acusphere, Inc.
Avici Systems, Inc.
COLO.COM
Concur Technologies, Inc.
Corvis Corporation
Digital Generation Systems, Inc.
eGroups, Inc.
Equinix, Inc.
HomeGrocer.com, Inc.
living.com Inc.
New Edge Networks, Inc.
NextCard, Inc.
Silicon Access Technology, Inc.
StockPower, Inc.
Telocity, Inc.
Comdisco Ventures tries to avoid concentrating its financing risk in a
few customers. The largest commitment Comdisco Ventures has made to any single
customer is approximately $25 million. At December 31, 1999, no commitment to
any single customer represents more than 3% of Comdisco Ventures' total assets.
Equity Holdings
Liquidity Events. Comdisco Ventures has been successful in identifying
companies that ultimately proceed to a liquidity event, such as an initial
public offering, or a merger with or sale to another company. In addition to
its ability to identify these companies, Comdisco Ventures benefits from the
IPO market's wide acceptance of transactions representing venture capital-
backed companies. According to the National Venture Capital Association and
Venture Economics, approximately 50%, or 271, of the 544 companies that went
public in 1999 were venture capital-backed. These liquidity events give
Comdisco Ventures the opportunity to sell or otherwise dispose of its equity
interests in those companies in an orderly manner, subject to securities law
and contractual lock-up agreements. The following table lists customers of
Comdisco Ventures that have been acquired by a public company or have had their
IPO, since October 1, 1996.
Comdisco Ventures' Customers That Have Completed Their Initial Public Offering
or Been Acquired by Public Companies Since October 1, 1996
<TABLE>
<CAPTION>
First Quarter Fiscal 2000
-------------------------
Acquisition by Public
IPO Company
--- ---------------------
<S> <C>
Be Free, Inc. Abaton.com, Inc.
CacheFlow, Inc. AdKnowledge, Inc.
Caliper Technologies Corp. Arithmos, Inc.
C-Bridge Internet Solutions, Inc. FlowWise Networks
Data Critical Corp. LeukoSite, Inc.
Digital Impact, Inc. Novera Software, Inc.
Digital Insight Power Trends, Inc.
DSL.net, Inc. Quote.com, Inc.
Raycer, Inc.
Edison Schools, Inc. (formerly, Edison Project) Sandpiper Networks, Inc.
Egreetings Network, Inc. Tycho Networks, Inc.
</TABLE>
38
<PAGE>
<TABLE>
<CAPTION>
First Quarter Fiscal 2000
-------------------------
(continued)
-----------
IPO Acquisition by Public Company
--- -----------------------------
<S> <C>
GetThere.com, Inc. WaveSpan Corporation
iGo Corporation WebSpective Software, Inc.
Interwoven, Inc.
MotherNature.com, Inc.
OnDisplay, Inc.
PlanetRx.com, Inc.
QuickLogic Corp.
SciQuest.com, Inc.
Silicon Image, Inc.
Tularik, Inc.
Virata Corp.
Webvan Group, Inc.
<CAPTION>
Fiscal 1999
-----------
IPO Acquisition by Public Company
--- -----------------------------
<S> <C>
Adforce, Inc. Academic Systems
Agile Software Corporation BabyCenter, Inc.
Allaire Corporation BFC Enterprises, Inc.
Ariba Technologies, Inc. BioStar, Inc.
Ask Jeeves, Inc. BrainPlay.com, Inc.
Audible, Inc. Chabi.com
Concur Technologies, Inc. CytoMed, Inc.
Continuus Software Corp. DAS Devices, Inc.
Copper Mountain Networks, Inc. Diamond Lane Communications Corp.
Critical Path, Inc. Excel Switching Corporation
E.piphany, Inc. Expersoft Corp.
Efficient Networks, Inc. Fibex Systems, Inc.
E-Loan, Inc. Internet Profiles Corp.
eToys, Inc. Lightera Networks, Inc.
Extreme Networks, Inc. LinkExchange, Inc.
FlyCast Communications Corp. Monterey Networks, Inc.
Gadzoox Networks, Inc. Pivot Technologies, Inc.
Intraware, Inc. Seeker Software
Keynote Systems, Inc. Sentryl Software Corporation
NetObjects, Inc. SpringStreet, Inc.
Netro Corporation StratumOne Communications, Inc.
NextCard, Inc. TransMedia Communications, Inc.
NorthPoint Communications, Inc. When, Inc. (when.com)
NVidia Corporation Whistle Communications
Packeteer, Inc. Zip2 Corporation
Phone.com, Inc.
Portal Software, Inc.
Quokka Sports
Ramp Networks, Inc.
SalesLogix Corporation
Select Comfort Direct Corp.
Showcase Corporation
TiVO, Inc.
Ventro Corporation (formerly, Chemdex
Corp.)
Viant Corporation
Vignette Corporation
Vixel Corporation
</TABLE>
39
<PAGE>
<TABLE>
<CAPTION>
Fiscal 1998
-----------
IPO Acquisition by Public Company
--- -----------------------------
<S> <C>
Com21, Inc. AnyRiver Entertainment, Inc.
CombiChem, Inc. ComCore Semiconductor, Inc.
Corixa Corporation CommQuest Technologies, Inc.
FlexiInternational Software, Inc. European Software Publishing Ltd.
Focal, Inc. gene/Networks, Inc.
FVC.COM Global Center, Inc.
Gene Logic, Inc. Hotmail Corporation
Hybrid Networks, Inc. ICAST Corp.
Information Advantage, Inc. Insight Micro Array Systems
Inktomi Corporation Netbot, Inc.
MicroMuse, Inc. OnLive! Technologies, Inc.
Power Integrations, Inc. PetCare Plus, Inc.
Preview Travel, Inc. Prominet Corporation
SportsLine.com, Inc. Research Holdings, Ltd.
USWeb Corporation Wayfarer Communications, Inc.
<CAPTION>
Fiscal 1997
-----------
IPO Acquisition by Public Company
--- -----------------------------
<S> <C>
Cardima, Inc. Agile Networks, Inc.
Cerus Corporation Alexon Biomedical, Inc.
Concentric Network Corp. Allelix Neuroscience, Inc.
Corsair Communications, Inc. Books That Work
Cubist Pharmaceuticals, Inc. ChemGenics/Millennium Pharmaceuticals
Endocardial Solutions, Inc. Digital Style Corp.
Intensiva HealthCare Corp. Dynasty Technologies, Inc.
LeukoSite, Inc. Informed Access Systems, Inc.
Lightbridge, Inc. Integrity QA Software, Inc.
Micro Therapeutics, Inc. Light Source Computer Images, Inc.
NeoMagic Corporation NetObjects, Inc.
Netmoves Corporation OnStream Networks, Inc.
(formerly, faxSAV, Inc.) PharmaGenics, Inc.
Peapod, Inc. PharmaSource Group, Inc.
Triangle Pharmaceuticals, Inc. Quinta Corporation
ViroPharma, Inc. Rapid City Communications Corp.
Sahara Networks, Inc.
Sneaker Stadium, Inc.
TransGlobal Systems, Inc.
TravelNet, Inc.
TView, Inc.
ViewStar Corporation
Web TV Networks, Inc.
Whitetree, Inc.
Zane Publishing, Inc.
</TABLE>
Public Equity Holdings. Comdisco Ventures directs the management of its
public equity holdings through a third party asset manager. Historically,
Comdisco Ventures' general policy has been to sell its equity positions in an
orderly manner as soon as reasonably possible after a liquidity event. In most
cases, securities law restrictions on transfer and contractual lock-up
provisions restrict Comdisco Ventures' ability to sell its equity position for
up to six months after a liquidity event. Comdisco
40
<PAGE>
Ventures' management consults with its outside manager on at least a quarterly
basis and has adjusted its general policy on occasion to respond to market
conditions. However, Comdisco Ventures' disposition policy with respect to its
equity holdings is not intended to, and does not, assure that Comdisco Ventures
will maximize its return on any particular holdings. Going forward, Comdisco
Ventures may review and change this general policy.
As of December 31, 1999, the current public equity holdings of Comdisco
Ventures had an equity value of $435 million and represented ownership in
approximately 70 companies. The 10 largest equity holdings represented 64% of
the total equity value of these holdings and was composed of the following
companies:
Largest Public Equity Stakes as of December 31, 1999
<TABLE>
<CAPTION>
Company Industry Sector
---------------------------- ----------------------------
<S> <C>
Agile Software Corporation Software & Computer Services
Be Free, Inc. Internet
CacheFlow, Inc. Communications & Networking
Critical Path, Inc. Software & Computer Services
E.piphany, Inc. Software & Computer Services
FlyCast Communications Corp. Internet
Keynote Systems, Inc. Software & Computer Services
OnDisplay, Inc. Internet
Ventro Corporation Internet
Vignette Corporation Internet
</TABLE>
The equity instruments Comdisco Ventures holds are generally subject to
securities law restrictions on transfer and contractual lock-ups restricting
its ability to sell them for up to approximately 180 days after an initial
public offering or longer. The public market for high-technology and other
emerging growth companies is extremely volatile. This volatility may adversely
affect both Comdisco Ventures' ability to dispose of those equity securities
and the value of those equity securities on disposal.
Private Equity Holdings. In addition to the public equity holdings of
Comdisco Ventures, as of December 31, 1999, it held warrants and other equity
positions in approximately 345 companies that are still private. The following
table sets forth those companies, grouped by business sector, to which Comdisco
Ventures has committed $3 million or more in financing (whether as a venture
lease, venture debt or direct equity purchase) as of December 31, 1999.
41
<PAGE>
Private Company Equity Holdings of Comdisco Ventures
as of December 31, 1999
Commitments Greater than $3 million
Communications & Networking
<TABLE>
<S> <C>
2Wire, Inc. Metawave Communications Corp.
AccessLan Communications, Inc. Octave Communications, Inc.
Airspan Communications Corporation Optical Micro-Machines, Inc.
Atmosphere Networks, Inc. Optical Networks, Inc.
Avici Systems, Inc. Optical Solutions, Inc.
Bandwidth9 Optimight Communications, Inc.
Caly Networks, Inc. Oresis Communications, Inc.
Chorum Technologies, Inc. Pluris, Inc.
COLO.COM Positive Communications, Inc.
Corvis Corporation ProactiveNet, Inc.
Endgate Corporation Promatory Communications
Equinix, Inc. Quintessent Communications, Inc.
eVoice, Inc. dba TalkStar.com Shoreline Teleworks, Inc.
Flashcom, Inc. Siara Systems, Inc.
Geyser Networks, Inc. Telera, Inc.
iBEAM Broadcasting Corporation Tellium, Inc.
Indus River Networks, Inc. Telocity, Inc.
iPass, Inc. TimeShift, Inc.
Jetstream Communications, Inc. Vertical Networks Incorporated
LGC Wireless, Inc. Video Networks, Inc.
New Edge Networks, Inc. Warpspeed Communications, Inc.
MainStreet Networks, Inc. Wavtrace, Inc.
Mapletree Networks, Inc.
Computer Hardware & Semiconductors
Agere, Inc. Monterey Design Systems
Aptix Corporation Quantum Effect Design, Inc.
Censtor Corporation Silicon Access Technology, Inc.
Chip2Chip, Inc. Silicon Spice, Inc.
Cielo Communications, Inc. Siros Technologies
C-Port Corporation Stream Machine, Inc.
Gemfire, Inc. Transmeta Corporation
Handspring, Inc. Volterra Semiconductor Corporation
Internet
Accompany, Inc. Interactive Transaction Services, Inc.
Affinia, Inc. iOwn Holdings, Inc.
Andale, Inc. IQ commerce Corporation
Asera, Inc. Lipstream Networks, Inc.
Blue Nile, Inc. living.com Inc.
Bowstreet.com, Inc. Lucy.com, Inc.
BravoGifts.com, Inc. Miadora, Inc.
Brightware, Inc Myteam.com, Inc.
Broadband Sports, Inc. Myplay, Inc.
Carstation.com, Inc. Naxon Corporation
Celarix, Inc. Neoforma.com, Inc.
Chip Shot Golf Corporation NetFlix.com, Inc.
Collabria, Inc. NONSTOP Solutions, Inc.
DoughNET Inc. NowDocs.com, Inc.
eBates Shopping.com, Inc. Obongo, Inc.
eGroups, Inc.
</TABLE>
42
<PAGE>
Embark.com, Inc. Onebox.com, Inc.
essential.com, Inc. Onvia.com, Inc.
e-STEEL Corporation Pogo.com Inc.
eve.com, Inc. Qpass, Inc.
Firstlook.com, Inc. remarQ Communities, Inc.
Flyswat, Inc. Resonate, Inc.
Food.com, Inc. RightWorks Corporation
Furniture.com, Inc. RocketTalk, Inc.
Great Entertaining, Inc. ShoppingList.com, Inc.
HomeGrocer.com, Inc. Snowball.com, Inc.
HomeWarehouse.com, Inc. SocialNet.com
IAM.com, Inc. StockPower, Inc.
iExchange.com, Inc. Xtra On-line Corporation
iMark.com, Inc.
Life Sciences
Accumetrics, Inc. FeRx Incorporated
Acusphere, Inc. Idun Pharmaceuticals, Inc.
Adesso Specialty Services Inspire Pharmaceuticals, Inc.
Align Technology, Inc. InterVentional Technologies, Inc.
American WholeHealth, Inc. Mitotix, Inc.
Argonaut Technologies, Inc. PercuSurge, Inc.
asterion.com, Inc. Radiant Research, Inc.
Cryogen, Inc. ScriptGen Pharmaceuticals, Inc.
Cytokinetics, Incorporated TheraSense, Inc.
Diversa Corporation
Eos Biotechnology, Inc.
Software & Computer Services
2Bridge Software Linguateq, Incorporated
Acta, Inc. Linuxcare, Inc.
Angara E-Commerce Software, Inc. Luminate Software Corporation
Annuncio Software, Inc. MarketTools, Inc.
Arbortext, Inc. Market-Touch Corporation
Corio, Inc. Net.Genesis Corp.
CrossWorlds Software NewChannel, Inc.
DataCore Software Corporation NightFire Software, Inc.
Docent, Inc. Niku Corporation
eDocs, Inc. Oberon Software Inc.
Efficient Market Services Portera Systems
Extensity, Inc. Saba Software, Inc.
FirstSense Software, Inc. Tioga Systems, Inc.
Flashpoint Technology, Inc. Torrent Systems, Inc.
Foglight Software, Inc. TriStrata, Inc.
Instill Corporation ValiCert, Inc.
Integral Development Corporation Worldstreet Corporation
Lightspan Partnership, Inc. Yantra Corporation
Other Products & Services
Advantage Schools, Inc.
AnyTime Access, Inc.
43
<PAGE>
Funding Sources
Since inception, Comdisco Ventures has funded its financing activities
through cash flows from operations and borrowings from Comdisco. To respond to
the growing demand for Comdisco Ventures' financing products, and to reduce
balance sheet risk to Comdisco's stockholders, Comdisco Ventures has explored
possible additional sources of funds for its financing activities, including
selling shares of Comdisco Ventures Stock to the public in the offering
contemplated by this prospectus.
Hybrid Fund
Comdisco Ventures formed Hybrid Venture Partners, L.P. ("Hybrid Fund"), a
Delaware limited partnership, in October 1999 to originate venture debt and
direct equity financing products. Comdisco Ventures committed $250 million as a
limited partner to Hybrid Fund, all of which has been invested in, or committed
to, customers. Comdisco Ventures has closed Hybrid Fund and it will not seek
additional capital commitments. Comdisco Ventures has agreed to provide short-
term loans to Hybrid Fund to facilitate its activities. Hybrid Fund began
funding direct equity financings in the second quarter of fiscal 2000 and
venture debt during the third quarter of fiscal 2000. Comdisco Ventures sold
those venture debt transactions it originated in the second quarter of fiscal
2000 to Hybrid Fund once Hybrid Fund began funding these types of transactions.
Comdisco Ventures may, depending on market conditions, form additional funding
vehicles similar to Hybrid Fund.
As a limited partner in Hybrid Fund and a non-managing member of its
general partner, Comdisco Ventures will participate in the profits and losses
of Hybrid Fund. Items of profit and loss of Hybrid Fund attributable to the
short-term investment of idle cash will be allocated among the partners of
Hybrid Fund in proportion to their respective capital commitments. All other
items of net profit of Hybrid Fund will be allocated among its partners as
follows:
. First, 100 percent to all the partners in proportion to their
respective capital commitments until each partner has been
allocated net profits representing an 8 percent priority return on
its unreturned capital contributions.
. Next, 100 percent to the general partner until cumulative
allocations of net profit over the term of Hybrid Fund have been
made:
(1) 80 percent to all the partners in proportion to their
respective capital commitments; and
(2)20 percent to the general partner as a carried interest.
. Next, 80 percent to all the partners in proportion to their
respective capital commitments and 20 percent to the general
partner as a carried interest.
Net losses of Hybrid Fund will be allocated first to reverse prior
allocations of net profits and thereafter to the partners in proportion to
their respective capital commitments.
Distributions by Hybrid Fund to its partners may be made in cash or in
securities.
The general partner of Hybrid Fund is Rosemont Venture Management I,
L.L.C., a Delaware limited liability company. The managing members of the
general partner primarily responsible for Hybrid Fund's investment activities
initially will include certain members of the current senior management of
Comdisco Ventures. In addition to its share of the profits and losses of Hybrid
Fund, the general partner will receive an annual management fee equal to 2% of
the aggregate committed capital of Hybrid Fund. Beginning in 2005, this fee
will be equal to 2% of the aggregate cost basis of securities held by Hybrid
Fund and reasonable reserves for the payment of fund expenses and the purchase
of portfolio securities under pre-existing binding commitments. Comdisco
Ventures is also a non-managing member of this general partner, and in that
capacity is entitled to participate in the general partner's profits and
losses.
44
<PAGE>
Comdisco Ventures has the right to participate in a manner and on an
economic level similar to its participation in Hybrid Fund in any fund in which
any of the members of current senior management responsible for its investment
activities are substantially involved in the future, provided that Comdisco
Ventures Stock remains outstanding and Comdisco commits to provide at least 25%
of the committed capital of that subsequent fund.
Instead of receiving payments of principal and interest and loan fees
associated with venture debt and the payments of sales proceeds associated with
its direct equity holdings, Comdisco Ventures will receive returns from venture
debt and direct equity financings originated by Hybrid Fund through its limited
partnership interests in Hybrid Fund and membership interests in the general
partner.
We anticipate the amounts Comdisco Ventures will receive as a limited
partner of Hybrid Fund and member of Hybrid Fund's general partner to be
substantially similar to the returns Comdisco Ventures would receive if
Comdisco Ventures were to provide those venture debt and direct equity
investment products offered by Hybrid Fund directly to its customers.
Financing Procedures
The successful execution of Comdisco Ventures' business and operating
strategy is dependent upon its underwriting and investment policies and
procedures.
Comdisco Ventures reviews business plans generated by its referral
network in order to identify potential customers. After identifying potential
customers that it believes merit further investigation, Comdisco Ventures
evaluates those potential customers in more depth. This review process,
described below, forms the basis of Comdisco Ventures' decision to fund or
reject a lease, loan and/or direct equity financing.
Preliminary Evaluation
Comdisco Ventures meets with the potential customer's management and
performs a preliminary investigation of its management, business operations,
and prospects. Comdisco Ventures generally consults with and gathers
information from a wide variety of industry sources to assess the prospects of
a potential customer and its industry. Comdisco Ventures reviews the
commitments of the existing venture capitalists (including their intention to
participate in future financing rounds) and the potential customer's capital
structure. The customer also provides projected financial statements, a
description of its market and competitive landscape, and a description of
operations (marketing and sales, research and development, employee issues, and
so forth). If Comdisco Ventures is satisfied with its preliminary investigation
of management, operations and prospects, it typically issues a term sheet
outlining a proposed transaction. After reaching an agreement on the term
sheet, Comdisco Ventures begins due diligence.
Due Diligence
Comdisco Ventures' due diligence may initially include on-site visits to
the potential customer's headquarters and other facilities, interviews with key
management and board members, references for senior management and discussions
with industry research analysts, other industry participants, customers and
suppliers where appropriate. Comdisco Ventures may also review the potential
customer's charter, capital structure, subsidiaries, assets, liabilities,
employee plans, litigation, tax matters and other relevant legal documentation.
45
<PAGE>
Portfolio Monitoring and Risk Management
Comdisco Ventures has three primary tools to monitor the performance and
quality of its financings:
. Comdisco Ventures monitors the progress of product development,
cash burn and overall adherence to the business plan;
. Comdisco Ventures maintains regular contact with management teams
to discuss business enrichment, cash flow needs and potential
financing and other capital structure issues; and
. Comdisco Ventures reviews various financial statements received
from its customers on a quarterly basis.
Workouts
All loans that are 60 days or more overdue are classified as a work-out
account. Whenever feasible, Comdisco Ventures attempts to use its position as a
lender and equity investor to work with other investors and lenders to
rehabilitate, rather than liquidate, defaulted loans. Comdisco Ventures'
primary objective at this stage is to minimize its loss on the lease and loan
obligations.
Loss experience
Since the initiation of its financing activities, credit losses have been
less than 3% of Comdisco Ventures' total commitments originated. This
percentage does not reflect any significant loss experience from Comdisco
Ventures' subordinated debt products, which were only first introduced on a
large scale beginning in fiscal 1998.
Comdisco Ventures believes that its low level of credit losses are
largely a result of its (1) transaction structuring experience, (2) due
diligence procedures specifically designed to analyze transactions with
emerging growth companies, (3) extensive monitoring and review of these
transactions, and (4) corrective approach to addressing delinquency. Comdisco
Ventures' loss experience has also benefited from the experience and diligence
of those leading venture capital firms that typically precede Comdisco Ventures
into a financing relationship with its customers.
Competition
Comdisco Ventures' primary competitors include financial institutions,
equipment lessors and manufacturers, venture capital firms, and non-traditional
lenders that provide debt and/or equity financing to emerging, high technology
companies. An increasing number of public companies also provide substantial
capital to companies who might otherwise be candidates for Comdisco Ventures'
financing products. Comdisco Ventures believes that it competes effectively
with these competitors based on creative and innovative deal structuring,
flexibility, reputation, quality of service, timely credit analysis, and
decision-making.
Employees
As of December 31, 1999, Comdisco Ventures employed 41 people on a full
time basis--12 personnel were involved in marketing and sales, 26 were in
processing, servicing and administrative support and 3 were executive
employees. No employees are represented by a labor union.
Facilities
Comdisco Ventures' principal executive offices are located and its
venture leasing and venture debt activities are conducted at 3000 Sand Hill
Road, Menlo Park, California. In addition to its principal offices, Comdisco
Ventures leases office space in Palo Alto, California, Waltham, Massachusetts
and Rosemont, Illinois.
46
<PAGE>
Comdisco Ventures believes its current facilities are adequate for its
existing needs and that additional, suitable space will be available as
required.
Regulation, Licenses and Qualifications, Federal And State
Because Comdisco Ventures is a non-bank, commercial lender, it is not
subject to material federal regulation. Nevertheless, under certain
circumstances, Comdisco Ventures may be required to comply with the Equal
Credit Opportunity Act ("ECOA"). Under the ECOA, Comdisco Ventures is required
to give full credit applicants notice of the right to receive a written
statement of reasons an application for credit is denied, unless the applicant
has gross revenues exceeding $1 million during its last fiscal year.
Comdisco Ventures is not subject to material regulation in most states,
although some states do require licensing for certain commercial financing
activities. Most states' usury laws, which limit the amount of interest charged
on loans originated in a state, either exempt commercial loans or do not extend
the benefit of the usury laws to corporate borrowers.
To date, substantially all documentation relating to Comdisco Ventures'
financing products is accepted in, and funding is made through, Comdisco's
principal offices in Illinois and these transactions are intended to be
governed by Illinois law, which does not require licensing for those
activities. Hybrid Fund is licensed as required in California, where the
documentation acceptance and funding for its transactions occur. Comdisco
Ventures anticipates applying for a license in California as well, as it
expands its funding sources.
Comdisco Ventures believes it is currently in material compliance with
any applicable state usury laws as well as other applicable federal and state
statutes and regulations.
Comdisco Ventures believes existing federal and state laws and
regulations have not had a material adverse effect on its operations. There
can, however, be no assurance that future laws and regulatory changes will not
occur and will not place additional burdens on its operations.
Legal Proceedings
Comdisco Ventures is not currently a party to any material litigation.
Management
The following table shows information about Comdisco Ventures' senior
management.
<TABLE>
<CAPTION>
Name Age Position
---- --- --------
<S> <C> <C>
James P. Labe 43 Chief Executive Officer
Geoffrey L. Tickner, Jr. 39 Chief Operating Officer
John J. Vosicky 51 Chief Financial Officer
</TABLE>
Jim Labe is Comdisco Ventures' Chief Executive Officer. He has been
involved in the debt-financing field within venture capital for more than
seventeen years. He founded Comdisco Ventures as a division of Comdisco in
early 1987, and served as President of the division until 1999 when he became
Chief Executive Officer. Prior to Comdisco, Jim spent four years with Equitec
Financial Group, structuring "venture leases" with venture backed companies.
His background also includes computer marketing and new business development.
Jim has been a speaker at venture capital industry conferences. He has also
participated in programs on venture leasing and other forms of creative equity-
linked financing at both the University of Chicago Graduate School of Business
and at Harvard Graduate School of Business. Jim received his MBA degree from
the University of Chicago and his BA degree from
47
<PAGE>
Middlebury College. He has been a corporate officer and Senior Vice President
of Comdisco, Inc. since January, 1996.
Geoff Tickner is Comdisco Ventures' Chief Operating Officer. He joined
Comdisco Ventures in 1998 after fifteen years in investment banking at Smith
Barney in San Francisco and New York. Geoff was a Managing Director in Smith
Barney's Technology Investment Banking Group where he was responsible for the
Communication Equipment and Enterprise Software sectors. Geoff received his BA
from Princeton in 1982 and his MBA degree from Stanford in 1986.
John Vosicky is Comdisco Ventures' Chief Financial Officer. He is also
Executive Vice President and Chief Financial Officer of Comdisco and will
continue to serve in those capacities. He has served as Executive Vice
President of Comdisco since July, 1994 and Chief Financial Officer of Comdisco
since November, 1984. John was Senior Vice President of Comdisco from November,
1985 to July, 1994. He joined Comdisco in 1975 as controller and prior to doing
so, worked for Peat, Marwick, Mitchell & Company in Chicago, Illinois. John
received his BA degree from St. Mary's University in 1970 in accounting, and
received his CPA certificate from the State of Illinois in 1973.
Glen Howard is Comdisco Ventures' Managing Director and Group Head of
Venture Lease Investments. He has been involved in sales and marketing for more
than twenty years. He has been with Comdisco for more than thirteen years,
serving ten years in lease financing sales and marketing at Comdisco before
joining Comdisco Ventures three years ago. Prior to joining Comdisco, he had
more than six years of sales and financing experience at IBM Corporation. Glen
received his BS degree in Systems Industrial Engineering from the University of
Arizona and received his MBA degree from Saint Mary's College.
Senior Management Compensation And Benefits
Cash Compensation. The following table shows fiscal 1999 cash
compensation we paid to Comdisco Ventures' senior management.
<TABLE>
<CAPTION>
Name Salary Bonus
- ---- -------- ----------
<S> <C> <C>
James P. Labe........................................... $300,000 $4,887,493 (a)
Geoffrey L. Tickner, Jr. ............................... 225,000 882,345 (a)
John J. Vosicky (b)..................................... 260,000 65,000
</TABLE>
- --------
(a) Bonus payments earned for fiscal 1999.
(b) Mr. Vosicky is also the Executive Vice President and Chief Financial
Officer of Comdisco. Additional information about his compensation appears
in the proxy statement concerning the special meeting of stockholders held
April 20, 2000 relating to the tracking stock proposal, filed with the SEC
on March 20, 2000.
Profit Sharing Plans. Each of Messrs. Labe and Tickner are participants
in two Comdisco Ventures' profit sharing plans under which they are eligible to
receive cash bonus payments. The first of these plans was established on
October 1, 1996 ("1996 Plan"). Under the 1996 Plan, plan participants are
entitled to receive cash bonus payments out of a total pool of 20% of the pre-
tax earnings attributable to Comdisco Ventures' transactions documented and
executed between October 1, 1996 and December 31, 1999. Bonus payments under
the 1996 Plan are made semi-annually, and will continue until all profits
attributable to those transactions covered by the 1996 Plan are realized by
Comdisco Ventures. The amounts paid as a cash bonus to each of Messrs. Labe and
Tickner under the 1996 Plan for fiscal 1999 are included in the cash
compensation table above. Mr. Vosicky is not a participant in this plan.
Comdisco Ventures established another profit sharing plan as of January
1, 2000 ("2000 Plan"). Under the 2000 Plan, plan participants are entitled to
receive cash payments out of a total pool of 20% of the pre-tax earnings
attributable to Comdisco Ventures' transactions documented and executed on or
after
48
<PAGE>
January 1, 2000 and before completion of this initial public offering. Bonus
payments under the 2000 Plan are made semi-annually and will continue until all
profits attributable to those transactions covered by the 2000 Plan are
realized by Comdisco Ventures. Mr. Vosicky is not a participant in this plan.
Employment Agreements. Each of Messrs. Labe and Tickner have entered into
a management agreement with Comdisco Ventures, commencing effective on the
closing of this offering, that contains these material provisions:
. a term of three years for Mr. Labe and two years for Mr. Tickner;
. an increase in fiscal year 2000 current annual salary for Mr.
Labe, from $300,000 to $500,000, and Mr. Tickner, from $300,000 to
$450,000.
. severance arrangements if the executive's employment is terminated
without cause before the end of the agreement;
. percentage participation in the Management Incentive Plan (as
described in the immediately following section);
. protection of Comdisco Ventures' confidential or proprietary
information; and
. limitations on the ability of the executive to compete with
Comdisco Ventures' business, or to solicit Comdisco Ventures'
employees, during the term of employment and for one year after a
termination of employment with Comdisco Ventures.
Management Incentive Plan
The Management Incentive Plan was approved by Comdisco stockholders at
the April 20, 2000 special meeting. The Management Incentive Plan provides
Comdisco Ventures' senior management with a proprietary stake in the
performance of Comdisco Ventures and the creation of stockholder value and
further aligns the interests of Comdisco Ventures' senior management with the
stockholders of Comdisco Ventures Stock.
The following is a summary of the material features of the Management
Incentive Plan. You should review the full text of the Management Incentive
Plan, which has been filed as an exhibit to the registration statement of which
this prospectus is a part.
Grants of Awards. Under the Management Incentive Plan, we will grant
options and/or restricted stock awards of Comdisco Ventures Stock to senior
management of Comdisco Ventures (other than Mr. Vosicky).
Shares Available for Issuance under the Management Incentive Plan. Under
the Management Incentive Plan, the number of shares of Comdisco Ventures Stock
that will be available for grant will be limited to shares,
representing 15% of the shares of Comdisco Ventures Stock deemed issued and
outstanding upon completion of this offering assuming for this purpose that
Comdisco Group's retained interest in Comdisco Ventures is represented by
issued and outstanding Comdisco Ventures Stock. Shares subject to an award that
expires unexercised, are forfeited, or terminated, or settled in cash instead
of Comdisco Ventures Stock, and shares tendered to pay for the exercise of an
option, will not again be available for grant under the Management Incentive
Plan.
Initial Awards Under the Management Incentive Plan. We have agreed to
issue, effective as of the closing date of this initial public offering, non-
qualified stock options for, or stock awards of, Comdisco Ventures Stock
representing substantially all of the shares of Comdisco Ventures Stock
authorized under the Management Incentive Plan to certain members of the
current senior management of Comdisco Ventures and to a former employee who
recently resigned his position as a senior investment professional with
Comdisco Ventures.
49
<PAGE>
The exercise price per share of the options to purchase Comdisco Ventures
Stock granted to Mr. Labe under the Management Incentive Plan will be $
per share. We set this exercise price based on the net book value of Comdisco
Ventures at March 31, 2000, as follows:
. if the Comdisco Ventures Option Value is equal to $800 million,
the exercise price per share shall be equal to the Aggregate
Comdisco Ventures Net Book Value divided by the Aggregate Comdisco
Ventures Stock Outstanding at IPO;
. if the Comdisco Ventures Option Value is less than $800 million,
the price per share shall be equal to the aggregate Comdisco
Ventures Net Book Value less that difference divided by the
Aggregate Comdisco Ventures Stock outstanding at IPO, but not less
than zero;
. if the Comdisco Ventures Option Value exceeds $800 million, the
exercise price per share shall be equal to the Aggregate Comdisco
Ventures Net Book Value divided by the Aggregate Comdisco Ventures
Stock outstanding at IPO; and
. if the Aggregate Comdisco Ventures IPO Value is less than $700
million, Comdisco will have no obligation to grant any options.
Where,
. "Aggregate Comdisco Ventures IPO Value" is the aggregate market
value of the Aggregate Comdisco Ventures Stock Outstanding at IPO
reflected by the IPO Price Per Share.
. "Aggregate Comdisco Ventures Net Book Value" is the net book value
of the assets allocated to Comdisco Ventures, as of March 31,
2000.
. "Aggregate Comdisco Ventures Stock Outstanding at IPO" is the
number of shares of Comdisco Ventures Stock issued in this
offering, together with that number of shares of Comdisco Ventures
Stock that would represent Comdisco's Group's retained interest if
those shares were issued and outstanding.
. "Comdisco Ventures Option Value" is the Aggregate Comdisco
Ventures IPO Value less the Aggregate Comdisco Ventures Net Book
Value.
. "IPO Price Per Share" is the initial public offering price per
share for Comdisco Ventures Stock in this offering.
Each of Messrs. Labe and Tickner will receive the following initial
option grants under the Management Incentive Plan:
<TABLE>
<CAPTION>
Number of Shares Exercise Price
Name Subject to Options Per Share
---- ------------------ --------------
<S> <C> <C>
James P. Labe...........................
Geoffrey L. Tickner, Jr.................
</TABLE>
The initial options will vest in equal installments over a three year
period. The number of shares subject to these options may be reduced over the
life of the options to reflect cash bonuses paid to those executives under the
Comdisco Ventures' profit sharing plans or other bonus arrangements.
Federal Income Tax Consequences. The following is a brief description of
the federal income tax consequences generally arising with respect to awards
under the Management Incentive Plan. The initial options granted under the plan
will be non-qualified stock options.
The grant of an option will create no tax consequences for the
participant or Comdisco. Upon exercising an option other than an incentive
stock option, the participant generally must recognize ordinary income equal to
the difference between the exercise price and fair market value of the freely
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transferable and nonforfeitable shares acquired on the date of exercise. In the
case of an employee, withholding will apply to amounts recognized as ordinary
compensation income. A participant will not recognize taxable income upon
exercising an incentive stock option (within the meaning of Section 422 of the
Code) except that the alternative minimum tax may apply.
If the participant does not hold the Comdisco Ventures Stock acquired
upon exercise of an incentive stock option for at least one year from the date
of exercise and two years from the date of grant (the "holding period"), the
participant generally must recognize ordinary income equal to the lesser of (1)
the fair market value of the shares at the date of exercise of the incentive
stock option minus the exercise price or (2) the amount realized upon the
disposition of the incentive stock option shares minus the exercise price.
Otherwise, a participant's disposition of shares acquired upon the exercise of
an option (including an incentive stock option for which the incentive stock
option holding periods are met) generally will result in capital gain or loss
measured by the difference between the sale price and the participant's tax
basis in those shares (the tax basis generally being the exercise price plus
any amount recognized as ordinary income in connection with the exercise of the
option). The holding period for purposes of determining whether this capital
gain or loss is long-term or short-term does not begin until the option is
exercised.
We generally will be entitled to a tax deduction equal to the amount
recognized as ordinary income by the participant in connection with an option.
We generally are not entitled to a tax deduction relating to amounts that
represent a capital gain to a participant. Accordingly, we will not be entitled
to any tax deduction with respect to an incentive stock option if the
participant holds the shares for the incentive stock option holding period
prior to disposition of the shares.
With respect to awards granted under the Management Incentive Plan that
result in the payment or issuance of cash or shares or other property that is
either not restricted as to transferability or not subject to a substantial
risk of forfeiture, the participant generally must recognize ordinary income
equal to the cash or the fair market value of shares or other property
received. We generally will be entitled to a deduction in an amount equal to
the ordinary income recognized by the participant.
With respect to awards involving the issuance of shares or other property
that is restricted as to transferability and subject to a substantial risk of
forfeiture (e.g., restricted stock), the participant generally must recognize
ordinary income equal to the fair market value of the shares or other property
at the first time the shares or other property becomes transferable or is not
subject to a substantial risk of forfeiture, whichever occurs earlier. We
generally will be entitled to a deduction in an amount equal to the ordinary
income recognized by the participant.
Related Transactions with Management
Mr. Labe is a managing member and Mr. Tickner is a special managing
member of the general partner of Hybrid Fund. As managing members, they are
entitled to participate in the profits and losses of the general partner. See
"--Funding Sources--Hybrid Fund," beginning on page 44.
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DESCRIPTION OF COMDISCO CAPITAL STOCK
The following is a summary and should be read with our restated charter
which we have filed as an exhibit to the registration statement of which this
prospectus is a part.
Currently Authorized Capital Stock
Our current certificate of incorporation authorizes us to issue
750,000,000 shares of common stock, par value $0.10 per share, and 100,000,000
shares of preferred stock, par value $0.10 per share. As of March 1, 2000, we
had 152,183,133 shares of common stock and no shares of preferred stock issued
and outstanding.
Our Restated Charter and Initial Designations of Series of Common Stock and
Preferred Stock
Under our restated charter there are 1,800,000,000 shares of common stock
of Comdisco authorized. The board of directors may issue the common stock in
multiple series. The board has designated two series of common stock as of the
date of this prospectus--750,000,000 shares of Comdisco Ventures Stock and
750,000,000 shares of Comdisco Stock.
We intend Comdisco Ventures Stock to reflect the performance of Comdisco
Ventures, our venture financing business division.
We intend Comdisco Stock to reflect the performance of Comdisco Group,
which consists of our other businesses and a retained interest in Comdisco
Ventures.
We have allocated, for financial reporting purposes, all of Comdisco's
consolidated assets, liabilities, revenue, expenses and cash flow between
Comdisco Group and Comdisco Ventures. In the future, we will publish financial
statements for each of Comdisco Group and Comdisco Ventures, together with
consolidated financial statements of Comdisco covering all of Comdisco Group
and Comdisco Ventures.
This description refers in many places to "Comdisco Group's retained
interest in Comdisco Ventures." This represents the ownership of Comdisco Group
in that portion of Comdisco Ventures that is not represented by outstanding
Comdisco Ventures Stock. The size of this retained interest relative to the
interest represented by Comdisco Ventures Stock may change in the future if
actions are taken such as:
. issuances of additional shares of Comdisco Ventures Stock,
. repurchases of Comdisco Ventures Stock, or
. transfers of cash or other property between Comdisco Group and
Comdisco Ventures
that change either the total amount of the assets of Comdisco Ventures or the
number of shares of Comdisco Ventures Stock that is outstanding.
Our board of directors has designated shares of Comdisco
Ventures Stock to represent those shares that would be deemed owned by Comdisco
Group in respect of its retained interest in Comdisco Ventures. See "--General
Conversion and Redemption Provisions--Retained Interest of Comdisco Group in
Comdisco Ventures" beginning on page 61 and our restated charter for additional
information about Comdisco Group's retained interest in Comdisco Ventures and
the initial number of shares of Comdisco Ventures Stock that would be deemed
owned by Comdisco Group in respect of its retained interest in Comdisco
Ventures.
Under our restated charter and to the extent permitted by Delaware law,
our board of directors could, without the need to obtain stockholder approval:
. designate common stock not previously designated by the board of
directors, or re-designate previously designated but unissued
common stock, into one or more additional new series of common
stock; or
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. increase or decrease from time to time the total number of
authorized shares of each designated series of common stock.
However, the board of directors could not increase the number of shares
of authorized stock of a designated series above a number which, when added to
the number of authorized shares of all designated common stock, would exceed
the total number of authorized shares of common stock. In addition, the board
of directors could not decrease the number of shares authorized of any series
of common stock below the number of shares outstanding of such series and
shares reserved for options, warrants, the rights plan and, as applicable, any
retained interest of one group by another.
At the time it creates any new series of common stock, our board of
directors would be authorized to determine and designate the number of shares
of each new series and all rights and privileges of each new series, including
dividend rights, exchange or redemption provisions, rights upon liquidation or
merger, and voting rights.
Authorized but unissued shares of Comdisco Ventures Stock and Comdisco
Stock and previously undesignated common stock would be available for issuance
by Comdisco from time to time, as determined by the board of directors, for any
proper corporate purpose. These purposes could include raising capital, paying
stock dividends, effecting a stock split, providing compensation or benefits to
employees or acquiring other companies or businesses, or designating a new
series of common stock. Comdisco would not be required to solicit your approval
for any issuance described above, unless required by the Delaware law or NYSE
or Nasdaq Stock Market rules.
Preferred Stock
Our board of directors has the authority to issue preferred stock in one
or more series, without stockholder approval and is authorized to fix the
dividend rights and terms, conversion rights, voting rights, redemption rights,
liquidation preferences, sinking funds and any other rights, preferences,
privileges and restrictions applicable to each series of preferred stock. Our
restated charter designates two series of preferred stock:
.200,000 shares of Series C Junior Participating Preferred Stock; and
. 200,000 shares of Series D Junior Participating Preferred Stock.
These shares are reserved for issuance in connection with Comdisco's
preferred stock purchase rights described below. None of these shares are
currently issued or outstanding.
Description of Comdisco Ventures Stock
Under the restated charter, we will have the authority to issue up to
750,000,000 shares of Comdisco Ventures Stock. We plan to sell up to
shares in this offering. The following additional shares of Comdisco Ventures
Stock initially will be reserved for issuance:
. shares under the Management Incentive Plan described
beginning on page 49;
. shares under Comdisco's other stock-based compensation
plans; and
. shares to represent Comdisco Group's retained interest in
Comdisco Ventures.
Dividends. We will be permitted to pay dividends on Comdisco Ventures
Stock out of assets of Comdisco legally available for the payment of dividends
under Delaware law. Our restated charter, however, provides that the total
amounts paid as dividends on Comdisco Ventures Stock cannot exceed the
available dividend amount for Comdisco Ventures.
The "available dividend amount" for Comdisco Ventures at any time is the
amount that would then be legally available for the payment of dividends on
Comdisco Ventures Stock under Delaware law if:
. Comdisco Ventures was an independent Delaware corporation; and
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. Comdisco Ventures had outstanding a number of shares of common
stock, par value $0.10 per share, equal to the number of shares of
Comdisco Ventures Stock that are then outstanding plus the number
of shares of Comdisco Ventures Stock that would be issuable with
respect to Comdisco Group's retained interest in Comdisco
Ventures.
The amount legally available for the payment of dividends on common stock
of a corporation under Delaware law is generally limited to:
. the total assets of the corporation,
. less its total liabilities,
. less the aggregate par value of the outstanding shares of its
common and preferred stock.
However, if that amount is not greater than zero, the corporation may
also pay dividends out of the net profits for the corporation for the fiscal
year in which the dividend is declared and/or the preceding fiscal year. As
mentioned above, these restrictions will form the basis for calculating the
available dividend amounts for Comdisco Ventures. These restrictions will also
form the basis for calculating the aggregate amount of dividends that Comdisco
as a whole can pay on its common stock (regardless of series). Thus, net losses
of any business group, and any dividends and distributions on, or repurchases
of, any series of common stock, will reduce the assets legally available for
dividends on other series of common stock.
Subject to the foregoing limitations (and to any other limitations set
forth in any future series of preferred stock or in any agreements binding on
Comdisco from time to time), we have the right to pay dividends on none, any or
all of the series of common stock, in equal or unequal amounts, notwithstanding
the performance of any business group, the amount of assets available for
dividends on any series, the amount of prior dividends declared on any series
or any other factor.
At the time of any dividend on the outstanding shares of Comdisco
Ventures Stock (including any dividend required as a result of a disposition of
all or substantially all of the assets of Comdisco Ventures), we will credit to
Comdisco Group, and charge against Comdisco Ventures a corresponding amount in
respect of Comdisco Group's retained interest in that group for purposes of
calculating available dividend amounts for future dividends. Specifically, the
corresponding amount will equal (1) the aggregate amount of that dividend times
(2) a fraction, the numerator of which is the number of shares that would be
issuable with respect to Comdisco Group's retained interest in Comdisco
Ventures and the denominator of which is the number of shares of Comdisco
Ventures Stock then outstanding.
Mandatory Dividend, Redemption or Conversion of Comdisco Ventures Stock.
If we sell or dispose of all or substantially all of the properties and assets
of Comdisco Ventures in a transaction other than one described below under "--
Exceptions to the Dividend, Redemption or Conversion Requirement if a
Disposition Occurs" we will:
. pay a dividend to the holders of Comdisco Ventures Stock in cash
and/or securities or other property having a value equal to their
proportionate interest in the net proceeds of the disposition; or
. if the disposition involves all of the properties and assets,
redeem all outstanding shares of Comdisco Ventures Stock in
exchange for cash and/or securities or other property having a
value equal to the proportionate interest of the holders of
Comdisco Ventures Stock in the net proceeds of the disposition; or
. if the disposition involves substantially all, but not all, of the
properties and assets, redeem a number of whole shares of Comdisco
Ventures Stock having an aggregate average market value, during
the 20 trading day period beginning on the 16th trading day
following consummation of that transaction, equal to the
proportionate interest of
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the holders of Comdisco Ventures Stock in the value of the net
proceeds of the disposition; or
. convert each outstanding share of Comdisco Ventures Stock into a
number of shares of Comdisco Stock equal to 115% of the ratio of
the average market value of one share of Comdisco Ventures Stock
to the average market value of one share of Comdisco Stock during
the 20 trading day period ending on the fifth trading day prior to
the first public announcement of that disposition transaction.
We will determine the proportionate interest of the holders of Comdisco
Ventures Stock in the net proceeds of a disposition by assuming that Comdisco
Group's retained interest in Comdisco Ventures is represented by issued and
outstanding shares of Comdisco Ventures Stock.
We may only pay a dividend or redeem shares of a series of common stock
if we have legally available funds under Delaware law. We will pay the dividend
or complete the redemption or conversion on or prior to the 90th trading day
following the disposition date.
For purposes of determining whether a disposition has occurred,
"substantially all of the properties and assets" attributed to Comdisco
Ventures means a portion of the properties and assets that represents at least
80% of the value of the properties and assets attributed to Comdisco Ventures.
The "net proceeds" of a disposition means an amount equal to what remains
of the gross proceeds of the disposition after any payment of, or reasonable
provision is made as determined by our board of directors for:
. any taxes payable by us, or which would have been payable but for
the utilization of tax benefits attributable to Comdisco Group, in
respect of the disposition or in respect of any resulting dividend
or redemption;
. any transaction costs, including, without limitation, any legal,
investment banking and accounting fees and expenses; and
. any liabilities of or attributed to Comdisco Ventures, including,
without limitation, any liabilities for deferred taxes, any
indemnity or guarantee obligations incurred in connection with the
disposition or otherwise, any liabilities for future purchase
price adjustments and any preferential amounts plus any
accumulated and unpaid dividends in respect of the preferred stock
attributed to Comdisco Ventures.
We may elect to pay the dividend or redemption price either in the same
form as the proceeds of the disposition or in any other combination of cash,
securities or other property that our board of directors or, in the case of
securities that have not been publicly traded for a period of at least 15
months, an independent investment banking firm, determines will have an
aggregate market value of not less than the value of the net proceeds.
Exceptions to the Dividend, Redemption or Conversion Requirement if a
Disposition Occurs. We are not required to take any of the above actions for
any disposition of all or substantially all of the properties and assets
attributed to Comdisco Ventures in a transaction or series of related
transactions that results in our receiving for those properties and assets
primarily equity securities of any entity which:
. acquires those properties or assets or succeeds to the business
conducted with those properties or assets or controls that
acquirer or successor; and
. is primarily engaged or proposes to engage primarily in one or
more businesses similar or complementary to the businesses
conducted by Comdisco Ventures prior to the disposition, as
determined by our board of directors.
The purpose of this exception is to enable us technically to dispose of
properties or assets of Comdisco Ventures to other entities engaged or
proposing to engage in businesses similar or
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complementary to those of that group without requiring a dividend on, or a
conversion or redemption of, Comdisco Ventures Stock, so long as we hold an
equity interest in that entity. A joint venture in which we own a direct or
indirect equity interest is an example of such an acquirer. We are not
required to control that entity, whether by ownership or contract provisions.
We are also not required to effect a dividend, redemption or conversion
if:
. the disposition is of all or substantially all of our properties
and assets in one transaction or a series of related transactions
in connection with our dissolution, liquidation or winding up and
the distribution of our assets to stockholders;
. the disposition is on a pro rata basis, such as in a spin-off, to
the holders of all outstanding shares of Comdisco Ventures Stock;
. the disposition is made to any person or entity controlled by us,
as determined by the board of directors;
. the disposition is made at a time when only one series of common
stock is outstanding; or
. before the 30th trading day following the disposition, we have
mailed a notice stating that we are exercising our right to
convert all of the outstanding shares of Comdisco Ventures Stock,
as applicable, into newly issued shares of Comdisco Stock as
contemplated under "Conversion of Comdisco Ventures Stock at
Option of Comdisco" below.
Sale of less than substantially all the assets of a group. The proceeds
from any disposition of assets that do not comprise all or substantially all
of the properties and assets attributed to Comdisco Ventures will be allocated
to Comdisco Ventures and used for its benefit, subject to the policies
described under "Certain Management and Allocation Policies," beginning on
page 70.
Conversion of Comdisco Ventures Stock at Option of Comdisco. We will
have the right, at any time, to convert shares of Comdisco Ventures Stock into
a number of shares of Comdisco Stock initially equal to 125% of the ratio of
the average market value of one share of Comdisco Ventures Stock to the
average market value of one share of Comdisco Stock over a 20-day trading
period ending on the fifth trading day prior to the mailing of the conversion
notice for conversions occurring in the first quarter after the original
issuance of Comdisco Ventures Stock. The percentage applied to the ratio of
market values will decline ratably each quarter over a period of ten quarters
to 115%.
If, however, we convert Comdisco Ventures Stock into Comdisco Stock as a
result of a tax event, as defined below, we will have the right to convert
shares of Comdisco Ventures Stock into a number of shares of Comdisco Stock
equal to % of the ratio of the average market values of the Comdisco
Ventures Stock and the Comdisco Stock described above, regardless of when that
adverse tax law change takes place.
"Tax event" means Comdisco's receipt of an opinion of our tax counsel
that, as a result of:
. any amendment to, or change in, the laws or regulations
interpreting the laws of the United States or any political
subdivision or taxing authority thereof or therein, including any
announced proposed change in those regulations by an
administrative agency; or
. any official or administrative pronouncement, action or judicial
decision interpreting or applying those laws or regulations
(regardless of whether that pronouncement, action or judicial
decision involves Comdisco),
it is more likely than not that for U.S. federal income tax purposes:
. Comdisco or our stockholders are, or at any time in the future
will be, subject to tax upon the issuance of shares of any of
Comdisco Stock or Comdisco Ventures Stock, or
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. any Comdisco Stock or Comdisco Ventures Stock is not or at any
time in the future will not be treated solely as stock of
Comdisco, or
. any Comdisco Stock or Comdisco Ventures Stock is or will be
treated as section 306 stock under the Internal Revenue Code.
For purposes of rendering this opinion, tax counsel will assume that any
administrative proposals will be adopted as proposed. However, in the event of
an announced proposed legislative change, tax counsel shall render an opinion
only in the event of enactment.
These provisions allow us the flexibility to recapitalize our outstanding
series of common stocks into one class of common stock that would, after the
recapitalization, represent an equity interest in all of our businesses. The
optional conversion could be exercised at any future time if our board of
directors determines that, under the facts and circumstances then existing, an
equity structure consisting of multiple series of common stock was no longer in
the best interests of all of our stockholders. A conversion could be exercised,
however, at a time that is disadvantageous to the holders of Comdisco Ventures
Stock. For additional information on the risks of a conversion and the limited
remedies available to stockholders, see "Risk Factors--Risks Relating to
Ownership of Comdisco Ventures Stock--Conversion of Comdisco Ventures Stock
into Comdisco Stock may adversely affect the holders of Comdisco Ventures
Stock," on page 14.
The conversion ratio that will result in the specified premium will be
calculated based on the average market value of one share of Comdisco Ventures
Stock as compared to the average market value of one share of Comdisco Stock
during the 20 consecutive trading day period ending on, and including, the
fifth trading day immediately preceding the date on which we mail the notice of
conversion to holders of Comdisco Ventures Stock.
Conversion would be based upon the relative market values of Comdisco
Stock, on the one hand, and Comdisco Ventures Stock, on the other. Many factors
could affect the market values of Comdisco Stock and Comdisco Ventures Stock,
including our results of operations and those of each group, trading volume and
general economic and market conditions. Market values could also be affected by
decisions by our board of directors or our management that investors perceive
to affect adversely one series of common stock compared to the other. These
decisions could include changes to our management and allocation policies,
transfers of assets between groups, allocations of corporate opportunities and
financing resources between the groups and changes in dividend policies.
Redemption of Comdisco Ventures Stock in Exchange for Stock of
Subsidiary. Although it currently has no intention to do so, our board of
directors may redeem on a pro rata basis all of the outstanding shares of
Comdisco Ventures Stock for shares of the common stock of one or more of our
wholly owned subsidiaries which will then own all of the assets and liabilities
attributed to Comdisco Ventures (and no other assets or liabilities), as
applicable. We may redeem shares of Comdisco Ventures Stock for subsidiary
stock only if we have legally available funds under Delaware law. In connection
with any exchange, in the event that we have a retained interest in Comdisco
Ventures, we could retain any remaining shares of common stock of the
subsidiary holding Comdisco Ventures' assets or distribute those shares as a
dividend on Comdisco Stock.
As a result of a redemption in exchange for stock of a subsidiary,
holders of the series of common stock redeemed would hold securities of a
separate legal entity. This redemption could be authorized by the board of
directors at any time in the future if it determines that, under the facts and
circumstances then existing, an equity structure comprised of multiple series
of common stock designated as tracking stocks is no longer in the best
interests of all of our stockholders as a whole.
Because Comdisco Ventures would most likely be subject to the
registration requirements of the 1940 Act if the exchange described above were
to occur, it is unlikely that our board of directors would redeem Comdisco
Ventures Stock in the manner described in this section.
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General Conversion and Redemption Provisions
Notices Upon Disposition of Group Assets. Not later than the 20th trading
day after the consummation of a sale of all or substantially all of the
properties and assets of Comdisco Ventures, we will announce publicly by press
release:
. the estimated net proceeds of the disposition;
. the number of shares of Comdisco Ventures Stock outstanding;
. the number of shares of any series of common stock into which
Comdisco Ventures Stock is convertible and the conversion,
exchange or exercise price of those convertible securities; and
. the number of shares issuable with respect to our retained
interest in Comdisco Ventures.
Not later than the 40th trading day after the consummation of the
disposition, we will announce publicly by press release whether we will:
. pay a dividend or redeem shares of Comdisco Ventures Stock with
the net proceeds of the disposition; or
. convert the shares of Comdisco Ventures Stock into shares of
Comdisco Stock.
We will mail to each holder of shares of Comdisco Ventures Stock any
additional notices and other information required by our restated charter.
Notice upon Optional Conversion or Redemption in Exchange for Stock of a
Subsidiary. If Comdisco determines to convert shares of Comdisco Ventures Stock
into shares of Comdisco Stock or into shares of stock of a subsidiary as
described above, Comdisco will send each holder of Comdisco Ventures Stock that
is being converted or redeemed a notice not less than 30 nor more than 45 days
prior to the conversion or redemption date. This notice will contain:
. a statement that all outstanding shares of Comdisco Ventures Stock
will be converted or redeemed, as applicable;
. the conversion or redemption date;
. the number of shares of Comdisco Stock or the number of shares of
stock of the subsidiary, as the case may be, which each holder of
Comdisco Ventures Stock will receive;
. the place or method for redemption or conversion; and
. any other information required by our restated charter.
Selection of Shares for Redemption. If less than all of the outstanding
shares of Comdisco Ventures Stock are to be redeemed, we will redeem those
shares proportionately from among the holders of outstanding shares of Comdisco
Ventures Stock or by the method as may be determined by our board of directors
to be equitable.
Fractional Interests; Transfer Taxes. We will not be required to issue
fractional shares of any capital stock or any fractional securities to any
holder of Comdisco Ventures Stock upon any conversion, redemption, dividend or
other distribution described above. If a fraction is not issued to a holder, we
will pay cash instead of that fraction.
We will pay all documentary, stamp or similar issue or transfer taxes
that may be payable in respect of the issue or delivery of any shares of
capital stock and/or other securities on conversion or redemption of shares. We
would not, however, be required to pay any tax that might be payable in respect
of any transfer involved in the issue or delivery of any shares of capital
stock and/or other
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securities in a name other than that in which the shares of Comdisco Ventures
Stock so exchanged or redeemed were registered, and no issue or delivery will
be made unless and until the person requesting that issue pays to Comdisco the
amount of any tax or establishes to our satisfaction that this tax has been
paid.
Stockholder Rights Upon Conversion or Redemption. If shares of Comdisco
Ventures Stock are converted or redeemed as previously described, after this
conversion or redemption all rights of a holder of shares of Comdisco Ventures
Stock that were converted or redeemed will cease. The only right a holder of
shares of Comdisco Ventures Stock converted or redeemed would have at that time
is the right to receive the cash and/or the certificates representing shares of
capital stock, securities or other property into which Comdisco Ventures Stock
was converted or for which it was redeemed, together with any payments for
fractional shares or rights to dividends, as provided above, without interest.
No holder of a certificate that prior to the conversion or redemption
represented shares of Comdisco Ventures Stock converted or redeemed will be
entitled to receive any dividends or other distribution or interest payment
with respect to shares of any kind of capital stock into, or in exchange for
which, shares of the Comdisco Ventures Stock were converted or redeemed until
surrender of the holder's certificate in exchange for a certificate
representing shares of that capital stock. Upon the surrender of the holder's
certificate, there will be paid to the holder the amount of any dividends or
other distributions (without interest) which theretofore became payable with
respect to a record date occurring after the conversion, but which were not
paid by reason of the foregoing, with respect to the number of whole shares of
capital stock represented by the certificate or certificates issued upon that
surrender. From and after a conversion, Comdisco will, however, be entitled to
treat the certificates for Comdisco Ventures Stock that have not yet been
surrendered for conversion as being evidence of the ownership of the number of
whole shares of capital stock into which the shares of Comdisco Ventures Stock
represented by those certificates should have been converted, notwithstanding
the failure to surrender those certificates.
Voting Rights. Holders of Comdisco Ventures Stock will generally vote
together with holders of Comdisco Stock as a single class on all matters
requiring a stockholder vote.
Until the 31st trading day following the effective date of the restated
charter, on all matters as to which all series of Comdisco's common stock will
vote together as a single class:
. each share of Comdisco Ventures Stock will have one vote; and
. each share of Comdisco Stock will have one vote.
On and after that 31st trading day, at each vote of stockholders, the
aggregate voting power of the Comdisco Ventures Stock and Comdisco Stock will
be adjusted as follows:
. each share of Comdisco Ventures Stock will have a number of votes
(or a fraction of a vote) based on the ratio of the average market
value of one share of Comdisco Ventures Stock to the average
market value of one share of Comdisco Stock during the 20
consecutive trading days ending on (and including) the record date
of the vote; and
. each share of Comdisco Stock will have one vote.
For example, if the average market value of one share of Comdisco
Ventures Stock for the period specified above was $20.00, and the average
market value of one share of the Comdisco Stock for the period specified above
was $40.00, each share of Comdisco Stock would have one vote and each share of
Comdisco Ventures Stock would have 0.5 votes based on the following
calculation:
$20.00
-----
= .5 votes per share
$40.00
However, in the event that the foregoing calculation results in the
holders of Comdisco Ventures Stock holding more than 35% of the total voting
power of all outstanding shares of common stock, the
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vote of each share of Comdisco Ventures Stock that exceeds that amount will be
reduced so that all of the outstanding shares of Comdisco Ventures Stock in the
aggregate represent 35% of the total voting power of all outstanding shares of
Comdisco's common stock.
Subject to the 35% limitation, the voting formula above is intended to
equate the relative voting rights of the series of common stock to their
relative market capitalization at the time of each adjustment. The periodic
adjustments could influence an investor interested in acquiring and maintaining
a fixed percentage of the voting power of Comdisco's outstanding stock to
acquire that percentage of all series of common stock, and would limit the
ability of investors in one class to acquire for the same consideration
relatively more or less votes per share than investors in the other series.
Because, of the limitations on the voting power of Comdisco Ventures
Stock, when the holders of Comdisco Ventures Stock and Comdisco Stock vote
together as a single class, the holders of Comdisco Stock will be in a position
to control the outcome of a majority vote even if the matter involves a
conflict of interest between the holders of Comdisco Ventures Stock and
Comdisco Stock.
If shares of only one series of common stock are outstanding, each share
of that series will have one vote. If any series of common stock is entitled to
vote as a separate class with respect to any matter, each share of that series
will, for purposes of that vote, have one vote on that matter.
We will set forth the number of outstanding shares of Comdisco Ventures
Stock and Comdisco Stock in our annual and quarterly reports filed pursuant to
the Exchange Act, and disclose in any proxy statement for a stockholder meeting
the number of outstanding shares and per share voting rights of each share of
Comdisco Ventures Stock and Comdisco Stock.
The holders of Comdisco Ventures Stock and Comdisco Stock will not have
any rights to vote separately as a class on any matter coming before our
stockholders, except for the limited class voting rights provided under
Delaware law or by NYSE or Nasdaq Stock Market rules.
Liquidation. In the event of our voluntary or involuntary liquidation,
dissolution or winding-up, the holders of Comdisco Ventures Stock and Comdisco
Stock will be entitled to receive our assets, if any, remaining for
distribution to stockholders (after payment of or provision for all
liabilities, including contingent liabilities, and payment of the liquidation
preference payable to any holders of our preferred stock), on a per share basis
in proportion to the liquidation units per share of each series. Each share of
Comdisco Stock shall have one liquidation unit. Each share of Comdisco Ventures
Stock will have a number of liquidation units, including a fraction of one
liquidation unit, equal to the ratio of the average market value of a share of
Comdisco Ventures Stock during the 20 consecutive trading days next preceding
the 300th day after the effective date of our restated charter, to the average
of the market value of one share of Comdisco Stock over the same period,
expressed as a decimal fraction rounded to the nearest five decimal places.
If the voluntary or involuntary dissolution, liquidation or winding up of
Comdisco occurs prior to , 2001, the average market value of one
share of Comdisco Ventures Stock will be determined based on:
(1)the 20 consecutive trading day period immediately prior to the
dissolution, liquidation or winding-up event, or
(2)the actual number of consecutive trading days in the event that
the dissolution, liquidation or winding-up event, if that event occurs
prior to the 21st trading day after the effective date of our restated
charter.
After the number of liquidation units with respect to Comdisco Ventures
Stock has been determined in the manner above, the number will not be changed
except as described below. Thus, the liquidation rights of the holders of the
Comdisco Ventures Stock or Comdisco Stock may not bear any relationship to the
relative market values or the relative voting rights of that series.
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The liquidation units of the Comdisco Ventures Stock and Comdisco Stock
were determined by Comdisco in consultation with our financial advisors and are
based upon, among other factors, each group's initial level of debt and equity
capitalization, each group's recent historical financial performance, the
market prices of shares of comparable companies that are publicly traded and
the current state of the markets for public offerings and other stock
transactions.
If Comdisco subdivides, by stock split, reclassification or otherwise, or
combines, by reverse stock split, reclassification or otherwise, the
outstanding shares of Comdisco Ventures Stock or Comdisco Stock, the number of
liquidation units of the Comdisco Ventures Stock or Comdisco Stock, as
applicable, shall be adjusted as determined by the board of directors so as to
avoid any dilution in the aggregate liquidation rights of either series of
common stock.
In the absence of a public trading market for the shares of Comdisco
Ventures Stock, our board of directors will exercise its good faith judgment to
determine the market value of a share of that stock for purposes of this
formula.
In the case of our dissolution, liquidation or winding up:
. no holder of Comdisco Stock will have any special right to receive
specific assets of Comdisco Group; and
. no holder of Comdisco Ventures Stock will have any special right
to receive specific assets of Comdisco Ventures.
Neither a merger nor consolidation of Comdisco into or with any other
corporation, nor any sale, transfer or lease of all or any part of our assets,
will, alone, be deemed a liquidation or winding up of Comdisco, or cause the
dissolution of Comdisco, for purposes of these liquidation provisions.
Comdisco considers that its complete liquidation is a remote contingency,
and its financial advisors believe that, in general, these liquidation
provisions are immaterial to the value of Comdisco Ventures Stock.
Retained Interest of Comdisco Group in Comdisco Ventures. The number of
shares of Comdisco Ventures Stock that, if issued, would initially represent
100% of the equity value of Comdisco Ventures has been set by the board of
directors. The board of directors made this determination following discussion
with Comdisco's independent financial advisors, based on:
. the historical and projected financial and operating information
of Comdisco Ventures;
. the market prices of securities and certain financial and
operating information of companies engaged in activities similar
to those of Comdisco Ventures;
. prevailing equity market conditions; and
. the range of the initial public offering price of the Comdisco
Ventures Stock to be issued.
The equity value of Comdisco Ventures remaining after we first distribute
Comdisco Ventures Stock in this offering will be held by Comdisco Group. This
retained interest, because it represents an interest between two business
groups within Comdisco, would not constitute outstanding shares of common stock
and, accordingly, would not be represented by shares of Comdisco Ventures Stock
and would not be voted on any matter by the Comdisco Group, including any
matter requiring the vote of the holders of Comdisco Ventures Stock as a
separate class. However, the market value attributable to Comdisco Group's
retained interest in Comdisco Ventures should be reflected in the market value
of the Comdisco Stock, which in turn would affect the aggregate voting power
represented by Comdisco Stock on any matter in which holders of Comdisco Stock
and Comdisco Ventures Stock vote together as a single class.
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We will adjust Comdisco Group's retained interest in Comdisco Ventures to
reflect further issuances or repurchases of Comdisco Ventures Stock that
relates to Comdisco Ventures (including the grant of any restricted stock
awards or exercises of any options granted to, Comdisco employees), capital
contributions to, or returns of capital from, Comdisco Ventures and certain
other events, including any distribution of that stock representing all of our
retained interest in Comdisco Ventures to holders of Comdisco Stock.
In this prospectus, we call the percentage interest in Comdisco Ventures
intended to be represented at any time by the outstanding shares of the series
of common stock that tracks that group the "Outstanding Interest Percentage",
and we call the remaining percentage interest in Comdisco Ventures intended to
be represented at any time by Comdisco Group's retained interest in that group
the "Retained Interest Percentage." At any time, the Outstanding Interest
Percentage equals the number of shares outstanding of Comdisco Ventures Stock
divided by the total number of notional shares of Comdisco Ventures Stock
deemed outstanding (expressed as a percentage) and the Retained Interest
Percentage equals the number of shares of Comdisco Ventures Stock issuable with
respect to Comdisco Group's retained interest in Comdisco Ventures divided by
the total number of notional shares of Comdisco Ventures Stock deemed
outstanding (expressed as a percentage). The sum of the Outstanding Interest
Percentage and the Retained Interest Percentage always equals 100%.
Prior to this offering, the Retained Interest Percentage is 100% and the
Outstanding Interest Percentage is 0%.
Whenever we decide to issue shares of Comdisco Ventures Stock, we would
determine, in our sole discretion, whether to attribute that issuance (and the
proceeds thereof) to Comdisco Group in respect of its retained interest in
Comdisco Ventures (in a manner analogous to a secondary offering of common
stock of a subsidiary owned by a corporate parent) or to Comdisco Ventures (in
a manner analogous to a primary offering of common stock). If we issue any
shares of Comdisco Ventures Stock and attribute that issuance (and the proceeds
thereof) to Comdisco Group in respect of its retained interest in Comdisco
Ventures, the number of shares issuable with respect to Comdisco Group's
retained interest in Comdisco Ventures would be reduced by the number of shares
of that series we issue, the number of outstanding shares of Comdisco Ventures
Stock would be increased by the same amount, the total number of notional
shares deemed outstanding of Comdisco Ventures Stock would remain unchanged,
the Retained Interest Percentage would be reduced and the Outstanding Interest
Percentage would be correspondingly increased. If we instead attribute that
issuance (and the proceeds thereof) to Comdisco Ventures, the number of shares
issuable with respect to Comdisco Group's retained interest in Comdisco
Ventures would remain unchanged, the number of outstanding shares of Comdisco
Ventures Stock and the total number of notional shares deemed outstanding of
Comdisco Ventures Stock would be increased by the number of shares we issue,
the Retained Interest Percentage would be reduced and the Outstanding Interest
Percentage would be correspondingly increased.
We have the right to issue shares of Comdisco Ventures Stock as a
distribution on Comdisco Stock. If we did so, we would attribute that
distribution to Comdisco Group in respect of its retained interest in Comdisco
Ventures. As a result, the number of shares of Comdisco Ventures Stock issuable
with respect to Comdisco Group's retained interest in Comdisco Ventures would
be reduced by the number of shares so distributed, the number of outstanding
shares of Comdisco Ventures Stock would be increased by the same amount, the
total number of notional shares deemed outstanding of Comdisco Ventures Stock
would remain unchanged, the Retained Interest Percentage would be reduced and
the Outstanding Interest Percentage would be correspondingly increased. If
instead we issued shares of Comdisco Ventures Stock as a distribution on
outstanding shares of Comdisco Ventures Stock, we would attribute that
distribution to Comdisco Ventures, in which case we would proportionately
increase the number of shares of Comdisco Ventures Stock issuable with respect
to Comdisco Group's retained interest in Comdisco Ventures. As a result, the
number of shares of Comdisco Ventures Stock issuable with respect to Comdisco
Group's retained interest in Comdisco Ventures and the total number of notional
shares deemed outstanding of Comdisco Ventures Stock would each be increased by
the same
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percentage as the number of outstanding shares of Comdisco Ventures Stock is
increased and the Retained Interest Percentage and Outstanding Interest
Percentage would remain unchanged.
At the time of any dividend on the outstanding shares of Comdisco
Ventures Stock (including any dividend required as a result of a disposition of
all or substantially all of the properties and assets of Comdisco Ventures, but
excluding any dividend payable in shares of Comdisco Ventures Stock), we will
credit to Comdisco Group, and charge against Comdisco Ventures, a corresponding
amount in respect of Comdisco Group's retained interest in Comdisco Ventures.
Specifically, the corresponding amount will equal (1) the aggregate amount of
that dividend times (2) a fraction, the numerator of which is the number of
shares of Comdisco Ventures Stock issuable with respect to Comdisco Group's
retained interest in Comdisco Ventures and the denominator of which is the
number of shares of Comdisco Ventures Stock then outstanding.
If we decide to repurchase shares of Comdisco Ventures Stock, we would
determine, in our sole discretion, whether to attribute that repurchase (and
the cost thereof) to Comdisco Group (in a manner analogous to a purchase of
common stock of a subsidiary by a corporate parent) or to Comdisco Ventures (in
a manner analogous to an issuer repurchase). If we repurchase shares of
Comdisco Ventures Stock and attribute that repurchase (and the cost thereof) to
Comdisco Group, the number of shares of Comdisco Ventures Stock issuable with
respect to Comdisco Group's retained interest in the Comdisco Ventures would be
increased by the number of shares so purchased, the number of outstanding
shares of Comdisco Ventures Stock would be decreased by the same amount, the
total number of notional shares of Comdisco Ventures Stock deemed outstanding
would remain unchanged, the Retained Interest Percentage would be increased and
the Outstanding Interest Percentage would be correspondingly decreased. If we
instead attribute that repurchase of Comdisco Ventures Stock or (and the cost
thereof) to Comdisco Ventures, the number of shares of Comdisco Ventures Stock
issuable with respect to Comdisco Group's retained interest in the Comdisco
Ventures would remain unchanged, the number of outstanding shares of Comdisco
Ventures Stock and the total number of notional shares of Comdisco Ventures
Stock deemed outstanding would be decreased by the number of shares so
repurchased, the Retained Interest Percentage would be increased and the
Outstanding Interest Percentage would be correspondingly reduced.
We may, in our sole discretion, determine to transfer cash or other
property of Comdisco Ventures to Comdisco Group in return for a decrease in
Comdisco Group's retained interest in Comdisco Ventures (in a manner analogous
to a return of capital) or to transfer cash or other property of Comdisco Group
to Comdisco Ventures in return for an increase in Comdisco Group's retained
interest in Comdisco Ventures (in a manner analogous to a capital
contribution). If we determine to transfer cash or other property of Comdisco
Ventures to Comdisco Group in return for a decrease in Comdisco Group's
retained interest in Comdisco Ventures, the number of shares of Comdisco
Ventures Stock issuable with respect to Comdisco Group's retained interest in
Comdisco Ventures and the total number of notional shares of Comdisco Ventures
Stock deemed outstanding would each be decreased by an amount equal to the fair
value of that cash or other property divided by the market value of a share of
Comdisco Ventures Stock on the day of transfer, the number of outstanding
shares of Comdisco Ventures Stock would remain unchanged, the Retained Interest
Percentage would be decreased and the Outstanding Interest Percentage would be
correspondingly increased. If we instead determine to transfer cash or other
property of Comdisco Group to Comdisco Ventures in return for an increase in
Comdisco Group's retained interest in Comdisco Ventures, the number of shares
of Comdisco Ventures Stock issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures and the total number of notional shares of
Comdisco Ventures Stock deemed outstanding would each be increased by an amount
equal to the fair value of that cash or other property divided by the market
value of a share of Comdisco Ventures Stock on the day of transfer, the number
of outstanding shares of Comdisco Ventures Stock would remain unchanged, the
Retained Interest Percentage would be increased and the Outstanding Interest
Percentage would be correspondingly decreased.
We may not attribute issuances of Comdisco Ventures Stock to Comdisco
Group, transfer cash or other property of Comdisco Ventures to Comdisco Group
in return for a decrease in Comdisco's retained interest in Comdisco Ventures
or take any other action to the extent that doing so would cause
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the number of shares of Comdisco Ventures Stock issuable with respect to
Comdisco Group's retained interest in Comdisco Ventures to decrease below zero.
For illustrations showing how to calculate the Retained Interest
Percentage, the Outstanding Interest Percentage, the number of shares of
Comdisco Ventures Stock issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures, and the total number of notional shares deemed
outstanding of Comdisco Ventures Stock after giving effect to certain
hypothetical dividends, issuances, repurchases and transfers, see Annex I to
this prospectus.
Determinations by the Board
Any determinations made by our board of directors in good faith under our
restated charter or in any certificate of designation filed pursuant thereto
would be final and binding on all stockholders of Comdisco, subject to rights
under applicable Delaware law and under the federal securities laws.
Preemptive Rights
Holders of Comdisco Ventures Stock will not have any preemptive rights to
subscribe for any additional shares of capital stock or securities that we may
issue in the future.
Amended and Restated Rights Agreement
We have issued preferred stock purchase rights to all holders of our
existing common stock under a rights agreement dated as of November 17, 1997,
between Comdisco and ChaseMellon Shareholder Services L.L.C., as rights agent.
Each existing right entitles the holder to purchase shares of Series C Junior
Participating Preferred Stock under conditions described in the existing rights
agreement.
In connection with the creation and issuance of our Comdisco Ventures
Stock, we will amend and restate our existing rights agreement, as of the
effective date of the restated charter, to:
. provide that each existing right will be redesignated as a
Comdisco right, which will continue to allow holders to purchase
shares of Series C Junior Participating Preferred Stock of
Comdisco if a distribution date occurs; and
. provide that for each share of Comdisco Ventures Stock issued
between the date of the amended and restated rights agreement and
the expiration date of the rights there shall be issued one
Comdisco Ventures Stock right, which will allow holders to
purchase shares of a newly designated Series D Junior
Participating Preferred Stock of Comdisco if a distribution date
occurs.
. We refer to the Comdisco Stock rights and the Comdisco Ventures
Stock rights collectively as the "rights."
A "distribution date" will occur upon the earliest of:
. the tenth day (or a later day determined by our board of
directors) after a public announcement that a person or group of
affiliated or associated persons other than us, any subsidiary of
Comdisco, or any of our or our subsidiaries' employee benefit
plans (an "acquiring person") has acquired beneficial ownership of
15% or more of the voting power of all the shares of our common
stock; or
. the tenth business day (or a later day determined by our board of
directors) following the commencement of or announcement of the
intention to commence a tender or exchange offer that would result
in that person or group beneficially owning 15% or more of the
voting power of all the shares of our common stock; or
. the tenth business day after our board of directors declares a
person to be an "adverse person."
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Any person or group that beneficially owns 20% or more of our outstanding
common stock on the effective date of the amendment and statement of the rights
plan (an "existing holder") will not be deemed an "acquiring person" until that
existing holder acquires beneficial ownership of 30% or more of the voting
power of our outstanding common stock. An adverse person is a person or group
(1) which beneficially owns 10% or more of the voting power of our outstanding
common stock and (2) which our board of directors has determined has interests
adverse to ours based on requirements set out in the amended and restated
rights agreement.
Until the distribution date, the rights will not be represented by a
separate certificate and may be transferred only with their respective series
of common stock.
Following the distribution date, holders of rights other than any
acquiring person or adverse person (whose rights will thereupon become null and
void) will be entitled to purchase from us:
. in the case of a Comdisco right, one one-thousandth of a share of
Series C Junior Participating Preferred Stock at a purchase price
of $75, subject to adjustment; and
. in the case of a Comdisco Ventures Stock right, one one-thousandth
of a share of Series D Junior Participating Preferred Stock at a
purchase price of $180, subject to adjustment.
The purchase prices discussed above are referred to as the "Series C
purchase price" and the "Series D purchase price."
Unless the rights are earlier redeemed, if any person or group becomes an
acquiring person or our board of directors declares a person to be an "adverse
person":
. a Comdisco Stock right will entitle its holder other than any
acquiring person or adverse person (whose rights will thereupon
become null and void) to purchase, at the Series C purchase price,
a number of shares of Comdisco Stock with a market value equal to
twice that purchase price; and
. any Comdisco Ventures Stock right will entitle its holder other
than any acquiring person or adverse person (whose rights will
thereupon become null and void) to purchase, at the Series D
purchase price, a number of shares of Comdisco Ventures Stock with
a market value equal to twice that purchase price.
After the rights have been triggered, the board of directors may exchange
the rights, other than rights owned by an acquiring person or adverse person,
at an exchange ratio of:
. one share of Comdisco Stock per Comdisco Stock right, subject to
adjustment, and
. one share of Comdisco Ventures Stock per Comdisco Ventures Stock
right, subject to adjustment.
Unless the rights are earlier redeemed, if, following the time a person
becomes an acquiring person or adverse person:
. Comdisco is acquired in a merger or other business combination
transaction and Comdisco is not the surviving corporation;
. any person consolidates or merges with Comdisco and all or part of
the common stock is converted or exchanged for securities, cash or
property of any other person or of Comdisco; or
. 50% or more of Comdisco's assets or earning power is sold or
transferred,
then, each right will entitle its holder other than any acquiring person to
purchase, for the applicable purchase price, a number of shares of common stock
of the surviving entity in that merger, consolidation or other business
combination of, or the purchaser in, that sale or transfer with a market value
equal to twice the applicable purchase price.
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The rights will expire on November 17, 2007, unless we extend or
terminate them as described below.
At any time until the close of business on the fifteenth day following a
public announcement that there is an acquiring person or our board of directors
declares a person to be an "adverse person", our board of directors may redeem
all of the rights at a price of $0.01 per right. On the redemption date, the
right to exercise the rights will terminate and the only right of the holders
of rights will be to receive that redemption price.
Prior to a distribution date, the board of directors may, without the
approval of any holders of rights, supplement or amend any provision of the
amended and restated rights agreement in any manner, whether or not that
supplement or amendment is adverse to any holders of the rights. From and after
a distribution date, the board of directors may, without the approval of any
holders of rights, supplement or amend the amended and restated rights
agreement only:
. to cure any ambiguity,
. to correct or supplement any provision that may be defective or
inconsistent with any other provision, or
. in any manner that it may deem necessary or desirable and which
does not materially adversely affect the interests of the holders
of rights other than an acquiring person, adverse person and their
associates and affiliates.
A holder of a right will not have any rights as a stockholder of
Comdisco, including the right to vote or to receive dividends, until a right is
exercised.
The amended and restated rights agreement contains provisions designed to
prevent the inadvertent triggering of the rights. A person will not be deemed
an acquiring person if the board of directors of Comdisco approved the
acquisition by that person of shares of common stock prior to that person
otherwise becoming an acquiring person. In addition, the amended and restated
rights agreement gives a person who has inadvertently acquired 15% or more of
the voting power of all series of our common stock and does not have any
intention of changing or influencing the control of Comdisco the opportunity to
sell a sufficient number of shares so that the acquisition would not trigger
the rights. In addition, the rights will not be triggered and a divestiture of
shares will not be required if a person becomes the holder of 15% or more, or
30% or more in the case of an existing holder, of the voting power of all of
our series of common stock, solely as a result of either (1) the reduction of
our outstanding common stock as the result of our repurchase of any of our
common stock or (2) any adjustment of the voting rights of Comdisco Ventures
Stock in accordance with the provisions of our restated charter. However, any
person who exceeds that threshold as a result of our stock repurchases or a
voting rights adjustment will trigger the rights if the person subsequently
acquires additional shares of our common stock. Our board may also further
amend the amended and restated rights agreement in the future, including in
connection with any distribution of Comdisco Group's retained interest in
Comdisco Ventures, to compensate for any unintended effects of the variable
voting rights associated with Comdisco Ventures Stock.
The restated rights agreement will permit disinterested stockholders to
acquire additional shares of our common stock or of an acquiring company at a
substantial discount in the event of certain described changes in control. The
restated rights agreement is intended to discourage anyone from buying shares
of common stock having more than 15% of the voting power of all series of our
common stock without prior approval by the board of directors.
We have filed the form of amended and restated rights agreement with the
SEC as an exhibit to the registration statement of which this prospectus is a
part.
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Other Provisions of Our Restated Charter, Bylaws and Delaware Law
Authorized Shares. Our restated charter provides that we may from time to
time designate and issue shares of common stock or preferred stock in one or
more series, the terms of which will be determined by our board of directors,
and authorize and issue additional common stock of any previously designated
series. Our board of directors, is authorized to fix the dividend rights and
terms, conversion rights, voting rights, redemption rights, liquidation
preferences, and any other rights, preferences, privileges and restrictions
applicable to each series of common stock or preferred stock. We will not
solicit further approval of our stockholders to designate, authorize or issue
those shares unless our board of directors believes that approval is advisable
or is required by NYSE or Nasdaq Stock Market rules or Delaware law. The
purpose of authorizing the board of directors to determine these rights and
preferences is to eliminate delays associated with a stockholder vote on
specific issuances. This authority however could enable our board of directors
to issue shares to persons friendly to current management which could render
more difficult or discourage an attempt to obtain control of Comdisco by means
of a merger, tender offer, proxy contest or otherwise, and thereby protect the
continuity of our management. These additional shares also could be used to
dilute the stock ownership of persons seeking to obtain control of Comdisco.
Classified Board of Directors; Removal of Directors; Limitation on
Ability to Call Special Meetings. Our restated charter provides that our board
of directors shall be divided into three classes and shall consist of such
number of directors as is set in our bylaws. Our bylaws provide that the board
of directors will be divided into three classes of an approximately equal
number of directors with each class of directors having a three-year term of
office. Our restated charter also provides that a director may be removed for
cause only upon the vote of two-thirds of the voting stock of Comdisco. These
provisions in our restated charter and bylaws may only be amended by a vote of
two-thirds of the voting power of all series of common stock of Comdisco voting
together as a class.
Our bylaws further provide that stockholders of Comdisco may not call
special meetings of the stockholders.
The provisions regarding classification of our board of directors,
removal of directors and the limitations on the stockholders' ability to call
special meetings may have the effect of discouraging anyone from attempting to
acquire control of Comdisco and thereby discouraging open market purchases of
any series of common stock.
Business Combinations with Substantial Stockholders. Our restated charter
provides that business combinations with substantial stockholders will require
the vote of two-thirds of the voting stock of Comdisco to approve that
transaction.
A "substantial stockholder" is defined as a person, other than a member
of our board of directors as of September 30, 1985 or any of our employee
benefit plans, who or which beneficially owns 10% or more of our outstanding
shares of common stock.
A "business combination" is defined to mean:
. a merger or consolidation of Comdisco with a substantial
stockholder;
. a sale, lease, exchange, transfer or other disposition of all or
any substantial part of the assets of Comdisco or any subsidiary
to a substantial stockholder (defined as 10% of the total book
value of the assets);
. a merger or consolidation of a substantial stockholder with
Comdisco or any subsidiary;
. a sale, lease, exchange, transfer or other disposition of all or
any substantial part of the assets of a substantial stockholder to
Comdisco or a subsidiary;
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. any re-classification of our common stock or any recapitalization
of Comdisco consummated within five years after a substantial
stockholder became a substantial stockholder;
. issuance of any securities of Comdisco or any subsidiary to a
substantial stockholder (except proportionately as a stockholder);
. acquisition by Comdisco or any subsidiary of securities of a
substantial stockholder; or
. any agreement providing for any of these types of transactions.
The business combination will not need to receive the two-thirds vote
outlined above if the consideration to be paid by the interested stockholder in
the business combination meets various tests set forth in our restated charter,
designed to ensure that the form and amount of consideration to be paid by the
interested stockholder is fair to the other holders of our common stock.
The business combination provisions outlined above may have the effect of
discouraging attempts to acquire control of Comdisco and thereby of
discouraging open market purchases of our common stock.
Stockholder Nominations and Proposals. Our bylaws provide that to
nominate directors, stockholders must submit a written notice to our corporate
secretary not less than 120 days nor more than 150 days before the first
anniversary of the date of the mailing of the proxy statement for our last
annual meeting. The notice must include the name and address of the stockholder
and of the nominee, a description of any arrangements between the stockholder
and the nominee, information about the nominee required by the SEC, the written
consent of the nominee to serve as a director and other information.
Similarly, to submit proposals at an annual meeting, a stockholder must
provide our corporate secretary of notice of the proposal not less than 120
days nor more than 150 days before the first anniversary of the date of the
mailing of the proxy statement for our last annual meeting. The notice must
include:
. a description of the proposal;
. the reasons for presenting the proposal at the annual meeting;
. the text of any resolutions to be presented;
. the stockholder's name and address and number of shares held;
. any material interest of the stockholder in the proposal; and
. a representation that the stockholder intends to appear at the
meeting, in person or by proxy, to submit the proposal.
In addition, the bylaws provide that only the board of directors,
chairman of the board, chief executive officer or president of Comdisco can
call special meetings of stockholders and that the only business that may be
brought before a special meeting is that business specified in the notice of
that meeting. These procedural requirements could have the effect of delaying
or preventing the submission of matters proposed by any stockholder to a vote
of the stockholders.
Delaware Law. Section 203 of the General Corporation Law of the State of
Delaware applies to Comdisco. Under certain circumstances, Section 203 limits
the ability of an "interested stockholder" to effect various business
combinations with Comdisco for a three-year period following the time that that
stockholder became an interested stockholder. An "interested stockholder" is
defined as a holder of 15% or more of our outstanding voting stock.
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An interested stockholder may engage in a business combination
transaction with Comdisco within the three-year period only if:
. our board of directors approved the transaction before the
stockholder became an interested stockholder or approved the
transaction in which the stockholder became an interested
stockholder;
. the interested stockholder acquired at least 85% of our voting
stock in the transaction in which it became an interested
stockholder; or
. our board of directors and the holders of shares entitled to cast
two-thirds of the votes entitled to be cast by all of our
outstanding voting shares held by all disinterested stockholders
approve the transaction.
Stock Transfer Agent and Registrar
ChaseMellon Shareholder Services L.L.C. will act as the registrar and
transfer agent for Comdisco Ventures Stock.
Stock Exchange Listing
Comdisco intends to apply to the Nasdaq National Market for the listing
of Comdisco Ventures Stock under the symbol "CDOV".
Anti-takeover Considerations
If Comdisco Ventures were a separate company and not part of a single
enterprise, any person interested in acquiring Comdisco Ventures without
negotiating with management could seek control of that entity by obtaining
control of its outstanding voting stock by means of a tender offer or proxy
contest. Although we intend Comdisco Ventures Stock to reflect the separate
performance of Comdisco Ventures, a person interested in acquiring Comdisco
Ventures without negotiation with Comdisco's management could obtain control of
that group only by obtaining control of all our outstanding voting stock.
The existence of multiple series of common stock could present
complexities and could in certain circumstances pose obstacles, financial and
otherwise, to an acquiring person. The existence of multiple series of common
stock could, under certain circumstances, prevent stockholders from profiting
from an increase in the market value of their shares as a result of a change in
control of Comdisco by delaying or preventing that change in control.
An additional shares of common stock is available for
future issuance without further stockholder approval. One of the effects of the
existence of authorized and unissued common stock and preferred stock could be
to enable the board to issue shares to persons friendly to current management
which could render more difficult or discourage an attempt to obtain control of
Comdisco by means of a merger, tender offer, proxy contest or otherwise, and
thereby protect the continuity of our management. These additional shares also
could be used to dilute the stock ownership of persons seeking to obtain
control of Comdisco.
For additional anti-takeover considerations, see "--Other Provisions of
Our Restated Charter, Bylaws and Delaware Law", beginning on page 67.
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CERTAIN MANAGEMENT AND ALLOCATION POLICIES
Because Comdisco Group and Comdisco Ventures will not be separate legal
entities, Comdisco has carefully considered a number of issues with respect to
the financing of each group, competition between groups, inter-group business
transactions, corporate opportunities and the allocation of shared services
expenses, corporate general and administrative expenses, debt, interest, taxes,
retirement benefit costs, and other support activities between the groups.
Following is a summary of policies and guidelines that we plan to follow to
help us to allocate costs and charges between the groups in a manner that will
ensure that transactions between the groups are made on a basis that in
management's judgment would be fair and equitable. These policies are not
subject to approval by Comdisco's stockholders and may be changed at any time
without stockholder approval.
The description of the Comdisco Ventures Policy Statement below is not
complete and is qualified in its entirety by reference to the Comdisco Ventures
Policy Statement. For information on how to obtain this document, see "Where
You Can Find More Information" on page 84. You are urged to read it in its
entirety.
Fiduciary and Management Responsibilities
Under Delaware law, absent an abuse of discretion, a director or officer
will be deemed to have satisfied his or her fiduciary duties to Comdisco and to
the holders of our Comdisco Stock and Comdisco Ventures Stock if that person is
disinterested and acts in accordance with his or her good faith business
judgment in the interests of Comdisco and all of our stockholders as a whole.
Our board of directors and our chief executive officer, in establishing
policies with regard to intracompany matters such as business transactions
between groups and allocations of assets, liabilities, debt, shared services
expenses, corporate general and administrative costs, taxes, interest,
retirement benefit costs, corporate opportunities and other matters, will
consider various factors and information which could benefit or cause detriment
to the stockholders of the respective groups and will make determinations in
the best interests of Comdisco and all of our stockholders as a whole. Comdisco
will adhere to the principle that transactions and transfers between groups
should be made on a basis that in management's judgment would be fair and
equitable.
Comdisco Ventures Stock Committee
The Comdisco Ventures Stock Committee of our board of directors will
oversee the interaction between the businesses of Comdisco Group and Comdisco
Ventures. The members of the Comdisco Ventures Stock Committee are selected by
our board of directors. In accordance with our bylaws, our board of directors
will delegate to the Comdisco Ventures Stock Committee authority to:
. interpret, make determinations under, and oversee the
implementation of the policies described in the Policy Statement
Regarding Comdisco Ventures Stock Matters described under "--
Comdisco Ventures Policy Statement," beginning on page 71;
. review our policies, programs and practices relating to:
. the business and financial relationships between Comdisco
Group and Comdisco Ventures,
. disclosures to stockholders and the public concerning, and
transactions by Comdisco or any of its subsidiaries, in
shares of Comdisco Ventures' tracking stock, and
. any matters arising in connection with any of the
foregoing, all to the extent the Comdisco Ventures Stock
Committee may deem appropriate;
. recommend changes in the policies, programs and practices that
Comdisco Ventures Stock Committee may deem appropriate;
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. adopt additional policies governing the relationship between
Comdisco Ventures and Comdisco Group; and
. engage the services of accountants, investment bankers,
appraisers, attorneys and other service providers to assist the
Comdisco Ventures Stock Committee in performing its duties.
The Comdisco Ventures Stock Committee will have and may exercise such other
powers, authority and responsibilities as our board of directors may determine
from time to time. Although our board of directors has no present intention to
do so, it may modify, suspend or rescind the bylaws or adopt additional bylaws,
at any time, without the approval of our stockholders, subject to our board of
directors' fiduciary duties.
Comdisco Ventures Policy Statement
We will, effective upon issuance of Comdisco Ventures Stock, adopt the
Comdisco Ventures Policy Statement, which Comdisco intends to follow.
General Policy
Our board of directors has determined that all material matters in which
holders of Comdisco Stock and Comdisco Ventures Stock may have divergent
interests will be generally resolved in a manner that is in the best interests
of Comdisco and all of its common stockholders after giving fair consideration
to the potentially divergent interests and all other relevant interests of the
holders of the separate classes of the common stock of Comdisco. Under the
Comdisco Ventures Policy Statement, the relationship between Comdisco Group and
Comdisco Ventures and the means by which the terms of any material transaction
between them will be determined will be governed by a process of fair dealing.
Relationship Between the Comdisco Group and Comdisco Ventures
The Comdisco Ventures Policy Statement provides that Comdisco will seek
to manage Comdisco Group and Comdisco Ventures in a manner designed to maximize
the operations, unique assets and value of both groups. Comdisco expects that
the operating relationship between the two groups will include the coordination
and use of bundled offers, marketing, sales, branding, and other intellectual
property and technology. In addition, there will be various financial
arrangements between the two groups, including with respect to debt, other
financings and taxes.
General. The Comdisco Ventures Policy Statement provides that, except as
otherwise provided in the policy statement, all material commercial
transactions between Comdisco Group and Comdisco Ventures will be on
commercially reasonable terms taken as a whole and will be subject to the
review and approval of our board of directors and/or the Comdisco Ventures
Stock Committee as its designee.
Allocation of corporate overhead and support services. Generally,
Comdisco Ventures will have access to the support services of Comdisco Group,
including human resources, legal, payroll, accounting, tax, information
technology and network services.
For shared corporate services that arise as a result of being part of a
combined entity, including securities filing and financial reporting services,
costs relating to these services will be:
. allocated directly to the group utilizing those services, and
. if not directly allocable to a group, allocated between the groups
on a fair and reasonable basis as our board of directors
determines.
For other support services, for example, billing and purchasing services,
the Comdisco Ventures Policy Statement provides that the groups will seek to
achieve enterprise efficiencies to minimize the
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aggregate costs incurred by the two groups combined, although each group also
will be entitled to negotiate and procure other support services on their own
from third parties.
Sourcing and provision of other services. Other than corporate overhead
and support services, Comdisco Ventures will use exclusively the services
offered by Comdisco Group if those types of services are required in Comdisco
Ventures transactions. The Comdisco Ventures Policy Statement further provides
that Comdisco Group will provide these services to Comdisco Ventures at the
best price offered by Comdisco Group to third parties in similar situations
when taking into account all relevant factors. In establishing these prices,
consideration of other factors, as appropriate, such as avoided costs and
synergies to be shared between the groups are expected to be taken into
account. In addition, each group will cooperate in good faith to develop offers
that reflect such other factors.
It is expected that when the combined services of the two groups are
bundled or offered together and the total cost to consumers of each of those
services are separately identified on a billing statement, Comdisco Group and
Comdisco Ventures will each control the pricing of its respective services and
receive the associated revenues.
In a combined transaction offering where the services of the two groups
are integrated and the total costs to consumers of each of those services are
not separately identified on a billing statement, the groups are expected to
work collaboratively to determine the nature of their arrangements and are also
permitted to source the services of the other group as described above;
provided, however, that Comdisco Ventures may not offer a combination of
services comprised primarily of Comdisco Group's services without Comdisco's
agreement.
Inter-Group Interest. The Comdisco Ventures Policy Statement provides
that Comdisco Ventures will not acquire Comdisco Stock.
No Employee Interest in Customers. The Comdisco Ventures Policy Statement
states that all employees of Comdisco are governed by Comdisco's conflicts and
insider trading policies. In addition, the Comdisco Ventures Policy Statement
provides that no employee of Comdisco Ventures may acquire any interest in any
customer of Comdisco Ventures.
Corporate Opportunities
The Comdisco Ventures Policy Statement provides that our board of
directors will allocate any business opportunities and operations, any acquired
assets and businesses and any assumed liabilities between the two groups, in
whole or in part, as it considers to be in the best interests of Comdisco and
its stockholders as a whole and as contemplated by the other provisions of the
policy statement. If a business opportunity or operation, an acquired asset or
business, or an assumed liability would be suitable to be undertaken by or
allocated to either group, our board of directors will allocate it using its
business judgment or in accordance with procedures that our board of directors
adopts from time to time to ensure that decisions will be made in the best
interests of Comdisco and its stockholders as a whole. Any allocation of this
type may involve the consideration of a number of factors that our board of
directors determines to be relevant, including, without limitation, whether the
business opportunity or operation, the acquired asset or business, or the
assumed liability is principally within the existing scope of a group's
business and whether a group is better positioned to undertake or have
allocated to it such business opportunity or operation, acquired asset or
business or assumed liability. Our board of directors currently intends,
however, subject to and without limiting the provisions of the Comdisco
Ventures Policy Statement, to allocate future venture financing opportunities
to Comdisco Ventures.
Dividend Policy
The Comdisco Ventures Policy Statement provides that, subject to the
limitations on dividends set forth in our charter, including any preferential
rights of any series of preferred stock of Comdisco, and
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to the limitations of applicable law, holders of shares of Comdisco Ventures
Stock will be entitled to receive dividends on that stock when, as and if our
board of directors authorizes and declares dividends on that stock.
Since Comdisco Ventures is expected to require significant capital
commitments to finance its operations and fund its future growth, the Comdisco
Ventures Policy Statement provides that Comdisco does not expect to pay any
dividends on shares of Comdisco Ventures Stock. If and when our board of
directors determines to pay any dividends on shares of Comdisco Ventures Stock,
the Comdisco Ventures Policy Statement provides that this determination will be
a business decision that our board of directors makes based upon the results of
operations, financial condition and capital requirements of Comdisco and other
factors that our board of directors considers relevant.
We expect that our dividend policy with respect to Comdisco Stock will be
consistent with the dividend policy we had for our prior existing common stock.
While the board of directors does not currently plan to change the policy
for payment of dividends referred to above, the board of directors has the
discretion to change this policy at any time. The amount of funds legally
available for dividends will reflect the gains or losses of all groups, and
Comdisco may be unable to pay dividends on a series of common stock that tracks
a group regardless of the financial condition or results of operations of that
group. We cannot assure you that there will be amounts available for payment of
dividends on any series of common stock.
In addition, subject to the limitations described above, and the
limitations set forth generally in this section, the board of directors may in
its sole discretion declare and pay dividends on neither series of common
stock, on one but not both series of common stock or on both series of common
stock. The amount of any dividend may likewise vary between Comdisco Stock and
Comdisco Ventures Stock in the sole discretion of the board of directors.
We will otherwise be permitted to pay dividends on Comdisco Ventures
Stock (and transfer corresponding amounts to Comdisco Group in respect of its
retained interest in the relevant group), but the total of the amounts paid as
dividends on the shares of Comdisco Ventures Stock and the corresponding
amounts transferred to Comdisco Group in respect of its retained interest in
the relevant group cannot exceed the available dividend amount for that group.
We will otherwise be permitted to pay dividends on Comdisco Stock out of
assets of Comdisco legally available for the payment of dividends under
Delaware law, but the total amounts paid as dividends on Comdisco Group Stock
cannot exceed the available dividend amount for Comdisco Group.
We expect that determinations to pay dividends on Comdisco Ventures Stock
or Comdisco Stock would be based primarily upon the financial condition,
results of operations, capital requirements, any restrictions contained in our
financing or other agreements and those other factors as our board of directors
deems relevant.
Financial Reporting
The Comdisco Ventures Policy Statement provides that Comdisco will
prepare and include in its filings with the SEC financial statements of
Comdisco Group and Comdisco Ventures for so long as Comdisco Ventures Stock is
outstanding. The financial statements of Comdisco Ventures will reflect the
financial position, results of operations and cash flows of the businesses
attributed to Comdisco Ventures and in the case of annual financial statements
will be audited.
Comdisco Ventures Stock Committee
We will, effective upon issuance of Comdisco Ventures Stock, establish
the Comdisco Ventures Stock Committee of our board of directors that we
describe above under "--Comdisco Ventures Stock Committee," beginning on page
70.
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In making determinations in connection with the policies set forth in the
Comdisco Ventures Policy Statement, the members of our board of directors and
Comdisco Ventures Stock Committee will act in a fiduciary capacity and in
accordance with legal guidance concerning their respective obligations under
applicable law. The delegation of responsibilities to Comdisco Ventures Stock
Committee will be subject to changes our board of directors may determine.
Amendment and Modification to the Comdisco Ventures Policy Statement
Our board of directors may amend, modify, suspend or rescind the policies
set forth in the Comdisco Ventures Policy Statement, including any resolution
implementing the provisions of the Comdisco Ventures Policy Statement. Our
board may also adopt additional or other policies or make exceptions with
respect to the application of the policies described in the Comdisco Ventures
Policy Statement in connection with particular facts and circumstances, all as
our board may determine, consistent with its fiduciary duties to Comdisco and
all of our stockholders.
Preparation of Financial Statements
We will prepare financial statements in accordance with generally
accepted accounting principles, consistently applied, for Comdisco Group and
Comdisco Ventures and for Comdisco on a consolidated basis. The financial
statements of Comdisco Group and Comdisco Ventures taken together will comprise
all the accounts included in the corresponding consolidated financial
statements of Comdisco. The financial statements of each of Comdisco Group and
Comdisco Ventures will reflect the financial condition, results of operations
and cash flows of the businesses included in the corresponding group.
The financial statements of each group will also include the allocated
portions of debt, interest, retirement benefit costs, shared services costs,
corporate general and administrative costs and taxes for each group. We will
make these allocations for the purposes of preparing the financial statements
of each group. However, the holders of Comdisco Stock and Comdisco Ventures
Stock will still be subject to all of the risks associated with an investment
in Comdisco as a whole.
Treasury Activities
Comdisco plans to continue to manage most financial activities on a
centralized basis. These activities include the investment of surplus cash, the
issuance and repayment of short-term and long-term debt and the issuance and
repurchase of common stock. If we transfer cash or other property allocated to
one group to another group, we may account for that transfer in one of the
following ways:
. as an adjustment to allocated pooled debt, or as a short-term or
long-term loan between groups, or as a repayment of a previous
borrowing, as described under "--Inter-group Loans" on the next
page; or
. as a sale of assets between groups; or
. as a reduction or increase in Comdisco Group's retained interest
in Comdisco Ventures.
Our board of directors has not adopted specific criteria to determine
which of the foregoing will be applied to a particular transfer of cash or
property from one group to another. Our board of directors and management will
make these determinations, either in specific instances or by setting generally
applicable policies, in the exercise of its business judgment. These
determinations will be based on all relevant circumstances, including the
financing needs and objectives of the receiving group, the investment
objectives of the transferring group, the availability, cost and time
associated with alternative financing sources, prevailing interest rates and
general economic conditions. We will make all transfers of assets from one
group to another on a fair and equitable basis for the foregoing purposes.
Although we may allocate our debt and preferred stock between groups, the
debt will remain the obligation of Comdisco as a whole and all of our
stockholders will be subject to the risks associated with those obligations.
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Comdisco Debt and Preferred Stock. We may allocate our debt between the
groups or, if we so determine, in its entirety to a particular group, for
example, in the case of specific acquisition financing. We will allocate
preferred stock, if issued, in a similar manner. We refer to debt and preferred
stock allocated between groups as "pooled."
The portion of the pooled debt allocated to Comdisco Ventures will bear
interest for purposes of its financial statements at a rate to reflect the
board of directors' good faith determination as to the relative credit risks of
Comdisco Ventures, and applied to Comdisco Ventures' allocated portion of the
pooled debt balance at the beginning of each period for which interest expense
is calculable. The remainder of the interest expense on pooled debt for that
period will be allocated to Comdisco Group. Preferred stock, if issued and if
pooled in a manner similar to the pooled debt, will bear dividends for group
financial statement purposes at a rate based on the weighted average dividend
rate of the preferred stock similarly calculated and applied. Any expense
related to increases in pooled debt or preferred stock will be reflected in the
weighted average interest or dividend rate of that pooled debt or preferred
stock as a whole.
If we allocate debt for a particular financing in its entirety to one
group, that debt will bear interest for group financial statement purposes at
the rate applicable to that debt as determined by the board of directors as
provided above. If we allocate preferred stock in its entirety to one group, we
will charge the dividend cost to that group in a similar manner. Any additional
expenses related to debt or preferred stock that is allocated in its entirety
to a group will be allocated in whole to that group.
Inter-group Loans. Cash or other property that we allocate to one group
that is transferred to another group could be accounted for either as
adjustments to allocated pooled debt, or as a short-term loan or as a long-term
loan. We will establish guidelines for the terms on which loans between the
groups will be made, including the interest rates, amortization schedule,
maturity and redemption terms.
Equity Issuances and Repurchases and Dividends. We will reflect all
financial effects of issuances and repurchases of shares of Comdisco Ventures
Stock or Comdisco Stock entirely in the financial statements of that group. We
will reflect financial effects of dividends or other distributions on, and
purchases of, shares of Comdisco Ventures Stock or Comdisco Stock entirely in
the respective financial statements of the related group.
Transfers of Assets Between Groups
Our restated charter permits the transfer of assets between groups
without stockholder approval. Comdisco has established a policy that all these
transfers will be made on a fair and equitable basis, as determined in good
faith by our board of directors or management. The consideration for these
transfers may be paid by one group to another in cash or other consideration.
Taxes
We will generally determine the income tax provisions of Comdisco and its
subsidiaries on a consolidated basis. We will allocate those consolidated
income tax provisions and related tax payments or refunds between the groups
based principally on the taxable income and tax credits directly attributable
to each group. These allocations will reflect each group's contribution,
whether positive or negative, to Comdisco's consolidated taxable income and the
consolidated tax liability and tax credit position. We will credit tax benefits
that cannot be used by the group generating those benefits but can be used on a
consolidated basis to the group that generated those benefits.
Current and deferred taxes and taxes payable or refundable allocated to
each group in its historical financial statements may differ from those that
would have been allocated to each group had they filed separate income tax
returns.
These policies are reflected in a tax sharing agreement between Comdisco
and Comdisco Ventures.
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Changes in Policies
Neither our board of directors nor management has any current plans to
change the above policies. However, these policies may be modified by the board
of directors or management in its or their sole discretion without the approval
of stockholders. Any modifications to the above policies will be made by the
board of directors or management in its or their good faith business judgment
of Comdisco's best interests, taking into consideration the interests of
Comdisco and all of Comdisco's stockholders.
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MATERIAL U.S. FEDERAL INCOME TAX CONSIDERATIONS
The following discussion is a summary of the material United States
federal income tax consequences of the ownership of Comdisco Ventures Stock.
The discussion is based on the Internal Revenue Code of 1986, as amended,
Treasury regulations, published positions of the Internal Revenue Service, and
court decisions as of the date of this prospectus, all of which are subject to
change. In particular, Congress could enact legislation affecting the treatment
of stock with characteristics similar to the Comdisco Ventures Stock, or the
Treasury Department could issue regulations that change current law. Any future
legislation or regulations could apply retroactively to the offering of
Comdisco Ventures Stock. See "--Absence of Authority Regarding Tracking Stock;
Possible Legislative, Regulatory or Other Changes" below. This discussion is
based on the opinion of Hopkins & Sutter, our special tax counsel.
The discussion below is included for general information only. It does
not discuss all aspects of United States federal income taxation that may be
relevant to a particular shareholder, nor does it discuss state, local, and
foreign tax consequences. Rather, it addresses only federal income tax
considerations that may be relevant to United States stockholders who will hold
their Comdisco Ventures Stock as capital assets within the meaning of Section
1221 of the Code. It may not apply to certain stockholders who are subject to
special treatment under the federal income tax laws, such as insurance
companies, corporations subject to the alternative minimum tax, banks, dealers
in securities, tax-exempt organizations, persons that hold existing common
stock as part of a straddle, hedging or conversion transaction, persons whose
functional currency is not the U.S. dollar, or stockholders who acquired their
stock pursuant to the exercise of employee stock options or otherwise as
compensation. Certain U.S. federal income and estate tax consequences to non-
U.S. stockholders are set forth further below.
Each Comdisco stockholder should consult his, her or its own tax advisor
as to the application of the federal income tax laws to their particular
situation, as well as to the applicability and effect of any state, local,
foreign or other federal tax laws.
Tracking Stock as Stock of Comdisco
In the opinion of Hopkins & Sutter, our special tax counsel, Comdisco
Ventures Stock will be considered stock of Comdisco for federal income tax
purposes. Accordingly, for federal income tax purposes, we believe that neither
you nor we will recognize any income, gain or loss as a result of the issuance
of Comdisco Ventures Stock pursuant to this offering.
Absence of Authority Regarding Tracking Stock; Possible Legislative, Regulatory
or Other Changes
The tax treatment of tracking stock has not been authoritatively settled.
The IRS has announced that it will not issue advance rulings on the
classification of tracking stock, and there are no court decisions or other
authorities that control the tax treatment of tracking stock. Hopkins &
Sutter's opinion is not binding on the IRS or a court. It is possible,
therefore, that the IRS could assert that Comdisco Ventures Stock represents
property other than stock of Comdisco. In that event, we could be required to
recognize significant taxable income or gain on the sale or distribution of
Comdisco Ventures Stock, and we might not be permitted to include the
operations of Comdisco Ventures in our consolidated federal income tax returns.
Hopkins & Sutter is of the opinion, however, that the IRS would not prevail in
those assertions under current law.
It is also possible that Congress could enact legislation or the IRS
could promulgate regulations that would adversely affect the tax treatment of
tracking stock. In particular, a legislative proposal made by the Clinton
Administration in February 2000 would, if enacted, tax stockholders on the
receipt of tracking stock as a distribution on, or in exchange for, their
existing stock, and grant the IRS authority to treat tracking stock as nonstock
or stock of another entity, effective for tracking stock issued on or after the
date of enactment. While this proposal would not directly apply to Comdisco
Ventures Stock
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purchased pursuant to this Offering prior to the date of enactment, it could,
if enacted, impede Comdisco's ability to thereafter distribute or sell Comdisco
Ventures Stock. We cannot predict whether the proposal will be enacted by
Congress and, if enacted, whether it will be in the form proposed by the
Clinton Administration. In addition, the IRS could issue regulations or other
administrative guidance, including regulations issued pursuant to its broad
authority under Section 337(d) of the Code, or a court could render a decision
that changes current law or adversely affects existing interpretations of
current law affecting tracking stock. Any of these changes, which may or may
not be retroactive, could alter the tax consequences to us or to our
stockholders discussed herein, and could be a "Tax Event" that would entitle
Comdisco to convert each outstanding share of Comdisco Ventures Stock into a
number of shares of Comdisco Stock equal to % of the ratio of the average
market values of the Comdisco Ventures Stock and the Comdisco Stock over a
specified trading period prior to such conversion. See "Description of Comdisco
Capital Stock--Description of Comdisco Ventures Stock," beginning on page 53.
This conversion should qualify as a tax-free recapitalization so that no gain
or loss is required to be recognized by us or by holders of the stock to be
converted.
Dividends
In general. In general, stockholders of a corporation are taxed (subject
to the intercorporate dividends-received deduction in the case of corporate
stockholders) on the receipt of dividends. In addition, under certain
circumstances where some stockholders of a corporation receive cash or other
dividends from the corporation while other stockholders increase their
proportionate equity interest in the corporation, Section 305 of the Code can
tax a stockholder whose proportionate equity interest in the earnings and
profits or assets of the corporation is increased as if that stockholder
received a constructive dividend. Based on the terms and conditions of the
tracking stock proposal and other circumstances, we do not believe that this
rule will apply to you for the foreseeable future.
Backup Withholding. Certain non-corporate holders of Comdisco Ventures
Stock could be subject to backup withholding at a rate of 31% on the payment of
dividends on or proceeds from the sale of that stock. Backup withholding will
apply only if the stockholder (1) fails to furnish its taxpayer identification
number, which, for an individual would be his or her social security number,
(2) furnishes an incorrect taxpayer identification number, (3) is notified by
the IRS that it has failed to properly report payments of interest or dividends
or (4) under certain circumstances, fails to certify under penalties of perjury
that it has furnished a correct taxpayer identification number and has not been
notified by the IRS that it is subject to backup withholding for failure to
report payments of interest or dividends. Stockholders should consult their tax
advisors regarding their qualification for exemption from backup withholding
and the procedures for obtaining that exemption if applicable. The amount of
any backup withholding from a payment to a holder of Comdisco Ventures Stock
will be allowed as a credit against that stockholder's federal income tax
liability and may entitle that holder to a refund, provided that the required
information is furnished to the IRS.
Conversion of Comdisco Ventures Stock into Comdisco Stock
Hopkins & Sutter has advised that, subject to unanticipated circumstances
that may exist at the time of conversion, if we exercise any of our options to
convert Comdisco Ventures Stock into Comdisco Stock, that conversion will be
tax-free to you (except where cash is received in lieu of fractional shares).
Your tax basis in the shares you receive as a result of that conversion will
equal your adjusted tax basis in the shares you surrender (subject to
adjustment for fractional shares redeemed for cash), and your holding period in
the shares you receive will include the holding period of the shares you
surrender in the exchange.
Certain U.S. Tax Consequences to Non-U.S. Holders
The following discussion applies to you if you are a (1) a nonresident
alien individual; (2) a foreign corporation, partnership or other entity; or
(3) a foreign estate or trust (Non-U.S. Holder).
78
<PAGE>
Dividends. Dividends paid to a Non-U.S. Holder generally will be subject
to withholding of federal income tax at a 30% rate or such lower rate as may be
specified by an applicable income tax treaty. However, if the dividend is
effectively connected with the conduct of a trade or business of the Non-U.S.
Holder within the United States, the dividend will instead be taxed at ordinary
federal income tax rates on a net income basis. Further, if the Non-U.S. Holder
is a corporation, this effectively connected dividend income may also be
subject to an additional branch profits tax.
Comdisco must report annually to the IRS and to each Non-U.S. Holder the
amount of dividends paid to that investor and the amount, if any, of tax
withheld with respect to those dividends. This information may also be made
available to the tax authorities in the Non-U.S. Holder's country of residence.
Sale or other Disposition of Comdisco Ventures Stock. A Non-U.S. Holder
generally will not be subject to federal income tax on any gain recognized on
the sale or other disposition of Comdisco Ventures Stock, except in the
following circumstances:
. The gain is effectively connected with a trade or business of the
Non-U.S. Holder within the United States.
. The Non-U.S. Holder is an individual who holds the Comdisco
Ventures Stock as a capital asset, is present in the United States
for 183 or more days in the taxable year of the sale or other
disposition, and either the individual has a "tax home" in the
United States for federal income tax purposes or the gain is
attributable to an office or other fixed place of business
maintained by the individual in the United States.
. The Non-U.S. Holder is subject to tax pursuant to the provisions
of the Internal Revenue Code applicable to certain United States
expatriates.
. Comdisco is or has been during certain periods a "United States
real property holding corporation." Comdisco believes that it will
not constitute a United States real property holding corporation
immediately after the offering and does not expect to become a
United States real property holding corporation; however, no
assurance can be given in this regard.
Backup withholding. Upon the sale or other disposition of Comdisco
Ventures Stock by a Non-U.S. Holder to or through a United States office of a
broker, that broker may be required to impose backup withholding at a rate of
31% and report the sale to the IRS, unless the investor certifies its foreign
status under penalties of perjury or otherwise establishes an exemption from
backup withholding. Upon a sale or other disposition to or through a foreign
office of a United States broker or a foreign broker with certain types of
relationships with the United States, the broker is not required to impose
backup withholding. However, the broker is required to report the sale or other
disposition to the IRS, unless the broker has documentary evidence in its files
that the seller is a Non-U.S. Holder and certain other conditions are met, or
the holder otherwise establishes an exemption.
Amounts withheld under these backup withholding rules are generally
allowable as a refund or credit against the Non-U.S. Holder's federal income
tax liability, if any, provided that the required information is furnished to
the IRS in a timely manner.
Final United States Treasury regulations, effective for payments made
after December 31, 2000, will affect the procedures to be followed by a Non-
U.S. Holder in establishing that investor's foreign status for purposes of the
withholding, backup withholding, and information reporting rules described in
the preceding paragraphs. Prospective Non-U.S. Holders should consult their tax
advisors concerning these regulations.
Federal Estate Taxes. Comdisco Ventures Stock owned or treated as owned
by an individual who is not a citizen or a resident of the United States at the
time of death will be included in that individual's gross estate for federal
estate tax purposes, unless an applicable estate tax treaty provides otherwise.
79
<PAGE>
UNDERWRITING
We intend to offer the shares of Comdisco Ventures Stock in the U.S. and
Canada through the U.S. underwriters and elsewhere through the international
managers. Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as U.S.
representative of the U.S. underwriters named below. Subject to the terms and
conditions described in a U.S. purchase agreement among us and the U.S.
underwriters, and concurrently with the sale of shares of
Comdisco Ventures Stock to the international managers, we have agreed to sell
to the U.S. underwriters, and the U.S. underwriters severally have agreed to
purchase from us, the number of shares of Comdisco Ventures Stock listed
opposite their names below.
<TABLE>
<CAPTION>
Number
of
U.S. Underwriter Shares
---------------- ------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated...............................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
.............................................................
-----
Total..........................................................
=====
</TABLE>
We have also entered into an international purchase agreement with the
international managers for sale of the shares of Comdisco Ventures Stock
outside the U.S. and Canada for whom Merrill Lynch International is acting as
lead manager. Subject to the terms and conditions in the international purchase
agreement, and concurrently with the sale of shares of Comdisco
Ventures Stock to the U.S. underwriters pursuant to the U.S. purchase
agreement, we have agreed to sell to the international managers, and the
international managers severally have agreed to purchase,
shares of Comdisco Ventures Stock from us. The initial public offering price
per share and the total underwriting discount per share are identical under the
U.S. purchase agreement and the international purchase agreement.
The U.S. underwriters and the international managers have agreed to
purchase all of the shares of Comdisco Ventures Stock sold under the U.S. and
international purchase agreements if any of these shares are purchased. If an
underwriter defaults, the U.S. and international purchase agreements provide
that the purchase commitments of the nondefaulting underwriters may be
increased or the purchase agreements may be terminated. The closings for the
sale of shares of Comdisco Ventures Stock to be purchased by the U.S.
underwriters and the international managers are conditioned on one another.
We have agreed to indemnify the U.S. underwriters and the international
managers against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the U.S. underwriters and
international managers may be required to make in respect of those liabilities.
The underwriters are offering the shares of Comdisco Ventures Stock,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of legal matters by their counsel, including the validity of the
shares, and other conditions contained in the purchase agreements, such as the
receipt by the underwriters of officer's certificates and legal opinions. The
underwriters reserve the right to withdraw, cancel or modify offers to the
public and to reject orders in whole or in part.
80
<PAGE>
Commissions and Discounts
The U.S. representative has advised us that the U.S. underwriters propose
initially to offer the shares of Comdisco Ventures Stock to the public at the
initial public offering price on the cover page of this prospectus and to
dealers at that price less a concession not in excess of $. per share. The
U.S. underwriters may allow, and the dealers may reallow, a discount not in
excess of $. per share to other dealers. After the initial public offering,
the public offering price, concession and discount may be changed.
The following table shows the public offering price, underwriting
discount and proceeds before expenses to Comdisco. The information assumes
either no exercise or full exercise by the U.S. underwriters and the
international managers of their over-allotment options.
<TABLE>
<CAPTION>
Per Without With
Share Option Option
------- ------- -------
<S> <C> <C> <C>
Public offering price............................. $ $ $
Underwriting discount............................. $ $ $
Proceeds, before expenses, to Comdisco............ $ $ $
</TABLE>
The expenses of the offering, not including the underwriting discount,
are estimated at $ and are payable by Comdisco.
Over-allotment Option
We have granted options to the U.S. underwriters to purchase up to
additional shares of Comdisco Ventures Stock at the public offering price less
the underwriting discount. The U.S. underwriters may exercise these options for
30 days from the date of this prospectus solely to cover any over-allotments.
If the U.S. underwriters exercise these options, each will be obligated,
subject to conditions contained in the purchase agreements, to purchase a
number of additional shares of Comdisco Ventures Stock proportionate to that
U.S. underwriter's initial amount reflected in the above table.
We have also granted options to the international managers, exercisable
for 30 days from the date of this prospectus, to purchase up to
additional shares of Comdisco Ventures Stock to cover any over-allotments on
terms similar to those granted to the U.S. underwriters.
Intersyndicate Agreement
The U.S. underwriters and the international managers have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Under the intersyndicate agreement, the U.S. underwriters and the
international managers may sell shares of Comdisco Ventures Stock to each other
for purposes of resale at the initial public offering price, less an amount not
greater than the selling concession. Under the intersyndicate agreement, the
U.S. underwriters and any dealer to whom they sell shares of Comdisco Ventures
Stock will not offer to sell or sell shares to persons who are non-U.S. or non-
Canadian persons or to persons they believe intend to resell to persons who are
non-U.S. or non-Canadian persons, except in the case of transactions under the
intersyndicate agreement. Similarly, the international managers and any dealer
to whom they sell shares of Comdisco Ventures Stock will not offer to sell or
sell shares to U.S. persons or Canadian persons or to persons they believe
intend to resell to U.S. or Canadian persons, except in the case of
transactions under the intersyndicate agreement.
Reserved Shares
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares of Comdisco Ventures Stock offered
by this prospectus for sale to some of Comdisco Ventures' employees and other
of our business associates and related persons and for purchase by Comdisco as
a contribution to our retirement plan. If these persons purchase reserved
shares, this will
81
<PAGE>
reduce the number of shares available for sale to the general public. Any
reserved shares that are not orally confirmed for purchase within one day of
the pricing of this offering will be offered by the underwriters to the general
public on the same terms as the other shares offered by this prospectus.
No Sales of Similar Securities
We have agreed, with exceptions, not to sell or transfer any Comdisco
Ventures Stock for 180 days after the date of this prospectus without first
obtaining the written consent of Merrill Lynch, Pierce, Fenner & Smith
Incorporated. Specifically, we have agreed not to directly or indirectly:
. offer, pledge, sell or contract to sell any Comdisco Ventures
Stock;
. sell any option or contract to purchase any Comdisco Ventures
Stock;
. purchase any option or contract to sell any Comdisco Ventures
Stock;
. grant any option, right or warrant for the sale of any Comdisco
Ventures Stock other than options granted pursuant to our stock-
based compensation plans;
. lend or otherwise dispose of or transfer any Comdisco Ventures
Stock;
. request or demand that we file a registration statement related to
the Comdisco Ventures Stock; or
. enter into any swap or other agreement that transfers, in whole or
in part, the economic consequence of ownership of any Comdisco
Ventures Stock, whether any such swap or transaction is to be
settled by delivery of shares or other securities, in cash or
otherwise.
This lockup provision applies to Comdisco Ventures Stock and to
securities convertible into or exchangeable or exercisable for or repayable
with Comdisco Ventures Stock.
Quotation on the Nasdaq National Market
We anticipate the shares to be approved for quotation on the Nasdaq
National Market, subject to notice of issuance, under the symbol "CDOV."
Before this offering, there has been no public market for our Comdisco
Ventures Stock. The initial public offering price will be determined through
negotiations among us and the U.S. representative and lead manager. In addition
to prevailing market conditions, the factors to be considered in determining
the initial public offering price are:
. the valuation multiples of publicly traded companies that the U.S.
representative and the lead manager believe to be comparable to
Comdisco Ventures;
. Comdisco Ventures' financial information;
. the history of, and the prospects for, Comdisco Ventures and the
industry in which Comdisco Ventures competes;
. an assessment of Comdisco Ventures' management, its past and
present operations, and the prospects for, and timing of, Comdisco
Ventures' future revenues;
. the present state of Comdisco Ventures' development; and
. the above factors in relation to market values and various
valuation measures of other companies engaged in activities
similar to those of Comdisco Ventures.
An active trading market for the shares may not develop. It is also
possible that after the offering the Comdisco Ventures Stock will not trade in
the public market at or above the initial public offering price.
82
<PAGE>
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares of Comdisco Ventures Stock is
completed, SEC rules may limit underwriters and selling group members from
bidding for and purchasing our Comdisco Ventures Stock. However, the U.S.
representative may engage in transactions that stabilize the price of the
Comdisco Ventures Stock, such as bids or purchases to peg, fix or maintain that
price.
If the underwriters create a short position in Comdisco Ventures Stock in
connection with the offering, i.e., if they sell more shares than are listed on
the cover of this prospectus, the U.S. representative may reduce that short
position by purchasing shares of Comdisco Ventures Stock in the open market.
The U.S. representative may also elect to reduce any short position by
exercising all or part of the over-allotment option described above. Purchases
of the Comdisco Ventures Stock to stabilize its price or to reduce a short
position may cause the price of the Comdisco Ventures Stock to be higher than
it might be in the absence of such purchases.
The U.S. representative may also impose a penalty bid on underwriters and
selling group members. This means that if the U.S. representative purchases
shares of Comdisco Ventures Stock in the open market to reduce the
underwriters' short position or to stabilize the price of such shares, it may
reclaim the amount of the selling concession from the underwriters and selling
group members who sold those shares. The imposition of a penalty bid may also
affect the price of the shares of Comdisco Ventures Stock in that it
discourages resales of those shares.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Comdisco Ventures Stock. In
addition, neither we nor any of the underwriters makes any representation that
the U.S. representative or the lead manager will engage in these transactions
or that these transactions, once commenced, will not be discontinued without
notice.
Other Relationships
Some of the underwriters and their affiliates have engaged in, and may in
the future engage in, investment banking and other commercial dealings in the
ordinary course of business with us. They have received customary fees and
commissions for these transactions.
83
<PAGE>
LEGAL MATTERS
Jeremiah M. Fitzgerald, Vice President and Chief Legal Officer of
Comdisco and McBride Baker & Coles, Chicago, Illinois, will pass upon the
validity of the issuance of the shares of Comdisco Ventures Stock offered by
this prospectus. As of March 1, 2000, Mr. Fitzgerald held 71,292 shares of
Comdisco Stock and options to purchase 164,415 shares of Comdisco Stock.
McBride Baker & Coles has from time to time represented and may continue to
represent, Comdisco and its affiliates in certain legal matters. As of March 1,
2000, attorneys at McBride Baker & Coles participating in the representation of
Comdisco in this matter held approximately 2,500 shares of Comdisco Stock.
Hopkins & Sutter will render an opinion to Comdisco with respect to certain tax
matters relating to the issuance of the shares of Comdisco Ventures Stock
offered by this prospectus. Brown & Wood llp will pass upon the validity of the
issuance of the shares of Comdisco Ventures Stock offered by this prospectus
for the underwriters.
EXPERTS
We incorporate by reference into this prospectus and our registration
statement our consolidated financial statements of Comdisco, Inc. as of
September 30, 1999 and 1998 and for each of the years in the three-year period
ended September 30, 1999, and we include in this prospectus and our
registration statement the combined financial statements of Comdisco Ventures
as of September 30, 1999 and 1998 and for each of the years in the three-year
period ended September 30, 1999. We have relied on the reports of KPMG LLP,
independent certified public accountants, incorporated by reference and
included in this prospectus and our registration statement, and upon their
authority as experts in accounting and auditing.
WHERE YOU CAN FIND MORE INFORMATION
Comdisco filed a registration statement on Form S-3 to register the
Comdisco Ventures Stock offered by this prospectus with the SEC. This
prospectus is part of the registration statement and constitutes a prospectus
of Comdisco. The registration statement (including the attached exhibits and
schedules) that we filed with the SEC contains additional relevant information
about Comdisco. The rules and regulations of the SEC allow us to omit certain
information included in the registration statement from this prospectus. The
full registration statement can be obtained from the SEC as indicated below, or
from us.
We also file reports, proxy statements, and other information with the
SEC. You may read and copy any reports, proxy statements, and other information
we file at the following locations of the SEC:
Public Reference Room New York Regional Office Chicago Regional
450 Fifth Street, N.W. 7 World Trade Center Office
Room 1024 Suite 1300 Citicorp Center
Washington, D.C. 20549 New York, New York 10048 500 West Madison
Street
Suite 1400
Chicago, Illinois
60661-2511
You may also obtain copies of this information by mail from the Public
Reference Section of the Commission, 450 Fifth Street, N.W., Room 1024,
Washington, D.C. 20549, at prescribed rates. Further information on the
operation of the Commission's Public Reference Room in Washington, D.C. can be
obtained by calling the Commission at 1-800-SEC-0330. Our SEC filings are also
available to the public from commercial documents retrieval services and at the
Internet world wide web site maintained by the SEC at www.sec.gov. Our SEC
filings are also available to the public at the Internet worldwide web site we
maintain at www.comdisco.com.
Comdisco Stock is listed on the New York Stock Exchange. Reports and
other information concerning Comdisco can also be inspected at the office of
the New York Stock Exchange, Inc., 20 Broad Street, New York, New York 10005.
84
<PAGE>
INCORPORATION OF INFORMATION COMDISCO FILES WITH THE SEC
The SEC allows us to "incorporate by reference" the information Comdisco
files with them, which means:
. incorporated documents are considered part of this prospectus;
. we can disclose important information to you by referring you to
those documents; and
. information that we file with the SEC will automatically be
considered to update and supersede this prospectus.
We incorporate by reference the documents listed below, which Comdisco
filed with the SEC under the Securities Exchange Act of 1934, as amended:
. Annual Report on Form 10-K of Comdisco for the year ended
September 30, 1999 as amended by Form 10-K/A filed with the SEC on
February 24, 2000;
. Quarterly Report on Form 10-Q of Comdisco for the quarter ended
December 31, 1999, as amended by Form 10-Q/A filed with the SEC on
February 29, 2000;
. Current Report on Form 8-K of Comdisco filed March 9, 2000; and
. the description of Comdisco's Comdisco Ventures Stock contained in
Comdisco's Registration Statement on Form 8-A filed under the
Exchange Act and any amendments or reports filed for the purpose
of updating that description.
We also incorporate by reference into this prospectus additional
documents that may be filed with the SEC pursuant to Sections 13(a), 13(c), 14
or 15(d) of the Exchange Act from the date of this prospectus prior to the
termination of the offering of the securities made by this prospectus. These
include periodic reports, such as Annual Reports on Form 10-K, quarterly
Reports on Form 10-Q and Current Reports on Form 8-K, as well as prospectuses.
Any statements contained in a previously filed document incorporated by
reference herein is deemed to be modified or superseded for purposes of the
prospectus to the extent that a statement contained herein (or in a
subsequently filed documents which also is incorporated by reference herein)
modifies or supersedes that statement.
If you are a shareholder, we may have sent you some of the documents
incorporated by reference, but you can obtain any of them through us, the SEC
or the SEC's Internet world wide web site as described on the preceding page
under "Where You Can Find More Information."
We will provide without charge upon written or oral request, a copy of
any or all of the documents that are incorporated by reference into this
prospectus, other than exhibits which are specifically incorporated by
reference into those documents. You should direct your requests in writing or
by telephone at the following address:
Comdisco, Inc.
6111 North River Road
Rosemont, Illinois 60018
Telephone: (847) 698-3000
Attention: Corporate Secretary
85
<PAGE>
ANNEX I
ILLUSTRATION OF TERMS OF COMDISCO VENTURES STOCK
The following illustrations show how to calculate the:
. Retained Interest Percentage;
. Outstanding Interest Percentage;
. number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures; and
. total number of notional shares deemed outstanding with respect to
Comdisco Ventures,
after giving effect to certain hypothetical dividends, issuances,
repurchases and transfers, in each case based on the assumptions set forth
herein.
In these illustrations, the number of shares issuable with respect to
Comdisco Group's retained interest in Comdisco Ventures is initially assumed to
be 100. Unless otherwise specified, each illustration below should be read
independently as if none of the other transactions referred to below had
occurred. Actual calculations may be slightly different due to rounding. The
illustrations are not intended to be complete and are qualified in their
entirety by the more detailed information contained in this document and the
annexes to this document. The following illustrations are purely hypothetical
and the numbers used herein, including assumptions of market values, were
chosen to simplify the calculations and are not intended to represent estimates
of actual numbers or values. Capitalized terms used but not otherwise defined
in this illustration of terms have the respective meanings ascribed to them in
this document.
"Total number of notional shares deemed outstanding with respect to
Comdisco Ventures" means the number of shares of Comdisco Ventures Stock
outstanding plus the number of shares issuable with respect to Comdisco Group's
retained interest in Comdisco Ventures.
At any given time, the percentage interest in Comdisco Ventures intended
to be represented by the outstanding shares of Comdisco Ventures Stock--which
we call the Outstanding Interest Percentage--is equal to:
Number of outstanding shares of Comdisco Ventures Stock
------------------------------------------------------------------
Total number of notional shares deemed outstanding with respect to Comdisco
Ventures
and the remaining percentage interest in Comdisco Ventures intended to be
represented by Comdisco Group's retained interest in Comdisco Ventures--which
we call the Retained Interest Percentage--is equal to:
Number of shares issuable with respect to Comdisco Group's retained interest in
Comdisco Ventures
---------------------------------------------------------------------------
Total number of notional shares deemed outstanding with respect to Comdisco
Ventures
The sum of the Outstanding Interest Percentage and the Retained Interest
Percentage would always equal 100%. In our example, before the first issuance
of shares of Comdisco Ventures Stock the number of shares issuable with respect
to Comdisco Group's retained interest in Comdisco Ventures is equal to 100, the
Retained Interest Percentage is 100% and the Outstanding Interest Percentage is
0%.
ISSUANCE OF COMDISCO VENTURES STOCK
The following illustrations reflect an assumed issuance by Comdisco of 20
shares of Comdisco Ventures Stock in the offering.
I-1
<PAGE>
Offering For Account of Comdisco Ventures
Assume the issuance is attributed to Comdisco Ventures as an increase in
its equity, with the net proceeds credited solely to Comdisco Ventures.
<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 0
Newly issued shares for account of Comdisco Ventures................... 20
---
Total issued and outstanding after the offering.................... 20
===
</TABLE>
. The number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures (100) would remain unchanged.
. As a result, the issued and outstanding shares (20) would represent an
Outstanding Interest Percentage of approximately 17%, calculated as
follows:
20
------
20 + 100
The Retained Interest Percentage would accordingly be about 83%.
. In this case, in the event of any dividend or other distribution paid on
the outstanding shares of Comdisco Ventures Stock (other than a dividend
or other distribution payable in shares of Comdisco Ventures Stock),
Comdisco Group would be credited, and Comdisco Ventures would be
charged, with an amount equal to 500% (representing the ratio of the
number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures (100) to the total number of shares of
Comdisco Ventures Stock issued and outstanding following the offering
(20)) of the aggregate amount of such dividend or distribution.
Additional Issuance of Comdisco Ventures Stock
The following illustrations reflect an assumed issuance of an additional
15 shares by Comdisco of Comdisco Ventures Stock after the assumed initial
issuance of 20 shares attributed to Comdisco Ventures as an increase in its
equity.
Additional Offering for Account of Comdisco Group
Assume the issuance is attributed to Comdisco Group in respect of its
retained interest, with the net proceeds credited solely to Comdisco Group.
<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 20
Newly issued shares for account of Comdisco Group...................... 15
---
Total issued and outstanding after additional offering............. 35
===
</TABLE>
. The number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures would decrease by the number of shares of
Comdisco Ventures Stock issued for the account of Comdisco Group.
<TABLE>
<S> <C>
Number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures prior to the additional offering...... 100
Newly issued shares for account of Comdisco Group.................... 15
---
Number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures after the additional offering......... 85
===
</TABLE>
I-2
<PAGE>
. As a result, the total issued and outstanding shares (35) would in the
aggregate represent an Outstanding Interest Percentage of approximately
29%, calculated as follows:
35
-----
35 + 85
The Retained Interest Percentage would accordingly be reduced to
approximately 71%.
. In this case, in the event of any dividend or other distribution paid on
Comdisco Ventures Stock (other than a dividend or other distribution
payable in shares of Comdisco Ventures Stock), Comdisco Group would be
credited, and Comdisco Ventures would be charged, with an amount equal
to approximately 243% (representing the ratio of the number of shares
issuable with respect to Comdisco Group's retained interest in Comdisco
Ventures (85) to the total number of shares of Comdisco Ventures Stock
issued and outstanding following the additional offering (35)) of the
aggregate amount of such dividend or distribution.
Additional Offering for Account of Comdisco Ventures
Assume the issuance is attributed to Comdisco Ventures as an increase in
its equity, with the net proceeds credited solely to Comdisco Ventures.
<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 20
Newly issued shares for account of Comdisco Ventures................... 15
---
Total issued and outstanding after the additional offering......... 35
===
</TABLE>
. The number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures (100) would remain unchanged.
. As a result, the total issued and outstanding shares (35) would in the
aggregate represent an Outstanding Interest Percentage of approximately
26%, calculated as follows:
35
------
35 + 100
The Retained Interest Percentage would accordingly be reduced to
approximately 74%.
. In this case, in the event of any dividend or other distribution paid on
Comdisco Ventures Stock (other than a dividend or the distribution
payable in shares of Comdisco Ventures stock), Comdisco Group would be
credited, and Comdisco Ventures would be charged, with an amount equal
to approximately 286% (representing the ratio of number of shares
issuable with respect to Comdisco Group's retained interest in Comdisco
Ventures (100) to the total number of shares of Comdisco Ventures Stock
issued and outstanding following the additional offering (35)) of the
aggregate amount of such dividend or distribution.
Offerings of Convertible Securities
If Comdisco were to issue any securities convertible into or exercisable
for shares of Comdisco Ventures stock, the Outstanding Interest Fraction and
the Retained Interest Fraction would be unchanged at the time of such issuance.
If any shares of Comdisco Ventures Stock were issued upon conversion or
exercise of such securities, however, then the Outstanding Interest Fraction
and the Retained Interest Fraction would be affected as shown above under
"Additional Offering for Account of Comdisco Group", if such securities were
attributed to Comdisco Group, or under "Additional Offering for Account of
Comdisco Ventures", if such securities were attributed to Comdisco Ventures.
I-3
<PAGE>
REPURCHASES OF COMDISCO VENTURES STOCK
The following illustrations reflect an assumed repurchase by Comdisco of
5 shares of Comdisco Ventures Stock after the assumed initial issuance of 20
shares of Comdisco Ventures Stock attributed to Comdisco Ventures as an
increase in its equity.
Repurchase for the Account of Comdisco Group
Assume the repurchase is attributed to Comdisco Group as an increase in
its retained interest in Comdisco Ventures, with the cost charged solely
against Comdisco Group.
<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 20
Shares repurchased for account of Comdisco Group....................... 5
---
Total issued and outstanding after repurchase...................... 15
===
</TABLE>
. The Number of Shares Issuable with Respect to Comdisco Group's Retained
Interest in Comdisco Ventures would be increased by the number of any
shares of Comdisco Ventures Stock repurchased for the account of
Comdisco Group.
<TABLE>
<S> <C>
Number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures prior to repurchase.................. 100
Number of shares repurchased for the account of Comdisco Group...... 5
---
Number of shares Issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures after repurchase..................... 105
===
</TABLE>
. As a result, the total issued and outstanding shares (15) would in the
aggregate represent an Outstanding Interest Percentage of approximately
12.5%, calculated as follows:
15
------
15 + 105
The Retained Interest Percentage would accordingly be increased to
approximately 87.5%.
Repurchase for Account of Comdisco Ventures Without Participation by Comdisco
Group
Assume the repurchase is attributed to Comdisco Ventures, with the cost
being charged solely against Comdisco Ventures. Further assume that the board
of directors does not determine to transfer assets from Comdisco Ventures to
Comdisco Group to hold constant the Outstanding Interest Fraction and Retained
Interest Fraction.
<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 20
Shares repurchased for account of Comdisco Ventures.................... 5
---
Total issued and outstanding after repurchase...................... 15
===
</TABLE>
. The number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures (100) would remain unchanged.
. As a result, the total issued and outstanding shares (15) would in the
aggregate represent an Outstanding Interest Percentage of approximately
13%, calculated as follows:
15
------
15 + 100
The Retained Interest Percentage would accordingly be increased to
approximately 87%.
I-4
<PAGE>
Repurchase for Account of Comdisco Ventures With Participation by Comdisco
Group
Assume the repurchase is attributed to Comdisco Ventures, with the cost
being charged solely against Comdisco Ventures. Further assume that the
repurchase is made in connection with a tender offer for 5, or 25%, of the then
outstanding shares at a price of $20 per share, and that the board of directors
determines to transfer cash or other assets from Comdisco Ventures to Comdisco
Group to hold constant the Outstanding Interest Fraction and Retained Interest
Fraction.
<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 20
Shares repurchased for account of Comdisco Ventures.................... 5
---
Total issued and outstanding after repurchase...................... 15
===
</TABLE>
. In order to hold constant the Outstanding Interest Fraction and Retained
Interest Fraction, the board of directors determines that the market
value of a share of Comdisco Ventures Stock in this context is $20 and
transfers from Comdisco Ventures to Comdisco Group an amount of cash or
other assets equal to about 500% (representing the ratio of the number
of shares issuable with respect to Comdisco Group's retained interest in
Comdisco Ventures (100) to the total number of shares of the Comdisco
Ventures Stock issued and outstanding (20), in each case immediately
prior to the repurchase) of the aggregate amount of the cash paid in the
tender offer to holders of outstanding shares of the Comdisco Ventures
Stock ($100), for a total of $500.
. In that case, the number of shares issuable with respect to Comdisco
Group's retained interest in Comdisco Ventures (100) would be decreased
to reflect the amount of cash so transferred ($500) divided by the
market value per share of the Comdisco Ventures Stock ($20).
<TABLE>
<S> <C>
Number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures prior to transfer................... 100
Adjustment in respect of Comdisco Group's retained interest to
reflect transfer to Comdisco Group of funds theretofore allocated
to Comdisco Ventures.............................................. 25
---
Number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures after transfer...................... 75
===
</TABLE>
. As a result, the total issued and outstanding shares (15) would in the
aggregate continue to represent an Outstanding Interest Percentage of
approximately 17%, calculated as follows:
15
-----
15 + 75
The Retained Interest Percentage would accordingly continue to remain
83%.
. Assuming that the board of directors transferred only half of the $500
amount, or $250, from Comdisco Ventures to Comdisco Group, the number of
shares issuable with respect to Comdisco Group's retained interest in
Comdisco Ventures (100) would decrease by the amount of cash so
transferred ($250) divided by the market value per share of Comdisco
Ventures Stock ($20).
<TABLE>
<S> <C>
Number of shares issuable with respect to Comdisco Group's
retained interest in Comdisco Ventures prior to transfer......... 100
Adjustment in respect of Comdisco Group's retained interest to
reflect transfer to Comdisco Group of cash theretofore allocated
to Comdisco Ventures............................................. 12.5
-----
Number of shares issuable with respect to Comdisco Group's
retained interest in Comdisco Ventures after transfer............ 87.5
=====
</TABLE>
I-5
<PAGE>
. In that case, as a result, the total issued and the outstanding shares
(15) would in the aggregate represent an Outstanding Interest Percentage
of a little less than 15%, calculated as follows:
15
-------
15 + 87.5
The Retained Interest Percentage would accordingly be increased to a
little more than 85%.
COMDISCO VENTURES STOCK DIVIDENDS
The following illustrations reflect assumed dividends of Comdisco
Ventures Stock on outstanding shares of Comdisco Stock and outstanding shares
of the Comdisco Ventures Stock , respectively, after the assumed initial
issuance of 20 shares of Comdisco Ventures Stock attributed to Comdisco
Ventures as an increase in its equity.
Comdisco Ventures Stock Dividend on Comdisco Stock
Assume 1,000 shares of Comdisco Stock are outstanding and Comdisco
declares a dividend of 1/20 of a share of Comdisco Ventures Stock on each
outstanding share of Comdisco Stock.
<TABLE>
<S> <C>
Shares previously issued and outstanding................................ 20
Newly issued shares for account of Comdisco Group....................... 50
---
Total issued and outstanding after dividend......................... 70
===
</TABLE>
. Any dividend of shares of Comdisco Ventures Stock to the holders of
shares of Comdisco Stock would be treated as a reduction in the number
of shares issuable with respect to Comdisco Group's retained interest in
Comdisco Ventures.
<TABLE>
<S> <C>
Number of shares issuable with respect to Comdisco Group's retained
interest in
Comdisco Ventures prior to dividend................................. 100
Number of shares distributed on outstanding shares of Comdisco Stock
for account of Comdisco Group....................................... 50
---
Number of shares issuable with respect to Comdisco Group's retained
interest in
Comdisco Ventures after dividend.................................... 50
===
</TABLE>
. As a result, the total issued and outstanding shares (70) would in the
aggregate represent an Outstanding Interest Percentage of approximately
58%, calculated as follows:
70
-----
70 + 50
The Retained Interest Percentage would accordingly be reduced to
approximately 42%. Note, however, that after the dividend, the holders of
Comdisco Stock would also hold 50 shares of the Comdisco Ventures Stock, which
would represent half the value attributable to Comdisco Ventures originally
held by Comdisco Group.
Comdisco Ventures Stock Dividend on Comdisco Ventures Stock
Assume Comdisco declares a dividend of 1/5 of a share of Comdisco
Ventures Stock on each outstanding share of the Comdisco Ventures Stock of the
same series.
<TABLE>
<S> <C>
Shares previously issued and outstanding.............................. 20
Newly issued shares for account of Comdisco Ventures.................. 4
---
Total issued and outstanding after dividend....................... 24
===
</TABLE>
I-6
<PAGE>
. The number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures would reflect the stock dividend payable
in shares of Comdisco Ventures Stock to holders of shares of Comdisco
Ventures Stock. That is, the number of shares issuable with respect to
Comdisco Group's retained interest in Comdisco Ventures would be
increased by a number equal to 500% (representing the ratio of the
number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures (100) to the number of shares of Comdisco
Ventures Stock issued and outstanding (20), in each case immediately
prior to such dividend) of the aggregate number of shares issued in
connection with such dividend (4), or 20.
<TABLE>
<S> <C>
Number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures prior to dividend................... 100
Adjustment in respect of Comdisco Group's retained interest to
reflect shares distributed on outstanding shares of the Comdisco
Ventures Stock.................................................... 20
---
Number of shares Issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures after dividend...................... 120
===
</TABLE>
. As a result, the total issued and outstanding shares (24) would in the
aggregate represent an Outstanding Interest Percentage of approximately
17%, calculated as follows:
24
------
24 + 120
The Retained Interest Percentage would accordingly remain approximately
83%.
CAPITAL TRANSFERS OF CASH OR OTHER ASSETS BETWEEN COMDISCO GROUP
AND COMDISCO VENTURES
Capital Contribution of Cash or Other Assets From Comdisco Group To Comdisco
Ventures
The following illustration reflects the assumed contribution by Comdisco
Group to Comdisco Ventures, after the assumed initial issuance of 20 shares of
Comdisco Ventures Stock attributed to Comdisco Ventures as an increase in its
equity, of $100 of assets allocated to Comdisco Group at a time when the market
value of the Comdisco Ventures Stock is $20 per share.
<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 20
Newly issued shares.................................................... 0
---
Total issued and outstanding after contribution.................... 20
===
</TABLE>
. The number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures would increase to reflect the contribution
to Comdisco Ventures of assets theretofore allocated by Comdisco Group
by a number equal to the value of the assets contributed ($100) divided
by the market value of Comdisco Ventures Stock at that time ($20), or 5
shares.
<TABLE>
<S> <C>
Number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures prior to contribution................. 100
Increase to reflect contribution to Comdisco Ventures of assets
allocated to Comdisco Group......................................... 5
---
Number of shares issuable with Respect to Comdisco Group's retained
interest in Comdisco Ventures after contribution.................... 105
===
</TABLE>
. As a result, the total issued and outstanding shares (20) would in the
aggregate represent an Outstanding Interest Percentage of 16%,
calculated as follows:
20
------
20 + 105
I-7
<PAGE>
The Retained Interest Percentage would accordingly increase to 84%.
Return of Capital Transfer of Cash or Other Assets from Comdisco Ventures To
Comdisco Group
The following illustration reflects the assumed transfer by Comdisco
Ventures to Comdisco Group, after the assumed initial issuance of 20 shares of
Comdisco Ventures Stock attributed to Comdisco Ventures as an increase in its
equity, of $100 of assets allocated to Comdisco Ventures on a date on which the
market value of Comdisco Ventures Stock is $20 per share.
<TABLE>
<S> <C>
Shares previously issued and outstanding............................... 20
Newly issued shares.................................................... 0
---
Total issued and outstanding after contribution.................... 20
===
</TABLE>
. The number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures would decrease to reflect the transfer to
Comdisco Group of assets theretofore allocated to Comdisco Ventures by a
number equal to the value of the assets transferred ($100) divided by
the market value of Comdisco Ventures Stock at that time ($20), or 5
shares.
<TABLE>
<S> <C>
Number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures prior to contribution................. 100
Decrease to reflect transfer to Comdisco Group of assets allocated to
Comdisco Ventures................................................... 5
---
Number of shares issuable with respect to Comdisco Group's retained
interest in Comdisco Ventures after contribution.................... 95
===
</TABLE>
. As a result, the total issued and outstanding shares (20) would in the
aggregate represent an Outstanding Interest Percentage of approximately
17.4%, calculated as follows:
20
------
20 + 95
The Retained Interest Percentage would accordingly decrease to
approximately 82.6%.
I-8
<PAGE>
COMDISCO VENTURES
FINANCIAL STATEMENTS
For the Years Ended September 30, 1999, 1998 and 1997
(With Independent Auditors' Report Thereon)
and For the Three Months Ended December 31, 1999 and 1998 (Unaudited)
INDEX
<TABLE>
<CAPTION>
Page
----
<S> <C>
Report of Independent Auditors............................................ F-2
Statements of Earnings and Division Equity--Years ended September 30,
1999, 1998 and 1997 and three months ended December 31, 1999 and 1998
(Unaudited).............................................................. F-3
Balance Sheets--September 30, 1999 and September 30, 1998 and December 31,
1999 (Unaudited)......................................................... F-4
Statements of Cash Flows--Years ended September 30, 1999, 1998 and 1997
and three months ended December 31, 1999 and 1998 (Unaudited)............ F-5
Notes to Comdisco Ventures Financial Statements........................... F-6
</TABLE>
F-1
<PAGE>
INDEPENDENT AUDITORS' REPORT
The Stockholders and Board of Directors
Comdisco, Inc.:
We have audited the accompanying balance sheets of Comdisco Ventures (a
division of Comdisco, Inc., "the Company") as of September 30, 1999 and 1998,
and the related statements of earnings and division equity, and cash flows for
each of the years in the three-year period ended September 30, 1999. These
financial statements are the responsibility of the Company's management. Our
responsibility is to express an opinion on these financial statements based on
our audits.
We conducted our audits in accordance with general accepted auditing
standards. Those standards require that we plan and perform the audit to obtain
reasonable assurance about whether the financial statements are free of
material misstatement. An audit includes examining, on a test basis, evidence
supporting the amounts and disclosures in the financial statements. An audit
also includes assessing the accounting principles used and significant
estimates made by management, as well as evaluating the overall financial
statement presentation. We believe that our audits provide a reasonable basis
for our opinion.
As described in Note 1 to the financial statements, Comdisco Ventures is
a division of Comdisco, Inc.; accordingly the financial statements of Comdisco
Ventures should be read in conjunction with the audited financial statements of
Comdisco, Inc.
In our opinion, the financial statements referred to above present
fairly, in all material respects, the financial position of Comdisco Ventures
at September 30, 1999 and 1998, and the results of its operations and its cash
flows for each of the years in the three-year period ended September 30, 1998
in conformity with generally accepted accounting principles.
/s/ KPMG LLP
December 2, 1999
Chicago, Illinois
F-2
<PAGE>
COMDISCO VENTURES
STATEMENTS OF EARNINGS AND DIVISION EQUITY
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended
December 31, Years Ended September 30,
---------------- ---------------------------
1999 1998 1999 1998 1997
-------- ------- --------- -------- --------
(unaudited)
<S> <C> <C> <C> <C> <C> <C>
Revenue
Leasing:
Operating.................. $ 37,882 $25,326 $ 116,678 $ 83,147 $ 61,544
Direct financing........... 111 189 1,389 1,073 2,771
Sales-type................. -- -- 336 866 4,305
-------- ------- --------- -------- --------
Total leasing............ 37,993 25,515 118,403 85,086 68,620
Sales........................ 2,318 1,269 6,142 7,136 6,942
Interest income on notes..... 11,759 2,314 22,580 6,655 3,139
Warrant sale proceeds and
capital gains............... 88,725 7,000 80,731 14,938 16,435
Other........................ 408 151 683 483 195
-------- ------- --------- -------- --------
Total revenue.............. 141,203 36,249 228,539 114,298 95,331
-------- ------- --------- -------- --------
Cost and expenses
Leasing:
Operating.................. 28,294 18,405 87,860 59,884 42,740
Sales-type................. -- -- 254 479 3,615
-------- ------- --------- -------- --------
Total leasing............ 28,294 18,405 88,114 60,363 46,355
Sales........................ 1,008 1,036 4,460 3,980 4,423
Selling, general and
administrative.............. 18,422 1,562 18,166 5,793 5,436
Interest..................... 10,791 4,014 23,373 10,835 7,670
Bad debt expense............. 21,800 800 23,200 4,786 6,250
-------- ------- --------- -------- --------
Total costs and expenses... 80,315 25,817 157,313 85,757 70,134
-------- ------- --------- -------- --------
Earnings before income
taxes....................... 60,888 10,432 71,226 28,541 25,197
Income taxes................. 23,685 4,160 28,402 11,381 10,047
-------- ------- --------- -------- --------
Net earnings................. $ 37,203 $ 6,272 $ 42,824 $ 17,160 $ 15,150
======== ======= ========= ======== ========
Division equity at beginning
of period................... $199,649 $71,080 $ 71,080 $ 53,920 $ 38,770
Net earnings................. 37,203 6,272 42,824 17,160 15,150
Other comprehensive income--
unrealized gains, net of
tax......................... 114,155 16,374 85,745 -- --
-------- ------- --------- -------- --------
Total comprehensive
income.................. 151,358 22,646 128,569 17,160 15,150
-------- ------- --------- -------- --------
Division equity at end of
period...................... $351,007 $93,726 $ 199,649 $ 71,080 $ 53,920
======== ======= ========= ======== ========
</TABLE>
See accompanying notes to financial statements.
F-3
<PAGE>
COMDISCO VENTURES
BALANCE SHEETS
(in thousands)
<TABLE>
<CAPTION>
September 30,
December 31, -----------------
1999 1999 1998
------------ -------- --------
(unaudited)
<S> <C> <C> <C>
ASSETS
Equity securities................................ $ 423,280 $197,335 $ 16,995
Receivables, net................................. 413,815 341,061 66,425
Inventory of equipment........................... 3,825 1,762 1,120
Leased assets:
Direct financing and sales-type................ 4,398 5,106 7,344
Operating (net of accumulated depreciation).... 326,409 283,241 182,403
---------- -------- --------
Net leased assets.............................. 330,807 288,347 189,747
Other assets..................................... 18,478 17,069 6,956
---------- -------- --------
$1,190,205 $845,574 $281,243
========== ======== ========
LIABILITIES AND DIVISION EQUITY
Inter-group payable.............................. $ 638,299 $533,297 $189,281
Accounts payable................................. 384 329 561
Deferred income taxes............................ 147,973 72,265 4,116
Other liabilities................................ 52,542 40,034 16,205
---------- -------- --------
839,198 645,925 210,163
---------- -------- --------
Division equity.................................. 351,007 199,649 71,080
---------- -------- --------
$1,190,205 $845,574 $281,243
========== ======== ========
</TABLE>
See accompanying notes to financial statements.
F-4
<PAGE>
COMDISCO VENTURES
STATEMENTS OF CASH FLOWS
(in thousands)
<TABLE>
<CAPTION>
Three Months
Ended
December 31, Years Ended September 30,
------------------ -------------------------------
1999 1998 1999 1998 1997
-------- -------- --------- --------- ---------
(unaudited)
<S> <C> <C> <C> <C> <C>
Cash flows from
operating activities:
Operating lease and
other leasing
receipts............. $ 40,486 $ 26,239 $ 117,504 $ 91,632 $ 80,051
Leasing costs,
primarily rentals
paid................. (193) (37) (90) (1,269) (111)
Sales................. 3,527 1,269 6,671 7,220 6,104
Cost of sales......... (1,007) (35) (113) (980) (423)
Warrant proceeds...... 92,044 7,000 80,731 14,938 16,435
Promissory note
receipts............. 51,240 8,288 66,912 32,685 15,753
Other revenue......... 1,172 150 15,231 6,883 3,334
Selling, general, and
administrative
expenses............. (9,009) (7,407) (7,546) (6,794) (5,435)
-------- -------- --------- --------- ---------
Net cash provided
by operating
activities....... 178,260 35,467 279,300 144,315 115,708
-------- -------- --------- --------- ---------
Cash flows from
investing activities:
Equipment purchased
for leasing.......... (79,447) (38,942) (205,624) (114,188) (91,297)
Purchase of property
and equipment........ (50) (2) (324) (140) (249)
Equity investments.... (36,210) (3,584) (39,641) (7,945) (4,294)
Issuance of promissory
notes................ (128,604) (67,420) (323,876) (57,213) (34,319)
Other................. 1,690 -- (5,558) 2,366 16,273
-------- -------- --------- --------- ---------
Net cash used in
investing
activities....... (242,621) (109,948) (575,023) (177,120) (113,886)
-------- -------- --------- --------- ---------
Cash flows from
financing activities:
Net change in inter-
group loans.......... 64,361 74,481 295,723 32,931 (1,948)
Principal payments on
nonrecourse debt..... -- -- -- (126) 126
-------- -------- --------- --------- ---------
Net cash provided
by financing
activities....... 64,361 74,481 295,723 32,805 (1,822)
-------- -------- --------- --------- ---------
Net increase in
cash and cash
equivalents...... -- -- -- -- --
Cash and cash
equivalents at
beginning of period.... -- -- -- -- --
-------- -------- --------- --------- ---------
Cash and cash
equivalents at end of
period................. $ -- $ -- $ -- $ -- $ --
======== ======== ========= ========= =========
Reconciliation of net
earnings to net cash
provided by operating
activities:
Net earnings.......... $ 37,203 $ 6,272 $ 42,824 $ 17,160 $ 15,150
Adjustments to
reconcile net
earnings to net cash
provided by operating
activities:
Leasing costs,
primarily
depreciation and
amortization....... 28,102 18,368 88,024 59,094 46,244
Leasing revenue..... 2,493 724 2,238 6,231 11,425
Principal portion of
promissory notes... 39,481 5,973 44,332 26,030 12,614
Cost of sales....... -- 1,001 4,347 3,000 4,000
Selling, general,
and administrative
expenses........... 31,213 (4,954) 33,820 3,785 6,251
Income taxes........ 23,685 4,069 28,402 11,381 10,047
Interest............ 10,791 4,014 23,373 10,835 7,670
Other--net.......... 5,292 -- 11,940 6,799 2,307
-------- -------- --------- --------- ---------
Net cash provided
by operating
activities....... $178,260 $ 35,467 $ 279,300 $ 144,315 $ 115,708
======== ======== ========= ========= =========
</TABLE>
See accompanying notes to financial statements.
F-5
<PAGE>
COMDISCO VENTURES
NOTES TO FINANCIAL STATEMENTS
(dollars in thousands)
(1) Summary of Significant Accounting Policies
Nature of Operations
Formed in 1987 as a division of Comdisco, Inc., Comdisco Ventures (the
"Company") provides a wide variety of financing products to venture capital-
backed start-up companies. These include equipment leases and loans,
subordinated debt, receivables financing, and equity financing. Its principal
market is North America.
The Company's cash activity is reflected through the intergroup payable
account. Interest expense on each payable account, which amounted to $23,373,
$10,835, and $7,670 in the years ended September 30, 1999, 1998, and 1997,
respectively, is included in interest expense in the accompanying financial
statements.
The Company is allocated certain shared services and support activity of
Comdisco, Inc., consisting of, among other things, financial and accounting
services, information technology services, certain selling and marketing
activities, executive management, human resources, corporate finance, legal and
corporate planning activities. Such allocated expenses amounted to $3,000
during the year ended September 30, 1999 and $1,000 in both of the years ended
September 30, 1998 and 1997. The Company was allocated such expenses based on
use and other criteria which management believes is reasonable.
Use of Estimates
The preparation of financial statements in conformity with generally
accepted accounting principles requires management to make estimates and
assumptions that affect the reported amounts of assets and liabilities and
disclosure of contingent assets and liabilities at the date of the financial
statements and the reported amounts of revenues and expenses during the
reporting period. Actual results could differ from those estimates.
Income Taxes
The Company is included in the consolidated Federal and state income tax
returns of Comdisco, Inc. Income tax expense has been computed as if the
Company filed its own income tax returns. Related current tax liabilities are
settled through the intracompany payable account.
The Company uses the asset and liability method to account for income
taxes. Deferred tax assets and liabilities are recognized for the future tax
consequences attributable to differences between the financial statement
carrying amounts of existing assets and liabilities and their respective tax
basis. The measurement of deferred tax assets is reduced, if necessary, by a
valuation allowance for any tax benefits of which future realization is
uncertain.
Lease Accounting
See Note 4 and 5 of Notes to Financial Statements for a description of
lease accounting policies, lease revenue recognition and related costs.
Inventory of Equipment
Inventory of equipment is stated at the lower of cost or market by
categories of similar equipment.
F-6
<PAGE>
COMDISCO VENTURES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Furniture and Equipment
Furniture and equipment is carried at cost and is depreciated using the
straight-line method over the estimated useful lives of the related assets
ranging from three to five years. Furniture and equipment is included as a
component of other assets.
Investments in Equity Securities
The Company determines the appropriate classification of marketable
securities at the time of purchase and reevaluates such designation at each
balance sheet date. Marketable securities classified as available-for-sale are
carried at fair value, based on quoted market prices, net of market value
discount to reflect any restrictions on transferability, with unrealized gains
and losses reported as a separate component of division equity. Equity
investments for which there is no readily determinable fair value are carried
at cost, less any appropriate valuation allowance.
Warrants
The Company's investments in warrants (received in connection with its
lease or other financings) are initially recorded at zero cost and carried in
the financial statements as follows:
. Warrants that meet the criteria for classification as available-
for-sale are carried at fair value based on quoted market prices
with unrealized gains and losses excluded from earnings and
reported in other comprehensive income.
. Warrants that do not meet the criteria for classification as
available-for-sale are carried at zero value.
The proceeds received from the sale or liquidation are recorded as
earnings when received.
Stock-Based Compensation
The Company utilizes the intrinsic value based method of accounting for
its stock-based compensation arrangements.
Interim Financial Information
The unaudited financial statements as of December 31, 1999 and for the
three month periods ended December 31, 1999 and 1998 include, in the opinion
of management, all adjustments (consisting of normal recurring accruals)
considered necessary for a fair presentation of the Company's financial
position, results of operations, and cash flows for such periods.
(2) Equity Securities
The Company invests in equity instruments of privately-held companies in
networking, communications, software, Internet-based and other industries. For
equity instruments, which are non-quoted investments, the Company's policy is
to regularly review the assumptions underlying the operating performance and
cash flow forecasts in assessing the carrying values. The Company identifies
and records impairment losses on equity securities when events and
circumstances indicate that such assets might be impaired. During 1999 and
1998, certain of these investments in privately-held companies became
available-for-sale securities when the investees completed initial public
offerings.
F-7
<PAGE>
COMDISCO VENTURES
NOTES TO FINANCIAL STATEMENTS--(Continued)
Equity securities include the following as of September 30:
<TABLE>
<CAPTION>
1999 1998
-------- -------
(in thousands)
<S> <C> <C>
Available-for-sale-securities:
Cost................................................. $ 7,735 $ 3,390
Unrealized gain...................................... 142,612 --
-------- -------
Market value......................................... 150,347 3,390
-------- -------
Equity instruments (at cost less valuation
adjustments).......................................... 46,988 13,605
-------- -------
Carrying value....................................... $197,335 $16,995
======== =======
</TABLE>
Realized gains or losses are recorded upon disposition of investments
based upon the difference between the proceeds and the cost basis determined
using the specific identification method. All other changes in the valuation of
portfolio investments are included as changes in the unrealized appreciation or
depreciation of investments in the other comprehensive income. Net realized
gains from the sales of equity investments were $5,161, $1,396, and $3,425 in
fiscal 1999, 1998 and 1997, respectively. Gross realized gains from the sales
of equity securities were $7,646 in fiscal 1999, $2,084 in fiscal 1998, and
$3,515 in fiscal 1997.
The Company records the proceeds received from the sale or liquidation of
warrants received in conjunction with its lease or other financings as income
when received. These proceeds were $75,570, $13,542 and $13,010 in fiscal 1999,
1998, and 1997, respectively.
(3) Receivables
Receivables include the following at September 30:
<TABLE>
<CAPTION>
1999 1998
-------- -------
(in thousands)
<S> <C> <C>
Equipment loans........................................ $ 85,088 $31,311
Subordinated loans..................................... 249,565 32,521
Receivable financing and other......................... 5,477 --
Nonperforming loans.................................... 2,975 1,487
-------- -------
Total notes receivable................................. 343,105 65,319
Accounts............................................... 7,148 3,325
Other.................................................. 7,321 3,781
-------- -------
Total receivables...................................... 357,574 72,425
Allowance for credit losses............................ (16,513) (6,000)
-------- -------
Total.............................................. $341,061 $66,425
======== =======
</TABLE>
The Company provides loans to early-stage high technology privately held
companies in networking, communications, software, and Internet-based and other
industries. The Company's loans are generally structured as equipment loans or
subordinated loans.
The amount of each loan varies, but generally does not exceed $10.0
million. The loans bear fixed interest rates with coupons currently ranging
from 8.0% to 13.0% per annum. In addition, loan processing fees typically
ranging from 0.75% to 1.5% of the principal amount of the loan may be paid at
loan closing. As part of the loan transaction, the Company receives warrants to
purchase or the right to convert into an equity interest in the borrower at a
nominal exercise price. The amount of the warrants
F-8
<PAGE>
COMDISCO VENTURES
NOTES TO FINANCIAL STATEMENTS--(Continued)
received and the exercise price varies based upon borrower-specific valuation
factors. Loans provide current income from interest and fees.
Contractual maturities of total notes receivables as of September 30,
1999, were as follows: 2000--$130,000; 2001--$153,000; 2002--$107,000; 2003 and
thereafter--$13,000. Actual cash flows will vary from contractual maturities
due to prepayments and charge-offs
Changes in the allowance for credit losses (combined notes and accounts
receivables) for the years ended September 30 were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
-------- ------- ------
(in thousands)
<S> <C> <C> <C>
Balance at beginning of year................... $ 6,000 $ 5,500 $ --
Provision for credit losses.................... 23,200 4,786 6,250
Net credit losses.............................. (12,687) (4,286) (750)
-------- ------- ------
Balance at end of year......................... $ 16,513 $ 6,000 $5,500
======== ======= ======
</TABLE>
(4) Lease Accounting Policies
FASB Statement of Financial Accounting Standards No. 13 requires that a
lessor account for each lease by either the direct financing, sales-type or
operating method.
Leased Assets
. Direct financing and sales-type leased assets consist of the
present value of the future minimum lease payments plus the
present value of the residual (collectively referred to as the net
investment). Residual is the estimated fair market value at lease
termination. In estimating the equipment's fair value at lease
termination, the Company relies on historical experience by
equipment type and manufacturer and, where available, valuations
by independent appraisers, adjusted for known trends. The
Company's estimates are reviewed continuously to ensure
realization, however the amounts the Company will ultimately
realize could differ from the estimated amounts.
. Operating leased assets consist of the equipment cost, less the
amount depreciated to date.
Revenue, Costs and Expenses
. Direct financing leases--Revenue consists of interest earned on
the present value of the lease payments and residual. Revenue is
recognized periodically over the lease term as a constant
percentage return on the net investment. There are no costs and
expenses related to direct financing leases since leasing revenue
is recorded on a net basis.
. Sales-type leases--Revenue consists of the present value of the
total contractual lease payments which is recognized at lease
inception. Costs and expenses consist of the equipment's net book
value at lease inception, less the present value of the residual.
Interest earned on the present value of the lease payments and
residual, which is recognized periodically over the lease term as
a constant percentage return on the net investment, is included in
direct financing lease revenue in the statement of earnings.
Operating leases--Revenue consists of the contractual lease
payments and is recognized on a straight-line basis over the
lease term. Costs and expenses are principally depreciation of
the equipment. Depreciation is recognized on a straight-line
basis over the lease term to the Company's estimate of the
equipment's fair market
F-9
<PAGE>
COMDISCO VENTURES
NOTES TO FINANCIAL STATEMENTS--(Continued)
value at lease termination, also commonly referred to as
"residual" value. In estimating the equipment's fair value at
lease termination, the Company relies on historical experience by
equipment type and manufacturer and, where available, valuations
by independent appraisers, adjusted for known trends. The
Company's estimates are reviewed continuously to ensure
realization, however the amounts the Company will ultimately
realize could differ from the amounts assumed in determining
depreciation on the equipment in the operating lease portfolio at
September 30, 1999.
. Initial direct costs related to operating and direct financing
leases, including salesperson's commissions, are capitalized and
amortized over the lease term.
(5) Leased Assets
The components of the net investment in direct financing and sales-type
leases as of September 30 are as follows:
<TABLE>
<CAPTION>
1999 1998
------ ------
(in
thousands)
<S> <C> <C>
Minimum lease payments receivable....................... $5,540 $7,876
Estimated residual values............................... 181 717
Less: unearned revenue.................................. (615) (1,249)
------ ------
Net investment in direct financing and sales-type
leases................................................. $5,106 $7,344
====== ======
</TABLE>
Unearned revenue is recorded as leasing revenue over the lease terms.
The following is a schedule of future minimum lease payments to be
received under direct financing and sales-type leases, based on contractual
terms in existence as of September 30, 1999:
<TABLE>
<CAPTION>
Minimum
payments
----------
(in
thousands)
<S> <C>
Years ending September 30,
2000........................ $3,147
2001........................ 1,954
2002........................ 422
2003........................ 17
2004........................ --
------
$5,540
======
</TABLE>
Operating leased assets include the following as of September 30:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Operating leased assets............................... $432,862 $294,352
Less: accumulated depreciation
And amortization..................................... (149,621) (111,949)
-------- --------
Net................................................... $283,241 $182,403
======== ========
</TABLE>
F-10
<PAGE>
COMDISCO VENTURES
NOTES TO FINANCIAL STATEMENTS--(Continued)
The following is a schedule of future minimum rental payments to be
received under operating leases, based on contractual terms in existence as of
September 30, 1999:
<TABLE>
<CAPTION>
Minimum
payments
--------
(in
thousands)
<S> <C> <C>
Years ending September 30,
2000..................... $129,127
2001..................... 109,085
2002..................... 66,515
2003..................... 10,565
2004..................... --
--------
$315,292
========
</TABLE>
(6) Lease Portfolio Information
The size of the Company's lease portfolio can be measured by the cost of
leased assets at the date of lease inception. Cost at lease inception
represents either the equipment's original cost or its net book value at
termination of a prior lease. The following table summarizes, by year of lease
commencement and by year of projected lease termination, the cost at lease
inception for all leased assets recorded at September 30, 1999:
<TABLE>
<CAPTION>
Projected year of lease
Cost at termination
lease --------------------------------
Year lease commenced inception 2000 2001 2002 2003
-------------------- --------- ------- ------- -------- -------
(in thousands)
<S> <C> <C> <C> <C> <C>
1995 and prior................. $ 10,476 $10,156 $ 320 $ -- $ --
1996........................... 39,838 38,168 1,393 277 --
1997........................... 77,909 45,338 31,636 461 474
1998........................... 113,881 3,942 40,899 64,508 4,532
1999........................... 204,202 13 9,325 115,465 79,399
-------- ------- ------- -------- -------
$446,306 $97,617 $83,573 $180,711 $84,405
======== ======= ======= ======== =======
</TABLE>
The following table summarizes the estimated net book value at lease
termination for all leased assets recorded at September 30, 1999. The table is
presented by year of lease commencement and by year of projected lease
termination:
<TABLE>
<CAPTION>
Net book Projected year of lease
value at termination
lease -----------------------------
Year lease commenced termination 2000 2001 2002 2003
-------------------- ----------- ------- ------ ------- ------
(in thousands)
<S> <C> <C> <C> <C> <C>
1996............................ $ 3,625 $ 3,625 $ -- $ -- $ --
1997............................ 10,306 6,421 3,885 -- --
1998............................ 11,790 509 4,549 6,732 --
1999............................ 24,209 -- 636 13,710 9,863
------- ------- ------ ------- ------
$49,930 $10,555 $9,070 $20,442 $9,863
======= ======= ====== ======= ======
</TABLE>
F-11
<PAGE>
COMDISCO VENTURES
NOTES TO FINANCIAL STATEMENTS--(Continued)
(7) Income Taxes
The Company files its U.S. income tax return as part of the consolidated
return with its parent. In accordance with a tax sharing agreement, the Company
records its income tax liabilities on a separate return basis.
The components of the income tax provision (benefit) charged (credited)
to operations were as follows:
<TABLE>
<CAPTION>
1999 1998 1997
------- ------- -------
(in thousands)
<S> <C> <C> <C>
Current:
U.S. Federal................................... $13,899 $ 9,280 $ 4,776
U.S. state and local........................... 3,220 2,150 1,106
------- ------- -------
17,119 11,430 5,882
------- ------- -------
Deferred:
U.S. Federal................................... 9,161 (40) 3,382
U.S. state and local........................... 2,122 (9) 783
------- ------- -------
11,283 (49) 4,165
------- ------- -------
Total tax provision.......................... $28,402 $11,381 $10,047
======= ======= =======
</TABLE>
The reasons for the difference between the U.S. Federal income tax rate
and the effective income tax rate for earnings were as follows:
<TABLE>
<CAPTION>
Percent of pre-
tax earnings
-----------------
1999 1998 1997
----- ----- -----
<S> <C> <C> <C>
U.S. Federal income tax rate.......................... 35.0% 35.0% 35.0%
Increase resulting from-state income taxes, Net of
U.S. Federal tax benefit............................. 4.9% 4.9% 4.9%
----- ----- -----
39.9% 39.9% 39.9%
===== ===== =====
</TABLE>
Deferred tax assets and liabilities at September 30, 1999 and 1998 were
as follows:
<TABLE>
<CAPTION>
1999 1998
-------- --------
(in thousands)
<S> <C> <C>
Deferred tax assets (liabilities):
Investments........................................ $ 3,504 $ 3,504
Accounts receivable................................ 1,968 848
Lease accounting................................... (18,420) (11,858)
Deferred income.................................... (2,450) 3,390
Accumulated other comprehensive income............. (56,867) --
-------- --------
Gross deferred tax assets (liabilities).............. (72,265) (4,116)
Less: valuation allowance........................ -- --
-------- --------
Net deferred tax assets (liabilities)................ (72,265) $ (4,116)
======== ========
</TABLE>
F-12
<PAGE>
COMDISCO VENTURES
NOTES TO FINANCIAL STATEMENTS--(Concluded)
(8) Commitments
The Company leases office spaces under operating leases that expire
periodically through February 29, 2004. Under the renewal options of the
agreement, the Company may extend the lease terms. Rent expense was $272, $198
and $161 in fiscal 1999, 1998 and 1997, respectively. Minimum lease payments
for the office spaces are as follows:
<TABLE>
<CAPTION>
Minimum lease
payments
-------------
(in
thousands)
<S> <C>
Years ending September 30,
2000..................... $214
2001..................... 218
2000..................... 25
2003..................... 25
2004 and thereafter...... 11
----
$493
====
</TABLE>
(9) Fair Value of financial instruments
The estimated fair value of the Company's financial instruments are as
follows:
<TABLE>
<CAPTION>
1999 1998
----------------- ----------------
Carrying Fair Carrying Fair
amount value amount value
-------- -------- -------- -------
(in thousands)
<S> <C> <C> <C> <C>
Assets:
Equity securities.................. $197,335 $197,335 $16,995 $16,995
Notes receivable including
noncurrent portion................ 341,061 341,061 66,425 66,425
</TABLE>
Fair values were determined as follows:
. Equity instruments are based on quoted market prices for
available-for-sale securities, and, for non-quoted equity
instruments, based on the lower of management's estimates of fair
value or cost. The Company's investment in warrants of public
companies were valued at the bid quotation.
. Notes receivable are estimated by discounting future cash flows
using the current rates at which similar loans would be made to
borrowers with similar business profiles.
(10) Comprehensive Income
Comprehensive income for the year ended September 30, 1999 (in thousands)
is comprised as follows:
<TABLE>
<S> <C>
Net income............................................................ $ 42,824
Other comprehensive income:
Unrealized gains on marketable equity securities.................... 142,612
Less income tax expense............................................. 56,867
--------
Total comprehensive income........................................ $128,569
========
</TABLE>
F-13
<PAGE>
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
Shares
[LOGO]
COMDISCO VENTURES STOCK
---------------
PROSPECTUS
---------------
Merrill Lynch & Co.
, 2000
- --------------------------------------------------------------------------------
- --------------------------------------------------------------------------------
<PAGE>
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
+The information in this prospectus is not complete and may be changed. We may +
+not sell these securities until the registration statement filed with the +
+Securities and Exchange Commission is effective. This preliminary prospectus +
+is not an offer to sell these securities and it is not soliciting an offer to +
+buy these securities in any jurisdiction where the offer or sale is not +
+permitted. +
++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++++
[Alternative Page for International Prospectus]
SUBJECT TO COMPLETION
PRELIMINARY PROSPECTUS DATED APRIL 12, 2000
PROSPECTUS
Shares
[LOGO]
Comdisco Ventures Stock
Comdisco, Inc. is a Delaware corporation. Our principal executive office is
6111 North River Road, Rosemont, Illinois 60018. Our telephone number is (847)
698-3000.
This is our initial public offering of Comdisco Ventures Stock, a new
series of our common stock intended to reflect the performance of Comdisco
Ventures, our venture financing business. The international managers are
offering shares outside the U.S. and Canada and the U.S.
underwriters are offering shares in the U.S. and Canada.
We anticipate that the price to the public will be between $
and $ per share. Currently, no public market exists for Comdisco
Ventures Stock. We intend to list our Comdisco Ventures Stock on the Nasdaq
National Market, under the symbol "CDOV."
Investing in Comdisco Ventures Stock involves risks. See "Risk Factors,"
beginning on page 8.
<TABLE>
<CAPTION>
Per
Share Total
------ -----
<S> <C> <C>
Public offering price........................... $ $
Underwriting discount........................... $ $
Proceeds, before expenses, to Comdisco.......... $ $
</TABLE>
The international managers may also purchase up to an additional
shares of Comdisco Ventures Stock at the public offering
price, less the underwriting discount, within 30 days from the date of this
prospectus to cover over-allotments. The U.S. underwriters may similarly
purchase up to an additional shares.
The shares of Comdisco Ventures Stock will be ready for delivery on or
about , 2000.
Neither the Securities and Exchange Commission nor any state securities
commission has approved or disapproved of these securities or determined if
this prospectus is truthful or complete. Any representation to the contrary is
a criminal offense.
Merrill Lynch International
The date of this prospectus is , 2000.
<PAGE>
[Alternative Page for International Prospectus]
UNDERWRITING
We intend to offer the shares of Comdisco Ventures Stock outside the U.S.
and Canada through the international managers and in the U.S. and Canada
through the U.S. underwriters. Merrill Lynch International is acting as lead
manager for the international managers named below. Subject to the terms and
conditions described in an international purchase agreement among us and the
international managers, and concurrently with the sale of shares
of Comdisco Ventures Stock to the U.S. underwriters, we have agreed to sell to
the international managers, and the international managers severally have
agreed to purchase from us, the number of shares of Comdisco Ventures Stock
listed opposite their names below.
<TABLE>
<CAPTION>
Number
International Manager of Shares
--------------------- ---------
<S> <C>
Merrill Lynch International...................................
..................................................
..................................................
..................................................
..................................................
..................................................
---------
Total....................................................
=========
</TABLE>
We have also entered into a U.S. purchase agreement with the U.S.
underwriters for sale of the shares of Comdisco Ventures Stock in the U.S. and
Canada for whom Merrill Lynch, Pierce, Fenner & Smith Incorporated is acting as
U.S. representative. Subject to the terms and conditions in the U.S. purchase
agreement, and concurrently with the sale of shares of Comdisco
Ventures Stock to the international managers pursuant to the international
purchase agreement, we have agreed to sell to the U.S. underwriters, and the
U.S. underwriters severally have agreed to purchase, shares of
Comdisco Ventures Stock from us. The initial public offering price per share
and the total underwriting discount per share are identical under the
international purchase agreement and the U.S. purchase agreement.
The international managers and the U.S. underwriters have agreed to
purchase all of the shares of Comdisco Ventures Stock sold under the
international and U.S. purchase agreements if any of these shares are
purchased. If an underwriter defaults, the U.S. and international purchase
agreements provide that the purchase commitments of the nondefaulting
underwriters may be increased or the purchase agreements may be terminated. The
closings for the sale of shares of Comdisco Ventures Stock to be purchased by
the international managers and the U.S. underwriters are conditioned on one
another.
We have agreed to indemnify the international managers and the U.S.
underwriters against certain liabilities, including liabilities under the
Securities Act, or to contribute to payments the international managers and the
U.S. underwriters may be required to make in respect of those liabilities.
The underwriters are offering the shares of Comdisco Ventures Stock,
subject to prior sale, when, as and if issued to and accepted by them, subject
to approval of legal matters by their counsel, including the validity of the
shares, and other conditions contained in the purchase agreements, such as the
receipt by the underwriters of officer's certificates and legal opinions. The
underwriters reserve the right to withdraw, cancel or modify offers to the
public and to reject orders in whole or in part.
Commissions and Discounts
The lead manager has advised us that the international managers propose
initially to offer the shares of Comdisco Ventures Stock to the public at the
initial public offering price on the cover page of this prospectus and to
dealers at that price less a concession not in excess of $. per share. The
international managers may allow, and the dealers may reallow, a discount not
in excess of $. per share to other dealers. After the initial public
offering, the public offering price, concession and discount may be changed.
80
<PAGE>
[Alternative Page for International Prospectus]
The following table shows the public offering price, underwriting
discount and proceeds before expenses to Comdisco. The information assumes
either no exercise or full exercise by the international managers and the U.S.
underwriters of their over-allotment options.
<TABLE>
<CAPTION>
Per Share Without Option With Option
--------- -------------- -----------
<S> <C> <C> <C>
Public offering price.............. $ $ $
Underwriting discount.............. $ $ $
Proceeds, before expenses, to
Comdisco.......................... $ $ $
</TABLE>
The expenses of the offering, not including the underwriting discount,
are estimated at $ and are payable by Comdisco.
Over-allotment Option
We have granted options to the international managers to purchase up to
additional shares of Comdisco Ventures Stock at the public offering
price less the underwriting discount. The international managers may exercise
these options for 30 days from the date of this prospectus solely to cover any
over-allotments. If the international managers exercise these options, each
will be obligated, subject to conditions contained in the purchase agreements,
to purchase a number of additional shares of Comdisco Ventures Stock
proportionate to that international manager's initial amount reflected in the
above table.
We have also granted options to the U.S. underwriters, exercisable for 30
days from the date of this prospectus, to purchase up to additional
shares of Comdisco Ventures Stock to cover any over-allotments on terms similar
to those granted to the international managers.
Intersyndicate Agreement
The international managers and the U.S. underwriters have entered into an
intersyndicate agreement that provides for the coordination of their
activities. Under the intersyndicate agreement, the international managers and
the U.S. underwriters may sell shares of Comdisco Ventures Stock to each other
for purposes of resale at the initial public offering price, less an amount not
greater than the selling concession. Under the intersyndicate agreement, the
international managers and any dealer to whom they sell shares of Comdisco
Ventures Stock will not offer to sell or sell shares to U.S. or Canadian
persons or to persons they believe intend to resell to U.S. or Canadian
persons, except in the case of transactions under the intersyndicate agreement.
Similarly, the U.S. underwriters and any dealer to whom they sell shares of
Comdisco Ventures Stock will not offer to sell or sell shares to persons who
are non-U.S. or non-Canadian persons or to persons they believe intend to
resell to non-U.S. or non-Canadian persons, except in the case of transactions
under the intersyndicate agreement.
Reserved Shares
At our request, the underwriters have reserved for sale, at the initial
public offering price, up to shares of Comdisco Ventures Stock offered
by this prospectus for sale to some of Comdisco Ventures' employees and other
of our business associates and related persons and for purchase by Comdisco as
a contribution to our retirement plan. If these persons purchase reserved
shares, this will reduce the number of shares available for sale to the general
public. Any reserved shares that are not orally confirmed for purchase within
one day of the pricing of this offering will be offered by the underwriters to
the general public on the same terms as the other shares offered by this
prospectus.
No Sales of Similar Securities
We have agreed, with exceptions, not to sell or transfer any Comdisco
Ventures Stock for 180 days after the date of this prospectus without first
obtaining the written consent of Merrill Lynch International. Specifically, we
have agreed not to directly or indirectly:
. offer, pledge, sell or contract to sell any Comdisco Ventures
Stock;
. sell any option or contract to purchase any Comdisco Ventures
Stock;
81
<PAGE>
[Alternative Page for International Prospectus]
. purchase any option or contract to sell any Comdisco Ventures
Stock;
. grant any option, right or warrant for the sale of any Comdisco
Ventures Stock;
. lend or otherwise dispose of or transfer any Comdisco Ventures
Stock;
. request or demand that we file a registration statement related to
the Comdisco Ventures Stock; or
. enter into any swap or other agreement that transfers, in whole or
in part, the economic consequence of ownership of any Comdisco
Ventures Stock, whether any such swap or transaction is to be
settled by delivery of shares or other securities, in cash or
otherwise.
This lockup provision applies to Comdisco Ventures Stock and to
securities convertible into or exchangeable or exercisable for or repayable
with Comdisco Ventures Stock.
Quotation on the Nasdaq National Market
We expect the shares to be approved for quotation on the Nasdaq National
Market, subject to notice of issuance, under the symbol "CDOV."
Before this offering, there has been no public market for our Comdisco
Ventures Stock. The initial public offering price will be determined through
negotiations among us and the U.S. representative and lead manager. In addition
to prevailing market conditions, the factors to be considered in determining
the initial public offering price are
. the valuation multiples of publicly traded companies that the U.S.
representative and the lead manager believe to be comparable to
Comdisco Ventures,
. Comdisco Ventures' financial information,
. the history of, and the prospects for, Comdisco Ventures and the
industry in which Comdisco Ventures competes,
. an assessment of Comdisco Ventures' management, its past and
present operations, and the prospects for, and timing of, Comdisco
Ventures' future revenues,
. the present state of Comdisco Ventures' development, and
. the above factors in relation to market values and various
valuation measures of other companies engaged in activities
similar to those of Comdisco Ventures.
An active trading market for the shares may not develop. It is also
possible that after the offering the Comdisco Ventures Stock will not trade in
the public market at or above the initial public offering price.
Price Stabilization, Short Positions and Penalty Bids
Until the distribution of the shares of Comdisco Ventures Stock is
completed, SEC rules may limit underwriters and selling group members from
bidding for and purchasing our Comdisco Ventures Stock. However, the U.S.
representative may engage in transactions that stabilize the price of the
Comdisco Ventures Stock, such as bids or purchases to peg, fix or maintain that
price.
If the underwriters create a short position in the Comdisco Ventures
Stock in connection with the offering, i.e., if they sell more shares than are
listed on the cover of this prospectus, the U.S. representative may reduce that
short position by purchasing shares of Comdisco Ventures Stock in the open
market. The U.S. representative may also elect to reduce any short position by
exercising all or part of the over-allotment option described above. Purchases
of the Comdisco Ventures Stock to stabilize its price or to reduce a short
position may cause the price of the Comdisco Ventures Stock to be higher than
it might be in the absence of such purchases.
82
<PAGE>
[Alternative Page for International Prospectus]
The U.S. representative may also impose a penalty bid on underwriters and
selling group members. This means that if the U.S. representative purchases
shares of Comdisco Ventures Stock in the open market to reduce the
underwriter's short position or to stabilize the price of such shares, it may
reclaim the amount of the selling concession from the underwriters and selling
group members who sold those shares. The imposition of a penalty bid may also
affect the price of the shares of Comdisco Ventures Stock in that it
discourages resales of those shares.
Neither we nor any of the underwriters makes any representation or
prediction as to the direction or magnitude of any effect that the transactions
described above may have on the price of the Comdisco Ventures Stock. In
addition, neither we nor any of the underwriters makes any representation that
the U.S. representative or the lead manager will engage in these transactions
or that these transactions, once commenced, will not be discontinued without
notice.
UK Selling Restrictions
Each international manager has agreed that
. it has not offered or sold and will not offer or sell any shares
of Comdisco Ventures Stock to persons in the United Kingdom,
except to persons whose ordinary activities involve them in
acquiring, holding, managing or disposing of investments (as
principal or agent) for the purposes of their businesses or
otherwise in circumstances which do not constitute an offer to the
public in the United Kingdom within the meaning of the Public
Offers of Securities Regulations 1995;
. it has complied and will comply with all the applicable provisions
of the Financial Services Act of 1986 with respect to anything
done by it in relation to the Comdisco Ventures Stock in, from or
otherwise involving the United Kingdom; and
. it has only issued or passed on and will only issue or pass on in
the United Kingdom any document received by it in connection with
the issuance of Comdisco Ventures Stock to a person who is of a
kind described in Article 11(3) of the Financial Services Act 1986
(Investment Advertisements) (Exemptions) Order 1996 as amended by
the Financial Services Act (Investment Advertisements)
(Exemptions) Order 1997 or is a person to whom such document may
otherwise lawfully be issued or passed on.
No Public Offering Outside the United States
No action has been or will be taken in any jurisdiction (except in the
United States) that would permit a public offering of the shares of common
stock, or the possession, circulation or distribution of this prospectus or any
other material relating to the our company or shares of our Comdisco Ventures
Stock in any jurisdiction where action for that purpose is required.
Accordingly, the shares of our common stock may not be offered or sold,
directly or indirectly, and neither this prospectus nor any other offering
material or advertisements in connection with the shares of Comdisco Ventures
Stock may be distributed or published, in or from any country or jurisdiction
except in compliance with any applicable rules and regulations of any such
country or jurisdiction.
Purchasers of the shares of Comdisco Venture Stock offered by this
prospectus may be required to pay stamp taxes and other charges in accordance
with the laws and practices of the country of purchase in addition to the
offering price on the cover pages of this prospectus.
Other Relationships
Some of the underwriters and their affiliates have engaged in, and may in
the future engage in, investment banking and other commercial dealings in the
ordinary course of business with us. They have received customary fees and
commissions for these transactions.
83
<PAGE>
[Alternative Page for International prospectus]
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Shares
[LOGO]
COMDISCO VENTURES STOCK
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P R O S P E C T U S
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Merrill Lynch International
, 2000
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<PAGE>
PART II
INFORMATION NOT REQUIRED IN PROSPECTUS
Item 14. Other Expenses of Issuance and Distribution.
The following table sets forth all expenses, other than underwriting
discounts and commissions, we will pay in connection with the sale of the
securities being registered. All the amounts shown are estimates, except for
the SEC registration fee and the Nasdaq National Market listing fee.
<TABLE>
<S> <C>
SEC Registration fee............................................. $39,600
Nasdaq National Market listing fee............................... *
Blue Sky fees and expenses....................................... 5,000
Printing and engraving expenses.................................. *
Legal fees and expenses.......................................... *
Accounting fees and expenses..................................... *
Transfer Agent and registrar fees and expenses................... *
Miscellaneous.................................................... *
-------
Total............................................................ $ *
=======
</TABLE>
- --------
*To be completed by amendment
Item 15. Indemnification of Officers and Directors.
Section 145 of the General Corporation Law of the State of Delaware (the
"Delaware Law") empowers a Delaware corporation to indemnify any persons who
were or are, or are threatened to be made, parties to any threatened, pending
or completed legal 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 or
director of such corporation, or is or was serving at the request of such
corporation as a director, officer, 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, suit or proceeding,
provided that such officer or director acted in good faith and in a manner he
or she reasonably believed to be in or not opposed to the corporation's best
interests, and, for criminal proceedings, had no reasonable cause to believe
his or her conduct was illegal. A Delaware corporation may indemnify officers
and directors against expenses (including attorneys' fees) in connection with
the defense or settlement of an action by or in the right of the corporation
under the same conditions, 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 or her against the expenses which such officer or director
reasonably incurred.
In accordance with the Delaware Law, our restated certificate of
incorporation contains a provision to limit the personal liability of the
directors of Comdisco for violations of their fiduciary duty. This provision
eliminates each director's liability to Comdisco or its stockholders for
monetary damages except (i) for any breach of the director's duty of loyalty to
Comdisco or its stockholders, (ii) for acts or omissions not in good faith or
which involve intentional misconduct or a knowing violation of law, (iii) under
Section 174 of the Delaware law providing for liability of directors for
unlawful payment of dividends or unlawful stock purchases or redemptions, or
(iv) for any transaction from which a director derived an improper personal
benefit. The effect of this provision is to eliminate the personal liability of
directors for monetary damages for actions involving a breach of their
fiduciary duty of care, including any such actions involving gross negligence.
Pursuant to most of Comdisco's employee benefit plans, including, without
limitation, its long-term incentive plans and stock option plans, directors,
officers and employees of Comdisco are indemnified against all loss, cost,
liability or expense resulting from any claim, action, suit or proceeding in
which such persons are involved by reason of any action taken or failure to act
under such plans.
II-1
<PAGE>
Pursuant to underwriting agreements filed as exhibits to registration
statements relating to underwritten offerings of securities issued or
guaranteed by Comdisco, the underwriters have agreed to indemnify Comdisco,
each officer and director of Comdisco and each person, if any, who controls
Comdisco within the meaning of the Securities Act of 1933, against certain
liabilities, including liabilities under said Act.
Comdisco is insured for liabilities it may incur pursuant to its restated
certificate of incorporation relating to the indemnification of its directors,
officers and employees. In addition, directors, officers and certain key
employees are insured against certain losses which may arise out of their
employment and which are not recoverable under the indemnification provisions
of Comdisco's restated certificate of incorporation.
Item 16. Exhibits.
(a) Exhibits and Financial Statement Schedules
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement between Comdisco, Inc. and
the U.S. Underwriters.
1.2 Form of International Underwriting Agreement between Comdisco,
Inc. and the International Underwriters.
4.1 The rights of holders of Comdisco Ventures Stock are defined in
the Fourth Article of the Amended and Restated Certificate of
Incorporation of Comdisco, Inc. (filed as Annex II to Comdisco
Inc.'s Proxy Statement on Schedule 14A, dated March 20, 2000 and
incorporated herein by reference).
4.2 The Policy Statement regarding Comdisco Ventures Stock Matters
of Comdisco, Inc.
4.3 Form of Amended and Restated Preferred Stock Purchase Rights
Plan of Comdisco, Inc.
4.4 Form of Temporary Certificate of Comdisco Ventures Stock.
5.1 Opinion of Jeremiah M. Fitzgerald, Vice President and Chief
Legal Officer of Comdisco, Inc., as to the legality of the
Comdisco Ventures Stock being registered.
8.1 Tax Opinion of Hopkins & Sutter.
10.1 Form of Comdisco Ventures Management Incentive Plan (filed as
Annex III to Comdisco Inc.'s Proxy Statement on Schedule 14A,
dated March 20, 2000 and incorporated herein by reference).
10.2 Form of Amended and Restated 1998 Long-Term Stock Ownership
Incentive Plan (filed as Annex IV to Comdisco Inc.'s Proxy
Statement on Schedule 14A, dated March 20, 2000 and incorporated
herein by reference).
10.3 Form of Amended and Restated 1999 Non-Employee Directors' Stock
Option Plan (filed as Annex V to Comdisco Inc.'s Proxy Statement
on Schedule 14A, dated March 20, 2000 and incorporated herein by
reference).
10.4 Form of Amended and Restated U.S. Employee Stock Purchase Plan
(filed as Annex VI to Comdisco Inc.'s Proxy Statement on
Schedule 14A, dated March 20, 2000 and incorporated herein by
reference).
23.1 Consent of Jeremiah M. Fitzgerald, Vice President and Chief
Legal Officer of Comdisco, Inc. (included in the opinion of
counsel filed as Exhibit 5.1).
23.2 Consent of KPMG LLP.
23.3 Consent of Hopkins & Sutter (included in the opinion of counsel
filed as
Exhibit 8.1).
24.1 Powers of Attorney (See page II-4).
</TABLE>
II-2
<PAGE>
(b) Financial Statement Schedules
None
Item 17. Undertakings.
The undersigned Registrant hereby undertakes that, for purposes of
determining any liability under the Securities Act, each filing of the
Registrant's annual report pursuant to Section 13(a) or Section 15(d) of the
Exchange Act that is incorporated by reference in the Registration Statement
shall be deemed to be a new registration statement relating to the securities
offered herein and the offering of such securities at that time shall be deemed
to be the initial bona fide offering thereof.
Insofar as indemnification for liabilities arising under the Securities
Act may be permitted to directors, officers and controlling persons of the
Registrant pursuant to the provisions described in Item 15, or otherwise, the
Registrant has been advised that in the opinion of the Securities and Exchange
Commission such indemnification is against public policy as expressed in the
Securities Act and is, therefore, unenforceable. In the event that a claim for
indemnification against such liabilities (other than the payment by the
Registrant of expenses incurred or paid by a director, officer or controlling
person of the Registrant in the successful defense of any action, suit or
proceeding) is asserted by such director, officer or controlling person in
connection with the securities being registered, the Registrant will, unless in
the opinion of its counsel the matter has been settled by controlling
precedent, submit to a court of appropriate jurisdiction the question whether
such indemnification by it is against public policy as expressed in the
Securities Act and will be governed by the final adjudication of such issue.
II-3
<PAGE>
SIGNATURES
Pursuant to the requirements of the Securities Act of 1933, the
Registrant, Comdisco, Inc., certifies that is has reasonable grounds to believe
that it meets all the requirements for filing on Form S-3 and has duly caused
this Registration Statement to be signed on its behalf by the undersigned,
thereunto duly authorized, in the Village of Rosemont, State of Illinois, on
April 12, 2000.
Comdisco, Inc.
/s/ Nicholas K. Pontikes
By: _______________________________
Nicholas K. Pontikes,
President
POWER OF ATTORNEY AND SIGNATURES
Each person whose signature appears below constitutes and appoints
Nicholas K. Pontikes, John J. Vosicky and William N. Pontikes, and each of
them, each with full power to act without the others, such person's true and
lawful attorney-in-fact agent, each with full power of substitution and
resubstitution, in such person's name and on such person's behalf, to sign any
amendment or amendments to this Registration Statement, and to sign any related
registration statement filed pursuant to Rule 462(b) of the Securities Act of
1933, and to file the same, with all exhibits thereto and other documents in
connection therewith, with the Securities and exchange Commission. Each of the
undersigned ratifies and confirms all that any of the attorneys agents shall do
or cause to be done by virtue hereof.
Pursuant to the requirements of the Securities Act of 1933, this
Registration Statement has been signed by the following persons in the
capacities and on the dates indicated.
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Nicholas K. Pontikes President, Chief Executive April 12, 2000
___________________________________________ Officer and Director (Principal
(Nicholas K. Pontikes) Executive Officer)
/s/ John J. Vosicky Executive Vice President, Chief April 12, 2000
___________________________________________ Financial Officer and Director
(John J. Vosicky) (Principal Financial Officer)
/s/ David J. Keenan Senior Vice President and April 12, 2000
___________________________________________ Controller (Principal
(David J. Keenan) Accounting Officer)
/s/ Robert A. Bardagy Director April 12, 2000
___________________________________________
(Robert A. Bardagy)
/s/ C. Keith Hartley Director April 12, 2000
___________________________________________
(C. Keith Hartley)
/s/ Harry M. Jansen Kraemer, Jr. Director April 12, 2000
___________________________________________
(Harry M. Jansen Kraemer, Jr.)
</TABLE>
II-4
<PAGE>
<TABLE>
<CAPTION>
Signature Title Date
--------- ----- ----
<S> <C> <C>
/s/ Carolyn N. Murphy Director April 12, 2000
____________________________________
(Carolyn N. Murphy)
/s/ Thomas H. Patrick Director April 12, 2000
____________________________________
(Thomas H. Patrick)
/s/ William N. Pontikes Director April 12, 2000
____________________________________
(William N. Pontikes)
/s/ Rick Kash Director April 12, 2000
____________________________________
(Rick Kash)
/s/ Philip A. Hewes Director April 12, 2000
____________________________________
(Philip A. Hewes)
/s/ James Voelker Director April 12, 2000
____________________________________
(James Voelker)
</TABLE>
II-5
<PAGE>
EXHIBIT INDEX
<TABLE>
<CAPTION>
Exhibit
Number Description
------- -----------
<C> <S>
1.1 Form of U.S. Underwriting Agreement between Comdisco, Inc. and the
U.S. Underwriters.
1.2 Form of International Underwriting Agreement between Comdisco, Inc.
and the International Underwriters.
4.1 The rights of holders of Comdisco Ventures Stock are defined in the
Fourth Article of the Amended and Restated Certificate of
Incorporation of Comdisco, Inc. (filed as Annex II to Comdisco
Inc.'s Proxy Statement on Schedule 14A, dated March 20, 2000 and
incorporated herein by reference).
4.2 The Policy Statement regarding Comdisco Ventures Stock Matters of
Comdisco, Inc.
4.3 Form of Amended and Restated Preferred Stock Purchase Rights Plan of
Comdisco, Inc.
4.4 Form of Temporary Certificate of Comdisco Ventures Stock.
5.1 Opinion of Jeremiah M. Fitzgerald, Vice President and Chief Legal
Officer of Comdisco, Inc., as to the legality of the Comdisco
Ventures Stock being registered.
8.1 Tax Opinion of Hopkins & Sutter.
10.1 Form of Comdisco Ventures Management Incentive Plan (filed as Annex
III to Comdisco Inc.'s Proxy Statement on Schedule 14A, dated March
20, 2000 and incorporated herein by reference).
10.2 Form of Amended and Restated 1998 Long-Term Stock Ownership
Incentive Plan (filed as Annex IV to Comdisco Inc.'s Proxy Statement
on Schedule 14A, dated March 20, 2000 and incorporated herein by
reference).
10.3 Form of Amended and Restated 1999 Non-Employee Directors' Stock
Option Plan (filed as Annex V to Comdisco Inc.'s Proxy Statement on
Schedule 14A, dated March 20, 2000 and incorporated herein by
reference).
10.4 Form of Amended and Restated U.S. Employee Stock Purchase Plan
(filed as Annex VI to Comdisco Inc.'s Proxy Statement on Schedule
14A, dated March 20, 2000 and incorporated herein by reference).
23.1 Consent of Jeremiah M. Fitzgerald, Vice President and Chief Legal
Officer of Comdisco, Inc. (included in the opinion of counsel filed
as Exhibit 5.1).
23.2 Consent of KPMG LLP.
23.3 Consent of Hopkins & Sutter (included in the opinion of counsel
filed as
Exhibit 8.1).
24.1 Powers of Attorney (See page II-4).
</TABLE>
<PAGE>
EXHIBIT 1.1
================================================================================
COMDISCO, INC.
(a Delaware corporation)
. Shares of Comdisco Inc. -- Comdisco Ventures Common Stock
FORM OF U.S. PURCHASE AGREEMENT
-------------------------------
Dated: ., 2000
================================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
U.S. PURCHASE AGREEMENT........................................................1
SECTION 1. Representations and Warranties.................................4
(a) Representations and Warranties by the Company..................4
(i) Compliance with Registration Requirements...............4
(ii) Incorporated Documents..................................5
(iii) Independent Accountants.................................5
(iv) Financial Statements....................................5
(v) No Material Adverse Change in Business..................5
(vi) Good Standing of the Company............................6
(vii) Good Standing of Subsidiaries...........................6
(viii) Capitalization..........................................6
(ix) Authorization of Agreement..............................6
(x) Authorization and Description of Securities.............6
(xi) Absence of Defaults and Conflicts.......................6
(xii) Absence of Proceedings..................................7
(xiii) Accuracy of Exhibits....................................7
(xiv) Absence of Further Requirements.........................7
(xv) Possession of Licenses and Permits......................8
(xvi) Investment Company Act..................................8
(b) Officer's Certificates.........................................8
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing................8
(a) Initial Securities.............................................8
(b) Option Securities..............................................9
(c) Payment........................................................9
(d) Denominations; Registration...................................10
SECTION 3. Covenants of the Company......................................10
(a) Compliance with Securities Regulations and Commission
Requests......................................................10
(b) Filing of Amendments..........................................10
(c) Delivery of Registration Statements...........................10
(d) Delivery of Prospectuses......................................11
(e) Continued Compliance with Securities Laws.....................11
(f) Blue Sky Qualifications.......................................11
(g) Rule 158......................................................12
(h) Use of Proceeds...............................................12
(i) Listing.......................................................12
(j) Restriction on Sale of Securities.............................12
(k) Reporting Requirements........................................12
SECTION 4. Payment of Expenses...........................................13
(a) Expenses......................................................13
</TABLE>
i
<PAGE>
<TABLE>
<S> <C> <C>
(b) Termination of Agreement.....................................13
SECTION 5. Conditions of U.S. Underwriters' Obligations.................14
(a) Effectiveness of Registration Statement......................14
(b) Opinion of Jeremiah M. Fitzgerald............................14
(c) Opinion of McBride Baker & Coles.............................14
(d) Opinion of Palmer & Dodge LLP................................14
(e) Opinion of Hopkins & Sutter..................................15
(f) Opinion of Wilson Sonsini Goodrich & Rosati..................15
(g) Opinion of Counsel for U.S. Underwriters.....................15
(h) Officers' Certificate........................................15
(i) Accountant's Comfort Letter..................................16
(j) Bring-down Comfort Letter....................................16
(k) Approval of Listing..........................................16
(l) Purchase of Initial International Securities.................16
(m) Conditions to Purchase of U.S. Option Securities.............16
(n) Additional Documents.........................................17
(o) Termination of Agreement.....................................17
SECTION 6. Indemnification..............................................17
(a) Indemnification of U.S. Underwriters.........................17
(b) Indemnification of Company, Directors and Officers...........18
(c) Actions against Parties; Notification........................19
(d) Settlement without Consent if Failure to Reimburse...........19
(e) Indemnification for Reserved Securities......................19
SECTION 7. Contribution.................................................20
SECTION 8. Representations, Warranties and Agreements to Survive
Delivery.....................................................21
SECTION 9. Termination of Agreement.....................................21
(a) Termination; General.........................................21
(b) Liabilities..................................................22
SECTION 10. Default by One or More of the U.S. Underwriters..............22
SECTION 11. Notices......................................................23
SECTION 12. Parties......................................................23
SECTION 13. Governing Law and Time.......................................23
SECTION 14. Effect of Headings...........................................23
</TABLE>
ii
<PAGE>
<TABLE>
<S> <C> <C>
SCHEDULES
Schedule A - List of Underwriters..............................Sch A-1
Schedule B - Pricing Information...............................Sch B-1
SCHEDULES
Exhibit A - Form of Opinion of Company's Counsel...................A-1
Exhibit B - Form of Opinion of Hybrid's Counsel....................B-1
</TABLE>
iii
<PAGE>
COMDISCO, INC.
(a Delaware corporation)
. Shares of Comdisco Inc. -- Comdisco Ventures Common Stock
(Par Value $.10 Per Share)
U.S. PURCHASE AGREEMENT
., 2000
MERRILL LYNCH & CO.
Merrill Lynch, Pierce, Fenner & Smith
Incorporated
as U.S. Representative of the several U.S. Underwriters
North Tower
World Financial Center
New York, New York 10281-1209
Ladies and Gentlemen:
Comdisco, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith
Incorporated ("Merrill Lynch") and each of the other U.S. Underwriters named in
Schedule A hereto (collectively, the "U.S. Underwriters", which term shall also
include any underwriter substituted as hereinafter provided in Section 10
hereof), for whom Merrill Lynch is acting as Representative (in such capacity,
the "U.S. Representative"), with respect to the issue and sale by the Company
and the purchase by the U.S. Underwriters, acting severally and not jointly, of
the respective numbers of shares of Comdisco Inc. -- Comdisco Ventures Common
Stock, par value $.10 per share ("Ventures Common Stock"), set forth in said
Schedule A, and with respect to the grant by the Company to the U.S.
Underwriters, acting severally and not jointly, of the option described in
Section 2(b) hereof to purchase all or any part of . additional shares of
Ventures Common Stock to cover over-allotments, if any. The aforesaid . shares
of Ventures Common Stock (the "Initial U.S. Securities") to be purchased by the
U.S. Underwriters and all or any part of the . shares of Ventures Common Stock
subject to the option described in Section 2(b) hereof (the "U.S. Option
Securities") are hereinafter called, collectively, the "U.S. Securities".
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "International Purchase Agreement")
providing for the offering by the Company of an aggregate of . shares of
Ventures Common Stock (the "Initial International Securities") through
arrangements with certain underwriters outside the United States and Canada (the
<PAGE>
"International Managers") for which Merrill Lynch International is acting as
lead manager (the "Lead Manager") and the grant by the Company to the
International Managers, acting severally and not jointly, of an option to
purchase all or any part of the International Managers' pro rata portion of up
to . additional shares of Ventures Common Stock solely to cover overallotments,
if any (the "International Option Securities" and, together with the U.S. Option
Securities, the "Option Securities"). The Initial International Securities and
the International Option Securities are hereinafter called the "International
Securities". It is understood that the Company is not obligated to sell and the
U.S. Underwriters are not obligated to purchase, any Initial U.S. Securities
unless all of the Initial International Securities are contemporaneously
purchased by the International Managers.
The U.S. Underwriters and the International Managers are hereinafter
collectively called the "Underwriters", the Initial U.S. Securities and the
Initial International Securities are hereinafter collectively called the
"Initial Securities", and the U.S. Securities, and the International Securities
are hereinafter collectively called the "Securities".
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in
such capacity, the "Global Coordinator").
The Company understands that the U.S. Underwriters propose to make a public
offering of the U.S. Securities as soon as the U.S. Representative deems
advisable after this Agreement has been executed and delivered.
The Company and the U.S. Underwriters agree that up to _______ shares of
the Initial U.S. Securities to be purchased by the U.S. Underwriters and that up
to _______ shares of the Initial International Securities to be purchased by the
International Mangers (collectively, the "Reserved Securities") shall be
reserved for sale by the Underwriters to certain eligible employees and persons
having business relationships with the Company and to the Company as a
contribution to its retirement plan, as part of the distribution of the
Securities by the Underwriters, subject to the terms of this Agreement, the
applicable rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. and all other applicable laws, rules and regulations.
To the extent that such Reserved Securities are not orally confirmed for
purchase by such eligible employees and persons having business relationships
with the Company or by the Company by the end of the first business day after
the date of this Agreement, such Reserved Securities may be offered to the
public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333-.) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of
2
<PAGE>
the 1933 Act Regulations, prepare and file a term sheet (a "Term Sheet") in
accordance with the provisions of Rule 434 and Rule 424(b). Two forms of
prospectus are to be used in connection with the offering and sale of the
Securities: one relating to the U.S. Securities (the "Form of U.S. Prospectus")
and one relating to the International Securities (the "Form of International
Prospectus"). The Form of International Prospectus is identical to the Form of
U.S. Prospectus, except for the front cover and back cover pages and the
information under the caption "Underwriting." The information included in any
such prospectus or in any such Term Sheet, as the case may be, that was omitted
from such registration statement at the time it became effective but that is
deemed to be part of such registration statement at the time it became effective
(a) pursuant to paragraph (b) of Rule 430A is referred to as "Rule 430A
Information" or (b) pursuant to paragraph (d) of Rule 434 is referred to as
"Rule 434 Information." Each Form of U.S. Prospectus and Form of International
Prospectus used before such registration statement became effective, and any
prospectus that omitted, as applicable, the Rule 430A Information or the Rule
434 Information, that was used after such effectiveness and prior to the
execution and delivery of this Agreement, is herein called a "preliminary
prospectus." Such registration statement, including the exhibits thereto,
schedules thereto, if any, and the documents incorporated by reference therein
pursuant to Item 12 of Form S-3 under the 1933 Act, at the time it became
effective and including the Rule 430A Information and the Rule 434 Information,
as applicable, is herein called the "Registration Statement." Any registration
statement filed pursuant to Rule 462(b) of the 1933 Act Regulations is herein
referred to as the "Rule 462(b) Registration Statement," and after such filing
the term "Registration Statement" shall include the Rule 462(b) Registration
Statement. The final Form of U.S. Prospectus and the final Form of International
Prospectus, including the documents incorporated by reference therein pursuant
to Item 12 of Form S-3 under the 1933 Act, in the forms first furnished to the
Underwriters for use in connection with the offering of the Securities are
herein called the "U.S. Prospectus" and the "International Prospectus,"
respectively, and collectively, the "Prospectuses." If Rule 434 is relied on,
the terms "U.S. Prospectus" and "International Prospectus" shall refer to the
preliminary U.S. Prospectus dated ., 2000 and preliminary International
Prospectus dated ., 2000, respectively, each together with the applicable Term
Sheet and all references in this Agreement to the date of such Prospectuses
shall mean the date of the applicable Term Sheet. For purposes of this
Agreement, all references to the Registration Statement, any preliminary
prospectus, the U.S. Prospectus, the International Prospectus or any Term Sheet
or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus (including the Form of U.S.
Prospectus and Form of International Prospectus) or the Prospectuses (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus
(including the Form of U.S. Prospectus and Form of International Prospectus) or
the Prospectuses, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectuses shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
3
<PAGE>
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectuses, as the case may be.
SECTION 1. Representations and Warranties.
(a) Representations and Warranties by the Company. The Company represents
and warrants to each U.S. Underwriter as of the date hereof, as of the Closing
Time referred to in Section 2(c) hereof, and as of each Date of Delivery (if
any) referred to in Section 2(b), hereof and agrees with each U.S. Underwriter,
as follows:
(i) Compliance with Registration Requirements. The Company meets the
requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any U.S. Option Securities are
purchased, at the Date of Delivery), the Registration Statement, the Rule
462(b) Registration Statement and any amendments and supplements thereto
complied and will comply in all material respects with the requirements of
the 1933 Act and the 1933 Act Regulations and did not and will not contain
an untrue statement of a material fact or omit to state a material fact
required to be stated therein or necessary to make the statements therein
not misleading, and the Prospectuses, any preliminary prospectuses and any
supplement thereto or prospectus wrapper prepared in connection therewith,
at their respective times of issuance and at the Closing Time, complied and
will comply in all material respects with any applicable laws or
regulations of foreign jurisdictions in which the Prospectuses and such
preliminary prospectuses, as amended or supplemented, if applicable, are
distributed in connection with the offer and sale of Reserved Securities.
Neither of the Prospectuses nor any amendments or supplements thereto
(including any prospectus wrapper), at the time the Prospectuses or any
amendments or supplements thereto were issued and at the Closing Time (and,
if any U.S. Option Securities are purchased, at the Date of Delivery),
included or will include an untrue statement of a material fact or omitted
or will omit to state a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading. The representations and warranties in this
subsection shall not apply to statements in or omissions from the
Registration Statement or the U.S. Prospectus made in reliance upon and in
conformity with information furnished to the Company in writing by any U.S.
Underwriter through the U.S. Representative expressly for use in the
Registration Statement or the U.S. Prospectus.
Each preliminary prospectus and the prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to
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Rule 424 under the 1933 Act, complied when so filed in all material
respects with the 1933 Act Regulations and each preliminary prospectus and
the Prospectuses delivered to the Underwriters for use in connection with
this offering was identical to the electronically transmitted copies
thereof filed with the Commission pursuant to EDGAR, except to the extent
permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed to
be incorporated by reference in the Registration Statement and the
Prospectuses, when they became effective or at the time they were or
hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder (the "1934 Act Regulations"), and,
when read together with the other information in the Prospectuses, at the
time the Registration Statement became effective, at the time the
Prospectuses were issued and at the Closing Time (and, if any U.S. Option
Securities are purchased, at the Date of Delivery), did not and will not
contain an untrue statement of a material fact or omit to state a material
fact required to be stated therein or necessary to make the statements
therein not misleading.
(iii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included in the
Registration Statement and the Prospectuses, together with the related
schedules and notes, present fairly the financial position of the Company
and its consolidated subsidiaries and Comdisco Ventures (as defined in the
Prospectuses) at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries or Comdisco Ventures, as the case may be, for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The selected financial
data and the summary financial information included in the Prospectuses
present fairly the information shown therein and have been compiled on a
basis consistent with that of the audited financial statements included in
the Registration Statement.
(v) No Material Adverse Change in Business. Since the respective dates
as of which information is given in the Registration Statement and the
Prospectuses, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise or of Comdisco Ventures, whether
or not arising in the ordinary course of business (a "Material Adverse
Effect"), and (B) there have been no transactions entered into by the
Company or any of its subsidiaries, other than those in the ordinary course
of business, which are material with
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respect to the Company and its subsidiaries considered as one enterprise or
Comdisco Ventures.
(vi) Good Standing of the Company. The Company has been duly organized
and is validly existing as a corporation in good standing under the laws of
the State of Delaware and has corporate power and authority to own, lease
and operate its properties and to conduct its business as described in the
Prospectuses and to enter into and perform its obligations under this
Agreement; and the Company is duly qualified as a foreign corporation to
transact business and is in good standing in each other jurisdiction in
which such qualification is required, whether by reason of the ownership or
leasing of property or the conduct of business, except where the failure so
to qualify or to be in good standing would not result in a Material Adverse
Effect.
(vii) Good Standing of Subsidiaries. No subsidiary of the Company is a
"significant subsidiary" as defined in Rule 405 of Regulation C of the 1933
Act Regulations. To the Company's knowledge, Hybrid Venture Partners, L.P.
("Hybrid") has been duly organized and is validly existing as a limited
partnership under the laws of the State of Delaware, has partnership power
and authority to own, lease and operate its properties and to conduct its
business as described in the Prospectuses and is duly qualified as a
foreign partnership to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of its business, except
where the failure to so qualify or to be in good standing would not result
in a Material Adverse Effect.
(viii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectuses in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectuses or
pursuant to the exercise of convertible securities or options referred to
in the Prospectuses). The shares of issued and outstanding capital stock of
the Company have been duly authorized and validly issued and are fully paid
and non-assessable; none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights
of any securityholder of the Company.
(ix) Authorization of Agreement. This Agreement and the International
Purchase Agreement have been duly authorized, executed and delivered by the
Company.
(x) Authorization and Description of Securities. The Securities to be
purchased by the U.S. Underwriters and the International Managers from the
Company have been duly authorized for issuance and sale to the U.S.
Underwriters pursuant to this Agreement and the International Managers
pursuant to the International Purchase Agreement, respectively, and, when
issued and delivered by the Company pursuant to this Agreement and the
International Purchase Agreement, respectively, against payment of the
consideration set forth herein and the International Purchase Agreement,
respectively, will be validly issued, fully paid and non-assessable; the
Ventures Common Stock conforms to all statements relating thereto contained
in the Prospectuses and such description conforms to the rights set forth
in the instruments defining the same; no holder of the Securities will be
subject to personal liability by reason of being such a holder; and the
issuance of the Securities is not subject to the preemptive or other
similar rights of any securityholder of the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company nor, to
the Company's knowledge, Hybrid is in violation of its charter or by-laws
or certificate of limited partnership or partnership agreement, as the case
may be, or in default in the performance or observance of any material
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obligation, agreement, covenant or condition contained in any contract,
indenture, mortgage, deed of trust, loan or credit agreement, note, lease
or other agreement or instrument to which the Company or, to the Company's
knowledge, Hybrid is a party or by which it or Hybrid may be bound, or to
which any of the property or assets of the Company or, to the Company's
knowledge, Hybrid is subject (collectively, "Agreements and Instruments")
except for such defaults that would not result in a Material Adverse
Effect; and the execution, delivery and performance of this Agreement and
the International Purchase Agreement and the consummation of the
transactions contemplated in this Agreement, the International Purchase
Agreement and in the Registration Statement (including the issuance and
sale of the Securities and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use of
Proceeds") and compliance by the Company with its obligations under this
Agreement and the International Purchase Agreement have been duly
authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or, to the Company's knowledge, Hybrid pursuant
to, the Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or, to the
Company's knowledge, the certificate of limited partnership or partnership
agreement of Hybrid or to the best of its knowledge any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or Hybrid or any of their assets,
properties or operations.
(xii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement and the
International Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary is a party
or of which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents which
are required to be described in the Registration Statement, the
Prospectuses or the documents incorporated by reference therein or to be
filed as exhibits thereto which have not been so described and filed as
required.
(xiv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
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the Securities under this Agreement and the International Purchase
Agreement or the consummation of the transactions contemplated by this
Agreement and the International Purchase Agreement, except (i) such as have
been already obtained or as may be required under the 1933 Act or the 1933
Act Regulations and foreign or state securities or blue sky laws and (ii)
such as have been obtained under the laws and regulations of jurisdictions
outside the United States in which the Reserved Securities are offered.
(xv) Possession of Licenses and Permits. The Company and, to the
Company's knowledge, Hybrid possess such permits, licenses, approvals,
consents and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by them
except where the failure to posses any one or more of such Governmental
Licenses would not, singly or in the aggregate, have a Material Adverse
Effect; the Company and, to the Company's knowledge, Hybrid is in
compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the
aggregate, have a Material Adverse Effect; all of the Governmental Licenses
are valid and in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to be in
full force and effect would not have a Material Adverse Effect; and neither
the Company nor, to the Company's knowledge, Hybrid has received any notice
of proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xvi) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectuses
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act"); the issuance and sale of the
Securities as herein contemplated will not violate the 1940 Act or the
rules and regulations thereunder.
(b) Officer's Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Global Coordinator, the U.S.
Representative or to counsel for the U.S. Underwriters shall be deemed a
representation and warranty by the Company to each U.S. Underwriter as to the
matters covered thereby.
SECTION 2. Sale and Delivery to U.S. Underwriters; Closing.
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each U.S. Underwriter, severally and not jointly, and
each U.S. Underwriter, severally and not jointly, agrees to purchase from the
Company, at the price per share set forth in Schedule B, the number of Initial
U.S. Securities set forth in Schedule A opposite the name of such U.S.
Underwriter, plus any additional number of Initial U.S. Securities which such
Underwriter may become obligated to purchase pursuant to the provisions of
Section 10 hereof.
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(b) Option Securities. In addition, on the basis of the representations and
warranties herein contained and subject to the terms and conditions herein set
forth, the Company hereby grants an option to the U.S. Underwriters, severally
and not jointly, to purchase up to an additional . shares of Ventures Common
Stock at the price per share set forth in Schedule B, less an amount per share
equal to any dividends or distributions declared by the Company and payable on
the Initial U.S. Securities but not payable on the U.S. Option Securities. The
option hereby granted will expire 30 days after the date hereof and may be
exercised in whole or in part from time to time only for the purpose of covering
over-allotments which may be made in connection with the offering and
distribution of the Initial U.S. Securities upon notice by the Global
Coordinator to the Company setting forth the number of U.S. Option Securities as
to which the several U.S. Underwriters are then exercising the option and the
time and date of payment and delivery for such U.S. Option Securities. Any such
time and date of delivery for the U.S. Option Securities (a "Date of Delivery")
shall be determined by the Global Coordinator, but shall not be later than seven
full business days after the exercise of said option, nor in any event prior to
the Closing Time, as hereinafter defined. If the option is exercised as to all
or any portion of the U.S. Option Securities, each of the U.S. Underwriters,
acting severally and not jointly, will purchase that proportion of the total
number of U.S. Option Securities then being purchased which the number of
Initial U.S. Securities set forth in Schedule A opposite the name of such U.S.
Underwriter bears to the total number of Initial U.S. Securities, subject in
each case to such adjustments as the Global Coordinator in its discretion shall
make to eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of Brown &
Wood LLP, One World Trade Center, New York, New York 10048, or at such other
place as shall be agreed upon by the Global Coordinator and the Company, at 9:00
A.M. (Eastern time) on the third (fourth, if the pricing occurs after 4:30 P.M.
(Eastern time) on any given day) business day after the date hereof (unless
postponed in accordance with the provisions of Section 10), or such other time
not later than ten business days after such date as shall be agreed upon by the
Global Coordinator and the Company (such time and date of payment and delivery
being herein called "Closing Time").
In addition, in the event that any or all of the U.S. Option Securities are
purchased by the U.S. Underwriters, payment of the purchase price for, and
delivery of certificates for, such U.S. Option Securities shall be made at the
above-mentioned offices, or at such other place as shall be agreed upon by the
Global Coordinator and the Company, on each Date of Delivery as specified in the
notice from the Global Coordinator to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against delivery to
the U.S. Representative for the respective accounts of the U.S. Underwriters of
certificates for the U.S. Securities to be purchased by them. It is understood
that each U.S. Underwriter has authorized the U.S. Representative, for its
account, to accept delivery of, receipt for, and make payment of the purchase
price for, the Initial U.S. Securities and the U.S. Option Securities, if any,
which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the U.S. Underwriters, may (but shall not be obligated to)
make payment of the purchase price for the Initial U.S. Securities or the U.S.
Option Securities, if any, to be purchased by any U.S. Underwriter whose funds
have not been received by the Closing Time or the relevant Date of
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Delivery, as the case may be, but such payment shall not relieve such U.S.
Underwriter from its obligations hereunder.
(d) Denominations; Registration. Certificates for the Initial U.S.
Securities and the U.S. Option Securities, if any, shall be in such
denominations and registered in such names as the U.S. Representative may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
U.S. Securities and the U.S. Option Securities, if any, will be made available
for examination and packaging by the U.S. Representative in The City of New York
not later than 10:00 A.M. (Eastern time) on the business day prior to the
Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each U.S.
Underwriter as follows:
(a) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(b), will comply with the requirements of
Rule 430A or Rule 434, as applicable, and will notify the Global
Coordinator immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become
effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to
the Prospectuses or for additional information, and (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus, or of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b)
and will take such steps as it deems necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule 424(b) was
received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global Coordinator
notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or
to the Prospectuses, whether pursuant to the 1933 Act, the 1934 Act or
otherwise, will furnish the Global Coordinator with copies of any such
documents a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file or use any such document to which the
Global Coordinator or counsel for the U.S. Underwriters shall object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the U.S. Representative and counsel for the U.S.
Underwriters, without charge,
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signed copies of the Registration Statement as originally filed and of each
amendment thereto (including exhibits filed therewith or incorporated by
reference therein and documents incorporated or deemed to be incorporated
by reference therein) and signed copies of all consents and certificates of
experts, and will also deliver to the U.S. Representative, without charge,
a conformed copy of the Registration Statement as originally filed and of
each amendment thereto (without exhibits) for each of the U.S.
Underwriters. The copies of the Registration Statement and each amendment
thereto furnished to the U.S. Underwriters will be identical to the
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each U.S.
Underwriter, without charge, as many copies of each preliminary prospectus
as such U.S. Underwriter reasonably requested, and the Company hereby
consents to the use of such copies for purposes permitted by the 1933 Act.
The Company will furnish to each U.S. Underwriter, without charge, during
the period when the U.S. Prospectus is required to be delivered under the
1933 Act or the 1934 Act, such number of copies of the U.S. Prospectus (as
amended or supplemented) as such U.S. Underwriter may reasonably request.
The U.S. Prospectus and any amendments or supplements thereto furnished to
the U.S. Underwriters will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will comply
with the 1933 Act and the 1933 Act Regulations and the 1934 Act and the
1934 Act Regulations so as to permit the completion of the distribution of
the Securities as contemplated in this Agreement, the International
Purchase Agreement and in the Prospectuses. If at any time when a
prospectus is required by the 1933 Act to be delivered in connection with
sales of the Securities, any event shall occur or condition shall exist as
a result of which it is necessary, in the opinion of counsel for the U.S.
Underwriters or for the Company, to amend the Registration Statement or
amend or supplement any Prospectus in order that the Prospectuses will not
include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of
such counsel, at any such time to amend the Registration Statement or amend
or supplement any Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare
and file with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or to
make the Registration Statement or the Prospectuses comply with such
requirements, and the Company will furnish to the U.S. Underwriters such
number of copies of such amendment or supplement as the U.S. Underwriters
may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts, in
cooperation with the U.S. Underwriters, to qualify the Securities for
offering and sale under the applicable securities laws of such states and
other jurisdictions (domestic or
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foreign) as the Global Coordinator may designate and to maintain such
qualifications in effect for a period of not less than one year from the
later of the effective date of the Registration Statement and any Rule
462(b) Registration Statement; 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 or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction in which the Securities have
been so qualified, the Company will file such statements and reports as may
be required by the laws of such jurisdiction to continue such qualification
in effect for a period of not less than one year from the effective date of
the Registration Statement and any Rule 462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds from the
sale of the Securities in the manner specified in the Prospectuses under
"Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Securities on the Nasdaq National Market and
will file with the Nasdaq National Market all documents and notices
required by the Nasdaq National Market of companies that have securities
that are traded in the over-the-counter market and quotations for which are
reported by the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180 days
from the date of the Prospectuses, the Company will not, without the prior
written consent of the Global Coordinator, (i) directly or indirectly,
offer, pledge, sell, contract to sell, 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 share of
Ventures Common Stock or any securities convertible into or exercisable or
exchangeable for Ventures Common Stock or file any registration statement
under the 1933 Act with respect to any of the foregoing or (ii) enter into
any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership
of the Ventures Common Stock, whether any such swap or transaction
described in clause (i) or (ii) above is to be settled by delivery of
Ventures Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Securities to be sold
hereunder or under the International Purchase Agreement, or (B) any shares
of Ventures Common Stock issued or options to purchase Ventures Common
Stock granted pursuant to existing employee benefit plans of the Company
referred to in the Prospectuses.
(k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act
and the 1934 Act Regulations.
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(l) Compliance with NASD Rules. The Company hereby agrees that it will
ensure that the Reserved Securities will be restricted as required by the
National Association of Securities Dealers, Inc. (the "NASD") or the NASD
rules from sale, transfer, assignment, pledge or hypothecation for a period
of three months following the date of this Agreement. The Underwriters will
notify the Company as to which persons will need to be so restricted. At
the request of the Underwriters, the Company will direct the transfer agent
to place a stop transfer restriction upon such securities for such period
of time. Should the Company release, or seek to release, from such
restrictions any of the Reserved Securities, the Company agrees to
reimburse the Underwriters for any reasonable expenses (including, without
limitation, legal expenses) they incur in connection with such release.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Securities to the Underwriters and the
transfer of the Securities between the U.S. Underwriters and the International
Managers, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors, (v) the qualification of the Securities under securities
laws in accordance with the provisions of Section 3(f) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the Underwriters
in connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and of
the Prospectuses and any amendments or supplements thereto, (vii) the
preparation, printing and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (viii) the fees and expenses of any transfer
agent or registrar for the Securities, (ix) the fees and expenses incurred in
connection with the inclusion of the Securities in the Nasdaq National Market
and (x) all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, in connection with matters
related to the Reserved Securities which are designated by the Company for sale
to employees and others having a business relationship with the Company.
(b) Termination of Agreement. If this Agreement is terminated by the U.S.
Representative in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Company shall reimburse the U.S. Underwriters for all of their out-
of-pocket expenses, including the reasonable fees and disbursements of counsel
for the U.S. Underwriters.
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SECTION 5. Conditions of U.S. Underwriters' Obligations. The obligations
of the several U.S. Underwriters hereunder are subject to the accuracy of the
representations and warranties of the Company contained in Section 1 hereof or
in certificates of any officer of the Company or any subsidiary of the Company
delivered pursuant to the provisions hereof, to the performance by the Company
of its covenants and other obligations hereunder, and to the following further
conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing Time no stop order suspending the effectiveness of
the Registration Statement shall have been issued under the 1933 Act or
proceedings therefor initiated or threatened by the Commission, and any
request on the part of the Commission for additional information shall have
been complied with to the reasonable satisfaction of counsel to the U.S.
Underwriters. A prospectus containing the Rule 430A Information shall have
been filed with the Commission in accordance with Rule 424(b) (or a post-
effective amendment providing such information shall have been filed and
declared effective in accordance with the requirements of Rule 430A) or, if
the Company has elected to rely upon Rule 434, a Term Sheet shall have been
filed with the Commission in accordance with Rule 424(b).
(b) Opinion of Jeremiah M. Fitzgerald. At Closing Time, the U.S.
Representative shall have received the favorable opinion, dated as of
Closing Time, of Jeremiah M. Fitzgerald, Esq., Vice President and Chief
Legal Officer of the Company , in form and substance satisfactory to
counsel for the U.S. Underwriters, together with signed or reproduced
copies of such letter for each of the other U.S. Underwriters to the effect
set forth in clauses (i)-(xvii), inclusive, (xix) and the penultimate
paragraph of Exhibit A hereto and to such further effect as counsel to the
U.S. Underwriters may reasonably request. In rendering his opinion, Mr.
Fitzgerald may rely, as to all matters involving the laws of the State of
New York, upon the opinion of Brown & Wood llp.
(c) Opinion of McBride Baker & Coles. At Closing Time, the U.S.
Representative shall have received the favorable opinion, dated as of
Closing Time, of McBride, Baker & Coles, counsel for the Company , in form
and substance satisfactory to counsel for the U.S. Underwriters, together
with signed or reproduced copies of such letter for each of the other U.S.
Underwriters to the effect set forth in clauses (i)-(ii), inclusive, (v)-
(ix), inclusive, (xiii), (xvi), (xix) and the penultimate paragraph of
Exhibit A hereto and to such further effect as counsel to the U.S.
Underwriters may reasonably request. In rendering its opinion, such counsel
may rely, as to all matters involving the laws of the State of New York,
upon the opinion of Brown & Wood llp.
(d) Opinion of Palmer & Dodge LLP. At Closing Time, the U.S.
Representative shall have received the favorable opinion, dated as of
Closing Time, of Palmer & Dodge LLP, special counsel to the Company, in
form and substance satisfactory to counsel for the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the
other U.S. Underwriters to the effect set forth in clause (xviii) of
Exhibit A hereto and to such further effect as counsel to the U.S.
Underwriters may reasonably request.
14
<PAGE>
(e) Opinion of Hopkins & Sutter. At Closing Time, the U.S.
Representative shall have received the favorable opinion, dated as of
Closing Time, of Hopkins & Sutter, special tax counsel to the Company, in
form and substance satisfactory to counsel for the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the
other U.S. Underwriters to the effect set forth in clause (xx) of Exhibit A
hereto and to such further effect as counsel to the U.S. Underwriters may
reasonably request.
(f) Opinion of Wilson Sonsini Goodrich & Rosati. At Closing Time, the
U.S. Representative shall have received the favorable opinion, dated as of
Closing Time, of Wilson Sonsini Goodrich & Rosati, counsel to Hybrid, in
form and substance satisfactory to counsel for the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the
other U.S. Underwriters to the effect set forth in Exhibit B hereto and to
such further effect as such counsel to the U.S. Underwriters may reasonably
request.
(g) Opinion of Counsel for U.S. Underwriters. At Closing Time, the
U.S. Representative shall have received the favorable opinion, dated as of
Closing Time, of Brown & Wood llp, counsel for the U.S. Underwriters,
together with signed or reproduced copies of such letter for each of the
other U.S. Underwriters with respect to the matters set forth in clauses
(i), (ii), (v), (vi) (solely as to preemptive or other similar rights
arising by operation of law or under the charter or by-laws of the
Company), (vii) through (ix), inclusive, (xi), (xiii) and the penultimate
paragraph of Exhibit A hereto. In giving such opinion such counsel may
rely, as to all matters governed by the laws of jurisdictions other than
the law of the State of New York, the federal law of the United States and
the General Corporation Law of the State of Delaware, upon the opinions of
counsel satisfactory to the U.S. Representative. Such counsel may also
state that, insofar as such opinion involves factual matters, they have
relied, to the extent they deem proper, upon certificates of officers of
the Company and its subsidiaries and certificates of public officials.
(h) Officers' Certificate. At Closing Time, there shall not have been,
since the date hereof or since the respective dates as of which information
is given in the Prospectuses, any material adverse change in the condition,
financial or otherwise, or in the earnings, business affairs or business
prospects of the Company and its subsidiaries considered as one enterprise
or of Comdisco Ventures, whether or not arising in the ordinary course of
business, and the U.S. Representative shall have received a certificate of
the President or a Vice President of the Company and of the chief financial
or chief accounting officer of the Company, dated as of Closing Time, to
the effect that (i) there has been no such material adverse change, (ii)
the representations and warranties in Section 1(a) hereof are true and
correct with the same force and effect as though expressly made at and as
of Closing Time, (iii) the Company has complied with all agreements and
satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time, and (iv) no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
15
<PAGE>
(i) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the U.S. Representative shall have received from KPMG LLP a
letter dated such date, in form and substance satisfactory to the U.S.
Representative, together with signed or reproduced copies of such letter
for each of the other U.S. Underwriters, containing statements and
information of the type ordinarily included in accountants' "comfort
letters" to underwriters with respect to the financial statements and
certain financial information contained in the Registration Statement and
the Prospectuses.
(j) Bring-down Comfort Letter. At Closing Time, the U.S.
Representative shall have received from KPMG LLP a letter, dated as of
Closing Time, to the effect that they reaffirm the statements made in the
letter furnished pursuant to subsection (i) of this Section, except that
the specified date referred to shall be a date not more than three business
days prior to Closing Time.
(k) Approval of Listing. At Closing Time, the Securities shall have
been approved for inclusion in the Nasdaq National Market, subject only to
official notice of issuance.
(l) Purchase of Initial International Securities. Contemporaneously
with the purchase by the U.S. Underwriters of the Initial U.S. Securities
under this Agreement, the International Managers shall have purchased the
Initial International Securities under the International Purchase
Agreement.
(m) Conditions to Purchase of U.S. Option Securities. In the event
that the U.S. Underwriters exercise their option provided in Section 2(b)
hereof to purchase all or any portion of the U.S. Option Securities, the
representations and warranties of the Company contained herein and the
statements in any certificates furnished by the Company or any subsidiary
of the Company hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the U.S. Representative
shall have received:
(i) Officers' Certificate. A certificate, dated such Date of
Delivery, of the President or a Vice President of the Company and of
the chief financial or chief accounting officer of the Company
confirming that the certificate delivered at the Closing Time pursuant
to section 5(h) hereof remains true and correct as of such Date of
Delivery.
(ii) Opinions of Counsels for Company. The favorable opinions of
Jeremiah M. Fitzgerald, Esq., Vice President and Chief Legal Officer
of the Company, McBride Baker & Coles, counsel to the Company, Palmer
& Dodge LLP, special counsel to the Company, Hopkins & Sutter, special
tax counsel to the Company and Wilson Sonsini Goodrich & Rosati,
counsel to Hybrid, in each case, in form and substance satisfactory to
counsel for the U.S. Underwriters, dated such Date of Delivery,
relating to the U.S. Option Securities to be purchased on such Date of
Delivery and otherwise to the same effect as the opinions required by
Sections 5(b) through (f) hereof.
16
<PAGE>
(iii) Opinion of Counsel for U.S. Underwriters. The favorable opinion
of Brown & Wood llp, counsel for the U.S. Underwriters, dated such
Date of Delivery, relating to the U.S. Option Securities to be
purchased on such Date of Delivery and otherwise to the same effect as
the opinion required by Section 5(g) hereof.
(iv) Bring-down Comfort Letter. A letter from KPMG LLP, in form and
substance satisfactory to the U.S. Representative and dated such Date
of Delivery, substantially in the same form and substance as the
letter furnished to the U.S. Representative pursuant to Section 5(j)
hereof, except that the "specified date" in the letter furnished
pursuant to this paragraph shall be a date not more than five days
prior to such Date of Delivery.
(n) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the U.S. Underwriters shall have been furnished with
such documents and opinions as they may require for the purpose of enabling
them to pass upon the issuance and sale of the Securities as herein
contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection
with the issuance and sale of the Securities as herein contemplated shall
be satisfactory in form and substance to the U.S. Representative and
counsel for the U.S. Underwriters.
(o) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of U.S.
Option Securities on a Date of Delivery which is after the Closing Time,
the obligations of the several U.S. Underwriters to purchase the relevant
Option Securities, may be terminated by the U.S. Representative by notice
to the Company at any time at or prior to Closing Time or such Date of
Delivery, as the case may be, and such termination shall be without
liability of any party to any other party except as provided in Section 4
and except that Sections 1, 6, 7 and 8 shall survive any such termination
and remain in full force and effect.
SECTION 6. Indemnification.
(a) Indemnification of U.S. Underwriters. The Company agrees to indemnify
and hold harmless each U.S. Underwriter and each person, if any, who controls
any U.S. Underwriter within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto), or the omission or alleged
17
<PAGE>
omission therefrom of a material fact necessary in order to make the
statements therein, in the light of the circumstances under which they were
made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered and (B) any untrue statement or alleged untrue statement of a
material fact included in the supplement or prospectus wrapper material
distributed in foreign jurisdictions in connection with the reservation and
sale of the Reserved Securities to employees, business associates and
related persons of the Company and to the Company as a contribution to the
Company's retirement plan or the omission or alleged omission therefrom of
a material fact necessary to make the statements therein, when considered
in conjunction with the Prospectuses or preliminary prospectuses, not
misleading;
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission or in connection with any violation of
the nature referred to in Section 6(a)(ii)(A) hereof; provided that
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the Company; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission or
in connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof, to the extent that any such expense is not paid under
(i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
U.S. Underwriter through the U.S. Representative expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the U.S. Prospectus (or any amendment or supplement thereto).
(b) Indemnification of Company, Directors and Officers. Each U.S.
Underwriter severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any
18
<PAGE>
amendment thereto), including the Rule 430A Information and the Rule 434
Information, if applicable, or any preliminary U.S. prospectus or the U.S.
Prospectus (or any amendment or supplement thereto) in reliance upon and in
conformity with written information furnished to the Company by such U.S.
Underwriter through the U.S. Representative expressly for use in the
Registration Statement (or any amendment thereto) or such preliminary prospectus
or the U.S. Prospectus (or any amendment or supplement thereto).
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees, promptly upon a request
in writing, to indemnify and hold harmless the Underwriters from and against any
and all losses, liabilities, claims, damages and expenses incurred by them as a
result of the failure of the Company or its
19
<PAGE>
employees, business associates and related persons of the Company to pay for and
accept delivery of Reserved Securities which, by the end of the first business
day following the date of this Agreement, were subject to a properly confirmed
agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for in Section 6
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party shall contribute to
the aggregate amount of such losses, liabilities, claims, damages and expenses
incurred by such indemnified party, as incurred, (i) in such proportion as is
appropriate to reflect the relative benefits received by the Company on the one
hand and the U.S. Underwriters on the other hand from the offering of the
Securities pursuant to this Agreement or (ii) if the allocation provided by
clause (i) 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 the Company on the one hand and of the U.S.
Underwriters on the other hand in connection with the statements or omissions,
or in connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof, which resulted in such losses, liabilities, claims, damages
or expenses, as well as any other relevant equitable considerations.
The relative benefits received by the Company on the one hand and the U.S.
Underwriters on the other hand in connection with the offering of the U.S.
Securities pursuant to this Agreement shall be deemed to be in the same
respective proportions as the total net proceeds from the offering of the U.S.
Securities pursuant to this Agreement (before deducting expenses) received by
the Company and the total underwriting discount received by the U.S.
Underwriters, in each case as set forth on the cover of the U.S. Prospectus, or,
if Rule 434 is used, the corresponding location on the Term Sheet, bear to the
aggregate initial public offering price of the U.S. Securities as set forth on
such cover.
The relative fault of the Company on the one hand and the U.S. Underwriters
on the other hand shall be determined by reference to, among other things,
whether any such untrue or alleged untrue statement of a material fact or
omission or alleged omission to state a material fact relates to information
supplied by the Company or by the U.S. Underwriters and the parties' relative
intent, knowledge, access to information and opportunity to correct or prevent
such statement or omission or any violation of the nature referred to in Section
6(a)(ii)(A) hereof.
The Company and the U.S. Underwriters agree that it would not be just and
equitable if contribution pursuant to this Section 7 were determined by pro rata
allocation (even if the U.S. Underwriters were treated as one entity for such
purpose) or by any other method of allocation which does not take account of the
equitable considerations referred to above in this Section 7. The aggregate
amount of losses, liabilities, claims, damages and expenses incurred by an
indemnified party and referred to above in this Section 7 shall be deemed to
include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no U.S. Underwriter shall
be required to contribute any amount in excess of the amount by which the total
price at which the U.S.
20
<PAGE>
Securities underwritten by it and distributed to the public were offered to the
public exceeds the amount of any damages which such U.S. Underwriter has
otherwise been required to pay by reason of any such untrue or alleged untrue
statement or omission or alleged omission.
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls a U.S.
Underwriter within the meaning of Section 15 of the 1933 Act or Section 20 of
the 1934 Act shall have the same rights to contribution as such U.S.
Underwriter, and each director of the Company, each officer of the Company who
signed the Registration Statement, and each person, if any, who controls the
Company within the meaning of Section 15 of the 1933 Act or Section 20 of the
1934 Act shall have the same rights to contribution as the Company. The U.S.
Underwriters' respective obligations to contribute pursuant to this Section 7
are several in proportion to the number of Initial U.S. Securities set forth
opposite their respective names in Schedule A hereto and not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any U.S. Underwriter or controlling
person, or by or on behalf of the Company, and shall survive delivery of the
Securities to the U.S. Underwriters.
SECTION 9. Termination of Agreement.
(a) Termination; General. The U.S. Representative may terminate this
Agreement, by notice to the Company, at any time at or prior to Closing Time (i)
if there has been, since the time of execution of this Agreement or since the
respective dates as of which information is given in the U.S. Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise or of Comdisco Ventures, whether or
not arising in the ordinary course of business, or (ii) if there has occurred
any material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the U.S. Representative, impracticable to market the Securities or
to enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission, the New York Stock Exchange or the Nasdaq National Market, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the Nasdaq National Market has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (iv) if a banking moratorium has been
declared by either Federal or New York authorities.
21
<PAGE>
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in Section 4 hereof, and provided further that Sections 1, 6,
7 and 8 shall survive such termination and remain in full force and effect.
SECTION 10. Default by One or More of the U.S. Underwriters. If one or
more of the U.S. Underwriters shall fail at Closing Time or a Date of Delivery
to purchase the Securities which it or they are obligated to purchase under this
Agreement (the "Defaulted Securities"), the U.S. Representative shall have the
right, within 24 hours thereafter, to make arrangements for one or more of the
non-defaulting U.S. Underwriters, or any other underwriters, to purchase all,
but not less than all, of the Defaulted Securities in such amounts as may be
agreed upon and upon the terms herein set forth; if, however, the U.S.
Representative shall not have completed such arrangements within such 24-hour
period, then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of U.S. Securities to be purchased on such date, each of the non-
defaulting U.S. Underwriters shall be obligated, severally and not jointly,
to purchase the full amount thereof in the proportions that their
respective underwriting obligations hereunder bear to the underwriting
obligations of all non-defaulting U.S. Underwriters, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
U.S. Securities to be purchased on such date, this Agreement or, with
respect to any Date of Delivery which occurs after the Closing Time, the
obligation of the U.S. Underwriters to purchase and of the Company to sell
the Option Securities to be purchased and sold on such Date of Delivery
shall terminate without liability on the part of any non-defaulting U.S.
Underwriter.
No action taken pursuant to this Section shall relieve any defaulting U.S.
Underwriter from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the U.S.
Underwriters to purchase and the Company to sell the relevant U.S. Option
Securities, as the case may be, either the U.S. Representative or the Company
shall have the right to postpone Closing Time or the relevant Date of Delivery,
as the case may be, for a period not exceeding seven days in order to effect any
required changes in the Registration Statement or Prospectus or in any other
documents or arrangements. As used herein, the term "U.S. Underwriter" includes
any person substituted for a U.S. Underwriter under this Section 10.
22
<PAGE>
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the U.S.
Underwriters shall be directed to the U.S. Representative at North Tower, World
Financial Center, New York, New York 10281-1201, attention of ; and notices to
the Company shall be directed to it at 6111 North River Road, Rosemont, Illinois
60018, attention of John J. Vosicky, with a copy to Jeremiah H. Fitzgerald, Vice
President and Chief Legal Officer, at the same address.
SECTION 12. Parties. This Agreement shall each inure to the benefit of
and be binding upon the U.S. Underwriters and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the U.S.
Underwriters and the Company and their respective successors and the controlling
persons and officers and directors referred to in Sections 6 and 7 and their
heirs and legal representatives, any legal or equitable right, remedy or claim
under or in respect of this Agreement or any provision herein contained. This
Agreement and all conditions and provisions hereof are intended to be for the
sole and exclusive benefit of the U.S. Underwriters and the Company and their
respective successors, and said controlling persons and officers and directors
and their heirs and legal representatives, and for the benefit of no other
person, firm or corporation. No purchaser of Securities from any U.S.
Underwriter shall be deemed to be a successor by reason merely of such purchase.
SECTION 13. GOVERNING LAW AND TIME. THIS AGREEMENT SHALL BE GOVERNED BY
AND CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED
TIMES OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein
and the Table of Contents are for convenience only and shall not affect the
construction hereof.
23
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the U.S. Underwriters and the Company in accordance with its terms.
Very truly yours,
COMDISCO, INC.
By ____________________________
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH & CO.
MERRILL LYNCH, PIERCE, FENNER & SMITH
INCORPORATED
By _____________________________
Authorized Signatory
For themselves and as U.S. Representative of the
other U.S. Underwriters named in Schedule A hereto.
24
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of
Initial U.S.
Name of U.S. Underwriter Securities
------------------------ ----------
<S> <C>
Merrill Lynch, Pierce, Fenner & Smith
Incorporated....................................
_________
Total.......................................................
=========
</TABLE>
Sch A-1
<PAGE>
SCHEDULE B
Comdisco, Inc.
. Shares of Comdisco, Inc. -- Comdisco Ventures Common Stock
(Par Value $.10 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $..
2. The purchase price per share for the U.S. Securities to be paid by
the several U.S. Underwriters shall be $., being an amount equal to the
initial public offering price set forth above less $. per share; provided
that the purchase price per share for any U.S. Option Securities purchased
upon the exercise of the over-allotment option described in Section 2(b)
shall be reduced by an amount per share equal to any dividends or
distributions declared by the Company and payable on the Initial U.S.
Securities but not payable on the U.S. Option Securities.
Sch B-1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
Prospectuses, and to enter into and perform its obligations under the U.S.
Purchase Agreement and the International Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which its ownership or
lease of substantial properties or the conduct of its business requires such
qualification and in which failure of the Company to be so qualified and in good
standing would have a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectuses in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the U.S. Purchase Agreement and the International Purchase Agreement or pursuant
to reservations, agreements or employee benefit plans referred to in the
Prospectuses or pursuant to the exercise of convertible securities or options
referred to in the Prospectuses); the shares of issued and outstanding capital
stock have been duly authorized and validly issued and are fully paid and non-
assessable; and none of the outstanding shares of capital stock of the Company
was issued in violation of the preemptive or other similar rights of any
securityholder of the Company.
(v) The Securities to be purchased by the U.S. Underwriters and the
International Managers from the Company have been duly authorized for issuance
and sale to the Underwriters pursuant to the U.S. Purchase Agreement and the
International Purchase Agreement, respectively, and, when issued and delivered
by the Company pursuant to the U.S. Purchase Agreement and the International
Purchase Agreement, respectively, against payment of the consideration set forth
in the U.S. Purchase Agreement and the International Purchase Agreement, will be
validly issued and fully paid and non-assessable and no holder of the Securities
is or will be subject to personal liability by reason of being such a holder.
(vi) The issuance of the Securities is not subject to the preemptive or
other similar rights of any securityholder of the Company.
(vii) The U.S. Purchase Agreement and the International Purchase Agreement
have been duly authorized, executed and delivered by the Company.
A-1
<PAGE>
(viii) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectuses pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); and, to the best of such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been issued
under the 1933 Act and no proceedings for that purpose have been instituted or
are pending or threatened by the Commission.
(ix) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectuses, excluding the documents incorporated by reference
therein, and each amendment or supplement to the Registration Statement and the
Prospectuses, excluding the documents incorporated by reference therein, as of
their respective effective or issue dates (other than the financial statements
and supporting schedules included therein or omitted therefrom, as to which such
counsel need express no opinion) appeared on their face to comply as to form in
all material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(x) Each document filed pursuant to the 1934 Act and incorporated by
reference in the Prospectuses (except for the financial statements included
therein or omitted therefrom, as to which such counsel need not comment),
appeared on its face to comply when filed as to form in all material respects
with the 1934 Act and the rules and regulations promulgated thereunder.
(xi) The form of certificate used to evidence the Ventures Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company and
the requirements of the Nasdaq National Market.
(xii) To the best of such counsel's knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which the
Company or any subsidiary is a party, or to which the property of the Company or
any subsidiary is subject, before or brought by any court or governmental agency
or body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the U.S. Purchase Agreement and International
Purchase Agreement or the performance by the Company of its obligations
thereunder.
(xiii) The information in the Prospectuses under "Description of Comdisco
Capital Stock--Description of Comdisco Ventures Common Stock", to the extent
that it constitutes matters of law, summaries of legal matters, the Company's
charter and bylaws or legal conclusions, has been reviewed by such counsel and
is correct in all material respects.
A-2
<PAGE>
(xiv) To the best of such counsel's knowledge, there are no statutes or
regulations that are required to be described in the Prospectuses that are not
described as required.
(xv) To the best of such counsel's knowledge and information, there are no
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto,
the descriptions thereof or references thereto are correct, and, except for
certain minor matters which, either individually or in the aggregate, will not
or do not have a Material Adverse Effect, no default exists in the due
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, loan agreement, note, lease or
other instrument so described, referred to, filed or incorporated by reference.
(xvi) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which such counsel need
express no opinion) is necessary or required in connection with the due
authorization, execution and delivery of the U.S. Purchase Agreement and the
International Purchase Agreement or for the offering, issuance, sale or delivery
of the Securities.
(xvii) The execution, delivery and performance of the U.S. Purchase
Agreement and the International Purchase Agreement and the consummation of the
transactions contemplated in the U.S. Purchase Agreement, the International
Purchase Agreement and in the Registration Statement (including the issuance and
sale of the Securities, and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use Of Proceeds")
and compliance by the Company with its obligations under the U.S. Purchase
Agreement and the International Purchase Agreement do not and will not, whether
with or without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any subsidiary pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to such counsel, to which the Company is a party or by which
it may be bound, or to which any of the property or assets of the Company is
subject (except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
action result in any violation of the provisions of the charter or by-laws of
the Company, or any applicable law, statute, rule, regulation, judgment, order,
writ or decree, known to me, of any government, government instrumentality or
court, domestic or foreign, having jurisdiction over the Company or any of its
respective properties, assets or operations (other than under the securities or
blue sky laws of the various states, as to which such counsel need express no
opinion).
A-3
<PAGE>
(xviii) The Company is not, and upon the issuance and sale of the
Securities as contemplated in the U.S. Purchase Agreement and the International
Purchase Agreement and the application of the net proceeds therefrom as
described in the Prospectuses will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act"); the issuance and
sale of the Securities as contemplated in the U.S. Purchase Agreement and the
International Purchase Agreement will not violate the 1940 Act or the rules and
regulations thereunder.
(xix) The Rights under the Company's Shareholder Rights Plan to which
holders of the Securities will be entitled have been duly authorized and validly
issued.
(xx) The opinion set forth under "Material U.S. Federal Income Tax
Considerations" is confirmed.
Nothing has come to such counsel's attention that would lead such counsel
to believe that the Registration Statement or any amendment thereto, including
the Rule 430A Information and Rule 434 Information (if applicable), (except for
financial statements and schedules and other financial data included or
incorporated by reference therein or omitted therefrom, as to which such counsel
need make no statement), at the time such Registration Statement or any such
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectuses or any
amendment or supplement thereto (except for financial statements and schedules
and other financial data included or incorporated by reference therein or
omitted therefrom, as to which such counsel need make no statement), at the time
the Prospectuses were issued, at the time any such amended or supplemented
prospectus was issued or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
A-4
<PAGE>
Exhibit B
FORM OF OPINION OF HYBRID'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(f)
Hybrid has been duly formed and is validly existing as a limited
partnership in good standing under the laws of the State of Delaware, has
partnership power and authority to own, lease and operate its properties and to
conduct its business as described in the Prospectuses and is duly qualified as a
foreign partnership to transact business and is in good standing in each
jurisdiction in which such qualification is required, whether by reason of the
ownership or leasing of property or the conduct of business, except where the
failure so to qualify or to be in good standing would not result in a Material
Adverse Effect; except as otherwise disclosed in the Registration Statement, all
of the issued and outstanding limited partnership units of Hybrid have been duly
authorized and validly issued, are fully paid and non-assessable and, to the
best of such counsel's knowledge, are owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge, lien,
encumbrance, claim or equity; none of the outstanding partnership units of
Hybrid were issued in violation of the preemptive or similar rights of any
securityholder of Hybrid.
B-1
<PAGE>
EXHIBIT 1.2
================================================================================
COMDISCO, INC.
(a Delaware corporation)
.Shares of Comdisco Inc. -- Comdisco Ventures Common Stock
FORM OF INTERNATIONAL PURCHASE AGREEMENT
----------------------------------------
Dated: ., 2000
================================================================================
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
INTERNATIONAL PURCHASE AGREEMENT...................................................... 1
SECTION 1. Representations and Warranties........................................ 4
(a) Representations and Warranties by the Company......................... 4
(i) Compliance with Registration Requirements...................... 4
(ii) Incorporated Documents......................................... 5
(iii) Independent Accountants........................................ 5
(iv) Financial Statements........................................... 5
(v) No Material Adverse Change in Business......................... 5
(vi) Good Standing of the Company................................... 6
(vii) Good Standing of Subsidiaries.................................. 6
(viii) Capitalization................................................. 6
(ix) Authorization of Agreement..................................... 6
(x) Authorization and Description of Securities.................... 6
(xi) Absence of Defaults and Conflicts.............................. 6
(xii) Absence of Proceedings......................................... 7
(xiii) Accuracy of Exhibits........................................... 7
(xiv) Absence of Further Requirements................................ 7
(xv) Possession of Licenses and Permits............................. 8
(xvi) Investment Company Act......................................... 8
(b) Officer's Certificates................................................ 8
SECTION 2. Sale and Delivery to International Managers; Closing.................. 8
(a) Initial Securities.................................................... 8
(b) Option Securities..................................................... 8
(c) Payment............................................................... 9
(d) Denominations; Registration...........................................10
SECTION 3. Covenants of the Company..............................................10
(a) Compliance with Securities Regulations and Commission Requests........10
(b) Filing of Amendments..................................................10
(c) Delivery of Registration Statements...................................10
(d) Delivery of Prospectuses..............................................11
(e) Continued Compliance with Securities Laws.............................11
(f) Blue Sky Qualifications...............................................11
(g) Rule 158..............................................................12
(h) Use of Proceeds.......................................................12
(i) Listing...............................................................12
(j) Restriction on Sale of Securities.....................................12
(k) Reporting Requirements................................................12
(l) Compliance with NASD Rules............................................12
SECTION 4. Payment of Expenses...................................................13
</TABLE>
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
(a) Payment of Expenses...................................................13
(b) Termination of Agreement..............................................13
SECTION 5. Conditions of International Managers' Obligations.....................13
(a) Effectiveness of Registration Statement...............................13
(b) Opinion of Jeremiah M. Fitzgerald.....................................14
(c) Opinion of McBride Baker & Coles......................................14
(d) Opinion of Palmer & Dodge LLP.........................................14
(e) Opinion of Hopkins & Sutter...........................................14
(f) Opinion of Wilson Sonsini Goodrich & Rosati...........................15
(g) Opinion of Counsel for International Managers.........................15
(h) Officers' Certificate.................................................15
(i) Accountant's Comfort Letter...........................................15
(j) Bring-down Comfort Letter.............................................16
(k) Approval of Listing...................................................16
(l) Purchase of Initial U.S. Securities...................................16
(m) Conditions to Purchase of International Option Securities.............16
(n) Additional Documents..................................................17
(o) Termination of Agreement..............................................17
SECTION 6. Indemnification.......................................................17
(a) Indemnification of International Managers.............................17
(b) Indemnification of Company, Directors and Officers....................18
(c) Actions against Parties; Notification.................................19
(d) Settlement without Consent if Failure to Reimburse....................19
(e) Indemnification for Reserved Securities...............................19
SECTION 7. Contribution..........................................................19
SECTION 8. Representations, Warranties and Agreements to Survive Delivery........21
SECTION 9. Termination of Agreement..............................................21
(a) Termination; General..................................................21
(b) Liabilities...........................................................21
SECTION 10. Default by One or More of the International Managers..................22
SECTION 11. Notices...............................................................23
SECTION 12. Parties...............................................................23
SECTION 13. Governing Law and Time................................................23
SECTION 14. Effect of Headings....................................................23
</TABLE>
ii
<PAGE>
<TABLE>
<CAPTION>
<S> <C> <C>
SCHEDULES
Schedule A - List of International Managers............................Sch A-1
Schedule B - Pricing Information.......................................Sch B-1
SCHEDULES
Exhibit A - Form of Opinion of Company's Counsel....................... A-1
Exhibit B - Form of Opinion of Hybrid's Counsel........................ B-1
</TABLE>
<PAGE>
COMDISCO, INC.
(a Delaware corporation)
. Shares of Comdisco Inc. -- Comdisco Ventures Common Stock
(Par Value $.10 Per Share)
INTERNATIONAL PURCHASE AGREEMENT
. , 2000
MERRILL LYNCH INTERNATIONAL
as Lead Manager of the several International Managers
Ropemaker Place
25 Ropemaker Street
London EC2Y 9LY
England
Ladies and Gentlemen:
Comdisco, Inc., a Delaware corporation (the "Company"), confirms its
agreement with Merrill Lynch International ("Merrill Lynch") and each of the
other international underwriters named in Schedule A hereto (collectively, the
"International Managers", which term shall also include any underwriter
substituted as hereinafter provided in Section 10 hereof), for whom Merrill
Lynch is acting as representative (in such capacity, the "Lead Manager"), with
respect to the issue and sale by the Company and the purchase by the
International Managers, acting severally and not jointly, of the respective
numbers of shares of Comdisco Inc. -- Comdisco Ventures Common Stock, par value
$.10 per share ("Ventures Common Stock"), set forth in said Schedule A, and with
respect to the grant by the Company to the International Managers, acting
severally and not jointly, of the option described in Section 2(b) hereof to
purchase all or any part of . additional shares of Ventures Common Stock to
cover over-allotments, if any. The aforesaid . shares of Ventures Common Stock
(the "Initial International Securities") to be purchased by the International
Managers and all or any part of the . shares of Ventures Common Stock subject to
the option described in Section 2(b) hereof (the "International Option
Securities") are hereinafter called, collectively, the "International
Securities".
It is understood that the Company is concurrently entering into an
agreement dated the date hereof (the "U.S. Purchase Agreement") providing for
the offering by the Company of an aggregate of . shares of Ventures Common Stock
(the "Initial U.S. Securities") through arrangements with certain underwriters
in the United States and Canada (the "U.S. Underwriters") for which Merrill
Lynch, Pierce, Fenner & Smith Incorporated is acting as representative (the
"U.S. Representative") and the grant by the Company to the U.S. Underwriters,
acting severally and not jointly, of an option to purchase all or any part of
the U.S. Underwriters' pro rata portion of up to . additional shares of Ventures
Common Stock solely to cover overallotments, if any (the "U.S. Option
Securities" and, together with the International
<PAGE>
Option Securities, the "Option Securities"). The Initial U.S. Securities and the
U.S. Option Securities are hereinafter called the "U.S. Securities". It is
understood that the Company is not obligated to sell and the International
Managers are not obligated to purchase, any Initial International Securities
unless all of the Initial U.S. Securities are contemporaneously purchased by the
U.S. Underwriters.
The International Managers and the U.S. Underwriters are hereinafter
collectively called the "Underwriters", the Initial International Securities and
the Initial U.S. Securities are hereinafter collectively called the "Initial
Securities", and the International Securities, and the U.S. Securities are
hereinafter collectively called the "Securities".
The Underwriters will concurrently enter into an Intersyndicate Agreement
of even date herewith (the "Intersyndicate Agreement") providing for the
coordination of certain transactions among the Underwriters under the direction
of Merrill Lynch & Co., Merrill Lynch, Pierce, Fenner & Smith Incorporated (in
such capacity, the "Global Coordinator").
The Company understands that the International Managers propose to make a
public offering of the International Securities as soon as the Lead Manager
deems advisable after this Agreement has been executed and delivered.
The Company and the International Managers agree that up to _______ shares
of the Initial International Securities to be purchased by the International
Managers and that up to _______ shares of the Initial U.S. Securities to be
purchased by the U.S. Underwriters (collectively, the "Reserved Securities")
shall be reserved for sale by the Underwriters to certain eligible employees and
persons having business relationships with the Company and to the Company as a
contribution to its retirement plan, as part of the distribution of the
Securities by the Underwriters, subject to the terms of this Agreement, the
applicable rules, regulations and interpretations of the National Association of
Securities Dealers, Inc. and all other applicable laws, rules and regulations.
To the extent that such Reserved Securities are not orally confirmed for
purchase by such eligible employees and persons having business relationships
with the Company or by the Company by the end of the first business day after
the date of this Agreement, such Reserved Securities may be offered to the
public as part of the public offering contemplated hereby.
The Company has filed with the Securities and Exchange Commission (the
"Commission") a registration statement on Form S-3 (No. 333- . ) covering the
registration of the Securities under the Securities Act of 1933, as amended (the
"1933 Act"), including the related preliminary prospectus or prospectuses.
Promptly after execution and delivery of this Agreement, the Company will either
(i) prepare and file a prospectus in accordance with the provisions of Rule 430A
("Rule 430A") of the rules and regulations of the Commission under the 1933 Act
(the "1933 Act Regulations") and paragraph (b) of Rule 424 ("Rule 424(b)") of
the 1933 Act Regulations or (ii) if the Company has elected to rely upon Rule
434 ("Rule 434") of the 1933 Act Regulations, prepare and file a term sheet (a
"Term Sheet") in accordance with the provisions of Rule 434 and Rule 424(b). Two
forms of prospectus are to be used in connection with the offering and sale of
the Securities: one relating to the International Securities (the "Form of
International Prospectus") and one relating to the U.S. Securities (the "Form of
U.S. Prospectus"). The Form of International Prospectus is identical to the Form
of U.S. Prospectus,
2
<PAGE>
except for the front cover and back cover pages and the information under the
caption "Underwriting." The information included in any such prospectus or in
any such Term Sheet, as the case may be, that was omitted from such registration
statement at the time it became effective but that is deemed to be part of such
registration statement at the time it became effective (a) pursuant to paragraph
(b) of Rule 430A is referred to as "Rule 430A Information" or (b) pursuant to
paragraph (d) of Rule 434 is referred to as "Rule 434 Information." Each Form of
International Prospectus and Form of U.S. Prospectus used before such
registration statement became effective, and any prospectus that omitted, as
applicable, the Rule 430A Information or the Rule 434 Information, that was used
after such effectiveness and prior to the execution and delivery of this
Agreement, is herein called a "preliminary prospectus." Such registration
statement, including the exhibits thereto, schedules thereto, if any, and the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, at the time it became effective and including the Rule 430A
Information and the Rule 434 Information, as applicable, is herein called the
"Registration Statement." Any registration statement filed pursuant to Rule
462(b) of the 1933 Act Regulations is herein referred to as the "Rule 462(b)
Registration Statement," and after such filing the term "Registration Statement"
shall include the Rule 462(b) Registration Statement. The final Form of
International Prospectus and the final Form of U.S. Prospectus, including the
documents incorporated by reference therein pursuant to Item 12 of Form S-3
under the 1933 Act, in the forms first furnished to the Underwriters for use in
connection with the offering of the Securities are herein called the
"International Prospectus" and the "U.S. Prospectus," respectively, and
collectively, the "Prospectuses." If Rule 434 is relied on, the terms
"International Prospectus" and "U.S. Prospectus" shall refer to the preliminary
International Prospectus dated . , 2000 and preliminary U.S.
Prospectus dated . , 2000, respectively, each together with the
applicable Term Sheet and all references in this Agreement to the date of such
Prospectuses shall mean the date of the applicable Term Sheet. For purposes of
this Agreement, all references to the Registration Statement, any preliminary
prospectus, the International Prospectus, the U.S. Prospectus or any Term Sheet
or any amendment or supplement to any of the foregoing shall be deemed to
include the copy filed with the Commission pursuant to its Electronic Data
Gathering, Analysis and Retrieval system ("EDGAR").
All references in this Agreement to financial statements and schedules and
other information which is "contained," "included" or "stated" in the
Registration Statement, any preliminary prospectus (including the Form of U.S.
Prospectus and Form of International Prospectus) or the Prospectuses (or other
references of like import) shall be deemed to mean and include all such
financial statements and schedules and other information which is incorporated
by reference in the Registration Statement, any preliminary prospectus
(including the Form of U.S. Prospectus and Form of International Prospectus) or
the Prospectuses, as the case may be; and all references in this Agreement to
amendments or supplements to the Registration Statement, any preliminary
prospectus or the Prospectuses shall be deemed to mean and include the filing of
any document under the Securities Exchange Act of 1934 (the "1934 Act") which is
incorporated by reference in the Registration Statement, such preliminary
prospectus or the Prospectuses, as the case may be.
3
<PAGE>
SECTION 1. Representations and Warranties.
------------------------------
(a) Representations and Warranties by the Company. The Company represents
and warrants to each International Manager as of the date hereof, as of the
Closing Time referred to in Section 2(c) hereof, and as of each Date of Delivery
(if any) referred to in Section 2(b), hereof and agrees with each International
Manager, as follows:
(i) Compliance with Registration Requirements. The Company meets the
requirements for use of Form S-3 under the 1933 Act. Each of the
Registration Statement and any Rule 462(b) Registration Statement has
become effective under the 1933 Act and no stop order suspending the
effectiveness of the Registration Statement or any Rule 462(b) Registration
Statement has been issued under the 1933 Act and no proceedings for that
purpose have been instituted or are pending or, to the knowledge of the
Company, are contemplated by the Commission, and any request on the part of
the Commission for additional information has been complied with.
At the respective times the Registration Statement, any Rule 462(b)
Registration Statement and any post-effective amendments thereto became
effective and at the Closing Time (and, if any International Option
Securities are purchased, at the Date of Delivery), the Registration
Statement, the Rule 462(b) Registration Statement and any amendments and
supplements thereto complied and will comply in all material respects with
the requirements of the 1933 Act and the 1933 Act Regulations and did not
and will not contain an untrue statement of a material fact or omit to
state a material fact required to be stated therein or necessary to make
the statements therein not misleading, and the Prospectuses, any
preliminary prospectuses and any supplement thereto or prospectus wrapper
prepared in connection therewith, at their respective times of issuance and
at the Closing Time, complied and will comply in all material respects with
any applicable laws or regulations of foreign jurisdictions in which the
Prospectuses and such preliminary prospectuses, as amended or supplemented,
if applicable, are distributed in connection with the offer and sale of
Reserved Securities. Neither of the Prospectuses nor any amendments or
supplements thereto (including any prospectus wrapper), at the time the
Prospectuses or any amendments or supplements thereto were issued and at
the Closing Time (and, if any International Option Securities are
purchased, at the Date of Delivery), included or will include an untrue
statement of a material fact or omitted or will omit to state a material
fact necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading. The
representations and warranties in this subsection shall not apply to
statements in or omissions from the Registration Statement or the
International Prospectus made in reliance upon and in conformity with
information furnished to the Company in writing by any International
Manager through the Lead Manager expressly for use in the Registration
Statement or the International Prospectus.
Each preliminary prospectus and the prospectuses filed as part of the
Registration Statement as originally filed or as part of any amendment
thereto, or filed pursuant to Rule 424 under the 1933 Act, complied when so
filed in all material respects with the 1933 Act Regulations and each
preliminary prospectus and the Prospectuses delivered to the Underwriters
for use in connection with this offering was identical to the
4
<PAGE>
electronically transmitted copies thereof filed with the Commission
pursuant to EDGAR, except to the extent permitted by Regulation S-T.
(ii) Incorporated Documents. The documents incorporated or deemed to
be incorporated by reference in the Registration Statement and the
Prospectuses, when they became effective or at the time they were or
hereafter are filed with the Commission, complied and will comply in all
material respects with the requirements of the 1934 Act and the rules and
regulations of the Commission thereunder (the "1934 Act Regulations"), and,
when read together with the other information in the Prospectuses, at the
time the Registration Statement became effective, at the time the
Prospectuses were issued and at the Closing Time (and, if any International
Option Securities are purchased, at the Date of Delivery), did not and will
not contain an untrue statement of a material fact or omit to state a
material fact required to be stated therein or necessary to make the
statements therein not misleading.
(iii) Independent Accountants. The accountants who certified the
financial statements and supporting schedules included in the Registration
Statement are independent public accountants as required by the 1933 Act
and the 1933 Act Regulations.
(iv) Financial Statements. The financial statements included in the
Registration Statement and the Prospectuses, together with the related
schedules and notes, present fairly the financial position of the Company
and its consolidated subsidiaries and Comdisco Ventures (as defined in the
Prospectuses) at the dates indicated and the statement of operations,
stockholders' equity and cash flows of the Company and its consolidated
subsidiaries or Comdisco Ventures, as the case may be, for the periods
specified; said financial statements have been prepared in conformity with
generally accepted accounting principles ("GAAP") applied on a consistent
basis throughout the periods involved. The supporting schedules, if any,
included in the Registration Statement present fairly in accordance with
GAAP the information required to be stated therein. The selected financial
data and the summary financial information included in the Prospectuses
present fairly the information shown therein and have been compiled on a
basis consistent with that of the audited financial statements included in
the Registration Statement.
(v) No Material Adverse Change in Business. Since the respective
dates as of which information is given in the Registration Statement and
the Prospectuses, except as otherwise stated therein, (A) there has been no
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise or of Comdisco Ventures, whether
or not arising in the ordinary course of business (a "Material Adverse
Effect"), and (B) there have been no transactions entered into by the
Company or any of its subsidiaries, other than those in the ordinary course
of business, which are material with respect to the Company and its
subsidiaries considered as one enterprise or Comdisco Ventures.
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(vi) Good Standing of the Company. The Company has been duly
organized and is validly existing as a corporation in good standing under
the laws of the State of Delaware and has corporate power and authority to
own, lease and operate its properties and to conduct its business as
described in the Prospectuses and to enter into and perform its obligations
under this Agreement; and the Company is duly qualified as a foreign
corporation to transact business and is in good standing in each other
jurisdiction in which such qualification is required, whether by reason of
the ownership or leasing of property or the conduct of business, except
where the failure so to qualify or to be in good standing would not result
in a Material Adverse Effect.
(vii) Good Standing of Subsidiaries. No subsidiary of the Company is
a "significant subsidiary" as defined in Rule 405 of Regulation C of the
1933 Act Regulations. To the Company's knowledge, Hybrid Venture Partners,
L.P. ("Hybrid") has been duly organized and is validly existing as a
limited partnership under the laws of the State of Delaware, has
partnership power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectuses and is duly
qualified as a foreign partnership to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
its business, except where the failure to so qualify or to be in good
standing would not result in a Material Adverse Effect.
(viii) Capitalization. The authorized, issued and outstanding capital
stock of the Company is as set forth in the Prospectuses in the column
entitled "Actual" under the caption "Capitalization" (except for subsequent
issuances, if any, pursuant to this Agreement, pursuant to reservations,
agreements or employee benefit plans referred to in the Prospectuses or
pursuant to the exercise of convertible securities or options referred to
in the Prospectuses). The shares of issued and outstanding capital stock of
the Company have been duly authorized and validly issued and are fully paid
and non-assessable; none of the outstanding shares of capital stock of the
Company was issued in violation of the preemptive or other similar rights
of any securityholder of the Company.
(ix) Authorization of Agreement. This Agreement and the U.S. Purchase
Agreement have been duly authorized, executed and delivered by the Company.
(x) Authorization and Description of Securities. The Securities to be
purchased by the International Managers and the U.S. Underwriters from the
Company have been duly authorized for issuance and sale to the
International Managers pursuant to this Agreement and the U.S. Underwriters
pursuant to the U.S. Purchase Agreement, respectively, and, when issued and
delivered by the Company pursuant to this Agreement and the U.S. Purchase
Agreement, respectively, against payment of the consideration set forth
herein and the U.S. Purchase Agreement, respectively, will be validly
issued, fully paid and non-assessable; the Ventures Common Stock conforms
to all statements relating thereto contained in the Prospectuses and such
description conforms to the rights set forth in the instruments defining
the same; no holder of the Securities will be subject to personal liability
by reason of being such a holder; and the issuance of the Securities is not
subject to the preemptive or other similar rights of any securityholder of
the Company.
(xi) Absence of Defaults and Conflicts. Neither the Company nor,
to the knowledge of the Company, Hybrid is in violation of its charter or
by-laws or certificate of limited partnership or partnership agreement, as
the case may be, or in default in the performance or observance of any
material obligation, agreement, covenant or condition contained in any
contract, indenture, mortgage, deed of trust, loan or credit agreement,
note, lease or other agreement or instrument to which the Company, or to
the Company's knowledge, Hybrid is a party or by which it or Hybrid may be
bound, or to which any of the
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property or assets of the Company or, to the Company's knowledge, Hybrid is
subject (collectively, "Agreements and Instruments") except for such
defaults that would not result in a Material Adverse Effect; and the
execution, delivery and performance of this Agreement and the U.S. Purchase
Agreement and the consummation of the transactions contemplated in this
Agreement, the U.S. Purchase Agreement and in the Registration Statement
(including the issuance and sale of the Securities and the use of the
proceeds from the sale of the Securities as described in the Prospectuses
under the caption "Use of Proceeds") and compliance by the Company with its
obligations under this Agreement and the U.S. Purchase Agreement have been
duly authorized by all necessary corporate action and do not and will not,
whether with or without the giving of notice or passage of time or both,
conflict with or constitute a breach of, or default under, or result in the
creation or imposition of any lien, charge or encumbrance upon any property
or assets of the Company or, to the Company's knowledge, Hybrid pursuant
to, the Agreements and Instruments (except for such conflicts, breaches or
defaults or liens, charges or encumbrances that would not result in a
Material Adverse Effect), nor will such action result in any violation of
the provisions of the charter or by-laws of the Company or to the Company's
knowledge, the certificate of limited partnership or partnership agreement
of Hybrid or to the best of the Company's knowledge any applicable law,
statute, rule, regulation, judgment, order, writ or decree of any
government, government instrumentality or court, domestic or foreign,
having jurisdiction over the Company or Hybrid or any of their assets,
properties or operations.
(xii) Absence of Proceedings. There is no action, suit, proceeding,
inquiry or investigation before or brought by any court or governmental
agency or body, domestic or foreign, now pending, or, to the knowledge of
the Company, threatened, against or affecting the Company or any
subsidiary, which is required to be disclosed in the Registration Statement
(other than as disclosed therein), or which might reasonably be expected to
result in a Material Adverse Effect, or which might reasonably be expected
to materially and adversely affect the properties or assets thereof or the
consummation of the transactions contemplated in this Agreement and the
U.S. Purchase Agreement or the performance by the Company of its
obligations hereunder or thereunder; the aggregate of all pending legal or
governmental proceedings to which the Company or any subsidiary is a party
or of which any of their respective property or assets is the subject which
are not described in the Registration Statement, including ordinary routine
litigation incidental to the business, could not reasonably be expected to
result in a Material Adverse Effect.
(xiii) Accuracy of Exhibits. There are no contracts or documents
which are required to be described in the Registration Statement, the
Prospectuses or the documents incorporated by reference therein or to be
filed as exhibits thereto which have not been so described and filed as
required.
(xiv) Absence of Further Requirements. No filing with, or
authorization, approval, consent, license, order, registration,
qualification or decree of, any court or governmental authority or agency
is necessary or required for the performance by the Company of its
obligations hereunder, in connection with the offering, issuance or sale of
the Securities under this Agreement and the U.S. Purchase Agreement or the
consummation of the transactions contemplated by this Agreement and the
U.S. Purchase Agreement, except (i) such as have been already obtained or
as may be required under the 1933 Act or the 1933 Act Regulations and
foreign or state securities or blue sky laws and
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(ii) such as have been obtained under the laws and regulations of
jurisdictions outside the United States in which the Reserved Securities
are offered.
(xv) Possession of Licenses and Permits. The Company and, to the
Company's knowledge, Hybrid possess such permits, licenses, approvals,
consents and other authorizations (collectively, "Governmental Licenses")
issued by the appropriate federal, state, local or foreign regulatory
agencies or bodies necessary to conduct the business now operated by them
except where the failure to posses any one or more of such Governmental
Licenses would not, singly or in the aggregate, have a Material Adverse
Effect; the Company and, to the Company's knowledge, Hybrid is in
compliance with the terms and conditions of all such Governmental Licenses,
except where the failure so to comply would not, singly or in the
aggregate, have a Material Adverse Effect; all of the Governmental Licenses
are valid and in full force and effect, except when the invalidity of such
Governmental Licenses or the failure of such Governmental Licenses to be in
full force and effect would not have a Material Adverse Effect; and neither
the Company nor, to the Company's knowledge, Hybrid has received any notice
of proceedings relating to the revocation or modification of any such
Governmental Licenses which, singly or in the aggregate, if the subject of
an unfavorable decision, ruling or finding, would result in a Material
Adverse Effect.
(xvi) Investment Company Act. The Company is not, and upon the
issuance and sale of the Securities as herein contemplated and the
application of the net proceeds therefrom as described in the Prospectuses
will not be, an "investment company" or an entity "controlled" by an
"investment company" as such terms are defined in the Investment Company
Act of 1940, as amended (the "1940 Act"); the issuance and sale of the
Securities as herein contemplated will not violate the 1940 Act or the
rules and regulations thereunder.
(b) Officer's Certificates. Any certificate signed by any officer of the
Company or any of its subsidiaries delivered to the Global Coordinator, the Lead
Manager or to counsel for the International Managers shall be deemed a
representation and warranty by the Company to each International Manager as to
the matters covered thereby.
SECTION 2. Sale and Delivery to International Managers; Closing.
----------------------------------------------------
(a) Initial Securities. On the basis of the representations and warranties
herein contained and subject to the terms and conditions herein set forth, the
Company agrees to sell to each International Manager, severally and not jointly,
and each International Manager, severally and not jointly, agrees to purchase
from the Company, at the price per share set forth in Schedule B, the number of
Initial International Securities set forth in Schedule A opposite the name of
such International Manager, plus any additional number of Initial International
Securities which such International Manager may become obligated to purchase
pursuant to the provisions of Section 10 hereof.
(b) Option Securities. In addition, on the basis of the representations
and warranties herein contained and subject to the terms and conditions herein
set forth, the Company hereby grants an option to the International Managers,
severally and not jointly, to purchase up to an additional . shares of Ventures
Common Stock at the price per share set forth in Schedule B,
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less an amount per share equal to any dividends or distributions declared
by the Company and payable on the Initial International Securities but not
payable on the International Option Securities. The option hereby granted
will expire 30 days after the date hereof and may be exercised in whole or
in part from time to time only for the purpose of covering over-allotments
which may be made in connection with the offering and distribution of the
Initial International Securities upon notice by the Global Coordinator to
the Company setting forth the number of International Option Securities as
to which the several International Managers are then exercising the option
and the time and date of payment and delivery for such International Option
Securities. Any such time and date of delivery for the International Option
Securities (a "Date of Delivery") shall be determined by the Global
Coordinator, but shall not be later than seven full business days after the
exercise of said option, nor in any event prior to the Closing Time, as
hereinafter defined. If the option is exercised as to all or any portion of
the International Option Securities, each of the International Managers,
acting severally and not jointly, will purchase that proportion of the
total number of International Option Securities then being purchased which
the number of Initial International Securities set forth in Schedule A
opposite the name of such International Manager bears to the total number
of Initial International Securities, subject in each case to such
adjustments as the Global Coordinator in its discretion shall make to
eliminate any sales or purchases of fractional shares.
(c) Payment. Payment of the purchase price for, and delivery of
certificates for, the Initial Securities shall be made at the offices of
Brown & Wood LLP, One World Trade Center, New York, New York 10048, or at
such other place as shall be agreed upon by the Global Coordinator and the
Company, at 9:00 A.M. (Eastern time) on the third (fourth, if the pricing
occurs after 4:30 P.M. (Eastern time) on any given day) business day after
the date hereof (unless postponed in accordance with the provisions of
Section 10), or such other time not later than ten business days after such
date as shall be agreed upon by the Global Coordinator and the Company
(such time and date of payment and delivery being herein called "Closing
Time").
In addition, in the event that any or all of the International Option
Securities are purchased by the International Managers, payment of the
purchase price for, and delivery of certificates for, such International
Option Securities shall be made at the above-mentioned offices, or at such
other place as shall be agreed upon by the Global Coordinator and the
Company, on each Date of Delivery as specified in the notice from the
Global Coordinator to the Company.
Payment shall be made to the Company by wire transfer of immediately
available funds to a bank account designated by the Company, against
delivery to the Lead Manager for the respective accounts of the
International Managers of certificates for the International Securities to
be purchased by them. It is understood that each International Manager has
authorized the Lead Manager, for its account, to accept delivery of,
receipt for, and make payment of the purchase price for, the Initial
International Securities and the International Option Securities, if any,
which it has agreed to purchase. Merrill Lynch, individually and not as
representative of the International Managers, may (but shall not be
obligated to) make payment of the purchase price for the Initial
International Securities or the International Option Securities, if any, to
be purchased by any International Manager whose funds have not been
received by the Closing Time or the relevant Date of Delivery, as the case
may be, but such payment shall not relieve such International Manager from
its obligations hereunder.
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(d) Denominations; Registration. Certificates for the Initial
International Securities and the International Option Securities, if any, shall
be in such denominations and registered in such names as the Lead Manager may
request in writing at least one full business day before the Closing Time or the
relevant Date of Delivery, as the case may be. The certificates for the Initial
International Securities and the International Option Securities, if any, will
be made available for examination and packaging by the Lead Manager in The City
of New York not later than 10:00 A.M. (Eastern time) on the business day prior
to the Closing Time or the relevant Date of Delivery, as the case may be.
SECTION 3. Covenants of the Company. The Company covenants with each
------------------------
International Manager as follows:
(a) Compliance with Securities Regulations and Commission Requests.
The Company, subject to Section 3(b), will comply with the requirements of
Rule 430A or Rule 434, as applicable, and will notify the Global
Coordinator immediately, and confirm the notice in writing, (i) when any
post-effective amendment to the Registration Statement shall become
effective, or any supplement to the Prospectuses or any amended
Prospectuses shall have been filed, (ii) of the receipt of any comments
from the Commission, (iii) of any request by the Commission for any
amendment to the Registration Statement or any amendment or supplement to
the Prospectuses or for additional information, and (iv) of the issuance by
the Commission of any stop order suspending the effectiveness of the
Registration Statement or of any order preventing or suspending the use of
any preliminary prospectus, or of the suspension of the qualification of
the Securities for offering or sale in any jurisdiction, or of the
initiation or threatening of any proceedings for any of such purposes. The
Company will promptly effect the filings necessary pursuant to Rule 424(b)
and will take such steps as it deems necessary to ascertain promptly
whether the form of prospectus transmitted for filing under Rule 424(b) was
received for filing by the Commission and, in the event that it was not, it
will promptly file such prospectus. The Company will make every reasonable
effort to prevent the issuance of any stop order and, if any stop order is
issued, to obtain the lifting thereof at the earliest possible moment.
(b) Filing of Amendments. The Company will give the Global
Coordinator notice of its intention to file or prepare any amendment to the
Registration Statement (including any filing under Rule 462(b)), any Term
Sheet or any amendment, supplement or revision to either the prospectus
included in the Registration Statement at the time it became effective or
to the Prospectuses, whether pursuant to the 1933 Act, the 1934 Act or
otherwise, will furnish the Global Coordinator with copies of any such
documents a reasonable amount of time prior to such proposed filing or use,
as the case may be, and will not file or use any such document to which the
Global Coordinator or counsel for the International Managers shall object.
(c) Delivery of Registration Statements. The Company has furnished or
will deliver to the Lead Manager and counsel for the International
Managers, without charge, signed copies of the Registration Statement as
originally filed and of each amendment thereto (including exhibits filed
therewith or incorporated by reference therein and documents incorporated
or deemed to be incorporated by reference therein) and signed
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copies of all consents and certificates of experts, and will also deliver
to the Lead Manager, without charge, a conformed copy of the Registration
Statement as originally filed and of each amendment thereto (without
exhibits) for each of the International Managers. The copies of the
Registration Statement and each amendment thereto furnished to the
International Managers will be identical to the electronically transmitted
copies thereof filed with the Commission pursuant to EDGAR, except to the
extent permitted by Regulation S-T.
(d) Delivery of Prospectuses. The Company has delivered to each
International Manager, without charge, as many copies of each preliminary
prospectus as such International Manager reasonably requested, and the
Company hereby consents to the use of such copies for purposes permitted by
the 1933 Act. The Company will furnish to each International Manager,
without charge, during the period when the International Prospectus is
required to be delivered under the 1933 Act or the 1934 Act, such number of
copies of the International Prospectus (as amended or supplemented) as such
International Manager may reasonably request. The International Prospectus
and any amendments or supplements thereto furnished to the International
Managers will be identical to the electronically transmitted copies thereof
filed with the Commission pursuant to EDGAR, except to the extent permitted
by Regulation S-T.
(e) Continued Compliance with Securities Laws. The Company will
comply with the 1933 Act and the 1933 Act Regulations and the 1934 Act and
the 1934 Act Regulations so as to permit the completion of the distribution
of the Securities as contemplated in this Agreement, the U.S. Purchase
Agreement and in the Prospectuses. If at any time when a prospectus is
required by the 1933 Act to be delivered in connection with sales of the
Securities, any event shall occur or condition shall exist as a result of
which it is necessary, in the opinion of counsel for the International
Managers or for the Company, to amend the Registration Statement or amend
or supplement any Prospectus in order that the Prospectuses will not
include any untrue statements of a material fact or omit to state a
material fact necessary in order to make the statements therein not
misleading in the light of the circumstances existing at the time it is
delivered to a purchaser, or if it shall be necessary, in the opinion of
such counsel, at any such time to amend the Registration Statement or amend
or supplement any Prospectus in order to comply with the requirements of
the 1933 Act or the 1933 Act Regulations, the Company will promptly prepare
and file with the Commission, subject to Section 3(b), such amendment or
supplement as may be necessary to correct such statement or omission or to
make the Registration Statement or the Prospectuses comply with such
requirements, and the Company will furnish to the International Managers
such number of copies of such amendment or supplement as the International
Managers may reasonably request.
(f) Blue Sky Qualifications. The Company will use its best efforts,
in cooperation with the International Managers, to qualify the Securities
for offering and sale under the applicable securities laws of such states
and other jurisdictions (domestic or foreign) as the Global Coordinator may
designate and to maintain such qualifications in effect for a period of not
less than one year from the later of the effective date of the Registration
Statement and any Rule 462(b) Registration Statement; provided, however,
that the Company shall not be obligated to file any general consent to
service of process
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or to qualify as a foreign corporation or as a dealer in securities in any
jurisdiction in which it is not so qualified or to subject itself to
taxation in respect of doing business in any jurisdiction in which it is
not otherwise so subject. In each jurisdiction in which the Securities have
been so qualified, the Company will file such statements and reports as may
be required by the laws of such jurisdiction to continue such qualification
in effect for a period of not less than one year from the effective date of
the Registration Statement and any Rule 462(b) Registration Statement.
(g) Rule 158. The Company will timely file such reports pursuant to
the 1934 Act as are necessary in order to make generally available to its
securityholders as soon as practicable an earnings statement for the
purposes of, and to provide the benefits contemplated by, the last
paragraph of Section 11(a) of the 1933 Act.
(h) Use of Proceeds. The Company will use the net proceeds from the
sale of the Securities in the manner specified in the Prospectuses under
"Use of Proceeds".
(i) Listing. The Company will use its best efforts to effect and
maintain the quotation of the Securities on the Nasdaq National Market and
will file with the Nasdaq National Market all documents and notices
required by the Nasdaq National Market of companies that have securities
that are traded in the over-the-counter market and quotations for which are
reported by the Nasdaq National Market.
(j) Restriction on Sale of Securities. During a period of 180 days
from the date of the Prospectuses, the Company will not, without the prior
written consent of the Global Coordinator, (i) directly or indirectly,
offer, pledge, sell, contract to sell, 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 share of
Ventures Common Stock or any securities convertible into or exercisable or
exchangeable for Ventures Common Stock or file any registration statement
under the 1933 Act with respect to any of the foregoing or (ii) enter into
any swap or any other agreement or any transaction that transfers, in whole
or in part, directly or indirectly, the economic consequence of ownership
of the Ventures Common Stock, whether any such swap or transaction
described in clause (i) or (ii) above is to be settled by delivery of
Ventures Common Stock or such other securities, in cash or otherwise. The
foregoing sentence shall not apply to (A) the Securities to be sold
hereunder or under the U.S. Purchase Agreement, or (B) any shares of
Ventures Common Stock issued or options to purchase Ventures Common Stock
granted pursuant to existing employee benefit plans of the Company referred
to in the Prospectuses.
(k) Reporting Requirements. The Company, during the period when the
Prospectuses are required to be delivered under the 1933 Act or the 1934
Act, will file all documents required to be filed with the Commission
pursuant to the 1934 Act within the time periods required by the 1934 Act
and the 1934 Act Regulations.
(l) Compliance with NASD Rules. The Company hereby agrees that it
will ensure that the Reserved Securities will be restricted as required by
the National Association of Securities Dealers, Inc. (the "NASD") or the
NASD rules from sale,
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transfer, assignment, pledge or hypothecation for a period of three months
following the date of this Agreement. The Underwriters will notify the
Company as to which persons will need to be so restricted. At the request
of the Underwriters, the Company will direct the transfer agent to place a
stop transfer restriction upon such securities for such period of time.
Should the Company release, or seek to release, from such restrictions any
of the Reserved Securities, the Company agrees to reimburse the
Underwriters for any reasonable expenses (including, without limitation,
legal expenses) they incur in connection with such release.
SECTION 4. Payment of Expenses. (a) Expenses. The Company will pay all
expenses incident to the performance of its obligations under this Agreement,
including (i) the preparation, printing and filing of the Registration Statement
(including financial statements and exhibits) as originally filed and of each
amendment thereto, (ii) the preparation, printing and delivery to the
Underwriters of this Agreement, any Agreement among Underwriters and such other
documents as may be required in connection with the offering, purchase, sale,
issuance or delivery of the Securities, (iii) the preparation, issuance and
delivery of the certificates for the Securities to the Underwriters, including
any stock or other transfer taxes and any stamp or other duties payable upon the
sale, issuance or delivery of the Securities to the Underwriters and the
transfer of the Securities between the U.S. Underwriters and the International
Managers, (iv) the fees and disbursements of the Company's counsel, accountants
and other advisors, (v) the qualification of the Securities under securities
laws in accordance with the provisions of Section 3(f) hereof, including filing
fees and the reasonable fees and disbursements of counsel for the Underwriters
in connection therewith and in connection with the preparation of the Blue Sky
Survey and any supplement thereto, (vi) the printing and delivery to the
Underwriters of copies of each preliminary prospectus, any Term Sheets and of
the Prospectuses and any amendments or supplements thereto, (vii) the
preparation, printing and delivery to the Underwriters of copies of the Blue Sky
Survey and any supplement thereto, (viii) the fees and expenses of any transfer
agent or registrar for the Securities, (ix) the fees and expenses incurred in
connection with the inclusion of the Securities in the Nasdaq National Market
and (x) all costs and expenses of the Underwriters, including the fees and
disbursements of counsel for the Underwriters, in connection with matters
related to the Reserved Securities which are designated by the Company for sale
to employees and others having a business relationship with the Company.
(b) Termination of Agreement. If this Agreement is terminated by the Lead
Manager in accordance with the provisions of Section 5 or Section 9(a)(i)
hereof, the Company shall reimburse the International Managers for all of their
out-of-pocket expenses, including the reasonable fees and disbursements of
counsel for the International Managers.
SECTION 5. Conditions of International Managers' Obligations. The
obligations of the several International Managers hereunder are subject to the
accuracy of the representations and warranties of the Company contained in
Section 1 hereof or in certificates of any officer of the Company or any
subsidiary of the Company delivered pursuant to the provisions hereof, to the
performance by the Company of its covenants and other obligations hereunder, and
to the following further conditions:
(a) Effectiveness of Registration Statement. The Registration
Statement, including any Rule 462(b) Registration Statement, has become
effective and at Closing
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Time no stop order suspending the effectiveness of the Registration
Statement shall have been issued under the 1933 Act or proceedings therefor
initiated or threatened by the Commission, and any request on the part of
the Commission for additional information shall have been complied with to
the reasonable satisfaction of counsel to the International Managers. A
prospectus containing the Rule 430A Information shall have been filed with
the Commission in accordance with Rule 424(b) (or a post-effective
amendment providing such information shall have been filed and declared
effective in accordance with the requirements of Rule 430A) or, if the
Company has elected to rely upon Rule 434, a Term Sheet shall have been
filed with the Commission in accordance with Rule 424(b).
(b) Opinion of Jeremiah M. Fitzgerald. At Closing Time, the Lead
Manager shall have received the favorable opinion, dated as of Closing
Time, of Jeremiah M. Fitzgerald, Esq., Vice President and Chief Legal
Officer of the Company, in form and substance satisfactory to counsel for
the International Managers, together with signed or reproduced copies of
such letter for each of the other International Managers to the effect set
forth in clauses (i)-(xvii), inclusive, (xix) and the penultimate paragraph
of Exhibit A hereto and to such further effect as counsel to the
International Managers may reasonably request. In rendering his opinion,
Mr. Fitzgerald may rely, as to all matters involving the laws of the State
of New York, upon the opinion of Brown & Wood LLP.
(c) Opinion of McBride Baker & Coles. At Closing Time, the Lead
Manager shall have received the favorable opinion, dated as of Closing
Time, of McBride, Baker & Coles, counsel for the Company, in form and
substance satisfactory to counsel for the International Managers, together
with signed or reproduced copies of such letter for each of the other
International Managers to the effect set forth in clauses (i)-(ii),
inclusive, (v)--(ix), inclusive, (xiii), (xvi), (xix) and the penultimate
paragraph of Exhibit A hereto and to such further effect as counsel to the
International Managers may reasonably request. In rendering its opinion,
such counsel may rely, as to all matters involving the laws of the State of
New York, upon the opinion of Brown & Wood LLP.
(d) Opinion of Palmer & Dodge LLP. At Closing Time, the Lead Manager
shall have received the favorable opinion, dated as of Closing Time, of
Palmer & Dodge LLP, special counsel to the Company, in form and substance
satisfactory to counsel for the International Managers, together with
signed or reproduced copies of such letter for each of the other
International Managers to the effect set forth in clause (xviii) of Exhibit
A hereto and to such further effect as counsel to the International
Managers may reasonably request.
(e) Opinion of Hopkins & Sutter. At Closing Time, the Lead Manager
shall have received the favorable opinion, dated as of Closing Time, of
Hopkins & Sutter, special tax counsel to the Company, in form and substance
satisfactory to counsel for the International Managers, together with
signed or reproduced copies of such letter for each of the other
International Managers to the effect set forth in clause (xx) of Exhibit A
hereto and to such further effect as counsel to the International Managers
may reasonably request.
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(f) Opinion of Wilson Sonsini Goodrich & Rosati. At Closing Time, the
Lead Manager shall have received the favorable opinion, dated as of Closing
Time, of Wilson Sonsini Goodrich & Rosati, counsel to Hybrid, in form and
substance satisfactory to counsel for the International Managers, together
with signed or reproduced copies of such letter for each of the
International Managers to the effect set forth in Exhibit B hereto and to
such further effect as counsel to the International Managers may reasonably
request.
(g) Opinion of Counsel for International Managers. At Closing Time,
the Lead Manager shall have received the favorable opinion, dated as of
Closing Time, of Brown & Wood llp, counsel for the International Managers,
together with signed or reproduced copies of such letter for each of the
other International Managers with respect to the matters set forth in
clauses (i), (ii), (v), (vi) (solely as to preemptive or other similar
rights arising by operation of law or under the charter or by-laws of the
Company), (vii) through (ix), inclusive, (xi), (xiii) and the penultimate
paragraph of Exhibit A hereto. In giving such opinion such counsel may
rely, as to all matters governed by the laws of jurisdictions other than
the law of the State of New York, the federal law of the United States and
the General Corporation Law of the State of Delaware, upon the opinions of
counsel satisfactory to the Lead Manager. Such counsel may also state that,
insofar as such opinion involves factual matters, they have relied, to the
extent they deem proper, upon certificates of officers of the Company and
its subsidiaries and certificates of public officials.
(h) Officers' Certificate. At Closing Time, there shall not have
been, since the date hereof or since the respective dates as of which
information is given in the Prospectuses, any material adverse change in
the condition, financial or otherwise, or in the earnings, business affairs
or business prospects of the Company and its subsidiaries considered as one
enterprise or of Comdisco Ventures, whether or not arising in the ordinary
course of business, and the Lead Manager shall have received a certificate
of the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company, dated as of Closing
Time, to the effect that (i) there has been no such material adverse
change, (ii) the representations and warranties in Section 1(a) hereof are
true and correct with the same force and effect as though expressly made at
and as of Closing Time, (iii) the Company has complied with all agreements
and satisfied all conditions on its part to be performed or satisfied at or
prior to Closing Time, and (iv) no stop order suspending the effectiveness
of the Registration Statement has been issued and no proceedings for that
purpose have been instituted or are pending or are contemplated by the
Commission.
(i) Accountant's Comfort Letter. At the time of the execution of this
Agreement, the Lead Manager shall have received from KPMG LLP a letter
dated such date, in form and substance satisfactory to the Lead Manager,
together with signed or reproduced copies of such letter for each of the
other International Managers, containing statements and information of the
type ordinarily included in accountants' "comfort letters" to underwriters
with respect to the financial statements and certain financial information
contained in the Registration Statement and the Prospectuses.
15
<PAGE>
(j) Bring-down Comfort Letter. At Closing Time, the Lead Manager shall
have received from KPMG LLP a letter, dated as of Closing Time, to the effect
that they reaffirm the statements made in the letter furnished pursuant to
subsection (i) of this Section, except that the specified date referred to shall
be a date not more than three business days prior to Closing Time.
(k) Approval of Listing. At Closing Time, the Securities shall have been
approved for inclusion in the Nasdaq National Market, subject only to official
notice of issuance.
(l) Purchase of Initial U.S. Securities. Contemporaneously with the
purchase by the International Managers of the Initial International Securities
under this Agreement, the U.S. Underwriters shall have purchased the Initial
U.S. Securities under the U.S. Purchase Agreement.
(m) Conditions to Purchase of International Option Securities. In the
event that the International Managers exercise their option provided in Section
2(b) hereof to purchase all or any portion of the International Option
Securities, the representations and warranties of the Company contained herein
and the statements in any certificates furnished by the Company or any
subsidiary of the Company hereunder shall be true and correct as of each Date of
Delivery and, at the relevant Date of Delivery, the Lead Manager shall have
received:
(i) Officers' Certificate. A certificate, dated such Date of Delivery,
of the President or a Vice President of the Company and of the chief
financial or chief accounting officer of the Company confirming that
the certificate delivered at the Closing Time pursuant to Section 5(h)
hereof remains true and correct as of such Date of Delivery.
(ii) Opinions of Counsels for Company. The favorable opinions of
Jeremiah M. Fitzgerald, Esq., Vice President and Chief Legal Officer
of the Company, McBride Baker & Coles, counsel to the Company, Palmer
& Dodge LLP, special counsel to the Company, Hopkins & Sutter, special
tax counsel to the Company, and Wilson Sonsini Goodrich & Rosati,
counsel to Hybrid, in each case, in form and substance satisfactory to
counsel for the International Managers, dated such Date of Delivery,
relating to the International Option Securities to be purchased on
such Date of Delivery and otherwise to the same effect as the opinions
required by Sections 5(b) through (f) hereof.
(iii) Opinion of Counsel for International Managers. The favorable
opinion of Brown & Wood LLP, counsel for the International Managers,
dated such Date of Delivery, relating to the International Option
Securities to be purchased on such Date of Delivery and otherwise to
the same effect as the opinion required by Section 5(g) hereof.
(iv) Bring-down Comfort Letter. A letter from KPMG LLP, in form and
substance satisfactory to the Lead Manager and dated such Date of
Delivery,
16
<PAGE>
substantially in the same form and substance as the letter furnished
to the Lead Manager pursuant to Section 5(j) hereof, except that the
"specified date" in the letter furnished pursuant to this paragraph
shall be a date not more than five days prior to such Date of
Delivery.
(n) Additional Documents. At Closing Time and at each Date of
Delivery, counsel for the International Managers shall have been furnished
with such documents and opinions as they may require for the purpose of
enabling them to pass upon the issuance and sale of the Securities as
herein contemplated, or in order to evidence the accuracy of any of the
representations or warranties, or the fulfillment of any of the conditions,
herein contained; and all proceedings taken by the Company in connection
with the issuance and sale of the Securities as herein contemplated shall
be satisfactory in form and substance to the Lead Manager and counsel for
the International Managers.
(o) Termination of Agreement. If any condition specified in this
Section shall not have been fulfilled when and as required to be fulfilled,
this Agreement, or, in the case of any condition to the purchase of
International Option Securities on a Date of Delivery which is after the
Closing Time, the obligations of the several International Managers to
purchase the relevant Option Securities, may be terminated by the Lead
Manager by notice to the Company at any time at or prior to Closing Time or
such Date of Delivery, as the case may be, and such termination shall be
without liability of any party to any other party except as provided in
Section 4 and except that Sections 1, 6, 7 and 8 shall survive any such
termination and remain in full force and effect.
SECTION 6. Indemnification.
---------- ---------------
(a) Indemnification of International Managers. The Company agrees to
indemnify and hold harmless each International Manager and each person, if any,
who controls any International Manager within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act as follows:
(i) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of any untrue statement or alleged
untrue statement of a material fact contained in the Registration Statement
(or any amendment thereto), including the Rule 430A Information and the
Rule 434 Information, if applicable, or the omission or alleged omission
therefrom of a material fact required to be stated therein or necessary to
make the statements therein not misleading or arising out of any untrue
statement or alleged untrue statement of a material fact included in any
preliminary prospectus or the Prospectuses (or any amendment or supplement
thereto), or the omission or alleged omission therefrom of a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading;
(ii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, arising out of (A) the violation of any applicable
laws or regulations of foreign jurisdictions where Reserved Securities have
been offered and (B) any untrue statement or alleged untrue statement of a
material fact included in the supplement or prospectus wrapper material
distributed in foreign jurisdictions in connection with the
17
<PAGE>
reservation and sale of the Reserved Securities to employees, business
associates and related persons of the Company and to the Company as a
contribution to the Company's retirement plan or the omission or alleged
omission therefrom of a material fact necessary to make the statements
therein, when considered in conjunction with the Prospectuses or
preliminary prospectuses, not misleading;
(iii) against any and all loss, liability, claim, damage and expense
whatsoever, as incurred, to the extent of the aggregate amount paid in
settlement of any litigation, or any investigation or proceeding by any
governmental agency or body, commenced or threatened, or of any claim
whatsoever based upon any such untrue statement or omission, or any such
alleged untrue statement or omission or in connection with any violation of
the nature referred to in Section 6(a)(ii)(A) hereof; provided that
(subject to Section 6(d) below) any such settlement is effected with the
written consent of the Company; and
(iv) against any and all expense whatsoever, as incurred (including
the fees and disbursements of counsel chosen by Merrill Lynch), reasonably
incurred in investigating, preparing or defending against any litigation,
or any investigation or proceeding by any governmental agency or body,
commenced or threatened, or any claim whatsoever based upon any such untrue
statement or omission, or any such alleged untrue statement or omission or
in connection with any violation of the nature referred to in Section
6(a)(ii)(A) hereof, to the extent that any such expense is not paid under
(i), (ii) or (iii) above;
provided, however, that this indemnity agreement shall not apply to any loss,
liability, claim, damage or expense to the extent arising out of any untrue
statement or omission or alleged untrue statement or omission made in reliance
upon and in conformity with written information furnished to the Company by any
International Manager through the Lead Manager expressly for use in the
Registration Statement (or any amendment thereto), including the Rule 430A
Information and the Rule 434 Information, if applicable, or any preliminary
prospectus or the International Prospectus (or any amendment or supplement
thereto).
(b) Indemnification of Company, Directors and Officers. Each International
Manager severally agrees to indemnify and hold harmless the Company, its
directors, each of its officers who signed the Registration Statement, and each
person, if any, who controls the Company within the meaning of Section 15 of the
1933 Act or Section 20 of the 1934 Act against any and all loss, liability,
claim, damage and expense described in the indemnity contained in subsection (a)
of this Section, as incurred, but only with respect to untrue statements or
omissions, or alleged untrue statements or omissions, made in the Registration
Statement (or any amendment thereto), including the Rule 430A Information and
the Rule 434 Information, if applicable, or any preliminary international
prospectus or the International Prospectus (or any amendment or supplement
thereto) in reliance upon and in conformity with written information furnished
to the Company by such International Manager through the Lead Manager expressly
for use in the Registration Statement (or any amendment thereto) or such
preliminary prospectus or the International Prospectus (or any amendment or
supplement thereto).
18
<PAGE>
(c) Actions against Parties; Notification. Each indemnified party shall
give notice as promptly as reasonably practicable to each indemnifying party of
any action commenced against it in respect of which indemnity may be sought
hereunder, but failure to so notify an indemnifying party shall not relieve such
indemnifying party from any liability hereunder to the extent it is not
materially prejudiced as a result thereof and in any event shall not relieve it
from any liability which it may have otherwise than on account of this indemnity
agreement. In the case of parties indemnified pursuant to Section 6(a) above,
counsel to the indemnified parties shall be selected by Merrill Lynch, and, in
the case of parties indemnified pursuant to Section 6(b) above, counsel to the
indemnified parties shall be selected by the Company. An indemnifying party may
participate at its own expense in the defense of any such action; provided,
however, that counsel to the indemnifying party shall not (except with the
consent of the indemnified party) also be counsel to the indemnified party. In
no event shall the indemnifying parties be liable for fees and expenses of more
than one counsel (in addition to any local counsel) separate from their own
counsel for all indemnified parties in connection with any one action or
separate but similar or related actions in the same jurisdiction arising out of
the same general allegations or circumstances. No indemnifying party shall,
without the prior written consent of the indemnified parties, settle or
compromise or consent to the entry of any judgment with respect to any
litigation, or any investigation or proceeding by any governmental agency or
body, commenced or threatened, or any claim whatsoever in respect of which
indemnification or contribution could be sought under this Section 6 or Section
7 hereof (whether or not the indemnified parties are actual or potential parties
thereto), unless such settlement, compromise or consent (i) includes an
unconditional release of each indemnified party from all liability arising out
of such litigation, investigation, proceeding or claim and (ii) does not include
a statement as to or an admission of fault, culpability or a failure to act by
or on behalf of any indemnified party.
(d) Settlement without Consent if Failure to Reimburse. If at any time an
indemnified party shall have requested an indemnifying party to reimburse the
indemnified party for fees and expenses of counsel, such indemnifying party
agrees that it shall be liable for any settlement of the nature contemplated by
Section 6(a)(iii) effected without its written consent if (i) such settlement is
entered into more than 45 days after receipt by such indemnifying party of the
aforesaid request, (ii) such indemnifying party shall have received notice of
the terms of such settlement at least 30 days prior to such settlement being
entered into and (iii) such indemnifying party shall not have reimbursed such
indemnified party in accordance with such request prior to the date of such
settlement.
(e) Indemnification for Reserved Securities. In connection with the offer
and sale of the Reserved Securities, the Company agrees, promptly upon a request
in writing, to indemnify and hold harmless the Underwriters from and against any
and all losses, liabilities, claims, damages and expenses incurred by them as a
result of the failure of the Company or its employees, business associates and
related persons of the Company to pay for and accept delivery of Reserved
Securities which, by the end of the first business day following the date of
this Agreement, were subject to a properly confirmed agreement to purchase.
SECTION 7. Contribution. If the indemnification provided for in Section 6
hereof is for any reason unavailable to or insufficient to hold harmless an
indemnified party in respect of any losses, liabilities, claims, damages or
expenses referred to therein, then each indemnifying party
19
<PAGE>
shall contribute to the aggregate amount of such losses, liabilities, claims,
damages and expenses incurred by such indemnified party, as incurred, (i) in
such proportion as is appropriate to reflect the relative benefits received by
the Company on the one hand and the International Managers on the other hand
from the offering of the Securities pursuant to this Agreement or (ii) if the
allocation provided by clause (i) 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 the Company on the one
hand and of the International Managers on the other hand in connection with the
statements or omissions, or in connection with any violation of the nature
referred to in Section 6(a)(ii)(A) hereof, which resulted in such losses,
liabilities, claims, damages or expenses, as well as any other relevant
equitable considerations.
The relative benefits received by the Company on the one hand and the
International Managers on the other hand in connection with the offering of the
International Securities pursuant to this Agreement shall be deemed to be in the
same respective proportions as the total net proceeds from the offering of the
International Securities pursuant to this Agreement (before deducting expenses)
received by the Company and the total underwriting discount received by the
International Managers, in each case as set forth on the cover of the
International Prospectus, or, if Rule 434 is used, the corresponding location on
the Term Sheet, bear to the aggregate initial public offering price of the
International Securities as set forth on such cover.
The relative fault of the Company on the one hand and the International
Managers on the other hand shall be determined by reference to, among other
things, whether any such untrue or alleged untrue statement of a material fact
or omission or alleged omission to state a material fact relates to information
supplied by the Company or by the International Managers and the parties'
relative intent, knowledge, access to information and opportunity to correct or
prevent such statement or omission or any violation of the nature referred to in
Section 6(a)(ii)(A) hereof.
The Company and the International Managers agree that it would not be just
and equitable if contribution pursuant to this Section 7 were determined by pro
rata allocation (even if the International Managers were treated as one entity
for such purpose) or by any other method of allocation which does not take
account of the equitable considerations referred to above in this Section 7. The
aggregate amount of losses, liabilities, claims, damages and expenses incurred
by an indemnified party and referred to above in this Section 7 shall be deemed
to include any legal or other expenses reasonably incurred by such indemnified
party in investigating, preparing or defending against any litigation, or any
investigation or proceeding by any governmental agency or body, commenced or
threatened, or any claim whatsoever based upon any such untrue or alleged untrue
statement or omission or alleged omission.
Notwithstanding the provisions of this Section 7, no International Manager
shall be required to contribute any amount in excess of the amount by which the
total price at which the International Securities underwritten by it and
distributed to the public were offered to the public exceeds the amount of any
damages which such International Manager has otherwise been required to pay by
reason of any such untrue or alleged untrue statement or omission or alleged
omission.
20
<PAGE>
No person guilty of fraudulent misrepresentation (within the meaning of
Section 11(f) of the 1933 Act) shall be entitled to contribution from any person
who was not guilty of such fraudulent misrepresentation.
For purposes of this Section 7, each person, if any, who controls an
International Manager within the meaning of Section 15 of the 1933 Act or
Section 20 of the 1934 Act shall have the same rights to contribution as such
International Manager, and each director of the Company, each officer of the
Company who signed the Registration Statement, and each person, if any, who
controls the Company within the meaning of Section 15 of the 1933 Act or Section
20 of the 1934 Act shall have the same rights to contribution as the Company.
The International Managers' respective obligations to contribute pursuant to
this Section 7 are several in proportion to the number of Initial International
Securities set forth opposite their respective names in Schedule A hereto and
not joint.
SECTION 8. Representations, Warranties and Agreements to Survive Delivery.
All representations, warranties and agreements contained in this Agreement or in
certificates of officers of the Company or any of its subsidiaries submitted
pursuant hereto, shall remain operative and in full force and effect, regardless
of any investigation made by or on behalf of any International Manager or
controlling person, or by or on behalf of the Company, and shall survive
delivery of the Securities to the International Managers.
SECTION 9. Termination of Agreement.
---------- ------------------------
(a) Termination; General. The Lead Manager may terminate this Agreement,
by notice to the Company, at any time at or prior to Closing Time (i) if there
has been, since the time of execution of this Agreement or since the respective
dates as of which information is given in the International Prospectus, any
material adverse change in the condition, financial or otherwise, or in the
earnings, business affairs or business prospects of the Company and its
subsidiaries considered as one enterprise or of Comdisco Ventures, whether or
not arising in the ordinary course of business, or (ii) if there has occurred
any material adverse change in the financial markets in the United States or the
international financial markets, any outbreak of hostilities or escalation
thereof or other calamity or crisis or any change or development involving a
prospective change in national or international political, financial or economic
conditions, in each case the effect of which is such as to make it, in the
judgment of the Lead Manager, impracticable to market the Securities or to
enforce contracts for the sale of the Securities, or (iii) if trading in any
securities of the Company has been suspended or materially limited by the
Commission, the New York Stock Exchange or the Nasdaq National Market, or if
trading generally on the American Stock Exchange or the New York Stock Exchange
or in the Nasdaq National Market has been suspended or materially limited, or
minimum or maximum prices for trading have been fixed, or maximum ranges for
prices have been required, by any of said exchanges or by such system or by
order of the Commission, the National Association of Securities Dealers, Inc. or
any other governmental authority, or (iv) if a banking moratorium has been
declared by either Federal or New York authorities.
(b) Liabilities. If this Agreement is terminated pursuant to this Section,
such termination shall be without liability of any party to any other party
except as provided in
21
<PAGE>
Section 4 hereof, and provided further that Sections 1, 6, 7 and 8 shall survive
such termination and remain in full force and effect.
SECTION 10. Default by One or More of the International Managers. If one or
more of the International Managers shall fail at Closing Time or a Date of
Delivery to purchase the Securities which it or they are obligated to purchase
under this Agreement (the "Defaulted Securities"), the Lead Manager shall have
the right, within 24 hours thereafter, to make arrangements for one or more of
the non-defaulting International Managers, or any other underwriters, to
purchase all, but not less than all, of the Defaulted Securities in such amounts
as may be agreed upon and upon the terms herein set forth; if, however, the Lead
Manager shall not have completed such arrangements within such 24-hour period,
then:
(a) if the number of Defaulted Securities does not exceed 10% of the
number of International Securities to be purchased on such date, each of
the non-defaulting International Managers shall be obligated, severally and
not jointly, to purchase the full amount thereof in the proportions that
their respective underwriting obligations hereunder bear to the
underwriting obligations of all non-defaulting International Managers, or
(b) if the number of Defaulted Securities exceeds 10% of the number of
International Securities to be purchased on such date, this Agreement or,
with respect to any Date of Delivery which occurs after the Closing Time,
the obligation of the International Managers to purchase and of the Company
to sell the Option Securities to be purchased and sold on such Date of
Delivery shall terminate without liability on the part of any non-
defaulting International Manager.
No action taken pursuant to this Section shall relieve any defaulting
International Manager from liability in respect of its default.
In the event of any such default which does not result in a termination of
this Agreement or, in the case of a Date of Delivery which is after the Closing
Time, which does not result in a termination of the obligation of the
International Managers to purchase and the Company to sell the relevant
International Option Securities, as the case may be, either the Lead Manager or
the Company shall have the right to postpone Closing Time or the relevant Date
of Delivery, as the case may be, for a period not exceeding seven days in order
to effect any required changes in the Registration Statement or Prospectus or in
any other documents or arrangements. As used herein, the term "International
Manager" includes any person substituted for an International Manager under this
Section 10.
22
<PAGE>
SECTION 11. Notices. All notices and other communications hereunder shall
be in writing and shall be deemed to have been duly given if mailed or
transmitted by any standard form of telecommunication. Notices to the
International Managers shall be directed to the Lead Manager at Ropemaker Place,
25 Ropemaker Street, London EC2Y 9LY, England, attention of .; and notices to
the Company shall be directed to it at 6111 North River Road, Rosemont, Illinois
60018, attention of John J. Vosicky, with a copy to Jeremiah H. Fitzgerald, Vice
President and Chief Legal Officer at the same address.
SECTION 12. Parties. This Agreement shall each inure to the benefit of and
be binding upon the International Managers and the Company and their respective
successors. Nothing expressed or mentioned in this Agreement is intended or
shall be construed to give any person, firm or corporation, other than the
International Managers and the Company and their respective successors and the
controlling persons and officers and directors referred to in Sections 6 and 7
and their heirs and legal representatives, any legal or equitable right, remedy
or claim under or in respect of this Agreement or any provision herein
contained. This Agreement and all conditions and provisions hereof are intended
to be for the sole and exclusive benefit of the International Managers and the
Company and their respective successors, and said controlling persons and
officers and directors and their heirs and legal representatives, and for the
benefit of no other person, firm or corporation. No purchaser of Securities from
any International Manager shall be deemed to be a successor by reason merely of
such purchase.
SECTION 13. Governing Law and Time. THIS AGREEMENT SHALL BE GOVERNED BY AND
CONSTRUED IN ACCORDANCE WITH THE LAWS OF THE STATE OF NEW YORK. SPECIFIED TIMES
OF DAY REFER TO NEW YORK CITY TIME.
SECTION 14. Effect of Headings. The Article and Section headings herein and
the Table of Contents are for convenience only and shall not affect the
construction hereof.
23
<PAGE>
If the foregoing is in accordance with your understanding of our agreement,
please sign and return to the Company a counterpart hereof, whereupon this
instrument, along with all counterparts, will become a binding agreement between
the International Managers and the Company in accordance with its terms.
Very truly yours,
COMDISCO, INC.
By__________________________________
Title:
CONFIRMED AND ACCEPTED,
as of the date first above written:
MERRILL LYNCH INTERNATIONAL
By__________________________________
Authorized Signatory
For themselves and as Lead Manager of the
other International Managers named in Schedule A hereto.
24
<PAGE>
SCHEDULE A
<TABLE>
<CAPTION>
Number of Initial
International
Name of International Manager Securities
- ----------------------------- -----------------
<S> <C>
Merrill Lynch International.......................................
___________________
Total.............................................................
===================
</TABLE>
Sch A-1
<PAGE>
SCHEDULE B
Comdisco, Inc.
. Shares of Comdisco, Inc.--Comdisco Ventures Common Stock
(Par Value $.10 Per Share)
1. The initial public offering price per share for the Securities,
determined as provided in said Section 2, shall be $..
2. The purchase price per share for the International Securities to
be paid by the several International Managers shall be $., being an amount
equal to the initial public offering price set forth above less $. per
share; provided that the purchase price per share for any International
Option Securities purchased upon the exercise of the over-allotment option
described in Section 2(b) shall be reduced by an amount per share equal to
any dividends or distributions declared by the Company and payable on the
Initial International Securities but not payable on the International
Option Securities.
Sch B-1
<PAGE>
Exhibit A
FORM OF OPINION OF COMPANY'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(b)
(i) The Company has been duly incorporated and is validly existing as a
corporation in good standing under the laws of the State of Delaware.
(ii) The Company has corporate power and authority to own, lease and
operate its properties and conduct its business as described in the
Prospectuses, and to enter into and perform its obligations under the
International Purchase Agreement and the U.S. Purchase Agreement.
(iii) The Company is duly qualified as a foreign corporation to transact
business and is in good standing in each jurisdiction in which its ownership or
lease of substantial properties or the conduct of its business requires such
qualification and in which failure of the Company to be so qualified and in good
standing would have a Material Adverse Effect.
(iv) The authorized, issued and outstanding capital stock of the Company is
as set forth in the Prospectuses in the column entitled "Actual" under the
caption "Capitalization" (except for subsequent issuances, if any, pursuant to
the International Purchase Agreement and the U.S. Purchase Agreement or pursuant
to reservations, agreements or employee benefit plans referred to in the
Prospectuses or pursuant to the exercise of convertible securities or options
referred to in the Prospectuses); the shares of issued and outstanding capital
stock have been duly authorized and validly issued and are fully paid and non-
assessable; and none of the outstanding shares of capital stock of the Company
was issued in violation of the preemptive or other similar rights of any
securityholder of the Company.
(v) The Securities to be purchased by the International Managers and the
U.S. Underwriters from the Company have been duly authorized for issuance and
sale to the Underwriters pursuant to the International Purchase Agreement and
the U.S. Purchase Agreement, respectively, and, when issued and delivered by the
Company pursuant to the International Purchase Agreement and the U.S. Purchase
Agreement, respectively, against payment of the consideration set forth in the
International Purchase Agreement and the U.S. Purchase Agreement, will be
validly issued and fully paid and non-assessable and no holder of the Securities
is or will be subject to personal liability by reason of being such a holder.
(vi) The issuance of the Securities is not subject to the preemptive or
other similar rights of any securityholder of the Company.
(vii) The International Purchase Agreement and the U.S. Purchase Agreement
have been duly authorized, executed and delivered by the Company.
A-1
<PAGE>
(viii) The Registration Statement, including any Rule 462(b) Registration
Statement, has been declared effective under the 1933 Act; any required filing
of the Prospectuses pursuant to Rule 424(b) has been made in the manner and
within the time period required by Rule 424(b); and, to the best of such
counsel's knowledge, no stop order suspending the effectiveness of the
Registration Statement or any Rule 462(b) Registration Statement has been issued
under the 1933 Act and no proceedings for that purpose have been instituted or
are pending or threatened by the Commission.
(ix) The Registration Statement, including any Rule 462(b) Registration
Statement, the Rule 430A Information and the Rule 434 Information, as
applicable, the Prospectuses, excluding the documents incorporated by reference
therein, and each amendment or supplement to the Registration Statement and the
Prospectuses, excluding the documents incorporated by reference therein, as of
their respective effective or issue dates (other than the financial statements
and supporting schedules included therein or omitted therefrom, as to which such
counsel need express no opinion) appeared on their face to comply as to form in
all material respects with the requirements of the 1933 Act and the 1933 Act
Regulations.
(x) Each document filed pursuant to the 1934 Act and incorporated by
reference in the Prospectuses (except for the financial statements included
therein or omitted therefrom, as to which such counsel need not comment),
appeared on its face to comply when filed as to form in all material respects
with the 1934 Act and the rules and regulations promulgated thereunder.
(xi) The form of certificate used to evidence the Ventures Common Stock
complies in all material respects with all applicable statutory requirements,
with any applicable requirements of the charter and by-laws of the Company and
the requirements of the Nasdaq National Market.
(xii) To the best of such counsel's knowledge, there is not pending or
threatened any action, suit, proceeding, inquiry or investigation, to which the
Company or any subsidiary is a party, or to which the property of the Company or
any subsidiary is subject, before or brought by any court or governmental agency
or body, domestic or foreign, which might reasonably be expected to result in a
Material Adverse Effect, or which might reasonably be expected to materially and
adversely affect the properties or assets thereof or the consummation of the
transactions contemplated in the International Purchase Agreement and U.S.
Purchase Agreement or the performance by the Company of its obligations
thereunder.
(xiii) The information in the Prospectuses under "Description of Comdisco
Capital Stock--Description of Comdisco Ventures Common Stock", to the extent
that it constitutes matters of law, summaries of legal matters, the Company's
charter and bylaws or legal conclusions, has been reviewed by such counsel and
is correct in all material respects.
A-2
<PAGE>
(xiv) To the best of such counsel's knowledge, there are no statutes or
regulations that are required to be described in the Prospectuses that are not
described as required.
(xv) To the best of such counsel's knowledge and information, there are no
contracts, indentures, mortgages, loan agreements, notes, leases or other
instruments required to be described or referred to in the Registration
Statement or to be filed as exhibits thereto other than those described or
referred to therein or filed or incorporated by reference as exhibits thereto,
the descriptions thereof or references thereto are correct, and, except for
certain minor matters which, either individually or in the aggregate, will not
or do not have a Material Adverse Effect, no default exists in the due
performance or observance of any material obligation, agreement, covenant or
condition contained in any contract, indenture, loan agreement, note, lease or
other instrument so described, referred to, filed or incorporated by reference.
(xvi) No filing with, or authorization, approval, consent, license, order,
registration, qualification or decree of, any court or governmental authority or
agency, domestic or foreign (other than under the 1933 Act and the 1933 Act
Regulations, which have been obtained, or as may be required under the
securities or blue sky laws of the various states, as to which such counsel need
express no opinion) is necessary or required in connection with the due
authorization, execution and delivery of the International Purchase Agreement
and the U.S. Purchase Agreement or for the offering, issuance, sale or delivery
of the Securities.
(xvii) The execution, delivery and performance of the International
Purchase Agreement and the U.S. Purchase Agreement and the consummation of the
transactions contemplated in the International Purchase Agreement, the U.S.
Purchase Agreement and in the Registration Statement (including the issuance and
sale of the Securities, and the use of the proceeds from the sale of the
Securities as described in the Prospectuses under the caption "Use Of Proceeds")
and compliance by the Company with its obligations under the International
Purchase Agreement and the U.S. Purchase Agreement do not and will not, whether
with or without the giving of notice or lapse of time or both, conflict with or
constitute a breach of, or default under, or result in the creation or
imposition of any lien, charge or encumbrance upon any property or assets of the
Company or any subsidiary pursuant to any contract, indenture, mortgage, deed of
trust, loan or credit agreement, note, lease or any other agreement or
instrument, known to such counsel, to which the Company is a party or by which
it may be bound, or to which any of the property or assets of the Company is
subject (except for such conflicts, breaches or defaults or liens, charges or
encumbrances that would not have a Material Adverse Effect), nor will such
action result in any violation of the provisions of the charter or by-laws of
the Company, or any applicable law, statute, rule, regulation, judgment, order,
writ or decree, known to such counsel, of any government, government
instrumentality or court, domestic or foreign, having jurisdiction over the
Company or any of its properties, assets or operations (other than under the
securities or blue sky laws of the various states, as to which such counsel need
express no opinion).
A-3
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(xviii) The Company is not, and upon the issuance and sale of the
Securities as contemplated in the U.S. Purchase Agreement and the International
Purchase Agreement and the application of the net proceeds therefrom as
described in the Prospectuses will not be, an "investment company" or an entity
"controlled" by an "investment company" as such terms are defined in the
Investment Company Act of 1940, as amended (the "1940 Act"); the issuance and
sale of the Securities as contemplated in the U.S. Purchase Agreement and the
International Purchase Agreement will not violate the 1940 Act or the rules and
regulations thereunder.
(xix) The Rights under the Company's Shareholder Rights Plan to which
holders of the Securities will be entitled have been duly authorized and validly
issued.
(xx) The opinion set forth under "Material U.S. Federal Income Tax
Considerations" is confirmed.
Nothing has come to such counsel's attention that would lead such counsel
to believe that the Registration Statement or any amendment thereto, including
the Rule 430A Information and Rule 434 Information (if applicable), (except for
financial statements and schedules and other financial data included or
incorporated by reference therein or omitted therefrom, as to which such counsel
need make no statement), at the time such Registration Statement or any such
amendment became effective, contained an untrue statement of a material fact or
omitted to state a material fact required to be stated therein or necessary to
make the statements therein not misleading or that the Prospectuses or any
amendment or supplement thereto (except for financial statements and schedules
and other financial data included or incorporated by reference therein or
omitted therefrom, as to which such counsel need make no statement), at the time
the Prospectuses were issued, at the time any such amended or supplemented
prospectus was issued or at the Closing Time, included or includes an untrue
statement of a material fact or omitted or omits to state a material fact
necessary in order to make the statements therein, in the light of the
circumstances under which they were made, not misleading.
In rendering such opinion, such counsel may rely, as to matters of fact
(but not as to legal conclusions), to the extent they deem proper, on
certificates of responsible officers of the Company and public officials. Such
opinion shall not state that it is to be governed or qualified by, or that it is
otherwise subject to, any treatise, written policy or other document relating to
legal opinions, including, without limitation, the Legal Opinion Accord of the
ABA Section of Business Law (1991).
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Exhibit B
FORM OF OPINION OF HYBRID'S COUNSEL
TO BE DELIVERED PURSUANT TO
SECTION 5(f)
Hybrid has been duly formed and is validly existing as a limited
partnership in good standing under the laws of the State of Delaware, has
partnership power and authority to own, lease and operate its properties
and to conduct its business as described in the Prospectuses and is duly
qualified as a foreign partnership to transact business and is in good
standing in each jurisdiction in which such qualification is required,
whether by reason of the ownership or leasing of property or the conduct of
business, except where the failure so to qualify or to be in good standing
would not result in a Material Adverse Effect; except as otherwise
disclosed in the Registration Statement, all of the issued and outstanding
limited partnership units of Hybrid have been duly authorized and validly
issued, are fully paid and non-assessable and, to the best of such
counsel's knowledge, are owned by the Company, directly or through
subsidiaries, free and clear of any security interest, mortgage, pledge,
lien, encumbrance, claim or equity; none of the outstanding partnership
units of Hybrid were issued in violation of the preemptive or similar
rights of any securityholder of Hybrid.
B-1
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EXHIBIT 4.2
COMDISCO, INC.
BOARD OF DIRECTORS
POLICY STATEMENT REGARDING
COMDISCO VENTURES STOCK MATTERS
1. GENERAL POLICY. It is the policy of the Board of Directors (the "BOARD") of
Comdisco, Inc. ("Comdisco") that:
(a) all material matters as to which the holders of Comdisco Stock and
the holders of Comdisco Ventures Stock may have potentially divergent
interests shall be resolved in a manner that the Board determines to be in
the best interests of Comdisco and all of its common stockholders, after
giving fair consideration to the potentially divergent interests and all
other relevant interests of the holders of the separate classes of common
stock of Comdisco; and
(b) a process of fair dealing will govern the relationship between
Comdisco Group and Comdisco Ventures and the means by which the terms of
any material transaction between them will be determined.
2. RELATIONSHIP BETWEEN THE GROUPS. Comdisco will seek to manage both
Comdisco Group and Comdisco Ventures in a manner designed to maximize the
operations, unique assets and value of both groups. In addition, there will be
various financial arrangements between the two groups, including with respect to
debt, other financings and taxes.
(a) General. Except as otherwise provided in this policy statement,
all material commercial transactions between Comdisco Group and Comdisco
Ventures will be on commercially reasonable terms taken as a whole and will
be subject to the review and approval of the Board and/or the Comdisco
Ventures Stock Committee as its designee.
(b) Allocation of Corporate Overhead and Support Services. Comdisco
Ventures will have access to the support services of Comdisco Group,
including, but not limited to Human Resources, Legal, Payroll, Accounting,
Tax, IT Services and Network Services.
With respect to corporate services that arise as a result of being
part of a combined entity (e.g., securities filing and financial reporting
services), costs relating to such services will be directly attributed to
the group utilizing such services, and to the extent such costs are not
directly attributable, allocated between the groups on a fair and
reasonable basis as approved by the Board. With respect to other support
services not detailed above, while the groups will seek to obtain for the
combined groups the lowest aggregate cost for all such services, each group
will be entitled to procure such services from third parties.
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(c) Sourcing and Provision of Other Services. Other than corporate
overhead and support services, Comdisco Ventures shall use exclusively the
services offered by Comdisco Group for use in Comdisco Ventures
transactions. Such services will be provided by Comdisco Group at the best
price offered to third parties in similar situations when taking into
account all relevant factors. The establishment of such price should also
give consideration to other factors, as appropriate, such as avoided costs
and synergies to be shared between the groups. In addition, each group will
cooperate in good faith to develop offers that reflect such other factors.
(d) When the combined services of the two groups are bundled or
offered together and the total cost to consumers of each of those services
are separately identified on a billing statement, Comdisco Group and
Comdisco Ventures will each control the pricing of its respective services
and receive the associated revenues.
In a combined transaction offering where the services of the two
groups are integrated and the total cost to consumers of each of those
services are not separately identified on a billing statement, the groups
will work collaboratively to determine the nature of their arrangements and
may also source the services of the other group as described above;
provided, however, that Comdisco Ventures may not offer a combination of
services comprised primarily of the services of the Comdisco Group without
Comdisco's agreement.
(e) No Inter-Group Interest in Comdisco Stock. Comdisco Ventures shall
not acquire an interest in Comdisco Stock.
(f) No Employee Interest in Customers. All employees of Comdisco are
governed by Comdisco's conflicts and insider trading policies.
Additionally, no employee of Comdisco Ventures shall acquire any interest
in any customer of Comdisco Ventures.
3. CORPORATE OPPORTUNITIES. The Board will allocate any business opportunities
and operations, any acquired assets and businesses and any assumed liabilities
between Comdisco Group and Comdisco Ventures, in whole or in part, as it
considers to be in the best interests of Comdisco and its stockholders as a
whole and as contemplated by the provisions of these policies. To the extent a
business opportunity or operation, an acquired asset or business, or an assumed
liability would be suitable to be undertaken by or allocated to either group, it
will be allocated by the Board in its business judgment or in accordance with
procedures adopted by the Board from time to time to ensure that decisions will
be made in the best interests of Comdisco and its stockholders as a whole. Any
such allocation may involve the consideration of a number of factors that the
Board determines to be relevant, including, without limitation, whether the
business opportunity or operation, the acquired asset or business, or the
assumed liability is principally within the existing scope of a group's business
and whether a group is better positioned to undertake or have allocated to it
such business opportunity or operation, acquired assets or business or assumed
liability. Subject to
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and without limiting the foregoing, the Board currently intends to allocate
future venture-backed financing opportunities to Comdisco Ventures.
4. DIVIDEND POLICY. Subject to the limitations set forth in Comdisco's Charter,
including any preferential rights of any series of preferred stock of Comdisco,
and to the limitations of applicable law, holders of shares of Comdisco Stock or
Comdisco Ventures Stock will be entitled to receive dividends on such stock
when, as and if authorized and declared by the Board. The payment of dividends
on Comdisco Stock will be a business decision to be made by the Board from time
to time based upon the results of operations, financial condition and capital
requirements of Comdisco and such other factors as the Board considers relevant.
Payment of dividends on Comdisco Stock may be restricted by loan agreements,
indentures and other transactions entered into by Comdisco from time to time.
With respect to Comdisco Ventures Stock, because Comdisco Ventures is
expected to require significant capital commitments to finance its operations
and fund its future growth, Comdisco does not expect to pay any dividends on
shares of Comdisco Ventures Stock for the foreseeable future. If and when the
Board does determine to pay any dividends on shares of Comdisco Ventures Stock,
any such determination will also be subject to factors similar to those
described above with respect to the payment of dividends on Comdisco Stock.
5. FINANCIAL REPORTING. Comdisco will prepare and include in its filings with
the Securities and Exchange Commission under the Securities Exchange Act of
1934, as amended, consolidated financial statements of Comdisco and combined
financial statements of Comdisco Ventures (for so long as Comdisco Ventures
Stock is outstanding). The financial statements of Comdisco Ventures will
reflect the financial position, results of operations and cash flows of the
businesses attributed thereto and in the case of annual financial statements
shall be audited.
6. COMDISCO VENTURES STOCK COMMITTEE. The Board will establish a standing
committee of the Board to be known as the Comdisco Ventures Stock Committee. The
Comdisco Ventures Stock Committee will have and exercise such powers, authority
and responsibilities as the Board may delegate to such Committee, which will
initially include authority to (a) interpret, make determinations under, and
oversee the implementation of these policies, other than as they relate to
dividends, with respect to which all determinations will be made solely by the
Board, (b) adopt additional general policies governing the relationship between
Comdisco Ventures and Comdisco Group, and (c) engage the services of
accountants, investment bankers, appraisers, attorneys and other service
providers to assist it in discharging its duties. In making determinations in
connection with these policies, the members of the Board and the Comdisco
Ventures Stock Committee will act in a fiduciary capacity and pursuant to legal
guidance concerning their respective obligations under applicable law. The
delegation of responsibilities to the Comdisco Ventures Stock Committee will be
subject to such changes as may be determined by the Board.
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7. AMENDMENT AND MODIFICATION OF THESE POLICIES. These policies and any
resolution implementing the provisions hereof may at any time and from time to
time be amended, modified, suspended or rescinded by the Board, and the Board
may adopt additional or other policies or make exceptions with respect to the
application of these policies in connection with particular facts and
circumstances, all as the Board may determine, consistent with its fiduciary
duties to Comdisco and all of its stockholders.
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EXHIBIT 4.3
_______________________________________________
COMDISCO, INC.
and
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
Rights Agent
_______________________
Amended and Restated Rights Agreement
Dated as of _______
_______________________________________________
<PAGE>
Table of Contents
<TABLE>
<CAPTION>
Page
----
<S> <C> <C>
Section 1. Certain Definitions....................................................................... 3
Section 2. Appointment of Rights Agent............................................................... 7
Section 3. Issue of Rights Certificates.............................................................. 7
Section 4. Form of Rights Certificates............................................................... 9
Section 5. Countersignature and Registration......................................................... 9
Section 6. Transfer, Split Up, Combination and Exchange of Rights Certificates; Mutilated, Destroyed,
Lost or Stolen Rights Certificates...................................................... 10
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights............................. 11
Section 8. Cancellation and Destruction of Rights Certificates....................................... 12
Section 9. Reservation and Availability of Capital Stock............................................. 13
Section 10. Preferred Stock Record Date............................................................... 14
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or Number of Rights............... 14
Section 12. Certificate of Adjusted Purchase Price or Number of Shares................................ 22
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning Power...................... 22
Section 14. Fractional Rights and Fractional Shares................................................... 24
Section 15. Rights of Action.......................................................................... 25
Section 16. Agreement of Rights Holders............................................................... 25
Section 17. Rights Certificate Holder Not Deemed a Stockholder........................................ 26
Section 18. Concerning the Rights Agent............................................................... 26
Section 19. Merger or Consolidation or Change of Name of Rights Agent................................. 27
Section 20. Duties of Rights Agent.................................................................... 27
Section 21. Change of Rights Agent.................................................................... 29
Section 22. Issuance of New Rights Certificates....................................................... 30
Section 23. Redemption and Termination................................................................ 30
Section 24. Exchange.................................................................................. 30
Section 25. Notice of Certain Events.................................................................. 32
Section 26. Notices................................................................................... 32
Section 27. Supplements and Amendments................................................................ 33
Section 28. Successors................................................................................ 33
Section 29. Determinations and Actions by the Board of Directors, etc................................. 33
Section 30. Benefits of This Agreement................................................................ 34
Section 31. Severability.............................................................................. 34
Section 32. Governing Law............................................................................. 34
Section 33. Counterparts.............................................................................. 34
Section 34. Descriptive Headings...................................................................... 34
EXHIBIT A....................................................................................................
EXHIBIT B-1..................................................................................................
EXHIBIT B-2..................................................................................................
</TABLE>
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AMENDED AND RESTATED RIGHTS AGREEMENT
AMENDED AND RESTATED RIGHTS AGREEMENT, is dated as of _____, 2000 (the
"Agreement"), between COMDISCO, INC., a Delaware corporation (the "Company"),
and CHASEMELLON SHAREHOLDER SERVICES, L.L.C., a New Jersey limited liability
company (the "Rights Agent"), and shall be effective as of the Redesignation (as
defined herein).
W I T N E S S E T H
A. On November 4, 1997, the Board of Directors of the Company adopted a
shareholder rights plan governed by the terms of a Rights Agreement (the
"Original Rights Agreement") and authorized and declared a dividend distribution
of one Right for each share of common stock, par value $0.10 per share, of the
Company (the "existing common stock") outstanding at the close of business on
November 17, 1997 (the "Record Date"), and has authorized the issuance of one
Right (as such number may be hereinafter adjusted pursuant to Section 11(i) or
11(p) hereof) for each share of existing common stock of the Company issued
between the Record Date (whether originally issued or delivered from the
Company's treasury) and the Distribution Date and, in certain circumstances
provided in Section 22 hereof, after the Distribution Date, each Right initially
representing the right to purchase one one-thousandth of a share of Series C
Junior Participating Preferred Stock, par value $0.10 per share (the "Series C
Preferred Shares"), of the Company having the rights, powers and preferences set
forth in the Exhibit A attached hereto, upon the terms and subject to the
conditions hereinafter set forth (the "Original Rights").
B. On April 20, 2000, the shareholders of the Company approved certain
amendments to the Company's Amended and Restated Articles of Incorporation (as
so amended, the "Restated Charter") authorizing the issuance of Comdisco, Inc.
- -- Ventures Stock (the "Ventures Stock") as a new series of common stock and
redesignating (the "Redesignation") each share of existing common stock as one
share of Comdisco, Inc. -- Comdisco Stock (the "Comdisco Stock"). On
_____________, 2000 ("Redesignation Date") the Board of Directors adopted this
amendment and restatement of the Original Agreement effective upon the
Redesignation (as so amended and restated, the "Agreement") and, conditioned
upon and simultaneously with the Redesignation, redesignated each Original Right
as a Comdisco Right and authorized the issuance of one Comdisco Right and one
Ventures Right with respect to each share of Comdisco Stock and Ventures Stock,
respectively, that shall become outstanding (i) after the Redesignation Date and
before the earliest of the Distribution Date, the Redemption Date and the Final
Expiration Date (as such terms are defined in Sections 3 and 7 hereof) or (ii)
after the Distribution Date but before the earlier of the Redemption Date or the
Final Expiration Date, if such Common Share became outstanding (A) upon the
exercise of a stock option, (B) pursuant to any employee plan or arrangement, or
(C) upon the conversion or exchange of a security which option, plan,
arrangement or security was granted, established or issued, as the case may be,
by the Company before the Distribution Date.
Each "Comdisco Right", as so redesignated, will continue to represent the
right to purchase one one-thousandth of a Series C Preferred Share having the
rights and preferences set forth in Exhibit A hereto, and each "Ventures Right"
will represent the right to purchase one one-thousandth of a share of Series D
Junior Participating Preferred Stock, par value $0.10 per share (the "Series D
Preferred Shares"), of the Company having the rights and preferences set forth
in the Restated Charter, which is attached as Exhibit A hereto, in each such
case upon the terms and subject to the conditions herein set forth.
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NOW, THEREFORE, in consideration of the premises and the mutual agreements
herein set forth, the parties hereby agree as follows:
Section 1. Certain Definitions. For purposes of this Agreement, the
following terms have the meanings indicated:
(a)(i) Except as provided in Clause (ii), "Acquiring Person" shall
mean any Person who or which, together with all Affiliates and Associates of
such Person, shall be the Beneficial Owner of shares representing 15% or more of
the total Voting Rights of all Common Stock then outstanding, but shall not
include (A) the Company, (B) any Subsidiary of the Company, (C) any employee
benefit plan of the Company or of any Subsidiary of the Company, (D) any Person
organized, appointed or established by the Company for or pursuant to the terms
of any such plan or (E) any Person who has reported or is required to report
such ownership (but less than 25%) on Schedule 13G under the Exchange Act(or any
comparable or successor report) or on Schedule 13D under the Exchange Act (or
any comparable or successor report) which Schedule 13D does not state any
intention to or reserve the right to control or influence the management or
policies of the Company or engage in any of the actions specified in Item 4 of
such Schedule (other than the disposition of Common Stock and, within 10
Business Days of being requested by the Company to advise it regarding the same,
certifies to the Company that such Person acquired shares representing in excess
of 14.9% of the total Voting Rights of all Common Stock then outstanding,
inadvertently or without knowledge of the terms of the Rights and who, together
with all Affiliates and Associates, thereafter does not acquire additional
shares of Common Stock while the Beneficial Owner of shares representing 15% or
more of the total Voting Rights of all Common Stock then outstanding, provided,
however, that if the Person described in this clause (E) requested to so certify
fails to do so within 10 Business Days, then such Person shall become an
Acquiring Person immediately after such 10 Business Day Period.
(ii) None of the following shall be considered an "Acquiring Person":
(A) any Person (an "Existing Holder") who, at the Redesignation Date,
together with all Affiliates and Associates of such Existing
Holder, is the Beneficial Owner of shares representing 20% or
more of the total Voting Rights of all Common Stock then
outstanding, until such time as such Existing Holder or any
Affiliate or Associate of such Existing Holder shall become the
Beneficial Owner of any additional shares of Common Stock or any
other Person who is the Beneficial Owner of any such shares shall
become an Affiliate or Associate of such Existing Holder, if
after giving effect to such additional shares or the shares
beneficially owned by such other Person, such Existing Holder,
together with all Affiliates and Associates of such Existing
Holder, shall be the Beneficial Owner of shares representing 30%
or more of the total Voting Rights of all Common Stock then
outstanding;
(B) any Person (a "Passive Holder," which term shall include any
Existing Holder) who, solely as a result of either (1) a
reduction in the number of shares of any series Common Stock
outstanding due to the repurchase of Common Stock by the Company
or (2) any adjustment in the Voting Rights of the Ventures Stock
in accordance with the provisions of the Company's Restated
Charter ("Voting Rights Adjustment"), shall become, together with
all Affiliates and Associates of such Passive Holder after such
repurchase, the Beneficial Owner of shares representing 15% or
more (30% or more, in the case of any Existing Holder) of the
total Voting Rights of all Common Stock then outstanding, unless
and until such time as such Passive Holder or any Affiliate or
Associate of
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such Passive Holder shall become the Beneficial Owner of any
additional shares of Common Stock or any other Person who is the
Beneficial Owner of any shares of Common Stock shall become an
Affiliate or Associate of such Passive Holder, if after giving
effect to such additional shares or the shares beneficially owned
by such other Person, such Passive Holder, together with all
Affiliates and Associates of such Passive Holder, shall be the
Beneficial Owner of shares representing 15% or more (30% or more,
in the case of any Existing Holder) of the total Voting Rights of
all Common Stock then outstanding. Each of the Existing Holder's
successors in interest that would beneficially own, as a result
of the transfer to such successor of any shares of Common Stock
beneficially owned by an Existing Holder ("Existing Holder
Shares"), shares representing 15% or more of the total Voting
Rights of all Common Stock then outstanding shall be treated as
an Existing Holder. An Existing Holder's successors in interest
shall be (i) the beneficiaries (whether by testate or intestate
succession) of the Existing Holder's estate and the trustee (in
his fiduciary capacity) or beneficiary of any trust who obtains
(by reason of the Existing Holder's death) beneficial ownership
of any Existing Holder Shares (ii) the Existing Holder's estate,
(iii) donees of the Existing Holder who are the Existing Holder's
lineal descendants (including Persons adopted prior to attaining
the age of 21 years) and the spouses of such lineal descendants
(iv) Qualified Charitable Organizations, (v) trusts for the
exclusive benefit of Persons listed in clauses (iii) and (iv)
(including split interest trusts and the trustee (in his
fiduciary capacity) of any such trust, (vi) partnerships, limited
liability companies and corporations in which the Persons listed
in clause (iii) are the exclusive partners, members or
shareholders, as the case may be, and (vii) the Affiliates and
Associates of the Persons listed in the foregoing clauses (i)
through (vi); or
(C) any Person who shall have become an Acquiring Person solely as
the result of either (1) an acquisition of Common Stock by the
Company which, by reducing the number of shares outstanding,
increases the proportionate number of shares beneficially owned
by a Person to shares representing 15% or more of the total
Voting Rights of all Common Stock of the Company then outstanding
as determined above or (2) a Voting Rights Adjustment; provided,
however, that if a Person becomes the Beneficial Owner of shares
representing 15% or more of the Common Stock of the Company then
outstanding (as determined above) solely by reason of purchases
of the Common Stock by the Company or as a result of a Voting
Rights Adjustment and shall, after such purchases by the Company
on such Voting Rights Adjustment, become the Beneficial Owner of
any additional shares of Common Stock by any means whatsoever,
then such Person shall be deemed to be an Acquiring Person.
(b) "Adverse Person" shall mean any Person declared to be an Adverse
Person by the Board of Directors upon determination that the criteria set forth
in Section 11(a)(ii)(B) apply to such Person; provided, however, that the Board
of Directors shall not declare any Existing Holder to be an Adverse Person;
provided, further, that the Board of Directors shall not declare any Person who
is the Beneficial Owner of shares representing 10% or more of the total Voting
Rights of all Common Stock of the Company to be an Adverse Person if such Person
has reported or is required to report such ownership on Schedule 13G under the
Exchange Act (or any comparable or successor report) or on Schedule 13D under
the Exchange Act (or any comparable or successor report) which Schedule 13D does
not state any intention to or reserve the right to control or
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influence the management or policies of the Company or engage in any of the
actions specified in Item 4 of such Schedule (other than the disposition of
Common Stock) so long as such Person neither reports nor is required to report
such ownership other than as described in this proviso to Section 1(b).
(c) "Affiliate" and "Associate" shall have the respective meanings
ascribed to such terms in Rule 12b-2 of the General Rules and Regulations under
the Securities Exchange Act of 1934, as amended and as in effect on the date of
this Agreement (the "Exchange Act").
(d) A Person shall be deemed the "Beneficial Owner" of, and shall be
deemed to "beneficially own," any securities:
(i) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to acquire (whether such
right is exercisable immediately or only after the passage of time)
pursuant to any agreement, arrangement or understanding (whether or not in
writing) or upon the exercise of conversion rights, exchange rights, other
rights, warrants or options, or otherwise; provided, however, that a Person
shall not be deemed the "Beneficial Owner" of, or to "beneficially own,"
(A) securities tendered pursuant to a tender or exchange offer made by such
Person or any of such Person's Affiliates or Associates until such tendered
securities are accepted for purchase or exchange, or (B) securities
issuable upon exercise of Rights at any time prior to the occurrence of a
Triggering Event, or (C) securities issuable upon exercise of Rights from
and after the occurrence of a Triggering Event which Rights were acquired
by such Person or any of such Person's Affiliates or Associates prior to
the Distribution Date or pursuant to Section 3(a) hereof or Section 22
hereof (the "Original Rights") or pursuant to Section 11(i) or 11(p) hereof
in connection with an adjustment made with respect to any Original Rights;
(ii) which such Person or any of such Person's Affiliates or
Associates, directly or indirectly, has the right to vote or dispose of or
has "beneficial ownership" of (as determined pursuant to Rule 13d-3 of the
General Rules and Regulations under the Exchange Act), including pursuant
to any agreement, arrangement or understanding, whether or not in writing;
provided, however, that a Person shall not be deemed the "Beneficial Owner"
of, or to "beneficially own," any security under this subparagraph (ii) as
a result of an agreement, arrangement or understanding to vote such
security if such agreement, arrangement or understanding: (A) arises solely
from a revocable proxy given in response to a public proxy or consent
solicitation made pursuant to, and in accordance with, the applicable
provisions of the General Rules and Regulations under the Exchange Act, and
(B) is not also then reportable by such Person on Schedule 13D under the
Exchange Act (or any comparable or successor report); or
(iii) which are beneficially owned, directly or indirectly, by any
other Person (or any Affiliate or Associate thereof) with which such Person
(or any of such Person's Affiliates or Associates) has any agreement,
arrangement or understanding (whether or not in writing), for the purpose
of acquiring, holding, voting (except pursuant to a revocable proxy as
described in the proviso to subparagraph (ii) of this paragraph (d)) or
disposing of any voting securities of the Company; provided, however, that
nothing in this paragraph (d) shall cause a Person engaged in business as
an underwriter of securities to be the "Beneficial Owner" of, or to
"beneficially own," any securities acquired through such Person's
participation in good faith in a firm commitment underwriting until the
expiration of 40 days after the date of such acquisition.
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(e) "Business Day" shall mean 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.
(f) "Close of business" on any given date shall mean 5:00 P.M., New
York City time, on such date; provided, however, that if such date is not a
Business Day it shall mean 5:00 P.M., New York City time, on the next succeeding
Business Day.
(g) "Comdisco Right" shall be the meaning set forth in Recital B of
this Agreement.
(h) "Comdisco Stock" shall be the meaning set forth in Recital B of
this Agreement.
(i) "Common Stock" when used in reference to the Company shall mean
shares of Comdisco Stock and/or Ventures Stock, as the context requires, or
other shares of capital stock of the Company into which Comdisco Stock or
Ventures Stock shall be re-classified or changed. "Common Stock" when used with
reference to any Person other than the Company shall mean the capital stock of
such Person with the greatest voting power, or the equity securities or other
equity interest having power to control or direct the management, of such
Person.
(j) "Current Market Price" shall have the meaning ascribed to such
term in Section 11(d) hereof.
(k) "Person" shall mean any individual, firm, corporation, partnership
or other entity.
(m) "Preferred Stock" shall mean the Series C Preferred Shares and/or
the Series D Preferred Shares, as the context requires, and, to the extent there
are not sufficient Series C Preferred Shares or Series D Preferred Shares
authorized to permit full exercise of the Rights, any other series of Preferred
Stock, par value $0.10 per share, of the Company designated for such purpose
containing terms substantially similar to the terms of Series C Preferred Shares
or Series D Preferred Shares, respectively.
(n) "Qualified Charitable Organization" shall mean a charitable
organization described in all of Section 170(c), Section 2055(a) and Section
2522(a) of the Internal Revenue Code of 1986, as amended (or any successor or
substitute statute), contributions to which are deductible for United States
income, estate and gift tax purposes at the time of any transfer to or for the
benefit of or in trust for such organization.
(o) "Section 11 Event" shall mean any event described in Section
11(a)(ii)(A) or (B).
(p) "Section 13 Event" shall mean any event described in clauses (x),
(y) or (z) of Section 13(a) hereof.
(q) "Series C Preferred Stock" shall have the meaning set forth in
Recital A of this Agreement.
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(r) "Series D Preferred Stock" shall have the meaning set forth in
Recital B of this Agreement.
(s) "Stock Acquisition Date" shall mean the first date of public
announcement (which, for purposes of this definition, shall include, without
limitation, a report filed pursuant to Section 13(d) under the Exchange Act) by
the Company or an Acquiring Person that an Acquiring Person has become such.
(t) "Subsidiary" shall mean, with reference to any Person, any
corporation of which an amount of voting securities sufficient to elect at least
a majority of the directors of such corporation is beneficially owned, directly
or indirectly, by such Person, or otherwise controlled by such Person.
(u) "Triggering Event" shall mean any Section 11 Event or any Section
13 Event.
(v) "Ventures Stock" shall have the meaning set forth in Recital B of
this Agreement a series of Common Stock registered with the Securities and
Exchange Commission (the "SEC") designated as such.
(x) "Ventures Rights" shall have the meaning set forth in Recital B of
this Agreement.
(y) "Voting Rights" when used with reference to the capital stock of,
or units of equity interest in, any Person shall mean the number of votes
entitled to be cast generally in the election of directors of such Person (if
such Person is a corporation) or to participate in the management and control of
such Person (if such Person is not a corporation).
Section 2. Appointment of Rights Agent. The Company hereby appoints the
Rights Agent to act as agent for the Company and the holders of the Rights (who,
in accordance with Section 3 hereof, shall prior to the Distribution Date also
be the holders of Common Stock) in accordance with the terms and conditions
hereof, and the Rights Agent hereby accepts such appointment. The Company may
from time to time appoint such Co-Rights Agents as it may deem necessary or
desirable.
Section 3. Issue of Rights Certificates.
(a) Until the earliest of (i) the close of business on the tenth day
after the Stock Acquisition Date (or, if the tenth day after the Stock
Acquisition Date occurs before the Record Date, the close of business on the
Record Date), (ii) the close of business on the tenth Business Day (or such
later date as the Board of Directors shall determine) after the date that a
tender or exchange offer by any Person (other than the Company, any Subsidiary
of the Company, any employee benefit plan of the Company or of any Subsidiary of
the Company or any Person organized, appointed or established by the Company for
or pursuant to the terms of any such plan) is first published or sent or given
within the meaning of Rule 14d-2(a) of the General Rules and Regulations under
the Exchange Act, if upon consummation thereof, such Person would be the
Beneficial Owner of 15% or more of the total Voting Rights of all Common Stock
then outstanding or (iii) the close of business on the tenth Business Day after
the Board of Directors determines, pursuant to the criteria set forth in Section
11(a)(ii)(B) hereof, that a Person is an Adverse Person (the earliest of (i),
(ii) and (iii) being herein referred to as the "Distribution Date"), (x) the
Rights will be evidenced (subject to the provisions of paragraph (b) of this
Section
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3) by the certificates for the Common Stock registered in the names of the
holders of the Common Stock (which certificates for Common Stock shall be deemed
also to be certificates for their respective Rights) and not by separate
certificates, and (y) the Rights will be transferable only in connection with
the transfer of the underlying shares of the Common Stock (including a transfer
to the Company). As soon as practicable after the Distribution Date, the Rights
Agent will send by first-class, insured, postage prepaid mail, to each record
holder of the Common Stock as of the close of business on the Distribution Date,
at the address of such holder shown on the records of the Company, one or more
right certificates (the "Rights Certificates"), evidencing one Right for each
share of Common Stock so held, subject to adjustment as provided herein. In the
event that an adjustment in the number of Rights per share of Common Stock has
been made pursuant to Section 11(i) or 11(p) hereof, at the time of distribution
of the Rights Certificates, the Company shall make the necessary and appropriate
rounding adjustments (in accordance with Section 14(a) hereof) so that Rights
Certificates representing only whole numbers of Rights are distributed and cash
is paid in lieu of any fractional Rights. As of and after the Distribution Date,
the Rights will be evidenced solely by such Rights Certificates.
(b) With respect to certificates for the Comdisco Stock outstanding as
of the Redesignation Date, until the Distribution Date, the Rights will be
evidenced by such certificates for the Comdisco Stock and the registered holders
of the Comdisco Stock shall also be the registered holders of the associated
Rights. Until the earlier of the Distribution Date or the Expiration Date (as
such term is defined in Section 7 hereof), the transfer of any certificates
representing shares of Comdisco Stock in respect of which Rights have been
issued shall also constitute the transfer of the Rights associated with such
shares of Comdisco Stock.
(c) Rights shall be issued in respect of all shares of Common Stock
which are issued (whether originally issued or delivered from the Company's
treasury) after the Redesignation Date but prior to the earlier of the
Distribution Date or the Expiration Date or, in certain circumstances provided
in Section 22 hereof, after the Distribution Date. Certificates representing
such shares of Common Stock shall also be deemed to be certificates for Rights,
and shall bear the following legend:
This certificate also evidences and entitles the holder hereof to certain
Rights as set forth in the Rights Agreement between Comdisco, Inc. (the
"Company") and ChaseMellon Shareholder Services, L.L.C., dated as of
November 17, 1997, as amended on _______ and from time to time further
amended (the "Rights Agreement"), the terms of which are hereby
incorporated herein by reference and a copy of which is on file at the
principal offices of the Company. Under certain circumstances, as set forth
in the Rights Agreement, such Rights will be evidenced by separate
certificates and will no longer be evidenced by this certificate. The
Company will mail to the holder of this certificate a copy of the Rights
Agreement, as in effect on the date of mailing, without charge promptly
after receipt of a written request therefor. Under certain circumstances
set forth in the Rights Agreement, Rights issued to, or held by, any Person
who is, was or becomes an Acquiring Person or an Adverse Person or any
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
With respect to such certificates containing the foregoing legend, until the
earlier of (i) the Distribution Date or (ii) the Expiration Date, the Rights
associated with the Comdisco Stock represented by such certificates shall be
evidenced by such certificates alone and registered
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holders of Comdisco Stock shall also be the registered holders of the associated
Rights, and the transfer of any of such certificates shall also constitute the
transfer of the Rights associated with the Comdisco Stock represented by such
certificates.
Section 4. Form of Rights Certificates.
(a) The Rights Certificates (and the forms of election to purchase and
of assignment to be printed on the reverse thereof) shall each be substantially
in the form set forth in Exhibit B-1 (in the case of a Comdisco Right) or
Exhibit B-2 hereto (in the case of a Venture Right) hereto and may have such
marks of identification or designation and such legends, summaries or
endorsements printed thereon as the Company may deem appropriate and as are not
inconsistent with the provisions of this Agreement, or as may be required to
comply with any applicable law or with any rule or regulation made pursuant
thereto or with any rule or regulation of any stock exchange on which the Rights
may from time to time be listed, or to conform to usage. Subject to the
provisions of Section 11 and Section 22 hereof, the Rights Certificates,
whenever distributed, shall be dated as of the Record Date and on their face
shall entitle the holders thereof to purchase such number of one one-thousandths
of a share of Preferred Stock as shall be set forth therein at the price set
forth therein (such exercise price per one one-thousandth of a share, the
"Purchase Price"), but the amount and type of securities purchasable upon the
exercise of each Right and the Purchase Price thereof shall be subject to
adjustment as provided herein.
(b) Any Rights Certificate issued pursuant to Section 3(a) or Section
22 hereof that represents Rights beneficially owned by (i) an Acquiring Person,
an Adverse Person or any Associate or Affiliate of an Acquiring Person or
Adverse Person, (ii) a transferee of an Acquiring Person or Adverse Person (or
of any such Associate or Affiliate) who becomes a transferee after the Acquiring
Person or Adverse Person becomes such, or (iii) a transferee of an Acquiring
Person or Adverse Person (or of any such Associate or Affiliate) who becomes a
transferee prior to or concurrently with the Acquiring Person or Adverse Person
becoming such and receives such Rights pursuant to either (A) a transfer
(whether or not for consideration) from the Acquiring Person or Adverse Person
to holders of equity interests in such Acquiring Person or Adverse Person or to
any Person with whom such Acquiring Person or Adverse Person has any continuing
agreement, arrangement or understanding regarding the transferred Rights or (B)
a transfer which the Board of Directors of the Company has determined is part of
a plan, arrangement or understanding which has as a primary purpose or effect
the avoidance of Section 7(e) hereof, and any Rights Certificate issued pursuant
to Section 6 or Section 11 hereof upon transfer, exchange, replacement or
adjustment of any other Rights Certificate referred to in this sentence, shall
contain (to the extent feasible) the following legend:
The Rights represented by this Rights Certificate are or were
beneficially owned by a Person who was or became an Acquiring Person,
Adverse Person or an Affiliate or Associate of an Acquiring Person or
Adverse Person (as such terms are defined in the Rights Agreement).
Accordingly, this Rights Certificate and the Rights represented hereby may
become null and void in the circumstances specified in Section 7(e) of such
Agreement.
Section 5. Countersignature and Registration.
(a) The Rights Certificates shall be executed on behalf of the Company
by its Chairman of the Board, its President or any Vice President, either
manually or by facsimile signature, and shall have affixed thereto the Company's
seal or a facsimile thereof which shall be
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attested by the Secretary or an Assistant Secretary of the Company, either
manually or by facsimile signature. The Rights Certificates shall be
countersigned by the Rights Agent, either manually or by facsimile signature,
and shall not be valid for any purpose unless so countersigned. In case any
officer of the Company who shall have signed any of the Rights Certificates
shall cease to be such officer of the Company before countersignature by the
Rights Agent and issuance and delivery by the Company, such Rights Certificates,
nevertheless, may be countersigned by the Rights Agent and issued and delivered
by the Company with the same force and effect as though the person who signed
such Rights Certificates had not ceased to be such officer of the Company; and
any Rights Certificate may be signed on behalf of the Company by any person who,
at the actual date of the execution of such Rights Certificate, shall be a
proper officer of the Company to sign such Rights Certificate, although at the
date of the execution of this Rights Agreement any such person was not such an
officer.
(b) Following the Distribution Date, the Rights Agent will keep or
cause to be kept, at its principal office or offices designated as the
appropriate place for surrender of Rights Certificates upon exercise or
transfer, books for registration and transfer of the Rights Certificates issued
hereunder. Such books shall show the names and addresses of the respective
holders of the Rights Certificates, the number of Rights evidenced on its face
by each of the Rights Certificates and the date of each of the Rights
Certificates.
Section 6. Transfer, Split Up, Combination and Exchange of Rights
Certificates; Mutilated, Destroyed, Lost or Stolen Rights Certificates.
(a) Subject to the provisions of Section 4(b), Section 7(e) and
Section 14 hereof, at any time after the close of business on the Distribution
Date, and at or prior to the close of business on the Expiration Date, any
Rights Certificate or Certificates (other than Rights Certificates representing
Rights that have been exchanged pursuant to Section 24 hereof) may be
transferred, split up, combined or exchanged for another Rights Certificate or
Certificates, entitling the registered holder to purchase a like number of one
one-thousandths of a share of Preferred Stock (or, following a Triggering Event,
such Common Stock, other securities, cash or other assets, as the case may be)
as the Rights Certificate or Certificates surrendered then entitled such holder
(or former holder in the case of a transfer) to purchase. Any registered holder
desiring to transfer, split up, combine or exchange any Rights Certificate or
Certificates shall make such request in writing delivered to the Rights Agent,
and shall surrender the Rights Certificate or Certificates to be transferred,
split up, combined or exchanged at the principal office or offices of the Rights
Agent designated for such purpose. Neither the Rights Agent nor the Company
shall be obligated to take any action whatsoever with respect to the transfer of
any such surrendered Rights Certificate or Certificates until the registered
holder shall have completed and signed the certificate contained in the form of
assignment set forth on the reverse side of such Rights Certificate and shall
have provided such additional evidence of the identity of the Beneficial Owner
(or former Beneficial Owner) or Affiliates or Associates thereof as the Company
shall reasonably request. Thereupon the Rights Agent shall, subject to Sections
4(b), 7(e), 14 and 24 hereof, countersign and deliver to the Person entitled
thereto a Rights Certificate or Certificates, as the case may be, as so
requested. The Company may require payment of a sum sufficient to cover any tax
or governmental charge that may be imposed in connection with any transfer,
split up, combination or exchange of Rights Certificates.
(b) Upon receipt by the Company and the Rights Agent of evidence
reasonably satisfactory to them of the loss, theft, destruction or mutilation of
a Rights Certificate, and, in case of loss, theft or destruction, of indemnity
or security reasonably satisfactory to them, and reimbursement to the Company
and the Rights Agent of all reasonable expenses incidental
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<PAGE>
thereto, and upon surrender to the Rights Agent and cancellation of the Rights
Certificate if mutilated, the Company will execute and deliver a new Rights
Certificate of like tenor to the Rights Agent for countersignature and delivery
to the registered owner in lieu of the Rights Certificate so lost, stolen,
destroyed or mutilated.
Section 7. Exercise of Rights; Purchase Price; Expiration Date of Rights.
(a) Subject to Section 7(e) hereof, the registered holder of any
Rights Certificate may exercise the Rights evidenced thereby (except as
otherwise provided herein including, without limitation, the restrictions on
exercisability set forth in Section 9(c), Section 11(a)(iii) and Section 23(a)
hereof) in whole or in part at any time after the Distribution Date upon
surrender of the Rights Certificate, with the form of election to purchase and
the certificate on the reverse side thereof duly executed, to the Rights Agent
at the principal office or offices of the Rights Agent designated for such
purpose, together with payment of the aggregate Purchase Price with respect to
the total number of one one-thousandths of a share of Preferred Stock (or other
securities, cash or other assets, as the case may be) as to which such
surrendered Rights are then exercisable, at or prior to the earliest of (i) the
close of business on November 17, 2007 (the "Final Expiration Date"), (ii) the
time at which the Rights are redeemed as provided in Section 23 hereof, or
(iii), the time at which such Rights are exchanged pursuant to Section 24 hereof
(the earliest of (i), (ii) and (iii) being herein referred to as the "Expiration
Date").
(b) The Purchase Price for each one one-thousandth of a share of
Series C Preferred Stock pursuant to the exercise of a Comdisco Right shall
initially be $75 (as adjusted, the "Series C Purchase Price"). The Purchase
Price for each one one-thousandth of a share of Series D Preferred Stock
pursuant to the exercise of a Ventures Right shall initially be $180 (as
adjusted, the "Series D Purchase Price"). The Series C Purchase Price and the
Series D Purchase Price and shall be subject to adjustment from time to time as
provided in Sections 11 and 13(a) hereof and shall be payable in accordance with
paragraph (c) below. References in this Agreement to the "Purchase Price" shall
mean the Series C Purchase Price and/or the Series D Purchase Price, as the
context requires.
(c) Upon receipt of a Rights Certificate representing exercisable
Rights, with the form of election to purchase and the certificate on the reverse
side thereof duly executed, accompanied by payment, with respect to each Right
so exercised, of the Purchase Price per one one-thousandth of a share of
Preferred Stock (or other shares, securities, cash or other assets, as the case
may be) to be purchased as set forth below and an amount equal to any applicable
transfer tax, the Rights Agent shall, subject to Section 20(k) hereof, thereupon
promptly (i) (A) requisition from any transfer agent of the shares of Preferred
Stock (or make available, if the Rights Agent is the transfer agent for such
shares) certificates for the total number of one one-thousandths of a share of
Preferred Stock to be purchased, and the Company hereby irrevocably authorizes
its transfer agent to comply with all such requests, or (B) if the Company shall
have elected to deposit the total number of shares of Preferred Stock issuable
upon exercise of the Rights hereunder with a depositary agent, requisition from
the depositary agent depositary receipts representing such number of one one-
thousandths of a share of Preferred Stock as are to be purchased (in which case
certificates for the shares of Preferred Stock represented by such receipts
shall be deposited by the transfer agent with the depositary agent) and the
Company will direct the depositary agent to comply with such request, (ii)
requisition from the Company the amount of cash, if any, to be paid in lieu of
fractional shares in accordance with Section 14 hereof, (iii) after receipt of
such certificates or depositary receipts, cause the same to be delivered to or
upon the order of the registered holder of such Rights Certificate, registered
in such name or names as may be designated by such holder, and (iv) after
receipt thereof, deliver such cash, if any, to or upon the
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order of the registered holder of such Rights Certificate. The payment of the
Purchase Price (as such amount may be reduced pursuant to Section 11(a)(iii)
hereof) shall be made in cash or by certified bank check or bank draft payable
to the order of the Company. In the event that the Company is obligated to issue
other securities (including Common Stock) of the Company, pay cash and/or
distribute other property pursuant to Section 11(a) hereof, the Company will
make all arrangements necessary so that such other securities, cash and/or other
property are available for distribution by the Rights Agent, if and when
appropriate. The Company reserves the right to require prior to the occurrence
of a Triggering Event that, upon any exercise of Rights, a number of Rights be
exercised so that only whole shares of Preferred Stock would be issued.
(d) In case the registered holder of any Rights Certificate shall
exercise less than all the Rights evidenced thereby, a new Rights Certificate
evidencing Rights equivalent to the Rights remaining unexercised shall be issued
by the Rights Agent and delivered to, or upon the order of, the registered
holder of such Rights Certificate, registered in such name or names as may be
designated by such holder, subject to the provisions of Section 14 hereof.
(e) Notwithstanding anything in this Agreement to the contrary, from
and after the first occurrence of a Section 11 Event, any Rights beneficially
owned by (i) an Acquiring Person, an Adverse Person or an Associate or Affiliate
of an Acquiring Person or Adverse Person, (ii) a transferee of an Acquiring
Person or Adverse Person (or of any such Associate or Affiliate) who becomes a
transferee after the Acquiring Person or Adverse Person becomes such, or (iii) a
transferee of an Acquiring Person or Adverse Person (or of any such Associate or
Affiliate) who becomes a transferee prior to or concurrently with the Acquiring
Person or Adverse Person becoming such and receives such Rights pursuant to
either (A) a transfer (whether or not for consideration) from the Acquiring
Person or Adverse Person to holders of equity interests in such Acquiring Person
or Adverse Person or to any Person with whom the Acquiring Person or Adverse
Person has any continuing agreement, arrangement or understanding regarding the
transferred Rights or (B) a transfer which the Board of Directors of the Company
has determined is part of a plan, arrangement or understanding which has as a
primary purpose or effect the avoidance of this Section 7(e), shall become null
and void without any further action, and no holder of such Rights shall have any
rights whatsoever with respect to such Rights, whether under any provision of
this Agreement or otherwise. The Company shall use all reasonable efforts to
insure that the provisions of this Section 7(e) and Section 4(b) hereof are
complied with, but shall have no liability to any holder of Rights Certificates
or other Person as a result of its failure to make any determinations with
respect to an Acquiring Person or Adverse Person or any of their respective
Affiliates, Associates or transferees hereunder.
(f) Notwithstanding anything in this Agreement to the contrary,
neither the Rights Agent nor the Company shall be obligated to undertake any
action with respect to a registered holder upon the occurrence of any purported
exercise as set forth in this Section 7 unless such registered holder shall have
(i) completed and signed the certificate contained in the form of election to
purchase set forth on the reverse side of the Rights Certificate surrendered for
such exercise, and (ii) provided such additional evidence of the identity of the
Beneficial Owner (or former Beneficial Owner) or Affiliates or Associates
thereof as the Company shall reasonably request.
Section 8. Cancellation and Destruction of Rights Certificates. All
Rights Certificates surrendered for the purpose of exercise, transfer, split up,
combination or exchange shall, if surrendered to the Company or any of its
agents, be delivered to the Rights Agent for cancellation or in cancelled form,
or, if surrendered to the Rights Agent, shall be cancelled by it, and no Rights
Certificates shall be issued in lieu thereof except as expressly permitted by
any of the provisions
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of this Agreement. The Company shall deliver to the Rights Agent for
cancellation and retirement, and the Rights Agent shall so cancel and retire,
any other Rights Certificate purchased or acquired by the Company otherwise than
upon the exercise thereof. The Rights Agent shall deliver all cancelled Rights
Certificates to the Company, or shall, at the written request of the Company,
destroy such cancelled Rights Certificates, and in such case shall deliver a
certificate of destruction thereof to the Company.
Section 9. Reservation and Availability of Capital Stock.
(a) The Company covenants and agrees that it will cause to be reserved
and kept available out of its authorized and unissued shares of Preferred Stock
(and, following the occurrence of a Triggering Event, out of its authorized and
unissued shares of Common Stock and/or other securities or out of any authorized
and issued shares of Common Stock held in its treasury), the number of shares of
Preferred Stock (and, following the occurrence of a Triggering Event, shares of
Common Stock and/or other securities) that, as provided in this Agreement
including Section 11(a)(iii) hereof, will be sufficient to permit the exercise
in full of all outstanding Rights.
(b) So long as the shares of Preferred Stock (and, following the
occurrence of a Triggering Event, shares of Common Stock and/or other
securities) issuable and deliverable upon the exercise of the Rights may be
listed on any national securities exchange, the Company shall use its best
efforts to cause, from and after such time as the Rights become exercisable (but
only to the extent that it is reasonably likely that the Rights will be
exercised), all shares reserved for such issuance to be listed on such exchange
upon official notice of issuance upon such exercise.
(c) The Company shall use its best efforts to (i) file, as soon as
practicable following the earliest date after the first occurrence of a Section
11 Event on which the consideration to be delivered by the Company upon exercise
of the Rights has been determined pursuant to this Agreement (including in
accordance with Section 11(a)(iii) hereof), or as soon as is required by law
following the Distribution Date, as the case may be, a registration statement
under the Securities Act of 1933, as amended (the "Securities Act"), with
respect to the securities purchasable upon exercise of the Rights on an
appropriate form, (ii) cause such registration statement to become effective as
soon as practicable after such filing, and (iii) cause such registration
statement to remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the earlier of (A) the date as of
which the Rights are no longer exercisable for such securities, and (B) the
Expiration Date. The Company will also take such action as may be appropriate
under, or to ensure compliance with, the securities or "blue sky" laws of the
various states in connection with the exercisability of the Rights. The Company
may temporarily suspend, for a period of time not to exceed ninety (90) days
after the date set forth in clause (i) of the first sentence of this Section
9(c), the exercisability of the Rights in order to prepare and file such
registration statement and permit it to become effective. Upon any such
suspension, the Company shall issue a public announcement stating that the
exercisability of the Rights has been temporarily suspended, as well as a public
announcement at such time as the suspension is no longer in effect. In
addition, if the Company shall determine that a registration statement is
required following the Distribution Date, the Company may temporarily suspend
the exercisability of the Rights until such time as a registration statement has
been declared effective. Notwithstanding any provision of this Agreement to the
contrary, the Rights shall not be exercisable in any jurisdiction if the
requisite qualification in such jurisdiction shall not have been obtained or the
exercise thereof shall not be permitted under applicable law or a registration
statement shall not have been declared effective.
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(d) The Company covenants and agrees that it will take all such action
as may be necessary to ensure that all one one-thousandths of a share of
Preferred Stock (and, following the occurrence of a Triggering Event, shares of
Common Stock and/or other securities) delivered upon exercise of Rights shall,
at the time of delivery of the certificates for such shares (subject to payment
of the Purchase Price), be duly and validly authorized and issued and fully paid
and nonassessable.
(e) The Company further covenants and agrees that it will pay when due
and payable any and all federal and state transfer taxes and charges which may
be payable in respect of the issuance or delivery of the Rights Certificates and
of any certificates for a number of one one-thousandths of a share of Preferred
Stock (or Common Stock and/or other securities, as the case may be) upon the
exercise of Rights. The Company shall not, however, be required to pay any
transfer tax which may be payable in respect of any transfer or delivery of
Rights Certificates to a Person other than, or the issuance or delivery of a
number of one one-thousandths of a share of Preferred Stock (or Common Stock
and/or other securities, as the case may be) in respect of a name other than
that of, the registered holder of the Rights Certificates evidencing Rights
surrendered for exercise or to issue or deliver any certificates for a number of
one one-thousandths of a share of Preferred Stock (or Common Stock and/or other
securities, as the case may be) in a name other than that of the registered
holder upon the exercise of any Rights until such tax shall have been paid (any
such tax being payable by the holder of such Rights Certificates at the time of
surrender) or until it has been established to the Company's satisfaction that
no such tax is due.
Section 10. Preferred Stock Record Date. Each person in whose name any
certificate for a number of one one-thousandths of a share of Preferred Stock
(or Common Stock and/or other securities, as the case may be) is issued upon the
exercise of Rights shall for all purposes be deemed to have become the holder of
record of such fractional shares of Preferred Stock (or Common Stock and/or
other securities, as the case may be) represented thereby on, and such
certificate shall be dated, the date upon which the Rights Certificate
evidencing such Rights was duly surrendered and payment of the Purchase Price
(and all applicable transfer taxes) was made; provided, however, that if the
date of such surrender and payment is a date upon which the Preferred Stock (or
Common Stock and/or other securities, as the case may be) transfer books of the
Company are closed, such Person shall be deemed to have become the record holder
of such shares (fractional or otherwise) on, and such certificate shall be
dated, the next succeeding Business Day on which the Preferred Stock (or Common
Stock and/or other securities, as the case may be) transfer books of the Company
are open. Prior to the exercise of the Rights evidenced thereby, the holder of a
Rights Certificate shall not be entitled to any rights of a stockholder of the
Company with respect to shares for which the Rights shall be exercisable,
including, without limitation, the right to vote, to receive dividends or other
distributions or to exercise any preemptive rights, and shall not be entitled to
receive any notice of any proceedings of the Company, except as provided herein.
Section 11. Adjustment of Purchase Price, Number and Kind of Shares or
Number of Rights. The Purchase Price, the number and kind of shares covered by
each Right and the number of Rights outstanding are subject to adjustment from
time to time as provided in this Section 11.
(a)(i) In the event the Company shall at any time after the date of
this Agreement (A) declare a dividend on the Preferred Stock payable in shares
of Preferred Stock, (B) subdivide the outstanding Preferred Stock, (C) combine
the outstanding Preferred Stock into a smaller
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number of shares, or (D) issue any shares of its capital stock in a
reclassification of the Preferred Stock (including any such reclassification in
connection with a consolidation or merger in which the Company is the continuing
or surviving corporation), except as otherwise provided in this Section 11(a)
and Section 7(e) hereof, the Purchase Price in effect at the time of the record
date for such dividend or of the effective date of such subdivision, combination
or reclassification, and the number and kind of shares of Preferred Stock or
capital stock, as the case may be, issuable on such date, shall be
proportionately adjusted so that the holder of any Right exercised after such
time shall be entitled to receive, upon payment of the Purchase Price then in
effect, the aggregate number and kind of shares of Preferred Stock or capital
stock, as the case may be, which, if such Right had been exercised immediately
prior to such date and at a time when the Preferred Stock transfer books of the
Company were open, he would have owned upon such exercise and been entitled to
receive by virtue of such dividend, subdivision, combination or
reclassification. If an event occurs which would require an adjustment under
both this Section 11(a)(i) and Section 11(a)(ii) hereof, the adjustment provided
for in this Section 11(a)(i) shall be in addition to, and shall be made prior
to, any adjustment required pursuant to Section 11(a)(ii) hereof.
(ii) In the event:
(A) any Person, at any time after the Rights Dividend Declaration
Date, shall become an Acquiring Person, unless the event causing
such Person to become an Acquiring Person is a transaction set
forth in Section 13(a) hereof, or is an acquisition of shares of
Common Stock pursuant to a tender offer or exchange offer for all
outstanding shares of Common Stock at a price and on terms
determined by at least a majority of the members of the Board of
Directors who are not officers of the Company and who are not
representatives, nominees, Affiliates or Associates of an
Acquiring Person, after receiving advice from one or more
investment banking firms, to be (a) at a price which is fair to
stockholders (taking into account all factors which such members
of the Board deem relevant, including, without limitation, prices
which could reasonably be achieved if the Company or its assets
were sold on an orderly basis designed to realize maximum value)
and (b) otherwise in the best interests of the Company and its
stockholders (a "Qualifying Offer"), or
(B) the Board of Directors of the Company shall declare any Person to
be an Adverse Person, upon a determination that such Person,
alone or together with its Affiliates and Associates, has, at any
time after this Agreement has been filed with the Securities and
Exchange Commission as an exhibit to a filing under the Exchange
Act, become the Beneficial Owner of Common Stock which the Board
of Directors of the Company determines to be substantial (which
number of shares shall in no event represent less than that
number of shares representing 10% or more of the total Voting
Rights of all Common Stock of the Company then outstanding) and a
determination by the Board of Directors of the Company, after
reasonable inquiry and investigation, including consultation with
such persons as such directors shall deem appropriate and
consideration of such factors as are permitted by applicable law,
that (a) such Beneficial Ownership by such Person is intended to
cause the Company to repurchase the shares of Common Stock
beneficially owned by such Person or to cause pressure on the
Company to take action or enter into a transaction or series of
transactions intended to provide such
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Person with short-term financial gain under circumstances where
the Board of Directors determines that the best long-term
interests of the Company would not be served by taking such
action or entering into such transaction or series of
transactions at that time or (b) such Beneficial Ownership is
causing or reasonably likely to cause a material adverse impact
(including, but not limited to, impairment of relationships with
customers or impairment of the Company's ability to maintain its
competitive position) on the business or prospects of the
Company, on the Company's employees, customers or suppliers or on
the communities in which the Company operates or is located,
then, promptly following the occurrence of any event described in Section
11(a)(ii)(A) or (B) hereof, proper provision shall be made so that each holder
of a Right (except as provided below and in Section 7(e) hereof) shall
thereafter have the right to receive, upon exercise thereof, at the then current
Purchase Price in accordance with the terms of this Agreement, in lieu of a
number of one one-thousandths of a share of Preferred Stock, such number of
shares of Comdisco Stock (in the case of a Comdisco Right) or Ventures Stock (in
the case of a Ventures Right) as shall equal the result obtained by (x)
multiplying the then current Purchase Price by the then number of one one-
thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 11 Event, and (y)
dividing that product (which, following such first occurrence, shall thereafter
be referred to as the "Purchase Price" for each Right and for all purposes of
this Agreement) by 50% of the Current Market Price per share of the applicable
series of Common Stock (determined pursuant to Section 11(d) hereof) on the date
of such first occurrence (such number of shares, the "Adjustment Shares").
(iii) In the event that the number of shares of Comdisco Stock or
Ventures Stock which are authorized by the Company's Restated Charter, but not
outstanding or reserved for issuance for purposes other than upon exercise of
the Rights, are not sufficient to permit the exercise in full of the Comdisco
Rights or Venture Rights, as the case may be, in accordance with the foregoing
subparagraph (ii) of this Section 11(a), the Company shall: (A) determine the
excess of (1) the value of the Adjustment Shares issuable upon the exercise of
each such Right (the "Current Value") over (2) the Purchase Price (such excess,
the "Spread"), and (B) with respect to each such Right, subject to Section 7(e)
hereof, make adequate provision to substitute for the Adjustment Shares, upon
the exercise of such Rights and payment of the applicable Purchase Price, (1)
cash, (2) a reduction in the Purchase Price, (3) Common Stock or other equity
securities of the Company (including, without limitation, shares, or units of
shares, of preferred stock, which the Board of Directors of the Company has
deemed to have essentially the same value or economic rights as shares of
Comdisco Stock or Ventures Stock, as applicable (such shares or units of shares
of preferred stock are referred to herein as "Common Stock Equivalents"), (4)
debt securities of the Company, (5) other assets, or (6) any combination of the
foregoing, having an aggregate value equal to the Current Value (less the amount
of any reduction in the Purchase Price), where such aggregate value has been
determined by the Board of Directors of the Company based upon the advice of a
nationally recognized investment banking firm selected by the Board of Directors
of the Company; provided, however, that if the Company shall not have made
adequate provision to deliver value pursuant to clause (B) above within thirty
(30) days following the later of (x) the first occurrence of a Section 11 Event
and (y) the date on which the Company's right of redemption pursuant to Section
23(a) expires (the later of (x) and (y) being referred to herein as the "Section
11(a)(ii) Trigger Date"), then the Company shall be obligated to deliver, upon
the surrender for exercise of a Right and without requiring payment of the
Purchase Price, shares of Common Stock (to the extent available) and then, if
necessary, cash, which shares and/or cash have an aggregate value equal to the
Spread. If the
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Board of Directors of the Company shall determine in good faith that it is
likely that sufficient additional shares of Common Stock could be authorized for
issuance upon exercise in full of the Rights, the thirty (30) day period set
forth above may be extended to the extent necessary, but not more than ninety
(90) days after the Section 11(a)(ii) Trigger Date, in order that the Company
may seek stockholder approval for the authorization of such additional shares
(such thirty (30) day period, as it may be extended, the "Substitution Period").
To the extent that the Company determines that some action should be taken
pursuant to the first and/or second sentences of this Section 11(a)(iii), the
Company (x) shall provide, subject to Section 7(e) hereof, that such action
shall apply uniformly to all outstanding Comdisco Rights or Venture Rights, as
the case may be, and (y) may suspend the exercisability of the Rights until the
expiration of the Substitution Period in order to seek stockholder approval for
such authorization of additional shares and/or to decide the appropriate form of
distribution to be made pursuant to such first sentence and to determine the
value thereof. In the event of any such suspension, the Company shall issue a
public announcement stating that the exercisability of the Rights has been
temporarily suspended, as well as a public announcement at such time as the
suspension is no longer in effect. For purposes of this Section 11(a)(iii), the
value of each Adjustment Share shall be the Current Market Price per share of
the Common Stock on the Section 11(a)(ii) Trigger Date and the per share or per
unit value of any Common Stock Equivalent shall be deemed to have the Current
Market Price per share of the Common Stock on such date.
(b) In case the Company shall fix a record date for the issuance of
rights (other than the Rights), options or warrants to all holders of Preferred
Stock entitling them (for a period expiring within forty-five (45) calendar days
after such record date) to subscribe for or purchase Preferred Stock (or shares
having the same rights, privileges and preferences as the shares of Preferred
Stock ("equivalent preferred stock")) or securities convertible into Preferred
Stock or equivalent preferred stock at a price per share of Preferred Stock or
per share of equivalent preferred stock (or having a conversion price per share,
if a security convertible into Preferred Stock or equivalent preferred stock)
less than the Current Market Price per share of Preferred Stock on such record
date, the Purchase Price to be in effect after such record date shall be
determined by multiplying the Purchase Price in effect immediately prior to such
record date by a fraction, the numerator of which shall be the number of shares
of such Preferred Stock outstanding on such record date, plus the number of
shares of such Preferred Stock which the aggregate offering price of the total
number of shares of such Preferred Stock and/or equivalent preferred stock so to
be offered (and/or the aggregate initial conversion price of the convertible
securities so to be offered) would purchase at such Current Market Price, and
the denominator of which shall be the number of shares of such Preferred Stock
outstanding on such record date, plus the number of additional shares of such
Preferred Stock and/or equivalent preferred stock to be offered for subscription
or purchase (or into which the convertible securities so to be offered are
initially convertible). In case such subscription price may be paid by delivery
of consideration part or all of which may be in a form other than cash, the
value of such consideration shall be as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights. Shares of Preferred Stock owned by or held for the
account of the Company shall not be deemed outstanding for the purpose of any
such computation. Such adjustment shall be made successively whenever such a
record date is fixed, and in the event that such rights or warrants are not so
issued, the Purchase Price shall be adjusted to be the Purchase Price which
would then be in effect if such record date had not been fixed.
(c) In case the Company shall fix a record date for a distribution to
all holders of Preferred Stock (including any such distribution made in
connection with a consolidation or merger in which the Company is the continuing
corporation) of evidences of
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indebtedness, cash (other than a regular quarterly cash dividend out of the
earnings or retained earnings of the Company), assets (other than a dividend
payable in Preferred Stock, but including any dividend payable in stock other
than Preferred Stock) or subscription rights or warrants (excluding those
referred to in Section 11(b) hereof), the Purchase Price to be in effect after
such record date shall be determined by multiplying the Purchase Price in effect
immediately prior to such record date by a fraction, the numerator of which
shall be the Current Market Price per share of Preferred Stock on such record
date, less the fair market value (as determined in good faith by the Board of
Directors of the Company, whose determination shall be described in a statement
filed with the Rights Agent and shall be binding on the Rights Agent and the
holders of the Rights) of the portion of the cash, assets or evidences of
indebtedness so to be distributed or of such subscription rights or warrants
applicable to a share of Preferred Stock and the denominator of which shall be
such Current Market Price per share of Preferred Stock. Such adjustments shall
be made successively whenever such a record date is fixed, and in the event that
such distribution is not so made, the Purchase Price shall be adjusted to be the
Purchase Price which would have been in effect if such record date had not been
fixed.
(d) (i) For the purpose of any computation hereunder, other than
computations made pursuant to Section 11(a)(iii) hereof, the "Current Market
Price" per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock for the thirty (30)
consecutive Trading Days immediately prior to such date, and for purposes of
computations made pursuant to Section 11(a)(iii) hereof, the "Current Market
Price" per share of Common Stock on any date shall be deemed to be the average
of the daily closing prices per share of such Common Stock for the ten (10)
consecutive Trading Days immediately following such date; provided, however,
that in the event that the Current Market Price per share of Common Stock is
determined during a period following the announcement by the issuer of the
Common Stock of (A) any dividend or distribution on such Common Stock, payable
in shares of such Common Stock or securities convertible into shares of such
Common Stock (other than the Rights), or (B) any subdivision, combination or
reclassification of such Common Stock, and the ex-dividend date for such
dividend or distribution, or the record date for such subdivision, combination
or reclassification shall not have occurred prior to the commencement of the
requisite thirty (30) Trading Day period or ten (10) Trading Day period, as set
forth above, then, and in each such case, the "Current Market Price" shall be
properly adjusted to take into account ex-dividend trading. The closing price
for each day shall be the last sale price, regular way, or, in case no such sale
takes place on such day, the average of the closing bid and asked prices,
regular way, in either case as reported in the principal consolidated
transaction reporting system with respect to securities listed or admitted to
trading on the New York Stock Exchange or, if the shares of Common Stock are not
listed or admitted to trading on the New York Stock Exchange, as reported in the
principal consolidated transaction reporting system with respect to securities
listed on the principal national securities exchange on which the shares of
Common Stock are listed or admitted to trading or, if the shares of Common Stock
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by the National
Association of Securities Dealers, Inc. Automated Quotation System ("NASDAQ") or
such other system then in use, or, if on any such date the shares of Common
Stock are not quoted by any such system, the average of the closing bid and
asked prices as furnished by a professional market maker making a market in the
Common Stock selected by the Board of Directors of the Company. If on any such
date no market maker is making a market in the Common Stock, the fair value of
such shares on such date as determined in good faith by the Board of Directors
of the Company shall be used. The term "Trading Day" shall mean a day on which
the principal national securities exchange on which the shares of Common Stock
are listed or admitted to trading is open for the transaction of business or, if
the shares of Common Stock
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<PAGE>
are not listed or admitted to trading on any national securities exchange, a
Business Day. If the Common Stock is not publicly held or not so listed or
traded, "Current Market Price" per share shall mean the fair value per share as
determined in good faith by the Board of Directors of the Company, whose
determination shall be described in a statement filed with the Rights Agent and
shall be conclusive for all purposes.
(ii) For the purpose of any computation hereunder, the "Current Market
Price" per share of Preferred Stock shall be determined in the same manner as
set forth above for Common Stock in clause (i) of this Section 11(d) (other than
the last sentence thereof). If the Current Market Price per share of Preferred
Stock cannot be determined in the manner provided above or if the Preferred
Stock is not publicly held or listed or traded in a manner described in clause
(i) of this Section 11(d), the "Current Market Price" per share of Preferred
Stock shall be conclusively deemed to be an amount equal to 1,000 (as such
number may be appropriately adjusted for such events as stock splits, stock
dividends and recapitalizations with respect to Common Stock occurring after the
date of this Agreement) multiplied by the Current Market Price per share of
Common Stock. If neither the Common Stock nor the Preferred Stock is publicly
held or so listed or traded, "Current Market Price" per share of the Preferred
Stock shall mean the fair value per share as determined in good faith by the
Board of Directors of the Company, whose determination shall be described in a
statement filed with the Rights Agent and shall be conclusive for all purposes.
(e) Anything herein to the contrary notwithstanding, no adjustment in
the Purchase Price shall be required unless such adjustment would require an
increase or decrease of at least one percent (1%) in the Purchase Price;
provided, however, that any adjustments which by reason of this Section 11(e)
are not required to be made shall be carried forward and taken into account in
any subsequent adjustment. All calculations under this Section 11 shall be made
to the nearest cent or to the nearest ten-thousandth of a share of Common Stock
or other share or one millionth of a share of Preferred Stock, as the case may
be. Notwithstanding the first sentence of this Section 11(e), any adjustment
required by this Section 11 shall be made no later than the earlier of (i) three
(3) years from the date of the transaction which mandates such adjustment, or
(ii) the Expiration Date.
(f) If as a result of an adjustment made pursuant to Section 11(a)(ii)
or Section 13(a) hereof, the holder of any Right thereafter exercised shall
become entitled to receive any shares of capital stock other than Preferred
Stock, thereafter the number of such other shares so receivable upon exercise of
any Right and the Purchase Price thereof shall be subject to adjustment from
time to time in a manner and on terms as nearly equivalent as practicable to the
provisions with respect to the Preferred Stock contained in Sections 11(a), (b),
(c), (e), (g), (h), (i), (j), (k) and (m), and the provisions of Sections 7, 9,
10, 13 and 14 hereof with respect to the Preferred Stock shall apply on like
terms to any such other shares.
(g) All Rights originally issued by the Company subsequent to any
adjustment made to the Purchase Price hereunder shall evidence the right to
purchase, at the adjusted Purchase Price, the number of one one-thousandths of a
share of Preferred Stock purchasable from time to time hereunder upon exercise
of the Rights, all subject to further adjustment as provided herein.
(h) Unless the Company shall have exercised its election as provided
in Section 11(i), upon each adjustment of the Purchase Price as a result of the
calculations made in Sections 11(b) and (c), each Right outstanding immediately
prior to the making of such adjustment shall thereafter evidence the right to
purchase, at the adjusted Purchase Price, that
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number of one one-thousandths of a share of Preferred Stock (calculated to the
nearest one-millionth) obtained by (i) multiplying (x) the number of one one-
thousandths of a share covered by a Right immediately prior to this adjustment,
by (y) the Purchase Price in effect immediately prior to such adjustment of the
Purchase Price, and (ii) dividing the product so obtained by the Purchase Price
in effect immediately after such adjustment of the Purchase Price.
(i) The Company may elect on or after the date of any adjustment of
the Purchase Price to adjust the number of Rights, in lieu of any adjustment in
the number of one one-thousandths of a share of Preferred Stock purchasable upon
the exercise of a Right. Each of the Rights outstanding after the adjustment in
the number of Rights shall be exercisable for the number of one one-thousandths
of a share of Preferred Stock for which a Right was exercisable immediately
prior to such adjustment. Each Right held of record prior to such adjustment of
the number of Rights shall become that number of Rights (calculated to the
nearest one ten-thousandth) obtained by dividing the Purchase Price in effect
immediately prior to adjustment of the Purchase Price by the Purchase Price in
effect immediately after adjustment of the Purchase Price. The Company shall
make a public announcement of its election to adjust the number of Rights,
indicating the record date for the adjustment, and, if known at the time, the
amount of the adjustment to be made. This record date may be the date on which
the Purchase Price is adjusted or any day thereafter, but, if the Rights
Certificates have been issued, shall be at least ten (10) days later than the
date of the public announcement. If Rights Certificates have been issued, upon
each adjustment of the number of Rights pursuant to this Section 11(i), the
Company shall, as promptly as practicable, cause to be distributed to holders of
record of Rights Certificates on such record date Rights Certificates
evidencing, subject to Section 14 hereof, the additional Rights to which such
holders shall be entitled as a result of such adjustment, or, at the option of
the Company, shall cause to be distributed to such holders of record in
substitution and replacement for the Rights Certificates held by such holders
prior to the date of adjustment, and upon surrender thereof, if required by the
Company, new Rights Certificates evidencing all the Rights to which such holders
shall be entitled after such adjustment. Rights Certificates so to be
distributed shall be issued, executed and countersigned in the manner provided
for herein (and may bear, at the option of the Company, the adjusted Purchase
Price) and shall be registered in the names of the holders of record of Rights
Certificates on the record date specified in the public announcement.
(j) Irrespective of any adjustment or change in the Purchase Price or
the number of one one-thousandths of a share of Preferred Stock issuable upon
the exercise of the Rights, the Rights Certificates theretofore and thereafter
issued may continue to express the Purchase Price per one one-thousandths of a
share and the number of one one-thousandths of a share which were expressed in
the initial Rights Certificates issued hereunder.
(k) Before taking any action that would cause an adjustment reducing
the Purchase Price below the then stated value, if any, of the number of one
one-thousandths of a share of Preferred Stock issuable upon exercise of the
Rights, the Company shall take any corporate action which may, in the opinion of
its counsel, be necessary in order that the Company may validly and legally
issue fully paid and nonassessable such number of one one-thousandths of a share
of Preferred Stock at such adjusted Purchase Price.
(l) In any case in which this Section 11 shall require that an
adjustment in the Purchase Price be made effective as of a record date for a
specified event, the Company may elect to defer until the occurrence of such
event the issuance to the holder of any Right exercised after such record date
the number of one one-thousandths of a share of Preferred Stock and other
capital stock or securities of the Company, if any, issuable upon such exercise
over and above the
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number of one one-thousandths of a share of Preferred Stock and other capital
stock or securities of the Company, if any, issuable upon such exercise on the
basis of the Purchase Price in effect prior to such adjustment; provided,
however, that the Company shall deliver to such holder a due bill or other
appropriate instrument evidencing such holders right to receive such additional
shares (fractional or otherwise) or securities upon the occurrence of the event
requiring such adjustment.
(m) Anything in this Section 11 to the contrary notwithstanding, the
Company shall be entitled to make such reductions in the Purchase Price, in
addition to those adjustments expressly required by this Section 11, as and to
the extent that in their good faith judgment the Board of Directors of the
Company shall determine to be advisable in order that any (i) consolidation or
subdivision of the Preferred Stock, (ii) issuance wholly for cash of any shares
of Preferred Stock at less than the Current Market Price, (iii) issuance wholly
for cash of shares of Preferred Stock or securities which by their terms are
convertible into or exchangeable for shares of Preferred Stock, (iv) stock
dividends or (v) issuance of rights, options or warrants referred to in this
Section 11, hereafter made by the Company to holders of its Preferred Stock
shall not be taxable to such stockholders.
(n) The Company covenants and agrees that it shall not, at any time
after the Distribution Date, (i) consolidate with any other Person (other than a
Subsidiary of the Company in a transaction which complies with Section 11(o)
hereof), (ii) merge with or into any other Person (other than a Subsidiary of
the Company in a transaction which complies with Section 11(o) hereof), or (iii)
sell or transfer (or permit any Subsidiary to sell or transfer), in one
transaction or a series of related transactions, assets or earning power
aggregating more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), if (x) at the time of or immediately after
such consolidation, merger or sale there are any rights, warrants or other
instruments or securities outstanding or agreements in effect which would
substantially diminish or otherwise eliminate the benefits intended to be
afforded by the Rights or (y) prior to, simultaneously with or immediately after
such consolidation, merger or sale, the stockholders of the Person who
constitutes, or would constitute, the "Principal Party" for purposes of Section
13(a) hereof shall have received a distribution of Rights previously owned by
such Person or any of its Affiliates and Associates.
(o) The Company covenants and agrees that, after the Distribution
Date, it will not, except as permitted by Section 23 or Section 27 hereof, take
(or permit any Subsidiary to take) any action if at the time such action is
taken it is reasonably foreseeable that such action will diminish substantially
or otherwise eliminate the benefits intended to be afforded by the Rights.
(p) Anything in this Agreement to the contrary notwithstanding, in the
event that the Company shall at any time after the Rights Dividend Declaration
Date and prior to the Distribution Date (x) declare or pay any dividend on any
series of the outstanding Common Stock payable in Common Stock (other than a
dividend payable in shares of Ventures Stock to the extent such dividend reduces
the Number of Shares Issuable with Respect to the Inter-Group Interest, as such
term is defined in the Restated Charter) or (ii) effect a subdivision,
combination or consolidation of any series of the Common Stock (by
reclassification or otherwise than by payment of dividends in Common Stock) into
a greater or lesser number of shares of Common Stock, then in any such case (y)
the number of one one-thousandths of a Series C Preferred Stock (in the case of
an event affecting the Comdisco Stock) or a Series D Preferred Stock (in the
case of an event affecting the Ventures Stock) purchasable after such event upon
proper exercise of
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each Right shall be determined by multiplying the number of one one-thousandths
of a Preferred Stock so purchasable immediately prior to such event by a
fraction, the numerator of which is the number of such shares of Common Stock
outstanding immediately before such event and the denominator of which is the
number of shares such Common Stock outstanding immediately after such event and
(z) each such shares of Common Stock outstanding immediately after such event
shall have issued with respect to it that number of Rights which each such share
of Common Stock outstanding immediately prior to such event had issued with
respect to it.
(q) The failure of the Board of Directors to declare a Person to be an
Adverse Person following such Person becoming the Beneficial Owner of shares of
Common Stock representing 10% or more of the total Voting Rights of all
outstanding shares of Common Stock shall not imply that such Person is not an
Adverse Person or limit the Board of Directors' right at any time in the future
to declare such Person to be an Adverse Person.
Section 12. Certificate of Adjusted Purchase Price or Number of Shares.
Whenever an adjustment is made as provided in Section 11 and Section 13 hereof,
the Company shall (a) promptly prepare a certificate setting forth such
adjustment and a brief statement of the facts accounting for such adjustment,
(b) promptly file with the Rights Agent, and with each transfer agent for the
Preferred Stock and the Common Stock, a copy of such certificate, and (c) mail a
brief summary thereof to each holder of a Rights Certificate (or, if prior to
the Distribution Date, to each holder of a certificate representing shares of
Common Stock) in accordance with Section 26 hereof. The Rights Agent shall be
fully protected in relying on any such certificate and on any adjustment therein
contained.
Section 13. Consolidation, Merger or Sale or Transfer of Assets or Earning
Power.
(a) In the event that, following the Stock Acquisition Date, directly
or indirectly, (x) the Company shall consolidate with, or merge with and into,
any other Person (other than a Subsidiary of the Company in a transaction which
complies with Section 11(o) hereof), and the Company shall not be the continuing
or surviving corporation of such consolidation or merger, (y) any Person (other
than a Subsidiary of the Company in a transaction which complies with Section
11(o) hereof) shall consolidate with, or merge with or into, the Company, and
the Company shall be the continuing or surviving corporation of such
consolidation or merger and, in connection with such consolidation or merger,
all or part of the outstanding shares of Common Stock shall be changed into or
exchanged for stock or other securities of any other Person or cash or any other
property, or (z) the Company shall sell or otherwise transfer (or one or more of
its Subsidiaries shall sell or otherwise transfer), in one transaction or a
series of related transactions, assets or earning power aggregating 50% or more
of the assets or earning power of the Company and its Subsidiaries (taken as a
whole) to any Person or Persons (other than the Company or any Subsidiary of the
Company in one or more transactions each of which complies with Section 11(o)
hereof), then, and in each such case (except as may be contemplated by Section
13(d) hereof), proper provision shall be made so that: (i) each holder of a
Right, except as provided in Section 7(e) hereof, shall thereafter have the
right to receive, upon the exercise thereof at the then current Series C
Purchase Price (in the case of a Comdisco Right) or the then current Series D
Purchase Price (in the case of a Ventures Right), in accordance with the terms
of this Agreement, such number of validly authorized and issued, fully paid,
non-assessable and freely tradable shares of Common Stock of the Principal Party
(as such term is hereinafter defined), not subject to any liens, encumbrances,
rights of first refusal or other adverse claims, as shall be equal to the result
obtained by (1) multiplying the then current Purchase Price by the number of one
one-thousandths of a share of Preferred Stock for which a Right was exercisable
immediately prior to the first occurrence of a Section 13 Event (or, if a
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Section 11 Event has occurred prior to the first occurrence of a Section 13
Event, multiplying the number of such one one-thousandths of a share for which a
Right was exercisable immediately prior to the first occurrence of a Section 11
Event by the Purchase Price in effect immediately prior to such first
occurrence) and dividing that product (which, following the first occurrence of
a Section 13 Event shall be referred to as the "Purchase Price" for each Right
and for all purposes of this Agreement) by (2) 50% of the Current Market Price
per share of the Common Stock of such Principal Party on the date of
consummation of such Section 13 Event; (ii) such Principal Party shall
thereafter be liable for, and shall assume, by virtue of such Section 13 Event,
all the obligations and duties of the Company pursuant to this Agreement; (iii)
the term "Company" shall thereafter be deemed to refer to such Principal Party,
it being specifically intended that the provisions of Section 11 hereof shall
apply only to such Principal Party following the first occurrence of a Section
13 Event; (iv) such Principal Party shall take such steps (including, but not
limited to, the reservation of a sufficient number of shares of its Common
Stock) in connection with the consummation of any such transaction as may be
necessary to assure that the provisions hereof shall thereafter be applicable,
as nearly as reasonably may be, in relation to its shares of Common Stock
thereafter deliverable upon the exercise of the Rights; and (v) the provisions
of Section 11(a)(ii) hereof shall be of no effect following the first occurrence
of any Section 13 Event.
(b) "Principal Party" shall mean:
(i) in the case of any transaction described in clause (x) or (y) of
the first sentence of Section 13(a), the Person that is the issuer of any
securities for or into which shares of Common Stock of the Company are converted
in such merger or consolidation, and if no securities are so issued, the Person
that is the other party to such merger or consolidation; and
(ii) in the case of any transaction described in clause (z) of the
first sentence of Section 13(a), the Person that is the party receiving the
greatest portion of the assets or earning power transferred pursuant to such
transaction or transactions; provided, however, that in any such case, (1) if
the Common Stock of such Person is not at such time and has not been
continuously over the preceding twelve (12) month period registered under
Section 12 of the Exchange Act, and such Person is a direct or indirect
Subsidiary of another Person the Common Stock of which is and has been so
registered, "Principal Party" shall refer to such other Person; and (2) in case
such Person is a Subsidiary, directly or indirectly, of more than one Person,
the Common Stocks of two or more of which are and have been so registered,
"Principal Party" shall refer to whichever of such Persons is the issuer of the
Common Stock having the greatest aggregate market value.
(c) The Company shall not consummate any Section 13 Event unless the
Principal Party shall have a sufficient number of authorized shares of its
Common Stock which have not been issued or reserved for issuance to permit the
exercise in full of the Rights in accordance with this Section 13 and unless
prior thereto the Company and such Principal Party shall have executed and
delivered to the Rights Agent a supplemental agreement providing for the terms
set forth in paragraphs (a) and (b) of this Section 13 and further providing
that, as soon as practicable after the date of any such Section 13 Event, the
Principal Party will
(i) prepare and file a registration statement under the Securities
Act, with respect to the Rights and the securities purchasable upon exercise of
the Rights on an appropriate form, and will use its best efforts to cause such
registration statement to (A) become effective as soon as practicable after such
filing and (B) remain effective (with a prospectus at all times meeting the
requirements of the Securities Act) until the Expiration Date;
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(ii) use its best efforts to qualify or register the Rights and the
securities purchasable upon exercise of the Rights under blue sky laws of such
jurisdiction, as may be necessary or appropriate; and
(iii) will deliver to holders of the Rights historical financial
statements for the Principal Party and each of its Affiliates which comply in
all respects with the requirements for registration on Form 10 under the
Exchange Act.
The provisions of this Section 13 shall similarly apply to successive mergers or
consolidations or sales or other transfers. In the event that a Section 13
Event shall occur at any time after the first occurrence of a Section 11 Event,
the Rights which have not theretofore been exercised shall thereafter become
exercisable in the manner described in Section 13(a).
(d) Notwithstanding anything in this Agreement to the contrary,
Section 13 shall not be applicable to a transaction described in subparagraphs
(x) and (y) of Section 13(a) if (i) such transaction is consummated with a
Person or Persons (or a wholly-owned Subsidiary of any such Person or Persons)
who acquired shares of Common Stock pursuant to a Qualifying Offer, (ii) the
price per share of Common Stock offered in such transaction is not less than the
price per share of Common Stock paid to all holders of shares of Common Stock
whose shares were purchased pursuant to such Qualifying Offer, and (iii) the
form of consideration being offered to the remaining holders of shares of Common
Stock pursuant to such transaction is the same as the form of consideration paid
pursuant to such Qualifying Offer. Upon consummation of any such transaction
contemplated by this Section 13(d), all Rights hereunder shall expire.
Section 14. Fractional Rights and Fractional Shares.
(a) The Company shall not be required to issue fractions of Rights,
except prior to the Distribution Date as provided in Section 11(p) hereof, or to
distribute Rights Certificates which evidence fractional Rights. In lieu of
such fractional Rights, there shall be paid to the registered holders of the
Rights Certificates with regard to which such fractional Rights would otherwise
be issuable, an amount in cash equal to the same fraction of the current market
value of a whole Right. For purposes of this Section 14(a), the current market
value of a whole Right shall be the closing price of the Rights for the Trading
Day immediately prior to the date on which such fractional Rights would have
been otherwise issuable. The closing price of the Rights for any day shall be
the last sale price, regular way, or, in case no such sale takes place on such
day, the average of the closing bid and asked prices, regular way, in either
case as reported in the principal consolidated transaction reporting system with
respect to securities listed or admitted to trading on the New York Stock
Exchange or, if the Rights are not listed or admitted to trading on the New York
Stock Exchange, as reported in the principal consolidated transaction reporting
system with respect to securities listed on the principal national securities
exchange on which the Rights are listed or admitted to trading, or if the Rights
are not listed or admitted to trading on any national securities exchange, the
last quoted price or, if not so quoted, the average of the high bid and low
asked prices in the over-the-counter market, as reported by NASDAQ or such other
system then in use or, if on any such date the Rights are not quoted by any such
system, the average of the closing bid and asked prices as furnished by a
professional market maker making a market in the Rights selected by the Board of
Directors of the Company. If on any such date no such market maker is making a
market in the Rights the fair value of the Rights on such date as determined in
good faith by the Board of Directors of the Company shall be used.
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(b) The Company shall not be required to issue fractions of shares of
Preferred Stock (other than fractions which are integral multiples of one one-
thousandth of a share of Preferred Stock) upon exercise of the Rights or to
distribute certificates which evidence fractional shares of Preferred Stock
(other than fractions which are integral multiples of one one-thousandth of a
share of Preferred Stock). In lieu of fractional shares of Preferred Stock that
are not integral multiples of one one-thousandth of a share of Preferred Stock,
the Company may pay to the registered holders of Rights Certificates at the time
such Rights are exercised as herein provided an amount in cash equal to the same
fraction of the current market value of one one-thousandth of a share of
Preferred Stock. For purposes of this Section 14(b), the current market value
of one one-thousandth of a share of Preferred Stock shall be one one-thousandth
of the closing price of a share of Preferred Stock (as determined pursuant to
Section 11(d)(ii) hereof) for the Trading Day immediately prior to the date of
such exercise.
(c) Following the occurrence of a Triggering Event, the Company shall
not be required to issue fractions of shares of Common Stock upon exercise of
the Rights or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of fractional shares of Common Stock, the Company may pay
to the registered holders of Rights Certificates at the time such Rights are
exercised as herein provided an amount in cash equal to the same fraction of the
current market value of one (1) share of Common Stock. For purposes of this
Section 14(c), the current market value of one share of Common Stock shall be
the closing price per share of Common Stock (determined pursuant to Section
11(d)(i) hereof) on the Trading Day immediately prior to the date of such
exercise.
(d) The holder of a Right by the acceptance of the Rights expressly
waives his right to receive any fractional Rights or any fractional shares upon
exercise of a Right, except as permitted by this Section 14.
Section 15. Rights of Action. All rights of action in respect of this
Agreement are vested in the respective registered holders of the Rights
Certificates (and, prior to the Distribution Date, the registered holders of the
Common Stock); and any registered holder of any Rights Certificate (or, prior to
the Distribution Date, of the Common Stock), without the consent of the Rights
Agent or of the holder of any other Rights Certificate (or, prior to the
Distribution Date, of the Common Stock), may, in his own behalf and for his own
benefit, enforce, and may institute and maintain any suit, action or proceeding
against the Company to enforce, or otherwise act in respect of, his right to
exercise the Rights evidenced by such Rights Certificate in the manner provided
in such Rights Certificate and in this Agreement. Without limiting the
foregoing or any remedies available to the holders of Rights, it is specifically
acknowledged that the holders of Rights would not have an adequate remedy at law
for any breach of this Agreement and shall be entitled to specific performance
of the obligations hereunder and injunctive relief against actual or threatened
violations of the obligations hereunder of any Person subject to this Agreement.
Section 16. Agreement of Rights Holders. Every holder of a Right by
accepting the same consents and agrees with the Company and the Rights Agent and
with every other holder of a Right that:
(a) prior to the Distribution Date, the Rights will be transferable
only in connection with the transfer of such Common Stock;
(b) after the Distribution Date, the Rights Certificates are
transferable only on the registry books of the Rights Agent and only if
surrendered at the principal office or offices
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of the Rights Agent designated for such purposes, duly endorsed or accompanied
by a proper instrument of transfer and with the appropriate forms and
certificates fully executed;
(c) subject to Section 6(a) and Section 7(f) hereof, the Company and
the Rights Agent may deem and treat the person in whose name a Rights
Certificate (or, prior to the Distribution Date, the associated Common Stock
certificate) is registered as the absolute owner thereof and of the Rights
evidenced thereby (notwithstanding any notations of ownership or writing on the
Rights Certificates or the associated Common Stock certificate made by anyone
other than the Company or the Rights Agent) for all purposes whatsoever, and
neither the Company nor the Rights Agent, subject to the last sentence of
Section 7(e) hereof, shall be required to be affected by any notice to the
contrary; and
(d) notwithstanding anything in this Agreement to the contrary,
neither the Company nor the Rights Agent shall have any liability to any holder
of a Right or other Person as a result of its inability to perform any of its
obligations under this Agreement by reason of any preliminary or permanent
injunction or other order, decree or ruling issued by a court of competent
jurisdiction or by a governmental, regulatory or administrative agency or
commission, or any statute, rule, regulation or executive order promulgated or
enacted by any governmental authority, prohibiting or otherwise restraining
performance of such obligation; provided, however, the Company must use its best
efforts to have any such order, decree or ruling lifted or otherwise overturned
as soon as possible.
Section 17. Rights Certificate Holder Not Deemed a Stockholder. No
holder, as such, of any Rights Certificate shall be entitled to vote, receive
dividends or be deemed for any purpose the holder of the number of one one-
thousandths of a share of Preferred Stock or any other securities of the Company
which may at any time be issuable on the exercise of the Rights represented
thereby, nor shall anything contained herein or in any Rights Certificate be
construed to confer upon the holder of any Rights Certificate, as such, any of
the rights of a stockholder of the Company or any right to vote for the election
of directors or upon any matter submitted to stockholders at any meeting
thereof, or to give or withhold consent to any corporate action, or to receive
notice of meetings or other actions affecting stockholders (except as provided
in Section 25 hereof), or to receive dividends or subscription rights, or
otherwise, until the Right or Rights evidenced by such Rights Certificate shall
have been exercised in accordance with the provisions hereof.
Section 18. Concerning the Rights Agent.
(a) The Company agrees to pay to the Rights Agent reasonable
compensation for all services rendered by it hereunder and, from time to time,
on demand of the Rights Agent, its reasonable expenses and counsel fees and
disbursements and other disbursements incurred in the administration and
execution of this Agreement and the exercise and performance of its duties
hereunder. The Company also agrees to indemnify the Rights Agent for, and to
hold it harmless against, any loss, liability, or expense, incurred without
negligence, bad faith or willful misconduct on the part of the Rights Agent, for
anything done or omitted by the Rights Agent in connection with the acceptance
and administration of this Agreement, including the costs and expenses of
defending against any claim of liability in the premises.
(b) The Rights Agent shall be protected and shall incur no liability
for or in respect of any action taken, suffered or omitted by it in connection
with its administration of this Agreement in reliance upon any Rights
Certificate or certificate for Common Stock or for other
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securities of the Company, instrument of assignment or transfer, power of
attorney, endorsement, affidavit, letter, notice, direction, consent,
certificate, statement, or other paper or document believed by it to be genuine
and to be signed, executed and, where necessary, verified or acknowledged, by
the proper Person or Persons.
Section 19. Merger or Consolidation or Change of Name of Rights Agent.
(a) Any corporation into which the Rights Agent or any successor
Rights Agent may be merged or with which it may be consolidated, or any
corporation resulting from any merger or consolidation to which the Rights Agent
or any successor Rights Agent shall be a party, or any corporation succeeding to
the corporate trust or shareholder services business of the Rights Agent or any
successor Rights Agent, shall be the successor to the Rights Agent under this
Agreement without the execution or filing of any paper or any further act on the
part of any of the parties hereto; provided, however, that such corporation
would be eligible for appointment as a successor Rights Agent under the
provisions of Section 21 hereof. In case at the time such successor Rights
Agent shall succeed to the agency created by this Agreement, any of the Rights
Certificates shall have been countersigned but not delivered, any such successor
Rights Agent may adopt the countersignature of a predecessor Rights Agent and
deliver such Rights Certificates so countersigned; and in case at that time any
of the Rights Certificates shall not have been countersigned, any successor
Rights Agent may countersign such Rights Certificates either in the name of the
predecessor or in the name of the successor Rights Agent; and in all such cases
such Rights Certificates shall have the full force provided in the Rights
Certificates and in this Agreement.
(b) In case at any time the name of the Rights Agent shall be changed
and at such time any of the Rights Certificates shall have been countersigned
but not delivered, the Rights Agent may adopt the countersignature under its
prior name and deliver Rights Certificates so countersigned; and in case at that
time any of the Rights Certificates shall not have been countersigned, the
Rights Agent may countersign such Rights Certificates either in its prior name
or in its changed name; and in all such cases such Rights Certificates shall
have the full force provided in the Rights Certificates and in this Agreement.
Section 20. Duties of Rights Agent. The Rights Agent undertakes the
duties and obligations imposed by this Agreement upon the following terms and
conditions, by all of which the Company and the holders of Rights Certificates,
by their acceptance thereof, shall be bound:
(a) The Rights Agent may consult with legal counsel (who may be legal
counsel for the Company), and the opinion of such counsel shall be full and
complete authorization and protection to the Rights Agent as to any action taken
or omitted by it in good faith and in accordance with such opinion.
(b) Whenever in the performance of its duties under this Agreement the
Rights Agent shall deem it necessary or desirable that any fact or matter
(including, without limitation, the identity of any Acquiring Person or Adverse
Person and the determination of "Current Market Price") be proved or established
by the Company prior to taking or suffering any action hereunder, such fact or
matter (unless other evidence in respect thereof be herein specifically
prescribed) may be deemed to be conclusively proved and established by a
certificate signed by the Chairman of the Board, the President, any Vice
President, the Treasurer, any Assistant Treasurer, the Secretary or any
Assistant Secretary of the Company and delivered to the Rights Agent; and such
certificate shall be full authorization to the Rights Agent for any action
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taken or suffered in good faith by it under the provisions of this Agreement in
reliance upon such certificate.
(c) The Rights Agent shall be liable hereunder only for its own
negligence, bad faith or willful misconduct.
(d) The Rights Agent shall not be liable for or by reason of any of
the statements of fact or recitals contained in this Agreement or in the Rights
Certificates or be required to verify the same (except as to its
countersignature on such Rights Certificates), but all such statements and
recitals are and shall be deemed to have been made by the Company only.
(e) The Rights Agent shall not be under any responsibility in respect
of the validity of this Agreement or the execution and delivery hereof (except
the due execution hereof by the Rights Agent) or in respect of the validity or
execution of any Rights Certificate (except its countersignature thereof); nor
shall it be responsible for any breach by the Company of any covenant or
condition contained in this Agreement or in any Rights Certificate; nor shall it
be responsible for any adjustment required under the provisions of Section 11,
Section 13 or Section 24 hereof or responsible for the manner, method or amount
of any such adjustment or the ascertaining of the existence of facts that would
require any such adjustment (except with respect to the exercise of Rights
evidenced by Rights Certificates after actual notice of any such adjustment);
nor shall it by any act hereunder be deemed to make any representation or
warranty as to the authorization or reservation of any shares of Common Stock or
Preferred Stock to be issued pursuant to this Agreement or any Rights
Certificate or as to whether any shares of Common Stock or Preferred Stock will,
when so issued, be validly authorized and issued, fully paid and nonassessable.
(f) The Company agrees that it will perform, execute, acknowledge and
deliver or cause to be performed, executed, acknowledged and delivered all such
further and other acts, instruments and assurances as may reasonably be required
by the Rights Agent for the carrying out or performing by the Rights Agent of
the provisions of this Agreement.
(g) The Rights Agent is hereby authorized and directed to accept
instructions with respect to the performance of its duties hereunder from the
Chairman of the Board, the President, any Vice President, the Secretary, any
Assistant Secretary, the Treasurer or any Assistant Treasurer of the Company or
any designee of any of the foregoing, and to apply to such officers for advice
or instructions in connection with its duties, and it shall not be liable for
any action taken or suffered to be taken by it in good faith in accordance with
instructions of any such officer.
(h) The Rights Agent and any stockholder, director, officer or
employee of the Rights Agent may buy, sell or deal in any of the Rights or other
securities of the Company or become pecuniarily interested in any transaction in
which the Company may be interested, or contract with or lend money to the
Company or otherwise act as fully and freely as though it were not Rights Agent
under this Agreement. Nothing herein shall preclude the Rights Agent from acting
in any other capacity for the Company or for any other legal entity.
(i) The Rights Agent may execute and exercise any of the rights or
powers hereby vested in it or perform any duty hereunder either itself or by or
through its attorneys or agents, and the Rights Agent shall not be answerable or
accountable for any act, default, neglect or misconduct of any such attorneys or
agents or for any loss to the Company resulting from any
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such act, default, neglect or misconduct; provided, however, reasonable care was
exercised in the selection and continued employment thereof.
(j) No provision of this Agreement shall require the Rights Agent to
expend or risk its own funds or otherwise incur any financial liability in the
performance of any of its duties hereunder or in the exercise of its rights if
there shall be reasonable grounds for believing that repayment of such funds or
adequate indemnification against such risk or liability is not reasonably
assured to it.
(k) If, with respect to any Right Certificate surrendered to the
Rights Agent for exercise or transfer, the certificate attached to the form of
assignment or the form of election to purchase, as the case may be, has either
not been completed or indicates an affirmative response to clause 1 and/or 2
thereof, the Rights Agent shall not take any further action with respect to such
requested exercise or transfer without first consulting with the Company.
Section 21. Change of Rights Agent. The Rights Agent or any successor
Rights Agent may resign and be discharged from its duties under this Agreement
upon thirty (30) days' notice in writing mailed to the Company, and to each
transfer agent of the Common Stock and Preferred Stock, by registered or
certified mail, and to the holders of the Rights Certificates by first-class
mail. The Company may remove the Rights Agent or any successor Rights Agent upon
thirty (30) days' notice in writing, mailed to the Rights Agent or successor
Rights Agent, as the case may be, and to each transfer agent of the Common Stock
and Preferred Stock, by registered or certified mail, and to the holders of the
Rights Certificates by first-class mail. If the Rights Agent shall resign or be
removed or shall otherwise become incapable of acting, the Company shall appoint
a successor to the Rights Agent. If the Company shall fail to make such
appointment within a period of thirty (30) days after giving notice of such
removal or after it has been notified in writing of such resignation or
incapacity by the resigning or incapacitated Rights Agent or by any registered
holder of a Rights Certificate (who shall, with such notice, submit his Rights
Certificate for inspection by the Company), then any registered holder of a
Rights Certificate may apply to any court of competent jurisdiction for the
appointment of a new Rights Agent. Any successor Rights Agent, whether appointed
by the Company or by such a court, shall be a corporation organized and doing
business under the laws of the United States or of the State of New York or
Illinois (or of any other state of the United States so long as such corporation
is authorized to do business as a banking institution in the State of New York
or Illinois), in good standing, having a principal office in the State of New
York or Illinois which is authorized under such laws to exercise corporate trust
powers and is subject to supervision or examination by federal or state
authority and which has at the time of its appointment as Rights Agent a
combined capital and surplus of at least $100,000,000 and which shall otherwise
meet any requirements imposed by the New York Stock Exchange on transfer agents
and registrars. After appointment, the successor Rights Agent shall be vested
with the same powers, rights, duties and responsibilities as if it had been
originally named as Rights Agent without further act or deed; but the
predecessor Rights Agent shall deliver and transfer to the successor Rights
Agent any property at the time held by it hereunder, and execute and deliver any
further assurance, conveyance, act or deed necessary for the purpose. Not later
than the effective date of any such appointment, the Company shall file notice
thereof in writing with the predecessor Rights Agent and each transfer agent of
the Common Stock and the Preferred Stock, and mail a notice thereof in writing
to the registered holders of the Rights Certificates. Failure to give any notice
provided for in this Section 21, however, or any defect therein, shall not
affect the legality or validity of the Rights, Rights Agreement or the
resignation or removal of the Rights Agent or the appointment of the successor
Rights Agent, as the case may be.
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Section 22. Issuance of New Rights Certificates. Notwithstanding any of
the provisions of this Agreement or of the Rights to the contrary, the Company
may, at its option, issue new Rights Certificates evidencing Rights in such form
as may be approved by its Board of Directors to reflect any adjustment or change
in the Purchase Price and the number or kind or class of shares or other
securities or property purchasable under the Rights Certificates made in
accordance with the provisions of this Agreement. In addition, in connection
with the issuance or sale of shares of Common Stock following the Distribution
Date and prior to the redemption or expiration of the Rights, the Company (a)
shall, with respect to shares of Common Stock so issued or sold pursuant to the
exercise of stock options or under any employee plan or arrangement, granted or
awarded as of the Distribution Date, or upon the exercise, conversion or
exchange of securities hereinafter issued by the Company, and (b) may, in any
other case, if deemed necessary or appropriate by the Board of Directors of the
Company, issue Rights Certificates representing the appropriate number of Rights
in connection with such issuance or sale; provided, however, that (i) no such
Rights Certificate shall be issued if, and to the extent that, the Company shall
be advised by counsel that such issuance would create a significant risk of
material adverse tax consequences to the Company or the Person to whom such
Rights Certificate would be issued, and (ii) no such Rights Certificate shall be
issued if, and to the extent that, appropriate adjustment shall otherwise have
been made in lieu of the issuance thereof.
Section 23. Redemption and Termination.
(a) The Board of Directors of the Company may, at its option, at any
time prior to the earlier of (i) the close of business on the fifteenth day
following the Stock Acquisition Date (or, if the Stock Acquisition Date shall
have occurred prior to the Record Date, the close of business on the fifteenth
day following the Record Date), or (ii) the Final Expiration Date, redeem all
but not less than all the then outstanding Rights at a redemption price of $0.01
per Right, as such amount may be appropriately adjusted to reflect any stock
split, stock dividend or similar transaction occurring after the date hereof
(such redemption price being hereinafter referred to as the "Redemption Price").
Notwithstanding the foregoing, the Board of Directors may not redeem any Rights
following a determination pursuant to Section 11(a)(ii)(B) that any Person is an
Adverse Person. Notwithstanding anything contained in this Agreement to the
contrary, the Rights shall not be exercisable after the first occurrence of a
Section 11 Event until such time as the Company's right of redemption set forth
in the first sentence of this Section 23(a) has expired. The Company may, at
its option, pay the Redemption Price in cash, shares of Common Stock (based on
the Current Market Price of the Common Stock at the time of redemption) or any
other form of consideration deemed appropriate by the Board of Directors.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the redemption of the Rights, evidence of which shall have been
filed with the Rights Agent and without any further action and without any
notice, the right to exercise the Rights will terminate and the only right
thereafter of the holders of Rights shall be to receive the Redemption Price for
each Right so held. Promptly after the action of the Board of Directors
ordering the redemption of the Rights, the Company shall give notice of such
redemption to the Rights Agent and the holders of the then outstanding Rights by
mailing such notice to all such holders at each holder's last address as it
appears upon the registry books of the Rights Agent or, prior to the
Distribution Date, on the registry books of the Transfer Agent for the Common
Stock. Any notice which is mailed in the manner herein provided shall be deemed
given, whether or not the holder receives the notice. Each such notice of
redemption will state the method by which the payment of the Redemption Price
will be made.
Section 24. Exchange.
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(a) The Board of Directors of the Company may, at its option, at any
time after any Person becomes an Acquiring Person or is determined to be an
Adverse Person pursuant to Section 11(a)(ii)(B), exchange all or part of the
then outstanding and exercisable Rights (which shall not include Rights that
have become void pursuant to the provisions of Section 7(e) hereof) for shares
of Common Stock at an exchange ratio of one share of Comdisco Stock per Comdisco
Right and one share of Ventures Stock per Ventures Right, appropriately adjusted
to reflect any stock split, stock dividend or similar transaction occurring
after the date hereof (each such exchange ratio being hereinafter referred to as
an "Exchange Ratio"). Notwithstanding the foregoing, the Board of Directors
shall not be empowered to effect such exchange at any time after any Person
(other than the Company, any Subsidiary of the Company, any employee benefit
plan of the Company or any such Subsidiary, or any entity holding Common Stock
for or pursuant to the terms of any such plan), together with all Affiliates and
Associates of such Person, becomes the Beneficial Owner of Common Stock
representing fifty percent (50%) or more of the total Voting Rights of all
Common Stock then outstanding.
(b) Immediately upon the action of the Board of Directors of the
Company ordering the exchange of any Rights pursuant to subsection (a) of this
Section 24 and without any further action and without any notice, the right to
exercise such Rights shall terminate and the only right thereafter of a holder
of such Rights shall be to receive that number of shares of Comdisco Stock or
Ventures Stock, as the case may be, equal to the number of such Rights held by
such holder multiplied by the applicable Exchange Ratio. The Company shall
promptly give public notice of any such exchange; provided, however, that the
failure to give, or any defect in, such notice shall not affect the validity of
such exchange. The Company promptly shall mail a notice of any such exchange to
all of the holders of such Rights at their last addresses as they appear upon
the registry books of the Rights Agent. Any notice which is mailed in the
manner herein provided shall be deemed given, whether or not the holder receives
the notice. Each such notice of exchange will state the method by which the
exchange of Common Stock for Rights will be effected and, in the event of any
partial exchange, the number of Rights which will be exchanged. Any partial
exchange shall be effected pro rata based on the number of Rights (other than
Rights which have become void pursuant to the provisions of Section 7(e) hereof)
held by each holder of Rights.
(c) In any exchange pursuant to this Section 24, the Company, at its
option, may substitute (i) Series C Preferred Stock (or equivalent preferred
shares, as such term is defined in Section 11(b) hereof) for shares of Comdisco
Stock exchangeable for Comdisco Rights, at the initial rate of one one-
thousandth of a Series C Preferred Stock (or equivalent preferred share) for
each share of Comdisco Stock and (ii) Series D Preferred Stock (or equivalent
preferred shares, as such term is defined in Section 11(b) hereof) for shares of
Ventures Stock exchangeable for Ventures Rights, at the preferred share) for
each share of Ventures Stock, such rates, in the case of clause (i) or (ii) of
this Section 24(c), to be appropriately adjusted to reflect adjustments in the
voting rights of the Preferred Stock pursuant to the terms thereof, so that the
fraction of a Preferred Stock delivered in lieu of Common Stock shall have the
same voting rights as such share of Common Stock.
(d) In the event that there shall not be sufficient shares of Common
Stock or Preferred Stock issued but not outstanding or authorized but unissued
to permit any exchange of Rights as contemplated in accordance with this Section
24, the Company shall take all such action as may be necessary to authorize
additional shares of Common Stock or Preferred Stock for issuance upon exchange
of the Rights.
31
<PAGE>
(e) The Company shall not be required to issue fractions of shares of
Common Stock or to distribute certificates which evidence fractional shares of
Common Stock. In lieu of such fractional shares of Common Stock, there shall be
paid to the registered holders of the Right Certificates with regard to which
such fractional share of Common Stock would otherwise be issuable, an amount in
cash equal to the same fraction of the Current Market Value of a whole share of
Common Stock. For the purposes of this subsection (e), the "Current Market
Value" of a whole share of Common Stock shall be the closing price of a share of
Common Stock (as determined pursuant to the second sentence of Section 11(d)(i)
hereof) for the Trading Day immediately prior to the date of exchange pursuant
to this Section 24.
Section 25. Notice of Certain Events.
(a) In case the Company shall propose, at any time after the
Distribution Date, (i) to pay any dividend payable in stock of any class to the
holders of Preferred Stock or to make any other distribution to the holders of
Preferred Stock (other than a regular quarterly cash dividend out of earnings or
retained earnings of the Company), or (ii) to offer to the holders of Preferred
Stock rights or warrants to subscribe for or to purchase any additional shares
of Preferred Stock or shares of stock of any class or any other securities,
rights or options, or (iii) to effect any reclassification of its Preferred
Stock (other than a reclassification involving only the subdivision of
outstanding shares of Preferred Stock), or (iv) to effect any consolidation or
merger into or with any other Person (other than a Subsidiary of the Company in
a transaction which complies with Section 11(o) hereof), or to effect any sale
or other transfer (or to permit one or more of its Subsidiaries to effect any
sale or other transfer), in one transaction or a series of related transactions,
of more than 50% of the assets or earning power of the Company and its
Subsidiaries (taken as a whole) to any other Person or Persons (other than the
Company and/or any of its Subsidiaries in one or more transactions each of which
complies with Section 11(o) hereof), or (v) to effect the liquidation,
dissolution or winding up of the Company, then, in each such case, the Company
shall give to each holder of a Rights Certificate, to the extent feasible and in
accordance with Section 26 hereof, a notice of such proposed action, which shall
specify the record date for the purposes of such stock dividend, distribution of
rights or warrants, or the date on which such reclassification, consolidation,
merger, sale, transfer, liquidation, dissolution, or winding up is to take place
and the date of participation therein by the holders of the shares of Preferred
Stock, if any such date is to be fixed, and such notice shall be so given in the
case of any action covered by clause (i) or (ii) above at least twenty (20) days
prior to the record date for determining holders of the shares of Preferred
Stock for purposes of such action, and in the case of any such other action, at
least twenty (20) days prior to the date of the taking of such proposed action
or the date of participation therein by the holders of the shares of Preferred
Stock, whichever shall be the earlier.
(b) In case any Section 11 Event shall occur, then, in any such case,
(i) the Company shall as soon as practicable thereafter give to each holder of a
Rights Certificate, to the extent feasible and in accordance with Section 26
hereof, a notice of the occurrence of such event, which shall specify the event
and the consequences of the event to holders of Rights under Section 11(a)(ii)
hereof, and (ii) all references in the preceding paragraph to Preferred Stock
shall be deemed thereafter to refer to Common Stock and/or other securities.
Section 26. Notices. Notices or demands authorized by this Agreement to
be given or made by the Rights Agent or by the holder of any Rights Certificate
to or on the Company shall be sufficiently given or made if sent by first-class
mail, postage prepaid, addressed (until another address is filed in writing with
the Rights Agent) as follows:
32
<PAGE>
Comdisco, Inc.
6111 North River Road
Rosemont, Illinois 60018
Attention: Secretary
Subject to the provisions of Section 21, any notice or demand authorized by this
Agreement to be given or made by the Company or by the holder of any Rights
Certificate to or on the Rights Agent shall be sufficiently given or made if
sent by first-class mail, postage prepaid, addressed (until another address is
filed in writing with the Company) as follows:
ChaseMellon Shareholder Services, L.L.C.
85 Challenger Road
Ridgefield Park, New Jersey 07660
Attention: Reorganization Department
Notices or demands authorized by this Agreement to be given or made by the
Company or the Rights Agent to the holder of any Rights Certificate (or, if
prior to the Distribution Date, to the holder of certificates representing
shares of Common Stock) shall be sufficiently given or made if sent by first-
class mail, postage prepaid, addressed to such holder at the address of such
holder as shown on the registry books of the Company.
Section 27. Supplements and Amendments. Prior to the Distribution Date
and subject to the penultimate sentence of this Section 27, the Company and, if
so directed by the Company, the Rights Agent, shall supplement or amend any
provision of this Agreement without the approval of any holders of certificates
representing shares of Common Stock and associated Rights. From and after the
Distribution Date and subject to the penultimate sentence of this Section 27,
the Company may and the Rights Agent shall, if the Company so directs,
supplement or amend this Agreement without the approval of any holders of Rights
Certificates in order to: (i) cure any ambiguity, (ii) correct or supplement any
provision contained herein which may be defective or inconsistent with any other
provisions herein, (iii) shorten or lengthen any time period hereunder, or (iv)
change or supplement the provisions hereunder in any manner which the Company
may deem necessary or desirable and which shall not adversely affect the
interests of the holders of Rights Certificates (other than an Acquiring Person,
Adverse Person or an Affiliate or Associate of an Acquiring Person or Adverse
Person); provided, however, that this Agreement may not be supplemented or
amended to lengthen, pursuant to clause (iii) of this sentence, (A) a time
period relating to when the Rights may be redeemed at such time as the Rights
are not then redeemable, or (B) any other time period unless such lengthening is
for the purpose of protecting, enhancing or clarifying the rights of, and/or the
benefits to, the holders of Rights (other than an Acquiring Person or Adverse
Person and its Associates and Affiliates). Upon the delivery of a certificate
from an appropriate officer of the Company which states that the proposed
supplement or amendment is in compliance with the terms of this Section 27, the
Rights Agent shall execute such supplement or amendment. Prior to the
Distribution Date, the interests of the holders of Rights shall be deemed
coincident with the interests of the holders of Common Stock.
Section 28. Successors. All the covenants and provisions of this
Agreement by or for the benefit of the Company or the Rights Agent shall bind
and inure to the benefit of their respective successors and assigns hereunder.
Section 29. Determinations and Actions by the Board of Directors, etc.
For all purposes of this Agreement, any calculation of the number of shares of
Common Stock or any other class of capital stock outstanding at any particular
time, including for purposes of determining the
33
<PAGE>
particular percentage of such outstanding shares of Common Stock of which any
Person is the Beneficial Owner, shall be made in accordance with the last
sentence of Rule 13d-3(d)(1)(i) of the General Rules and Regulations under the
Exchange Act. The Board of Directors of the Company shall have the exclusive
power and authority to administer this Agreement and to exercise all rights and
powers specifically granted to the Board or to the Company, or as may be
necessary or advisable in the administration of this Agreement, including,
without limitation, the right and power to (i) interpret the provisions of this
Agreement, and (ii) make all determinations deemed necessary or advisable for
the administration of this Agreement (including a determination to redeem or not
redeem the Rights or to amend the Agreement). All such actions, calculations,
interpretations and determinations (including, for purposes of clause (y) below,
all omissions with respect to the foregoing) which are done or made by the Board
in good faith, shall (x) be final, conclusive and binding on the Company, the
Rights Agent, the holders of the Rights and all other parties, and (y) not
subject the Board to any liability to the holders of the Rights.
Section 30. Benefits of This Agreement. Nothing in this Agreement shall
be construed to give to any Person other than the Company, the Rights Agent and
the registered holders of the Rights Certificates (and, prior to the
Distribution Date, registered holders of the Common Stock) any legal or
equitable right, remedy or claim under this Agreement; but this Agreement shall
be for the sole and exclusive benefit of the Company, the Rights Agent and the
registered holders of the Rights Certificates (and, prior to the Distribution
Date, registered holders of the Common Stock).
Section 31. Severability. If any term, provision, covenant or restriction
of this Agreement is held by a court of competent jurisdiction or other
authority to be invalid, void or unenforceable, the remainder of the terms,
provisions, covenants and restrictions of this Agreement shall remain in full
force and effect and shall in no way be affected, impaired or invalidated;
provided, however, that notwithstanding anything in this Agreement to the
contrary, if any such term, provision, covenant or restriction is held by such
court or authority to be invalid, void or unenforceable and the Board of
Directors of the Company determines in its good faith judgment that severing the
invalid language from this Agreement would adversely affect the purpose or
effect of this Agreement, the right of redemption set forth in Section 23 hereof
shall be reinstated and shall not expire until the close of business on the
tenth day following the date of such determination by the Board of Directors.
Without limiting the foregoing, if any provision requiring a majority of the
members of the Board of Directors who are not officers of the Company and who
are not representatives, nominees, Affiliates or Associates of an Acquiring
Person to act is held by any court of competent jurisdiction or other authority
to be invalid, void or unenforceable, such determination shall be made by the
Board of Directors of the Company in accordance with applicable law and the
Company's Certificate of Incorporation and Bylaws.
Section 32. Governing Law. This Agreement, each Right and each Rights
Certificate issued hereunder shall be deemed to be a contract made under the
laws of the State of Delaware and for all purposes shall be governed by and
construed in accordance with the laws of such state applicable to contracts made
and to be performed entirely within such state.
Section 33. Counterparts. This Agreement may be executed in any number of
counterparts and each of such counterparts shall for all purposes be deemed to
be an original, and all such counterparts shall together constitute but one and
the same instrument.
Section 34. Descriptive Headings. Descriptive headings of the several
Sections of this Agreement are inserted for convenience only and shall not
control or affect the meaning or construction of any of the provisions hereof.
34
<PAGE>
IN WITNESS WHEREOF, the parties hereto have caused this Rights Agreement to
be duly executed and their respective corporate seals to be hereunto affixed and
attested, all as of the day and year first above written.
Attest: COMDISCO, INC.
By By
- ------------------------- --------------------------
Name: Name:
Title: Title:
Attest: ChaseMellon Shareholder
Services, L.L.C., as Rights Agent
By By
- ------------------------- --------------------------
Name: Name:
Title:
35
<PAGE>
EXHIBIT A
---------
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION OF COMDISCO, INC.
CONTAINING THE DESIGNATIONS, PREFERENCES
AND RIGHTS OF SERIES C JUNIOR
PARTICIPATING PREFERRED STOCK
AND OF SERIES D JUNIOR
PARTICIPATING PREFERRED STOCK
<PAGE>
AMENDED AND RESTATED
CERTIFICATE OF INCORPORATION
OF
COMDISCO, INC.
Comdisco, Inc. (the "Corporation"), a corporation organized and existing under
and by virtue of the General Corporation Law of the State of Delaware
("DGCL"), certifies:
FIRST. That the name under which the Corporation was originally incorporated
was Comdisco, Inc. and the date of filing of its original certificate of
incorporation was June 28, 1971.
SECOND. That, pursuant to Sections 242 and 245 of the DGCL, the Corporation's
Board of Directors and shareholders duly adopted this Amended and Restated
Certificate of Incorporation.
THIRD. The text of the Corporation's amended and restated certificate of
incorporation is hereby further amended and restated to read in full as
follows:
1. The name of the Corporation is COMDISCO, INC.
2. The address of its registered office in the State of Delaware is No.
1209 Orange Street, in the City of Wilmington, County of New Castle. The
name of its registered agent at such address is The Corporation Trust
Company.
3. The nature of the business or purposes to be conducted or promoted is:
To engage in any lawful act or activity for which corporations may be
organized under the General Corporation Law of Delaware.
To manufacture, purchase or otherwise acquire, invest in, own,
mortgage, pledge, sell, assign and transfer or otherwise dispose of,
trade, deal in and deal with goods, wares and merchandise and personal
property of every class and description.
To acquire, and pay for in cash, stock or bonds of this corporation or
otherwise, the good will, rights, assets and property, and to undertake
or assume the whole or any part of the obligations or liabilities of
any person, firm, association or corporation.
To acquire, hold, use, sell, assign, lease, grant licenses in respect
of, mortgage or otherwise dispose of letters patent of the United
States or any foreign country, patent rights, licenses and privileges,
inventions, improvements and processes, copyrights, trademarks and
trade names, relating to or useful in connection with any business of
this corporation.
To acquire by purchase, subscription or otherwise, and to receive,
hold, own, guarantee, sell, assign, exchange, transfer, mortgage,
pledge or otherwise dispose of or deal in and with any of the shares of
the capital stock, or any voting trust certificates in respect of the
shares of capital stock, scrip, warrants, rights, bonds, debentures,
notes, trust receipts, and other securities, obligations, choses in
action and evidences of indebtedness or interest issued or created by
any corporations, joint stock companies, syndicates, associations,
firms, trusts or persons, public or private, or by the government of
the United States of America, or by any foreign government, or by any
state, territory, province, municipality or other political subdivision
or by any governmental agency, and as owner thereof to possess and
exercise all the rights, powers and privileges of ownership, including
the right to execute consents and vote thereon, or to do any and all
acts and things necessary or advisable for the preservation,
protection, improvement and enhancement in value thereof.
To borrow or raise moneys for any of the purposes of the corporation
and, from time to time without limit as to amount, to draw, make,
accept, endorse, execute and issue promissory notes, drafts, bills of
exchange, warrants, bonds, debentures and other negotiable or non-
negotiable instruments and
A-1
<PAGE>
evidences of indebtedness, and to secure the payment of any thereof and
of the interest thereon by mortgage upon or pledge, conveyance or
assignment in trust of the whole or any part of the property of the
corporation, whether at the time owned or thereafter acquired, and to
sell, pledge or otherwise dispose of such bonds or other obligations of
the corporation for its corporate purposes.
To purchase, receive, take by grant, gift, devise, bequest or
otherwise, lease, or otherwise acquire, own, hold, improve, employ, use
and otherwise deal in and with real or personal property, or any
interest therein, wherever situated, and to sell, convey, lease,
exchange, transfer or otherwise dispose of, or mortgage or pledge, all
or any of the corporation's property, assets, or any interest therein,
wherever situated.
In general, to possess and exercise all the powers and privileges
granted by the General Corporation Law of Delaware or by any other law
of Delaware or by this Amended and Restated Certificate of
Incorporation together with any powers incidental thereto, so far as
such powers and privileges are necessary or convenient to the conduct,
promotion or attainment of the business or purposes of the corporation.
The business and purposes specified in the foregoing clauses shall,
except where otherwise expressed, be in nowise limited or restricted by
reference to, or inference from, the terms of any other clause in this
Amended and Restated Certificate of Incorporation, but the business and
purposes identified in each of the foregoing clauses of this article
shall be regarded as independent business and purposes.
4. Capital Stock. The total number of shares of all classes of stock which
the Corporation shall have authority to issue is 1,900,000,000 consisting
of (i) 1,800,000,000 shares of Common Stock, $0.10 par value per share
("Common Stock"), and (ii) 100,000,000 shares of Preferred Stock, $0.10 par
value per share ("Preferred Stock").
A. Common Stock.
1. Issuance of Common Stock in Series; Designation;
Reclassification.
Subject to the provisions of this Article 4(A) and provisions of
law, the Corporation shall have the authority to issue shares of
Common Stock in multiple series. One series of Common Stock
shall be designated as Comdisco Stock ("Comdisco Stock"). The
second series of Common Stock shall be designated as Comdisco
Ventures Stock ("Ventures Stock"). When the filing of this
Amended and Restated Certificate of Incorporation becomes
effective, each share of Common Stock outstanding immediately
prior thereto shall automatically be reclassified as one share
of Comdisco Stock (and outstanding certificates that had
theretofore represented shares of Common Stock shall thereupon
represent an equal number of shares of Comdisco Stock despite
the absence of any indication thereon to that effect).
The total number of shares of Comdisco Stock which the
Corporation shall have the authority to issue shall initially be
750,000,000, and the total number of shares of Ventures Stock
which the Corporation shall have the authority to issue shall
initially be 750,000,000. The Board of Directors (or such
committee of the Board of Directors as the Board of Directors
shall empower) is hereby empowered to authorize by resolution or
resolutions, an increase in the number of authorized shares of
Comdisco Stock or Ventures Stock in (but not above a number for
either series that, when added to the number of authorized
shares of all other designated series of Common Stock would
exceed the total number of authorized shares of Common Stock) or
a decrease in the number of authorized shares of Comdisco Stock
or Ventures Stock (but not below the number of shares then
outstanding). The Board of Directors shall have the authority to
designate, prior to the time of the first issuance of the
Ventures Stock, the number which, immediately prior to such
first issuance, will constitute the Number of Shares Issuable
with Respect to Comdisco Group's Retained Interest in Comdisco
Ventures and any other terms which are consistent with
applicable law and the provisions of this Article 4(A).
A-2
<PAGE>
The Board of Directors (or such committee of the Board of
Directors as the Board of Directors shall empower) is hereby
empowered to authorize by resolution or resolutions from time to
time the issuance of one or more additional series of Common
Stock and to fix the designations, powers, preferences and
relative, participating, optional or other rights, if any, and
the qualifications, limitations or restrictions thereof, if any,
with respect to each series of Common Stock and the number of
shares constituting each such series, and to increase or
decrease the number of shares of any such series to the extent
permitted by the DGCL, as amended from time to time.
2. Dividends.
(a) Dividends. Subject to the preferences and other terms of any
outstanding series of Preferred Stock, the holders of any series
of Common Stock shall be entitled to receive dividends on their
shares of Common Stock if, as, and when declared by the Board of
Directors out of the lesser of (i) the funds of the Corporation
legally available therefor or (ii) the Available Dividend Amount
for the Group to which such series of Common Stock relates.
(b) Discrimination Between or Among Series of Common Stock.
Subject to paragraph (a) of Section 2 of this Article 4(A) and
subject to the preferences and other terms of any outstanding
series of Preferred Stock, the Corporation shall have the
authority to declare and pay dividends on a single series of
Common Stock, or one or more series of Common Stock, in equal or
unequal amounts, notwithstanding the relative amounts of the
Available Dividend Amount with respect to any Group, the amount
of assets available for dividends on either series of Common
Stock, the amount of prior dividends paid on either series of
Common Stock, the respective voting rights of each series of
Common Stock or any other factor.
3. Mandatory Dividend, Redemption or Conversion on Disposition of
All or Substantially All of the Assets of a Group; Optional
Conversion of Comdisco Stock for Ventures Stock; Redemption of
Ventures Stock for Stock of a Subsidiary at the Corporation's
Option.
(a) Mandatory Dividend, Redemption or Conversion.
(i) In the event of a Disposition of All or Substantially All
of the Assets of a Group (other than an Exempt Disposition),
the Corporation shall, on or before the 90th Trading Day
after the Disposition Date, provided that the funds of the
Corporation are legally available therefor, either:
(x) declare and pay a dividend to holders of the series
of Common Stock that relates to that Group (in cash,
securities (other than Common Stock) or other property,
or a combination thereof), subject to the limitations on
dividends set forth under Section 2 of this Article 4(A),
in an aggregate amount having a Fair Value (determined as
of the Disposition Date) equal to the product of the
Outstanding Interest Fraction with respect to such Group
(determined as of the record date for such dividend) and
the Fair Value (determined as of the Disposition Date) of
the Net Proceeds of such Disposition;
(y) redeem from holders of the series of Common Stock
that relates to the Group that consummated such
Disposition, in exchange for cash, securities (other than
Common Stock) or other property (or a combination
thereof) in an amount equal to the product of the
Outstanding Interest Fraction with respect to such Group
(determined as of the redemption date) and the Fair Value
(determined as of the Disposition Date) of the Net
Proceeds of such Disposition, all of the outstanding
shares of such series of Common Stock, unless such
Disposition involves substantially all, but not all, of
the assets attributed to such Group, in which case, a
number of shares of such series of Common Stock (rounded,
if necessary, to the nearest whole number) having an
aggregate average Market Value, during the 20
A-3
<PAGE>
consecutive Trading Day period beginning on the 16th
Trading Day following the Disposition Date, equal to such
amount; or
(z) if that Disposition relates to Comdisco Ventures
convert each outstanding share of Ventures Stock into a
number of shares of Comdisco Stock (rounded, if
necessary, to the nearest whole number) equal to 115% of
the ratio of the average Market Value of one share of
Ventures Stock to the average Market Value of one share
of Comdisco Stock during the 20 consecutive Trading Day
period ending on (and including) the fifth trading day
prior to the first public announcement immediately
preceding the Disposition Date).
(ii) For purposes of this Section 3 of this Article 4(A), if
a Group consummates a Disposition in a series of related
transactions, such Disposition shall not be deemed to have
been completed until consummation of the last of such
transactions.
(b) Optional Conversion of Comdisco Stock for Ventures Stock.
(i) The Corporation may, at any time, convert each
outstanding share of Ventures Stock into a number of shares
of Comdisco Stock (rounded, if necessary, to the nearest
whole number) equal to that percentage of the ratio of the
average Market Value of one share of Ventures Stock to the
average Market Value of one share of Comdisco Stock (the
"Applicable Percentage") specified for the applicable
conversion date below. The average Market Value of a share of
each series of Common Stock shall be determined during the 20
consecutive Trading Day period ending on (and including) the
5th Trading Day immediately preceding the date on which the
Corporation mails the notice of conversion to holders of
Ventures Stock.
<TABLE>
<CAPTION>
If the Conversion Date Falls
During the The Applicable Percentage Will
Period Indicated be the Percentage Specified
Below for Such Period Below
---------------- ------------------------------
<S> <C>
First
Quarter 125%
Second
Quarter 124%
Third
Quarter 123%
Fourth
Quarter 122%
Fifth
Quarter 121%
Sixth
Quarter 120%
Seventh
Quarter 119%
Eighth
Quarter 118%
Ninth
Quarter 117%
Tenth
Quarter 116%
After
Tenth
Quarter 115%
</TABLE>
For purposes of the foregoing chart, (x) the first "Quarter"
is the period from and including the date of first issuance
of shares of Ventures Stock to but excluding the third month
anniversary of such date (provided that, if the date of first
issuance of shares of Ventures Stock is the 29th, 30th or
31st day of any month, the first "Quarter" will be the period
from and including such date of first issuance to but
excluding the third month anniversary of the first day of the
month immediately following the month in which such date of
first issuance falls) and (y) each subsequent "Quarter" is
the period from and including the day after the end of the
prior Quarter to but excluding the third month anniversary of
such day.
(ii) Notwithstanding the preceding paragraphs, if a Tax Event
has occurred, the Applicable Percentage shall equal %
irrespective of when the exchange occurs. "Tax Event" means
the receipt by the Corporation of an opinion of a tax advisor
A-4
<PAGE>
experienced in such matters, who shall not be an officer or
employee of the Corporation or any of its affiliates, to the
effect that, as a result of any amendment to, or change in,
the laws (or any regulations thereunder) of the United States
or any political subdivision or taxing authority thereof or
therein (including any proposed change in such regulations
announced by an administrative agency), or as a result of any
official or administrative pronouncement or action or
judicial decision interpreting or applying such laws or
regulations, it is more likely than not that for United
States federal income tax purposes (1) the Corporation, its
subsidiaries or affiliates or any of its successors or its
stockholders is or, at any time in the future, will be
subject to tax upon the issuance of shares of either Comdisco
Stock or Ventures Stock, (2) either Comdisco Stock or
Ventures Stock is not or, at any time in the future, will not
be treated solely as stock of the Corporation or (3) either
Comdisco Stock or Ventures Stock is or will be treated as
Section 306 stock under the Internal Revenue Code of 1986, as
amended. For purposes of rendering such opinion, a tax
advisor shall assume that any administrative proposals will
be adopted as proposed. However, in the event a change in law
is proposed, a tax advisor shall render an opinion only in
the event of enactment.
(c) Optional Redemption of Ventures Stock for Stock of a
Subsidiary.
At any time at which all of the assets and liabilities of
Comdisco Ventures (and no other assets or liabilities of the
Corporation or any subsidiary thereof) are held directly or
indirectly by one or more subsidiaries of the Corporation
(the "Group Subsidiaries"), the Board of Directors may,
provided that there are funds of the Corporation legally
available therefor, declare that all of the outstanding
shares of Ventures Stock shall be redeemed, as of the
exchange date described below, for the number of fully paid
and nonassessable shares of common stock of each of such
Group Subsidiaries as is equal to the product of the
Outstanding Interest Fraction with respect to Comdisco
Ventures (determined as of the redemption date) and the
number of shares of common stock of each such Group
Subsidiary held by Comdisco immediately before such exchange.
Such shares of common stock of such Group Subsidiaries may be
delivered directly or indirectly through the delivery of
shares of one or more of such Group Subsidiaries that own
directly or indirectly all of the other shares that are
deliverable pursuant to the preceding sentence.
(d) General Dividend, Conversion and Redemption Provisions.
(i) If the Corporation completes a Disposition of All or
Substantially All of the Assets of a Group (other than an
Exempt Disposition), the Corporation shall, not more than the
20 Trading Days after the consummation of such Disposition,
issue a press release specifying (w) the Net Proceeds of such
Disposition, (x) the number of shares of the series of Common
Stock related to such Group then outstanding, (y) the number
of shares of such series of Common Stock issuable upon
conversion, redemption or exercise of any convertible or
exchangeable securities, options or warrants and the
conversion, redemption or exercise prices thereof and (z) if
the Group is not Comdisco Group, the Number of Shares
Issuable with Respect to Comdisco Group's Retained Interest
in such Group. The Corporation shall, not more than 40
Trading Days after such consummation, announce by press
release which of the actions specified in Section 3(a)(i) of
this Article 4(A) it has determined to take, and upon making
that announcement, that determination will be irrevocable. In
addition, the Corporation shall, not more than 45 Trading
Days after such consummation and not less than 30 Trading
Days before the applicable payment date, redemption date or
conversion date, send a notice by first-class mail, postage
prepaid, to holders of the relevant series of Common Stock at
their addresses as they appear on the transfer books of the
Corporation, specifying:
(1) if the Corporation has determined to pay a special
dividend, (A) the record date for such dividend, (B) the
payment date of such dividend (which cannot be
A-5
<PAGE>
more than 90 Trading Days after such consummation) and
(C) the aggregate amount and type of property to be paid
in such dividend (and the approximate per share amount
thereof);
(2) if the Corporation has determined to undertake a
redemption, (A) the date of redemption (which cannot be
more than 90 Trading Days after such consummation), (B)
the aggregate amount and type of property to be paid as a
redemption price (and the approximate per share amount
thereof), (C) if less than all shares of the relevant
series of Common Stock are to be redeemed, the number of
shares to be redeemed and (D) the place or places where
certificates for shares of such series of Common Stock,
properly endorsed or assigned for transfer (unless the
Corporation waives such requirement), should be
surrendered in return for delivery of the cash,
securities or other property to be paid by the
Corporation in such redemption; and
(3) if the Corporation has determined to undertake a
conversion, (A) the date of conversion (which cannot be
more than 90 Trading Days after such consummation), (B)
the number of shares of the other series of Common Stock
to be issued in the conversion for each outstanding share
of such series of Common Stock and (C) the place or
places where certificates for shares of such series of
Common Stock, properly endorsed or assigned for transfer
(unless the Corporation waives such requirement), should
be surrendered in return for delivery of the other series
of Common Stock to be issued by the Corporation in such
conversion.
(ii) If the Corporation has determined to complete any
conversion described in Section 3(b) or (c) of this Article
4(A), the Corporation shall, not less than 30 Trading Days
and not more than 45 Trading Days before the exchange date,
send a notice by first-class mail, postage prepaid, to
holders of the relevant series of Common Stock at their
addresses as they appear on the transfer books of the
Corporation, specifying (x) the conversion date and the other
terms of the conversion and (y) the place or places where
certificates for shares of such series of Common Stock,
properly endorsed or assigned for transfer (unless the
Corporation waives such requirement), should be surrendered
for delivery of the stock to be issued or delivered by the
Corporation in such conversion.
(iii) Neither the failure to mail any notice required by this
Section 3(d) of this Article 4(A) to any particular holder
nor any defect therein would affect the sufficiency thereof
with respect to any other holder or the validity of any
dividend, redemption or conversion contemplated hereby.
(iv) If the Corporation is redeeming less than all of the
outstanding shares of a series of Common Stock pursuant to
Section 3(a)(i) of this Article 4(A), the Corporation shall
redeem such shares pro rata or by lot or by such other method
as the Board of Directors determines to be equitable.
(v) No holder of shares of a series of Common Stock being
converted or redeemed shall be entitled to receive any cash,
securities or other property to be distributed in such
conversion or redemption until such holder surrenders
certificates for such shares, properly endorsed or assigned
for transfer, at such place as the Corporation shall specify
(unless the Corporation waives such requirement). As soon as
practicable after the Corporation's receipt of certificates
for such shares, the Corporation shall deliver to the person
for whose account such shares were so surrendered, or to the
nominee or nominees of such person, the cash, securities or
other property to which such person
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shall be entitled, together with any fractional payment
referred to below, in each case without interest. If less
than all of the shares of Common Stock represented by any one
certificate is converted or redeemed, the Corporation shall
also issue and deliver a new certificate for the shares of
such Common Stock not converted or redeemed.
(vi) The Corporation shall not be required to issue or
deliver fractional shares of any capital stock or any other
fractional securities to any holder of Common Stock upon
conversion, redemption, dividend or other distribution
described above. If more than one share of Common Stock shall
be held at the same time by the same holder, the Corporation
may aggregate the number of shares of any capital stock that
would be issuable or any other securities that would be
distributable to such holder upon any such conversion,
redemption, dividend or other distribution. If there are
fractional shares of any capital stock or any other
fractional securities remaining to be issued or distributed
to any holder, the Corporation shall, if such fractional
shares or securities are not issued or distributed to such
holder, pay cash in respect of such fractional shares or
securities in an amount equal to the Fair Value thereof
(without interest).
(vii) From and after the date set for any conversion or
redemption contemplated by this Section 3 of this Article
4(A), all rights of a holder of shares of Common Stock being
converted or redeemed shall cease except for the right, upon
surrender of the certificates theretofore representing such
shares, to receive the cash, securities or other property for
which such shares were converted or redeemed, together with
any fractional payment as provided above, in each case
without interest (and, if such holder was a holder of record
as of the close of business on the record date for a dividend
not yet paid, the right to receive such dividend). A holder
of shares of Common Stock being converted shall not be
entitled to receive any dividend or other distribution with
respect to shares of the other series of Common Stock until
after certificates theretofore representing the shares being
converted are surrendered as contemplated above. Upon such
surrender, the Corporation shall pay to the holder the amount
of any dividends or other distributions (without interest)
which theretofore became payable with respect to a record
date occurring after the conversion, but which were not paid
by reason of the foregoing, with respect to the number of
whole shares of the other series of Common Stock represented
by the certificate or certificates issued upon such
surrender. From and after the date set for any conversion,
the Corporation shall, however, be entitled to treat the
certificates for shares of a series of Common Stock being
converted that were not yet surrendered for conversion as
evidencing the ownership of the number of whole shares of the
other series of Common Stock for which the shares of such
Common Stock should have been converted, notwithstanding the
failure to surrender such certificates.
(viii) The Corporation shall pay any and all documentary,
stamp or similar issue or transfer taxes that might be
payable in respect of the issue or delivery of any shares of
capital stock and/or other securities on any conversion or
redemption contemplated by this Section 3; provided, however,
that the Corporation shall not be required to pay any tax
that might be payable in respect of the issue or delivery of
any shares of capital stock and/or other securities on any
conversion or redemption contemplated by this Section 3;
provided, however, that the Corporation shall not be required
to pay any tax that might be payable in respect of any
transfer involved in the issue or delivery of any shares of
capital stock and/or other securities in a name other than
that in which the shares so converted or redeemed were
registered, and no such issue or delivery will be made unless
and until the person requesting such issue pays to the
Corporation the amount of any such tax, or establishes to the
satisfaction of the Corporation that such tax has been paid.
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(ix) The Corporation may, subject to applicable law,
establish such other rules, requirements and procedures to
facilitate any dividend, redemption or conversion
contemplated by this Section 3 as the Board of Directors may
determine to be appropriate under the circumstances.
4. Voting Rights.
At every meeting of stockholders, the holders of Comdisco Stock
and the holders of Ventures Stock shall vote together as a
single class on all matters as to which common stockholders
generally are entitled to vote, unless a separate vote is
required by applicable law. On all such matters for which no
separate vote is required, (a) holders of Comdisco Stock shall
be entitled to one vote per share of Comdisco Stock held and (b)
before the 31st Trading Day after the Effective Date, holders of
Ventures Stock shall be entitled to one vote per share of
Ventures Stock held. On and after the 31st Trading Day after the
Effective Date, holders of Ventures Stock shall be entitled to a
number of votes per share of Ventures Stock held (calculated to
the nearest five decimal places) equal to the Average Market
Value of one share of Ventures Stock divided by the Average
Market Value of one share of Comdisco Stock during the 20
Trading Day period ending on (and including) the applicable
record date; provided that, in no event, shall the total number
of votes of all outstanding Ventures Stock exceed 35% of the
total number of votes of all outstanding series of Common Stock.
5. Liquidation Rights.
In the event of any voluntary or involuntary liquidation,
dissolution or winding-up of the Corporation, holders of each
series of Common Stock shall be entitled to receive their
proportionate interests in the net assets of the Corporation, if
any, remaining for distribution to stockholders, after payment
of or provision for all liabilities, including contingent
liabilities of the Corporation and payment of the liquidation
preference payable to any holders of the Corporation's Preferred
Stock, if any such stock is outstanding. Each share of each
series of Common Stock will be entitled to a share of net
liquidation proceeds in proportion to the respective liquidation
units per share of such class. Each share of Comdisco Stock
shall have one liquidation unit. Each share of the other series
of Common Stock shall have a number of liquidation units
(including a fraction of one liquidation unit) equal to the
quotient (rounded to the nearest five decimal places) of the
average Market Value of one share of such series of Common Stock
during the 20 consecutive Trading Day period ending on, and
including, the 300th day after the Effective Date, divided by
the average Market Value of one share of Comdisco Stock during
such 20 Trading Day period. If the liquidation, dissolution, or
winding-up of the Corporation occurs before such 300th day, the
average Market Value will be determined based on the 20
consecutive Trading Day period ending immediately before the
liquidation, dissolution, or winding-up event, or such lesser
number of consecutive Trading Days immediately prior to such
event if the liquidation, dissolution, or winding-up event
occurs prior to the 21st Trading Day after the Effective Date.
Neither the merger nor consolidation of the Corporation with any
other entity, nor a sale, transfer or lease of all or any part
of the assets of the Corporation, would, alone, be deemed a
liquidation, dissolution or winding-up for purposes of this
Section 5 of this Article 4(A).
6. Adjustments to Number of Shares Issuable with Respect to Comdisco
Group's Retained Interest in Any Group.
The Number of Shares Issuable with Respect to Comdisco Group's
Retained Interest in any Group, as in effect from time to time,
shall, automatically without action by the Board of Directors or
any other person, be:
(a) adjusted in proportion to any changes in the number of
outstanding shares of the series of Common Stock related to
such Group caused by subdivisions (by stock split,
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reclassification or otherwise) or combinations (by reverse
stock split, reclassification or otherwise) of shares of such
series of Common Stock or by dividends or other distributions
of shares of such series of Common Stock on shares of such
series of Common Stock (and, in each such case, rounded, if
necessary, to the nearest whole number);
(b) decreased by (i) if the Corporation issues any shares of
the series of Common Stock related to such Group and the
Board of Directors attributes that issuance (and the proceeds
thereof) to Comdisco Group, the number of shares of each
series of Common Stock so issued, and (ii) if the Board of
Directors reallocates to Comdisco Group any cash or other
assets theretofore allocated to such Group in connection with
a redemption of shares of the series of Common Stock related
to such Group (as required pursuant to clause (ii) of the
proviso to the definition of Comdisco Group below) or in
return for a decrease in the Number of Shares Issuable with
Respect to Comdisco Group's Retained Interest in such Group,
the number (rounded, if necessary, to the nearest whole
number) equal to (x) the aggregate Fair Value of such cash or
other assets divided by (y) the Market Value of one share of
the series of Common Stock related to such Group as of the
date of such reallocation; and
(c) increased by (i) if the Corporation repurchases any
shares of the series of Common Stock related to such Group
and the Board of Directors attributes that repurchase (and
the consideration therefor) to Comdisco Group, the number of
shares of such series of Common Stock so repurchased and (ii)
if the Board of Directors re-allocates to such Group any cash
or other assets theretofore allocated to Comdisco Group in
return for an increase in the Number of Shares Issuable with
Respect to Comdisco Group's Retained Interest in such Group,
the number (rounded, if necessary, to the nearest whole
number) equal to (x) the Fair Value of such cash or other
assets divided by (y) the Market Value of one share of the
series of Common Stock related to such Group as of the date
of such re-allocation.
Neither the Corporation nor the Board of Directors shall take
any action that would, as a result of any of the foregoing
adjustments, reduce the Number of Shares Issuable with Respect
to Comdisco Group's Retained Interest in any Group to below
zero. Subject to the preceding sentence, the Board of Directors
may attribute the issuance of any shares of any series of Common
Stock (and the proceeds here from) or the repurchase of any
series of Common Stock (and the consideration therefor) to
Comdisco Group and Delivery or to the Group to which such series
of Common Stock relates, as the Board of Directors determines in
its sole discretion; provided, however, that the Board of
Directors must attribute to Comdisco Group the issuance of any
shares of any series of Common Stock that are issued (1) as a
dividend or other distribution on, or as consideration for the
repurchase of, shares of Comdisco Stock or (2) as consideration
to acquire any assets or satisfy any liabilities attributed to
Comdisco Group.
7. Additional Definitions.
As used in this Article 4, the following terms shall have the
following meanings (with terms defined in singular having
comparable meaning when used in the plural and vice versa),
unless the context otherwise requires:
"ALL OR SUBSTANTIALLY ALL OF THE ASSETS" of any Group means a
portion of such assets that represents at least 80% of the then
current Fair Value of the assets of such Group.
"AVAILABLE DIVIDEND AMOUNT" for Comdisco Group, on any day on
which dividends are paid on shares of Comdisco Stock, is the
amount that would, immediately prior
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to the payment of such dividends, be legally available for the
payment of dividends on shares of Comdisco Stock under Delaware
law if (a) Comdisco Group and each other Group were each a
single, separate Delaware corporation, (b) Comdisco Group had
outstanding (i) a number of shares of common stock, par value
$0.10 per share, equal to the number of shares of Comdisco Stock
that are then outstanding and (ii) a number of shares of
preferred stock, par value $0.10 per share, equal to the number
of shares of Preferred Stock that have been attributed to
Comdisco Group and are then outstanding, (c) the assumptions
about each Group that is not Comdisco Group set forth in the
next sentence were true and (d) Comdisco Group owned a number of
shares of each series of Common Stock (other than Comdisco
Stock) equal to the Number of Shares Issuable with Respect to
Comdisco Group's Retained Interest in each Group to which each
such series of Common Stock relates.
"AVAILABLE DIVIDEND AMOUNT" for any Group other than Comdisco
Group, on any day on which dividends are paid on shares of the
series of Common Stock relating to such Group, is the amount
that would, immediately prior to the payment of such dividends,
be legally available for the payment of dividends on shares of
such series of Common Stock under Delaware law if such Group
were a single, separate Delaware corporation having outstanding
(a) a number of shares of common stock, par value $0.10 per
share, equal to the number of shares of such series of Common
Stock that are then outstanding plus the Number of Shares
Issuable with Respect to Comdisco Group's Retained Interest in
such Group and (b) a number of shares of preferred stock, par
value $0.10 per share, equal to the number of shares of
Preferred Stock that have been attributed to such Group and are
then outstanding.
"COMDISCO GROUP" means (a) all of the businesses, assets and
liabilities of the Corporation and its subsidiaries, other than
the businesses, assets and liabilities that are part of any
Group other than Comdisco Group, (b) the rights and obligations
of Comdisco Group under any inter-Group debt deemed to be owed
to or by Comdisco Group (as such rights and obligations are
defined in accordance with policies established from time to
time by the Board of Directors) and (c) a proportionate interest
in any Group other than Comdisco Group (after giving effect to
any options, Preferred Stock, other securities or debt issued or
incurred by the Corporation and attributed to any Group other
than Comdisco Group) equal to the Retained Interest Percentage;
provided, however, that: (i) the Corporation may re-allocate
assets from one Group to another Group in return for other
assets or services rendered by that other Group in the ordinary
course of business or in accordance with policies established by
the Board of Directors from time to time, and (ii) if the
Corporation transfers cash, other assets or securities to
holders of shares of a series of Common Stock other than
Comdisco Stock as a dividend or other distribution on shares of
such series of Common Stock (other than a dividend or
distribution payable in shares of such series of Common Stock),
or as payment in a redemption required by Section (3)(a) of this
Article 4(A), then the Board of Directors shall re-allocate from
such Group to Comdisco Group cash or other assets having a Fair
Value equal to the aggregate Fair Value of the cash, other
assets or securities so transferred times the Retained Interest
Amount with respect to such Group as of the record date for such
dividend or distribution, or on the date of such redemption, as
the case may be.
"COMDISCO VENTURES" means (a) the venture financing business
division of the Corporation; and all of the businesses, assets
and liabilities of the Corporation and its subsidiaries that the
Board of Directors has, as of the Effective Date, allocated to
Comdisco Ventures for accounting purposes, (b) any assets or
liabilities acquired or incurred by the Corporation or any of
its subsidiaries after the Effective Date in the ordinary course
of business and attributable to Comdisco Ventures, (c) any
businesses, assets or liabilities acquired or incurred by the
Corporation or any of its subsidiaries after the Effective Date
that the Board of Directors has specifically allocated to
Comdisco Ventures or that the
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Corporation otherwise allocates to Comdisco Ventures in
accordance with policies established from time to time by the
Board of Directors and (d) the rights and obligations of
Comdisco Ventures under any inter-Group debt deemed to be owed
to or by Comdisco Ventures (as such rights and obligations are
defined in accordance with policies established from time to
time by the Board of Directors); provided, however, that:
(i) the Corporation may re-allocate assets from one Group to
another Group in return for other assets or services rendered
by that other Group in the ordinary course of business or in
accordance with policies established by the Board of
Directors from time to time, and (ii) if the Corporation
transfers cash, other assets or securities to holders of
shares of Ventures Stock as a dividend or other distribution
on shares of Ventures Stock (other than a dividend or
distribution payable in shares of Ventures Stock), or as
payment in a redemption of shares of Ventures Stock required
by Section 3(a) of this Article 4(A), then the Board of
Directors shall re-allocate from Comdisco Ventures to
Comdisco Group cash or other assets having a Fair Value equal
to the aggregate Fair Value of the cash, other assets or
securities so transferred multiplied by a fraction, the
numerator of which shall equal the Number of Shares Issuable
with Respect to Comdisco Group's Retained Interest in such
Group on the record date for such dividend or distribution,
or on the date of such redemption, and the denominator of
which shall equal the number of shares of such Group
outstanding on such date.
"DISPOSITION" means a sale, transfer, assignment or other
disposition (whether by merger, consolidation, sale or
otherwise) of All or Substantially All of the Assets of a Group
to one or more persons or entities, in one transaction or a
series of related transactions.
"DISPOSITION DATE" is the date of the consummation of a
Disposition.
"EFFECTIVE DATE" means the date on which this Amended and
Restated Certificate of Incorporation becomes effective under
Delaware law.
"EXEMPT DISPOSITION" means any of the following:
(a) Disposition in connection with the liquidation,
dissolution or winding-up of the Corporation and the
distribution of assets to stockholders, (b) a Disposition to
any person or entity controlled by the Corporation (as
determined by the Board of Directors in its sole discretion),
(c) a Disposition by any Group for which the Corporation
receives consideration primarily consisting of equity
securities (including, without limitation, capital stock of
any kind, interests in a general or limited partnership,
interests in a limited liability company or debt securities
convertible into or exchangeable for, or options or warrants
to acquire, any of the foregoing, in each case without regard
to the voting power or other management or governance rights
associated therewith) of an entity which is primarily engaged
or proposes to engage primarily in one or more businesses
similar or complementary to businesses conducted by such
Group prior to the Disposition, as determined by the Board of
Directors in its sole discretion, (d) a dividend, out of any
Group's assets, to holders of series of Common Stock related
to such Group and a re-allocation of a corresponding amount
of such Group's assets to Comdisco Group as required pursuant
to clause (ii) of the proviso to the definition of Comdisco
Group above, (e) a dividend, out of Comdisco Group's assets,
to holders of Comdisco Stock and (f) any other Disposition,
if (i) at the time of the Disposition there are no shares of
Comdisco Stock outstanding, (ii) at the time of the
Disposition there are no shares of the series of Common Stock
relating to the Group that consummated such Disposition
outstanding or (iii) before the 30th
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Trading Day following the Disposition the Corporation has
mailed a notice stating that it is exercising its right to
exchange all of the outstanding shares of the series of
Common Stock relating to the Group that consummated such
Disposition for newly issued shares of Comdisco Stock as
contemplated under Section 3(b) of this Article 4(A).
"FAIR VALUE" means (a) in the case of cash, the amount thereof,
(b) in the case of capital stock that has been Publicly Traded
for a period of at least 15 months, the Market Value thereof and
(c) in the case of other assets or securities, the fair market
value thereof as the Board of Directors shall determine in good
faith (which determination shall be conclusive and binding on
all stockholders).
"GROUP" initially means Comdisco Group or Comdisco Ventures;
provided that if the Board of Directors authorizes the issuance
of shares of a series of Common Stock other than Comdisco Stock
or Ventures Stock, the Board of Directors shall designate the
assets and liabilities of Comdisco Group to which such series of
Common Stock relates, which assets and liabilities shall be an
additional "Group" for all purposes of this Article 4.
"MARKET VALUE" of a share of any class or series of capital
stock on any Trading Day means the average of the high and low
reported sales prices of such class or series on such Trading
Day or, in case no such reported sale takes place on such
Trading Day, the average of the reported closing bid and asked
prices regular way of a share of such class or series on such
Trading Day, in either case as reported on the New York Stock
Exchange ("NYSE") Composite Tape or, if the shares of such class
or series are not listed or admitted to trading on the NYSE on
such Trading Day, on the principal national securities exchange
on which the shares of such class or series are listed or
admitted to trading or, if not listed or admitted to trading on
any national securities exchange on such Trading Day, on The
Nasdaq National Market System of the Nasdaq Stock Market
("NASDAQ NMS") or, if the shares of such class or series are not
listed or admitted to trading on any national securities
exchange or quoted on the Nasdaq NMS on such Trading Day, the
average of the closing bid and asked prices of a share of such
class or series in the over-the-counter market on such Trading
Day as furnished by any NYSE member firm selected from time to
time by the Corporation or, if such closing bid and asked prices
are not made available by any such NYSE member firm on such
Trading Day, the fair market value of a share of such class or
series as the Board of Directors shall determine in good faith
(which determination shall be conclusive and binding on all
stockholders); provided, that, for purposes of determining the
average Market Value of a share of any class or series of
capital stock for any period, (a) the "Market Value" of a share
of any class or series of capital stock on any day prior to any
"ex-dividend" date or any similar date occurring during such
period for any dividend or distribution (other than any dividend
or distribution contemplated by clause (b)(ii) of this sentence)
paid or to be paid with respect to such capital stock shall be
reduced by the Fair Value of the per share amount of such
dividend or distribution and (b) the "Market Value" of a share
of any class or series of capital stock on any day prior to (i)
the effective date of any subdivision (by stock split or
otherwise) or combination (by reverse stock split or otherwise)
of outstanding shares of such class or series of capital stock
occurring during such period or (ii) any "ex-dividend" date or
any similar date occurring during such period for any dividend
or distribution with respect to such capital stock to be made in
shares of such class or series of capital stock shall be
appropriately adjusted, as determined by the Board of Directors,
to reflect such subdivision, combination, dividend or
distribution; and provided further, if (a) the Corporation
repurchases outstanding shares of any series Common Stock other
than Comdisco Stock and the Board of Directors attributes that
repurchase (and the consideration therefor) to the Group to
which such series of Common Stock relates and (b) the Board of
Directors determines to
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re-allocate to Comdisco Group cash or other assets theretofore
allocated to the Group to which such series of Common Stock
relates in order to avoid a change in the Retained Interest
Percentage, the "Market Value" of a share any series Common
Stock other than Comdisco Stock used to compute the
corresponding reduction in the Number of Shares Issuable with
Respect to Comdisco Group's Retained Interest in the Group to
which such series of Common Stock relates will equal the Fair
Value of the consideration paid per share of Common Stock so
repurchased; and provided further, if the Corporation redeems a
portion of the outstanding shares of any of series of Common
Stock other than Comdisco Stock (and the Board of Directors re-
allocates to Comdisco Group cash or other assets theretofore
allocated to the Group to which such series of Common Stock
relates in the manner required by clause (ii) of the proviso to
the definition of Comdisco Group above), the "Market Value" of a
share of such series of Common Stock used to compute the
corresponding reduction in the Number of Shares Issuable with
Respect to Comdisco Group's Retained Interest in the Group to
which such series of Common Stock relates will equal the Fair
Value of the consideration paid per share of such series of
Common Stock so redeemed.
"NET PROCEEDS" of a Disposition of any of the assets of a Group
means the positive amount, if any, remaining from the gross
proceeds of such Disposition after any payment of, or reasonable
provision (as determined in good faith by the Board of
Directors, which determination will be conclusive and binding on
all stockholders) for, (a) any taxes payable by the Corporation
or any subsidiary or affiliate thereof in respect of such
Disposition or which would have been payable but for the
utilization of tax benefits attributable to the Group not the
subject of the Disposition, (b) any taxes payable by the
Corporation in respect of any resulting dividend or redemption,
(c) any transaction costs, including, without limitation, any
legal, investment banking and accounting fees and expenses and
(d) any liabilities (contingent or otherwise) of, attributed to
or related to, such Group, including, without limitation, any
liabilities for deferred taxes or any indemnity or guarantee
obligations which are outstanding or incurred in connection with
the Disposition or otherwise, any liabilities for future
purchase price adjustments and any obligations with respect to
outstanding securities (other than Common Stock) attributed to
such Group as determined in good faith by the Board of
Directors.
"NUMBER OF SHARES ISSUABLE WITH RESPECT TO COMDISCO GROUP'S
RETAINED INTEREST" means, with respect to any Group, initially
the number the Board of Directors designates prior to the time
the Corporation first issues shares of the series of Common
Stock applicable to such Group as the number of shares of such
series of Common Stock that could be issued by the Corporation
for the account of Comdisco Group in respect of its retained
interest in such Group, as authorized by Section 1 of this
Article 4(A); provided, however, that such number as in effect
from time to time shall automatically be adjusted as required by
Section 6 of this Article 4(A).
"OUTSTANDING INTEREST FRACTION" means (i) with respect to
Comdisco Group, at any time of determination, and (ii) with
respect to any other Group, at any time of determination, a
fraction the numerator of which shall be the number of shares of
the series of Common Stock applicable to such Group outstanding
on such date and the denominator of which shall be the sum of
the number of shares of the series of Common Stock applicable to
such Group outstanding on such date and the Number of Shares
Issuable with Respect to Comdisco Group's Retained Interest in
such Group.
"PUBLICLY TRADED" with respect to any security means (a)
registered under Section 12 of the Securities Exchange Act of
1934, as amended (or any successor provision of law), and (b)
listed for trading on the NYSE (or any other national securities
exchange registered under
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Section 7 of the Securities Exchange Act of 1934, as amended (or
any successor provision of law)) or listed on the Nasdaq NMS (or
any successor market system).
"RETAINED INTEREST" means with respect to any Group, other than
Comdisco Group, at any time of determination, a fraction the
numerator of which shall be the Number of Shares Issuable with
Respect to Comdisco Group's Retained Interest in such Group and
the denominator of which shall be the number of shares of the
series of common stock relating to such Group outstanding on
such date.
"RETAINED INTEREST PERCENTAGE" means (i) with respect to
Comdisco Group, at any time of determination, one (1) and (ii)
with respect to any Group that is not Comdisco Group, at any
time of determination, a fraction the numerator of which shall
be the Number of Shares Issuable with Respect to Comdisco
Group's Retained Interest in such Group and the denominator of
which shall be the sum of the number of shares of the series of
common stock applicable to such Group outstanding on such date
and the Number of Shares Issuable with Respect to Comdisco
Group's Retained Interest in such Group.
"TRADING DAY" means each weekday on which the relevant security
(or, if there are two relevant securities, each relevant
security) is traded on the principal national securities
exchange on which it is listed or admitted to trading or on the
Nasdaq NMS or, if such security is not listed or admitted to
trading on a national securities exchange or quoted on the
Nasdaq NMS, traded in the principal over-the-counter market in
which it trades.
8. Effectiveness of Sections 2 through 7 of This Article 4(A).
The terms of Sections 2 through 7, inclusive, of this Article 4
(A) shall apply only when there are shares of multiple series of
Common Stock outstanding.
9. Determinations by the Board of Directors.
Subject to applicable law, any determinations made by the Board
of Directors in good faith under this Amended and Restated
Certificate of Incorporation, as it may be amended from time to
time, including without limitation any such determinations with
respect to the businesses, assets and liabilities of either
Group, transactions between the Groups or the rights of holders
of any series of Common Stock or Preferred Stock made pursuant
to or in the furtherance hereof, shall be final and binding on
all stockholders of the Corporation. A record of all formal
determinations of the Board of Directors made as contemplated
hereby shall be filed with the records of the actions of the
Board of Directors.
B. Preferred Stock.
1. Designation. The Preferred Stock shall be designated and known as
"Preferred Stock." The number of shares constituting such Preferred
Stock shall be 100,000,000.
2. Rights and Preferences. Preferred Stock may be issued from time
to time in one or more series, each of such series to have such
terms as stated or expressed herein and in the resolution or
resolutions providing for the issue of such series adopted by the
Board of Directors of the Corporation as hereinafter provided. Any
shares of Preferred Stock, which may be redeemed, purchased or
acquired by the Corporation, may be reissued except as otherwise
provided by law. Different series of Preferred Stock shall not be
construed to constitute different classes of shares for the purposes
of voting by classes unless expressly provided.
Authority is hereby expressly granted to the Board of Directors from
time to time to issue the Preferred Stock in one or more series, and
in connection with the creation of any such series, by resolution or
resolutions providing for the issue of the shares thereof, to
determine and fix such voting powers, full or limited, or no voting
powers, and such designations, preferences and relative
participating, optional or other special rights, and qualifications,
limitations or restrictions
A-14
<PAGE>
thereof, including without limitation thereof, dividend rights,
conversion rights, redemption privileges and liquidation
preferences, as shall be stated and expressed in such resolutions,
all to the full extent now or hereafter permitted by the General
Corporation Law of Delaware. Without limiting the generality of the
foregoing, the resolutions providing for issuance of any series of
Preferred Stock may provide that such series shall be superior or
rank equally or be junior to the Preferred Stock of any other series
to the extent permitted by law. Except as otherwise provided in this
Amended and Restated Certificate of Incorporation, no vote of the
holders of the Preferred Stock or Common Stock shall be a
prerequisite to the designation or issuance of any shares of any
series of the Preferred Stock authorized by and complying with the
conditions of this Amended and Restated Certificate of
Incorporation, the right to have such vote being expressly waived by
all present and future holders of the capital stock of the
Corporation.
C. Designation of Series C Junior Participating Preferred Stock
1. Designation and Amount. Two Hundred Thousand (200,000) of the
authorized and unissued shares of Preferred Stock are designated as
"Series C Junior Participating Preferred Stock." Such number of
shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of
shares of Series C Preferred Stock to a number less than the number
of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued
by the Corporation convertible into Series C Junior Participating
Preferred Stock.
2. Dividends and Distributions.
(a) The holders of shares of Series C Junior Participating
Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash
on the last day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or
fraction of a share of Series C Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (x) $1.00 or (y) subject to the
provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend
payable in shares of Comdisco Stock or a subdivision of the
outstanding shares of Comdisco Stock (by reclassification or
otherwise), declared on the Comdisco Stock of the Corporation
since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of
Series C Junior Participating Preferred Stock. In the event the
Corporation shall at any time after the date that these Restated
and Amended Articles of Incorporation become effective (the
"Rights Declaration Date") (i) declare any dividend on Comdisco
Stock payable in shares of Comdisco Stock, (ii) subdivide the
outstanding Comdisco Stock, or (iii) combine the outstanding
Comdisco Stock into a smaller number of shares, then in each
such case the amount to which holders of shares of Series C
Junior Participating Preferred Stock were entitled immediately
prior to such event under clause (y) of the preceding sentence
shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Comdisco Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Comdisco Stock that were
outstanding immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on
the Series C Junior Participating Preferred Stock as provided in
Paragraph (a) above immediately after it declares a dividend or
distribution on the Comdisco Stock (other than a dividend
payable in shares of Comdisco Stock); provided that, in the
event no dividend or distribution shall have
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<PAGE>
been declared on the Comdisco Stock during the period between
any Quarterly Dividend Payment Date and the next subsequent
Quarterly Dividend Payment Date, a dividend of $0.01 per share
on the Series C Junior Participating Preferred Stock shall
nevertheless be payable on such subsequent Quarterly Dividend
Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series C Junior Participating Preferred
Stock from the Quarterly Dividend Payment Date next preceding
the date of issue of such shares of Series C Junior
Participating Preferred Stock, unless the date of issue of such
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders
of shares of Series C Junior Participating Preferred Stock
entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series
C Junior Participating Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the determination
of holders of shares of Series C Junior Participating Preferred
Stock entitled to receive payment of a dividend or distribution
declared thereon, which record date shall be no more than 30 days
prior to the date fixed for the payment thereof.
3. Voting Rights. The holders of shares of Series C Junior
Participating Preferred Stock shall have the following voting
rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series C Junior Participating Preferred
Stock shall entitle the holder thereof to 1,000 votes on all
matters submitted to a vote of the stockholders of the
Corporation. In the event the Corporation shall at any time
after the Rights Declaration Date (i) declare any dividend on
Comdisco Stock payable in shares of Comdisco Stock, (ii)
subdivide the outstanding Comdisco Stock, or (iii) combine the
outstanding Comdisco Stock into a smaller number of shares, then
in each such case the number of votes per share to which holders
of shares of Series C Junior Participating Preferred Stock were
entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is
the number of shares of Comdisco Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Comdisco Stock that were outstanding immediately prior
to such event.
(b) Except as otherwise provided herein or by law, the holders
of shares of Series C Junior Participating Preferred Stock and
the holders of shares of Comdisco Stock shall vote together as
one class on all matters submitted to a vote of stockholders of
the Corporation.
(c) (i) If at any time dividends on any Series C Junior
Participating Preferred Stock shall be in arrears in an amount
equal to six (6) quarterly dividends thereon, the occurrence of
such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period
on all shares of Series C Junior Participating Preferred Stock
then outstanding shall have been declared and paid or set apart
for payment. During each default period, all holders of
Preferred Stock (including holders of the Series C Junior
Participating Preferred Stock) with dividends in arrears in an
amount equal to six (6) quarterly dividends thereon, voting as a
class, irrespective of series, shall have the right to elect two
(2) directors.
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<PAGE>
(ii) During any default period, such voting right of the holders
of Series C Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(c) of this Article 4(C) or
at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that such voting right shall
not be exercised unless the holders of ten percent (10%) in
number of shares of Preferred Stock outstanding shall be present
in person or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which
the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the
right, voting as a class, to elect directors to fill such
vacancies, if any, in the Board of Directors as may then exist
up to two (2) directors or, if such right is exercised at an
annual meeting, to elect two (2) directors. If the number which
may be so elected at any special meeting does not amount to the
required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of directors as
shall be necessary to permit the election by them of the
required number. After the holders of the Preferred Stock shall
have exercised their right to elect directors in any default
period and during the continuance of such period, the number of
directors shall not be increased or decreased except by vote of
the holders of Preferred Stock as herein provided or pursuant to
the rights of any equity securities ranking senior to or pari
passu with the Series C Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right
to elect directors, the Board of Directors may order, or any
stockholder or stockholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may
request, the calling of special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the
President, a Vice-President or the Secretary of the Corporation.
Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this
subparagraph (iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him or her
at his or her last address as the same appears on the books of
the Corporation. Such meeting shall be called for a time not
earlier than 20 days and not later than 60 days after such order
or request or in default of the calling of such meeting within
60 days after such order or request, such meeting may be called
on similar notice by any stockholder or stockholders owning in
the aggregate not less than ten percent (10%) of the total
number of shares of Preferred Stock outstanding. Notwithstanding
the provisions of this subparagraph (iii), no such special
meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting
of the stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall
continue to be entitled to elect the whole number of directors
until the holders of Preferred Stock shall have exercised their
right to elect two (2) directors voting as a class, after the
exercise of which right (x) the directors so elected by the
holders of Preferred Stock shall continue in office until their
successors shall have been elected by such holders or until the
expiration of the default period, and (y) any vacancy in the
Board of Directors may (except as provided in Paragraph (ii) of
this Section 3(c) of this Article 4(C)) be filled by vote of a
majority of the remaining directors theretofore elected by the
holders of the class of stock which elected the director whose
office shall have become vacant. References in this Paragraph
(c) to directors elected by the holders of a particular class of
stock shall include directors elected by such directors to fill
vacancies as provided in clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect
directors shall cease, (y) the term of any directors elected
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<PAGE>
by the holders of Preferred Stock as a class shall terminate,
and (z) the number of directors shall be such number as may be
provided for in the Amended and Restated Certificate of
Incorporation or by-laws irrespective of any increase made
pursuant to the provisions of Paragraph (c)(ii) of this Section
3 (such number being subject, however, to change thereafter in
any manner provided by law or in the Amended and Restated
Certificate of Incorporation or by-laws). Any vacancies in the
Board of Directors effected by the provisions of clauses (y) and
(z) in the preceding sentence may be filled by a majority of the
remaining directors.
(d) Except as set forth herein, holders of Series C Junior
Participating Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series C Junior Participating
Preferred Stock as provided in Section 2 of this Article 4(C)
are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares
of Series C Junior Participating Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up)
to the Series C Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series C Junior Participating Preferred
Stock, except dividends paid ratably on the Series C Junior
Participating Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are
then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding
up) with the Series C Junior Participating Preferred Stock,
provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series C Junior
Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series C Junior Participating Preferred Stock, or
any shares of stock ranking on a parity with the Series C
Junior Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of such
shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and
other relative rights and preferences of the respective
series and classes, shall determine in good faith will result
in fair and equitable treatment among the respective series
or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation
could, under Paragraph (a) of this Section 4 of this Article
4(C), purchase or otherwise acquire such shares at such time and
in such manner.
5. Reacquired Shares. Any shares of Series C Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled
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<PAGE>
promptly after the acquisition thereof. All such shares shall upon
their cancellation become authorized but unissued shares of
Preferred Stock and may be reissued as part of a new series of
Preferred Stock to be created by resolution or resolutions of the
Board of Directors, subject to the conditions and restrictions on
issuance set forth herein.
6. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation (voluntary or otherwise), dissolution
or winding up of the Corporation, no distribution shall be made
to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series C Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series C Junior Participating
Preferred Stock shall have received an amount equal to 1,000
times the Purchase Price, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series C Liquidation
Preference"). Following the payment of the full amount of the
Series C Liquidation Preference, no additional distributions
shall be made to the holders of shares of Series C Junior
Participating Preferred Stock unless, prior thereto, the holders
of shares of Comdisco Stock shall have received an amount per
share (the "Comdisco Adjustment") equal to the quotient obtained
by dividing (i) the Series C Liquidation Preference by (ii)
1,000 (as appropriately adjusted as set forth in subparagraph
(C) below to reflect such events as stock splits, stock
dividends and recapitalizations with respect to the Comdisco
Stock) (such number in clause (ii), the "Comdisco Adjustment
Number"). Following the payment of the full amount of the Series
C Liquidation Preference and the Comdisco Adjustment in respect
of all outstanding shares of Series C Junior Participating
Preferred Stock and Comdisco Stock, respectively, holders of
Series C Junior Participating Preferred Stock and holders of
shares of Comdisco Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in
the ratio of the Comdisco Adjustment Number to 1 with respect to
such Preferred Stock and Comdisco Stock, on a per share basis,
respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series C Liquidation
Preference and the liquidation preferences of all other series
of preferred stock, if any, which rank on a parity with the
Series C Junior Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the
Comdisco Adjustment, then such remaining assets shall be
distributed ratably to the holders of Comdisco Stock.
(c) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Comdisco
Stock payable in shares of Comdisco Stock, (ii) subdivide the
outstanding Comdisco Stock, or (iii) combine the outstanding
Comdisco Stock into a smaller number of shares, then in each
such case the Comdisco Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such
Comdisco Adjustment Number by a fraction the numerator of which
is the number of shares of Comdisco Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Comdisco Stock that were outstanding
immediately prior to such event.
7. Consolidation, Merger, etc. Notwithstanding anything to the
contrary contained herein, in case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which
the shares of Comdisco Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any
such case the shares of Series C Junior Participating Preferred
Stock shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind),
as the case may be,
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<PAGE>
into which or for which each share of Comdisco Stock is changed or
exchanged. In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Comdisco Stock
payable in shares of Comdisco Stock, (ii) subdivide the outstanding
Comdisco Stock, or (iii) combine the outstanding Comdisco Stock into
a smaller number of shares, then in each such case the amount set
forth in the preceding sentence with respect to the exchange or
change of shares of Series C Junior Participating Preferred Stock
shall be adjusted by multiplying such amount by a fraction the
numerator of which is the number of shares of Comdisco Stock
outstanding immediately after such event and the denominator of
which is the number of shares of Comdisco Stock that were
outstanding immediately prior to such event.
8. No Redemption. The shares of Series C Junior Participating
Preferred Stock shall not be redeemable.
9. Amendment. The Amended and Restated Certificate of Incorporation
of the Corporation shall not be further amended in any manner which
would materially alter or change the powers, preferences or special
rights of the Series C Junior Participating Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of
a majority or more of the outstanding shares of Series C Junior
Participating Preferred Stock, voting separately as a class.
10. Fractional Shares. Series C Junior Participating Preferred Stock
may be issued in fractions of a share which shall entitle the
holder, in proportion to such holders fractional shares, to exercise
voting rights, receive dividends, participate in distributions and
to have the benefit of all other rights of holders of Series C
Junior Participating Preferred Stock.
D. Designation of Series D Junior Participating Preferred Stock
1. Designation and Amount. Two Hundred Thousand (200,000) of the
authorized and unissued shares of Preferred Stock are designated as
"Series D Junior Participating Preferred Stock." Such number of
shares may be increased or decreased by resolution of the Board of
Directors; provided, that no decrease shall reduce the number of
shares of Series D Preferred Stock to a number less than the number
of shares then outstanding plus the number of shares reserved for
issuance upon the exercise of outstanding options, rights or
warrants or upon the conversion of any outstanding securities issued
by the Corporation convertible into Series D Junior Participating
Preferred Stock.
2. Dividends and Distributions.
(a) The holders of shares of Series D Junior Participating
Preferred Stock shall be entitled to receive, when, as and if
declared by the Board of Directors out of funds legally
available for the purpose, quarterly dividends payable in cash
on the last day of March, June, September and December in each
year (each such date being referred to herein as a "Quarterly
Dividend Payment Date"), commencing on the first Quarterly
Dividend Payment Date after the first issuance of a share or
fraction of a share of Series D Junior Participating Preferred
Stock, in an amount per share (rounded to the nearest cent)
equal to the greater of (x) $1.00 or (y) subject to the
provision for adjustment hereinafter set forth, 1,000 times the
aggregate per share amount of all cash dividends, and 1,000
times the aggregate per share amount (payable in kind) of all
non-cash dividends or other distributions other than a dividend
payable in shares of Ventures Stock or a subdivision of the
outstanding shares of Ventures Stock (by reclassification or
otherwise), declared on the Ventures Stock of the Corporation
since the immediately preceding Quarterly Dividend Payment Date,
or, with respect to the first Quarterly Dividend Payment Date,
since the first issuance of any share or fraction of a share of
Series D Junior Participating Preferred Stock. In the event the
Corporation shall at any time after the date that these Restated
and Amended Articles of Incorporation become effective (the
"Rights Declaration Date") (i) declare any dividend on Ventures
Stock payable in shares of Ventures Stock, (ii) subdivide the
outstanding Ventures Stock, or (iii) combine the outstanding
Ventures Stock into a smaller number of shares, then in each
such case the
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amount to which holders of shares of Series D Junior
Participating Preferred Stock were entitled immediately prior to
such event under clause (b) of the preceding sentence shall be
adjusted by multiplying such amount by a fraction the numerator
of which is the number of shares of Ventures Stock outstanding
immediately after such event and the denominator of which is the
number of shares of Ventures Stock that were outstanding
immediately prior to such event.
(b) The Corporation shall declare a dividend or distribution on
the Series D Junior Participating Preferred Stock as provided in
Paragraph (y) above immediately after it declares a dividend or
distribution on the Ventures Stock (other than a dividend
payable in shares of Ventures Stock); provided that, in the
event no dividend or distribution shall have been declared on
the Ventures Stock during the period between any Quarterly
Dividend Payment Date and the next subsequent Quarterly Dividend
Payment Date, a dividend of $0.01 per share on the Series D
Junior Participating Preferred Stock shall nevertheless be
payable on such subsequent Quarterly Dividend Payment Date.
(c) Dividends shall begin to accrue and be cumulative on
outstanding shares of Series D Junior Participating Preferred
Stock from the Quarterly Dividend Payment Date next preceding
the date of issue of such shares of Series D Junior
Participating Preferred Stock, unless the date of issue of such
shares is prior to the record date for the first Quarterly
Dividend Payment Date, in which case dividends on such shares
shall begin to accrue from the date of issue of such shares, or
unless the date of issue is a Quarterly Dividend Payment Date or
is a date after the record date for the determination of holders
of shares of Series D Junior Participating Preferred Stock
entitled to receive a quarterly dividend and before such
Quarterly Dividend Payment Date, in either of which events such
dividends shall begin to accrue and be cumulative from such
Quarterly Dividend Payment Date. Accrued but unpaid dividends
shall not bear interest. Dividends paid on the shares of Series
D Junior Participating Preferred Stock in an amount less than
the total amount of such dividends at the time accrued and
payable on such shares shall be allocated pro rata on a share-
by-share basis among all such shares at the time outstanding.
The Board of Directors may fix a record date for the
determination of holders of shares of Series D Junior
Participating Preferred Stock entitled to receive payment of a
dividend or distribution declared thereon, which record date
shall be no more than 30 days prior to the date fixed for the
payment thereof.
3. Voting Rights. The holders of shares of Series D Junior
Participating Preferred Stock shall have the following voting
rights:
(a) Subject to the provision for adjustment hereinafter set
forth, each share of Series D Junior Participating Preferred
Stock shall entitle the holder thereof to the number of votes on
all matters submitted to a vote of the stockholders of the
Corporation equal to the product of (x) 1,000 and (y) the number
of votes then attributed to a share of Ventures Stock. In the
event the Corporation shall at any time after the Rights
Declaration Date (i) declare any dividend on Ventures Stock
payable in shares of Ventures Stock, (ii) subdivide the
outstanding Ventures Stock, or (iii) combine the outstanding
Ventures Stock into a smaller number of shares, then in each
such case the number of votes per share to which holders of
shares of Series D Junior Participating Preferred Stock were
entitled immediately prior to such event shall be adjusted by
multiplying such number by a fraction the numerator of which is
the number of shares of Ventures Stock outstanding immediately
after such event and the denominator of which is the number of
shares of Ventures Stock that were outstanding immediately prior
to such event.
(b) Except as otherwise provided herein or by law, the holders
of shares of Series D Junior Participating Preferred Stock and
the holders of shares of Ventures Stock shall vote together as
one class on all matters submitted to a vote of stockholders of
the Corporation.
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(c) (i) If at any time dividends on any Series D Junior
Participating Preferred Stock shall be in arrears in an amount
equal to six (6) quarterly dividends thereon, the occurrence of
such contingency shall mark the beginning of a period (herein
called a "default period") which shall extend until such time
when all accrued and unpaid dividends for all previous quarterly
dividend periods and for the current quarterly dividend period
on all shares of Series D Junior Participating Preferred Stock
then outstanding shall have been declared and paid or set apart
for payment. During each default period, all holders of
Preferred Stock (including holders of the Series D Junior
Participating Preferred Stock) with dividends in arrears in an
amount equal to six (6) quarterly dividends thereon, voting as a
class, irrespective of series, shall have the right to elect two
(2) directors.
(ii) During any default period, such voting right of the holders
of Series D Junior Participating Preferred Stock may be
exercised initially at a special meeting called pursuant to
subparagraph (iii) of this Section 3(c) of this Article 4(C) or
at any annual meeting of stockholders, and thereafter at annual
meetings of stockholders, provided that such voting right shall
not be exercised unless the holders of ten percent (10%) in
number of shares of Preferred Stock outstanding shall be present
in person or by proxy. The absence of a quorum of the holders of
Common Stock shall not affect the exercise by the holders of
Preferred Stock of such voting right. At any meeting at which
the holders of Preferred Stock shall exercise such voting right
initially during an existing default period, they shall have the
right, voting as a class, to elect directors to fill such
vacancies, if any, in the Board of Directors as may then exist
up to two (2) directors or, if such right is exercised at an
annual meeting, to elect two (2) directors. If the number which
may be so elected at any special meeting does not amount to the
required number, the holders of the Preferred Stock shall have
the right to make such increase in the number of directors as
shall be necessary to permit the election by them of the
required number. After the holders of the Preferred Stock shall
have exercised their right to elect directors in any default
period and during the continuance of such period, the number of
directors shall not be increased or decreased except by vote of
the holders of Preferred Stock as herein provided or pursuant to
the rights of any equity securities ranking senior to or pari
passu with the Series D Junior Participating Preferred Stock.
(iii) Unless the holders of Preferred Stock shall, during an
existing default period, have previously exercised their right
to elect directors, the Board of Directors may order, or any
stockholder or stockholders owning in the aggregate not less
than ten percent (10%) of the total number of shares of
Preferred Stock outstanding, irrespective of series, may
request, the calling of special meeting of the holders of
Preferred Stock, which meeting shall thereupon be called by the
President, a Vice-President or the Secretary of the Corporation.
Notice of such meeting and of any annual meeting at which
holders of Preferred Stock are entitled to vote pursuant to this
subparagraph (iii) shall be given to each holder of record of
Preferred Stock by mailing a copy of such notice to him or her
at his or her last address as the same appears on the books of
the Corporation. Such meeting shall be called for a time not
earlier than 20 days and not later than 60 days after such order
or request or in default of the calling of such meeting within
60 days after such order or request, such meeting may be called
on similar notice by any stockholder or stockholders owning in
the aggregate not less than ten percent (10%) of the total
number of shares of Preferred Stock outstanding. Notwithstanding
the provisions of this subparagraph (iii), no such special
meeting shall be called during the period within 60 days
immediately preceding the date fixed for the next annual meeting
of the stockholders.
(iv) In any default period, the holders of Common Stock, and
other classes of stock of the Corporation if applicable, shall
continue to be entitled to elect the whole number of directors
until the holders of Preferred Stock shall have exercised their
right to elect two (2) directors voting as a class, after the
exercise of which right (x) the directors so elected by the
holders of Preferred Stock shall continue in office until their
successors shall have been elected by
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<PAGE>
such holders or until the expiration of the default period, and
(y) any vacancy in the Board of Directors may (except as
provided in Paragraph (ii) of this Section 3(c) of this Article
4(D)) be filled by vote of a majority of the remaining directors
theretofore elected by the holders of the class of stock which
elected the director whose office shall have become vacant.
References in this Paragraph (c) to directors elected by the
holders of a particular class of stock shall include directors
elected by such directors to fill vacancies as provided in
clause (y) of the foregoing sentence.
(v) Immediately upon the expiration of a default period, (x) the
right of the holders of Preferred Stock as a class to elect
directors shall cease, (y) the term of any directors elected by
the holders of Preferred Stock as a class shall terminate, and
(z) the number of directors shall be such number as may be
provided for in the Amended and Restated Certificate of
Incorporation or by-laws irrespective of any increase made
pursuant to the provisions of Paragraph (ii) of this Section 3
of this Article 4(D) (such number being subject, however, to
change thereafter in any manner provided by law or in the
Amended and Restated Certificate of Incorporation or by-laws).
Any vacancies in the Board of Directors effected by the
provisions of clauses (y) and (z) in the preceding sentence may
be filled by a majority of the remaining directors.
(d) Except as set forth herein, holders of Series D Junior
Participating Preferred Stock shall have no special voting
rights and their consent shall not be required (except to the
extent they are entitled to vote with holders of Common Stock as
set forth herein) for taking any corporate action.
4. Certain Restrictions.
(a) Whenever quarterly dividends or other dividends or
distributions payable on the Series D Junior Participating
Preferred Stock as provided in Section 2 of this Article 4(D)
are in arrears, thereafter and until all accrued and unpaid
dividends and distributions, whether or not declared, on shares
of Series D Junior Participating Preferred Stock outstanding
shall have been paid in full, the Corporation shall not:
(i) declare or pay dividends on, make any other distributions
on, or redeem or purchase or otherwise acquire for
consideration any shares of stock ranking junior (either as
to dividends or upon liquidation, dissolution or winding up)
to the Series D Junior Participating Preferred Stock;
(ii) declare or pay dividends on or make any other
distributions on any shares of stock ranking on a parity
(either as to dividends or upon liquidation, dissolution or
winding up) with the Series D Junior Participating Preferred
Stock, except dividends paid ratably on the Series D Junior
Participating Preferred Stock and all such parity stock on
which dividends are payable or in arrears in proportion to
the total amounts to which the holders of all such shares are
then entitled;
(iii) redeem or purchase or otherwise acquire for
consideration shares of any stock ranking on a parity (either
as to dividends or upon liquidation, dissolution or winding
up) with the Series D Junior Participating Preferred Stock,
provided that the Corporation may at any time redeem,
purchase or otherwise acquire shares of any such parity stock
in exchange for shares of any stock of the Corporation
ranking junior (either as to dividends or upon dissolution,
liquidation or winding up) to the Series D Junior
Participating Preferred Stock; or
(iv) purchase or otherwise acquire for consideration any
shares of Series D Junior Participating Preferred Stock, or
any shares of stock ranking on a parity with the Series D
Junior Participating Preferred Stock, except in accordance
with a purchase offer made in writing or by publication (as
determined by the Board of Directors) to all holders of
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such shares upon such terms as the Board of Directors, after
consideration of the respective annual dividend rates and
other relative rights and preferences of the respective
series and classes, shall determine in good faith will result
in fair and equitable treatment among the respective series
or classes.
(b) The Corporation shall not permit any subsidiary of the
Corporation to purchase or otherwise acquire for consideration
any shares of stock of the Corporation unless the Corporation
could, under Paragraph (a) of this Section 4 of this Article
4(D), purchase or otherwise acquire such shares at such time and
in such manner.
5. Reacquired Shares. Any shares of Series D Junior Participating
Preferred Stock purchased or otherwise acquired by the Corporation
in any manner whatsoever shall be retired and cancelled promptly
after the acquisition thereof. All such shares shall upon their
cancellation become authorized but unissued shares of Preferred
Stock and may be reissued as part of a new series of Preferred Stock
to be created by resolution or resolutions of the Board of
Directors, subject to the conditions and restrictions on issuance
set forth herein.
6. Liquidation, Dissolution or Winding Up.
(a) Upon any liquidation (voluntary or otherwise), dissolution
or winding up of the Corporation, no distribution shall be made
to the holders of shares of stock ranking junior (either as to
dividends or upon liquidation, dissolution or winding up) to the
Series D Junior Participating Preferred Stock unless, prior
thereto, the holders of shares of Series D Junior Participating
Preferred Stock shall have received an amount equal to 1,000
times the Purchase Price, plus an amount equal to accrued and
unpaid dividends and distributions thereon, whether or not
declared, to the date of such payment (the "Series D Liquidation
Preference"). Following the payment of the full amount of the
Series D Liquidation Preference, no additional distributions
shall be made to the holders of shares of Series D Junior
Participating Preferred Stock unless, prior thereto, the holders
of shares of Ventures Stock shall have received an amount per
share (the "Ventures Adjustment") equal to the quotient obtained
by dividing (i) the Series D Liquidation Preference by (ii)
1,000 (as appropriately adjusted as set forth in subparagraph
(c) below to reflect such events as stock splits, stock
dividends and recapitalizations with respect to the Ventures
Stock) (such number in clause (ii), the "Ventures Adjustment
Number"). Following the payment of the full amount of the Series
D Liquidation Preference and the Ventures Adjustment in respect
of all outstanding shares of Series D Junior Participating
Preferred Stock and Ventures Stock, respectively, holders of
Series D Junior Participating Preferred Stock and holders of
shares of Ventures Stock shall receive their ratable and
proportionate share of the remaining assets to be distributed in
the ratio of the Ventures Adjustment Number to 1 with respect to
such Preferred Stock and Ventures Stock, on a per share basis,
respectively.
(b) In the event, however, that there are not sufficient assets
available to permit payment in full of the Series D Liquidation
Preference and the liquidation preferences of all other series
of preferred stock, if any, which rank on a parity with the
Series D Junior Participating Preferred Stock, then such
remaining assets shall be distributed ratably to the holders of
such parity shares in proportion to their respective liquidation
preferences. In the event, however, that there are not
sufficient assets available to permit payment in full of the
Ventures Adjustment, then such remaining assets shall be
distributed ratably to the holders of Ventures Stock.
(c) In the event the Corporation shall at any time after the
Rights Declaration Date (i) declare any dividend on Ventures
Stock payable in shares of Ventures Stock, (ii) subdivide the
outstanding Ventures Stock, or (iii) combine the outstanding
Ventures Stock into a smaller number of shares, then in each
such case the Ventures Adjustment Number in effect immediately
prior to such event shall be adjusted by multiplying such
Ventures Adjustment Number by a fraction the numerator of which
is the number of shares of Ventures Stock
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<PAGE>
outstanding immediately after such event and the denominator of
which is the number of shares of Ventures Stock that were
outstanding immediately prior to such event.
7. Consolidation, Merger, etc. Notwithstanding anything to the
contrary contained herein, in case the Corporation shall enter into
any consolidation, merger, combination or other transaction in which
the shares of Ventures Stock are exchanged for or changed into other
stock or securities, cash and/or any other property, then in any
such case the shares of Series D Junior Participating Preferred
Stock shall at the same time be similarly exchanged or changed in an
amount per share (subject to the provision for adjustment
hereinafter set forth) equal to 1,000 times the aggregate amount of
stock, securities, cash and/or any other property (payable in kind),
as the case may be, into which or for which each share of Ventures
Stock is changed or exchanged. In the event the Corporation shall at
any time after the Rights Declaration Date (i) declare any dividend
on Ventures Stock payable in shares of Ventures Stock, (ii)
subdivide the outstanding Ventures Stock, or (iii) combine the
outstanding Ventures Stock into a smaller number of shares, then in
each such case the amount set forth in the preceding sentence with
respect to the exchange or change of shares of Series D Junior
Participating Preferred Stock shall be adjusted by multiplying such
amount by a fraction the numerator of which is the number of shares
of Ventures Stock outstanding immediately after such event and the
denominator of which is the number of shares of Ventures Stock that
were outstanding immediately prior to such event.
8. No Redemption. The shares of Series D Junior Participating
Preferred Stock shall not be redeemable.
9. Amendment. The Amended and Restated Certificate of Incorporation
of the Corporation shall not be further amended in any manner which
would materially alter or change the powers, preferences or special
rights of the Series D Junior Participating Preferred Stock so as to
affect them adversely without the affirmative vote of the holders of
a majority or more of the outstanding shares of Series D Junior
Participating Preferred Stock, voting separately as a class.
10. Fractional Shares. Series D Junior Participating Preferred Stock
may be issued in fractions of a share which shall entitle the
holder, in proportion to such holders fractional shares, to exercise
voting rights, receive dividends, participate in distributions and
to have the benefit of all other rights of holders of Series D
Junior Participating Preferred Stock.
5. The name and mailing address of each incorporator is as follows:
<TABLE>
<CAPTION>
Name Mailing Address
---- ---------------
<S> <C>
B.J. Consono 1209 Orange Street
Wilmington, Delaware 19899
F.J. Obara, Jr. 1209 Orange Street
Wilmington, Delaware 19899
J.L. Rivera 1209 Orange Street
Wilmington, Delaware 19899
</TABLE>
6. The Corporation is to have perpetual existence.
7. In furtherance and not in limitation of the powers conferred by statute,
the board of directors is expressly authorized:
To make, alter or repeal the by-laws of the Corporation.
To authorize and cause to be executed mortgages and liens upon the real
and personal property of the Corporation.
To set apart out of any of the funds of the Corporation available for
dividends a reserve or reserves for any proper purpose and to abolish
any such reserve in the manner in which it was created.
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<PAGE>
By a majority of the whole board, to 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. The by-laws may provide that in
the absence or disqualification of a member of a committee, the member
or members thereof present at any meeting and not disqualified from
voting, whether or not he or they constitute a quorum, may unanimously
appoint another member of the board of directors to act at the meeting
in the place of any such absent or disqualified member. Any such
committee, to the extent provided in the resolution of the board of
directors, or in the by-laws of the Corporation, shall have and may
exercise all the powers and authority of the board of directors in the
management of the business and affairs of the Corporation, and may
authorize the seal of the Corporation to be affixed to all papers which
may require it; but no such committee shall have the power or authority
in reference to amending the Amended and Restated Certificate of
Incorporation, adopting an agreement of merger or consolidation,
recommending to the stockholders the sale, lease or exchange of all or
substantially all of the Corporation's property and assets,
recommending to the stockholders a dissolution of the Corporation or a
revocation of a dissolution, or amending the by-laws of the
Corporation; and, unless the resolution or by-laws expressly so
provide, no such committee shall have the power or authority to declare
a dividend or to authorize the issuance of stock.
When and as authorized by the stockholders in accordance with statute,
to sell, lease or exchange all or substantially all of the property and
assets of the Corporation, including its good will and its corporate
franchises, upon such terms and conditions and for such consideration,
which may consist in whole or in part of money or property including
shares of stock in, and/or other securities of, any other corporation
or corporations, as its board of directors shall deem expedient and for
the best interest of the Corporation.
8. 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 of 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
General Corporation Law of the State of Delaware 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 General
Corporation Law of the State of Delaware 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 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.
9. 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 statutes) 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. Elections
of directors need not to be by written ballot unless the by-laws of the
corporation shall so provide.
10. Except as expressly provided in this Amended and Restated Articles of
Incorporation, the Corporation reserves the right to amend, alter, change
or repeal any provision contained in this Amended and Restated Articles of
Incorporation, in the manner now or hereafter prescribed by statute, and
all rights conferred upon stockholders herein are granted subject to this
reservation.
11. The number of directors which shall constitute the whole board shall be
not less than four nor more than fifteen, such number to be set by or in
accordance with the by-laws. Such by-law provision can only
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<PAGE>
be amended by the Board of Directors or by the affirmative vote of not less
than 66 2/3% of the stock then entitled to vote in an election of
directors. The directors shall be divided into three classes as nearly
equal in number as possible. At the 1986 annual meeting of stockholders,
one class of directors was elected for a one-year term, one class for a
two-year term and one class for a three-year term. At each succeeding
annual meeting of stockholders, successors to the class of directors whose
term expires in that year will be elected for a three-year term. A director
shall hold office until the annual meeting of stockholders for the year in
which his term expires or until his successor is elected and qualified.
Vacancies and newly created directorships within any class resulting from
any increase in the authorized number of directors may be filled by a
majority of directors then in office, though less than a quorum, and any
director so chosen shall hold office for a term which shall coincide with
the term of such class to which he is elected. If there are no directors in
office, then an election of directors may be held in the manner provided by
statute.
The affirmative vote of the holders of at least 66 2/3% of the stock then
entitled to vote in an election of directors shall be required for the
approval of any proposal that (a) any director of the corporation be
removed from office for cause; or (b) this Article 11 of this Amended and
Restated Certificate of Incorporation be altered, amended or repealed.
12. A. In addition to the requirements of any applicable statute, the
affirmative vote of not less than 66 2/3% of the stock then entitled to
vote in an election of directors owned by persons other than a "substantial
stockholder" (as hereinafter defined), considered for purposes of this
Article 12 as one class, shall be required for the approval or
authorization of any "business combination" (as hereinafter defined)
between the corporation and any substantial stockholders provided, however,
that such additional voting requirement shall not be applicable if:
1. The business combination is solely between the Corporation and
another corporation, 50% or more of the voting stock of which is owned
by the Corporation and none of which is owned by a substantial
stockholder and each holder of common stock of the Corporation receives
the same type of consideration in proportion to his holdings; or
2. All the following conditions are satisfied: (a) the cash or fair
market value of the property, securities or "other consideration to be
received" (as hereinafter defined) per share in the business
combination by holders of the common stock of the corporation is not
less than the higher of (i) the highest price per share (including
brokerage commissions, soliciting dealers' fees and dealer-manager
compensation) paid by such substantial stockholder in acquiring any of
its holdings of the Corporation's common stock, or (ii) the highest per
share market price of common stock during the three-month period
immediately preceding the date of the proxy statement described in (c)
below or, if none, during the six-month period prior to the
consummation of the business combination; (b) after becoming a
substantial stockholder and prior to the consummation of such business
combination (i) such substantial stockholder shall not have acquired
any newly issued shares of capital stock, directly or indirectly, from
the Corporation (except upon conversion of convertible securities
acquired by it prior to becoming a substantial stockholder or upon
compliance with the provisions of this Article 12 or as a result of a
pro rata stock dividend or stock split), and (ii) such substantial
stockholder shall not have received the benefit, directly or indirectly
(except proportionately as a stockholder), of any loans, advances,
guarantees, pledges or other financial assistance or tax credits
provided by the Corporation, or made any major changes in the
Corporation's business or equity capital structure; and (c) if such
proposal otherwise requires stockholder approval, a proxy statement
responsive to the requirements of the Securities Exchange Act of 1934,
whether or not the Corporation is then subject to such requirements,
shall be mailed to the public stockholders of the Corporation for the
purpose of soliciting stockholder approval of such business
combination.
B. For the purposes of this Article 12:
1. The term "business combination" shall mean (a) any merger or
consolidation of the Corporation with or into a substantial
stockholder, (b) any sale, lease, exchange, transfer or other
disposition,
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<PAGE>
including, without limitation, a mortgage or any other security device,
of all, or any "substantial part" (as hereinafter defined) of the
assets of the Corporation including, without limitation, any voting
securities of a subsidiary) or of a subsidiary, to a substantial
stockholder, (c) any merger or consolidation of a substantial
stockholder with or into the Corporation or a subsidiary of the
Corporation, (d) any sale, lease, exchange, transfer or other
disposition of all or any substantial part of the assets of a
substantial stockholder to the Corporation or a subsidiary of the
Corporation, (e) the issuance of any securities of the Corporation or a
subsidiary of the Corporation to a substantial stockholder (except
proportionately as a stockholder), (f) the acquisition by the
Corporation or a subsidiary of the Corporation of any securities of a
substantial stockholder (except proportionately as a stockholder), (g)
any reclassification of common stock of the Corporation, or any
recapitalization involving common stock of the Corporation, consummated
within five years after a substantial stockholder becomes a substantial
stockholder, and (h) any agreement, contract or other arrangement
providing for any of the transactions described in this definition of
business combination;
2. The term "substantial stockholder" shall mean and include any
individual, corporation, partnership, "group" or other person or entity
which, together with its "affiliates" and "associates", "beneficially"
owns (as those terms are defined on the date on which this provision
was adopted in Rules 12b-2, 13d-3 and 13d-5(b) of the General Rules and
Regulations under the Securities Exchange Act of 1934) in the aggregate
10% or more of the outstanding shares of common stock of the
Corporation, and any affiliate or associate of any such individual,
corporation, partnership, group or other person or entity excluding,
however, any incumbent members of the Board of Directors as of
September 30, 1985 and any employee benefit plan of the corporation or
its subsidiaries;
3. The term "substantial part" shall mean more than 10% of the total
book value of assets of the corporation in question, as of the end of
its most recent fiscal year ending prior to the time the determination
is being made;
4. Without limitation, any shares of common stock of the Corporation
which any substantial stockholder has the right to acquire at any time
pursuant to any agreement, or upon exercise of conversion rights,
warrants, options, or otherwise, shall be deemed outstanding and
beneficially owned by such substantial stockholder for purposes of this
Article 12 only; and
5. The phrase "other consideration to be received" shall include,
without limitation, common stock of the corporation retained by its
existing stockholders other than a substantial stockholder in the event
of a business combination with such substantial stockholder in which
the corporation is the surviving corporation.
C. The provisions set forth in this Article 12 may not be repealed or
amended in any respect or in any manner including through any merger or
consolidation of the corporation with any other corporation unless the
surviving corporation's Certificate of Incorporation contains an article to
the same effect as this Article 12, except by the affirmative vote of the
holders of not less than 66 2/3% of the stock then entitled to vote in an
election of directors, subject to the provisions of any series of preferred
stock which may at any time be outstanding; provided, however, that if
there is a substantial stockholder such action must be approved by not less
than 66 2/3% of the stock then entitled to vote in an election of directors
owned by persons other than the substantial stockholder.
13. A director of the Corporation shall not be personally liable to the
Corporation or its stockholders for monetary damages for breach of
fiduciary duty as a director to the fullest extent permitted by the General
Corporation Law of the State of Delaware, as the same exists or may
hereafter be amended, 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) under Section 174 of the General
Corporation Law of the State of Delaware, or (iv) for any transaction from
which the director derived any improper personal benefit. Any repeal or
modification hereof by the stockholders of the Corporation shall not
adversely affect any right or protection of a director of the Corporation
existing at the time of such repeal or modification.
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<PAGE>
IN WITNESS WHEREOF, the Corporation has caused this Amended and Restated
Certificate of Incorporation to be executed as of this day of ,
2000.
Comdisco, Inc.
By: _________________________________
A-29
<PAGE>
EXHIBIT B-1
-----------
[Form of Rights Certificate]
Certificate No. CGR- _______ Rights
NOT EXERCISABLE AFTER NOVEMBER 17, 2007 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.[THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHTS CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.]
(1) --------------1 The portion of the legend in brackets shall be inserted only
if applicable and shall replace the preceding sentence.
Comdisco Stock Rights Certificate
COMDISCO, INC.
This certifies that _________________, or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Amended and Restated Rights Agreement, dated as of _____________, 2000 (the
"Rights Agreement"), between COMDISCO, INC., a Delaware corporation (the
"Company"), and ChaseMellon Shareholder Services, L.L.C., a New Jersey limited
liability company (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 PM (New York City time) on November 17, 2007, at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-thousandth of a fully-paid, nonassessable share of Series
C Junior Participating Preferred Stock (the "Preferred Stock") of the Company,
at a purchase price of $___ per one one-thousandth of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase set forth on the reverse hereof and the Certificate
contained therein duly executed. The Purchase Price shall be paid in cash. The
number of Rights evidenced by this Rights Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are the number of Rights, number and Purchase
Price as of _____________, 2000, based on the Preferred Stock as constituted at
such date, and are subject to adjustment upon the happening of certain events as
provided in the Rights Agreement. The Company reserves the right to require
prior to the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement) that a number of Rights be exercised so that only whole shares
of Preferred Stock will be issued.
B-2-1
<PAGE>
Upon the occurrence of a Section 11 Event (as such term is defined in the
Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an Acquiring Person or Adverse Person or an Affiliate
or Associate of any such Acquiring Person or Adverse Person (as such terms are
defined in the Rights Agreement), (ii) a transferee of any such Acquiring
Person, Adverse Person, Associate or Affiliate, or (iii) under certain
circumstances specified in the Rights Agreement, a transferee of a person who,
concurrently with or after such transfer, became an Acquiring Person, Adverse
Person or an Affiliate or Associate of an Acquiring Person or Adverse Person,
such Rights shall become null and void and no holder hereof shall have any
rights whatsoever with respect to such Rights from and after the occurrence of
such Section 11 Event.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Certificates representing
the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $0.01 per Right at any time prior to the earlier of the close of
business on (i) the fifteenth day following the Stock Acquisition Date (as such
time period may be extended or shortened pursuant to the Rights Agreement) or
(ii) the Final Expiration Date. In addition, the Rights may be exchanged, in
whole or in part, for shares of Common Stock, or shares of preferred stock of
the Company having essentially the same value or economic rights as such shares.
Immediately upon the action of the Board of Directors of the Company authorizing
any such exchange, and without any further action or any notice, the Rights
(other than Rights which are not subject to such exchange) will terminate and
the Rights will only enable holders to receive the shares issuable upon such
exchange.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder, as such, of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything
B-2-2
<PAGE>
contained in the Rights Agreement or herein be construed to confer upon the
holder hereof, as such, any of the rights of a stockholder of the Company or any
right to vote for the election of directors or upon any matter submitted to
stockholders at any meeting thereof, or to give or withhold consent to any
corporate action, or to receive notice of meetings or other actions affecting
stockholders (except as provided in the Rights Agreement), or to receive
dividends or subscription rights, or otherwise, until the Right or Rights
evidenced by this Rights Certificate shall have been exercised as provided in
the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of _____________, 200_
ATTEST: COMDISCO, INC.
________________________ By________________________
Secretary Title:
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By_______________________________
Authorized Signature
B-2-3
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
Please print social security or other identifying number of the transferor:
____________________
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers
unto:
_____________________________________________
(Please print name and address of transferee)
_____________________________________________
(Please print social security or other
identifying number of the transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: __________________, 200_
___________________________
Signature
Signature Guaranteed:__________________________
B-2-4
<PAGE>
Certificate
-----------
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person,
Adverse Person or an Affiliate or Associate of any such Acquiring Person or
Adverse Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person, Adverse Person or
an Affiliate or Associate of any such Acquiring Person or Adverse Person.
Dated: _________________, 200_ _________________________ Signature
Signature Guaranteed:________________________
B-2-5
<PAGE>
NOTICE
The signatures to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to
exercise Rights represented by the Rights Certificate.)
To: COMDISCO, INC.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
__________________________________________(Please print name and
address)
__________________________________________
(Please print social security or other
identifying number)
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
__________________________________________(Please print name and address)
__________________________________________
(Please print social security or other identifying number)
Dated: _______________, 200_
_______________________
Signature
Signature Guaranteed:__________________________
B-2-6
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person,
Adverse Person or an Affiliate or Associate of any such Acquiring Person or
Adverse Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person, Adverse Person or
an Affiliate or Associate of any such Acquiring Person or Adverse.
Dated: _________________, 200_ _________________________
Signature
Signature Guaranteed:________________________
B-2-7
<PAGE>
NOTICE
The signatures to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
B-2-8
<PAGE>
EXHIBIT B-2
-----------
[Form of Rights Certificate]
Certificate No. CDOVR- _______ Rights
NOT EXERCISABLE AFTER NOVEMBER 17, 2007 OR EARLIER IF REDEEMED BY THE COMPANY.
THE RIGHTS ARE SUBJECT TO REDEMPTION, AT THE OPTION OF THE COMPANY, AT $0.01 PER
RIGHT ON THE TERMS SET FORTH IN THE RIGHTS AGREEMENT. UNDER CERTAIN
CIRCUMSTANCES, RIGHTS BENEFICIALLY OWNED BY AN ACQUIRING PERSON OR AN ADVERSE
PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS AGREEMENT) AND ANY SUBSEQUENT
HOLDER OF SUCH RIGHTS MAY BECOME NULL AND VOID.[THE RIGHTS REPRESENTED BY THIS
RIGHTS CERTIFICATE ARE OR WERE BENEFICIALLY OWNED BY A PERSON WHO WAS OR BECAME
AN ACQUIRING PERSON OR ADVERSE PERSON OR AN AFFILIATE OR ASSOCIATE OF AN
ACQUIRING PERSON OR ADVERSE PERSON (AS SUCH TERMS ARE DEFINED IN THE RIGHTS
AGREEMENT). ACCORDINGLY, THIS RIGHT CERTIFICATE AND THE RIGHTS REPRESENTED
HEREBY MAY BECOME NULL AND VOID IN THE CIRCUMSTANCES SPECIFIED IN SECTION 7(e)
OF SUCH AGREEMENT.]
(1) --------------1 The portion of the legend in brackets shall be inserted only
if applicable and shall replace the preceding sentence.
Comdisco Ventures Rights Certificate
COMDISCO, INC.
This certifies that _________________, or registered assigns, is the
registered holder of the number of Rights set forth above, each of which
entitles the owner thereof, subject to the terms, provisions and conditions of
the Amended and Restated Rights Agreement, dated as of _____________, 2000 (the
"Rights Agreement"), between COMDISCO, INC., a Delaware corporation (the
"Company"), and ChaseMellon Shareholder Services, L.L.C., a New Jersey limited
liability company (the "Rights Agent"), to purchase from the Company at any time
prior to 5:00 PM (New York City time) on November 17, 2007, at the office or
offices of the Rights Agent designated for such purpose, or its successors as
Rights Agent, one one-thousandth of a fully-paid, nonassessable share of Series
D Junior Participating Preferred Stock (the "Preferred Stock") of the Company,
at a purchase price of $___ per one one-thousandth of a share (the "Purchase
Price"), upon presentation and surrender of this Rights Certificate with the
Form of Election to Purchase set forth on the reverse hereof and the Certificate
contained therein duly executed. The Purchase Price shall be paid in cash. The
number of Rights evidenced by this Rights Certificate (and the number of shares
which may be purchased upon exercise thereof) set forth above, and the Purchase
Price per share set forth above, are the number of Rights, number and Purchase
Price as of _____________, 2000, based on the Preferred Stock as constituted at
such date, and are subject to adjustment upon the happening of certain events as
provided in the Rights Agreement. The Company reserves the right to require
prior to the occurrence of a Triggering Event (as such term is defined in the
Rights Agreement) that a number of Rights be exercised so that only whole shares
of Preferred Stock will be issued.
Upon the occurrence of a Section 11 Event (as such term is defined in
the Rights Agreement), if the Rights evidenced by this Rights Certificate are
beneficially owned by (i) an
B-2-1
<PAGE>
Acquiring Person or Adverse Person or an Affiliate or Associate of any such
Acquiring Person or Adverse Person (as such terms are defined in the Rights
Agreement), (ii) a transferee of any such Acquiring Person, Adverse Person,
Associate or Affiliate, or (iii) under certain circumstances specified in the
Rights Agreement, a transferee of a person who, concurrently with or after such
transfer, became an Acquiring Person, Adverse Person or an Affiliate or
Associate of an Acquiring Person or Adverse Person, such Rights shall become
null and void and no holder hereof shall have any rights whatsoever with respect
to such Rights from and after the occurrence of such Section 11 Event.
This Rights Certificate is subject to all of the terms, provisions and
conditions of the Rights Agreement, which terms, provisions and conditions are
hereby incorporated herein by reference and made a part hereof and to which
Rights Agreement reference is hereby made for a full description of the rights,
limitations of rights, obligations, duties and immunities hereunder of the
Rights Agent, the Company and the holders of the Rights Certificates, which
limitations of rights include the temporary suspension of the exercisability of
such Rights under the specific circumstances set forth in the Rights Agreement.
Copies of the Rights Agreement are on file at the above-mentioned office of the
Rights Agent and are also available upon written request to the Rights Agent.
This Rights Certificate, with or without other Rights Certificates, upon
surrender at the principal office or offices of the Rights Agent designated for
such purpose, may be exchanged for another Rights Certificate or Rights
Certificates of like tenor and date evidencing Rights entitling the holder to
purchase a like aggregate number of one one-thousandths of a share of Preferred
Stock as the Rights evidenced by the Rights Certificate or Rights Certificates
surrendered shall have entitled such holder to purchase. If this Rights
Certificate shall be exercised in part, the holder shall be entitled to receive
upon surrender hereof another Rights Certificate or Certificates representing
the number of whole Rights not exercised.
Subject to the provisions of the Rights Agreement, the Rights evidenced by
this Certificate may be redeemed by the Company at its option at a redemption
price of $0.01 per Right at any time prior to the earlier of the close of
business on (i) the fifteenth day following the Stock Acquisition Date (as such
time period may be extended or shortened pursuant to the Rights Agreement) or
(ii) the Final Expiration Date. In addition, the Rights may be exchanged, in
whole or in part, for shares of Common Stock, or shares of preferred stock of
the Company having essentially the same value or economic rights as such shares.
Immediately upon the action of the Board of Directors of the Company authorizing
any such exchange, and without any further action or any notice, the Rights
(other than Rights which are not subject to such exchange) will terminate and
the Rights will only enable holders to receive the shares issuable upon such
exchange.
No fractional shares of Preferred Stock will be issued upon the exercise of
any Right or Rights evidenced hereby (other than fractions which are integral
multiples of one one-thousandth of a share of Preferred Stock, which may, at the
election of the Company, be evidenced by depositary receipts), but in lieu
thereof a cash payment will be made, as provided in the Rights Agreement.
No holder, as such, of this Rights Certificate shall be entitled to vote or
receive dividends or be deemed for any purpose the holder of the shares of
Preferred Stock or of any other securities of the Company which may at any time
be issuable on the exercise hereof, nor shall anything contained in the Rights
Agreement or herein be construed to confer upon the holder hereof, as such, any
of the rights of a stockholder of the Company or any right to vote for the
election of
B-2-2
<PAGE>
directors or upon any matter submitted to stockholders at any meeting thereof,
or to give or withhold consent to any corporate action, or to receive notice of
meetings or other actions affecting stockholders (except as provided in the
Rights Agreement), or to receive dividends or subscription rights, or otherwise,
until the Right or Rights evidenced by this Rights Certificate shall have been
exercised as provided in the Rights Agreement.
This Rights Certificate shall not be valid or obligatory for any purpose
until it shall have been countersigned by the Rights Agent.
WITNESS the facsimile signature of the proper officers of the Company and
its corporate seal.
Dated as of _____________, 200_
ATTEST: COMDISCO, INC.
________________________ By________________________
Secretary Title:
Countersigned:
CHASEMELLON SHAREHOLDER SERVICES, L.L.C.
By___________________________________
Authorized Signature
B-2-3
<PAGE>
[Form of Reverse Side of Rights Certificate]
FORM OF ASSIGNMENT
(To be executed by the registered holder if such
holder desires to transfer the Rights Certificate.)
Please print social security or other identifying number of the transferor:
____________________
FOR VALUE RECEIVED, _______________________ hereby sells, assigns and transfers
unto:
_____________________________________________
(Please print name and address of transferee)
_____________________________________________
(Please print social security or other
identifying number of the transferee)
this Rights Certificate, together with all right, title and interest therein,
and does hereby irrevocably constitute and appoint _____________________
Attorney, to transfer the within Rights Certificate on the books of the within-
named Company, with full power of substitution.
Dated: __________________, 200_
___________________________
Signature
Signature Guaranteed:__________________________
B-2-4
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) this Rights Certificate [ ] is [ ] is not being sold, assigned and
transferred by or on behalf of a Person who is or was an Acquiring Person,
Adverse Person or an Affiliate or Associate of any such Acquiring Person or
Adverse Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person, Adverse Person or
an Affiliate or Associate of any such Acquiring Person or Adverse Person.
Dated: _________________, 200_ _________________________ Signature
Signature Guaranteed:________________________
B-2-5
<PAGE>
NOTICE
The signatures to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
FORM OF ELECTION TO PURCHASE
(To be executed if the registered holder desires to
exercise Rights represented by the Rights Certificate.)
To: COMDISCO, INC.
The undersigned hereby irrevocably elects to exercise __________ Rights
represented by this Rights Certificate to purchase the shares of Preferred Stock
issuable upon the exercise of the Rights (or such other securities of the
Company or of any other person which may be issuable upon the exercise of the
Rights) and requests that certificates for such shares be issued in the name of
and delivered to:
__________________________________________(Please print name and address)
__________________________________________
(Please print social security or other identifying number)
If such number of Rights shall not be all the Rights evidenced by this
Rights Certificate, a new Rights Certificate for the balance of such Rights
shall be registered in the name of and delivered to:
__________________________________________(Please print name and address)
__________________________________________
(Please print social security or other identifying number)
Dated: _______________, 200_
_______________________
Signature
Signature Guaranteed:__________________________
B-2-6
<PAGE>
Certificate
The undersigned hereby certifies by checking the appropriate boxes that:
(1) the Rights evidenced by this Rights Certificate [ ] are [ ] are not
being exercised by or on behalf of a Person who is or was an Acquiring Person,
Adverse Person or an Affiliate or Associate of any such Acquiring Person or
Adverse Person (as such terms are defined in the Rights Agreement);
(2) after due inquiry and to the best knowledge of the undersigned, it [ ]
did [ ] did not acquire the Rights evidenced by this Rights Certificate from any
Person who is, was or subsequently became an Acquiring Person, Adverse Person or
an Affiliate or Associate of any such Acquiring Person or Adverse.
Dated: _________________, 200_ _________________________
Signature
Signature Guaranteed:________________________
B-2-7
<PAGE>
NOTICE
The signatures to the foregoing Assignment and Certificate must correspond
to the name as written upon the face of this Rights Certificate in every
particular, without alteration or enlargement or any change whatsoever.
B-2-8
<PAGE>
EXHIBIT 4.4
TEMPORARY CERTIFICATE - EXCHANGEABLE FOR DEFINITIVE ENGRAVED CERTIFICATE WHEN
READY FOR DELIVERY
Comdisco, Inc.
INCORPORATED UNDER THE LAWS OF THE STATE OF DELAWARE
Comdisco Ventures Stock
COMMON STOCK
CUSIP ___________________
SEE REVERSE FOR CERTAIN DEFINITIONS
This Certifies that
is the owner of
FULLY PAID AND NON-ASSESSABLE SHARES OF COMDISCO, INC. -- COMDISCO VENTURES
STOCK PAR VALUE OF $.10 PER SHARE OF
Comdisco, 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 until
countersigned by the Transfer Agent and registered by the Registrar.
Witness the facsimile signatures of its duly authorized officers.
Dated:
SECRETARY
PRESIDENT
COUNTERSIGNED AND REGISTERED:
CHASEMELLON SHAREHOLDER SERVICES, LLC
TRANSFER AGENT
AND REGISTRAR,
BY
AUTHORIZED SIGNATURE
<PAGE>
[REVERSE OF CERTIFICATE]
THE COMPANY WILL FURNISH WITHOUT CHARGE TO EACH STOCKHOLDER WHO SO REQUESTS, A
FULL STATEMENT OF ALL OF THE POWERS, DESIGNATIONS, PREFERENCES AND RELATIVE,
PARTICIPANTS, OPTIONAL OR OTHER SPECIAL RIGHTS AND THE QUALIFICATIONS,
LIMITATIONS OR RESTRICTIONS OF SUCH PREFERENCES AND RIGHTS FOR THE SHARES
REPRESENTED BY THIS CERTIFICATE.
This certificate also evidences and entitles the holder hereof to certain Rights
as set forth in the Rights Agreement between Comdisco, Inc. (the "Company") and
ChaseMellon Shareholder Services, L.L.C., dated as of November 17, 1997, as
amended on _________, and from time to time amended (the "Rights Agreement"),
the terms of which are hereby incorporated herein by reference and a copy of
which is on file at the principal offices of the Company. Under certain
circumstances, as set forth in the Rights Agreement, such Rights will be
evidenced by separate certificates and will no longer be evidenced by this
certificate. The Company will mail to the holder of this certificate a copy of
the Rights Agreement, as in effect on the date of mailing, without charge
promptly after receipt of a written request therefor. Under certain
circumstances set forth in the Rights Agreement, Rights issued to or held by any
Person who is, was or becomes an Acquiring Person or an Adverse Person or any
Affiliate or Associate thereof (as such terms are defined in the Rights
Agreement), whether currently held by or on behalf of such Person or by any
subsequent holder, may become null and void.
The following abbreviations, when used in the inscription on the face of this
certificate, shall be construed as though they were written out in full
according to applicable laws or regulations.
TEN COM-as tenants in common
TEN ENT-as tenants by the entireties
JT TEN-as joint tenants with right of survivorship and not as tenants
in common
UNIF GIFT MIN ACT--..................Custodian..................................
(Cust) (Minor)
under Uniform Gifts to Minor
Act.........................
(State)
Additional abbreviations may also be used though not in the above list.
For value received, hereby sell, assign and transfer unto
PLEASE INSERT SOCIAL SECURITY OR OTHER
IDENTIFYING NUMBER OF ASSIGNEE
PLEASE PRINT OR TYPEWRITE NAME AND ADDRESS INCLUDING POSTAL ZIP CODE OF ASSIGNEE
Shares of the capital stock represented by the within Certificate, and do hereby
irrevocably constitute and appoint
Attorney to transfer the said stock on the books of the within-named Corporation
with full power of substitution in the premises.
Dated,
NOTICE: THE SIGNATURE OF THIS ASSIGNMENT MUST CORRESPOND WITH THE NAME AS
WRITTEN UPON THE FACE OF THE CERTIFICATE, IN EVERY PARTICULAR, WITHOUT
ALTERATION OR ENLARGEMENT, OR ANY CHANGE WHATEVER.
Signature(s) Guaranteed:
THE SIGNATURE(S) SHOULD BE GUARANTEED BY AN ELIGIBLE GUARANTOR INSTITUTION
(BANKS, STOCKBROKERS, SAVINGS AND LOAN ASSOCIATIONS AND CREDIT UNIONS WITH
MEMBERSHIP IN AN APPROVED SIGNATURE GUARANTEE MEDALLION PROGRAM) PURSUANT TO
S.E.C. RULE 17Ad-15.
<PAGE>
EXHIBIT 5.1
OPINION OF JEREMIAH M. FITZGERALD
April 12, 2000
The Board of Directors of
Comdisco, Inc.
6111 North River Road
Rosemont, Illinois 60018
Comdisco, Inc.
Registration Statement on Form S-3
Comdisco Ventures Stock and Comdisco Ventures Stock Rights
Ladies and Gentlemen:
Reference is made to that certain Registration Statement on Form S-3 (the
"Registration Statement") filed on this date with the Securities and Exchange
Commission under the Securities Act of 1933, as amended (the "1933 Act"),
relating to the offer and sale of (i) up to $150,000,000 of Comdisco, Inc. -
Comdisco Ventures Common Stock, par value $.10 per share (the "Comdisco Ventures
Stock"), of Comdisco, Inc. (the "Company") and (ii) an equal number of rights to
purchase shares of the Company's Preferred Stock, Series D, par value $.10 per
share (the "Comdisco Ventures Rights"), initially attached to each share of
Comdisco Ventures Stock and to be issued pursuant to the amended and restated
rights agreement between the Company and ChaseMellon Shareholder Services
L.L.C., as rights agent (the "Restated Rights Agreement"). Defined terms not
otherwise defined herein have the meaning ascribed to them in the Registration
Statement.
I have participated in the preparation of the Registration Statement and
have examined the corporate records and documents, statements and certificates
of officers of the Company and such other materials as I have deemed necessary
to the issuance of this opinion.
For purposes of this opinion, I assume (a) that before the issuance of the
Comdisco Ventures Stock, the Tracking Stock Proposal as set forth in the
Company's Proxy Statement filed March 20, 2000 is approved by the shareholders
of the Company, (b) that the Restated and Amended Certificate of Incorporation
in the form included as Exhibit 4.1 to the Registration Statement is filed with,
and declared effective by, the Delaware Secretary of State's office, and (c) the
Restated Rights Agreement is duly executed and delivered by the Company and the
rights agent.
I assume that before the offer and sale of the Comdisco Ventures Stock, the
appropriate action will be taken to register and qualify the Comdisco Ventures
Stock under all applicable state securities or "blue sky" laws.
I express no opinion herein as to the laws of any state or jurisdiction
other than the corporation law of the state of Delaware and the federal laws of
the United States of America.
Based on the foregoing, I am of the opinion that:
1. The Comdisco Ventures Stock has been duly authorized, and, when issued
and paid for as described in the Registration Statement, will be validly issued,
fully paid and nonassessable.
2. All corporate actions required under the corporation laws of the state
of Delaware have been taken for the Comdisco Ventures Rights, and when issued
pursuant to the Restated Rights Agreement, the Comdisco Ventures Rights will be
validly issued.
It is understood that this opinion is to be used only in connection with
the offer and sale of the Comdisco Ventures Stock while the Registration
Statement is in effect. Also, please note that I am opining as to the matters
expressly set forth herein, and no opinion should be inferred as to any other
matters.
I consent to the filing of this opinion as an exhibit to the Registration
Statement in accordance with the requirements of Item 601(b)(5) of Regulation
S-K under the Securities Act and to the statement made in reference to me under
the caption "Legal Matters" in the related prospectus and in any amendment or
supplement to the prospectus. I do not admit by giving this consent that I am in
the category of persons whose consent is required under Section 7 of the 1933
Act, as amended, or the rules and regulations of the Securities and Exchange
Commission thereunder.
Very truly yours,
/s/ Jeremiah M. Fitzgerald
------------------------------------------
Jeremiah M. Fitzgerald, Vice President and
Chief Legal Officer
<PAGE>
EXHIBIT 8.1
[LETTERHEAD OF HOPKINS & SUTTER]
April 12, 2000
Comdisco, Inc.
6111 North River Road
Rosemont, IL 60018
Re: Certain Federal Income Tax Consequences of the Issuance of Tracking
Stock by Comdisco, Inc.
-------------------------------------------------------------------
Ladies and Gentlemen:
We have acted as tax counsel to Comdisco, Inc. ("Comdisco") in connection
with the preparation of its Proxy Statement dated March 20, 2000 (the "Proxy
Statement"), and in connection with the registration of the public offering of
up to $150,000,000 of Comdisco Ventures common stock ("Venture Tracking Stock").
(All terms used herein without definition shall have the meanings set forth in
the prospectus (the "Prospectus") that is part of the Registration Statement on
Form S-3 filed by Comdisco with the Securities and Exchange Commission on April
12, 2000.) In connection therewith you have requested our opinion regarding (i)
the federal income tax consequences to Comdisco and its shareholders of the
implementation of the Tracking Stock Proposal (as defined in the Proxy
Statement) and (ii) the accuracy of the discussion included in the Prospectus
under the caption "Material U.S. Federal Income Tax Considerations."
In rendering the opinions expressed herein, we have examined (i) the Proxy
Statement, the Prospectus, and the Annexes thereto, (ii) the Amended and
Restated Certificate of Incorporation of Comdisco to be filed upon approval of
the tracking stock proposal (the "Restated Charter"), and (iii) such other
agreements, certificates, or documents as we have deemed necessary or
appropriate for purposes of this opinion (collectively, the "Transaction
Documents"). As to certain factual matters, we have relied solely upon and
assumed the accuracy, completeness, and genuineness of, certificates or
statements of representatives of Comdisco.
In our examination of the Transaction Documents, we have assumed, with your
consent, that all Transaction Documents submitted to us as photocopies, by
telecopy, or by e-mail faithfully reproduce the originals thereof; that the
originals are authentic; that all such Transaction Documents submitted to us
have been or will be duly executed and validly signed (or filed, where
applicable) to the extent required in substantially the same form as they have
been provided to us; that the Restated
<PAGE>
Comdisco, Inc.
April 12, 2000
Page 2
Charter will be adopted in compliance with the terms of the Transaction
Documents in all material respects; that each executed Transaction Document will
constitute the legal, valid, binding, and enforceable agreement of the signatory
parties; that the outstanding instruments designated as the stock of Comdisco
will be treated under Delaware law as validly issued and outstanding shares of
Comdisco stock; that all representations and statements set forth in the
Transaction Documents are and will remain true, accurate, and complete in all
material respects; and that all obligations imposed on, or covenants agreed to
by, the parties pursuant to any of the Transaction Documents have been or will
be performed or satisfied in accordance with their terms in all material
respects.
Based on the foregoing, it is our opinion, as of the date hereof, that:
The Reclassification
(1) No income, gain, or loss will be recognized to Comdisco's
shareholders from the reclassification of the existing common stock of
Comdisco as Comdisco Stock pursuant to the adoption of the Restated
Charter, and the amendment and restatement of the Rights Agreement incident
thereto (the "Reclassification"). Comdisco's shareholders will have the
same tax basis and holding period in the Comdisco Stock resulting from the
Reclassification as they have in their Comdisco common stock immediately
before the Reclassification.
(2) The Comdisco Stock will be treated as stock of Comdisco for
federal income tax purposes, and will not be "section 306 stock" within the
meaning of Section 306 of the Internal Revenue Code of 1986, as amended
(the "Code") or "nonqualified preferred stock" within the meaning of
Section 351(g) of the Code.
(3) Comdisco will not recognize income, gain, or loss in and as a
result of the Reclassification.
Ventures Tracking Stock Issuance
(4) Comdisco will not recognize income, gain, or loss on the sale of
Ventures Tracking Stock, the distribution of Ventures Tracking Stock as a
dividend on Comdisco Stock, or the issuance of Ventures Tracking Stock in
exchange for Comdisco Stock (a "Ventures Tracking Stock Issuance").
(5) Ventures Tracking Stock issued in a Ventures Tracking Stock
Issuance will be treated as stock of Comdisco for federal income tax
purposes and will not be "section 306 stock" (within the meaning of Section
306 of the Code) or "nonqualified preferred stock" (within the meaning of
Section 351(g) of the Code).
<PAGE>
Comdisco, Inc.
April 12, 2000
Page 3
(6) If Comdisco distributes Ventures Tracking Stock as a pro rata
dividend on the Comdisco Stock, a holder of Comdisco Stock will not
recognize any income, gain, or loss on the receipt of such stock dividend
(except where cash is received in lieu of a fractional share). The
shareholder will allocate the adjusted tax basis in his or her Comdisco
Stock immediately before the distribution between the Comdisco Stock and
the Ventures Tracking Stock (including any fractional share deemed
received) in proportion to their respective fair market values immediately
after the distribution, and will have a holding period in the Ventures
Tracking Stock that includes the period for which the Comdisco Stock has
been held.
(7) If Comdisco issues Ventures Tracking Stock in exchange for
Comdisco Stock, such exchange will constitute a recapitalization
reorganization within the meaning of Section 368(a)(1)(E) of the Code.
Accordingly, an exchanging shareholder will not recognize any income, gain,
or loss on the exchange (except where cash is received in lieu of a
fractional share), and will have the same tax basis and holding period in
the Ventures Tracking Stock received (including any fractional share deemed
received) as he or she has in the Comdisco Stock surrendered.
(8) A shareholder who receives cash in lieu of a fractional share of
Ventures Tracking Stock in a transaction described in paragraph (6) or (7)
above will be deemed to receive the fractional share and then sell it back
to Comdisco for the cash received in a redemption. He or she will
recognize gain or loss equal to the difference, if any, between the tax
basis in the fractional share deemed received and the amount of cash
received for such fractional share.
Conversion
(9) If Comdisco converts Ventures Tracking Stock into Comdisco Stock
under the circumstances described in the Prospectus and pursuant to the
conversion provisions in the Restated Charter, such conversion will
constitute a recapitalization reorganization within the meaning of Section
368(a)(1)(E) of the Code. Accordingly, exchanging shareholders will not
recognize any income, gain, or loss on the receipt of the Comdisco Stock in
exchange for Ventures Tracking Stock (except where cash is received in lieu
of fractional shares), and will have the same tax basis and holding period
in the Comdisco Stock received in the exchange (including any fractional
share deemed received) as they have in the Ventures Tracking Stock
surrendered.
<PAGE>
Comdisco, Inc.
April 12, 2000
Page 4
Accuracy of the Tax Discussion
(10) The discussion contained in the Prospectus under the caption
"Material U.S. Federal Income Tax Considerations" constitutes an accurate
summary of the material United States federal income tax consequences of
the Tracking Stock Proposal.
The opinions expressed in paragraphs (1)-(9), inclusive, apply only to
persons (other than Non-U.S. Holders) who hold their stock as capital assets
within the meaning of Section 1221 of the Code, and are not applicable (i) to
shareholders who, for federal income tax purposes, are subject to special tax
treatment, such as, without limitation, insurance companies, corporations
subject to the alternative minimum tax, banks, dealers in securities, tax-exempt
organizations, persons that hold the stock as part of straddle, hedging, or
conversion transaction, persons whose functional currency is not the U.S.
dollar, or (ii) to shareholders who acquired their stock pursuant to the
exercise of employee stock options or otherwise as compensation.
The opinions expressed herein are based upon existing statutory,
regulatory, administrative, and judicial authority in effect as of the date of
this letter, any of which may be changed at any time with retroactive effect.
In particular, we note that the Clinton Administration proposed legislative
changes earlier this year which would, if enacted, apply to tracking stock, and
our opinion assumes that no such legislation, or regulations issued thereunder,
will apply to any of the Comdisco Stock, the Ventures Tracking Stock, or the
transactions addressed herein.
Further, our opinions are based solely on the documents that we have
examined and the additional information that we have obtained and the
representations referred to herein that we have assumed with your consent to be
true, accurate, and complete on the date hereof. Our opinions cannot be relied
upon if any of the material facts contained in such documents or any such
additional information is, or later becomes, materially inaccurate or if any of
the representations referred to herein is, or later becomes, materially
inaccurate.
Our opinions represent our legal judgment, have no official status of any
kind, and are not binding upon the Internal Revenue Service or any court. In
this regard we note that no existing authority directly addresses the federal
income tax classification of tracking stock, and that the current policy of the
Internal Revenue Service is to refuse to issue private letter rulings as to the
federal income tax classification of tracking stock.
Finally, our opinion is limited to the tax matters specifically addressed
herein. We have not been asked to address, nor have we addressed, any other tax
consequences of the Tracking Stock Proposal or other transactions described in
the Prospectus or Proxy Statement, including, but not limited to, any state,
local, or foreign tax consequences.
<PAGE>
Comdisco, Inc.
April 12, 2000
Page 5
We assume no obligation to update or supplement this letter to reflect any
facts or circumstances which may hereafter come to our attention with respect to
the opinion expressed above, including any changes in applicable law which may
hereafter occur.
This letter is furnished by us as counsel to Comdisco solely in connection
with the Tracking Stock Proposal and is for the benefit of Comdisco and its
subsidiaries and may not be relied upon for any other purpose without our
express written consent. We hereby consent, however, to the filing of this
opinion as an exhibit to the Registration Statement and to reference of our name
under the captions "Material U.S. Federal Income Tax Considerations" and "Legal
Matters" in the Prospectus. In giving such consent, we do not thereby admit that
we are included within the category of persons whose consent is required under
Section 7 of the Securities Act of 1933 or rules and regulations promulgated
thereunder.
Very truly yours,
HOPKINS & SUTTER
By: /s/ John B. Palmer III, a Partner
-------------------------------------
John B. Palmer III, a Partner
<PAGE>
Exhibit 23.2
------------
Consent of KPMG LLP
-------------------
The Board of Directors
Comdisco, Inc.:
We consent to the incorporation by reference in the Registration Statement on
Form S-3 of Comdisco, Inc. of our reports dated November 2, 1999, relating to
the consolidated balance sheets of Comdisco, Inc. and subsidiaries as of
September 30, 1999 and 1998, and the related consolidated statements of
earnings, stockholders' equity, and cash flows for each of the years in the
three-year period ended September 30, 1999, and the related financial statement
schedule, which reports appear in or are incorporated by reference in the
September 30, 1999 annual report on Form 10-K of Comdisco, Inc., as amended by
Form 10-K/A, and to the reference to our firm under the heading "Experts" in the
Registration Statement.
We also consent to the use of our report included herein relating to the balance
sheets of Comdisco Ventures as of September 30, 1999 and 1998, and the related
statements of earnings and division equity, and cash flows for each of the years
in the three-year period ended September 30, 1999.
Chicago, Illinois
April 7, 2000
